Business-as-Usual Will Stifle Nuclear, Coal Development

 

In a letter dated July 21, Duke Energy CEO James Rogers urged Senate Majority Leader Harry Reid (D-Nev.) to “include a carbon title in your base energy bill that allows this country to move forward.” Rogers argued that a business-as-usual approach to carbon regulation would stifle development of new nuclear and coal-fired power plants and make America dangerously dependent on volatile natural gas markets.

Rogers also referred Sen. Reid to a McKinsey analysis that showed U.S. GDP would grow more under a “utility first” carbon regulation scenario than it would without any carbon regulation, and that carbon allowances and efficiency improvements would actually reduce electricity bills on average by 7 percent.

Rogers’ letter arrives just as Senate Democrats were convening to debate whether to include a carbon title in an energy bill sponsored by the majority leader. The San Francisco Chronicle’s website quoted Senate sources predicting that a scaled-down bill would proceed in late July and would not include carbon regulation, but some legislators—including Sen. Joe Lieberman (I-Ct.)—are hoping to retain the carbon title in Reid’s bill.-Michael T. Burr

Posted: July 22nd, 2010 under Current News, carbon regulation, climate change, coal, efficiency, energy policy, green energy, natural gas, nuclear renaissance, renewables.
Comments: 2

Gas LDC’s proposal deemed insufficient incentive for conservation.

 

Weekly update courtesy of URN #3976: Following the trend seen in several other states recently, the Tennessee Regulatory Authority (TRA) has become the latest governing body to deny a utility’s petition to institute a revenue decoupling mechanism.

In the case before the TRA, a natural gas local distribution company (LDC), Piedmont Natural Gas Co., had requested permission to implement a decoupling program, claiming that absent the ability to break the link between actual sales and revenues, it would have no impetus for promoting conservation, energy efficiency, and other usage reduction measures. According to the LDC, decoupling would provide it with the means for aligning its own financial objectives with the best interests of its customers.

Piedmont’s proposal was premised on a decoupling program with a true-up mechanism that would allow full recovery of the average per-customer margin. However, in looking at the LDC’s earnings statistics that underlie its plan, the TRA observed that such earnings were based on a benchmark from the company’s last rate case, which had been in 2003. Using a reference point from that long ago could translate into a disincentive for customers to lower their consumption levels, the TRA said.

The TRA explained that Piedmont had structured its decoupling mechanism in such a way that a consumer could reduce usage but not see any decrease in the amount billed. To address its concerns that the LDC’s outdated rate-making data could skew customers’ bills, regardless of their conservation efforts, the TRA ruled that it would be imprudent to authorize a decoupling program in a stand-alone proceeding. Instead, it determined that decoupling should be considered within the context of a full-blown rate case. Subscribe to Utility Regulatory News for the full story.

Posted: June 30th, 2010 under efficiency, natural gas, regulation, revenue decoupling.
Comments: 1

Rejects Other Special Rate Mechanism Proposals

Weekly Update Courtesy of URN #3973: In the course of a natural gas base rate proceeding, the Michigan Public Service Commission has authorized the utility, Consumers Energy Co., to institute a revenue decoupling program on a trial basis. However, several other special cost recovery proposals were not greeted with similar favor.

The company had requested the revenue decoupling mechanism (RDM), alleging that ongoing conservation and energy-efficiency initiatives were exerting downward pressure on the utility’s sales, and hence its revenues. To assure that successful usage reduction campaigns would not adversely affect actual revenues even if the company experiences lower sales, Consumers Energy suggested tracking its sales and revenues separately through the RDM. It proposed modeling the decoupling program on the RDM that had already been approved for its electric operations, which was premised on a consumption-per-customer algorithm. Although agreeing that a gas RDM was appropriate, the commission noted that electric and natural gas consumption can have very different characteristics, especially during Michigan’s sometimes harsh winters. The commission therefore ruled that the gas RDM should be based on a straight revenue algorithm rather than a consumption-per-customer algorithm and also should employ a 15-year weather-normalized sales approach. To not incorporate normalization would risk extreme billing volatility for customers if the state had a colder-than-normal winter, the commission said.

Turning to Consumers Energy’s other proposals, the commission denied the utility’s uncollectible expense tracker mechanism (UETM), its pension expense mechanism (PEM), and its other post-employment benefits (OPEB) mechanism. The company had asserted that the UETM, PEM, and OPEB tracker all followed costs that are closely linked with market performance and the economy in general. Citing the fact that Michigan’s economy is in even worse shape than the rest of the country, the utility argued that the separate cost recovery mechanisms were imperative. The commission, however, observed that newly streamlined rate case procedures would prevent much of the regulatory lag that had inhibited timely recovery of such costs in the past.

Given signs that the economy was finally improving as well as its new expedited rate case schedules, the commission deemed the UETM, PEM, and OPEB mechanism unnecessary. -Subscribe to Utility Regulatory News for the full story.

Posted: June 18th, 2010 under Uncategorized, efficiency, natural gas, regulation, revenue decoupling.
Comments: none

Weekly updates courtesy of Utility Regulatory News #3968

Although authorizing additional revenues of almost $3.5 million for a natural gas local distribution company, the Arizona Corporation Commission has instructed the company to provide supplemental funds for certain of its low-income ratepayer assistance plans, so as to mitigate the impact of the rate increase on its more vulnerable customers during the ongoing economic recession.

Citing the effects of a customer base that varies seasonally, and purporting to have experienced negative growth during the test period, the company, UNS Gas, had requested an increase of nearly $9.5 million and a rate of return on equity (ROE) of 11%. The company averred that the 11% ROE was reasonable given the business risks experienced by a group of comparable firms. The commission, however, deemed the company’s selected proxy group to be flawed in that it looked to the general business world rather than similarly situated utilities. The commission thus found the company’s risk assessment to have been overstated, noting that utility services are not discretionary for consumers and remain fairly stable even during economic downturns.

By the same token, the commission declared the company’s projected number of customers to have been understated. According to the commission, the company’s rate of growth may have slowed, but it was still growing nonetheless. The commission therefore settled on a 9.5% ROE for the company. Moreover, finding that customers with modest means have been more affected by the poor economy than has been the company, the commission ordered the company to 1) increase spending on various low-income weatherization initiatives; 2) add to its bill paying assistance funds; 3) increase the income eligibility level for certain programs; and 4) refrain from increasing the monthly customer charge for qualifying low-income plan participants. Subscribe to URN for the full story.

Posted: May 26th, 2010 under Uncategorized, natural gas, regulation.
Comments: none

By Michael T. Burr

If you were following @FortnightlyMag on Twitter last week, you saw a stream of tweets in real time from Accenture’s International Utility & Energy Conference in Tyson’s Corner, Va. Below is an edited selection of those tweets, most of which are paraphrased quotations from the speakers indicated.

Gen. Colin Powell, former U.S. Secretary of State (April 20, 2010)

-Energy is the second most powerful force. The free exchange of ideas is the first. 1:27 PM

-Openness and democracy is the greatest weapon America has. 1:14 PM 

-China won’t become America’s enemy because they’re doing too well by being our partner. 1:25 PM 

-In my judgment and that of Kleiner Perkins, cars in America are moving to electricity. It’s a solution that makes sense. 1:03 PM 

-Fuel cells have a unique military application. #bloomenergy 1:55 PM 

-Fuel cells are a breakthrough. Think of them like cell phones. #bloomenergy 1:54 PM

-We need to be careful not to focus so much on terrorism that we forget what we can accomplish. Keep moving forward. 1:40 PM

Ray Kurzweil, inventor and futurist (April 19, 2010)

-People tend to disregard new technologies in the early years of logarithmic growth. 8:50 AM

-Exponential growth in IT is transforming every industry. Every industry will be an IT industry. 8:07 AM

-Nanotechnology is inherently an information technology, subject to exponential growth. 9:20 AM

-Solar and storage are the energy technologies that depend on nanotechnology, and they follow the law of accelerating returns. 10:40 AM

-The cost per watt of photovoltaic cells is a function of nanotech progress. 9:20 AM

-Solar energy production doubles every two years. In five years solar will reach the cost-per-watt crossover point and will be cost-competitive with the alternatives. 8:15 AM

Electricity storage is a bit behind solar. It’ll be eight to nine years before storage is cost effective. In 10-20 years, it’s a whole different landscape. 11:24 AM

-Decentralized power networks are inherently more stable than centralized networks. 8:35 AM

-We’re destroying jobs at the bottom of the skill ladder and replacing them with eight times as many at the top. 8:48 AM

Jonathan Silver, DOE loan program executive director (April 20, 2010)

-Government loans should finance technologies that private financing doesn’t support. When private financing comes in, DOE should get out. 7:55 AM

-The worst thing for private financing isn’t a bad set of rules; it’s uncertainty about the rules. 7:58 AM

-Clean tech investing is the driver of the VC industry today. 8:01 AM

-[On Fortnightly’s question RE: FutureGen status and plans:] Expect progress. Next question? 8:15 AM

Andy Karsner, former DOE Under-Secretary (April 20, 2010)

-Durable price signals are the most effective remedy for ‘capital constipation.’ 9:28 AM

-DOE has lost its focus on R&D toward scalable techs and is displacing private capital. 8:49 AM

-Congress has two approaches to policymaking — do nothing or overreact. 8:33 AM

-Congress is more likely to legislate energy policy in reaction to a crisis than it is to legislate with thoughtful deliberation. 8:35 AM

-”No policy” is a lot cheaper than “bad policy.” 8:46 AM

-The official US position on oil price policy is we don’t know and it’s out of our control. 9:12 AM

Andy Serri, Ameren (April 20, 2010)

-In Washington, the loudest party, the last to speak, rules the day. Subject matter experts aren’t in the room. 8:54 AM

Hugh McDermott, Better Place (April 19, 2010)

-As long as EV batteries carry a price premium, we will take that out of the equation w/ leasing. 3:27 PM

Mark Case, Baltimore Gas & Electric (April 19, 2010)

-BG&E’s “no losers” rebate program nets the same peak reduction as critical peak pricing and gives 100% of customers immediate benefit. 2:47 PM

-Peak rebate program will save customers $1,500 each over the 15 year meter lifespan. 2:44 PM

Chris Colbert, UniStar (April 19, 2010)

-We haven’t started construction yet and Calvert Cliffs is already big: $600 million just for permitting & licensing. 1:02 PM

-You have to convince yourself you’re not building just one reactor, but three or four. 1:35 PM

-We’re not just building a project; we’re building up the whole nuclear industry again, including the NRC. 1:30 PM

Gautham Chandra, Washington Gas Light (4/19/2010)

-We try to position ourselves to be the lowest cost platform to bring the best technology solutions to market. 10:49 AM

-The regulatory tide is moving gradually toward DG and distributed control of the grid. 11:27 AM

A.R. Mullinax, Duke Energy CIO (4/19/2010)

-We’re hedging our bets, investing in all the emerging solutions. 10:45 AM

-Once you break the electricity storage barrier, everything changes. 11:18 AM

Arthur Hanna, Accenture (4/19/2010)

-About 51% of US consumers say they don’t trust energy companies to make correct decisions to address US energy challenges. 9:33 AM

-… Yet 2/3 say the industry is responsible to solve energy problems. 9:35 AM

-The energy industry has a responsibility to take charge of educating consumers. If they don’t trust us, they’ll trust someone else. 9:48 AM

Geoffrey Colvin, Fortune magazine (4/19/2010)

-The most successful companies are very good at creating new solutions for customers’ new problems. 10:22 AM

Posted: April 26th, 2010 under Current News, R&D, Uncategorized, climate change, dynamic pricing, finance, geoengineering, green energy, investment banks, natural gas, renewable energy credits, renewables, smart grid.
Comments: none