Author: Michael Giberson

Michael Giberson

Ticket scalping, like price gouging, is a usually pro-social market activity that is stuck with a pejorative name.  At Swifter, Higher, sportswriter Kyle Whelliston writes about his experience picking up a cheap ticket into the first hockey game of the Vancouver Olympics.  It wasn’t as easy as he hoped, but at a cost of missing the first few minutes of action he was able to get a price he liked.

What surprised me in the article was how well organized the gray-market activity was. I wonder whether the Olympics would increase or decrease overall ticket revenue by facilitating an active secondary market (assuming a secondary market was legal in the host country).

(Via Freakonomics blog.)

Michael Giberson

If you are already a rock star and can’t imagine doing anything else, then “money for nothing and your chicks for free” may be a reasonable characterization of your situation.  On the other hand, if you’re a teenage boy picking up a guitar and hoping to attain wealth and women, you should consider the start-up costs involved.  Some discussions of “vehicle-to-grid” (V2G) revenue potential seem a bit like the “money for nothing and your chicks for free” kind of analysis.

Consider the Financial Times article, “Grids to Harness Power of Electric Cars,” a story that builds on recent V2G presentations at the American Association for the Advancement of Science meetings in San Diego.

The first experimental V2G system has just gone live at the University of Delaware, where three electric cars are connected to the grid whenever they are not being driven. “They are making five to ten dollars a day just by being plugged in,” said Kenneth Huber, technology manager for the PJM grid, which covers the mid-Atlantic states.

The two-way connection not only pulls in power to recharge the battery but also sends electricity back to the grid. V2G vehicles work like an electrical sponge, absorbing excess energy when demand for power is low, and returning some to the grid when demand is high, said Willett Kempton, project leader at the University of Delaware.

…  Prof Kempton says his project suggests that an investment in V2G technology could pay off very fast for an electric car owner. Once the technology is commercialised, the additional costs of fitting a V2G-enabled battery and charging system would be about $1,500 – and the owner could make $3,000 a year through a load-balancing contract with the grid.

V2G is economically viable because electric car owners are buying batteries anyway, so it makes sense to use them for communal energy storage. It would be much more costly for electric grids to install stationary battery banks or other storage systems dedicated to load balancing.

It is dangerous to leap to conclusions based on a newspaper summary of research, but the characterization above suggests that a few assumptions may be key.  The assumption that “electric car owners are buying batteries anyway” may mean that the V2G analysis treats the battery as a free resource, and so compares V2G revenue estimates just to the incremental costs of V2G capability and operations.

I suppose it is a perfectly reasonable assumption for anyone who is going to buy an electric car anyway, and then is considering adding V2G capability. If, on the other hand, the intention is to advocate V2G revenue possibilities as an inducement to buy the electric car in the first place, a more inclusive analysis seems reasonable.

(For more on Dire Straits, “Money for nothing”: YouTube, Songfacts.)

Michael Giberson

From the Fredericksburg, VA, Free Lance-Star, “GAS-TAX PINCH OR GOUGING?“:

Spotsylvania County Supervisor Hap Connors threatened yesterday to file price-gouging complaints because of a lobbying association’s campaign that blames a Virginia Railway Express tax for increased gas prices.

The county became a member of the commuter rail service Monday and enacted a 2.1 percent tax on wholesale gasoline required for VRE membership. The tax is expected to generate more than $3 million annually.

… The Virginia Petroleum, Convenience and Grocery Association represents 650 retail members operating more than 4,500 convenience and grocery stores with gas pumps across Virginia.

Association spokesman Michael O’Connor said the group made laminated signs for Spotsylvania members that warn county residents they will pay 5 cents more a gallon because of the tax.

“Either the gasoline retailer will have to eat that 5 cents or it is going to be passed on to the consumer,” O’Connor said.

Supervisor Connors sent O’Connor an e-mail yesterday warning that he would file price-gouging complaints if O’Connor did not remove the signs.

Michael Giberson

The documentary film Haynesville offers a view of the shale gas boom from the point of view of several landowners in northeastern Louisiana. One of the landowners is a sort of good-ol’-boy type who hung onto family land and added to it even as family members moved away. His 300 or so acres of backwoods land made him a multi-millionaire when the gas developers came to town. Another part of the story shows the impact of the gas money on a growing church congregation; the preacher wants to build a new Christian school with the money. The film also follows the activities of a mother who gathers small landowners into a large block to negotiate with the gas companies for both higher payments and contractual protection for water quality and other environmental values.

Intertwined in these stories are some talking-head interviews with energy, environmental, and policy experts. I found these parts of the film mildly intrusive – but that’s probably because I already spend too much of my life reading about energy resource policy issues; likely most viewers will find the contextual information helpful. The film should be required viewing for landowners sitting over shale gas resources, especially in areas not used to oil and gas development.

The documentary is making the rounds. A showing is coming up in Houston on March 4, and the film will be part of the SXSW festival in Austin in a few weeks. If you’re interested in more information on the film, check out the website or become a fan of Haynesville on Facebook.

One of the natural gas companies doing a lot of the development of the Haynesville shale resource is Chesapeake. See, for example, their “February 2010 Investor
Presentation,” which details their interests and optimism about their work in Haynesville and elsewhere. This three-page document explains Chesapeake’s hydraulic fracturing process, including a description of the (very small amount of) chemical additives that get injected along with a lot of water and sand as part of the fracing. The summary is produced by Chesapeake, so maybe it minimized the possible risks, but the environmental risks do appear to be small. Some information on the topic is included in the Wikipedia article on hydraulic fracturing.

Meanwhile, the new conventional view that shale gas will ensure plenty of domestic natural gas for the United States for the next 100 years remains under criticism from skeptics who believe the resources are significantly over-estimated. Allen Brooks, at Musings from the Oil Patch, provides a review of some recent analysis from skeptics. As I’ve said before, it seems obvious to me that the people in the best position to know – the folks doing the drilling and producing from shale formations – have clearly signaled what they think is true by spending huge amounts of money to secure leases and develop additional properties. Nonetheless, production of vast quantities of gas from shale remains a relatively new commercial activity, so a certain amount of unavoidable uncertainty remains.

Michael Giberson

Paul Kedrosky gave a short talk at TED 2010 on the Simon/Ehrlich bet on commodities prices, and posts a summary of the content as “Re-litigating the Simon/Ehrlich Bet.” If the Simon-Ehrlich bet is to be re-litigated, and Kedrosky comment is taken as offering a brief in favor of Ehrlich’s position, what can be said in defense of the Simon position?  Alex Tabarrok responds that Kedrosky’s argument misses the whole point.

Here is Kedrosky in excerpt:

By way of refresher, the situation was this: After a decade of soaring commodity prices, plus related worries about resource scarcity, in 1980, Paul Ehrlich, a dour population ecologist, took up Julian Simon, a cornucopian economist, on a bet. Ehrlich (on paper) put equal mounts of money into five commodities (he selected chromium, copper, nickel, tin and tungsten) whose prices would, he thought, be higher a decade later. Higher prices meant Ehrlich won; lower prices meant Simon won. The loser paid the winner the difference.

Ehrlich lost. A decade later, in 1990, all five commodities’ prices were lower than they were in 1980.

Kedrosky reexamines the data to see how frequently a 10-year bet on the selected commodities prices would have produced a win for either Simon or Ehrlich.  From 1980 to 1993, Simon would have won but for two years, then beginning in 1994, largely due to the run up in commodities prices that lasted from 2004 to 2009, Ehrlich would have won subsequent bets.  Kedrosky sums up:

So, what does all this mean? A few things. First, and most importantly, it means Simon was right but fairly lucky. There is nothing wrong with being lucky, of course, but compulsive Simon/Ehrlich-citers need to be reminded that it is no law of nature (let alone of rickety old economics) that commodity prices (inflation-adjusted or otherwise) trend inexorably downward, even over a decade.

Kedrosky then offers a discussion of short term price gyrations in oil markets and effects on the United States, suggesting  that “the market” will “break the largest and most elastic buyer’s back”, either “smoothly or through ugly societal and economic disruption.”  The metaphor got a little twisted there – is it possible to smoothly break someone’s back? Is it possible to break an elastic buyer’s back? – and so I get a little lost.

Essentially Kedrosky suggests that as oil becomes more scarce, prices will become higher and more volatile for a while, and then there will be a transition to lower priced oil (after substitutes emerge), and that transition will be either smooth or ugly.  This is hardly revolutionary analysis.  In fact, except for slight differences in tone, the message here is fairly consistent with the claims made in CERA’s “undulating plateau” analysis.  CERA seems to expect a smooth transition, a conclusion based on how markets usually respond to increasing resource scarcity.

Alex Tabarrok points out, however, the Kedrosky seems to be missing the key point of the Simon-Ehrlich dispute, which was fundamentally about scarcity, not prices:

The bet was never fundamentally about prices, the bet was about scarcity, living standards and whether we were running out of natural resources–remember that at the time Ehrlich was predicting hundreds of millions would die of starvation and even that England would not exist in the year 2000!  Prices were just a convenient but imperfect way to mark the bet to market.The reason prices have risen in the 1990s is not that things are getting worse but that things are getting better–especially in China and India where things have been getting much better.  As China and India have become richer demand has increased tremendously in these countries putting upward pressure on prices.  In other words, prices have risen because the value of resources has risen.  That’s quite different–indeed the opposite–of what Ehrlich was predicting. [Emphasis added.]

Michael Giberson

Some of the most common questions about wind power revolve around the role of energy storage in integrating wind power with the electric grid.

So begins a position piece, “Wind Power and Energy Storage,” issued by the American Wind Energy Association. And just as there are common questions, there are common answers. Just about everyone who has thought about it has concluded that a little bit of energy storage would go a long way in improving the value of the variable electric power produced by the wind. At least as long ago as 1909 an engineer writing in The Times of London observed that the usefulness of wind energy was enhanced by power storage.

So you might think the AWEA’s article on “Wind Power and Energy Storage” reports that the technologies are best friends forever? Not so. The next few sentences:

The reality is that, while several small-scale energy storage demonstration projects have been conducted, the U.S. was able to add over 8,500 MW of wind power to the grid in 2008 without adding any commercial-scale energy storage. Similarly, European countries like Denmark, Spain, Ireland, and Germany have successfully integrated very large amounts of wind energy without having to install new energy storage resources. In the U.S., numerous peer-reviewed studies have concluded that wind energy can provide 20% or more of our electricity without any need for energy storage.

The article explains that the existing flexibility of resources connected to the electric grid provides sufficient capability to accommodate significant amounts of variable wind power output without requiring new energy storage systems.  The AWEA acknowledges that energy storage would be “helpful,” but also that “many types of energy storage are poorly suited to help accommodate … wind energy” and that it is “often not cost-effective.”  Elsewhere, AWEA refers to the “storage bogeyman” and says it is a myth that wind power needs energy storage.

So it may not be too surprising that energy storage supporters feel a certain animosity toward the AWEA, even if they see their energy storage and wind power technologies as natural complements.

Michael Giberson

Robert Rapier at R-Squared Energy Blog looks into recent claims by DARPA to soon have oil from algae at a cost of $2/gallon. His bottom line: “I suspect that in a couple of years we will be doing the post-mortem on this one when we find that there is no $2 algal oil to be found anywhere.”

Michael Giberson

From time to time you see reports of electric utility executives or analysts worried about a forthcoming avalanche of electric vehicles (EVs) that will, just maybe, overwhelm utility distribution systems. What happens if everyone comes home from work and plugs in at the same time?  What happens if drivers want to recharge on-peak rather than off-peak?  I’m omitting links because I’m reacting to the general attitude and not a specific analysis, but a recent sample comment was the stern declaration: “EVs need to avoid charging during peak hours.”

Nonsense.

When car batteries become sufficiently advanced that lots of people actually buy and drive an electric car, then electric-utility scale batteries will also be more advanced.  It is, or at least can be, the same technology.  Utility applications actually have more choices, the batteries don’t have to be lightweight, so improvements in battery technology are likely to become widespread within the power industry before they become widespread in vehicle applications.

The supply side of the industry will readily handle the changes in load presented by growth of the electric vehicle market.

Michael Giberson

Via David Henderson at EconLog, about buying locally.

Michael Giberson

The Wall Street Journal reports on research analyzing quarterly reports (nearly 1/2 a million of them from over a 27-year period) which discovered strong circumstantial evidence that companies tweak their results to improve reported earnings.  The evidence? The number 4 occurs less frequently than chance would dictate in the tenths of a cent digit for quarterly earnings.  Pushing an initially calculated 0.4 cent result just a little will get it to 0.5 cent, and 0.5 cent can be rounded up to the nearest whole cent, which can make the difference between making or just missing a quarterly target.

The study, conducted by folks at Stanford, also found that that companies that later restate quarterly earnings or become charged with accounting violations report far fewer 0.4 cent results on average, compared to other firms.

The article quotes one of the study’s author, Stanford law professor Joseph Grundfest, as suggesting the pattern may be “a leading indicator of a company that’s going to have an accounting issue.” Maybe so. But now that this study has been publicized, it suggests a way to fake a signal of quality: just fudge them up to a 0.4 cent end. Be suspicious of a company that hasn’t had a 0.4 earnings result for the last ten years if they start reporting 0.4 cent results all of the time.

Michael Giberson

Cellulosic ethanol is purportedly the future of biofuels, at least if you listen to ethanol’s supporters.  While the topic of cellulosic ethanol is a subject of some interesting research, digging around the internet for information mostly turns up flag-waving lobbyists seeking more help from the federal government.

In a recent news release, ethanol producer POET Energy announced that the director of it’s Project LIBERTY would be giving a project status update on the planned cellulosic ethanol plant at a pair of Iowa-based events. (Project LIBERTY has its own website which talks a lot about energy dependence and independence and includes a lot of stars and stripes, red-white-and-blue imagery.)

The news release included a link to “a documentary about POET’s pilot cellulosic ethanol plant“, which I thought might be interesting.  As it turns out it was interesting, though more for what it revealed about the reliability of its content than for what it said about ethanol.

About one-third of the way through the POET video, in the context of discussing criticism of ethanol policies and specifically when discussing the effect of grain ethanol on food prices, it said, “Many claimed the diversion of corn to make fuel drove up food costs, a myth later disproved by independent economists.”

As the narrator read the bolded phrase, the video flashed an image that looked like a newspaper column.  It went by so fast the first time I couldn’t read more than the first few words of the headline: “Big Food’s Smear Campaign….”

Curious who these independent economists were, I stopped the video and scrolled back to the image (at about the 3:41 minute mark).  The full headline said, “Big Food’s Smear Campaign Exposed by New Group of Ethanol Producers.”  The subhead said, “Growth Energy formed to promote clean, green, high-tech, homegrown biofuels.”  Turns out the column was just a Growth Energy news release.

Growth Energy also has a website, which sports more flag-waving imagery, and describes the group in more detail.  Is this group the source of the purported “independent economists”?  The Washington, D.C., based group was, as advertised, formed and funded by the subsidized ethanol industry.  I don’t think “independent” means what POET thinks it means.

For a little more insight into how ethanol is grown in Washington, D.C., and perhaps insight into the current administration’s commitment to science-based public policy, read Timothy Carney’s column in the Washington Examiner: “Obama EPA’s ’science’ pleases powerful ethanol lobby.”

Growth Energy has a video, too.  It begins with a flag, fades to a baseball stadium, and soon enough the Statue of Liberty.  If I would have stuck with it a little longer I’m sure I would have got a picture of apple pie, Mom, and probably a boy scout or ten marching in a Fourth of July parade somewhere in America’s heartland.  But I had had enough.

Flag-waving by lobbyists in pursuit of government-granted privileges always turns my stomach.

Michael Giberson

It’s the anniversary of the birth of Charles Darwin, which means it is Darwin Day!

Darwin Day is a recently instituted celebration intended to commemorate the anniversary of the birth of Charles Darwinon February 12, 1809. The day is used to highlight Darwin’s contribution to science and to promote science in general. Some may believe that Darwin Day also commemorates the passing of those who earned the Darwin Award.

It is also the 201st anniversary of the birth of Abraham Lincoln, but Abe was a politician, and more recent politicians have deemed it reasonable to officially recognize him and other presidents with a federal holiday later in the month. No more need be said here today.

So celebrate by testing a hypothesis, doing an experiment, or collecting some careful observations. In other words: Go do some science!

And cake. Have some cake, too.

Michael Giberson

The headlines about fraud in Europe’s carbon credit trading system (2010: “Fraud Besets E.U. Carbon Trade System,” 2009: “Europol: $7.4 Billion Lost from Carbon Trading Fraud in Europe“) seem to confirm what some critics of carbon credit trading have been saying all along (2007: “Carbon Trading Open Invitation To Fraud,” 2007: “The greenhouse gas emission trading scam“).  Are these news stories proof that the critics are right? Are carbon credit markets inherently susceptible to fraud?

Victor Flatt, at Flatt Out Environment, says no, these stories are just show the growing pains associated with a new market.

The fraud perpetrated on the EU exchange was basic garden variety thievery.  Criminals got access to an asset (carbon credits) and stole them. This could (and has) happened with many assets, and is a risk of electronic records and trading. … The one way that this can be attributed as uniquely related to the carbon market is that the entire trading system is new, and new systems present more opportunities for thievery, rent-seeking, and fraud. It seems clear that the security protocols on some of the EU country registries were not sufficiently strong or that market participants were not educated enough about the protocols of the exchanges to protect their security information from “phishing.” Luckily, the amounts in play were relatively small, they were quickly discovered, and this will provide lessons for future security upgrades.

So far the RGGI trading in carbon credit appears to be fraud free.  At least my searching through news reports and the market monitor’s statements doesn’t turn up any fraud complaints.

Market manipulation can be achieved without fraud, and whether or not the European market is susceptible to manipulation is not revealed by the above complaints.  Again, so far at least, the RGGI markets have not shown evidence of market manipulation.  (The RGGI design team did go to some lengths to design a market that would be difficult to manipulate.)

Of course, since these trading markets are essentially created by legislative action, they could be revised by legislative action.  The temptation to jump in and “fix” the market will rise any time enough legislators think that the prevailing carbon credit price is too high or too low.  Existing pollution credit trading programs in the U.S. have escaped such meddling mostly by being too small to be of much interest.  Also, they seemed to work so well that few people wanted to mess with them.  Carbon credit trading won’t be “too small to be of much interest,” so its best protection from after-the-fact legislative meddling will be to work so well than few people will want to mess with it.

That and, of course, continuing public support for the underlying science of climate change that is motivating efforts to control greenhouse gas emissions in the first place.

Michael Giberson

No doubt that since Elinor Ostrom won a Nobel Prize last year for, among other things, her work on decentralized approaches to common pool resource issues, a small legion of social science graduate students are looking for new cases of non-governmental management of common pool resources.

Here is an example supplied by Fred McChesney: on-street parking spaces dug out from the snow in Chicago.

Alex Taborrak notes the Washington Post reports that in Boston the city has codified a similar practice: if you dig yourself a parking spot in the snow, a lawn chair or trash can will render the space yours for up to two days.

Perhaps a comparison to reclaimed-from-the-snow parking space management practices in the Washington, D.C., area would be possible.  Given the amount of snow that has fallen in the capital area, you probably have a few weeks to collect the necessary comparative data.

ADDED: Pittsburgh offers another variant of  law and practice:

“Chairs and barriers of any type holding parking spaces on city streets are considered abandoned property and will be removed and discarded,” Pittsburgh Police spokeswoman Diane Richard told Channel 4 Action News in an e-mail.

See also the discussion by Pitt Law professor Mike Madison. HT for both links to Freakonomics.

So Chicago has an informal practice guided by custom and tolerated by the city; Boston has the practice codified into city ordinance; Pittsburgh has an informal practice which is actively opposed by the city; and Washington DC doesn’t get serious snow often enough to have a well developed custom.  Lots of angles to study.

What about Minneapolis and Milwaukee?  What about Seattle or Denver?  Any more reports?

STILL MORE: Via Market Design, where Al Roth dubs the practice “anti-social,” a Boston Globe story on claiming parking spots before the snow begins to fall, “Claiming a spot before shoveling? That’s not Southie.”

Michael Giberson

For a number of years, state law in California has permitted cities or counties to arrange to become the electric power service provider for their areas – an arrangement where they would be responsible for acquiring the electric energy needed for consumers in their areas while the local utility would continue to operate the transmission and distribution.  (Consumer in the affected areas are allowed to opt-out, and stay with the private utility.) Only in the past few years have a few local government taken the “community choice aggregator”  idea seriously, and so only recently have the state’s privately-owned utilities worried much about the prospect of losing customer base.

San Francisco-based PG&E has initiated an effort to change the law so that local governments would need a two-thirds majority favorable vote from citizens in their communities in order to become a community choice aggregator.  Advocates of the local government-centered efforts worry that a two-thirds requirement will be insurmountable.  Details of the story are available at the Mercury News.  The state’s Legislative Analyst’s Office supplies a description.

Hat Tip for the link goes to Tom Fowler, NewsWatch: Energy, but he misleadingly styles the story as “California utilities spending big to block electric competition.”  For one, just a single utility – PG&E – seems to be involved. The state’s other investor-owned utilities appear not to be participating in the effort.  And the effort isn’t so much an attempt to “block electric competition” as it is an attempt by one monopolist to block other potential monopolists from horning in on its action.

Of course there has long been competition between private utilities and municipalities in the electric industry. According to Forrest McDonald’s biography of Samuel Insull, one reason Insull became an advocate of state-regulated private monopoly utilities in the late 1890s was as an effort to avoid municipalization of his companies.  Historically, municipalities were motivated by a hope of lower rates (at least that was usually the story for public consumption).  In the case of at least of few of the local governments exploring becoming an aggregator now, however, the announced motivation is to purchase a larger amount of renewable power, even though it can be more expensive.

As an aside: In parts of Texas with significant amounts of real retail electric competition, consumers can already choose the amount of their power that comes from renewable sources, with multiple companies offering contracts ranging all the way from 0 to 100 percent renewable energy content.

Michael Giberson

Audi said its “Green Police” commercial, shown during the Super Bowl, was meant to be funny.  Turns out that neither the Plastics Division of the American Chemistry Council, nor at least some environmentalists, were amused.  I found the ad annoying – I’m not sure why – but anything that can unite the American Chemistry Council with at least some environmentalists has something going for it, right?  (More on the ad controversy at USA Today.)

The folks at the chemistry council set up a response website, Green Police Confused, pointing out how the extensive use of plastic in the Audi A3 TDI helped the car win the “2010 Green Car of the Year” award at the LA Auto Show.  Now that’s funny.

For your viewing pleasure, first the Audi ad and then a celebration of the plastics in Audi’s “Green Car of the Year”:

HT to Tom Fowler, indispensable at NewsWatch: Energy.

Michael Giberson

First Google PowerMeter, then Google.org invests in renewable power R&D and now a Google entity – Google Energy LLC – files at FERC to become a wholesale power marketer. What’s going on?

At the EU Energy Policy Blog, Fereidoon Sioshansi examines “Power Marketer Google“:

Google has a habit of surprising its competitors. The fast moving company is known for launching into new forays not always knowing where it may end up. In this sense, it is not only the competitors who are trying to read what the company’s latest move may entail.

In early January, Google submitted an application to the Federal Energy Regulatory Commission (FERC) seeking approval to become a power marketer. There are approximately 1,500 entities in the US who have FERC’s blessing to operate as power marketers. Most are utility companies, power generators or pure traders, companies who buy and sell power at wholesale prices and serve as intermediaries between generators and large consumers. Some are large energy-intensive electricity users such as Alcoa and Safeway with hundreds of supermarkets across the country. But why Google?

Google is closed mouthed about its full intentions, only acknowledging that as a power marketer it could “better manage (electricity) supplies for its own operations” and have “greater access to renewable energy resources.” Both are reasonable reasons to seek official power marketing status….

The Google Energy LLC application does go on a bit about selling ancillary services, and the rate schedule submitted identifies a complete list of ancillary service products it wishes to be able to trade in the organized regional markets and with third parties in areas outside of the regional markets.  The seeming focus on ancillary services suggests some interesting possibilities: most of the regional markets provide some ability for large consumers to supply reserve services, for example, and increasing the availability of ancillary services would ease integration of renewable power to the power grid, something Google favors.

But actually the filing is just trying to be exhaustive in its listing of products that it may trade, either because Google doesn’t want to inadvertently reveal strategic plans or because they haven’t yet decided on a specific set of plans and so simply seek flexibility to pursue opportunities as they emerge.  And, in fact, it is fairly common for power marketers to submit relatively general requests for market-based rate authority. (I.e. compare the Google Energy LLC filing linked below to the quite similar filing of Monarch Global Energy, Inc., a generalized electricity services consultant, in ER10-583-001.)

So few clues yet as to Google’s plans and maybe Google hasn’t yet fixed on a plan. But it is an interesting move coming on top of the other energy actions the company has taken.  Competitors, potential trading partners, and electric power market geeks will be watching.

Links to Google Energy LLC’s filings at FERC:

• Application of Google Energy LLC for Market-Based Rate Authority and Granting of Waivers and Blanket Authority, ER10-468, (2009-Dec-23).
• Clarifying amendments to Google Energy LLC’s Application for market based rate authority and granting of waiver and blanket authorizations under ER10-468, (2010-Jan-19).

Michael Giberson

From WTVM-9:

Latrese Brown, a Cusseta [Georgia] resident, gathered a group of people who believe Sumter EMC is ripping them off. “Not only mine but my entire community light bills are outrageous high, they’re more than our mortgages, more than our rent, more than our car note,” complains Brown.

… The citizens of Cusseta went to their county commissioners Tuesday night and asked them to consider bringing in another company.

“You should be able to choose who you’re with, we choose our gas company, we should be able to choose who provides our lights to us because we want to choose our customer service.”

Notice what she said? “We choose our gas company, we should be able to choose who provides our lights …” Georgia is, I think, unique in allowing competitive retail natural gas suppliers to operate. Consumer Latrese Brown has experienced a competitive retail gas market and a regulated monopoly electric utility service, and she concluded she’d like to give competitive retail electricity a try, too.

Greg Crowder, vice president of marketing and administration at Sumter EMC says it’s not Sumter Electric calling the shots. He argues they have not increased rates and that the electric service act decided territories for electric companies.

“It was done to keep from duplicating efforts, two utilities running down the same road to serve the same customer then that’s inefficient,” says Crowder.

Of course Georgia is not overrun with multiple natural gas pipes running down the same road. A single natural gas pipeline company manages the distribution pipeline and provides delivery service.  Separately, about 15 or so competing retail natural gas suppliers offer consumers a variety of fixed-price or variable-price contract offerings and other terms.

It is not too complicated to have a single wire running down the street and yet multiple retailers delivering power over that single wire.

… And, the cause for the high bills is nothing more than the heaters reaction to the extreme temperatures, “the heating load is what caused the high bills, we’ve seen it before.”

The proximate cause of the unexpectedly high bills was the much cooler than normal weather experienced this winter.  Nothing unusual about occasionally experiences unusually cold weather. What seemed noteworthy about the news story was that consumers facing unexpectedly high bills were not demanding regulators take direct action to reduce electric rates.  Rather, they sought protection through competition, just like they already enjoy for retail natural gas prices.

Michael Giberson

I spent the middle of last week in Austin at the University of Texas-Law conference on wind, solar and geothermal energy law, and as a side bonus got to hear some informal, Austin-based commentary on the Tres Amigas proposal to interconnect the Eastern, Western, and Texas electric grids. It will give you some idea of the thinking in the state capital that I heard the term “Dos Amigas” used more than a few times.

During the pre-conference “fundamentals” discussion, in response to a question that asked whether stronger transmission links to other states would help accommodate added growth in Texas wind power, a current member of the Public Utility Commission of Texas arose from the audience, climbed onto the dais, and took the microphone to say, among other things, “ERCOT is just fine the way it is.” The other main point of his comment was to suggest that the Southwest Power Pool, which has long covered the wind resource rich Texas Panhandle (with relatively weak links elsewhere, but a plan to beef up those links), would ably serve to sell the wind resource out of state while not compromising ERCOT’s jurisdictional status with respect to the feds.

Later in the conference a speaker offered a Texas policymaker’s view: ERCOT has its well-regarded CREZ plan to spend $5 billion on transmission enhancements primarily intended to allow wind generation in far west Texas, central west Texas, and the Texas panhandle to be delivered downstate to consumers in the Dallas, Houston, Austin, and San Antonio regions. If those lines link to Tres Amigas, then the prospect arises that consumers elsewhere will – in effect – “drink our milkshake.” Texas policymakers don’t want other consumers to drink our milkshake, especially after ERCOT consumers spend $5 billion to build there own transmission “straw” into the Panhandle region.  (Yeah, I watched “There Will Be Blood” a week or so ago, hence the milkshake and straw references. The presenter did not use this language.)

Peter Behr, writing for ClimateWire, has a more journalistic report on the debate over Tres Amigas. Behr reports that Occidental Petroleum – a large power consumer within the ERCOT region – has actively opposed the Tres Amigas project in filings at FERC, as has the Texas Industrial Energy Consumers. I haven’t read their filings, but apparently they believe ERCOT power prices will be higher on average with Tres Amigas than without, and as consumers they prefer lower prices.

In my opinion, however, they are more likely to get slightly lower (and somewhat less volatile) prices with better links to the rest of the grid.  That’s the way market expansion usually works.

Tres Amigas posts its FERC filings and related documents on its website. Here are links to a couple of the opposing views filed at FERC.  The “Supplemental Protest of Occidental…” includes the expert witness testimony that Behr discusses in his story:

• Comments of the Public Utility Commission of Texas under ER10-396. (2010-Jan-19)
• Supplemental Protest of Occidental Permian, Ltd., Occidental Chemical Corporation and Occidental Power Marketing, L.P. under ER10-396. (2010-Jan-19)

Not all Texas policymakers oppose Tres Amigas. Member of Congress Randy Neugebauer (R-TX) sent FERC a letter indicating the project would encourage investment in renewable power and urging the Commission to give the project a “fair and deliberate view.”  And, as the ClimateWire story suggests, developers aiming to exploit the extensive power generation potential of the region are strongly behind the project.

Michael Giberson

I’ll be away from my desk for a couple of days, so posting may be light. (Unless I can figure out the WordPress ap on my phone, in which case maybe I’ll live blog parts of the renewable energy conference I’ll be attending in Austin.)