tag:blogger.com,1999:blog-4361990989642100421.post6461331957144605211..comments2024-03-12T10:09:34.656-07:00Comments on KlamBlog: War of Words #1: Congressman McClintock and the Karuk Tribe on the "Klamath Facilities Removal Draft EIS/EIR"Felice Pacehttp://www.blogger.com/profile/15745833097325147423noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-4361990989642100421.post-25505327321325603392011-10-05T16:52:13.890-07:002011-10-05T16:52:13.890-07:00Felice....
Thank you for the references. I will ...Felice....<br /><br />Thank you for the references. I will check them out, as should your readers.<br /><br />But remember, "the company" DOES pay for fronting many costs and so it is commonly said that "the company pays," especially in the popular media where finer distinctions are often lost -- but the question is, are these charges ultimately charged BACK to the shareholders alone? Or are they ultimately charged solely to the ratepayers, as "rate recoverable?" <br /><br />I would bet that in several of the cases you cite, probably all, it was NOT the shareholders but the ratepayers who ULTIMATELY bore the costs of producing their own electricity. In other words, those normal operational costs were "rate recoverable." But I too invite your readers of this blog to check these references out, with that in mind -- who ULTIMATELY paid?<br /><br />In regulated utilities, shareholders generally get a guaranted rate of return in exchange for a guarantee that they will not be later dunned for prudent and reasonable costs. Such costs are, instead, divvyed up among ratepayers. That IS the general rule. If these are exception, such exceptions are very rare indeed. <br /><br />These are my last comments to this posting.Glen Spainnoreply@blogger.comtag:blogger.com,1999:blog-4361990989642100421.post-27206654622747608342011-10-05T16:06:45.060-07:002011-10-05T16:06:45.060-07:00Glen Spain thinks that PacifiCorp is a special typ...Glen Spain thinks that PacifiCorp is a special type of corporation which considers and cares for its customers more than its shareholders. I don't think that passes the laugh test. <br /><br />As Glen should know, corporations have a fiduciary responsibility to maximize return to investors.<br /><br />Glen does get it right on the liability question: PacifiCorp cut a deal that - if it stands - will get them out of ALL liability - including for any toxic legacies which could be hidden and forgotten around those 100 year old powerhouses. <br /><br />That provision is one reason I think Glen and others who negotiated the Dam Deal are not very good negotiators. PacifiCorp took y'all to the cleaners! <br /><br />Unfortunately, it's the taxpayers who will suffer as a result.<br /><br />Glen is correct that utilities regulated by the PUCs are "pass through organizations" - they pass through the costs of operating powerplants to electricity customers and get to collect 9% profit from those customers as well. But that is the rule for generating and selling electricity; not for removing an asset that has outlived its productivity. For that there are few precedents..about 10 to be exact. <br /><br />In the case of the Edwards Dam removal in Maine, "the funds were provided by Bath Iron Works and the Kennebec Hydro Developers Group, which were dam owners upstream." (see: http://en.wikipedia.org/wiki/Edwards_Dam#Removal_process). <br />In the case of a dam on the Raritan River in NJ the corporate owner paid (see: http://www.nj.com/hunterdon-county-democrat/index.ssf/2011/01/fish_will_benefit_from_dam_rem.html)<br /><br />Three lawyers who represent utilities apparently think there is a risk that dam owners will have to pay for removal. They published a journal article arguing that such an order would be a breach of contract and a regulatory taking (see: http://www.felj.org/elj/Energy%20Journals/Vol17_No1_1996_article_paying_for.pdf) <br /><br />And even Spain's fellow Klamath deal-maker - American Rivers - believes getting private owners to pay for dam removal is feasible. They devoted a whole section of their "PAYING FOR DAM REMOVAL: A Guide to Selected Funding Sources" to private funding including from dam owners. They also provide pie charts which say that when dams have been decommissioned owning companies have paid 30 to 40% of the costs. (see: http://act.americanrivers.org/site/DocServer/pdr-color.pdf?docID=727)<br /><br />Unlike Klamath Ratepayers, other ratepayers have not kept quiet when companies have tried to get them to bear the full cost of dam decommissioning. (see: http://www.montereyherald.com/local/ci_18056043). <br /><br />All this suggests that Glen is a bit confused and/or misinformed. I'd recommend doing a little more homework and not just accepting everything PacifiCorp tells you as gospel.Felice Pacehttps://www.blogger.com/profile/15745833097325147423noreply@blogger.comtag:blogger.com,1999:blog-4361990989642100421.post-62280290206653456162011-10-05T12:26:15.664-07:002011-10-05T12:26:15.664-07:00Felice....
To respond directly to your question, ...Felice....<br /><br />To respond directly to your question, PacifiCorp management wants to save its RATEPAYERS money, and is obligated to do so by PUC oversight. The KHSA does that. <br /><br />It also wants to reduced to as close to zero as possible the Company's risks in getting out of the basin totally by getting out of the dam removal business entirely, giving that responsibility over to a third party. The KHSA does that.<br /><br />It also wants to escape gracefully from potential relicensing obligations at least 2.5 times (i.e., $500+ million) the cost at which its customer contribution is capped for dam removal ($200 million max) in the KHSA. <br /><br />All together these are good business decisions that serve its ratepayers by reducing their current rate shock and future financial exposure. These are the sort of good decisons corporate managers get promoted for.<br /><br />And to reiterate: Only in the most OUTRAGEOUS of circumstances, such as the deliberate fraud by shareholders in the ENRON-PGE swindle, will PUCs assess ANY direct and personal contributions by public utility shareholders to the kitty of a public utility. Neither I nor the experts I have consulted know of any such instance, ever, with regard to powerplant decommissionings, which are considered routine and normal operations ALWAYS funded solely by ratepayers.<br /><br />If you know, as you say, a counterexample in which this actually occurred with respect to normal operations such as powerplant decommissioning, please specifically cite it and reference your documentation in this comment space. We can discuss it then in more detail instead of in the abstract. Until then I remain unconvinced and my analysis stands.<br /><br />Thanks.Glen Spainnoreply@blogger.comtag:blogger.com,1999:blog-4361990989642100421.post-82259396882124663102011-10-02T11:33:34.494-07:002011-10-02T11:33:34.494-07:00There is an old saying that goes: "a little k...There is an old saying that goes: "a little knowledge is a dangerous thing!"<br /><br />That's true of Glen Spain's rudimentary knowledge of how PUC's operate. In fact, PUC's have ordered shareholders to pay some of the cost of removing dams and powerhouses that power companies no longer want to operate because they are obsolete and non-performing assets. <br /><br />All behavior has a reason. If Glen Spain wants us to believe he knows what he's talking about he needs to explain to us why PacifiCorp chose not to decommission the project via FERC but instead took the more difficult road of making deals that require federal legislation and that are likely to be challenged in court. <br /><br />I believe that - like just about every other corporation - PacifiCorp managers did what they did because it will save the shareholders money. In fact PacifiCorp managers have a duty to do just that.<br /><br />Glen, If saving their shareholders money was not the motivation for the Dam Deal, then what was the motivation?Felice Pacehttps://www.blogger.com/profile/15745833097325147423noreply@blogger.comtag:blogger.com,1999:blog-4361990989642100421.post-49671527598914092642011-09-24T14:33:27.068-07:002011-09-24T14:33:27.068-07:00Dear Klamblog..
There is a fundamental error in y...Dear Klamblog..<br /><br />There is a fundamental error in your analysis, to wit:<br /><br />"We think it is likely that the PUC would order that PacifiCorp shareholders would have to come up with some of the facilities removal funds. After all, those shareholders have been pocketing profits from operating those facilities for many, many years."<br /><br />This is a common misconception, but shows a complete misunderstanding of how public utilities are organized and function. It took me a while to wrap my head around the different between regular corporations and public utilities too. They are PASS THROUGH organizations, not like regular corporations.... thus they (and their shareholders)make no "profit" as such. They are not allowed to, by law! <br /><br />Shareholders are entitled to ONLY a legally fixed (but guratanteed) rate of return on their investment... not a share of "profits." There ARE no "profits" in the usual sense for a public utility. Every extra dollar that in a normal corporation could be "profit" must instead be refunded back to the utility's ratepayers through reduced rates, all regulated by the PUCs.<br /><br />And it is the ratepayers -- NEVER the shareholders -- who fund, through their rates, the construction, operation and eventually decommissioning and replacement of the company's physical faciliites. That is how utilities always work! <br /><br />The KHSA is one of the very very rare exceptions, and that will need special Congressional approval to achieve. <br /><br />Publicly regulated utilities operate this way to provide power grid stability, and to attract investors, who take on none of the risks in a utility as they would in any ordinary corporation, and cannot pocket the profits -- but do get stable and GUARANTEED rates of return, so investment is risk-free. Utilities are regulated monopolies, not regular corporations. <br /><br />So there is virtually ZERO chance that the PUC would EVER require PacifiCorp shareholders to foot ANY of the bill for relicensing and/or decommissioning. These would be, as it always is and always has been, financed by revenues from the one product the company sells -- electrical power -- collected through its ratepayers.<br /><br />Sorry, this is fundamental... and totally invalidates much of your analysis. <br /><br />-- Glen Spain, PCFFAGlen Spainnoreply@blogger.com