Every now and then we note a typical energy cost increase from one of the many local power/utility companies. From KCP&L upticks to recent Westsar rate spikes . . . The cost of power is always trending upward.
Accordingly, here's a really smart question along with info from a reader in our blog community . . .
How can the utility companies putting in substantial increases when the inputs of energy are declining in cost?
Well you get a monopoly, then you pay off, I mean sponsor key politicos, then you take control of the black boxes of government, then you get a rigged increase
Price change since September, 2014.
Crude oil: -50%
Natural gas: -33%
Copper: -22%
Aluminum: -16%
Coal: -12%
Steel: -69%
Silver: -17%
Are the public slavish cows who don't understand, does the media undress that, inquiring minds want to know . . .
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You decide or at least the PR flacks for these companies like FORMER COUNCIL WOMAN CINDY CIRCO should at last have to work on Saturday.
More in a bit . . .
Could it be all the emission regulations for power plants handed down by the EPA? There is a little more to power production than the cost of fuel.
ReplyDeleteI am sure when can blame President George W. Bush for that. I believe Obama said when he ran for president that he wanted to put the coal companies out of business.
ReplyDeleteWhen you have a crooked Public Utilities Commission like Missouri the consumers don’t have a fucking chance. Those sonzabitches are involved in everything except balancing consumer interests.
ReplyDelete8:05 Yes and no, the Supreme Court sent the EPA regulations back to the EPA. They are currently non-binding. With that said, many plants had already begun implementing the changes in anticipation of their eventual implementation.
ReplyDeleteHowever, given the DRAMATIC decrease in fuel costs (natural gas and coal are the only real commoditites important here) it is relevant and there should be a noticeable decrease in utility costs. Now some utility companies work in the futures market, they do this so they aren't beholden to spikes in commodity prices. This allows them to make budgets for the year. So even with the dramatic decrease in prices, many utility companies are paying above market price (while they are protecting against an increase by locking in prices via futures, they also do not reap the price drops either) Furthermore, they are now buying futures contracts that will lock in these lower prices for 2016 and 2017.
So while, I can see how rates are not decreasing this year, the question is, will we see decreases in 2016 and 2017?
I hope my comment at 12:58 makes sense. If you have any questions please feel free to ask.
ReplyDeleteAs an example lets look at Central Appalacian coal futures. From Sept 2014 to Sept 2016. If in Sept 2014 the utility had bought a futures contract for Sept 2015 they would have paid around $59. Fast forward to Sept 2015, the price is now $42 for that same amount of coal, but the utility is now taking delivery on the coal futures contract they purchased at $59. So the utility is paying $17 more than the spot price of coal. BUT they have to buy coal for 2016, so they are going to buy a Sept 2016 futures contract at $45. Now Sept 2016 comes and lets pretend the price of coal has rebounded to $60, the utility will be taking delivery on their futures contract they paid $45 for so a $15 discount.
ReplyDeleteThere is a lag in the realization of prices. This is why there hasn't been a rash of bankruptcy's in the oil Exploration and production sector. They are still realizing $80 prices for a barrel of oil, even though the price of oil is really only $45. Its called hedging. But those hedges are rolling off now in teh 4th quarter and many oil exploration compainies will struggle as we head into 2016 and their hedges roll off and they have to realize the market price.
It can get really confusing when you start thowint in 3-way collars which are popular among many energy producers.
Whats the bitch about fuel costs? It costs a lot of money to fly politicians around from resort to resort
ReplyDeleteTriple down economics
ReplyDeleteHow are those wind mills coming?
ReplyDeleteOh that's right there is no grid where you put the wind mills