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. 

Employee Buyout Unlikely: Private Communications

Rod Adams and the Employee Buy Out

In March, Rod Adams visited Vermont and toured Vermont Yankee. He was impressed by the excellent condition of the power plant. He also thought about Vermont's heritage of employee-ownership, dairy cooperatives and so forth.  Rod began to think that the employees could buy Vermont Yankee, and run it as a "B" corporation that has social goals.  Such a corporation is not required to maximize profits.

Rod didn't just "think."  He contacted people and made inquiries. He posted about this idea, and so did I.  We were hopeful about it.  (I list references at the end of this post.)

My Phone Rings: Private Communications

Information for my blog comes from reading articles in the press or attending meetings (such as Public Service Board meetings). I rarely get a phone call.  In this day and age, a phone call means "I want to tell you something, and I don't want to leave a digital trail. Don't quote me directly. This is background stuff only."

After Rod's posts, I got phone calls from all over the place: local people and nuclear supporters from other parts of the country.

When I came to summarize this "off the record" information, I realized what I heard was pretty much in the public record anyhow.  Or I heard people's opinions, things that they wanted to share with me without a record.

Oh well. They needed to call.  I needed to learn in the way that I needed to learn.  So here's what I learned.

Employee Buy Out is Close to Impossible

Here are some of the reasons that an employee buyout is close to impossible.

Employees would not benefit that much.

Most employees would not participate in a buy-out.  Most employees are focused on making their own choices between:

• getting the retention bonuses that Entergy has put in place versus 
• starting anew somewhere else.  

Most employees have very little interest in investing money and time in something that is uncertain and would not protect their families.

The new owners couldn't get licenses

In general, both the NRC and state agencies insist that nuclear plant owners have solid assets and a solid track record. A co-operative company formed by employees would not meet NRC criteria for a license or PSB criteria for a Certificate of Public Good.  This would be true even if the company was backed by a wealthy private investor.

Political and Fiscal Opposition

The current Vermont administration has been very set against continuing operation of Vermont Yankee.  They have expressed this by testifying against the plant in front of the Public Service Board, calling the plant "Entergy Louisiana" at every turn, and taxing it outrageously.

Lake Champlain

The "taxing it" part is the one that would be impossible to fight.  The state assessed a $12 million dollar "generation tax" on Vermont Yankee.  This tax only applies to plants that were "built after 1965 and are greater that 200 MW."  That is a very targeted tax, and there is no particular reason that the legislature can't increase it to $18 million or more, whenever they decide to do so.  The way the law is written, nobody but Vermont Yankee will be hurt by such an increase.

(Ummm, a completely unscientific survey conducted by Meredith Angwin reveals that most plants of this size pay a generation tax of less than $5 million dollars. Hey, as long as I am talking about "private communications," I may as well throw that one in, though tax records are public in general.)

There have been many other taxes, also, including a tax to clean up Lake Champlain (on the other side of the state from the plant) and to support Clean Energy projects. And there are other taxes. The state requires Entergy to pay the Red Cross for shelters in case of an evacuation: Entergy must pay the Red Cross a total of $700,000 over a period of four years.

It is nearly impossible for a business to fight taxes at this level. There is no reason to believe that employee ownership would lead to any less state taxes.  Vermont Yankee would still be a nuclear plant and they would be employees of a nuclear plant.  They would be worse: they would be owners of a nuclear plant.  The taxes would stay.

Conclusion

I conclude that an employee buyout of Vermont Yankee is close to impossible.

I am sorry to conclude that there will be no employee buy-out, but I thought I had better make this statement explicit on my blog.

 ---------

References:

Rod Adams

What a Waste---Vermont Yankee is in beautiful condition (March 28)

Vermont Yankee: Clean Kilowatt Cow That Deserves Saving  (May 1)

Save Vermont Yankee. If not you, who? If not now, when? (May 6)

Meredith Angwin

Saving Vermont Yankee: Rod Adams Moves Forward (May 7)

Employee Ownership (May 8)

Posts about Taxes:

Millions for education but not one cent for tribute (Meredith Angwin at ANS Nuclear Cafe, December 2013)

Vermont Yankee asked to pay $200,000 in 2014  Terri Hallenbeck at Burlington Free Press on how Vermont Yankee must continue to pay Red Cross for shelters. (Article undated, apparently early 2014)

A Lingering Lawsuit: The Generation Tax

Since I blog about Vermont Yankee, every now and again I have to update the legal issues.  So here we go...again.   The first lawsuit is about the Generation Tax.

The Generation Tax: The First Lingering Lawsuit

What it is: A tax law written so narrowly that only Vermont Yankee was affected by it. This tax was challenged by Entergy in federal court

History: The legislature passed a law which increased the "generation tax" on Vermont Yankee (fee to the state per kWh sold) to a total of about $12 million a year.  This tax was designed to force Vermont Yankee to continue to make payments to the state at the same level as it had been paying the state under Memorandums of Understanding (signed contracts with the state). However, these contracts ended in March 2012.

A federal court called some of those payments  "a form of blackmail (extorted by the state) for approval of construction (by Entergy)," but at least they were signed contracts.  The new twelve million dollar tax, however, is a tax imposed by the state on "power plants with a nameplate capacity of over 200 MW."  There's only one such plant in the state. When they passed this law, legislators were warned by lawyers that such a closely-directed law would probably be challenged in court. (See page 12 of this Entergy filing.)

What happened recently:  Entergy lost in federal court and in appeals court.  The tax continues in effect.

On the other hand, courts do not like to rule on constitutional issues if they can find another way to decide. Both federal courts ruled mostly on jurisdictional issues, claiming that Entergy should have filed suit in the state courts before coming to the federal court.  You can see these rulings on this page, maintained by the Attorney General of Vermont: Generating Tax Entergy Litigation.

In the sequence:

• the federal court dismissed the case,
• Entergy appealed the dismissal 
• the appeals court ruled against Entergy.  

The appeals courts said that that Entergy has to start the appeals process in state courts.

You can also read a review of the case by Gabriella Khoransanee at FindLaw, a website for legal professionals.

Calvin Coolidge tips hat

By the way, a big hat tip and kudo to William Sorrell, Vermont Attorney General, for keeping up these user-friendly and complete pages on the various lawsuits.

What's next:   Khoransanee expects the legal challenges to the tax will continue in other courts, as suggested by the federal court rulings.  To some extent, the whole thing is going to be moot pretty soon, because Vermont Yankee is planning to close.  At that point, Vermont Yankee will no longer pay a "generation" tax, because it won't be generating electricity.

However, twelve million dollars for a year's worth of tax is twelve million dollars.  I suspect both sides will consider it worthwhile to keep litigating about this sum of money.  I think Entergy will follow the guidance of the federal court, and begin the litigation process again in the state courts.