Solyndra’s messy and expensive collapse a few weeks ago dominated the news. This week, it’s been replaced by a bevy of solar positives.
Bloomberg has some toes on the ground at the Solar Power International conference this week, and the ears above those toes caught some interesting info on solar. Duke Energy’s James Rogers was quoted as noting that U.S. utilities, with their access to “low-cost capital” will have a leg up in expanding solar options for consumers, especially if a carbon tax materializes. (Rogers is well known for being in favor of a carbon tax or a federal cap-and-trade option. His passion for renewables is common knowledge, though there is speculation that some of that passion has to do with the subsidies for those projects, which ups returns much higher than traditional energy sources.)
Whether Rogers is right or wrong about the utility position in the solar equation, there’s no doubt that activity in that arena continues to thrive. NextEra Energy Resources, a subsidiary of NextEra Energy and a sister company to Florida Power & Light, announced the commissioning of the Hatch Solar Center in New Mexico.
According to the company, the five-megawatt Hatch facility is comprised of 84 Amonix 60-kilowatt units and is the largest operating concentrated photovoltaic solar power plant in North America. NextEra Energy Resources owns and operates the plant and sells the power to El Paso Electric under a 25-year power purchase agreement.
Down in Georgia, sentiment over solar has changed the mindset of Public Service Commissioner Lauren McDonald. McDonald is pitching an interesting funding idea for solar---charging Georgia Power customers a nickel a month on top of their current bill to put into a solar power rainy day fund, essentially.
AP reported that other members of the commission were surprised at McDonald’s new concept. McDonald is proposing a type of budget compromise, connecting what Georgia Power wants to pay to what developers say they need to make a profit on projects. No word on requiring Georgia Power to buy renewables, but one wonders what would happen to that pile of nickels without a solar mandate. And, since Georgia doesn’t have a renewable portfolio standard, utilities aren’t forced into a “must have” demand situation, making the world of solar building---or any renewable building, really---a bit of a risky business equation.
Still, it’s interesting that McDonald, a Republican, is pitching such a green/green idea (green cash for green energy).
And, despite the dour trading of solar stocks recently, there still appears to be green cash in that sunny form of green energy. Google-backed SolarCity, which makes rooftop systems, recently signed on Robert Kelly as the company’s CFO. Kelly managed Calpine’s 1996 IPO, so there’s industry speculation that SolarCity may be looking to go public, pulling in key players to help with that option.
At the start of this month, it felt like Solyndra’s collapse was trumpeting the death of the solar subsidy, if not the solar industry altogether. As the end of this month approaches, it appears that Solyndra was just a minor glitch in the matrix and the solar industry has already moved on to bigger, brighter, greener pastures---at least as long as the subsidies and renewable energy portfolio standards remain.
Wednesday, October 19, 2011
Tuesday, October 11, 2011
Illinois at center of “As the Smart Grid Turns” controversy
This Illinois smart grid struggle is starting to look a bit like a daytime drama.
Hopefully, Commonwealth Edison (ComEd) and Ameren aren’t holding their corporate, collective baited breath on that legislative stamp of approval for their smart grid programs. The Illinois smart grid bill is unlikely to be resuscitated anytime soon. Unlike soap characters, bills rarely rise from the dead.
And, the handful of senators and representatives who beat the drum for an overturn of Gov. Pat Quinn’s veto may be laying low for awhile since the Chicago Sun Times and the Better Government Association laid out a lot of links this week---links between campaign donations and politicians who approached the smart grid bill favorably in the last session.
Now, the appearance of impropriety isn’t proof of impropriety, it’s true. But, it often muddies the picture.
A bit of history may be in order. Back in September, Illinois Governor Pat Quinn vetoed Senate Bill 1652, set to raise electric consumer rates in increments over the next decade to pay for system upgrades, resulting in approximately a $3 billion cash pool.
At the time Quinn vetoed the bill, he called it a “sweetheart deal” that basically erased all accountability for “big utilities.” The veto was supported by various organizations ranging from AARP to the Environmental Law and Policy Center. ComEd was, of course, disappointed at the veto, releasing a statement that the bill, despite Quinn’s description, “does not guarantee profits.”
Some politicians had discussed overturning the veto at the next legislative session, but that was before the big reveal this week.
The Better Government Association (BGA) released information through the Chicago Sun Times that ComEd and Ameren gave more than $1.3 million in campaign funds in the state. That cash was distributed, according to BGA, between January 2010 and the end of May 2011. More money came along over the summer, pushing the total to near $1.5 million. Both the politicians and power players have said that the money didn’t influence, and wasn’t intended to influence, the vote on the smart grid bill that passed in May.
BGA pointed out, however, that House supporters of the bill received six times more cash than opponents of the bill. Senate supporters came in at three times more.
Overall, however, there are 177 legislators in the Illinois chambers. Only 20 of them didn’t receive donations from ComEd and Ameren during the period recorded by BGA. Ninety-eight people voted for that bill, with eight of those not receiving a dime, leaving a whole lot of people who did get some campaign cash voting against, despite the money rolling in.
Once again, though, we’re back to the appearance of things. While the rights of corporations to freely spend political capital has been upheld by the Supreme Court, the average ComEd customer will still wonder if utilities giving cash to politicians was the only reason 1652 existed. And the benefits of smart grid will be lost in the hunt for meaning in the donation trail.
It’s human nature to assume a tit-for-tat response, though. When given a gift by a relative or friend we didn’t plan for at the holidays, how many of us run out and buy return gifts? They’ve given us something; we feel the urge to give something back.
ComEd and Ameren gave a lot of gifts to Illinois politicians. Did a few of those politicians feel the need to reciprocate with a legislative gift? That’s not something that can ever be proven or disproven, really. Money’s written down and accounted for. Good and bad intentions usually are not.
In the end, though, it appears that Illinois’ smart grid portrait is growing increasingly more Dorian Gray than traditional, stately over-the-fireplace staple. Impropriety, cash, anger and consumer backlash may end up making that portrait unrecognizable, with its owners covering it up and hiding it away.
Whether the sins of the portrait are real or imagined, it’s still the appearance that appears to matter most.
Hopefully, Commonwealth Edison (ComEd) and Ameren aren’t holding their corporate, collective baited breath on that legislative stamp of approval for their smart grid programs. The Illinois smart grid bill is unlikely to be resuscitated anytime soon. Unlike soap characters, bills rarely rise from the dead.
And, the handful of senators and representatives who beat the drum for an overturn of Gov. Pat Quinn’s veto may be laying low for awhile since the Chicago Sun Times and the Better Government Association laid out a lot of links this week---links between campaign donations and politicians who approached the smart grid bill favorably in the last session.
Now, the appearance of impropriety isn’t proof of impropriety, it’s true. But, it often muddies the picture.
A bit of history may be in order. Back in September, Illinois Governor Pat Quinn vetoed Senate Bill 1652, set to raise electric consumer rates in increments over the next decade to pay for system upgrades, resulting in approximately a $3 billion cash pool.
At the time Quinn vetoed the bill, he called it a “sweetheart deal” that basically erased all accountability for “big utilities.” The veto was supported by various organizations ranging from AARP to the Environmental Law and Policy Center. ComEd was, of course, disappointed at the veto, releasing a statement that the bill, despite Quinn’s description, “does not guarantee profits.”
Some politicians had discussed overturning the veto at the next legislative session, but that was before the big reveal this week.
The Better Government Association (BGA) released information through the Chicago Sun Times that ComEd and Ameren gave more than $1.3 million in campaign funds in the state. That cash was distributed, according to BGA, between January 2010 and the end of May 2011. More money came along over the summer, pushing the total to near $1.5 million. Both the politicians and power players have said that the money didn’t influence, and wasn’t intended to influence, the vote on the smart grid bill that passed in May.
BGA pointed out, however, that House supporters of the bill received six times more cash than opponents of the bill. Senate supporters came in at three times more.
Overall, however, there are 177 legislators in the Illinois chambers. Only 20 of them didn’t receive donations from ComEd and Ameren during the period recorded by BGA. Ninety-eight people voted for that bill, with eight of those not receiving a dime, leaving a whole lot of people who did get some campaign cash voting against, despite the money rolling in.
Once again, though, we’re back to the appearance of things. While the rights of corporations to freely spend political capital has been upheld by the Supreme Court, the average ComEd customer will still wonder if utilities giving cash to politicians was the only reason 1652 existed. And the benefits of smart grid will be lost in the hunt for meaning in the donation trail.
It’s human nature to assume a tit-for-tat response, though. When given a gift by a relative or friend we didn’t plan for at the holidays, how many of us run out and buy return gifts? They’ve given us something; we feel the urge to give something back.
ComEd and Ameren gave a lot of gifts to Illinois politicians. Did a few of those politicians feel the need to reciprocate with a legislative gift? That’s not something that can ever be proven or disproven, really. Money’s written down and accounted for. Good and bad intentions usually are not.
In the end, though, it appears that Illinois’ smart grid portrait is growing increasingly more Dorian Gray than traditional, stately over-the-fireplace staple. Impropriety, cash, anger and consumer backlash may end up making that portrait unrecognizable, with its owners covering it up and hiding it away.
Whether the sins of the portrait are real or imagined, it’s still the appearance that appears to matter most.
Thursday, October 6, 2011
Obama wants to build a better grid right now
This week, the Obama administration told Americans they want to build stuff. Now, Obama has said that to Americans before with the stimulus package. That version of building stuff looked more like the WPA of the 1930s---roads, bridges, hard and solid infrastructure.
This time around, Obama wants to build infrastructure of the less concrete and more dynamic sort---namely, power lines.
He’s focused on seven specific projects in Arizona, Colorado, Idaho, Minnesota, New Mexico, Nevada, Wyoming, Utah, New Jersey, Pennsylvania, Oregon and Wisconsin, and his contribution to the projects isn’t financial. It’s regulatory---or reducing regulatory red tape, you might say.
Oh yes, and the president says it will create thousands of jobs.
To create those new gigs, Obama wants to speed up the federal permitting for those seven projects: getting all the players together, working out a game plan, and making it happen. But, power line siting is more difficult than just getting everyone to chat. After all, Congress chats all the time, and the American people still see a lot of gridlock on that front.
Gridlock on the permitting and siting front is almost inevitable, chatting or no chatting. While it’s certainly an admirable concept to get more power flowing to the people, the people can be rather picky about seeing the inner workings. Everyone wants power; no one wants to live near power lines.
Now, a lot of Obama’s proposed “lucky seven” are in the West. That will help with speeding up siting and permitting. More elbow room, less people. Less people living near those lines means less people complaining about living near those lines. So, a lot of these have at least a decent shot in getting a good, swift kick in the pants to hurry completion.
The projects where Obama’s “hurry up plan” may work include a new 500 kV transmission line proposed by Idaho Power running a 300-mile long, single-circuit from Boardman, Oregon to Melba, Idaho; an Idaho Power/Rocky Mountain Power project between Glenrock, Wyoming and Melba, Idaho once again; the SunZia Transmission plan to construct and operate up to two 500 kV transmission lines in New Mexico and Arizona; and the TransWest Express to assist wind projects in Wyoming.
Those are likely to go off with fewer hitches because they go through a lot of uncharted country and involve not so many folks in the mix. With transmission siting, less is more: less people, less entities, less complications.
The Cascade Crossing Line that involves a lot of substation upgrades around lean and green-leaning Salem, Oregon may have a few hurdles, as might the CapX2020 project in Minnesota and Wisconsin and the Susquehanna-Roseland power line in Pennsylvania and New Jersey that’s heavy on substations and people interaction.
A lawyer for the Citizens Energy Task Force in Wisconsin, which opposes the CapX2020 project, has already been quoted in a local paper asking if the government would just “ram it through no matter what.”
And, locals near the Susquehanna-Roseland line already have a history of protesting the capacity upgrade for a number of reasons: aesthetics, energy fuel source, the location of the line through a recreation area, and because of the tower height required. (Current towers are about 80 feet tall. The new ones could be closer to 200 feet.) The New Jersey Sierra Club has a lawsuit against the proposal as well. There’s even an entire website dedicated to the opposition called “Stop the Lines” which claims the proposed project is about utility “greed” at the state’s expense.
After the White House announcement, Stop the Lines issued a statement saying, “Corporate profit should not be given priority here. Fast-tracking the destruction of a priceless national treasure---the Delaware Water Gap National Recreation Area---must not be allowed.”
So, all may not be so quick in this expedited expedition.
And, of course, on top of the issue with people living near power there’s the issue of the government’s concept of time. Transmission line siting is considered speedy if accomplished in five years and can take decades. By expediting the process, Obama may only be shaving a few years off. So, in 2015 we might see those New Mexico, Arizona, Wyoming lines start up. By early retirement, I may hear of the Susquehanna-Roseland completion. But, in the end, there’s no way Obama is seeing a foot of new power line before the next election.
So, I hope transmission siting wasn’t a large part of his new campaign.
This time around, Obama wants to build infrastructure of the less concrete and more dynamic sort---namely, power lines.
He’s focused on seven specific projects in Arizona, Colorado, Idaho, Minnesota, New Mexico, Nevada, Wyoming, Utah, New Jersey, Pennsylvania, Oregon and Wisconsin, and his contribution to the projects isn’t financial. It’s regulatory---or reducing regulatory red tape, you might say.
Oh yes, and the president says it will create thousands of jobs.
To create those new gigs, Obama wants to speed up the federal permitting for those seven projects: getting all the players together, working out a game plan, and making it happen. But, power line siting is more difficult than just getting everyone to chat. After all, Congress chats all the time, and the American people still see a lot of gridlock on that front.
Gridlock on the permitting and siting front is almost inevitable, chatting or no chatting. While it’s certainly an admirable concept to get more power flowing to the people, the people can be rather picky about seeing the inner workings. Everyone wants power; no one wants to live near power lines.
Now, a lot of Obama’s proposed “lucky seven” are in the West. That will help with speeding up siting and permitting. More elbow room, less people. Less people living near those lines means less people complaining about living near those lines. So, a lot of these have at least a decent shot in getting a good, swift kick in the pants to hurry completion.
The projects where Obama’s “hurry up plan” may work include a new 500 kV transmission line proposed by Idaho Power running a 300-mile long, single-circuit from Boardman, Oregon to Melba, Idaho; an Idaho Power/Rocky Mountain Power project between Glenrock, Wyoming and Melba, Idaho once again; the SunZia Transmission plan to construct and operate up to two 500 kV transmission lines in New Mexico and Arizona; and the TransWest Express to assist wind projects in Wyoming.
Those are likely to go off with fewer hitches because they go through a lot of uncharted country and involve not so many folks in the mix. With transmission siting, less is more: less people, less entities, less complications.
The Cascade Crossing Line that involves a lot of substation upgrades around lean and green-leaning Salem, Oregon may have a few hurdles, as might the CapX2020 project in Minnesota and Wisconsin and the Susquehanna-Roseland power line in Pennsylvania and New Jersey that’s heavy on substations and people interaction.
A lawyer for the Citizens Energy Task Force in Wisconsin, which opposes the CapX2020 project, has already been quoted in a local paper asking if the government would just “ram it through no matter what.”
And, locals near the Susquehanna-Roseland line already have a history of protesting the capacity upgrade for a number of reasons: aesthetics, energy fuel source, the location of the line through a recreation area, and because of the tower height required. (Current towers are about 80 feet tall. The new ones could be closer to 200 feet.) The New Jersey Sierra Club has a lawsuit against the proposal as well. There’s even an entire website dedicated to the opposition called “Stop the Lines” which claims the proposed project is about utility “greed” at the state’s expense.
After the White House announcement, Stop the Lines issued a statement saying, “Corporate profit should not be given priority here. Fast-tracking the destruction of a priceless national treasure---the Delaware Water Gap National Recreation Area---must not be allowed.”
So, all may not be so quick in this expedited expedition.
And, of course, on top of the issue with people living near power there’s the issue of the government’s concept of time. Transmission line siting is considered speedy if accomplished in five years and can take decades. By expediting the process, Obama may only be shaving a few years off. So, in 2015 we might see those New Mexico, Arizona, Wyoming lines start up. By early retirement, I may hear of the Susquehanna-Roseland completion. But, in the end, there’s no way Obama is seeing a foot of new power line before the next election.
So, I hope transmission siting wasn’t a large part of his new campaign.
Thursday, September 29, 2011
Autovation shows innovation
The D.C. suburb of National Harbor saw a lot of action this week as exhibitors and attendees of Autovation descended upon the Gaylord National to discuss the automated side of the utility equation.
Autovation is run by Utilimetrics, an association with the goal of bringing together “diverse stakeholders of electricity, water and gas distribution utilities to promote and share best practices for smart grid/smart metering, communications, utility automation and data management.”
Autovation is now in its 24th year and, this week, it offered a bevy of options from breakfast with utility peers to big picture sessions on today’s hottest power topics.
A couple of utilities opened and closed the week. Pepco Holdings revealed how they are taking a look at new technologies and transmission projects, even chatting up the smart grid, in the opening session. Commonwealth Edison (ComEd) closed the show painting a picture of the perfect smart energy home, which could include smart meters, demand response options, energy efficient appliances and other “killer applications” of smart grid technology.
And smart tech did end up in interesting spots at the show. While AMI and communications have always been an Autovation staple---and is now a smart grid one as well and should be, given the need for those items---electric vehicles (EVs) got their own series of sessions this year at the show, a whole track, even. Topics ranged from managing the distribution system impacts to identification of utility and customer issues with EVs. (Last year, Deloitte predicted that EVs and other alternative fuel/green would be a third of global sales by 2020. J.D. Powers, on the other hand specifically hailed EVs at a whopping 3.5 percent by 2015. Whichever prediction wins, EVs have certainly garnered a lot of conference attention this week.)
My favorite Autovation session, by far, featured Portland General Electric (PGE) insiders Eric Spack and Steve Sprague who revealed how the utility is using new meter tech to not just examine revenue protection but to bust pot growers in the area who are stealing a whole lot of power. The packed session was treated to some fabulous shots of home nurseries found and local news reports on PGE’s work. (And how often do you get to hear a speaker admit that his favorite part of the presentation is the marijuana part that will come later? Not too often, and it got some good chuckles.)
In other Autovation news, Hydro One and San Diego Gas and Electric were award winners at the show this year. Hydro One received the 2011 Excellence in Project Management Award for its smart meter deployment in Ontario. These days, almost all of Hydro One’s customers have smart meters and over a million have switched to time-of-use pricing. San Diego Gas and Electric won the 2011 Consumer Outreach Award for the utility’s smart metering program and its communications plan to keep the consumer in the loop.
In the downtime between sessions and awards, breakfasts and receptions, attendees could visit the Autovation show floor which featured both industry staples like Elster, Aclara and Itron and niche companies like Mad Dash and Ecologic Analytics.
Communications and open standards provider SmartSynch announced a major contract at the show. Michigan’s Consumers Energy has chosen the company to provide the metering system for the utility’s modernization program, to the tune of 1.8 million electric customers.
“As we develop our program, it will allow us to offer new options to customers and allow them to use our system to integrate new technology---such as smart appliances and plug-in electric vehicles---into their daily lives,” Consumers Energy President and CEO John Russell said in a release about the SmartSynch partnership.
Those EVs were just popping up everywhere at Autovation, I swear.
Next year’s Autovation is scheduled for Sept. 30-Oct. 2 in the hometown of the Queen Mary, Long Beach, California.
Autovation is run by Utilimetrics, an association with the goal of bringing together “diverse stakeholders of electricity, water and gas distribution utilities to promote and share best practices for smart grid/smart metering, communications, utility automation and data management.”
Autovation is now in its 24th year and, this week, it offered a bevy of options from breakfast with utility peers to big picture sessions on today’s hottest power topics.
A couple of utilities opened and closed the week. Pepco Holdings revealed how they are taking a look at new technologies and transmission projects, even chatting up the smart grid, in the opening session. Commonwealth Edison (ComEd) closed the show painting a picture of the perfect smart energy home, which could include smart meters, demand response options, energy efficient appliances and other “killer applications” of smart grid technology.
And smart tech did end up in interesting spots at the show. While AMI and communications have always been an Autovation staple---and is now a smart grid one as well and should be, given the need for those items---electric vehicles (EVs) got their own series of sessions this year at the show, a whole track, even. Topics ranged from managing the distribution system impacts to identification of utility and customer issues with EVs. (Last year, Deloitte predicted that EVs and other alternative fuel/green would be a third of global sales by 2020. J.D. Powers, on the other hand specifically hailed EVs at a whopping 3.5 percent by 2015. Whichever prediction wins, EVs have certainly garnered a lot of conference attention this week.)
My favorite Autovation session, by far, featured Portland General Electric (PGE) insiders Eric Spack and Steve Sprague who revealed how the utility is using new meter tech to not just examine revenue protection but to bust pot growers in the area who are stealing a whole lot of power. The packed session was treated to some fabulous shots of home nurseries found and local news reports on PGE’s work. (And how often do you get to hear a speaker admit that his favorite part of the presentation is the marijuana part that will come later? Not too often, and it got some good chuckles.)
In other Autovation news, Hydro One and San Diego Gas and Electric were award winners at the show this year. Hydro One received the 2011 Excellence in Project Management Award for its smart meter deployment in Ontario. These days, almost all of Hydro One’s customers have smart meters and over a million have switched to time-of-use pricing. San Diego Gas and Electric won the 2011 Consumer Outreach Award for the utility’s smart metering program and its communications plan to keep the consumer in the loop.
In the downtime between sessions and awards, breakfasts and receptions, attendees could visit the Autovation show floor which featured both industry staples like Elster, Aclara and Itron and niche companies like Mad Dash and Ecologic Analytics.
Communications and open standards provider SmartSynch announced a major contract at the show. Michigan’s Consumers Energy has chosen the company to provide the metering system for the utility’s modernization program, to the tune of 1.8 million electric customers.
“As we develop our program, it will allow us to offer new options to customers and allow them to use our system to integrate new technology---such as smart appliances and plug-in electric vehicles---into their daily lives,” Consumers Energy President and CEO John Russell said in a release about the SmartSynch partnership.
Those EVs were just popping up everywhere at Autovation, I swear.
Next year’s Autovation is scheduled for Sept. 30-Oct. 2 in the hometown of the Queen Mary, Long Beach, California.
Wednesday, September 21, 2011
Utilities contribute backbone and Benjamins to the economy
We talk a lot about utilities being the backbone of our economy, since electricity is the maker of the modern world. (You can't go through a single business transaction these days that doesn’t rely on electricity in some way, from powering lights and computers at the local bank to massive Wall Street stock transfers.) But, utilities are also a very profitable business by themselves, contributing to the economy in both backbone and Benjamins. Run correctly, utlities bring in cash and rising share prices for stakeholders.
(In case you're not up on the urban slang: Benjamins started as a slang term for $100 bills, since Ben Franklin is on the $100 bill. It's now grown into a general slang term for all large amounts of dollars and cents.)
So, let’s take a look at some of the dollar-and-cents power news this week.
Barrons is so happy with Southern Company that they’ve downgraded the utility’s shares. No, really. Not kidding. It seems that the cash gurus always thought Southern was an A-number one investment in this sector, but now the prices of Southern shares have popped up to reflect their goodness. So, it’s not a steal anymore. That being said, Barrons shifted their rating for Southern to Above Average from Buy.
In other cash and power hot spots on the web, Motley Fool is labeling National Grid a “cash king.” (They define their “cash king margin” as cash flow divided by sales, with that number topping 10 percent.) According to Motley Fool’s calculations, National Grid is at 13.2 percent (up a couple of percentage points from last year and up 10 from three years ago). American Electric Power (AEP) took second in their overview at 7.8 percent. Like National Grid, AEP showed “significant growth” from last year.
The other two utilities reviewed for potential “cash king” status by Motley Fool didn’t do quite as well as AEP and National Grid. Exelon came in at 0.8 percent, down over 10 percentage points from last year, and Duke Energy was in negative numbers, even more negative that last year’s but less negative than five years ago.
Investment website Seeking Alpha labeled utilities “boring,” but noted that they are a good buy since utilities represent a stable foundation for any investment portfolio. (In bad economic times, even investors look for less risk and less crazy. It may mean slower returns, but it’s not a rollercoaster ride that could end in one long drop.)
Seeking Alpha wasn’t looking for Motley Fool’s “cash king.” Instead, they examined the net profit margin. For those of us not watching our investments like hawks, a net profit margin is a formula figuring a company’s profit per dollar generated.
Looking at a net profit margin above that coveted 10 percent---like Motley Fool’s “cash king”---Seeking Alpha suggested ten good utility purchases that they labeled “cheap” but with “strong profitability.” These included DPL Incorporated, which sells electricity in West Central Ohio; Wisconsin Energy; CPFL Energy in Brazil; El Paso Electric; and Duke Energy, among others. (Editor’s note: If you’re interested in the power markets and distribution options in Brazil like CPFL Energy, check into the new DistribuTECH Brasil conference at this link.)
So, Duke didn’t make “cash king,” but it did get the thumbs up on net profit margin.
And, speaking of Duke and money, the Duke-Progress Energy merger that could make the combined company a monopoly of sorts in the Carolinas is still jumping regulatory hoops and hearings. The hearings were opened to the public this week with customers fearing high rates to support the combined entities' profits.
Duke and Progress, however, believe the merger is necessary to spread higher rates over a wider consumer base, since the companies see a whole lot of generation spending coming.
“In order to meet future demand for electricity, both companies will have to invest in new generation that will be more costly than the companies' current embedded costs," said Duke CEO Jim Rogers and Progress CEO Bill Johnson in a prepared statement at the hearing’s opening.
Over at the Wall Street Transcript, Ali Agha, managing director in the equity research department of SunTrust Robinson Humphrey gave some tidbits from the recent “Alternative Energy and Utilities Report.”
Agha recommends AES and AEP. Agha sees AES accelerating in 2011 through 2012 in the area of earnings growth. He stated that AES may hit $1.70 in earnings by 2015.
Agha likes AEP because it’s cheap. Like Barron’s once saw Southern, Agha views AEP as a sweet deal, trading below value.
Utilities remain sound business sense for many shell-shocked investors. And, according to the experts, some are still trading on the “cheap and sweet” deal level. As utilities---and the rest of the economy---continue to recover, the bargin prices may disappear, but the value won’t. It's hard to argue with an investment that brings you both comfort and profit.
(In case you're not up on the urban slang: Benjamins started as a slang term for $100 bills, since Ben Franklin is on the $100 bill. It's now grown into a general slang term for all large amounts of dollars and cents.)
So, let’s take a look at some of the dollar-and-cents power news this week.
Barrons is so happy with Southern Company that they’ve downgraded the utility’s shares. No, really. Not kidding. It seems that the cash gurus always thought Southern was an A-number one investment in this sector, but now the prices of Southern shares have popped up to reflect their goodness. So, it’s not a steal anymore. That being said, Barrons shifted their rating for Southern to Above Average from Buy.
In other cash and power hot spots on the web, Motley Fool is labeling National Grid a “cash king.” (They define their “cash king margin” as cash flow divided by sales, with that number topping 10 percent.) According to Motley Fool’s calculations, National Grid is at 13.2 percent (up a couple of percentage points from last year and up 10 from three years ago). American Electric Power (AEP) took second in their overview at 7.8 percent. Like National Grid, AEP showed “significant growth” from last year.
The other two utilities reviewed for potential “cash king” status by Motley Fool didn’t do quite as well as AEP and National Grid. Exelon came in at 0.8 percent, down over 10 percentage points from last year, and Duke Energy was in negative numbers, even more negative that last year’s but less negative than five years ago.
Investment website Seeking Alpha labeled utilities “boring,” but noted that they are a good buy since utilities represent a stable foundation for any investment portfolio. (In bad economic times, even investors look for less risk and less crazy. It may mean slower returns, but it’s not a rollercoaster ride that could end in one long drop.)
Seeking Alpha wasn’t looking for Motley Fool’s “cash king.” Instead, they examined the net profit margin. For those of us not watching our investments like hawks, a net profit margin is a formula figuring a company’s profit per dollar generated.
Looking at a net profit margin above that coveted 10 percent---like Motley Fool’s “cash king”---Seeking Alpha suggested ten good utility purchases that they labeled “cheap” but with “strong profitability.” These included DPL Incorporated, which sells electricity in West Central Ohio; Wisconsin Energy; CPFL Energy in Brazil; El Paso Electric; and Duke Energy, among others. (Editor’s note: If you’re interested in the power markets and distribution options in Brazil like CPFL Energy, check into the new DistribuTECH Brasil conference at this link.)
So, Duke didn’t make “cash king,” but it did get the thumbs up on net profit margin.
And, speaking of Duke and money, the Duke-Progress Energy merger that could make the combined company a monopoly of sorts in the Carolinas is still jumping regulatory hoops and hearings. The hearings were opened to the public this week with customers fearing high rates to support the combined entities' profits.
Duke and Progress, however, believe the merger is necessary to spread higher rates over a wider consumer base, since the companies see a whole lot of generation spending coming.
“In order to meet future demand for electricity, both companies will have to invest in new generation that will be more costly than the companies' current embedded costs," said Duke CEO Jim Rogers and Progress CEO Bill Johnson in a prepared statement at the hearing’s opening.
Over at the Wall Street Transcript, Ali Agha, managing director in the equity research department of SunTrust Robinson Humphrey gave some tidbits from the recent “Alternative Energy and Utilities Report.”
Agha recommends AES and AEP. Agha sees AES accelerating in 2011 through 2012 in the area of earnings growth. He stated that AES may hit $1.70 in earnings by 2015.
Agha likes AEP because it’s cheap. Like Barron’s once saw Southern, Agha views AEP as a sweet deal, trading below value.
Utilities remain sound business sense for many shell-shocked investors. And, according to the experts, some are still trading on the “cheap and sweet” deal level. As utilities---and the rest of the economy---continue to recover, the bargin prices may disappear, but the value won’t. It's hard to argue with an investment that brings you both comfort and profit.
Thursday, September 15, 2011
China out Wal-Marts the Waltons and Solyndra collapses
Last week, the FBI raided the California offices of thin-film solar maker Solyndra, once a poster child for the new energy movement that was to bring green jobs across the country in a giant wave of momentous change.
But, that was 2008. Now it’s 2011, and the momentous green wave didn’t happen here. That wave never reached our shores. Instead, that wave is stuck inside the country outline of China.
It fizzled out at the borders.
Here’s the deal: The Chinese are sharp. They see the potential in the green market for massive future energy needs. They’re also unified and interconnected in ways we individual Americans are not. So, being a communist country and an industrial powerhouse, they pulled the ultimate Wal-Mart: They stole the market share.
How’s that done? Well, for a lot of years Wal-Mart was the king of this philosophy, some would say. (Honestly, though, they aren't the only ones to use a strong arm to rule a market.) Here’s the basic concept: Go into a small market, undercut prices by taking a loss that can be balanced nicely across your wide network, force the mostly small and mostly independent competition out of business when they cannot meet your low, low prices competitively, and then become the sole player in the game---which lets you set prices any way you’d like from that point forward. Now, Wal-Mart may quibble with this characterization, but it’s a view of “market hogging,” if you will, that’s always followed them as they expanded. They have a bad reputation for running smaller companies out of town on a rail with those low, low price guarantees. And, factually, smaller manufacturers, suppliers and retailers can't get the big group deals that Wal-Mart can. They're leveraging their size.
Now, think of China as government Wal-Mart, a state-run powerhouse capable of taking a large financial hit up front and more than willing to leverage its size. So, they develop huge state subsidies in order to flip a switch on green manufacturing. Instantly, everyone’s up and running, pushing a product out that’s cheaper because they’re not having to carry the burden of production costs or start-up money at this point. (They’re the runner who jumps the gun with the blessings of the establishment.)
Now, American green companies have gotten some help from stimulus cash, but nothing like the funnel of dough the Chinese have contributed. The Chinese help is overwhelming, full and even overreaching. Americans, on the other hand, are putting together guaranteed government loans, some venture capital, some cash from friends and family, their maxed out credit cards---they’re struggling for a product they believe in. But, the emphasis in on struggling here. And it’s a heavy emphasis indeed.
So, as the FBI sorts through the lost belongings and paperwork of Solyndra---where the Walton family ranks as venture capital investors, actually---there will be a lot of speculation about whether the government did enough due diligence in choosing Solyndra for that suddenly very unpopular green loan.
But, perhaps that’s the wrong question. Perhaps, instead, we should ask if the government really invested enough given how quickly China was able to flip the green game to its favor.
But, that was 2008. Now it’s 2011, and the momentous green wave didn’t happen here. That wave never reached our shores. Instead, that wave is stuck inside the country outline of China.
It fizzled out at the borders.
Here’s the deal: The Chinese are sharp. They see the potential in the green market for massive future energy needs. They’re also unified and interconnected in ways we individual Americans are not. So, being a communist country and an industrial powerhouse, they pulled the ultimate Wal-Mart: They stole the market share.
How’s that done? Well, for a lot of years Wal-Mart was the king of this philosophy, some would say. (Honestly, though, they aren't the only ones to use a strong arm to rule a market.) Here’s the basic concept: Go into a small market, undercut prices by taking a loss that can be balanced nicely across your wide network, force the mostly small and mostly independent competition out of business when they cannot meet your low, low prices competitively, and then become the sole player in the game---which lets you set prices any way you’d like from that point forward. Now, Wal-Mart may quibble with this characterization, but it’s a view of “market hogging,” if you will, that’s always followed them as they expanded. They have a bad reputation for running smaller companies out of town on a rail with those low, low price guarantees. And, factually, smaller manufacturers, suppliers and retailers can't get the big group deals that Wal-Mart can. They're leveraging their size.
Now, think of China as government Wal-Mart, a state-run powerhouse capable of taking a large financial hit up front and more than willing to leverage its size. So, they develop huge state subsidies in order to flip a switch on green manufacturing. Instantly, everyone’s up and running, pushing a product out that’s cheaper because they’re not having to carry the burden of production costs or start-up money at this point. (They’re the runner who jumps the gun with the blessings of the establishment.)
Now, American green companies have gotten some help from stimulus cash, but nothing like the funnel of dough the Chinese have contributed. The Chinese help is overwhelming, full and even overreaching. Americans, on the other hand, are putting together guaranteed government loans, some venture capital, some cash from friends and family, their maxed out credit cards---they’re struggling for a product they believe in. But, the emphasis in on struggling here. And it’s a heavy emphasis indeed.
So, as the FBI sorts through the lost belongings and paperwork of Solyndra---where the Walton family ranks as venture capital investors, actually---there will be a lot of speculation about whether the government did enough due diligence in choosing Solyndra for that suddenly very unpopular green loan.
But, perhaps that’s the wrong question. Perhaps, instead, we should ask if the government really invested enough given how quickly China was able to flip the green game to its favor.
Wednesday, September 7, 2011
AEP Ohio case finds settlement amid controversy
On Sept. 7, AEP Ohio called it quits---not in offering power but in a series of cases pending before the Public Utilities Commission of Ohio (PUCO). In the end, the final settlement gives AEP the OK to merge Columbus Southern Power (CSP) and Ohio Power (OPCo) into a single unit.
There are other issues laid to rest as well, including a mandate to transition to a competitive generation market by 2015.
AEP Ohio seems pretty happy with the outcome, but not everyone in Ohio is thrilled.
On the happy side of things: AEP Ohio, of course.
"After a decade of legislative and regulatory changes to Ohio's market for electricity, this agreement allows an appropriate transition to a fully competitive electricity generation environment for AEP in the state," said Nicholas Akins, AEP president, in a written statement. "With the clarity this agreement provides, AEP is adopting a new Ohio business model that transforms the company into two entities---a regulated energy delivery system and a separate generation business. It also advances key state policies while sustaining investment in Ohio."
And the agreement was signed by a lot of stakeholders---20 or so organizations that AEP Ohio dubbed as “representing a broad range of customers.”
Among the biggest features of the agreement: a timeline for that open market move that has AEP supplying capacity to retail at a discount for three years, a fund to bolster economic efforts and a continuation of the company’s low-income fund, and an option for customers to choose renewable sources.
According to AEP, in 2012, typical CSP customer bills will decrease a bit (about $4) while typical Ohio Power bills will increase a bit (about $4). But, right now, it’s not the customers who are doing the complaining about this deal, it’s retail provider FirstEnergy Solutions.
They sent out a release in response to the deal that claimed customers would “be forced” to fork over a billion above competitive price values.
"The settlement filed today is no better for customers than AEP's initial plan which was overwhelmingly opposed by consumer and business groups," said Donald R. Schneider, President of FirstEnergy Solutions in another written statement. "With this settlement, customers will be denied the benefits of low prices from the competitive market and be illegally burdened with high electric prices for years to come---all to benefit AEP shareholders at the expense of customers. The plan also unfairly favors large industrial customers by providing them with cheaper electric rates at the expense of residential and low-income customers."
Details on how that billion breaks down or number supporting the claim that the settlement favors industrial customers at the expense of others were not provided in the release, although it is fairly common for all power companies to cut higher end/heavier use customers, like commercial and industrial users, a break.
As with any deal ever made, it seems this one has winners and hecklers. Since this settlement is a compromise, it seems to fit the very definition of it---that nobody is totally happy.
There are other issues laid to rest as well, including a mandate to transition to a competitive generation market by 2015.
AEP Ohio seems pretty happy with the outcome, but not everyone in Ohio is thrilled.
On the happy side of things: AEP Ohio, of course.
"After a decade of legislative and regulatory changes to Ohio's market for electricity, this agreement allows an appropriate transition to a fully competitive electricity generation environment for AEP in the state," said Nicholas Akins, AEP president, in a written statement. "With the clarity this agreement provides, AEP is adopting a new Ohio business model that transforms the company into two entities---a regulated energy delivery system and a separate generation business. It also advances key state policies while sustaining investment in Ohio."
And the agreement was signed by a lot of stakeholders---20 or so organizations that AEP Ohio dubbed as “representing a broad range of customers.”
Among the biggest features of the agreement: a timeline for that open market move that has AEP supplying capacity to retail at a discount for three years, a fund to bolster economic efforts and a continuation of the company’s low-income fund, and an option for customers to choose renewable sources.
According to AEP, in 2012, typical CSP customer bills will decrease a bit (about $4) while typical Ohio Power bills will increase a bit (about $4). But, right now, it’s not the customers who are doing the complaining about this deal, it’s retail provider FirstEnergy Solutions.
They sent out a release in response to the deal that claimed customers would “be forced” to fork over a billion above competitive price values.
"The settlement filed today is no better for customers than AEP's initial plan which was overwhelmingly opposed by consumer and business groups," said Donald R. Schneider, President of FirstEnergy Solutions in another written statement. "With this settlement, customers will be denied the benefits of low prices from the competitive market and be illegally burdened with high electric prices for years to come---all to benefit AEP shareholders at the expense of customers. The plan also unfairly favors large industrial customers by providing them with cheaper electric rates at the expense of residential and low-income customers."
Details on how that billion breaks down or number supporting the claim that the settlement favors industrial customers at the expense of others were not provided in the release, although it is fairly common for all power companies to cut higher end/heavier use customers, like commercial and industrial users, a break.
As with any deal ever made, it seems this one has winners and hecklers. Since this settlement is a compromise, it seems to fit the very definition of it---that nobody is totally happy.
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