Blogs > Power to the People

Following energy issues in the state of Connecticut and beyond.

Friday, May 29, 2009

Devon Station Is Getting a Makeover

Commuters on Interstate 95 are greeted by a familiar site as they cross the Moses Wheeler Bridge in either direction: the smokestacks of the Devon Station Power plant, which sits on the Milford side of the Housatonic River.

But those familiar landmarks will disappear later this year. City officials and executives with GenConn - the joint venture company created by United Illuminating and NRG Energy to build and operate two new peaking power generators on the site - say that smokestacks and all the steelwork located on the top of the power plant’s main building (the brick building at the center of photo above) and a secondary building (at far right) will be torn down starting in August.
Those two buildings, by the way, no longer house active generating units. NRG shutdown those units during 2004 and the New Jersey-based company currently operates four peaking generation units (shown in the foreground of the photo, near the river’s edge). Peaking generation units are called on to produce electricity only during times of the year in which the demand for power is at its highest.

Work on the two new peaking power generators (shown in a computer illustration at the far left of the above photo) was started earlier this month and will conclude about a year from now, said Anthony Marone, UI’s vice president of client services and president of GenConn.
But removal of the smokestacks and steelworks won’t start for several months because a female peregrine falcon and her babies have taken up residence in a nest on the roof of one of the buildings, he said. Waiting until August will allows the baby falcons to grow and leave the nest on their own, along with their mother.

UI, of course, has a history when it comes to issues with birds.

The New Haven-based utility incurred the wrath of bird lovers far and wide for its ongoing battle with monk parakeets. UI officials remove the nests the birds make on the company’s utility poles, saying they are a fire hazard and cause reliability problems.

The battle over the birds has been so heated that it prompted a 2005 lawsuit by Friends of Animals of Darien against the utility. The group sued UI in the wake of a 2005 eradication effort that involved capturing the monk parakeets and turning them over to the U.S. Department of Agriculture to be gassed.

That suit was dismissed by a Superior Court judge in May 2008.

Wednesday, May 27, 2009

Ripples in the power pool

One of the most interesting aspects of Northeast Utilities' partnership with Hydro-Quebec and NStar in a $1 billion plan to use a high voltage, direct current power line to bring hydropower from Canada into New England is the impact the project will have on the rest of the electric grid.

Since plans for the power line call for the electricity to be delivered to location in New Hampshire that hasn't been determined yet, a key question that needs to be answered is how is the power going to be delivered to the population centers of southern New England?

And while you're pondering that question, a logical follow up should be this: If new power lines are built - or existing ones are up graded - to access the hydropower that is going to be delivered to New Hampshire, who will pay for them?

The regional power grid operator, ISO-New England, will be responsible for coming up with the answers to those questions.

If an expansion of any of the power lines linking New Hampshire with southern New England is deemed to be necessary to assure the reliable delivery of power, then the costs associated with those lines would be allocated across the entire ratepayer base in the six-state region. And while New England will hopefully have emerged from the current recession by 2014, when the line between Quebec and New Hampshire is proposed to be put into service, allocation of costs in that manner would mean higher electric bills for everyone.

We should get a preliminary glimpse of ISO-NE's inclinations on what additional power line projects are needed to service the hydropower super highway from Canada when the grid operator releases its 2009 System Plan in September or October.

"When there’s changes that are proposed to the system, we undertake comprehensive technical analysis to determine whether it would have a negative impact," Erin O'Brien, an ISO-NE spokeswoman, said Wednesday when asked about the grid operator's role in the process.

The System Plan serves as broad road map on what the power grid's needs are for the future. More detailed information on the kind of improvements that are needed to service the southern terminus of the NU-Hydro-Quebec power line "probably won't be available (this fall) … you probably won't see it until there are additional studies done later on," O'Brien said.

Wednesday, May 20, 2009

Perhaps A Peace Offering Is In Order

The lunch time crowd in front of the Connecticut Financial Center must have been horribly disappointed Wednesday.

Twelve days earlier, Mayor John DeStefano and two top executives with the United Illuminating Co. had done their best impression of World Wrestling Entertainment’s "SmackDown," trading angry words over what kind of impact that UI’s plan to move its headquarters to Orange in 2012 would have on the city. All that was missing was the steel cage, the fake blood and the men in wrestling tights.

But with James P. Torgerson - president and chief executive officer of UIL Holdings Corp., UI’s corporate parent - and Anthony Vallillo, president of the utility company, otherwise occupied in New York City on Wednesday schmoozing with potential investors regarding an upcoming stock offering, things took a decidedly more restrained tone.

Yes, DeStefano and Connecticut Attorney General Richard Blumenthal are still calling on UI officials to repent and change the ways. And, yes, the mayor still is determined to keep using Vallillo’s choice of transportation - a Jaguar - not only as a symbol for the company’s alleged greed, but as a verbal weapon to keep flogging UI's president with.

But at the same time, both DeStefano and Blumenthal seemed to be taking great pains to avoid demonizing the company as a whole.

For his part, Hizzoner offered to meet with Torgerson and work out a deal where UI employees would get the same discount for parking that New Haven employees do, provided they use city-owned parking facilities.

The mayor was short on specifics in terms of what kind of savings that might yielded for UI employees. But the offer was a nice subtle touch that showed DeStefano was listening at the common man at the May 8th press conference: UI employees on their lunch hours had complained about the cost of parking in the city compared to the free parking they would get at a new headquarters in Orange.

DeStefano also refused to take what would have been a easy shot at one of UIL Holdings corporate directors.

The Connecticut Financial Center is owned by members of the Chase family, who are major players in the state’s business community. A member of that family, Arnold Chase, serves on the board of directors of UIL Holdings.

DeStefano said he has no reason to believe that Arnold Chase is putting his role as a corporate director ahead of the family’s commitment to the city of New Haven.

"It’s in his best interest, in the family’s best interest, in the ratepayers best interest to keep them (UI) in that building," DeStefano said of Arnold Chase, who is president of Gemini Networks, a broadband telecommunications provider.

Blumenthal did his part to keep the good will theme at the press conference going by saying the UI "has been ill-served by the people who have spoken for it."

He said that the company’s rank-and-file workers are dedicated to their jobs and the commitment to keep electricity flowing. Those employees, Blumenthal said, should not have to endure the public’s wrath, which he said should be focused on UI’s corporate leaders.

Another showdown at the UI Corral?

The last time New Haven Mayor John DeStefano staged a press conference in front of United Illuminating's headquarters at the Connecticut Financial Center, the May 8th event yielded some high drama for even the most cynical folks in the media.

The utility's two top executives - James P. Torgerson, president and chief executive officer of UIL Holdings Corp., UI's corporate parent, and Anthony Vallillo, president of New Haven-based company - came outside to square off with Hizzoner in a verbal slugfest on the sidewalk just a few steps down Church Street from City Hall. The subject: UI's proposed relocation of its headquarters to Orange in 2012 when the company's lease at the Connecticut Financial Center is set to expire.

Most press events are highly scripted affairs. But the angry words that DeStefano traded with the utility executives were raw and real, right down to the Mayor's criticizing the type of car - a Jaguar - Vallillo allegedly drives.

Could a replay of that highly charged confrontation be in the offing for Wednesday?

DeStefano and Connecticut Attorney General Richard Blumenthal have called a 12:30 p.m. press conference in front of UI headquarters to release information concerning the cost of United Illuminating’s move to Orange.

The mayor and Blumenthal are turning up the pressure on UI, which just abandoned its efforts before the Connecticut Department of Public Utility Control to get a higher return on equity than the regulatory agency granted the company in February.

But even as the company was abandoning its efforts to get the DPUC to consider raising its return on equity, it was also announcing that it was a launching a registered public stock offering. UI will sell 4 million shares in the public offering and will also sell 600,000 shares to investment banks and other companies.

But in launching the stock offering, UI seems to have contradicted claims made before the DPUC last week that it need a higher return on equity to attract outside investment it wasn't capable of getting with the lower rate. UI used that alleged lack of interest in the company's stock to justify deferring $60 million in infrastructure improvements and repairs.

That same stock offering will likely prevent a public rematch between DeStefano and the two UI executives.

Federal securities regulators require a "quiet period" leading up to stock offerings, which essentially prohibits company officials from doing or saying anything that might possibly mislead investors about its prospects.
So DeStefano and Blumenthal - who on Tuesday pressed the DPUC for a full scale investigation into UI's operations - will get a few free shots in at the company at Wednesday's event.

Since DeStefano seems determined to contrast what he perceives as the company's hubris and greed with the tough time that ratepayers - particularly those in New Haven - are having trying to make ends meet, here's a free suggestion for the mayor.

Give the proposed UI headquarters a catchy moniker, one that the media might even pick up on.

DeStefano is capable of coming up with one on his own, but for the sake of discussion, here are three that I've come up with:

- "The Crystal Palace in the Cornfield"

- "Torgerson's Taj Mahal"

- "Vallillo's Versailles"

Of course adopting such a strategy would do nothing to further the debate about what unquestionably is an important public issue.

But then, reasoned discourse has already taken a back seat to this political street theater in which the goal is not compromise and come up with a solution to the problem at hand, but rather to make your opponent look bad in public.

Tuesday, May 19, 2009

A Breach of Faith

The Fourth of July is still a month and half off, but you can expect some real fireworks from today's state Department of Public Utility Control hearing with the United Illuminating Co.

UI went before the DPUC last week to argue that the 8.75 percent return on equity that the regulatory agency approved for it in a February rate case was scaring off investors. Skittish investors meant the company had difficulty accessing the capital it says it needs for the basics of the utility business: replacing poles and wires as well as building new substations. Or at least that's the story UI officials tell.

But to paraphrase a line from Mark Twain, reports of UI's difficulty accessing capital have been greatly exaggerated. How else would you explain the company's announcement late Monday that it plans to offer 4 million of its shares in a registered public offering and an additional 600,000 shares to investment banks?

No company with any smarts brings its shares to market if it doesn't think there's a market for them. So clearly, even with an 8.75 percent return on equity, there must be plenty of buyers for these shares.

UI officials aren't talking right now because securities regulators require a company maintain "quiet period" leading up to stock offerings. Given some of their recent moves, that's probably a good thing because it's harder to put your foot in your mouth when that orifice is shut.

Connecticut Attorney General Richard Blumenthal smells blood in the water on this one. You could almost hear our esteemed Attorney General salivating on the other end of the phone line Monday night as he spoke of acts of deliberate deception on the part of UI that he said “shreds the company’s credibility with the public and with regulators.”

Blumenthal has said he will seek fines and other sanctions against UI and has said he will seek to reduce the company's return on equity even further.

Being threatened by the Attorney General is bad enough, but it's not even the first time that the threat of reducing UI’s return on equity has been used. An exasperated DPUC Vice Chairman John Betkoski III did the exact same thing last week when UI began laying out its case for increasing the return on equity.

It takes real talent to tick off a DPUC Commissioner and an Attorney General in the space of one week. Today, we'll see what UI officials can do for an encore

Monday, May 11, 2009

A wise strategy?

New Haven Mayor John DeStefano is angry that one of the city's major corporate players - the United Illuminating Co. - is planning to move its operations to Orange.

DeStefano’s anger is to be expected. After all, the utility is the city's 12th largest employer and leases a large chunk -200,000 square feet - of downtown real estate in the Connecticut Financial Center.

And then there's the prestige factor of a company that has been located in New Haven for 166 years finally deciding to move to the 'burbs.

Being mayor at a time when a major business in your community bolts for the exits is akin to being captain of the Titanic: All of the blame probably shouldn’t rest on you alone, but it’s hardly something you want to put on your resume.

But you've got to wonder about Hizzoner's strategy of linking UI's plans to leave the Elm City with the company's request that the state's Department of Public Utility Control reexamine the 8.75 percent return on equity. The DPUC set that rate for company in February and now UI is claiming it can’t get enough investors to operate the company normally as a result.

It's not that ratepayers won't eventually pay for the cost of building UI's new headquarters because they ultimately will. But UI can't build the cost of what may eventually come to be known as "The Crystal Palace in the Cornfield" into its rate structure until the new headquarters space is largely inhabitable, according to Anthony Vallillo, UI's president and chief operating officer.

And thus far, the DPUC hasn't come out against the new headquarters plan, even though it has been several opportunities to do so.

That's not to say that it won't. But during hearings Monday on whether regulators should reconsider UI's return on equity, several DPUC commissioners raised the question if the headquarters issue should either be considered as part of another proceeding or perhaps another venue: the courts.

Following Monday's proceedings, DPUC Vice Chairman John Betkoski III acknowledged that the regulatory agency often takes a narrow - some would say "focused" - view on what testimony is germane to a given subject and what is not.

"I supposed we could have said that it was not a subject that was central to this matter," Betkoski said of the headquarters issue. "But when we bring people all the way up here (to New Britain, where the DPUC is headquartered) to speak, we like to give them a little leeway."

The city of New Haven's argument against UI leaving is not a weak one by any means, particularly when assessing the impact the company's departure would have on the city.

City planner Karen Gilvarg estimated on Monday that it would take at least two years, given the current rate at which office space vacancies are filled up, for New Haven to find new tenants for the space UI now occupies. And while UI employees can now take a bus or a train practically to the door step of the headquarters, moving the headquarters to Orange is predicated on lots of people driving lots of passenger cars.

"It doesn't make sense," DeStefano sputtered to reporters after delivering testimony to the DPUC. "It's a lack of vision."

It's hard to disagree with that assessment, particularly when Vallillo said last week that the proposed move to Orange is being driven, in part, by UI's lease at the Connecticut Financial Center expiring in 2012. Last time I checked, leases can be renewed and given the current state of the economy, you have to believe that UI's landlord would be willing to negotiate some highly favorable terms rather than having a third of the Connecticut Financial Center left empty.

But lumping the headquarters issue in with the dispute over return on equity seems like grasping at straws.

The burden of proof is on UI officials to convince the DPUC that it should do what is rarely done: reopen the discussions on return on equity. Betkoski certainly didn't seem inclined to support such a move on Monday, even arguing at one point that perhaps UI's rate of return should be reduced even further.

There is a time and place for everything. And the battle over UI's moving its headquarters should either be fought in a court of law or in a separate proceeding before the DPUC, not as part of the current case on return on equity.

Wednesday, May 6, 2009

Spending on Savings

Seventeen New Haven area towns are among 143 communities that are in line for $8.63 million in federal stimulus money that is being made available to 143 municipalities for energy efficiency projects under a block grant plan that will be submitted to state lawmakers for review later this month.

Under Gov. M. Jodi Rell’s plan, every town is eligible for at least $25,000, plus an amount that is based on the population of that community. Towns in the New Haven area are eligible for nearly $1.02 million in stimulus money.

"These block grants will help them move forward with innovative projects that will create green collar jobs and ultimately put money back into the local economies," Rell said.

Here’s a break down of the New Haven area towns and how much money they are eligible for:
- Ansonia $78,713
- Bethany $41,117
- Branford $108,926
- Cheshire $108, 489
- Clinton $64,316
- Derby $61,004
- East Haven $107,907
- Guilford $89,783
- Killingworth $43,656
- Madison $79,417
- North Branford $66,714
- North Haven $94,500
- Old Saybrook $55,517
- Orange $64,997
- Seymour $72,024
- Westbrook $44,163
- Woodbridge $51,642

The funding will support 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. Towns will be required to apply for the funds, outlining the projects they wish to undertake, and must spend or fully commit the funds within two years of the grant award.

State statutes require that Rell’s plan go before the Legislature’s Appropriations and Energy committees for a public hearing. The state will then submit the block grant proposal to the U.S. Department of Energy by May 26.

Tuesday, May 5, 2009

Making Money The Old Fashioned Way

Any one of a certain age can remember actor John Houseman’s famous commercial for Smith Barney that aired in the late 1970s and through the 1980s: “They make money the old-fashioned way. They earn it.”

Over at United Illuminating, they’ve apparently come up with a new take on making money, if the earnings report for the utility’s corporate parent, UIL Holdings, is any indication. UI’s commercial catch phrase should probably read something like this:

“At the United Illuminating Co., they make money in new way. They defer infrastructure projects."

Even as UIL Holdings was releasing first quarter earnings on Tuesday that showed a 45 percent increase over the same period a year earlier, the company was revealing in a filing with the federal Securities and Exchange Commission (SEC) that much of that growth in profits was the result of deferrals of operating and maintenance projects.

James P. Torgerson, UIL’s president and chief executive officer, will tell financial analysts Wednesday that those deferrals will cover a variety of infrastructure projects at UI, some in the short term and some over longer periods. According to the company’s SEC filing, the projects that UI will defer include:

- Building new substations and furbishing existing ones.
- Cable replacement programs.
- Pole replacements.
- Computer software and hardware upgrades.

Torgerson says the deferrals of the projects are necessary as UI struggles to cope with a decision in February by the state Department of Public Utility Control in which regulators rejected a $51.4 million rate increase the company had sought. Instead, the DPUC’s decision called for a $970,000 reduction in revenue requirements.

Some of the projects being deferred are only being put off until later this year, said company spokesman Al Carbone. But other projects may be delayed for up to several years, he said, although he would not elaborate on which projects were being delayed the longest.

“Obviously, the goal is to insure the reliability and safety of our distribution network,” Carbone said. “All of these projects are part of our 10-year operating plan and will be done. But the schedule for doing them has changed.”

This is a jaw dropping announcement to make for a company that has long been considered a New Haven institution . While I have no doubt that UI officials take their mandate to keep the lights on seriously, it’s a little hard to have unwavering faith in the company’s ability to provide safe and reliable service when they are talking about deferring maintenance or replacement of basic items like utility poles and cables.

I also think it’s fair to suggest that talking about this level of cuts at the same time that you’re announcing a 45 percent increase in quarterly profits requires some explaining to utility regulators and other state consumer advocates.

Look, I don’t think anyone would begrudge UI making a reasonable profit; the company is a major employer in the New Haven area and has been a good corporate citizen over the years. But I don’t think a 45 percent increase in quarterly profits qualifies as reasonable in the minds of most people.