Why electric demand is flat

Electric demand in the US has been flat for most of this decade and looks to stay that way.

Why?

At the bigger ticket level, homes are better insulated, and more older homes are going off the books.

At the medium ticket level, appliances continue to get more efficient. Thank government EnergyStar regulations.

At the moderate ticket level, computers and devices are ever more energy efficient.

At the small ticket level? A trip to WallyWorld illustrates.

I just moved, and needed a couple of light bulbs.

Two-three years ago, approximately, Wally just started selling LED bulbs. They had plenty of CFLs, halogen incandescents and some traditional incandescents.

Now?

NO, none, not a single CFL. (NO traditional incandescents, either. Just halogens.)

And, plenty of different types of CFLs.

Again, in part, due to regulation. Halogen incandescents are for those who want to spend less, even though paying more later. But, Obama's lights bill did this.

Other reasons include more backyard renewable energy. Thank regulation that requires at least partial feed-in tariff to utilities in many states, though not Texas.

Vox also wants to thank outsourcing of industry. Actually much of that happened before the start of this decade.

Anyway, even without the feed-in tariff here in Texas, obviously, Energy Future Holdings, the parent of TXU, is going to struggle more. And, that's the flip side of electric dereg.

Goodbye, #TXU, #Luminant, #EFH, whoever the hell you are

Well, the old TXU, or at least the post-deregulation power-generating portion of it, Energy Future Holdings, or EFH, is officially in bankruptcy.

The Wall Street Journal summarizes why, as most of us know — badly gambling wrong on fracking.

That said, that's not the whole story.

Behind that decision stands the separation of the old TXU, and other old electric utilities, into different arms for generation, transmission and other things as part of Texas' electric deregulation.

Even at the time it was being done, it was being questioned.

And, between that and the wrongly-placed bet, this has been a time bomb waiting to detonate, oh, for about four years.

To a large degree, the prospects of Energy Future Holdings hinge on something it and its owners can’t control: the price of natural gas. While it has insulated itself somewhat, through financial hedges that protect it from price swings, it still needs the prices to rise sharply to have any hope of paying off its staggering debt load. 

Indeed, while the company met its roughly $3.6 billion in interest payments on its debt last year, it still faces a $20 billion balloon payment coming due in 2014.

And, the backstory to that is that greed can be a powerful motivator, even to the point of making even a Saint Warren of Buffett wrong, wrong, wrong, on some decision-making:

Investors who bought $40 billion of TXU’s bonds and loans — including legendary wise men like Warren E. Buffett — have seen huge losses as most of the bonds trade between 70 and 80 cents on the dollar. The other $8 billion used to finance the buyout came from the private equity investors themselves, along with banks like JPMorgan and Citigroup and large institutional investors like the Canadian Pension Plan. Several analysts and energy bankers say that this latter stake currently has little value. 

The whole NYT story linked above is worth a good read.

Next question is: what does this mean? The story at top says the restructuring will take about 11 months. But, especially since Oncor, the transmission arm, isn't involved, there's not a lot of jobs to be slashed, as is often the case in such filings. Per federal safety regulations, you have to have X number of people running your power plants, for example. And, given that your wrong bet on natural gas got you in this pickle, you  can't raise rates. Indeed, EFH/TXU has been peddling longer-term contracts up to the last minutes before bankruptcy, including to my place of work.

As for transmission issues? The Electric Reliability Council of Texas, or ERCOT, the folks that oversee transmission issues, say there should be no problem. But, we're expecting another hotter-than-normal summer here. (Or, maybe I should say, in light of global warming, we're expecting another "new normal" summer here.) Combine that with any questions about power generation, and how much of that can reasonably done from older coal-fired plants given today's Supreme Court ruling (see below) and I hope ERCOT, while being sanguine for public consumption, is nonetheless doing careful planning in private. That's doubly true since, contra GOP legislative and gubernatorial "geniuses" in Austin, deregulation has given Texas residents higher electric rates than before, ones that are, overall, considered to be above the national average.

At the same time, this could be good news for the environment. Luminant, EFH's electric generation arm, had four of the five worst power plants in the country for mercury emissions as of a couple of years ago. If the bankruptcy finally forces it to finish writing off its older power plants, and its use of much of the dirty lignite from here in the state, there's a benefit right there.

And, they'll probably have to do that write-off. Today's Supreme Court ruling on EPA power plant regulation authority is not good for coal-fired power plants in general, and certainly not for older ones, especially if they use dirtier coal. Besides, since that underscores, if indirectly, EPA authority to regulate carbon dioxide emissions, it's another good reason for Luminant to cut its losses. It will hurt some small towns near some of its power plants, but this is a call that needed to be made at some point anyway.

But, the bankruptcy filing didn't stipulate any plans for that, leaving state-level leaders of environmental groups a bit frustrated:

Tom “Smitty” Smith, director of Public Citizen’s Texas office, said trying to retrofit plants like Big Brown would be like spending thousands of dollars to fix up a junk car, and Luminant would be better off investing in wind and natural gas plants.

To me, it's a no-brainer in light of the SCOTUS ruling. That said, will its creditors buy on? There's other issues in the filing, per the link above, that could have environmental ramifications. And, speaking of "Big Brown"?

No wonder, based on the mercury link above, and its shaky bottom line, that TXU/EFH/Luminant was among the corporations suing the EPA. So, too, of course was our "sue Obama" attorney general, Greg Abbott. Guess what, Greg? You lost. Ain't the first time. Remember last October, when you lost two out of three? No wonder you're our state's top money-waster.

(By the way, does anybody also notice how Abbott gets as quiet as a church mouse whenever he loses as the SCOTUS level?)

As for details of that bankruptcy? It's a bit complicated, as the Dallas Morning News explains. Will it work? Spinning off the competitive, deregulated Texas Competitive Electric Holdings, in essence, what most of us saw as TXU before deregulation, isn't likely to thrill all creditors. And, a lot of junior creditors may get bupkis. I somehow am skeptical of the 11-month timeline to emerge from this bankruptcy. Every other financial claim by EFH in three-plus years has been wrong, at least to some degree. Why should we believe it now?

Also, any chance that some of the financial speculators behind EFH ask for some socialistic relief from the state? Stay tuned on that one. So far, Kohlberg Kravis Roberts, Texas Pacific Group and Goldman Sachs, the three speculative buyers, have resisted spending their own money more than absolutely necessary.

After all, it was bribery lobbying in Austin that let this takeover happen in the first place. Again, per that long NYT piece:

To that end (of getting state OK for the takeover), the K.K.R. group spent at least $17 million on lobbying (including 2,400 breakfast tacos on the Legislature’s opening day and San Antonio Spurs tickets for certain state representatives), according to Texans for Public Justice, a watchdog group. According to the group and others, the lobbying money was used to win over opponents in the Texas Legislature and fend off legislation that would have given regulators power to veto the deal.

Don't you sleep on this idea of Round Two of bribery lobbying in Austin being on the 2015 agenda of the Lege. That's especially true since the original round was bipartisan, including Democrats such as then-Dallas Mayor Ron Kirk. Electric issues had already been popping up at the edges of some primary races earlier this year.

That said, the buyout also personified the ugliness of "greenwashing":

Other advisers for the buyout team approached environmentalists, including the Natural Resources Defense Council and James D. Marston and Fred Krupp, two leaders of the Environmental Defense Fund, to support the deal. The buyout team offered to cut the number of proposed coal-fueled plants to 3 from 11.  

And, that's why I loathe "Gang Green" environmental groups.

Boo-hoo for Texas electric utilities

Hey, TXU, Reliant, et al, especially among the first two of you big boys.

You wanted electric dereg? Fine, deal with the consequences.

Including utility hoppers.

Of course, I can’t really say “boo-hoo,” because you pass the costs on to people like me.

That said, our “beloved” Texas Lege was stupid enough to deregulate electricity without covering all the bases:

But electricity providers are hampered by state rules that prohibit the creation of a statewide database showing customers’ payment histories. If there were one, providers could see which customers are big risks. … It’s up to the Legislature to fix this loophole and put an end to energy hoppers.

There’s more of that GOP genius on energy issues at work.

Of course, since state law prohibits both denial of electric service or even rate differentials based on credit history, there’s little utilities could do even if they had a state database, right?

Ahh, schadenfreude.

Texas RR Commission chair Williams good for a laugh

From the “I get newspaper e-mails” division …

Michael Williams, chairman of the Texas Railroad Commission and the Governor’s Competitiveness Council, is clueless, disingenuous or something.

In November 2007, Gov. Rick Perry created the Governor’s Competitiveness Council. … As chairman of that dynamic group, I had the pleasure of reporting our findings to Gov. Perry at the Competitiveness Council Summit on Aug. 6.

As a starting point, we discussed the current strength of the Texas economy, which can be credited in large part to our business-friendly economic climate. This climate has drawn a large number of new companies and encouraged existing Texas companies to expand. As a result, Texas continues to lead the country in job creation while nationwide unemployment has risen. …

In conjunction with this report, the council also drafted the Texas 2008 State Energy Plan. Without significant reforms in how we acquire and generate energy, especially electricity, Texas will be incapable of succeeding in any of the previously identified industry clusters.

Energy costs have increased, requiring Texans to dedicate larger percentages of our income to keep the lights on, drive to work and to run our stores and factories. It, therefore, becomes critical that Texas formulate an energy policy that keeps the lights on, keeps energy rates competitive, and continues to draw business to Texas.

While the document proposes more searches for alternative/renewable energy, it also touts clean coal and offshore drilling.

That’s bad enough.

The glaring problem is it refuses to address deregulated electricity rates, which will surely promote an anti-business view of Texas, if companies who move here have employees getting summer sticker shock, as this story indicates.

“The high bills in Texas demonstrate what a huge mistake deregulation has been," said Tom “Smitty” Smith, director of the consumer group Public Citizen in Austin and a staunch opponent of the process.

“The Legislature created this monster, and only they can change it, but they won't unless they hear from citizens.”

With Texas having the hottest summer since 1998, at least, and a population that’s grown at least 25 percent since the Legislature passed dereg in 1999, elected officials do need to hear from the public.

That’s contrary to business libertarian bushwah like this:

“These prices aren't about deregulation and the market — it's about natural-gas prices and limiting of other options of producing power like limits on coal and nuclear,” said Bill Peacock, director for the Center for Economic Freedom with the Texas Public Policy Foundation.

“We will see the benefits in time, and you can't go back on deregulation.”

Would those benefits include electric companies scamming customers?

Betty Garza was incensed last month when she opened up her power bill: a whopping $682, her highest ever, and about half of her monthly house payment.

Garza called her power provider, Stream Energy, and discovered that the rate she had locked in had expired. She said she should have received advanced notice that the lock-in period was ending.

How many other start-up electric companies are doing this to how many other customers?

Meanwhile, Williams and Gov. Helmethair, Rick Perry, apparently still aren ‘t giving up on the Trans Texas Corridor, either. More from Williams:

Even with our current strength, the Council recognized several
significant economic disconnects that will stunt our growth if they are
not closed. They include a transportation infrastructure that is ill-prepared to accommodate our ongoing population growth.

That statement has TTC written all over it.

Texas electric dereg leads to bait and switch

National Power promised folks electricity at 11 cents a kilowatt hour. Now it’s reneging. And it all appears legal. One customer says not only should he be commended for avoiding a cancellation fee with his previous electric company, but National Power ought to pay him one:

“They want to charge $300 for an early termination fee, but they’re not offering to pay a $300 termination fee,” Tony Wright said.

Hey, Tony, you live in Texas, remember?

Moving hassles part 2: electric service

As with phone service, I opted, after browsing online, to go with the company I had in Lancaster. Again, the company shall remain nameless, but once more, I will reveal initials: TXU.

TXU’s customer service rep said she could only start me off with its basic plan, not its floating rate plan based on natural gas prices. She said she would transfer me to another number where somebody else could then have me automatically switched to this plan.

(Sidebar: People of a certain political bent who talk about government bureaucracies have never done an apples-apples comparison to big business bureaucracy, I’ll wager.)
Well, after five minutes of hold time, I got a voice mail and left my info.

I tried, half an hour later, contacting the CSR main number. The first person tried to switch me over, but could not pull up my account info. The person he transferred me listened to my request, then transferred me back to the hang on and wait Gehenna I was in before.

(Sidebar two: Doorknob help us if KKR’s buyout of TXU finally goes through. They’ll probably fire 90 percent of TXU’s CSRs, in order to help pay down the massive debt from the acquisition, and you’ll never get a person to answer the phone.)

Makes you wonder if deregulated services really save you money after you pay for the post-installation call Aleve and Tagamet.

Can TXU be any bigger babies than this?

Threatening to close power plants if they actually get slapped on the hand for manipulating prices is the definition of a corporate crybaby. Hey, all you dereg-favoring politicians in Austin, want to still boast about how dereg has made power so cheap?

Why electric deregulation isn’t working

Even the Cato Institute doesn’t like it, but for the wrong reasons, although it’s OK with reverting

As I can tell you from living in Texas, even though 100 percent dereg doesn’t hit here until Jan. 1, it just doesn’t work. Of course, if you want more proof, read this from the New York Times.

As for Cato? It’s complaint is that dereg still leaves the government too much in the market. Hey, Mr. “Libertarian Democrat,” Markos Moulitsas, did you hear that? Sure, the libertarians are all going to migrate to the Democratic Party. (I swear he gets more self-delusional all the time.)

But some advocates of introducing competition to the electric industry have soured on the idea. They include the Cato Institute, a leading promoter of libertarian thought that favors the least possible regulation and that concluded earlier this year that government and electric utilities have made such hash of the new system that the whole effort should be scrapped.

“We recommend total abandonment of restructuring,” Cato said. If the public rejects a greater embrace of markets, Cato wrote, the next best choice would be a “return to an updated version of the old” system.

Well, I’ll agree with the last sentence, there, which is shocking enough.

Which of the Four Stooges will get my vote for Texas governor?

Simple: The first candidate to make a full and unequivocating pledge to kill electricity deregulation will have a huge inside track.

Bit of potentially good news: Phil King and other members of the Lege are talking about capping dereg. We’ll see after Nov. 7.