Wednesday, February 14, 2007

The fight rages on

Ken Dixon covers more UI rate hike lobbying efforts in this article for the Connecticut Post.
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1 comment:

Anonymous said...

Deregulation of power in Connecticut is an unmitigated disaster. It's primary function has been not to encourage competition, but to reward an inefficient power company. The state regulators are utterly ineffective by intent.

The talk about costs is unconnected to reality. I have power bills in another dergulated state. My charges for CL&P are astronomically higher on a per kilowatt basis. And because distribution costs are directly linked to KWH, those are a multiple of my costs in the other state.

My KWH charge in the other state is $0.03510. It's a lightly populated county many miles from the nearest generating plant. The polwer company is generally considered to be the worst private operator of several in a large state. The distribution and transmission fee combined is roughly $0.025 per KWH for a total of just under $.06 per KWH.

CL&P serves my cul desac of about 30 houses with 1 acre zoning. At my other house, There are 10 customers off a 2 mile private lane. We are five miles from a paved road. It is a quarter of a mile from the pole to my first meter at a barn and a half mile to the house. There are no subsidies. and competitive power is marginally cheaper, sometimes.

A coop serves part of that county. Its rates are slightly higher, but its distribution system is superior and it does not create phony charges to add to its rate base. I've had two partial underground installations. My electrician did the excavation, installed unnecessary conduit and everything but the cable. He is not alloowed under tariff to put the power cable in the conduit It takes a four man crew and two trucks plus a special machine to do what he could have done eassily and qickly. The connect could have been done by an ordinary lineman. Instead, it generated a charge of nearly $5,000 (he other install was about $1,000). A third of that cost was a tax gross up because under accounting standards almost all of the costs was profit, i.e., the workers were already in the rate base as was the equipment. It is the state tariff that allows these profit making on costs already covered by rate payers.

Emergency workers have been slashed to increase profits and response is slow. Power quality is poor and the Tariff gives the company the exclusive right to install power spiking equipmet. Worse, the state tariff allows the power company to include the cost of my underground line, fully paid by me, in the power company rate base.

AS screwed up as that is, it doesn't compare to connecticut. Most areas have utility systems that are fully depreciated. But distribution fees are rising at least as fast as generating fees.

Stranded costs was a bogus theory unaccepted by any power price analysts intende to bail out copanies like UI from all of its screwups. Power generation is a marginal cost business. Generating areas are supposed to be the result of careful analysis of how to maximize marginal cost savings. The approach Connecticut has taken is to minimize any savings of scale. In simple terms, most generators have declining costs as utilization goes up. Nuclear plants are most efficient at 85-95 percent capacity. Coal fired steam plans also decline in costs per KWH as capacity reaches an optimal level. During demand surges, generating capacity is supposed to be brought on to maximize the scale advantages of lower maginal cost.

What we did was to sell our rate covered generating plants to maximixe UI'S profits and then to have those same plants valued at a far higher level so as to justify high KWH charges. Now we buy power from generators who claim abnormally high operatiing costs. We have built under a state mandate a power system that cannot get better or cheaper. The only current way to build cheaper generation is state sponsorship because no power company wants less than our fat rates.

The idea that rates have not increased quickly enough to make generation more effiient is ludicrous. With standard power service, my rate per KWH had risen 80 percent in five years. Since the first of the year, it has gone up another 40 percent. Last summer, I experienced my first $500 + bill despite more efficiency, which was 90 percent higher for substantially less power.

Rates at my other hours have gone up with a multiple state oeprator, but nowhere near the rate of connecticut -- and there was always a fuel adjustment surcharge.

I'm a long time investor in several power companies, which were once known as widow and orphan stocks. Companies made catastrophic decisions on bulding nuclear power plants two decades ago. State regulation prevented them from going out of business, but with cost to taxpayers and ratepayers. We now in some states are once again buying hose same plants, except for prices that make no sense except in a corrupt sense. I've watched deregulated companies replace one coporate bureaucracy with three and sometimes five, ceos with enormous pay packages and "incentives" that are supposedly performance based. Doesn't happen. The CEOs make money by trading companies and facilities and phony targets. My experience is that well run companies with relatively happy customers under dereg are the best investments.The less involved with dereg and the corruption that went with it a company is, the more likely it was to retain its value and grown from 10 year ago.

Then there are the ones in bad dereg states, including connecticut. Their prices have declined because they are operated for the management, not for stockholders or customers. UI is and has been a disaster for years.

Cities can't operate power sytems? Ridiculous. The only real requiement is a distribution system and that already exists, most often on public rights of way. The state should encourage the total breakup of UI if it cannot be properly regulated. Eminent domain and proper price setting will take care of any distributiojn which is not depreciated fully. There are numerous other options including cooperatives and quasi-public companies.

There are no incentives for these companies to operate more efficiently, either in generation or distribution. The worse they are, they more they charge.

Connecticut has a good conservation program and it could be improved, a lot. Other states have done a better job of deregulating.The state could also encourge efficient, green power at a non-corporate level.

In hind sight, I would have been better served in overall costs to go off grid in the other state due to phony installation costs. It does not now, but may if things change. I have space for an extensive solar grid that is out of sight. In Connecticut, I may already be at the point where I would be better served by a power system that combines solar and staged diesel generation.

LIfe is complicated by rising prises for basic fuels. What is not helping us is that no matter how much we conserve, we are at the mercy of the middlemen, the utilities. They have exhaused their usefulness based on our experience in deregulation.

While we're running the distibution system for power, we might as well deal with cabletelevision and statewide broadband to every home at a reasonable price. We don't know who got paid off by who, but it was the Rowland Administration when everything was for sale. It's impossibloe no to thing that the current mess was caused in part by corrupt politics and corporations.

UI should have been placed into receivership given its self-inflicted wounds of mismanagement. And it and its generatio should have been placed into operation under contradt on behalf of the state. Instead we bribed UI to continue being the worst utility in the country.

February 21, 2007 at 12:08 AM

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