Vermont Energy Plan is Basically Unworkable

2010 Known Electric Resources from PSD
Blog post about this at ANS Nuclear Cafe

Input requested

The Vermont Public Service Department (PSD)  is revising the Vermont Comprehensive Energy Plan which they issued in 2011.  They want public input by July 24,  in other words, this Friday.

Here's the main link to their page about updating the plan. The lower section of this post contains links for commenting.

Yes, the plan has been under serious discussion for about a month.  First PSD had invitation meetings (late June), now they are having public meetings (July).  Then they will issue a draft 2015 plan and request further comments later in the year. You can see local timeline here.  The 2011 plan is one of the base documents.

The Charts and the Questions

On the morning of June 30, the subject of the invitation meeting was Energy Supply Resources. Asa Hopkins is Director the Planning and Energy Resources Division of the PSD. Here is a link to his presentation. (You can see all the meeting agendas and presentations at this link.)

From Hopkin's presentation, this is the current version of the 2010 chart:

 2015 Known Vermont Electric Sources from PSD

Yes, it looks familiar.

 We've got the big green part at the bottom: HydroQuebec.  HydroQuebec falls off somewhat as the old contracts finish, but it is still steady.  Above it is the steady purple of Vermont and New York State hydropower, and the increased level of nuclear (medium blue) as the Seabrook contracts begin. Then there's that huge red part, "residual mix" (aka "buying from the grid or short-term contracts") that is supposed to diminish.  As a matter of fact, it's supposed to go away entirely.

After all, the Vermont plan is for 90% renewables, and the chart shows that we already have a big section of nuclear (relatively new long-term contracts). Nuclear is clean-air, but the Vermont plan isn't about clean air and low carbon, it's about renewables and only renewables.  In other words, with the nuclear purchase in place, in order to meet the Vermont plan, we really can't afford to buy a single electron from the grid.  We also can't afford to expand our use of natural gas.

All that white space at the top right must be filled with renewables.

The last few slides in the presentation show the PSD grappling with this problem. A slide labelled "Question #1 background cont." includes the following:
"Expected identified resources ….leave 46% of the electric portfolio undetermined."

Here come the cars and heat pumps

If you look at the 2015 chart above, you will notice that the line at the top (how much electricity Vermont is projected to require) slopes up gently to the right.  On that chart, the Vermont electricity requirement number seems to hang right around 6,000,000 MWh (6 TWh) for fifteen years.

But if you look at another chart in the same viewgraph presentation, you get quite a different picture.  This is Vermont projected electricity use from the TES (Total Energy Study)  done for the PSD.  The TES study included all sectors of energy use, and predicted that Vermont can lower total energy use significantly.  However, to do this, Vermont will use considerably more electricity (electric vehicles and heat pumps). The chart below sums this up.

Future Vermont Electricity Use, from Total Energy Study and PSD presentation

In this chart, as building heat (heat pumps) and transportation (electric vehicles) kick in, the Vermont energy use goes from around 5 TWh in 2015, to around 9 TWh in 2050.

In other words, the Known Electric Resources chart ended in 2030, with just a gentle uptick in demand, as shown by the top line of the chart. For that top line, PSD  used a VELCO projection of energy use, instead of referring to their own PSD studies.  I don't know what study they used for the "46% of the portfolio" number.

However,  if Vermont really runs all sectors on renewables and therefore electricity, we are going to need much more electricity than estimated by VELCO.  Vermont electricity use practically doubles by 2050. It looks to me as if "46% of the portfolio…. is undetermined" could be a serious underestimate of the problem.

Where will we get so many renewables?  I think that buying from Hydro Quebec seems the only realistic option. And of course, HQ will love the sight of Vermont needing to buy their power!  Talk about Vermont having no bargaining position whatsoever.

Ah well. We can always write to the PSD, and encourage them to read their own reports.

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To comment to PSD

 PSD has specific questions,  which they describe in this document:

http://publicservice.vermont.gov/sites/psd/files/Pubs_Plans_Reports/State_Plans/Comp_Energy_Plan/2015/2015%20CEP%20Update%20Process%20kickoff%20FINAL.pdf

You can make comments through SurveyMonkey

https://www.surveymonkey.com/r/?sm=1NTqHoQRyM1MBw1NQ9xeThq78cUOihKpFdnD4A2EqZE%3d

Or, you can answer questions through SurveyMonkey https://www.surveymonkey.com/r/?sm=kjY2yQok9BGK%2f38FGcFM%2b6pO9xwR%2fNdD7QARhCJpNA8%3d

Once again, the main page about the 2015 plan is here.

The 2011 Plan, the Reports since 2011, and the 2015 plan

The 2011 Comprehensive Plan  was quite lengthy.  It consists of five documents: a one-page overview, a 14 page summary, a 314 page main document, an appendix document (each appendix is separately paginated: I guess the appendix document at 200 pages) and a 26 page "public involvement report." (This last report contains a very amusing typo at the bottom of most pages.  I know that everybody makes mistakes, including me. No big deal. Still, I find my little smiles where I can.) You can find links to all these documents at 2011 Comprehensive Energy Plan.

On to the 2015 plan.

There's a ten-page document of questions about the 2015 plan CEP Process Kickoff Final.  This document contains a lengthy list of energy reports that have been issued by state agencies since 2011.   Yes.  There's a lot of reading ahead if you want to read everything before commenting on the 2015 plan.

You won't have time to read all this before Friday.  I hope this blog post has given some guidance.

The Government Chooses the Electricity Supplier: Disturbing Trends in Vermont and New Hampshire

In Hanover New Hampshire

In New Hampshire, individuals and businesses can choose their electricity supplier, due to deregulation.  Some of the choices include:
Liberty Utilities
Unitil
Eversource (formerly PSNH)
New Hampshire Electric Co-op

However, Hanover, New Hampshire, home of Dartmouth College, hopes to be a Green Power Community.  It intends to achieve this goal by encouraging people to buy Green Power instead of the "brown power" (their words) supplied by regular utilities.  Specifically, Hanover wants you to sign up for their chosen Green Power utility:ENH, the Hanover Green Power Challenge supplier. Hanover hopes that  residents will sign up this utility, right on the link on the Hanover Town website. On the website, under Green Power Challenge FAQs,  there are these words:

Beginning on Thursday, May 14th, to sign up for the Green Power Challenge, simply paste the following website address into your browser. ENH has designed a website specifically for the Hanover Challenge: 
http://www.hanovernh.org/Pages/HanoverNH_BComm/shc/greenpower.  You will be able to fill out your customer registration via the website and ENH will take care of the rest.  The sign-up period closes on May 28th.

Most of the FAQ page on the town website is a carefully crafted sales pitch for signing up for ENH, including how easy it is to sign up, how your electricity won't be disconnected and reconnected, and the favorable rates you can get for twenty months.

From the ENH point of view, I am sure it is wonderful to see the Town be so pro-active for them.  ENH apparently cut a deal with the town to offer good rates, if the town would promote their product.

I wonder what Liberty Utilities thinks of all this?

In Vermont

As we saw during the lawsuits about Vermont Yankee, Vermont is a states-rights kind of state. (When the federal judges ruled for Entergy, several people in state government were quoted as saying it was a sad day for state's rights.) In Vermont, some towns want more say on energy siting  but the state Public Service Board process rolls right over them. In other words, we do things at the state level, here in Vermont.  We are choosing electricity vendors at the state level, too, though not as explicitly as having a link on the state website.

Instead, we just passed a law that pretty much forces our local utilities into the waiting arms of one vendor: Hydro-Quebec.  On May 25, John Herrick of Vermont Digger wrote a thorough article on an energy bill that was passed during the waning days of the legislative session: Legislative Wrap: State Passes Ambitious Renewable Energy Goal. Instead of reviewing the whole article (REC controversy and all), I just want to quote a few sentences: This bill requires that 55 percent of a utility’s electricity come from renewables, including large-scale hydro power, by 2017. The target increases the ratio to 75 percent by 2032.

Because of our excellent relationship with Hydro Quebec, Vermont passed a law saying that "big hydro" was counted as renewable energy.  I actually think big hydro should be counted as renewable energy, but counting it as renewable is somewhat unusual.

To evaluate the 55% renewable goal (in two years!) I tried to determine out how much renewable energy Vermont is using right now.  Alas, it is surprisingly hard to figure this out. The Governor's electricity page claims data from 2011.  It shows Vermont as having over 50% of its electricity from renewables: 37% from large hydro, 8% from small hydro, and the rest of the 50%  from wood, wind and "other."

Actually, I think that about 40% of Vermont's current electricity comes from hydro power: 10% in-state, and over 30% from Hydro Quebec. Green Mountain Power (GMP) seems to agree with me. On their Fuel Mix page for 2015, GMP shows 34% large hydro, 8% small hydro (adding up to 42%),  and they also show 44% "system power."  This chart is described as "after REC sales," so maybe they are not counting  the approximately 2% from wind?  I think that is what is happening.

A Green Mountain Power projection for the future (on page 4 of their ISO-NE presentation in March 2015) is another data point.  In describing this chart, GMP says that if they sell RECs from "premium renewables,"  the remaining power will be counted as system power. "Premium renewables" probably includes wind and in-state small hydro,

Okay.  It is pretty darn confusing, but it is clear that Vermont does not have 55% renewable energy now, and may have a hard time moving up to that mark by 2017.

Or maybe Vermont won't have a hard time.  Vermont's ace-in-the-hole is that we consider Big Hydro to be renewable, and other states don't.  So we can sell all our instate-renewable energy as RECs, and count their in-state production as  merely "system power." Under the new law, Vermont is required to have "55% renewables." However, it can meet this goal by buying more out-of-state Big Hydro.  Vermont would probably buy more from Hydro Quebec, the only game in town with lots of extra hydro power to sell.

In other words, in my opinion, Vermont's "ambitious renewable energy program" is almost a web-page link to Hydro Quebec.

Is this okay?

I grew up in Chicago, under "Richard J. Daley, Mayor." Frankly, it's a little late in life for me to act shocked about favorable treatment for favored vendors.

And yet, I think our local governments are breaking some new ground  in this regard. Town governments with links to one utility vendor and FAQs about how easy it will be to sign up with that vendor?  Passing a state law that pretty much requires purchases from an electricity vendor in a neighboring country?

I'm not shocked.  I admire the ingenuity.

Vermont and Renewable Sprawl: Perspective from Platts

SunGen Solar Farm
Sharon, VT

Vermont Leads the Way in Pushback Against Renewable Sprawl

Platts tracks world-wide energy prices and issues.  It is part of McGraw Hill Financial Services, and it offers a variety of subscriptions and analysis reports. Platts is known to be a premier source for energy information.

Platts covers the whole world, which means it doesn't spend a lot of time covering Vermont.  But sometimes Vermont energy issues "lead the way."  In that case, Platts has articles and blog posts about Vermont.

On that theme, Platts has a recent blog post about Vermont.  Before nuclear opponents start their happy dance, however, ("Oh yes we led the way, we did!"),  we should look at the subject of the Platts article.  Guest post: Out of sight, out of mind? Vermont considers its renewables describes how people in Vermont are pushing back against renewable sprawl.

As Long As It's Not Too Severe

The blog author  is John Kingston, president of McGraw Hill Financial Institute. He notes that people in Vermont support renewables in the same way that Edith Bunker supports capital punishment: "as long as it's not too severe." Local towns want more say in the siting process: they feel shut out of the conversation.  (Well, the towns are shut out of the conversation.  When the Public Service Board okays a project, the towns have little recourse.)

Vivien Leigh as Scarlett O'Hara

The Vermont legislature has been stymied this year about renewable legislation. It has come up with a new program: Wait Till Next Year.  Like Scarlett O'Hara, the legislature plans to "think about it tomorrow."  This year, the legislature hopes to pass legislation that will provide incentives for renewable projects in environmentally-damaged "brown fields" and gravel pits and so forth.

This won't work.  I mean, Vermont may get some renewable projects built in gravel pits, but the "90% renewables mandate" in Vermont means that there simply aren't enough gravel pits.  To quote the Platts post:

So like the civil New Englanders they are, everyone is agreeing to listen. But that’s not going to solve the problem. ….

The replacement for that (Vermont Yankee) power is going to need to occur with a lot of the population making Edith Bunker-like declarations about renewable energy which, as the growing disputes in Vermont show, can not take a major role in electricity generation unless it takes a major role in real estate consumption too.

Romaine River
from Wikipedia

End Notes:

I encourage you to read the comments on the Platts  post. One commenter from Quebec is cynical about Hydro Quebec (HQ) secrecy. Apparently, HQ has claimed to be able to supply Vermont, Ontario and even more places. But HQ doesn't actually share much information on its excess capacity to generate electricity.

HQ is definitely looking south to new markets, and constructing new dams on the Romaine River.

 Meanwhile, despite the 90% renewables mandate, Vermont is planning to remove small dams, rather than renovate them.  Apparently, in Vermont, dams affect the local ecology.

In recent weeks, the Vermont legislature has been considering new energy siting rules.  However, as noted above, the bottom line is that the legislature plans to Wait Till Next Year.

Electricity Prices Soar in New England. And Soon in Vermont.

 Neighboring States

Yesterday and today, two New England electricity distribution companies announced the rate increases that they require for winter.  Vermont can expect similar price rises.  Let's start with the neighboring states.

Massachusetts 37%: National Grid says that its customers in western Massachusetts can expect a 37% rate hike on November first, due to the retirement of Vermont Yankee nuclear plant and Salem coal plants. Other factors were also cited, including the fact that there are no new gas pipelines, expensive replacement fuels are used in winter, and natural gas prices are rising.  The higher electricity prices in Massachusetts will be in effect until April.  The video clip about the price rise finishes with a recommendation: people should think about replacing their older energy-hog refrigerators with a newer model.

New Hampshire 50%: Meanwhile, in New Hampshire, a small utility expects to double the "energy charge" portion of customer's bills in November.  The company, Liberty Utilities, explains that this will lead to an increase of about 50% in the customer's bills. A spokesman for Liberty Utilities explains that when demand for natural gas exceeds the supply, electric generators must use more expensive fuels to generate electricity, therefore driving up prices for the whole electricity market. This utility is located very close to my home in Vermont.

Is Vermont Different?  Well, no.

The latest we heard, the major Vermont utility, Gaz Metro (aka Green Mountain Power) was lowering rates by 2.5%, largely due to revenue sharing from Vermont Yankee.   Maybe we're good, here in Vermont? Too bad about the other states, but we're good?

Vermont: Yeah, we have grid power.  Nope.  Not really.  We're not good. None of our major utilities agreed to buy power from Vermont Yankee after the 2012 end of the plant's NRC license. Instead of buying Vermont Yankee power, they basically bought grid power. They bought one million megawatt-hours more grid power per year than they had purchased when they had contracts with Vermont Yankee.  Guy Page of Vermont Energy Partnership wrote Vermont Electricity At A Glance in March 2013, showing how much grid power Vermont utilities now purchase.

The Vermont Yankee license was renewed for another 20 years, but still, our utilities shunned  the plant.  They buy a lot of grid power, and  they are partially vulnerable to the same wholesale electricity market prices that affect the utilities in New Hampshire and Massachusetts.

Vermont: Yeah, we have Hydro Quebec Power. Partially vulnerable?  Did I say partially vulnerable? I meant mostly vulnerable!

Spillway in Hydro Quebec system

The jewel-in-the-crown of Vermont power purchases are the utility contracts with Hydro-Quebec.  See, it's not all grid power in this state.

But...those contracts don't matter.  As I wrote in two posts in 2010 (March 2010 and   December 2010) Vermont contracts with Hydro Quebec are market-follow contracts.  If the grid price goes up, the rate that Hydro Quebec charges Vermont also goes up. As I wrote in the December post, A Bad Deal with Hydro-Quebec,  these contracts will NOT protect us against major rises in grid prices.  The contracts have a little price-smoothing. Prices will not bounce around with the daily market changes. But those 35-50% price rises in other states aren't because of the volatility of the grid prices.  The price rises in other states are because of the total electricity cost raises on the grid.

I expect a similar price rise for Vermont.

Watch for it.

I suspect, however, that Green Mountain Power will probably not announce the price rise until after the election in November.

Summertime and Truth: Reading about Courage and about Quebec

My Internet Goes Down

We changed Internet providers.  Such a change is never particularly easy, and the family was offline for about a week during the transition.

During this time, I still had my iPad that could connect to the cell network, so I kept up with my emails.  But I couldn't keep up with blogging or writing comments on other people's blogs or anything like that.  It was too awkward, and sometimes it just didn't work at all.  I stopped trying to do these things.

My Reading Goes Up

 My goodness. Who KNEW I would have so much free time in one week? This was actually a shocking revelation.  In one week,  I read two books. Neither book was about nuclear energy.

Survival

The first book was Deep Survival: Who Lives, Who Dies and Why, by Laurence Gonzales.  Gonzales describes fairly horrific situations.  In some cases, people chose high-risk activities: attempting a new route to a summit.  In other cases, people found themselves in high-risk situations: a small plane crashed in the Andes, and a young woman managed to walk back to civilization.  In either event, people found themselves where it would be easy to die, but not so easy to survive.

How did the survivors make it? What actions or traits did they have in common? Gonzales is very clear that even if someone does everything right, the person may die.  The forces against them may be just too great.  However, bearing that in mind, how did people survive?

Climber getting ready to rappel
Wikimedia

The survivors all assessed their situation realistically, but kept hope alive by making intermediate goals and achieving them. For example, the two climbers on the new route had an accident, and one of them suffered a broken leg.  With cooperation (lowering the broken-leg climber down, about fifty feet at a time) and intermediate goals, and frankly, with luck...they both made it off the mountain.

What struck me about this book was the emphasis on realism.  The people assess the situation accurately. They determine what can be achieved, and what cannot be achieved.  They decide what we can do, and when we have to reassess the situation.

And they worked as a team, if more than one person was in danger. Notice all the words "we" in the sentences above.

Life Raft
Air Force photo from Wikipedia

If one person helped another person, both were far more likely to survive.  The helper had more motivation to be clear-eyed. The person being helped was confident that though his own efforts might be limited, his efforts would be part of the plan. For example, on a life raft with five people, two survived by helping each other.

Note: Why two out of five? Two of the people on the raft started the trip drunk. They ended up drinking seawater, going mad, and jumping out of the life raft. One person was too badly injured to survive: she was injured as the original boat was sinking.  The two sober people in the raft helped each other and helped the badly injured person, and those two survived.

About Nuclear

I could not help but compare the clear-eyed realism of the survivors with the endless Fear Uncertainty and Doubt (FUD) being spread by nuclear opponents.  "This could happen, or maybe that could happen! Be very afraid!"  On one of my email lists, there is a quote from an anti-nuclear screed claiming a rise in radiation from uranium daughter products in fuel rods. They claim this rise could happen under some circumstances, and it would take place 1.2 million years from now.

I began to think that if people really buy into this FUD, their mental processes can get warped.  If you are worried about a radiation rise that might/maybe take place in 1.2 million years, are you seeing the world clearly? Will you look out for cars when you cross the street?  Will you be able to tolerate pain if you find you must walk down a mountain from a plane crash?

I began to think about anti-nuclear FUD as a bigger problem than whether or not nuclear energy continues in this country.  At this point,  I believe anti-nuclear FUD is a symptom of a world-view that simply cannot work for people.  That is another reason to fight FUD, but the battle may be bigger than I thought it was.

Sigh. Well, time for another book.

Quebec Mystery: How the Light Gets In

For a complete change of pace.  I also read Louise Penny's mystery novel: How the Light Gets In. This is the second-to-the latest of the Inspector Gamache novels.  The latest one has just been released: I expect the bookstore to call me any day that my book order has arrived.  (Yes, for Pete's sake.  I am not rich, but I often order hardbacks of Penny's novels.)

Penny's novels are set in the Eastern Townships of Quebec, the area just north of the Vermont border.  Her books have fascinating, intricate plots, and real characters who change over the course of the series. People fall in love, and fall out of love. Inspector Gamache makes brilliant deductions, and he makes serious mistakes.

Penny's writing is both clear and poetic.  She usually gives a talk in Vermont when her books are released, and I always go to hear it.  (To give you an idea of how her books are constructed, the title "How the Light Gets In" comes from Leonard Cohen's Anthem.)

Montreal near St. Louis Square
Wikimedia

The books are set mostly in southern Quebec, but some are set in other regions of Quebec Province, including Montreal. Without giving away the plots, I can tell you that one theme in the books is about the way the Cree were treated during the initial stages of the James Bay Project--building the Hydro Quebec dams. In the books, there are various dangerous ramifications to this James Bay theme.

Yes, Penny's books are "just" a set of mystery novels, but every now and again, it is good for me to read something from Quebec.  You see, in Vermont, the people against Vermont Yankee often praise the "clean hydropower we can get from Quebec."  Well, yes we can get it, except for the transmission constraints (and that is another blog post entirely).  But the Hydro Quebec power is also a story of pain and tears.  It's worth remembering that, even in the course of a mystery novel.

HydroQuebec Spillway

Back On-Line

I suppose it will be a while before I read another book, since I am back on-line now!

But I have resolved to take some time to read books in the future.  This off-line experience showed me the value of reading books and contemplating them in (relative) silence, without the chatter of the Internet.  One book helped me realize the value of clear thinking and courage. Another reconfirmed that I do not buy into the everything-is-so-rosy view of Quebec hydro power.

Clarity and contemplation.  I'm going to try it.

Vermont Yankee's Closing Will Hurt Vermont

The Plant Will Close

On Aug. 27, Entergy announced that Vermont Yankee would be shuttered in the fall or 2014, when its current fuel load is finished producing power.

Entergy’s decision elicited a variety of reactions. Some regarded this as a great victory and were practically dancing in the streets. I was among those who were upset and depressed by the news. But I suspect that most people were somewhere in the middle. They thought, well, Vermont isn’t using Vermont Yankee power anyway, so it shouldn’t make much of a difference.

It does. Vermont Yankee’s closing will affect everyone in Vermont. It will make our electricity more expensive, more fossil-fuel based and less reliable.

Vermont utilities are using Vermont Yankee power now. They’re not officially buying Vermont Yankee power, but “using” power and “buying” power are different. Power use has to do with physical structure — where power plants, transmission lines and users are located. “Buying” power is about power contracts. A utility can choose to “buy” power from far away, but it will continue to use the power from the local generators. For example, when Green Mountain Power bought power from Seabrook instead of from Vermont Yankee, no power lines needed to be constructed. When a major supplier of regional power is lost, it must be replaced, regardless of who’s buying it.

So when Vermont Yankee closes, people in Vermont will have to get actual power from other sources. Can they get this power? The short answer is yes. Vermont Electric Power Co. (VELCO) manages the state transmission systems. VELCO was concerned that Vermont Yankee might close. Between 2010 and 2013, it invested $30 million in new lines and substations to bring replacement electricity to Vermont.

The Replacement Power

What will the new power sources be? Despite the Vermont Comprehensive Plan, very little will come from renewable sources. Building renewables is a slow, expensive, land-intensive job. Vermont Yankee generates 620 megawatts of power and is well-connected to the grid. In contrast, the Lowell Mountain wind project produces 64 MW and has difficulty getting on the grid. Rep. Tony Klein, a strong advocate of wind energy, said recently that he expects no more wind farms to be built in Vermont for another 10 to 15 years.

When Vermont Yankee goes off-line, Vermont will get its power from outside Vermont: either power supplied by the regional grid, ISO-NE, or hydro-power from Canada. With Yankee closing, much of the power on the grid, especially the spot market power, will be gas-fired and its price is due to go up. Power supplied under contract by HydroQuebec follows that spot price. Before, when gas prices went up, Vermont Yankee could underbid the gas prices, and supply many megawatt-hours at a lower price than gas. But without Vermont Yankee, gas prices will determine the price of almost everything on the grid.

Natural Gas and Some Oil

Industrial Gas Turbine

Our local grid power is already overdependent on natural gas. Right now, 52 percent of the power on the grid is produced from natural gas, and it will be a higher percentage when Vermont Yankee closes. ISO-NE considers gas dependence a “key strategic risk” for New England. The area is vulnerable to supply disruptions and price changes for this commodity.

Let’s start with supply disruptions. We had a natural gas supply crisis during the January 2013 cold snap. Although many in New England heat their homes with natural gas, the limited gas lines serving the region make for an inadequate supply. In cold weather, when domestic demand for gas spikes, those customers receive priority, and the power plants can’t get enough gas. During that cold snap, the grid would attempt to summon the help of a gas-burning power plant, and the plant would answer: “Sorry. Can’t go online. No gas.”

This year, ISO-NE started a “Winter Reliability Program” to address this problem — by using oil. ISO-NE has set aside $75 million to keep (mostly) oil-burning plants at the ready. That’s right, the grid is paying $75 million to have oil-burning plants keep oil onsite. (This is a “capacity” payment; the plants will be paid separately when they actual make power.) ISO-NE is ensuring reliability, but at a high dollar cost and a high cost in fossil-fuel use.

Without Vermont Yankee, more power will come from gas plants, but they will still be supplied by the same set of pipelines. Unless new pipelines are built quickly, an unlikely event, it will take less of a cold snap to activate the “we can’t get gas for our power plant” situation. In that case, more oil will be needed for back-up.

Price also matters, and once again, the problem is a lack of pipelines. Fracking has made a lot of gas available, but New England’s access to it is limited. The Federal Energy Regulatory Commission, which tracks national supply and demand, published a market assessment in October that reported that gas prices are relatively stable in most of the country, except in New England. In other regions, gas prices charged last winter and for futures contracts written on the coming winter are around $4 per MMBTU (1 million BTUs). In New England, natural gas prices last year were $6.60 MMBTU, but the futures price for the winter of 2014 is soaring to $11.75. Electricity prices in this area are also expected to rise, since electricity prices customarily track gas prices.

Canadian Hydro--only a very partial solution

What about getting more power from hydro plants in Canada? This will work … partially. Depending on how much electricity we import, new transmission lines may well be needed. Some of these lines are already being planned. We should also note that Canadian power is unlikely to shield us from price rises on the grid. Under the new HydroQuebec contracts signed around 2012, the price HydroQuebec charges will fluctuate; it will move according to the market price on the grid, which itself follows natural gas prices.

Ice Storm of 1998

In this case, we will be actually moving more electricity from Canada, not just writing contracts. Electricity carried long distances is also liable to disruptions. In 1998, an ice storm devastated HydroQuebec’s power lines, causing widespread, lengthy power outages. This could happen again, but let’s look at a more recent and more mundane supply disruption.

During that same cold snap last January, HydroQuebec exported only about half of the usual amount of electricity to the U.S. Why did it cut back just when the power was most needed?

Quebec law requires HydroQuebec to supply inexpensive electricity to “legacy” customers within the province. The needs of those customers must be met, and at a retail price of around 3 cents per kWh. Therefore, many people in Quebec heat with electricity. In a cold snap, the Quebec heaters go on, and HydroQuebec has less power to send to us. HydroQuebec hates this, but has no choice.

Cold Weather and Reliability

Even with Vermont Yankee running, Vermont and New England were overly dependent on natural gas. Without Vermont Yankee, the problems will get worse,. Our dependence on natural gas and on Canada sets us up for a perfect storm of increased power prices — and it won’t take a monster storm to trigger it. Cold weather itself will do a fine job.

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This op-ed originally appeared in the Valley News on November 17, and appeared in the Ethan Allen Institute newsletter in December.

A reference list for this post is Reference list for effects of closing Vermont Yankee.

Reference list about effects of closing Vermont Yankee

My op-ed, Vermont Yankee Closing Will Hurt Vermont,  was based on many references. This list of links helps support it, but no simple list can be a complete set of references on these subjects.

Wind Projects in Vermont

Representative Klein on not-expecting wind projects in Vermont for about ten years
http://vtdigger.org/2013/10/30/vlct-director-argues-local-input-energy-project-permitting/

Natural Gas

ISO says natural gas dependence is key strategic risk
http://www.iso-ne.com/nwsiss/pr/2013/iso_new_england_issues_statement_vy_retirement_final.pdf

FERC Market Assessment of price nationally

https://www.ferc.gov/market-oversight/reports-analyses/mkt-views/2013/10-17-13.pdf

Matt Wald of the NYTimes on natural gas and New England
http://www.nytimes.com/2013/02/16/business/electricity-costs-up-in-gas-dependent-new-england.html?_r=0

20% electricity price rise expected in Boston this winter

http://www.bizjournals.com/boston/blog/mass_roundup/2013/10/national-grid-prices-rising-this-winter.html?page=all

Portland at Forbes on the gas crisis in New England

http://www.forbes.com/sites/williampentland/2013/12/05/has-anyone-noticed-new-englands-escalating-energy-crisis/

Winter Reliability with Oil

ISO Winter reliability program---burning oil
http://isonewswire.com/updates/2013/9/18/ferc-accepts-iso-nes-proposed-winter-20132014-reliability-pr.html

Hydro Quebec and more

When HQ exported only half the electricity during a cold snap...
http://yesvy.blogspot.com/2013/01/cold-weather-winners-and-losers-on.html

HQ Planning document:
Note page 6 on 97% of electricity goes to Heritage Pool in Quebec
Note page 32 on plans for profits from exports
http://www.hydroquebec.com/publications/en/strategic_plan/pdf/plan-strategique-2009-2013.pdf

An older blog post about HQ and profits.
HQ charts showing where their profits come from.  This post is old, but HQ puts equivalent charts in every annual report.  Look at the blue charts...also see page 32 of planning document above
http://yesvy.blogspot.com/2010/12/you-better-be-good-to-your-in-state.html#.UnztaChfWec

The great ice storm of 1998
http://en.wikipedia.org/wiki/North_American_Ice_Storm_of_1998

Careful review of who-owns-what in the weird structure of Gaz  Metro and HQ. My basic conclusion---ordinary shareholders do not influence these companies.  The government of Quebec controls the actions of these companies.  It's hard to figure out, however.  Good links within the post.
http://vtuncommontaters.wordpress.com/2012/05/02/who-owns-green-mountain-power/

Where Vermont Power Will Come From After Vermont Yankee

Rainfall in U S during ice storm
Does not include rainfall Jan 4 and 5

On Sunday, the Valley News published my op-ed Yankee's Closing Will Hurt Vermont. 

I always enjoy having an op-ed in the my local Sunday paper.  I hope you read it. It's about the probable effects on Vermont when Vermont Yankee closes.

Factors Affecting Vermont Electricity 

As I wrote in the op-ed:

Vermont Yankee’s closing will affect everyone in Vermont. It will make our electricity more expensive, more fossil-fuel based and less reliable.

I explained the factors that will affect our power supply and pricing after Vermont Yankee closes.  Specifically:

• The plant will not be replaced by renewables.  Wind turbine construction in Vermont is practically at a standstill, for example.
• Our power will come from outside Vermont, and be subject to various sorts of interruption, including too few natural gas supply lines, ice storms, and HydroQuebec needing to use its electricity in Quebec during a cold snap.
• The electricity price will follow the grid price of natural gas.  According to FERC, the New England price of natural gas is set to rise substantially (from $6.60 MMBTU to $11.75 MMBTU).  In the rest of the country, the price of natural gas is set to remain stable.
• Grid payments of $75 million to oil-burning plants (the ISO-NE Winter Reliability Program) will be rolled into our electricity costs.

What About the People at Vermont Yankee?

Realtor map of my area
Map shows town boundaries
Dartmouth is in Hanover
My home is in Hartford

Several people asked me why I didn't mention the people at Vermont Yankee, the effect of the plant closing on the local economy, the effect on the state economy, the effect on the state taxes?  

There's a simple reason.  I live about sixty miles north of the plant, and I think people in this area don't care very much about southern Vermont.  People here generally commute across the bridge to New Hampshire, where they work at Dartmouth College, Dartmouth Medical Center, and many high-tech industries spawned by Dartmouth (for example, HyperTherm).  

People here care where their electricity comes from. They care about reliability and about environmental impact.  They care somewhat about their electric bills.  My own feeling is people here don't care that much about what happens to Brattleboro or Vernon. They are insulated from many aspects of the Vermont economy through their jobs in New Hampshire.

Therefore, for my local paper, I wrote about things that affect all of Vermont: where our electricity comes from, how reliable it is, how fossil fuels will be used to produce our electricity, and how expensive electricity may become.

The Op-Ed

For an op-ed, Yankee's Closing Will Hurt Vermont was  very data-dense!  Sometimes I wondered--where was the "opinion" part?  Why did I write it this way?

Still, it was fun to write, and I plan to reprint it on this blog in a week or so.  

However, I always like to have people access the op-ed at the newspaper for a few days before I begin putting it on my own blog.  I hope you enjoy the article.

----

P.S.  Just came across an article in a Boston business journal which says that Boston should expect a 20% percent price rise in electricity this winter, for some of the same reasons I discussed for expecting price rises in Vermont.

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.

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.

-------

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

Vermont, Canada and the World: Dr. Andy Cook on Energy Choices

Recently, I was complaining to a friend about the amount of time it takes to fuss with a presentation and get it right. I am trying to get my slide show (more or less, my Putney School slide show) ready to post on the web. My friend asked if I had seen the Andy Cook videos; he thought they might be helpful to me.

I was aware that Vermont Yankee has its own YouTube channel. When I went to the channel, though, it took me a moment to find the Andy Cook videos. Apparently, Dr. Cook gave this presentation about Vermont's Energy Future at Vermont Yankee sometime last summer. It is posted on YouTube in three parts. The video contains a wide-ranging overview of world energy needs, the use of fossil energy, Vermont/ Canadian relationships, and the role of Vermont Yankee.

Dr. Andrew Cook

Dr. Andrew Cook is a vice-president at AREVA. He grew up in Canada. Cook went to graduate school at M.I.T. in nuclear engineering at the same time Howard Shaffer was a graduate student. (I have never met Dr. Cook.) Cook now lives in Maine and is a citizen of the United States. He is an avid hiker and outdoorsman.

I decided to embed these videos in my blog today because I found them very informative on areas I rarely cover . For example, Cook describes the effect of the James Bay project on Canada. He also explains how the big things we hear about (the BP spill for example) are not one-offs, but part of an on-going set of predictable accidents.

I hope you enjoy the videos.

North of the Border, East of the Border: Nuclear, Wind, Hydro and Vermont

A friend asked me what I thought of the recent Green Mountain Power (GMP) contract to purchase electricity from Seabrook Station. My blog yesterday on the Seabrook contract has links, charts, cost comparisons and so forth. Today, I decided to share my note to my friend, amended for this post.

Yes Nuclear! Yes Inexpensive Electricity!

Dear Friend,

You sent me a link to Emerson Lynn's blog post about the Seabrook contract and asked my opinion. Yes, I am glad to see this agreement between GMP and Seabrook. I am happy to see a good power purchase agreement for Vermont, and since I am pro-nuclear, I am glad to see power coming reliably from another nuclear facility. I don't consider the difference in price to be substantial: VY bid 4.9, but VY could probably match the Seabrook price (4.7 cents) especially if VY can sell the rest of their power at market prices.

In his post, Lynn describes the "negotiated deal" with HydroQuebec (HQ). The only deal so far with HydroQuebec replaces the power from current HQ contracts: those contracts end in 2016. The new HQ deal does not replace any Vermont Yankee power. This Seabrook contract also only replaces some of the power from Vermont Yankee. There is still a gap in Vermont's power supply for the future.

In other words, many of the uncertainties have not been removed, and power prices are still capable of rising if Vermont Yankee is not in the mix. Much power is bought "at the market" and taking low-priced supplies out of the mix will affect the price.

Still, the Seabrook purchase news is basically good news, and very hopeful for Vermont's future.

NIMBY Alert

At another level, this news is also troubling. It shows a NIMBY attitude that I don't like. "We hate nuclear plants in-state, but we are delighted with cheap power from out-of-state nuclear plants." A friend of mine asked if Vermont is going to end up with hydro plants and nuclear plants lined up on our borders in neighboring countries and states. They would provide Vermont's baseload supply, while Vermont builds nothing by wind turbines. I am sorry to say this could happen.

Aside: Actually, Vermont is not even building wind turbines. It is buying wind turbine power from New Hampshire. GMP made a recent deal for the output of a wind farm in NH, while GMP's Vermont wind project, Lowell Mountain, appears stalled by local opposition. End aside.

The power plants lined up on Vermont's borders will pay taxes and fees to their own states or countries, not to us. They will employ people in Canada or at the New Hampshire seacoast, not Vermonters. The power grid will still have to adjust to the new sources of power, certainly raising some transmission costs. In other words, the purchase from Seabrook is good news, but doesn't mean we don't need Vermont Yankee.

Every time I make a presentation about VY economics I explain that the existing economic studies are about payroll loss and tax loss to the state. No study addresses loss of Vermont jobs because of increased cost of electricity. (I generally show a picture of an iceberg at this point of the presentation---that is, the loss of jobs due to electricity price rise is the hidden effect.)

So, this business of "gosh, we have low-cost power so we are saved" means that "gosh, we have some low-cost power so maybe we are back to having only the economic losses predicted by the studies." That's $60 to $100 million a year loss in economic activity and about $10 million in taxes, including the Clean Energy Development Fund.

Spiritual Problem

The economic loss is a big problem, but maybe not the biggest. Howard Shaffer is fond of saying that Vermont Yankee is Vermont's fair share of the grid. We can't just take from the grid; we have to give back. As a fair share, VY is quite benign. No coal trains, no flooded valleys, no NOx from gas turbines.

However, as I see Vermont right now, though people talk about "community" this or that, many really don't see themselves as part of a community about electricity or jobs or pretty much anything. When I mention job loss if Vermont Yankee closes, one or two enterprising types in the audience will challenge my statement. They will stand up and with a bit of a smirk, remind me that many people who work at Vermont Yankee live in neighboring states. In other words, the loss of a job by a person who lives in Massachusetts but works in Vermont is not a loss that should concern Vermonters.

This attitude drives me nuts.

We buy our power from HQ in Canada. We buy nuclear power from New Hampshire, and even buy wind electricity from New Hampshire. We want to take and take and never give back a kWh to anybody else. The rest of the world exists to supply us.

To me, this is beyond an electricity problem. This is a spiritual problem. I truly worry about this state.

Well! Thank you for asking my opinion, though I probably gave you FAR more opinion than you wanted!

Hope to see you soon!

Best,

Meredith

Lilac image from Wikimedia

It's a lilac image because I have a beautiful lilac bush in full bloom right next to my study window. You can think of the illustration as lilac stationary for a note to a friend.

Some Transparency in the Vermont Hydro-Québec Contract. Maybe We Should Thank John McClaughry

The Hidden Contract

In a late-December post, I pointed out several ways that the Hydro-Québec contract was a bad deal. One bad thing about the deal was the required secrecy.

When John McClaughry read my blog post about the HQ contract, he realized that this contract was another example of secrecy in government, secrecy that does not serve the ratepayers or taxpayers of Vermont. He decided to ask about it

About John McClaughry. I head the Ethan Allen Institute Energy Education Project. John McClaughry, a former Vermont State Senator, leads the main Ethan Allen Institute. One of the Institute goals is transparency in state government. For example. the Institute also has a Transparency Project which is a joint project of the Ethan Allen Institute and the Public Assets Institute.

McClaughry's Letter to the Public Service Board

On December 31, 2010, John McClaughry wrote a letter to James Volz, Chair of the Public Service Board. McClaughry shared a copy of this letter with me. I have a long quote from his letter at the end of this post.

My translation of his letter would be: You are giving an unfair advantage to HQ compared to VY, by putting the HQ contract terms under seal of secrecy. What law allows you to set this kind of advantage for one party over another?

The PSB Responds

Within days, the PSB responded, in a letter dated January 4 and signed by Kurt Janson, General Counsel. Once again, I have a long quote from this letter at the end of this post. Janson never mentions Vermont Yankee.

My translation of Janson's letter would be: We know that markets are more efficient when they are more open. However, the greater good is to help Vermont utilities with theoretical new out-of-state contracts. We're not going to comment on the effect of this secrecy on VY. Thanks for writing.

Truth in Purchasing?

A few days after this exchange, HydroQuebec announced that its going-in price to Vermont would be 5.8 cents per kWh instead of the current price of 6.6 cents. In Vermont, rejoicing was general. Wow, did we get a good deal! Wow, now we have transparency!

And also. "Wow, now Entergy knows the price it has to beat!"

Perhaps McClaughry's letter had something to do with this revelation. Perhaps it didn't. His letter could have been irrelevant, or the proverbial straw that broke the camel's back of secrecy. We will never know.

So, Now We Know The Deal?

I, for one, am not impressed with the new information. The HQ price still floats with the market price. The price is still tied to the "clearing price" which is set by natural gas. Entergy was offering a fixed price, and the HQ is still a variable rate mortgage.

As a matter of fact, I am less impressed now than I was before. My life experience says that only the slippery mortgage brokers and credit-card companies offer too-good-to-be-true teaser rates, going in to the contract. This 5.8 cents business is a teaser rate IMHO.

What Vermont Yankee Should Do

I am going out on a limb here. I have a negotiating suggestion for Vermont Yankee. Of course, they don't ask me for advice.

VY should go to the utilities and say: Our going-in rate is 5.3 cents. Half a cent below what HQ has offered. However, our tracking system for rate rises must be exactly the same as HQ. So, if the price of power goes up to 8 cents and HQ is getting 8, we get 7.5. Etc. We're always below them, but we get the same market-based deal as they got.

This would be a great deal for Vermont Yankee. They would make a fortune. It would be the lowest price producer, and still make a fortune. Of course, some regulators might object that ratepayers would be soon paying more than if they had taken VY's 6.1 cent fixed price offer. To which Vermont Yankee could answer: you had your chance, friends. You missed it.

I like it.

Aside: I expect electricity rates to rise, rather steeply, in a year or so. The rise will start when the hoopla about the Marcellus shale dissolves into the reality that most shale wells are expensive wells that don't produce much gas. (Yes, I know. This assertion is worth its own blog post. I'll get to it.) End Aside.

Here's a video on the deal from WCAX. Note how often the words "market" and "market smoothing" appear. A great deal of excitement for a 5.8 cent teaser rate.

The Letters

From McClaughry

Dear Mr. Chairman:

In their prefiled testimony for the Joint Applicants (Vermont power companies) in this case, Deehan and Cole state:

As described in the Petitioners’ Motion for Confidential Treatment of Prefiled Evidence, the details of the PPA’s pricing provisions are subject to confidentiality limitations under Section 11.15 of the PPA, and are therefore described in more detail in confidential testimony that we will submit under seal upon approval by the Board of confidential treatment. For this same reason, portions of the PPA, Confidential Exhibit Petitioners’ Joint-3, have been redacted.......

Your Board has an obligation to determine whether a PPA merits a certificate of public good. At the same time that the Board is deliberating on this docket, the General Assembly will be debating whether to allow Entergy Vermont Yankee to pursue a certificate of public good for extending Vermont Yankee’s operating period for another twenty years. It seems clear that a commitment by Entergy Vermont Yankee to offer these same utilities a multi-year power price more favorable than that agreed to by the Buyers and HydroQuebec would produce strong added support for a favorable vote in the General Assembly.

This it seems to me imperative that legislators be informed of just what that power price is under this PPA. If the parties to this PPA have agreed on that price, as their prefiled testimony avers, why is in the public interest for the Board to compel nondisclosure to legislators debating a similar and very relevant issue? .....

It appears to have been argued by HQ, and supported by the purchasing utilities, that the PPAdeal is dependent upon nondisclosure. Why is in the public interest for the board to grant that request? If that information is kept secret by a public body, the interest of Entergy Vermont Yankee, HQ’s leading competitor, in offering a PPA with terms that would favorably influence the chances of gaining legislative approval for its application – approval that HQ is not required to obtain – would be damaged or thwarted.

I would appreciate it if you or your counsel would, for the record, state the legal authority and rationale for the Board keeping the HQ PPA terms secret from the legislature and the public.

For the record, I make this request solely on behalf of this Institute, and I have not discussed this request, directly or indirectly, with any parties to Docket 7670.

Yours truly,

John McClaughry

President (acting)

(Senator, 1989-92)

From Kurt Janson, General Counsel of the PSB

...public disclosure of the Confidential Information relating to price and credit arrangements would provide an entity seeking to sell power to, or purchase power from, the Buyers (or HQUS) with knowledge as to the Buyers' (or HQUS's) position on several of the most significant factors at issue in negotiating power contracts, putting them at a significant competitive disadvantage. Price and credit terms relating to wholesale power agreements are commercially sensitive and are typically not disclosed to the public.....

The Vermont utilities know the specific terms of the HQ power contract, and when they negotiate with other sellers of power the Vermont utilities will be able to compare potential deals to the HQ contract. Therefore, making the HQ terms public would not be expected to result in better power deals for Vermont; to the contrary, it would provide potential sellers with valuable information that they otherwise would not have regarding the terms and conditions that the Vermont utilities might ultimately accept.

As a general matter, more transparency about the specific terms of power purchase agreements is still desirable both because of the public interest and because competitive markets tend to operate more efficiently when market participants have greater information. However, given the national trend toward greater confidentiality about pricing information in recent years, there is a concern that requiring Vermont distribution utilities to publicly disclose commercial1y sensitive pricing terms may put them at a competitive disadvantage in relation to out-of-state sellers and buyers of power. (Emphasis added by blogger.)

Janson then continues that this desire for more efficient markets must be balanced with the desire not to undermine the bargaining position of Vermont utilities. He never mentions Vermont Yankee.

Image of Spillway of Robert-Bourassa Generating Station from Wikipedia.