The war for your electric bill

Stock analyst Jim Jubak, focusing on the effects of private-equity buyout funds, explains, "the last time Wall Street applied its best minds to the electric power industry, they brought us Enron, brownouts and wholesale-price-gouging in California, not to mention higher electric bills." Jubak points out that Wall Street investors raised $189 billion in 2006, and are headed for more than $250 billion this year, and with these funds, are buying out and privatizing public companies which supply energy to local communities. Companies like First Data, HCA, TXU Corp have all been privatized with this trend. Mirant, owner of 24 U.S. power generating plants is currently for sale and being targeted by the privatizers.

Jubak points to some likely results of this process.

And buyout funds are kicking the tires on other utilities. The buyout funds have lots of money to put to work, and utilities have the kind of big predictable cash flow that these funds like to see. This is bad, bad news for your utility bill in the short run. In the long run, it's even worse.

In the short run, making a profit on one of these buyout deals depends, first, on "restructuring" the company so that it's more profitable than it was before the buyout. Most of the time, restructuring involves spinning off money-losing operations and outsourcing some part of operations -- and it always involves cutting jobs.

That would be bad enough in the case of a utility, since job cuts are likely to mean a decline in utility service.

But you'll wind up paying more for less service because, second, turning those small gains in corporate profits into big profits for buyout investors rests on building the buyout deal so that borrowed money, known as leverage, multiplies those relatively modest improvements in corporate earnings.

In funding such privatizing investments, investors put up some cash, but borrow the rest by issuing debt backed by the assets of the acquired company. Jubak explains that, "in essence, the purchased company buys itself, but the buyout fund (and its investors) gets 100% of all future profits when the company is eventually sold back to the public." This is a shell game on a grand scale, but with an unwitting public as the dupes.

The debt load of these purchases also results in a reduced investment in new power lines and new power plants, all of which could benefit the consumer.

more...... articles.moneycentral.msn.com/Investing/

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Electricity consumers deserve better system

AP reporter Ryan Keith pointed out in his story that deregulation has not been successful in any of the 16 states, plus the District of Columbia, that have put it into place since the late 1990s. In fact, consumers in deregulated states pay more for electricity than those who stayed with regulating their power industries - about 30 percent more in 2006. And the gap continues to grow.

Consumers in all states are paying considerably more for electricity than a decade ago, primarily because of increases in the cost of fuel, primarily natural gas.

But that doesn't explain why deregulated states pay more for electricity than those in regulated states. What does seem to explain the situation is the lack of a competitive market.

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One thing is clear, however: Deregulation of electric utilities isn't working, and consumers are paying for it. That's a problem which needs a solution.

Power lines in new link to childhood leukaemia

From the UK:

A leaked Government-commissioned report has raised fresh fears of a link between power lines and cancer.

The draft paper urges ministers to consider banning the building of homes and schools close to overhead high voltage power cables to reduce significantly exposure to electromagnetic fields from the electricity grid.

The Stakeholder Advisory Group on Extremely Low Frequency Electromagnetic Radiation (Sage) says a ban is the "best available option", pointing out that some countries have "corridors" for high voltage power lines where development is not allowed.

Some stakeholders took the view - adopted by the Government's health advisers and the World Health Organisation - that childhood leukaemia is the only adverse health effect where evidence is strong enough for precautionary measures. According to this view, if there is a link, the building ban would cut just one case of childhood leukaemia every year or two and the costs would outweigh the benefits by a factor of at least 20.

But others have backed a California Department of Health Services paper in 2002 which suggested electromagnetic fields are "possibly carcinogenic" in terms of childhood leukaemia. It also cited four other health effects - adult leukaemia, adult brain tumours, miscarriages and motor neurone disease.

"The advice to government from following this 'California' view would therefore be to tend to favour implementing the 'corridors for new build' option," Sage added, stressing that this is why it has not been able to form a consensus.

The panel also recommends that the Health Protection Agency should issue more information about how to reduce the impact of exposure to electromagnetic fields.

For some years, there has been concern about cancer risks among people living near power lines. A pooled analysis of several studies suggests that the possibility exists of a doubling of the risk of leukaemia in children in homes at high levels of exposure to extremely low frequency (50-60 Hz) magnetic fields.

For the overwhelming majority of children living in homes with magnetic field levels below a given level - estimated to be 99.6 per cent of children in the UK Childhood Cancer Study - the data was consistent with no increased risk.

For higher magnetic fields levels, the leukaemia risk was estimated to be double.

more... www.telegraph.co.uk

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