Friday AM February 15th, 2008

CERA looks at electricity market trends...U.S. trade deficit declined in 2007 after setting records for five consecutive years...Labor Department reports newly laid-off workers filing claims for unemployment benefits fell slightly last week...

Power prices will continue to escalate, according to Jone-Lin Wang of Cambridge Energy Research Associates. The group's CERAWeek forums have been underway at the Westin Galleria.  But the cost of building power plants is also rising.

"The power industry face(s) a huge investment wave. We need to build a lot more power plants and transmission lines. That's just a reality, just to keep the lights on." Ed: "And building these power plants has doubled, maybe tripled." "That's our second point, and we just released a new index of building power plants in North America. And it was only 100 back in the year 2000, and now its 231. So we more than doubled the cost of building power plants. Just when the power industry is embarking on this huge investment—we need to build a lot—prices more than doubled! So that's the second one. And the third one is that exchange rates are not favorable. As you know, we don't build a lot of the components for power plants and transmission lines. In the case of nuclear, for example, we need to import parts and components from Japan and from France."

Because of public opinion, plans to build coal-fired power plants have been scaled back.

"And so if we don't build these coal plants, we have to build something else, and most likely, people will switch to natural gas. And now, we import quite a bit of gas, and it's projected to increase quite a bit. In ten years, it will be like 20 percent. So we will be subject to international movements, and the large countries, I mean countries with large gas reserves--you know, Russia, Iran and so on—electric power is increasingly dependent on natural gas, at least for the next ten years, because in North America we are rejecting coal because of CO2 concerns. We are embracing renewables, but renewables still don't have scale. And nuclear would take a long time. We're at the beginning of a nuclear revival, if we get there. And, but it takes ten years."

The cost of building power plants in the United States has risen 76 percent over the past three years, according to CERA. That means a $1 billion project in 2000 would cost around $2.3 billion today. Nuclear plant costs account for about 52 percent of the price increases since 2000. The Power Capital Costs Index predicts that 80 to 110 gigawatts of new generation capacity will come online by 2012.

Federal Reserve Chairman Ben Bernanke says the economic outlook has worsened. Speaking to the Senate Banking Committee, he signals that the central bank is poised to continue lowering interest rates. Bernanke says the combined impacts of the housing and credit crises have strained the economy. He says hiring has slowed and people are likely to tighten their belts further because of high energy prices and falling home values. Bernanke pledged that the Fed "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," indicating additional rate cuts are likely.

The Associated Press reports United Airlines and Houston-based Continental Airlines are in advanced negotiations on a possible merger. AP quotes a person familiar with the talks as saying the airlines could complete a combination quickly if Delta and Northwest strike a deal. The person, who wasn't authorized to speak by the companies, says there are still significant issues to resolve. United spokeswoman Jean Medina and Continental spokesman Dave Messing declined comment. Air France-KLM, the world's largest airline by revenue, has said it's considering investing in a Delta-Northwest combination. AP reports such a deal is expected to trigger more consolidation in the highly competitive airline industry. Airlines want to offer large global route networks to attractive lucrative corporate travel business.

American Airlines answered a call from pilots for faster contract negotiations--by proposing a longer process. Fort Worth-based American also offered the prospect of winner-take-all arbitration if talks fail. The company asked its 12,000-member Allied Pilots Association to begin four months of talks--compared to the union's four weeks--next month. American says after four months, both sides could enter a phase in which an arbitrator would pick the company's plan or the union's--but nothing in between. The matter would involve up to ten issues--five selected by each side. If neither side wants arbitration after four months, American says the national mediation board could intervene, with no deadline for a deal. But the union this week said mediation should be limited to 120 days. The end of mediation is an important step toward a strike.

An appeals court has upheld a judge's decision to vacate an Enron executive's conviction on falsifying records related to the broadband unit. Houston-based Enron went bankrupt in 2001 after its stock collapsed. The 5th U.S. Circuit Court of Appeals of New Orleans this week ruled ex-broadband finance chief Kevin Howard's conviction of falsifying records should be thrown out. The defense said the conviction was tied to a flawed legal theory used by prosecutors. U.S. District Judge Vanessa Gilmore last year threw out Howard's falsifying records conviction as well as four others for fraud and conspiracy because of the faulty theory. She also ordered a new trial. Prosecutors conceded the four fraud and conspiracy counts should be vacated, but asked the appeals court to uphold the falsifying records count--saying evidence proved the charge.

The U.S. trade deficit declined in 2007 after setting records for five consecutive years. The Commerce Department says the deficit dropped to $711 billion last year, a decline of 6.2 percent. The trade deficit with China continued to rise, jumping by 10.2 percent to $256.3 billion. That was the largest gap ever recorded with a single country, as Chinese imports surged despite a string of high-profile recalls of tainted products. The Bush administration credits its free trade policies for spurring strong growth in exports while critics contend that even with the lower overall deficit, the imbalance is still nearly double what it was in 2001, the year Bush took office. For December, the deficit fell by 6.9 percent to $58.8 billion, a bigger-than-expected improvement to close out the year. Analysts say the decline in the dollar over the past two years has helped to strengthen U.S. exports, making American goods cheaper and ultimately more competitive in many overseas markets.

The Labor Department reports that the number of newly laid-off workers filing claims for unemployment benefits fell by 9,000 to 348,000 last week. That was a bigger improvement than analysts had been expecting. The four-week average for claims, which smoothes out the weekly volatility, rose by 3,500 to 347,250. The four-week average is at its highest level since October 2005.

A major U.S. bond insurer has told lawmakers that it has adequate capital to survive industry-wide distress and that a bailout is not needed. New York regulators are working with bond insurers and banks to ease financial strains in the bond insurance industry that government officials say threatens to hurt communities, individual investors and the wider economy. But the chief financial officer with MBIA, one of the biggest bond insurers, told a House panel that a rescue plan is unnecessary. The chairman of rival Ambac Financial Group said "stable and predictable" credit ratings by the agencies are needed to restore confidence in the industry. Officials say the distress in the bond insurance industry, an offshoot of the subprime mortgage crisis, is spreading and could bring serious problems far beyond the financial markets. Lawmakers and regulators are concerned that a collapse of the bond insurers—which back the funding for hospitals, schools and other public works--could deliver another glancing blow to already battered banks and force higher taxes on homeowners.

The New York Times is cutting 100 jobs from its newsroom this year as financial pressures mount from a weak economy and competition from the Internet. Executive Editor Bill Keller told employees Thursday that the cuts would come mainly through attrition and buyouts, but layoffs were also possible. Spokeswoman Catherine Mathis said the paper has a total of 1,332 newsroom employees, which would make the cutbacks equivalent to nearly eight percent of the editorial staff. The Times has cut jobs elsewhere at the paper but these cuts are the first in recent memory to affect its newsroom.

The IRS says taxpayers can go ahead and file returns that include five forms dealing with the alternative minimum tax. It had asked them to hold off until now because of last-minute action by Congress to fix the AMT. The Internal Revenue Service says it needed time to reprogram its computers to process the forms. Lawmakers waited until December to put a one-year freeze on the growth of the tax. The AMT was originally meant to affect only a handful of very rich people. But now it hits millions of middle- and upper-middle income Americans because it never was adjusted for inflation. The five forms now cleared for filing deal with education credits, residential energy credits, and child and dependent care expenses. The mortgage interest credit and the first-time homebuyer credit for District of Columbia residents also are good to go. You can find the actual forms online.

Imagine having your shirt recharge your wireless phone. Someday, it just might be possible. Scientists have found how to generate electricity by moving fabric with tiny wires woven inside. The development is seen raising the possibility of fabrics that produce power simply by gentle movement. The research, described in the journal Nature, combines the precision of nanotechnology with an effect where electricity is generated when pressure is applied to certain materials. While the idea has been understood at least as far back as the 19th century, it is getting new examination, as concerns about energy supplies are inspiring quests for alternative power sources. Scientists at the Georgia Institute of Technology covered individual fibers of fabric with tiny wires made of zinc oxide. The wires are 1,800 times thinner than a human hair.

Bio photo of Ed Mayberry

Ed Mayberry

Local Anchor, All Things Considered

Ed Mayberry has worked in radio since 1971, with many of those years spent on the rock 'n' roll disc jockey side of the business...