I’ve come to realize over the course of many years that the electric utility business is fascinatingly challenging. No other industry that I can think of has more bosses than an electric utility. In fact, high ranking utility people promoted from Executive Vice President to President/CEO leave a job with one boss and accept a job with dozens of bosses.
A utility must take orders from Washington. Recently, the Supremes overturned a lower court ruling that effectively said, Michigan, you don’t have to listen to New Jersey to set limits on your emissions. Now Mr. CEO, you do.
The utility pleas for a decent rate of return at the state level – readers of this blog understand that it takes a lot of capital to run a utility, but the ignorant don’t think the utility needs to offer a decent rate of return for investors who supply the capital. Customers think this is a multi-billion dollar company made of money. They think the utility spends money like the federal government. No. I haven’t seen utilities spend $375,000 to study why rattlesnakes don’t attack squirrels that wag their tails. Nor do they spend a million dollars studying how playing video games improves grandma’s and grandpa’s cognitive functions. This is true.
Consumers and interveners want heavy doses of “clean” renewable energy – and the part that cracks me up, many times the zealots that demand the renewable energy protest construction of transmission lines to transport power from areas where the wind blows to areas where people live. We have this going on right now, a few miles from my house, with the regulatory approval process for the construction of the Xcel Energy / ITC Badger-Coulee transmission line. What is their major malfunction? Aside from transporting wind-generated energy to populated areas of Wisconsin, it helps stabilize reliability.
Speaking of transmission lines, the ignorant (people) fear “high voltage”. Breaking news: high voltage allows transmission lines to carry more power. You want “low voltage”? Fine. Just take the reciprocal of the voltage reduction, and that’s how many more power lines that will be needed. For example, if the zealots want 90 kiloVolt lines rather than the proposed 345 kV Badger Coulee line, they would need about four of them rather than one, all else equal. Who wants to pay for that? And where would you like those lines to be built?
The other thing, of course, is the elite folks cruising around in their $100,000 Teslas won’t stand for amazingly reliable (relatively) offshore wind generation. They don’t want to look at these things. They make too much noise. By the way, I’ve been around wind-turbines before, and I can’t hear them – probably because the wind is blowing too hard. Who comes up with this stuff?
Recently, of course, hydraulic fracturing has greatly expanded the supply of natural gas. The natural kneejerk reaction by many stakeholders is switch to natural gas and decommission nuclear and coal plants. This looks smart until the price of natural gas, and specifically its price relative to petroleum, returns to historically normal levels. Markets will find a way to use natural gas at roughly $7 per million Btu rather than petrol products at $28 per million Btu, particularly for transportation.
On top of all this is utilities never know what regulations from the EPA will be coming down the pike. The courts, as noted above, have given the EPA a lot of rope to do whatever they want in this regard under the clean air act. Thereby, they pretty well call the shots for fuel supply. Unfortunately for Ms. CEO, the assets to be built have a 40-year or even longer lifespan. Everything is a gamble. In 15 years, the EPA may declare carbon dioxide emissions from combined cycle natural gas plants are a danger to the human race, or maybe just cockroaches and termites, which could result in a catastrophic chain reaction in the food chain ecosystem.
The king of all that trumps everything for a utility, because it’s what customers demand, is reliable power at low cost. All the hissing and moaning from the issues above run counter to reliable, low-cost power. Utilities have to placate a loud but tiny minority, but also in general, most consumers who don’t think of the consequences (i.e. cost) of supporting this wonderland of clean, low cost, always on, invisible, safe, varmint-friendly, avian-safe, zero-emission power; while taking a beating from their largest customers who just want reliable and cheap.
Come to think of it, what is the only source of clean, low cost, always on, invisible, safe, varmint-friendly, avian-safe, zero-emission power? Energy efficiency!