Bottom Line Energy Issues - News

Nevada Regulations Bring Complaints

Nevada adopted a rule in its state deregulation policy permitting large users to leave the systems of Nevada Power and Sierra Pacific Power as long as they can't hurt any remaining classes of customers. Regulations to implement that rule issued by the PUC provide casinos, mines, and commercial and industrial customers with a road map that some are complaining about. State Sen. Randolph Townsend asked, "Why do we need cumbersome regulations when the legislation is quite specific?" PUC chair Don Soderberg noted , "This is a highly competitive environment. The industries coming forward may feel that they don't want their competitors to know what they are up to." Tad Greener, an energy consultant, objected, "I'm very concerned that this commission is going to allow the so-called large sophisticated users to leave, and it's a confidential process as to whether they are

harming us or not." State law requires that departing customers pay their part of deferred energy charges, which total more than $1 billion, to the affected utilities. Also, departing customers may find it difficult to buy power from out of state and import it because power line capacity is limited. Sum total of these roadblocks is that benefits of deregulation in Nevada may be long in coming, if at all.

CA Muddles Along

A flood of new power plants under construction and permitted have delayed the need for any new transmission lines to import power from neighboring Nevada, Arizona and Mexico until 2008 and deflated the CA energy crisis. That's the good news. What gets overlooked is that deficient power line capacity within the state played a tremendous role in the crisis last summer. The chronic bottleneck in moving power north-south will not be alleviated until a new line is built along "Path 15" that is hung up in federal/state debates. Construction is not expected before spring 2003. The financial health of the two threatened stock-holder owned utilities is improving but the state's fiscal situation has deteriorated into projected deficits caused by its tendency toward socialized energy policy. Before it gets fully operational, the new state Power Authority is being investigated by the Joint Legislative Audit Committee. In a letter to PA chair David Freeman, critic Tom Hannigan, director of the state Dept.of Water Resources, said the Authority's plan to buy peaker generator output is too expensive, overblown, and unable to respond quickly enough to balancing power needs. And, the state Energy Commission says it is at odds with the Power Authority's siting plans. Plus, a dispute over rate setting authority between Gov. Davis and Treasurer Phil Angelides, who want state control, and the PUC president, Loretta Lynch (appointed by Gray) and Senate leader John Burton, who want continued PUC control, is at the center of a high-stakes test of wills that shows no signs of let up... you get the picture.

The standoff between the regulators and the Dept. of Water Resources, the power buying agency, delays the issuance of a $12.5 billion bond sale, causing default on a $4.3 billion bridge loan that has triggered a more costly three-year term loan to fund the state's $43 billion energy commitments. (Whew!) There is still no definite plan on how to repay the bonds. Legal challenges by suppliers are flying through federal and state courts with some previous court rulings being ignored and unenforced. Some political foes of Gov. Davis want him to renegotiate the long term purchase contracts that now are causing the state to sell excess power purchases below its costs. While some suppliers seem willing to deal, others are standing pat on their long term agreements. If generator operating costs rise due to increasing gas prices this winter, it might benefit some suppliers to tie their prices for electricity to changes in fuel costs.

Several CA cities are so disgruntled with the direction in which the state is headed they have begun actions to set up municipal public power authorities responsible to voters. Los Angeles has long been in the public power business. So has the state capital, Sacramento, and others including Alameda and Palo Alto. Obviously, the incumbent private utilities are resisting these movements. They want to protect their stockholders' investments in generating plants, and transmission and distribution infrastructure. Jennifer Ramp, speaking for PG&E said, "It's perfectly natural that any company - bankrupt or not - facing a hostile takeover would fight these measures and get the word out to voters that this is not going to solve the energy crisis." But, Ross Mirkarimi, who runs the public power campaigns was blunt in his retort. "They are going to do everything they can to preserve their monopoly and greed."
So, Who's Your Energy Manager?

Burlington Northern Santa Fe Railway has hired TXU Energy to do billing and energy management across its entire 35,000 system which covers 38 states. The contract calls for TXU Energy, a subsidiary of TXU Corporation, to consolidate billing and management for an estimated 20,000 utility accounts that would extend to rail operations, yards, repair shops, and office complexes. TXU would not necessarily provide electricity and gas services, but will have a say in who does. This contract is among several that TXU Energy has signed with major industries and government units to be an energy manager. Jeff Campbell, BNSF VP said, "[We] expect to reduce utility costs and increase energy efficiency. We have a partner whose core competency and focus is energy management. This allows BNSF to focus on meeting our customers' expectations." The railroad hauls enough coal from Wyoming to utilities to generate 11 percent of all electricity produced in the U.S. Profiles of energy management companies similar to TXU Energy can be found at www.espio.com.Check it out.

Florida Being Challenged to Open Up Markets

A group of energy companies has formed the Partnership for Affordable Competitive Energy to lobby Tallahassee lawmakers for a share of the wholesale electric generation market. Sean Finnerty, VP for development for PACE, said their goal is to provide a united front as companies seek a more open market to compete with incumbent utilities. The state regulated monopoly on power generation, transmission, and distribution has left the incumbent utilities immune from competition. Companies like Competitive Power Ventures, Inc., and Duke Energy North America want to change that. At this point the PACE goal does not include open retail sales which would open the door to full deregulation. Finnerty said, "It's like all trade associations in that it's making sure there is unity among members on issues and bringing the important issues forward." Michael Green, GM of Duke's regional operations, was selected as chair of PACE. He said, "It is important for citizens to understand that through a competitive wholesale marketplace, enhanced services will be delivered at lower costs."

Texas Deregulation Floundering

Consumer representatives are seeking to delay full scale deregulation slated for Jan. 1 because of numerous flaws exposed during the pilot run. They also criticize the so-called "provider-of-last-resort" service who will charge more and could require upfront deposits. Tom Noel, CEO of the Electric Reliability Council of Texas said the groups misunderstood the challenges in getting the system up to speed. He said, "We are in the final testing of a very complicated system, and while it's not been perfect we're already getting much better results than predicted." But, First Choice Power, an affiliate of Texas-New Mexico Power, noted that the pilot project exposed problems that would "vastly undermine any benefits of competition if they were to occur in a fully open market." Chris Schein, of TXU Corp. said, "We have had a great deal invested in deregulation, so if we open prematurely and consumers' first experience is bad, it's bad for our company." The authors of the TX state law on deregulation are split on whether the system will be ready for business. Senate leader, David Sibley said Texas should continue on schedule and fully open its retail electricity markets on Jan. 1. because , "Consumers are counting on the savings on their electricity bills as they plan their budget." But, House leader Steve Wolens said, "I have no faith in the system...I just want to know if ya'll will have time to fix it." Stay tuned.

Bush Urged to Halt RTOs on National Security Grounds

First there was the state ISOs, then the voluntary RTOs, and now the mandatory RTOs. Under the new chair, Pat Woods, the Federal Energy Regulatory Commission has taken a harder line to urge owners of transmission lines to join up and transfer operations over to independent organizations to help assure equal access for interstate wheeling of power. This reorganization generally is recognized to be needed so a national market for wholesale and retail bulk power can develop. From its initial Order 888 and Order 889 and Order 2000, FERC has been conducting workshops around the country that have run into disputes with state leaders who want more autonomy in permitting new transmission line construction.

Although a strong case is made for consolidating even further into four regional transmission organizations, a different approach was documented by Lauren McDonald, chair of the Georgia PSC. In a letter mailed to Pres. Bush, she wrote, "As you are well aware, our electricity infrastructure is crucial to our national security. I believe that at this time, our national security has been compromised and, therefore, this is not the time to consider or implement any change in the management of our nation's transmission grid." She was seconded by a letter to Bush from William Saunders, chair of the South Carolina PSC that said, "I believe our efforts should be focused on improving the security of these facilities rather than implementing an overhaul of the entire system. I believe that swift action on your part to delay the RTO process at FERC would provide the utility companies and state regulators a better opportunity to focus on the more important issue of the security of our electrical system."

Considering the events of 9/11 and after, it appears to this writer that these letters merit utmost support. Not so much to enhance protection of power plants, but to redirect FERC into the opposite direction from the RTOs, i.e, the maximum decentralization of our energy systems so that a strike at any one Point of Vulnerability (POV) will not disable a large segment of the system. The ultimate energy security may be a solar powered fuel cell located in your own facility with no external attachments to a vulnerable grid. Let's get on with it.

That's the bottom line for now.