Energy Cartel Plugs Into Free Market

* In their April 10 commentary, “Give Power Buyers a Club in Cartel Wars,” Michael Shames and Peter Navarro propose a new definition of “fair”: “This fair price would be cost-based--not market driven.”

Their definition of “fair” price ignores the following:

What other people are bidding (market forces); the value of the product to the consumer; and the financial goals of the sellers.

Well, the government of Cuba determined the prices of salt and tomatoes that way, a determination that produced perpetual shortages of both products. Price controls on natural gas, petroleum and passbook savings produced shortages of all those things in the U.S. in the late ‘70s until price controls were removed by the Carter and Reagan administrations. That is not the kind of “fair” that a dynamic, growing economy wants.

Is there really a large constituency in Washington and Oregon that would want to join us in such a buyers’ cartel? I got the idea from reading The Times that those states would rather serve their own basic uses first and then sell their surpluses to the grid (not guaranteed to exist) at market prices.

MATTHEW R. MARLER

San Diego

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Regarding Shames and Navarro’s belated admission as to production costs is telling and incomplete. Until the recent 46% increase, prices were capped at 5 cents per kilowatt-hour. But if production costs, not counting accounts receivable financing costs, are at 15 cents per kilowatt-hour, then the price cap was truly doing financial harm to the utilities. One could dare say that with the permission to sign longer-term hedge contracts and a rate of 15 cents to 20 cents per kilowatt-hour, enacted some 12 to 15 months ago, the utilities would not be in these dire straits. And neither would we.

ANTHONY CANALES

Granada Hills

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Michael Ramirez’s cartoon (Commentary, April 10) made a very clear point. Gov. Gray Davis is at least trying to do something about the energy crisis in California. President Bush, on the other hand, is attempting to do . . . nothing.

JASON LOGAN

San Diego