I’m sitting in the United Club at LAX, waiting for my Red-eye flight back to Baltimore. My son’s high school graduation is tomorrow. It’s only Wednesday evening but it feels like a full week already. Gary Ackerman and I went on a Road Trip of epic proportions on which we met six members in one day in the LA area. Next day, three members in Orange County and San Diego, and on the next two members in the San Diego area before I dropped Gary at the Cross Border Express Airport on the border with Mexico. I then drove back to LA and am writing this blog while listening to the toddler next to me report on the comings and goings of the planes out the window.
This is my second effort to write a blog on this particularly sticky subject… the very real problems when policy makers intervene in markets. The reasons such a discussion is difficult in the context of the California electricity markets are emotional. First is the continuing psychic damage that was done in 2000-01. The second is that we want to electricity to be competitive but there is something about it that makes us want to “fix” it all the time. But the most damaging of all is a popular narrative that firmly states that the 2000-01 crisis was all about manipulation. That narrative is damaging because it leads to the entrenched belief that regulatory intervention is necessary to protect from the manipulation, and by extension a painful crisis, from happening again.
Before I start in on the latest frustration along the path to market formation in the wider West, let me pause and explain recent developments to my friends in the Western Interconnection. Most of the trade press and the attention of FERC and the rest of Washington barely noticed the surprise of Xcel’s pulling out of Mountain West. Rather, the folks in the East are consumed by the cries of anguish emanating out of First Energy, Murray Coal and whether the DoE and DoD might invoke a Cold War legal mechanism to save coal and nuclear units in the East. This is the regulatory version of “East Coast bias” that many Pac-12 fans have asserted ESPN and other sports outlets have for things that don’t happen in a convenient time zone.
Our nation has struggled to define the proper boundary between state authority and that of the federal government since the first vote on independence. In this video, you can see the debate in the first Presidential Cabinet between Thomas Jefferson and Alexander Hamilton — two talented Founding Fathers — having completely different views. It’s been a struggle ever since, encompassing a Civil War, several Constitutional stand-offs, and indeed it has been the backdrop of almost every US Presidential election.
Is that a Paper Moon?
-Wednesday, April 4, 2018
In this scene from the movie “Paper Moon”, money changing occurs so rapidly that the cashier finds herself unsure what has transpired. The same can happen with transmission in the fast-moving energy market if you’re not careful. WPTF’s excellent chair of our WECC Committee – Caitlin Liotiris addressed a meeting of participants in the Energy Imbalance Market (EIM) about transmission availability in the EIM market. The points she made with regard to the current EIM here (EIM TX) may be even more of an issue as we approach the possibility of a “day ahead” product associated with the EIM.
Do the Right Thing
-Wednesday, March 21, 2018
I haven’t written for a couple of weeks. Gary has been on a hot streak with the Burrito and there has been a great deal for the “incoming” Executive Director to process. But most of all, I’ve been watching what is happening in California, at FERC and the chess match for market development in the West between CAISO, the Mountain West and PEAK/PJM . Dang, this is happening faster than delivering pizza on a Friday night in Brooklyn.
“Wax on, wax off”
-Sunday, March 4, 2018
Learning how to run WPTF in anticipation of Gary Ackerman’s departure on June 30 has been challenging. First, directing a trade association is a unique skill set. Even if you’ve been a member of one, there are few jobs that prepare you for it. It’s rather a combination of cruise director, mixed with college administrator with treasury responsibilities. WPTF, to its credit, is even more unique with perhaps the broadest-based membership in our industry and robust committee structure. Hence it is no wonder that I sometimes joke that Gary is Mr. Miyagi – though he has yet to ask me to “paint the fence”…
Three nights and two days inside hotel meeting spaces… that is the Winter NARUC meeting in DC. A gauntlet to be sure but there is no single event of which I know that brings together so many from industry and regulation in the energy space. It was also kind of my “coming out” party as “incoming” Executive Director of WPTF. For most of the time in the halls and receptions, I was tied to the hip with Gary Ackerman as we sought to speak with as many Western regulators and other folks of significance in our space.
She looked at me intently and said; "I know there are a lot of people who want electric markets to be just like any commodity market, but electricity is different”. While acknowledging the difference, I told my then-colleague, you rely upon the markets to set prices efficiently and to attract capital for investment and thus these markets HAVE to behave like other commodities.
“What the Hell is this?”, my CEO said as he was looking at a pro formafor financing a major acquisition. Twenty or so years ago, my company (US Generating Company – it would become part of PG&E National Energy Group) was bidding on the generating assets of New England Electric. My CEO was Joe Kearney, the best leader and smartest man I ever knew in the industry. A PhD graduate in nuclear engineering from MIT and a former developer of natural gas pipelines, he was also as facile as anyone I ever knew with finance… you know, how we get money to fund things.