Fortnightly - Winter 2016

Frontlines

Steve Mitnick 2016-01-25 02:34:05

Forum for Our Industry’s Civil Discourse Fortnightly’s new chief reflects on his background and our principles. I’m newly named as Editor-in-Chief of this historic magazine, but you may think of me as the Forrest Gump of the utilities industry, with a quicker wit hopefully. In the last 37 years, like Forrest in the 1994 film, I’ve played a bit part in many big performances. In the late seventies, President Jimmy Carter wanted to increase coal burning at power plants. (How did that turn out?) On behalf of Carter’s new Energy Department, I talked with utility executives to help the administration and Congress figure out how to overcome their reluctance to burn more coal. Yes, in that quaint period, utilities owned all the power plants. By the early eighties I was testifying constantly before regulatory commissions, often as an expert on the rate of return that utilities should be allowed to earn. But I gave up that line of work. The chairwoman of a commission I had testified for let slip that it wasn’t really rocket science. She admitted to me that she always set the allowed return at the midpoint between the recommendations of the utility and consumer advocate. My elaborate economic models were no more than clutter in the proceedings. Throughout the eighties, yours truly and other modelers labored to dethrone the power plant dispatch models that ignored time. Dispatch models factoring in time predominated by the decade’s end, enabling planners to consider energy storage, demand response, intermittent renewable generation, load following, etc. It was 1989 when, at a retreat of a prestigious energy consultancy, I first heard a partner propose that locational marginal prices should govern regional power plant systems. I knew that approach would have trouble coping with the real world complexities of regional systems; and said so. Yet a few years hence we saw regional markets emerge, priced by node. Though real-world complexities, as I had warned, continue to this day to vex those who structure and restructure markets. Later, as when Forrest Gump made Alabama’s football team, my big break came. I noticed an obscure provision in the regulations implementing the 1990 Clean Air Act Amendments. It criminalized imperfections in the required continuous emission monitoring of power plants. Each utility’s “designated representative” (or designated felon, the joke went) was immensely grateful for the data screens I created to keep them on the right side of the law. A more noticed provision encouraged utilities to erect scrubbers at coal plants, and do so on an accelerated schedule. I made the economic case with real options theory for switching to low-sulfur coal, instead of rushing to scrubbers. Coal switching saved utilities and thus their consumers billions. It also inadvertently lessened carbon dioxide emissions, a greenhouse gas, since scrubbers raise heat rates and thereby emissions. The Energy Policy Act of 1992 ushered in deregulation. Regulators presumably would become dinosaurs; so would the utilities they oversaw. Alas I bought in, helping utilities from Spain to Scotland and from Peoria to Pineville become, well, more like the deregulation juggernaut Enron. I was persuaded as almost all were, even helping out Enron once, in one of my most effective testimonies before regulators. In today’s parlance, the utility model was being disrupted. Power plants, meter reading, and everything in between would now be ruled by markets and taken over by market entrants. Enron fell, hard, but market theories persisted. In the first years of this century, a group of utilities and then equity funds backed my non-utility transmission development company. A 125-mile direct current interconnection between upstate and New York City would transfer a thousand megawatts, making the five boroughs less of an isolated load pocket. I survived a public hearing with an armed critic, and then a dangerous encounter with an oncoming train, while surveying a right-of-way. I cajoled every major official up and down the Hudson River, including Senator Hillary Clinton, whose career continues. The best day for that project, I thought, came when the New York Times endorsed our “Empire Connection” in an editorial. This turned into the worst day, however, when the governor vowed to block the project, hating that the Times was for it. By 2005, at the renowned consultancy McKinsey & Company, I travelled North America advising the largest energy companies. In one such assignment, I managed to shock an extensive team of petroleum company executives, engineers, and consultants that was about to undertake a massive oil development project. If it proceeded, I had warned, its potential environmental impact would be so unprecedented that the New York Times would rail against it on the first page, above the fold. The company’s executive suite heeded my warning, dooming the project. A year later, New York’s forceful attorney general (some would say bellicose) was on his way to a landslide victory to become governor. I left the life as a high-flying consultant to become New York’s “energy czar.” Later I recalled that at least one tsar in Russia met an untimely demise. Caught in between a death struggle between my take-no-prisoners governor and the legislative leader from the other party, a former boxer, I couldn’t leave politics soon enough. Resuming my consulting and ramping up my economic research, I dove deeply into how Americans pay for, use, and value electricity; even writing a book on the subject that you’ve seen perhaps. I was given access to half a billion consumer bills and the computer resources to make some sense of all of it. Eventually my new rubric – “value of electricity” – had found a home in a range of debates about utility regulation and policy. These and other experiences have helped to shape this new Editor-in-Chief. I know what Public Utilities Fortnightly has meant in our industry’s history since 1929, as well as its role today and in the challenging days ahead. To me, this magazine has become the principal forum in our industry for civil discourse, the central meeting place to hash out our constant arguments about regulation and policy. To fulfill this mission, the magazine stands for balance, as we advance our conflicting ideas with mutual respect and a basis in verifiable facts. And the magazine stands for, most of all, the public interest. That is the coin of this realm. How does a regulatory or policy proposal or the rejection of a proposal best serve the interests of America’s utility consumers (notwithstanding each of our own special interests)? In the publication’s first years, the epic battles between Insull, Willkie, Roosevelt, and Lilienthal took place on our pages. Since passing our fiftieth birthday, the clashes on our pages have come along in quick succession. We’ve argued about nuclear prudence, efficiency programs, deregulation, regional markets, federal versus state jurisdiction, emission allowance trading, renewable portfolio standards, net metering, gas-electric integration, storm response, pipeline safety, the ups and downs of gas and coal, nuclear plant retirements, capacity markets, demand response, microgrids, and on and on. To date, Public Utilities Fortnightly has published over one hundred thousand pages with thousands of authorsubmitted articles, features and advertisements. Some of our authors claimed to foresee the industry’s future. Others were more uncertain. Forrest Gump offered his own explanation: “I don’t know if we each have a destiny, or if we’re all just floatin’ around accidental-like on a breeze.” As for me, like Forrest, I think it’s maybe a little of both.

Published by Public Utilities Reports, Inc. View All Articles.

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