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The "Changing Rules" Myth

1/16/2020

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Here's another stupidity currently being recycled by Missouri municipalities in opposition to legislation that is currently working its way through...
Lawson wondered whether singling out one project should be a concern to anyone planning to develop large scale projects in the state. Lawson said, “What signal are we sending about our state’s desire for job creation and economic progress if we change the rules at the last minute?”
Different versions of the "changing rules" myth have been hanging around for years.  It's time to put them to rest.

The legislature isn't "changing the rules," it's changing the law.  That's what legislatures do.  It's a risk all transmission projects accept when developing a project.

Laws are not a stagnant thing.  Once they're made, they're often changed.  New laws are made.  Existing laws are amended.  It's what happens in a healthy, democratic society.  If we had to keep all laws stagnant for fear of "changing the rules" on someone, there are plenty of old laws that would still be hanging around, much to our detriment.  We change laws to make them work better, for the benefit of all citizens.

To answer Lawson's question about the "signal" it sends, let's look at Iowa.  In 2017, the Iowa legislature passed a new law that declared above-ground merchant transmission lines a private development purpose that may not be granted eminent domain authority.  The Clean Line project that inspired this legislation, the Rock Island Clean Line, was faced with a choice... to build its project without eminent domain authority, or to bury it.  Nothing the legislature did actually banned or stopped the project.  It was Clean Line's choice to abandon it.

The "signal?"  Transmission is still being built in Iowa, but not above-ground merchant lines.  Instead a better project has been proposed for basically the same purpose.  SOO Green Renewable Rail proposes an underground merchant transmission project built on existing rights-of-way.  It's a much better solution to the imagined problem.  It may be more expensive, with undergrounding costing roughly twice as much as above-ground lines, but that's okay because this is a market-based project.  The market for transmission capacity will dictate the prices customers will be willing to pay in a voluntary market, free from manipulation and outside influences.  The developers of SOO Green believe their project will be marketable, despite its cost.

This is the signal the Iowa legislature sent... that projects must do better to avoid impacts to Iowa citizens.  And they all lived happily ever after.

Arkansas also passed a law inspired by a different Clean Line project, the Plains and Eastern Clean Line.  That law prevented the use of eminent domain for a transmission project that was not directed or designated to be constructed by a regional transmission organization.  What happened?  Nothing.  There's still transmission and economic prosperity going on in Arkansas, and the lights are still on.

Legislatures can and do change laws all the time.  And the one in Missouri desperately needs updating!  Public utility and eminent domain law were developed at a time before merchant transmission was proposed in the state.  Multi-state merchant transmission without contracted customers is a relatively new thing everywhere, and other states have dealt with it in the recent past, as noted above.  Nothing disastrous happened. 

The law that gives a public utility eminent domain authority is premised on a belief that a public utility is constructing regulated infrastructure.  The cost of that infrastructure and the ones who pay for it is highly regulated, whether by state utility commissions, or the Federal Energy Regulatory Commission.

Enter speculative merchant, market-based, transmission.  Its rates aren't regulated in the same way.  Its rates are negotiated between willing buyers and willing sellers.  Nobody is forced to pay for anything they don't want to.  The regulators cannot say whether a rate is too low, or too high.  They rely on the market to do so.   If a price is too high, there will be no market interest.  Market rates police themselves (assuming they were negotiated in a fair manner without undue influence or preference).

Eminent domain is not a market based mechanism.  It is the government stepping in to effect the taking of private property at a "fair," not market-based price.  If the price paid for property was negotiated without any limit, that would be a market-based price between a willing buyer and a willing seller.  The sellers are unwilling in an eminent domain situation.

Using the market interference of eminent domain on a market-based transmission project is not only unfair to the unwilling seller, it unjustly enriches the transmission project owner, who is still operating in the realm of negotiated, market-based rates.  Its market isn't affected by the price it pays for property.  In fact, if it was truly market-based, the price of property necessary for the project should be based on the same voluntary, free market in which the project negotiates its rates.

It's a legal mismatch that uses the regulated utility's eminent domain authority to boost the earnings for a market-based project.  Many states, such as Iowa and Arkansas (and Illinois, too, although this happened at the state Supreme Court) have recognized this.  Missouri has also now realized it, and that's why its legislators want to remove eminent domain authority for market-based, merchant transmission projects.

It's not to "change the rules," it's to update the law to support new development while protecting the citizens of Missouri.  Grain Belt Express could still build its project.  It just would have to negotiate property prices in a market-based environment without the government-granted power of eminent domain to limit its acquisition costs, and GBE doesn't want to assume that responsibility or cost.

A project that is truly market-based has no need for eminent domain.  GBE and its supporters are simply complaining because legislators are intent on fixing the current legal loophole they slipped through.  With the loophole firmly closed, new transmission in Missouri will be better for ALL citizens, not just a few.
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Are Missouri Municipalities Helping Or Hurting Electric Customers By Clinging To Grain Belt Express?

1/16/2020

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More good news yesterday!  Representative Jim Hansen's bill to remove eminent domain authority from merchant transmission projects passed out of the Missouri House Rules Committee by a large margin.  It's headed to the floor for a vote, possibly as early as next week!  Be on the lookout for opportunities to support this much-needed legislation!

Also yesterday, the Senate companion bill sponsored by Senator Brown had a hearing in the Senate Commerce, Consumer Protection, Energy & Environment Committee.  This hearing was much more contentious, and the outcome is uncertain.

The handful of Missouri municipalities who remain incomprehensibly wedded to GBE showed up to blather against the bill.  Ahead of that, these folks did some kind of joint press release that resulted in a string of  substantially similar news articles that were full of pie-in-the-sky thinking and misinformation.

Let's take a look at one of them... the one from the City of Chillicothe.

These stories all contain claims of savings for municipal electric customers, Chillicothe's claimed share being $425,000 annually, spread over 9,600 customers (do the math - it's $3.69 per month, rounded).  That figure was taken from the more general $12.8 million annual savings for all municipalities participating in this game of Russian Roulette.  Except that number is historic and probably not all that applicable right now.

The $12.8M figure came out of MO PSC testimony and was calculated years ago based on GBE replacing a contract with Prairie State that is set to expire by 2021.  Prairie State was an inordinately expensive contract entered into by the municipalities years ago.  It was a bad deal, and it's cost municipal electricity customers millions in increased costs ever since.  It was probably not a smart contract to sign in the first place.

How smart are these municipalities when it comes to energy contracts?  How much do they consider the economic impacts on the customers they serve when making contract decisions?  The history here isn't very good.

Here's the thing... Prairie State will need to be replaced very soon.  What have the municipalities done to accomplish that?  Are they sitting around waiting for GBE to replace it?  That's not going to happen.  GBE won't be completed for years, if ever, so what are these customers supposed to do for energy in the mean time?  Are the municipalities entering into higher-priced, short-term contracts to fill the gap, while betting that GBE will come through to lower costs at some point?  Seems like an awful lot of money wasted now for something that is unlikely to ever happen.  If the municipalities were smart, they would have been looking for the cheapest, long-term contract they could find to replace Prairie State now.  This would be in the best interests of the ratepayers.

Signing a higher priced contract with an exit clause for the municipalities to escape in the future if GBE comes on line comes at a huge price to municipal electric customers.  So would signing a short term contract based on guessing when GBE might be available.

These municipalities should be concerned with only one objective... to provide reliable, cost effective electricity for their customers at all times.  Instead, they're hoping for two birds in a bush to replace the one in their hand.  They continue to fixate on GBE and ignore the present needs of their customers.

GBE offered municipalities in Missouri service on its proposed transmission line at a below cost rate in order to coerce them to sign a contract that was used by GBE to create the illusion of "need" for its project.  It was a gift, but it was a gift with strings attached.  The strings require the municipalities to forego cheaper replacement contracts in favor of the GBE gift happening in the future.  In order to create the illusion of "savings," GBE was compared to the municipalities most expensive electric contract, Prairie State.  At the time, its expiration was at least 5 years in the future, so it seemed a safe bet.  However, GBE has made little to no progress in that 5 year time period.  Prairie State has to be replaced before GBE could ever be built, using the most optimistic view possible.  This means that the municipal savings are actually shrinking, unless the municipalities went out and found an equally expensive contract to replace Prairie State, just to preserve the savings illusion.  Who pays the price for this kind of wishful thinking?  The municipal electric customers!  The municipalities aren't acting in the best interests of their customers, and they're probably using old data to make outrageous "savings" claims.

Contracting for electricity is part price comparison, and part risk evaluation.  Different contracts come with different prices, time frames, and risks.  A cheap contract may lock the customer into a longer term, and it may come with a lot of risk.  Another contract may be a bit more expensive, but with a shorter term, and a lower risk profile.  All of this must be balanced when contracting decisions are made.  It's not all about the price.

What's risk?  Risk is that the resource might not be able to deliver as scheduled.  GBE is a prime example of this.  In exchange for a very attractive price, the contract is long term, and about as risky as it comes.  If the resource can't deliver, the contract holder is left scrambling to find a replacement resource on a very short time frame.  These kind of resources are going to be more expensive, due to their short term, "just in time" nature.  This is what the municipalities will be facing when GBE doesn't deliver.

Why won't it deliver in time?
CMU General Manager Jim Gillilan said local customers would notice a reduction in their bills after the transmission line is built, which he expected to be in 2022.
Where did he get his expectation?  Certainly not from GBE, whose latest claim was that it hoped the project could be ready by 2023 or 2024.  That's a full two years after Chillicothe expects.  Where's Chillicothe's power going to come from during those two years?

My estimate is that GBE is even further down the road.  Here's why:

  1. GBE doesn't have enough customers to make the project economic.  It only has 2 customers at last count, one of them being the municipalities that are getting service below GBE's cost.  That means that GBE needs to find other customers who are willing to pay more than their share to cover the municipalities' discount.  GBE hasn't found enough customers to make it feasible in more than 10 years.  I don't see it happening any time soon.
  2. GBE does not have a permit in Illinois.  It has to reapply from the beginning, a process that would take at least 18 months (and they haven't even applied yet -- tick, tock!).  Assuming that goes beautifully for GBE (which it won't) any possible permit will certainly spend time in the courts, just like the last one that was vacated.  Based on the Illinois Supreme Court opinions on both GBE and RICL, this looks a little dicey for GBE.
  3. GBE must receive the assent of all eight Missouri counties through which it is proposed to pass.  The counties have been resistant and seem unlikely to assent any time soon.
All of these are HUGE roadblocks that make GBE's risk profile really shaky.  Having a risky profile drives customers away, hence GBE's lack of customers is a self-propelled ride to failure.

It's not happening in 2022.  It's highly unlikely to happen in 2023 or 2024.  And the longer it sits, the worse it smells to potential customers.  And we've yet to figure in time to actually build the project, assuming it's fully approved and finds customers.  How long do you suppose it may take to construct?  We're talking years, it's a very ambitious project.

So, when the municipalities continue to champion GBE, you might want to ask them why.  What contract does it expect GBE to replace?  What's the price of that contract compared to GBE?  When does that contract expire?  What if GBE isn't ready by the time that contract expires?  What contracts are waiting in the wings to fill the gap?

Is this really about saving municipal customers any money at this point, or is it more about politics and stubborn resentment?  After all, those birds flew out of the municipalities bush a long time ago.  Pretending they're still there for the taking is a fool's game. 

The municipalities need to take a step back and ask themselves if this continued hope for GBE is really in the best interests of their customers... before the customers themselves start asking this question.
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House Bill To Limit Eminent Domain Clears Committee in Missouri

1/14/2020

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Good news this morning!  Representative Jim Hansen's HB 2033 to limit eminent domain for merchant transmission sailed through a committee hearing yesterday and was approved to pass this morning.

We're on our way! 

Lots of stuff got brought up in the hearing yesterday, and two very different news articles were posted.  One was good, and one was biased opinion cloaked as news.  Do we call that "fake news" these days?  At any rate, it gives me an opportunity to clear up some misinformation that got spread yesterday.

The bad article can be found here.  Does the St. Louis Post-Dispatch have a bias in favor of the project?  I'd guess they do, after reading the article, or maybe the reporter himself is just uneducated or too lazy to get information first hand and relied too much on opinion instead of fact?

The article starts out with an apparent misunderstanding of the three branches of government.  This is something I think I learned in elementary school, and perhaps a refresher course is in order.
Although judges and state regulators have given it the go-ahead, Missouri lawmakers are still trying to unplug a controversial electric transmission line.
State regulators are part of the executive branch of government.  They carry out laws as they exist.  Judges are part of the judicial branch of government.  They interpret laws as they exist.  Legislators, on the other hand, are part of the legislative branch of government.  They MAKE laws exist.  The legislature can change laws, or make new laws, that are then carried out by the executive branch, or interpreted by the judicial branch.  It doesn't matter what judges or state regulators did with existing laws, the legislature is in the process of making a new law.  Once it does, the regulators and judges will follow the new law.  This ostensible "justification" for GBE makes no sense, because legislators can change the law.  Legislators are not beholden to the opinions of judges or regulators.  Only legislators make laws!

And now let's skip to the reported malarkey spewed by Invenergy at yesterday's hearing.
A spokeswoman for Chicago-based Invenergy, which is spearheading the project, said the power line project will have a significant economic impact in the state.

“This project will create thousands of jobs here in Missouri,” said Nicole Luckey.
In addition, she said the company is prepared to pay more for land than its fair market value.
“We are committed to compensating landowners fairly,” Luckey said.

Invenergy says its structures will take up less than 10 acres of land throughout Missouri, not including land underneath transmission wires.

Jobs, jobs, jobs!  We've all heard this baloney before and we know that job promises rarely come true.  Their numbers are based on extrapolated numbers in a computer program, not reality.  In addition, most of the jobs will be temporary and filled with trained professionals from out of state.  Quit trying to push the "benefits" thing, nobody believes it.

And let's examine that statement about paying more than fair market value.  Who determines "fair market value" if a taking isn't challenged in the courts?  Invenergy does!  Invenergy's land agent subcontractor works to get "market study" data from past land sales in each county.  There could be some picking and choosing going on there that skews the numbers.  Then an "average" market value for land in that county is developed.  Once that figure is arrived at, individual property characteristics can be applied to either raise or lower it to arrive at a "fair" cost per acre.

We are committed to compensating landowners fairly?  Is this the landowner's idea of fair, or is it Invenergy's idea of fair?  Of course, it's Invenergy's, because they currently hold the power of eminent domain to take a property, even if the owner does not agree the compensation is fair.  There's nothing fair about this!

And, which is it, Invenergy?  Fair market value... or more than fair market value?  How much more?  Those statements, taken together, make no sense, which leads me to think that maybe the whole thing is just made up baloney.

Speaking of baloney... less than 10 acres?  So is that all that will be compensated across the state?  Why would Invenergy pay for land not taken?  The truth is that Invenergy is planning to take a 200-foot wide strip of land clear across the state, and they have to compensate landowners for all of it.  This claim is ludicrous.

This seems to be the only thing the reporter managed to come away with to represent the bill's supporters yesterday.
Landowners in the path of the transmission lines argue that a private company should not be able to condemn land in order to build the project.

I'm pretty sure there was a lot more said on this topic that perhaps was just too complicated for this uneducated reporter to grasp.

The difference between merchant transmission and regionally ordered and cost allocated transmission was explained rather succinctly.  Here's my version:

Regionally ordered and cost allocated transmission comes from independent regional transmission system operators.  They order new transmission for purposes of reliability, economics, or public policy.  When transmission is ordered, the transmission organization also assigns cost responsibility for the project to regional customers based on their use of the transmission line.  Most importantly, those customers assigned cost responsibility for the project only pay for the cost of the project, plus regulated return to the owner of the transmission.

Now, the difference of merchant transmission, like GBE.  No transmission organization ever ordered GBE.  Its costs will not be collected from regional customers.  Instead, GBE has federal negotiated rate authority.  It collects its costs through rates it negotiates with voluntary customers.  Whatever price GBE can agree to with customers is the amount those customers pay, regardless of what the project costs to build.  These are what is known as "market rates," where the rate charged is supported by a free market where each party comes to the table and negotiates the price without undue influence.

Therefore, GBE's rates are independent from the cost of the project.  If GBE saves money on land acquisition due to the use of eminent domain, then that profit goes in GBE's pocket.  It won't change the rate it has negotiated with its voluntary customers.  On the other hand, when a project is cost allocated to regional customers, they only pay for what it costs to build.  If the owner saves money on land acquisition through the use of eminent domain, those savings go to the customers who pay for the transmission project.

Bottom line:  Eminent domain would increase GBE's profits beyond its cost of service.  If GBE cannot use eminent domain to keep land acquisition prices low and must depend on free market negotiation to acquire land to build its project, that eats into GBE's profits.  There are no savings that go back to customers if land acquisition costs are limited by eminent domain.  This is why merchant transmission should never be granted eminent domain authority.  And this is why the Missouri Legislature wants to change the law to exclude its use for merchant transmission.

This article about yesterday's hearing is much more balanced.  This reporter paid attention and didn't try to apply bias to sway reader's opinions.  You should read it to get a complete picture of what was said by both sides.

And here's what that Invenergy lady had to say in this report:
The company in charge of the project, Invenergy, said condemnation of properties under eminent domain is more of a last resort.

“We are not seeking ownership,” Nicole Luckey, director of regulatory affairs at Invenergy, said. “We are seeking an easement over folks’ land. Landowners will retain full ownership of the land in an easement. They can continue to use it for agricultural purposes.”

Luckey said landowners would be paid 110% of the market value in an easement, plus a structured payment that can be taken in a lump sum or in an annual payment, which would increase every year.

More of a last resort?  More of a last resort to paying a price for land that is negotiated in a free market?  Eminent domain isn't a part of fair negotiation.  It's coercion, plain and simple.  It was also reported, although not in this article, that she claimed that if a landowner didn't want to negotiate with Invenergy, the company would simply route its project around them.

So, in that case, GBE's route may look like this:
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I'm not buying it.

Easement.  Sure, that's where another party has a right to use a portion of your land for their own purposes, even if you object.  Of course, you still "own" it and pay taxes and insurance on it.

Oh! 110% of market value?  Is that "fair?"  Once again, who determines market value?  Invenergy does.  They're going to pay landowners 10% more than the value they determine is fair.  Garbage in, garbage out!

A transmission company's hired land acquisition company spends several months creating a plan before they hit the streets.  They do the market studies, then create a database containing a range of values for each property.  The lowest "fair market value" in the range is what a landowner is originally offered.  The value can increase when a landowner resists, dependent upon approval from higher ups.  What's the highest value in the range for your property?  Of course, they're not going to tell you.

I heard that the Invenergy lady also told a lovely story about the company's plan to hire land agents.  It will be very selectively hiring agents in January, training the agents in February, and then sending them out to the field in March.  BALONEY!  Transmission owners don't hire individual land agents off the street and then train them.  They contract with land acquisition companies that already have teams of trained agents, such as this one, which is said to train their agents in psy ops in order to get resistant landowners to sign agreements.  What happened to the land acquisition company Clean Line was using in Missouri?  Is Invenergy going to just toss out that database and start fresh?  In that case, how could it know what a particular landowner was previously offered to make sure it's new offer was at least as much?

She also allegedly said that Invenergy would gladly deliver all the energy to Missouri, if it could.  Still can't find any customers, Invenergy?
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Missouri's energy needs are met, without any part of GBE.

So, now we see where this bill wanders next.  A companion bill in the Senate is set for Committee hearing on Wednesday.  Off to a great start!

What can you do?  You could dash off a Letter to the Editor of one of the newspapers reporting on yesterday's committee hearing, just to set them straight.  Or you could send one to your local paper, or any other paper in Missouri.  Need help?  Just ask!
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The Swamp's Energy Circus

1/12/2020

6 Comments

 
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Holy Swamp Circus, Batman!  The House Energy & Commerce Committee is working on a "CLEAN Future Act" that renewable energy industry group ACORE says is based on a report it recently released.

And what in ACORE's report?  This

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I'll sum it up for you in as few words as possible.
  1. Require every state to set a renewable energy standard under federal law.  This will require states to pay increased prices for renewables, even if they are more expensive than conventional sources of energy.
  2. Provide new, perpetual federal tax credits to renewable energy, so it can appear to be "cheaper."
  3. Charge federal penalties to sources of energy that contain "carbon" so that these sources of energy become more expensive than the expensive renewable sources.
  4. Supersize the electric transmission network to provide free transportation for more renewable energy.
Of course, the devil is in the details.  One huge detail conveniently left out of this report is HOW MUCH WOULD THIS COST?  All of ACORE's great ideas come at a huge cost to electric consumers, you and me!  None of this stuff is free or cheap, in fact, it's going to cost us trillions if implemented.

But, the climate, the planet, civilization, for goodness sake!  Oh, the humanity!

How much good would this plan actually do?  ACORE's basis for this is full of holes.
The U.S. accounts for 15% of the world’s total GHG emissions, making it the world’s second largest emitter.
Only 28% of U.S. GHG emissions are attributable to the electricity sector.

Today, 22% of America’s 1,047.6 gigawatt (GW) utility
-scale, electric generation capacity is renewable, while 67% of our electrical capacity produces GHG emissions. In 2050, the U.S. Energy Information Administration projects that 60% of the generation mix will still produce GHG emissions. Replacing this projected emitting capacity with pollution-free renewable power will require nearly 30 GW of additional renewable capacity each year between 2020 and 2050, a roughly 50% increase above the current growth rate of U.S. renewables.
So, let's see... spending trillions on decarbonizing the electricity sector would result in a 28% reduction to 15% of GHG emissions.  Do you know how small a number that is?  ACORE is also talking about CAPACITY FACTORS.  A generator's nameplate capacity is the amount of energy it could produce if it ran at maximum capacity all the time.  The capacity factor is the actual energy produced, because generators don't run all the time.  The capacity factor of a generator with a continual supply of fuel allowing it to run at maximum capacity at any time is pretty high.  Renewable generators, such as wind and solar, on the other hand, have miniscule capacity factors because they cannot be counted on to run at their nameplate capacity at any time because their fuel supply is variable.  Therefore, in order to produce the kind of capacity factor ACORE is talking about using wind and solar, we'd have to build ten times as much generation.  How cost effective is it to build 10 times the generation you actually need just so you can get a 10% capacity factor out of a renewable generator? I'm really not convinced here.

But wait... there's more!

About those new, permanent tax credits for renewables:
Qualifying technologies should include all current and future resources that meet emissions criteria, including enabling technologies like energy storage and expanded interstate, high-voltage transmission that accesses clean energy resources.
The tax credit recommended in the report is: 
The electricity title of the Clean Energy for America Act (S. 1288) would provide a minimum credit to any clean electricity facility that is at least 35 percent cleaner than the national average, with zero-emissions facilities receiving a production tax credit of up to 2.4 cents per kWh or an investment tax credit of up to 30%, at the election of the taxpayer. The PTC would be available for ten years after the facility is placed in service, and the credit in its entirety would phase out when emissions from the electricity sector fall to 50% below 2019 levels. Additionally, the Clean Energy for America Act would repeal a range of existing preferential incentives for fossil fuel companies, including the expensing of intangible drilling costs, percentage depletion, deductions for tertiary injectants, and credits for enhanced oil recovery and marginal oil wells.

So, 2.4 cents tax credit per kwh  generated for qualifying sources.  And how is that going to be applied to electric transmission?  First of all, there is no such thing as "clean" electrons.  All electrons look the same and get all mixed up in the transmission network, so there is no way to judge whether the electricity on a transmission line is 35 percent cleaner than the national average.  What's the national average of the cleanliness of electricity?  Second of all, how would this be measured?  Measuring the generation of electrons to calculate a production tax credit is simple.  They are measured as they are created.  Once they are transferred to our current AC electric transmission network, they get all mixed up with other electrons and nobody can tell where they go.  Complicating this, a lot of electrons are simply lost along the way.  Is it the clean ones?  Or the dirty ones?  If you measure how many "clean" electrons you add to the transmission system, then you're overestimating because some are lost.  But you can't measure them at the receiving end because they're all mixed up (and some just go around in a circle forever and nobody ever uses them).  Ya know what?  A production tax credit (or investment tax credit) for electric transmission is about the most imprecise and stupid thing I've ever heard.  It can't work.  They'd just be guessing at how much to pay these transmission owners.

And here's the big thing... tax credits for generators and transmission owners mean they pay less taxes.  If they pay less taxes, WE pay MORE taxes to make up the difference.  So it's not like these "credits" actually make the energy any cheaper, we just pay for the energy in our tax bill instead of our electric bill.  The end game here is that electricity will get even MORE expensive.

And just to make sure renewables appear to be "cheaper", let's remove any existing credits for conventional generation, and then add "carbon" penalties to them.

But all this pretend "cheapness" might end up being more expensive for "the poor."  Oh, look, it's Renewable Robin Hood!
Since energy is an unavoidable expense, putting a price on carbon could also, at least initially, have a disparate impact on lower-income households. To prevent that outcome, any equitable carbon pricing program should be designed to avoid economic regressivity. One possible solution is to return revenue from carbon pricing to citizens in the form of a pro-rata carbon “dividend.”
Let's tax the hell out of carbon and make energy really expensive, and distribute that tax revenue to "the poor" so that they can have cheap energy.  Rob from the rich, and give to the poor (because "the poor" have lots of votes!!)

And then let's bring back the NIETCs that big green accidentally killed in 2011 when they were being used to justify new transmission for fossil fuels, except now we'll use them to usurp state authority to site new transmission for our wondrous "clean" energy transmission.
Additionally, Congress should clarify federal backstop siting authority by restoring Congressional intent of the Energy Policy Act of 2005, which would encourage and accelerate investment and development of needed transmission infrastructure when that infrastructure is in the national interest and advances the objectives of a comprehensive climate plan.
National Interest Electric Transmission Corridors (NIETCs) were established in 2005.  Essentially, the U.S. DOE can designate these corridors through studies that identify transmission constraints.  Once a corridor is designated, backstop siting and permitting authority shifts to the Federal Energy Regulatory Commission (FERC) in the event that a state cannot approve a transmission project within one of these corridors.  They tried to do it right after the legislation passed, but the effort failed in the courts.  Ironically, it was the big environmental groups that fought NIETCs in the courts to have them vacated and the backstop permitting authority neutralized.  All a state has to do is simply deny a permit and that nullifies FERC authority.  But now ACORE wants Congress to re-vamp this idea with the requirement that NIETCs facilitate transmission for "clean" energy.

Guess what?  NIETCs didn't work the first time.  They won't work this time, either.  Transmission siting and permitting is state jurisdictional, and that's never going to change.  There's simply nothing ACORE or Congress can do to usurp state authority over transmission.

This report is a swamp clown horror show!  It will make electricity so expensive that we can't afford it.  Well, if we sit in the dark, I guess that will take care of a very, very small percentage of carbon emissions.

We can't afford the "CLEAN Future Act" and we can't afford ACORE's pie-in-the-sky recommendations.  Where's Batman when you need him?
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If OMS Is Concerned About The Regulatory Revolving Door, What Should The Citizens Of Missouri Think?

1/12/2020

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A couple months ago, Missouri Public Service Commissioner and former chairman Daniel Hall left the PSC (and his other job as President of the Organization of MISO States) for a job at the American Wind Energy Association.
The Organization of MISO States "will examine the revolving door policies of its member states after its president departed his position earlier this month to take a job with a wind energy trade association," according to RTO Insider.
The move comes in response to Louisiana Public Service Commissioner Eric Skrmetta’s call to create a code of conduct among OMS representatives — all of whom are state utility commissioners — governing how they transition into jobs in the industry they regulate.
“We’re asking for the OMS to consider adopting a code of ethics or a code of conduct policy,” Skrmetta told fellow regulators during a Board of Directors meeting Nov. 19 as part of the National Association of Regulatory Utility Commissioners’ annual meeting in San Antonio.
OMS leaders said the organization will begin the effort by examining state rules on post-employment restrictions before it decides to move forward with developing any policy.

Skrmetta said he was raising the issue after former OMS President and Missouri Public Service Commissioner Daniel Hall left both posts to become the central region director for the American Wind Energy Association earlier this month. Skrmetta said he took issue with the fact that there was no downtime before the transition and that the move wasn’t announced ahead of time.
“The turnaround is instantaneous,” he said. “It’s pretty obvious we have to take some steps.”
If the OMS is deeply concerned about the appearance of bias and impropriety, what are the citizens of Missouri supposed to think?

Former Commissioner Hall was a huge champion of the unnecessary and unneeded Grain Belt Express project.  In fact, the PSC's approval of the GBE project claimed,
There can be no debate that our energy future will require more diversity in energy resources, particularly renewable resources. We are witnessing a worldwide, long-term and comprehensive movement towards renewable energy in general and wind energy specifically. Wind energy provides great promise as a source for affordable, reliable, safe, and environmentally-friendly energy. The Grain Belt Project will facilitate this movement in Missouri, will thereby benefit Missouri citizens, and is, therefore, in the public interest.
And the next thing you know, he finds himself Central Region Director, Electricity and Transmission Policy for the American Wind Energy Association.  Some folks may think it smacks of bias or some sort of impropriety, while others may think it's just a bit of natural kismet, because Hall has always loved the big wind industry.  But how can the public be sure?

They can't.  Not for sure.  Did Hall's love of big wind influence his support for GBE?  Or did Hall's love of GBE influence his support for big wind?  Did AWEA lean on Hall to favor GBE with the idea of future employment in mind?  Did Hall support GBE as a way to curry favor with AWEA to lead to future employment?  Of course, there is no evidence any of these scenarios occurred.  But OMS is concerned.  Maybe the citizens of Missouri should be also?

So, what would Hall be doing in his new, windy position?

“We are excited to have Daniel on our team,” said Amy Farrell, SVP Public and Government Affairs for AWEA.  “His legal and technical expertise, along with his years of experience in regulation at the state level will help us work toward AWEA’s transmission vision of an increasingly connected, national grid.”
 
Hall will be responsible for policy concerning the efficient and affordable integration of wind energy, including consideration of seams issues between Regional Transmission Organizations (RTOs), RTOs and similar Independent System Operators (ISOs), are electric power transmission operators that coordinate, control, and monitor multi-state electric grids across much of North America.
 
“Wind energy has been a remarkable growth and success story, especially in our part of the country,” Hall said.  “But for that growth to continue, we need to update America’s electricity grid to meet 21st century needs. I look forward to bringing together state utility commissions, federal regulators and RTO’s to make that happen.”
Sounds like he will be using his connections developed during his stint as a public service commissioner to promote new transmission for wind.  In fact, that seems to be exactly what he's doing in this article, where AWEA believes the cost of new transmission to reliably interconnect new wind farms in remote areas should be shifted from the owner of the new wind farm to electric consumers in MISO.  Instead of these new generators built in areas where their electricity isn't needed having to pay for their own driveway to interconnect to the existing highway systems, AWEA wants everyone in the region to pay for the new generator's driveway.  In exchange, AWEA wants to pretend that these electric customers get some "benefit" in exchange for their payments, such as increased economic activity and payments to landowners.  Much of this new electricity is intended to be exported out of the region, so why should electric customers in the region pay for it?  So they can have their community overrun with oversized wind turbines that make their lives a living hell, along with oversized transmission superhighways that devalue their land on their way out of the region?  And just how far does this crazy scheme stray from Hall's thinking about GBE as a "benefit" to Missouri?

Maybe Missouri needs to take steps similar to those proposed by OMS?
“Avoiding the appearance of impropriety is an important goal for this body,” Skrmetta said. He suggested OMS adopt a recusal mechanism or require members to disclose extracurricular tasks that might conflict with the aims of their offices.

Kentucky Public Service Commissioner Talina Mathews suggested OMS begin the effort by taking inventory and comparing each state’s existing code of ethics on post-employment policies, a task the board assigned to an informal board subcommittee.

Skrmetta said initiating a code of conduct would create protections for OMS and create an “absolute armor plate” for the organization. He also argued that as AWEA’s central region director, Hall was active in MISO states immediately after leaving OMS.

Thomas suggested OMS might add some boilerplate language that directors are bound to their state’s individual code of ethics.


OMS President Matt Schuerger asked the subcommittee to wrap up its research in time for the board’s January meeting.
“It’s a reasonable question that’s been put before us,” he said, promising more discussion.
Regulators, especially politically appointed ones, rarely make a career out of regulating.  Appointments always have a term limit, and changing political winds can guarantee that a regulator may not be reappointed by a elected successor.  So, why would anyone WANT the job of public service commissioner?  Because it's a springboard to riches in the regulated sector.  Former regulators are highly prized within the industries they regulate, or within the law firms that work for the regulated.  Every company wants to own a former regulator or public service employee who has connections that may help them with future proceedings before the regulator.  These former regulators are simply worth more in the employment market AFTER they serve than before.  What's a former public service commissioner to do if he doesn't sell himself to the industry he formerly regulated?

But, we definitely need some sort of cooling off period between public service and private industry so that a former commissioner's new job doesn't cause the kind of stink cloud that's enveloping former Missouri PSC Commissioner Daniel Hall right now.
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Transource Continues To Waste My Money As Hearings Continue

1/11/2020

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There.  I fixed the headline for this article published recently.

There's absolutely no good answer to why Transource feels the need to award a construction contract for a project that hasn't been approved in either state in which it is proposed to be constructed.  No good reason at all.

Maybe it's a PR stunt?  Perhaps Transource wants to tell the PA PUC in its upcoming status report that it has awarded the contract for the project to a "Pennsylvania company" and created jobs in the state?  Otherwise, it makes no sense at all, since Transource cannot put any shovels in the ground until it has its certificates.  But what may be happening is stockpiling of materials and final engineering work for a transmission project that will never be built.  Transource continues to spend buckets of ratepayer cash on their dead project.  Every dime Transource spends will have to be repaid by electric ratepayers assigned cost responsibility for the project by PJM, plus annual return more than 10% until the sunk costs are paid off.  We're talking tens of millions of dollars repaid over perhaps a 5-year period when the project is abandoned.  Actions like this are why everyone's electric bills are so expensive.  We've only recently finished paying off the quarter billion dollar sunk costs of the failed PATH transmission project that was never built.  Gotta keep those dollars coming in for abandoned projects!

So, who got awarded the contract for a project that will never be built?  Harlan Electric, which is supposed to be based in Harrisburg.  But it's also based in Massachusetts and Michigan, and builds projects all over the place.  If you think all the folks working on the project for the company are based in Harrisburg, you may not be correct.  How many workers would be imported to construct the project?  If all workers were local to Harrisburg, there would be no need for hotels with group rates, right?  The workers could simply go home every night.  Instead, Transource wants to hear from local hospitality folks who want to bid on supplying restaurants, catering, venue rental, and hotels with group rates.  Sure sounds like support for a traveling minstrel show of transmission workers.

But it seems there is one company local to Pennsylvania (although not in the project area) that has been awarded a subcontract, according to the Waynesboro Record Herald.

Harlan Electric representatives are securing subcontractors and will be working with local contractors such as Newville Construction of Newville.
So, Harlan is just a general contractor who will be subbing the actual work out to other contractors?  My, my, that sure sounds cost efficient!  Everybody gets a piece of the ratepayer cash pie!

And where have we heard the name Newville Construction before?

I think it first came up in this video, where a farmer appealed to other farmers in the project area, telling them that the transmission project won't be a burden and that the construction company would leave their property in better condition than they found it.  The farmer, Jim Shuster, didn't mention that he is also the President and Founder of Newville Construction.  Of course, that's not relevant, right?  It must have just been a happy accident that a company he owns, in addition to his farms, ended up with a construction contract, right?  Of course, Jim wasn't paid "a plugged nickel" for his work in the video.  That's what he said in this article.
"Jim spoke from his perspective as the owner of Eleven Oaks Farm on his experiences with utilities and agriculture. Transource has not yet made a selection of the construction companies that will build (the line), nor has it promised work to Newville Construction." 
Shuster said that is the case. He said he was approached by the International Brotherhood of Electrical Workers to appear in the video and testify about his experience with power lines and agriculture. He doesn't understand the opposition to the power line. "I wasn't paid a plugged nickel for that," he said. "I was not promised a dime's worth of work for doing it." 
The impact on the land is minimal, he said, and his company operates under the directive to leave the land in better condition than they found it, something that has earned the company awards and praise from conservation groups. 
Transmission and Agriculture video.mp4
"We're not some Ma and Pa operation with a backhoe," he said. "We're a $30 million-a-year business." 
He is angry with some of those who oppose the power line because, he said, they suggested that his farm is a hoax. About the opposition, he said, "It's one of the most hypocritical things I've ever seen." Unless those opposed to the transmission line have their own power plant, he said, the electricity they use flows through a power line on some other farmer's property. 

"I frankly don't understand what their problem is with it," he said. 

Well, serendipity!  What a fortuitous event!  What are the chances?  Wish I could take those chances to Vegas!  Jim wasn't promised a thing in exchange for making that video.  He only did it as a favor to the union.  And by a rare stroke of good luck, he ended up with a contract to work on the proposed transmission line! 

I wonder if Jimmy Hoffa knows anything about this?  Maybe I can contact him via seance?  The union is surely involved somehow.
“Anytime jobs are created, it’s a win,” said Bernie Kephart, business manager for IBEW Local 126. “Our workers earn family-sustaining wages building the infrastructure that supports our daily lives. We’re proud to build infrastructure that saves customers money and reinforces the grid against power outages in Maryland and Pennsylvania.”
“We support clean, safe and affordable power,” said William C. Tipton Jr., business manager/financial secretary for Maryland IBEW Local 70. “Any conversation around energy comes to a quick halt if we do not have the transmission infrastructure to transfer that power to all who need it.”
Wait a tick... it has not been determined that the IEC will save customers money or reinforce the grid against power outages in Maryland and Pennsylvania.  It also has not been determined that the IEC would provide clean, safe and affordable power.  The only ones who can make this determination are the Pennsylvania PUC and the Maryland PSC.  Neither one of these agencies have made their determination yet.  There's still a long slog ahead, and there's still opposition from state agencies who protect customers, as well as opposition from landowners in the project area.  The jury is still out.

Jobs aren't everything.  Creating jobs just for the sake of having jobs is a waste of money.  My money, your money, electric customer money.
Local companies contracted by Transource also completed much of IEC’s geotechnical survey work, which concluded last year.
Right... and much of that money was wasted when the original eastern route was completely scrapped in favor of building the connection on existing right-of-way.  It's not like using existing infrastructure was an idea that came out of the blue after the work was completed.  Opponents had identified existing resources and asked to use them from the very beginning, before one penny was wasted on geotechnical work.

Waste, waste, waste.

But, hey, now that Transource has awarded all its construction contracts, perhaps we can get a better feel for how much this project is actually going to cost?  With all these contractors, subcontractors, and hotel venues, maybe it would cost more than has been estimated?  There's no cost cap on this project.  The more AEP (Transource) spends, the more it makes!  Perhaps that's why they're still moving full-speed ahead on a project that has stalled in the regulatory process?  Maybe they just want to pad their investment so they can recover it from us with interest?

Stop wasting my money, Transource!
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Invenergy Will Benefit From GBE More Than Electric Customers In Missouri

1/10/2020

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Great article in the Webster County Citizen!  Legislators discuss the problems with using eminent domain for Grain Belt Express, and the possibility that it will again become a legislative hot-topic this year.  In the wake of last year's proposed legislation, legislators are educated, aware, and ready to take action.
“The problem originates with it being a privately-developed line. To acquire the right-of-ways across the state, the developer would use eminent domain.
And this is the crux of the problem.  A privately-developed line... what does that mean?  Aren't all transmission lines not owned by a municipal or consumer owned utility "privately developed?"  No, they're not.  Most transmission development is proposed in response to orders from independent federally-designated regional transmission organizations.  These projects are ordered for purposes like electric reliability, or to lower regional market prices, or in some instances, in response to state public policy requirements.  Grain Belt Express is none of these.  It wasn't ordered by a RTO.  No RTO has ordered this project for any reason that serves the general public.  Instead, GBE was proposed by a private company as a profit center.  Invenergy, GBE's current owner, plans to make revenue by selling capacity on its line to generators or end users on the east coast.  It's all about the Benjamins!  It's not about serving the public.  It's about profit.

And in order to ensure its profit, GBE offered service on its proposed transmission line to municipal utilities in Missouri at a cost below market.  GBE offered the municipalities service at a loss leader price that didn't even cover its own costs to simply serve as a way to create an artificial "need" for the project in Missouri.  Being offered a free lunch was something the municipal utilities simply couldn't pass up.  So now they support the project, claiming that it would save their residents money on their electric bills.  How much?  A couple bucks, maybe.

In exchange for some residents of Missouri possibly saving a couple bucks on their electric bills, Missouri would toss another group of residents under the bus, subjecting them to eminent domain takings of their property.  These takings will occur on property that is in use as productive farm land, taking profit from the property owners.

When do the needs of one group become superior to the needs of another group, in the name of "public good?"  This is a tough issue to struggle with.  However, there's one group missing from this kind of equation... the owner of GBE, who stands to pocket billions if it can use state-granted eminent domain to acquire land for its for- profit transmission line.  This issue is only being debated in Missouri because GBE wants to use eminent domain for its own profit (but under the guise of "public service" to municipal utilities).  While the municipal utilities serve all their customers equally without a profit motive, the same can't be said for GBE.  Invenergy only wants to build the project for the purpose of its own profit.
“These wind farms that are not in our state, they are in Kansas, and that power, most of it is going to Boston or Philadelphia, they are going to drop it off to about 30 municipalities in Missouri. I want Farmington to get cheaper power, I want them to be able to take advantage of that, but I see this company dropping off a few municipalities for the purpose of trying to get by in Missouri.”
Just to get by... just to get over... just to take advantage of Missourians for Invenergy's own profit.  If big companies from out-of-state (or even out of the country) can manipulate Missouri law, and its regulators, for corporate profit, where does it end?  How many other companies will see Missouri as a smorgasboard of company riches, where eminent domain is routinely granted for corporate initiatives?  When are the rights of Missourians going to matter as much (or more!) than out-of-state corporate profit?
“My opposition to it, the way they got approval was going to create an environment where eminent domain was going to take on a new level and take away people’s property up in northern Missouri.
"The point was that a private entity was going to benefit from eminent domain more than the general public was. You use eminent domain because it will benefit the community as a whole.”
Eminent domain is a solemn power that should be reserved for only the most necessary situations, not handed out willy-nilly to ensure maximum profit for out-of-state corporations.

Here's the thing... removing eminent domain authority from GBE will not necessarily end the project.  The company could still build its project, however it would have to negotiate with each landowner in a free market without the ability to simply take property when negotiations get too expensive.  Eminent domain allows Invenergy to keep its land acquisition costs low by using the threat of eminent domain taking to force the landowner to sell cheap.  This benefits only Invenergy.  The municipalities have their price locked in.  It won't change if the project costs Invenergy more to build.  Lower land acquisition costs translates into lower project construction costs.  The cheaper GBE is to build, the more profit is in it for Invenergy. 

Unlike those RTO-ordered transmission projects that are paid for by all electric users at the cost of the project, GBE is a merchant transmission project that sells capacity on its project at auction.  GBE will hold the same auction for its service whether its costs to acquire land are small or large.  The prices negotiated will reflect the value of the service to the customer, not the actual cost of the project.  Invenergy's profit margin on this project comes from the difference between its actual costs to build and operate the project and the price negotiated with its customers.  If Invenergy's cost to build is lower because it uses eminent domain, its eventual profit margin will be higher.

Grain Belt Express' use of eminent domain to bolster its own profit must be stopped for the good of Missourians.
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How To Increase Your Tax Credits Without Hardly Trying

1/2/2020

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Were you planning a new industrial wind installation to begin construction in 2019 in order to qualify for the reduced 40% production tax credit before it expired for good?

You may now be "frustrated" to learn that your Congress critters and their lobbyist friends have not only extended the PTC into 2020, but also increased it to 60%!  That's just soooo unfair!  Here you were, doing your best to show that construction of your project began in 2019 (even though IRS regs. allow you to qualify without actually constructing anything), when the rug was pulled out from under you.  Stupid Congress!

Production Tax Credit for 2019 = 40%.
Production Tax Credit for 2020 = 60%.

Never fear, taxpayer parasite, these fine folks are here to save your bacon!
Because the revised phase-down schedule actually phases the credit "up" for projects beginning construction in 2020 (when compared to projects beginning construction in 2019), taxpayers who may have taken steps to begin construction on projects during 2019 to secure the 40% credit prior to the ultimate PTC expiration date, are likely to be frustrated to learn that they would have been better off delaying their construction efforts until 2020.
Nonetheless, because the determination of when construction of a project has begun is intensely factual and is subject to extensive IRS guidance, taxpayers overseeing projects that are otherwise on the cusp of the "beginning of construction threshold" may be able, with a careful planning, to structure their project and future transactions, so as to allow construction associated therewith to be treated as having begun in 2020 rather than 2019. Successful planning in this regard could translate to significant benefits associated with use of a 60% PTC rather than a 40% PTC.

That's right, with careful planning by these guys, you can now claim 60% PTC, instead of the lousy 40% you had originally carefully planned for.

Apparently actual physical construction doesn't really matter, it's all about the construction date you plan on paper.  Don't you just love the IRS?

So, what's wrong with this?  It allows industrial wind companies to re-shuffle their papers (plans) to increase their tax credits by 20%.  Corporations pay less taxes.  But the government still needs money to function, right?  So, how does it make up the loss?  Because you pay more!

All those wonderful production tax credits for industrial wind corporations don't grow on trees.  Although the government prints money, it can't just print an extra little bit to cover this 20% increase in the PTC.  Every dollar of production tax credits awarded to these corporations comes out of taxpayer pockets.  If corporations pay less taxes, you have to pay more to make up the difference.

And now they have great firms that can re-shuffle their paperwork to increase the credit.
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"Wolf!", Cried Sierra Club

1/2/2020

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Ya know how I suspect you don't have a cogent argument?  You make crap up to try to scare people to support your position.  And that seems to be what happened when the Federal Energy Regulatory Commission ordered a re-vamp of PJM Interconnection's capacity auction.

PJM's markets are a confusing mess that not a lot of folks understand.  Regular people understand pretty much nothing about PJM's electricity markets that supposedly serve their electric needs and provide power at prices that save consumers money.  That's what PJM says anyhow, and since most consumers don't even know that PJM exists in the first place, it's pretty much an "I don't care" situation.  But, in the energy world, PJM's markets are a big deal, a real big deal.  PJM's markets have been gamed and influenced to provide the most profits to energy suppliers forever.  That's why PJM has a Market Monitor to keep an eye on things to try to outsmart the gamers.

Over the last decade, states who have authority over their own electric generation mix, have attempted to encourage the generation source of their choice by providing subsidies.  But when those subsidies interfere with PJM's regional electric market, it becomes non-competitive.  One time, a state wanted to provide subsidies to a new generator that made up the difference between the generator's revenue and the PJM market so that it could offer and be accepted into PJM's capacity market.  The courts said that was not permissible.  State subsidies cannot be tied to PJM's market.  Since then, numerous states have found ways to subsidize their generation of choice without overtly tying it to PJM's market.  But the subsidies DO affect PJM's market, making that generation source "cheaper" so that it can offer a lower bid into the capacity market because the state is covering some of the generator's costs.

You only need a rudimentary knowledge of how PJM's capacity market works to understand this.  Capacity isn't electricity.  Capacity is the ability to produce electricity when called upon to do so.  Generators are paid for their capacity separately from the actual power they provide.  Because PJM has a need for a certain amount of electricity to keep the power on, it has to know that it will be available.  PJM sets its resource number for each year three years in advance, then holds an auction of sorts.  Generators with available capacity submit sealed bids.  PJM stacks the bids by price.  It then accepts bids, starting with the lowest, until it get up the stack to the amount of generation that meets its resource requirement.  All generators accepted in this process are paid the top clearing price.  Say the generator supplying the last bit of capacity bid $50, that means that every generator accepted gets paid $50, even though they may have bid in at a lower amount.  It pays to be a lower bid in the capacity market.  A generator can provide a lower bid because it receives subsidies.  Without subsidies, it would have to bid in at a higher cost, and that could mean that it doesn't clear the auction.  It would also mean that the ultimate price for all the capacity would rise if all generators had to bid in at their unsubsidized cost.  This subsidy gaming of PJM's market has been going on forever, but in such small amounts that it didn't really affect the market.

But in recent years, states have gone wild with the subsidies for renewables and other favored generation, such as nuclear.  With all these new subsidies, the market price tanked and the unsubsidized resources were forced out of the market.  Many have closed.  A market made up of subsidized resources is artificially priced and not really a competitive market at all.

So, FERC has been trying to fix this.  One fix is to strip subsidies from offered resources to make them bid in at a realistic price.  That's what FERC did just before Christmas.  It ordered PJM to revise its MOPR (Minimum Offer Price Rule) to nullify the effect of state subsidies.

And then all hell broke loose.

The self-serving environmental groups and renewable and other generators benefiting from subsidies freaked out.  And this happened.
“Trump and FERC are selling us out to the fossil fuel industry. They are adding billions of dollars in subsidies for coal, oil, and natural gas at the expense of green jobs and our health. They will now be getting over $6 billion a year just from our PJM grid alone, in addition to $15 billion a year in direct federal subsidies and all types of indirect subsidies. These dirty industries cannot compete with cheaper and cleaner renewable energy, so they are looking for a massive subsidy at our expense. This will hurt green jobs and public health,” said Jeff Tittel, Director of the New Jersey Sierra Club.
Honestly, what rubbish!!!  He says that FERC added billions of dollars of subsidies for coal, oil and natural gas.  They did no such thing.  That's an outright lie.  FERC did not give new subsidies to any generators, it simply mitigated the existing subsidies for renewables and nuclear.  If all generators exist on an even playing field, it is not instituting new subsidies.  And then he whines about "federal subsidies."  The FERC order didn't touch federal subsidies, like the production tax credit for new wind generators.  FERC felt it had no authority to nullify federal subsidies, just state subsidies.

The environmental groups have been whining about subsidies for a number of years.  As subsidies for renewable generators took off into a billion dollar industry, environmental groups chose to defend that by pointing to what it calls existing subsidies for fossil fuel generation.  Try to have a debate with any cleaniac about renewable energy subsidies, and they deflect by claiming other generators are getting just as much in other subsidies.  It's not true, but it serves to change the argument to one about dueling subsidies and away from public outrage at the juicy subsidies filling the pockets of renewable energy companies.  There are no overt subsidies of fossil fuel generation that come even close to those provided by the federal government for utility scale wind and solar.  Big Green insists renewable subsidies are no greater than those provided to fossil fuels.

But when FERC removed all state subsidies for all generators, Sierra Club whines that renewables are hurt by it.  If the subsidies are equal, then removing them all doesn't change anything.  Apparently there are more subsidies for renewables than there are for fossil fuels, or renewables wouldn't be hurt by their removal.  Big Green's favorite argument has flamed out.  It no longer has any relevance.

I'm going to guess that the Sierra Club guy crying about shameful giveaways didn't even bother to read the FERC Order before beginning to bellow.  That's pretty shameful in itself.  I actually did read the order, hard as it was to stomach, and I can't find any basis for the nonsense spewing from Sierra Club.  What I find interesting is the whole state v. federal thing.  If states are providing subsidies to certain generators, those subsidies are coming from state consumers and/or taxpayers.  The subsidies are affecting a regional market, not just one contained within the borders of the state.  So, if New Jersey subsidizes nuclear generators and that lowers the regional capacity market price, I would get a price benefit here in West Virginia.  Thanks, New Jersey!  And now, if New Jersey is still providing a subsidy to generators that does not lower prices in the regional market, and market prices go up, New Jersey citizens are sort of paying twice for the same subsidy.  Maybe they should rethink their subsidy, instead of trying to visit it upon everyone else?

Some claim FERC's Order will cause a great exodus from PJM and its regional market.  Buh-bye, don't let the door hit you on the way out.  If a state wants to subsidize certain kinds of generation that fits with its political goals, then it needs to keep that subsidy within its own borders.  Go ahead, subsidize what you want.  That's a state issue.  I could be selfish and parochial here, since New Jersey and other states are subsidizing the regional capacity prices I have to pay, and only worry about my own bottom line.  But the continued (and increased) state subsidies are causing existing generation to drop out of the market as uneconomic.  That's generation that we've all paid for over the years, replaced by new generation that we're all going to have to pay for over the next 50 years.  At some point, this kind of a market is going to explode.  Regional capacity prices will be pure fiction, totally influenced by individual state policies.

So, do we really need a regional capacity market?  Do we really need to know that sufficient generation will be available 3 years from now to keep the lights on, or should we depend on state generation policies to provide adequate generation for their own state?  Or, maybe we should just cross our fingers and hope the lights come on three years from now, when existing baseload generators are all gone and we're depending on a new crop of intermittent generators whose capacity factors are quite small?  Remember, capacity is a generator's ability to generate power when called.  Those coal and gas generators have high capacity factors because they can generate any time from stockpiled fuel.  Wind and solar, however, have very small capacity factors because they rely on the vagaries of weather and sunlight to supply their fuel in real time.  If we add huge battery capacity to create a stockpile, that has a huge additional cost.  Because the capacity factors of renewable generators are so small, we need to hugely overbuild them to guarantee any amount of capacity.  How would this end up being "cheaper"?  State generation subsidies are merely skewing the market for now, with big problems down the road.

Let's see what FERC's Order does to PJM's capacity market, and if we're actually getting some surety from the "increased" costs it imposes.  Today's prices aren't really lower, they're subsidized and being paid outside PJM's market through state subsidies.  What if you added up the current capacity market costs and all existing state subsidies that will now be nullified?  That's the actual true cost of capacity.  This order won't so much increase prices as it will re-allocate who pays the cost of capacity.

The sky isn't falling.  There's no slobbering wolf wandering through town.  It's just Sierra Chicken Little and all his chickie friends telling us once again that the world is ending because they didn't get their way.  Thank goodness there are energy professionals that actually understand these markets and don't base their decisions on a bunch of propaganda and whining.
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Maryland Office of People's Counsel Digs Into PJM's Magic Math

12/19/2019

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Earlier this week, a whole pile of testimony was filed at the Maryland PSC regarding the partial settlement that Transource engineered in the case of its proposed Independence Energy Connection.

We all know that PJM has been using magic math to alter the project's benefit/cost ratio in order to make it appear economic.  But, what exactly has PJM done?  The OPC's witness gets right to the point.  In its latest iteration, PJM's B/C left something important out of its "base case" that calculated benefit.  PJM has been inconsistent in evaluating the three separate projects it recently bundled into one aggregate project with a B/C of 2.25:1.  When project 5E (the Graceton-Bagley rebuild) tanked below 1.25, PJM added the H-L project (Hunterstown-Lincoln) to its base case in order to raise that number to 1.8.  PJM added H-L because it increased the B/C ratio for 5E. 

However, when it came time to re-evaluate the Transource project, PJM took H-L OUT of the base case because that increased the B/C ratio for the Transource project.  OPC's witness believes that the "benefits" of the Transource project will fall if H-L is included in the base case.
I believe that PJM should have conducted an evaluation to calculate the B/C ratio of the Reconfigured Project 9A with the H-L Project in the base case, consistent with its approach to evaluating Project 5E. Project 5E failed the B/C threshold in the latest reevaluation, but PJM repeated the analysis including the H-L Project in the base case because of its impending recommendation that the PJM Board approve the H-L Project. My understanding of the rationale for including the H-L Project in the base case is that with such a high benefit-cost ratio and a low total cost it is highly likely the H-L Project will be approved, and that project will impact the flows to Project 5E, making it more reasonable to review Project 5E with the H-L Project in the Base Case.
The Reconfigured Project 9A has a similar fact pattern, although the results are opposite directionally. The latest reevaluation of Project 9A passed the B/C threshold without the H-L Project, but it is reasonable to expect that, due to the proximity of the two projects, the addition of the H-L Project will alter the flows of power that produced the 9A benefits.
While we do not currently have all of the data needed to estimate the results of that case, it is possible that including the H-L Project in the Base Case will reduce the calculated benefits of the Reconfigured Project 9A.
You should carefully read this testimony.

Bravo, OPC!
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    About the Author

    Keryn Newman blogs here at StopPATH WV about energy issues, transmission policy, misguided regulation, our greedy energy companies and their corporate spin.
    In 2008, AEP & Allegheny Energy's PATH joint venture used their transmission line routing etch-a-sketch to draw a 765kV line across the street from her house. Oooops! And the rest is history.

    About
    StopPATH Blog

    StopPATH Blog began as a forum for information and opinion about the PATH transmission project.  The PATH project was abandoned in 2012, however, this blog was not.

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