Today’s lede: California bill seeks to pave way for CAISO expansion in the West. Legislation that would help the California Independent System Operator’s ambitions to expand to other states in the Western U.S. apparently has legs, spurring critics to emerge. Essentially, Assembly Bill 813 (click through here) would help address issues largely preventing the single-state California ISO from expanding to become more of a west-wide regional transmission organization. With governance dominated by the state of California, entities outside of the state aren’t likely to join an expanded ISO and a more seamless western regional electricity market. The Assembly bill reportedly is scheduled to be heard today by the Senate Energy, Utilities and Communications Committee.
A 2016 California ISO assessment found that expanding into a regional grid entity would enable the state’s 50 percent renewables mandate by 2030 while saving electricity consumers $1.5 billion during the same timeframe. “We believe the findings in these studies will help drive the formation of a new, more efficient, cost-effective, and greener western electric grid,” ISO CEO Steve Berberich said in a press release issued at that time (click through here). “It’s also clear that a regional grid allows California and other states to eventually exceed their renewable goals, including California’s 50-percent mark.”
So the bill is seen as a necessary avenue for California to reach its outsized renewable energy and climate goals by providing a market for excess renewables generation inside of California, and establishing a larger footprint for grid balancing and backup generation (It would also help establish a west-wide organized power market that would better enable growing renewables development outside of California). Yet it is exactly these points that critics are seizing upon, arguing that California would cede its political dominion over the ISO governing board to a regional board answerable to the Federal Energy Regulatory Commission. They want instate renewables kept home, and they don’t want fossil-fuel based generation imported into the state.
Gary Ackerman, the soon-to-be-former Western Power Trading Forum executive director, wrote last week in his Friday Burrito, an influential industry insider newsletter, about “rumblings” in Sacramento that AB 813 is “gaining momentum” after California’s politically potent unions agreed to some concessions in a revised bill unveiled last week. “AB 813 still has language that proscribes California joining any multistate grid platform that has a centralized forward capacity market,” Ackerman noted. “Some people believe that the [Gov. Jerry] Brown administration is pressuring labor and the IOUs to embrace the bill and its regionalization concept in exchange for the Governor supporting a separate legislative proposal to indemnify the utilities for wildfire damage as long as the utility in question has followed CPUC-approved maintenance procedures regarding tree trimming.”
The apparent wind beneath the wings of AB 813 has critics coming out of the woodwork, citing the specter of the turn-of-the-century California market meltdown and Enron.
Kevin Smith, writing for the Southern California News Group (click through here), cites a recent report by Consumer Watchdog attacking the legislation entitled, “Betting against the house: How California’s leaders could gamble away our energy future on a western power trading casino” (click through here). “California leaders are being pressed by former allies of Enron and energy traders who ripped off the state to gamble away California’s energy future on the revival of a plan for a Western regional power trading system that will benefit billionaires and Wall Street and put ratepayers and the environment at risk,” the group says.
“Billionaire investors such as Warren Buffett, energy companies, and Wall Street banks see big profits off power exports to California, including coal power, that a regional power trading market would facilitate,” the report says. “They see big opportunities in building expensive new transmission lines underwritten largely by Californians to vastly expand a speculative commodities market in which contracts for electricity, whether dirty or clean, are bought and sold like pork bellies. But giving up control over California’s own power grid threatens new forms of Enron-style market manipulation that led to California’s disastrous energy crisis two decades ago, rolling blackouts, shrinking clean energy and efficiency investments, and a tab of some $40 billion to Californians. When traders run the casino, the house always wins and consumers are left at great risk.”
A similar attack was waged by Wenonah Hauter, executive director of Food & Water Watch, in an op-ed published in the San Francisco Chronicle (click through here). “Regionalizing California’s grid would increase speculation and raise energy bills for Californians,” Hauter writes. “While speculation in a financial instrument pegged to electric transmission is already costing Californians more than $700 million, the problem could grow worse in a Western market with even less oversight.”
She likened the plan AB 813 would enable to “the electricity deregulation of the 1990s that allowed corporations such as Enron to treat California’s energy system like a casino, which resulted in Californians being overcharged and blackouts caused by manipulation.” She concludes, “California’s choice is stark: The state will either give up control of its grid and energy future — jeopardizing public health, clean air, clean water and the climate — or California will control its destiny and lead the nation to a transition to clean, renewable energy. The Legislature must not repeat the mistakes of the past.”
A more muted review was offered by Dan Walters, a former columnist for the Sacremento Bee, who writes in the Mercury News (click through here), “Californians were sold a bill of shoddy goods 22 years ago and are still paying the price in higher electricity bills. This is a very complex issue that isn’t sexy clickbait for the media, but they should be paying more attention. And politicians had better think very carefully before they vote for another power play just because it looks good on paper.”
National security and baseload power plant subsidies. Both Axios and Politico are reporting the comments of Bruce Walker, assistant secretary for the Energy Department’s Office of Electricity, on a new episode of the Columbia Energy Exchange podcast (click through here) in which he appears to indicate there is secret national security information driving the Trump administration’s plans to intervene in competitive wholesale electricity markets to financially buttress uneconomic baseload coal and nuclear power plants.
“The Department of Energy is uniquely situated in that it is part of the intelligence community. And as part of the intelligence community we make classified intelligence decisions. We utilize information that we have to secure, from a national security perspective, the United States,” Walker says on the podcast. “We understand the vulnerabilities based on our position within the intelligence community,” he said. “So, we’ll continue to work and evaluate our strategies and when we’ve decided what that strategy is, we’ll act on it.”
Axios sees Walker’s comments as DOE “positioning itself at a time when many critics from various quarters say the potential aid is unneeded and accuse the administration of grafting a new post-facto rationale onto their longstanding goal of saving coal plants.” Politico notes that Walker told reporters in February that his office “would never use” emergency authority under Section 202(c) of the Federal Power Act to stave off a mere economic issue.
“We’re not only looking at coal, nuclear generation, we’re looking at all generation and we’re looking at how the grid comes together, which is why my team has been focused on developing the North American resiliency model which is focused on understanding and highlighting the interdependencies of the different systems,” Walker said on the podcast.
If Axios is correct and secret national security threats are driving the administration, how then exactly do they justify unprecedented market intervention? “A memo circulated at the National Security Council earlier this month cited possible attacks on natural gas pipelines among the justifications for DOE’s latest national security approach to protecting coal and nuclear power — which are also facing unrelenting competition from cheap natural gas,” Politico notes.
Concerns about potential cyberattacks on natural gas pipelines were cited by both Energy Secretary Rick Perry and DOE Under Secretary Mark Menezes in recent weeks (click through here) as justification for intervention to provide baseload coal and nuclear above-market rents. Cybersecurity for pipelines is overseen by the Transportation Security Administration, the same Homeland Security agency that frisks passengers at airports. But if that’s a driving concern, why not beef up the federal cybersecurity oversight for pipelines rather than intervene in well-functioning competitive electricity markets? That’s certainly an approach advocated by FERC commissioners Rich Glick and Neil Chatterjee, both former Capitol Hill legislative staff, in op-eds published by Axios (click through here) and the Houston Chronicle (click through here).
Is one subsidy really any better? It’s not a surprise to hear gas and renewable industries attacking the plan. But it is truly odd to hear renewable energy interests directly attacking subsidies as a destabilizing influence on energy markets. After all, they have marinated for decades in multiple billions of subsidies, credits, and market carve-outs. In fact, renewable energy received 45 percent of all federal energy subsidies in 2016 ($6.7 billion in 2016, on top of the $30 billion received from 2010 to 2013). Could the protests from renewable advocates simply be cognitive dissonance? Or, could they honestly believe that no one but them should benefit from market-destabilizing government intrusion? Either way, it’s difficult to take seriously their sudden concern for the primacy of free markets. The Trump administration is right to be concerned about grid resiliency and its potential impacts on national security. It’s also correct to argue that fuel diversity and fuel security are the best means of promoting grid resilience, because if one generation source fails, you still have other options. But, the administration runs off the rails when it suggests that the planned closure of coal and nuclear plants is a national emergency that must be addressed with subsidies.
Coal and nuclear are hedges against volatile natural gas prices. Anyone who thinks this country no longer faces the threat of runaway energy prices should consider that almost 115,000 megawatts of “base-load” electricity-generating capacity from coal plants has been shuttered since 2010 — and replaced largely with natural gas. Several nuclear plants have also closed due to competition from natural gas. Today, more than 70 percent of the electricity in California, Texas, Florida, and New England is produced from natural gas. A few states are entirely dependent on natural gas. A reliable supply of base-load electric power is crucial for our economy and to protect consumers from the destructive effects of wide swings in gas prices. Saving coal and nuclear plants is an essential part of the solution. The administration must act quickly and decisively while there is still time to prevent gas prices from rising to levels akin to those last seen during the oil crisis of the 1970s. Without action, we face a continuing threat to our energy security and economy, and more bitter political recrimination to assess blame.
Dumb Energy. Wind and solar electricity are renewable energy. How nice to pluck energy out of the air and the sky. It’s a scam. Big money men and screwball dreamers, otherwise called environmentalists, are behind the scam. Apparently, it has not dawned on the believers in the scam that solar does not work at night, and wind works only when the wind is blowing. The core characteristic of wind and solar is that they are erratic sources of electricity. The supply is randomly intermittent. Who in Hell thinks this dumb energy is a good way to supply electricity? The wind and solar promoters, in order to accommodate their dumb energy, demand that the electric grid be re-engineered to become a “smart” grid. Perhaps the idea is that if the grid is smart enough, the dumb energy will be canceled by the smart grid. That’s actually what the smart grid people have in mind.
More electric industry news items of note:
China hits pause on Appalachian energy investment citing trade war concerns. Brian Anderson was hoping not to be alone at the podium at the Westin Convention Center on Monday morning. He was hoping to be flanked by officials from China Energy Investment Corp. and to watch the crowd’s eyes widen as the CEO of the Chinese giant announced its first few projects in the U.S. This was to be the first tangible milestone of a bombshell agreement announced in November between China Energy and West Virginia — one that promised the possibility of nearly $84 billion in Chinese investment in the tri-state area in shale gas and chemical manufacturing industries over two decades. What better venue for the mic-drop than the Northeast U.S. Petrochemical Construction Conference, perhaps even upstaging the much-anticipated annual update from Shell Chemical Co. on its ethane cracker complex in Beaver County. Three weeks ago, Mr. Anderson, who directs the West Virginia University Energy Institute, got the call he was expecting. The trip to Pittsburgh was canceled. The reason: a pending trade war between the U.S. and China.
National Grid expands energy-efficiency program. Solar batteries are now part of an energy program that helps National Grid customers in Rhode Island, Massachusetts and New York reduce their electricity use during hot, summer days. As part the program ConnectedSolutions (click through here), National Grid has started sending electronic signals to batteries in people’s homes to feed more of its stored energy into the electrical grid when energy use peaks between 2 p.m. and 5 p.m. Paul Wassink, senior engineer at National Grid, said extra energy from the batteries means less power is coming from traditional energy resources, which he said is beneficial in the long-term. “There will be less pollution in the air, there will be a smaller electrical system, there will be fewer power plants, and electricity rates will go lower over time,” he said.
The cost of filling up the tank with electricity. The southern California electric vehicle owner is paying the equivalent of just $1.85 per gallon. Things are looking pretty sunny for this driver. While it may look like California electric vehicle drivers are getting a great deal, they aren’t necessarily. The prices paid by California’s electric vehicle drivers are higher than they should be. This is likely slowing electric vehicle adoption. According to data reported in June by the California Independent System Operator (CAISO), wholesale electricity prices averaged a just $43 per megawatt-hour ($0.66 per gallon equivalent) in 2017. Nighttime prices were even lower, as shown below in a chart from the CAISO. That means southern California electric vehicle drivers were paying at least triple the cost of producing electricity.
Pa. regulators zap Fla. electricity supplier with $30,000 penalty over marketing practices. State regulators have approved a $30,000 civil penalty under a settlement with a Florida electric generation supplier over the company’s marketing and sales practices. The Pennsylvania Public Utility Commission unanimously approved the deal Thursday with American Power & Gas of Pennsylvania LLC, several years after it began investigating the company’s marketing and sales practices as a statewide licensed electric generation supplier. The settlement terms include American Power revising its marketing practices to potential customers, paying a civil penalty of $30,000 and ensuring that its training programs for sales representatives remain compliant with PUC regulations. American Power, of Seminole, Fla., is an energy marketing company. It does not own power plants but buys electricity on the wholesale market and resells it. Messages seeking comment were not returned Monday, but the company filed a statement earlier this year saying it cooperated with investigators and supported the PUC’s settlement decision. State regulations hold electricity suppliers responsible for their sales and marketing practices.
N.J. bill aims to clear the way for utility tree trimming. Cutting bureaucratic red tape that could prevent or delay utilities from cutting back vegetation from power lines in the intent of a bill sponsored by state Sen. Steve Oroho, R-24th Dist. “Having consistent, dependable power is paramount to New Jersey families, particularly during nasty weather conditions,” Oroho said in a statement. “Overgrown trees and shrubs often tend to be the culprits when your power goes out during a storm. Removing some of the bureaucracy will help utility companies to engage in the preventative maintenance that’s needed to guarantee access to lifesaving utilities regardless of the elements.”
SCE&G customers could see lower gas bills later this year. The federal reforms that slashed corporate tax bills late this year are helping to lower utility bills for some South Carolina Electric & Gas customers. The SCANA Corp. subsidiary said it’s seeking approval from state regulators to trim the base rates it charges for natural gas by $22.6 million, or an average of about 5.3 percent. Residential customers would see their monthly bills decline by about 7 percent, $4.09 based on yearly average usage.
Direct Energy Business Adds Unrivaled Energy Monitoring Capabilities. Direct Energy, one of the largest energy and energy-related services providers in North America, today announced customers based in PJM will now have access to site level energy monitoring capabilities on PowerRadar™ available with Fixed Energy Plus Solution. With Fixed Energy Plus from Direct Energy Business the supply charges are fixed, and demand-based charges are passed through in a transparent way as customers will be able to see these itemized costs on their energy bills. This gives customers more opportunity to control their capacity and transmission costs with targeted peak load management and energy efficiency efforts in response to peak load notifications they receive when there’s a probability of a high peak demand day. Customers will also have access to their usage data via the PowerRadar platform to better understand how their energy consumption programs are performing by providing customers with the insights they need to make informed decisions to lower their future capacity and transmission costs; hence, lowering their overall energy spend. “With hotter-than-normal weather forecast for summer in the PJM region, now is the time for businesses to be thinking about how to reduce their electricity bill. Fixed Energy Plus provides our customers with new levels of transparency into the bill, access to industry leading software to monitor usage in real time and the tools to help them manage their spend with confidence,” said John Schultz, President Centrica North America and Direct Energy Business. “We are proud to offer our customers more ways to reduce exposure to price volatility as well as offering the tools and insights they need to lower the total cost of their power.”
Dominion Energy – Time to start buying into the long-term story. Dominion Energy Inc. (D) has had a very rough year of negative market events surrounding the company including legislative issues with the SCANA Corporation (SCG) merger, the Federal Energy Regulatory Commission or FERC revised MLP regulations, and environmental concerns for its Atlantic Coast Pipeline, all in a rising interest rate environment. All of these events means that Dominion now trades at a terrific valuation, with a large sustainable dividend with very nice potential upside over the coming years, as almost all of its current issues are temporary and will be solved or dealt with effectively in the coming years. With debt reduction a primary goal of the company after its recent merger and expansion plans, investors will be more inclined to get on board after its final equity raise later this year as it sorts out its issues. The stock might or might not be bottoming out right now, but the stock is a great value for long-term holders regardless.
How a Florida utility became the global king of green power. NextEra became a renewable-energy Goliath using tax subsidies to help finance projects around the country and avoiding debt—staying quiet about it all. Who is the world’s largest operator of wind and solar farms? It’s also America’s most valuable power company. Still stumped? It’s by design. “That is a marketing problem…that we foster intentionally,” Michael O’Sullivan, NextEra Energy Inc.’s head of renewable development, told University of Notre Dame students in 2015.
Elon Musk says Tesla shorts will get blown up — he even predicted exactly when. Bank of America billed last week as “the world economy’s most important week of the year,” but the stock market didn’t exactly reflect that. In fact, investors bracing for the worst came out of last week’s potentially damaging flow of news with nary a scratch as the S&P 500 SPX, -0.89% finished the stretch mostly flat. For those betting against Tesla TSLA, -4.52% , however, any reprieve could be short-lived, at least if what the boss had to say on Sunday is any indication. While Musk is reportedly busy on the factory floor “almost 24/7” trying to help fix bottlenecks and get Model 3 production up to his targeted 5,000 a week, he’s not about to let the opportunity to rattle some cages go by the wayside, so there he is, dropping another bold prediction for the stock. Musk’s done his many times before, to be sure. In 2012, he warned of a “tsunami of hurt” that was coming for Tesla shorts, and, over the next year the stock surged almost 500%. Last month, he predicted the “short burn of the century” after he bought a big chunk of Tesla shares for himself. Anyway, what makes his latest prediction rather unique is that he put a timeline on when he believes the stock will rally. To the day. The number just so happens to coincide with when the quarter comes to a close and the company reports those highly anticipated delivery and production numbers.