Category Archives: Uncategorized

Playing Politics with National Security

The New York Times

The New York Times (Photo credit: niallkennedy)

How is it that the New York Times is able to write elaborately detailed stories about the cyber-attacks on Iran from Stuxnet and Olympic Games, the code names for the computer viruses allegedly used to infect Iran’s nuclear enrichment program?  The NYT even is able to produce a graphic that shows the detailed business process used to produce these virus attacks.

We’ve also been treated to detailed information about drone strikes on terrorists, on the campaign for targeting specific people, and even the president’s fingerprints on the “kill list”.

The answer to the question seems both obvious and disgusting.

The information is apparently being deliberately fed to favored reporters in order to bolster the President’s ‘war on terror’ credential in national defense.  That seems to be the logical conclusion of analysts and journalists either amazed or drooling over the prospects that they would be leaked information for the next juicy story.  There seems to be very little attempt by “administration officials” to hide what they are doing.

I thought national defense and security intelligence was supposed to be secret.  Why would we tell Iran these things?  Is this some giant ‘head fake’ to persuade Iran to give up their program and cut a deal before the worms start taking aim at other stuff in the Islamic Republic?  Is this a reminder that Iran cannot procrastinate forever, that there are consequences short of air strikes, that there really isn’t that much distance between Israel and the US?

Is this a trial balloon to judge public reaction to war played by alternative means than sending in the Marines?  Because cyber-attacks are, in fact, an act of war, Defense Secretary Leon Panetta said so himself recently when discussing the issue of Chinese espionage.

If the president thinks that he is going to get ‘macho man’ credit for spamming Iran with computer viruses to make their centrifuges spin out of control, or deliberating targeting the terrorists of the world to demonstrate that there is no place the hide from American justice and self-defense—he will.

Until we realize that he put at risk the very successful tactics, intel and people in America’s defense forces by leaking it to the press for partisan political purposes without regard to the collateral damage it might do.  And worse, the President risks an even more precipitous loss of public confidence as we realize his actions undermine the nation security he is sworn to uphold.


Victory for Solar Friendly PG&E Rates

The Pacific Gas and Electric Company logo

Image via Wikipedia

That was the headline from the cleantech blog I opened May 27, 2011 as I surveyed my email inbox, sipped my first cup of coffee and tried to wake up.  There were other stories about the decision by the California Public Utilities Commission to approve a revised rate design for electricity rates, but this ‘Victory for Solar Friendly PG&E Rates’ symbolized this morning the inherent conflicts in utility rate design—it is almost always a zero-sum game.

The California Public Utilities Commission voted down proposals by PG&E that would have been a big step backward for solar customers. The two major victories were 1) the CPUC opted to maintain its 4 tier rate structure, wherein high usage customers are given a strong price signal to conserve electricity or invest in solar to offset the cost of high usage, and 2) PG&E will not be allowed to implement a fixed customer charge,” the blog story from Vote Solar read.

Yes but!

On the warm side of the hills where a growing share of PG&E’s customers live and try to make a living sufficient to feed their family and afford their rising utility bill, the reaction was very different.

The CPUC action in this rate design case split the differences between the parties. It did allow PG&E to reduce the rate tiers but did not permit the increase in the customer service charge. This PG&E rate re-design proposal came about because of outrage in Bakersfield over high utility bills as PG&E was installing smart meters.  This outrage has come to be known as the Bakersfield Effect because it brought customers out into the street ‘totally ticked off’ blaming their smart meter for the high bill caused by the socially engineered rate design.

PG&E’s spokesman Tom Bottorff said after the CPUC decision that PG&E customers who use large amounts of electricity will pay 17.6 percent less than they do now under the new rate design approved but will still pay nearly three times as much as the Tier 1 customers.

For years Tier 1 rates have been called “lifeline rates” designed to provide low cost rates to the first block of energy use to benefit poor, seniors and others in need.  But apartment dwellers in San Francisco and homes in the foggy Bay Area use less electricity and thus benefits from the tiered rate structure because they don’t use their air conditioners in summer. On the warm side of the hills or in the central valley portion of PG&E’s service territory it is a different story.  There the steeply progressive nature of PG&E’s residential rate structure hits hard whether you are low income or not.  PG&E had proposed to reduce the tiers even more than the CPUC approved and more evenly distribute the cost of service by moving a portion of the revenue requirement to a larger customer service charge paid by all residential customers—about $3.00 per month which would have affected the folks in the fog.

The next paragraph in the Vote Solar cleantech blog post revealed the truth about the rate design contest that the CPUC had just resolved:

“Why does this matter? Because rate design, or the process of setting electricity prices, is one of the most important factors in the financial decision for energy customers to go solar. Since much of a solar energy system’s value comes from the utility payments it is offsetting, electricity rates have a significant impact on a solar customer’s return on investment.”

“In the PG&E rate case, the utility had proposed eliminating its 4th residential tier – effectively moving its highest consumption customers into a lower tier and raising rates for others. This closely follows PG&E’s decision to eliminate Tier 5, which recently penalized existing PV owners and makes the changing price dynamics for solar even more extreme – not helpful when you’re trying to encourage investments with long-term payoffs. We modeled the impact of these proposals across a variety of consumption levels, PV system sizes and geographic locations under the two rate scenarios. The modeling showed that most PV customers would lose bill savings in a big way under PG&E’s proposed changes. The graph below illustrates the impact to a typical Tier 4 customer:

Furthermore, PG&E proposed a fixed $3.00 charge in lieu of its existing minimum charge. On policy grounds, Vote Solar opposes flat charges like these because they represent a lost opportunity to incentivize energy conservation and customer investment in PV; in other words, no amount of customer activity would be able to reduce that charge. And the net effect of the proposal would be to drive up rates for low usage customers and reduce rates for high usage customers.”

There you have it!

The reason the solar lobby in California vigorously opposed PG&E’s rate design proposal had nothing to do with the public concern about rising utility bills and EVERYTHING to do with keeping rates as high as possible on the warm side of the hills to improve the competitive position of solar energy companies.

You see solar still costs more even though its costs have been dropping—than other power generation supply options.  But PG&E and other investor owned utilities in California are required to procure 33% of the electricity consumed from renewable sources even if they cost more.  That is one factor driving up utility rates. So the best hope of solar companies to make a profit and be sustainable is to keep the 33% RPS pressure on utilities to buy the output of their projects and keep the rates high to make solar look more cost effective.

It’s enough to make you green—-with envy.  You can be sure this Vote Solar bragging is not taking place in Bakersfield or elsewhere in the Central Valley—but safely in the fog of their 300 Brannon Street, San Francisco office.

Making Sense of Mixed Economic Signals: Energy Price Fool’s Gold

US EIA Domestic Oil Production Trend

While world oil prices hover around $100 per barrel, the US is using 2% less energy than its five year average.  Moreover, overall US consumption of oil has been more or less flat since 2004 and down about 10% from 2007 pre-recession highs.  There is plenty of oil in the supply pipeline but prices are volatile.

Oil Economics Reality

Our oil economics reality lesson is that oil price movement has little to do with the actual supply of oil available.  There is plenty of oil today. Oil prices are set in global markets by the actions of thousands of trades each day.  Those prices are decided based upon factors that include the swing in productive oil capacity, the value of the US dollar, global political events that may or may not create trouble, and speculation about whether the future price of oil will go up or down.

Like it or not we are tied to this global oil price phenomenon and oil prices are tied to the value of the US dollar.  The stronger our US economy, the more valuable the dollar and thus the lower the relative price of oil can be to produce the same bang for the speculative buck.

We tell ourselves that while high oil prices still hurt our economy it could be worse.  Our improved energy efficiency is saving us from an even sharper spike in energy prices. There are a few places where that logic is true.  In California, for instance, the systematic imposition of energy efficiency standards the first time Jerry Brown was governor has resulted in energy intensity that is fully one-half the national average. If the rest of the US would adopt, apply and catch up with California’s energy intensity performance we would save a fortune in energy costs.

California prides itself in being green.  We adopt environmental regulations like we mean it and apply them with an intensity that matches.  We are the first in a number of areas.  The first to ban the construction of new nuclear power plants, the first to prohibit our utilities from buying coal fired power from out of state, the first to adopt a 33% renewable portfolio standard.  We were leaders in geothermal and wind and solar before it was fashionable elsewhere.

But we import 20% of our energy from other states.  We pay some of the highest electricity rates with some of the most progressive inclining block rate designs in the nation. And we are beginning to export more jobs to other states than some states create as a result of our onerous environmental and business regulations.

We don’t consume less we just produce less and import more.  As the seventh largest economy in the world California outsources our carbon impact to other states and other nations.  We pay higher prices for many goods and services because they are shipped to us from around the world in a global economy that has become dependent upon substituting higher labor costs for higher energy and transportation costs.

By producing less closer to home are we really doing the planet any favors? Would a cleaner coal plant built in California and run according to our stiffer environmental rules have a greater impact on the planet than the coal plants built in China under must less stringent rules that produce the goods we buy?

We oppose offshore drilling along the California Coast fearful of an oil spill.  Our senators oppose more drilling in Alaska even in the area originally set aside for oil production.  The Alaska Pipeline is beginning to experience maintenance problems because the volume of oil flowing through it as a result of these restrictions causes the oil to cool too rapidly in Alaska’s cold climate and damages the pipeline.

America is accused of paying so much attention to the Middle East in order to protect our access to its oil. Yet a 2006 study by James Murphy, an economist at the University of Alaska Anchorage, and Mark Delucchi at the University of California Davis found that America’s costs to keep oil flowing in the Middle East ranged anywhere between $47 billion and $98 billion per year.  But the amount of oil coming to the United States from the region was worth less than $35 billion per year.

There is plenty America can do to reduce our dependence upon imported oil and other energy supplies.  It requires decisions to produce more energy at home.  Fortunately, America’s technological prowess in developing 3D seismic exploration, horizontal drilling techniques allowing access to more difficult to reach oil and natural gas seams in shales, and hydraulic fracturing to economically recover those resources from unconventional sources is a game changer.  Already unconventional gas production growth in the US has virtually eliminated the need to import LNG from Russia, Quatar and elsewhere.   Today higher oil prices and lower natural gas prices have E&P companies shifting focus to oil with the expectation we will see material increases in domestic oil production as well.  That is exactly what we are seeing in North Dakota, Texas and elsewhere new technologies are being used to unlock access to unconventional energy resources.

The government can help by making energy regulation more predictable. If the government would restore deep water drilling in the Gulf of Mexico and authorize drilling permits in Alaska and exploration along the Atlantic and Pacific coasts America would again be a leader in energy production.  Lower cost, reliable, affordable domestic energy supplies, reduced geopolitical risks and relief from higher transport costs for imports would encourage more domestic manufacturing and job creation.

Higher energy prices undermine higher economic growth rates—what part of this do we not understand?  Getting America’s economic mojo back includes getting back to low cost energy supply from domestic sources to facilitate a rebirth of manufacturing. Doing so is good for America. The best way to reduce emissions is to avoid shipping everything we consume from half way around the world.  The best way to return growth to America’s economy is to make more of what we need at home and keep more of our own dollars working here at home.

Parents Support Education but Not at Any Cost

The lessons from the TEA party influence in shaping the 2010 election are being felt beyond the election of Congressional and state officials.  The principles of limited government, fiscal responsibility and getting our money’s worth out of government spilled over into the education decisions made across the country.

This is bad news for the teachers unions that have dominated education decisions for years leaving us with huge unfunded pension liabilities, high rates of per pupil spending and unsatisfying student performance results.  While unions rage about standardized testing parents clamor for answers about why their kids are falling behind since spending more money has not produced better outcomes.

Across the country voters made choices about education.  In many local elections voters approved parcel taxes or levies to support local school districts when it was clear where their money was going and what the need was that the measure addressed.  But it was a very different story at the state level where measures sought to raises taxes or impose fees in teachers union supported causes:

  • No income tax in Washington State where voters rejected a plea from unions and Bill Gates to impose an income tax on couples making over $400,000 per year to fund education and health care programs.
  • No raiding Arizona early-childhood health and education fund to balance the state budget the voters said rejecting a legislative proposal for more budget flexibility.
  • Oklahoma voters say NO to new education spending rejecting $830 million in new tax spending on education.  There were two measures decided, one required the state’s per-pupil spending to match the average of other states in the region. A second would have amended the state constitution making the first measure advisory not mandatory on the legislature. These measures were prompted by teachers unions lawsuit in 2007 calling per-pupil spending was inadequate. Voters did not agree.
  • Florida voters kept class size limits in the State Constitution rejecting a ballot proposal to relax the class size limits in public schools. Teachers unions had campaigned hard to reject the measure so the problem of how to pay for it goes back to the Legislature to solve.
  • Colorado voters shot down three measures to limit the state’s revenue raising capabilities including one that would have cut $337 million in property-tax revenue for schools during the first year.
  • Oregon voters rejected casino gambling to raise money for education.
  • Hawaii voters end elected state school board replacing it with one appointed by the Governor.   The Legislature will need to pass enabling laws to put the action into effect.

The message from voters seems to be that they want public education to be well funded and effective but they expect results that benefit their kids to be the first priority rather than arbitrary per pupil spending ratios.  Teacher unions had a tough time winning further tax increases for education setting up battles in State Legislatures over balancing the budget by setting spending priorities with revenue available.

A slow economic recovery assures that education funding stays on the front burner as schools increasing face competition from other equally high priorities like public safety, health care and infrastructure maintenance for tax revenues.

We have just begun the soul searching reform of education.  The recession, budget cuts and looming unfunded pension liabilities will force this soul searching to accelerate and be productive in living within our means and making each dollar count to get good education results for kids.  Crude per pupil spending formula for measuring schools is not going to cut it.  Standard test scores are useful but not the only thing school must teach kids.  Teachers are important in our childrens’ education success but so is accountability for education results.  Educations rules are too rigid, education management is too restricted in making changes needed for future success including removing poor performing teachers, and restrictions on using new methods, resources, technology and people with skills from outside the traditional teaching profession are holding us back.

Change is in the air in education and parents need to take back control of education and not let the Government reduce it down to the lowest common denominator to the detriment of our kids.

Can Healthcare go to Pot?

Both health care and illicit drugs are driven, priced and delivered based upon the laws of supply and demand.  Sixty years of employer based health insurance has not solved the social policy problem of how to insure unemployed or the uninsured without progressively driving up the cost for those who are insured stuck covering the unreimbursed costs through higher prices for health care services.  Concerns over the rising cost of health care and its effect limiting access to millions of Americans gave rise to ObamaCare, but health costs are expected to continue to rise.

The “War on Drugs” has been spending money for more than thirty years to reduce drug demand without success.  Last year California made more than 78,000 drug arrests most of which were misdemeanors.  Along the US border with Mexico concerns are rising to near panic over violence between competing drug cartels for control of market access to buyers in the US and drug routes through Mexico. In California alone, the state estimates that growing pot is an estimated $14 billion a year business.[1] If the state collected sales and use taxes on pot sales it might generate $1.4 billion in taxes from an industry estimated to gross about $18 billion per year in California alone.[2]]

What do these two stories have to do with each other?  You see this coming don’t you.  The State needs money and Californians are going to smoke pot anyway, Sacramento reasons, so why not legalize it and tax it to help close our budget deficit.

Welcome to the progressive California Bear Republic!

So on the November 2, 2010 ballot, Californians will vote on Proposition 19 the Marijuana Legalization Initiative and decide just that question.  State Assemblyman Tom Ammiano (D-San Francisco) introduced AB390 in the 2009 session to legalize, tax and regulate marijuana. AB390 passed the Assembly Public Safety Committee and was reintroduced as AB2254 in 2010, but the TaxCannibis2010 initiative campaign easily raised enough signatures to put the measure on the November ballot, and the Legislature was happy to let the people have their way on the measure without putting their own fingerprints on such a loaded question.

But before you file this as one more crazy idea from the left coast, consider this.  There is growing opposition to the Tax Cannabis 2010 measure in the three far north coastal counties in California.  This area is prime pot growing country and the local growers don’t want the competition. Listen to this radio story from the KCBS station in the San Francisco Bay area.

It turns out that when California legalized medical marijuana dispensaries several years back the retail price of marijuana fell from $6,000 per pound to $4,000 per pound and it keeps falling as more of these “wink, wink” medical facilities are licensed by cities.  The North Coast growers cooperative does not want to lose its profits which are higher than anything the health care lobby has been able to impose on us to date.

Competition works to drive down prices and effectively manage supply and demand!

So let’s make a deal, we here in California will all vote FOR Proposition 19 if the ballot measure is amended to allow for the same full competition for the rest of the health care market.  If the North Coast old hippies have it right we should expect health care to follow pot prices down, and there will be plenty of providers to deliver it, and the drug cartels will have to fight each other to INCLUDE Medicare patients instead of throw them under the bus.

Peace, Brothers and Sisters!

[1] Time Magazine, “Is Marijuana the Answer to California’s Budget Woes?”, July 24, 2009