Thursday, December 20, 2012

RICL and Non-Confidential Potential Profits

OK I was bored tonight and went to the American Wind Energy Associations website.  I found myself reading their webpage about powerlines.  (I don't like to say transmission.  That’s a dirt RICL word.)  This was making me made as I still oppose Rock Island Clean Line, ICC Docket # 12-0560.

That page got me thinking, and yes, people say I think too much.   Anyway, the wheels started turning.  I didn’t know where the wheel would take me, but the wheels were definitely turning.

After the reading AWEA powerline page, the Jimmy Glotfelty’s great quote in bold print on every page of this blog started running through my head.

“It’s their land and their choice to make revenue”

Next, the fact RICL won’t show us their balance sheet bothering.   It is a bit silly of RICL to hide it.  We know they have no physical assets and the cash side is flush enough to get a venture capital project to pay the labor and permitting.  RICL won’t show us their income statement even though they don’t produce anything.  This seems rather silly for RICL to keep this confidential.  We know they are not producing anything or adding value.  We know the income side of the balance sheet is a bunch of zeros. 

Shall we remind RICL what they ensured FERC?   Yeah.  They need a reminder!
Rock Island also commits to: (1) offer the same rates, terms, and conditions that are offered to anchor customers to all open season participants; (2) ensure transparency in the open season process; and (3) report the results of the open season to the Commission.

If RICL is willing to offer the same rate and terms and conditions to all, ensure "transparency" in the open season,  and report the results to FERC, then why does RICL keep this information "confidential" and away from the consumers and residents of Illinois?
What is more troubling is RICL won’t say how much this electricity will cost us.  This one really has had me wondering.  If they wanted to be a public utility in Illinois, why won’t they tell us how much the electricity is going to cost?  Why does Michael Skelly refuse to provide any transparency?

All actual, forcasted, and potential numbers are considered “confidential & proprietary” by RICL.  They are trying really really hard not to let the public know costs and potential profits to this powerline.

Why?  Does RICL actually think they can become a public utility without providing their actual facts and actual estimations?

It is weird how RICL tries very hard not to say any specific numbers anymore, but they have given us enough numbers to do the math.

Now here is the fun part. 

Enough is known about the Clean Line Energy Partners and there business model to do the math ourselves and like Jimmy Glotfelty said about windmills on National Review Online “It’s their land and their choice to make revenue”.   None of these numbers have come from "confidential" papers submitted to the ICC, but rather pieces here and there RICL has supplied to the public.  So let’s started doing some math and see where it leads.

The powerline is rated at 3,500 megawatts per hour.  RICL desires to run it to the maximum rated capacity.  Coal, nuclear, wind, or monkeys generating energy on a bicycle, RICL will put whatever it can on this powerline that creates energy.  RICL also claims it will host 4,000 MWh’s.  So they are providing a fudge factor to reach the 3,500 megawatts per hour.

24 hours in a day.  There shouldn’t be no disputing that number.

365 days in a year.  I am not too smart, but I think I have this number right.

Muliply 3,500 megawatts/ hour times 24 hours in a day times 356 days in a year.

This comes out to 30,000,000 MWh’s in a year.  Interestingly,  RICL’s Exhibit 10.13 to the ICC says the will only provide 15,000,000 MWh’s in a year!   Strange David Berry is only projecting the powerline to run at 50% capacity. It’s been said windmills are about 40% efficient.   42.9% of 4,000MWh’s is about 15,000,000 annual MWh’s.  Maybe this math is wrong to reach 30,000,000MWh's.  So…which number to use….well RICL says they will be 3 times larger than the Hoover Dam.   The Dam  produces 4 billion MWh’s of electricity per year.  So let’s go with David Berry’s number of 15,000,000 MWh’s per year.

$2,000,000,000 is the known estimated cost of this project.

$25/MWh could be RICL’s transportation charge.   RICL’s  has to Iowa they could charge $20/MWh,   RICL has also indicated in a powerpoint presentation they could charge as much as $25 per megawatt hour to truck is energy from Spenser, Iowa to Channahon, Illinois.    

So, let’s do the math.   At 15 million megawatt hours per year , the total potential annual gross income is $375,000,000.

After this powerline is built, how much actual costs are there to operating a powerline?   It’s a powerline.  It runs itself.  (At least that’s what the wind energy people say about wind turbines…The energy is free.)  The costs would largely be administrative and sales to fill the powerline.  Yes, there will be fluff expenses with ZAM, ZIF, Rock Island Wind, Clean Line Energy Partners and Clean Line Investments, Clean Line Investors… and such.  Still, let’s figure $35 million to cover labor and costs.

The potential profits for this powerline are ridiculously obscene under this scenario. 

This is where Jimmy Glotfelty’s quote comes back into the picture.  “It’s their land and their choice to make”.  Yes, Jimmy was talking about the windmills, and this is the powerline for the windmills.   A similar model should apply to the landowners this powerline transverses. 

Wouldn’t it make sense for RICL to treat the landowners this powerline as the stakeholders they are rather than attempt to steal their land through eminent domain?

If RICL paid $5/MWh to the stakeholders of this powerline running at the allocated 42.9% capacity, it would be an annual royalty of about $75,000,000. 

The Right of Way royalty would be divided among landowners for the 12,000 acres of right of way. 

The annual royalty would be about $6,250.00/acre for a powerline at 42.9% capacity. 

An 80 acre field ( 80 rods by 160 rods) would have 6 acres of 200 foot right of way. 

$37,878.79 would be the annual royalty to the landowner of an 80 acre field the powerline crosses.

In 10 years that royalty for allowing a powerline being built across the field could be as high as $378,787 at $5 per megawatt.

Under this scenario but with RICL purchasing the ROW outright, their payback is about 6 years.

It is understandable why RICL wants to keep the costs and pricing top secret.  Their profits are potentially obscene and the value of this powerline will be far more than 2 billion when the venture capital companies sell it.   After completion of this potential project, the value of the right of way alone is worth 2 billion dollars.  RICL’s is attempting to steal the right of way for 12,000 acres at 100 million.  

Is $500,000,000 even a fair outright purchase of this ROW considering the profits RICL could be making over the next 40 years.  Are they even running this powerline at 100% capacity?

Looks to me what RICL wants to keep confidential is its potential profits.  RICL doesn’t want the landowners to learn how much their land is valued for this privately owned project. 

It would be advisable for RICL to be careful and more transparent.  Personal greed and refusing to share with the true stakeholders of this project could cause the ICC to reject their application to become a public utility. 

Regardless what Clean Line pays for the Right of Way, the consumer is the one who loses. 

RICL, how much is this electricity really going to cost Illinois consumers? 

“It’s their land and their choice to make revenue.”

1 comment:

  1. Now I just can't stop wondering... does Jimmy have a bicycle? Pedal, Jimmy, pedal!