Posted tagged ‘utilities’

Does Burning Money Increase MoCo’s Carbon Footprint?

28 April 2014


Council member Roger Berliner sponsored a set of environmental bills that made it through the council last week.  The worst one — which was passed, of course — requires the county to purchase 100% of its electricity from “clean fuels”.  The current requirement is 30%.

This initiative is all cost, and no benefits.

Based on the county’s fiscal impact statement, the law will increase the county’s energy expenditures in the range of $279,000 – $545,000 per year.  That gets over a million easily, in less than four years.Plaudits to Nancy Floreen, who argued for looking at this from a budgetary standpoint.  None of the other council members thought that was worthwhile.

And what do we get for those millions of dollars? Nothing.   The incremental change from this bill is so infinitesimally tiny that it adds up to nothing. No change in greenhouse gas emissions, no impact on climate change. Zero. Just a meaningless statement and bit of bluster.

So if the environment is not improved, who does benefit from those millions of taxpayer dollars? Well, council members like Berliner and George Leventhal get to crow about their wondrous accomplishment. (Leventhal excelled at playing the pompous windbag on this one.  He called it “the most urgent public policy challenge that we face.”   Really, George? More urgent than homelessness? Crime? Poverty? Educational failures for low-income neighborhoods?)

And certain energy producers, politically favored, get a more than tripling of the subsidy they currently receive. These producers are too expensive to compete, so they work through the political process to extract funds from MoCo taxpayers.

I can understand wanting to reduce emissions from fossil fuels.  I can understand reasonable policy proposals to do that.  But anyone with a lick of sense can also see what is purely symbolic, useless, and wasteful.This is a useless and expensive heap of corporate welfare, that allows the politicians to beat their chests, but accomplishes nothing. Nothing, that is, except take away funds from needs that really are urgent.



Public Service Commission Doesn’t Help the Public

15 April 2013

Nearly a year after the dreadful power outages of the 2012 derecho,  the Public Service Commission has finally taken decisive action, to show how well government can regulate utilities to protect consumer interests.  They’ve decided … to do nothing.

They did, however, note “a significant and unsatisfactory disconnect between the public’s expectations of the distribution system reliability… and the ability of the present-day electric distribution systems to meet those expectations.”

There are two basic ways to ensure that service providers are aware of the needs of their customers, and remain responsive to those needs.  One way is to promulgate and enforce government regulations on the service providers.  The other is to have market pressures and competition as the hammer to induce businesses to meet customer needs efficiently and effectively.

Once again, then, we see the impotence of government regulation when it comes to protecting consumer interests  Contrast it with the consumer sovereignty in a market system.  When products or services don’t meet their expectations, consumers don’t meet for a year to decide to do nothing.  They don’t need to become experts in the ins and outs of distribution systems and economic regulation.  Instead, they simply move their business elsewhere.  The state of Maryland should be focused on revamping the regulatory system to resemble a real market with choice, to enable electricity customers to do just that.

Windpower Boondoggle

3 March 2013

The fate of Governor O’Malley’s windpower boondoggle is  now in the hands of the Senate, as the House has passed the Maryland Offshore Wind Energy Act.  Although the envisioned project is relatively small, the corporate welfare effects are among the largest that the General Assembly has considered.   [Let’s define corporate welfare effects as the net loss to residents:  Amount of public money that will be fed to the well-connected corporation + other losses to residents.]

The bill creates an “Offshore Wind Business Development Fund”, funneling $17.7 million into the pockets of the project developers over five years.  Furthermore, according to the analysis of the State’s Department of Legislative Services,  both state and local expenditures  are expected to increase “significantly beginning in FY 2017 due to higher electricity prices.”

Sounds like a real win-win proposition, doesn’t it?  Only if you are one of the lucky developers poised to rake in both state subsidies and higher rates from the ratepayers, and then get further subsidies from taxpayers to cover the overruns.  For those corporations, it’s a guaranteed gain. For the ratepayers and taxpayers of Maryland, it’s a guaranteed loss.

Addressing PEPCO Problem — for real

4 September 2012

I thought it best to follow up on the snarky approach from my post on PEPCO solutions.  How about something a little more practical?

The problems that need to be addressed include (apparently) better maintenance of the infrastructure for distributing electricity, and improvement of PEPCO’s responsiveness, especially to repairing wiring and connections when storms cause outages.

How can these problems best be addressed?

First, forget about Councilman Berliner’s dream of a publically owned power company.  There is little empirical evidence to suggest that a publically owned utility would be more efficient or responsive than an investor-owned utility like PEPCO.

Keep in mind that PEPCO is already a monopoly – granted and enforced by the state.  The main problem with a government-granted monopoly like PEPCO is that the firm has little incentive to improve service.  Since the law precludes any competition with PEPCO, they don’t have to fear that customers will abandon them in favor of a different electricity provider.

How, then, can we provide incentive for PEPCO to do better?  In theory, oversight from the state is designed to pressure them to be more responsive to consumer needs.  And there have been many cries for the Public Service Commission to “crack down” on PEPCO.  But the PSC doesn’t seem to have successfully induced PEPCO to better service.  In fact, it almost seems like PSC has done the opposite.

The policy solution may go back to that problem of incentives.  Despite the monopoly they are granted, there are ways to improve the utility’s performance incentives.

1)      Emphasize competition, wherever possible.  Maryland law has already been changed to allow some flexibility and competition in generation of electricity.  You can choose which of several firms you would like to buy power from.  But in distribution  of electricity – that is, bringing it into your home — we have no competition yet allowed by law.  One way to do this is to emulate the model that is used for pay television services.  In much of the county, you can choose your service provider for pay television.  In addition to satellite services like Direct TV and Dish Network, service is provided by Comcast, RCN, and Verizon.   If you get junk mail, or see television commercials, you know how fiercely those three firms battle for customers.  For the most part, they are not building redundant wiring networks.  They are competing for the right to use the existing network infrastructure (both cable and telephone) to provide services to customers.   A similar model is used in telephone service.  You don’t have to purchase your telephone service from Verizon; there is an array of CLECs (competitive local exchange carriers) that you can contract with.  This doesn’t even discuss VOIP or other options.  All of this competition has helped lower rates and improve service;  wouldn’t it be nice to see the same thing happen for electricity distribution?

2)      Reduce barriers to entry.  We need to make sure that the legal framework for electricity is advancing to meet the technological framework, which is changing all the time.  Cogeneration, home solar, local generation – these are just a few ways for people to get electricity and (at least partially) bypass the PEPCO network.  Any legal or administrative obstacles to increasing these options need to be removed.

3)       Fix the “decoupling” policy.  Decoupling was the legislative solution to an apparent paradox (or conflict of interest) that confronts electric utilities.  On the one hand, the state wants to conserve energy, and utilities are required to subsidize energy efficiency programs for consumers.  That left the utilities in the awkward position of urging customers to buy less from their businesses.   The decoupling policy was the remedy: it guaranteed income to the utilities even if power consumption dropped.

The problem is that this creates a tremendous disincentive for utilities to be efficient about restoring power.  As UMBC economist Tim Brennan phrases it, “[T]he silliest thing we could do would be to promise these utilities the same profits regardless of how much electricity they deliver.”   The PSC has already taken steps to limit the charges that utilities can make, but the issue needs to be addressed more comprehensively.

Predictably Preposterous Policy Prescriptions for Pepco

15 August 2012

Everyone recognizes that Pepco’s performance in maintaining stability of electricity supply is poor.  The question is: What to do about it?  Here are some knee-jerk, mindless suggestions we’ve heard from local politicians, and my quick assessment:

– The problem is corporate greed.  PEPCO spends too much to compensate executives and shareholders, and not enough on maintenance.  The Public Service Commission needs to regulate them more strictly, and come down hard on them.  [Fantasy]

– Montgomery County needs to take over PEPCO’s assets and run it as a publicly-owned utility. MoCo could do a better job and be more efficient and responsive.  [Drug-addled fantasy]

– The Federal government needs to take it over. [Complete schizophrenic dissociation from reality]


WSSC: Performance and Accountability Problems

11 July 2008

After the big break in the Washington Suburban Sanitary Commission water main in Derwood, there’s been a lot of concern over the failures in the county’s emergency notification system.  Not only were there technological problems, but apparently the only two people able to set the notification system in operation were both on vacation at the same time.  (You can’t make this stuff up).   As a result, notification of health issues and the boil-water order were delayed.  Residents are up in arms, and the County Council and the County Executive are promising to look into the situation.

But it seems like no one is paying attention to the other issue here: the integrity of the piping and the rest of the infrastructure that provides water to our taps.  We’ve had a number of water main breaks in the County in the past couple of years, and the problem has largely been attributed to aging pipes, and insufficient attention paid to maintenance and replacement.   WSSC has budgeted to replace 27 miles of pipeline in each of 2007 and 2008.  However, they’ve only replaced 16 miles in 2007, and they are scheduled to replace only 25 in 2008.  (Anybody want to bet on how much actually gets replaced this year?)

What’s the problem?  Is there an issue with management, or planning, or how they handle revenues from users? We won’t really know, because WSSC has refused to allow an audit by the Montgomery County inspector general. There are questions about WSSC’s performance, and they are stonewalling against measures to gain accountability.

It’s time to take a good, hard look at the advantages of privatizing the water utility.

Symbolic Politics of Global Warming

29 May 2008

Council member Roger Berliner is “committed to ensuring that Montgomery County is at the forefront of the fight against Global Warming.” As if anything Montgomery County did – compared to one or two new power plants in China – had any contribution at all to global warming.

At his behest, the council has passed legislation this month, committing the county to a passel of activities that, at best, will be harmless. Some of the features:

– Commits the county to developing a Climate Protection Plan, to reduce greenhouse gas emissions in MoCo by 80%.

Does the council realize what that means? Or is it just pretty talk? An 80% reduction would mean that all roads in the county would become Lexus lanes – because only the wealthy would be able to afford to drive a car. Air conditioning would be a thing of the past, as the cost of electricity would skyrocket.

– Directs Montgomery County government to develop a “renewable energy action plan”. Part of the plan is examining the feasibility of creating a “Sustainable Energy Fund – “a non-profit organization which develops end-user markets for products and services relating to energy efficiency and renewable energy.”

Oh, good. It’s not dumb enough that the county is in the liquor business and the nightclub business and the music entertainment business and the summer camp business. Now the county is going into the electric utility business. I’m sure that will be a real productive exercise.

And for what? As a result of these edicts, the total greenhouse gases in the world – which is the only measurement that counts – would be virtually unaffected by the privations of one stupid county, directed by one thoughtless council member.

Best yet, this meaningless and damaging bill was declared an emergency, giving it expedited consideration and enforcement. “The Council declares that this legislation is necessary for the immediate protection of the public interest” (italics mine).

I don’t know which of those terms – “necessary”, “immediate”, or “protection” is more untrue. All together, though, they add up to one big farce.