Follow the money is a catchphrase popularized by the 1976 drama-documentary motion picture “All The President’s Men”. It suggested a money trail or 
corruption scheme within high (often political) office. I think the problem has become epidemic, not just in politics, in everything … even the energy business. Yes, even energy efficiency, demand response, and now behavioral programs.
It used to be pretty easy to separate advertisement from news. They used to print it in separate areas and even on separate pages. Now you can’t separate a word you read or hear from what someone has paid for you to be exposed to. The talking points are everywhere for everyone with the money to buy the microphones.
I have watched it happen over time, seemingly slowly at first. But now, it is rampant. Printed copies of papers no longer provide the income. You have to sell your soul to make it in journalism today and it is a race to the ethical bottom of the barrel for all too many. It is simply amazing to watch. Major network news is not immune from it because the people they interview are often on the dole. So, you don’t know what to believe any longer.
It may be the most obvious when political leaders control the message and the “spin” around the “talking points.” I guess that is natural given the democratic process and the fact that the average American feeds entirely on sound bites for their intellectual nourishment. I find it obvious and repulsive when I watch TV now as the pharmaceutical firms buy the airwaves in their rampant greed to push medicines to cure all our fears and achieve all our dreams … with obvious side effects that are harmful. At least now they now are forced to admit them. Listen carefully the next time you hear an ad to improve your T. Pretty scary. I wish there were requirements for the messages from our President to have the same level of disclaimer. “You can keep your doctor.” “You can keep your health plan.” Where were the disclaimers? Fortunately on this one the media is on the hunt for the truth.
The energy industry is swimming in a sea of sound bites surrounded by spin. Superficially appealing notions are being spread as if it were a quick fix for otherwise disengaged consumers. Let’s just use guilt as a way to get people to use less. Who cares that it is obviously not a long term resource. Let’s just spend money, especially if I can earn a return on that expense. There is also a bit of tit for tat here: I will promote this nonsense just as long as you let me build this or that.
I find this terribly disconcerting given the history of the utility industry. It has always taken a hard look at resource planning. It discounted lots of things that simply were not reliable enough to avoid the need to build capacity. As deregulation swept in during the late 1980s the assumption was that the market would take care of this issue. Conversations lately at the FERC and NERC prove quite the contrary. We are headed for a supply side train wreck. Sad indeed.
Take a gander at the FERC conference on winter issues as it highlighted highlights challenges. The exceptionally cold weather this winter pushed the bulk electric system “very close to the edge,” Federal Energy Regulatory Commission acting Chair Cheryl LaFleur said at the agency’s April 1 technical conference on the winter’s effects on regional transmission organizations’ markets and operations. The bigger issue “is really the notion of reliability on a going forward basis,” given the power plant retirements coming in the next couple of years, Commissioner Tony Clark said.
“APPA is glad FERC has acknowledged the serious impact of the polar vortex on electric system operations and pricing. We hope they will also analyze the impact on consumers and ensure that they are not negatively impacted in the long run,” said Sue Kelly, president and CEO of the American Public Power Association. “There is a lot to be concerned about here.”
There was general consensus on the need for more infrastructure—particularly natural gas—and for better alignment of natural gas pipeline and electric generation scheduling practices. LaFleur wondered about whether a better way to value baseload generation is needed. There also was some discussion of the need for a North American Electric Reliability Corp. cold weather reliability standard.
The cold weather produced record winter peak demand for natural gas and electricity, significant price spikes (with natural gas exceeding $100/mmBtu at times in the Northeast), soaring uplift charges and “unprecedented” power plant outages, notably in PJM and the Midcontinent Independent System Operator areas. Apart from the Northeast and Midwest, most other U.S. gas price hubs traded below $6/MMBtu during these cold spells, FERC staff said. Natural gas storage dipped to an 11-year low of 896 BCF for the week ending March 21.
FERC staff said they are still reviewing the “unprecedented volatility” in natural gas markets, but the high prices appear to be due to “high demand, pipeline flow restrictions, covering of physical short positions and concern for pipeline penalties.”
“Some of the actions taken by the regions resulted in high, in some cases historically high, uplift payments” for out-of-market measures, FERC staff said. The uplift costs for January rivaled the total uplift incurred by the RTOs for an entire year, they said. A large part of uplift goes to reimburse generators for costs that are not covered through normal energy market and ancillary service sales, the staff noted.
“The amount of unavailable generation was unprecedented,” PJM Executive Vice President of Operations Michael Kormos said. On Jan. 6 and 7, 41,336 MW of generation (29 percent of peak load) was unavailable in PJM; for MISO, the figure was 30 percent, FERC staff said. ISO New England had 1,473 MW of generation out, representing 7 percent of peak load. Less than one-quarter of the outages in PJM and MISO were due to fuel supply issues, while 100 percent of the ISO New England outages were, FERC staff said. To address the outage rate, PJM plans to increase winter testing requirements for generators. Interruption of natural gas “is a concern, and will be even more for the future,” Kormos said.
PJM faces the retirement of some 12,000 MW of coal-fired generation between 2014 and 2016 and plans to replace it with a mix of demand response, imports and new gas-fired plants, Kormos said. However, PJM in 2014-15 will have to rely much more heavily on demand response and imports while new plants are being built, he said. Net interchange is a big issue for PJM, which “has a horrible ability to forecast it,” Kormos said.
“For the first time in the history of our industry, the traditional symbiotic relationship between system operator and central dispatch during emergency operations became suspect,” said John Sturm, vice president, corporate & regulatory affairs, ACES Power Marketing. “This is a relationship based on mutual trust and reliance. The RTO/ISO trusts the generator will respond to dispatch. The generator trusts the RTO/ISO will dispatch it if needed for reliability and will compensate at least its costs.”
At times, RTOs instructed generators to run for reliability needs when gas was not available, Sturm said. At other times, RTOs instructed generators to run for reliability needs and they procured gas, only to have the unit dispatch order canceled a few hours later. Also, generators cleared to run in the day-ahead market, “only to find that gas prices soared once the RTO award was known at 4 p.m., causing extensive losses,” he said.
The long and short of this is that we have a lot of work to do and the situation is only going to get worse if the renewables portfolio grows at projected levels. We are facing a train wreck. Who is going to blow the whistle and slow things down?