January 2009 Archives

The US power sector has its troubles, but Europe sometimes has us beat. News from Platts' EU reporters is that the national strike in France cut about 17 GW of power output Thursday, more than the 9.7 GW that a January 15 strike cut. Middle-of-the-night cuts amounted to about 14 MW, according to the energy and mining union, which said strikers would lighten up for the start of the day, when power demand rises, but then crack down more later.

So just how much television are people watching in California? Apparently enough to put an undue strain on the electric grid, according to energy regulators in the Golden State.

While California's Legislature and governor are proposing dramatic fuel-efficiency measures to help cut emissions from the millions upon millions of cars on the road, the California Energy Commission is taking its energy-efficiency initiative to the family living room, where it says TVs -- in the era of the 60-inch plasma flat screen -- account for up to 10% of people's electric bills. And all of that American Idol, CSI and Days of Our Lives is driving up power costs for everyone while creating more pollution, the CEC insists.

Talk about regional transmission planning. If a Senate Appropriations Committee stimulus bill provision gets passed, the regions will get one whole heck of a lot bigger.

In keeping with the one-big-grid idea that some have advocated, the provision would put $80 million toward a study, supported by the Department of Energy and done by the North American Electricity Reliability Corp., states and transmission owners and operators: "a resource assessment and analysis of future demand and transmission requirements." The kicker is that the aim would be development of three "interconnection-based transmission plans," for the Eastern Interconnection, the Western Interconnection and Ercot. (It seems the Electric Reliability Council of Texas is just never going to be forced to wrestle with the rest of the world.)

One could probably be forgiven for blaming one's experimental youth for any flashbacks associated with President Barack Obama's staffing choices. But the fact remains that many officials in the new Obama administration have a distinctive Clintonian air -- and according to the president and CEO of the American Gas Association, that's probably not a bad thing.

NYMEX parent CME Group has brought another level of futures market education to the public, this time in the form of a trading simulation game designed to expand the popularity of the simulation in the visitor's lobby of CME's Chicago headquarters.

CME's trading simulator allows one to become a hedger or a speculator in the lumber futures market, condensing an eight-week trading period into a two-minute game.

As the rubber really starts to meet the road on federal spending and policy initiatives, a few utility CEOs are declaring themselves strongly for or against one policy possibility or another. Entergy's Wayne Leonard did so this weekend in The New York Times.

Fellow CEO Michael Morris at American Electric Power is lately repeating strongly a stand he has taken before, on transmission line siting authority. In Morris' view, transmission developers can get the money and build the lines; he does not want the federal government getting its hands into those things. He does want Washington to do one big thing: take siting authority away from states. (But does Congress need two big federal-state power sector conflicts on its hands? Siting authority could be a royal battle, and state regulators along with customer groups are already battling efforts to tie federal grants to rate decoupling for efficiency measures.)

(It remains interesting that a utility whose territory is in regional transmission organizations still has a huge interest in owning transmission lines; clearly the profit incentive is still with us, regardless of whether all the advantages of ownership are still there.)

Anyway, Entergy CEO Leonard's issue is different.

The idea of decoupling utility revenues from power sales is old, in California, and it has taken off lately in several other states; a variety of mechanisms for it have been under review. But mandating it from DC? Some in Congress want to tie state efficiency grants to state decoupling, and not at all surprisingly, state utility regulators do NOT like that prospect at all. Don't tell them how to regulate.

The regulators are hardly the only ones, though. As was to be expected, the customer-end groups that have opposed decoupling historically still oppose it. No magic has appeared to convert them. So now we have everybody wanting to deploy a lot of efficiency and conservation, and utilities agreeing to it -- but only if it is tied to decoupling measures so they will not lose money by selling less power. Representative Henry Waxman and others have gone along with that. Representative Joe Barton and others have not. Industrials and consumer advocates have now come out to join the state regulators in calling on Congress to turn it down.

Thank goodness, finally, anyone who wants to outfit herself in regional transmission organization gear has someplace to go for it. As of this week, if you are looking for a Tri-Mountain Unisex Long Sleeve Polo, slate blue, visit ISO New England's web site, and be fulfilled. Since it says ISO New England on it, tastefully, it's not only handsome, it's also an icebreaker.

Anyone who follows energy news knows there has been a lot of discussion about the development and commercial use of renewables. The House Energy and Commerce Committee has inched a step forward, passing legislation that pushes states to increase their use of renewables and creates a loan guarantee program to that end.

But while Congress and the Obama administration are moving down one path, the marketplace is doing its own thing.

A strategy for some companies looking ahead to a nearly certain CO2 allowance market: Buy now, in whatever markets exist now, and bank them for use in the national CO2 program that is eventually established. Ameren, a totally Midwestern utility, is doing that in part by buying allowances in the totally Northeastern CO2 allowance program.

The company's strategy is "acting early, and buying a number of options now that we think will count," Ameren's James Moore said at a Platts carbon trading conference in Houston. One of the things the company is buying, he said, are allowances in the Regional Greenhouse Gas Initiative, where power generators in the 10-state Northeastern region have to cover their emissions. Assuming the allowances are good anywhere in the future, buying now is a good deal. RGGI allowances are selling in the $3 to $4 range. Forecasts for national allowance prices go from $10 to $25 and up.

Amid the important conversations going on around the policy/personnel/generation shift in Washington, there is an online dispute -- friendly, but profound -- going on about the climate change principles that a big business/environmental coalition has endorsed. It's especially interesting because it's a truly personal dialog, between two people who indisputably care about what they're doing.

Joseph Romm and David Hawkins have been around for some time, Romm as acting assistant energy secretary in the Clinton administration, scientist and author, and Hawkins as a onetime Environmental Protection Agency air official and longtime air expert at the Natural Resources Defense Council. NRDC's endorsement last week of the US Climate Action Partnership's blueprint for climate change legislation disappointed Romm. ... It's about climate science and the wisdom of compromising.

If Steven Chu has a lot to say about it, the federal government will not be trying to get authority to site big new transmission lines when he is secretary of energy.

Whether his voice will rule on the issue, who knows? But the question, asked of him at his Senate confirmation hearing Tuesday, is one loaded with import for those following the tension over state-federal authority in the siting arena.

The coal war is escalating.

Maybe it's everywhere else, too, or maybe it's here in Washington because this is the center of the interest-group and decision-maker universe. Whatever the case, if you're here you can't get away from it, and who the heck would have thought just a little while ago that the merits and demerits of coal would confront ordinary people - not just policymakers and energy writers, but everybody -- at every turn?

Granted, we do get assaulted with all kinds of stuff that's hardly likely to show up in other places, like billboards promoting fighter planes made by one contractor or another, for heaven's sake. As though most of us on the Metro had something to do with awarding the contract. But then, if even two of us have something to do with it, I guess it's worth the expense. But geez, the anti-clean-coal "Reality" campaign is just bashing us subway riders over the head.

Want to find out if you are a good trader or have the potential to make a successful career in trading? Just look at your fingers (women need not apply).

A recent study by the National Academy of Sciences concludes that men predisposed to or sensitive to high levels of testosterone ultimately thrive in the high-pressure world of trading -- particularly volatile, short-term trading. But its researchers also contend that the male hormone may be partly to blame for the massive economic meltdown spreading across the globe.

Last week, the analyst group FBR Capital said it saw US electricity demand dropping 1.9% this year. The number is not huge, but given how the demand figure is like a fundamental economic pulse rate, the implications are.

FBR said, in particular, that electricity demand from commercial and industrial customers was "faltering." This "demand destruction," as the economists call it, immediately hits demand for natural gas and coal. Oversupply is already pushing down the price of both. It is not only power producers facing a falloff in sales. So too are natural gas producers, petrochemical firms and coal companies.

Lots of people want lots of things from the upcoming economic stimulus package. A new idea came today from Tennessee Representative Zach Wamp, who suggests that possibly the package could include some aid to clean up localities damaged by the Tennessee Valley Authority's massive coal ash spill.

TVA itself is talking about insurance, the extent of which is unclear at the moment, and aggrieved parties are filing lawsuits for damages. But according to Wamp, who plans to run for governor of his state, the spill at TVA's Kingston coal-burning plant is much like Hurricane Katrina, a weather event, and thus federal aid should be made available to the state and county.

The recent fuss in Utah over how much natural gas vehicle owners should pay for fuel points to a larger question that could affect US energy policy down the line: Which consumers should be first in line for natural gas if the current supply bubble bursts -- and at what cost?

Competition for compressed natural gas hasn't been much of an issue because most consumers weren't willing to buy NGVs for which there is little to no supporting infrastructure. In Utah, state regulators addressed that head-on 20 years ago by requiring utility Questar Gas 20 to put such an infrastructure in place. The company built 21 public stations in the state that were, until last summer, distributing only small amounts of CNG.

All that changed when the price of gasoline ripped through the $4/gallon mark. Enterprising folks began buying NGVs elsewhere, bringing them to Utah and selling them for a profit. As a result, NGV demand increased threefold and continues putting a great strain on Questar's NGV-fueling stations to this day.

Word today that the US Court of Appeals for the 5th Circuit in New Orleans wants a federal district court in Houston to re-sentence Jeffrey Skilling, the former CEO of Enron, flared some serious memories in our Houston newsroom.

For those who covered Enron from its heyday through to its declaration of bankruptcy, and then through the trial of its two top executives, Skilling and former Chairman Ken Lay, one of the more shocking notions of late has been how small-potatoes Enron seems in comparison to the collapse of Lehman Brothers.

People who favor a carbon tax instead of a CO2 cap-and-trade system don't have much going for them. Success-wise. But they do not give up, and one has to admire that.

On Monday, Representative John Larson of Connecticut, chairman of the House Democratic Conference, said he would push for a direct tax on pollution linked to global warming. He proposed a similar program during the last Congress without success, but said Monday, ''I think the tide is starting to turn.''

The Supreme Court is being pressed by ExxonMobil to take up a case that, while centered on a long-running tussle over a complicated oil pipeline tariff scheme, encompasses a far more interesting question about the ability of Congress to reach back into a regulatory or contract matter and make a change involving a single case or company.

For the US Federal Energy Regulatory Commission and other quasi-judicial administrative and/or regulatory bodies, the crucial question at hand is whether lawmakers can change the result of a properly litigated/settled proceeding. Long-held court precedent establishes basic separation of powers stemming from the US Constitution, which forbids Congress from dictating the results of a single adjudication without changing the generally applicable law, Exxon pointed out in its petition for certiorari.

Occasionally you run into something that puts an issue in something of a nutshell -- doesn't resolve it, but articulates it, which can be a help. Unsurprisingly, I did that just recently when I took another look at the National Regulatory Research Institute's web site, where its director, Scott Hempling, has a number of essays that provide a lot of food for thought for the state regulators who are NRRI's constituents.

Hempling has always been one to wrestle with hard questions, and the essays do that. One of them echoes a question that big players in the power industry have been arguing vigorously for a few years, in various forms and forums -- "competition" versus "regulation."

The battle is one of studies hurled by one side and another, earnest discussion and sometimes paid advertisements. But it is always unsatisfying, because the vocabulary can be fuzzy and the words are used differently by the different parties. Hempling zeroes in on that very problem.

Whether Dynegy's Bruce Williamson did it just for sheer relief, or not, his separation from the plant-building joint venture with LS Power can't help but lift from him what must have been a big headache.

In today's announcement that the companies were callilng off the JV, Dynegy said it was ceding to LS the ownership and development rights to several coal-fired projects. But it was not necessarily giving up participation in two coal projects that are under construction -- Plum Point in Arkansas and Sandy Creek in Texas. It might get out of those projects, but for now it is "continuing to reevaluate" them.

The coal projects have caused nothing but grief for Dynegy and Williamson, who in December won the distinguished "corporate Scrooge" award from Co-Op America for exhibiting among "the worst kinds of unbridled greed and a lack of compassion or concern for others over the last year."

Just about everyone who ever had a big idea to do something really unique and profitable can verify one of life’s hard truths -- the devil is in the details. So it would seem with Russ Lester.

According to Sacramento Business Journal, Lester has a machine that makes artificial natural gas from walnut shells. He uses the biogass to produce electricity that powers a 12,000-square-foot food storage refrigerator. It has been working well for about a year.