Remember the power flow?

It’s downstream from Washington.

Yesterday, I wrote of Texas power woes:

Central planners knew reserve dispatchable (on demand) electricity provision was a weakness for renewables’ case, even as renewables raise the importance of dispatchable power. If planners wanted more renewable energy they had to raise electricity prices to fund building the standby generators and securing the fuel supplies they might not use, or take bigger risks across the board.

Wind and solar were not to be dinged for the increased costs they impose on the grid to ensure reliable generating capacity during extreme weather events. Mustn’t have anyone question whether windmills or solar panels are doing the job you hired them for if you still have to have natural gas plants idling in case of bad weather.

Unsuprisingly, wind proponents would prefer the raise rates solution, now that they can act like they’re not responsible for the lobbying that contributed to it. The WSJ notes: “The wind lobby says Texas should have required thermal (nuclear, gas, coal) plants to be weatherized to withstand single-digit temperatures.

I wouldn’t have phrased it as if the costs might be borne by the conventional power companies. Consumers would pay. And I wouldn’t have accepted the wind lobby’s implication that the thermal power companies were the culprits, since the wind lobby persuaded the regulators to avoid price increases attributable to wind power in favor of higher risk. How do you think the new power transmission lines for windmills and solar are paid for? See also.

When wind lobbyists ask politicians to “require our competition to” it’s just another sign Texas is not a free market in electricity.

Then there are Federal regs.

In this case it seems as if they were used to give Texas a little slap. On Feb 12th, Texas Governor Greg Abbott asked the President to declare a major disaster for Texas’ 254 counties. The President approved it for 77 counties. Grants are now available for temporary housing, home repairs, and low-cost loans for most Texans. That means large population centers like Dallas, Houston, San Antonio, Austin…

You can supply your own theory about why rural Texans are considered to have been less damaged.

By Feb 14th ERCOT (Electric Reliability Council of Texas) was urging everyone to minimize electricity consumption, and had asked the Department of Energy for permission to exceed Federal restrictions (running fossil fuel plants at only about 60% capacity). The DoE approved this request with the proviso, first suggested by ERCOT, that the power would be sold at no less than $1,500 per megawatt hour, compared to $18.20 per megawatt hour in February 2020.

Note: the $1,500 figure, contrary to some reports, was SUGGESTED BY ERCOT. This doesn’t change anything regarding regulatory conditions, it simply means ERCOT knew what they had to do to get approval. DoE may not have initiated the price floor, but they still imposed it.

The letter later referred to this pricing as “a separate mechanism to help ensure this capacity is deployed only when absolutely necessary.”

Webber, the professor at the University of Texas at Austin, said that cost was a “minimum price” that would ensure plants permitted to bypass environmental restrictions were not given an unfair advantage.

“Emissions controls cost money,” he said. “It would be unfair to let some power plants turn off their emissions controls, which lowers their operational costs, and then to use that lower cost to underbid other generators who responsibly left their controls in place.”

Ted Kury, director of energy studies for the Public Utility Research Center at the University of Florida, said “when wholesale prices get high, the market operator is actually hoping that this sends a signal to folks to stop using electricity.” That works for, say, large companies — but it often ends up being punitive for residential customers.

Yes, prices are signals, but I think in this case Texans had already got the conserve power message. Soon enough they couldn’t buy it at any price. No “unfair advantage” there. And we can’t think of any way to have tiered pricing without sophisticated computer systems. And we don’t have that. Right?

Still, we must be absolutely sure that hoarders, wreckers, exploiters, and saboteurs – like some Aluminum smelter somewhere in Texas – didn’t use any of that power. They might have achieved 2 or 3 days production at the same electricity cost they’d have a week later. They might have forced their employees to drive to work under disaster conditions, and then made them sign NDAs to prevent anyone from ever finding out what evil businessmen do when old people are freezing to death. Or, some Bitcoin miner might have done the same thing, because they are really evil and they’d have comparatively few employees. Yeah, THOSE guys could get away with it.

Well, at least until the digital meter monitor reported their electricity usage.

Citizens for Enervating Michigan’s Economy II

There are a few lobbyists styling themselves “Citizens for Energizing Michigan’s Economy” who are hammering the radio with political ads criticizing legislators who support expanding energy choice. CEME is, in fact, dependent for funding upon Detroit Edison and Consumers Energy. These guys have been around for awhile, so their pedigree is clear:

Touting A ‘Looming Energy Shortfall,’ Utility-Connected Nonprofit Spent $7.4 Million Last Year (2015)

The $4-Million Push To Influence Michigan Energy Law (2015)

Utilities spend $1.6M to influence Michigan energy policy debate (2015)

Michigan Big Energy firms working together to steer legislation to fatten their profit statements (2015)

Consumers Energy confirms affiliated PAC donated to Rep. Gary Glenn’s election opponent (2018)

Consumers Energy contributed $43.5 million over four years to Citizens for Energizing Michigan’s Economy (2018)

Utilities-backed dark money group sparking energy debate in Michigan This article describes ““Citizens for Michigan’s Energy Future,” which is just another front for the same lobbyists. (2015)

One of the current ads claims that opposing energy company plans is the same as “outsourcing Michigan jobs” in the utility industry. Well, it might be true that there would be fewer Michigan utility jobs. However, job creation should not be a utility company’s prime objective. They should reliably deliver electricity at reasonable rates. Which means no featherbedding.

Besides that, they don’t tell you they are in favor of outsourcing electricity generation in order to help meet Michigan’s ill-advised* renewable energy goals; This Michigan Utility Is Planning Your Energy Future: “[Consumers Energy] expects to rely heavily on electricity from out-of-state generators by 2040.” Lots of Michigan’s energy is planned to be purchased from other states, while Consumers’ own solar arrays will cover “between 25,000 to 35,000 acres by 2040.”

They neglect to mention that they lobby furiously to eliminate energy supplier choice (now capped at 10%), dramatically increasing costs for public schools. See also; Consumers Energy-funded group running ads against electric choice/deregulation

TOC mentioned “Citizens for Energizing Michigan’s Economy” in 2014, when they were last found trying to increase your electricity costs by opposing consumer choice in electricity supply. They ran deceptive advertising then. They are doing it again.

Lobbyists have a First Amendment right to petition the government. I think you should have a balanced view of their agenda, and who these “citizens” are working for.

According to Consumers Energy’s spokesperson Katie Carey, “Our contributions to Citizens for Energizing Michigan’s Economy came from the company’s general funds and were not reflected in utility customer rates.” Well, since money is fungible – and could have been used to reduce rates, or pay dividends – I’m skeptical.

*Oh, by the way, here’s how windmill power worked out for Ontario: Ontario Wind Turbines

Looting and Freedom

Whether political freedom or economic freedom is more important is a moot question.

The most basic property right is self-ownership. To the degree that right is compromised, so is freedom. A commenter at the linked article above noted this:

“I propose in the following discussion to call one’s own labor, and the equivalent exchange of one’s own labor for the labor of others, the ‘economic means’ for the satisfaction of needs, while the unrequited appropriation of the labor of others will be called the ‘political means’.”

   – Franz Oppenheimer, The State. New York: Free Life
      Editions, 1908 (1975), pp. 24-25

Beyond the unabashed wealth redistributionism of a Bernie Sanders, ‘unrequited appropriation of the labor of others’ includes all forms of rent-seeking: Regulation favoring entrenched business (from tariffs to requiring hair braiders to take hundreds of hours of training, to subsidies for solar panels, movies, art, mortgages, etc., etc., etc.); union shops; civil asset forfeiture and eminent domain; and zoning laws.

We may agree politically to give some portion of some of those freedoms to the State, but we will, by definition, be less free; and bureaucracies will always take more than is granted.

Principled resistance to the looting is a requirement of freedom.

The President’s hugest success?

Achieving Durable Success in the Fight for Deregulation

By virtually any metric, President Trump’s regulatory agenda has achieved nearly unprecedented results. Neomi Rao, the administrator of the Office of Information and Regulatory Affairs (OIRA), has carried out Trump’s one-in, two-out executive order (EO 13771) to the letter, just as his supporters had hoped and detractors had feared.

Well done.

Post scriptum

Apropos of President Trump’s Bezos bashing is this 2017 article from the Wall Street Journal: Why the Post Office Gives Amazon Special Delivery

Myopia is the first word that springs to mind on reading this. Well, the first polite word. The author knows regulation is the problem, and proposes more regulation as the solution.

Yes, United States Postal Service delivery of parcels is probably (it’s debatable that USPS even knows*) mis-priced, but it’s most definitely not Amazon’s fault. And it won’t be fixed by tweaking regulation, because if it could be it wouldn’t be a problem in the first place.

At the margin – “[USPS] has filled its spare capacity by delivering more boxes” – USPS would be far worse off without Amazon. It’s evident that without Amazon – whose parcels arguably cost the USPS next to nothing to deliver, since they’re making all those mandated stops anyway – USPS losses would be much greater. USPS must think so, too, since it has been making Sunday parcel deliveries in peak periods for some time now.

At least taxpayers get something back for subsidizing the government delivery service if they shop at Amazon. Or Newsweek, or National Review… USPS subsidized periodicals with $273 million in 2006.

All USPS problems result from its monopoly on first class mail, attendant regulatory price caps and other interference, consequent market cluelessness, and a refusal to innovate typical of government supported monopolies. USPS pricing errors are no “accident of history.” Unless you use Obamacare pricing as your definition of ‘accident.’

Maintaining delivery capacity USPS can’t fill is mandated by the Federal government. Rather than enable USPS to compete, our Congresscritters cap the first class mail rates and then make “it illegal for the Postal Service to price parcel delivery below its cost.”

Of course, *”calculating cost can be devilishly subjective.” So, to fix the problem legislators caused, the regulator decides to layer on some more regulation – “its regulator determined that, at a minimum, 5.5% of the agency’s fixed costs must be allocated to packages and similar products. A decade later, around 25% of its revenue comes from packages, but their share of fixed costs has not kept pace.” Well, they don’t actually know that, do they?

And, why not 5.8%, or 6.49%? And, kept pace with what? Isn’t 5.5% still 5.5%? And, isn’t that still the ‘right’ number a decade after it was imposed by the wise men? Or, did variable costs change “unexpectedly”? And, if 5.5% is a minimum regulatory stricture, why hasn’t USPS already raised it – since it’s illegal not to?

Gotta admire the precision decimal acumen of those nimble central planners, who can’t react to internet disruptions even as rapidly as every 10 years, and base pricing on fixed costs.

What do you bet UPS and FedEx know their total costs and don’t calculate them the way USPS does?

Yep, “devilishly subjective” pricing is a perfect scenario for a stultifyingly bureaucratic, government unionized organization with health care and pension liabilities at 169% of the fiscal 2016 revenues, and $15 billion in low interest loans from the U.S. Treasury.

Select high-volume shippers are able to drop off presorted packages at the local Postal Service depot for “last mile” delivery at cut-rate prices. With high volumes and warehouses near the local depots, Amazon enjoys low rates unavailable to its competitors.” Let me rephrase that, “Because Amazon has invested in efficient logistics and well planned locations, it makes it easier for any delivery company to transport its goods. Especially an organization with tens of thousands of locations in that ‘last mile’” What do you bet Amazon gets volume discounts from FedEx and UPS?

“[T]he Postal Service needs to stop picking winners and losers in the retail world.”? How? There is no way to subsidize a government delivery service without “picking winners and losers in the retail world.”

Spare me the “universal-service obligation—to provide for all Americans at uniform price and quality. This communication service helps knit this vast country together, and it’s the why the Postal Service exists” argument. If that’s the mandate nobody should be surprised we have to subsidize it. Stop whining about the cost resulting from that choice, and stop scapegoating the companies (there will always be some) who can take advantage of regulatory winner/loser decisions, until you are willing to privatize the USPS.

Of course, as in Europe, the Post Office should be privatized. To do that, the first class mail monopoly must be eliminated. Then USPS can compete on price and service. Delivery to marginal locations will become more expensive and/or a bit slower. IAC, the “first class” mail rates would rise to market values. Junk mail volume would plummet, and we’ve been subsidizing that too. If “[T]wo-thirds of Amazon’s domestic deliveries are made by the Postal Service,” the Post Office’s burdensome real estate holdings might even become an advantage. At current pricing, they already are.

Or we could nationalize UPS and FedEx. That would fix the problem and provide more jobs for regulators.

USPS demonstrates exactly what happens to protected industries; misallocation of capital, mispricing, insensitivity to customer needs, complacency about markets – resulting in inability to innovate or compete.

The President’s ire is misdirected. Since it’s an economic question, that’s unsurprising. Well, actually, it’s petty personal animus toward Jeff Bezos, but that’s even less surprising.