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Comment by Long Islander on March 15, 2011 at 12:48am

Some more timely reading appropriate to understanding Iberdrola's racket from Gordon Weil.

 

LePage can reshape utility regulation to promote lower customer costs

 

Gordon L. Weil

 

February 24, 2011

 

 

Gov. Paul LePage's administration seems to be intent on reducing the cost of government and easing the burden on taxpayers.

 

With more money in their own hands, the theory goes, people can save and spend on their own priorities, and businesses can invest and earn bigger profits.

 

While the political debate is being waged over which government services are so vital as to resist cuts, the governor and Legislature should look at utility regulatory policy as a way to reduce costs for individual and business customers.

 

The governor soon will appoint a new member of the Public Utilities Commission and designate a new chairman of the three-member body. The term of Jack Cashman, the current chairman, expires at the end of March.

 

Too much policy relating to electricity has been based on the long-term view of what is claimed to be good for Maine. Customers often are forced to pay higher costs now for promised benefits later.

 

The payoffs have usually not happened, but even if they could be realized, they hurt. Maine already has among the highest electric rates in the country, and those high rates undoubtedly discourage economic development.

 

While the governor cannot dictate regulatory decisions, he can appoint a person with a different perspective from what we have seen in recent years.

 

So LePage should select a new commissioner who is committed to paying attention to the impacts of regulatory decisions on people in the here-and-now. To be sure, utilities will have to be treated fairly, but simply justifying their spending because, for example, it promotes wind power is a costly and unwise policy.

 

In fact, LePage and his advisers ought to reshape the energy policies set by Gov. John Baldacci because they are costly and unrealistic.

 

At the end of his term in December, Baldacci touted his policies of energy independence and offshore wind power development. Yet, accomplishing either will impose new costs on Maine customers for electric transmission lines.

 

What's more, Maine customers are not guaranteed that they will get any better rates for wind power no matter what it costs to produce it. That's not how the New England market works.

 

At the same time as he touted energy independence, Baldacci hailed the possibility of power from eastern Canada, claiming that, because Maine was essential to the success of new developments there, it would be able to benefit. However, any such new power supply, if it happens, is likely to be a decade away.

 

Besides, as Cashman later reminded a legislative committee, there's no reason to believe the Canadians will give Maine any special rates, taking less than they can get in the open market.

 

Maine should take another look a continued participation in the New England regional power market. The market operator imposes a complex and costly system on the region. And, if this self-perpetuating body errs, federal regulators allow it to collect the costs of fixing the mistake from the very people who were hurt.

 

Instead of waiting for eastern Canada to come up with a possible alternate regional arrangement, Maine could take the initiative.

 

Also, Maine consumer-owned utilities now offer lower electric rates. The governor and Legislature should make it easier for new ones to be formed. LePage would do well to have his own independent energy advisers look at ways to cut electric rates. The Legislature has erred in asking the PUC, a judicial-style body, to advise it on state policy.

 

Also, LePage's regulatory review should take a close look at the surcharges that have been imposed on utility bills.

 

Telephone bills are loaded with taxes and fees on local services. My phone bill has eight surcharges, at least half of which are imposed by the state. That includes support for Internet service in schools and libraries and 911.

 

However laudable these purposes may be, they have nothing to do with providing telephone service. They get tacked on the phone bill, allowing the Legislature to avoid paying for them with tax dollars.

 

Much the same is true for electric service. The charges are not so visible on the bill, but they are there. If anything, they are even worse because they are hidden. Once again, no matter how worthy the expense -- from low-income assistance to greenhouse gas reduction -- they have nothing to do with paying for electric service.

 

The governor and Legislature, an entirely new political regime in Augusta, have a rare opportunity to reconsider and reform regulatory policy from scratch.

 

 

 

Gordon L. Weil, a weekly columnist for this newspaper, is an author, publisher, consultant and former international organization, U.S. and Maine government official.

 

http://www.kjonline.com/opinion/columnists/lepage-can-reshape-utili...

 

Welch Nominated as Public Utilities Commission Commissioner

March 14, 2011

Augusta, Maine – Governor Paul LePage announced today that Thomas Welch of Hancock has been nominated as Commissioner of the Maine Public Utilities Commission (MPUC). Welch, if approved, would join current Commissioners Vendean Vafiades and David Littell.

Welch served as Chairman of the MPUC from 1993 to 2005 and played a leading role in the adoption of incentive regulation for Maine’s major telephone utility. Prior to joining the Public Utilities Commission, Welch was Chief Deputy Attorney General for Antitrust in the Pennsylvania Attorney General's Office; in-house counsel for Bell Atlantic; an associate at McCutchen, Doyle, Brown & Enersen; and Assistant Professor at Villanova University School of Law. Most recently, Welch has been a member of Pierce Atwood's Energy and Regulatory practice. Since 2006 he has provided advice to a broad spectrum of participants in the electric, telecommunications and gas industries. Welch is included in the 2010 edition of The Best Lawyers in America for Energy Law.

Welch received his A.B., Phi Beta Kappa, from Stanford University and his J.D. from Harvard Law School

Welch will appear before the Joint Standing Committee on Energy, Utilities and Technology in the upcoming weeks. A date has not yet been scheduled.

The MPUC regulates electric, natural gas, telecommunications and water utilities to ensure that Maine consumers enjoy safe, adequate and reliable services at rates that are just and reasonable for both consumers and utilities. The Commission oversees emerging competitive markets for some of these services. The Commission also regulates water taxis and ferries in Casco Bay, and promotes safe digging through the Dig Safe underground utility damage prevention program.

 

http://www.maine.gov/tools/whatsnew/index.php?topic=Gov+News&id...

Comment by Long Islander on March 15, 2011 at 12:44am

 

Some timely reading appropriate to understanding Iberdrola's racket from Gordon Weil.

You pay utilities to raise your rates; here's how

By Gordon L. Weil

04/16/2009

 

from the Kennebec Journal

 

Did you know that you pay to support utilities' efforts to increase your rates?

 

Well, you do. Here's how it works.

 

A utility owned by investors must get regulators to approve most major actions, including virtually all that serve to change rates. That includes rate increases to cover operations, to add to major facilities or to insure investors a return on their investment.

 

Utilities owned by their customers, non-profits like municipal water and electric utilities, do not have investors and usually need approvals from their elected governing boards.

 

In a matter involving an investor-owned utility, the regulatory body acts like a judge and determines if the utility can do what it has requested. In Maine, the regulator is the Public Utilities Commission or PUC, a three-member body that has its own independent staff. It can hire experts.

 

Of course, the utility itself is represented, usually by lawyers and experts. They support the utility's request and seek to discredit those who oppose the utility's proposal.

 

Often the utility request is opposed by consumer representatives. In Maine, consumers are represented by the Public Advocate, who also has his or her own staff and can hire experts.

 

Sometimes individual customers take part, but only the largest can afford adequate legal counsel and experts.

 

The PUC is supposed to walk the line between the utility interests and the consumer interests, ruling in accord with what is called the "public interest."

 

On one hand it will try to keep costs as low as possible to protect customers. But it must also make sure that the utility receives enough money to provide reliable service and a profit for its investors. The investors need to make money or they won't provide the funds needed by the utility for its equipment, buildings, vehicles and the like.

 

The utility's legal obligation is not to its customers but to its investors. So, not surprisingly, it will seek to get as much from its customers as it thinks it can in order to reward its investors. That's why the PUC has to make sure that the utility gets what is fair, but not more.

 

In most businesses, how much profit owners can make depends on their costs, the productivity of their workers, their competition and the market. They get no guarantees and may charge whatever they want.

 

Utilities are usually monopolies so they have no competition and lack the economic influence of the marketplace on what they charge. The PUC takes the place of the competition.

 

Here's where things begin to get interesting. The PUC allows utility rates that will recover costs and to earn a profit for investors. The allowed profit, earned if the utility operates efficiently, is a percentage of the amount invested. Though the profit is not guaranteed, it is a lot more secure than most other businesses get.

 

What's more, the PUC or any similar regulator allows an additional amount to cover the income taxes the utility will have to pay on its profit. In other words, the allowed profit is an after-tax amount. In effect, that makes the possible profit even greater.

 

These days, during hard times, the utility continues to have the right to earn this profit, even while other businesses are failing or losing money. The theory is that utilities provide essential services and cannot be allowed to fail. And nobody wants to hear that more utilities should be owned by their customers and not require a profit at all.

 

All this may be known by some readers and entirely sensible to most others. But let's get back to the regulatory proceeding where the rates are set.

 

The costs of the PUC and the Public Advocate are paid from the proceeds of a surcharge attached to utility rates. Fair enough. Customers pay their own way.

 

What about the utilities? Since they are trying to boost their profits, do they pay their own way? No. Their costs are included in the rates they charge and which customers may oppose. That can encourage high regulatory spending by utilities.

 

So, customers pay the costs of utilities to raise their own rates, and investors get the benefit.

 

Isn't it time to fix that? For-profit utilities should pay their own regulatory costs. That might even make them think twice about asking for higher rates.

 

http://kennebecjournal.mainetoday.com/view/columns/6201234.html

 

Public advocate’s independence, focus should be strengthened

 

April 8, 2010

 

Gordon L. Weil

 

In 1981, Gov. Joseph Brennan wanted to respond to rising demands for better consumer participation in utility regulation. I was Maine energy director at the time, and he asked me to draw up a bill for that purpose.

 

The proposal was for a new position in the governor’s office called the Public Advocate. This person with a small staff was to participate in proceedings at the Maine Public Utilities Commission on behalf of “the using and consuming public.”

 

After the bill passed, Brennan asked me to be the first public advocate.

 

The nomination was subject to legislative confirmation. The reviewing committee asked me how I would be able to determine the consumer interest and who would be my boss for such decisions.

 

I replied that I was appointed by the governor, who had been elected by the voters of Maine, and that I would report to him. I said that my own standard would be to adopt positions that brought “the greatest good to the greatest number” of Mainers.

 

Though nobody on the committee voiced the concern, a reasonable question in my own mind was whether the governor might direct me to pursue a position that was not in the consumer interest but reflected some of his other policy goals.

 

I reported weekly to Brennan. I did not have to clear my positions with him. Of course, he could have directed me, but he didn’t. Instead, he told me to make sure that my regulatory advocacy was presented in most politically favorable light. That made sense, and I tried to do it.  I think that he and I both understood that the Legislature had given me a specific task — to protect utility customers — and that his job was to make sure I did that job properly.

 

The position had been created because of outspoken public frustration, and Brennan was committed to an effective response. Other state government departments could support his other initiatives.

 

For some, there now seems to be confusion about how to mesh the public advocate’s role in protecting consumers with being an appointee of the governor.

 

I suggest that the legislative mandate to the public advocate should be made unequivocal on his or her independent role.

 

A second issue arises in connection with how the public advocate defines the consumer interest.

 

My intention was to protect the essential customer interest: the lowest possible rates consistent with reliable service. Others, both in and out of government, could argue for the increased use of renewable resources or more competition among telephone or electric providers.

 

While they were pursing those agendas, it was my responsibility to remind the Public Utilities Commission that the customers pay, that Maine has low family incomes and that rates affect people’s lives and businesses.

 

In other words, my position was focused on short-term rates. I argued against rate increases. I opposed promises that higher rates this year would bring lower rates later, since such promises rarely pay off.

 

For example, rates paid to suppliers of renewable power were raised in the belief that when oil prices rose, the renewable supply would be economical. That made Maine rates both high and noncompetitive, and industry invested elsewhere.

 

More recently, some have advocated paying artificially higher rates to generators to encourage them, thus adding more competitors. But competition is not an end in itself; it is supposed to produce lower rates.

 

The public advocate should blow the whistle on pie-in-the-sky proposals like these.

 

The investor-owned utilities won’t do that. They are financially responsible only to their shareholders. Amazingly to me, their regulatory advocates can seek higher rates while being paid to do so using the customers’ money.

 

As time passed, some large industrial customers formed a group to protect their interests before the Public Utilities Commission.

 

The group has performed well for its members, and it has not generally adopted positions detrimental to other customers.

 

The vision of the public advocate has changed over time. Instead of being the customer’s gadfly, the office found itself supporting rate increases to pay for meeting long-term policy goals.

 

That is far from the original intent in creating the position.

 

I respect and admire all four of my successors as public advocate. They have performed with integrity and professionalism. But the public advocate — and utility customers — need help.

 

Besides reinforcing the public advocate’s independence, the Legislature should require the public advocate to focus on keeping rates low, consistent only with the need to maintain reliable service.

 

 

Gordon L. Weil, a weekly columnist for this newspaper, is an author, publisher, consultant and former international organization, U.S. and Maine government official.  

 

http://www.onlinesentinel.com/opinion/GORDON-L-WEIL--Public-advocat...

 

 

Comment by Whetstone_Willy on March 15, 2011 at 12:17am

From: http://www.americanthinker.com/2010/02/wind_energys_ghosts_1.html

“In early 2009 the Socialist government of Spain reduced alternative energy subsidies by 30%.  Calzada continues:

"At that point the whole pyramid collapsed.  They are firing thousands of people.  BP closed down the two largest solar production plants in Europe.  They are firing between 25,000 and 40,000 people...."

"What do we do with all this industry that we have been creating with subsidies that now is collapsing?  The bubble is too big.  We cannot continue pumping enough money.  ...The President of the Renewable Industry in Spain (wrote a column arguing that) ...the only way is finding other countries that will give taxpayers' money away to our industry to take it and continue maintaining these jobs."

That "other country" is the United States of America”.