A letter Gimpy sent to his Senator :

[SuperScout]

Let's see if I can follow your logic (?):

1. You cite The Life Extension Foundation as practically the source of knowlwedge, wisdom and discoveries as it relates to health.

2. The Life Extension Foundation has made the statement that "Americans pay outrageous prices for prescription medications because of a flawed and antiquated regulatory system... the resullt is a quasi-monopoly that protects drug company profits at the expense of the consumer.

The only way to stop the spiraling increase in prescription drug prices is for the citizenry to organize and petition Congress to amend the Food, Drug and Cosmetic Act.

We propose to change the law in a way that creates a free market environment, where the price of medications would plummet to affordable levels..."

3. I agree with The Life Extension Foundation that less regulation, i.e., a "free makert environment," would help reduce prices of medications.

4. You reply with "... No........I'm afraid to say that we need MORE "regulation" in the area of affordable drugs in this country NOT LESS!..."

Good Grief! You change positions faster and more frequently than the wunderkind of osmosis, Johnny Kerry! No wonder you like him.

Regarding dereguation of utilities here in Texas: our rates have held steady, or have actually decreased, for all the folks that I've talked to statewide. Of course, you might be taking you talking points from such intellectual luminaries as Molly Ivins, so I could be wrong.

The chart you posted, that the MOPH copied incorrectly from The Life Extension Foundation, was flawed from the very beginning, not with just some "slight information inaccuracies," but with some completely erroneous material; it proves nothing, other than the MOPH Surgeon General was citing bad science.

[Gimpy]

Originally posted by SuperScout Let's see if I can follow your logic (?):

1. You cite The Life Extension Foundation as practically the source of knowlwedge, wisdom and discoveries as it relates to health.

***
No......I did NOT. I posted several other sources as well .
***


2. The Life Extension Foundation has made the statement that "Americans pay outrageous prices for prescription medications because of a flawed and antiquated regulatory system... the resullt is a quasi-monopoly that protects drug company profits at the expense of the consumer.

***
Yes........I DO agree with this! ***


The only way to stop the spiraling increase in prescription drug prices is for the citizenry to organize and petition Congress to amend the Food, Drug and Cosmetic Act.
***
Yes.....I do agree with this! ***



We propose to change the law in a way that creates a free market environment, where the price of medications would plummet to affordable levels..."
***
No............I do NOT agree with all of this part. I believe that "price controls" and if the FDA relaxed its drug approval standards, the cost of bringing new patented drugs could be reduced.

The current exorbitant profit margins now being reaped, also provide incentive for drug companies to get their patented molecules approved by the FDA, whether they kill people or not. Horror stories abound of how drug companies have egregiously falsified data to obtain FDA approval.**

3. I agree with The Life Extension Foundation that less regulation, i.e., a "free makert environment," would help reduce prices of medications.

***
Yes and NO.......as explained above .
***

4. You reply with "... No........I'm afraid to say that we need MORE "regulation" in the area of affordable drugs in this country NOT LESS!..."

Good Grief! You change positions faster and more frequently than the wunderkind of osmosis, Johnny Kerry! No wonder you like him.

***
You, like your "heros" in the Whitehouse and Congress extrapolate and manipulate statements and turn them into half-truths and outright misrepresentations of facts! No surprise there!
***

Regarding dereguation of utilities here in Texas: our rates have held steady, or have actually decreased, for all the folks that I've talked to statewide. Of course, you might be taking you talking points from such intellectual luminaries as Molly Ivins, so I could be wrong.

The chart you posted, that the MOPH copied incorrectly from The Life Extension Foundation, was flawed from the very beginning, not with just some "slight information inaccuracies," but with some completely erroneous material; it proves nothing, other than the MOPH Surgeon General was citing bad science.

***
Only acording to YOU my friend! The subsequent information I posted thorougly clarified and clearly explained any mis-conceptions created by the MOPH article!
***

And, the article below just ADDS weight to my arguement.

Texas "de-regulation" info will follow.

******

March 23, 2004
Regulators Want Antidepressants to List Warning
By GARDINER HARRIS



Patients taking antidepressants can become suicidal in the first weeks of therapy, and physicians should watch patients closely when first giving the drugs or changing dosages, federal regulators said yesterday.

The warnings are part of a public health advisory issued by the Food and Drug Administration and are a reminder that antidepressants, taken by millions around the world, are not without risks. The agency is asking drug manufacturers to place detailed caveats about the drugs' side effects prominently on their labels.

The agency's decision to issue such a broad warning was a surprise. Top F.D.A. officials have long insisted that their decisions are driven only by clear-cut evidence from well-run clinical trials.

But in a conference call with reporters yesterday, agency officials said that most studies had shown no convincing link between drug therapy and suicide. However, suicide is such a rare side effect that studies on the subject have been difficult to interpret, the regulators said.

Still, the agency issued the advisory anyway
.
"It warns physicians that patients' depression may become worse," said Dr. Russell Katz, the agency's chief of neurological drugs, "that they may develop suicidal thinking or behavior after the initiation of treatment."

A series of secret studies, which were conducted by drug companies and became public last year, seemed to show that depressed children and teenagers given antidepressants were more likely to become suicidal than those given placebos. The studies also showed that most antidepressants were not effective in treating depression in children and teenagers. Those studies are still under review at the agency.

Nevertheless, an independent scientific advisory panel urged the agency last month to issue stronger warnings about the possibility that teenagers and children given the drugs could become suicidal.

Some psychiatrists said the new warnings were likely to have an impact on sales, which amounted to about $12 billion worldwide in 2002, and would change how the drugs were prescribed.

Prozac, from Eli Lilly, is one of the most widely prescribed drugs of all time. Zoloft, from Pfizer, had $3.1 billion in sales last year, making it one of the world's top-selling medicines.

Dr. Jeffrey Lieberman, a professor of psychiatry and pharmacology at the University of North Carolina, said that the agency's action suggested that antidepressants had become too popular and physicians too casual about dispensing them.
"I think the effect of these warnings will be to have physicians become a bit more conservative in using these drugs," Dr. Lieberman said. "They'll start limiting their use of them just to patients who are clearly depressed with clinically significant symptoms as opposed to those who have very mild symptoms."

Dr. Regina Casper, a professor of psychiatry at Stanford, said that family physicians had become far too confident in the drugs' safety. Patients who are given their first prescription for an antidepressant should see their doctor at least once a week and perhaps more frequently, something family physicians rarely have time for, she said.
"I think this will have a real sobering effect among family practice doctors," Dr. Casper said.

The warnings also tell physicians to be particularly careful to evaluate whether patients have bipolar illness, also known as manic depression. Antidepressant therapy for such patients can cause a manic episode, the label states.

While suicide is already mentioned in a rarely read portion of a sheet included with prescriptions for the antidepressants, the new discussion of suicide will be placed in the drug's warning section, the most important, widely read and prominent section of the label. To further ensure that doctors will read the material, part of it will be in boldface. The label is the primary way the F.D.A. communicates with physicians about the safety and efficacy of drugs.

While the F.D.A. does not have the power to require the changes , if the manufacturers refuse to go along, the agency can declare their drugs mislabeled and force their removal. But this takes much longer and is a burdensome, time consuming process which could allow more deaths to occur until the solution is agreed upon. Because every antidepressant introduced in the past 15 years is included in the warning, no company is at a disadvantage. Indeed, even drugs like the GlaxoSmithKline antidepressant Wellbutrin, also known as Zyban, that have not been linked with suicide were included.

The drugs in the warning are: Prozac; Zoloft; Paxil; Wellbutrin; Luvox, from Solvay; Celexa and Lexapro, from Forest Laboratories Inc.; Effexor, from Wyeth; Serzone, from Bristol-Myers Squibb; and Remeron, from Akzo Nobel.

The dispute about whether popular antidepressants cause some patients to become suicidal or violent has been continuing for 14 years. In 1990, a Harvard psychiatrist wrote a paper suggesting that some of his patients had become acutely suicidal after taking Prozac. More testimonials followed. But a 1991 scientific advisory panel put together by the drug industry concluded that there was no convincing evidence.

######

Hmmmmmmmmm, ya suppose their "scientific panel" may have been somewhat "biased" towards concluding in FAVOR of the Drug Industry??? Naw, surely not? Yeah, and I'm sure they've got some GREAT swamp-front home building sites they would love to sell you also!

[Gimpy]

Originally posted by SuperScout Let's see if I can follow your logic (?):

Regarding dereguation of utilities here in Texas: our rates have held steady, or have actually decreased, for all the folks that I've talked to statewide. Of course, you might be taking you talking points from such intellectual luminaries as Molly Ivins, so I could be wrong.

Well now, is that so?

***
July 10, 2002

Confidence in Texas' Electric Deregulation Program Declines As Problems Rise
by Dan Piller

Almost half a year after its much-ballyhooed launch, electric deregulation in Texas remains an unfulfilled promise.

Rates, which dropped Jan. 1 when deregulation took effect, are rising again . Most consumers have been slow to switch from their longtime monopoly utility to a new electricity provider, while thousands of others have encountered billing problems. Electricity trading has been tarred by disclosures of "sham trades," adding to the dark cloud cast over the industry by Enron's collapse.

Barely 4 percent of Texas' 5.5 million eligible meters have been switched from an investor-owned utility to one of several new electricity marketers. In North Texas, just 3 percent of TXU's customers have switched, according to a Wall Street report released last week.

Despite those small numbers, the task of accounting for customer switches has proved to be too much for the computer systems of the utilities, the providers and the Electric Reliability Council of Texas (ERCOT).

ERCOT chief executive Tom Noel says as many as 300,000 bills and accounts out of nearly 1.2 million switches attempted since trials started in August have been lost or delivered late, due largely to computer errors. Most of these switches are for people who have moved, not from changing their electric providers.
TXU acknowledges that it has lost track of about 90,000 of its 2.8 million customer accounts.

"There's been a lot of finger-pointing," says Noel, who has been on the hot seat in front of legislators for paperwork problems that have plagued deregulation since Jan. 1. Last week, ERCOT's chairman, Jack K. Hawks, resigned under fire.

Noel notes that ERCOT has been working to tie together the computer systems of the various utilities and energy marketers, but says "in reality, we all are responsible."

The missteps have caused second-guessing even among the leading advocates of deregulation, including Erle Nye, chairman of Dallas-based TXU Corp., and state Rep. Steve Wolens of Dallas, one of the authors of the 1999 Texas law that opened up the power market.

"In hindsight, we should have given deregulation a longer trial period before we plunged in," says Nye, referring to a pilot program run by ERCOT in late 2001.

Says Wolens: "We underestimated the magnitude of the task involved in the switching process."

Meanwhile, the big consumer savings touted by government and industry leaders, including then-Gov. George Bush and former Enron Chairman Kenneth Lay, have yet to be realized.

A 6 percent reduction in TXU's rates mandated by deregulation on Jan. 1 is likely to disappear later this month when the Public Utility Commission acts on TXU's request to raise rates 6 percent because of rising natural gas costs. TXU's new rate, when monthly charges are included, will be near 9 cents per kilowatt hour.

Rival providers, who opened the market in January with rates at least a penny below TXU's regulated "price-to-beat," have recently hiked their rates in anticipation of TXU's increase. As of last week, just one of the eight competitors in the Fort Worth-Dallas market -- Reliant Resources of Houston -- was offering a price below 8 cents per kilowatt hour.

The skimpy margin between the price to beat and the competitive prices has prompted a round of 'I-told-you-so' from deregulation critics.

"Deregulation is a clear case of overpromising," said Reggie Harris, director of the Southwest office of Consumers Union. "This is reminiscent of what we were told years ago about nuclear power, that it would be 'too cheap to meter."'

Competition was weakened in Texas this spring when one of the new market entrants, New Power Holdings, stopped taking new customers amid financial difficulties. After booking 86,000 accounts during the pilot program, and about a third of all switches under deregulation, New Power is facing possible bankruptcy. The company, 44-percent owned by Enron, was squeezed by that company's collapse.

The loss of New Power was significant because it was the most aggressive marketer -- offering an opening price of more than 1 cent per kilowatt hour below TXU's price.

The price comparisons have left many consumers unimpressed. Darwin Hushhour of Keller, a customer of the Tri-County Electric Cooperative, said he was surprised to learn that his mother-in-law would have to pay a monthly price higher than his for electricity from TXU when she moved from Bryan to an area of Keller not served by Tri-County.

"I was feeling left out because Tri-County said it wouldn't be a part of deregulation," Hushhour said. "Now I feel better. At least I can check around for another rate for my mother-in-law, but so far it doesn't look all that attractive. As for me, I plan to stay with the cooperative."

Meanwhile Enron, like an unwanted relative that won't leave, continues to haunt deregulation. Last week, PUC recommended that Enron be fined $7 million for using phony "wash trades" during peak electricity demand periods last August to drive up prices and revenues.


The proposed fine was an indication that, contrary to promises made by deregulation boosters in Texas, the state's vaunted wholesale market can indeed be gamed by clever wholesale electricity traders, and that California-style wholesale price spikes can happen here.

Some worry that Texas may be vulnerable to another round of wholesale price rises this summer as the state's electric grid moves the peak loads needed to power air conditioners.

Although the state expects to generate up to 25 percent more electricity than the 60,000 megawatts needed on its hottest days, Texas' transmission system is vulnerable to congestion. And Fort Worth-Dallas is a prime worry. On a peak hot day, the Metroplex will consume about 9,000 megawatts of electricity while nearby generators can create about 5,000 megawatts.
The deficit has to be drawn over transmission wires, usually from generating plants in central and south Texas.

"I'm worried about congestion on the transmission system this summer," said Wolens. "We could have a problem."

Noel is more sanguine, describing Texas' transmission system as healthy. Still, he added, "there is no question that more transmission is needed, particularly for the D/FW area."
In 2001, TXU opened a 345-kilovolt transmission line from a Limestone County generator to hook up with the Fort Worth-Dallas grid. But three other major transmission projects -- two approaching Fort Worth-Dallas from the southwest in Comanche County and another northwest from Graham -- won't be ready for another year.

The experiences of California and even Texas last August show that any constraints in the electricity delivery system can prove expensive since electricity can't be stored. The wholesale trading market for electricity is unregulated, and system operators usually can't follow trades that are made mostly on Internet platforms.

So on days when electricity is in short supply, wholesale prices can run from the normal $20-$35 per megawatt hour to $1,000 or more.

Noel says that ERCOT has learned from the hiccup last August and has adopted a transmission rate structure for wholesalers that penalizes, rather than rewards, traders such as those at Enron who deliberately overloaded the grid system.

"This summer, if you cause the congestion, you'll pay for it rather than benefit by it," Noel said. >

State and federal regulators are working on various rules that would control the wholesale markets. Politicians are taking notice.

(I SURE AS HELL HOPE SO--------My opinion!= Gimp)


Democratic gubernatorial candidate Tony Sanchez has already run television spots highlighting "skyrocketing" electric rates.
Anti-deregulation forces see a possible opportunity in this political cycle. "I hope that deregulation becomes a major political issue in this campaign," said Tom Smith, director of Texas Public Citizen and a longtime critic of deregulation.

"Tony [Sanchez] is setting up the issue beautifully."
The glitches in Texas, coming soon after the California disaster, have given other states cold feet. Arkansas, Montana, Nevada, New Mexico, Oregon and West Virginia, which had been set to open their electricity markets this year, have delayed deregulation. Florida and North Carolina, two larger states whose legislatures have considered deregulation bills, have decided to pass for the time being. (YOU'RE DARN RIGHT WE HAVE! = GIMP)

TXU's Nye points to Enron, which he called "the poster boy for deregulation," as a prime cause of renewed skepticism. Enron and its now-discredited management for years preached the virtues of opening both the regional transmission grids and the monopoly utility systems to free market competition.

Enron aside, the old-line investor-owned utilities have proved to be tough competitors even when the laws allow them to be undercut in price. Virginia, like Texas, began deregulation on Jan. 1. But after five months, the competitive market has all but evaporated as none of the new providers were able to compete with the dominant Dominion Power. Similarly, Illinois has failed to generate a competitive retail market after deregulation.

Wall Street, at least, had assumed greater switching. "TXU has lost only about 3 percent of its customers, fewer than I anticipated. We figured on a 20 percent turnover by the end of the year," said Daniel Ford, an analyst with Lehman Brothers.
TXU's Nye looks for residential electricity marketing to heat up this summer.

"People become price-sensitive when their costs are highest," says Nye. "If we're going to see significant movement of customers, the summer will be the time."

For information on how to switch electric providers, go to: www.powertochoose.com

Copyright 2002 Fort Worth Star Telegram

********

Yep, looks like things are working out real fine down there in "Rio Linda" land Super.

YEAH.........RIGHT!

[SuperScout]

You post crap that is as dated as last year's headlines, and have far less impact. At first, I thought you had an original thought, but I was mistaken; sorry 'bout that. "Democratic gubernatorial candidate Tony Sanchez has already run television spots highlighting "skyrocketing" electric rates.
Anti-deregulation forces see a possible opportunity in this political cycle. "I hope that deregulation becomes a major political issue in this campaign," said Tom Smith, director of Texas Public Citizen and a longtime critic of deregulation.

"Tony [Sanchez] is setting up the issue beautifully."
The glitches in Texas, coming soon after the California disaster, have given other states cold feet. Arkansas, Montana, Nevada, New Mexico, Oregon and West Virginia, which had been set to open their electricity markets this year, have delayed deregulation. Florida and North Carolina, two larger states whose legislatures have considered deregulation bills, have decided to pass for the time being." [In case you forgot to update your calendar, that race involving Tony Sanchez was decided in 2002, almost two years ago.]

[Gimpy]

Why don't YOU show us some documented proof where things have improved so much since then?

Then, if you CAN.............I'll show YOU some evidence that supports "deregulation" is NOT working like all the republicans and energy giants said it would!

[Gimpy]

let me show YOU something!

*****

YES, "CALIFORNIA TYPE" ENERGY PROBLEMS CAN HAPPEN IN TEXAS AND EVERY OTHER STATE

Janee Briesemeister
Senior Policy Analyst

Consumers Union(1) Southwest Regional Office

The energy crisis in California is an extreme situation, to be sure. However, many of the underlying causes of the situation there are fundamental flaws in the theory and structure of deregulated electricity markets. To say that California's problems are due solely to a shortage of generating plants and that Texas shouldn't be concerned because we have new generating plants coming on line grossly oversimplifies both situations.

Consumers Union has warned for years that the electricity market is not suited for deregulation and relying on the market could cost consumers considerably more than sticking with regulation.(2) The fundamental problem is the characteristics of the commodity are not compatible with markets. Electricity can't be stored, there are no substitutes, and there are limits on the ability of buyers to conserve. Moreover, electricity is too vital to health, safety and the economy to leave its fate to the ups and downs of market trading.

Texas' electricity deregulation law(3) (4) is not modeled after California's law, but that difference alone will not ensure success. At the same time it is not too late to carefully examine Texas' deregulation law to ensure sufficient safeguards are in place to prevent high prices, shortages, and poor service.

Similarities between California Texas

California is the "Perfect Storm" of bad law, bad luck, bad decisions and possibly bad actors when it comes to electricity deregulation. Yet any one of the many factors which contributed to the California crisis could cause price increases and /or shortages of electricity anywhere. A deregulated electricity market is fraught with potential problems, and Texas could experience these problems as well.

Market Structure

California generators were required to sell into a power pool(6) where generators were paid the highest price bid. Texas has not followed the mandatory power pool model. Because the pool produced low prices initially, the California Public Utilities Commission (CPUC) discouraged utilities from entering long term contracts for purchasing energy. In retrospect, reliance on the pool, rather than encouraging a portfolio of generation purchases including long-term contracts, is now seen as contributing to price spikes in California.

Although Texas does not require trading through a pool neither does it require long-term contracts as is frequently reported in the news media. Utilities here can secure generation as they see fit. Although Texas has rejected the pool structure used in California, it is too early to predict precisely how utilities will structure their electricity purchase portfolios, such as whether and how they would mix long term, shorter term and spot purchases. The utilities' contracting strategy will not be subject to disclosure so none of us will know how the wholesale market is working. Moreover, purchasing power through a bilateral contact rather than a pool does not ensure a stable price. Bilateral contracts are often tied to a market index, and thus prices could fluctuate as do spot market prices. In addition, a Harvard economist has also criticized the ERCOT market design, saying it compares to California's, despite the fact that a mandatory power pool is not required. He recommends Texas follow the model used in Pennsylvania.(7)

The California PUC and the Legislature have also identified the stakeholder ISO board as another contributor to market dysfunction.(8) The California Legislature has passed an emergency law disbanding the industry-dominated ISO board and replacing it with one governed by independent appointees of the governor, who are charged with protecting the public interest.(9) The ERCOT ISO is very similar to the original California ISO. The ERCOT ISO is governed by a "stakeholder" board. Like California, there are customer representatives on the board, including representatives of residential customers. However, customer representatives are in the minority.

Finally, deregulation itself is a factor in the California situation. Regulators and lawmakers found they did not have sufficient authority to take action to correct market dysfunction under their reduced powers.(10) The Legislature is in emergency session to address the California energy crisis. Losing control to federal regulators has also been a problem. Californians and the other Western States have been asking the Federal Energy Regulatory Commission to cap wholesale prices in the West to calm the market. FERC has refused. Non-ERCOT areas in Texas will also fall under greater FERC jurisdiction with deregulation. In addition, the municipal utilities in California that did not opt in to competition are not experiencing the energy crisis that has hit customers of investor- owned utilities.

"Gaming" the market/Market power

Many if not most observers agree the utilities, generators and brokers in California used the rules established in the market to their best advantage (i.e. maximize profit). Generators and marketers anywhere will take advantage of the market rules in order to maximize profit. "Gaming" or engaging in strategic actions to take advantage of market rules or market situations (eg outages) is not necessarily a violation of anti-trust laws or illegal per se. Rather, gaming is intended to increase the price of a product or service in order to increase profit. Several of the generators serving California have earned record profits in recent months, although few will separately break out earnings from California.(11)

Texas' law may be insufficient to prevent gaming. The Texas law does place a limitation on the amount of generation that can be controlled by one generator within a power region to no more than 20% market share. The theory is a generator with a large market share could exhibit market power and control price. However, a firm's market share is not the only determinant of market power. For example, no generator in California has close to 20% market share.

A market share limitation would not have prevented gaming in California and cannot be relied upon to prevent all gaming in Texas. That's because market power and/or market manipulation is exercised by exploiting market rules and/or a specific situation, such as an unexpected outage. In fact, the staff of the Texas PUC has identified gaming opportunities stemming from ERCOT market rules and transmission congestion within ERCOT.(12)
Transmission constraints

Transmission constraints have played a role in the California crisis, as "Path 15" connecting the northern and southern ends of the state creates a bottleneck in the movement of electricity. If power could have been moved from the southern part of California, the northern area could have avoided some of the recent rolling blackouts.

There are severe transmission constraints in Texas, including within ERCOT, such as in the Dallas-Fort Worth area. The ERCOT ISO has identified "critical" transmission lines necessary to support competition. Some of these new transmission lines are under construction, while others are not expected to be completed prior to the end of the year 2002.(13) A delay in construction of any of these lines would limit the ability to move power around the state and increase the potential for areas within ERCOT to experience shortages or price volatility. The new power plants under construction are useless unless there is sufficient transmission capacity to move the power where it is needed. There are also transmission constraints affecting areas of Texas outside of ERCOT. Although these "non-ERCOT" areas are interconnected to the larger national grid, transmission constraints can give local utilities market power and/or increase prices due to the inability to move power into the area.

Outages

Supply shortages due to outages contributed to the price spikes in California. On the books, demand and supply are not out of whack in California but unexpected outages (along with transmission constraints) caused demand to exceed available supply. Markets in California and New England states have both experienced a marked increase in the number of plant outages under deregulation. Studies in both places conclude that at least some of these outages could be due to generators deliberately withholding capacity in order to drive up price.(14) Actions by generators in California are currently under investigation.(15)
Unplanned outages drive up market price in any deregulated market, and there is no assurance, other than price caps, that price spikes due to unexpected shortages won't happen in Texas. For example, just last May the wholesale price of electricity in ERCOT spiked and reserve margins were strained due to unplanned outages at several generation plants in Texas.(16)

Unplanned outages can occur due to weather events, unscheduled maintenance, etc.(17)

Lack of reserve requirement

Like Texas, California projected generation surpluses at the time its deregulation law was enacted. Neither the Texas nor the California laws require a generation reserve margin. The market rules proposed by the ERCOT ISO also do not require a reserve margin, although the consumer representatives on the ERCOT ISO governing board have sought such a requirement.(18) Lack of rainfall in California prevented hydroelectric plants from producing energy during the summer peak demand. A reserve margin would have provided a cushion against the price spikes that resulted due to shortages.

A reserve margin may not appear to be important in Texas because the forecast is for an excess supply of generation for the next few years. As the situation in California illustrates, it is not possible to predict future events which might limit supply. There is also a disincentive to build new plants during times of excess supply. Thus, Texas could get hit with a supply-demand imbalance some years down the road-a problem that would be mitigated by a reserve requirement.(19)

Waiting for "price signals" to build new plants

The market, not public policy, determines when and where new plants are built. The market waits for "price signals" to spur investment. To translate into layman's terms, a "price signal" to build is a very high price, which ensures the investor in the new plant that there is a profit to be made. Deregulation was supposed to shift the risk of building power plants away from consumers and to the market. Yet consumers are the ones at risk of shortages and/or high prices by relying on "price signals" to induce investment in plants.

Despite comments made by some there is little evidence to support claims that California's environmental laws are to blame for California's current shortage of electricity. A spokesperson for Houston-based Reliant energy, which operates electric plants in California, has referred to those claims as "absolutely false," and Texas Natural Resource Conservation Commission member Ralph Marquez has stated that Texas' air laws are as stringent as California's.(20) Indeed, the state's utilities' blocked attempts by the CPUC to build more power plants six years ago, claiming the forecasts of increased demand were exaggerated.(21)

Market forces, coupled with the lack of a reserve requirement could create a supply shortage in Texas in a few years. Twenty-eight of the plants announced in Texas are not yet under construction and may not be built until market prices are high enough to please investors. That's because deregulation has meant that generation planning is no longer a regulatory function, but a market function. In a free market businesses wait for "price signals" before investing in new plants. Under deregulation no state can require a company to build a plant. Texas law also leaves responsibility for the construction of new power plants to the market.

Lack of fuel diversity

The recent rise in natural gas prices has had an unprecedented effect on electricity prices, due to the growing dependence on natural gas for production of electricity. Most of the new generation in Texas uses natural gas as fuel. Summer spikes in natural gas prices are indicative of our county's growing reliance on natural gas to generate electricity. Texas Railroad Commissioner Tony Garza has cited electric generation plants as a factor in the rise in natural gas prices.(22) Such high natural gas prices were never contemplated when either the California or Texas deregulation laws were passed.

Access to natural gas

California's access to natural gas has been severely reduced due to a pipeline taken out of service. Without fuel, electric generators cannot produce electricity. California is also a risk of home heating "blackouts" due to lack of natural gas.

All states, including Texas are becoming more dependent on natural gas for electric generation. In fact, Texas' electricity deregulation law states a preference for use of natural gas for the generation of electricity. As Texas and other states become more reliant on natural gas for electric generation, issues such as gas storage, pipelines, commodity prices and control of natural gas by electric market competitors must be front and center. Other states have recognized the critical link between natural gas and electricity supply. For example, the ISO for the deregulated New England region has recently completed a study of gas pipeline capacity necessary to support electric plants. The initial findings are that constraints in the transportation of natural gas in the New England region could affect gas-fired electrical generation in the next 2-4 years.(23)

Texas is different from other states in that the regulation of retail gas and electric utilities are in separate agencies and there has been little coordination between the agencies. Yet there is common ownership between the state's two largest electric utilities and two largest natural gas utilities. The consolidation in the energy industry necessitates stronger oversight of affiliate relationships. These include the potential for cross-subsidy between the regulated gas side and the unregulated retail electric side of the business and the potential for unfair affiliate transaction and relationships which disadvantage consumers and competitors. One example would be a gas utility favoring its competitive electric affiliate over a competitor in the sale and/or transport of gas.

Access to natural gas and the potential for market power in natural gas affecting electricity generation are serious issues to which scant attention has been paid. To our knowledge there has been no study similar to the one done in New England to identify whether there will be sufficient gas available to meet the needs of electric generators under deregulation.

Unforeseen events/bad luck

A series of unpredictable events, including insufficient rainfall affecting hydro electricity and an out-of-service gas pipelines created shortages and compounded structural problems in California. No state law can immunize against unforeseen events or bad luck. At times such events may trigger short- term price spikes. Unpredictable events can also cause longer term market dysfunction if left unchecked.

A deregulated market without "circuit breakers" such as price caps allows generators and marketers to take advantage of unforeseen events, such as weather, emergency plant maintenance, fuel price spikes, etc. These unplanned events not only cause price increases and/or shortages in and of themselves, generators can capitalize on the situation and further increases prices in the electricity market.

Similar unexpected or uncontrollable events could happen in Texas and affect the supply and price of electricity. No once can control the weather and events such as tornadoes, hurricanes and ice storms could have a very significant impact on the price of electricity under deregulation. For example, reports have already identified the drought as potentially causing a shortage of electricity here in Texas.(24) As stated earlier, unscheduled plant outages drove up wholesale prices temporarily in Texas last May, and two summers ago in the Midwest.

Its not just about California

Significant problems, although smaller in comparison to California's, are cropping up in other states. Utilities in other deregulated states have recently sought to increase the cap on consumer prices, citing high wholesale prices. For example, GPU, which voluntarily sold its generation plants, has petitioned the Pennsylvania Public Utility Commission for a rate increase. Rhode Island regulators granted a 13% increase in the standard offer price last August. In New York there was a 40% increase in the generation portion of the Con Edison bill last summer. That portion of consumers' bills was not capped. In Massachusetts regulators recently approved a 15% increase in the generation portion of the default electric rate.

Deregulation "Successes" portrayed in the media also do not tell the whole story. Although the Texas deregulation model is often compared to Pennsylvania's there are some key differences between the two models. In Pennsylvania retail price caps for consumers extend as long as 2010. The generation portion of the capped retail rate is also capped until 2009, thus limiting generation price swings-a significant difference from both California and Texas. There is a power plant capacity reserve requirement in Pennsylvania, unlike California and Texas. All companies in the retail market must maintain a reserve margin. Still, there is pressure on wholesale prices on Pennsylvania. Utility.com has exited the market for residential customers. A major utility has sought to increase its capped price to recover over $200 million in past and projected losses, citing high wholesale prices and mentioning the California situation.(25 26 27 28)

Ohio is also compared to Texas and called a success, although that designation would appear to also be premature, as the retail market opened only this year. There is virtually no activity in the retail market for residential consumers. Price caps are in place for 3-5 years as in Texas. The incumbent utility must sell a certain amount of generation at a set price to new retailers serving each customer group (this acts like a price cap on a portion of generation in the market). An important difference between Ohio and Texas is that Ohio permits "opt-out" municipal aggregation, meaning a customer is included in the group electric purchase negotiated by the municipality unless she chooses another provider. Nearly 100 municipalities have joined together to form a buying pool and have negotiated a contract promising consumers rate cuts of 1-3% below the 5% cut mandated by law for the incumbent utility. Voters have endorsed municipal aggregation with an "opt-out" feature in nearly 40 communities. Opt-out aggregation gives the municipalities buying power to secure good deals for their citizens and businesses.

Conclusion

It is now clear that deregulation is a risky proposition for consumers. Despite the promise of savings, consumers in several states have seen increased prices under deregulation. California consumers are likely to be forced to bail out utility debt to the tune of several billion more dollars on top of the over $20 billion in so-called "stranded costs" already paid.

When deregulation does not work, lawmakers are blamed. Consumers were promised savings under deregulation. Consumers and businesses are not satisfied to leave electricity (and other energy) prices to the cycles of the market. They demand that lawmakers correct extreme high prices that threaten the economic viability of consumers and businesses.(29) We call on lawmakers to give consumers certainty about their electric bills and service quality under deregulation. The promise that consumers would be no worse off must be kept.

The electric market in Texas has only recently been deregulated. So it may be too early to call the market or the state's law a success or a failure, even though some things have failed to happen and continue to plague the industry. Texas may have passed a very different statute than California did, but it also cannot outlaw the realities of a deregulated market that places the private economic interest of businesses over the public interest standard which guided the provision of regulated electricity.
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Notes:
(1) Consumers Union is a nonprofit membership organization chartered in 1936 under the laws of the state of New York to provide consumers with information, education, and counsel about goods, services, health, and personal finance; and to initiate and cooperate with individual and group efforts to maintain and enhance the quality of life for consumers. Consumers Union's income is solely derived from the sale of Consumer Reports, its other publications and from noncommercial contributions, grants and fees. In addition to reports on Consumers Union's own product testing, Consumer Reports, with approximately 4.5 million paid circulation, regularly carries articles on health, product safety, marketplace economics, and legislative, judicial, and regulatory actions which affect consumer welfare. Consumers Union's publications carry no advertising and receive no commercial support.

(2) Cooper, Mark, Residential Consumer Economics of Electric Utility Restructuring, (Consumer Federation of America and Consumers Union, July, 1998) (hereafter, Cooper, Economics). Cooper, Mark, Electricity Restructuring and the Price Spikes of 1998 (Consumer Federation of America and Consumers Union, June 1999 (hereafter, Cooper, Spike). Cooper, Mark, Reconsidering Electricity Restructuring (Consumer Federation and Consumers Union, November, 2000) (hereafter, Reconsidering). Earlier analysis has reviewed conceptual, simulation and foreign evidence. This paper relies solely on the domestic, U.S. experience to date.

(3) First, we use the popular term "deregulation" although "restructuring" is more accurate. Certain aspects of the retail sale of electricity remain regulated, such as charges for using transmission and distribution service. It is also our position that due to the importance of electricity and its characteristics, it should never be completely deregulated.

We also use the more common term "utilities" to refer to the incumbent utilities, although they will technically be "affiliated retail electric providers" after January 2002. New entrants into the retail market will be "retail electric providers." Affiliated retail providers are required to offer consumers a rate known as the "price to beat" or PTB for 5 years after the market opens.

(4) The bill, known as SB 7 passed in the 76th Legislature in 1999.

(5) Electric Reliability Council of Texas, the grid operator for most of the state.

(6) Numerous articles have been written about what went wrong in California. See for example, "How State's Consumers Lost With Electricity Deregulation," Nancy Vogel, Los Angeles Times, December 9, 2000.

(7) Comments of Dr. Bill Hogan before the Public Utility Commission in Project No. 23220, Petition of the Electric Reliability Council of Texas for Approval of the ERCOT Protocols.

(8) Report on the California Electricity Market to Governor Gray Davis, prepared by the California Public Utilities Commission, August 2, 2000.

(9) ABX1 5.

(10) See for example the August report to the Governor of California; also comments of Commissioners and lawmakers reported in various news stories.

(11) "Independent Plants Play Role in Electricity Troubles," Richard A. Oppel, Jr. New York Times, January 23, 2001. "Charges of Gouging as Power Costs Skyrocket," Chris Kraul, Los Angles Times, August 28, 2000; State targets power suppliers for refunds," Steve Johnson, San Jose Mercury News, Januray 7, 2001

(12) These concerns, and analyses prepared by Dr. Shmuel Oren, can be found in PUC Docket No. 23220, Petition of the Electric Reliability Council of Texas for Approval of the ERCOT Protocols.

(13) The status of transmission constraint projects is updated regularly on the ERCOT ISO website. www.ercot.com.

(14) See for example, "Generator Outage Increases: A Preliminary Analysis of Outage Trends in the New England Electricity Market," Prepared by Daniel Allen, Bruce Biewald and David Schlissel for Union of Concerned Scientists, Cambridge, MA. January 7, 2001.

(15) Power plant outages increased 461% in August, 2000 over August 1999. Various investigations of practices in the wholesale market in California are ongoing, including one by the state's attorney general. The City of San Francisco has sued 11 generators alleging they deliberately withheld supply from the market. Paul Joskow, an economist at the Massachusetts Institute of Technology, an co-author of the study, "Quantitative Analysis of Pricing Behavior in California's Wholesale Electricity Market During Summer 2000," November, 2000, has stated that his study "suggested generators had been exercising some market power," as reported in "Overload: For Power Suppliers, The California Market Loses Its Golden Glow", Wall Street Journal, January 25, 2001, p. 1.

(16) Update on Activities in the ERCOT Wholesale Electricity Market, April-June 2000. PUC Project 19616

(17) For example, a prolonged drought can affect electricity production. An August report prepared for the Texas Drought Preparedness Council , a state government task force, warned that continued lack of rainfall could affect electricity production in some parts of the state.

(18) The PUC is currently discussing whether to require ERCOT to require a reserve margin.

(19) Indeed, PUC staff is estimating a potential capacity shortage for several utilities this coming summer. These include Austin Energy, CPL, EGS, SWEPCO and WTU. Project No. 21534, Market Oversight Division Memo of January 8, 2001.

(20) "Bush's Idea of Easing Smog Rules Won't Help, Experts Say," Marla Cone, Gary Polakovic, Los Angles Times, January 25, 2001.

(21) "Utilities fought attempts to book power supply, monitoring in '90's",Chris O'Brien, San Jose Mercury News. February 3, 2001.

(22) News release of Commissioner Tony Garza, September 26, 2000. http://www.rrc.state.tx.us/news-rele...00/000926.html

(23) http://www.iso-ne.com/Special_Studies/Gas_Study/

(24) Memo of Texas Drought Preparedness Council on Statewide Drought Situation Report, August 3, 2000.

(25) PUC Defers Ruling on GPU Rate Relief: Adds Request to Merger Application, Pennsylvania Public Utility Commission Press Release of January 24, 2002 at http://puc.paonline.com

(26) "Pennsylvania: How dare they compare us with California," Restructuring Today, January 24, 2002

(27) "California and Pennsylvania Retail Market Development", Ahmed Kaloko, PhD. Chief Economist, Pennsylvania Public Utility Commission. At http://puc.paonline.ocom

(28) For example, Comments of AEP in Project 21409, at pp. 14-15 AEP states that "In Pennsylvania, competitive suppliers unable to find power at prices low enough to support day-to-day cash flow requirements have actually informed residential customers and small commercial customers that they would be better off returning to the incumbent's regulated standard offer. One competitive retail provider, Dominion Resources, even offered "extra low" rates to entice customers to return in the fall."

(29) For example, a recent poll of California consumers shows that Californians favor re-regulation of electricity by 2 to 1. More than half of those polled did not believe the state had an energy shortage, rather blaming greed by suppliers for price spikes and black-outs. One-third of respondents blamed private utilities for the crisis; while the next largest share of blame, 22%, went to the Legislature. See "Most Californians Think Electricity Crunch is Artificial (Times Poll)", Mark Z. Barabak, Los Angles Times, January 8, 2003.