Sunday, February 25, 2007

Coal plants and market manipulation (updated)

Texas is in dire need of additional power generation capacity. TXU was to help by building 11 new coal fired power plants in the state. A huge media campaign by a number of players, not the least of which was our very own Houston Chronicle, railed against the plan. Now Kolberg Kravits & Roberts, along with Texas Pacific Group have agreed to buy the utility and that if the deal goes through, they will scrap plans for the coal fired plants. While the environmentalists cheer, I have to wonder if there may be a different angle here. When summer comes the price of electricity is going to spike and without additional capacity, the price is going to spike even higher. That would be a very effective way for KKR and Texas Pacific Group to recoup their expenditures in buying TXU, meanwhile us ratepayers will be hung out to dry.

Thanks for nothing!

UPDATE:
Tom Fowler at the Chronicle sees the glass as half-full, but he also puts some numbers to the issue. I think he is wrong because the same problems TXU had will befall anyone else that wants to build cheap generating capacity (and coal, as filthy as it is, certainly fills that niche). The interest groups will crawl out of the woodwork. the result is that whatever capacity is built will probably be Natural gas fired meaning it will be subject to price spikes due to fuel costs.

3 Comments:

Anonymous Anonymous said...

I was a concerned when I saw TXU was up for grabs, and this morning's Chronicle confirmed the deal has been approved by the board of directors. I haven't read the story yet - just glanced at the headlines. I recently switched over to TXU after I got a $500 electric bill from Reliant. I locked in with TXU for a substantially reduced rate, but now I wonder if it means anything!? I'm an uninformed consumer, and I've no one to blame but myself! Pathetic!

I see nothing inherently wrong with coal burning plants.

February 26, 2007 7:41 AM  
Anonymous Anonymous said...

Oh - I get it.
Cya around

February 27, 2007 1:04 AM  
Anonymous Anonymous said...

If we look back to the beginning of the Texas PUC; you will see panicked Utilities trying to figure out how to make a bigger buck. The game then became "return on investment" We all had pretty good services compared to the rest of the world, and not as good as could be, but livable.

The Utilities figured out that to make more money they had to up the ROI and spend more on physical infrastructure, the kind that they could get that ROI; as the economy tanked in the Carter 22% interest years, more was sunk into plants and facilities.

Now think about it: is an investor consortium going to spend that kind of BILLIONS without an assurance in their game plan of getting some MULA $$$$$

If you look around at the Demise of HL&P and their foray into all sorts of stuff we are far worse off now than ever before and the demand is growing with each and every new development... we are seeing fewer power plants being built and a lot being sold off and the profits are not going back to the rate payers, but to the investors that separated the plants out of the scheme of things and into their pockets.

We have not lost power plants, de to the failure of upgrades and the increase in land values... wait until the next dry scorching hot summer; we will be just like the northeast... and blackouts, brownouts and other types of failures will be the order of the week!

February 28, 2007 7:39 AM  

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