James Hamilton on Proposition 80

Given my call to Just Say No to ARNOLD’s propositions, the news reported by Kevin Drum warms my heart that my state will not fall for the replacement governor’s spin. But that’s only Propositions 74 to 77. Proposition 73 is a call to the “right to life” (better put anti-choice) crowd to come help ARNOLD at the polls and will likely fail. Proposition 78 reminds me of Bush’s Rx bill – and I’m not so sure about whether we are ready to really pay for the Proposition 79 alternative.

Proposition 80 is another attempt by my state to regulate the provision of electricity. Our last experiments with re-regulation have not worked so well so I was wondering if there was any wisdom on this new one. James Hamilton comes through:

California law AB 1890 forced the major California utilities to divest their fossil-fuel generating capacity, created the California Power Exchange to run wholesale auctions of electricity, and mandated a reduction in retail electricity prices. By 2000, California had reached a situation in which electrical generating capacity was close to demand on peak usage days. Because of the way in which wholesale prices were determined by the bids from power producers, in periods when there was the least spare capacity, it turned out to be in the financial interests of producers to have as much of their production off-line as possible in order to be able to sell at a nearly unlimited price. One of the key things that made this market manipulation possible was the fact that retail demand was by construction completely unresponsive to daily market conditions. Proposition 80 would repeal sections of AB 1890, and replace them with an outright ban on users making new arrangements to purchase electricity directly from producers. The proposition would further prohibit time-differentiated rate schedules for small users, unless the users give affirmative written consent.

He continues as to why we should vote no on this proposal. I’m convinced – it’s no on everything. Now, I don’t know what makes me more angry. That our replacement governor decided to waste our monies and time with these propositions – or that his minions are on TV with such brazen dishonesty trying to get us to vote yes.

Meanwhile – back to energy issues and my latest post. My Tamny should visit the blog of James Hamilton before opining on oil profits. I certainly intend to.