¶ … leaves some questions unanswered. For example the issue of elasticity was raised. Now, for power demand I wonder to what degree such elasticity, especially in the short-term, truly exists. I view Verve as being in a relatively inelastic industry, particularly in light of the lack of ready substitutes, so the regulatory constraints on their earnings are likely a bigger factor in limiting revenues. The company's annual report has been cited declaring that short and medium term issues to profitability remain, and I am curious as to your take as to what these are. The alleged reluctance to use fossil fuels is given the same weighting in the discussion as the Carbon Pollution Reduction Scheme, for example, which seems unlikely to reflect reality.
Response to Barr. I think the conclusions reached here are very reasonable. Verve's current situation is not reflective of its ideal situation due to a high level of government interference. It seems in trying to please too many masters (power generation, environment, potential competitors) the authorities have placed Verve in a no-win situation for the time being. The conclusion of this paper hints at major changes down the pipeline for Verve and that these will ultimately determine the financial viability of Verve. This leaves Verve with the question of how to cobble together survival until these events (tariff cap removal especially) occur. Moreover, even with these changes Verve will remain subject to government's heavy hand -- will this limit their profit potential no matter what other changes are made?
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