By Katy Grimes

With industrial electricity rates 88 percent higher in California than in Texas last year, the news that the San Onofre nuclear plant in is not going to be restarted is just more evidence of a government created energy crisis in the making.

Due to  political pressure from Sen. Barbara Boxer, D-CA for the closure of one of California’s largest power plants,  a shortage of electricity is expected, power producers agree. But they claim they can handle it. At what cost?

It is 108 degrees in Sacramento today. If this is a sign of the summer ahead, a shortage of electricity is not good news.

And it’s even tougher to take knowing my $300-a-month California electricity bill would be $61  in Texas.

Gov. Jerry Brown wants us to practice conservation measures. Could this be a Gray Davis redux? “The governor also is urging continued conservation of electricity as the hot summer months approach,” Sacramento’s News10 reported.

“Steve Berberich of the California Independent System Operator, which runs the state’s transmission grid, said pockets of Southern California will likely be subjected to conservation alerts this summer as the demand for electricity grows,” the Sacramento Bee reported.

“‘It will be tight – we will have to have conservation messages out there,’ said Berberich, the ISO’s chief executive. ‘If we ask for conservation, we need (consumers) to respond.’ Gov. Jerry Brown issued his own call for conservation.”

California politicians created the problem the last time, and they can do it again.

California’s No-Nukes Act

“The Nuclear Waste Act of 2012” was a ballot proposal which would immediately have prohibited the generation of nuclear power in the state, including by existing power plants. Fortunately, the initiative did not make it to the ballot. But that is the mindset of the party in political power in California.

The authors of the nuclear waste act claimed the Legislative Analyst’s Office’s fiscal analysis for the initiative was false and misleading, and prejudiced voters against signing our petition. They sued and tok the case all the way to the California Supreme Court, which refused to hear the case.

The last electricity crisis

The 2000-2001 California electricity crisis was caused by market and price manipulations, delays in approval of new power plants, and capped retail electricity prices.The state suffered from large-scale rolling blackouts. one of the state’s largest energy companies collapsed, and the economic fall-out led to the historic recall election of then Governor Gray Davis.

“California has a new energy crisis,” Forbes reported last month. “It’s not about power marketers manipulating electricity prices. And it’s not about oil spilling into the Pacific Ocean. It’s about the future of the long-standing nuclear facility in Southern California and whether the 1.4 million homes that it services will feel the effects of its shutdown.”

It takes double the power to replace the nuclear power by renewable and conventional energy. Most nuclear plants calculate 1000 Megawatts of power generates electricity to one million homes.

The California Legislative Analyst addressed the very real problem of what to replace nuclear power with, in their analysis of the 2012 proposed ballot initiative. “The state’s electricity authorities have stated that it would take many years to replace the electricity generating capacity of the two nuclear plants due to the current complexity of siting power plants and transmission lines.”

The two nuclear plants referred to by the LAO are The Diablo Canyon Nuclear Power Plant, located in San Luis Obispo and owned by PG&E, and the San Onofre Nuclear Generating Station, mainly owned by Southern California Edison in San Diego County.

“These two plants produce enough electricity to power more than 6 million homes — nearly 10,000 megawatts of of power,” I wrote in 2012. “The cost of power generation to replace clean nuclear power would be more than double what nuclear power costs. This is because renewable energy only produces intermittently, and needs double the amount of conventional or nuclear energy produced in order to address the intermittency issue. In addition to needing more renewable energy to power the same number of homes, wind and solar still need conventionally produced energy as backup.”

It would take more than 20,000 MegaWatts of conventional energy to replace the nuclear power generated by the two nuclear plants in the state —  if additional conventional power plants could even be built.

Although the radiation isotopes must be contained, nuclear power only generates steam; there are no greenhouse gas emissions produced, which is why it is considered clean energy. Renewable energy is far more expensive to produce than nuclear, and unreliable as a primary energy source, according to the energy expert.

What now?

How is this going to impact the cost of power? Increases are inevitable. It’s not going to be pretty.

Texas has electricity deregulation, which is the direction California should be headed. But don’t hold your breath with the governor urging conservation measures.

by Wayne Lusvardi

A few hundred years ago there was the famous Dutch Tulip Mania of 1637. It was followed by the South Sea Bubble of 1711 and the Mississippi Company Bubble of 1719.

In modern times, there was the California Energy Crisis of 2000-01, with its energy bubble caused by government price caps. Then there was the U.S. sub-prime Mortgage Bubble of 2003 to 2006, centered in California.

Now there is the mania of the San Bernardino County Joint Powers Authority to seize “underwater mortgages” on homes through the use of eminent domain.

The county’s proposal calls for a joint public-private partnership to be formed with a private mortgage company to reduce the amount owed on “underwater mortgages.”  Underwater mortgages are where the amount owed on a home loan is way more than the current market value of the home.

All the loan reductions would be rolled into a municipal bond to spread the cost of over-mortgaged properties to all property owners in the county on their property tax bill.  It is assumed that losses could be socialized; but gains in property value would still be allowed to private property owners.

Hope and mass delusion spring eternal when people are economically desperate. And San Bernardino homeowners with “underwater mortgages” are understandably desperate and prone to being misled by loan sharks. Only in this case the government is inviting the loan sharks into San Bernardino County, just as they did with the sub-prime Mortgage Bubble.

A Homeowner ‘Steering’ Committee

Homeowners are apparently being misled by the news that the county plans to use eminent domain to reduce the loans on their over-mortgaged properties. They have now formed the San Bernardino Homeownership Protection Program to steer San Bernardino County to rescue their over-mortgaged properties and not to have those mortgages picked by some other process.

David John of the Heritage Foundation reports that, at most, only about 20,000 to 30,000, of the 150,000 underwater mortgages would be considered for the proposed loan write down program. For the higher figure, that’s about 20 percent.  As we can already see the selection of who gets such loan reductions would be prone to being politicized.  Will loan reductions be “blue-lined,” just as mortgages were purportedly once denied to minority neighborhoods by “redlining?” 

How Homeowners Are Misled

Here is how Kathleen Pender, the personal finance and investing columnist for the San Francisco Chronicle, understands such a loan-reduction program would work:

“Suppose a homeowner owes $300,000 on a home now worth $200,000. The city seizes the loan and pays the current mortgage holders $170,000. This price assumes a large number of severely underwater homeowners will ultimately default. The city, which now owns the loan, writes down the balance to $190,000. Now instead of being underwater, the borrower has $10,000 in equity. He gets a new loan for $190,000, which pays off the $170,000, with $20,000 left over for the city to share with its investors and pay expenses.” 

Pender’s above example is mistaken, however.  Homeowners would not be allowed $20,000 in “equity” or price appreciation upon re-sale of their home. Government can socialize losses, but they cannot privatize gains.  A knowledgeable person like Pender is even misinformed as to how this program would work.  When even the experts are misled, it is no surprise that homeowners are deluded that there is some magic wand that government could wave to get rid of the excess mortgages on their properties and allow them to reap a small profit.

Profit on Loan Reductions Forbidden

I previously worked for a public housing authority and did many loan write-downs for low-income and affordable housing programs.  The standard practice was to require homeowners to agree in writing to give up any future value appreciation in their home as a condition for receiving a loan subsidy. This is also how the popular semi-private homeownership program called Habitat for Humanity works. Kurt Eggert, professor of law at Chapman University, has additionally said that homeowners would be forbidden from making a profit on any loan reductions for properties in foreclosure or with underwater mortgages.

The U.S. Subprime Home Loan Bubble of 2003 to 2007

We’re still suffering from the collapse of the mid-2000s subprime home loan bubble and resulting bank panic. The bubble was created by government to compensate for a huge loss of jobs resulting from a relative demographic decline of intact families to take out enough home and small business loans to support pensions and Medicare for the elderly.

Government policy “mandated” that renters take out sub-prime loans and become homeowners to prop up pensions and government medical care.  Obamacare is just another form of such a “mandate” to prop up pension and medical subsidies, only now it is called a “tax” because of the July 28 U.S. Supreme Court Ruling. This demographic imbalance is the same problem that has caused the economies of Greece, Spain and other European countries to collapse.

Bubbles, manias and Benito

San Bernardino has falsely promised homeowners with underwater mortgages that they can have their cake and eat it too; that they can reduce the over-mortgaged loans on their now deflated home values and can have some small amount of equity and future home price appreciation at the same time.

Even if implemented, such a loan reduction program would lead to yet another false bubble economy and crash.  Government cannot load the over-mortgaged portion of everyone’s home loan in California into a hidden premium in energy or water rates, as it has with Green Power to pay for smog reduction.

California has ended up with a man-made permanent water drought as an unintended consequence of cleaning up smog from urban air basins by loading the cost in inflated water rates.  San Bernardino County will unintentionally end up with permanent economic drought and stagnation if it should be able to figure out a way to legally justify the socializing of over-mortgaged properties by eminent domain.

Lenders would avoid making home loans in San Bernardino. And the bond market would be afraid to invest in San Bernardino for fear that bonds would be confiscated by government via eminent domain.  A system of gambling in home loan derivatives would be introduced to the San Bernardino real estate market, just as California allowed casinos on Indian Tribe lands in the Inland Empire.

California would more resemble Mussolini’s fascist Italy, in which business and government colluded, than it would a free market economy.  The home loan market in San Bernardino would be stigmatized as the first in the U.S. with socialized mortgages.