Wis. utilities want customers to cover all fuel volatility

Wisconsin’s five regulated electric utilities have asked to have fuel increases in gas and coal costs automatically passed along to their customers rather than wait until they can file a formal rate case.

Their regulator said no.

Kansas conversations on utilities and efficiency

A workshop in Topeka, Kansas has been trying to figure out how to incentivize Kansas utilities to embrace conservation. The local regulated utility summarizes the problem:

“We are totally committed to energy efficiency,” said Chris Giles of Kansas City Power and Light, “as long as we can have the same level of return we would earn and prohibit the loss of profit margins.”

Step one in the 12-step process is, after all, admitting that you have a problem, so I take this admission as a necessary (if not a sufficient) step in the right direction.

The electric sector’s price inversion

There is a phenomenon known in financial markets as an “inverted yield curve.” Like a stray elephant in Central Park, it is a reliable indicator that something odd is going on. It seldom lasts long, as markets quickly note and adjust to the weirdness.

Prices in current electric markets are similarly inverted, especially in the coal belt. Like Manhattan elephants and inverted yield curves, they signal strange goings-on. However, this one shows no signs of correcting itself soon.

Cleveland brewery attempts energy recyling yet is foiled by regulation

Last week Cleveland Scene wrote about a local brewery that is recovering its waste heat. They set out to convert the heat into electricity and useful steam for their brewery. In a great quote, the owner Patrick Conway says:

“When our engineer explained this technology to us,” says Patrick, “it was like putting wheels on luggage.”

The brewery will use the heat to run chillers, and intends also to generate electricity. But there’s a catch…

Government-guaranteed, for-profit businesses are inherently risky

Q: What do the banking crisis and the energy crisis have in common?
A: They have both been created in no small part by government policies that have expressly incentivized risky behavior.

For the banking perspective, pick up any recent issue of The Economist. They have lately been running a series of rather insightful critiques of the recent federal bailout of Fannie Mae and Freddie Mac. Their criticism is essentially that a competitive market is like a pregnancy — there’s no such thing as half. Either nationalize these banks or let them fail, but don’t maintain the fiction of a for-profit, publicly traded government-guaranteed company.

But this criticism need not stop at Freddie. It applies equally to any industry that governments deem “too important to fail.” In the energy context, a great current example is the recent Supreme Court decision Morgan Stanley Capital Group Inc. v. Public Utility District No. 1 of Snohomish County, not because of the case itself, but because it’s brought the 50-year old “Mobile-Sierra” doctrine into the light of day.