Electric Rates May Rise As Consumers Use Less

   NEW YORK - (BUSINESS WIRE) - 1/6/2013 - The credit rating firm Fitch believes the expected small increases in U.S. electricity usage will add to the financial pressure on some power entities. The Energy Information Administration projects a 0.6 percent increase in consumption for industry and 0.7 percent for residences through 2040. Consumption fell in 2008, 2009, and 2011 with a small increase in 2010.     For competitive generation companies (gencos), the dampening effect on electricity sales from energy efficiency has exacerbated the already depressed spot and forward wholesale power prices. Coal-fired generators are most vulnerable as evidenced by the recent writedown by Ameren of its merchant genco business and Dominion's retirement of its Kewaunee nuclear power plant.
    "Over the next three-to-five years, we expect increasing challenges to the monopolistic utility business model as federal lighting standards will be fully effective in 2015 and competition is introduced from energy efficiency and demand-response businesses, the economics of which compare favorably to utility supplied power and such lost sales will hurt the utility credit profile. The avoidance of electricity consumption, measured as 'negawatts', is already reflected in market pricing at PJM capacity auctions and competes with traditionally supplied power. Higher unit costs and stranded costs in less productive capital investments are the largest potential impact from slower electricity sales," the firm said.
    In Fitch's view, the impact on most public power entities is not likely to be as material, given their cost-of-service business model and lower reliance on industrial sector sales. Slower growth in usage could even delay investment in expensive new power supply resources for many public power utilities, thereby moderating production costs and necessary rate increases.
    However, public power entities that rely heavily on the sale of excess power to subsidize retail revenue are likely to face continued pressure to raise rates in 2013. In addition to the reduction in usage, the firm expects pressure on these entities to rise as wholesale market prices increase only modestly through 2015, natural gas prices remain low and most regions of the U.S. maintain excess capacity.
    For more information, see: www.fitchratings.com.

Counties Vie for $1.2 Billion FutureGen Project

    By Benjamine Yount - (Illinois Statehouse News) - 12/21/10 -  The four communities in Illinois hoping for the revamped FutureGen project now know who their competition is.
    The FutureGen Alliance on Dec. 20 named Douglas, Morgan, Christian and Fayette counties as the final four communities for the underground sequestration site for the $1.2 billion project.
   FutureGen has been looking for a new site since the federal government pulled the plug on the original design that was supposed to be built in Mattoon. FutureGen has already announced it will build the project's state of the art clean-coal power plant near Meridosia in Morgan County.  FutureGen plans to spend $700 million to retro-fit an existing Ameren power plant.
   Those plans, along with Monday's announcement, have economic developers in Morgan County smiling.
   Terri Denison with the Jacksonville Regional Economic Development Corporation said he's allowing himself some hope that Morgan County  will get lucky.
    "If we're chosen as [the underground storage site] then all $1.2 billion would be here in Morgan County," Denison said.  "Where as if one of the other communities was to be the fortunate winner, then that $1.2 billion would be split-up between a number of communities.  We're kinda going for the home run in the bottom of the ninth."
   But other communities say they've done their work and are also hoping for a payoff. Tuscola's Brian Moody has been through a selection process with FutureGen once before, and is happy to be back on the short list.
   "[This] is really what we expected. Given our previous experiences with the first FutureGen project  and all of the various technical requirements that are necessary for an adequate sequestration site — we assumed that we would have a suitable site," said Moody.
    But for Moody, and many others involved in FutureGen in Illinois, the debacle that followed the initial selection of Mattoon is still fresh in their minds.
"We try not to get our hopes up.  We try to be very realistic about any kind of major industrial site selection process…We're trying to have some guarded optimism," said Moody.
   Denison in Jacksonville is "cautiously optimistic."
    "It not only involves the federal government, but the state of Illinois also has to play a part in this to make it happen. Ameren has to see that it makes financial sense for the corporation and the share holders. … So there are a lot of hurdles to go before it's a done deal," added Denison.
    If the deal gets done, FutureGen will be worth a lot to the four communities still in the hunt. Denison is quick to point out that along with the $1.2 billion in investments, there will be close to 1,000 construction jobs and dozens of full- time jobs to come. But it's not just the number of jobs that's attractive. FutureGen will bring high-paying, white collar jobs to Morgan County, Denison said.
    In addition to Morgan County and Tuscola, Vandalia and a site in Christian County remain in the hunt for FutureGen, Monday's decision leaves the city of Quincy and Pike County out of the running.
   The FutureGen Alliance hopes to chose a final site for the carbon sequestration facility by the end of January Construction, however, is not expected to begin until late 2012.  FutureGen is not expecting power to be produced until some time in 2016.
   Story courtesy of Illinois Statehouse News.

Alfred Kahn Testifies on FERC's 'Parity' Proposal

   NEW YORK - (BUSINESS WIRE) - 8/31/2010 - In an affidavit filed Monday with the Federal Energy Regulatory Commission (FERC) on demand response compensation in organized wholesale markets, the “father of regulatory economics” Dr. Alfred E. Kahn testified in support of FERC’s Notice of Proposed Rulemaking (NOPR) to require that organized wholesale markets compensate demand response in the same manner as generation.
   In his testimony, Kahn emphasizes that “demand response is in all essential respects economically equivalent to supply response,” and that “economic efficiency requires, as the NOPR recognizes, that it should be rewarded with the same Locational Marginal Price (LMP) that clears the market.”
   Kahn further advocates that “any increase in the efficient responsiveness of demand (to prices competitively determined, as in the ISO-conducted auctions) will move us in the direction of correcting the most severe deficiency in most such markets in the US, the lack of an adequately, price-responsive demand side.”
   Kahn’s testimony comes on the heels of comments filed by opponents to demand response parity, including the Electric Power Supply Association, which, according to Dr. Kahn, mischaracterized full LMP compensation for demand response as a “subsidy” rather than a legitimate investment.
   “That electricity generators have opposed this plan should not be surprising: their primary business is to sell power, not to encourage its conservation, and I have myself publicly cited evidence that they reap the preponderance of their profits on those occasions when demand is at its peak,” Kahn said in his comments.
   Kahn is a world-renowned economist and the Robert Julius Thorne Professor of Political Economy, Emeritus, at Cornell University. He served as an economic advisor to President Carter, the Chairman of the New York Public Service Commission, and the Chairman of the Council on Wage and Price Stability. Dr. Kahn is the author of many publications including "The Economics of Regulation," the first comprehensive integration of the economic theory and institutional practice of economic regulation.
   “Having Dr. Kahn, one of our country’s most respected economists, advocate so articulately for full LMP compensation for demand response as set forth in the FERC NOPR is a significant win for ratepayers, for the demand response industry, and for the businesses and organizations that provide this valuable service to the grid,” EnerNOC President David Brewster said.
  Viridity Energy President and CEO Audrey Zibelman added, “I am pleased to see such a strong statement from Professor Kahn highlighting the impact of demand response in bringing greater levels of competition to the organized electricity markets and in improving the operation of the markets for consumers."

Reference

Federal register article 
Demand response explained

Ameren Seeks Expansion Through New Company

(Illinois Statehouse News) - 8/3/2010 - By Kevin Lee - A prominent midwest utilities corporation wants the green light on a slate of new large-scale electricity projects within a year.
   Ameren Corporation, which disburses both natural gas and electricity utilities in Illinois and Missouri, is creating a new subsidiary to manage the projects, which include running high-voltage transmission lines across the state and linking together existing power plants.
   The petition asks the federal regulatory commission to determine how midwest utilities consumers would divide the costs of the construction projects. The corporation expects a response in 60 days.
Tom Voss, President and CEO of Ameren, said expanding transmission efforts would help spur development and keep prices competitive for utilities consumers.
   “New transmission would also open up new markets for our procurement of electricity for Illinois customers. So we think that it’ll make the markets more competitive so it should eventually help with keeping costs under control,” he said.
   State Rep. Frank Mautino, D-Spring Valley, was cautiously optimistic on the idea of constructing high-voltage lines to buttress the state’s energy grid.
   “From what we hear from industry, chambers of commerce, the (Illinois) Manufacturers’ Association, is that there is a deficit of power. We haven’t really built any new generation, and so the ability to strengthen the grid has been a goal of theirs,” he said.
   One of the projects in the portfolio includes running transmission lines through the Grand Tower Power Plant in southern Illinois.
   Maureen Borkowski, the new president and CEO of the Ameren subsidiary that will oversee the transmission projects, said the project will provide energy support to the region.
   “One of the transmissions projects is a big ‘X’ with Grand Tower at the middle of that ‘X,’” Borkowski said. “The purpose for that project, primarily, is due to congestion relief as well as (improving) local area reliability.”
   Borkowski also mentioned a large-scale proposal that would run transmission lines from Missouri to Indiana, through Quincy, Ill., and could potentially link energy sources throughout the state.
   “That transmission project has a multitude of different benefits including reliability, wind integration, congestion relief. And that also happens to be on the path of the two clean-coal technology plants,  the Taylorville Energy Center and FutureGen (near Mattoon, Illinois) that are being proposed in that region,” she said.
   Neither clean-coal plant is running as of yet.
   Borkowski said that if the federal government accepts the portfolio of projects, then Ameren would have to seek further approval on the portfolio from the Midwestern Transmission Independent Service Operators, a regional nonprofit energy organization, and the state of Illinois.
   Story courtesy of Illinois Statehouse News.