|
|
Enron Mail |
---------------------- Forwarded by Carla Hoffman/PDX/ECT on 08/11/2000 10:18
AM --------------------------- Enron Capital & Trade Resources Corp. From: "Pergher, Gunther" <Gunther.Pergher@dowjones.com< 08/11/2000 09:59 AM To: "Pergher, Gunther" <Gunther.Pergher@dowjones.com< cc: (bcc: Carla Hoffman/PDX/ECT) Subject: DJ Rising Electricity Prices Could Be Wild Card In July CPI 16:55 GMT 11 August 2000 =DJ Rising Electricity Prices Could Be Wild Card In July CPI By Henry J. Pulizzi Of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)--Now that gasoline prices are finally settling down, economists say another energy component could prove to be a spoiler on the government's main consumer inflation gauge. Amid a shifting regulatory landscape and typical summertime price increases, the nation's utilities appear to be boosting consumers' electricity bills enough to skew the Labor Department's July consumer price index. Those gains would partly offset the anticipated favorable influence of recently declining gas prices. "There is a real chance of starling increases in electricity prices over the next month or two, thanks mostly to the bungled deregulation of the industry," Ian Sheperdson, chief U.S. economist at High Frequency Economics in Valhalla, N.Y., wrote in a recent report. "All the anecdotal evidence from the West and East Costs suggests consumers are reeling from sudden double - and in some cases triple - digit percentage increases in their bills." First Union economist Mark Vitner agreed: "It is a potential trouble spot, it is a particular problem in the West." In California, where no new power plants have been built in a decade, the private companies that purchased plants from the state's utilities have been raising prices in response to strong demand and dwindling supply. The impact of the cost increases will be revealed Wednesday, when the Labor Department releases the July CPI next Wednesday. Economists generally expect the figures to point to a continued tame inflation scenario - a 0.1% overall monthly increase, featuring declining clothing, computer and gas prices is forecast. Labor Department economist Patrick Jackman said recent statistics suggest gas prices fell 3% to 3.5% last month. That would mark a departure from June, when soaring prices at the nation's gas stations contributed to a big 0.6% spike in the CPI. Rising Demand, Surging Prices But electricity, which represents 2.5% of the entire index, will be a wild card in the coming report. Electricity costs usually rise in the summer as consumers pay more for the juice that powers their air conditioners. This summer is no different, Vitner said, adding that utilities have even more pricing power than normal. "Overall demand for electricity has been rising. All this high-tech equipment uses a lot of electricity," Vitner said. Indeed, prices rose 0.8% in June after seasonal adjustments. Before those adjustments, prices surged a whopping 6.6% during the month. As for a July increase, Jackman said "it certainly is a possibility. The question is how are the seasonal factors are going to handle it." Sheperdson, however, believes it's clear that electricity costs are on the rise. "Three factors are driving prices higher," he said. "First, flaws in the auction system set up after deregulation effectively allow the generating companies to manipulate prices at times of high demand. Second, the economic boom means that periods of high demand are much more common than was anticipated at the time of deregulation, so generators have more opportunity to extract premium prices from distributors and, hence, consumers. Third, little new electricity-generating capacity has been added in recent years." Producer prices, which Sheperdson says provide a good guide to movements in the CPI, may offer ominous insight into the potential consumer electricity price gains. Residential electric power prices on the producer level rose faster in July than at any point since January 1991. And they aren't expected to slow down anytime soon. August could be especially problematic because higher electricity costs will coincide with another pickup in gas prices and continued gains in natural gas prices, Vitner said. "We have no idea how far the CPI measure of residential electricity prices could rise, but there must be a good chance that substantial increases will be recorded," Sheperdson said. "With natural gas prices also climbing again, following a dip in July, it may take a while before energy ceases to push inflation higher." -Henry J. Pulizzi; Dow Jones Newswires; 202-862-9255; henry.pulizzi@dowjones.com Copyright © 2000, Dow Jones & Company Inc G_nther A. Pergher Senior Analyst Dow Jones & Company Inc. Tel. 609.520.7067 Fax. 609.452.3531 The information transmitted is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this in error, please contact the sender and delete the material from any computer. <<Gunther Pergher (E-mail).vcf<< - Gunther Pergher (E-mail).vcf
|