Sunday, February 22, 2015

Jimmy Glotfetly Does Ken Lay

"Mr. Lay offered fantastic advice for us on how we open markets," recalled Jimmy Glotfelty, a onetime policy aide to then-Gov. Bush.

Oh Jimmy, Jimmy, Jimmy.  What kind of advice could Ken Lay possibly have about opening up markets?  Just speculating here, was Ken Lay’s advice was first to repeal the Public Utilities Company Holding Act and allow speculation capital from New York City to enter the transmission business, like Jimmy was pushing legislatures before the 2005 Energy Policy Act.  Maybe Key Lay suggested there needs to be more avenues for speculators to enter the energy markets, like Merchant Transmission Lines.  Perhaps Ken Lay was telling Jimmy how merchant transmission lines can provide more “liquidity” and “opportunities” for arbitrage in the energy markets. 

It just makes one wonder what Jimmy Glotfelty learned back in Dick Cheney’s double super top secret energy meetings. 

Here’s another interesting quote from Jimmy Glotfelty at The Daily Signal blog by the Heritage Foundation.

Secondly, the PTC actually reduces the cost of energy paid for by consumers…under the industry norm, a 20 year Purchase Power Agreement with the PTC reduces the actual cost paid for by the load serving entity..this is good for the consumer…and as Alabama Power found.."wind from the plains states puts downward pressure on retail rates" cite: alabama power rate case

Isn’t that part of Exelon’s argument is in Illinois?  Wind farms produce too much unneeded energy in the region and injects it into the grid in Illinois.  About one third of Northern Illinois’ wind energy is technically purchased by the Tennessee Valley Authority.  The abundance of energy is generated in Illinois and the wind energy is purchased outside the region. 

In the meantime Exelon and baseload energy suffers with lower prices in Illinois from the excessive supply.  Like Jimmy says, “a 20 year Purchase Power Agreement with the PTC reduces the actual cost paid for by the load serving entity”.   So, we, as a society, pay more for wind energy from the government subsidy and their side contracts, but that is supposed to be acceptable because we pay less for the baseload.  

What happens when the baseload says screw it and shuts down the unprofitable plants?

Unfortunately, Exelon is now asking “why are we supplying this energy at a loss”.  No electricity generator is in the benevolence business.  Sure there is good will, but no one runs a nuclear plant at a loss for the goodness of society.   Their purpose is not to make electricity.  Like any other company, electric generators’ purpose is to make money.  The concept of a deregulated market would have worked but for Governor Quinn, the Illinois Power Agency, and other bureaucrats making these side deals with wind corporations.   At what point does this become predatory pricing?

Finally, a good economist can find an economic reason to blast any resource in this day and age. We need begin a chorus that supports all domestic energy resources as s system to lower the costs of energy for all Americans.

What kind of argument is that when basic common sense beyond an infatuation for “clean” energy understands Plains & Eastern Clean Line or any other of the company’s projects are a bad deal.  You don’t need an MBA from Harvard and a political science major to hide all the red flags with Clean Line Energy Partners LLC. 

Thursday, February 19, 2015

Jimmy Glotfeltys Dream of Ziffs & Investment Captial in Transmission

It's a pleasant surprise to have federal legislatures who listen to their residents, see the problem, and have the innovation to find solutions.  Arkansas legislatures are a breath of fresh air. They listen to their residents and respond! Arkansas Senators Boozman and Cotton has introduced a bill called the Assuring Private Property Rights Over Vast Access to Lands (APPROVAL) Act that would castrate Section 1222 of the 2005 Energy Policy Act.   The proposed bill would require the federal government to obtain approval of effected states' governors and utility boards before exercising Sec 1222 (potential federal eminent domain). Affected tribal governments would also have to approve such transmission projects.

It's a smart bill.   With Plains & Eastern Clean Line being the first attempt of Sec 1222 of the 2005 Energy Policy Act, there are and this law as it stands will largely be stuck down as unconstitutional by the courts.  While APPROVAL ACT is a good bill and deserving of becoming law, perhaps it is time to end this experiment with allowing "investment bankers" fund speculation projects in transmission.  

Back in 2004 while Jimmy Glotfelty was working for the Bush Administration, he testified before a Senate Committee about the 2003 blackout.   As a Department of Labor bureaucrat, he went out of his was to make an interesting assertion.

"I just got back from spending from spending two days in New York City meeting with investment bankers ... and time and time again we heard that repeal of PUHCA was necessary for more investment in the transmission sector."

There is a place for venture capital (investment bankers) in America but not in the transmission industry.

Venture Capital in the oil industry can promote ingenuity and lower energy prices (if the investors don't "Pump & Dump" the project).  Unfortunately, the purpose of venture capital in transmission is too promote a political agenda in wind energy laden with subsidies that discourages innovation. Electricity prices are not going to decline because New York City "investment bankers" speculate in transmission.

What Jimmy failed to state in his Senate testimony is the transmission industry does not NEED investment capital.  The transmission industry already has mechanisms in place.   If FERC does its job properly, new investments are allowed and encouraged through cost allocation and some very generous guaranteed returns on investments.  

Since the FDR Administration, the risk of speculation by investment capital has been discouraged to keep ratepayers costs low and managed.   Yes, the current system has problems, such as FERC Commissioner Phillip Moeller believing his job is to promote the President's political agenda over consumer's best interests, but we, as a society, do not NEED speculators to bypassing the Regional Transmission Organization's planning process.

Michael Zilkauch (sp?) was very successful in wildcat oil in the 80's using unconventional sonar technology.  Oil production increased and fuel prices declined.  This is the ideal industry for investment bankers, like Ziff and Zilkauch.  If the Ziffs' stick with Athabasca and Canadian oil sands and not raiding the company, there is tremendous potential, but the transmission industry was never meant for speculators.  We, as a society, recognized the risk and didn't need the risk.

If the grid is as antiquated as some suggest, then let's have a discussion with state & federal legislatures, regulators, Transmission Organizations, and ratepayers. We, as a society, should not be having Department of Energy backroom deals like Plains & Eastern Clean Line that bypasses Regional Transmission Organization's with no concern for the interests of consumers, and steamrolls over landowners.

This isn't about promoting wind. America's energy demand economic model has changed, not through government mandates, but innovation.  No one’s lights are going out without HVDC transmission and wind energy from the Midwest.    Skelly would have us believe all the "low hanging fruits" are gone and we, as a society, need to make some hard decisions on where to site new transmission.   Actually, the "low hanging fruit" is steamrolling new transmission by venture capital.  Finding innovative solutions with the modern demand curve  that are more economical and less intrusive is the challenge and opportunities.

This is about keeping electricity economically priced, reliable, and secure.