GUEST POST: And Economic JUSTICE PREVAILS

by Anonymous

[Note:  This is a guest post by a reader with ties to the utility industry who wished to remain anonymous.  The post tells the story of how a monopoly utility company killed jobs and innovation by claiming that renewable energy causes economic injustice, with a good dose of hypocrisy thrown in for good measure.  So, as you’ll see when you read the post, the title is tongue-in-cheek.  

If you’re interested in writing a guest post for the Cowgirl Blog, email me on the tip-line at mntnacowgirl (at) gmail.com.]

In a grand show of economic JUSTICE this week the Senate Natural Resources committee tabled two net meter bills, thanks to the compassionate and caring testimony of NorthWestern’s star Lobbyist.    NorthWestern won the day with arguments that went to the very heart and core of economic justice .  Kudos for such a large corporation bringing such a delicate topic to the Montana state house.  Economic Justice arguments stopped what could be  the most important energy policy decisions that Montana will face in this generation’s lifetime.

NorthWestern carried this noteworthy debate on the shoulders of grandma’s wallet,  the risks of cancer, and fire safety in the home.  Their three strikes and you are out strategy had Legislator Pat Connell walking away from the plate, head hung low giving the time honored  “ the dog ate my homework” excuse and suggesting a “study” be done.   Based on the questions asked by other  committee  members, none got the memo that net meter bills were coming, none read the assignment, and none took the time or initiative to study the changing world we live in.   But kudos to them all for caring about grandma’s wallet.

So was the right decision made?  Is there economic justice in Montana’s energy laws?  Let’s ponder that question.  For context let’s remember, a large monopoly controls the vast majority of the Montana service territory, enter Northwestern.   Fresh off a couple of bankruptcies, her books are strong.  Her strong credit allowed her to buy a nearly $1 billion suite of hydropower dams this past year.  She has a guaranteed rate of return,  so those poles and wires  will keep humming with the sound of money.   We all pay a flat rate for kilowatt hours.   It is a rate that is one of the highest in the region, over ten cents per kilowatt hour.   The fundamental economic justice questions become;  1)  Is that a reasonable rate?  and 2)  Should a customer be allowed to invest in a net metered solar, wind or hydro system and be allowed to use the utilities poles and wires to share that electricity with their neighbors?  NorthWestern’s simple answers were: 1) Yes, the rate is fine,   and 2) No, not everybody gets to use the poles and wires.

The supporters of the net meter bills saw the debate from a different point of view.   They see the answers to first question as, No , ten cent per kWh is not a reasonable rate and there is strong risk of the price going higher.  They believe that the answer to the second question is Montana individuals, communities and business should not be artificially restricted from investing in net metered solar, wind and hydro, and furthermore, Yes we should allow for net meter laws in a way that preserves a fair and just way of paying for the poles and wires.

NorthWestern’s logic carried the day and legislators in the Senate Natural Resources committee (http://leg.mt.gov/content/Sessions/64th/2015-senate-committees.pdf ) tabled at least two of the pending net meter bills and signaled it may kill them all.   Thereby effectively throttling back a growing and important part of Montana’s  “energy independence economy”.   Energy Independence is good when it comes to pipelines,  but in their minds, not so good when it comes to solar rooftops.

These net meter bills offered so many new jobs that Legislative committee chairs had to repeatedly cut off testimony from business, agriculture, engineers, electricians, and solar installers that were  there to beg for the work.  They were not asking for the moon or handouts.  They were merely asking that a law on the books since 1999, be expanded to allow their industry to grow.  They were asking for net meter bills that would allow Montana’s to have a choice in their electric supply mix.  They were asking for net meter bills that allowed individuals and business to invest in real estate improvements on their own property  and  thereby improve both the taxable value of that property and its resale value,.  They were asking for bills that allowed for businesses and ranches  to  reduce operating costs and provide  true long term rate stability.    They were asking to be allowed to help contribute to sustainable national and individual energy independence.     But they lost.

Here is how it went down.   First you must understand utilities own and operates the poles and wires that connect all our homes to each other, and connect us to the dams, wind turbines and coal & gas generators that power our great state.   In a strange twist of monopolistic history,  back in the day nobody could really figure out how to share the costs of these poles and wires.  We all benefit from them.  We all pay for them.  We all need them.  In cities there is an electric meter every few hundred feet  along the wire.  But  in the country  one is lucky to see a meter every few miles of wire.  It was decided it wouldn’t be fair to have to pay by how much wire it takes to serve you.  Instead it seemed  more fair to just bill for the poles and wire costs base on how much electric juice you used.    Back in the day, that meant you didn’t have to move to town to have electric lights.  Economic justice prevailed back then but it required some to pay a little more on a length of wire basis,  but hey,  getting electricity to the masses,  helps us all be more productive.

Over time, the prices of energy has increased, people look at their power bills and say “hey, this hurts!”  They conclude they need to use less energy, or maybe even make some of their own electricity.   That is what happens in functioning markets, when the price of goods and services rise to painful levels, consumers look to alternatives.  Also in functioning markets somebody inevitably builds a better mouse trap.   Enter the falling price of roof top solar,  plus  grandma, cancer and fires in the home.  The connections between those four topics are obvious,  aren’t they?   It was so obvious to the Montana legislature.  So they killed the net meter bills, which from many folks point of view is the quid essential better mouse trap.

Here is how  NorthWestern helped everybody see that obvious elephant in the room.  The elephant  is how we pay for poles and wires.   Remember  how we pay for poles and wires is tied to the price of how much energy one uses.   That worked great when energy was cheap,  and we could all use electricity  like a drunken sailor.   But we sobered up.  We now see the personal financial costs,  not to mention the health care and environmental costs of burning fossil fuels.  We started to see the social costs, the environmental justice cost, of mining coal and extracting natural gas right here in Montana.  Some Montanan’s want to invest in solar to off-set those costs.  Some are willing to pay more up front, for the assurance of stable energy costs well into the future.   NorthWestern erroneously,  but successfully, defined the argument that you must buy your fair share of kilowatt hours  FROM THEM or you shouldn’t use the poles and wires.  If you want to pay extra for green power, NorthWestern says, just pay US our green rate and you can feel better. http://www.northwesternenergy.com/docs/default-source/documents/MT_Rates/Electric/egps-1.pdf

Remember each kilowatt hour is priced based on the cost of producing that unit of energy plus  a little extra  tacked on to the price to pay for the poles and wires.  We all benefit from the poles and wires, we all have to pay for the poles and wires.    So what is your fair share?    Well Northwestern was unable, actually unwilling to answer that question.

Enter the legislative theater stage left, grandma, huddled in a cold damp corner shivering, because some eco-nut put solar on his roof with a net meter.    Why is grandma cold, because NorthWestern had to raise her electric rates,  because, again remember the poles and wires  get paid for by how much power you use.  The solar nut case is using less energy and not paying his fair share, hoisting that burden on grandma.   Now the price of solar is dropping.  It is not just the hippie solar dude with solar, now it is affordable and logical for small businesses and ranches to do solar.  That my friend, is how the risk of cancer came into our story.  “There is no such thing as a small melanoma” NorthWestern warns us …..in the name of economic justice.  This solar thing could get out of hand.  Soon the death spiral will hit us, everybody will want solar, and alas ….NO one will be left to pay for the poles and wires.

When our studious legislators asked for numbers to help define what this run-away solar train might look like, the Public Service Commission came in with very rough napkin numbers and said, “Well the current net meter folks are racking up maybe $300,000 annually in unpaid transmission and delivery fees, BUT , there well may be,  and likely are, several un-quantified benefits to the utility that off-set that small loss in revenue.”   Legislators are big boys they know that $300K annually in the utility world is like one roll of toilet paper in the house hold budget, very important, but in the end, a throwaway item.     Just for context, and to keep the  economic justice spin on it, the annual employee discount enjoyed by NorthWestern employees is over $600K annually. Nobody took the bullet for grandma on that totally pure cost shift. (yes, in the rate tariff the NOrthWestern employee’s share of poles and wires cost is reduced by 40% relative to our rates  see: http://www.northwesternenergy.com/docs/default-source/documents/MT_Rates/Electric/REDS-1.pdf     So if you look at only half the equation, aka the $300k, you might have the appearance of a cost shift to grandma.

“What might these other un-quantified benefits be?” our attentive  legislators asked.  The complex answers stunned the legislative team for a moment. They sat like deer in the headlights when they heard terms like “deferred line and substation expansions”  and “reduced line loses” and “arbitrage value of day to night price differentials”.  Scared of such complexities, the legislators asked about fire safety in the home.

But for the reader’s sake, some of whom might be legislators, let’s break it down.  “Deferred line and substation expansions” really are complex and they involve really large sums of money, millions in engineering costs, and millions in construction costs.  NOT a throw away item.  In short,  it means more folks can be added to the same poles and wires, without expensive fixes.  That means more people can use more kilowatt hours and more people are thus paying for the poles and wires.  This allows the system to grow without big investments.  Grandma is going to be fine.  Allowing more economic growth in Montana,   while using the existing infrastructure, means Montana and NorthWestern will be just fine.

“Reduced line loss” is part of why some line work can be deferred.  But reduced line loss has other more quantifiable values as well.  When that wing nut guy put solar on his roof, there are times of the day  that he produces more energy that he can use at that moment.  Where does that solar energy go? Into that vast array of poles and wires we have been talking about.  When that happens, solar energy powers the neighbor’s freezer or whatever lights he left on before he went to work.  That means NorthWestern can back down either the David Gates Natural Gas plant near Anaconda, or throttle back one of the dams. That saves some water in the pond for the fish to use for a few more hours and means less air pollution from the gas plant.  There is more good news…..  the amount of gas energy  NOT used when compared to  the amount of solar energy used is NOT a one to one relationship.  Because  line loses are avoided,   a utility can back down more than one unit of gas for each unit of solar that goes to the neighbor.  Instead of that gas derived power having to flow from the Anaconda gas plant to Missoula,  the solar derived power only has to flow from Brooks Street to Higgins Ave, a MUCH SHORTER DISTANCE.   Estimates vary but when NorthWestern supplies  residential and small business meters with energy from far away, they have to produce 5% to 10% more energy to overcome line loses.    But don’t worry, while the ding bat solar guy’s meter is running backwards, the neighbors meter is running forward and NorthWestern still gets to bill that neighbor.  Yes you read correctly NorthWestern bills Joe neighbor for energy NorthWestern did not produce,  and for line loses that never happened.  And YES, the scumbag solar guy actually had his meter run backwards part of the day,  that is where the name “net meter” came from.

Finally let’s examine  the last un-quantified benefit, “arbitrage value of day to night price differentials”.   NorthWestern like all utilities in the region have arbitrage experts on staff (likely getting that 40% employee rate break on their power bill).    Arbitrage experts are always busy making big bucks doing daily, weekly and seasonal deals that buy power when the price low and sell it when the price is high.     To illustrate the concept,  while NorthWestern’s  lobbyist was misleading the legislature about this concept, the parents at home in the company were spending over $2 million on a test program called a “Smart Grid demand-response demonstration project”.  http://www.bpa.gov/Projects/Initiatives/SmartGrid/DocumentsSmartGrid/success-stories-northwestern.pdf      In that project they encouraged customers with “price signals” that illustrated how much more expensive electricity is to use and produce during the day compared to at night. In that project they would sell you power at night at ½ the normal flat-rate to encourage you to use it then.  During the day, they would charge you one and half times the value of the flat-rate to encourage you to use less during the day.   The solar head case idiot puts power into the system during the day when it is most valuable, and takes his power back from the system when it is the least expensive to produce and NorthWestern pockets the difference.   If you run the numbers using NorthWestern’s own day to night price spread,   and using an average size net meter system, it more than off sets what that solar meathead didn’t pay for poles and wires.   http://www.northwesternenergy.com/for-suppliers/customer-load-profiles/residential-customer-profile

So while the legislators in the republican stacked  natural resources committee where distracted by the shiny coins  and all the things they did not understand, NorthWestern made their final appeal for economic justice.   Net metering they warned, “is like a fire on the sofa,  you want to put it out, not throw a bucket of gasoline on it.”   Now that my friends, is a tough argument to counter.   If  you have a sofa fire,  by all means be a wet blanket.  But if what you have is not a sofa fire, but an economic fire starting to burn… what is the appropriate course of action?

NorthWestern said, This new fangled contraption called solar could take off like a wild fire and its best we stop it right here, right now,  and while it is only half the size of our employee discount.    In other words, don’t do anything that could possibly jump start an industry that brings  you a climate friendly, new source of energy , that can bring stable rates, and perhaps even declining rates to all Montanans.  Never mind the local jobs it brings solar installers, roofers, electricians, contractors and carpenters IN EVERY COMMUNITY IN MONTANA.   By all means don’t expand the legally allowable  size of a solar system.   Why if we legally allow bigger systems we will be able to power an entire hospital (and contribute to disaster preparedness- yes solar systems can be configured to toggle to solo mode when NorthWesterns grid goes down) .  Don’t expand it to community size where people join together in a cooperative manner, and pool their resources and share in a common solar system.  Why that sounds like shades of communism.    Removing a legal impediment in existing Montana law that now constrains the growth of home grown energy is downright un-American.  NorthWestern even took the time remind the legislative committees that some of them solar panels …. are made in China.  Why, when it comes to China, we all better off in the long run just shipping them coal.

That my friends, is how economic justice works in Montana.    One only has to fabric an economic injustice like protecting grandma.  Then we stifle a new industry spawned by the space age.  Solar is one of those promising technologies that was always just ten years down the road from being ready for the masses.   Well my friends, that technology has arrived, the wait is over and the monopoly mentality is shivering in their boots.

That old poles and wires model, where everybody pays some into it and everybody gets to use it  has served us well.  It meant folks urban and rural could co-exist.  Some paid a little bit more, some paid a little bit less, but everybody got enough to meet there needs.  The perfect balance point on how much to pay for poles and wires has never been found.  No one can say it is in the proper balance right now.  However, now there is chance for urban roofs, and rural barns to grab some sun and share it with their neighbors.  The economic numbers are so strong that in some states, and in some countries that our solar hero actually gets paid for the kilowatt hours he generates and feeds into the system.  So far the net meter bills have only asked we be allowed to share more of the solar benefits with our neighbors.

Yes there are challenges for NorthWestern for running  a system with intermittent and distributed generation.   But with great power comes great responsibility.  Utilities across the world have stepped up the plate and successfully integrated orders of  magnitude  more intermittent and distributed generation than what these new net meter bills will allow.   Generally systems with hydro resources to help balance the variability have been the most successful.

Montana has an amazing renewable energy heritage with its hydro electric system which started in the late 1800’s.   That hydro system was and still is synonymous  with names of leaders like Max Hebgen,  Anton Holter, Sam Hauser, and Christopher Higgins. Recently Montana has expanded and now taps Her amazing wind potential.   Another great name, David Gates , is now  associated with the natural gas plant that has helped enable Montana’s wind resources.   All of those energy sources will continue to shape our collective future.   Solar is in Montana’s future and the world’s future as well.   The question becomes, will names like Bob Rowe be attached to Montana’s solar future because of how he protected grandma from solar?   Will we have to wait for some other great leader’s name to attach to the legacy of solar in Montana?  Come on Bob, show us your real definition of economic justice.  You raised the issue.

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9 Comments on "GUEST POST: And Economic JUSTICE PREVAILS"

  1. Superb info and context!
    Thankyou anon!

  2. DITTO……..should be MANDATORY reading for PSC………!

  3. I think it was the SENATE energy committee that SHAMELESS bent over for NW Energy, also known
    as MPC, the ‘spawn’ of the Copper barons

  4. House of Ill Re-butte | February 1, 2015 9:26 PM at 9:26 PM |

    I read this guest post twice in frustration. I’m sure there are salient points within, but between the poor writing and the strange drama, I have no takeaway. Grandma, cancer, house fires, “quid essential” points and “line loses” left me, well, losed, so to speak. I read through the links and still struggled with the drama and quotations that apparently don’t quote anyone.
    If someone could rewrite this in a coherent manner, I would like very much to read it.

    • I fear I must agree. I’m sire there is always more than what we hear in a brief TV news story. Those legislators on committed aren’t stupid, but they haven’t any time to really get to know what’s before them (4 months every other year?) Please pretend you are writing a set up to a documentary. Be elementary, for those of us without a degree in utility finance, economics, or political science, please.

      • To add to the excellent points made: NWE also benefits to a large degree from having exactly zero investment in or maintenance costs for the wind, solar, and hydro power that small producers furnish them. When they can buy our power for a nickel, and sell it for a dime, with no risk, wouldn’t you think they would want a lot more, not less?

    • If you are interested in learning more of the basics of how distributed generation is impacting utilities. I would suggest the writing of David Roberts at Grist. Here is a look at how distributed generation fits (or doesn’t) with traditional utilities: http://grist.org/climate-energy/rooftop-solar-is-just-the-beginning-utilities-must-innovate-or-go-extinct/

      If you are really interested there are a number of additional posts he collected into a “Utilities for Dummies” series: http://grist.org/series/utilities-for-dummies/

      To address one point you raised, “line losses” refers to electricity that is generated but is “lost” during transmission from the generation source to the final consumer. Physics requires that as electricity is converted (e.g. substations) and moved long distances through wires, some of it will be lost (typically through heat).

      Finally, (if you are still with me) I would recommend this series on Montana Power from Montana PBS that came out a few years ago: http://watch.montanapbs.org/video/2243192802/

  5. I have to say that I did not have a problem with the writing. I found the article to be engaging, and informative. I am not sure I agree completely with mtnativeyes that this should be written at a lower level of analysis. Legislators may not be “stupid” but if they are not listening to available testimony and soliciting informed opinions from all sides (not just NWE), then they are guilty of being willfully ignorant. I applaud the writer, and wish I could sit across the table from him/her to pick their brain for a couple of hours more. Thanks for taking the time to explore a complex but highly timely issue.

  6. I also appreciated this post – I learned from it and while utility regulation is complicated, I feel it is important to understand how NorthWestern is trying to pull the wool over our eyes.

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