Blogs > Power to the People

Following energy issues in the state of Connecticut and beyond.

Wednesday, April 29, 2009

Cents and (A Lack of) Sensibility

You can’t fault State House Speaker Chris Donavan and State Rep. Vickie Nardello for trying.

The legislation the two Democrats are proposing in an effort to reduce consumers’ electric bills has its heart in the right place. Everybody wants to pay less for their power, particularly with the state mired in the depths of a recession.

And according to Donovan and Nardello, their plan would lower electric bills by at least 5 percent or perhaps more, starting sometime next year.

The problem with their proposal is that it is counterintuitive and complex, something that doesn’t make sense even to someone like me, who has spent years covering the state’s utilities. And if some of the logic in this bill leaves me dumbfounded, imagine how its going to play to the average consumer.

The highlights of the legislation are as follows:

- United Illuminating Co. and Connecticut Light & Power customers who get their electricity through those utilities’ standard service offers would no longer be able to move to another power provider - as they can now - if this proposal were to become law.

- People who have already switched to another company to provide their electricity would not have to switch back.

- Large commercial and industrial customers would realize savings through a provision that would allow UI and CL&P to bypass so-called “middlemen” - like power brokers - and buy their electricity directly from generating companies.

But the more questions you start asking about this proposal, the more confounding it gets.

Nardello says the savings for residential and small business customers would be achieved by stabilizing the customer base. She says power generating companies build a risk premium into what they charge because they’re not certain that the customers that they have at the beginning of the contract won’t switch to another provider later on.

Try as I might, I’m hard-pressed to think of the state’s residential and small business customers as a dramatically fluctuating group.

Here’s why: Electric deregulation came into play July 1, 2000. It’s almost nine years later, and only 8 percent of the state’s customers have switched from the UI and CL&P standard offers.

That may be change, but to portray it as any kind of volatile movement is laughable.

Deregulation was foisted on Connecticut based upon the premise that competition drives down prices. But as Connecticut Attorney General Richard Blumenthal noted at the press conference announcing the Donovan-Nardello plan, the price of electricity in Connecticut has more than doubled in recent years, giving the state the dubious distinction of having the nation’s highest rates or close to it, depending upon what data you look at.

“There has to be a fundamental complete overhaul of the system,” Blumenthal said, speaking in support of the legislation. “The present system is a bust.”

The Donovan-Nardello plan simply doesn’t go far enough in fixing the problem. It doesn’t address the primary driver of high electric prices in the marketplace: the cost of the fuel used to produce the power.

The cost of fuel largely determines the price at which companies that produce electricity offer their power into the wholesale market place. Nardello acknowledged that during her press conference, but argued that the changes she and Donovan are proposing would offer some relief and that some cost reductions are better than none.

The press conference at which this legislation was unveiled drew representatives of trade groups that made up a who’s-who of competitive power providers in the state, companies like Direct Energy and ConEdison Solutions. They even trotted out Chris DePino, former state Republican chairman and a former lawmaker himself. All that was missing was from DePino was the former lawmaker doing a solo on his harmonica, a talent for which he earned some notoriety back when he was leading the state GOP.

These folks sounded like a chorus in a greek tragedy as they expounded upon how any variation from a totally deregulated marketplace would be bad public policy and anti-consumer.

My radar as a reporter always tells me that when someone screams that long and that loud against public policy, there has to be some value in said policy. In the 1998 legislative session in which Connecticut’s electric de-regulation was passed, similar forces were equally vociferous that ruination would be in store for the state if free market forces weren’t allowed to take hold.

Now, the state is in the midst of a recession and I don’t see businesses rushing to relocate here because of cheap electricity.

The Donovan-Nardello legislation passed the state House on a 103-39 vote later on Wednesday. Now it moves on to the Senate and while I think the average Connecticut resident would like to see some rate relief, I’m just not convinced this legislation is going to do it.

Even Al Carbone, a UI spokesman, said he wasn’t sure what level of savings could be achieved by elimination the risk premium that’s currently in place for service to residential and small business customers.

“We don’t know how much risk is going to be averted as a result of the legislation,” Carbone said. “There are other risk premiums built in when someone bids on a power contract.”

Tuesday, April 28, 2009

What's Up on Wednesday....

Don’t Believe The Hype.

That’s what the band Public Enemy told us back in 1988 and for a journalist, it’s usually pretty good advice. Nothing is ever as good as it seems and the job of a journalist is to ask the right questions that separate the facts from the hype, to give you a realistic idea of what’s going on.

What does all this have to do with an energy blog, you ask?

Well, dear reader, the Democrats in the General Assembly sent out an advisory Tuesday afternoon announcing a press conference Wednesday at 11 a.m. at the Legislative Office Building in Hartford. Democratic lawmakers are promising to announce “the introduction of legislation that will provide needed electric rate relief and rate stability for residential, commercial, industrial, and small business consumers.”

That’s a pretty tall order, particularly when you consider that much of what drives electric pricing - fuel costs, for example - is beyond the control of state legislators.

But clearly, the Democrats think they can deliver on this. They’re bringing in Connecticut Attorney General Richard Blumenthal as well as representatives of some of the state’s biggest industrial power consumers - companies like Sikorsky, Pratt & Whitney and Hamilton Sunstrand - for this announcement.

Sources in Hartford insist that the legislation that House Speaker Chris Donovan (D-Meriden) and State Rep. Vickie Nardello (D-Bethany), who chairs the General Assembly’s Energy and Technology Committee, will introduce has nothing to do with the creation of a state power authority. That is an idea that Blumenthal has championed for years, but is currently mired in committee during the current legislative session.

So will the Democrats be able to deliver on this sweeping promise or is this just more hype? Keep it here and we’ll have our answer tomorrow.

Tuesday, April 21, 2009

"What We Have Here Is...Failure To Communicate"

It’s never a good sign when the people charged with running New England electric grid, a complex job if there every was one, say that they don’t fully understand their own forecasting software.

Yet, that is apparently just what happened to the people at ISO-New England, if the story they put forth Tuesday is to be believed.

Since April 10th, the Holyoke, Mass.-based grid operator has had comparatively little to say while Connecticut officials complained that ISO-NE failed to prevent two unnamed power plant operators from pocketing $85.8 million for power that they never actually put into the system. Drawing from ISO-NE’s own March 20th filing with the Federal Energy Regulatory Commission (FERC), Connecticut’s Department of Public Utility Control and the state’s Office of Consumer Counsel said the power plant operators failed to deliver power when requested on 108 separate occasions.

Of course, now ISO-NE is clarifying its FERC filing, saying that it never actually requested the power generators to provide the electricity on those occasions and that the payments were legitimately made over 26 months on occasions when it need to guarantee that the region had enough power to keep the lights on.

“The data regarding the energy delivery was never fully understood,” said Ellen Foley, an ISO-NE spokeswoman, referring to forecasting software that is used to determine the region’s electric needs. Control room operators at ISO-NE also use real-time information that Foley claims allowed them to determine on those 108 occasions that the demand for power - which had been projected by the forecasting software - wasn’t as great as had been expected.

Grid operators determined no additional power supply was needed on those occasions and so none was actually requested to be delivered, according to Foley.

Of course, cynics among us might be tempted to say that ISO-NE’s explanation might have had something to do with Connecticut Attorney General Richard Blumenthal’s filing of a complain with FERC and his plan to launch an anti-trust investigation into the matter.

Neither Blumenthal nor Gov. M. Jodi Rell are buying the ISO-NE’s explanation. And perhaps, FERC officials may not be either; agency officials agreed to hear Blumenthal’s complain immediately, something sources tell me doesn’t usually happen.

Of course it’s possible that there were legitimate mistakes made and by early Tuesday evening, Foley was saying that ISO-NE’s management was going to “undertake a rigorous review of internal processes and will make improvements where necessary.”

But you have to wonder if the biggest mistake ISO-NE officials made wasn’t to deal on a more candid basis with Connecticut officials, once this matter became public.
If mistakes were made, own up to them and work together with Connecticut officials toward a solution.

Instead, they developed what can best be described as bunker mentality in this matter and did nothing to dispel the notion that some people in Connecticut have of ISO-NE - that it has the interests of power providers and utilities at heart rather than those of ratepayers in the region.

Monday, April 20, 2009

Report Says State's Solar Industry Needs A Little Help To Shine

Legislation currently being considered by Connecticut lawmakers would provide a real boost to the state’s solar energy industry, according to a new report released last week.

The report, prepared for the Connecticut Long Term Sustainable Solar Strategy Workgroup, says House Bill 6635 would provide a comprehensive strategy for building a sustainable solar industry in the state. The workgroup was convened by the Connecticut Clean Energy Fund and the Connecticut Department of Public Utility Control and includes officials from environmental organizations, utility industry, government policy officials and solar industry representatives.

The report - which was developed for the group by KEMA, a nationally known consulting firm - contends that the legislation would pave the way for a series of programs that would help the solar industry in Connecticut grow from its current levels. Among the programs need to help the industry grow in Connecticut are residential rebates, incentives for low-income households, community solar programs and utility owned solar projects.

Currently, the state has about 300 people working in the solar energy industry and has supported 24 in-state solar businesses, according to the report, which also says that 1000 solar energy systems have been installed on houses, schools and companies.

“We have a tremendous opportunity to make solar energy a significant part of our energy mix, and bring the industry to a scale where it can compete with conventional dirty generation,” said Roger Smith, campaign director for Connecticut Clean Water Action and one of the 12 members of the solar energy workgroup. “The solar strategy report makes it clear that solar for households, businesses and towns has real job and economic benefits. Now the legislature needs to make this potential a reality.”

Monday, April 13, 2009

ISO-New England, You Got Some 'Splainin' To Do...

That's what two Connecticut agencies are saying, anyway.

The state's Department of Public Utility Control (DPUC) and the Office of Consumer Counsel (OCC) want federal energy regulators to force ISO- New England to disclose details regarding an $85.8 million payment made to a pair of power plant operators who then failed to deliver the electricity they had promised.

Coming out when it did, on the eve of a long holiday weekend for many people, this news may have missed by more than a few people. But this has all the elements of being a really interesting story as well as an infuriating one for Connecticut ratepayers.

It involves gobs and gobs of money being given to companies that allegedly failed to do their jobs (Stop me if you think this sounds a little bit like the current financial services industry mess). It also has the DPUC and OCC paraphrasing an old line from the Watergate scandal, "What did ISO-NE know and when did they know it?"

Over a 26-month period between 2006 and 2009, ISO-NE paid two unnamed power plant operators $85.8 million from ratepayers across the region to provide power. That wouldn't be a problem, but the companies in question failed to live up to their end of bargain on 108 separate occasions.


You'd think that ISO-NE officials would be falling all over themselves to provide the DPUC and OCC with any information those agencies might need, rather than waiting for the federal government to step in. But ISO-NE officials will only say, in the words of spokeswoman Marcia Blomberg, that the regional electric grid operator “will comply with any FERC directive.”

The news that the DPUC and OCC want more information on these transactions shouldn't come as a surprise to ISO-NE officials.

After all, the Holyoke, Ma.-based grid operator recently filed a proposal with FERC seeking to close an alleged loophole in the forward capacity market. The market is designed to allow ISO-NE to purchase sufficient power generating capacity for future years at competitive prices.

As the economy continues to sour, consumers' patience for people getting paid enormous sums of money for a job poorly done is limited at best; witness all the anger directed at AIG employees who got bonuses.

That same level of anger ought to be applied to this case, even though none of the parties involved got any government bailout money. As ratepayers, Connecticut resident ought to be livid that ISO-NE officials apparently did anything to punish the two companies for failing to do what they said they would.

And to some of that anger ought to be directed at ISO-NE, which won’t identify the power plant owners in questions. The grid operator considers the companies' names to be "proprietary information," according to Blomberg.

You'd think $85.8 million dollars of our money would at least buy us that much information.

And although I'm no lawyer, the argument that the identities of the companies involved are proprietary seems dubious at best.

Maybe more intricate details of the companies' dealings with ISO-NE should be considered proprietary. But how does identifying the names of power plant operators that didn't provide services they got paid for meet that threshold?

The truth is, it doesn't and actually could harm consumer confidence in ISO-NE's ability to run the region's competitive power marketplace.
After all, why should ratepayers have any confidence in an entity that either:

A) Can't find loopholes in its markets and close them before someone exploits them, raking in millions of dollars they did nothing to earn.

Or

B) Allows a few players in the market to hurt the reputations of all the other power producers.

There's no question that the markets in which the electricity we use is bought and sold are extremely complex. But from my perspective, this particular matter seems amazing simple at this point.

The way I see, where can I find the kind of work that pays me $85.8 million for doing something and then allows me to walk away unpunished when I don't do my job?

Tuesday, April 7, 2009

Details, details, details..

Tuesday’s announcement by Northeast Utilities that the company will develop 575 recharging stations in Connecticut and Massachusetts for electric cars like the Chevy Volt ought to be a cause for celebration for anyone who is anxious to see this country reduce its dependence on gas powered vehicles.

The Volt is scheduled to make its debut in late 2010 and NU’s project gives the company, which is the corporate parent of Connecticut Light & Power and the Western Massachusetts Electric Co., the opportunity to be environmentally conscious while at the same time slowly preparing itself - and its transmission grid - for a future where such vehicles are in wider use.

But before anyone gets too excited about what this means, let’s consider some of the details that might get lost in the excitement associated with this announcement.

For starters, the company’s current business model for the project calls for half of the $1.38 million price tag to be paid for with a US Department of Energy grant, which is scheduled to be announced in June.

Al Lara, an NU spokesman, says the company “is committed to the project” even if the grant money doesn’t come through. But Lara acknowledged that if the grant money fails to materialize, the company would have to reassess whether it could build all of the recharging stations with its own money.

Then there’s the issue of where these recharging stations would be located.

Plans now call for about 500 of them to be built in the garages of people who own plug-in electric vehicles like the Chevy Volt. NU’s logic, according to Lara, is that the average home doesn’t a have a 220-volt outlet in its garage and that’s what it takes recharge vehicles like the Volt.

But what’s just as important in making electric cars part of the mainstream if American life is having enough recharging stations available in easily accessible public places, the way gas stations are now. NU’s current plans call for only about 25 recharging stations to be accessible to the public.

The Volt comes with a small gas powered engine to repower the battery after the vehicle has gone 40 miles on a single charge. But my guess is the motoring public would have a greater level of comfort if people knew that there was going to be more than two dozen recharging stations spread among Connecticut’s 169 towns.

Finally, there’s the issue of how the recharging stations would be operated. NU’s Lara says the company is still working out the details like how the owner of an electric car would pay for using a recharging station and security issue associated with the facilities. Those are pretty important details if the company expects the business to add to its bottom line. not detract from it.

There’s no question that NU’s plan is forward thinking. But there needs to be a lot more focus on the details involved if the plan is to be successful.

Friday, April 3, 2009

New Haven area communities get stimulated

Seven New Haven area communities are getting $3.38 million of the $24 million in federal stimulus money coming to Connecticut for energy efficiency projects at both the state and local level, Gov. M. Jodi Rell said Friday.

Hamden, Milford, New Haven, Shelton, Stratford, Wallingford and West Haven are the area communities getting the money from the feds. Here’s the breakdown in terms of how much money the communities will be receiving:

- Hamden: $531,500.
- Milford: $536,100.
- New Haven: $1,263,500.
- Shelton: $175,800.
- Stratford: $208,900.
- Wallingford: $197,500.
- West Haven: $471,600

The money will be used for a variety of projects, including energy audits, retrofits, transportation programs that conserve energy, greenhouse gas reduction, development of energy efficient building codes and geothermal building systems. Communities can also use the money to create a financial incentive program for energy improvements, according Rell.

“This is a wonderful opportunity for towns and cities to make investments that build on our long-term goals for a cleaner environment while creating jobs at the local level,” Rell said.

Wednesday, April 1, 2009

Maybe somebody out there was listening....

Government often moves at a glacial pace, but folks in Washington may have actually been listening two weeks ago when Governor M. Jodi Rell sent a letter to members of the U.S. Senate's Committee on Energy and Natural Resources to oppose language in a piece of legislation that would have expanded the powers of the Federal Energy Regulatory Commission.

Rell, in a letter to Senate Majority Leader Harry Reid of Nevada, said that language that was in the Clean Renewable Energy and Economic Development Act at the time would have effectively given FERC the right to put power lines wherever it wanted and was "an assault on state rights."

You have to give Rell credit for standing up for what she feels is in Connecticut's best interest, particularly given our state's experience with FERC over issues like the Broadwater project in Long Island Sound and the natural gas pipeline project across the same body of water between Branford and Long Island. Having said that, though, you had to wonder if Rell's effort was too little, too late, especially with all the talk about "smart" electric grids that has become the hot topic du jour under President Obama.

Turns out somebody in the halls of power was listening because on Wednesday word came out that the U.S. House of Representatives is now considering its own version of Reid's legislation in the Senate that doesn't include increased powers for FERC. The draft bill from House Energy and Commerce Chairman Henry Waxman (D-Calif.) and Representative Ed Markey (D-Mass.) would require FERC to set “grid planning principles” and establish a regional planning process as the nation tries to expedite the growth of renewable energy resources.

Rell said Wednesday that's good news for Connecticut and other states.

“I have long supported the idea of increased development and use of ‘clean’ energy,” Rell said. “But we cannot – and will not – allow the need for our nation to increase its energy independence to come at the expense of residents or irreplaceable natural resources like the Long Island Sound. This is exactly why forward-looking states like Connecticut created bodies such as the Connecticut Siting Council – and why they must be a part of an ongoing dialogue about how that infrastructure is developed.”

Siting Council Chairman Daniel Caruso said Wednesday that he is encouraged by the House version of the bill. "I want to publicly thank Governor Rell for her unambiguous and very public leadership on this issue, which has clearly led to these positive developments in Washington," Caruso said.

The importance of the House legislation is that it comes at time when the Siting Council is about to begin hearing the first of three high voltage transmission line upgrade projects that has been proposed by Northeast Utilities. That process will start next week in New Britain.