Government’s role—for better or worse
Government relations took up much of the panel’s air time. Lee said he’s spending his time in Austin and Washington, D.C., making sure regulatory risk is properly managed.
Lest the feds get all the attention, Morris (Figure 4) reminded the audience that “the in-state financial regulator is the ultimate permit holder” for a nuclear unit, not the Nuclear Regulatory Commission.
4. CEO lineup. Participants in the 2008 CEO Roundtable were (from left to right) Michael Morris—chairman, president, and CEO, American Electric Power; James E. Rogers, Jr.—chairman, president, and CEO, Duke Energy Corp.; Milton Lee—general manager and CEO, CPS Energy; Thomas Brooks—vice chairman and executive vice president, Constellation Energy; and Fred Fletcher—assistant general manager, Burbank Water & Power. Dr. Robert Peltier, POWER’s editor-in-chief, moderated the session. Source: POWER
Rogers noted that so-called “stroke of the pen” risk (passage of legislation for which the consequences are not adequately foreseen) is greater when prices are rising. He insinuated that corn-based ethanol was an example and noted, “look how wrong D.C. got that!”
Obviously, the stroke-of-the-pen risk that keeps everyone up at night is climate change legislation, which is tied, like a ball and chain, to the future of coal. Ultimately, said Brooks, the CO2 program has to deal with its regressive nature. “It is a tax on the ratepayer,” he said, whether it’s a bona-fide tax or a cap and trade program.
Morris estimated that paying for the Lieberman-Warner bill (which has since died in the Senate) “will double our costs” and insisted that “inadvertent legislation on global warming could devastate the bottom 20% of the population.” He warned that the situation could become like the one faced by South Africa, where a lack of electricity is now devastating that country’s economy. Rogers claimed that the Lieberman-Warner bill “bastardizes cap and trade” from the SO2 model and has now become a way for the federal government to raise money and spend it. Lee and Rogers, like Wood, prefer a carbon tax to cap and trade, though Lee would like to see the money spent for industry R&D and economic development. (See Rogers’ commentary)
For Fletcher, the pen has already been stroked: “Southern California faces greenhouse gas regulation today.”
Several agreed that it would be folly to try to mitigate global climate change without a global framework.
Here is the most interesting paradox of the session. Many panelists had harsh, though carefully couched, words for government’s role in the energy business. Yet all of them are asking the government for something.
One, deriding the government for raising $20 billion from nuclear utilities for waste management but never delivering on the service, said he thinks we need a broader electric grid with federal control, kind of like the interstate highways. Another said we should rely on the profit motive instead of the government, but then insisted that federal loan guarantees were necessary to kick-start new nuclear units. Someone from the audience asked about the now-cancelled FutureGen project, and one of the CEOs who decried government’s role in corn-based ethanol said that “DOE made a mistake” in pulling out of that project.
It just shows that when the government spends money on things you like, government is good. When it doesn’t, it’s bad. Managing this paradox is certainly what Rogers was referring to when he said “political engineering” will be the key to success.
Perhaps an old saying comes to mind when thinking about the government and electricity: Can’t live with them; can’t live without them. The electricity industry should try to figure out how to live with a government that’s not only in a populist frame of mind (worried about the impact of high energy prices) but also willing to consider global climate change legislation that adds tremendous cost to the system—at a time when the federal government is deep in debt from overseas military adventures and unrestrained domestic spending, in hock to Asian governments who buy our treasury bills, and desperate for revenue.
What we will all pay for climate change legislation through electricity rates ultimately may be what pays for government mismanagement elsewhere in the budget. That’s the legal form of Three-card Monty.
—Jason Makansi (jmakansi@pearlstreetinc.com) is president of Pearl Street Inc., a technology deployment services firm.
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