Daylight savings time begins early this year, setting off a mini-tech panic as IT-administrators across corporate America sweat out whether patches and other fixes will accomodate the new time fiat. Based on research on electricity use from the 1970's, Congress expects the time-shift to save an equivalent of 100,000 barrels of oil per day. Assuming counter-factually that electricity use patterns are the same as they were in the 1970's, that amounts to a $6,000,000 per day energy savings based on a $60/barrel oil price. Times three weeks, that means there are expected savings of $126,000,000.

I wonder what the costs are to the IT industry, corporate networks and individuals in adapting to the new time? Given the direct costs, opportunity costs and the like, not to mention the costs of IT-failures based on the new rule, I would not be surprised if they offset the purported savings.

To make it worse, here is a paper from the California Energy Commission that questions whether there will be any meaningful energy savings, especially since the time-move occurs in March and November when peak electricity demand almost never occurs. If this is correct, then the cost benefit becomes even more dubious.

It is not too much a stretch to bring this whole "convergence" meme to include electricity regulation as well. The digital economy is based on electrons -- cheap, plentiful, reliable electrons, and lots of them. I discuss the need for them in the home state here. In part, this is meant to be a corrective that to the "renewable energy is plentiful and cheap" notion; in larger part, it is meant to be a call "smarten" the grid through IT to trigger more robust market responses to price.

Maryland's descent into regulatory chaos and insanity proceeds apace.
The Baltimore Sun has a good synopsis of what is going on. My op-ed appeared in The Sun today and can be found here.
I spent some time with the briefs from the lawsuit filed by the dismissed PSC members last night, and must say there appears to be a valid state constitutional objection to the legislature's statutory dismissal of a body that constitutionally can only be removed by the governor for official malfeasance. Perhaps my favorite part of the Maryland legislature's dismissal statute is its siting of legal challenges to the Act in Baltimore City. Given the Democratic bent of Balmer' and the hyperpartisan nature of this dispute with the Republican Governor Ehrlich, I think this is what is colloquially known as being "home-towned."
We will have to wait and see if the Maryland appellate courts play it straight on the outcome...

The Maryland legislature, as expected, overrode Governor Ehrlich's veto of a bill that would have limits Baltimore Gas & Electric's rate increases and eliminated all the current members of the PSC. The bill is a travesty for two reasons, and bodes very ill long-term for Maryland's electricity customers.

First, the bill continues the Maryland legislature's well-known belief in its ability to suspend basic principles of economics. With this bill, the legislature effectively denies BG&E cost recovery for its electricity service -- or, rather, to pay the competitive price for electricity. While this is being hailed as a populist victory over corporate greed, no one has made an effective case that the PSC's determination back in the spring was indeed wrong. The 72% rate increase -- whether phased-in or digested all at once -- is certainly large, none of the opponents has made the case that BG&E's costs have not increased that much. With natural gas prices up in the neighborhood of 300% in the past few years and the market price for electricity being far above that currently charged by BG&E, it is no surprise that rates would rise, even substantially. Of course, none of this can get in the way of a good political skewering of the PSC and Constellation Energy, BG&E's parent. In the future, though, Maryland ratepayers will get to enjoy lower bond ratings for its utility, higher debt costs, less capital expenditures, diminished reliability, and all other byproducts of a good populist rebellion.

Reliability in electricity is like motherhood and apple pie. It's hard to be against it. This is why the provisions in the Energy Policy Act of 2005 that give FERC new authority to regulate in the name of reliability were very broadly supported. There were, however, a few of us lonely souls who suggested this might not be such a good idea, because virtually anything can be done in the name of reliability. Now, while the ink is barely dry on the President's signature, we see confirmation for our concerns. FERC Commissioner Nora Mead Brownell, going boldly where others might fear to tread, said in an interview last week: "This is a chance to change the world." She added, "People will be surprised how comprehensive" the upcoming notice of proposed rulemaking on reliability will be. Of course, rather than promulgating a costly new regulatory regime in the name of reliability, we should be moving toward a more competitive system in which power producers have market-based incentives to provide the right level of reliability. Sadly, we don't seem to be moving in that direction. Hopefully, Commissioner Brownell's comments do not reflect the views of her colleagues on the Commission. We will stay tuned.

Jerry Taylor and Peter Van Doren of Cato have the Energy Bill analyzed just about right in National Review Online, with two exceptions. Taylor & Van Doren argue that provisions relating to power line siting and liquified natural gas (LNG) terminal siting override state and local autonomy, and thus should be opposed by conservatives. In essence, these provisions give federal regulators' authority to site power lines and LNG terminals, respctively.

In truth, these are among the more salutary portions of a decidedly mixed bill. The holdout problems inherent in siting at a local level are enormous, and the political dynamics give enormous leverage to coalitions of NIMBY and environmentalist groups to slow roll or kill needed tranmission projects. Furthermore, when you are talking about electricity transmission or natural gas supply, these are truly inter-state services. A siting decision in one jurisdiction can affect energy prices regionally. The same goes for LNG terminals, which would help mitigate the volatility in natural gas prices by bringing on more reliable supply.

Drudge links today to a Houston Chronicle story touting business partnerships to promote broadband-over-powerlines, a sure sign that at least the technological hype has gone mainstream.

Most of the focus on BPL is from the broadband-side, which is surely the right focus given the competition potential it brings as low-incremental cost platform. However, the lion's share of benefits from BPL (smart, two-way data streams) may accrue to the electric system. The Chronicle story quotes Thomas Standish the COO of CenterPoint Electric, a BPL leader:

But where we really think it will work well is in such areas as remotely reading gas and electric meters and remotely turning on and off power service for customers in the competitive retail electric markets.

We can all have opinions about where various markets are going and which technologies will be successful, but opinions that are backed up by real money have more credibility. That is why it was heartening, especially for those of us who have been watching the ups and downs of broadband over powerline (BPL) over the years, to see that Google, Goldman Sachs and Hearst - three presumably sophisticated investors - are investing $100 million in Current Communications, a small company that is a leader in BPL. Current is the company that is partnering with Cinergy to provide BPL in Cincinnati (the biggest BPL project now underway) and also partnered with Pepco in the pilot project in Potomac, Md. If successful, BPL will obviously be another broadband pipe and particularly beneficial for rural areas.

Here in Colorado, our local utility, Xcel Energy, has agreed to use union labor in building a new coal-fired power plant near the union-heavy town of Pueblo. For Xcel, this was a rational decision for a number of reasons. First, it gets the plant built without labor problems and the quicker they get the plant into service, the sooner they can begin recovering their costs. Second, it gets to pass through the increased labor costs to ratepayers, thus Xcel's incentives to cost economize on labor are much different than that of a normal business. The incentives to economize aren't non-existent; they are just much weaker than with a business in a competitive market.

For ratepayers, the union labor is obviously less of a good deal. They have to pay inflated union labor costs in their energy bills. What's more, I doubt the Public Utility Commission has the political wherewithal to challenge higher cost union labor wages as "imprudent" and thus disallowable in rates. (Plus, the likelihood of state employees, who are unionized, challenging the prudency of unionized labor costs seems, well, let's just say mighty low.)

While D.C. basked in the first convincing evidence that Spring will soon take hold, a group of Congressional staffers crunched through repeated dustings of snow on their way to classes in Aspen, Colorado. The staffers were few in number but decidedly well-placed and bipartisan, representing key committees and offices in both the House and Senate. They had agreed to devote part of their Easter recess to participate in the Federal Institute for Regulatory Law & Economics, hosted at the famed Aspen Institute. The Federal Institute was modeled after a similar program for state regulators that PFF launched successfully last year, in conjunction with our academic partners at the University of Colorado's Silicon Flatirons Telecommunications Program and George Mason University's Interdisciplinary Center for Economic Science.