Lori Smith Schell

Founder and President

Empowered Energy

(Durango, CO)

There’s probably never been a more exciting time to be part of the world of energy.  For better or worse, energy is often front-page news.  Everyone you talk to has an opinion on how the world’s energy problems should be solved, though the solutions offered are often ill informed or based on little factual evidence.  The USAEE has a critical role to play in ensuring that the debate surrounding energy policy is based on the best information available and that a healthy debate on competing policies can be held to give everyone the chance to be heard.

As part of that process, final preparations are being made for the upcoming 32^nd USAEE/IAEE North American Conference, being held in Anchorage, Alaska, from July 28-31, 2013.  The chosen theme of the conference is “Industry Meets Government:  Impact on Energy Use & Development” and there are several plenary sessions that have a decidedly Arctic theme, along with a number of plenary sessions on developments in electricity markets and oil & natural gas markets.  A very special offsite reception will be held on Tuesday evening at the Alaska Heritage Center, providing additional time to connect with colleagues and friends, including an offsite reception at the Alaska Heritage Center.  You can view the full conference program at http://www.usaee.org/USAEE2013/program.aspx.  I encourage you to register soon as the early bird rate ends on May 31^st.

Robert Eric Borgström

Advisor on Energy Regulatory Policy and Management

(Washington, DC)

Dear Colleagues,

As our USAEE President writes, it is an “exciting time to be part of the world of energy”.  In that respect, I am greatly appreciative of the interesting contributions made to this issue of Dialogue by members from around the USA.  However, we are just scratching the surface of a vast reserve of information and experiences.  The objective of Dialogue is to be an effective medium for sharing information about the research and case studies by USAEE members from all sectors of the energy economics community (business/consulting, government and academia, including students) as well as the activities of our organization.  I encourage all members of USAEE, as well as IAEE members in Canada and Mexico, to propose articles that will share with your fellow members the excitement that we all feel in being a part of today’s energy dialogue.

Implications of FERC Staff Recommendation to Lower the Base ROE for Transmission in New England

Michael Kline, Principal

Berkeley Research Group, LLC (Washington, DC)

Barclay Gibbs, Principal

Berkeley Research Group, LLC (Washington, DC)

Duncan Anderson, Senior Associate

Berkeley Research Group, LLC (Washington, DC)

On September 30, 2011, a group of New England stakeholders filed a complaint with the Federal Energy Regulatory Commission (“FERC”) requesting that the Base Return on Equity (“ROE”) for New England transmission owners be reduced from 11.14 percent to 9.2 percent.[1] The stakeholders include several industrial groups, the Massachusetts’ attorney general, and other state regulators. In their complaint, stakeholders allege that “[d]ue to changes in the capital markets since the Bangor Hydro proceeding, the 11.14 percent Base ROE is no longer just and reasonable.”[2] The current rate of 11.14 percent was set in in the Bangor Hydro proceedings and based on market information from 2004 and bond yields from 2006.[3]

Contemporary Government-Business Relations via China’s Energy Sector

Xiaofei Li, Ph.D.

Asst. Prof., Dept. of History & Political Science

York College of Pennsylvania (York, PA)

China presents a most intriguing case since it has a market economy running atop a stagnant communist regime. Various models have been proposed to explain such government-business relationships, among which the “merchant-state dualism” best explains the complex situation in China. “Merchant-state dualism” is a hybrid relationship between the state and society that maintains state control over merchants, while giving them some autonomy. This article explores the interactions between the Chinese national oil companies and China’s government with regards to selecting certain oil investments in light of external effects of investing in politically sensitive countries. It thus highlights the political underpinnings and calculations behind China’s oil decisions, which sheds light on the merchant-state dualism in contemporary China. The interactions between government and business elites as China’s merchant-state dualism manifests itself in China’s energy sector either helps or hinders  Chinese national oil companies in competition for international project with non-Chinese companies.

Back to the Future?

The Evolution of the North American Natural Gas Market

Lori Smith Schell, Ph.D., ERP

Empowered Energy

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Presented at the 4^th ELAEE Conference, Montevideo, Uruguay: 8 April 2013

This paper discusses the impact of the “shale gas revolution” on the North American natural gas market.  Although the author recognizes that there are many different natural gas market hubs located throughout North America, all of the pricing discussed in this paper is tied to the Henry Hub, located onshore Louisiana and the pricing point for the New York Mercantile Exchange (“NYMEX”) natural gas futures contract.  Arbitrage potential requires that pricing at all natural gas market hubs throughout the extensive North American natural gas pipeline system rationalize with respect to pricing at the Henry Hub, making the Henry Hub price a good proxy as “the” North American market price.

Alternative Energy No Longer Alternative

Declining costs poised to move renewables mainstream

Fereidoon P. Sioshansi

Editor & Publisher, EEnergy Informer

(Walnut Creek, California)

The World in 2013, a publication of The Economist, boldly declares, “The word ‘alternative,’ with its connotations of hand-wringing greenery and a need for taxpayer subsidy, has to go. And in 2013 it will. ‘Renewable’ power will start to be seen as normal.”

For Gas and Electric Utilities the Recent Recession/Recovery is Different from Previous Ones

Donald A. Murry

Economist, Guernsey Company (Oklahoma City, OK)

Professor Emeritus of Economics at University of Oklahoma.

and

Zhen Zhu

Consulting Economist, Guernsey Company (Oklahoma City, OK) and

Professor of Economics, University of Central Oklahoma (Edmond, OK)

Over the last several decades, the general economic environment in which utilities operate seems to have changed significantly. Recently, the prolonged economic recovery in the United States, the various crises in the rest of the world including, for example,  the European economic and financial crises and the slow-down in the Chinese economy have greatly influenced the U.S. economic landscape. How the utility regulators view the impact of economic uncertainty on the needed returns on common equities (ROE) of the utilities is an important issue in setting the ROE returns of the utilities. Our analysis of the allowed returns for electric and gas utilities in the U.S. for the period 1982-2012 clearly demonstrate an increasing perception of increased cyclical volatility in the recognized risk premiums in allowed ROEs. Significantly, we measured empirically  a set of structural changes  in the allowed risk premiums during this period.

Roger Marks

Conference Program Chair

USAEE / IAEE North American Conference; Captain Cook Hotel, Anchorage, Alaska: July 28-31, 2013

The theme of the conference is Industry Meets Government: Impact on Energy Use and Development.

July is approaching fast! Plan NOW to attend. May 31 is the deadline for discounted early registration.

The following articles describing local chapter activities were provided by the Bay Area (California), Louisville and National Capital Area Chapters of USAEE. All USAEE local chapter presidents are cordially invited to submit articles about their chapter's activities.

Chris McGill, Vice President-AGA, Speaks at Louisville Chapter’s February Meeting

Eric Yussman

Market Policy Analyst

Louisville Gas & Electric/Kentucky Utilities

(Louisville, KY)

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On February 5, the Louisville Chapter of the U.S. Association for Energy Economics hosted a visit from Chris McGill, Vice President of Policy Analysis at the American Gas Association (AGA). McGill discussed the gas market environment today versus ten years ago, focusing on the transition from supply scarcity to abundance. He highlighted infrastructure, technological progress (specifically the development of shale gas and the technologies that support its extraction), regulatory evolution, changes in consumption, and market stability.

C.-Y. Cynthia Lin

Assistant Professor

University of California at Davis

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I am pleased to report that the USAEE Bay Area Chapter was recently formed in fall of 2012.  Our chapter is led by our Vice President, Dr. Andrew J. Coleman (Electric Power Research Institute); our Treasurer, Les Deman (LDEC Consulting Co.); our Secretary, Karen Lang (PG&E), and myself, as President.

Dan Yergin Keynotes National Capital Area Chapter Annual Dinner

Phillip Brown

Specialist in Energy Policy

Congressional Research Service (Washington, DC)

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Disclaimer: The views presented herein are those of the authors [and/or speaker] and are not presented as those of the Congressional Research Service or the Library of Congress.

On February 13, 2013, approximately 150 energy professionals gathered at the University Club in Washington, DC to hear Daniel Yergin keynote the National Capital Area Chapter (NCAC) annual dinner, the largest attendance in the chapter’s history. Dr. Yergin’s speech centered on his most recent book, The Quest: Energy, Security, and the Remaking of the Modern World, and attendees were treated to a candid Q&A session as well as a book signing with the Pulitzer Prize-winning author.