"First they ignore you, then they ridicule you,
then they fight you, then you win."
-- Mohandas Gandhi
Over a year ago, AEP/FirstEnergy began the process of trying to “recover” what they claim is $120 million that PJM rate payers, including rate payers in WV, owe them for the stranded costs in their failed PATH transmission project. Here is my main post on the case from December 2012.
Since then, FERC referred the case for settlement discussions. Because I am an intervenor in the case, I was bound by FERC rules to keep information on those talks confidential. Settlement talks broke down last month, so the case was referred to a hearing judge to begin the process of moving the case toward a full evidentiary hearing. And now the case is back on the public record, so I can continue covering it.
Those of you who are interested in following the case can see the documents that have been, and will be, filed in the case by typing the case number, which is ER12-2708. FERC’s system is a little goofy, because they have dockets and case numbers all over the place, and your entry in the proper field must be the exact docket number in their system, or you can’t retrieve anything. Go to this page and enter “ER12-2708″ into the field labeled “Docket Number” and hit the submit button at the bottom of the page. That will call up all the documents that have been filed in the PATH abandonment cost case to date.
You should follow this case, because it will have a direct impact on your electric bill if you live in the PJM region, as I do. We got only cost and harm from the PATH project, now, under the Cheney administration’s transmission subsidy program, AEP/FirstEnergy want us to pay even more.
I have talked a lot about how the electric power industry has begun a major campaign against decentralized solar power. Well, here is a really scary story for power companies.
DC Water, which processes all the sewage for the District of Columbia, is going to be producing 1/3 of the electricity it is now buying from PEPCo, DC’s only electric utility, from a new methane digester system. Here is the story from the Washington Post. DC Water will now have the capacity to produce 13 megawatts of power from this system, 1/3 of the sewage plant’s current load.
The other wonderful part of this system is that because parts of the new system operate at over 350 degrees, the resulting sludge at the end of the process, will now become a class A fertilizer that can be used directly on food crops, instead of the sludge’s past class B rating. This new rating will generate even more income for DC Water which will be passed on to its rate payers. And the new fertilizer will allow nutrients and organic matter to be returned to US soils to close an important soil/health loop in our agricultural system as advocated by Sir Albert Howard 80 years ago. Here is a link to Howard’s thinking of the connections between large scale sewage systems and maintaining soil fertility.
Needless to say, this development is very unusual in the US, but is common in Europe. Naturally, DC Water had to buy this technology from a Norwegian company because the US no longer leads the world in energy technologies.
Decentralized power comes in all shapes and forms. PEPCo just lost 1/3 of the load of its biggest single customer. Ruh roh.
Well, here’s another report clearly illustrating that the cost of energy efficiency investments is far less expensive than all other forms of electricity generation. Here is a chart from the recent ACEEE report on comparative levelized cost of EE versus construction of new electricity generation:
Why does this chart and report matter to West Virginians right now? Because the WV PSC, in its tortured decision to dump the obsolete Harrison coal-fired plant on WV’s FirstEnergy companies simply brushed aside investment in energy efficiency in our state’s electrical system. And, because the PSC just approved the transfer of a big chunk of Unit 3 of the John Amos coal-fired plant onto the electric bills of WV’s AEP customers at Appalachian Power. The PSC is still considering Ohio-based AEP’s plan to dump half of the Mitchell coal-fired plant onto AEP’s Wheeling Power rate payers. AEP officials testified in the PSC case that the levelized cost of the Mitchell plant is about 6.8 cents per kwh, far above the levelized cost of energy efficiency investments that would make that plant unnecessary.
Even the WV Division of Energy, in its new state energy plan, pointed out that energy efficiency investment is far less expensive than power plants. But Gov. Tomblin and the PSC and the other WV politicians all ignored this part of their own plan and continue to pimp the coal industry and coal-fired power plants.
We’ll let ACEEE’s Maggie Molina have the last word here:
The results of our analysis clearly demonstrate that energy efficiency programs are holding
steady as the least-cost energy resource option that provides the best value for America’s
energy dollar. Data from a large number of diverse jurisdictions across the nation show that energy efficiency has remained the lowest-cost resource even as the amount of energy
efficiency being captured has increased significantly. At an average cost of 2.8 cents per
kilowatt hour (kWh), electricity efficiency programs are one half to one third the cost of
alternative new electricity resource options such as building new power plants.
On April 1, the WV PSC issued yet another press release touting WV’s relatively low electric rates. The PSC and the WV Consumer Advocate (and the WV coal industry) love to crow about WV’s low rates, but they are looking at the wrong number.
While WV has the sixth lowest residential electric rate in the US, the US Dept. of Energy’s report on average residential electric bills tells a different story. In average monthly residential electric bills, WV ranks 29 from the lowest. The table below is for 2012, because that is the Energy Information Administration’s most recent calculation.
|2012 Average Monthly Bill- Residential|
|(Data from forms EIA-861- schedules 4A-D, EIA-861S and EIA-861U)|
|State||Number of Customers||Average Monthly Consumption (kWh)||Average Price (cents/kWh)||Average Monthly Bill (Dollar and cents)|
|District of Columbia||231,550||721||12.28||88.51|
So why, if WV’s rates are so low, are WV’s electric bills so high? There is a simple reason. Take a look at Massachusetts, with residential electric rates 50% higher than WV’s. The average residential electric bill in Massachusetts is only $93.53, in large part because Massachusetts legislators, regulators and power companies have created one of the best energy efficiency programs in the US. Vermont’s average residential rate is over .17 per kwh, but the state’s average monthly electric bill is more than ten dollars less than WV’s. Vermont has one of the best energy efficiency programs in the US.
WV has a lot of poor and working people who cannot afford high electric bills, but that is exactly what our state’s failed leadership has created.
So the next time you hear the PSC bragging about WV’s low electric rates, remember one thing – We don’t pay electric rates, out here in the real world, we pay electric bills.
It is disgraceful that WV media outlets, including my good friends at the Hur Herald, as well as the major news outlets like the Charleston Gazette, uncritically xeroxed the PSC’s press release without digging deeper into this story. Perhaps if WV media outlets had editors who encouraged real reporting on electricity issues in our state, legislators and regulators would do their jobs and create an electrical system that works for citizens of WV, instead of the two Ohio-based holding companies that provide almost all the electricity in WV.
Oh, limiting carbon emissions is so complicated. How are we ever going to get it done? You’ve got credits and offsets and trading. Oh, it’s just so hard.
No it’s not. You just have to get serious. The method is very easy. Tax fossil fuels, collect the tax and then rebate it to the people who are going to create real solutions: citizens and businesses. The government only keeps enough of the money to administer the program.
Impossible, you say?
British Columbia has been doing it for five years, and the carbon tax is working great. Not only have people in BC reduced carbon emissions but the carbon tax has actually lowered personal income taxes:
It [the carbon tax] also saved many of them a lot of money. Sure, the tax may cost you if you drive your car a great deal, or if you have high home gas heating costs. But it also gives you the opportunity to save a lot of money if you change your habits, for instance by driving less or buying a more fuel-efficient vehicle. That’s because the tax is designed to be “revenue neutral”—the money it raises goes right back to citizens in the form of tax breaks. Overall, the tax has brought in some $5 billion in revenue so far, and more than $3 billion has then been returned in the form of business tax cuts, along with over $1 billion in personal tax breaks, and nearly $1 billion in low-income tax credits (to protect those for whom rising fuel costs could mean the greatest economic hardship). According to the BC Ministry of Finance, for individuals who earn up to $122,000, income tax rates in the province are now Canada’s lowest. [emphasis added]
Behind all the squawking and whining by WV politicians there is Section 111d of the federal Clean Air Act. Section 111d is the part of the Clean Air act that requires the federal Environmental Protection Agency (EPA) to provide states with performance standards for emissions from existing power plants. In the last few years, EPA has determined that Section 111d allows the agency to establish guidelines to regulate the emission of dangerous carbon compounds from existing power plants, primarily plants burning fossil fuels. The US Supreme Court has determined that regulation of carbon emissions “fit well within the Act’s capacious definition of ‘air pollutant’” and can be regulated by EPA under the Clean Air Act.
In a paper published this month “The Case for End-Use Energy Efficiency Programs in the Section 111(d) Rule for Existing Power Plants” by Kate Konschnik and Ari Peskoe, the authors explain how Section 111d will be implemented:
Section 111(b) of the Clean Air Act directs EPA to publish a list of categories of stationary sources that in the Agency’s judgment, “cause[ ], or contribute[ ] significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare.”11 EPA sets standards of performance for new sources in each category.12 Under Section 111(d), EPA issues emission guidelines for existing sources in the same category;13 States then implement performance standards that are “no less stringent than the corresponding emission guideline(s).”
Some have argued that Section 111 requires all emission reduction measures to occur due to action taken at a source. However, the language of the statute does not support this contention. The heart of the Section 111 program is the standard of performance, defined in Section 111 as:
a standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any nonair [sic] quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.
This definition does not limit EPA’s consideration of emission reduction systems to those that are implemented at a source or facility. To the contrary, the breadth of the “best system of emission reduction” and the fact that the Clean Air Act provides no definition for this term implies a broad delegation of authority, providing EPA with flexibility in setting and approving performance standards. The definition’s multi-factor balancing test provides some guidance, while enabling the Agency and the States to craft cost-effective standards that make sense for each source category.
The rest of Section 111 likewise supports EPA’s broad inquiry into “adequately demonstrated” systems. There is no language requiring the performance standard to be achieved at each source. Section 111(b) directs EPA to set standards of performance “for new sources”; Section 111(d) requires states to “establish[ ] standards of performance for any existing source”. These provisions do not constrain the setting of performance standards to systems of emission reduction occurring within the source’s fence line. [I have removed footnotes for this post, but they can be found in the report. I have also added emphasis.]
Note the passages that I have bolded above. Section 111 allows states to meet pollution reduction targets by any “best system of emission reduction” using “adequately demonstrated” methods. Konschnik and Peskoe provide a lot more explanation of the broad scope and flexibility that states have to implement reductions in carbon emissions, but this is the heart of their point about the law’s language and clear purpose: states have the flexibility to meet new emissions targets with a wide range of system wide solutions.
WV politicians, of course, have responded to all regulation of the coal industry, including the coal-fired power plants owned by WV’s two Ohio-based holding companies, AEP and FirstEnergy, with a constant bleating about a “war on coal.”
Last month, the WV DEP, the state agency that will be in charge of developing WV’s Section 111d implementation, published “West Virginia’s Principles to Consider in Establishing
Carbon Dioxide Emission Guidelines for Existing Power Plants” laying out the plans of WV’s coal establishment to resist regulation of carbon emissions by EPA.
Here are the five principles laid out in this document:
A. EPA should regulate CO2 emissions from existing electric generating units (EGUs) under provisions for the protection of public welfare because CO2 has not been demonstrated to have any direct adverse impact on public health. The agency should make a formal finding that adverse effects on public health have not been demonstrated as specified in 40 CFR §60.22(d)(1), and acknowledge that the provisions of 40 CFR §60.24(d) apply. This would provide maximum state flexibility in developing state CAA §111 plans.
B. EPA should establish mass-based emission guidelines in terms of reductions from a 2005 base year. The agency is required to consider the different sizes, types and classes of existing units, reflective of the level of emission control achievable through the application of the site-specific Best System of Emission Reduction (BSER) at all designated facilities. The guidelines should reflect the use of practical and cost-effective CO2 control measures achievable within the fence-line.
C. EPA should establish CO2 emission guidelines that allow maximum flexibility by states to meet emission reduction targets. Moreover, the agency must fully consider the wide range of variation among the existing power plant fleet and recognize that states have broad discretion to balance the emission guidelines and compliance times against other factors of public concern in establishing emission standards, compliance schedules and variances. For example, some states may want to credit GHG reductions realized through other policies and any other state mandated programs such as demand-side energy efficiency improvements.
D. EPA should extend the deadline for submission of state plans under CAA §111(d) to three years, so as to parallel the requirements for State Implementation Plans (SIPs) under CAA §110 and provide states adequate time for plan development. CAA §111(d) does not specify any specific time frame for plan submittal, and 40 CFR § 60.27(a) provides that the Administrator may, whenever he deems necessary, extend the period for submission. CAA §111(d) also does not specify any time frames or milestones to achieve any related state emission reductions. EPA must recognize that climate change is a long-term, multi-national problem that requires long-term solutions (measured in multiple decades) and there is no quick fix available. Compliance milestones should be extended accordingly.
E. EPA must allow states to take into consideration, among other factors, the remaining useful life of the existing sources when establishing performance standards, as required by CAA §111(d)(B). [emphasis added]
Later in its document, the DEP describes its approach to using energy efficiency improvements to meet Section 111d requirements:
There are two basic ways to reduce the generation of electricity from existing power plants – supply-side efficiency improvements or demand-side efficiency improvements. Supply-side efficiency improvements include site specific energy efficiency measures that improve heat rate (MMBtu/MW-hr) and therefore, lower CO2 emissions at the plant. Conversely, demand-side electricity reductions are the result of efficiency improvements that result in the use of less electricity by the consumer – industrial, commercial or residential. These demand-side energy efficiency measures can include, among other things, the use of more efficient lighting, air conditioning systems, heating systems, or the installation of insulation, energy efficient windows or doors. Demand-side efficiency improvements may often be outside the control of the source and, therefore, may present limited applicability as control options. [emphasis added]
So DEP, not surprisingly, starts off their “principles” with a toned down version of climate change denial when they assert that climate change has not produced any public health impacts. The agency maintains a focus on power plants and “inside the fence” measures to comply with Section 111d and whines for delays and special treatment for the plants owned by Ohio’s holding companies. This is not a plan.
The DEP’s discussion of energy efficiency dismisses demand side efficiency programs by saying they “may represent limited applicability as control options.” Really? Tell that to PJM Interconnection which manages power plant capacity throughout the region and directly controls power plant capacity in WV. PJM has a huge and well established system for documenting and controlling demand side resources. DEP’s claim is so unfounded as to be ludicrous.
As explained above by Konschnik and Peskoe, the DEP’s position is in directly contradiction to the letter of the Clean Air Act which includes all system wide means of reducing emissions.
Why would this be so? Why would the WV DEP chose to be so wildly off base with its “principles”?
For the simple reason that WV has no existing energy efficiency or renewable power programs that have an “adequately demonstrated” impact on reducing emissions as required by the Clean Air Act. Neither AEP nor FirstEnergy has energy efficiency programs that come anywhere near the demonstrated effectiveness of programs in states like California and Massachusetts. WV has no standards for energy efficiency improvements in state statutes. The WV Legislature only this year passed a flaccid integrated resource planning requirement that specifically exempts FirstEnergy for a number of years.
Instead of bellowing about the “war on coal” WV politicians should have been protecting West Virginians by establishing strong energy efficiency programs in our state. Instead, the Legislature has welcomed the WV Coal Association to block any new laws that would require a change from WV’s total commitment to coal burning power plants.
The WV PSC has done legislators one better by allowing both AEP and FirstEnergy to shift ownership of three coal-fired power plants (the AEP transfer is still not complete) to their WV regulated subsidiaries, insuring that WV rate payers will bear the full cost of Gov. Tomblin’s and DEP’s failed plan for resisting new Section 111d requirements.
Of course, none of this discussion includes the fact that many states will include offsets and credits to Section 111d implementation based on the demonstrated effectiveness of their solar carve out programs and real renewable energy credit programs. WV has none of this. WV’s ARPS coal promotion scheme has, in fact, dug WV’s Section 111d hole deeper by actively suppressing renewable power generating capacity in our state.
So WV lies at the mercy of new federal regulation of carbon emissions because WV politicians of almost all stripes have failed in their job to insure the well being and prosperity of our state. These politicians have chosen the corporate interests of holding companies and faceless corporate shareholders in Ohio and other states over innovation and businesses in our own state.
If WV politicians had put in place strong energy efficiency programs and incentives for the development of renewable power generation in WV years ago, as in other state, we would now have programs with demonstrated effectiveness that could be used to reduce the cost of complying with the new Section 111d requirements. But they failed. And West Virginians will pay the price in rising electric rates and lost jobs.
While power companies are pushing the argument that solar power generators should be forced to sell power back to the grid at a discount, Minnesota has created a formula that values solar power at its real value. The state’s PUC recently voted to value the power sold through MN’s new solar gardens program at its real value, using its “value of solar” tariff.
MN’s value of solar tariff is the first rate tariff that takes into account the damage that fossil fuels do to the American economy.
Utilities have complained that paying the retail rate, under a policy known as net metering, amounts to an unfair subsidy for customers that own solar panels at the expense of those who don’t. Meanwhile, solar advocates say the retail rate underestimates the value of solar panels to the grid and society.
Minnesota Gov. Mark Dayton signed a bill last year requiring the state’s energy office to develop a formula that utilities may use to determine how it should compensate customers who generate electricity from solar panels.
‘This isn’t an incentive’
Wednesday’s debate, which follows nearly two years of discussions among state officials, utility representatives and solar advocates, focused largely on the cost of carbon emissions, of which there were three main options.
One was referred to as the “established externality value” and was created by Minnesota utility regulators two decades ago as a tool to help the commission evaluate resource options.
The value has been updated for inflation but never fully reevaluated, and the commission recently agreed with environmental groups that the numbers are “outdated and no longer scientifically defensible.”
Another was referred to as the “planning value” and was created in recent years to help Minnesota utilities and regulators estimate the likely cost of complying with future carbon regulations. That number doesn’t reflect the cost to society in health or environmental damages from carbon, something the Minnesota law requires to be included in the formula.
Instead, the commission voted to adopt the federal government’s social cost of carbon figure, which environmental groups and the state’s Department of Commerce argued was the best fit for a value-of-solar formula.
“The social cost of carbon is specifically focused on measuring what is the economic and health damage of emitting one more ton of carbon,” said Erin Stojan Ruccolo, director of electricity markets for Fresh Energy.
In other words, MN is one of the few states in the US whose utility regulators operate in the real world where people die from fine particulate matter inhalation and mercury from coal-fired power plants poison water.
MN has also created one of the most extensive community solar programs in the US, where families and businesses can share the benefits of large, local solar panel arrays. The “community solar gardens” provide a real step forward in solar power generation. The community solar projects allow people who don’t own property with good solar exposure to get their electricity from locally generated solar arrays.
Could we do this here in WV? Of course we can, but the state’s coal industry has our energy system and business community in a death grip.