Tag Archives: Energy

Energy Choice Now: Michigan Electric Rates Continue to Climb Under Choice Cap

Michigan electric rates continue to increase as the state lacks the price competition present under electric choice to discipline pricing.

Rates in all sectors are higher than they were one year ago, Energy Choice Now said.

“Over the last year, Michigan’s rates jumped 3.7 percent – far more than the rate of inflation, and more than double the regional average increase of just 1.5 percent. Meanwhile, rates in Illinois, a state that continued with competition when Michigan re-monopolized its electric system in 2008, dropped by 4.7 percent,” Energy Choice Now said.

According to Energy Choice Now, Michigan’s overall electricity rates in May were 16 percent higher than the regional average. Industrial electric rates were 23 percent higher and commercial rates were 14.5 percent higher. Residential rates were 15.6 percent higher than their regional counterparts.

The latest numbers from the U.S. Energy Information Administration, which reflect data from May 2013, show that Michigan needs electric competition soon before it falls even further behind its neighboring states, said Wayne Kuipers, executive director of Energy Choice Now Michigan.

“Our business members tell us time and again that energy is one of their top three cost drivers – that electricity rates are paramount when companies are deciding whether to expand or contract, to create jobs or lay off workers,” Kuipers said. “Because of Michigan’s electric monopoly, our businesses have to dig out of a hole from the very beginning. That’s not a business-friendly climate.”

Via Energy Choice Matters

Residential Shopping Continuing to Decline at ComEd

Commonwealth Edison in Illinois has seen another month of declining residential migration, as expected with several municipal aggregations having recently returned customers to the utility.

According to the latest stats from the Illinois Commerce Commission, the number of residential customers on competitive electric supply at ComEd decreased by 20,000 accounts from June 30 to July 31, and now stands at 2.309 million customers.

This monthly loss follows a recent seesaw of shopping at ComEd, which had seen residential migration grow by 17,000 accounts during June, but fall by 17,000 during May.

In contrast, the Ameren territories continue to see residential migration growth, and saw a large spike at Ameren Rate Zone III during July.

Specifically, from June 30 to July 31, the increase in shopping at each Ameren rate zone was

Rate Zone I: 12,255

Rate Zone II: 3,209

Rate Zone III: 49,406

For comparison, the increase in shopping at each Ameren rate zone was as follows from May 31 to June 30:

Rate Zone I: 3,601

Rate Zone II: 2,991

Rate Zone III: 7,097

Via Energy Choice Matters

Arizona Public Service CEO: Can Count Customers Supporting Retail Deregulation “On One Hand”

Donald Brandt, CEO of Arizona Public Service Company, said on an earnings call Friday that he can count the number of Arizona customers that support deregulation of the electric industry, which would introduce retail choice to the system, “on one hand.”

“Where I sit now, I think we could count the number of customers that are proponents of dereg, so-called deregulation, on one hand,” Brandt said.

“I’m looking at a list of 153 organizations, elected officials, chambers, numerous other business leaders, leaders of the Arizona Senate, the Arizona House of Representatives, numerous mayors, city managers, and other local elected officials across the state that have come out strongly against it,” Brandt said.

“I don’t think the proponents of deregulation necessarily counted on the negative reaction it’s received. As you know, reliability of an electric system is very important, and it’s also a fundamental of all advanced economies. But in Arizona, the hottest state in America, reliable electric service is literally a life or death necessity,” Brandt said.

Brandt said that a decade ago when Arizona last attempted to move forward with deregulation, “essentially the Arizona courts concluded that most of the rules and other processes that had been put in place were unconstitutional and/or illegal for a variety of different reasons.”

“[T]hat obstacle to deregulation still exists,” Brandt said.

The last dalliance with deregulation, “was a very expensive endeavor for the utilities, for our customers, and there was no visible benefits that came of that exercise. And I think once the commission has a chance to review all the comments and reply comments … they’ll have a good sense that there’s not too many opportunities here for Arizona customers, and significant risk and cost that are almost a virtual certainty,” Brandt said.

“I am very confident that the Corporation Commission is going to act in the best interest of all our customers and to do that action on a timely basis,” Brandt said.

Via Energy Choice Matters

Newly available wind power often has no place to go

The windswept prairies of the Midwest are undergoing an energy transformation the electric grid can’t handle.

Wind turbines tower over rural vistas in the heartland, where the clean energy source is becoming increasingly popular with utility companies that face state-mandated renewable energy standards. Unfortunately, the nation’s aging power grid is hampering those efforts.

At the end of last year, installed wind-generation capacity totaled 60 gigawatts nationwide – 5 percent of the nation’s production capacity – according to data from the U.S. Energy Department’s National Renewable Energy Laboratory. Another 135 gigawatts of potential wind production awaits development and connection to the grid, according to industry data.

“There hasn’t been a lot of investment in the grid for the last two decades,” said Michael Goggin, a senior analyst at the American Wind Energy Association, the industry’s main trade group. “We just don’t have a strong grid that’s built out in the parts of the country where there are a lot of wind resources.”

The transmission grid was built a generation ago for coal, nuclear and hydropower plants without renewable energy in mind. It makes transmission from wind farms in rural areas difficult and costly.

The shortfall in transmission capacity hasn’t gone unnoticed.

Gil Bindewald, a project manager at the Department of Energy, said decision makers had to consider policy, technology and financing when dealing with transmission issues.

“There is no silver bullet solution for effectively integrating renewable sources of energy such as wind onto the grid,” Bindewald said.

The growth of the nation’s wind-power supply is evident on a remote stretch of Kansas Highway 23, where the spinning blades of wind turbines quickly surround motorists near the town of Cimarron. The site, which has 57 turbines spread over 16,000 acres of leased farmland, is capable of powering 40,000 homes with 131 megawatts of production.

But Duke Energy and Sumitomo Corp., which brought the project online in June 2012, face significant congestion as they try to bring that energy to the market.

Greg Wolf, the renewables president at Duke Energy, wouldn’t comment on the level of congestion, but he said the bottleneck was noticeable.

“Because it’s new and because there’s variability in wind versus a traditional gas-fired unit, there’s been a learning curve here,” Wolf said. “Not to mention the fact that we’ve added a large number of new megawatts at a quick pace.”

Wolf said deficiencies in the grid and differing state policies on the placement of transmission lines were prime causes of congestion.The Southwest Power Pool, the Federal Energy Regulatory Commission’s regional transmission operator in the area, said it experienced four to five transmission curtailments – periods of high congestion that shut down wind units – per week. Over the past eight months, those curtailments have affected up to seven sites.

 

“They’ve connected to the system in our region ahead of planned transmission upgrades,” said Southwest Power Pool’s director of system operations, Don Shipley. “Some of the wind farms have seen fairly significant impacts of up to 50 percent of their projected production.”

In other words, a lot of the power those farms were expecting to generate isn’t making it to the market.

Shipley said the electric market and the wind farms were losing money because of the curtailments, as the pool is unable to sell power that the grid is incapable of transmitting.

 

A report last year from Synapse Energy Economics, a Cambridge, Mass., consulting firm that specializes in energy and environmental issues, highlighted 17 grid-expansion projects that it said were needed within the Midwest Independent Transmission System Operator, which oversees the upper Midwest’s power grid; that would help address congestion and grid reliability and also satisfy state clean-energy mandates.

The projects could increase wind energy production by an additional 41 million megawatt hours, enough to power about 3.5 million homes annually.

Opponents of wind energy say that even a nominal increase in transmission costs will mean higher utility prices for consumers.

The industry counters that any rate increase would be small.

“It’s not a considerable impact,” said Natalie Hocken, an official at PacifiCorp, a power company in the Northwest. “A large transmission investment will have some impact on our rates just like any other capital investment would.”

 

In the Synapse study, models show that the average one-megawatt-hour-per-month consumer in the upper Midwest might save as much as $17.50 per year with 20 gigawatts of wind production on the grid by 2020. According to the Synapse study, “Since wind energy ‘fuel’ is free, once built, wind power plants displace fossil-fuel generation and lower the price of supply – thus lowering the energy market clearing price.”

 

Along with infrastructure, the policy on building transmission lines to service new markets has fallen behind.

Utilities and policy makers often blame transmission policy for delaying grid expansion. For PacifiCorp, permitting takes at least three years at the federal level alone. Including the permitting process, constructing transmission projects can take up to eight years.

As with the grid, the policies were developed when utilities owned the generation and transmission infrastructure required to deliver electricity.

“We’ve transitioned to a kind of market structure with competitive markets for electricity, and the same company doesn’t own both the transmission and generation,” said Goggin, of the American Wind Energy Association. “The policies that were able to build transmission under the old system don’t work under the market system.”

 

The Federal Energy Regulatory Commission acts as a backstop in policy disputes. Under a new policy, the commission is working to make the development of transmission lines between states easier for utilities.

The Southwest Power Pool is moving to boost communication with the sites it oversees. The two sides are working to improve the real-time ability to react to curtailments throughout Southwest’s grid system. Shipley said he expects transmission projects targeted for completion in 2015 to alleviate regular curtailments in the region.

For the wind industry, tackling transmission is the key to tapping a vast resource. If the industry doesn’t increase capacity, utilities might be stuck watching their resource blow away.

“There’s enough resource there to power the United States a dozen times over by conservative estimates,” Goggin said. “A lot of that resource is concentrated in the middle of the country, far from where people live. There’s extremely cost-effective wind left out there. We just can’t tap it, because we haven’t built out the transmission system.”

 

Will another Illinois coal plant bite the dust?

It’s been a year since Midwest Generation’s two coal plants in Chicago closed, amid much celebration from environmental groups and residents.

Now another archaic Midwest Generation coal plant located in a low-income, largely minority urban community is in the spotlight.

Environmental advocates think that the coal plant in Waukegan, 40 miles north of Chicago on the shore of Lake Michigan, will close in the next few years. But they aren’t willing to wait; they say state agencies must take action now to stop the plant from killing fish and polluting the lake, groundwater and air.

They want the Illinois Environmental Protection Agency (IEPA) to make more stringent demands in a Clean Water Act permit that is currently open for public comment; and they want the company to have frank discussions about the plant’s future with community residents and elected officials.

During a public hearing on the draft water permit in Waukegan July 31, environmentalists and local residents voiced concerns about contamination from coal ash stored on the site; and impacts on fish from the plant’s open cooling system, which sucks in Lake Michigan water then returns it at significantly higher temperatures.

Federal regulations to address coal ash storage and cooling systems are still being developed, so environmental lawyers argued that it is up to the state agency to deal with these issues in the meantime. Jessica Dexter, a staff attorney with the Environmental Law and Policy Center (ELPC), criticized the agency for delaying monitoring requirements and mandates on coal ash and cooling system impacts until the next permit is issued.

Dexter said during a webinar hosted by the ELPC July 30 that the IEPA has “backpedaled” from stronger protections on Lake Michigan water quality in a draft permit the state agency had proposed in 2011 and never ratified.

“In the most recent draft, IEPA has resurrected a variance that the facility obtained in 1978,” Dexter said. “Legally speaking, those variances don’t last forever. We argue the facility should at least have to submit data to prove that the variance is still appropriate before the permit is renewed.

“Instead of reviewing data now, IEPA has put a condition in the permit that asks Midwest Generation to submit data later so that when the permit is up for renewal in five years, IEPA can make the decision that it should be making in this permit.”

She said the pending permit should institute stricter limits on the temperature of the about 650 million gallons of water released back into the lake each day.

“Unnaturally hot water can harm aquatic life,” said Sierra Club Illinois clean water advocate Cindy Skrukrud during the webinar. “It can disrupt fish spawning cycles so that they spawn at the wrong time when their food supply isn’t available.”

Meanwhile countless fish are killed in open cooling systems such as Waukegan’s when they are sucked into or up against the water intake structure. Environmental advocates have been pushing the government to demand closed cooling systems, where water is not sucked in from the lake.

The ELPC and Sierra Club are members of RE-AMP, which publishes Midwest Energy News.

Coal ash concerns

In 2012 the IEPA issued the Waukegan plant a violation notice related to arsenic, boron and other compounds leaching into groundwater from its coal ash storage; and environmental groups have filed suit over groundwater contamination from the plant. Midwest Generation president Douglas McFarlan said the company has entered a compliance agreement with the IEPA and that currently all the ash storage ponds are lined and not leaking.

The Waukegan plant is highlighted in a report released this month by the Sierra Club and other environmental groups identifying coal plants as the biggest cause of toxic water pollution nationwide.

The report says that the state discharge permit Waukegan has been operating under for more than a decade “sets only copper and iron limits for the 3.2 million gallons per day of ash-contaminated waste which Waukegan is authorized to discharge, failing to set any limits for poisons like arsenic, mercu­ry, and selenium.” The new draft permit currently under review “repeats this mistake,” in the report’s words, still lacking limits on the toxic heavy metals.

McFarlan said there are no limits on those metals since the plant is not releasing them into the water. A Midwest Generation fact sheet says that  all wastewater is treated before being released into the lake, and that: “The vast majority of water discharged by Waukegan Station is cooling water which does not come into contact with anything within the station except the outside of steel tubes for cooling purposes only.”

Environmentalists, however, suspect that contamination from the coal ash ponds could be making its way into groundwater and then into the lake.

“We know that the groundwater on the site flows from the ponds towards Lake Michigan,” said Skrukrud during the webinar. “We believe that IEPA should incorporate groundwater monitoring requirements into this permit as it did for the city of Springfield’s power plant” in central Illinois.

Days numbered?

Meanwhile, critics say that in the bigger picture, Midwest Generation should be candid with the community and elected officials about the fate of the plant, which many see as likely to close in the near future.

The plant was originally built in the 1920s, and its current two boilers date to 1958 and 1962. Under state rules on sulfur dioxide and other pollutants, the company must complete installation of pollution control equipment — estimated to cost $160 million — by May 2015.

In its third quarter 2012 filing with the Securities and Exchange Commission, Midwest Generation said that it could only retrofit its plants with pollution controls by borrowing money or receiving more funding from its parent company, Edison Mission Energy, and that it was “less likely” retrofits would be done on the Waukegan station.

In December 2012, Midwest Generation declared Chapter 11 bankruptcy, and in a January hearing before the Illinois Pollution Control Board company officials said they lacked the money to make retrofits by state deadlines.

An April 2013 email dispatch by the financial institution UBS Securities LLC said “we believe” the pending state sulfur dioxide limit “will eventually have the effect of likely retiring” the Waukegan plant and individual units at the Joliet and Will County plants southwest of Chicago.

But Midwest Generation has not publicly announced any plans to close Waukegan, and McFarlan said in an email that the company is continuing to invest in the plant.

“Like every business owner — coal plants or the corner pharmacy or Midwest Energy News — we constantly evaluate market conditions and make short-term and long-term business decisions as necessary.  Since we acquired Waukegan Station in 1999, we have spent over $50 million on new pollution controls, including the installation of some of the first mercury emission controls on any power plant in the country in 2008.  We are in early stage work on additional improvements that would require about $120 million in investment over the next two years. We will make final investment decisions when and as necessary to comply with state and federal regulations.”

Environmental justice

In Chicago, community groups, city officials and Midwest Generation executives have been participating in a task force to discuss possible future uses of the two coal plant sites. Sierra Club Beyond Coal campaign field organizer Christine Nannicelli said they would like to see a similar process start in Waukegan even before the plant closes.

The plant’s closure could have even greater significance in a town like Waukegan, since there are fewer other employment options for affected workers; and the 194-acre lakefront plant site could end up either a benefit or a bane to the economically struggling community. Waukegan is already home to several Superfund sites, including the notorious now-closed Outboard Marineplant which caused serious PCB contamination.

“There’s a long history of industry on that lakefront leaving town and leaving a lot of pollution,” said Nannicelli.

As in Chicago, advocates say Midwest Generation has a particular responsibility to the community given the environmental justice implications of its operation. The population within three miles of the Waukegan plant is 72 percent minority with an average income of $16,000 annually, according to the NAACP’s report “Coal Blooded: Putting Profits Before People.”

The civil rights group’s 2011 list of the nation’s worst coal plants in terms of environmental justice ranked the Waukegan plant 12th, and Midwest Generation’s Crawford and Fisk plants first and third, respectively. Nannicelli noted that many of the lower-income Latino residents living around the Waukegan plant regularly eat fish they catch in Lake Michigan, which could potentially be contaminated with mercury and other toxins.

Good for air, bad for water?

While the IEPA permit debated this week deals only with water impacts, public health and environmental experts are also concerned about the plant’s air emissions.

A 2010 report by the ELPC found that the Waukegan plant was responsible for up to $690 million in health costs over the past eight years, from soot (particulate matter) and smog which are linked to cardiovascular, respiratory and other problems.

In an April 2013 report the Sierra Club mapped what it describes as a “dangerous” sulfur dioxide plume above allowable EPA levels, emanating from the Waukegan plant and encompassing a high school and the popular Illinois Beach State Park.

Advocates note that ironically if Midwest Generation does decide to invest in a sulfur dioxide control system known as dry sorbent injection (DSI), the ash produced will become more toxic since it will include the compounds removed through the DSI process.

McFarlan said that such “fly ash” is not stored on-site at the plant; and that the plant’s ash ponds primarily hold less toxic “bottom ash” from boilers.

Nevertheless, Nannicelli said advocates worry about a provision in the IEPA permit allowing for intermittent storage of fly ash on site.

“The more you take out of the air, the more water pollution you can see,” said Nannicelli. “It makes it clear to everyone that there’s no safe or healthy way to burn coal. That’s why the company needs to come forward with a clear plan for a reasonable retirement.”

Via Midwest Energy News

Michigan solar developer joins feds race to the rooftops

Michigan is now a center for manufacturing solar panels, but making a buck on installing them here remains tough.

Many Michiganders still don’t understand that their state has enough sunshine to make solar power worth the investment. Michigan utilities sharply limit how much power they buy back from privately owned solar power systems, reducing their profitability. And, unlike solar-savvy states, Michigan offers no solar tax incentives, and many local officials are completely unfamiliar with permitting standards for the technology.

But none of that bothers Srinergy’ s Prasad Gullapalli. He’s got his eyes on the prize.

His three-year-old, Novi-based solar installation company has joined the U.S. Department of Energy’s nationwide Race to the Rooftops contest. The firm and the partners it is recruiting will compete for part of a $10 million prize. It will be shared among the first three teams that install 6,000 smaller-scale solar systems on homes or businesses while keeping their “soft costs”—everything but the panels and other hardware—at or below $1 per watt.

That means no more than $2,000 in soft costs for a tiny, 2,000-watt (2 kW) solar panel system, the smallest the contest allows and small for even a home; and no more than $15,000 for a 15-kw system, the largest the contest allows and typical for many businesses who install their own rooftop systems.

The DOE’s rooftop race encourages America’s solar installers to directly confront their biggest challenge—the high cost of installation. Panel prices are already falling rapidly—by 60-percent since 2011—thanks to evolving technology and fierce competition from Chinese manufacturers.

Minh Le, program manager of DOE’s Solar Energy Technologies Office, explained in an email that the contest is looking for subsidy-free ways to cut labor, local inspection and permitting, utility connection, sales commission, system design, and marketing costs.

Minh says the race will help figure that out by prompting contestants to work “with local agencies, utilities, communities, and installers to streamline the permitting, installation, and interconnection process for solar.”

Another DOE official indicated that the department’s eventual goal for its overarching Sunshot Initiative—the rooftops race is just one part of it—is to get soft installation costs down to 60 cents a watt for small systems as park of making “solar power cost-competitive with other forms of electricity by the end of the decade.”

After the contest is over, in late 2015, Le added, DOE aims to discover, adopt, and promulgate the “best practices that reduce the soft costs of solar energy systems by more than 65 percent.”

Since, according to the DOE, soft costs often account for half the price of small-scale solar installations, cutting them by that much could drop a project’s cost by one-third. That would put a modest home system in the $3 per watt range, or $15,000 for a 5-kilowatt system—enough electricity to simultaneously power most appliances in a typical home.

Surprisingly, Gullapalli said his young company is already at that price point in solar-wary Michigan.

“If you want to do solar,” he said, “most local installers will say it costs $4 or $4.50 per watt. We are saying it is $3, so I’m not worried about the competition. We are very confident that, because of the way we manage the business we can do that. All we need are the roofs to install on.”

But he knows getting to 6,000 solar systems in Michigan is an uphill battle.

“Very few people in Michigan know about solar power, and there are no tax incentives at the state level,” he said. “So we are creating outreach without state leadership. I know there are states definitely ahead of us, like New Jersey, Colorado, and California. But it doesn’t mean we should give up the race. That is what the challenge is all about: setting an example.”

Gullapalli said he’s not concerned that, so far, he’s formally signed up only one partner—WARM, a Detroit-based non-profit providing clean-energy services, technical assistance and policy guidance. There’s still 18 months to go before the contest’s first tally and reckoning, and he’s confident that his price for panel installation will help expand his team, win many new customers and, perhaps, millions of dollars for him and his partners.

Building teams, knocking down barriers

Jacob Corvidae, who oversees WARM’s green consulting work, said the price Gullapalli is quoting is realistic, given falling panel prices, Srinergy’s approach, and local permitting officials who “get” solar and are helping it grow.

Corvidae said WARM’s own, initial forays into solar installation provided valuable lessons.

“We now try to find places where officials understand how their building codes apply to solar projects,” he said. “But that can take time to figure out.

“So we don’t enter into a specific city until we are sure we have 10 customers ready to move on installing panels,” he continued. “That means going to the permitting office just once. Then we can get a crew out there to do all of them in one week. That seems like a small step, but it really adds up.”

Gullapalli says Srinergy has developed a good working relationship with permitting officials in Canton, Ann Arbor, Farmington Hills, Detroit, Novi, River Rouge, and a few other cities.

“In these places,” he said, “the cost of the city services involved [permitting and inspection] is negligible.”

But many local governments in Michigan still have no process for approving solar projects—limiting the potential market for SRInergy and its partners.

WARM’s Corvidae said help is on the way.

“The State of Michigan is developing model policies and codes through the Michigan Energy Office, and should be done by the end of the summer,” he observed. “And the [non-profit] Clean Energy Coalition and Great Lakes Renewable Energy Association are also working on developing other policies to help solar grow.”

A recent news report noted that Saginaw, Midland and nearby William and Thomas townships recently became “solar-ready communities” by streamlining their permitting processes.

WARM, meanwhile, is helping Srinergy via the connections it’s built working with homes and businesses throughout the region on efficiency and clean energy projects.

“Our primary role is to get the word out to people who care about these things that we now have an option for affordable solar,” Corvidae said. “We also function as an honest broker. We are a trusted non-profit; we are here to let you know this is legitimate; it’s not just a marketing scheme by some contractor; we have the expertise to provide quality control.”

Corvidae said another barrier to taking solar mainstream in Michigan—and reaching 6,000 rooftops—is financing. Some people can pay cash for a $10,000 or $20,000 system, and wait the typical 12 to 15 years for full return on their investment. But most homeowners and businesses need a loan.

Gullapalli sends customers to Michigan Saves for financing. The non-profit offers loans for residential and commercial efficiency and clean energy projects with very attractive terms: 10-year loans at 7 percent. Corvidae says that’s a terrific deal, one that could soon break Michigan’s solar market wide open.

“We are getting close to the point where you’ll be paying off the panels for less than you once paid on your monthly electric bills,” he said. “I think we are pretty much ready to blow the roof off.”

Getting on the map

Gullapalli believes that his company’s business model will help him recruit more team members and win the race: Srinergy often subcontracts the physical installation to other, local contractors.

“We want to grow the business in a very local way,” he said. “Even if we have a project in Ann Arbor (about 20 miles away), we try to use people there, instead of our people being a half-hour on the road each way. Time is money, and that is why we are very aggressive on our own efficiency.

“But when it comes to all of the contractual obligations, designing the systems, site assessments, all of that, those are a turnkey package that we manage from our office.”

He will also outsource marketing, sales, and public relations efforts as he continues his conversations with a variety of private and non-profit organizations.

Whether SRInergy’s approach is enough to grab the big prize is a tough question.

After all, the DOE said companies in Arizona, California, and Hawaii installed more than 6,000 solar systems in each state last year, while firms in New Jersey and Colorado installed more than 3,000.

But Corvidae and Gullapalli are undeterred. Winning would be great, they said, but it’s not everything.

“Even if we don’t win,” Corvidae said, “we can put Michigan on the map on this, and put solar on the map in Michigan. It helps the entire solar industry; the more people see the panels, the more it becomes normal and the more people want to do it.”

“Hey, you gotta be a little crazy to do this,” Gullapalli said. “But without that, we would not have made it to the moon. I’m the crazy guy now, but you never know.”

Via Midwest Energy News 

The 5 most important names in green power you’ve never heard of

Five people will make a decision soon that will have an outsized impact on the future of renewable energy in America. I’m not talking about big shots like Obama, Koch, Boehner, Bloomberg or Steyer.

I’m talking about names many have never heard of: Moeller, Norris, LaFleur, Clark and Binz (if he is confirmed). These are the chief electricity officers of the United States of America — they are the commissioners of the Federal Energy Regulatory Commission (FERC).

You’ve probably heard this before: “Scientists agree that in order to avoid the worst consequences of climate change, we must generate 80 percent of our energy from renewable sources by 2050.” No single entity

will play as crucial a role as FERC in ensuring that the infrastructure exists to handle new renewable energy generation.

President Obama’s climate plan is a courageous step forward and deserves the widespread media coverage it has received. But only the acceleration of utility-scale renewable energy projects can take us where we need to go.

Modernizing our nation’s power system is a daunting task, but there are good reasons to be optimistic. America has enough wind and solar to power the entire country more than a dozen times over. And with the cost of wind and solar going down every day, rapid development of large-scale generation projects appears inevitable.

But if you place the map of regions with the best wind and solar energy on top of a map of our current transmission system, you won’t find too much overlap.Transmission is the key to unlocking America’s virtually unlimited renewable resources and delivering their energy to users.

Unlike our interstate highway system, which is funded by taxpayers, high-voltage transmission lines are built with private capital. Investors will put money into transmission projects as long as they generate returns that are attractive relative to similar types of investments. This is where FERC steps in. They set the return on equity (ROE) for transmission projects across the nation.

As you might imagine, the higher the ROE, the more incentive there is to build transmission. A company never would invest in our grid if the maximum ROE were 1 percent — meaning it would take 100 years to recoup the costs of a project. And if it were 100 percent, we would end up building much more transmission than we need and sticking consumers with the bill.

Recent history also tells us that the cost of inadequate transmission is steep. Electric customers are still paying billions of dollars per year for congestion, poor reliability and overpriced power from dirty, outdated, inefficient power plants — all of which are the direct result of three decades of underinvestment in transmission. Renewable energy was locked out of a strained and inadequate grid. In the mid-2000s, FERC recognized the chronic neglect of transmission investments as a major burden on ratepayers and a barrier to modernizing our electric system, and stepped in to raise transmission ROEs.

That decision helped spur a wave of new transmission investments that are reducing costs to consumers and expanding access to renewable energy. For example, the Midwest ISO has begun a new set of transmission lines called theMVP projects. The average consumer is seeing $23 in savings for every $11 spent on these new lines.

Why is transmission such a great deal for electric customers? It’s the smallest part of an electric bill — 11 percent on average — compared with 58 percent for generation and 31 percent for distribution. Transmission pays for itself quickly by relieving costly congestion, moving cheap and clean renewable power to customers, making the grid more reliable and secure, and putting old and inefficient power plants out of business. Simply put, transmission is essential infrastructure for competition, consumer choice, economic efficiency and environmental protection.

Despite the well-documented value that transmission investments deliver to ratepayers and the environment, FERC has been hearing complaints recently that ROEs for transmission projects are too high, and that ratepayers need relief. These complaints are misguided, and their timing could not be worse. Never in our history has so much depended on expanding and modernizing our electric transmission system.

Our chief electricity officers may never get the ROE for transmission “just right”; the uncertainty of markets, interest rates and the economy probably make that lofty goal impossible to achieve. But they can — and they must — ensure that ROEs remain at levels that ensure a steady and stable flow of private capital into urgently needed transmission investments. Failing to do so would stall renewable energy development — and with it, progress on reducing emissions — and would increase the cost of electricity for everyone.

The president’s climate plan is moving forward. State renewable energy standards are helping expedite that progress. The falling costs of wind and solar are driving growth. But none of that will matter if the infrastructure to deliver renewable energy to customers is not built.

Five FERC commissioners will make a little-noticed decision in the near future, one that either will keep us on the right track or throw a major obstacle — one that we can ill-afford — on the road to achieving our nation’s renewable energy future and stabilizing our world’s climate.

Via GreenBiz

JPMorgan Accused of Energy-Market Manipulation by U.S. Agency

JPMorgan Chase & Co.  manipulated power markets in California and the Midwest from September 2010 to June 2011, obtaining tens of millions of dollars in overpayments from grid operators, the U.S. Federal Energy Regulatory Commission alleged today.

The agency said in a Notice of Alleged Violations that it had preliminarily determined a JPMorgan trading unit had engaged in eight manipulative bidding strategies.

The New York-based bank has agreed to sanctions including a fine of about $400 million in a settlement that may be announced as early as tomorrow, according to a person familiar with the case who asked not to be identified because the terms aren’t yet public. Other sanctions may include forfeiting profits, this person said.

Brian Marchiony, a JPMorgan spokesman, declined to comment on the FERC action.

The case marks another setback for the biggest U.S.-based bank, which sailed through the 2008 financial crisis without a single quarterly loss. Last year JPMorgan lost more than $6.2 billion from wrong-way derivatives bets placed by traders in London. The incident prompted a U.S. Senate investigation, the departure of two senior executives and a debate over whether Chief Executive Officer Jamie Dimon should keep his chairman role. In May shareholders re-elected him as chairman.

Physical Commodities

JPMorgan said July 26 it may sell or spin off its physical commodities business including energy trading, three days after a congressional hearing examined whether banks are using their ownership of raw materials to manipulate markets.

Commodities chief Blythe Masters oversees the unit, J.P. Morgan Ventures Energy Corp. The wholly owned subsidiary trades and holds physical commodities, including agricultural products, metals and energy, as well as derivatives.

The FERC in November revoked a JPMorgan energy-trading unit’s right to trade power for six months after accusing the firm of providing misleading information to regulators. The suspension, which took effect in April, marked the first such sanction for an active market participant.

The FERC staff said in today’s allegations, announced by e-mail, that the bank’s energy-trading unit was involved in five market-gaming strategies in California from September 2010 to June 2011. The company engaged in three gaming strategies in the Midwest from October 2010 to May 2011, the staff said.

Bidding Practices

Investigators have suspected that bidding practices by JPMorgan traders improperly got grid operators to overpay for electricity from power plants the bank controls, Thomas Olson, a FERC attorney in the agency’s enforcement office, said in a July 2012 filing with the U.S. District Court for the District of Columbia.

In wholesale electricity markets, buyers and sellers negotiate prices based on supply and demand. There are costs associated with making a bid to provide power, including fuel and starting up the generator, according to Steven Greenlee, a spokesman for the California Independent System Operator, the state’s grid operator. If a sale of electricity doesn’t yield enough revenue for the generator to recover its startup costs, the grid operator will issue the company a “make whole” payment, he said in an e-mail.

Grid Operator

After examining JPMorgan’s bidding practices, FERC staff told JPMorgan in March that it appeared the company’s traders may have violated agency and grid-operator rules, the company said in a May regulatory filing. It also said the regulator’s staff intended to bring an enforcement case against the trading unit and that its personnel and two subsidiaries may face claims stemming from a probe into bidding practices.

Since 2011, the FERC has revealed at least 13 probes of energy-market gaming, including investigations of trading units at Deutsche Bank AG, Barclays Plc (BARC) and JPMorgan.

“There are big profits that are made in these markets,” Susan Court, a former director of the agency’s enforcement office, said in a July 18 phone interview. “FERC’s mandate is to make sure those markets are not defrauded.”

FERC Chairman Jon Wellinghoff has stepped up scrutiny of corporations as the agency wields policing powers that were expanded in the wake of Enron Corp.’s 2001 collapse. The regulator on July 16 ordered Barclays and four of the company’s former traders to pay a combined $487.9 million in fines and penalties for engaging in what the agency said was a scheme to manipulate energy markets in the Western U.S. from 2006 and 2008.

Other Cases

Deutsche Bank agreed on Jan. 22 to pay $1.6 million to resolve FERC claims that an energy-trading unit manipulated markets in 2010. The Frankfurt-based bank didn’t admit or deny wrongdoing.

In the Barclays case, the FERC levied $453 million in civil penalties against London-based banks and four its ex-traders. It also directed the lender to give up $34.9 million in profits. The bank has vowed to fight the penalties.

The FERC accused one former Barclays employee, Scott Connelly, of heading a market-gaming scheme, fining him $15 million. It fined three other former traders $1 million each.

“FERC appears to be willing to fine individual traders in some of these larger enforcement cases,” said Carrie Allen, an energy attorney with Akin Gump Strauss Hauer & Feld LLP. “It’s a pretty standard prosecutorial tactic that FERC is embracing.”

The agency fined ex-Amaranth Advisors LLC trader Brian Hunter $30 million in 2011, ruling he manipulated the price of contracts on the New York Mercantile Exchange in 2006 while boosting the value of financial derivatives. A U.S. Court of Appeals ruled in March that FERC lacked the jurisdiction for the fine.

Public Citizen

“I do not see a positive role in the way that these banks are operating in these markets,” Tyson Slocum, director of the energy program at Public Citizen, a Washington-based consumer-advocacy group, said in a phone interview. “I don’t understand the value added to reliability, to efficiency.”

The FERC should use its authority under the Federal Power Act to ensure that utility customers are refunded for market violations, he said.

The FERC in March 2012 reached a then-record $245 million settlement with Constellation Energy Group Inc. over alleged energy trading violations in New York. Constellation didn’t admit any wrongdoing.

Via Bloomberg