Coyote Blog

I was perusing the US electricity generation data a minute ago, and noticed this trend in nuclear generation in the US (all numbers in millions of MW-hours, from here):

1995..........673
1996..........675
1997..........629
1998..........674
1999..........725
2000..........705
2001..........534
2002..........507
2003..........459
2004..........476
2005..........436
2006..........425

I am wondering at the fall of 300 million megawatts-hours from 1999 to 2006.  My guess is that maybe some of the really old US government-owned plants closed.  But to the extent that this decline is due to aging plants and regulations limiting capacity, it strikes me that if someone in government really wanted to come up with a plan by 2020 to reduce CO2 in utility plant emissions, that regaining a portion of this lost nuclear capacity might be the cheapest and fastest approach.  After all, 300 million MWH is about 20% of total coal-fired generation and about 45 times more capacity than the sum of all US generation from non-hydro renewables (which don't really reduce CO2 anyway).

New today from the new Australian government, who to date have placed themselves solidly in the catastrophic camp:

PRIME Minister Kevin Rudd last night did an about-face on deep cuts to
greenhouse gas emissions, days after Australia's delegation backed the
plan at the climate talks in Bali.

A government representative at the talks this week said Australia backed a 25-40 per cent cut on 1990 emission levels by 2020.

But after warnings it would lead to huge rises in electricity prices, Mr Rudd said the Government would not support the target.

The
repudiation of the delegate's position represents the first stumble by
the new Government's in its approach to climate change.

Best thing I have read in a long time:

Imagine an egalitarian world in which all food is organic and local,
the air is free of industrial pollution, and vigorous physical exertion
is guaranteed. Sound idyllic?

But hold on"¦ Life expectancy is 30 at most; many children die at or
soon after birth; life is constantly lived on the edge of starvation;
there are no doctors or dentists or modern toilets. If it is
egalitarian it is because everyone is dirt poor, and there is no
industrial pollution because there are no factories. Food is organic
because there are no pesticides or high technology farming methods. As
a result, producing food means long hours of back-breaking physical
work which may end up yielding little.

There is "“ or at least was "“ such a
place. It is called the past. And few of us, it seems, recognise the
enormous benefits to humanity of escaping from it. On the contrary,
there is a pervasive culture of complaint about the perils of affluence
and a common tendency to romanticise the simple life.

Via Hit and Run.  I made a fairly similar point here when I compared California "robber baron" Mark Hopkins mid-19th century house to one a friend of mine used to own in Seattle:

One house has hot and cold running water, central air conditioning,
electricity and flush toilets.  The other does not.  One owner has a a
computer, a high speed connection to the Internet, a DVD player with a
movie collection, and several television sets.  The other has none of
these things.  One owner has a refrigerator, a vacuum cleaner, a
toaster oven, an iPod, an alarm clock that plays music in the morning,
a coffee maker, and a decent car.  The other has none of these.  One
owner has ice cubes for his lemonade, while the other has to drink his
warm in the summer time.  One owner can pick up the telephone and do
business with anyone in the world, while the other had to travel by
train and ship for days (or weeks) to conduct business in real time.

Best thing I have read in a long time:

Imagine an egalitarian world in which all food is organic and local,
the air is free of industrial pollution, and vigorous physical exertion
is guaranteed. Sound idyllic?

But hold on"¦ Life expectancy is 30 at most; many children die at or
soon after birth; life is constantly lived on the edge of starvation;
there are no doctors or dentists or modern toilets. If it is
egalitarian it is because everyone is dirt poor, and there is no
industrial pollution because there are no factories. Food is organic
because there are no pesticides or high technology farming methods. As
a result, producing food means long hours of back-breaking physical
work which may end up yielding little.

There is "“ or at least was "“ such a
place. It is called the past. And few of us, it seems, recognise the
enormous benefits to humanity of escaping from it. On the contrary,
there is a pervasive culture of complaint about the perils of affluence
and a common tendency to romanticise the simple life.

Via Hit and Run.  I made a fairly similar point here when I compared California "robber baron" Mark Hopkins mid-19th century house to one a friend of mine used to own in Seattle:

One house has hot and cold running water, central air conditioning,
electricity and flush toilets.  The other does not.  One owner has a a
computer, a high speed connection to the Internet, a DVD player with a
movie collection, and several television sets.  The other has none of
these things.  One owner has a refrigerator, a vacuum cleaner, a
toaster oven, an iPod, an alarm clock that plays music in the morning,
a coffee maker, and a decent car.  The other has none of these.  One
owner has ice cubes for his lemonade, while the other has to drink his
warm in the summer time.  One owner can pick up the telephone and do
business with anyone in the world, while the other had to travel by
train and ship for days (or weeks) to conduct business in real time.

From Steven Malloy:

Congress
began investigating the carbon offset industry this week. The inquiry
could produce some "inconvenient truths" for Al Gore and the nascent
offset industry.

Carbon offsets ostensibly allow buyers to
expunge their consciences of the new eco-sin of using energy derived
from fossil fuels. Worried about the 8 tons of carbon dioxide (CO2)
emitted each year by your SUV? Similar to the indulgences offered by
Pope Leo X in the 16th century, you can absolve yourself of sin by
purchasing $96 worth of CO2 offsets "“ typically offered at $12 per ton
of CO2 emitted "“ from offset brokers who, in turn, supposedly use your
cash to pay someone else to produce electricity with low or no CO2
emissions....

A
Capitol Hill staffer told me that the congressional inquiry would look
into the possibility of "double-dipping" in the offset industry.

Only double-dipping?  Earlier, I argued that the purveyors of offsets may be triple dipping:

1. Their energy projects produce electricity, which they sell to
   consumers.  Since the
   electricity is often expensive, they sell it as "CO2-free"
   electricity.  This is possible in some sates -- for example in Texas,
   where Whole Foods made headlines by buying only CO2-free power.  So the
   carbon offset is in the bundle that they sell to
   electricity customers.  That is sale number one. 
2. The company most assuredly seeks out and gets
   government subsidies.  These subsidies are based on the power being
   "CO2-free".  This is sale number two, in exchange for subsidies. 
3. They still have to finance the initial construction of the plant, though.  Regular heartless
   investors require a, you know, return on capital.  So Terrapass
   finances their projects in part by selling these little certificates that you
   saw at the Oscars.  This is a way of financing their plants from people
   to whom they don't have to pay dividends or interest "”just the feel-good
   sense of abatement.  This is the third sale of the carbon credits.

Anybody who has been a part of a productive business (e.g. so this excludes almost all politicians and academics) will probably have experience with some type of profit improvement program.  Usually you are doing about a hundred things simultaneously to reduce costs.  When costs actually go down, you find yourself scratching you head - what actually made the difference.  Everyone will claim that their program or initiatives saved the company X amount of money, but when you add up all the X's, you get a number four or five times the actual improvement. 

Well, apparently the same dynamic occurs in carbon offsets:

An investigation by the Financial Times
suggests that many carbon offsets are illusory, and that there is
little assurance that purchasing carbon offsets does much of anything
to reduce carbon dioxide emissions. Specifically, the report found:

-
Widespread instances of people and organisations buying worthless
credits that do not yield any reductions in carbon emissions.

- Industrial companies profiting from doing very little "“ or from
gaining carbon credits on the basis of efficiency gains from which they
have already benefited substantially.

- Brokers providing services of questionable or no value.

- A shortage of verification, making it difficult for buyers to assess the true value of carbon credits.

Who in the world would have every predicted this?  Well, it turns out a lot of people did, including me.  For example, I suggested that companies like Terrapass are probably selling their CO2 offsets at least three times:

1. Their energy projects produce electricity, which they sell to
   consumers.  Since the
   electricity is often expensive, they sell it as "CO2-free"
   electricity.  This is possible in some sates -- for example in Texas,
   where Whole Foods made headlines by buying only CO2-free power.  So the
   carbon offset is in the bundle that they sell to
   electricity customers.  That is sale number one. 
2. The company most assuredly seeks out and gets
   government subsidies.  These subsidies are based on the power being
   "CO2-free".  This is sale number two, in exchange for subsidies. 
3. They still have to finance the initial construction of the plant, though.  Regular heartless
   investors require a, you know, return on capital.  So Terrapass
   finances their projects in part by selling these little certificates that you
   saw at the Oscars.  This is a way of financing their plants from people
   to whom they don't have to pay dividends or interest "”just the feel-good
   sense of abatement.  This is the third sale of the carbon credits.

I also suggested that there is an incredible opportunity for outright fraud:

This type of thing is incredibly amenable to fraud.  If you sell more
than 100% of an investment, eventually the day of reckoning will come
when you can't pay everyone their shares (a la the Producers).  But if
people are investing in CO2 abatement -- you can sell the same ton over
and over and no one will ever know.

Finally I argued that many of the abatement numbers make no sense:

Something smells here, and it is not the cow-poop methane.  This 100,000 pound [CO2 Offset] coupon retails for $399.75 (5x79.95) on the TerraPass web site.
First, this rate implies that all 300 million Americans could offset
their CO2 emissions for about $100 billion a year, a ridiculously low
figure that would be great news if true. 

Lets look at solar, something I know because I live in Arizona and have looked at it a few times.  Here is the smallest, cheapest installation
I can find.  It produces 295 CO2-free Kw-hours in a month if you live
in Phoenix, less everywhere else.  That is enough to run one PC 24
hours a day -- and nothing else.  Or, it is enough to run about 10
75-watt light bulbs 12 hours a day -- and nothing else.  In other
words, it is way, way, way short of powering up a star's Beverly Hills
mansion, not to mention their car and private jet.  It would not run
one of the air conditioning units on my house.  And it costs $12,000!
Even with a 20 year life and a 0% discount rate, that still is more
than $399.75 a year.  For TerraPass's offset claim to be correct, they
have to have a technology that is one and probably two orders of
magnitude more efficient than solar in Arizona.

[update:  Al Gore's house 221,000 kwH last year.  Call it 18,400KwH
per month, that would require about 62 of these solar installations for
$744,000.  I don't think $399.75 is really offsetting it]

Who would have ever predicted this...

BARNET, VT. -- Sara Demetry thought she had found a way to atone for her personal contribution to global warming.

The
psychotherapist clicked on a website that helped her calculate how much
heat-trapping carbon dioxide she and her fiance emitted each year,
mostly by driving and heating their home. Then she paid $150 to e-BlueHorizons.com, a company that promises to offset emissions.

But Demetry's
money did not make as much difference as she thought it would. While
half of it went to plant trees to absorb carbon dioxide, the other half
went to a Bethlehem, N.H., facility that destroys methane -- a gas that
contributes to global warming. The facility has been operating since
2001 -- years before the company began selling offsets -- and Demetry's money did not lead the company to destroy any more methane than it would have anyway.

Well, I predicted it:

I don't have any inside information on TerraPass, the company made
famous by providing the $399.75 certificates that offset all your
emissions for a year.  I do know that the numbers don't seem to add up,
as I wrote here and Protein Wisdom similarly wrote here.

However, I thought about their business model some (since I have been on a role with new business models) and it strikes me that it is brilliant.  Because I am almost positive that they are (legally) reselling the same carbon credits at least three times!...

1. Their energy projects produce electricity, which they sell to
   consumers.  Since the
   electricity is often expensive, they sell it as "CO2-free"
   electricity.  This is possible in some sates -- for example in Texas,
   where Whole Foods made headlines by buying only CO2-free power.  So the
   carbon offset is in the bundle that they sell to
   electricity customers.  That is sale number one. 
2. The company most assuredly seeks out and gets
   government subsidies.  These subsidies are based on the power being
   "CO2-free".  This is sale number two, in exchange for subsidies. 
3. They still have to finance the initial construction of the plant, though.  Regular heartless
   investors require a, you know, return on capital.  So Terrapass
   finances their projects in part by selling these little certificates that you
   saw at the Oscars.  This is a way of financing their plants from people
   to whom they don't have to pay dividends or interest "”just the feel-good
   sense of abatement.  This is the third sale of the carbon credits.

My guess is that the majority of carbon offsets sold are for projects that would have gone ahead anyway, without the purchase of the offset (for example, planting trees or building power plants).  In this case, e-BlueHorizons is doing #3 after the plant was commissioned.   Caveat Emptor.  HT: Maggie's Farm

I don't have any inside information on TerraPass, the company made famous by providing the $399.75 certificates that offset all your emissions for a year.  I do know that the numbers don't seem to add up, as I wrote here and Protein Wisdom similarly wrote here.

However, I thought about their business model some (since I have been on a role with new business models) and it strikes me that it is brilliant.  Because I am almost positive that they are (legally) reselling the same carbon credits at least three times!

Think of TerraPass not as a company that hands out little certificates, but as a business who makes money through energy projects.  These projects generate electricity without producing CO2 (e.g. wind), or in the case of their cow-poop projects they generate electricity by converting a very bad greenhouse gas (methane) to a less bad one (CO2).

So, for each Kw they generate, there is a certain number of tons of greenhouse gas emissions avoided vs. if they had generated the same Kilowatts with fossil fuels.  (How many tons depends on what fuel you assume the power would have been made with -- my guess is they assume coal, since that gives them the biggest offset, though in fact the marginal fuel in most areas is natural gas in peaking turbines, which produces a lot less CO2).

Anyway, they can claim some number of tons of avoided CO2.  But I am pretty sure they are reselling these abated tons at least three times!  Here is how I think it works:

1. Their energy projects produce electricity, which they sell to consumers.  Since the
   electricity is often expensive, they sell it as "CO2-free"
   electricity.  This is possible in some sates -- for example in Texas, where Whole Foods made headlines by buying only CO2-free power.  So the carbon offset is in the bundle that they sell to
   electricity customers.  That is sale number one. 
2. The company most assuredly seeks out and gets
   government subsidies.  These subsidies are based on the power being
   "CO2-free".  This is sale number two, in exchange for subsidies. 
3. They still have to finance the initial construction of the plant, though.  Regular heartless
   investors require a, you know, return on capital.  So Terrapass
   finances their projects in part by selling these little certificates that you
   saw at the Oscars.  This is a way of financing their plants from people
   to whom they don't have to pay dividends or interest "”just the feel-good
   sense of abatement.  This is the third sale of the carbon credits.

All, by the way, entirely legal, though perhaps not wholly ethical if you really care about reducing CO2 emissions and not just being able to cover your ass to smugly deflect criticism.  This is actually a brilliant way to finance electricity projects, one that Enron wasn't even smart enough to dream up.

And there is nothing wrong with buying these certificates.  The International Star Registry has sold thousands (millions?) of people on the idea that they can have a star named after themselves.  Of course, no actual official body that names stars accepts these as real names, but that's OK, the certificate kind of makes a cool graduation gift (friends of ours did the ISF thing for my father-in-law after he died and my wife really liked it).

Postscript:  By the way, this ignores the ability of such a company to resell the same credits to multiple certificate holders, since the whole CO2 credit thing is pretty damn hard to audit and no one is even trying.  I don't think these guys are doing so, but someone will think of it.

Apparently one of the reasons all those stars at the Oscars were so pleased with themselves is that they all got a smugness coupon in their gift bags (emphasis added):

Hollywood's wealthy liberals can now avoid any guilt they might feel
for consuming so much non-renewable fossil fuel in their private jets,
their SUVs, and their multiple air-conditioned mansions. This year's
Oscar goodie bag contained gift certificates representing 100,000
pounds of greenhouse gas reductions from TerraPass, which describes
itself as a "carbon offset retailer." The 100,000 pounds "are enough to
balance out an average year in the life of an Academy Award presenter,"
a press release from TerraPass asserts. "For example, 100,000 pounds is
the total amount of carbon dioxide created by 20,000 miles of driving,
40,000 miles on commercial airlines, 20 hours in a private jet and a
large house in Los Angeles. The greenhouse gas reductions will be
accomplished through TerraPass' [program] of verified wind energy, cow
power [collecting methane from manure] and efficiency projects." Voila,
guilt-free consumption! It reminds us of the era when rich Catholics
paid the church for "dispensations" that would shorten their terms in
Purgatory.

Something smells here, and it is not the cow-poop methane.  This 100,000 pound coupon retails for $399.75 (5x79.95) on the TerraPass web site.  First, this rate implies that all 300 million Americans could offset their CO2 emissions for about $100 billion a year, a ridiculously low figure that would be great news if true. 

Lets look at solar, something I know because I live in Arizona and have looked at it a few times.  Here is the smallest, cheapest installation I can find.  It produces 295 CO2-free Kw-hours in a month if you live in Phoenix, less everywhere else.  That is enough to run one PC 24 hours a day -- and nothing else.  Or, it is enough to run about 10 75-watt light bulbs 12 hours a day -- and nothing else.  In other words, it is way, way, way short of powering up a star's Beverly Hills mansion, not to mention their car and private jet.  It would not run one of the air conditioning units on my house.  And it costs $12,000!  Even with a 20 year life and a 0% discount rate, that still is more than $399.75 a year.  For TerraPass's offset claim to be correct, they have to have a technology that is one and probably two orders of magnitude more efficient than solar in Arizona.

[update:  Al Gore's house 221,000 kwH last year.  Call it 18,400KwH per month, that would require about 62 of these solar installations for $744,000.  I don't think $399.75 is really offsetting it]

So if Al Gore and the Hollywood-ites start whipping out these coupons and claiming to be green, be very, very skeptical.  My guess is that TerraPass is less like a real carbon offset and more like, say, the International Star Registry, where you get a nice certificate for the wall and the internal glow of having a star named after you (which, officially, it really is not).  Both the star registry and TerraPass are selling the exact same thing -- fluff.  Actually, TerraPass's certificate is a bit cheaper than the star registry.  Smugness on sale!  Think of it as the "International Earth Good-Guy Registry."

Update:  This type of thing is incredibly amenable to fraud.  If you sell more than 100% of an investment, eventually the day of reckoning will come when you can't pay everyone their shares (a la the Producers).  But if people are investing in CO2 abatement -- you can sell the same ton over and over and no one will ever know.

Also, this is a brilliant way to finance a power station.  Say you want to build a wind power station.  Actual regular investors will, you know, want a return paid to them on their investment.  But TerraPass has apparently found a way to get capital from people without paying any return.  They just give these people a feel-good share of the lack of CO2 emissions and a little certificate for the wall, and TerraPass gets capital they never have to repay to build a power station they likely would have built anyway that they can then in turn sell the power from and not have to give any of the revenues to investors.  Smart.

More thoughts:  My guess is that TerraPass, when it sells the electricity from these projects to customers, is selling it on the basis that it is earth-friendly and causes no CO2 emissions.  This lack of emissions is likely part of the "bundle" sold to electricity customers.  But note that this would be selling the same lack of emissions twice -- once to TerraPass certificate holders, and once to the electricity customers.  I am sure they are both told they are avoiding X tons of emissions, but it is the same X tons, sold twice (at least).  Even Enron didn't try this. 

I really wish I had fewer scruples, because this would be a fabulous business model -- free capital, the ability to sell the same goods multiple times to different people, all the while getting lauded for saving the world in the press and getting invited to the Academy Awards.

Update #2:  LOL. IowaHawk is offering the same thing, but for the discounted rate of $9.95!  And with much better bumper stickers.  He also suggests a multi-level marketing approach.  Here are just two of many choices:

When you or I sign a bad contract, we have to live with it.  Did you sign up for a mortgage you can't afford anymore?  Sorry, you can find a way to suck it up financially, you can have the bank take your home, or you can declare bankruptcy and try to sort things out.  As a farmer, did you pre-sell your crops for what now looks like too low of a price?  Sorry, better luck next year.  What you and I don't get to do (and with good reason) in these situations is call for a mulligan and arbitrarily rewrite the terms of the contract the way we would like them today.

But the government, apparently, gets to do just that.  A while back I wrote about a series of court cases regarding wholesale electricity contracts in California:

Mike Gibberson
links a pair of court decisions that may set back any progress made in
deregulating at least the wholesale electricity markets.  In a series
of suits, the State of California is seeking a mulligan, asking the
court to rule that wholesale electricity contracts it entered into in
2000-2001 should be voided because the price was too high and FERC did
not have the authority to allow blanket market-based rather than
cost-based electricity pricing.  And the judges seem to agree:

The panel held that prices set in those bilateral transactions pursuant
to FERC's market-based program enjoyed no presumption of legality.

I
don't think there is anything more depressing to a good
anarcho-capitalist like myself than seeing the government rule that a
price negotiated at arms length by the free will of consenting, and in
this case well-informed adults enjoys "no presumption of legality."  If
not, then what does?  Is that where we are heading, to a world where no
voluntary actions enjoy a presumption of legality?

By the way, one has to remember that this is not a case of an
impoverished high school drop-out in East St. Louis signing a high
interest rate loan he didn't understand.  This is the case of highly
paid electricity executives and government electricity officials
signing electricity contracts.  It is as ridiculous to argue that they
were somehow duped in buying the one and only item they ever buy for
resale as to argue that Frito-Lay somehow shouldn't be held responsible
for the price it negotiates for potatoes.  These electricity companies
knew they had obligations to supply power at retail at certain rates
and failed to lock up enough supply in advance.  Whether Jeff Skilling
gamed the short-term spot market is irrelevant - the utility executives
were at fault for finding themselves beholden to the spot market for so
great a volume of electricity, and doubly at fault for taking this
power at insane rates when other lower cost options were available to
them (such as cutting off customers on interruptible contracts).

Apparently, Congress is doing it again, this time with offshore oil royalty rates.   They WSJ($) picks up the story:

The Democrats also insist that the big five oil
companies have received sweetheart deals from the government that have
ripped off taxpayers. So let's take a closer look. The most
controversial issue involves $6 billion in royalty payments that oil
companies are said to owe the government for oil pumped from federal
waters. The facts suggest otherwise.

These were leases for drilling rights in the Gulf of
Mexico signed between oil companies and the Clinton Administration's
Interior Department in 1998-99. At that time the world oil price had
fallen to as low as $10 a barrel and the contracts were signed without
a requirement of royalty payments if the price of oil rose above $35 a
barrel.

Interior's Inspector General investigated and found
that this standard royalty clause was omitted not because of any
conspiracy by big oil, but rather because of bureaucratic bungling in
the Clinton Administration. The same report found that a year after
these contracts were signed Chevron and other oil companies alerted
Interior to the absence of royalty fees, and that Interior replied that
the contracts should go forward nonetheless.

The companies have since invested billions of dollars
in the Gulf on the basis of those lease agreements, and only when the
price of oil surged to $70 a barrel did anyone start expressing outrage
that Big Oil was "cheating" taxpayers out of royalties. Some oil
companies have voluntarily offered to renegotiate these contracts. The
Democrats are now demanding that all these firms do so -- even though
the government signed binding contracts.

The Democratic bill strong-arms oil companies into
renegotiating the contracts or pay a $9 per barrel royalty fee from
these leases. If the companies refuse, they lose their rights to bid
for any future leases on federal property. So at the same time that the
U.S. is trying to persuade Venezuela and other nations to honor
property rights, Congress does its own Hugo Chávez imitation.

Note: This is an update of this post, where I got these royalty issues both wrong and right.

There is no doubt that electricity markets are a mess.  Electric utilities have been regulated for so long and in so many ways, and new capacity is so hard to add, the deregulation experiments tend to fail over short time periods for any number of reasons.  In California, what was called "deregulation" never really was such, since pricing signals were never passed on to consumers and therefore never really influenced demand.  In Texas, the areas where my company operates still struggle with deregulation, and we have seen few price or customer service benefits. 

This is not that surprising when you consider other major industries that have been so thoroughly regulated.   Railroads come to mind, for example.  Deregulation occurred thirty years ago and we are only recently starting to see a renaissance in that industry.  Pre-deregulation airline incumbents (e.g. Delta, United, American) are still struggling with open markets.

Mike Gibberson links a pair of court decisions that may set back any progress made in deregulating at least the wholesale electricity markets.  In a series of suits, the State of California is seeking a mulligan, asking the court to rule that wholesale electricity contracts it entered into in 2000-2001 should be voided because the price was too high and FERC did not have the authority to allow blanket market-based rather than cost-based electricity pricing.  And the judges seem to agree:

The panel held that prices set in those bilateral transactions pursuant
to FERC's market-based program enjoyed no presumption of legality.

I don't think there is anything more depressing to a good anarcho-capitalist like myself than seeing the government rule that a price negotiated at arms length by the free will of consenting, and in this case well-informed adults enjoys "no presumption of legality."  If not, then what does?  Is that where we are heading, to a world where no voluntary actions enjoy a presumption of legality?

By the way, one has to remember that this is not a case of an impoverished high school drop-out in East St. Louis signing a high interest rate loan he didn't understand.  This is the case of highly paid electricity executives and government electricity officials signing electricity contracts.  It is as ridiculous to argue that they were somehow duped in buying the one and only item they ever buy for resale as to argue that Frito-Lay somehow shouldn't be held responsible for the price it negotiates for potatoes.  These electricity companies knew they had obligations to supply power at retail at certain rates and failed to lock up enough supply in advance.  Whether Jeff Skilling gamed the short-term spot market is irrelevant - the utility executives were at fault for finding themselves beholden to the spot market for so great a volume of electricity, and doubly at fault for taking this power at insane rates when other lower cost options were available to them (such as cutting off customers on interruptible contracts).

Yet another nutty jury has decided that it should be national policy to have warning signs every few feet on a railroad to warn trespassers against danger:

Jeffrey Klein and Brett Birdwell were 17 "when they trespassed onto
railroad property and climbed atop a rail car" because they wanted to
see the view from there. They were shocked by a 12,500-volt wire and
severely injured. The incident took place in Lancaster, Pa. but through
the miracle of forum selection the lawsuit against Amtrak and Norfolk
Southern landed before a jury in Philadelphia, a locality notably more
favorable for plaintiffs than Lancaster. An attorney said the railroads
should have posted signs for the benefit of trespassers warning of the
overhead hazard and also should have had the electricity turned off at
the time.

This is by no means the first such verdict.  I featured another here:

By the way, the exact wording on the complaint against the railroad is even better than I thought:

"The
[engineer] did not stop the train in a timely manner, and failed to
yield the right of way to a pedestrian walking along the tracks in
plain view"

A freight train's topping distance is measured in miles, even with full emergency braking.

She and her attorney's further argue:

that
the railroad was negligent for failing to post signs warning 'of the
dangers of walking near train tracks and that the tracks were actively
in use

Lets leave aside the obvious point
about individual responsibility, and ask what would happen if this were
the legal standard, to have such signs.  To make sure someone saw one,
you would have to have one say every 30 feet.  Since there are just over 200,000 miles of freight railroads in the North America that works out to a bit over 35,000,000 signs that need to be posted.  At $100 per sign this would cost $3.5 billion.

Kevin Drum, building on a story from the NY Times, uses data from the California Energy Commission to make the case that California is the most efficient user of electricity in the country and that this efficiency can be attributed sole to government intervention.  Drum, always on the lookout for an excuse for the government to take over some sector of the economy, concludes:

Anyway, it's a good article, and goes to show the kinds of things we
could be doing nationwide if conservative politicians could put their
Chicken Little campaign contributors on hold for a few minutes and take
a look at how it's possible to cut energy use dramatically "” and reduce
our dependence on foreign suppliers "” without ruining the economy. The
energy industry might not like the idea, but the rest of us would.

On its face, California's numbers are impressive.  The CEC's numbers show California to have the lowest per capita electricity use in the nation, using electricity at half the national rate and one quarter the "least efficient" states.

This would be really cool if it were true that a few simple public policy steps could cut per capital energy consumption in half.  Unfortunately, though I am willing to posit California is better than average (as any state would be with a mild climate and newer housing), the data doesn't say what Drum and the article are trying to make it say. 

The consumption data is from here.  You can see that there are three components that matter - residential, commercial, and industrial.  Residential and commercial electricity consumption may or may not be fairly apples to apples comparable between states (more in a minute).  Industrial consumption, however, will not be comparable, since the mix of industries will change radically state by state.  As an extreme example, states with high aluminum production or oil refining or steel making, which are electricity intensive, will have a higher per capita industrial electricity consumption, irrespective of public policy.  The graph Drum and the NY Times uses includes industrial consumption, which is a mistake -- it is more reflective of industry mix than true energy efficiency.

Take two of the higher states on the list.  Wyoming, at the top of the per capita consumption list, has industrial electricity consumption as a whopping 58% of total state consumption.  KY, also near the top, has industrial consumption at 50% of total demand.  The US average is industrial consumption at 29% of total demand.  CA, NY, and NJ, all near the bottom of the list in terms of per capital demand, have industrial use as 20.6%, 15.1%, and 16% respectively.  So rather than try to correlate electricity consumption to local energy regulations, it is clear that the per capita consumption numbers by state are a much better indicator of the presence of heavy industry. In other words, the graph Drum shows is actually a better illustration of the success of CA not in necessarily becoming more efficient, but in exporting its pollution to other states.  No one in their right mind would even attempt to build a heavy industrial plant in CA in the last 30 years.  The graph is driven much more by the growth of industrial electricity use outside CA relative to CA.

Now take the residential numbers.  Lets look again at the states at the top of the per capita list:  Alabama, South Carolina, Louisiana, Tennessee, Arkansas, Mississippi, Texas.  Can anyone tell me what these states have in common?  They are hot and humid.  Yes, California has its hot spots, but it has its mild spots too  (also, California hot spots are dry, so they can use more energy efficient evaporative cooling, something that does not work in the deep south).  These southern states are hot all over in the summer.  So its reasonable to assume that maybe, just maybe, some of these hot states have higher residential per capita consumption because of air conditioning load?  In fact, if one recast this list as residential use per capita, you would see a direct correlation to summer air conditioning loads.   This table of cooling degree days weighted for population location is a really good proxy for how much air conditioning is needed by state.  (Explanation of cooling degree days). You can see that states like Alabama and Texas have two to four times the number of cooling degree days than California, which should directly correlate to about that much more per capita air conditioning (and thus electricity) use.

In fact, I have direct knowledge of both Alabama and Texas.  Both have seen a large increase in residential per capita electricity use vis a vis California over the last thirty years.  Granted.  But do you know why?  The number one reason for increased residential electricity use in the South is the increased access of the poor, particularly poor blacks, to air conditioning.  It is odd to see a liberal like Drum railing against this trend. Or is it that he just didn't bother to try to understand the numbers?

OK, now I have saved the most obvious fisking for last.  Because even when you correct for these numbers, California is pretty efficient vs. the average on electricity consumption.  Drum attributes this, without evidence, to government action.  The NY Times basically does the same, positing in effect that CA has more energy laws than any other state and it has the lowest consumption so therefore they must be correlated.  But of course, correlation is not equal to causation.  Could there be another effect out there?

Well, here are the eight states in the data set above that the California CEC shows as having the lowest per capita electricity use:  CA, RI, NY, HI, NH, AK, VT, MA.  All right, now here are the eight states from the same data set that have the highest electricity prices:  CA, RI, NY, HI, NH, AK, VT, MA.  Woah!  It's the exact same eight states!  The 8 states with the highest prices are the eight states with the lowest per capita consumption.  Unbelievable.  No way that could have an effect, huh?  It must be all those green building codes in CA.  I suspect Drum is sort of right, just not in the way he means.  Stupid regulation in each state drives up prices, which in turn provides incentives for lower demand.  It achieves the goal, I guess, but very inefficiently.  A straight tax would be much more efficient.

Please, is there anyone in the "reality-based community" that cares that their data really is saying what they think it is saying??

Lynne Kiesling of the Knowledge Problem has been blogging on just what chocolates are the best in the world (her normal beat is economics and electricity markets).  In this post, she answers my question about my wife's favorite, Maison
du Chocolat, and how it compares to her favorites.

I am reminded of my kids' favorite Johnny Depp line from Chocolat:  "good, but not my favorite".

By the way (just to make this post totally stream of consciousness), I think it would be impossible to have Lena Olin's character in Chocolat be any different than her role as Sydney's mom in Alias.