THE FRIDAY BURRITO Vol. XIV #36 November 11, 2011
Three Elevens
“Education is what remains when we have
forgotten all that we have been taught.”
George Savile
“I want to stand as close to the edge as I can
without going over. Out on the edge you see all
the kinds of things you can't see from the
center.”
Kurt Vonnegut, Jr.
© 2011 Foothill Services Nevada Inc. All Rights Reserved. The Burrito contains the personal views and food for
thought of Gary Ackerman and does not reflect the views of any other person or organization other than Foothill Services Nevada, Inc.
The material is intended for adults, including the humor. If you are offended by the humor, then don’t read the Burrito. A list of
acronym definitions of terms used herein can be found here for the most recent list under the clever heading of Gary Acronym
Definitions.
I denied that winter had arrived until last weekend when I witnessed this year’s first major
snowfall in the Sierras. La Nina conditions are certainly dumping buckets of moisture
upon us, just as predicted. Combined with
Western States Playbook
the snow were frigid temperatures that kept
the powdery substance on the ground Platt’s California Power Conference:
throughout the week. The nighttime December 8-9 in San Francisco,
thermometer dropped into the teens, and Marriott Union Square. For a full
daytime highs didn’t make it above the 40s. agenda, click here.
Typically I don’t prepare my front or back CAISO Transmission Planning:
yards for heavy snow until mid-November. December 1 working group meeting
Therefore, I was caught unprepared … patio on transmission planning and
furniture, the garden hose and nozzle, lawn generation interconnection process.
benches, and a dozen solar-powered accent Meeting materials will be posted on
lights were left exposed to the early winter 11/21. RSVP by 11/23 to
reckoning until I made time to attend to smc@caiso.com.
them later in the week and that was a chore.
Home ownership is an endless set of tasks
that consumes much more time than one ever expects.
Let the insanity continue. That’s what I say. The Cappuccino issued its companion
proposed decision (PD) regarding RPS compliance in accordance with the provisions in
the legislation known as SB 2. The earlier PD, which I discussed a few weeks ago dealt
with the categories of RPS energy, you know that bucket thing. Parties entered opening
and reply comments on that matter over the last two weeks. But to review, recall that the
SB2 legislation set up three general categories for transactions: The first bucket was for
energy generation with a first point of interconnection at a California BA or from dynamic
transfers. The second category was for firmed-and-shaped energy. The third bucket or
category and the easiest to satisfy for renewable imports, was based upon unbundled
RECs. There was some heated arguments about RECs being included in the other two
“premium” buckets, but the earlier PD placed unbundled RECs entirely in the third bucket
and didn’t allow them in the others.
So, moving on to the second PD, WPTF counsel, Dan Douglass, provided me with a
summary. I read his email regarding the methodology and formulas for calculating RPS
procurement obligations, and I found myself needing a stiff drink after perusing it.
The PD is a mathematical tour de force that I can’t imagine anyone would be able to recite
from memory. But ignoring the formulae, here are the PD’s highlights:
Adopts multi-year compliance periods—2011-2013, 2014-2016, 2017-2020, and
2021 et seq.
Eliminates the carry-over of procurement deficits from one compliance period to
the next
Eliminates the directive to the Commission to adopt flexible rules for compliance
(presumably because such rules were viewed as unnecessary by the Legislature
given the flexibility afforded by multi-year compliance periods and the elimination
of carried-forward deficits)
The compliance periods in the first bullet item above are necessary because the law ramps
up the RPS target from 20% to 33%
What we believe… renewable energy in increments. I leave the
1) Competition yields lower cute formulas for those of you interested in
electricity rates. such things. Comments on the latest PD are
2) Stable and transparent rules and due on November 17.
regulations promote private
investment. Can you believe the brouhaha created in the
3) Private investors, rather than aftermath of the Solyndra debacle? No one
utilities, will spend money on is a saint when it comes to politics and
new power plants and federal handouts to private corporations. Is
transmission facilities if they can anyone surprised that one of Solyndra’s
earn a return that is balanced financial backers, George Kaiser, whose
with the risks. family foundation owned a 36% stake in
4) Private sector investment results Solyndra, promoted federal loan guarantees
in lower average prices without through his lobbying efforts? Of course, at
risking consumers’ money. this stage of the story, the Republicans and
Democrats are simply posturing to see who
can get the most mileage out of the story.
The White House previously told House Republicans that it would respond to any narrow
request for documents rather than an “any and all” type of subpoena. So, what do the
House Republicans do? The opposite. The Republicans launched an open-ended fishing
expedition upon the White House last Friday looking for any and all dirt on the Solyndra
deal with respect to emails between the company officers, financial backers and the like,
and White House aides. This week, the WSJ cracked the story that George Kaiser “asked
the president to crack down on Chinese competitors of the solar-panel maker but avoided
lobbying directly for the company.” Hot dog! I guess the story does have legs after all,
and Solyndragate is off and running.
I’m surprised that no one copied me on a NYT’s article published a few weeks ago about
control room operators at balancing authorities. Matt Wald, who has been with the NYT
for as long as I can remember, wrote the article entitled “On the Front Lines of the Power
Grid,” and did a good job summarizing the drama that comes from a job that is long on
boredom and easy to screw up in a pinch. He also interviewed several people from the
CAISO. One passage caught my attention. “One aspect that makes the job complicated is
that on the grid these days, there is a market not just for electricity, but also for ‘ancillary
services.’ These include the ability to ramp up and down quickly, which will be required
as the wind and sun vary in intensity; the ability to add or subtract very large amounts of
power in tiny fractions of a second, to keep the alternating current system working as
closely as possible to 60 alternations per second; the ability to step in to control voltage;
the ability to stand by for hours or days at a time, poised to start up if something goes
wrong; and the ability, if everything goes wrong, to begin generating with no outside
power to help.” It’s nice to see our business sector spoken about in the popular media, and
with integrity. It happens so infrequently.
And while we are talking about national news stories, I read that U.S. median home prices
across the country dropped a hair less than 5% in Q3. Reading about this made me think
of a story about a friend of a friend that brings the impact of falling home prices to the
forefront. The person in question is
a single woman who is in her mid
50s and lives in the metropolitan LA
area. She inherited from her parents Learn
the house she grew up in and lived in From
as an adult. The home’s value Les
considerably escalated throughout
the early 2000s, and as her income The U.S. unemployment rate is currently 9.0%, with 13.9
million people actively seeking work and millions of others
was spotty, she borrowed against the that have stopped looking or are underemployed. Why are so
market value of the house to pay many people unemployed and more importantly, what can be
ordinary expenses. Finally, the day done to reverse this dismal situation?
of reckoning came when she could High unemployment levels are easily explained. Economics
borrow no more. She was forced 101 teaches that private firms hire more workers when the
cost of hiring is less than the revenue the worker produces.
into a bank foreclosure, and the Firms today are able to produce all of the goods and services
buyer of the home offered several that the market wants without adding employees. Firms
hundred thousand dollars less than would hire more people if the demand for goods and services
increased, so any policy initiative that only seeks to reduce
the outstanding mortgages. She will the cost of new employees will be insufficient.
be hit with a capital gains tax, plus
The critical question is how to raise aggregate demand.
the income tax on the amount of the One way would be to get consumers to spend more, but high
short sale relative to the outstanding unemployment makes that solution difficult. Liberals contend
mortgages. That’s right. When a that demand would increase by reducing income taxes on the
middle class, extending unemployment benefits, investing in
lender forgives an amount of the national/state/local infrastructure projects or increasing
outstanding debt, the debt holder government hiring. Conservatives are focusing on reducing
must declare that amount as income. taxes for all consumers and businesses plus reducing
regulations that raise the cost of doing business.
I don’t think this particular woman’s
predicament is unique. In fact, it Most of these policies have stimulated economic growth in
the past, albeit with accompanying government deficits. Yet
might be the precursor of many such no one knows if any of these policies would produce a
trust-fund babies and adult children sustainable level of economic growth to reduce
who are inheritance rich but not unemployment. Clearly, the U.S. had been losing jobs to
China, India and other nations even before the 2007-08
financially savvy. Think about it. A meltdown.
woman in her fifties suddenly goes What if none of the policies work? Economic theory says
from living in a nice single family that eventually prices and wages will fall sufficiently to make
home with an exquisite view of the U.S. goods and services more competitive. Unfortunately,
this remedy would take a long time and result in significant
LA basin to being homeless, deeply social upheavals. The bottom line is that if you can figure
in debt to the IRS, and with no out a solution to the growth question, either a Nobel Prize in
marketable skills with which to economics or the Presidency of the U.S. is in your future.
reverse her situation. That is the
story, and a very scary story about the nouveau poor.
In the food corner this week, Dan Brin offered a tasty recipe for braised short ribs. He
told me he made the item for a dinner that was held on the rooftop of a friend’s Brooklyn
apartment building … it was a charity event. Since Dan’s recipe doesn’t require a
sweeping view of Manhattan, I guess you can make it anywhere.
Braised short ribs, especially this recipe, should be made at least one day ahead of serving.
In a large skillet, heat 2 tbsp. of canola oil. Season 6 flanken-style short ribs with the bone
in and cut 2 inches thick (about 4 lbs. total) with salt and pepper. Add them to the skillet
and cook over a moderate heat, turning once, until the meat is browned and crusty, about
18 minutes. Transfer the ribs to a shallow baking dish in a single layer.
In the same skillet place 1 large onion finely chopped, 2 carrots peeled and sliced, 3 celery
ribs sliced, and 3 thickly-sliced garlic cloves and cook over a low heat, stirring
occasionally, until the vegetables are
Amy’s Apps very soft and lightly browned, about
20 minutes. Add a 750 ml bottle of a
dry red wine such as a Cab or a Pinot
Noir, and 4 thyme sprigs and bring to
a boil over a high heat. Pour the hot
Hanging With Friends
marinade over the ribs in the baking
Rating: 3 out of 5 Commistars dish and let the ensemble cool a bit.
Cover and refrigerate overnight,
Hanging With Friends is Zynga’s version of hang man. You turning the ribs once. You can
start out by creating a word for another person to guess.
They also make up a word for you to guess. You each try to marinate the ribs for up to 2 days.
solve the word without getting too many strikes. If you get
too many strikes, one of your balloons pops. Did I mention
Preheat the oven to 350°. Transfer the
you have a character hanging from balloons? Instead of an
ribs and marinade into a large,
actual hang man, Zynga chose a more politically correct
enameled cast-iron casserole pot. Add
image of hanging your character from balloons. Too many
popped balloons and you fall into the lava and lose the
3 cups of chicken stock and bring to a
game. It’s linked to Words With Friends, so you can easily
boil. Cover and cook in the lower
monitor your Scrabble games. If you’re really bad at hang
third of the oven for 1½ hours, or until
man, you can spend lots of real money on coins which can
buy you various forms of assistance throughout the game.
the meat is tender but not falling
apart. Uncover and braise for 45
minutes longer, turning the ribs once or twice, until the sauce is reduced by about half and
the meat is very tender.
Transfer the meat to a clean shallow baking dish, and discard the bones as they fall off.
Strain the remaining sauce into a heatproof measuring cup and skim off as much fat as
possible. Pour the sauce over the meat; there should be about 2 cups.
For the final step, preheat the broiler. Broil the meat, turning once or twice, until glazed
and sizzling for about 10 minutes. Transfer the meat on to your dinner plates, spoon the
sauce on top and serve. Don’t forget some mashed potatoes, buttered noodles or crusty
bread to go with this savory dish.
Damn, that sounds good. Here is your ribbing for this week:
>>> Things in the People’s Republic of California
@@@ California Transmission Costs As Seen by the Municipal Utilities
>>> Shout Outs
>>> Odds & Ends (_!_)
>>> Things in the People’s Republic of California
@@@ California Transmission Costs As Seen by the Municipal Utilities
A group of three Bay Area municipal utilities (Palo Alto, Silicon Valley Power, and City
of Alameda) October 5 filed comments on the CEC Staff’s Draft Report on Renewable
Power in California: Status and Issues. The group of three refers to themselves in their
comments as the Bay Area Municipal Transmission Group (BAMx), and offer what I
think are some reasonable ideas about transmission planning in California. In a nutshell,
BAMx believes that the CEC isn’t paying enough attention to consumer costs for
transmission. The munis are CAISO transmission customers, and, therefore, they and
their consumers are on the hook to pay their volumetric share of the CAISO’s
transmission access charge (TAC). As customers, they are concerned about unchecked
escalation for interconnecting renewable generation to the grid, and foisting such costs on
transmission customers. IOU retail customers should be equally concerned, but in a sense,
those customers are too dispersed to effectively organize on matters such as transmission
costs, whereas the municipal utility community is relatively more concentrated and more
focused on cost issues.
The chart above was referred to during the recent WITG Transmission Roundtable in
Sacramento. It documents to some degree the forecast of a $16/MWh TAC, which is
considerably higher than today’s $6/MWh TAC. Per the BAMx comments, “Although the
CPUC has the major responsibility to implement cost containment, the CEC needs to
recognize its responsibility to assist in this effort. We are surprised how little cost
containment is addressed in the current draft report.”
BAMx points to the CAISO’s TPP-GIP as the natural starting point to refine the
transmission queue. The CAISO is in the throes of improving the TPP-GIP so that it
“implement[s] an economic assessment that would require an [interconnection customer]
to pay for the network upgrade that it causes, if the project is neither identified as
economic nor policy-driven under the TPP.” Additionally, BAMx recommends that the
CEC and the CAISO integrate the CEC’s annual assessment of the renewable net short
position into the CAISO transmission planning process, something like a feedback
mechanism to improve forecasting accuracy regarding the need for incremental
transmission.
One section in BAMx’s comments that pleased me dealt with California’s overreliance on
in-state renewable generation to acheive the RPS target. “It is very reasonable to assume
that a part of 33% RPS goal would be achieved most economically and with least
environmental impact if [out of state]
renewable resources, delivered over existing What we believe (cont.) …
transmission, is allowed to freely compete 5) However, when IOUs do the
with instate resources to meet our 33% goal.” investing, the risks to them
The emphasis for BAMx is that existing are minimal or non-existent
transmission lines are sufficient to bring in because ratepayers cover all
more renewable imports that can compete of the costs.
with in-state renewable resources. Well, if 6) Overcapacity lowers
that’s the case, then incremental inter-state electricity spot market prices;
transmission lines would allow for even more yet retail rates can increase in
competitive renewable energy that would put this case due to full cost-of-
downward pressure on the prices and the cost service regulation.
to meet RPS compliance. Alas, SB2 killed 7) Markets work best when there
that idea. However, I digress. The are many buyers and sellers.
“transmission” question becomes one of 8) At-risk money will be put to
which parties are bearing the cost: TAC work and attract new
payers or parties outside of the TAC region? investment where markets
exist that are legitimate and
>>> Shout Outs yield credible prices.
Congrats to Greg Wolfe who recently joined NextEra as a Senior Director of Origination.
Greg will remain in Portland and he can be contacted at Greg.wolfe@nexteraenergy.com,
or 503-819-7783.
Also in a new job is Jolly Hayden. Jolly joined Energy Infrastructure Alliance of
America, L.L.C. as its VP of Electric Business Development. He will be leading electric
infrastructure project development efforts across the U.S. Jolly’s new company was
formed in 2010 as a REIT to invest in companies that own and develop electric
transmission and distribution utility assets. The founding members include: Hunt Power,
Marubeni Corporation, John Hancock Life Insurance, TIAA-CREF, and OPTrust Private
Markets Group. The fund has committed a combined total of $2.1 billion in equity capital
commitments and assets. EIAA’s current assets and development projects are primarily
based in Texas and the desert Southwest. Good luck old friend. Jolly can be contacted at
jhayden@eiaareit.com, or at (512) 721-2704.
Dan Richard about whom I waxed eloquent in last week’s edition regarding California’s
High-Speed Rail project wrote: “Thanks for the shout out on high speed rail. I do have to
point out that the price tag in our business plan was $98.5 Billion in year-of-expenditure
dollars (i.e., inflated $), not constant dollars, over the next 22 years (about $65 Billion in
FY 2010 dollars). We use a 3% inflation rate, which is probably high. Using the last
three years' rate for the next three years and then jumping to 3 percent immediately shaves
$5 billion off the cost.
“Your question about the price comparison with alternatives is a valid one; that will be
part of the debate. However, I do want to point out that we will only build each segment
when (a) we have the funds identified; (b) there is stand-alone value for that leg if nothing
else were ever done and (3) after the initial construction, that each leg would be able to
cover its going-forward O&M costs. I know it's sticker shock, but it would be the same
as if we asked the price of all the new power plants that are needed over the next 25 years,
when in fact we procure them in tranches.”
Thanks, Dan.
Arlin Travis inked his thoughts regarding Ben Hobbs’ letter from last week regarding
CARB’s exemption of BPA: “Powerex points out the BPA exemption for carbon is unfair
treatment for soveriegns under NAFTA. Ben Hobbs points out that the BPA exemption for
Carbon just results in resource shuffling as clean power is diverted to Calif and the ‘dirty’
stuff shifted elsewhere. He thinks that is a false feeling of good. What should feel worse
and more unfair and if not corrected, get someone
… and, what we should do: fired is the shuffling of money from the
1. Believe in ourselves. California economy to BPA to further subsidize
2. Encourage creation of electricity prices in Oregon and Washington. If
independent, multi-state BPA pays the carbon charge, then the money
regional transmission goes back into the CA economy (albeit after first
organizations that being laundered through the sticky wallets of the
coordinate policies with California electric utilities). If BPA doesn't pay,
respective state utility then BPA will capture the $13/MWh spread and
commissions. expatriate the money to the already heavily
3. Support rules for resource federally subsidized rate payers of the PNW.
adequacy that apply Powerex is right, wake up California, treat BPA
uniformly among all load- power the same under the rules as Powerex
serving entities. power.”
Mark Bryfogle picked up his pen after a long Burrito hiatus, and responded to my
summary of the Houston Chapter meeting. “As far as I know, there is still considerable
uncertainty between FERC and CFTC regarding administrative authority under Dodd-
Frank. However, position limits certainly seem to be under CFTC. One doesn’t hear too
much about CFTC interaction with electricity, but there is implicit interaction via natural
gas and crude.
Listen to an interview with CFTC Commissioner Brad Chilton at the following link. To
me, Chilton sounds like he is on the ball. Chilton thinks position limits might be set
within two weeks. He says that swaps need to be DEFINED first. (Not to pick on the
CFTC, but one would have thought that a swaps definition would have been hashed out
ages ago.) Limits will be implemented over 60 days after swaps are defined. Most
importantly, Chilton thinks that there will be significant reductions in financial trading of
commodities. Specifically, ‘positions limit exemptions’ will be restrictioned to
institutions with a need for a commodity or ‘business risk’ (equals convenience risk?) as
an end user – and have to be justified DAILY albeit reported monthly.”
Next week I’ll put in a dialgue that I facilitated via email between Mark and Garth
Lawrence on the Dodd/Frank impact of moving swaps from over-the-counter (OTC)
transactions to exchanges. My reading of their emails showed me that I have much to
learn regarding D/F. It’s a whole new language.
Jack Ellis is back with a powerful note regarding the recent bankruptcy declaration of
Beacon Power. “I wasn’t aware of Beacon Power’s financial difficulties when I first wrote
about the cost of energy storage a few Burritos ago, but they were one of the firms I had in
mind when suggesting a ‘pay for performance’ policy. Advocates of such should be
careful what they ask for. Even with pay-for-performance, it’s not clear Beacon’s
technology would be financially viable based on market revenues alone. A report on the
Platt’s web site suggests that Beacon’s 20 MW plant in New York will cost $70 million,
or around $3,500/kW, which means they’d need revenues in excess of $500/kW/year to
recover and earn a return on invested capital. In 2009, the New York ISO’s annual report
shows an annual average price for regulation was $37.70/MWh, or $330/kW/year, which
leaves a $170/kW/year shortfall. Conditions worsened in 2010 as the price for regulation
fell to $28.80 ($252/kW/year) and the trend headed lower, not higher. If the average
mileage payment set out in FERC Order 755 was $1/MW, Beacon’s flywheel plant would
have to be dispatched to full reversal every six minutes based on 2009 regulation prices
and every four minutes based on 2010 regulation prices!
“In California, the economic case for a similar plant that only provides regulation is even
less favorable than it is in New York. CAISO revenues from providing regulation have
been under $50/kW/year for the last couple of years, which leaves a $450/kW/year
revenue shortfall. At $1/MW for mileage, a flywheel or battery plant providing regulation
would have to be switched from full charging to full discharging on average once every
two and a half minutes. Perhaps the
CAISO needs this kind of performance, …and, what we should do (cont.):
but my gut feeling is the reversals would 4. Enforce competitive solicitations
take place far less often. Moreover, by utilities for purchasing either
there’s a lot of infra-marginal supply thermal or renewable power.
competing for the opportunity to provide 5. Support choice among retail
regulation, and I suspect suppliers would electricity customers.
be willing to accept smaller mileage 6. Lobby for core/non-core split of
payments or perhaps even no mileage retail customers.
payment in order to get something for their 7. Advocate against policies that
capacity. limit, through bid mitigation,
merchant returns on investment
“Beacon and other proponents of pay-for- that are utility-like returns.
performance have also argued their fast
response technologies reduce the amount of regulation that needs to be procured. They
may in fact be correct, but all that means is there will be more downward pressure on
prices as increasing supply, including certain kinds of flexible loads that have relatively
low market entry costs, meets flat or decreasing demand. Order 755 will spur a lot of
competition, but flywheels and batteries built specifically to provide frequency regulation
in organized markets won’t be viable unless they can be built at much lower cost.”
I received the following anonymous letter regarding a reserves market in the Pacific
Northwest in lieu of an energy imbalance market: “Interesting story about the NWPP and
EIM. I heard about a meeting recently and the title was ‘Loss of Wind Task Force’. It’s
interesting that at least one party is taking the leap that a daily reserves market could be a
mechanism for a BA to acquire balancing energy. All of the IOU BA's in the Pacific
Northwest (except for Northwestern) and BPA get their imbalance energy from their
merchant side. Having the BA go to a reserves pool instead would be an interesting
idea...albeit a very complicated change from current practice.”
Finally, our own Amy from Amy’s Apps wrote in response to Aaron Johnson’s use of a
Community Supported Agriculture (CSA) for his fresh vegetables: “The CSA I use lets
you exclude whatever produce you don't want. You can also make special requests for
them to add certain things. The produce isn't quite as good as some of the other ones, but
it's worth it for the flexibility. They also deliver right to my door whereas others require
pickup. Check it out at http://www.farmfreshtoyou.com.”
>>> Odds & Ends (_!_)
The pooch parade continues. The picture
on the left is Sam Enoka’s dogs: Bree (the
Ibizan Hound) and Kahi (the miniature
dachshund) - they're 8 years old now. On
the right is a picture of Laura Beane’s pup
named Otis, who is 7-years old. Laura
wrote, “I simply do not understand how
people can survive without a dog.”
Randy Jones sent me the picture to the right of Bitsy, his family’s 3-
month old “tiny toy party poodle with a huge attitude.” Finally,
Halley, who is only 7-months old, is shown on the left when she was a
wee little pup. Her owner really wanted y’all
to see how cute she was then. She’s kind of a
handful now. However, she still has that
quizzical look when she wants something …
like food or attention.
Keep those pictures and stories coming.
Now that we’ve had some fun, it’s time for more fun. It’s story time. Hell, this whole
Burrito has been one continuous story:
What is Celibacy?
Celibacy can be a choice in life, or a condition imposed by circumstances. While attending
a Marriage Weekend, Frank and his wife Ann listened to the instructor declare, "It is
essential that husbands and wives know the things that are important to each other."
He then addressed the men. "Can you name and describe your wife's favorite flower?"
Frank leaned over, touched Ann's arm gently, and whispered, "Gold Medal-All-Purpose,
isn't it?"
And thus began Frank's life of celibacy...
I might have run that one before. After all, it’s been 13 years of trying to remember each
story, and I don’t always recall. Here’s an original for sure:
Well, that concludes another week. Have a great weekend, and start thinking about
sending me holiday cooking recipes, along with all the other assignments I have given
you.
gba