MorganEnergy

The absence of posts this week has been the result of way too much travel. Here, live from Heathrow (again), is a quick list of things that look interesting but I haven’t had time to read yet:

• At EU Policy Blog Steven Stoft explains how to deal with OPEC
• At Knowledge Problem Lynne Kiesling finds something to like in the New York Times
• And also from Lynne a video of Severin Borenstein talking about real time pricing

The great on-off British Energy sale saga has lurched back into life with rumors that Centrica will agree to take a 25% stake in the company, thereby enabling EdF to raise the total bid to £12bn. Although Centrica’s involvement will mean some British ownership of BE, the prospect of majority control by a French company is still raising nationalistic passions in some areas of the UK media. Here’s The Independent’s Jeremy Warner:

If this were France, the sale would have been wholly to Centrica, however low the price, so as to preserve the national integrity of the assets. Yet these days, money speaks louder than any strategic considerations the Government might have. So instead, it must settle for Centrica’s minority participation.

An alternative theory might be that the British government knows that new nuclear power stations will be deeply unpopular with the electorate and that having a French scapegoat at hand to blame for any problems will be very convenient.

Where will be find the next big crop of energy industry privatizations? The Wall Street Journal thinks that it might be in Turkey. Justification for this is based on a prediction from a Turkish think tank which believes that the country’s energy sector is desperately in need of investment – a projected requirement of $125bn over the next 12 years. Selling off companies to rich foreigners would certainly be one way to make that happen. And indeed some sales are already happening. However, ongoing tensions between various factions in Turkish politics may not provide the sort of comfortable environment that big investors prefer.

Knowledge Problem is a general economics blog run by Lynne Keisling of Northwestern University assisted by Michael Giberson. Many of the posts are about energy issues. Yesterday Lynne took Rebecca Smith of the Wall Street Journal to task for yet another one of those articles that looks at a market that is having problems (in this case Texas) and claims that all of those problems are caused by deregulation.

The ERGEG (European Regulators´ Group for Electricity and Gas) and CESR (Committee of European Securities Regulators) have launched a joint consultation on trading regulations in energy and gas markets. The core element of their concern is expressed in their press release as follows:

The existing EU securities legislation (i.e. the Market Abuse Directive – MAD) may not properly address potential market integrity issues in the electricity and gas markets. MAD applies almost exclusively to financial instruments admitted to trading on a regulated market. Physical products (e.g. spot market products) are not covered, and derivatives markets products are covered only if they are admitted to trading on a regulated market.

A consultation document has been issued asking market participants to comment on the effectiveness of the current regulations and, in particular, so say whether they think that a greater obligation for transparency would improve the situation. Details of responses received and public hearings to be held will hopefully be posted on the pages made available for them at the ERGEG web site.

The Texas Public Utilities Commission has committed the state to a massive $4.93 bn project that will build transmission to carry up to 18,456 MW of wind (and possibly solar) power from remote areas of the state to the major population centers.
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Back in 2006 Germany power company, E.ON, attempted to buy Endessa, a Spanish company. Although the European Commission approved the bid, it was blocked by Spain’s National Energy Commission. The wheels of European justice grind fairly slowly, but yesterday the European Court of Justice ruled that Spain had no right to block the purchase. More details on EurActive.

The EU Energy Policy blog has a long and interesting post on the question of how and when regulatory authorities can overturn long term contracts. It begins with a discussion of a recent US Supreme Court decision about contracts struck at the height of the California Energy Crisis and notes:

According to the federal judges, the market context at the time of contract formation should be taken into account to establish whether the price originally agreed upon reflected the statutory requirements of justness and reasonableness. Moreover, the contracts should be deemed contrary to the public interest if they are outside the ‘zone of reasonableness’ and resulted in retail rates higher than would be the case if that zone were not exceeded.

The post later goes on the compare and contrast US and EU regulatory approaches, and the varying powers that FERC and the European Commission have to make decisions of this type.

Maybe we should not have reported on the progress towards setting up a new power exchange in the UK, because Energy Business Review now says that the process has suffered yet another setback. Anthony Belchambers, the CEO of the Futures & Options Association, is reported as saying:

We were getting close to coming to a decision two or three months ago but there was a fairly fundamental change in circumstances outside our control. This meant that those on the shortlist were invited to submit supplementary proposals. This is going to add a further period of time and we are probably looking at something towards September-October before we are in a position to make a decision.

Fundamental change in circumstances? Anyone?

Still, October is not that far off.

Rumors abound that Swedish power company Vattenfall is putting together a bid for the UK’s Scottish & Southern Energy. The supposed bid price is £16.50. Reuters appears to have the best selection of gossip.