Harry Reid and Energy Legislation: Bet on a Lame Duck Session

Grant Ellis
According to The Hill, "Senate Majority Leader Harry Reid (D-Nev.) said Tuesday a nationwide renewable-electricity standard, or RES, is "absolutely" in the mix as he tries to salvage energy legislation this year - possibly in a lame-duck session."

As I have opined in these electronic pages before, Renewable Electricity Standards (RES) are the stuff of "skyrocketing" electricity prices. The effect is quite similar to Cap & Trade but without as much smoke from which to sense danger.

To recap, the RES (sometimes called a Renewable Portfolio Standard ) levels an unfunded mandate on electricity generating utilities (GENCO's). The mandate requires each GENCO to incorporate X% of renewable generation capacity within their portfolio of generating assets. For instance, a 15% RPS (as proposed) would require a GENCO that has 1000 megawatts of conventional generating capacity to include 150 megawatts of renewable generating capacity by some prescribed date certain.

It seems that many people see this sort of mandate as being somewhere between "inert" and "beneficial". One of those people is Sam Brownback (R-Kan)....and therein lies trouble. These mandates are anything but inert and are certainly not beneficial.

Here's the way the game is played:
 
1.      The RES is handed down as law to REGULATORs

2.      REGULATORs create specific renewable requirements and standards which are handed down to GENCO's

3.      GENCO's engage Developers of "alternative energy resources" to solicit bids and to ascertain project costs, schedules and related particulars

4.      The GENCO selects a Developer and a Power Purchase Agreement is settled.

5.      The Power Purchase Agreement sets the wholesale kilowatt-hour price of the forecasted energy delivery from the Developers "alternative resource".

6.      The GENCO appeals to the governing REGULATOR for a special tariff under which the "alternative" kilowatt-hours may be retailed to consumers at premium (profitable) pricing

7.      The REGULATOR grants a special tariff as needed to keep the GENCO financially whole

Note the circular nature of this gambit: the REGULATOR is at the center of the unfunded mandate AND provides the means by which the mandate is ultimately funded. The result is that literally no one with a financial interest in the "deal" is held to any economic standard.

This precise scenario unfolded this summer under the Cape Wind project (the offshore wind farm visible from the Kennedy compound). In that case, the Attorney General of Massachusetts (Martha Coakley) got involved AFTER the Power Purchase Agreement had been established noting that "Neither party had an incentive to bargain for terms that yield cost-effective terms for ratepayers." This intercession was highly unusual. Ultimately the buyer and seller agreed to reduce the kilowatt-hour pricing from $0.207 to $0.187. The final wholesale price, roughly twice the going retail rate, recognizes that fully 30% of the Cape Wind project cost is taxpayer subsidized.

In the end, these RES's are little more than a slick means for fleecing taxpayers and ratepayers (jointly and severally) under the cover of "climate change". To be clear, without the too-widely-accepted notion that "climate change" can be blunted or reversed by earth's human inhabitants, none of these green initiatives would even pass the smell test.

Greencentric idiocy must be fought at every level on the basis of economics. Three reasons:

1.      Now more than ever, Americans are coming to grips with the economic realities of "going stupid"

2.      Almost nothing greencentric makes any economic sense once brought into the light of day

3.      "Climate change" enthusiasts continue to have overwhelming momentum...absent the discussion of their economic folly


Grant Ellis aka "Grant from Comfort" holds a BSEE from the University of Florida and has 30+ years of real-world experience in distributive power generation, power distribution, energy efficiency and project management.


According to The Hill, "Senate Majority Leader Harry Reid (D-Nev.) said Tuesday a nationwide renewable-electricity standard, or RES, is "absolutely" in the mix as he tries to salvage energy legislation this year - possibly in a lame-duck session."

As I have opined in these electronic pages before, Renewable Electricity Standards (RES) are the stuff of "skyrocketing" electricity prices. The effect is quite similar to Cap & Trade but without as much smoke from which to sense danger.

To recap, the RES (sometimes called a Renewable Portfolio Standard ) levels an unfunded mandate on electricity generating utilities (GENCO's). The mandate requires each GENCO to incorporate X% of renewable generation capacity within their portfolio of generating assets. For instance, a 15% RPS (as proposed) would require a GENCO that has 1000 megawatts of conventional generating capacity to include 150 megawatts of renewable generating capacity by some prescribed date certain.

It seems that many people see this sort of mandate as being somewhere between "inert" and "beneficial". One of those people is Sam Brownback (R-Kan)....and therein lies trouble. These mandates are anything but inert and are certainly not beneficial.

Here's the way the game is played:
 
1.      The RES is handed down as law to REGULATORs

2.      REGULATORs create specific renewable requirements and standards which are handed down to GENCO's

3.      GENCO's engage Developers of "alternative energy resources" to solicit bids and to ascertain project costs, schedules and related particulars

4.      The GENCO selects a Developer and a Power Purchase Agreement is settled.

5.      The Power Purchase Agreement sets the wholesale kilowatt-hour price of the forecasted energy delivery from the Developers "alternative resource".

6.      The GENCO appeals to the governing REGULATOR for a special tariff under which the "alternative" kilowatt-hours may be retailed to consumers at premium (profitable) pricing

7.      The REGULATOR grants a special tariff as needed to keep the GENCO financially whole

Note the circular nature of this gambit: the REGULATOR is at the center of the unfunded mandate AND provides the means by which the mandate is ultimately funded. The result is that literally no one with a financial interest in the "deal" is held to any economic standard.

This precise scenario unfolded this summer under the Cape Wind project (the offshore wind farm visible from the Kennedy compound). In that case, the Attorney General of Massachusetts (Martha Coakley) got involved AFTER the Power Purchase Agreement had been established noting that "Neither party had an incentive to bargain for terms that yield cost-effective terms for ratepayers." This intercession was highly unusual. Ultimately the buyer and seller agreed to reduce the kilowatt-hour pricing from $0.207 to $0.187. The final wholesale price, roughly twice the going retail rate, recognizes that fully 30% of the Cape Wind project cost is taxpayer subsidized.

In the end, these RES's are little more than a slick means for fleecing taxpayers and ratepayers (jointly and severally) under the cover of "climate change". To be clear, without the too-widely-accepted notion that "climate change" can be blunted or reversed by earth's human inhabitants, none of these green initiatives would even pass the smell test.

Greencentric idiocy must be fought at every level on the basis of economics. Three reasons:

1.      Now more than ever, Americans are coming to grips with the economic realities of "going stupid"

2.      Almost nothing greencentric makes any economic sense once brought into the light of day

3.      "Climate change" enthusiasts continue to have overwhelming momentum...absent the discussion of their economic folly


Grant Ellis aka "Grant from Comfort" holds a BSEE from the University of Florida and has 30+ years of real-world experience in distributive power generation, power distribution, energy efficiency and project management.