Category: $$$$$$

Oh, The Thinks Bob Can Think!

3/30/2016

Hannibal BPW General Manager Bob Stevenson thinks

In previous columns you might have read between the lines to think I am in favor of the HBPW buying wind energy from western Kansas.

No, Bob, what I think is that you're a shameless shill for Clean Line Energy Partners and I wonder what you're getting out of it, on a personal level. No reading between the lines required! I read between the lines to try to decipher your grammatically tired columns. And that makes me tired. But, hey, what would Tuesday be without an advertisement for Clean Line penned by Bob? Productive, that's what.

This week's column purports that Clean Line is the only way for Hannibal to reach economical wind markets. Really? Based on what? Bob doesn't say. It's a fantastical statement without any facts to back it up. I don't believe it.

Bob shares that he will be changing Hannibal's purchasing strategy in June, 2017. Is that when the open and competitive purchasing process ends and the sole source back room deals begin? Like most municipalities, Hannibal has codified purchasing requirements. I guess Bob is going to change the City Code? Good luck, there, tiger!

What's the problem with soliciting bids for wind energy and paying the transmission costs on the existing system? Could it reveal that economical wind energy could reach Hannibal without a Clean Line? You could even sign a PPA for that wind, just to keep your prices "stable" over the long term. Because stable prices, even those that become way too high when compared to market prices, sort of like Prairie State, are best, right? You'll never know the possibilities of what energy is available until you openly solicit bids!

Instead, Bob prefers to operate in a much smaller world where the all the energy available can only be delivered by a Clean Line. That's simply ridiculous, Bob! And it's not true.

And then Bob starts waxing Sibylline about a future where all businesses in the world relocate to Hannibal because only it has green energy delivered by a Clean Line.

Why buy the cow when you can get the milk for free, Bob? Sure, businesses like to pretend they are powered by green energy. But that's all they do... pretend! They don't have to move to Hannibal to pretend they're powered by green energy They simply buy renewable energy credits (RECs) and carry on at their preferred location. Having energy delivered by a Clean Line isn't a draw for businesses to relocate to Hannibal. Buying junk RECs from renewable energy projects in another state or region allows a business to claim it's powered by green energy, at little cost. It's a heck of a lot cheaper than relocating the physical business to Hannibal.

Hannibal could become known for something alright... for buying capacity on a transmission line to nowhere at great expense to its ratepayers.

Have you ever tried your hand at fan fiction, Bob?

3 Comments

U.S. DOE Takes Kickback From Investors To Condemn Private Property

3/28/2016

6 Comments

Think your home is your castle? Not anymore, if the Federal government can make money selling it to a private investor.

On Friday, the U.S. Department of Energy sold its authority to condemn land to private investors in exchange for two percent of the investors' profit from using the condemned land.

That's right... the U.S. DOE will receive 2% of the revenues collected by Clean Line at the end of each fiscal quarter, once the transmission line starts delivering electricity. DOE says it will use its new windfall "to offset costs associated with federal hydropower infrastructure or for any other authorized purpose." So, at best, this payola will be used to lower rates for customers of federal hydropower marketers. At worst, it will be used "for any other authorized purpose." Of course, this isn't defined. So ol' Beethoven could "authorize" the purchase of a private island for him and his renewable energy investor buddies. Anything goes, right, Ernie?

I don't think that was the intent of Congress in allowing a brainless piece of lobbyist mischief to become part of the 2005 Energy Policy Act. Section 1222 doesn't contemplate the Federal government making money off transmission projects it "participates" in or "owns." Nor does it authorize the Secretary to determine how his boodle is spent. Not anywhere.

Everybody is making money off the Clean Line scheme. Clean Line's investors, Clean Line's executives (personally invested in the project), legislators Clean Line has "donated" to, vendors who want to supply goods and services, local governments being paid off at the rate of $7500/transmission mile, wind companies, landowners who lease their land for wind farm royalties, Federal hydropower ratepayers, environmental groups, unions, economic development hacks, and even the Federal government. It's all profit and no sacrifice from these entities. Everyone's got their finger into the money pie, and it costs them nothing. These are the supposed "public benefits."

And these are the sacrifices that must be made so that "the public" can benefit. The landowner whose property is along the transmission line route is forced to sacrifice his private property to enable this money-fest for the benefit of others without any skin in the game. He pays dearly. The landowner can be found at the bottom of this greed pile on. The landowner isn't part of any "share in the wealth" plan. The landowner is involuntarily forced to make a sacrifice by having his property condemned by the Federal government so that others can profit from its use. In exchange, the landowner is handed a one time pittance that attempts to compensate him for the current value of his property taken. A landowner's potential for future profit related to his property? The Federal government doesn't recognize that in its rush to provide for the future profits of energy speculators, union workers, suppliers, etc.

If my property was subject to such a taking, I'd add the following clause to any easement or survey permission presented to me, in addition to any "fair market value" or one-time structure payments:

Participation Amount. Commencing on and after the Project Completion, Clean Line shall pay to the easement grantor (landowner) at the end of each fiscal quarter an amount equal to 2% of the gross revenues received by the Clean Line Parties from the Project during such fiscal quarter resulting from the sale of transmission service in connection with the Project (as such gross revenue amount is reflected in Clean Line's Financial Statements for such fiscal quarter, including, with respect to the first such fiscal quarter, sales of transmission service which occurred at any time prior to Project Completion) (the “Participation Amount”).
The Participation Amounts shall be paid to landowner to offset costs associated with having their property devalued and their quality of life disturbed in perpetuity, or for any other landowner authorized purpose.

The Secretary of Energy has sold you out in exchange for quarterly dividends from Clean Line Energy Partners. Ernie would have a really hard time telling you that you're not also eligible to receive 2% of the revenues, since you're actually making an involuntary sacrifice to enable this profit-making scheme. Fair is fair, right?

6 Comments

How Much Do You Want to Pay Environmental PIGs to "Represent" You at FERC?

3/9/2016

4 Comments

Warning... this is going to be a long one. Like a terrifying octopus, this issue has tentacles going in all directions. Hopefully I can follow them all, so that you, little consumer, can follow along and perhaps act in your own interests down the road.

Let's start with the good news -- FERC has approved ratepayer funding for the Consumer Advocates of the PJM States (CAPS) to participate in PJM matters. This is good news for consumers in the PJM region who don't have time or inclination to participate in PJM's countless stakeholder proceedings. CAPS is made up of "state advocate offices designated by the laws of their respective jurisdictions to represent the interests of utility consumers within the service territory of PJM...". These state consumer advocates are overworked and underfunded for all they do on behalf of residential electric customers.

One caveat in the Order, however, says that CAPS funding may only be used for "staffing and travel costs for state consumer advocates to participate in in-person meetings and other proceedings at PJM as well as to pay professional staff and operation of the CAPS organization." This also includes "participation in other Commission activities, such as responding to Notices of Proposed Rulemakings and participating in Technical Conferences." CAPS funding may not be used for "(1) activities related to proceedings of state agencies; (2) proceedings at federal agencies other than the Commission; (3) litigation of matters at the Commission arising from the filing of Tariff or Operating Agreement changes by PJM including the filing of interventions or protests or participation in hearings or settlements; or (4) the hiring of counsel or expert witnesses to support the filings of other parties."

However, Commissioner Tony Clark dissented, stating:

This Commission has not before endorsed the policy that the activities of non-decisional
intervenor groups be funded through a dedicated utility tariff under the auspices of the FPA. Yet here we are doing exactly that. Today’s order is couched in the language of
good intentions, but I find it troubling precedent as both a matter of policy and prudence.

Commissioner Clark said that this Order "cracks open Pandora's box," and before the ink was even dry on the Order and the Dissent, that's exactly what happened. Clark wondered:

My public policy concern is that there is little that meaningfully differentiates these
organizations from a myriad of other state agencies and not-for-profit governmental
organizations or other interest groups that will now say, “what about my piece of the
pie?” CAPS entities argue they are uniquely situated. But aren’t state energy offices, in
their own way, also uniquely situated? What about state departments of environmental
quality? Do they, too, deserve a Regional Transmission Organization (RTO) funded
organization to finance their participation in stakeholder meetings? Furthermore, given
that CAPS includes at least one non-governmental non-profit, we now have cracked-open the lid of Pandora’s Box just a little wider yet. What is to stop any of the countless groups that intersect with the regulatory world from arguing that they are also uniquely situated to speak for any number of communities of interest?

Which brings us to... Monday, when the very PIGs (Public Interest Groups) Commissioner Clark was concerned about filed a rulemaking petition looking for their own piece of the pie.

It's no secret that Public Citizen has been harping on FERC for years to set up the Office of Public Participation which was authorized by Congress back in 1978. That's 38 years ago, folks. And Public Citizen just now thought about filing a Petition for Rulemaking? That's some stellar FERC work right there! Thirty eight years ago, a leisure-suited Congress authorized such an office, along with a funding stream to compensate "persons under this subsection" through the year 1981. What is new is that Public Citizen now wants its piece of the "person" pie! And Public Citizen has brought along an entire herd of hungry PIGs to gobble up what it believes should now be a $6.5M yearly pie. The petition was signed by 31 self-appointed PIG "advocates" for consumers and the environment, and not a state advocate office designated by the laws of their respective jurisdictions to represent the interests of utility consumers in the bunch.

The hungry PIGs are a hodge-podge of "consumer interest" groups you've never heard of, environmental organizations, "coalitions," "projects," "centers," "councils," "institutes," "partnerships," and an "investment corporation." I've never seen many of these groups doing much of anything at FERC, and I haven't seen them litigating actual rate cases that save consumers real money. The few I have seen poking their stick into the FERC lion cage are more interested in policy issues, such as championing environmental interests before the Commission. These organizations are already very well funded through grants and gifts to advocate for the environment. Do they deserve public money for carrying out their political goals? These aren't public interest groups, they're specialty interest groups.

Let's look at just a couple on the list. Public Citizen describes its climate and energy program as: "Public Citizen's energy and climate program advocates for affordable, clean and sustainable energy. We safeguard families by promoting the strong regulation of energy markets, educate the public on the dangers of continued reliance on dirty energy sources, help solve climate change by promoting localized clean energy alternatives and hold large energy corporations accountable by exposing wrongdoing." The group's Form 990s available here and here describe their Energy Program as: "Provides information to the public on the threat of catastrophic climate change, the dangers of nuclear and fossil fuels, and the opportunities available to advance energy efficiency and develop renewable energy solutions." And they show a whole lot of income from mysteriously unnamed donors, and grants to clean energy programs. And they also show that Public Citizen has its fingers in a whole lot of political issue pies, not just energy. Their "Accomplishments" page is devoid of any victories at FERC. I'm not convinced that Public Citizen is substantially contributing to important issues at the Commission, or that any participation by Public Citizen presents a "financial hardship" for their "person."

At the other end of the PIG roll, A World Institute for a Sustainable Humanity describes itself as: "A World Institute for a Sustainable Humanity (A W.I.S.H.) is an international nonprofit organization whose mission is to provide models and support for life sustaining activities that integrate solutions to poverty and the environment while fostering self-reliance. It was founded in March of 1995 and is registered as an NGO in fourteen countries and states." A search of FERC's eLibrary for this organization brings up nada. I'm not convinced they have ever done anything at FERC that contributed to any substantial issues.

This seems more like a "build the funding and they will come" pipe dream.

So, what does the 1978 law say, anyhow?

(a)
(1) There shall be an office in the Commission to be known as the Office of Public Participation (hereinafter in this section referred to as the “Office”).
(2)
(A) The Office shall be administered by a Director. The Director shall be appointed by the Chairman with the approval of the Commission. The Director may be removed during his term of office by the Chairman, with the approval of the Commission, only for inefficiency, neglect of duty, or malfeasance in office.
(B) The term of office of the Director shall be 4 years. The Director shall be responsible for the discharge of the functions and duties of the Office. He shall be appointed and compensated at a rate not in excess of the maximum rate prescribed for GS–18 of the General Schedule under section 5332 of title 5.
(3) The Director may appoint, and assign the duties of, employees of such Office, and with the concurrence of the Commission he may fix the compensation of such employees and procure temporary and intermittent services to the same extent as is authorized under section 3109 of title 5.
(b)
(1) The Director shall coordinate assistance to the public with respect to authorities exercised by the Commission. The Director shall also coordinate assistance available to persons intervening or participating or proposing to intervene or participate in proceedings before the Commission.
(2) The Commission may, under rules promulgated by it, provide compensation for reasonable attorney’s fees, expert witness fees, and other costs of intervening or participating in any proceeding before the Commission to any person whose intervention or participation substantially contributed to the approval, in whole or in part, of a position advocated by such person. Such compensation may be paid only if the Commission has determined that--
(A) the proceeding is significant, and
(B) such person’s intervention or participation in such proceeding without receipt of compensation constitutes a significant financial hardship to him.
(3) Nothing in this subsection affects or restricts any rights of any intervenor or participant under any other applicable law or rule of law.
(4) There are authorized to be appropriated to the Secretary of Energy to be used by the Office for purposes of compensation of persons under the provisions of this subsection not to exceed $500,000 for the fiscal year 1978, not to exceed $2,000,000 for the fiscal year 1979, not to exceed $2,200,000 for the fiscal year 1980, and not to exceed $2,400,000 for the fiscal year 1981.

So, any funding to "persons" is contingent upon the participation substantially contributing the approval of that person's position. This is not an advance funding free-for-all for PIGs to suddenly access funds to create their own offices to participate in FERC ratemaking. Funding only comes AFTER a "person" wins a case. The proceeding also must be "significant," whatever FERC wants to presume that to be. Such "person's" participation must also present a "financial hardship." That's a conundrum. If a person can only collect funding after their position is approved by the Commission, then said "person" would have already spent the money to participate, without knowing in advance if they will prevail, or whether the proceeding is "significant." If the money has been spent without promise of funding, then how could the "person" then make a case of financial hardship? If it's a true financial hardship, they'd never be able to participate in the first place. For real people, every dollar they spend on lawyers and experts is one dollar less they can spend on hot dogs and tickets to the ball game.

Public Citizen then goes on to quote the Congressional Record from 1978, which makes clear that Congress intended this public participation to come from "electric consumers," or "individuals." I don't see anything in there about PIGs. After all, any "person" could declare that their efforts were "for consumers," and attempt to score some public funding for participating at the Commission, even utilities, or utility industry coalitions or associations, such as EEI. Who knows what will pop out of Pandora's box?

Case in point... after blathering on about how the idea for the Office of Public Participation was based on public participation by electric ratepayers, in ratemaking, Public Citizen says this:

The Office of Public Participation is also needed to provide support to communities involved with FERC-jurisdictional hydro and natural gas infrastructure proposals.

Funny that. The Delaware Riverkeeper Network also used FERC's failure to create the Office of Public Participation and fund intervenor costs as an example of FERC's "bias" in its recent lawsuit filed against the Commission in U.S. District Court. While I have the utmost sympathy for individuals personally affected by fracking and pipelines, I have no respect for the environmental groups who use these folks as battering rams to accomplish their environmental goals. That lawsuit was painful to read and I can't imagine a court wasting much time on it. Just because funding for FERC's gas program comes from gas companies does not create bias. The annual costs for the program are allocated to gas companies based on their usage. The Commission would be funded whether or not they approved new pipeline applications, because gas will continue to flow. Adding new pipelines to the stable simply spreads out the costs among a larger herd. It does not increase FERC's "take," nor pay dividends to FERC employees to approve pipelines. The continual attacks on FERC (both judicial and in person at the facility) aren't helping the cause. About the only good argument in the whole lawsuit relates to requests for rehearing, and FERC has already handled that. And that's oftentime the problem with environmental and other group participation that comes from "outside" FERC's little specialty practice arena. It can be clueless about process, laws, and even FERC's jurisdiction to act in the first place. I'm not sure adding more misinformed voices to the shuffle is prudent or helpful. If you want to participate at FERC, make it meaningful. Don't just carry on at monthly meetings, interrupting every other hearing underway in the building, because you're angry and unsatisfied with your own ignorance of the process. Educate yourself!

And be careful what you wish for. In discussions with grassroots groups in states with a mechanism for intervenor funding for participation in public utility cases, the same complaint comes up over and over. They allege that well-heeled and well-connected PIGs are always first in line at the funding trough, and there is precious little left over for the folks who are actually on the front lines of energy projects and rate increases. Oftentimes the PIGs use their funding to weigh in on the side of the utilities, especially to enable construction of renewable energy infrastructure. PIGs don't care about you, little ratepayer or landowner. They really don't.

Funding PIGs to carry on in a nonsensical manner at FERC is a bad idea. Let's see if FERC actually notices a proposed rulemaking on this issue, or simply bats it aside as more PIG mischief.

4 Comments

Can You Afford a Green Pyramid in Your Town?

3/3/2016

9 Comments

If Egyptology suddenly came into fashion in Oregon, and enthusiasts convinced the state to use its ratemaking powers to advance the cause, utilities would gladly build a pyramid in Portland, and they would make money doing so.

That's how cost of service utility rates work. the more money utilities invest in their systems, the more money they make. That's because every dollar they spend is returned to them by ratepayers, plus interest, over the usable life of the asset (often 40 years or more). It works just like your home mortgage -- the bank invests in your house, and you pay them a small amount of principal every month, along with interest on the remaining balance, until the debt is exhausted. But while your interest rate may be somewhere between 3 - 5%, utilities earn interest on their investments at a rate between 9 - 12%, or more. Utilities and their regulators insist that these kind of interest rates are necessary to attract investment in utility infrastructure.

So, what's this about a green pyramid? A recent op-ed in the Wall Street Journal by NARUC president Travis Kavulla tells How Utilities are Teaming Up with Greens Against Consumers.* Mr. Kavulla ought to know -- the National Association of Regulatory Utility Commissioners is a trade group for state utility commissioners.

Mr. Kavulla points out how big green is driving state policy to hasten the switch to renewables, and many utilities are going along for the ride because it's profitable for them. What you may think is great environmental policy may be costing you a lot more. The environmental groups behind this legislation that urge you to support it usually fail to tell you the whole story. When they claim to have wrestled a utility giant to the floor to get environmental concessions, the truth is that the utility only went along because there was more profit in it for them then they could make from resisting. And who pays the bill? You do!

In addition to Mr. Kavulla's excellent example, consider the Sierra Club's proposed "settlement" agreement with utility giant AEP in Ohio. Sierra Club told the public that they scored big by "forcing" AEP to agree to repower with natural gas (or close) some of its coal plants 15 years from now, and to "commit" to develop 500 megawatts of wind energy and 400 megawatts of solar energy. In exchange, Sierra Club agreed to allow AEP to rip off Ohio consumers by making them pay to financially prop up power plants that are uneconomic for the company. Ratepayers will foot the bill to repower or close the coal plants, plus the cost of developing the renewables, plus the cost of the rate increase AEP wanted in the first place. Sierra Club wins! AEP wins! Electric ratepayers lose!

While saving the environment may have been an admirable goal at one time, it's gone way, way beyond that in recent years. Big green is outta control! They're no longer funded by their members and therefore responsive to their needs. Now they're funded by enough foundations, dummy organizations, and front groups to give the Koch brothers wet dreams. It's all secretly funded by what I like to call "the environmental 1%," a bunch of filthy rich guys who want to control energy policy for their own gain. How do they gain? They invest in renewable energy. No different than the hated Koch critters. Their big green organizations are now bought and paid for through grants and contributions. They're not a consumer's friend any more. It's no longer about protecting the environment... the game plan has changed. Big green doesn't care how much it costs you... and the utilities are raking in their own kind of green.

But don't worry, little ratepayer, when you can no longer afford to pay your electric bill, you can always warm your tootsies at your town's green pyramid.

*If you're not a WSJ subscriber, copy and paste the headline into google and click through to read the article for free.

9 Comments

How MISO Works (for Bob)

3/2/2016

2 Comments

Hannibal Board of Public Works General Manager Bob Stevenson's weekly sales pitches for Clean Line Energy Partners are getting sillier.

This week's offering accuses investor owned utility Ameren of keeping its transmission lines "overloaded" in order to maximize profit. In order to get there, Bob completely overlooks the efforts of the Midcontinent Independent System Operator (MISO) to plan and operate the regional transmission system.

Bob supposes that Ameren manipulates its transmission lines to increase economic congestion and that only a non-MISO transmission proposal can fix it.

Impossible!

Here's what MISO, a federally regulated regional transmission system operator, does:

Reliability Assurance - "...we provide enhanced operating and monitoring of the regional electric grid and more efficient use of the region’s transmission infrastructure." Including Ameren's!
Transmission and Resource Planning - "MISO facilitates value-based regional planning for reliable generation and transmission of energy. Our ongoing studies and evaluations consider seasonal demand fluctuations, growing consumer needs and the integration of renewable energy." MISO plans and orders transmission lines needed for reliability, economics (including transmission line congestion), and public policy purposes. If the region needs a new transmission line to make electric delivery more reliable, more economic, or to meet public policy goals, MISO planners find the most robust and economic solution, and orders the project to be built through a competitive process.
Competitive Markets - "We use a five-minute commitment process that provides market liquidity and transparent pricing while also minimizing congestion and maximizing efficient energy transmission." Including Ameren's!
Tariff Administration - "As a regional transmission organization, we are the sole decision-making authority on the provision of transmission service in accordance with our FERC-approved tariff. Additionally, we coordinate transmission use and administration with other tariffs in the region." How transmission is priced and paid for in the region, according to the tariff, which prevents utilities like Ameren from gaming the system.

Bob's accusations against Ameren are unfounded. Moreover, they simply couldn't happen because of all the things MISO does.

If Ameren creates economic congestion (which, in simplest terms, means that the cheapest generation cannot reach every community), then MISO would order a new transmission line to decrease congestion and lower prices. However, it isn't always economic or desirable to eliminate all congestion. Congestion will always exist and even the most careful planning may do nothing but shift it around. When eliminating certain congestion will provide more benefit than cost, MISO will order transmission to eliminate it.

MISO did not create a Clean Line in its regional transmission plan, nor order it to be built!

Clean Line could have presented its transmission plan to MISO and requested it be studied to solve existing or anticipated reliability, economic or public policy purposes, and whether it passed a cost/benefit analysis. If MISO had agreed that a Clean Line served some purpose, it would have included it in its plan, ordered it to be built, with the costs allocated to regional electric ratepayers. Instead, Clean Line chose to proceed with its project outside MISO's planning process. Therefore, there is no documented need for a Clean Line. It is completely extraneous -- a market-based proposition that will succeed or fail based on market need for such a project.

In short, MISO has not found a need for Clean Line. Not to "accommodate new wind farms." Not to "redesign and expand the transmission system." Not to alleviate economic congestion. Not to prevent Ameren from exercising market power. Not for any reason.

Moreover, Clean Line's own presentation to Hannibal detailing "wind options" for the city showed several economically-comparable options that most likely used Ameren-owned transmission lines (at transmission prices much, much less than the purported price of transmission via a Clean Line).

Our transmission system is perfectly adequate for its intended purpose. That's what MISO does.

MISO does not sit around watching the transmission system rot while waiting for foreign investors to propose extraneous transmission projects to meet need. That's ridiculous!

That's Bob! For this week!

2 Comments

Cookin' With Clean Line in Hannibal

2/8/2016

7 Comments

Clean Line Energy Partners was back in Hannibal, Missouri, last week, where "Development Director" Mark Lawlor continued his desperate courtship of the Hannibal Board of Public Works.

The goal of the evening was an "agreement that would commit the BPW to nothing accept [sic] 'being a good witness' in front of the PSC and being willing to work toward a final arrangement."

This wasn't about cheaper energy for Hannibal, it was about Clean Line using Hannibal as a witness at the PSC. What are the qualities of a "good" witness, I wonder? Does a "good" witness represent the interests of the citizens of Hannibal, or does a "good" witness represent the interests of Clean Line?

Clean Line made several presentations to Hannibal. One of the presentations cooked up by Clean Line was a table showing "wind options" for Hannibal. The table compared 4 wind power purchase agreements with Clean Line's Grain Belt Express project and came to the conclusion that GBE was the cheapest "wind option" for Hannibal. But, how does the information in this table compare with previous claims made by Clean Line?

The first project in the table is an "unnamed" Westar wind project located in Kansas, part of the Southwest Power Pool (SPP) transmission region. The energy was priced at $22.70/MWh, but transmission costs to move it through the SPP region into the neighboring MidContinent Independent System Operator (MISO) transmission region to deliver it to Hannibal were pegged at $10/MWh, bringing the total cost of the Westar option in at $32.70/MWh.

The second option was Apex Clean Energy Ford Ridge project located in Illinois, part of the MISO transmission region. Price for the generation was quoted around $40/MWh. Because the wind project in Illinois and Hannibal are both located within the MISO region, the transmission cost is estimated at only $2-4/MWh, much less than paying transmission through two transmission regions. This brought Apex's total in somewhere in the mid $40s/MWh.

The third option was EDF Red Pine located in Minnesota, also part of the MISO region. The energy price was quoted in the mid $30s/MWh, with transmission costs at $4-6/MWh. EDF's total was quoted at "High $30s/MWh."

The fourth option presented was an Iberdrola project located in Iowa, also in MISO. The energy cost was quoted at $30-33/MWh, with transmission costs of $2-4/MWh. When Clean Line added up this option, they used their highest estimates, instead of the lowest, or even splitting the difference with an average, to come up with a price in the "high $30s"/MWh. However, using the lowest costs presented here, Iberdrola could come in at $32/MWh, not the $37/MWh quoted by Clean Line.

Apparently that high quote was necessary because Clean Line's estimate of its Grain Belt Express project came in at a remarkable $30-34/MWh. Using the lowest Iberdrola figures would have made it competitive with Clean Line's quote.

Let's look at Clean Line's quote for using its Grain Belt Express as a wind option for Hannibal. While the other 4 options were 20-year power purchase agreements with actual wind generators at a set price, Clean Line's option includes only the transmission price and locks Hannibal into a contract to purchase that amount of capacity for the life of the Grain Belt Express project. A typical transmission line has a life of 40-50 years.

Clean Line's presentation included a line about whether the quoted project is eligible for the federal production tax credit. Clean Line claims its project is eligible for the credit. That's just not true. The production tax credit is available for generators, not transmission lines. There is no guarantee that any future wind farms that may use the Grain Belt Express would be eligible for the credit. While existing wind generators are most likely taking advantage of the $23.00/MWh credit, recent action by Congress to phase out the credit lowers it beginning in January, 2017:

For wind facilities commencing construction in 2017, the PTC amount is reduced by 20%

For wind facilities commencing construction in 2018, the PTC amount is reduced by 40%

For wind facilities commencing construction in 2019, the PTC amount is reduced by 60%

It's doubtful that any wind farms will be built to provide energy for Grain Belt Express before the PTC starts being reduced. The current $23.00/MWh credit is going to be cut by 60% before Clean Line's proposed in-service date of 2019. Without the sweet taxpayer subsidy provided by the PTC, wind farm operators will have to add the additional subsidy cost onto their energy price. Clean Line's quoted energy price doesn't reflect this reality.

And while Clean Line told Hannibal that it was not receiving any government subsidies, the quoted energy price included the production tax credit, which is a 10-year taxpayer-funded subsidy for wind generators.

The Grain Belt Express energy prices of $20-24/MWh quoted by Clean Line are in line with Westar's Kansas project, however Clean Line cannot guarantee or write a contract for those energy prices. Clean Line can only sell transmission capacity, not energy. Hannibal would be on its own to negotiate energy prices with any future wind farms that might connect with Clean Line's future Grain Belt project. And Hannibal would be locked in to receiving its energy from Kansas via Grain Belt Express for 40-50 years, no matter what cheaper options may become available in the future.

Clean Line claims the transmission cost for Grain Belt Express will be approximately $10/MWh, bringing the total cost of the Grain Belt Express option in at $30-34/MWh. Except that can't be right.

In 2014, Lawlor told Midwest Energy News the price of energy delivered by Grain Belt Express was between $40 and $45/MWh.

Lawlor said the line can at current prices deliver wind energy to Missouri at between 4 and 4.5 cents per kilowatt-hour.

(Editorial note: 1,000 kWh = 1 MWh, however I am presenting these quoted figures in MWh for uniformity).

And also in 2014 Grain Belt Express witness David Berry, Clean Line's Executive Vice President of Strategy and Finance, told the Missouri Public Service Commission in his sworn testimony that it would cost $15 to $20/MWh to transmit energy via Grain Belt Express.

The cost of delivered energy is equal to the cost to generate wind energy in western Kansas (2.0-2.5 cents) plus the cost to move power on the Grain Belt Express Project, which we estimate at 1.5-2.0 cents per kWh.

In 2013, Clean Line told MISO that its transmission costs for the Clean Line projects were $20 to $25/MWh.

Even when a transmission charge of $20/MWh to $25/MWh (based on Clean Line estimates for a 500 mile to 700 mile HVDC facility) is included, the delivered cost of heartland-region wind would be below both in-state wind and in-state solar PV price estimates in the Eastern U.S.

So what happens when we substitute these previously quoted transmission figures for the transmission figure in Clean Line's "Wind Options" chart? Grain Belt Express' cost balloons to $45 to $49/MWh, the highest priced "Wind Option" on the chart!

We all know that estimates can vary, but how is it that Clean Line's estimated transmission costs keep getting cheaper and cheaper over time? It's still the same project. It's still got the same price tag. Clean Line is still promising to use the same "local" vendors to supply parts and labor. Where is Clean Line planning to cut costs?

Clean Line's falling prices also overlook increased project costs over the years. Time is money on a project like Clean Line. As a start up with no functioning product, Clean Line has no revenue. Early time estimates by Clean Line had the projects going on-line by now. However, due to overwhelming opposition and permitting issues, Clean Line is years behind schedule in generating revenue. Each year the company operates without revenue adds to the final cost of its product. Each permitting hurdle costs more money. Clean Line's first application for a permit in Missouri likely cost several million dollars. A second application will double that cost. Every penny that Clean Line spends on unforeseen development costs must get added to the ultimate cost of its product. Clean Line's $10/MWh transmission cost could be completely cooked in order to make it appear that Grain Belt Express is the cheapest option for Hannibal.

And if Clean Line fudged its own numbers, how much liberty did it take with the numbers from the other projects it included in its "Wind Options" table? The quoted prices from the other wind options have no validity unless quoted by the companies that own them. Hopefully Hannibal will request proposals from all these companies before committing to "being a good witness" for Clean Line at the MO PSC.

Is this how Hannibal purchases the cheapest energy for its ratepayers? By receiving quotes from one company that takes the liberty of quoting for other companies in order to make its own quote the cheapest?

Going back to the "Wind Options" table, take a look at the transmission prices across the board. Clean Line's cost is one of the highest. Why is that? Because all the other transmission prices quoted use existing transmission that is paid for by all ratepayers in the region. The MISO region includes 42 million ratepayers. In contrast, Grain Belt Express will be paid for only by the users of this particular transmission line, a much, much smaller population. Spreading costs over a larger population results in cheaper pricing. Grain Belt's customer base is limited by the size of its project -- it can only sell a fixed amount of capacity. Therefore, Grain Belt's costs can do nothing but go up. Grain Belt's transmission cost is so high because it is user-financed by a smaller group of consumers.

Clean Line's "Wind Options" presentation begs the question: Is Clean Line even needed? Clean Line seemed to have no trouble presenting four other options for "cheap" wind energy for Hannibal to be delivered via existing transmission lines planned and operated by a regional transmission organization. How can we believe that "cheap" wind can't be delivered without building an expensive Clean Line? This presentation demonstrates that it can.

Regional transmission organizations exist to plan and manage electrical supply in their own regions. Each transmission organization has a robust planning process that orders new transmission to be built when it's needed, whether for reliability, economic, or public policy purposes. Clean Line is not part of this process, but is completely superfluous. No transmission organization has ordered Clean Line to be built for any purpose. Clean Line is simply a venture capitalist attempt to build an extraneous transmission line in order to make money moving power between regional transmission organizations.

Hannibal simply must do its due diligence before committing its ratepayers to 50 years of higher energy prices, or selling itself out as "a good witness" for billionaires hoping to increase their wealth building nonessential transmission lines.

7 Comments

Deja Vu, Hannibal - Contract in Haste, Repent at Leisure

1/24/2016

6 Comments

Hannibal Board of Public Works General Manager Bob Stevenson seemed quite eager to believe the unbelievable sales pitch of Clean Line Energy's salesmen last week. Bob said his mind was "blown" by offered electricity prices of $.02 kWh.

"Stevenson termed that power price as 'mind-blowing cheap'."

Since Bob's brains have now splattered everywhere, Hannibal needs to find itself some functioning minds so it doesn't repeat its power purchasing mistakes of the past. Because when you contract in haste, you are bound to repent at leisure.

In 2007, Hannibal BPW entered into an agreement with the Missouri Joint Municipal Electric Utility Commission (MJMEUC) to purchase an ownership share in a coal-fired electric generating station in neighboring Illinois. Hannibal's share was 20 megawatts.

At the time, then BPW General Manager Jack Herring seemed to also have blown his mind over the opportunities of Prairie State:

"We believe that a project like Prairie State is the best way for us to secure a substantial portion of our members' needs for an affordable, long-term source of electricity. The project offers us cleaner energy from a convenient source located just across the river," said Duncan Kincheloe, general manager and chief executive officer of MJMEUC, in a press release.

So, Hannibal issued bonds to pay for everything. And signed a contract that ensured Hannibal "will not be contributing any funds to the project until it starts receiving power from Prairie State." Hannibal's BPW Board said it had "bided its time" by considering the project over a period of 18 months, during which the project cleared what was described as "an assortment of legal hurdles." Prairie State was supposed to generate power at 4.2 cents.

Except that's not what happened. Prairie State was plagued with cost overruns and construction delays. Even when it came online, it was often operating way below its full capacity. In addition, power prices have fallen way below even those promised prices. Meanwhile, Prairie State's costs have ballooned to as much as $.07573 in 2014. And municipal utilities who signed up for Prairie State's mind blowing deal aren't so happy.

“We’re in almost a million and a half bucks, and we don’t have a dime of revenue,” said Bob Stevenson, director of Hannibal’s Board of Public Works. “All I can say is, I had other plans for that money.”

Hannibal is raising rates for residential customers by 3 percent next month to offset the effect of construction delays.

“The only reason we’re having to do this is this problem we’re having with Prairie State,” Stevenson said.

But has Hannibal learned anything from its Prairie State experience? Do Bob's plans for that money include investing it in a speculative transmission line with no customers?

Beware unregulated companies pushing power purchase schemes, Hannibal! As history demonstrated with Prairie State, you ratepayers need to look out for yourselves and can't trust your BPW to make smart power choices on your behalf. And you can't afford another Prairie State!

Clean Line offered Hannibal electricity priced at $.02. Except Clean Line isn't a generator, and owns no generation resources. Clean Line can't offer Hannibal any electricity, at any price, because Hannibal could never contract with Clean Line to purchase electricity at a certain price. The best Clean Line could offer is that Hannibal could sign a power purchase agreement with an un-built third-party generator in a far off place. That hypothetical generator would set its own price and contract with places like Hannibal, independent of Clean Line's promises, in order to finance its own construction. Except that's nowhere close to happening. Fictional power purchase agreements at mind-blowing prices don't exist.

Clean Line offered Hannibal capacity on its proposed transmission line. The transmission line isn't built yet either. What good is capacity on a transmission line that doesn't exist to a generator that also doesn't exist? Just like Prairie State, a purchase of transmission capacity is "take or pay."

The “take or pay” contracts, standard for large-scale power projects such as Prairie State, are favored by lenders and credit rating agencies because they provide assurance that the borrower pays its debts. They also require end users, in this case municipal utility customers, to make debt payments regardless of whether the plant is operational. And if any of the cities default, a “step-up provision” in the contract requires remaining cities to pick up that city’s share of the payments.

Clean Line, a company who told federal regulators that it would shoulder all financial risk for its own project, is looking to sell and pass on its risk to municipal power companies in Missouri. If munis in Missouri sign "take or pay" capacity contracts to guarantee Clean Line's financing, the munis will bear all the risk if Clean Line fails.

Clean Line has also offered Hannibal a $12.5M "investment" in its transmission project. In exchange for $12.5M, Hannibal BPW could own a tiny portion of Clean Line's project, if it is ever built.

And that's just the problem. By the time the Prairie State investments were made by Missouri municipalities, the project was approved and under construction. Clean Line's project still faces several permitting hurdles, including approval by the Missouri PSC, who turned the project down once already last year. The project is under appeal in Illinois, where state regulators made a grave legal error approving it. There's no guarantee that Clean Line's project will be approved in a timely fashion, if at all. Even if approved, Clean Line must still find financing to build the project before beginning. Clean Line has no customers to use as collateral. None. Potential wind farms cannot sign contracts with Clean Line until they have their own financing guaranteed by signing contracts with buyers of their own. No utilities want to engage in that kind of double-layered risk to sign "take or pay" contracts for generation and transmission that has yet to be approved or built. Instead, Clean Line is sniffing around Missouri municipalities to scrounge up some cash so it may present the mutilated bodies of Missouri municipalities to the PSC during future permitting proceedings with the hope that the PSC will feel an obligation to bail out in-state municipalities who may go belly-up if their investment in Clean Line disappears.

When Clean Line runs out of money, it's done. There is no chance it may recover the money it has already spent. An investment in Clean Line is one that can be lost in its entirety.

Any municipality thinking about making a deal with Clean Line should only gamble with what they are comfortable losing.

Clean Line may end up being a bigger loser than Prairie State.

6 Comments

WV Legislature to "Fix" Public Service Commission with Investor Owned Utility Money

1/23/2016

1 Comment

Well, bless their little hearts. Some WV legislators still believe elections aren't controlled by corporate money.
As if WV's current governor-appointed PSC Commissioners aren't bad enough (completely clueless political favors or biased industry plants), a handful of legislators have set their sights on guaranteeing that future Commissioners are on the utility payroll.

A couple of bills intended to "fix" our awful public service Commission could end up making matters worse.

First up, HB2238 attempts to fix the PSC by geographically spreading out the commissioners to have one from each congressional district. Whatever. This one is harmless.

But HB2483 wants to elect commissioners. And where do these legislators think PSC candidates will get their campaign money?

They will get it from the investor owned utilities they would "regulate" if elected. And how do you suppose these "elected" commissioners would vote on proposals by their campaign funders?

In other states that elect PSC commissioners, the vast majority of PSC campaign money comes from the utilities the PSC regulates.

Alabama PSC funded by coal.
Georgia PSC funded by utilities.
Louisiana PSC funded by utilities.
Accusations of utility influence fly in Montana PSC race.
76% of Nebraska PSC campaign donations from utilities.
South Dakota PSC candidates accept unlimited donations from utilities they regulate.

Other problems:

PSC Commissioners moonlighting as industry lobbyists.
PSC Candidates funded by utility contractors when law prohibits direct utility contributions.
Candidates for New Mexico's Public Regulation Commission receive public funding for campaigns since 2003.
Oklahoma regulator accepts congressional campaign contributions from utilities she regulates.

And because PSC Commissioners would be elected from three different districts, that would remove the current requirement that at least one of them be an attorney. It would also toss out the window the current requirement that only two of them can be from the same political party.

Considering a huge majority of the voters electing utility-financed PSC candidates have never heard of the PSC and have no idea what they do, is it a good idea to let these clowns elect commissioners based on TV ads or party affiliation?

As long as the governor appoints commissioners, we stand a chance of getting decent commissioners from a decent governor. Once utilities can influence PSC elections, there is absolutely no chance of getting a decent commissioner. None.

Kick this legislation to the curb. Uninspired and thoughtless "fixes" may just cause further damage.

1 Comment

Hey, Hannibal... What's up chuck?

1/21/2016

2 Comments

Samuel Clemens, better known as Mark Twain, grew up in Hannibal, Missouri. He once said, "We have the best government that money can buy."

And it must have been in that spirit that "top brass" (subtract consonants at your own pleasure) from Texas-based Clean Line Energy Partners descended on Hannibal this week.

Skelly said that Clean Line is prepared to make a power proposal that would represent a “fantastic deal for the city of Hannibal.”

Insert carnival sideshow music here.

For a visual depiction of the action, go here to get your poster of Michael Skelly scowling in his Dad jeans, arms crossed in defiance.

Of course, nothing is written in stone, or legally binding.

What's the pitch?

Lawlor suggested that the Grain Belt Express could potentially offer power to Hannibal for as little as 2 cents per kilowatt hour (kwh).

...the possibility that Hannibal could buy “capacity rights,” which the BPW could utilize or sell on the open market.

Lawlor said a $12.5 million investment in Grain Belt could equate to a 25 megawatt stake in the Ralls County converter station and a portion of the project's capacity, noting the utility could buy as much or as little as it wanted.

So, Mark, Clean Line is selling power now? And at two cents per kWh? Where's your generator? And how is that power going to get to Hannibal? How much would that possibly cost? FOB Kansas, right?

And how about that mind blowing opportunity to invest $12.5 million dollars in the Grain Belt Express project? What's the guaranteed return on that? And what happens if Grain Belt is never built? The entire $12.5 million dollars of Hannibal's ratepayers hard earned cash disappears forever. You'd think Hannibal has learned their lesson about investing in energy market revenue schemes, after their recent investment in Prairie State, right?

Critics of the investment need only look at the audit’s bottom line regarding Prairie State to find areas where revenues from the sale of power generated at the plant continued to not equal the BPW’s expenses associated with the facility.

I can't imagine what the good citizens of Hannibal must be paying for power, what with all this energy market investment going on. How much will rates go up to fund a $12.5M "investment" in Grain Belt Express for which the ratepayers may never see any benefit?

And it wouldn't even supply half of Hannibal's energy needs, "The 25 megawatt chuck of power the city is interested in would represent approximately 40 percent of the city’s current needs."

What's a "chuck" of power? Maybe it's this.

Is this deal really about cheaper power for Hannibal, or is it about:

What Clean Line will be seeking initially from the city is a letter of participation that the company would include in its next application for a Certificate of Public Convenience and Necessity from the Missouri Public Service Commission. The PSC denied Clean Line such a certificate in July 2015.

In a renewed effort to illustrate Grain Belt's merits to the PSC, Clean Line has approached municipal utilities about participating in the project.

Don't be a cheap date, Hannibal. That "letter of participation" is worth a lot to Grain Belt Express. Think of it as Clean Line's precious...

You could probably get Clean Line to pay YOU $12.5M for the letter, if you hold out for a better deal. Now that's an energy market play with a real return!

But, will the Missouri Public Service Commission really be swayed by Clean Line investors and their non-binding "letters of participation?" Probably not. The MO PSC has already rejected this project once, and nothing has changed (except Clean Line's traveling carnival side show barker act at municipal power authorities across the state). It would be foolish to underestimate the state-wide opposition to this project.

Samuel Clemens had a lot of wise things to say. He also said...

"It's not the size of the dog in the fight, it's the size of the fight in the dog."

My money's on the Grain Belt Express opposition.

2 Comments

FERC Takes On ISO-NE Formula Rates

1/14/2016

0 Comments

FERC continues its focus on transmission formula rates, recently opening an investigation into ISO-NE's processes. This follows FERC's investigation into MISO formula rates several years ago.

In its December 28 Order, FERC set the justness and reasonableness of ISO-NE's RNS and LNS formula rates and the development of protocols for hearing. FERC said the current formula rates lack transparency and sufficient detail to determine how certain costs are derived and recovered. The rates also lack sufficient protocols to ensure the data is correct, calculations are performed correctly and that the charges are reasonable and prudent. The protocols also lack sufficient notice, review, and challenge procedures for interested parties.

There seems to be some concern over the timing and synchronization between RNS (regional) and LNS (local) rates. Currently, transmission owners submit their own revenue requirements for a combined RNS formula rate, in addition to individual LNS rate filings.

This article in the NH Union Leader presents a handy-dandy graph of transmission costs in different regions. ISO-NE's transmission charges are nearly double those of second place transmission rate champion, PJM. Does ISO-NE really have that much more transmission, or are things simply out of control on the formula rate front that allows "errors" to boost annual revenue requirements with bogus charges?

Who's currently monitoring whether transmission owners are doubling their return by including the same costs in both RNS and LNS formula rates? FERC's Order says its impossible to determine right now.

And what if companies like Eversource are accidentally including costs for things, like advertising for their Northern Pass project, in RNS/LNS rates collected from ratepayers, instead of including them in the transmission service agreement costs formula rate to be paid by HQ Hydro? All sorts of "mistakes" could happen in the current rate scheme.

Who's minding the store up there? FERC says ISO-NE currently has an option to audit the RNS/LNS rates, but I wonder how much real auditing actually happens?

Good thing that FERC is taking on the challenge of shedding a little light into ISO-NE formula rates. But the work doesn't stop there... even the best formula rates and protocols are useless unless someone takes advantage them to actually take a look at the rates on a yearly basis, long after FERC's work here is done.

Good luck on getting a handle on your transmission costs problem, New England!

0 Comments

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Oh, The Thinks Bob Can Think!

U.S. DOE Takes Kickback From Investors To Condemn Private Property

How Much Do You Want to Pay Environmental PIGs to "Represent" You at FERC?

Can You Afford a Green Pyramid in Your Town?

How MISO Works (for Bob)

Cookin' With Clean Line in Hannibal

Deja Vu, Hannibal - Contract in Haste, Repent at Leisure

WV Legislature to "Fix" Public Service Commission with Investor Owned Utility Money

Hey, Hannibal... What's up chuck?

FERC Takes On ISO-NE Formula Rates

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