Saturday, September 13, 2014

Clean Line Energy Partners, FERC, & Accepting Risk

"Risk" is the potential of losing something of value.

"Risk" is mentioned ten times in FERC's consent for the Rock Island Clean Line LLC to negotiate rates.  Ten times FERC concedes RICL accepts the potential of losing something of value.  All this time RICL is a limited liability corporation with no employees and no assets.  All employees and all money is spent by the parent Clean Line Energy Partners.  RICL has nothing of value to potentially lose. 

Below are some exerts from the Conditional Consent by FERC.  The governmental regulators go far out of their way to state RICL (llc) is accepting "full market risk"...whatever that means in FERCENESSE.  Here's an example.

FERC Conditional Consent
Rock Island affirms that it will assume the full market risk of the Project and that it will have no captive customers.
Now here's an exert from Dave Berry's testimony at the Illinois Commerce Commission where he is cross examined by the attorney for the Illinois Landowners Alliance. 

ICC Transcript
Q. Okay. That's, that's a, would you agree that's a major risk for those generators to shoulder?
A. That is the business of a power plant developer to manage the risk of their own generation development.

Q. Okay. And is that a yes then?
A. I wouldn't describe it as a major risk, I would describe it as the risk of their business.

Q. But it is, that's the way it would work,is that correct? How I described? That risk would be on the generators?
A. By that risk, could I ask you to clarify what you mean by that risk?

Q. The risk that, associated with those generators who sign capacity contracts with you actually doing all the things necessary in order to get their generation facilities built and in service and connected to your western terminance.
A. Yes, they would take that risk.



As Dave Berry concedes in the attorney's questioning, under RICL's intended model, the generators (wind farms) would be accepting all the risk. Berry intends the wind farms would sign capacity contracts with RICL.  Under this model, RICL would push the risk on to the generators.  If the wind doesn't blow, that's the wind company's problem.  RICL's income would be virtually guaranteed with only the risk of the wind companies failing to meet their contractual agreements.

So if RICL is able to defer it's risk to the wind companies, how do the wind companies mitigate the risk?  In the perfect world of Michael Skelly's fantasies, there would be a Production Tax Credit.  This would mitigate some of the wind companies risk as a guaranteed source of income.

In Skelly's world, there would also be Renewable Portfolio Standards and states would  eagerly be signing 20 year Power Purchasing Agreements to buy the wind energy at premium prices.  Effectively, the combination of the Production Tax Credit and Power Purchasing Agreements would make the ratepayers Captive Customers.

And what about FERC's consent where RICL agrees not to have captive customers?  Wouldn't RICL also be able to argue captive customers are a problem of the wind companies are not captive customers of RICL?

A CAPTIVE CUSTOMER is a customer who does not have realistic alternatives to buying power from the local utility, even if that customer had the legal right to buy from competitors.
Would there be risk under RICL's business plan? 
Yes, but not Clean Line Energy and their 14 llc's. 

Would there be captive customers?  Yes, but not Clean Line Energy and their 14 llc's. 

Clean Line Energy Partners LLC investors also do not accept health or environmental risks for stray current.  With 14 LLC's there isn't much risk the investors would be liable for.

It's amazing a company can seek federal approval to negotiate rates and state's approval to construct a powerline with no gaurentee of suppliers and no gaurentee of demand at the delivery point.  The company has no assets.  The company has no creditors who can even testify to the level of actual risk.  Yet, the company can claim to the state regulators eminent domain is needed to get the creditors and get the suppliers.

Who is really bearing the risk for this alleged Merchant Transmission Line? 

The ratepayers who would be paying a higher price for energy across RICL and the landowners who would be forced to bear the risk of having a virtual aerial sewer across their fields if this companies failure.  Keep in mind this company's staff doesn't know Jack about how to build a transmission line.  Consider the risks taken by the landowners.  Soil damage, loss in crop production and income, damages to crops and buildings by stray current, health hazards, and land devaluation.  All of these risks are mitigated by Clean Line Energy Partners through layers and layers of limited liabilities corporations.  

It is not surprising Clean Line Energy Partners LLC is having difficulty securing credit or wind companies as clients.  When the company places all the risk on the client, they have no customers lining up for their service.  No customers means no credit. 

If those at Clean Line Energy Partners LLC want to know more about risk, ask a farmer who grew up in recession of the 80's.  Yeah, it sucks for RICL to not have a Production Tax Credit, but it's nothing like when Jimmy Carter placed Russia on a grain embargo and destroyed the Midwest grain markets.    Yes, farmers know about risk.




RICL, Risk, and FERC's Consent
1.  Commission precedent distinguishes merchant transmission projects from traditional public utilities in that the developers of merchant projects assume all of the market risk of a project and have no captive customers from which to recover the cost of the project.

2.  To do so, the Commission must determine that the merchant transmission owner has assumed the full market risk for the cost of constructing its proposed transmission project.

3.  Rock Island affirms that it will assume the full market risk of the Project and that it will have no captive customers.

4.  Rock Island meets the definition of a merchant transmission owner be cause it assumes all market risk associated with the Project and has no captive customers.

5.  Rock Island has agreed to bear all the risk that the Project will succeed or fail based on whether a market exists for its services.

6.  Rock Island also argues that wind generators, whose energy the Project will likely transmit, present numerous risks that transmission project developers and investors must overcome.


Dave Berry's testimony at the Illinois Commerce Commission while being questioned by the Illinois Landowner's Alliance Attorney
Q. Okay. Generally how will revenues under those kinds of contracts be structured?
A. As a fixed capacity charge.

Q. Okay. Would that be a monthly charge?
A. It's possible; it would be based on a period of time certainly.

Q. Okay. So in the utility parlance, would you call that a demand charge? Is that fair?
A. I would not, actually.

Q. No? Okay. How would it be different than a demand charge?
A. A capacity charge is based on the amount of capacity reserved. A demand charge is typically based on actual utilization or actual demand.

Q. Do you understand how demand charges work in the utility -- utility industry?
A. I believe I do.

Q. Okay. I won't belabor that point. Okay, so back to signing these contracts with customers. When would you, again, based on the timeframe that you've described here, when would you expect to first receive revenues from any of your anchor tenants? For the Rock Island project.
A. Be as the project is completed, which, based on our current schedule, would be towards the end of 2017.

Q. Okay. Mr. Berry, so you're telling us that Rock Island, you expect Rock Island to be able to obtain financing for the project's construction without any generation having been located at or near the western terminance in the resource area, and Rock Island's project lenders will be counting on, when they commit to you and allow you to close on the financing for this project, they will be counting on prospective generators in the resource area, getting all their necessary approvals, their own project of corporate financing for their wind projects or their generation project, and getting those projects constructed in commercial operation?
A. No, I would not characterize it that way.

Q. How would you characterize it?
A. Our lenders/investors will look to the revenue contracts into which we enter, however, it's
not standard under those contracts that the transmission shipper take the development risk associated with the project of the -- excuse me, I think I stated that wrong.  It's not typical under such contracts that the transmission shipper would try to push onto the transmission provider the risks of the transmission shipper completing his project.

Q. Okay. So the shippers that you mentioned will have an obligation, once they've signed these capacity contracts, they'll have an obligation to pay you once you have the transmission line in service and ready to be utilized, regardless of whether they have actually developed their generation facilities?
A. The nature of a capacity charge, as I described earlier, is that you pay for the capacity if it's available, regardless of your use.

Q. Okay. That's, that's a, would you agree that's a major risk for those generators to shoulder?
A. That is the business of a power plant developer to manage the risk of their own generation development.

Q. Okay. And is that a yes then?
A. I wouldn't describe it as a major risk, I would describe it as the risk of their business.

Q. But it is, that's the way it would work,is that correct? How I described? That risk would be on the generators?
A. By that risk, could I ask you to clarify what you mean by that risk?

Q. The risk that, associated with those generators who sign capacity contracts with you actually doing all the things necessary in order to get their generation facilities built and in service and connected to your western terminance.
A. Yes, they would take that risk.

Q. Okay, thank you.
A. By they, I mean the generators.

Tuesday, September 2, 2014

Sam Brownback, Aquaducts, Transmission and Eminent Domain

Sam  Brownback is an idiot.

Jansas has more problems than a pubilc utility commisson that's a rubber stamp machine with no regard for the public it serves, or the Grain Belt Express being a privately held transmission line wanting eminent domain,  or permittign and constuction of a coal plant no one wants or needs.  
Let's not forget while Governor Brownback supports Kansas wind as long as the overpriced energy is being exported to other states through the Grain Belt Express Clean Line Powerline, Governor Brownback opposes federal mandates that requires Kansas ratepayers to pay higher rates to use that same over priced wind energy at home..  Here's a new twist to the saga of Sam Brownback attempting to develop an "all of the above"energy policy without definition or clarity.



Dump Governor (Blazing Saddles)

Dumber (Illinois Governor Pat Quinn supporting Clean Line Energy)

Dumberer (Sam Brownback)







Apparently the Kansas Water Authority wants to consider building a canal to wheel water from the Missouri River near White Cloud, Kansas (elevation 883 feet)  to Utica Kansas (elevation 2251 feet).  They're looking at a 360 mile long aqueduct that climbs 1,368 feet to supply water to the drier southwest Kansas.  This project willobviously require more eminent domain. 


Keep in mind the Sunflower coal powered generation plant in Holcomb, Kansas is only 20 miles away from Utica.  Sunflower claims the new coal plant would be to power homes in Texas and Colorado .  Like the Grain Belt Express powerline, Governor Brownback has supported this potential project claiming it would bring jobs.  Remember, coal generation stations use voluminous amounts of water. 

Kansas is considering building a 360 mile long aqueduct  to transport water uphill 1,368 feet to support a new coal plant, opposed by the EPA, to provide power for Texas and Colorado.  

If western Kansas is running short of water, why build a power plant that is not needed and will consumer more water?   Why would or SHOULD Kansas residents support and be forced to pay for this aqueduct that was initially projected to cost over $2 billion dollar 30 years ago when it was first reviewed?

The argument will most likely follow the classic "Sunflower won't use this water.  They will use other waters." Same argument as the bureaucrat who says this spending isn't from the General Fund but "other monies" that don't count....  In the end, water is water.  If western Kansas is water defiecient, it just does not make logical sense for state ragulators to approve a coal generation station there.

Kansas would invariably be going down the road of more eminent domain for a public works project that will not be supported by the residents.  Sound familiar?   Got Grain Belt Express?
  
Perhaps the Governor Brownback's people NEED to learned the fundamentals rules of water.  Just in case they haven't heard them yet, here are the three rules of water transportation.

1.  Water flows downhill.
2.  Water never flows uphill.
3.  Water never ever flows uphill.

This aqueduct is going uphill 1,368 feet to feed a plant that is not needed.  The amount of pumping required will be incredible and the amount of shrinkage or line loss due to evaporation be ridiculous.  Even dumberer will be the idea of pumping this water uphill with wind energy when the wind blows at night while no one is consuming electricity to store the water uphill.  Then during the day with higher demand, run the water back downhill through turbines to reproduce the energy and this time sell it at a higher price.  The wind doesn't blow during the day when it is consumed and the aqueduct would be a form of energy storage.  Don't laugh too hard.  Even with all the shrinkage and line loss, this is being suggested. 


Governor Brownback  needs to do the math here and get on top of this issue.  This is even dumber of an idea as Brownback's support for the Grain Belt Express and supporting exporting Kansas wind energy but opposes paying for the same high priced wind energy at home.  This Governor's "all-of-the-above" energy policy is starting to remind me of a Mel Brooks character in Blazing Saddles.

When a states energy policy is defined by lobbyists pushing through agendas through a week utility commission, it's not surprising energy policies can be such a mess.  Renewable Portfolio Standards are another example of an energy policy delivered by lobbyists and it wouldn't surprise me Governor Brownback was for the RPS before he was against it.


Does it really make economic sense to run an aqueduct through the best farmland to feed a power plant in the driest part of the state? 


No, residents do not oppose these projects because they are going through their property.  These projects are opposed because they are a product of a politically dysfunctional energy policy made up of dumb and dumber ideas.

Tuesday, August 26, 2014

Governor Brownback's Flip Flop on Supporting Wind Energy but Opposing its High Cost

The lack of "wisdom" from some Governors sometimes amazes me.  At the very least, it is comforting to know Illinois isn't the only state with a governor who lacks the foresight to create a state's energy policy.  As indicated by The St. Louis Post-Dispatch, apparently Kansas Governor Sam Brownback has perhaps "seen the light" as the winds of public oppinion has begun to blow in a different direction. 

Maybe Kansas Governor Sam Brownback took a reality pill and is now opposed to new federal regulations by the EPA to promote wind energy.  It would appear Sam is now all about economically priced energy while Missouri looks to Kansas for wind energy to be in compliance with the new EPA rules designed to enhance demand for wind energy. 

Here's what the St. Louis article says;

"Working with Kansas could run into administrative as well as political roadblocks. It would depend on the development of a method to credit wind generation in a state’s emissions formula without double-counting it toward compliance in Missouri and Kansas. States with abundant renewable resources could be reluctant to let other states use them toward compliance.

Political considerations could also block cooperation. Kansas Gov. Sam Brownback, a Republican, opposed the regulations from the outset, saying the day they were released they would “raise the cost of living for every Kansan.”

Is this an election year?  What happened Sammy?  Shoving overpriced Kansas wind down the throats of residents in eastern states was OK but when the EPA mandates Kansas comply, Brownback is opposed to high priced energy.  Hypocrite. 

Looks like the Kansas governor is all about supporting the wind industry when people in different states have to pay for it but opposes high priced energy for Kansas.  Maybe Governor Brownback supports the wind industry but just opposes paying for it.  Perhaps Governor Sam supports wind energy when it is subsidized with a federal Production Tax Credit , but opposes high priced energy bills when wind energy is mandated by the federal government without the tax subsidy.  Perhaps it is just a matter of convenience for Brownback to blame Obama.

Now that the Federal Energy Regulatory Commission (FERC) mandates people not benefiting from a transmission project pay their "fair share" to promote wind energy, it will be interesting if Sam Brownback is reluctant  to share Kansas wind energy with it's neighbor to the east.  When Kansas residents are paying for transmission projects to take energy out of Kansas, my guess is Brownback will balk.  As the campaign has begun, he is already looking to blame President Obama for the high price of alternative forms of energy (wind).

Wasn't Sam Brownback the one pushing wind energy and the Grain Belt Express Clean Line llc powerline to send wind energy eastward?  Didn't Sammy claiming transmission eastward will promote Kansas wind energy, create jobs.....So what happened Sam?  Why the change of heart? Why opposed to new regulations that will enhance demand for Kansas wind and the Grain Belt Express?  Did the Clean Line Kool-Aid sour in your stomach?  Yep, Here's a quote from Governor Sammy. 

“The Grain Belt Express Clean Line will provide a vital boost in Kansas’ efforts to lead the nation in renewable energy production,” said Kansas Governor Sam Brownback. “This project will bring well-paying jobs, generate revenue for landowners and local communities, and open Kansas’ abundant wind resource to new markets.  Transmission projects like this are key in our mission to establish Kansas as not only the Wheat State but also the Wind State."
So why the flip-flop Sammy?  Why were you for wind energy before you were against it?  Do you still support the wind industry?  Is this kind of like "I support the troops but oppose the war" kind of BS?

From the sounds of the St. Louis article, Saammy recognizes if Missouri buys wind energy from Kansas wind farms, this will decrease the supply of wind energy for Kansas Residents.  If demand for Kansas wind energy artificially increases because Missouri is competing with Kansas for wind Kansas residents are going to have to pay more for electricity.  What happened to Governor Sam Brownback's claim that wind energy offers a "clean path for growth"?

Sucks doesn't it Sammy? 

Kansas takes responsibility for it's own energy policy and the next door neighbor start says we want a piece of your deregulated business.  Plus, if more transmission is needed to wheel this energy to Missouri, Sammy probably recognizes Kansas residents will be forced to pay their "fair share".   Yeah, Sam supports transmission to shove new wind energy down the throats of eastern states when Kansas residents aren't paying for it, but know under FERC's Order 1000, Kansas residents could be paying for transmission to send wind energy to Missouri and without the federal subsidy the price of wind can be hidden.

Then again, maybe Brownback's backing from coal and the proposed new Sunflower coal plant in Holcomb, Kansas is the motivation.  Yes, Brownback supports a new coal plant that will send energy to states in the south and west.    Then again maybe Governor Brownback, is more like Illinois Democrat Governor Quinn and willing to tell the public what they want to hear but advocate those who pay his campaign.  It's called Pay-to-Play in Illinois.

It's pointless for Gov Brownback to blame the rising cost of energy on Obama and the EPA.  He's the one supporting the state's Renewable Portfolio Standard and supporting paying too much for wind energy.  It's not surprising other states are repealing these Renewable Portfolio Standards as they realize wind energy is expensive.


The "wisdom" of Governors sometimes amazes me.  At the very least, it is comforting to know Illinois isn't the only state with a governor who lacks the foresight to create a state's energy policy.  Kansas Governor Sam Brownback perhaps has "seen the light" as the wind has begun to blow in a different dirrection.  The St. Louis Post-Dispatch has and interesting article a week ago. 

http://www.stltoday.com/business/local/mo-utilities-look-to-kansas-wind-to-comply-with-carbon/article_29faa710-8ed1-531b-9a01-c6e375cc13a8.html

Not sure what happened, maybe a dose of reality, but Kansas Governor Sam Brownback is now opposed to new federal regulations by the EPA to promote wind energy.  It would appear Sam is all about economically priced energy while Missouri looks to Kansas for wind energy to be in compliance with the new EPA rules designed to enhance demand for wind energy. 

Here's what the St. Louis article says;

"Working with Kansas could run into administrative as well as political roadblocks. It would depend on the development of a method to credit wind generation in a state’s emissions formula without double-counting it toward compliance in Missouri and Kansas. States with abundant renewable resources could be reluctant to let other states use them toward compliance.

Political considerations could also block cooperation. Kansas Gov. Sam Brownback, a Republican, opposed the regulations from the outset, saying the day they were released they would “raise the cost of living for every Kansan.”

Is this an election year?  What happened Sammy?  Shoving overpriced Kansas wind down the throats of residents in eastern states is OK but when the EPA mandates Kansas comply, Brownback is opposed to high priced energy.  Hypocrite. 

Looks like Kansas governor is all about supporting the wind industry when others in different states have to pay for it but opposes high priced energy for Kansas.  It would appear Sam supports wind energy when it is subsidized with a federal Production Tax Credit (http://cjonline.com/news/2012-06-04/brownback-calls-renewal-wind-tax-credit?page=1)  , but opposes high priced energy bills when wind energy is mandated by the federal government without the tax subsidy. 

Now that the Federal Energy Regulatory Commission (FERC) mandates people not benefiting from a transmission project pay their "fair share" to promote wind energy, it will be interesting if Sam Brownback is reluctant  to share Kansas wind energy with it's neighbor to the east.  When Kansas residents are paying for transmission projects to take energy out of Kansas, my guess is Brownback will balk.  As the campaign has begun, he is already looking to blame President Obama for the high price of alternative forms of energy (wind).

Wasn't Sam Brownback the one pushing wind energy and the Grain Belt Express Clean Line llc powerline to send wind energy eastward?  Didn't Sammy claiming it will promote Kansas wind energy, create jobs.....So what happened Sam?  Why the change of heart? Why opposed to new regulations that will enhance demand for Kansas wind and the Grain Belt Express?  Did the Clean Line Kool-Aid sour in your stomach? 

Yep, Here's a quote from Governor Sammy. 

“The Grain Belt Express Clean Line will provide a vital boost in Kansas’ efforts to lead the nation in renewable energy production,” said Kansas Governor Sam Brownback. “This project will bring well-paying jobs, generate revenue for landowners and local communities, and open Kansas’ abundant wind resource to new markets.  Transmission projects like this are key in our mission to establish Kansas as not only the Wheat State but also the Wind State."
So why the flip-flop Sammy?  Why were you for wind energy before you were against it?  Because it will raise the cost of energy in Kansas.

From the sounds of the St. Louis article, Saammy recognizes if Missouri buys wind energy from Kansas wind farms, this will decrease the supply of wind energy for Kansas Residents.  If demand for Kansas wind energy artificially increases because Missouri is competing with Kansas for wind Kansas residents are going to have to pay more for electricity.  What happened to Sammy's claim that wind energy offers a "clean path for growth"? http://www.kansas.com/opinion/opn-columns-blogs/article1073788.html

Sucks doesn't it Sammy? 

Kansas takes responsibility for it's own energy policy and the next door neighbor start says we want a piece of your deregulated business.  Plus, if more transmission is needed to wheel this energy to Missouri, Sammy probably recognizes Kansas residents will be forced to pay their "fair share".   Yeah, Sam supports transmission to shove new wind energy down the throats of eastern states when Kansas residents aren't paying for it, but know under FERC's Order 1000, Kansas residents could be paying for transmission to send wind energy to Missouri and without the federal subsidy the price of wind can be hidden.

Then again, maybe Brownback's backing from coal and the proposed new Sunflower coal plant in Holcomb, Kansas is the motivation.  Yes, Brownback supports a new coal plant that will send energy to states in the south and west.   http://www2.ljworld.com/news/2014/jul/17/groups-246k-ad-campaign-praises-brownback-over-pro/  Then again maybe Governor Brownback, is more like Illinois Democrat Governor Quinn and willing to tell the public what they want to hear but advocate those who pay his campaign.  It's called Pay-to-Play in Illinois.

It's pointless for Gov Brownback to blame the rising cost of energy on Obama and the EPA.  He's the one supporting the state's Renewable Portfolio Standard and paying too much for wind energy.  It's not surprising other states are repealing these Renewable Portfolio Standards as they realize wind energy is expensive.

Perhaps the smart thing for a Governor running for reelection with a failed energy policy, like Governor Brownback or Illinois' Governor Quinn, to do is to embrace it.  State residents should pay their fair share for "clean" energy.  The best way for an incumbent governor to discourage the base  is to hide from his record.

Which is it Governor Brownback?  Do you support wind energy and its high cost to consumers or do you support an open competitive energy market with economically priced energy?

Tuesday, August 19, 2014

Plains & Eastern Recycles FERC Approval to Pass it Off as News

HA! Look at this!  FERC has approved Plains & Eastern Clean Line’s to negotiate rates...AGAIN.  Somebody should have told North American WINDPOWER FERC already granted Plains & Eastern Clean Line approval to negotiate rates once already.  Here’s a quote from the WINDPOWER 3024 article.
 
Clean Line Energy says its Plains & Eastern Clean Line project has obtained a key regulatory approval from the Federal Energy Regulatory Commission (FERC).

Now, here’s an article from the 2012 Windpower Engineering and Development complete with Clean Line Picto-Map Graphic. Notice the similarities to the 2014 article.

Plains and Eastern Clean Line (Clean Line) has obtained a key regulatory approval from the Federal Energy Regulatory Commission (FERC) to begin negotiating transmission service agreements with potential customers of the transmission line project.

It’s virtually the same sentence in the articles two years apart!  Got plagiarism?  Can anybody make up something so absurd?   Skelly, get a new publicist.  A real utility company wouldn’t make such a faux pas.  Is WINDPOWER so disengaged they didn't remember this story was done two years ago. 

This begs an obvious question that WINDPOWER failed to ask.  WTF?  Clean Line Energy had FERC approval to negotiate rates.  Plains & Eastern Clean Line Energy Partners LLC llc llc claimed there is enough interest to supply 485% of Plains & Eastern’s capacity.  So if Clean Line really has 15 wind companies purported to want to utilize a 3,500 MW HVDC powerline, why does Plains & Eastern NEED FERC’s approval to negotiate rates and be allowed to have only one company supplying 100% of the 3,500MW’s?

Something is not adding up here.  

There are 15 wind companies wanting this powerline.

There is up to 17,000MW’s wanting to compete for this powerline.

But Plain’s & Eastern cannot make a go of this and NEED to be allowed to negotiate with only one supplier.  

So what changed?  What made 14 of the alleged 15 wind companies interested in Plains & Eastern walk away?  Why no open season?  Why spin this through a wind energy trade publication like this is allegedly purported to be the first time FERC approved Plains & Eastern the right to negotiate rates?  

Slow public relations traction and Clean Line elects to rerun old news as new news?


Does FERC’s Order 1000 make the Merchant Transmission Model so uncompetitive, it allowed Plains & Eastern to more favorable negotiation privileges?  How does this benefit ratepayers more than the last time FERC approved Plains & Eastern’s last request to negotiate rates?

To me this is more of the same.  Clean Line Energy wants every possible position in their favor before they sell the project to National Grid.  Even if Clean Line Energy Partners puts something in writing in a request to the federal government, they aren’t afraid to ask for a redo.   

Would FERC allow a real utility company such generous negotiation terms?  Would Duke or Southern Company get the same deal?

Are FERC commissioners so determined to advance wind energy, they will allow ratepayers to pay exorbitant rates to advance the industry?

Who is representing the consumer at FERC?  Anyone?  

HAS FERC EVEN NOTICED CLEAN LINE ENERGY PARTNERS KEEPS CLAIMING THIS POWERLINE IS FOR WIND ENERGY WHEN FERC ALREADY TOLD CLEAN LINE ENERGY PARTNERS THEY CANNOT DISCRIMINATE BETWEEN FORMS OF ENERGY?

What's going to be on this line when the "windpower" is not blowing?  It's probably not going to be energy generated from hog manure.

How much is this wind energy from 750 miles away going to cost consumers? 

Sunday, August 17, 2014

FERC, Order 1000, and the Death of the Merchant Transmission Model

FERC Order 1000 passed another hurdle at the D.C. appellate court.  The court made a classic  late Friday afternoon release issuing a ruling on the Order 1000.   Am I the only one suspicious on Friday afternoon releases?  

Back in the summer of 2013 Keryn at STOPPATHWV blog gave a good account for the basis of the appeal.  Later this spring she made an account of the arguments at the appeal.  This weekend, RTO Insider gave a good report on the appeal decision.

For those who do not remember FERC’s Order 1000,  the Federal Energy Regulatory Commission is attempt to promote or give “incentives” to build powerlines for promote wind companies.  Yes, Order 1000 is federal bureaucrats picking winners and losers.  Yes, Order 1000 is the government promoting an industry and playing favoritism.  Order 1000’s intent is to promote wind generation corporations through a simpler process to promote building transmission lines to serve the wind industry.  

Order 1000 discourages local generation.  Order 1000 discourages offshore wind generation by subsidizing Midwest wind generation with transmission projects being built and paid for separately.  Order 1000 discourages energy generation in the backyards of east coast urban centers and rewards generation in the less populated areas of the country.  FERC’s Order 1000 also discourages distributed generation and rooftop solar by homeowners.  

Order 1000 is not a friend of Midwesterns who might be living in the path of a political agenda.  Order 1000 is not a friend of the state’s public utility commissions.  In the ruling, the court agrees with FERC that the federal government’s consent for a powerline can argueably still be overruled by state’s commissions.  FERC also argues Order 1000 is a friend of the states because it is intended to promote state’s public policy statements, like Renewable Portfolio Standards.

The Institute for Energy Research (whoever they are) had a good characterization of the appellate court’s ruling.

“Today’s decision continues an unfortunate trend of our court system rubber stamping policies that expand the size and authority of our federal government. FERC Order 1000 socializes the cost of expanding expensive green energy projects—forcing the American people to foot the bill. This blatant disregard for the interests of American families will lead to higher electricity costs and will impact those who can least afford it.

“The Obama administration, Harry Reid, and the national environmental lobby are the only winners here. As always, their victory comes at the expense of the American people.”


How does this affect Clean Line Energy and the Rock Island Clean Line?

Order 1000 is an enemy of my enemy.  While Order 1000 is not a friend of ratepayers as it forces consumers in unaffected states to pay for a project.  It is the socialization of paying for transmission costs.  Conceivably a project by a REAL UTILITY COMPANY could be approved by FERC to wheel wind energy from western Iowa to eastern states to promote wind energy.  Such a project would be paid for in communities everywhere from Iowa to New Jersey through their monthly bills.  

So, why would an eastern state want to buy wind energy shipped across RICL when they could buy wind energy that is shipped through a REAL UTILITY COMPANY and wheeled at “no cost additional costs” across a transmission line paid through cost allocation?  It’s a no brainer.  Wind energy from Iowa would look cheaper if it is shipped across a powerline that is being paid by ratepayers separately?

The Center for American Progress explain’s cost allocation under Order 1000 nicely.



The only plus to FERC’s Order 1000 is it discourages the Merchant Transmission Line Model.  Unfortunately, it socializes costs and forces people hundreds of miles away to pay for the project.  The merchant model is dead under Order 1000.  It’s not competitive as people who don’t care or do not need the transmission line pay for it.   The Wall Street Journal characterized the socialized cost allocation model used by Order 1000 as people in Minnesota paying and benefiting for fixing potholes in New York City. The RICL merchant model cannot compete with such absurdity.  

Could RICL argue that its line is in compliance with Order 1000 and ask for it to be converted to cost allocation from the merchant transmission line model?  They could try, but RICL has already made one failed attempt at cost allocation at PJM, the Regional Transmission Organization.  RICL has also gone far out of their way to argue they are not a part of PJM’s long term planning.  because Clean Line doesn’t not want to comply with the organization’s requirements about financial openness.   We all know Clean Line’s balance sheet probably has a lot of zeros without commas after them, but the company wants to keep bank account and funds available a secret.   

If the federal appeals to Order 1000 run dry before RICL is built, it is conceivable PJM orders a sister project made by ratepayers in Michigan to New Jersey.  RICL would get no customers and no lenders.  If Clean Line attempted an Order 1000 compliant project as proposed by PJM, Clean Line would have to throw out Docket 12-0560 at the Illinois Commerce Commission and start over at the ICC.  

That’s not going to happen.  While Order 1000 is not a friend of ratepayers as FERC attempts to be an arbiter between RTO’s and transmission companies, Order 1000 is also not a friend of RICL and Clean Line’s merchant model.  RICL has effectively boxed themselves out of taking advantage of Order 1000.  

In many respects, it’s a matter of which devil is worse FERC’s Order 1000 or RICL.  For the ratepayer, all we can do is go after one devil at a time, and the first one is RICL.  Appeals to Order 1000 could likely continue and even when appeals are over, the order is so contradictory, it might be impossible to work it out at the Regional Transmission Organizations.  

Regardless of the Appellate Court’s ruling, Keryn’s conclusion at StopPATHWV blog from last March is still true.


When are the needs of consumers going to be considered?  Consumers aren't buying the specious arguments that billions of dollars of new transmission provide benefit to them.  In fact, more and more consumers are taking steps to check out of the grid and invest in their own onsite generators.  Only then will these ridiculous and expensive arguments end.  Meanwhile, fight on fellas.

When is FERC going to be concerned with what is best for consumers?  Now that Big Wind’s  bureaucrat/advocate at FERC, John Norris, has quit, it would be nice change if President Obama nominated a  FERC commissioner who is not interested in promoting a political agenda or part of the energy industry, but consumers instead.  If you are going to dream, dream big.  This monster at FERC is not going to be cut down through the judicial branch and few Congressmen recognize FERC’s abuse of power.  Whoever replaces John Norris needs to be a representative of ratepayers and the public.

Sunday, July 27, 2014

What is a Bin Truck

This is the best known picture of the ever elusive "bin truck' as described by the Rock Island Clean Line's "expert witness" at the Illinois Commerce Commission's hearing. Pierre Adams of Kewiet,  the general contractor of RICL claims their cranes and bulldozers offer far less compaction than a farmer's bin truck.

We still are asking ourselves "What is a bin truck".

Saturday, July 26, 2014

Farmer Economics and the Cost of Energy

If you want to meet 500 macro economists who speak like normal people, attend a grain elevator's customer appreciation pork chop supper at the county park.  Seriously, there are farmers in every state, county, and township who are a heck of a lot sharper than the talking heads on CNN, MSNBC, or Fox News.  These farmers aren't president of organizations or have fancy NGO titles.  They are just ordinary farmers who realize how national and international policies can affect their Midwestern livelihood. 

Recently I was talking a neighbor, Bob, and he made an observation about the energy market that you just do not here from industry pundits.  Sure the pre-2008 energy market is gone.  Not only are people consuming less, but energy efficiency is also working.  The observation Bob made was the manufacturing industry declined and created the 2008 recession.  The manufacturing economy has not returned.  The service industry does not consume electricity at the rate of the manufacturing.  Energy demand is not going to return to 2008 levels until manufacturing returns to 2008 levels. 

Duh.  He's right.  It's the economy stupid.  

It's absurd Michael Skelly of Clean Line Energy and Economist David Loomis of Illinois State University to claim wind energy creates jobs.  High priced energy does not create jobs.   Low priced energy creates jobs.  The number one cost in manufacturing is labor.  The second highest cost in the manufacturing industry is energy.  For America to be competitive in manufacturing we utilize skilled labor better than any other country.  Another great asset of America is low priced energy.  We have an abundance of economically priced energy.  It wasn't too many years ago Warren Buffet was predicting America was going to be a net importer of natural gas. 

America did something even President Obama said was impossible.  We drilled our way out of this. 

Today corporations want to export America's natural gas.  This really makes no sense.  We have TransCanada wanting to export Natural Gas through the Keystone pipeline.  Williams Corporation wants to build a pipeline through Kentucky for the export market.  Dominion wants to build a liquified natural gas export facility through Cove Point Maryland.  Like Clean Line Energy with the Rock Island, Grain Belt Express and the Plains & Eastern, all of these companies are asking for eminent domain to export energy.

This energy economy is a weird one as this nation is in a state of transition.  We send natural gas from Texas through Illinois to Ohio.  We send natural gas south from North Dakota through Illinois to Ohio.  Natural gas production is exploding in Pennsylvania.  Yet, Boston lacks the infrastructure to supply it with enough natural gas to keep the lights on and heat homes in the winter.  Instead of building infrastructure to meet our own needs, corporations look at building export facilities.

Much like the stupidity of the government's grain policies in the 1980's, Eastern states have been paying people not to use energy in times of peak demand.  Perhaps it shouldn't be surprising the Federal Energy Regulatory Commission thinks this is a good idea.  It's classic governmental insanity.  New England generation capabilities is decreasing but the last thing they want is to build offshore wind turbines to help meet their own needs. 

 

This is the map Clean Line Energy hates so much.  While it shows the winds blowing in the center of the United States, this map also shows the potential of offshore winds.  Clean Line and the wind industry wants powerlines from Iowa, Kansas and Oklahoma to supply the eastern states with wind energy.  The Rock Island Clean Line desires to wheel Iowa electricity (wind maybe) and tap the PJM markets (Pennsylvania, Virginia, New Jersey ). 

While learning the energy markets during the past couple years, it is interesting the farther northeast you go, the more costly the electricity becomes. Beyond the PJM territory, the New York ISO and then there is the New England ISO.  Each of these are regional grid operators (Regional Transmission Operators).  The NYISO is a bit hotter of a market than PJM, and the New England market prices can be even higher.  Demands outpace supplies more than in the electricity Midwest energy markets. It would also appear local government policies possibly discourage new generations.


The opposition against offshore wind generation in the Cape Cod community is well known.

Here is another interesting map.  This shows the flow of natural gas and the magnitude of volumes. 

Interesting thing here, like transmission, pipelines flow from the Midwest to the East then the Northeast.  That intersection in Northern Illinois is largely LaSalle County.  The Northern Borders Pipeline comes down from North Dakota and Kinder Morgan pipelines come up from West Texas and Houston, converging and utilizing the Troy Grove underground storage.  As best as I understand, these pipelines do not cross the Appalachian Mountains.

Like electricity, the natural gas market can be a bit starved in the New England area. Remember, this last winter natural gas had to be diverted from electricity generation to heat. The next map shows just how starved New England is for natural gas from a logistic view.


Again, notice how starved eastern New York and New England is.  Logistically, very little natural gas can get into the Boston market (the red lines).  This map doesn't show it well, but there is a pipeline coming down from Canada and another pipeline comes through Maine. Liquid Natural Gas ships can be offloaded into the  Maine pipeline for the New England market.  Unfortunately for Massachusetts, New England, like the European natural gas markets,  can be affected by export reductions from Putin in Russia.  

While the Midwest has the coal, natural gas, nuclear and wind there are other options for the Northeast.  Pennsylvania is having a natural gas boom as fracking is developing new supplies.  Coal is also available in more nearby states.  Nuclear energy is still an option for eastern states as nuclear energy is not bound to regional natural resources.  The is no logistical reason why so much of the nation's nuclear generators are in the Midwest. 

Oddly, here we are in America with some great turmoil created by low cost natural gas.  (It sure put the screws to Clean Line's business plan, but we also are faced with the TransCanada purposing the Keystone Pipeline to ship natural gas from Canada to Texas, while Texas natural gas is sent north and east. Williams Corporation wants to build the Bluegrass Pipeline through Ohio and Kentucky and farther southeast to export markets. In another project Dominion wants to export liquified natural gas in Virginia. 


So we send natural gas from Texas up through Iowa and Illinois to eastern states.  We build nuclear plants in Illinois and wheel the electricity eastward.  While New England is starved for natural gas,  companies want to ship Pennsyvania natural gas south to export. This is nuts.

On top of all this, Clean Line wants to ship wind energy to eastern states.  There again, New England states are short on electricity.  Wouldn't make more sense to build generation near populations centers, like Boston?  Wouldn't it make more sense to build more natural gas infrastructure to domestic markets that need it than to build towards export markets? 

Then again, Farmer Economics says you don't build infrastructure to the northeast from the Gulf of Mexico only to turn around and build more pipelines from Pennsylvania to the the Gulf of Mexico.  Farmer Economics  also says you don't build infrastructure to promote one type of a generic commodity.  In the end, that is what wind energy is.  It's a generic commodity marketed as an Identity Preserved commodity.  Electrons are electrons. 

Recently Amy Kurt said at a recent Grundy County workshop; "It makes no economical sense to put any other kind of generation out in O'Brien County Iowa where there is nothing except great wind energy resource and then PAY to ship that power over our line to connect to the grid.  If I were to develop another type of energy generation resource, I'd put it where the population centers are and I'd put it right where the grid is.  I wouldn't pay to have it shipped over our lines."

In the end electrons are electrons.  Transmission wires don't care about the source.  Wind energy is not the thing to create more jobs.  High cost wind energy actually discourages economic growth as it makes foriegn manufacturing more competitive.  Just as wind energy is not the thing, HVDC Merchant Transmission Lines are not the thing to get us to the thing.  Wheeling electrons needlessly does not create economic growth. It discourages it.

Farmer Economics says the least cost alternative and nearest option is the best option.  The least cost energy regardless of the source is what will generate jobs and make the economy grow.  Paying a premium for another form is as dumb as shipping natural gas northeast then shipping it back southwest. You would think FERC would recognize the futility of such proposed lines.  That's what we, the people, pay these bureaucrats to do and prevent corporations to do projects that are not in the best interest of the nation.

You would like to think FERC Commissioner John Norris would understand this and have more common sense, as he originates from Iowa.  Then again, Illinois Governor Pat Quinn has no economic sense and neither does Kansas Governor Sam Brownback.  FERC and a few Governor offices could use a little more Farmer Economics on their team.