As relief workers fan out across Japan’s eastern coast to find victims of this weekend’s devastating earthquake and tsunami, Tokyo Electric Power Co. (TEPCO) engineers are scrambling to prevent a runaway meltdown at three nuclear reactors, and trying to restore proper cooling to several others.

It’s a nightmare scenario by any definition. Countless families have been affected by this once-in-a-millennium disaster — and the nightmare isn’t over. In particular, Daiichi plant workers now are risking their lives, in what can only be described as an heroic effort to contain the nuclear crisis. Their sacrifice for Japan and the world shouldn’t be underestimated.

In the context of this barely comprehensible human tragedy, questions about how the meltdown will affect America’s nuclear future seem inappropriate. They’re also premature; the Daiichi situation is rapidly evolving as workers struggle to cool reactor cores, and assess possible damage to containment structures. In any case, we won’t know the full extent of the nuclear disaster for some time — perhaps weeks or even months.

However, when Japan gets past the immediate emergency and begins to rebuild, then it will be time to decide whether Daiichi is this generation’s Three Mile Island — i.e., whether it will end the industry’s plans for a nuclear renaissance. Greenpeace and other anti-nuclear groups already are saying Daiichi “proves” nuclear power is unacceptably dangerous and should be stopped. And politicians in some countries are calling for a halt to projects that were in the works. Whether this impulse gains strength in the coming months, or fades with the memory of the current nightmare, will determine how Daiichi affects the industry’s long-term future.

Alternatively, Daiichi could bring a constructive conversation about nuclear design and siting. It could serve as an object lesson for engineers who are planning or operating reactors in geologically active areas — or within range of a 14-meter tsunami. It could give the industry a chance to explain how the new designs are inherently safer than Daiichi’s 40 year-old boiling water reactors.

In short, when the time comes to consider what Daiichi means for the power industry, we might decide to learn the lessons it can teach, and use those lessons to build a safer nuclear future.

Until that time, however, we can only watch, and offer support to the resilient and resourceful people of Japan.

Posted: March 14th, 2011 under Current News, Uncategorized, nuclear renaissance.
Comments: 1

In the latest installment in the saga over customer engagement failures and smart-meter backlash, the following statement from California Public Utilities Commission (CPUC) President Michael Peevey arrived in Fortnightly’s inbox last night , along with a link to a video recording of Peevey’s statement:

>>>

Commissioners and members of the public, I recognize that we once again have a large number of speakers who want to address the Commission on the subject of smart meters and their concerns about wireless radio frequency emissions from these devices.

Before hearing from this morning’s speakers, I would like to say a word about the subject.  I think what I have to say might calm some of the emotion around this issue.

First, I want to make an observation:  Virtually every speaker who has addressed this subject has been a PG&E customer.  We have not had complaints about radio frequency emissions or other concerns about smart meters from customers of other utilities in California.  For example, PG&E’s neighboring utility in Sacramento - the Sacramento Municipal Utility District - has not had any sort of customer complaints of the kind we’ve been hearing from PG&E customers.  Nor have the southern California utilities.

Nonetheless, given the continued strong interest in this issue in parts of Northern California, I have spoken directly with PG&E’s president and asked him to bring to this Commission a proposal or a series of proposals that will allow customers with an aversion to wireless devices the option of being metered without the use of wireless technology.

In other words, I am directing PG&E to prepare a proposal for our consideration that will allow some form of opt-out for customers who object to these devices at reasonable cost, to be paid by the customers who choose to opt-out. I’ve asked to have it within two weeks.

Obviously, I cannot prejudge how this Commission will evaluate any such proposal by PG&E, nor can I predict what PG&E itself will propose.  But I think it’s clear the time has come for some kind of movement in the direction of customer opt-outs.

Thank you.

>>>END<<<

Posted: March 11th, 2011 under Current News, Smart metering, customer engagement, dynamic pricing, regulation, smart grid.
Comments: none

In report to CPUC, Structure Group deems meters OK, but criticizes utility for poor communication

Weekly Update Courtesy of Utility Regulatory News #3988: Reviewing the results of a report it had commissioned after fielding more than 1,300 customer complaints about smart meters and associated high bills, the California Public Utilities Commission has concluded that the meters, as well as their related software and billing systems, were operating within industry norms and were accurate within approved standards.

The subject meters had been deployed by Pacific Gas & Electric Co. (PG&E) in the San Joaquin Valley area, with complaints about high bills ensuing  almost immediately upon their installation. In response to such inquiries, the commission had enlisted the services of The Structure Group (TSG) to evaluate and analyze the new advanced metering devices. After conducting laboratory tests, field tests, and end-to-end system tests, TSG found no problems with the meters and their connected systems. According to the TSG report, the metering devices were working properly and customer billings reflected the data collected from the meters. However, the audit team faulted PG&E for its initial response to consumer complaints, finding that its action in cancelling numerous bills, then rebilling customers without explanation, caused unnecessary confusion.

The utility also was criticized for failing to adequately communicate with and educate its customers about the new meters prior to rolling them out. A lack of appropriate communication protocols was also cited as being behind customer complaints of unsatisfactory service and delayed responses to their complaints. The audit disclosed that it took PG&E an average of 4.5 months to resolve smart meter-related billing disputes. For the full story, subscribe to URN.

Posted: October 8th, 2010 under Current News, Smart metering, Uncategorized, customer engagement, dynamic pricing, smart grid.
Comments: none

Business Roundtable asks Sen. Reid to Intervene

Fortnightly obtained today the following letter from AEP CEO Michael Morris, which was sent to Senate Energy Committee Chairman Harry Reid under the auspices of the Business Roundtable. This is especially interesting given Morris’s work to help craft workable GHG legislation in Congress.-MTB

>>>>>>>>>

The Honorable Harry Reid

Majority Leader

United States Senate

Washington, D.C. 20510

The Honorable Mitch McConnell

Minority Leader

United States Senate

Washington, D.C. 20510

Dear Majority Leader Reid and Minority Leader McConnell:

The Environmental Protection Agency (EPA) has finalized or soon will be finalizing several regulations under the Clean Air Act addressing greenhouse gas emissions from power plants and major industrial sources. While these regulations will be challenged in the courts, the lack of a clear regulatory roadmap for these and future regulations affecting greenhouse gas emissions has created additional investment uncertainty for large portions of the utility and manufacturing sectors of our economy.

EPA and most industry participants agree that the Clean Air Act is not well-designed to regulate ubiquitous pollutants like carbon dioxide emissions, whose impact is global, not local or regional. Congress never envisioned that the Clean Air Act would be used to regulate carbon dioxide emissions and EPA has struggled mightily to tailor a regulatory program for greenhouse gas emissions under the Clean Air Act that makes sense. For this reason, Business Roundtable long has advocated Congressional action and international cooperation to address the climate issue. Without comprehensive legislation and global agreements encompassing other major emitting nations, EPA regulations only will increase energy costs for U.S. companies, thereby reducing their competitiveness in international markets, and drive up consumer costs, while doing little to reduce global concentrations of greenhouse gas emissions.

Unfortunately, it does not appear that Congress will act on comprehensive energy and climate legislation this year. It does have time to enact legislation that would delay the effectiveness of EPA regulations for up to two years, as proposed by Senator Rockefeller, until the next Congress has the opportunity to address the climate issue legislatively. We urge the Senate to do so. A two year delay will give Congress and the Administration time to work with a variety of stakeholders to develop new approaches, such as those advocated by Business Roundtable in its Balancing Act and Unfinished Business studies, focusing on new technologies and efficiency, as promising ways of addressing the climate challenge. A focus on developing needed technologies not only will help reduce greenhouse gas emissions but it will also help develop the industries of tomorrow and result in a more secure energy future.

A vote to delay pending EPA greenhouse gas emissions will provide Congress the opportunity to develop sound policy approaches to address greenhouse gas emissions, rather than default to a poorly designed EPA regulatory approach that is likely to further damage U.S. competitiveness, drive up consumer costs and make an immaterial contribution to reducing global greenhouse gas concentrations. Business Roundtable respectfully urges a favorable vote on legislation that would delay the effective date of EPA regulatory action with respect to greenhouse gas emissions.

Sincerely,

Morris-1

Michael G. Morris

Chairman, President and CEO

American Electric Power, Inc.

Chairman, Sustainable Growth Initiative

Business Roundtable

C: United States Senate

Posted: September 15th, 2010 under Current News, carbon regulation, climate change, coal, energy policy, green energy, regulation.
Comments: 1

Frugal utilities rise to the top, but anticipate cap-ex turnaround.

America’s power and gas companies cut capital spending in 2009 by more than 10 percent compared to 2008, according a report published in the September issue of Public Utilities Fortnightly magazine (www.fortnightly.com). However, as regulatory and economic uncertainties diminish during 2010 and 2011, many companies are resuming major construction programs that were delayed during the recession.

The sixth-annual Fortnightly 40 study, sponsored by Accenture, ranked the four-year shareholder value performance of U.S. investor-owned utilities (IOUs) and merchant power companies. The C Three Group of Atlanta, which along with Public Utilities Fortnightly developed the F40 financial model, analyzed the annual reports of 84 power and gas companies to compare a series of shareholder-value metrics — such as profit margin, dividend yield, return on equity (ROE), return on assets (ROA) and sustainable growth.

Among the F40 study’s results, the report showed that cumulative capital expenditures among all 84 companies in the survey declined by nearly $10 billion from 2008 to 2009, with a corresponding improvement in free cash flow. As a whole the industry’s cap-ex totaled $83.9 billion in 2009, versus the previous year’s expenditure of $93.8 billion. Accordingly, the average F40-ranked company in 2009 generated $300 million in free cash, compared to negative-$100 million in 2008.

Despite the industry’s cap-ex retrenchment through 2009, rebounding electricity sales and a stabilizing economic outlook subsequently have allowed some companies to expedite projects that previously were deferred, according to Jean Reaves Rollins, managing partner with the C Three Group. “Well over 10,000 MW of new generating capacity has been announced or placed in the licensing process in the past 12 months,” she said. “We expect to see more announcements as the implications of clean air standards become clearer.”

Moody’s senior vice president James Hempstead echoed the observation. “Many big companies are actively revising their views and strategic assessments as to how much capacity will be refurbished, repowered or mothballed,” he said. “There could be a significant amount of capital expense on the sidelines that hasn’t been incorporated into plans yet.”

F40-ranked Dominion Resources (#9) provides a clear example; CFO Mark McGettrick told Fortnightly the company purchases more wholesale electricity than almost every other utility in America, but nonetheless the company is proceeding cautiously with construction plans. “We have a lot of catching up to do on the generation side,” McGettrick said. “We have a construction plan through 2012 … but environmental regulations are a moving target, particularly regarding CO2 emissions.” He said Dominion is “taking a wait-and-see approach” toward investments affected by potential changes in federal environmental and energy policies.

“The industry is in a holding pattern, but the end is in sight,” said Michael T. Burr, Public Utilities Fortnightly’s editor-in-chief and author of the F40 report. “Companies are waiting to see what happens with the economy and with shale-gas developments. They’re waiting on the outcome of elections in November, and they’re waiting for energy policy leadership from Washington. Once we get clarity on those issues, we’ll know whether the Big Build is returning.”

The 2010 Fortnightly 40 Ranking

Companies leading the F40 ranking in 2010 included DPL, Exelon and Energen. Ranked among the top 10 companies for the first time was Mirant (#4) — which recently agreed to be acquired by RRI Energy. And NRG Energy jumped into the 11^th position after appearing in the top 40 rankings (#32) for the first time last year. Such shifts exemplify an ongoing trend among the F40 ranks, with growth-oriented unregulated businesses driving stronger long-term shareholder performance. For the past four years, the top 10 companies in the F40 have earned an increasing share of their revenues from unregulated resources, compared with a decreasing share among the bottom 10 ranked companies.

In other trends, Southern Company and Edison International — both of which increased their cap-ex budgets substantially in 2009 and produced negative cash flow at least two years in a row — dropped to the bottom half of the F40, after previously holding strong positions in the top 15. And volatility in natural gas prices sent rankings downward for some gas utilities, including Delta Natural Gas, Equitable Resources and New Jersey Resources.

In general, however, the F40 metrics — combined with supplementary 2009 and 2010 data from the C Three Group, Accenture, Moody’s and the Edison Electric Institute — showed that F40 ranked companies remain financially robust despite some adverse results in 2009. For example:

• Slumping electricity sales drove ROA figures for the F40 companies downward by about one-fifth last year, from an average of about 6 percent in 2008 to 4.75 percent in 2009;
• Stock prices for the F40 companies have underperformed the broader market since January 2009 — although they outperformed the Dow Jones Utilities Index by nearly 10 percent;
• F40 companies outperformed all other categories of power and gas companies in most measures of credit quality, including debt-coverage ratios; and
• Except for a few companies that face substantial regulatory risk, credit ratings have held steady for most companies in the F40 rankings.

“There’s no homogeneous answer to what drives long-term performance,” said Robert Laurens, senior executive in Accenture’s strategy practice. “The most successful companies are those that execute a strategy that’s consistent with the company’s core competencies and its market context — whether it’s a regulated or non-regulated business.”

Fortnightly 40 RankingsFull Financial Data, Historic Trends and Supplemental Analysis from the C-Three Group LLC, Accenture and Moody’s available in the FULL REPORT. Not a subscriber? Click FREE TRIAL to gain immediate access.

* Indicates statistical tie among category ranks. Because the 40th position was a tie, the 2010 Fortnightly 40 includes 41 companies.

Copyright 2010, PUR Inc., Vienna, VA, All Rights Reserved.

Permission to cite the F40 table in whole or in part is granted to publications that acknowledge the source as follows: Public Utilities Fortnightly magazine, September 2010 (www.fortnightly.com). Sponsored by Accenture, with methodology and analysis provided by the C Three Group.

Posted: September 2nd, 2010 under Current News, Uncategorized, credit crunch, credit ratings, energy policy, finance, recession, regulation, utility stocks.
Comments: none