While harm from climate change becomes more apparent every day, EPA is dragging its feet in setting much-needed limitations on greenhouse gas emissions from new power plants. This failure is a plain violation of the Clean Air Act. So CLF recently took the first step to spur EPA into action. Working with attorneys at Clean Air Task Force, we let EPA know that if it does not act, we will sue.

Kite on Marconi Beach, courtesy of EandJsFilmCrew @ Flickr. Recent extreme weather caused significant damage at Cape Cod’s Marconi Beach.

The Clean Air Act requires EPA to issue regulations limiting emissions of air pollutants that may “endanger public health or welfare.” We know well that greenhouse gases drive climate change and therefore endanger public health and welfare in many ways: droughts pose risks to our food supply; sea level rise increases flooding of vulnerable communities; and extreme weather events threaten to wash coastal infrastructure out to sea. Nevertheless, during the early and mid-2000s, EPA all but ignored greenhouse gases. Many states and environmental groups (including CLF) sued to make EPA do something.

First, we argued, greenhouse gases are air pollutants subject to EPA regulation. Second, we said, EPA had to decide one way or the other whether greenhouse gases were dangerous; if so, the Clean Air Act imposes an absolute duty on EPA to regulate them. In a fine opinion by now-retired Justice Stevens, the Supreme Court agreed with us: greenhouse gases are pollutants subject to EPA regulation, and EPA had to decide whether they are dangerous. Two years later, EPA decided that greenhouse gases do, in fact, pose a danger to public health. This means EPA is required by law to regulate them.

After all that, EPA did begin to regulate greenhouse gases. However, it did not limit emissions from the single largest category of greenhouse gas polluters – power plants – which account for nearly 40% of the nation’s carbon dioxide emissions. If any polluters need robust regulation, power plants do. Finally, after more pushing from CLF and other environmental organizations, EPA published proposed standards for greenhouse gas emissions by power plants.

Under the Clean Air Act, these proposed standards started a clock – EPA had one year to issue final rules. Instead, EPA announced on Day 364 that the final rules would be delayed indefinitely. This delay is both illegal and wrong. EPA now has sixty days to fix its error and issue final rules that seriously address the most pressing problem of our time.

If it does not, CLF and Clean Air Task Force will turn to federal court to compel EPA to act.

Source: HAM Guy, Flickr.
New Hampshire’s state flower, and my favorite sign of spring.

It’s another spring in New Hampshire, and the slow death of Public Service Company of New Hampshire’s (PSNH) coal-fired business model continues, as do PSNH’s efforts to hold back reality and hold on to its regulatory protection from competition. More and more PSNH customers are choosing cleaner, cheaper energy options, the company is again getting special treatment as it initiates a strange new program to lure those fleeing customers back, and its dirty and inefficient coal plants are once again sitting idle, with PSNH customers still paying for their upkeep.

Increasing Choices for PSNH Customers

PSNH (and shareholders of PSNH’s parent company, Northeast Utilities) must be wondering when the rate of residential customers abandoning PSNH’s energy service will slow. It certainly wasn’t during the first three months of 2013, when the number of households purchasing power from PSNH’s competitors topped 49,000. By comparison, that number was 2,704 at the end of March 2012.

The number of small businesses migrating away from PSNH has steadily increased, from 11,194 in March 2012 to 16,919 this March. Of course, PSNH’s medium and large commercial customers have been taking advantage of competitive suppliers since long before it was a practical option for residents, and they move back and forth from PSNH and the competitors much more frequently; in any given month, between 75% and 90%+ of medium and large businesses purchase their power from PSNH’s competitors.

Source: PSNH data

We last checked in on PSNH’s accelerating death spiral in January, highlighting the historically low use of its coal plants to produce power and the flight of customers away from PSNH’s ballooning rates. The utility’s ancient, filthy coal plants are sitting idle for large stretches of time during the year, at substantial cost to ratepayers, because PSNH is able to recover its costs and a guaranteed profit from its customers even when it isn’t economic to put the plants online. Despite a winter when the spot market price of natural gas was very volatile, PSNH’s coal plants provided no economic relief to its customers, as its energy rates remained almost 40% higher than those offered by other New Hampshire utilities and energy suppliers.

In response to the huge disadvantage posed by PSNH’s coal plants, the competitive atmosphere has continued to flourish in New Hampshire’s energy market in 2013. We’ve previously highlighted the residential energy services offered by companies like ENH Power and North American Power, and still more companies are hurrying to take advantage of PSNH’s above-market rates by siphoning off customers.  As the Union Leader recently reported, four new competitive suppliers have applied for licensing with the NH Public Utilities Commission already this year.

The “Alternative Default Rate”

Looking to secure a special deal to protect itself from its new competitors, PSNH applied for and received [PDF] regulator approval to pilot an “alternative default rate” to lure back customers who had switched to other suppliers. The alternative rate will only be available to large commercial customers at first, with small businesses and residential customers to be added to the program within nine months.

After the increased public awareness of competitive electricity supply in NH around the end of 2012 rate hike, the press and public were quick to take note of this plan, and customers who stayed with PSNH through the January rate hike feel doubly burned.

Saving by Switching

After PSNH’s astronomical rate hike in January, the energy rates offered competitive suppliers like ENH Power and North American Power should be even more attractive to PSNH customers who were previously cautious about making the switch. And switching online is easy, free, and safe: it takes a matter of minutes if you have a copy of your latest PSNH bill handy.

As spring turns to summer, and PSNH’s troubles grow, the ongoing challenge remains: to ensure that clean energy competition continues to flourish in the Granite State and that PSNH does not secure a legislative or regulatory bailout that subsidizes its dying business model. Although PSNH doesn’t seem willing to change its terrible economic decision to keep operating its coal plants, New Hampshire residents and businesses are taking matters into their own hands and deciding to do something about it.

Come join Conservation Law Foundation and our allies THIS SATURDAY in Burlington, Vermont for a discussion on Vermont’s Energy Choices.

Vermont’s Energy Choices: Old Dirty Problems and Clean Energy Solutions
Saturday, April 27th, 1:30 PM at the Billings Auditorium at UVM in Burlington

The time is NOW to move away from dirty sources of energy such as tar sands, nuclear, oil and coal. Solutions are available now to move us away from expensive, dangerous and polluting energy.

Come hear national and international experts on the problems of dirty energy – from fracking to tar sands – and  the real-world successes of renewable power – including community based renewable power in Europe.

Throwing up our hands is not an option. Come find out how to make a clean energy future our reality.

You can sign up and more information here:  See you Saturday!

Mount Tom power plant in Holyoke, MA.

A familiar story appears to be unfolding at the Mt. Tom coal plant in Holyoke, Massachusetts. According to recently released documents, the owner submitted what is known as a Dynamic Delist Bid with ISO New England (ISO-NE), the operator of the New England electricity system and markets, and ISO-NE accepted the bid.

This means that during the 2016-2017 capacity commitment period the plant will not be obligated to run and will not receive any capacity payments. The plant could still run and be paid for the electricity it makes, but the act of de-listing means that Mt. Tom’s owner thinks there is a significant chance it will not be economic for the plant to run during that year.

This is not surprising given the sharp decline in how often the plant has been running over the past few years:

This news is particularly significant for two reasons:

• First, submitting a de-list bid to leave the market for one year has been the first step on the path to retirement for two other coal-fired plants in Massachusetts, Somerset Station and Salem Harbor Station;
• and Second, the fact that ISO-NE accepted the de-list bid means that it determined that Mt. Tom can exit the capacity market for that timeframe without any impact on reliability. That’s a good indication that Mt. Tom could permanently retire without impacting the system, although some additional analysis would need to be done.

Although this is welcome news, because it means the end of a long legacy of pollution, it is not surprising. Even Brayton Point, New England’s largest power plant is facing desperate financial circumstances. Coal-fired power plants have been faltering across the country over the last two years, and CLF, Coal Free Massachusetts and local allies have been warning that Mt. Tom is not only a polluting, outdated relic but that it is also an unprofitable, unstable source of revenue for the City of Holyoke and that now is the time to plan for a cleaner, brighter future.

A task force created to examine the issue of retiring, demolishing, and eventually redeveloping the sites of aging coal-fired power plants in the Commonwealth will be visiting Holyoke on March 6 for a meeting with ISO-NE and a tour of the Mt. Tom plant.  CLF and its local allies are urging the task force to open this meeting to the public and to solicit more public input on the process.  Thus far, although meetings have been open to the public, there has been little effort to engage local community members.  Engaging the public is critical to an open, fair, transparent process that will create results that the entire community can get behind.

Just how much financial trouble is Dominion facing at its 50-year old coal and oil-fired power plant? The prospects are bleak and looking worse. For years, people have assumed that the largest coal-fired power plant in New England could weather any storm, but the numbers show that Brayton Point is facing dark days, and the clouds are not likely to lift.

Brayton Point Capacity Factors from 2007-2012

Today, Conservation Law Foundation released an independent analysis of the financial performance of Dominion Resources’ Brayton Point power plant in Somerset, Massachusetts. The report, authored by the Institute for Energy Economics and Financial Analysis, projects a bleak future for the 50-year-old coal-fired facility. Entitled Dark Days Ahead: Financial Factors Cloud Future Profitability at Dominion’s Brayton Point, the report found that the once profitable power plant’s earnings before interest, taxes, depreciation and amortization (EBITDA) are plummeting due to a perfect storm of market conditions that are projected to continue at least through the end of the decade.

The report shows that those conditions make it unlikely that Brayton Point will ever recoup its recent $1 billion investment in upgrades to the facility, or return to profitability.

“Brayton Point is looking at losing money for the foreseeable future,” said David Schlissel, who co-authored the report with financial expert Tom Sanzillo. “The market conditions have changed and are continuing to change for old coal plants. There is nothing on the horizon that shows that this power plant will be able to return to financial health; in fact, even the most optimistic scenario shows that Brayton Point cannot produce earnings that would cover its costs and produce a return for equity investors at any time through 2020.”

Sanzillo added, “The forecast for Brayton Point is indicative of what’s happening all over the country. We are seeing the owners of these 50-year-old coal-burning facilities facing do or die decisions about their futures, with hundreds having already announced their plans to retire in the next few years and more going that route every month. Brayton Point’s current experience – bleeding money and owner Dominion Resources having already written off $700 million of its $1 billion investment in upgrading the plant – and its bleak outlook clearly show that continuing to operate this plant doesn’t make economic sense.”

A Perfect Storm of Changing Conditions Sends Earnings Plummeting

The report points to a set of changed conditions that together are putting severe downward pressure on Brayton Point’s earnings, which dropped from $345 million in 2009 to an anemic $24 million in 2012, a decrease of some 93 percent:

• Natural gas prices have declined significantly since 2008 and are expected to remain low for at least the remainder of this decade.
• Wholesale energy market prices have decreased In response to the declining natural gas prices, , meaning reduced revenue for coal plant owners and reduced generation at coal plants like Brayton Point.
• Meanwhile, prices for capacity have been also been declining with a 35% decrease in the price obtained in the Forward Capacity Auction in 2012 as compared to the price for 2010.
• Additionally, energy usage in ISO-NE decreased by 2-3 percent between 2008 and 2012 as a result of the economic downturn and increasing energy efficiency efforts.

Future Profitability is Unlikely

The report provides two extremely conservative scenarios of future performance: an “optimistic scenario,” in which generation from Brayton Point coal Units 1-3 is projected to rise to a 60% capacity factor through the years 2013-2020, and a “less optimistic” scenario, which assumes that the units’ generation will not exceed 40% for any year in the period. In 2012, Brayton Points Units 1-3 operated at an average 16% capacity factor. Thus, the report says, earnings from those units could be much lower than projected in the two scenarios modeled. “In no way have we looked at a ‘worst case’ scenario,” noted Mr. Sanzillo.

In both scenarios, based on forward-looking conditions, the report shows that it is unlikely that future energy market prices, ISO-NE capacity market prices, plant generation and coal prices will lead to earnings high enough to provide its owner with adequate recovery of capital or return on investment. The report’s conclusions are based on projections that show that it is reasonable to expect that for the remainder of this decade, at least:

• Energy market prices in New England will remain low, reflecting continuing low natural gas prices.
• Energy consumption in New England will remain flat while consumption in Massachusetts may decline.
• Bituminous coal prices will increase over time.
• As a result, the generation at Brayton Point Units 1-3 is not likely to reach the high levels of performance achieved by the units through 2009.
• Future New England capacity prices are not likely to increase significantly.

On the longer horizon, from 2020 on, the report points to increasing pressure to place a significant price on carbon emissions from fossil fuel-fired power plants, and the plant’s age, as additional factors that will likely weigh on the plant’s earnings.

N. Jonathan Peress, VP and director of Conservation Law Foundation’s Clean Energy and Climate Change program, commented, “Brayton Point, like many other old coal plants in New England and around the country, is at a tipping point. Dominion has already made a losing investment in trying to make this plant viable beyond its useful life. Now, Dominion and its shareholders need to decide whether to keep pumping money into Brayton Point with little chance of a return, as this analysis clearly shows, or to let it go. This report provides compelling evidence for the Town of Somerset, which has been seeing its tax revenue from the plant decline in recent years, to begin planning for Brayton Point’s retirement, and a healthier future for that community in all respects.”

New England, I'm pleased to say, was well represented at the climate rally in DC this weekend.

“People get ready, there’s a train a-comin’.”  Curtis Mayfield.

Before 50,000 committed supporters, from many states and nations and braving frigid wind-chill temps, Bill McKibben announced on Sunday that all of the work he has done for the last 25 years has been in hopeful anticipation of that moment. The moment when the Climate Movement actually took off.

It certainly felt like a fully loaded train with a big head of steam, on a long journey. It was full of people who have gotten more than ready for the trip, and it was a wide-open, broad and inclusive group. Emcee’d by the Rev. Lennox Yearwood, President of the Hip Hop Caucus, speakers ranged from Van Jones (author, former Obama aide and Pres. of Rebuild the Dream) to Chief Jacqueline Thomas (a First Nation Chief in British Columbia) to Maria Cardona (Founder, Latinovations) to Michael Brune (Sierra Club Exec. Director) and U.S. Senator Sheldon Whitehouse (D-RI). The crowd was the same – young and old, people of all colors, people of faith and non-believers, northerners, southerners, mid-westerners and westerners, people walking and in chairs.

New England, I’m very pleased to say, was well represented, including large delegations from VT, NH and MA (and I’m sure from RI, ME and CT, but I didn’t find them in the large crowd), and topped off by a rousing address from Senator Whitehouse.

Senator Sheldon Whitehouse (D-RI) delivering a rousing address to the crowd.

As Rev. Yearwood put it, “we’re fighting for existence.”

That is not an understatement. Climate models (increasingly showing their accuracy over time, if not underestimation of warming effects) show that unchecked, increasing warming will render large parts of the planet uninhabitable by mammalian life within the next few centuries. If the greater good of humanity (and other species) is not our polar star now, we are failing in our jobs as human beings: to paraphrase Curtis Mayfield again, there is no room among us “for those who would hurt all mankind, just to save [their] own.”

To address a problem that large, it takes a movement. Kudos to Bill McKibben and 350.org, Michael Brune and the Sierra Club, and all of the other groups that have organized, coalesced and launched this train. History will remember them well.

This movement needs to support savvy, well-planned and strategic actions. Sunday’s rally was wisely focused on the Keystone XL pipeline, over which President Obama has unique discretion, under applicable law. While the facts are clear on this one (James Hansen: “game over” for climate if KXL gets built), it is a hugely political game. Circling the White House, calling the President out on his recent commitments to act on climate, playing the political game as it is played, is needed for this vital decision.

But not all vital actions on climate change are like that. We certainly need people in the streets, in villages and barrios, on college campuses and in cornfields and in automobile assembly plants. This is the lifeblood of the movement. But we also need lobbyists and lawyers, economists and highly focused activists, scientists and doctors and investment analysts and progressive regulators – all working the system that shapes our economy.

Shutting down New England’s coal plants, for example, will not happen by marching alone. There is nobody who can do that with the stroke of a pen, as the President can on KXL. Rather, there are many skirmishes and battles to be fought, against extremely entrenched interests who will only succumb when faced with final, non-appealable orders, or when it’s clear they’ll lose more money than their shareholders will accept. The same is true for many fights in the climate campaign: ensuring that any transmission for clean energy is built on the right terms, guarding against overbuilding natural gas infrastructure, fully and properly regulating any fracking activity that is deemed acceptable, adjusting energy markets so that clean energy is favored and dirty energy is disfavored, rebuilding our communities so people don’t need cars as much and can live healthier lives, and many, many more.

“Forward on Climate” is the charge. All the rest is commentary, so to speak. But the commentary – as the Talmudic story goes – is where the work is. We actually move forward by studying and sweating the details, and it takes a long, sustained effort. We’ve been here before. Equal Protection of the laws – what does it really mean? For almost 150 years we’ve been working that out, and paying for it with blood and hopes, dreams and treasure. And lifetimes of effort. Restoring our planet’s climate to some sort of balance – equitable, healthy and just – is another, long-term struggle.

Please join us for this historic journey. Join Conservation Law Foundation. Join other organizations committed to this pivotal fight. We all need your help. And we’ll need it for generations to come. And for their benefit and very survival. “There’s no hiding place” against what we have wrought.

How are PSNH’s coal plants like Mark Sanchez? (photo credit: flickr/TexKap)

Earlier this week, the Concord Monitor published a must-read editorial addressing PSNH’s future. Much like an earlier widely-printed op-ed on the subject, the editorial correctly describes the PSNH death spiral of escalating costs, fleeing customers, and dirty inefficient power plants kept alive by massive ratepayer subsidies.

The editorial also points out one key reason why PSNH’s argument that its plants are an insurance policy against high natural gas prices is increasingly off the mark: it ignores the damage that those plants do to the climate and to the environment. In 2012, despite not operating for much of the year, PSNH’s plants were nonetheless collectively the single largest source of greenhouse gas emissions in New Hampshire.

As time goes on, PSNH’s “insurance policy” argument only gets more specious. Relying on inflexible power plants that take many hours to start up and shut down is diametrically at odds with the dynamic and advanced electric grid that will help New England move toward a clean energy future and address concerns around the region’s increasing use of natural gas. We know what we need to do: the region needs to reduce energy demand through cost-effective energy efficiency investments, to deploy clean renewable technologies like wind that displace fossil fuel use, and to optimize the rules of the wholesale electric market to ensure smooth operation of the grid. Indeed, regional grid operator ISO New England’s recent market design efforts will almost certainly make poor-performing, inflexible power plants like PSNH’s less competitive, not more.

Propping up outdated physical assets – with high fixed maintenance costs – in the hopes that they will someday become competitive again is not “insurance.” It’s the kind of backward thinking that no competent manager or economist would endorse.

As a matter of policy, PSNH’s strategy enacts the classic economic mistake of “throwing good money after bad” by placing too much emphasis on “sunk costs,” an unfortunately common problem that James Surowiecki recently discussed in The New Yorker in describing the irrationality of sports teams’ commitments to ineffective players, like the Jets’ Mark Sanchez, after years of poor performance and bloated salaries.

At least sports teams suffer the consequences of their choices – they lose. With guaranteed profit and regulator-approved rates to recover its costs, PSNH and its parent Northeast Utilities have continued to win, even after a decade or more of terrible investment decisions. Unless of course PSNH can be made to pay for the mess it has created.

The key paragraph of the Concord Monitor’s editorial argues precisely this same point:

[L]awmakers must ensure that the lion’s share of the loss is incurred by investors in PSNH’s parent company, Northeast Utilities, not by New Hampshire ratepayers. That includes the huge cost of the mercury scrubber. It was investors, after all, who gambled that it made sense to spend hundreds of millions of dollars to keep an old coal plant running. They could have said no. So it’s investors who should lose if that gamble doesn’t pay off.

As PSNH looks for opportunities to spread its costs to the New Hampshire businesses and households that have escaped PSNH’s high rates, this is timely advice for New Hampshire policymakers. They should heed it.

The massive drag on New Hampshire’s economy caused by PSNH’s continued operation of the uneconomic and obsolete Merrimack Station and Schiller Station coal-fired units—extracting hundreds of millions per year in above market costs for its shareholders—is spiraling out of control, and several recent developments at the NH Public Utilities Commission raise troubling questions about what the agency empowered to protect ratepayers is doing about PSNH’s problems.

While competition among energy suppliers in New England is fostering efficiency, benefitting the environment and saving ratepayers money, PSNH’s energy service business, for which it collects its cost of service and a handsome profit, is increasingly looking like a dinosaur ready for extinction. Thousands of NH ratepayers are taking advantage of lower cost, more efficient electricity suppliers, but those remaining with PSNH are being dragged down into its death spiral.

One recent indicator is PSNH’s skyrocketing energy service rate. In early December, PSNH requested a 34% energy service rate increase (to 9.54 cents/kwh, equating to hundreds of dollars extra per household per year) beginning in 2013. At the end of December, the PUC approved the rate increase. CLF is challenging that increase at the PUC on the grounds that, even aside from the fact that it entirely consists of above market costs, NH law prevents the PUC from approving a utility’s requested rate increases when the utility has not submitted required planning documents demonstrating that it has a sound plan for serving its customers at the lowest cost. PSNH failed to submit long term least cost planning documents due last September; until they do so, the PUC is not authorized to approve their rate increases.

Fundamentally, the job of a utility commission dealing with a regulated utility like PSNH is to ensure that prices mimic the results of market competition while ensuring the best service for ratepayers. Thus far, the PUC has shielded PSNH from the consequences of its poor decisions, lack of meaningful planning, and insistence on retaining antiquated power plants that sit idly due to their high costs. It also is once again delaying the release of economic and environmental information that PSNH used when deciding to build the $422 million scrubber project at Merrimack Station. And days ago the PUC approved PSNH’s 2010 plan for its energy supply resources – a plan that utterly ignored lower natural gas market forecasts and impending environmental regulations when planning its future operations.  CLF is acting to protect ratepayers from PSNH’s dying business model; the extent to which the PUC is doing so is less than clear.

The PUC is engaged in dockets investigating both the costs of the scrubber project and PSNH’s increasing energy service costs. It remains to be seen whether these investigations will have any impact on the expensive mess PSNH has yoked to NH ratepayers, and whether PSNH will continue even farther down the path of  eroding New Hampshire’s advantage as a low cost state to grow a business and a family.

The data don’t lie. In line with the trends we’ve been warning about for years, PSNH’s coal-fired business model is in free fall:

Residential and small business customers continue to flee PSNH’s dirty, increasingly expensive energy service.

Source: NHPUC data

• Over the past year the number of residential energy customers in New Hampshire who purchased energy service from a supplier that is not PSNH jumped to around 30,000 households in December of 2012 (compared to around 2,000 households in December of 2011).
• That figure doesn’t include the veritable flood of customers who abandoned PSNH’s energy service at the end of 2012 when word got out about PSNH’s 34% rate increase (ENH reported signing up 1,700 customers on December 31 alone for service starting January 1). The stampede of residential and small business customers away from PSNH’s energy service shows no signs of slowing down.

PSNH’s coal plants are becoming even less competitive and will operate even less in 2013 than in 2012.

Source: ISO-NE, EPA, and PSNH data

• We noted before that PSNH’s coal unit capacity factors have taken a nosedive over the past five years, and they are projected to keep falling on an annual basis in 2013 (see chart below).
• A power plant’s capacity factor reflects the amount of power the plant generated compared to the amount of power it could have generated if used to its full potential; when that number is low, it means it was a better economic choice for the plant’s owner to keep the plant idle most of the time. While other coal plants throughout New England are also running at low capacity, PSNH is the only utility in the region that can force ratepayers to bear its fixed costs plus a hefty guaranteed profit, even when its plants don’t generate power.

The Bottom Line:

Even as many customers are taking advantage of cleaner, cheaper alternatives, PSNH’s dirty and costly power plants are a heavy – and growing – burden for the majority of New Hampshire ratepayers and for New Hampshire’s economy. In a future post, I’ll discuss how the state agency tasked with protecting ratepayers from unreasonable rates is handling PSNH’s implosion (spoiler: not well) and what CLF is doing about it (another spoiler: fighting to protect New Hampshire ratepayers and the environment).