CA ratepayers fleeced for green power line in Canada

Montana Alberta tie LineJuly 2, 2013 

By Wayne Lusvardi  

Public, municipal and private power companies throughout California buy hydropower from the Western Power Administration. This means ratepayers across California are paying for a wind farm transmission line that benefits only those who live in Alberta, Canada with subsidized power and reduced air pollution. 

Obama administration directives increasing hydropower electricity rates over the past two years to fund green projects caused the U.S. House Committee on Natural Resources to hold a hearing in Washington, D.C., on June 26. It was called, “The Power Marketing Administrations: A Ratepayer Perspective.”

Rep. Tom McClintock, R-Elk Grove, chairman of the Subcommittee on Water and Power, and Rep. Doc Hastings, R-Washington, chairman of the Natural Resources Committee, called the hearing.

McClintock summed up the reason for the hearing:

 “Today the subcommittee hears from the ratepayers who are bearing spiraling costs for electricity caused by ill-advised government policy. For example, we will hear that Central Valley Project power customers are being fleeced by an unaccountable tax program that lavishes funds on environmental causes while inflating electricity prices to cost-prohibitive levels.” 

Montana to Alberta Tie Line

Of particular issue is a mandate imposed on the Western Power Administration to finance $161 million of the costs of the Montana to Alberta, Canada Tie Line, a 214-mile transmission line linking wind farms in Montana to provide power in Alberta, Canada.  The Western Power Administration is an independent agency that runs 56 hydropower plants generating 10,505 megawatts of power from 15 Central and Western states, including California and Montana.  The federal mandate comes from Order No. 1000 of the Obama-controlled Federal Energy Regulatory Commission, which forbids discrimination against wind energy projects.

Newspapers in Canada heralded the project as a “New Merchant Transmission Line with Montana a No-Cost Line for Albertans.”

California pays and Canada benefits

Boasted Dawn Delaney, a spokesperson for the Alberta Electric System Operator, “The cost of planning, designing, constructing, operating and interconnecting a merchant intertie are not paid by Alberta ratepayers.”

Beneficiaries of the new line also include the Spanish firm Grupo NaturEner’s 189-megawatt Rim Rock wind farm located near Kevin, Montana.

Another beneficiary is Morgan Stanley Capital Group that has a power purchase agreement that includes pollution credits needed by San Diego Gas and Electric. In 2010, SDG&E petitioned the California Public Utilities Commission to invest in the Montana to Alberta Tie Line to comply with stringent green power mandates of AB 32, California’s Global Warming Solutions Act of 2006.

Subsidized “Free Market” 

Capital Power, based in Edmonton, Canada couldn’t economically build its originally proposed Halkirk Wind Farm without California pollution credits. Bryan DeNeve, senior vice-president of Enbridge, the private builder and operator of the new transmission line says this is a “whole new approach to Alberta’s free market.” He added:

“If consumers were forced to buy power from renewable sources, that would be a whole different approach to Alberta’s free market and we’d start to look like Ontario (with its Feed-in-Tariff) with its higher prices paid for wind energy.”

What DeNeve fails to mention is that this so-called “free market” is being subsidized by hydropower ratepayers in California’s Central Valley and electricity customers of San Diego Gas & Electric, who pay higher electricity rates. And to meet anti-pollution mandates, California’s regulated electric utilities are being forced to pay to clean up air pollution in places like Canada.

Air is cleaner in Canada but paid for by San Diego

By providing public financing to private merchant wind power and transmission line companies, Canadian-based Capital Power will be able to shut down 2,400 megawatts of older coal-fired power plants by 2021. However, the new wind farms will not entirely replace the old coal power plants, but will also require the construction of new gas-fired power plants for backup when the wind doesn’t blow.

McClintock and Hastings were joined by representatives of the Southwestern (hydro) Power Association, the Public Power Council of Portland, Oregon, Tri-State Generation and Transmission Association and the Redding (Calif.) Electric Utility, in criticizing the the Obama administration’s undermining of the long-time policy of “beneficiary pays.”   McClintock said:

“Families and businesses have paid for this resource with interest under the longstanding ‘beneficiaries pay’ principle.  The premise of this doctrine is that those who benefit must pay for their commensurate cost. That doctrine is being radically transformed under this Administration that seems intent on imposing costly mandates, regulations, fees and litigation that are making the monthly arrival of the family utility bill a growing financial nightmare.”

In 2012, ratepayers of SDG&E called for cutting back $600 million in the Rim Rock Wind Farm in Montana.  San Diego electric customers would not directly benefit from the wind farm Tie Line to Alberta, nor would air pollution be reduced in California.  San Diego would not actually get power from the Montana wind farm, but instead would get high-priced certificates so that it could continue to operate polluting power plants in its customer service area.

California’s 33 percent renewable energy mandate has been combined with Obama-controlled Federal Energy Regulatory Commission’s Order No. 1000 in a way that the California Global Warming Solutions Act of 2006 and the Federal Energy Policy Act of 2005 never intended.

12 comments

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  1. Dyspeptic
    Dyspeptic 2 July, 2013, 09:58

    “The premise of this doctrine is that those who benefit must pay for their commensurate cost.”

    This is the exact opposite principle of the Welfare State, where those who benefit from welfare payments pay nothing for them. Nice to see that stupid Kalifornia voters are paying to subsidize Canadian energy customers. How many idiots in this state know this? Even if they were aware of this irritating fact, would it change their atrophied minds? Of course not. This is the land of the lotus eaters, where fact, logic and common sense are banished.

    Reply this comment
  2. Queeg
    Queeg 2 July, 2013, 19:53

    You earn so pay! Electric is cheap….producing sustainable energy is a noble endeavor….being caddy and whineeeee…..so…so…typically CWD. The only internet site attracting predominately enemies of transformation of some sorry,wasteful and dirty energy policies.

    Reply this comment
  3. Wayne Lusvardi
    Wayne Lusvardi 2 July, 2013, 22:34

    FYI, dirty power plants were banished from California when the U.S. EPA in 1996 gave the state an ultimatum to clean the air or face a cut off of Federal funds by 2001. So in 2001, California shut down old coastal polluting power plants but imported dirty power from other states. So no one that I am award of is for returning to the “good old days” or terrible Los Angeles smog.

    But natural gas power plants are two thirds less polluting than coal fired power plants. Green power is clean but does not eliminate the need for gas fired backup up power plants. So trading a third as much air pollution for green power that still has about a third of the air pollution because it needs gas fired backup power plants isn’t much of an environmental or economic gain.

    Those who live in glass housed windmills shouldn’t throw stones.

    Reply this comment
  4. Mark
    Mark 3 July, 2013, 07:03

    Thanks for the post Wayne!
    I came across a post recently discussing who ends up paying for infrastructure upgrades to meet the 33%RES. I noted a few comments you might find of interest:

    1) “These facilities include the Whirlwind Substation, Colorado River
    Substation expansion, West of Devers Project, South of Kramer Project, Lugo-Pisgah
    Transmission Project, Red Bluff Substation, and the Eldorado-Ivanpah Transmission
    5 Project. The final total of these facilities is not determined but will certainly amount to
    the billions of dollars of new transmission, and accounts for most of the new transmission being developed to interconnect renewable resources. All of this cost, along with the risk of abandoned plant or stranded assets, is being borne by the consumer.

    2) “The Commission should take away at least two points from the May 14th Workshop. First, transmission costs are increasing at a staggering pace, and no longer represent a de minimis portion of the overall electric bill.”

    http://www.energy.ca.gov/2012_energypolicy/documents/2012-05-14_workshop/comments/2012-05-31_Post_Workshop_Comments_of_the_California_Municipal_Utilities_Association_TN-65532.pdf

    Reply this comment
  5. Randy Wilkerson - Western Area Power Administration
    Randy Wilkerson - Western Area Power Administration 3 July, 2013, 14:07

    This story contains a number of factual errors that I would like to correct. Western Area Power Administration (www.wapa.gov) sells long term firm electric power to public, municipal and other not-for-profit power companies.

    Western sells and transmits power generated at 14 different multipurpose water resource projects throughout the West, organized into 10 independently managed and financed rate-setting systems. (http://ww2.wapa.gov/sites/Western/about/Pages/default.aspx)

    Since rates are calculated independently for each project to ensure the rate recovers all costs associated with that project, and only that project, California rate payers only pay for costs associated with the Central Valley Project and the Washoe Project.

    This brings us to the crux of the misconceptions in the article. Western provided initial financing for the Montana Alberta Tie Ltd. Project through its Transmission Infrastructure Program (http://ww2.wapa.gov/sites/western/recovery/Pages/default.aspx), using money available to it from the U.S. Treasury. MATL was also financed as a separate and distinct project from the hydropower projects. In the initial plan, Western would repay the U.S. Treasury using revenue generated by selling capacity, or space, on the transmission line to local utilites in Alberta and Montana. However, Western’s share in the project was bought out by developer Enbridge, who repaid, in full, Western’s financing for MATL. We have since returned the funds to the U.S. Treasury. In other words, California rate payers did not pay any of the costs associated with the Montana Alberta Tie Ltd. Project.

    The section on the “Montana to Alberta Tie Line” talks about a “mandate” (FERC Order 1000) imposed on Western to finance the MATL Project. There was no mandate to finance the MATL Project. The project applied for financing through Western’s Transmission Infrastructure Program, which is authorized to borrow up to $3.25 billion from the U.S. Treasury to finance the development of transmission projects that helps deliver renewable energy to market across the West. The MATL Project was selected because it met all the criteria for financing.

    FERC Order No. 1000 requires regional transmission planning and cost allocation to all utilities under its jurisdiction in the nation.

    Regarding the discussion of San Diego Gas & Electric’s investment in the Rim Rock Wind Farm, San Diego Gas & Electric has received benefits from its investment. It would be appropriate to talk with them.

    To conclude, California ratepayers did not pay for the MATL line.

    Reply this comment
  6. Wayne Lusvardi
    Wayne Lusvardi 3 July, 2013, 14:26

    Mark
    Thank you for your note.

    When wind and solar farm operators and the California Public Utilities Commission cite the falling cost of green power they leave out the mounting cost of new transmission lines and newer regulating facilities needed to balance the grid to prevent spontaneous and mysterious blackouts.

    Do we have a definitive answer yet what caused the San Diego blackout in 2011 yet? Nope.

    Reply this comment
  7. Ulysses Uhaul
    Ulysses Uhaul 3 July, 2013, 18:47

    Do not fight your future…a futile exercise…elections seem to never go your way for some reason…..hmmmm.

    Reply this comment
  8. Wayne Lusvardi
    Wayne Lusvardi 3 July, 2013, 19:28

    IN THE ONLINE PUBLICATION PLATTS ENERGY WEEK FOR SEPT. 19, 2011, RANDLY WILKERSON OF WAPA APPEARS TO BE QUOTED AS SAYING THAT WAPA LOANED $161 MILLION TO THE MONTANA-ALBERTA TIE LINE. SEE QUOTE BELOW:

    WAPA has funded three projects under the loan authority that would not be affected because they are “grandfathered” under the legislation, WAPA spokesman Randy Wilkerson said Friday. They are the TransWest Express Transmission Project ($25 million), the Montana Alberta Tie Line that is being built from Lethbridge, Alberta to Great Falls, Montana ($161 million), and Electrical District 5 – Palo Verde Hub in Arizona ($91 million).

    LINK: http://www.wusa9.com/news/local/story.aspx?storyid=167592

    Reply this comment
  9. Wayne Lusvardi
    Wayne Lusvardi 3 July, 2013, 19:35

    There are inconsistent statements all over the internet contradicting Mr. Wilkerson’s statement above that WAPA did not loan any funds to the Montana Alberta Tie Line.

    On August 27, 2012, it was publicly reported that Enbridge repaid a $161 million loan from the Western Area Power Administration for the Montana Alberta Tie Line (MATL).

    Link here: http://www.marketwire.com/press-release/enbridge-repays-us-federal-transmission-infrastructure-program-loan-on-montana-alberta-tsx-enb-1694654.htm

    Reply this comment
  10. Wayne Lusvardi
    Wayne Lusvardi 3 July, 2013, 19:47

    What Mr. Wilkerson’s comment above left out is apparently WAPA served as intermediary to structure a loan of U.S. Federal Stimulus funds to the Montana-Alberta Tie Line project. So the loan funds came from all U.S. taxpayers not solely Central Valley electric ratepayers, but also including all California taxpayers. So Californians did finance a share of the $161 million loan to the Montana – Alberta Tie Line contrary to Mr. Wilkerson’s statement.

    Link here: http://energy.gov/sites/prod/files/OAS-RA-12-01.pdf

    Reply this comment
  11. Mark
    Mark 4 July, 2013, 06:37

    Wayne,

    One detail that doesn’t get much attention is how the Time of Delivery (TOD) factors, that are built into the PPA’s that PG&E, SCE, etc. have entered into to meet the 33%RES, affects generation costs at super peak times.
    http://docs.cpuc.ca.gov/WORD_PDF/FINAL_RESOLUTION/154753.PDF

    The 2011 Market Price Referent price has gone down since I have been following the market for RE (2008). On the other hand the TOD premium has gone up. The Super Peak Time of Delivery factor for 2008 contracts with PG&E was 2.01 for the June-Sept time frame. The December 1, 2011 Resolution, linked above, indicates that the TOD factor for the same time period has increased to 2.38.

    PG&E is paying the utility scale PV investors over $.20 kWh for generation at super peak times before they have to pay for the new transmission infrastructure and allocate costs for distribution and back up power services. It’s a tad misleading to talk about the Market Price Referent dropping for PV without noting the premiums being paid to secure RE via the TOD factors.

    Reply this comment
  12. Jeff
    Jeff 13 February, 2015, 07:28

    California purchases power from outside of California, from a wide variety of producers who pass along the cost of capital infrastructure development and operations.

    Just as California does for it’s exports.

    Feel free to isolate California from the rest of the world.

    Reply this comment

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