Category Archives: Ratemaking

What Is Prudent?
 Red Flags Clearly Ignored
 In Vogtle 3&4 Project

Environment, Nuclear, Ratemaking, Utilities, , ,

Georgia Power is in the midst of a prudence review of its spending at the Vogtle 3 and 4 nuclear project—a review that undoubtedly will be lengthy, comprehensive, and mind-numbingly dull, turning on such issues as whether given decisions were “reasonable given the facts and circumstances which were known or reasonably should have been known at the time the decision was made.”1The real question though isn’t whether Georgia Power has spent customers’ money (and believe you me it is customers, not the utility, that are paying for this long-delayed, much over-budget project) prudently, but where the hell the adults where when the decision was made to go ahead with construction in the first place.

A close review of Georgia Power’s own documents (the filing can be found here) in the case shows two things: First, there were red flags aplenty when someone, anyone in the decisionmaking process would have been justified in standing up and saying, ‘Hey, wait a minute, what are we thinking?” Second, executives at Georgia Power apparently are color-blind and can’t see the color red, and continue to insist that everything—and I mean everything—they have done during the past decade to build the two new Vogtle units has been appropriate. For example, writing in the introduction to the company’s 885-page filing to the public service commission, Paul Bowers, Georgia Power’s chairman, president and CEO, offered up this classic: “Every dollar, and every day, that has been invested has been necessary to complete these new units safely and correctly. Our reports will establish that the new units could not have been built for less money or in less time than it has taken.” That may be, but that kind of logic can justify almost any expenditure. If the utility had paid attention to the red flags hanging everywhere it might have more accurately estimated the project’s cost and required construction time in the first place, which in turn might have led to a different decision by the commission.

The problems with the project go back to the very beginning. For starters, what were Georgia Power and Westinghouse executives thinking in April 2008 when they signed an engineering procurement and construction (EPC) contract for the two new nuclear units that was essentially a fixed price affair—even though detailed design drawings for the reactor’s construction were still years from completion, meaning, for the clear-eyed, that the contract price was little more than an estimate scribbled on the back of a cocktail napkin.

Continue reading What Is Prudent?
 Red Flags Clearly Ignored
 In Vogtle 3&4 Project →

Email, RSS Follow

Utility Execs’ New Worry:
 Economic Growth,
 Electricity Sales
 No Longer Linked

Forecasts, Ratemaking, Utilities, , ,

If you just glance at the chart below you will dismiss it out of hand—boring, you’ll yell, why are you wasting my time with that graphic, you’ll ask. But take a second, closer look and you’ll see that this graphic tells a compelling story, that of the collapse of the electric utility business model.

Retail sales of electricity in the United States have flat-lined for the past decade: In 2006 total retail sales were 3,669,919 million kilowatt-hours (kwh), in 2015 they were 3,724,525 million kwh. Do the math, that’s an increase of just 54,606 million kwh—or less than 1.5 percent total in 10 years.

Retail_sales_of_electricity,_annual

Continue reading Utility Execs’ New Worry:
 Economic Growth,
 Electricity Sales
 No Longer Linked →

Email, RSS Follow

Corporate Interest
 In Green Energy
 Requires New Thinking
 From Electric Utilities

Environment, Ratemaking, Solar, Utilities, Wind, , , ,

There was a news nugget in the American Wind Energy Association’s latest market report (released last week, the executive summary can be found here) that should be required reading for electric utility executives everywhere: Non-utility purchasers (that is, corporate and institutional customers) signed power purchase agreements (PPAs) for more than 1,300 megawatts of windpower in the fourth quarter of 2015—accounting for roughly 75 percent of the total.

Translation: Corporate America is going green and if you don’t give them what they want, they are going to get it on their own.

This transition has been under way for some time—Whole Foods, for example, said it planned to go all-in for windpower in 2006 and Walmart signed its first major windpower deal in 2008—but it wasn’t until 2013 that the change really began to take hold. Since then, it has been an entirely different story, almost an overnight transition from “meh” to “let’s do this.” According to data from RMI’s Business Renewables Center, corporate buyers signed power purchase agreements for more than three gigawatts of new wind and solar power in 2015, two and a half times the 1.2 GW of green power purchased in 2014. And this is just the beginning, says Hervé Touati, head of the BRC. “Despite this incredible success, less than 20 corporations have been active in this space since its inception. This is just a start….”

Continue reading Corporate Interest
 In Green Energy
 Requires New Thinking
 From Electric Utilities →

Email, RSS Follow

Nuclear Power Economics
 Requires Believing
 In `Impossible Things’

Forecasts, Nuclear, Ratemaking, Utilities, ,

It is increasingly clear that the economics of nuclear power don’t add up. Just in the past two and a half years, for example, seven plants at six sites have been shut down due to uneconomic performance or massive equipment repair costs—and other plants are on the chopping block. Similarly, the two ballyhooed active construction projects, in Georgia and South Carolina, are seriously behind schedule and way over budget. Nonetheless, utility executives and regulators in a number of states still have not gotten the message, notably in Florida and Virginia where executives at Juno Beach-based Florida Power & Light and Richmond-based Dominion soldier on, pushing new reactor proposals whose economics, simply put, just don’t add up and could leave ratepayers holding the bag for billions of dollars in nuclear construction costs.

The charade is particularly obvious in Florida, where FPL, a unit of NextEra Energy, annually goes through a process with state regulators to show the feasibility of a proposed two-unit, 2,200 megawatt addition to its existing facility at Turkey Point south of Miami. The yearly dance was completed last month with regulators signing off on FPL’s feasibility analysis as “reasonable” and approving the utility’s ability to recover from ratepayers the roughly $25 million it will spend this year on the reactor proposal.

A closer look at FPL’s analysis, however, shows that, at best, it stretches the boundaries of what can be considered reasonable. In particular, there is the little matter of whether the plant will be built and operated for 40 years, or 60.

Continue reading Nuclear Power Economics
 Requires Believing
 In `Impossible Things’ →

Email, RSS Follow

LEDs Pose Same Threat
 As Solar & Net Metering
 For Utility Ratemaking

Distributed Generation, Environment, Ratemaking, Solar, Utilities, ,

What is the difference between LEDs and residential solar panels? Plenty, clearly, but for a utility executive worried about slow or no load growth they amount to exactly the same thing—trouble.

I have written extensively about the broad utility-led campaign to quash state net metering programs (see these posts here and here). In general, this effort is based on the premise that net metering unfairly benefits residential solar users (by overpaying them for their generation) and shifts costs onto non-solar customers (by forcing companies to charge them for the fixed costs no longer being paid for by the solar customers through their electricity purchases). But that premise is also true of LEDs if you think it through.

This week I decided to replace a bank of six aging incandescent lightbulbs in my home’s master bathroom with new LEDs—something homeowners are doing with increasing frequency around the country. In years past, this would have been a non-event, but with LEDs’ vastly improved efficiency and lengthy lifespan the equation has changed significantly.

I did a little back of the envelope calculating about the switch: The six bulbs I pulled out consumed 260 watts of electricity when turned on (for reasons unclear to me I had five 40W bulbs and one 60W bulb installed in the bathroom), the new ones just 66W total (and they are brighter to boot, but that is another story). So, every time I turn on the bathroom light switch I am saving 194 watts. That’s an admittedly small amount of power, but if you figure the lights are on for three hours daily that adds up to 582 watt-hours per day. That’s still not much, but over the course of a month, these six lights could save me on the order of 17.5 kilowatt-hours (30×582=17,460 watt-hours or 17.46 kwh).

Continue reading LEDs Pose Same Threat
 As Solar & Net Metering
 For Utility Ratemaking →

Email, RSS Follow