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April 9, 2002
PNW Water Institutional Development
Richard Slaughter, Ph.D.Don Reading, Ph.D.Climate Impacts GroupUniversity of Washington
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April 9, 2002
The Question
Does it require crisis?
April 9, 2002
Alternative ModelsMiles, et al.
• Dependent variable
- Regime effectiveness
- outcomes: changes in human behavior
• Independent variables
- problem structure (malign)
- institutional (regime) setting
- distribution of power
-quality of leadership
April 9, 2002
Alternative ModelsMiles, et al.
• Dependent variable- Regime effectiveness
- outcomes: changes in human behavior
• Independent variables- problem structure (malign)- institutional (regime) setting- distribution of power
-quality of leadershipMissing: Linkage between policy and outcomes
April 9, 2002
The Question
How quickly and completely do existing institutions translate social costs into private costs?
April 9, 2002
The Question
How quickly and completely do existing institutions translate social costs to private costs?
Hypothesis: the more effective the linkages between social and private costs, the more efficient the institution
April 9, 2002
The QuestionHow quickly and completely do existing
institutions translate social costs to private costs?
Hypothesis: the more effective the linkages between social and private costs, the more efficient the institution
Linkage (transactions costs):
1. Specification of property rights
2. Information
April 9, 2002
Alternative ModelsNorth
• Dependent variable- outcomes: changes in human
behavior• Independent variables
– institutional structure– transactions costs° cost of acquiring knowledge, negotiating agreements ° cost of enforcing agreements
April 9, 2002
Alternative ModelsNorth
• Assumption: Market reflects all human economic interaction, will reflect existing marginal costs as constrained by transactions costs
– Corollary 1: If policy directs a particular outcome (indirectly changing cost relationships), the market will reflect the change, producing unintended and sometimes perverse side-effects.– Corollary 2: The market will, at best, recognize only the
discounted present value of future costs.
April 9, 2002
Institutional Innovation
April 9, 2002
When Do Innovations Occur? Increased demand/Resource constraint
— changes price relationships
New technology
— allows use of a technology previously not feasible; reduces costs
Change in social priorities
— new public policy; changes prices
April 9, 2002
Case Studies Snake River
2000 - 2001 energy crisis
Klamath Basin
April 9, 2002
Klamath River Basin 2001
April 9, 2002
Expected Findings (Klamath)
Appropriation rights not defined in constitution or statues
Tribal rights
ESA and related statutes
Irrigation rights assigned by Bureau - Administrative allocation
Crisis continues …
April 9, 2002
Snake River 1850 - 2002
April 9, 2002
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1918
1921
1924
1927
1930
1933
1936
1939
1942
1945
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
0
1
Fish Flush Irrigated Acres Drought Milner CFS Brownlee CFS Plus 1 SD Minus 1 SD
Snake River Development HistoryUpper Snake: 345 diversions, 41 reaches, 700 water rights, 9 reservoirs
April 9, 2002
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1918
1921
1924
1927
1930
1933
1936
1939
1942
1945
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
0
1
Fish Flush Irrigated Acres Drought Milner CFS Brownlee CFS Plus 1 SD Minus 1 SD
Ground Water Development/Desert
Land Act 1877
Committee of Nine
National Reclamation Act
Jackson Lake 1911 - 16
Milner/Twin Falls Project
American Falls
Carey Act 1894
Snake River Development HistoryUpper Snake: 345 diversions, 41 reaches, 700 water rights, 9 reservoirs
April 9, 2002
April 9, 2002
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1918
1921
1924
1927
1930
1933
1936
1939
1942
1945
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
0
1
Fish Flush Irrigated Acres Drought Milner CFS Brownlee CFS Plus 1 SD Minus 1 SD
Ground Water Development/Desert
Land Act 1877
Committee of Nine
National Reclamation Act
Jackson Lake 1911 - 16
Milner/Twin Falls Project
American Falls
Carey Act 1894
Snake River Development HistoryUpper Snake: 345 diversions, 41 reaches, 700 water rights, 9 reservoirs
April 9, 2002
Snake River Development HistoryUpper Snake: 345 diversions, 41 reaches, 700 water rights, 9 reservoirs
April 9, 2002
California Electricity Market 1990 - 2010
April 9, 2002
In the social production of their existence, men inevitably enter into definite relations, which are independent of their will, namely relations of production appropriate to a given stage in the development of their material forces of production. The totality of these relations of production constitutes the economic structure of society, the real foundation, on which arises a legal and political superstructure and to which correspond definite forms of social consciousness. The mode of The mode of production of material life conditions the general production of material life conditions the general process of social, political and intellectual life. process of social, political and intellectual life.
A CONTRIBUTION TO THE CRITIQUE OF POLITICAL ECONOMY, Karl Marx, 1859
April 9, 2002
On-Peak
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
$650
$700
$750
$800
Jun-97 Jun-98 Jun-99 Jun-00 Jun-01
Mid-C Prices
$2,125
$3,322
Fill-up $25
Fill-up $50,000
Fill-up $8,500
April 9, 2002
FERC 888, 889 - 1996
Open Access Transmission
Separate Transmission/Generation
Merchant Plants
WHOLESALE DEREGULATIONWHOLESALE DEREGULATION
April 9, 2002
California Retail Deregulation
Separate Generation and Distribution (Retail) – Market, not Utility Commission, Determines Supply
Freeze Retail Rates – No Link Between Supply & Demand
Utilities Must Buy in Pool – No Bilateral Contracts
Uncertainty – No Generation Built Despite Demand Increases
April 9, 2002
‘‘Causes’Causes’ of Price Spikes
Supply & Demand Imbalance
Drought – Northwest/California Exchange
Natural Gas Prices
Market Manipulation
April 9, 2002
April 9, 2002
WSCC Power Area
70
90
110
130
150
170
190
210
230
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
YEAR
MW
500
600
700
800
900
1000
1100
1200
1300
1400
GW
H
WSCC Generation WSCC Peak WSCC Energy
April 9, 2002
ImpactsPrice Spikes
Demand Side (Conservation) Purchase Demand Elasticity
Supply Side Planned Generation (Natural Gas – CC’s, CT’s) Dam Operations to Maximize Power Output Not for Fish ‘Temporary’ Generation Contracts
FERC Rules Change July 2001 Price Caps, Generation Sale Requirement California Eliminated Perverse Rules
April 9, 2002
California-Mexico Power Area
20
30
40
50
60
70
80
90
100
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
YEAR
MW
150
200
250
300
350
400
450
500
550
600
650
GW
H
CA-MX Generation CA-MX Peak CA-MX Energy
April 9, 2002
WSCC Power Area
70
90
110
130
150
170
190
210
230
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
YEAR
MW
500
600
700
800
900
1000
1100
1200
1300
1400
GW
H
WSCC Generation WSCC Peak WSCC Energy
April 9, 2002
WSCC Generation 2001
41%
38%
6%7% 5% 3%
Hydro Steam
Nuclear Combustion Turbine
Combined Cycle Other
April 9, 2002
WSCC Generation Additions 2001-2010
Hydro
Combustion Turbine
Combined Cycle
Other
Nuclear
Steam
(10,000) - 10,000 20,000 30,000 40,000 50,000 60,000 70,000
MW
April 9, 2002
WSCC Generation 2010
30%
26%4%8%
29%
3%
Hydro Steam
Nuclear Combustion Turbine
Combined Cycle Other
April 9, 2002
WSCC 2001-2010 Generation Additions
2% 10%10%
78%
Utility Under Construction
Independent Power Producter Under Construction
Utility NOT Construction
Independent Producer NOT under Construction
April 9, 2002
MARKET ADJUSTMENTS THROUGH MARKET ADJUSTMENTS THROUGH PRICEPRICE AND AND INSTITUTIONAL DECISIONSINSTITUTIONAL DECISIONS
April 9, 2002
On-Peak
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
$650
$700
$750
$800
Jun-97 Jun-98 Jun-99 Jun-00 Jun-01
Mid-C Prices
$2,125
$3,322
Fill-up $25
Fill-up $50,000
Fill-up $8,500