Intergrating Renewable Resources: ISO-NE Consumer Group Meeting October 9, New Hampshire

The Consumer Liaison Group 

The purpose of the Consumer Liaison Group (CLG) is to be the voice of the electricity consumer in advising the grid operator, ISO-NE. As you can see by this page in their website, ISO-NE has many advisory and working groups, including groups on marketing, transmission, and planning  As you can read in this CLG annual report: The Consumer Liaison Group (CLG) is a forum for sharing information between ISO New England (ISO) and those who ultimately use and pay for electricity in New England.

I am the Vermont representative to the Coordinating Committee of the CLG.  I used to be one of two representatives (states can have several representatives) but the representative from the Department of Public Service recently resigned.  I expect another representative will be nominated soon.

The Upcoming Meeting in New Hampshire

The next CLG meeting will take place on October 9 in New Hampshire (announcement above). The subject of this meeting is the important issue of integrating renewables to the grid.

CLG meetings rotate between the six New England states, along with frequent meetings in Boston.  Here's my description of the meeting in Vermont in March, when I was the panel chair.  Here is the official (and excellent) summary of the Vermont meeting.

Gus Fromuth, New Hampshire representative, will chair the panel for the upcoming meeting.  Here's a link to the meeting agenda, including call-in information if you can't attend in person.

Somewhat surprisingly, a representative from Green Mountain Power will be on the panel, though Green Mountain Power only operates in Vermont, not New Hampshire.  However, the meeting panels address regional issues, as well as state issues.

The meetings are free and open to the public.  They usually provide a lunch, so it is best to register in advance. It is not-good, seriously not-good, to register and be a no-show (wastes the cost of a lunch).  On the other hand, you can come at the last minute and I encourage you to come.  There's always room at the meeting.  The worst that can happen if you show up at the last minute would be---you don't get lunch.  (But there's usually plenty of food. )  Note: You can call in, if you can't attend in person.

Links:

For technical reasons  (I can't mount a pdf on a blogspot post, so I have to play with it), the links in the announcement above do not work.   Here are the links from the announcement, in the order in which they appear on the announcement.

Sheraton Portsmouth Harborside Hotel

CLG and CLG webpage

Register

Mary Louise "Weezie" Nuara email mnuara@iso-ne.com


I hope to see you in New Hampshire!

Vermont Utilities Buy Nuclear Capacity from New Hampshire: Guest post by Bruce Parker

Utilities buy nuclear capacity from New Hampshire as Vermont dismantles nuke plant

By Bruce Parker  /   July 8, 2015  / Vermont Watchdog

DECOMMISSIONED: Vermont Yankee, an electric generating nuclear power plant located in Vernon, Vt., generated 620 megawatts of electricity and provided 71 percent of the state’s electric generation before lawmakers and environmentalists pressured it to cease operations.caption

Utility companies in Vermont are buying nuclear capacity from New Hampshire while Vermont dismantles its former electricity-generating nuclear powerhouse.

“We got a 20-year contract with NextEra, which is not very typical,” David Hallquist, CEO of Vermont Electric Cooperative, said of his company’s move to stock up on low-cost nuclear generation.

“The generators who are going to be around a long time, such as a nuclear plant, are going to sell long-term contracts. And with the volatility of the forward capacity market … we expect upward pressure (on prices) to continue,” he said.

Hallquist said his company filed a petition with the Public Service Board the last week of June to get approval of the long-range contract with NextEra, a Florida-based energy company that operates a nuclear power plant in Seabrook, New Hampshire. The nuclear plant is attracting business as officials in the Green Mountain State work to decommission Vermont Yankee, a nuclear plant that formerly supplied 70 percent of all electricity generated in Vermont.

Vermont Electric Cooperative, the state’s largest locally-owned electric utility, seeks up to 10 megawatts of capacity from the Seabrook nuclear plant. Hallquist says locking in a long-term rate on nuclear capacity makes sense due to nuclear power’s affordability relative to other power sources.

“Capacity in New England used to be fairly inexpensive relative to today — and that was just two years ago that it was relatively inexpensive. The capacity charge was just $3 a megawatt-month back two years ago. Today it’s $10 a megawatt-month,” he said.

To keep the lights on and prevent blackouts, electric utilities purchase both energy and capacity. Energy, measured in megawatt hours, is the electricity currently being consumed. Capacity, in contrast, is stable backup power that utilities use to manage peak loads that draw upon the grid. The amount of capacity utilities need is determined by ISO standards set by 13 independent system operators across the country. Those operators monitor grid use and provide oversight to keep the grid stable.

Since Vermont Yankee closed in 2013 — in part due to hot pressure from Gov. Peter Shumlin and the state’s renewables-minded Legislature — utility companies in the Green Mountain State have scrambled to find reliable sources for their forward-capacity needs. According to Hallquist, wind and solar power are useless as sources of capacity.

“The problem is when you’re doing capacity you’ve got to make sure it’s there when you need it. So solar and wind, because it’s an intermittent resource, you can’t purchase it as a capacity tool. You can only purchase (it for) energy,” he said. “ISO New England has to make sure the generation is available when the load is there, and you can’t necessarily count on solar and wind for capacity, because it’s weather dependent.”

NEW HAMPSHIRE STRONG: Vermont utility companies are planning to purchase nuclear power capacity from New Hampshire’s Seabrook Station Nuclear Plant due to the plant’s stable generation and highly affordable rates.

Halquist’s company isn’t the only utility stocking up on next-door nuclear. In January, Green Mountain Power petitioned the Public Service Board for a 16-year, 150-megawatt contract purchase of nuclear from Seabrook.

“What we have filed for is a purchase that is mostly capacity and a little bit energy. We need that to help with our capacity obligations,” Dorothy Schnure, spokesperson for Green Mountain Power, told Vermont Watchdog.

Schnure said the company’s nuclear request underwent Public Service Board hearings in early June and now awaits approval.

“We went out to bid because we needed more capacity to help stabilize prices, and this was the lowest of the bids,” she said.

“Vermont at its peak uses about 1,100 megawatts of electricity. So you have to have enough generation, or capacity, available to satisfy that peak.”

Green Mountain Power uses nuclear generation for energy use as well as capacity, which is why its petition includes both. According to Schnure, the company hoped to reduce the nuclear energy in its portfolio but now intends to increase it.

“Originally, it was set to decrease to 50 (megawatts) and then decrease again to 40 megawatts. (As) part of this recent filing we slow the energy ramp down. Instead of going from 60 to 50 to 40, it goes from 60 to 50 to 55. So, going out into the future, we get a little bit more energy from Seabrook than we originally were getting in the original contract,“ she said.

In 2013, Entergy announced it was closing Vermont Yankee due to financial considerations. The Nuclear Regulatory Commission extended the plant’s operating license 20 years starting in 2011, and in 2012 Entergy won a court battle preventing the Vermont Legislature from shutting down its operations, which lawmakers attempted in 2010.

At the plant’s scheduled closing last December, Shumlin said he “long advocated for the closing of this plant.”

“I believe the ceasing of operations … after nearly 43 years represents a positive step for our state and our energy future. (T)hanks to investments in renewable energy such as solar, Vermont’s energy future is on a different, more sustainable path that is creating jobs, reducing energy costs for Vermonters and slowing climate change,” Shumlin said in a statement.

But Guy Page, communications director for the Vermont Energy Partnership, a coalition that advocates for clean, low-cost electricity solutions, said recent nuclear purchases tell a different story.

“There is a very sad irony to this situation. The source of power that had been demonized by Vermont’s energy leaders is now being embraced because it’s a decent, clean, low-cost solution to their energy problem,” he said.

“While it’s true it’s a good deal and it’s low carbon, Vermont is not getting the jobs. Vermont is not getting the tax revenue. Vermont is not getting the incredible donor benefit of having a large generous employer in their backyard.”

Page said Vermont Yankee, in addition to offering clean low-cost power, provided Winham County with good-paying jobs, money and volunteers for homeless shelters, and public safety emergency responders.

“That free infrastructure that was there because of the generosity of these people, they won’t be getting that from Seabrook.”

Page claims the situation in Vermont compares with Germany, which closed nuclear plants after the Fukushima disaster in Japan, but had to install coal plants to make up for the lost electricity generation.

“We’ve lost Vermont Yankee, and who knows what else we’re going to lose. What they’re saying is let’s double down on natural gas, let’s build more pipelines, let’s build more renewables,” Page said. “No one in power is talking about, gosh, maybe we ought to keep our existing nuke plants around. … It’s so easy to say no and wave a flag and feel good. But what are you going to do in its place?”

Contact Bruce Parker at bparker@watchdog.org


Bruce Parker is a reporter for Watchdog.org. Contact him at bparker@watchdog.org and follow him on Twitter @WatchdogVT

Sign-up for our Vermont Watchdog email list to receive the latest news and in-depth coverage.

COPYRIGHT
© 2015 Franklin Center for Government & Public Integrity

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This article originally appeared at Vermont Watchdog Org on July 8, 2015, and is used with permission.

Guy Page of Vermont Energy Partnership is quoted near the end of this post. Page is a frequent guest blogger at this blog.  David Hallquist, CEO of Vermont Electric Co-Op, is quoted near the beginning of this post.  Mr. Hallquist has published a guest post on this blog.

Meredith Angwin sends her appreciation to Bruce Parker, Guy Page and David Hallquist for their appearance on this blog.

Distributed Generation for Vermont: Making a Virtue of Necessity

Panel, from left to right: William Driscoll of A.I.V at podium,
me,  TJ Poor of Vermont DPS, Douglas Smith of GMP,
John Goodrich of  Weidmann
Photo courtesy of Howard Shaffer

The panel about power

On Friday March 13, I was panel moderator at an ISO-NE (New England grid operator) meeting of the Consumer Liaison Group.  We discussed the past and the future of the grid in Vermont and the Northeast.

I enjoyed the meeting, and I hope I was able to be a good moderator.  Here's my post about the meeting, and here's a direct link to the ISO-NE web page about the meeting. All the presentations were excellent and worth reading. They are posted on the ISO-NE page. In this following post, I share some of my personal opinions, inspired by this event.

Importing Vermont's Electricity

I moderated a panel. One of the panel participants claimed that closing Vermont Yankee had no effect on Vermont utilities. He said that the utilities had no power contracts with Vermont Yankee  after 2012 (this is true). So didn't matter to Vermont utilities that the plant closed in 2014.

After his comment, I decided to make my own comment, as the moderator.  I noted that whether or not local utilities were contracting with Vermont Yankee to buy power, the Energy Information Administration looks at states in terms on what electricity is produced within the state. Vermont Yankee used to make about 70% of the power produced in the state.  When it went off-line permanently, that left the state with only 30% of its previous in-state power supply available. Therefore, shutting Vermont Yankee makes a huge difference to Vermont, if you look at the power produced within the state, not the power contracts.

I basically shared the comments above, as a clarification, during the meeting.  In this blog, I will go a little further.

Power contracts are written by utilities. Utilities can make long and short term contracts with all sorts of power generators, near and far. The types of power under contract can change in a week, a month, or in the very instant that a new piece of paper is signed. However, power produced in the state changes more slowly.  Power produced within the state is far more indicative of the state-of-the -state,  in terms of electricity.  That is why the Energy Information Agency looks at power produced within the state, not at power contracts.

Vermont electricity

With Vermont Yankee closed, the state of Vermont produces less than 1/3 of the electricity that it produced a year ago.  If someone asked me: "Where does Vermont get its electricity from?" I would have a simple answer.  We get our electricity from out of state.  

This answer means that the Vermont Energy Plan for 90% renewables and the newest energy bills that are now debated in the Vermont legislature are a bit…well, maybe… a bit silly?  No. "Silly" is a loaded word.  "Unrealistic" sounds better.  I'll go with "unrealistic."

Thinking about Distributed Generation

6.5 Kilowatt Wind Turbine
Britain

Two of the speakers, Douglas Smith of Green Mountain Power and TJ Poor of the Department of Public Service, emphasized Vermont's push into Distributed Generation.  As a matter of fact, the title of Douglas Smith's presentation is Distributed Generation in Vermont.  Vermont plans to build small renewable power facilities (farm methane, wind farms, biomass plants, solar photovoltaic installations) instead of big centralized power.

In his third slide, Smith admits that most of the Green Mountain Power electricity supply is sourced from outside of Vermont.  Much of the rest of his presentation concerns Vermont incentives for renewables and distributed generation: those incentives that are in place now, and those that are proposed.

Our choice by choice---or our choice by necessity?

When you are listening to a well-organized presentation, you can't help but "buy in" to the presenter's view of the situation. When I was listening to Poor and to Smith, I thought that Vermont had chosen distributed generation.

But afterwards, I began to wonder.

Have we chosen distributed generation because distributed generation is such a great thing?  Or is it because it is really Vermont's only choice?  Vermont Yankee is closed, we import around 70-80% of our power from out of state or even out of the country.  Nothing wrong with that. However, if we want to say something to the world besides "We'll buy whatever electricity you are selling," we have to build some power production in-state.

What power production can we build in Vermont? Only a madman would try to site a good-sized thermal plant in Vermont. Gas pipelines are fiercely opposed, and coal would be laughed out of the state. (People wouldn't even protest coal. They would just laugh, I think.) Nobody would ever try to build another nuclear plant. We can build some more hydro, but hydro is pretty tapped-out in the Northeast.  Certainly there are no further sites for big hydro.

So there you have it.  If we build anything in Vermont, it will be small. It will be "distributed generation."

Virtue and Necessity

We can make a virtue (clean! small!) of the necessity to build only small facilities.  We can make comprehensive energy plans and pass new laws about renewables.  We can get good press.  We can pat ourselves on the back. We can claim to be the cleanest and the greenest state in the whole United States.

Well and good.  However, in the meantime---

If someone asked me: "Where does Vermont get its electricity from?" I would have a simple answer.  We get our electricity from out of state.

Another Name for Methane: The Microgrid for Vermont

Sudden Press about the "Microgrid"

Natural gas

In the past two days, articles about NRG and the supposed New Generation have been coming thick and fast.

At the national level, NRG and HuffPo are starting a joint venture called Generation Change: Together We Will Be Heard. This forum is going to have "realer than real" dialog about energy, including the new "solar power that has evolved from large roof top panels limited to industrial buildings to ones that are compact, portable and charge our phones, cameras and tablets."

Okay, yeah, confusing.

At the Vermont local level, there's a joint venture between NRG and the Gaz Metro's wholly-owned subsidiary, Green Mountain Power (GMP).  As Vermont Digger reported:  GMP Teams With National Energy Company to Build Microgrids.

The story is clearer locally, but the story is not fun.

The NRG CEO takes a stand for Natural Gas

The Vermont Digger story quotes NRG CEO David Crane about these planned microgrids.  He says that  "the best form of energy storage is natural gas. "

Huh huh huh? Now methane is energy storage?

Traditional not-smart solar

Let me explain this, by referencing to the comment stream on this article (which is terrific). In the comments, people in favor of microgrids and people against microgrids all ask the same question:  Exactly HOW does natural gas come into this?

Finally, one comment link explains it. The link is to this article, with more extensive quotes from the NRG CEO. NRG Energy Deploying Dean Kamen’s Solar-Smart In-Home Generator.

Note the clever title "Solar Smart Generator." Solar and smart!  How wonderful.

55KW Stirling Generator
Wikipedia
Smart Solar?

If you continue to read, however, you find that Solar-Smart is a Stirling engine running on natural gas. It is sized for the home. And somehow, it's all about Hurricane Sandy.

I gather that NRG's goal is for every home to have its own Stirling engine and a natural gas connection.  The end-quote on the Solar-Smart article is from NRG CEO David Crane:  “The solar industry belongs with the natural gas industry -- those industries go together. They just don’t know it yet.”

 Side Note: It's a large company, but not everyone has heard of NRG. Wikipedia describes their business areas as including co-generation, renewable energy, and renewables. The company owns many fossil-fired plants, some wind farms, and part of a nuclear plant.  The core company was part of Houston Lighting and Power. It has expanded by many acquisitions.

The GMP CEO takes a stand against electricity distribution

Now, back to Vermont.  In the Vermont Digger article, we see that the CEO of GMP is in line with this "your very own Stirling engine" idea. (I guess that is why she's teaming up with NRG on microgrids.)  In the article, GMP CEO Mary Power  described the current energy infrastructure as “archaic” and made up of “twigs and twine” that will cost the nation tens of billions of dollars over the next decade.

The CEO of Green Mountain Power Seems pretty cavalier about the current grid. Doesn't sound eager to maintain that old "twigs and twine" system.   This is even though she heads a DISTRIBUTION utility, for heaven's sake!   What is she doing saying stuff like this? Does she want to see the archaic grid disappear, along with GMP and her job?

GMP may lose, but Gaz Metro will win

Of course not. In my opinion, CEO Mary Powell's  job is safe.  After all, she works for Gaz Metro.  GMP is a wholly-owned subsidiary of Gaz Metro. We Vermonters forget that at our peril.

Even if Powell doesn't bother much about the grid in Vermont, her parent company can do very well. Gaz Metro can hope to put in lots of gas pipelines for those microgrid Stirling engines.

Vermonters may lose, but the state government will win

"Twigs and Twine"
Wonder what GMP linemen
think of Ms. Powell's statement?

A wonderful thing about natural gas is you can raise the taxes almost infinitely.  Vermont put tax after tax on Vermont Yankee, and Vermont Yankee decided to close down. Vermont slapped a $12 million generation tax on Vermont Yankee. Meanwhile, through its revenue sharing agreement,  the plant was already on the hook for $18 million in revenue sharing with the local utilities.

Sending the state and utilities a total of $30 million dollars in a year is a lot for a small plant. As an oversimplification, taxing Vermont Yankee to that extent made its profits lower and its power less competitive.  This was one of the reasons it closed, in my opinion.

Raising Taxes for the State

With gas pipelines, raising taxes is just so easy.  You can force a gas pipeline to pay, say, $30 million a year in taxes...no problem. The pipeline will just go to the PSB and ask for a rate increase.  People won't stop buying the product (natural gas) just because the price went up. For heating your home, home, fuel oil and propane will probably still be more expensive than natural gas.  Also, once you use  natural gas, there may well be a cost to retrofitting your home furnace for another fuel.

What about the electric utilities? Aren't they price sensitive? Well, no.  Merchant plants sell into a market and they are price sensitive.  But the distribution utilities are regulated, and they get more money by the simple expedient of asking for it.  Let's face it.  New coal or nuclear aren't in the cards. Renewables, though subsidized, aren't cheap either.

Basically, as long as gas remains cheaper than oil, the sky will be the limit on how much distribution utilities will be willing to pay for gas-fired electricity. Even if gas is highly taxed and expensive, the distribution utilities will buy it. After all, the distribution utilities can't go broke, as long as they can go to the PSB, explain the situation, and get a rate increase.

The Winners and The Losers

So, with this great leap forward of a mutual aid pact between Gaz Metro and NRG, who are the winners and the losers?

Winners:

• Gaz Metro (sells more gas)
• GMP (sells more gas, after all, it is Gaz Metro)
• State administration. The state can tax the pipelines as much as they want to tax them, and the consumers will pay.

Losers:

• Vermont consumers who want reliable power. They want someone to keep repairing those sticks and that twine.
• Vermont consumers who want affordable power. The mixture of high-priced gas, stealth gas taxes and few merchant plants will mean "bye-bye to affordable."
• Any sincere environmentalist who is living painfully off the grid with solar panels, a wood stove, a bunch of batteries, and a vegetable garden. This person just didn't know how easy it is to be green with natural gas, the new storage. 

$17 Million Vermont Yankee Check to Utility--Use It Well: Guest post by Reg Wilcox

Reg Wilcox

The Check

Green Mountain Power (GMP), the state’s largest electric utility, announced last month that it will receive a $17.8 million benefit from Vermont Yankee nuclear power plant. This big check was just the latest multi-million dollar benefit paid to Vermonters by Vermont Yankee and its owner, Entergy.

When GMP and other companies sold Vermont Yankee to Entergy in 2002, Entergy agreed to share proceeds with the previous owners from any power sales above 6.1 cents per kilowatt-hour. The $17.8 million is GMP’s share of revenue generated by Vermont Yankee power sales from March 2012 - 2013. For Vermont consumers, it's a fleeting bright spot in the cloudy outlook of climbing regional power prices.

GMP Payments to Ratepayers: The History

GMP has said the $17.8 million will go directly back to ratepayers. However, we were told this once before when money from the GMP-Central Vermont Public Service utility merger was spent on state energy programs instead of being returned to ratepayers as promised. There has been plenty of talk in the Legislature this year about new rules and laws to protect the interests of John Q. Ratepayer. Here is a perfect opportunity to "walk the talk."

Given the state’s history with not fulfilling energy promises, we have cause to be concerned. The very agreement that created this most recent revenue windfall for ratepayers was predicated on Entergy receiving a timely Public Service Board decision on the continued operation of Vermont Yankee past March, 2012. That guarantee was consciously withdrawn by the 2010 Vermont Senate vote. Entergy has met its obligations to the tune of $30 million in clean energy funding, a 10 year contract that delivered below-market power to Vermont utilities, revenue sharing, and millions for Windham County economic development, while the state has moved the goalposts time and time again.

The Sources For Vermont Power

Vermonters are still waiting for the State of Vermont to deliver on its promise to deliver low-cost, low carbon power. During the protracted dispute between Vermont Yankee and the State of Vermont, the plant’s many supporters repeatedly maintained that the only viable replacement for its power would be more expensive and increase carbon emissions. This is exactly what has happened as a result of Vermont’s decision to stop buying power from Vermont Yankee. According to grid operator ISO-New England, the average market price of electricity in March, 2014 was 11.25 cents per kilowatt hour, almost three times the four cent 2002-2012 contract rate. Even if a new contract would have cost marginally more, it is plain for all to see that we're paying more now for dirtier power.

The latest solution is a recent plan announced by the New England governors to acquire more electricity and natural gas from Canada and surrounding states. How much will this plan cost Vermonters? Who will pay? And how does more natural gas reduce our “carbon footprint?” And if this plan fails we will remain hamstrung by inadequate access to hydro and other traditional forms of power, having placed too much faith in the as-yet unproven promise of solar and wind generation. It is plain to see that state energy policies have left Vermonters without any good options.

Vermont Should Keep Its Promises

For years, many Vermont leaders took every opportunity to criticize Vermont Yankee, while pitching an alternative, bright new energy future that was short on specifics. As we wave goodbye to Vermont Yankee, it’s now time for the state to restore our confidence in its energy policy. It can start by not hijacking the $17.8 million dollar Vermont Yankee benefit from GMP customers, and by keeping its promises to deliver low-carbon, affordable, reliable electricity.

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Reg Wilcox, BSEE Norwich, MSEE Clarkson, is a retired IBM Senior Program Manager. Reg grew up on a dairy farm in Cambridge, worked out of state for ten years after graduate school, and returned to his home town when he began his career with IBM in 1978.   In 1802, Reg’s ancestors, Nathan and Rachel Wilcox, were the first European settlers of the Town of Morgan, Vermont.

This post has also appeared as an op-ed in the Rutland Herald (behind a paywall).

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Update: May 31, 2014

Governor Shumlin announces proposed rate decrease in Vermont.  Press release link below:
http://vtdigger.org/2014/05/30/gov-shumlin-announces-agreement-proposed-rate-decrease/

A quote from the press release, but with emphasis added by blogger:

“At a time when other states in our region are seeing double digit increases in power costs, Vermonters are going to see rates go down this year,” Gov. Shumlin said. “This rate decrease is great news for Vermont. The agreement provides stability and predictability for one of our most valued employers, and helps ensure that Vermont maintains a thriving center of innovation and technology well into the future. This is further evidence that the merger of Green Mountain Power and Central Vermont Public Service is already delivering cost savings and putting money in Vermonter’s pockets.”

Gaz Metro: Who Owns the Vermont Infrastructure

The Merger

The two major electric utilities in Vermont have asked the Public Service Board for permission to merge. The two utilities are Green Mountain Power (GMP) a wholly-owned subsidiary of Gaz Metro of Quebec, and Central Vermont Public Service (CVPS). Public Service Board docket 7700 has been opened to consider this merger, and public comments are still accepted.

In the proposed merger, Gaz Metro (the company that owns GMP) would buy CVPS, putting both utilities under Canadian ownership.

This merger may not be good for Vermont. With this merger, 72 percent of Vermont’s electric utilities would be under Canadian ownership. The transmission line companies (TRANSCO and VELCO) that are jointly owned by the utilities would also be Canadian-controlled. Also, Gaz Metro owns Vermont Gas Systems (VGS) and VGS owns the only gas pipeline into Vermont. After the merger, one Canadian company would own most of Vermont’s electric utilities and all Vermont’s natural gas pipelines.

Problems with the Merger

Issues with the merger can be classified into three main categories:

1. Foreign Ownership of so much of the energy infrastructure in Vermont.
2. Consolidation of Ownership by one powerful company.
3. Weak Regulatory Control by Vermont, including conflict-of-interest issues.

This blog post will discuss the first two issues. Later posts will consider other issues.

Foreign Ownership

It is not popular to make too much of the foreign ownership question, because it appears xenophobic to do so. Nevertheless, when countries export electricity or gas to other countries, they attempt to make a large part of their profits from the exports. The profits from the exports allow the country to sell energy (electricity or gas) more cheaply at home.

For example, according to the 2010 HydroQuebec annual report, HydroQuebec sold 7% of its electricity outside of Quebec, but made 17% of the company’s net income from those sales. According to Thierry Vandal, President of HydroQuebec (in the annual report):

…tight control over our energy market transactions and risks meant that every kilowatthour exported was highly profitable.

A graphic about profits heads this blog post: it is from the HydroQuebec annual report. You can click to enlarge it.

Gaz Metro Profits

Gaz Metro does not break out its profits sources so neatly, and a careful reading of its annual report shows its GMP and VGS investments to be less profitable compared to its Canadian sales. Still, Gas Metro profits from GMP and VGS increased 40% between 2008 and 2009. One factor in the increased profitability was an increase of $3.8 million in GMP’s share of TRANSCO’s earnings. Since total Gaz Metro profits (all divisions) were $160 million dollars, this increase is quite significant. A United States Federal tax credit of $40 million dollars for the Lowell Mountain wind farm project will also be highly significant to the Gaz Metro bottom line.

In other words, Vermont sales are becoming a growing and profitable business for Gaz Metro (To review the financial material more closely, go to the Management Discussion and Analysis section of the Gaz Metro Annual Report.)

Canadian Regulators and Vermont

Gaz Metro will make a profit by entering the Vermont market: that is to be expected. They would not begin business in Vermont if they did not expect to be profitable. Still, no matter how physically or emotionally close Vermont may be to Canada, we should be aware that Canadian regulators often require companies to supply Canadian customers with energy at lower prices than foreign customers. Gaz Metro is required to supply natural gas at cost to most of its Canadian customers.

If Canadian companies are a modest part of Vermont’s energy supply, Canadian regulatory constraints are not too much of an issue. If a single Canadian company owns most of Vermont’s electric distribution and all Vermont’s gas distribution, the requirements of Canadian regulators can have major impacts on Vermont’s customers.

Consolidation of Ownership

Consolidation of ownership issues tend to be the issues most discussed by commentators. So much of the infrastructure being owned by one company has been heavily discussed and challenged. In a recent article in Vermont Digger, Avram Patt, general manager of Washington Electric Cooperative, explained that whoever controls VELCO will make all of the major infrastructure decisions in the state. Because of this, municipal and cooperative utilities (including Washington Electric) have intervened before the PSB, hoping to protect their interests.

John McClaughry echoes this concern in an article in Vermont Tiger entitled Senator Illuzzi and the Utility Merger Case. Vermont State Senator Illuzzi has also intervened in the merger hearing. As McClaughry writes: Illuzzi argues, rightly in my opinion, that VELCO is the big prize here, because the Canadians want to ship a lot of hydro power south to the major US markets in New York and Boston. VELCO essentially owns the transmission corridor.

Illuzzi has also intervened about the merger at the federal level, at FERC. Once again, Illuzzi’s intervention rests on the fact that the combined utility will own the VELCO’s transmission corridor. In their application to merge, GMP and CVPS tried to address this concern by saying that some of the VELCO stock will be placed in a new trust fund, the “Vermont Low Income Trust for Electricity.”

Illuzzi’s intervention filing rejects this as a solution: Apart from a pro forma share transfer agreement that appears as part of Exhibit I to the Application and some vague assertions, the Applicants’ claims about the “VELCO Conveyance” do nothing to remedy the concern that this merger, between the two largest utilities in the State of Vermont, would give them effective control over the decision making of the State’s only owner of high voltage transmission facilities.

The Gas Pipeline

At the same time as the electric utility merger, Gaz Metro is planning to expand further into Vermont as a gas company. Right now, Gaz Metro only supplies gas to the Burlington area, but they hope to extend their pipeline to Rutland. Guy Page of VTEP reviewed the proposed Vermont Energy Plan: the plan supports Gaz Metro extending its pipeline south.

Once the Gaz Metro pipeline is built, natural-gas-fired plants can make electricity. As Page said on VPR: "Well, it (the plan) talks a lot about building natural gas plants in Vermont, medium sized natural gas plants."

Right now, there are no natural gas power plants in Vermont. However, after the utility merger and the pipeline extension, there may be many such plants. Gaz Metro may build the plants, GMP may build the plants, or other entities might build them. Gaz Metro will certainly own the pipeline, and profit by the existence of the new natural gas plants.

In other words, natural gas or electricity, Vermont’s energy supply and energy transmission will depend heavily on Gaz Metro. This would be a major consolidation of energy supply sources in one foreign company.

Vermont and Regulation

Vermont has regulated utilities. The Department of Public Service (DPS) is the consumers’ advocate when utilities come before the Public Service Board (PSB) in a docket about service and rates. After the merger, no matter how concentrated their holdings are in Vermont, Gaz Metro still must submit to the rulings of the PSB.

People in favor of the merger point this out, and say that the DPS and PSB will protect consumer interests. So far, this is not happening. In later posts, I will discuss recent DPS and PSB actions, and on-going issues about conflict of interest.

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This post originally appeared at True North Reports. I am grateful to Rob Roper for permission to repost it here.

The Sixth Lawsuit about Vermont Yankee: Suing for the Cost of Replacement Power

I never should have done it. Four days ago, I published a post Five Legal Wrangles About Vermont Yankee.

I counted five, but lo and behold! Today there's a sixth lawsuit! You just can't keep up a count around here.

The Cooling Tower Problems

In August 2007 and July 2008, Vermont Yankee had widely-publicized collapses of a part of the cooling tower bank. The first incident happened because it happened. Vermont Yankee has rather old wooden cooling towers, and there was a maintenance problem on one of them. The second incident happened because of an incomplete repair of the first incident. In both cases, the plant stayed on-line, but de-rated power. It lowered power output for 11 days (first incident) and 12 days (second incident).

On the basis of these incidents, Central Vermont Public Service (CVPS) and Green Mountain Power (GMP) are suing Entergy. They had to buy more expensive replacement power during the time of lowered output from Vermont Yankee. They say that the plant was negligent about maintaining the cooling towers, so they deserve the money in recompense. You can read their press release here and it has been widely reprinted as a news article. Albany station WAMC had a short program on the lawsuit, hosted by Pat Bradley. Don Kreis of Vermont Law School gives his opinion, and I give mine. (The program is three minutes long.)

If Everything Isn't Perfect, We're Suing

Briefly speaking, this is a ridiculous lawsuit. There are all sorts of utility contracts out there, and CVPS and GMP did not have a contract in which Entergy had to pay them for replacement power. That is the end of the story. GMP and CVPS didn't have a contract that required reimbursement.

The utilities are claiming that Entergy's plant maintenance was so bad that the de-rating was due to Entergy negligence. I have one word for that: Ridiculous! Vermont Yankee has a high capacity factor, and has had a series of breaker-to-breaker runs (from one refueling to another without a stop). In this case, it wasn't even off-line for the repairs. It had just powered down.

If utilities sued every time a plant powered down or went off-line unexpectedly, there would be no end to it! Of course, if a plant is not operating at full capacity, something went wrong. I suppose this could have been prevented if everything had been done perfectly. Let's look at coal plants, for example. They have to keep testing the coal they receive. Let's say they receive some coal and they don't get the chemistry analysis quite right and boom...their boiler is coated with slag and they are off-line. (Most coal plants test coal extensively and blend coal to avoid this situation. They don't always manage to avoid it.) Should a coal plant be sued on the basis that they should have done a better chemical analysis?

Utility Contracts

There are all sorts of utility contracts out there. Bob Hargraves and I visited seven plants when we led the ILEAD course on Energy Safari. If you read the posts on the Energy Safari blog, you will read about power plants that:

• sell power at the market price when the price is high enough
• sell power at a fixed price, and have to reimburse the utility when they have promised power but can't deliver
• sell power at a fixed price, and don't have to reimburse anybody if their power isn't available
• don't want to tell us the terms of their contracts

If a utility wants to buy power that is available without interruption at a given price, it writes a contract saying that the power plant must reimburse the utility for any power that is not provided. Of course, the utility can expect to pay more for power on that basis, just as you can expect to pay for an "extended service contract" on an appliance. Insurance against failure costs money.

Insurance

The utility can also pay money for insurance. If the utility buys insurance against having to buy higher-cost power, it doesn't have to put any terms in the contract with the power plant.

For example, I attended a hearing at the State House when GMP and CVPS testified that they actually have insurance policies which would reimburse them for replacement power costs if Vermont Yankee power was not available to them. The policies began to pay if Vermont Yankee was off-line for more than about 30 days. I am sure the utilities could have bought other insurance: insurance against three-day outages, twelve day power reductions, anything. Insurance companies love to sell insurance! However, insurance against small events would have been expensive, since such events are very likely. Most companies self-insure for small problems.

Money or Harassment?

I can never know anyone's motives, of course. However, to me this lawsuit sounds more harassment than like a business situation. Surely the utilities know what kind of contract they have with Vermont Yankee? Surely they know that they don't have the sort of contract that includes reimbursement for replacement power? Surely they know about the various types of contracts? Surely they know that accusing a plant of negligent maintenance won't fly, when the plant is running from fuel loading to fuel loading (breaker to breaker), 500 days or more, without unplanned shut-downs? Surely they know they could have purchased insurance against the costs of replacement power? Surely they know they actually have purchased insurance against the costs of replacement power due to long outages?

GMP and CVPS are acting as if they don't know any of this.

Interestingly, the utilities want to have a jury trial on this subject. I think they are hoping to capitalize on the "Entergy Louisiana" and "strontium fish" rhetoric of the Vermont administration. They hope to win their case by pounding on the table.

Washing Machines

The Entergy lawyers can argue their case without any table-pounding.

"Ladies and gentlemen of the jury. CVPS and GMP had opportunities to insure themselves against paying the cost of replacement power. They could have stipulated that we pay the cost of replacement power as a requirement in their contract with Entergy. Or they could have bought third-party insurance for their costs during power derates or outages. CVPS and GMP did not taken any such action.

"Instead, these utilities are in the position of someone who does not buy the extended warranty on the new washing machine, but expects to get free service anyway. We at Entergy are pleased that they expected perfect operation of the plant. We are pleased our general excellent maintenance and breaker-to-breaker runs may have led them to expect perfect operation. However, they took no steps to protect themselves if operation was imperfect. Though we are flattered at their expectations, we must point out that expectations of perfect operation are unrealistic, and are certainly not enforceable through the courts."

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Picture of the Comerford Hydro plant from Energy Safari blog. Picture taken by Bob Hargraves. All other graphics from Wikipedia..

Gaz Metro and Vermont: Today's Update

Green Mountain Power(GMP) is a wholly-owned subsidiary of GazMetro of Quebec. GMP has applied to the Vermont Public Service Board for permission to take over Central Vermont Public Service: Docket 7700. If GMP owns CVPS, over 70% of Vermont will be served by a utility owned by Gaz Metro.

Since Gaz Metro also owns Vermont Gas Systems (VGS), the only natural gas supplier to Vermont, this electric utility merger would be a major consolidation of Vermont energy infrastructure (electric and gas) in the hands of a foreign corporation. To me, this is very different from Unilever owning Ben and Jerry's. There are other sources for ice cream in Vermont. With the Gaz Metro takeover of GMP, there will be no competing sources of energy in most areas of Vermont. Governor Peter Shumlin favored a Gaz Metro takeover of CVPS, discouraging a bid from another Canadian utility.

In analyzing the ramifications of this possible merger, I feel it has three over-arching issues.

1. Foreign ownership of much of the energy infrastructure in the state.
2. Consolidation of ownership by one powerful company.
3. Weak regulation and conflict of interest in Vermont's own regulatory process.

I covered the first two issues in an article this morning at True North Reports: The GMP/Gaz Metro merger. I plan to cover the third issue: weak regulation and conflict of interest, in a future article at True North Reports.

Conflict of Interest Article at Vermont Digger

This morning, Vermont Digger published an article about the conflict of interest issue in Vermont, which is being energetically pursued by Senator Vince Illuzzi. The Commissioner of the Department of Public Service, Elizabeth Miller, is married to a lawyer who is a partner in the law firm representing GMP in the merger. The Vermont Digger article is Before the PSB: State senator leverages fight over independent counsel for Gaz Metro merger. I encourage you to read it. The DPS says Ms. Miller does not have a conflict that would cause her to recuse herself. The Digger article is excellent, with many links to original documents, such as the DPS answer to Senator Illuzzi. I recommend this article very highly.

When I write my own article (promises, promises) I also plan to cover recent Public Service Board decisions that protected utility and Gaz Metro interests, and did not protect the citizens. The charter of the DPS is to be the advocate of the ordinary citizen in cases before the PSB. DPS is not fulfilling to that charter, in my opinion.

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John McClaughry, head of the Ethan Allen Institute, was one of the first to raise the issue of infrastructure consolidation and conflict of interest, in his Vermont Tiger post Sen Illuzzi and the Utility Merger Case. The picture of Senator Illuzzi is borrowed from that post.

Power Purchases in Vermont: Not Really Replacing Vermont Yankee But Adding Greenhouse Gases.

The chart above comes from the Vermont Department of Public Service website. Dave Lamont of that department drew this chart in March of this year. It shows the "committed resources" for Vermont's electricity supply. Vermont uses approximately 6000 GWh electricity per year. The chart shows power plants and utilities that have agreed to sell power to Vermont.

We can see the more-than-2000 GWh from Vermont Yankee (bottom left gray area) coming to an end in 2012. We can also see old Hydro-Quebec (HQ) contracts coming to an end in 2016 and new HQ contracts starting around that time frame, for slightly less supply than the old contracts.

The most noticeable thing on the chart is all that white space to the right of 2012--the who-knows-where-it's-coming-from part of Vermont's electricity supply. Roughly half the electricity supply after 2012 on this chart is white space: it simply isn't there.

Recently, new announcements of power purchases by Vermont utilities have re-assured people in Vermont that there's going to be plenty of electricity anyhow, if Vermont Yankee closes. However, there is less in these contracts than meets the eye, in my opinion.

The New Contracts

The big new contract is GMP (Green Mountain Power) with Seabrook Station Nuclear power plant in New Hampshire. GMP is going to buy 60 MW of power from Seabrook. That is about 1/3 of the power that Vermont obtains from Vermont Yankee. To see this amount on the chart above, draw a line at about 700 GWh above the existing lines. As you will note, the big supply gap is still there. For example, adding 700 GWh in 2017 (when the current HQ contracts phase out and we are on the new HQ contracts) moves the total supply to around 3600 GWh out of 6000 GWh required. Okay. So that's only 40% white space now. When we factor in the Seabrook purchase, only 40% of the electricity is "who knows where it is coming from?"

However, today's news included more announcements of power purchases, this time by Central Vermont Public Service (CVPS). CVPS bought 0.57 GWh through the end of 2012. The new contracts are opaque: CVPS said they held a "structured auction," and got a good price (4.75 cents per kWh). However, CVPS won't release the names of the auction winners. Nobody knows what kind of power CVPS bought. It's probably fossil based, because the Northeast grid is fossil based.

CVPS also had to get ready for the Vermont Yankee outage, and needed to buy power for that. As the Reuters article says: The contracts will also fill Central Vermont's energy needs during the planned Vermont Yankee refueling outage this fall, the utility said.

The Seabrook power purchased by GMP is available for many years, but the agreements announced today by CVPS are only for power through 2012, when the old and new HQ contracts are also both available. It's a short-term power purchase agreement.

That Chart Again: The Short-Term Power Purchase Agreements

Looking at that Committed Resources chart again, at the head of this blog, we can notice two new things.

• First, look at the medium blue area called Vermont PPAs. These are various short-term power purchase agreements set up by the Vermont utilities. With a PPA, the utilities hopes to get a better deal than they would receive from the spot market. PPAs are never arranged too far in advance, or for very much power. These CVPS deals announced today are just more PPA deals, which are usually not accompanied with such hoopla. Of course, anything that claims to replace Vermont Yankee power will be a major announcement, nowadays.
• Second, these CVPS contracts extend only through the end of 2012, so they could only be covering the small amount of white space at the top of the chart, through 2012. They have no effect on the big white space to the right of the chart.

It's hard to see what all the excitement was about.

Time for Perspective: Greenhouse Gases

Up until now, I have been describing the Committed Resources chart at the top of this blog post. It's not the only chart the Department of Public Service prepared for their March presentation.

Below is a companion chart, showing the sources of greenhouse gases for Vermont. While Vermont Yankee is running, the electricity section of the greenhouse gas emissions is low. However, after 2012, look at those emissions grow! By 2015, the electricity sector in Vermont is making more greenhouse gases than all the heating of all Vermont buildings (RCI fuel use). By 2020, with autos and home heating emissions steady, the electricity sector has grown to be the biggest emitter of greenhouse gases.

I have noticed that the emission chart says "electricity supply high-emission scenario" but I don't see a low-emission scenario in the presentation. I can think of a low-emission scenario, though.

If Vermont Yankee keeps operating, that is a low-emission scenario, and a very good one.

Notes: You can double-click on the charts to enlarge them.

I also blogged about the Committed Resources chart at ANS Nuclear Cafe.