Well, this is exciting as it is my very first post.
The following is my take on what is going on with our power industry and your money.
How many of you realize you are being taken to the cleaners by your "friendly" investor owned electric utility thanks to the ineptitude of the Environmental Protection
Agency (EPA) and the Public Utilities Commission (PUC)? To appreciate what I am going to say you have to realize utilities are in the business of making money. Their charter is to deliver reliable power. The beauty for them is they have a captured customer (us) and a PUC willing to let them make money.
Because of impending EPA laws to reduce NOx, SO2, mercury, acid gases and particulates, many utilities are doing their own economic analyses to decide what to do with their coal fired power plants. They will need to decide whether to shut them down, reduce the output, install emission controls to meet the future. Oh yes, I have to add if they shut them down they will need to build new plants to meet energy demands. Do you see where this is going?
First a little background.
The Public Utilities Commission (PUC)
Utilities need to get Capital spending projects approved by the State Public Utilities Commissions. If they can get the capital investment approved they can put it in the rate base and all the ratepayers pay for it. That's you and me. Oh yes, did I forget to mention they are also entitled to a profit on the capital investment?
You should check on the qualifications of the PUC Commissioners in your state as it will surprise you. Many don't have qualifications fit for their position. Unfortunately, they make decisions that cost us billions of dollars. They are no match against utilities that are armed with intimidating data (often biased to support their goal) and with the veiled threat that if they don't get what they want their customers will freeze to death and the world will collapse.
Environmental Protection Agency (EPA)
The EPA says they are on our side and want clean air, water, and whatever else they can make rules for. Unfortunately they are also subject to the politics of the day. Like most bureaucrats they make rules but don't have a clue about the economics for the rules they make. For example, they will mandate a power plant has to install a scrubber or SO2 and or a Selective Catalytic reduction system for NOx. They don't care that this will cost a 300MW unit (medium size) about 250 million dollars. Multiply this by hundreds of units and you have a staggering amount of money (hundreds of billions) but they just don't care. All they want is clean air or whatever the politics dictate. Now you may say this is a good thing but remember the utilities can recover this cost from the ratepayers and make a profit and we are the rate payers. The EPA doesn't care that there are less expensive technologies that can do almost as well and cost about 5% of the big stuff. For example, a power plant may be told to get a 70% reduction that will cost 250 million dollars but are not allowed to use a technology that can achieve 60% reduction that will cost less than 10 million dollars. The EPA doesn't care because they are only looking at the reductions, not the economics or the hardships to the ratepayers.
The EPA has just passed a couple new rules called CSAPR for NOx and SO2 and MATS for mercury, acid gases and particulates. These rules dictate what emissions levels are required. This is a very important ruling that will impact what we pay for electricity. Next they will impose rules for CO2 emissions (global warming) and force power plants to capture it and bury it in the ground. They will be forced to do even though there is no available economic technology to do it. This will be the death knell for coal plants. The government is saying we need to use solar and wind but this is will never be a complete solution. Even worse they offer subsidies to encourage its use. However, it is not their money, it is our money although most of you probably forget that. Remember, all the money the government has is taken from us. It is odd it then becomes their money to squander as they want. But then again it is our fault because we let them.
The Utility
You may think the poor regulated Utility is between a rock and a hard place with all these new rules. This is hardly the case. Remember all they have to do is convince the PUC they need to spend capital. Here is what they do. They will do an analysis to determine what make the most money for them, plain and simple. It will be done under the guise of keeping on our lights and heat. This is not a matter of ethics or morals or rate payer hardships, and is probably not even a consideration, it is bottom line business. I hope most of you can see the differences since they are not related. Good example is our darling Apple Computer the largest company in the world who just got caught in a possible conspiracy to control the price of electronic books. Our banks do this routinely.
So here is what many utilities will do. they will do the economics for installing the expensive stuff to reduce emissions which, by the way in many cases will cost more than the cost of the power plant when it it was built. They will not look at the less expensive technologies because they will say they are risk adverse and the expensive stuff is what the EPA wants us to do. Even if they didn't work the cost will be irrelevant compared to the expensive stuff, i.e. instead of costing 250 million it would cost 260 million. Unfortunately, utilities won't try them because they don't want to risk changing their economic models that will not optimize their profits.
Here is what happens
Utilities will then say one of the two following;
1. The plant is old, not very efficient, and it does not warrant the big investment for emission controls we are ordered to use. However, we will need more power in the future and therefore we need to build new power plants. Let's use natural gas because it is cleaner and gas is cheap (for now). The PUC then approves the project and the construction begins. Need I remind you again that we pay for it and the profit they are entitled to. These projects almost always over run the budget and we also pay for the over runs. Duke energy is a good example where a project is out of control, one billion dollars over run, and they want the ratepayers to pay for it. Their PUC only needs to say OK.
2. We need to install the most costly emission equipment because that is what the EPA want us to install even though we could meet the limits with less expensive systems and the PUC doesn't have a clue between the two. Oh, by the way the ratepayers have to pay and also pay for our profit.
Bottom Line
The bottom line is the ratepayers always have, do now, and always will get screwed unless we do something. The system is broken because we have incompetent and arrogant people running the EPA and the PUC which is a dangerous combination but this is just my point of view. You can expect your utility rates to soar in the near future for all this pollution equipment and more expensive alternative energy sources. You can also do something about it.
What to do
We need to take charge of our destiny and force the bureaucrats to do what we say and not make us do what they want.
We need to make them set goals for emissions that are reasonable and cost effective, especially in this economy. We also need to allow some time to implement them properly and not force them so quickly as is being done. The limits for emissions are set in a quasi arbitrary manner with no concern for the burden to the ratepayers. The EPA exaggerates the benefits and underplays the costs to achieve their goal. We need to step back and see what the cost will be compared to the benefit we get. Why would any rational person spend 250 million dollars to achieve 80-90% reductions in SO2 and NOx when they can spend 10 million to achieve 60% reductions. This frees up 240 million dollars at each plant to install wind and solar which makes a lot more sense. As for CO2, the current technology requires about 20% of the plant power to capture CO2 transport and bury it underground somewhere where it is supposed to stay forever without leaking. Therefore, for four plants we will need one more plant just to capture CO2. This doesn't include the huge capital investment for the equipment and the enormous increase in water needs. It is OK with the regulated utility if they can get approval from the PUC to make us pay for it. Why not, it means more profit.
The following is my take on what is going on with our power industry and your money.
How many of you realize you are being taken to the cleaners by your "friendly" investor owned electric utility thanks to the ineptitude of the Environmental Protection
Agency (EPA) and the Public Utilities Commission (PUC)? To appreciate what I am going to say you have to realize utilities are in the business of making money. Their charter is to deliver reliable power. The beauty for them is they have a captured customer (us) and a PUC willing to let them make money.
Because of impending EPA laws to reduce NOx, SO2, mercury, acid gases and particulates, many utilities are doing their own economic analyses to decide what to do with their coal fired power plants. They will need to decide whether to shut them down, reduce the output, install emission controls to meet the future. Oh yes, I have to add if they shut them down they will need to build new plants to meet energy demands. Do you see where this is going?
First a little background.
The Public Utilities Commission (PUC)
Utilities need to get Capital spending projects approved by the State Public Utilities Commissions. If they can get the capital investment approved they can put it in the rate base and all the ratepayers pay for it. That's you and me. Oh yes, did I forget to mention they are also entitled to a profit on the capital investment?
You should check on the qualifications of the PUC Commissioners in your state as it will surprise you. Many don't have qualifications fit for their position. Unfortunately, they make decisions that cost us billions of dollars. They are no match against utilities that are armed with intimidating data (often biased to support their goal) and with the veiled threat that if they don't get what they want their customers will freeze to death and the world will collapse.
Environmental Protection Agency (EPA)
The EPA says they are on our side and want clean air, water, and whatever else they can make rules for. Unfortunately they are also subject to the politics of the day. Like most bureaucrats they make rules but don't have a clue about the economics for the rules they make. For example, they will mandate a power plant has to install a scrubber or SO2 and or a Selective Catalytic reduction system for NOx. They don't care that this will cost a 300MW unit (medium size) about 250 million dollars. Multiply this by hundreds of units and you have a staggering amount of money (hundreds of billions) but they just don't care. All they want is clean air or whatever the politics dictate. Now you may say this is a good thing but remember the utilities can recover this cost from the ratepayers and make a profit and we are the rate payers. The EPA doesn't care that there are less expensive technologies that can do almost as well and cost about 5% of the big stuff. For example, a power plant may be told to get a 70% reduction that will cost 250 million dollars but are not allowed to use a technology that can achieve 60% reduction that will cost less than 10 million dollars. The EPA doesn't care because they are only looking at the reductions, not the economics or the hardships to the ratepayers.
The EPA has just passed a couple new rules called CSAPR for NOx and SO2 and MATS for mercury, acid gases and particulates. These rules dictate what emissions levels are required. This is a very important ruling that will impact what we pay for electricity. Next they will impose rules for CO2 emissions (global warming) and force power plants to capture it and bury it in the ground. They will be forced to do even though there is no available economic technology to do it. This will be the death knell for coal plants. The government is saying we need to use solar and wind but this is will never be a complete solution. Even worse they offer subsidies to encourage its use. However, it is not their money, it is our money although most of you probably forget that. Remember, all the money the government has is taken from us. It is odd it then becomes their money to squander as they want. But then again it is our fault because we let them.
The Utility
You may think the poor regulated Utility is between a rock and a hard place with all these new rules. This is hardly the case. Remember all they have to do is convince the PUC they need to spend capital. Here is what they do. They will do an analysis to determine what make the most money for them, plain and simple. It will be done under the guise of keeping on our lights and heat. This is not a matter of ethics or morals or rate payer hardships, and is probably not even a consideration, it is bottom line business. I hope most of you can see the differences since they are not related. Good example is our darling Apple Computer the largest company in the world who just got caught in a possible conspiracy to control the price of electronic books. Our banks do this routinely.
So here is what many utilities will do. they will do the economics for installing the expensive stuff to reduce emissions which, by the way in many cases will cost more than the cost of the power plant when it it was built. They will not look at the less expensive technologies because they will say they are risk adverse and the expensive stuff is what the EPA wants us to do. Even if they didn't work the cost will be irrelevant compared to the expensive stuff, i.e. instead of costing 250 million it would cost 260 million. Unfortunately, utilities won't try them because they don't want to risk changing their economic models that will not optimize their profits.
Here is what happens
Utilities will then say one of the two following;
1. The plant is old, not very efficient, and it does not warrant the big investment for emission controls we are ordered to use. However, we will need more power in the future and therefore we need to build new power plants. Let's use natural gas because it is cleaner and gas is cheap (for now). The PUC then approves the project and the construction begins. Need I remind you again that we pay for it and the profit they are entitled to. These projects almost always over run the budget and we also pay for the over runs. Duke energy is a good example where a project is out of control, one billion dollars over run, and they want the ratepayers to pay for it. Their PUC only needs to say OK.
2. We need to install the most costly emission equipment because that is what the EPA want us to install even though we could meet the limits with less expensive systems and the PUC doesn't have a clue between the two. Oh, by the way the ratepayers have to pay and also pay for our profit.
Bottom Line
The bottom line is the ratepayers always have, do now, and always will get screwed unless we do something. The system is broken because we have incompetent and arrogant people running the EPA and the PUC which is a dangerous combination but this is just my point of view. You can expect your utility rates to soar in the near future for all this pollution equipment and more expensive alternative energy sources. You can also do something about it.
What to do
We need to take charge of our destiny and force the bureaucrats to do what we say and not make us do what they want.
We need to make them set goals for emissions that are reasonable and cost effective, especially in this economy. We also need to allow some time to implement them properly and not force them so quickly as is being done. The limits for emissions are set in a quasi arbitrary manner with no concern for the burden to the ratepayers. The EPA exaggerates the benefits and underplays the costs to achieve their goal. We need to step back and see what the cost will be compared to the benefit we get. Why would any rational person spend 250 million dollars to achieve 80-90% reductions in SO2 and NOx when they can spend 10 million to achieve 60% reductions. This frees up 240 million dollars at each plant to install wind and solar which makes a lot more sense. As for CO2, the current technology requires about 20% of the plant power to capture CO2 transport and bury it underground somewhere where it is supposed to stay forever without leaking. Therefore, for four plants we will need one more plant just to capture CO2. This doesn't include the huge capital investment for the equipment and the enormous increase in water needs. It is OK with the regulated utility if they can get approval from the PUC to make us pay for it. Why not, it means more profit.
