November 2008 Archives

The role natural gas will play as the ''bridge fuel'' to clean energy technology might not be the sure thing its biggest advocates would have you believe.

In the same November 19 NDN forum mentioned in the previous Power Lines post, Bowties and Bicycles, Commissioner Jon Wellinghoff, who appears so far to be the favorite to be tapped as chairman of the Federal Energy Regulatory Commission in the Obama administration, cast himself as a gas skeptic.

PURPA turned 30 this month -- President Jimmy Carter signed it November 9, 1978 -- but is this any kind of celebration?

The publicly traded merchant power generators -- companies that grew out of the Public Utility Regulatory Policies Act and the energy acts that followed it through the years -- are mostly posting strong earnings on a cash basis, but their stocks have been battered. Some are cheaper than a latte, as the saying goes.

Platts, like every other financial news operation, uses a lot of insights from amorphous, unseen, Solomonic "analysts." Now those innovative types at Houston's Tudor Pickering Holt are offering ordinary folks a shot at being an "analyst for a day."

Here's your shot at immortality for a news cycle.

The Tudor Pickering analysts admit the opportunity came up because they are lazy. Specifically, they don't want to write the note on the Friday after Thanksgiving. (We'd consider taking a shot ourselves, but we're off that day as well. Not to mention that corporate would probably object.)

Not only will the change in administration put a Democrat in the chairman's seat at the Federal Energy Regulatory Commission, it could well put there a person who is champing at the bit to get energy efficiency, demand response, high technology on transmission lines, plug-in electric vehicles, and surely more, deployed on the country's power system.

If Jon Wellinghoff gets Barack Obama's nod at FERC -- which as a post by Joel Kirkland last week says appears to be a strong possibility -- the commission will put itself strongly into an arena it has not played in before, with a group of people who until recently have been on the edges of mainstream power industry conversation. They seem to be on the edges no longer, and they are welcoming the somewhat obscure regulatory agency into their company.

Is something good unraveling or is something good just beginning? The question arises when looking at Maine, where the Public Utilities Commission has proposed letting groups of customers own renewable power facilities.

The PUC is considering allowing up to 10 residential and business customers to share ownership of projects of up to 500 kW and participate in net metering with the local utility. Stringer Lisa Wood reports that the Governor's Office of Energy Independence and Security wants to expand the idea a lot; it would allow projects and net metering up to a cap of between 2 MW and 5 MW, and customers could share ownership across utility territories. The renewable source could be at the customers' site or elsewhere. This is far from negligible.

Anyone who has been elected or appointed to the ranks of elite Washington, D.C., politics and society can tell you it is very much like swimming in shark-infested waters. For that reason alone, the appointment of Desirée Rogers to the office of Social Secretary may rank as one of President Obama (and wife Michelle's) shrewdest decisions yet.

The Washington Post reported Monday Desirée Rogers, a prominent Chicago businesswoman and Harvard MBA, would bcome the first African American White House social secretary. Last summer, she was named president of social networks for Allstate Financial, a new business unit of the Allstate Corporation; before that, she served as president of Peoples Gas Light & Coke and North Shore Gas companies, all divisions of Integrys Energy Group.

Looks like the "Pickens Plan" may find itself competing with the "Dorn Doctrine."

The nationwide push led by T. Boone Pickens to convert millions of vehicles from gasoline to natural gas has run up against some stiff opposition from a group that thinks it has an even better solution: electric cars.

In a report out this week, Jonathan Dorn of the Earth Policy Institute writes: "While the idea of running US vehicles on natural gas has lately received a great deal of attention, powering our cars with green electricity is a more sensible option on all fronts — national security, efficiency, climate stabilization, and economics."

The gloves are coming off in Pennsylvania regarding the Marcelllus Shale and water.

Just this summer, drillers and the Pennsylvania Department of Environmental Protection had a "kumbaya" moment at the state fairgrounds after the DEP shut down some rigs in the state for not having proper water management plans.

"Crack cocaine" just isn't something that energy media get to write much. Or ever in our working lives. Maybe most of us never hankered to do so, but there's no question that after time in the trenches of regulatory and market jargon, the tough-streets vernacular adds a welcome frisson to the day.

So thanks to Jim Rogers, the Duke Energy CEO who through the years has provided a good deal of provocative material to chew on. Others have begun lately to lament the prospect of more dependence on natural gas for generation, but Rogers put the sizzle in it: Natural gas is the crack cocaine of our industry, he told a news conference sponsored by the Johns Hopkins School of Advanced International Studies. Whoa.

Is a new spirit of cooperation really brewing between conservationists and energy producers in the West? It appears so, if John Swartout is any indication.

Swartout, who has been executive director of the Great Outdoors Colorado Trust Fund for almost five years, is leaving December 1 to become the Colorado Oil and Gas Association's senior vice president for policy and government affairs.

Casual political observers are reading into President-elect Barack Obama's picks for transition team leaders. In the regulated power and gas universe, the choice of Rose McKinney-James to guide the transition at the Federal Energy Regulatory Commission at the very least offers more insight into Obama's intentions on the renewable energy front. But one could also easily read it as tea leaves suggesting that FERC Commissioner Jon Wellinghoff is high up on the list to be tapped for chairman.

Half of Americans view reducing climate change as extremely important or very important, according to one new survey. Sixty-one percent think companies should shoulder the costs of dealing with it. Only 16% think that products and services should cost more as a result. Most would be dissatisfied -- one third would be very dissatisfied -- if they had to pay a 10% higher utility bill to address climate change.

These figures come from a survey by EcoAlign, a "strategic marketing agency focused on energy and the environment." Its CEO is Jamie Wimberly, who some years ago was with the Consumer Energy Council of America.

If only Jon Stewart knew something about T. Boone Pickens, or electricity, or wind power, or natural gas. Pickens' appearance on Stewart's The Daily Show Wednesday night might have gone beyond hero worship.

As it went, though, Stewart gave Pickens what must have been a really tremendous ego boost. He didn't get anywhere near asking about Pickens's own continuing business commitment; Pickens' wind power project in Texas is now on hold because of the credit crunch. No, the conversation served to tell Stewart the most basic basics of Pickens' energy plan, which Stewart thought was dynamite -- natural gas for trucks, and wind and solar to displace natural gas for power generation.

It was smaller than an ice cube, pure white in color and -- as it warmed -- it popped and sizzled. Could this rapidly evaporating mix of frozen water and methane symbolize the world’s energy future? US Interior Secretary Dirk Kempthorne thinks so.

While the markets breathe a sigh of relief as Chesapeake Energy raises another $1.25 billion to ease a cash crunch by selling a one-third stake its Marcellus Shale operations, we couldn't help but think of Tom Sawyer whitewashing Aunt Polly's fence.

The California Independent System Operator reminded us Monday of the exceedingly granular and possibly eternal process that it has been going through to redesign its power market. The ISO had scheduled a telephone meeting to discuss a detail, and Monday it sent around a notice canceling the meeting at least in part because it had determined the subject did not need discussion.

California has for six years been hunting the elusive MRTU, which evades all capture. Technically known as the market redesign and technology upgrade, MRTU is something akin to the fabulous beasts in Lewis Carroll's poem "Jabberwocky" or the unseen quarry in Carroll's "The Hunting of the Snark." It seems to be a myth, on a horizon that always recedes as we slowly walk toward it. The latest target date for the market modernization is February 1, though a number of players are awfully skeptical about readiness.

US Representative Rick Boucher says the first order of business in Congress next year should be moving a bill to create an "assured funding flow" for development and demonstration of carbon capture and sequestration technologies. He introduced such a bill earlier this year.

Around the same time Boucher talked about this at an Edison Electric Institute conference Monday – yes, this is related -- the North American Electric Reliability Corp. released a report on the industry's concerns about climate change initiatives' impact on power system reliability. One of the issues NERC said the industry identified when it asked them this past summer was the impact of carbon capture and sequestration, CCS, on reliability.

Obama quotations are going around nowadays. Here's a good one: "A good compromise, a good piece of legislation, is like a good sentence, or a good piece of music. Everybody can recognize it. They say, 'Huh. It works. It makes sense.'"

The power grid, the transmission system, is talked about more and more in recent months, and a terrific lot in recent days as one of the infrastructure issues to be addressed in both economic stimulus and energy agendas. What remains awfully difficult to tell is what the idea on transmission will be -- and whether it can be widely accepted as something that makes sense.

The Federal Energy Regulatory Commssion's effort to find something, anything, wrong with busted hedge fund Amaranth Advisors and their former gas futures trader Brian Hunter looks like it will end with a whimper, not a bang.

As we reported in Monday's issue of Platts' Gas Daily, FERC enforcement staff said it was close to settling with Amaranth and Hunter over allegations that Hunter manipulated the prices of the March, April and May 2006 NYMEX gas futures contract by "banging the close," rapidly selling hundreds of contracts in the final 30 minutes before the contract rolls off the board in an effort to lower prices.

Just after dozens of news organizations and blogs included Governor Ed Rendell in the roster of those talked about as President-elect Obama's secretary of energy, Rendell did us the favor this afternoon of bowing out. It's always nice to shrink the list as the speculation goes on. Of course, it's likely to get longer before it gets shorter again. It's hard to know how long Obama will take to make this choice; there has never been a time when energy and environment positions have been in the spotlight as the White House changes hands.

Rendell vowed to finish his term as governor, through 2010, at least in part for home-state political reasons.

Somebody needs to tell the stock and options traders in New York that the hot new rumor about BP buying Chesapeake Energy isn't that hot and isn't that new.

Wednesday, stock traders pushed Chesapeake's share price up $4.71/share, 12%. High-volume trading sparked by the rumor that the supermajor was going to stop buying Chesapeake's shale positions one by one and just buy the US' largest natural gas producer.

Today the options guys joined in, tripling the number of call (buy) options on Chesapeake, most in the $30/share range, according to CBOE data, even though the stock traders had moved on, taking their money back and leaving Chesapeake's stock hovering around $22/share, basically unchanged.

It turns out that environmental extremists may not be the perpetrators behind three bomb attacks on a natural gas pipeline in a remote area along the Alberta-British Columbia border in Canada.

Instead, a PhD student at the University of Alberta posits the attacker may be a nearby resident who has a personal beef with pipeline owner EnCana and that the attacker's interests are more economic than environmental.

Paul Josse told Canawest News Service that the perpetrator “is ensconced in their own local struggle and probably started to use these tactics after being frustrated for years in their community with a lack of success at getting results.” That differs from early suppositions by police that the assaults were ideological in nature.

With natural gas production surging in the Marcellus Shale of Appalachia, it would seem safe to assume that gas and electric utilities in the Northeast would be eager to begin signing up for pipeline capacity to secure that cheaper, nearby gas rather than rely so heavily on the far-away, hurricane-prone Gulf of Mexico for more costly supply.

Not so much.

So ... Pennsylvania and other coal states were already in the spotlight on the eve of voting day, and now the heat has risen to what could be an uncomfortable degree for Obama-Biden. The Republican National Committee has some pretty good material to hit them with. A coal remark Senator Obama made to the San Francisco Chronicle in January could deal him a costly blow now.

Adding to the potential damage Senator Biden did weeks ago when he spoke against clean coal development, the quotation has Obama saying coal plants can be built, but "it will bankrupt them because they're going to be charged a huge sum for all that greenhouse gas that's being emitted."

USA Today last week published a less-than-favorable story about the Municipal Gas Authority of Georgia and a now-defunct $709 million gas supply deal backed by Lehman Brothers. Arthur Corbin, the CEO of MGAG, responded in a uniquely southern and genteel way.

Corbin asserted that the newspaper implied that MGAG subsidiary Main Street Natural Gas acted capriciously by entering the deal, which was designed to save customers millions over 30 years. That assertion, he insisted in a letter to the editor, "is flatly incorrect."