Cold Weather Winners and Losers on the Vermont Grid

It's cold outside and it is going to stay cold.

It's not unseasonably cold: last night dipped to about fifteen below. On the other hand, the planting guides tell me that I should only buy trees and bushes that are hardy to thirty below.  So it's not that cold, by regional standards.

Still, it is cold.  Partially because of space heaters and so forth in these northern climes, the electricity  price on the ISO-NE grid is soaring.  The usual wholesale price on the New England grid is between $30 and $70 MWh (3 and 7 cents per kWh).  As you can see from the screen capture I took this morning from the front page of the ISO-NE website, the grid is now running more like  $200 MWh, or 20 cents per kWh.

Who wins and who loses (on the grid), when the temperature dips like this?

Losers:

I would call Hydro Quebec a possible loser at this point. They are selling record amounts of power, as described in this article Hydro Quebec expects to break record for 2nd day in a row.   They are asking people to conserve and reduce consumption.

So, if they are selling so much electricity, why do I call them a loser?  Because they are not exporting as much electricity, and export to the U S is where they make money.  According to a tweet yesterday from Platt's (which I have not been able to verify, but Platt's news service is pretty good):

Hydro-Quebec is seeking voluntary demand cuts during peak hours Wednesday, Thursday; Weds exports to US fall to 800 MW from 1,400-1,500 MW

The lack of HQ power is probably one of the reasons that  the grid price in New England is soaring.

The Vermont contracts with HydroQuebec (HQ) supposedly smooth most of this type of spike in grid prices. Vermont doesn't have to pay top dollar to HQ when grid prices rise suddenly.  Still, HQ expects to make much of its profits from export. If you read the introductions to their annual reports, you can see them apologizing if they don't make enough money on exports.

HQ is exporting about half the usual amount of power right now. So they aren't making as much money as they would like to make. That's why I said HQ is a loser in this situation.

Yes. I know.  I can hear you all reminding me.  HQ did close the Gentilly 2 nuclear station earlier this month,  claiming they had excess power.  Oh well.  To quote Kurt Vonnegut: "So it goes."

Winners: 

Every merchant generator (including Vermont Yankee) is a winner.  Look at those prices compared to their costs.  Wowee!

Losers Again: 

 Most transmission and distribution utilities are losers in this situation   They are paying a lot for power on the grid, but they can't change their price-to-consumers to reflect this.  Months later, in front of their state regulatory boards, the utilities may get some kind of rate increase. For right now, I think they are hurting. They are in the position of losing money on every kWh sold, and trying to make it up on volume.

The more a generator depends on short-term contracts (not committed power) the worse off they are, in terms of the gap between cost of power and what they can charge the end-user for power.  Green Mountain Power boasted that they are able to get good short-term deals on the grid because they don't have too much committed power. That strategy might not look as good today as it does on some other days.

Winners Again:

However, the Vermont utilities are doing well due to the Vermont Yankee Revenue Sharing Agreement.   This agreement requires the plant to pay Vermont utilities half of the amount over 6.1 cents that they receive for power.  So if VY were receiving 18.1 cents/ kWh for power right now, the utilities are getting one half of the difference between 18.1 cents and 6.1 cents.  The difference is 12 cents, and the utilities are getting 6 cents every time VY sells a kWh.

Revenue sharing is a "heads-you-win, tails-I-lose" agreement for VY.  If the price on the grid is low, VY just has to sell the power cheaply.  If the price is high, VY does not get the full benefit: the utilities share the money.

However, it is the agreement that Entergy made when they bought the plant, and they are holding to it.

Irony Time

Kurt Vonnegut

If you listen to the last few minutes of the Federal Appeals Court hearing, you can hear the lawyer for the state say that these Vermont Yankee payments to utilities is a reason that the state needs to close the plant.  The hearing is embedded in my blog post State Claims Economic Reason for Closing Plant,

If Kurt Vonnegut were alive today, he could write something scathingly funny about the Vermont administration's attitude toward Vermont Yankee.  Unfortunately, I do not have his skills as a satirist.

Update

This post has inspired posts on important related topics at other blogs.

At Canadian Energy Issues, Steve Aplin writes: Money down the drain, possibly forever: Hydro Quebec pines for Gentilly 2's revenue generating potential

At Neutron Economy, Steve Skutnik looks at natural gas.  Production price is not the only issue. Pipeline capacity is also crucial, and ultimately, limiting. Where's the real bottleneck for natural gas? Distribution.