Illinois is a text book case of why government shouldn't screw with markets

[vi edit]

10 years ago the state in it's infinite wisdom capped the prices that electric companies charged to customers.

In January that cap expires and the power companies were forced to go out and hit the open market in an auction for power this upcoming year.

Guess what. Energy is a lot more expensive now than it was ten years ago. In one month the rates will go up 55% in some parts of the state. This is what happens when you fix a price on something that shouldn't be. Eventually you have to own up to it and the end result isn't pretty.

Instead of a gradual increase over the years of 5%, you are sucker punched for the full amount.

And to add insult to injury, this is all hitting the fan during an election year and everyone is turning it into a barganing chip. Some lawmakers are urging to *extend* the freeze even further and using that for votes. Didn't they learn anything from this lesson?

*sigh*

 

[TravisT]

Yeah, states probably shouldn't get involved, but it would be nice to see the federal government step in and find alternatives to our current energy sources to hopefully drive down prices. Thats another issue though, but maybe the Energy prices could increase slowly to eventually lift the cap rather than all at once. 55% increase will throw many homeowners under the bus, so the State SHOULD step in to figure out an alternative to the problem.

 

[alchemize]

And yet, somehow the power companies haven't gone bankrupt nor have they had massive layoffs (but by golly if they don't get this rate increase then we'll have brownouts and huge layoffs!) In this aspect I'm a socialist - enron proved we aren't ready for entirely de-regulated energy markets.

edit: and the vast majority of Illinois' electricity comes from coal, the rest from nuclear. So there is really no valid reason for huge rate increases other than "it's what the market will bear".

 

[zephyrprime]

Unless electricy can be bought at walmart in capsule form like batteries, a deregulated electricity market will not work. The electricity market is illiquid so pricing power will be almost entirely in the hands of producers in many locations.

The Illinois lawmakers sound like idiots though since they didn't price in inflation. Rigid caps like that are no good.

 

[techs]

Originally posted by: alchemize
And yet, somehow the power companies haven't gone bankrupt nor have they had massive layoffs (but by golly if they don't get this rate increase then we'll have brownouts and huge layoffs!) In this aspect I'm a socialist - enron proved we aren't ready for entirely de-regulated energy markets.

edit: and the vast majority of Illinois' electricity comes from coal, the rest from nuclear. So there is really no valid reason for huge rate increases other than "it's what the market will bear".

I agree.
When you have necessity like electricity and you have a limited number of suppliers by necessity or market pressure you set up a situation like California. Where the monoplies, duoplies etc can fix the market at whatever they want.
In fact before all the "deregulation" of utilities the power companies were doing just fine in most parts of the country providing reasonably priced electricity in return for reasonable profits.

 

[ebaycj]

The funny thing is Exelon Nuclear (parent company to Commonwealth Edison, the company that provides IL with most of its power) has had good revenues over the whole period. In fact they are doing so well (before the rate hike) that they are actually cutting electricity prices in Pennsylvania.

IMHO, Utility monopolies (Electricity, Natural Gas, and to some extent, Telephone/Cable/Internet) should be regulated by the local government. If there is a choice of companies to buy a given product from, then no regulation is necessary.

I do agree with ZephyrPrime though, in that there should have been some sort of an adjustment for inflation with this regulation. Fixed price caps just don't stand the test of time.

 

[tw1164]

I got a letter from my power company (PP&L) about a similar situation here in Pennsylvania. It stated that I can look forward to about a 40% increase when the caps are removed in 2009.

 

[vi edit]

I don't disagree with their reasons, it's just that burying your head in the sand for 10 years and then freaking out right before the thing expires is idiotic. What did they expect?

I just don't understand why years ago they didn't take a look at it and start a graduated rate increase system.

Ultimately who gets screwed the most? The people they aimed to help the most. Now instead of seeing bills go up a couple bucks a month each year it's going up $30-$60 a month. It was intended to help the people on low/fixed income and now they are the ones who will feel it the most.

 

[theeedude]

Originally posted by: vi_edit
Guess what. Energy is a lot more expensive now than it was ten years ago. In one month the rates will go up 55% in some parts of the state. This is what happens when you fix a price on something that shouldn't be. Eventually you have to own up to it and the end result isn't pretty.

Instead of a gradual increase over the years of 5%, you are sucker punched for the full amount.

So what? That means for 10 years you were getting lower priced electricity than other states. Seems to me like that is better than having 5% hike every year, in terms of what you would have actually paid.

 

[BoomerD]

Kahleeforneeya found out a couple of years ago just what happens when you de-regulate the energy markets. The players who brokered the deregulation, promised cheaper energy, the ability to buy your power from whatever source you want, (green energy, nuke, etc) but in the end, those turned out to be lies...Almost immediately, PG&E and the other big companies sued to stop the outside power purchaes, (they'd have been paid a small amount for use of their infrastructure) and in 2001, the energy companies threw the screwing to Kahleeforneeyan ratepayers...Enron, Duke Energy, and the rest...manipulated the market and drove prices thru the roof, driving PG&E into bankrupcy, and nearly doing so to a couple other major electric companies...

 

[theeedude]

Originally posted by: BoomerD
Kahleeforneeya found out a couple of years ago just what happens when you de-regulate the energy markets. The players who brokered the deregulation, promised cheaper energy, the ability to buy your power from whatever source you want, (green energy, nuke, etc) but in the end, those turned out to be lies...Almost immediately, PG&E and the other big companies sued to stop the outside power purchaes, (they'd have been paid a small amount for use of their infrastructure) and in 2001, the energy companies threw the screwing to Kahleeforneeyan ratepayers...Enron, Duke Energy, and the rest...manipulated the market and drove prices thru the roof, driving PG&E into bankrupcy, and nearly doing so to a couple other major electric companies...

Exactly, the only good thing to come out of CA deregulation is that it killed deregulation

 

[her209]

Originally posted by: senseamp

Originally posted by: BoomerD
Kahleeforneeya found out a couple of years ago just what happens when you de-regulate the energy markets. The players who brokered the deregulation, promised cheaper energy, the ability to buy your power from whatever source you want, (green energy, nuke, etc) but in the end, those turned out to be lies...Almost immediately, PG&E and the other big companies sued to stop the outside power purchaes, (they'd have been paid a small amount for use of their infrastructure) and in 2001, the energy companies threw the screwing to Kahleeforneeyan ratepayers...Enron, Duke Energy, and the rest...manipulated the market and drove prices thru the roof, driving PG&E into bankrupcy, and nearly doing so to a couple other major electric companies...

Exactly, the only good thing to come out of CA deregulation is that it killed deregulation

And the people who invested in Enron stocks!

 

[ebaycj]

Originally posted by: vi_edit
I don't disagree with their reasons, it's just that burying your head in the sand for 10 years and then freaking out right before the thing expires is idiotic. What did they expect?

I just don't understand why years ago they didn't take a look at it and start a graduated rate increase system.

Ultimately who gets screwed the most? The people they aimed to help the most. Now instead of seeing bills go up a couple bucks a month each year it's going up $30-$60 a month. It was intended to help the people on low/fixed income and now they are the ones who will feel it the most.

This is true. Communism on essential utility monopolies FTW!!!

 

[Hacp]

Originally posted by: vi_edit
10 years ago the state in it's infinite wisdom capped the prices that electric companies charged to customers.

In January that cap expires and the power companies were forced to go out and hit the open market in an auction for power this upcoming year.

Guess what. Energy is a lot more expensive now than it was ten years ago. In one month the rates will go up 55% in some parts of the state. This is what happens when you fix a price on something that shouldn't be. Eventually you have to own up to it and the end result isn't pretty.

Instead of a gradual increase over the years of 5%, you are sucker punched for the full amount.

And to add insult to injury, this is all hitting the fan during an election year and everyone is turning it into a barganing chip. Some lawmakers are urging to *extend* the freeze even further and using that for votes. Didn't they learn anything from this lesson?

*sigh*

Aren't electrical companies virtual monopolies?

 

[piasabird]

Maybe I will build my own steam turbine underground if prices get too high.

If prices rise too much it will make Solar power a good choice.

It is not like California or other places have done much better.

P.S. I live in Illlinois, near St Louis, MO.

I could always move to Missouri. It is only a few miles accross the Mississippi.

 

[CaptnKirk]

Originally posted by: piasabird
Maybe I will build my own steam turbine underground if prices get too high.

If prices rise too much it will make Solar power a good choice.

It is not like California or other places have done much better.

P.S. I live in Illlinois, near St Louis, MO.

I could always move to Missouri. It is only a few miles accross the Mississippi.

and be taxed to death - Federal, State, County, City, District . . .

and Property, Luxury, and just about everything else that can be imagined is taxed.

I have never lived in such a 'suck 'em dry with taxes' state as when I lived in St. Louis.
Too bad, I liked St. Louis, but it just plain costs too much.

Stick with Alton and Wood River - you might get lucky and get a free basement full of gas again.

 

[Lemon law]

Monopolies always need to be regulated----and monopolies always bitch about it---sane regulation prevents what happened in Ill.-------but California is a text book case of what happens if you remove the regulations from monopolies------my Stae---Indiana---just removed regulations on phone companies--------I expect to be posting the results when it takes effect.

Regulation always is the way to go---when you remove regulation---they will just plain go power happy nuts---never fails.---just because unwise regulation is sometimes bad does not make the converse that no regulation is better---but that is the argument the public is always sold.

And if you want to go back in time---that was the cause of the S&L problem years ago---removing regulation and changing rules---that was Reagans brainfart--promising paradise on earth when regulation was removed---went over like a lead balloon again.

 

[theeedude]

Originally posted by: her209

Originally posted by: senseamp

Originally posted by: BoomerD
Kahleeforneeya found out a couple of years ago just what happens when you de-regulate the energy markets. The players who brokered the deregulation, promised cheaper energy, the ability to buy your power from whatever source you want, (green energy, nuke, etc) but in the end, those turned out to be lies...Almost immediately, PG&E and the other big companies sued to stop the outside power purchaes, (they'd have been paid a small amount for use of their infrastructure) and in 2001, the energy companies threw the screwing to Kahleeforneeyan ratepayers...Enron, Duke Energy, and the rest...manipulated the market and drove prices thru the roof, driving PG&E into bankrupcy, and nearly doing so to a couple other major electric companies...

Exactly, the only good thing to come out of CA deregulation is that it killed deregulation

And the people who invested in Enron stocks!

:thumbsup: Those people were rejoicing when Enron was screwing CA, so serves them right.

 

[QuantumPion]

Originally posted by: BoomerD
Kahleeforneeya found out a couple of years ago just what happens when you de-regulate the energy markets. The players who brokered the deregulation, promised cheaper energy, the ability to buy your power from whatever source you want, (green energy, nuke, etc) but in the end, those turned out to be lies...Almost immediately, PG&E and the other big companies sued to stop the outside power purchaes, (they'd have been paid a small amount for use of their infrastructure) and in 2001, the energy companies threw the screwing to Kahleeforneeyan ratepayers...Enron, Duke Energy, and the rest...manipulated the market and drove prices thru the roof, driving PG&E into bankrupcy, and nearly doing so to a couple other major electric companies...

I'm sorry but you are misinformed. The cause of the California Energy Crisis was the failure to fully deregulate the energy market. They only deregulated the wholesale price of energy, while keeping the retail price of energy capped. So when the cost of the production of energy increased due to higher fuel costs, the energy producers sold their energy elsewhere or shut down entirely instead of taking a loss. This caused energy shortages and rolling blackouts.

The partial deregulation is also what allowed Enron et al to scam the market, using megawatt laundering (buying and reselling energy back to the providers for a higher price, using a loopwhole in the California law) and overscheduling (scamming money from the state to pay for phoney transmission costs). Neither of these would have been possible if the state had fully deregulated the energy market.

 

[BlancoNino]

Originally posted by: alchemize
And yet, somehow the power companies haven't gone bankrupt nor have they had massive layoffs (but by golly if they don't get this rate increase then we'll have brownouts and huge layoffs!) In this aspect I'm a socialist - enron proved we aren't ready for entirely de-regulated energy markets.

edit: and the vast majority of Illinois' electricity comes from coal, the rest from nuclear. So there is really no valid reason for huge rate increases other than "it's what the market will bear".

Enron, the big picture, is a great example of the free markets working.

 

[Lemon law]

Not quite so simple as that QuantumPion,

The thing that was sold to California was that prices on the spot market had been historically cheaper--which is sorta like running your car on waste french fry oil--its ok for a few people---but everyone in the country can't do the same thing.---just not enough wastr french fry oil---the other aspect of the California bill was that any public entities hasd to divest themselves of power generating factilities---and sell out to the private sector---removing all competition---so you are in essence blaming just the enron types---when I am saying the industry as a whole should have warned California that this would happen and then partisipated in the feeding frenzy.---lesson---these people are not to be trusted.

Monopolies are the removal of competition--necessary at times for the public interest---very strict regulations are always needed then--removal of those regulations always produce horrible results----either competition regulates a market---which is impossible in monopoly situations---or regulations are needed.

 

[theeedude]

Originally posted by: QuantumPion

Originally posted by: BoomerD
Kahleeforneeya found out a couple of years ago just what happens when you de-regulate the energy markets. The players who brokered the deregulation, promised cheaper energy, the ability to buy your power from whatever source you want, (green energy, nuke, etc) but in the end, those turned out to be lies...Almost immediately, PG&E and the other big companies sued to stop the outside power purchaes, (they'd have been paid a small amount for use of their infrastructure) and in 2001, the energy companies threw the screwing to Kahleeforneeyan ratepayers...Enron, Duke Energy, and the rest...manipulated the market and drove prices thru the roof, driving PG&E into bankrupcy, and nearly doing so to a couple other major electric companies...

I'm sorry but you are misinformed. The cause of the California Energy Crisis was the failure to fully deregulate the energy market. They only deregulated the wholesale price of energy, while keeping the retail price of energy capped. So when the cost of the production of energy increased due to higher fuel costs, the energy producers sold their energy elsewhere or shut down entirely instead of taking a loss. This caused energy shortages and rolling blackouts.

The partial deregulation is also what allowed Enron et al to scam the market, using megawatt laundering (buying and reselling energy back to the providers for a higher price, using a loopwhole in the California law) and overscheduling (scamming money from the state to pay for phoney transmission costs). Neither of these would have been possible if the state had fully deregulated the energy market.

Bunch of Baloney. It is well documented that the electricity shortage was artificially created by the energy companies withholding supply. The biggest non-deregulated utility in CA, the LADWP had absolutely no problems, and actually made money selling electricity to other CA utilities. The state needs to have control over electricity market, because it has been clearly demonstrated that the energy markets can't be trusted to regulate themselves. Hopefully CA's expensive lesson will save other states the trouble we went through.

 

[kendo26]

Illinois and ComEd resident here. ComEd is saying the Chicago Area can expect a 24 percent increase, and on top of that they are crying bankruptcy if the higher rates don't go into effect.

 

[BrownTown]

I don't understand how you can be mad at a company for raising rates after being forced into keeing rates steady for 10 years. I mean in the last 10 years the prices of coal, natural gas, and uranium have more than doubled, plus you have 10 years of inflation to deal with. I'd say you darn well need rate increases. I mean, maybe yall could post what your currently being billed per killowatt hour, and what that would go to after the rate hikes so we can see how that compares to the rest of the country.

 

[kendo26]

Actually, the law that was signed ten years ago was a price roll back. The 24 percent increase in rates doesn't even equal what we were paying for power in '95