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June 30, 2006

Wyden Cries "Hold!" on Internet Discrimination

Fearing that additional charges on Internet access would greatly harm free growth and access to the Internet, Oregon Senator Ron Wyden announced on Wednesday his intention to place a "hold" on legislation (passed this week out of the Senate Commerce Committee) that could allow such charges.

Wyden explained his strong opposition to the telecommunications legislation, which contains a provision corroding equal access to the Internet, this way: "Without a clear policy preserving the neutrality of the Internet and without tough sanctions against those who would discriminate, the Internet will be forever changed for the worse. This one provision threatens to divide the Internet into technology 'haves' and 'have nots.' This one provision concentrates even more power in the hands of the special interests that own the pipelines to the Internet. This one provision codifies discrimination on the Internet by a handful of large telecommunications and cable providers. This one provision will allow large, special interests to saddle consumers and small businesses alike with new and discriminatory fees over and above what they already pay for Internet access. This one small provision is akin to hurling a giant wrecking ball at the Internet."

Called by some an "Internet Tax," the ability to charge for different levels of speed and service would be a boon to certain telecommunications companies such as Verizon and Qwest, while causing distress among Internet-based companies such as Ebay and Amazon, and a wide assortment of organizations (such as CUB) who use the Internet as a vital communication tool. (According to the Oregonian's David Sarasohn, groups like the Christian Coalition are with Wyden on this issue, because they rely on the Internet to communicate with their many members.)

According to the San Francisco Chronicle (06/29/06): "The debate over net neutrality has become a civil war of sorts in the technology industry. Web content companies, high-tech firms and grassroots groups had hoped to persuade lawmakers to order the Federal Communications Commission to write regulations that would prevent phone and cable companies from levying additional charges on content providers to assure speedier delivery of Internet traffic."

CUB supports the strong stand that Sen. Wyden has taken on protecting net neutrality. As he stated in his floor speech Wednesday: "The Internet has thrived precisely because it is neutral. It has thrived because consumers, and not some giant cable or phone company, get to choose what they want to see and how quickly they get to see it. I am not going to allow a bill to go forward that is going to end surfing the web free of discrimination."

Telecommunications services are fast becoming one of the cornerstones of American civic and financial life, and the Internet is the superhighway of our current telecommunications system. We can't afford to stand by as equal and free access to the Internet is eroded. Good work, Sen. Wyden!

Finally, our legislators need to hear from you on issues that you consider important. You can find both Oregon Senators on the web: Sen. Ron Wyden and Sen. Gordon Smith. The Capitol Switchboard at (800) 459-1887 is also effective. Even a few calls on an issue raises the profile, but a few dozen calls really pulls the issue into the forefront.

Posted by Oregon CUB at 02:10 PM | Comments (0)

June 14, 2006

PUC Decides Harbinger Must File

The PUC voted yesterday (Oregonian 06/14/06) to order Harbinger Capital Master Fund to file an application acknowledging that they've acquired the ability to "exercise influence" on an Oregon utility, in this case Portland General Electric. Sometimes called the merger statute, this Oregon law says that any individual or company owning more than 5% of an investor-owned utility in Oregon must file an application with the Public Utility Commission, so that the Commission can approve the purchase, merger, or ability to exercise influence.

The Commission can then deny the application, in which case Harbinger would have to sell a portion of their stock in PGE. The Commission can approve the application, or the commission can approve the ownership with conditions. (For example, the MidAmerican ownership case resulted in approval with some stringent conditions negotiated by CUB regarding information sharing, financial ring-fencing, renewables purchases, etc.)

CUB filed a Complaint last Thursday asking the PUC to open an investigation on Harbinger's ownership of 7.4% of PGE stock and the resulting need for Harbinger to undergo this process. Harbinger's local attorney has argued that his client does not intend to influence PGE's operations, and is therefore exempt from the ownership application requirement. CUB believes that the law is based on ability to exercise influence, not intent to exercise influence. We argued that Harbinger's intent is moot under the law; they have the ability to exercise influence and they need to file. Based upon the recommendation of the PUC Staff and on intervenor comments, like CUB's Complaint, the Commission opened and closed a short investigation in the matter, concluding that Harbinger is indeed required to file an ownership application.

An important part of an investigation of the "exercising influence" statute is the ability to conduct discovery, which allows us to find out what Harbinger's analysis is of their PGE stock purchase, their plans for the stock, etc. Opening this case will allow the PUC to use said discovery process to judge the new utility ownership's effect on customers, and to place conditions on the purchase if they consider it in the best interest of customers.

This is important partially because Harbinger has shown itself to be very willing to exercise influence with another utility it owns a percentage of: NorthWestern Corp. of Montana. Harbinger, which owns 20% of NorthWestern, has tried to force a sale of the utility company against the wishes of the utility's Board of Directors (see Oregonian article from 04/17/06). We neither believe nor disbelieve Harbinger's attorney when he assures us that Harbinger has no such desire to exercise influence in the case of PGE. We simply want to see the memos, the spreadsheets, and the financial analysis showing their plans and expectations for PGE.

We appreciate our members' willingness to support the work that keeps these issues front and center, when significant numbers of participants would like to keep utility ownership deals under the radar. The electrical power and gas service into our homes and small businesses are crucial to daily functioning, and much too important to be given over to for-profit corporations without any oversight. We rely on you to keep us diligently at work, keeping our utilities in good hands.

Posted by Oregon CUB at 01:11 PM | Comments (0)

June 09, 2006

Who Pays for the Boardman Outage?

CUB submitted response testimony last week in a case involving a broken coal power plant, PGE's Boardman plant in Eastern Oregon, up near the Washington border. PGE has asked for $50.1 million from customers to cover some of the time the plant was closed. CUB and PUC staff have both responded by saying customers should pay their fair share of the outage, but that we think a fair amount would fall well under $1 million. That's a big difference in numbers. Here is basically what happened.

A turbine rotor crack at Boardman caused the plant to close, or go "off-line," back on Oct. 23, 2005. While replacing the repaired rotor in February of this year, the generator rotor was damaged, causing further delay. The plant finally got going again in late May 2006, having been out for about 5 months. A root cause analysis, determining what was the original cause of the outage, has not been completed. When that is done, it will be used to determine whether PGE's management of the plant was prudent or imprudent, and if it is found that the rotor cracked due to PGE's imprudence, then CUB will argue that customers should pay none of the costs. Until that root cause analysis is done, however, let us tell you about the current case.

PGE filed a deferral on the outage, a request to track the costs associated with having Boardman closed, in order to ask the PUC to approve passing those costs along to customers. Their request would only include costs from the first phase of the outage due to the cracked turbine rotor, from Nov. 18th through Feb. 5th. (Costs for the second phase were not requested, presumably because it was clear that PGE was responsible for the second rotor's breaking, or because inexpensive hydropower during that time kept replacement power costs low.) PGE estimated the cost of this outage at $50.1 million. PUC staff, in their own analysis, thought $42.8 was the correct cost to cover the outage.

This was an unusually long outage, but these things do happen. Power plants go off-line, as PacifiCorp's Hunter coal plant did during the 2001 power crisis, as PGE's Trojan nuclear plant did fairly regularly in its 17-year operation. A certain amount of leeway is built into the Return on Equity, the profit that these corporate utilities are allowed to make under state regulations. We provide a Return on Equity (ROE) to utilities, the amount of which currently runs at about 10% profit on investment, so that utilities are rewarded for the risks associated with their investment in the system. Generally, this ROE is considered ample compensation for the risk of most plant outages and other unexpected costs.

The ROE is a guesstimate based upon forecasts, since no one can really say what the weather and therefore hydropower will be like, or what the actual demand for electricity will be, etc. When costs are low and profits are high, the utility keeps the extra money for its shareholders. When costs are high and profits are lower, the utility should absorb some of the higher cost. Traditionally, a sharing mechanism is often used to ensure that the risks and benefits are not weighted too heavily on either the utility or on customers. This sharing mechanism involves using a "deadband" that includes costs that the company is expected to absorb as part of the normal risk of doing business and making a profit.

PGE is asking for customers to pay 100% of the costs associated with Boardman's outage from 11/18/05-02/05/06. CUB is arguing that this is nonsense. Assuming that PGE's management of the plant has been prudent, customers should pay some of the costs that fall outside the normal cost deadband. But because we believe the deadband is about $42 million, customers' share of costs comes to less than $1 million, not $50 million.

Boardman is a more expensive plant to run, even on good days, than most coal plants. About one third of Oregon's electricity is served by coal, mostly from plants in Utah, Wyoming, or Montana. The power produced in these other Western states is then transmitted to Oregon over the grid as electricity. Boardman, on the other hand, has no nearby source of coal and requires railroad shipments of coal from the Rocky Mountains to be brought in, which is a more expensive proposition. And then Boardman has been the target for criticism based on the air pollution it emits, dirtying the air of "more than 10 protected parks and wilderness areas, including Mount Hood, Mount Rainier and Mount Jefferson..." (Oregonian, 05/23/06).

Finally, there is also the issue of carbon regulation, which we believe to be an inevitable result of global warming, the financial burden of which will fall most heavily on customers consuming coal-based electricity. Boardman was approved in 1975, before CUB's existence, and was built without pollution control technology that was available even at that time. Be assured that CUB will fight to keep any more traditional coal-burning plants from being built in Oregon. And we will make sure customers don't pay any more than they need to on the one we already have.

Posted by Oregon CUB at 11:29 AM | Comments (0)

June 06, 2006

Cable Television Local Control at Risk

Most of us at Citizens' Utility Board wear multiple hats. CUB Organizing Director Jeff Bissonnette, among his many volunteer activities, sits on the Board of Portland Community Media. He therefore is doubly interested in the consumer privacy and local control issues being posed by legislation now in Congress. We have written about this danger to telecommunications customers and Oregon communities in our blog, A Telecomm Bill to Beat.

His Commentary Article appeared in the Insight section of the Portland Tribune today (06/06/06). Here is what he had to say:

Keep local access, control

By JEFF BISSONNETTE
Issue date: Tue, Jun 6, 2006
For the Tribune
----------------------------------------------------------------------
Portland Community Media celebrates its 25th anniversary this year, but it may have a hard time making it another 2 1/2 years if proposed federal legislation becomes law.

PCM has provided equipment and training for thousands of residents in Portland to use the cable system as a means of local community communications. Cable subscribers have had opportunities to watch high school football and city parades, local basketball games and state and city government public hearings on the community channels.

PCM also supported local and state democracy by providing thousands of hours of election coverage -- more time, in fact, than all of the commercial broadcast network affiliates combined.

All of this could end if Congress approves the pending legislation.

The U.S. House of Representatives is expected to vote on the Communications Opportunity, Promotion and Enhancement (or COPE) Act -- a bill that's supposed to encourage more competition to cable companies. The bill would permit multibillion-dollar companies like Verizon, AT&T and Qwest, the bill's major beneficiaries, to cherry-pick the lucrative neighborhoods in a community, leaving the rest behind. And, as soon as one subscriber is signed up by the phone company, the existing cable operator can adopt the national franchise and abandon local public service commitments.

While the bill would not create the competitive marketplace that its sponsors promise, it would do the following:

1. Rely on a one-size-fits-all solution for the whole country. Cities will be forced to spend your tax dollars on expensive Capitol Hill attorneys to defend their legitimate rights-of-way regulations. Local consumers will be left to call a backlogged Federal Communications Commission with complaints. (Try reaching someone at the FCC on the phone.)

2. Allow phone companies to pick the area of a city they choose to serve, abandoning the historic commitment to universal service for all residents. This may result in short-term lower rates for areas with competition, but areas without competition will get no rate relief.

3. Cut funding for public access in cities and towns that currently have more support than what is provided for in the bill. COPE would cut Portland Community Media funding by $360,000. PCM would no longer be able to afford to provide the training, equipment and other support that enables community producers to create the kind of local programming our viewers have come to expect.

4. Replace video franchises, locally negotiated to best serve community needs, with a licensing procedure that would allow virtually anyone -- qualified or not -- to come into a city and begin digging up the streets.

5. Weaken consumer and privacy protections by limiting local governments' ability to adopt and enforce strong standards and rules to protect their citizens.

6. Create a loophole that can be used to sidestep the regulations by redefining services. While it may walk and talk like a duck, the phone companies can call it a goose and walk away from this law.

If you believe in local control, in being able to watch your local government or share local views, and in keeping control of your local rights-of-way, contact the members of Oregon's congressional delegation immediately.

Tell Congress: Don't be fooled again! Stand up for our local communities and for consumers. Say “Nope” to COPE!

Jeff Bissonnette is president of the board of directors of Portland Community Media.

Posted by Oregon CUB at 11:47 AM | Comments (0)

June 02, 2006

Towers and Powers All Falling Down

Things seemed to be falling all over the place last week, two of the most noteworthy falls being the falls of two icons: Trojan's cooling tower, which was imploded on May 21, 2006; and the conviction of those powerful executives who led Enron to implosion. One of these falls was literal and physical; one was legal and financial. Both were connected to Portland General Electric, Oregon's largest electricity-providing utility.

The Oregonian, in its coverage of the Trojan implosion (Nine seconds end Trojan era 05/22/06), referred to "Oregon's brief and troubled experience with nuclear power generation," and, indeed, this description seems apt. Built by Bechtel in 1976, shortly before a 1980 ballot measure that prohibited further nuclear power generation facilities without an adequate nuclear waste disposal solution, Trojan was supposed to provide electric power to Oregonians for more than 30 years; however, it lasted only until 1993. Trojan had experienced an unusually high number of shutdowns and safety violations in those 17 years; for instance, CUB reported in 1990 that PGE had been fined, partially because "PGE personnel were signing surveillance forms for inspections that were not done..."

So things were not going well at Trojan. Ballot measures had been filed to close Trojan by concerned energy activists. The final straw came when the steam generator tubes broke, costing at least $135 million to replace, and an analysis by the Public Utility Commission showed that closing Trojan, and replacing that electricity with purchased power from the market, would be cheaper for customers in the long run.

There followed much legal and political wrangling: CUB filed and won a lawsuit against a PUC decision allowing PGE to keep making a profit on the closed nuclear plant. PGE then turned to the Legislature and got a bill passed into law that allowed utilities to keep collecting profits on closed power generating facilities. CUB then began collecting signatures to place this law on the ballot, giving citizens the chance to reject this corporate giveaway. PGE, seeing the writing on the wall, signed a settlement agreement in which they ended the collection of more profit on the defunct power plant.

And there the situation sat, until May 21st. On that day, after lighting a fuse to 2,792 pounds of dynamite, the long-closed nuclear tower "bowed slightly to the southeast ... and then sunk into itself and was gone."

And then four days later came another fall, one that reverberated around the country from a Texas courtroom. From Newsweek's June 5th edition: "Ken Lay was convicted on all 10 conspiracy and fraud charges the government brought against him, and Jeff Skilling ... was convicted of 19 of 28 counts." How did the prosecution get these convictions? "They charged Lay and Skilling primarily with misleading investors, employees, and regulators..." Everyone has had their suspicions about Enron's shady dealings, and this decision seems to confirm them, to prove that Enron really was rotten at its core.

Enron's legacy in Oregon is twofold. First, they bought PGE in order to launch a radical deregulation plan in our energy market that would have sold all generation assets and forced customers to buy power from a retail market, a market that didn't exist then and still doesn't today. Based on what happened in the wholesale market, our estimation is that, if Enron had been successful, in 2001 rates would have risen from 6 cents per kilowatt hour (kWh) to more than 30 cents, costing customers at least $1 billion. Enron did get approval to buy PGE, but they got held up on that whole deregulation scheme: "There's little question Enron will see to it that electricity deregulation takes hold in Oregon [ed. note: didn't happen], but two guys you've never heard of are trying to make sure that consumers aren't screwed in the process. The two are the bearded (and often barefoot [ed. note: not so much anymore]) Bob Jenks and his clean-cut cohort Jason Eisdorfer." Willamette Week, 08-05-98.

The second legacy Enron left was, of course, the West Coast energy crisis of 2001. Their trading scams and deliberate power supply manipulations led to blackouts in California, and higher rates throughout the Northwest. Many utilities in the region were forced to raise rates 30-50% during this time, including PGE.

Customers of PGE in Oregon weren't the only ones affected -- so were PGE employees. Thousands of local PGE employees lost significant chunks of their retirement savings.

And so a tower implodes in a huge pile of steel and concrete. And convictions follow the day when "Enron imploded ... turning almost overnight from No. 7 in the Fortune 500 into a bankrupt hulk." Both of these outcomes may be, at their base, more symbolic than final. Lay and Skilling will likely be free from jail for months or years while they appeal, and PGE customers will be paying to clean up the Trojan site and store the accumulated nuclear waste for years to come.

For those of us who believed Trojan was a nuclear lemon, and that Enron's money-making machinations had to be illegal, we find a certain vindication in these conclusions, symbolic or not. However you look at it, feeling vindicated is nice, but with PGE asking for an 8.4% increase in rates while raising executive salaries, it's time to get back to work.

Posted by Oregon CUB at 10:49 AM | Comments (1)