New York City At the Institute for Energy Economics and Financial Analysis during the second day of the organizing conference, we witnessed a fascinating argument, disguised as a debate in the question and answer section, between a number of environmental advocates and a hedge fund manager over the competing values of social justice and solar power in net pricing, primarily as it is practiced in California. The hedge funder was arguing the case of social injustice, calling net utility pricing a direct intra-ratepayer subsidy by the poor and regular consumers, particularly tenants, of the rich, upper income investors in solar power, who owned the buildings and were landlords. The environmentalists were querulous advocates of the need for renewable energy investment by any means necessary.
Jonathan Barrett is the managing director of the hedge and equity fund called Luminus Management, which specializes in the understanding and investing in the power and energy markets. He’s originally a South African who has bounced around several merger and acquisition jobs on Wall Street. He’s on the board of a nonprofit called Hedge Funds Care for Children and the Harlem Charter School. From his remarks he’s politically and ideologically conservative, believing for example that all government investments are bad, that regulations are evil using as his example the telecom industry versus the internet (ignoring the government investment there!), and that the Republican Congress may get the budget under control at another point. Suffice it to say, he is a most unlikely advocate for social justice for the poor, but there you have it, which also explains how complicated the issue of net pricing is, and against all odds how compelling his case was, despite his serving as its knight and unlikely champion.
Net pricing, particularly as practiced in California, requires that all excess power generated by a consumer-based supply, like rooftop solar, rolls the meter back towards zero and when there is a surplus has to be purchased back at retail rates by the utility company. He argues, that net pricing has to disappear, and others in the finance energy agreed with him, because it is financially unsustainable. The utility is having to eat its own cost of transmission, sunk generation costs, and has to guarantee that it will still provide the same customer with electricity at peak usage periods and pay the price to do so, which means that it loses money on the net pricing transaction to that particular consumer. Where Barrett wins the point is that there is no governmental subsidy, but a subsidy from other ratepayers that are underwriting the initial investment of the landlord or homeowner who are quickly getting back much of their investment and being paid an unrealistically high price, which the public, investor owned utility has to then pass on to the poorer consumer, making it a highly regressive tax of sorts.
Environmentalists tried to counter his argument by trying to argue that other industries like oil were subsidized or that renewables like wind and solar were new industries and deserved subsidies, but there points were glancing and easily batted away by Barrett. Wind, he argued, was an old industry, oil he easily argued was crony capitalism based on special interests pleadings, but it hardly mattered. It was all easy work for him since the various environmentalists that appeared before the floor microphone had no direct argument that this was not an income transfer from the poorer to the richer and therefore regressive. The other members of the panel one from JP Morgan and another from a foundation, wisely kept their own counsel and slumped down lower towards the table as Barrett dispatched the arguments with some pique.
There was a fairer contest between the two Wall Street wheeler-dealers on the issue of yield companies and how long they might last with an investment before they inevitably lost their shirt and the fact that regular Joe’s would be fools to invest based on yield since only luck would keep all of them from going to the cleaners. That argument was also fascinating, if any of us had had a couple of extra hundred million to throw into the game with these financial sharks, but “net pricing” was an education, since in a kneejerk way many of us might have just assumed it was a social and community good until we witnessed Barrett’s performance, but now in the words of Poe’s raven, can do so “nevermore.”
New York City The first day of the annual Energy Finance conference convened in New York University’s Law School buildings on Washington Square by the Institute for Energy Economics and Financial Analysis was – believe it or not – fascinating. Not only did I get to catch up with Daniele Pommes and his No Al Carbone campaign around coal-fired plants in Brindi, Italy, but also with a lot of other campaigns, old and new, around coal operations in the USA and elsewhere around the world.
None of that was really the subject at hand on the first day of the conference though. Tom Sanzillo, the IEEFA finance director, had brought in some financial hotshots including Dr. Tony Yuen from Citigroup and Julien Dumoulin-Smith from UBS Investment Research specializing in energy markets, as well as Tim Buckley, now with IEEFA and formerly an investment banker from Sydney, Australia to talk about what was really happening in coal markets, and it added up to an amazing immersion course over several hours in high line energy economics.
The UBS whiz kid summed it up most forcefully as he repeatedly argued that there was a “war of attrition” on coal, coal was losing, and now would clearly not prevail. Dumoulin-Smith argued essentially that the price of gas was now so low that the cost spread between gas and coal for new power plant construction allowed utilities to lock in costs, build the plant, and be profitable just on the price differential alone. Buckley focusing more on coal shipped into markets that were forced to import the supply came at it from another angle, but between the strength of the dollar and falling prices of other currencies, the cost of “dispatch” or transportation, and the pricing of coal even though the market had dropped, it was a dead letter, especially given the Indian commitment to be 50% dependent on its own coal in the next several years and Australia’s existing products.
A number of speakers argued that the impact of just the USA-China agreement that President Obama announced as a commitment that both would cut down their carbon emissions by 50% was sufficient enough already to indicate that CO2 emissions would not get worse. Listening to the mega-domes talk about the lowering cost of renewables like wind and sun, the problems of pipelines, the low cost of liquid natural gas, the refining of byproducts, there almost seemed to be hope, if you believed the experts that capitalism might save the world yet for our grandchildren regardless of what we all might have thought as we’ve fought the son of a gun utilities on these issues for the last more than 40 years.
My thoughts kept coming back to the fights in the 1970’s that ACORN waged to cut the size of the Middle South Utility, now Entergy’s, White Bluff plant on the Arkansas River between Little Rock and Pine Bluff. They mentioned an ongoing fight with the Colstrip plants in Montana. I can remember well sitting with the organizers and leaders of the Northern Plains Resource Council in Billings on winter nights in the early 70’s strategizing on how to clip the company plants for building Colstrip II.
A number of questioners tried to ask the experts how they would place a financial “market” value on the fights they had waged to stop plants in their towns. Sanzillo was clear that the campaigns were central, even if there was no easy way to put a number to it.
Having been in these fights over five decades, many of us could have assured the questioners that price is just one part of the puzzle, because it has been boots on the ground and voices raised that have potentially put is in the winning column against coal way more than the magic of capital markets and supply and demand. Breathing and living on the planet turns out to be a huge value added, no matter how the numbers shake out.
The Dubliners – Springhill Mine Disaster Performed by Luke Kelly
New Orleans Catching up on Skype this week, it was great to hear the progress ACORN Bristol had made in the United Kingdom in advancing the campaign to win what they call an Ethical Letting Charter or a model set of standards for landlords and tenants. The campaign has been developing for months as tenants organized in Easton and other neighborhoods in Bristol have steadily banged on letting agents or real estate rental agencies to change their business practices on security, leases, and repairs. Given the way the world works in Britain, the organization cannot just pound on the City Council for relief, so the campaign is forced to go after the industry and individual companies to win agreement on the standards. After hard work the first company has voluntarily signed an agreement, so the bubble has been burst and ACORN members are determined to bring the rest in line.
The full text of the agreement is well laid out, but too long to include all of it here. The key items though are utterly reasonable and well summarized. The Ethical Letting Charter calls for the following major principles:
The ethical lettings charter centres upon a commitment to security of tenure; beginning with support for and use of recurring Assured Short hold Tenancies (AST’s); the strengthening of conditions for serving notice to tenants which enable more ethical evictions and repossessions; as well as extending time frames
Commitments centre upon recurring AST’s with no extra cost; a phasing out of tenancy fees, beginning with their transparent valuation including costs; the reduction of deposits to affordable amounts, stored within accredited tenancy deposit protection schemes that are not arbitrarily reducible; as well as the careful scrutiny of rent prices
Commitments centre upon making and keeping properties at a statutory and recommended level of quality, maintenance as well as health & safety. Checks, repairs and improvements should be carried out within sufficient time frames and to recommended legal standards
Commitments centre upon the stopping of discrimination against potential tenants due to their belonging to any protected group and/or being welfare recipients and/or parents/carers with dependents; as well as work with ACORN and the local authority to promote equal access in the future
ACORN intends to award “a Gold, Silver or Bronze Accreditation, reflecting the level of commitments” made by landlords and rental agencies. The charter is firmly rooted in reality and understands that some of the improvements will take time and therefore ACORN indicates that it will monitor the signatories carefully as they move “towards greater levels of commitment” and improve their accreditation ratings over time.
This is a breakthrough campaign for tenants’ rights in Britain, and since the same issues pop up all around the world, it’s worth following closely.
New Orleans When the archly conservative National Journal asks whether the Obama Administration is preparing to play hardball with Florida over $1 billion in Medicaid funding that is set to expire later this year for “disproportionate share,” the heart quickens as people, meaning most rational and sentient beings, committed to better health care for all, stand to cheer, “Right on, let’s play two!” The “disproportionate share” situation unleashes a potentially powerful lobbying force inside the Taliban camps supporting the governors who have stood at the hospital door, blocking the expansion of Medicaid to lower income families as part of the Affordable Care Act, so there’s hope at home, and maybe in Washington.
Here’s the story in a nutshell.
“Disproportionate share” funding is the additional money paid by the feds to a state to subsidize hospitals who are providing a disproportionate share of care to lower income patients, and thereby expected to lose more money in because of uninsured care for such families. Living in Louisiana, another state with a huge lower income population and a similar coming shortfall of three-quarters of a billion, we all know about “disproportionate share” hospitals because giving them a hand to get started and rake in the extra Medicaid is one of the things that got former Governor Edwin Edwards in so much trouble and eventually in the federal pokey. Texas is another state in the billion dollar club with disproportionate share payments timing out soon.
The hope for us and the fear expressed by the National Journal is that the Center for Medicaid and Medicare Services (CMS) has already told Florida that there is no way they are going to renew the disproportionate agreement without changes. Senator Bill Nelson, Democrat from Florida, quoting other conversations indicated that the CMS position was essentially why should they pay for something twice? Here! Here! To some degree, hands on the purse strings are already tied, since to fund the Affordable Care Act support Congress had already cut disproportionate share payments by over $18 billion from 2014 to 2020. The Republican recalcitrants have a problem because you can’t rob Peter to pay Paul, if Paul has already lost his money.
Experts say CMS has leverage. CMS seems to say they are trying to be reasonable. We should say, as loudly as possible, that it is definitely hardball time. The National Journal and others aren’t surprised that the Florida legislature is now debating finally expanding Medicaid. Seems like it is time for some Obama Administration squeeze plays at the plate. They must know that they can’t reward these naysayers, and they absolutely know that lower income families need the additional Medicaid support, so this shouldn’t be about politics, but basic morality.
Organizers everywhere have been looking for a way to rekindle the Medicaid expansion fight. Here’s a handle and there are a lot of public and private hospitals that are our potential allies on this one. Now that Obama is starting to be more of the President that we hoped he might be, this seems like one where he should be clapping from the box seats while all of us are cheering from the stands to get the most we can with our leverage now. I’m for having Secretary Burwell start throwing everything with heat and mixing in a lot of brush-back pitches and maybe a few bean-balls at these hard heads and hearts.
Almanac Singers – Roll The Union On by Pete Seeger
New Orleans No matter whether you care who is the mayor of Chicago or not, and believe me it is a factor in an important and hot contest between incumbent and former chief of staff for both Clinton and Obama, Rahm Emmanuel, and challenger Cook County Commissioner Jesus “Chuy” Garcia carrying the flag for progressives and many unions, we all have to love the fact that one of the big, big issues in the race is traffic cameras. Yes, traffic cameras!
If you drive a car in a big city, you know what I’m talking about when a red light flashes as you pass an intersection and within thirty days you get a picture of your truck’s rear end, big as life, with your license plate clearly identified. It’s not just big cities either. A couple of years ago I got one somewhere around Sioux City, Iowa passing through on the interstate driving home from Montana. Most people would not know that Sioux City was a city if it didn’t include that fact in its name.
Let me be clear though. We are all for traffic safety, but there’s something about these cameras that just screams “gotcha” and feels like a scam. The issue in Chicago, where Gracia has promised to eliminate all of the cameras and Emanuel has already conceded that he would remove 25 of them, though still leaving almost 150 in place, is the public’s feeling that the cameras are rigged to ensnare drivers. Certainly placement of the cameras is arbitrary and capricious by definition.
New York City doesn’t tell people where they are located, though in most cities they are pretty obvious once you start looking. Of course it is difficult to tell the difference between a red-light traffic camera and all of the new Homeland Security cameras, but that’s another issue for another time. In New Orleans, in most areas, there are ample warnings and often even signs. The tickets though start at $105, while New York seems to only be $50. Houston and Los Angeles have voted to get rid of the cameras, as have other communities because of all of the problems and the limited results.
The biggest issue is that it’s all about the money, not traffic safety. The Federal Highway Administration in a 2005 study looked at seven cities and found that there was a 25% drop in collisions based on people running lights, but a 15% increase in rear end collisions as people tried to avoid the tickets. In Philadelphia, a study there argued that it was important to publicize the location so that there are better safety results.
Most drivers become “once burned, twice learned” and avoid at all cost the intersections because we’re not morons. Even in New York with their hidden cameras, the revenue fell from $71 million in 2011 to $28 million in 2014 according to the New York Times. Same for New Orleans, though the numbers are different, prompting Mayor Landrieu to add more cameras to try to make up the revenue.
The burden unfortunately is inequitable. Too many of the light locations are in lower income and working communities where people are hustling to get to work. Expensive tickets once unpaid escalate quickly with more fines and interest, and even in some cities, New Orleans again is an example, it cost more to appeal by another $50, than to pay, pushing regular drivers into the category of legal scofflaws, creeping around the streets hoping to avoid the Denver boot and even more costs.
Traffic safety is critical, but there has to be a better way, and seeing this issue front-and-center in a big city political contest like Chicago, may force this revenue stream to be dammed, and real solutions to emerge.
New Orleans The filming inside our house ended after three days of chaos when the company and crew finished after two nights of shooting until 4 and 5 AM in the morning. The dressing crew returned to put Humpty-Dumpty back together again, and, surprisingly, seemed to be doing a solid, competent job of it, leading us to hope we will all survive this experience intact, which would be nice.
Part of life is learning, and I have to say that one thing I’ve learned is that these movie shoots are models in careful, organization with exacting, almost military precision. I would have liked to have had their software program to use before some of our conventions or large actions.
Often, as we picked up clothes or took a shower, we would see a one-sided 8” by 11” sheet which signaled the “crew call.” The title of the film ruled the page, but as central to the message was the time of the “call.” The banner would helpfully remind the crew of the weather conditions for the day, the time that “breakfast” would be ready, which meant 3pm for a night shoot and 9:30 PM for “lunch” on their day-night reversal. There were special warnings about rain gear and bans on social media. A section laid out all of the scenes that would be shot by number with descriptions, the cast or actors by number in the scene, whether it was day or night, and the page of the script they were following. Another box would note the location, which was obviously our house. Leaving nothing for chance or memory, another box on the page would identify the cast by name and number, when they were being picked up and needed to be ready to shoot, and who was doing the picking up. Additional sections of the call would detail the atmosphere, elements, advanced schedule for future days, including the days off for the entire company in mid-week, and what they could expect for later.
We’re probably already way too far into the weeds for most of you dear readers and listeners, so I’ll spare you the further detailed page laying out the entire crew of 40 and cast of 4 and all of their individualized instructions on reporting, duty call, and specific assignments. Suffice it to say, this was a small army that moved with precision at least on paper. Luckily for us, as participatory-observers after a fashion, the discipline of the organization carried into the numerous pictures of how and where the furniture would be replaced including the bookshelves. They fretted over where to place some items that we had hidden by a door in the living room here and there. The surviving remnant of the experience will be a yellow-gold color in the dining room once they are done, where we have decided to thank them and embrace a burst of color. We will also fix the garage door in their honor.
Would we do it again? Doubtful. Was it worth it? We think so.
The movie will be in Malayalam, though I’m betting there will be English and Hindi subtitles. It’s an offbeat comedy, but the seriousness and professionalism of the director and the crew makes me think well of their enterprise and its prospects. We ended up as bit players in the enterprise but came away sharing their optimism and wishing them nothing but good fortune. We would love to see the movie end up in a theater near you, but luckily an amendment we added to our contract guarantees us a copy when all is said and done to share with family and friends, and that’s something we look forward to in the future. Meanwhile the company has another 24 days or so of shooting in New Orleans, as we jump off the bus, none the worse for wear.