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Propping up outdated physical assets – with high fixed maintenance costs – in the hopes that they will someday become competitive again is not “insurance.”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.

Keeping the lights on shouldn’t be this difficult. The response by Entergy to the outage at the Super Bowl is very reminiscent of the responses by Entergy to the many problems at its Vermont Yankee nuclear plant. It boils down to a piece of equipment failed and the power went out. A repeated problem at Vermont Yankee has been equipment failures – from cooling tower collapses to leaking pipes.

Sure problems happen, but c’mon. Enough already. The problem is that the same company that can’t keep the lights on for the Super Bowl is also challenged to keep its nuclear fleet running smoothly.

Even without news of the Super Bowl outage, UBS issued another report  about the shaky financial future of Vermont Yankee. The report states:

“We continue to believe Entergy is likely to decommission at least one of its units, such as Vermont Yankee, in 2013. We anticipate the process of decommissioning will become of greater importance to Entergy shareholders, as concerns around shareholder-financed contributions to decommissioning funds continue to garner concern.”

The financial outlook looks bleak. Meanwhile, next week hearings begin at the Vermont Public Service Board about Vermont Yankee’s future. Entergy has money to keep four law firms employed working on the case. That money would be better spent closing the plant and cleaning up the site.

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).

photo courtesy of someones.life @ flickr.com

I joined with residents of Vermont’s Northeast Kingdom today and fellow environmental colleagues to protect Vermont from the devastation of tar sands oil.

We filed a legal action to ensure Vermonters have a say over any proposal to move tar sands through Vermont. See press release here.

The request asks that the increasingly imminent proposal to move tar sands through an existing Northeast Kingdom pipeline be subject to state land use (Act 250) review. See request here.

Tar sands oil poses unique risks to the many natural treasures of the Northeast Kingdom and also imposes extreme climate change risks.

Tar sands oil is a gritty tar-like substance that produces far more emissions than conventional oil. The vastness of the tar sands reserves in Western Canada means that using tar sands oil delays efforts to move towards cleaner energy supplies, and sends us backwards on climate change.

As James Hansen, a leading climate scientist has said, the exploitation of tar sands on mass will be, “game over” for the climate.

Already there are requests to move tar sands east from Alberta to Montreal. The only realistic way to move it beyond Montreal to the deep ports it needs for transportation is through the Portland Montreal Pipeline which passes through Vermont.

There has already been one spill in this old pipeline in Vermont. A spill of tar sands oil – which is much harder to clean up – would be devastating.

Our filing requests that any plans to use the pipeline for tar sands oil be reviewed though Vermont’s land use development law – Act 250 – to protect our land, water and air resources threatened by this dirty fuel .

Vermont is poised to take a big bite out of the high cost and pollution of heating our homes and businesses. Slashing a full one-quarter of both lies within our reach.

Over the past decade, the cost Vermonters pay for staying warm has more than doubled. This strains our pocketbooks, our environment, our health and our security. Watching our dollars go up in smoke drains our economy.

What can we do? Building on the enormous success of our electric efficiency efforts, we can improve the heating efficiency of our homes and businesses in a similar manner. While some efforts have begun, most of the savings opportunity remains on the table. Throughout Vermont, heating efficiency has saved the average homeowner about $1,000 a year.  (See a recent editorial here).

A new report of Vermont’s Thermal Efficiency Task Force provides a strong roadmap for jumpstarting heating efficiency and renewable heat for our homes and businesses. The Task Force recommendations show how Vermont can stretch its heating dollars farther and provide over $1.4 billion in direct savings. That’s $1.4 billion that is not going up in smoke, literally leaking out of our homes and businesses.

Affordable heat means lowering bills. Every year Vermont struggles to fund low income heating assistance (LIHEAP). With affordable heat, Vermont can reduce the funds needed and can use LIHEAP dollars to help more Vermonters. Cutting fuel use by one-quarter means that for every four homes that are weatherized, help is available for one additional family.

Affordable heat reduces pollution. Every gallon of fossil fuel we don’t burn means less pollution. Whether we are adding solar to our roofs or insulating/weatherizing our homes we leave a lasting positive legacy for our children by taking seriously our responsibility to tackle climate change and reduce pollution.

The long and short of it is that Vermont — and Vermonters — can’t afford to keep wasting energy, wasting money and wasting clean air. Vermont’s commitment to affordable heat is our ticket to more comfortable homes and businesses, and a thriving and affordable clean energy economy.

photo courtesy of topher76@flickr.com

This past week has shown Vermont first-hand the high cost of nuclear power. Hosting a plant in your state is clearly a high-stakes bargain.

Vermont went to Court in Manhattan this week before a three judge panel at the United States Court of Appeals. (Read more here and here). It had fifteen minutes for its lawyer to explain to the judges why the decision of the District Court blocking the actions of the Vermont Legislature should be reversed. A tough task.

With clarity and nimbleness, Vermont proved it was up to the task. Its lawyer, Attorney David Frederick, an experienced appellate lawyer who argued a case last week before the United States Supreme Court, explained that Vermont has every right to determine Vermont Yankee’s fate. And doing so does not impinge on the federal government’s oversight of radiological issues.

In a nutshell, there were three points.

First the United States Supreme Court case from 1983 that let stand a California law enacting a moratorium on nuclear plants would allow the Vermont law. If a state can ban all nuclear plants, it can certainly allow the Legislature to determine the fate of one plant.

Second, the lease on Vermont Yankee expired and like a landlord, Vermont can simply refuse to renew the lease. Period. Any tenant knows this. Vermont is hosting this plant and can say it wants the property used for another purpose.

Third, Vermont has huge skin in the game and economic exposure from Vermont Yankee. If Entergy, the owner of Vermont Yankee, goes bankrupt or simply chooses to walk away, Vermonters are left holding the bag for what Conservation Law Foundation has described as the nuclear equivalent of junk car in its backyard. This possibility is more likely following recent reports that Vermont Yankee is not pulling its weight and that Entergy would be better off closing the plant.

The stakes are high. Apart from hosting this plant, Entergy is seeking to recoup over $4 million in legal fees, and now has four law firms working to push every legal angle possible. Times change. When Vermont first approved the Vermont Yankee facility in the 1970s, there was a hearing for three days before the Vermont Public Service Board. Clearly nuclear power and hosting plants is more expensive and time consuming than ever.

Vermont is right to begin extracting itself from this nuclear legacy. Unfortunately, that is proving to be not so easy.

Burying our garbage in landfills is a waste of resources, but it’s also a convenient way to get rid of stuff we don’t need or want. If there were clear alternatives to trashing our resources, would we use them? The Massachusetts Department of Environmental Protection (DEP) believes the answer is yes.

The DEP has finalized new rules that provide a permitting pathway for operations that process source separated materials – stuff like food waste or recyclable plastics that are not mixed with other wastes in the general trash stream. Source separated materials are distinguished from “waste”, so qualifying facilities will not be permitted as solid waste facilities. Previously a facility that sought to collect discarded material for recycling or some other reuse was considered a solid waste facility. This created barriers to the productive use of materials like food waste. The new regulations are a good step toward better management of our discarded materials.

Under the new rules, finalized November 23, DEP has created three size-based categories:

1. Small facilities (no permit required)
2. General permit facilities (certain activities permitted by-right)
3. Facilities that will require a new Recycling, Composting, and Conversion (RCC) permit

The good news is that these rules create a permitting pathway for anaerobic digestion (AD) facilities. AD is a process in which organic material, like food waste, is processed in an airtight container to create a gas similar to natural gas (high in methane). AD facilities can use the gas to fuel energy generators to create electricity and heat that can be used onsite or sold in the energy market.

AD facilities, if properly sited and appropriately operated, offer a win-win by managing food waste and generating a renewable gas for energy production. Rather than putting our food waste into a landfill where it does more harm than good, the energy in the food can be efficiency recovered for productive use.

“But what about composting?” you may be asking. DEP’s goals, as stated in the current draft Solid Waste Master Plan, include diverting 350,000 tons of organic waste per year from landfills. Some of this will be accomplished by AD facilities, but some diversion will be accomplished by composting. The new rules clarify which operations are permitted by DEP and which are permitted by the Department of Agricultural Resources (DAR).

Whether we create high quality fertilizers and soil amendments through composting, or energy and fertilizer through AD, we will be diverting organic material from landfill disposal. DEP’s new rules are a step in the right direction to better manage our resources for economic advantage and environmental gain.

Photo courtesy of Andy Hares @ flickr.com

The financial world is waking up to what a drag Vermont Yankee really is. The tired, old and leaking nuclear plant in Vermont is not carrying its weight. Financial analysts report that Vermont Yankee is economically vulnerable and a retirement announcement would boost stock prices for its parent, Entergy.

You can read the UBS Investment Research report “Re-assessing Cash Flows from the Nukes” here. It states:

“Notably, we believe both its NY Fitzpatrick and Vermont Yankee plants are at risk of retirement given their small size; while potentially negative to sentiment, an announcement to retire the units would likely drive positive FCF revisions.”

Clearly it is past time to close this plant.

Analysts today dropped the projected price target for Entergy’s stock. They see high debt and little cash coming in. Not good news for any investment.

It is good the financial world is waking up to what Vermonters have known for years. Vermont Yankee is not a good deal. It hasn’t been for years. It is expensive and financially risky. Conservation Law Foundation submitted testimony to the Public Service Board on the lousy economics of allowing Vermont Yankee to continue to operate. It does not have enough money for decommissioning, low energy prices mean it is not making money and any problems would saddle Vermont with big problems. You can read CLF’s testimony here.

These are not problems we need. Nuclear power was once touted as too cheap to meter. That has never been true. Now it is too expensive to even keep operating. Thank goodness financial markets are waking up to this fact.