Today’s lede: FirstEnergy’s generation company files for bankruptcy protection. In a highly anticipated move, FirstEnergy has filed for bankruptcy protection for its generation arm, which has been pummeled by weak prices in competitive electricity markets that are the result of abundant, inexpensive shale gas.
It’s been a tumultuous journey for the utility company with utility subsidiaries spanning Ohio, Pennsylvania and New Jersey. Early on, it was not a fan of competitive markets. The company that brought us the sprawling historic blackout of 2003 by failing to adequately maintain its transmission corridors hired “experts” in an attempt to blame the blackout on competition producing electricity flows that taxed the system. The joint U.S.-Canada report on the blackout put that to rest.
Then natural gas prices spiked, driving healthy returns for its generation fleet in electricity markets, and FirstEnergy had a fox hole conversion – even joining the COMPETE Coalition, a multimillion-dollar advocacy campaign sponsored by merchant power producers to support competition in wholesale electricity markets under attack because gas prices were driving electricity prices higher. Then shale gas came along and ruined that party.
Now FirstEnergy is at the forefront of efforts to obtain consumer subsidies for power plants struggling economically in competitive markets. It was reportedly Murray Energy Corp., FirstEnergy’s primary coal supplier, who convinced the Trump administration to forward a proposed rule to the Federal Energy Regulatory Commission last year calling for electricity consumers to subsidize economically ailing coal and nuclear plants in the competitive markets.
FERC earlier this year rejected that proposal, but FirstEnergy has returned to the trough, now seeking an emergency order from the Energy Department that would allow it to continue operating its old, inefficient plants at consumers’ expense. The company also renewed its call for lawmakers in Ohio and Pennsylvania to enact legislation to economically buttress its power plants in those states. Those state-level efforts have met with understandable skepticism from lawmakers, but clearly FirstEnergy looks to its bankruptcy filing and the prospect of plant closures to sway lawmakers to support subsidies. A DOE response is legally problematic, as the authority for such an order as FirstEnergy seeks is predicated on emergencies such as war. The so-called war on coal would not meet legislative intent
For its part, electricity system operator and market overseer PJM Interconnection has weighed in saying there is no emergency to justify special treatment for FirstEnergy’s plants. “PJM can state without reservation there is no immediate threat to system reliability,” Vincent Duane,PJM’s senior vice president and general counsel, said in a letter to Energy Secretary Rick Perry. “”Indeed, the FES units that announced their expected retirement earlier this week, by their own disclosures, will remain operational in most cases until through May 2021.”
Natural Resources Defense Council attorney John Moore blogged on the company’s bid for subsidies, calling it “an illegal power plant bailout” that will require “millions of utility customers [to] pay the price for this scheme to boost FirstEnergy’s bottom line.”
The Trump administration has proven itself amenable to such anti-consumer market intervention, whether the failed bid at FERC or import tariffs for solar, steel and aluminum. So few will be surprised if the DOE issues the legally problematic order FirstEnergy is seeking.
Here’s a news roundup on the bankruptcy filing:
Retail supplier blasts Mass. AG’s ‘one-sided’ report. Competitive retail suppliers were blindsided last week by a high-profile report issued by Massachusetts Attorney General Maura Healey criticizing them for predatory marketing practices costing consumers millions more than if they’d stayed with utility default service. The report, urging lawmakers to ban competitive retailers from serving the residential market, opened a new front in a battle royal begun last year when regulators in New York proposed banning residential sales. Pushback against the New York Public Service Commission’s proposed ban on residential saleshave thus far proven a success, and retail suppliers are coming out swinging in Massachusetts.
Direct Energy’s Chris Kallaher is scoring headlines across the state in a piece by State House News Service’s Colin Young, in which Kallaher criticized the report as based on a “profoundly misguided premise” to pursue “a serious mistake” in energy policy.
“It is disappointing to see the Attorney General rely on a single, flawed report and flawed conclusions to deny millions of Massachusetts consumers the right to choose an electric supplier,” Kallaher told Young. “Direct Energy and other suppliers would have been happy to discuss these matters with the Attorney General to prevent the release of such a one-sided report, but we were not given the opportunity to do so. As a result, the Attorney General is now pursuing a path that would be bad for Massachusetts consumers and bad for the Commonwealth’s broader energy goals.”
Massachusetts adopted competition in electricity supply as a means of producing better results for consumers and businesses than monopoly utility regulation, Kallaher noted, “and Massachusetts consumers are clearly better off now than they would have been without restructuring.”
Young noted that Gov. Charlie Baker has not taken a position on Healey’s report or her demand for an end to competitive supply options for residential customers. Instead, a spokesman pointed to past efforts aimed at helping consumers make informed energy choices. “The Baker-Polito Administration will review the report and remains committed to protecting residential and small business electricity consumers,” said Peter Lorenz, communications director for the Executive Office of Energy and Environmental Affairs.
The Lowell Sun, meanwhile, editorialized in opposition to the AG’s proposed ban on competitive retail sales in the residential market. “While we agree with the spirit of Healey’s measure, we don’t believe legislating this industry out of existence is the answer. In our economic system, individuals should have the right to make their own choices, even bad ones,” the newspaper’s editorial board opined. “However, companies found to have used deceptive or illegal sales practices should be vigorously prosecuted. Subjecting these suppliers to stricter regulations, such as substantiating their marketing claims, should in time separate legitimate suppliers from the fraudulent players. That’s how the attorney general should address this problem.”
See the State House News Service story here:
Va. Supreme Court upholds large consumers’ right to shop for renewable energy. In a clear victory for retail suppliers in a state marked by anti-consumer policies in support of monopoly regulation, the Virginia Supreme Court upheld a State Corporation Commission ruling allowing large energy users to obtain renewable power from suppliers other than the incumbent utility monopoly, which in most of the state is Dominion Energy.
Direct Energy, which has spearheaded efforts in the state to produce this fissure in the regulatory dam protecting monopoly providers, hailed the decision as a victory for consumers. ““We’re very excited for our customers and the fact that the State Corporation Commission twice and the Supreme Court today made clear that it’s time for Dominion to cease its efforts to really unilaterally impose barriers on its residential and retail customers,” Direct’s Ron Cerniglia said. The decision eliminates regulatory uncertainty that was chilling competition and will allow the company to move forward in Virginia, “particularly in the commercial and industrial market,” Cerniglia said.
Virginia was poised to open its electricity market to competition in the early 2000s but reversed course in the wake of the California’s botched effort to create a competitive electricity market. Virginia consumers further took it on the chin a few years ago when Dominion convinced lawmakers to pass legislation that froze rates and effectively hamstrung the SCC’s authority to oversee rates and order refunds to consumers. The state Legislature acted earlier this year after an SCC staff analysis quantified the hundreds of millions of dollars that utilities were overearning in the state. But the law still allows utilities to overearn as long as they make investments in the grid and renewables.
Here’s a news roundup on the decision:
N.H. mayor lambasts Northern Pass siting panel’s rejection. New Hampshire’s economy is being hampered by high electricity prices, and the state’s denial of siting approval for the proposed Northern Pass project was “a very clear sign we either don’t understand the incredible stress the high cost of electricity is placing on our manufacturers or, worse yet, we simply don’t care,” Tony Guinta, mayor of Franklin, N.H., writes in the Concord Monitor:
“For years I’ve been warning anyone who would listen that the business community has been patiently waiting to see if New Hampshire was serious about doing something to reduce the highest electricity costs in the country. Approval of Northern Pass was the one project that would have given manufacturers some solace that we all realized how devastating these rates have been to their businesses and that we were committed to making decisions to address the problem.”
Meanwhile, Garry Rayno writes in the Monitor about the written order in support of the Site Evaluation Committee’s Feb. 1 rejection of Northern Pass, a 192-mile, $1.6 billion transmission line designed to bring low-cost Canadian hydropower into New England. “Given the nature of the master plans and local ordinances along the Project’s route, the Project would have a large and negative impact on land uses in many communities that make up the region affected by the project,” the order concludes.
Mayor Guinta’s op-ed can be seen here:
Clean Line Energy hires former guv to argue case in Missouri. Clean Line Energy is the electricity sector’s version of Monty Python’s black knight. Despite years of effort to site its proposed transmission line to bring wind power from the nation’s bread basket to consumption centers to the east, state regulators have consistently rejected siting approval for parochial reasons. With a pivotal challenge to Missouri’s rejection of Clean Line’s proposed $2.3 billion Grain Belt Express project pending before the state Supreme Court, the company has hired former Gov. Jay Nixon to argue its case.
“I think it’s a great opportunity for our state and an important one policy-wise,” Nixon told the Associated Press, which noted that two of Missouri’s seven Supreme Court judges were appointed by Nixon, including one who previously worked for him in both the governor’s and attorney general’s offices. Nixon told the AP he expects no favoritism and sees no potential conflict of interest.
“I don’t think anything says that after you’ve been governor, if you happen to be there for a while, that you should be limited in your ability to aggressively represent the clients that you so desire,” Nixon said. Paul Agathan, who will argue the case on behalf of landowners opposed to the power line, also told the AP sees no conflict in Nixon appearing before judges he appointed. Nevertheless, he noted, “It can’t hurt him, obviously.”
Rising W.Va. electricity prices examined in consumer advocate’s report. Rising electricity prices continue to garner headlines and policy maker concerns in West Virginia. So far, however, the focus has been on the regulatory costs of coal-fired electricity and, unlike in other monopoly-regulated states, there thus far has been little discussion in the public sphere of competition as an alternative to monopoly regulation.
Max Garland writes in the Charleston Gazette-Mail about a recent Consumer Advocate Division’s annual report examining rising electricity costs in the state (a 25 percent increase in costs since 2014). However, the report notes that, despite increasing price pressure, the state enjoys electricity costs that are 10 percent lower than the average customer costs in five cities in surrounding states (Pittsburgh, Baltimore, Columbus, Ohio, Richmond, Va., and Lexington, Ky.).
Garland notes that rising electricity costs prompted a debate by state lawmakers of legislation allowing manufacturers to receive a special discount on their electricity. The bill, which would have effectively had residential consumers subsidize large industrial and commercial users, died in the state Senate. He also noted FirstEnergy’s failed effort to move its merchant power plant in Pleasants County into the ratebase, which would have had West Virginia consumers on the hook for the operating costs plus a rate of return for the uneconomic power plant.
Despite these pro-consumer outcomes, rates will continue to rise in West Virginia due to its reliance on coal-fired power. This has been exacerbated by low-cost shale gas, which unseated coal as the electric industry’s low-cost fuel source. West Virginia utilities can no longer export low-cost excess coal-fired power into PJM’s competitive market, meaning the state’s captive utility customers must pick up the cost of uneconomic resources.
“Our expensive coal-fired power can’t compete in wholesale markets,” James Van Nostrand, director of the Center for Energy and Sustainable Development at the West Virginia University College of Law, told Garland. “Most of the United States has diversified and taken advantage of cheaper natural gas, and we’re not doing any of those things.”
Population declines also mean that the ratebase supporting those higher costs is shrinking, exacerbating the problem, Garland reported.
“As long as costs related to them are reasonable in making the power, then everyone has to pay for them,” said Emmett Pepper, executive director of Energy Efficient West Virginia. “If there’s fewer people to pay for them, rates just go up. If we lose a large industrial energy user, then everyone has to make up for them.”
New storage law in Colo. Lauded. The Pueblo Chieftan’s Peter Roper praised Gov. John Hickenlooper’s recent signing into law a measure (SB 9) clarifying the right of Colorado’s monopoly-captive customers to store electricity. “It’s a major step toward letting consumers control when and at what price they use electricity, or even if they will need to purchase electricity from a traditional utility,” Roper writes. “It was another victory for supporters of renewable energy, who argue that being able to store power in large amounts eliminates the biggest objection to wind and solar power: that they are dependent on sunshine and weather.”
Colo. Co-op candidate advocates renewables. David Pierson, a candidate for the board of directors for the Poudre Valley Rural Electric Association (PVREA), writes in the Coloradan that the rural co-op should pursue renewable energy solutions and resist the increasing cost of coal-fired electricity from its traditional electricity supplier, Tri-State Generation and Transmission. The rising costs of coal-fired electricity “will be passed along to us, and our electricity rates will rise. To forestall this, if one of its largest customers — PVREA — aggressively pushes for cheaper renewable energy, Tri-State should be forced to adapt to us or face obsolescence,” Pierson, a retired air traffic controller, writes. “To pressure Tri-State, we should act locally. Whether encouraging homeowners or businesses to install rooftop solar, or building utility-scale solar or wind farms, these are local investments and local jobs. It will pressure Tri-State to meet our needs, not us surrendering to their model. Additionally, by keeping more of our energy local, we reduce the transmission loss of energy — once again helping keep our rates lower.” Tri-State, meanwhile, touted its green bona fides in the Montrose Press, noting that 30 percent of the energy consumed by its member co-ops came from renewable sources.
Colo. municipalization effort results in ‘war’ with utility. Mark Jaffe, writing in The Gazette, provides a comprehensive look at the ongoing efforts by Pueblo, Colo., to potentially withdraw from Black Hills Energy’s system and create a municipally owned utility.
“The tale of Black Hills and Pueblo, a worn and weathered industrial city on southeast Colorado’s high desert, is one that reveals some of the flaws in the way the Colorado Public Utilities Commission has regulated utilities, and it speaks to the changing nature of the electricity business,” Jaffe writes. “Pueblo is searching for a new way to power itself. It could be a municipal utility, another electricity provider or buying bulk power on the market.”
“We will be doing a feasibility study,” said Chris Markuson, executive director of Pueblo County Economic Development. “Everything is on the table.”
Other news of note:
Solar panel makers brush off US tariffs and head to emerging markets
Industry leaders say the Trump administration’s move will backfire on America
Elon Musk’s easy ride at Tesla is over
Tesla’s Stock Now Looks Like a Show-Me Story
U.S. Utilities Look To Electric Cars as Their Savior Amid Decline In Demand
UPS declares the “beginning of the end” for combustion engines by making its London fleet entirely electric
EIA projects that U.S. coal demand will remain flat for several decades
Here’s the quickest way to drive up electricity bills and ruin a competitive market
The electricity business is undergoing a transformation which will bring some volatility, but that comes with a free market. Our policymakers should resist any attempt to choose winners or losers and trust the market to work.
Texas co-op faces citizen’s group advocating for electricity choice
Why San Diego’s franchise accord with SDG&E needs fresh thinking
By Bill Powers, principal of Powers Engineering and chairman of California Local Energy Advancing Renewables; Jay Powell, a member of the city’s Sustainable Energy Advisory Board and a former executive director of the City Heights Community Development Corp.; and Craig Rose, former staff writer for The San Diego Union-Tribune.
Ky. legislative leaders must stop utilities from cornering the market on the sun
By Tom FitzGerald, director of the Kentucky Resources Council
MOODY’S LIKES THE LOOK OF NJ, OTHER NORTHEASTERN STATES, FOR OFFSHORE WIND
Offshore wind energy at a turning point in Maine
CenterPoint Energy announces completion of critical electric transmission line in Texas
Site visits, hearings set in Pa. for power-line project
Pa. utility commission needs to move on rate cuts: Our view
R.I Lt. Gov. McKee reports progress on utility rates
ITC to Pass Through Benefits of Lower Corporate Taxes to Customers
PG&E seeks approval to offset rate increases with tax breaks
Michigan regulators OK $65.8 million electric rate hike for Consumers Energy
MPSC orders utilities to report cyber attacks, issues electric vehicle instructions
DTE plan doubles renewable energy investments
With declining energy demand, Springfield, Mo., City Utilities faces new challenges
Making the Business Case for Renewable Energy
In Chain Store Age, by Joe Rinzel, executive director of Employers For Renewable Energy
Paid content: Retail supplier plugs benefits of competition in Pa. business journals
Environmental and energy activist looks to unseat GOP N.Y state lawmaker
Arizona’s solar leaders form Distributed Energy Resources Alliance
Ariz. Corporation Commission takes issue with newspaper’s editorial
PacifiCorp challenges Ore. PUC staff in controversial $1.5B wind power bidding process
Utility answers PUC staff contention that bidding process didn’t yield best results for ratepayers
Vermont solar complaints focus on REC distribution
Don’t let old power plants litter Calif. beaches
Customers demand Madison Gas & Electric switch to clean energy after Oak Creek coal dust incident
How Duke Energy Corporation Makes Most of Its Money
The utility has made some big changes in recent years. This is how it makes money now that the it’s done moving all of the chess pieces.
Duke Energy turning waste from hog farms into electricity
Navigant examines growth of ‘smart services’ as cities set ambitious climate targets
Brattle Economists: Some Hydro Plants Substantially Undervalued In Today’s Power Markets
Global Virtual Power Plant Market Will Hit $5.5 Million Value By 2023
What Does It Take to Electrify Everything in Your Home?
This California family just found out: “Unless you have gone through it, there is stuff you never would have foreseen.”