Joseph Krist

Publisher

NUCLEAR SUBSIDIES

The Department of Energy awarded the funding for the Diablo Canyon Power plant to Pacific Gas & Electric, which owns the nuclear facility, to help cover the cost of continued power production. The federal money follows a $1.4 billion loan from the state last month. provides about 9 percent of the state’s electricity. PG&E said the funding it had received from the state and federal governments would cover the cost of extending the license and operations of the plant. The utility said the federal money would help repay the state. There are still details to be negotiated but it is expected that the money would be distributed over four years beginning in 2023.

In Michigan, the owners of the shuttered Palisades nuclear plant announced late last week that it was denied funding from the U.S. Department of Energy’s Civil Nuclear Credit Program. No U.S. nuclear power plant has been reopened after an owner filed a formal notice — known as a letter of permanent secession of operation — to the Nuclear Regulatory Commission that it was being decommissioned, which occurred in the case of Palisades earlier this year. The decision

MTA 

The latest review of the mass transit situation in NYC comes from the NYC Independent Budget Office (IBO). As of this fall, ridership on public transit (subway, buses, and commuter rails) hovers around two-thirds of its pre-pandemic rate, while tolled crossings on bridges and tunnels have recovered to pre-pandemic levels. Ridership is now expected to reach just 81 percent of pre-pandemic levels by the end of 2026.

As a result of the revisions made in July, farebox revenues are expected to only make up about 25 percent of the authority’s $19 billion in annual revenues over the next several years—up from 17 percent during 2020 and 2021—but considerably lower than the near 40 percent of pre-pandemic revenues in 2019. Revenue from tolls is expected to stay around its pre-pandemic share.

Ridership on commuter-dominated services like the Long Island Rail Road (LIRR), Metro-North Railroad, and the subway reached extreme lows in the spring of 2020, averaging just 3 percent, 5 percent, and 8 percent of pre-pandemic ridership in April, respectively. Since the start of September 2022, commuter rail recovery has begun to outpace that of the city’s subway and buses.

Crossings on the MTA’s bridges and tunnels saw the least impact from the onset of the pandemic, reaching a low of 32 percent of pre-pandemic levels in the first week of April 2020, and quickly rebounding to over 80 percent by the summer of 2020. Currently, this is the only mode of transit under the MTA’s purview to have returned to 100 percent of pre-pandemic weekly ridership.

The various MTA services do not contribute equally to the authority’s revenue; commuter rail generates the greatest revenue per ride, at approximately $9, while buses have tended to yield the lowest revenue per ride, at around $2. However, most MTA user revenue is generated from tolls and high-volume services like the subway. At the start of 2020, subway ridership yielded the greatest proportion of monthly fare and toll revenue, at 44 percent.

This changed during the initial wave of the pandemic: from April through August 2020, toll revenue from paid bridge and tunnel crossings grew to more than half of all MTA user revenues and has since remained the largest source of these revenues. In August 2022, bridge and tunnel crossings made up 37 percent of user revenues, while subway fares contributed 35 percent.  IBO estimates that the MTA will meet its $6.2 billion fare and toll revenue targets for this year. This is, however, approximately $700 million less than the Authority’s original 2022 target set before Omicron.

The State Comptroller has also weighed in on the future revenue needs of the MTA. The Authority has also put forward an alternative plan to narrow its recurring budget gaps through 2028 by using early debt repayment. the MTA would also eliminate a projected $180 million in recurring debt service costs through 2053, which are associated with debt for operations that the Authority borrowed during the height of the pandemic. The paydown of the outstanding notes and bonds would reduce the size of the budget gaps by an average of $915.4 million through 2028.

The challenges remain substantial going forward. Fare revenue is expected to be the largest source of growth among all revenue sources between 2022 and 2026, rising by 29 percent. The MTA expects fare revenue (including none of the MTA’s major tax subsidy sources, including the Metropolitan Mass Transportation Operating Assistance (MMTOA), payroll mobility tax and real estate transaction taxes, are expected to rise by more than 7 percent over the same period, with toll revenue remaining flat over the period. Revenue in 2026, but that remains 10 percentage points lower than its share in 2019.

TRANSIT WORKER SHORTAGE

Public transit providers across North America face a shortage of operators and mechanics, a crisis that has strained budgets and forced agencies to reduce service. Ninety-six percent of agencies surveyed reported experiencing a workforce shortage, 84 percent of which said the shortage is affecting their ability to provide service. Although the shortage is most acute at agencies serving large urbanized areas and agencies with greater ridership, most agencies across the country report the shortage has forced service reductions regardless of the size of an agency’s ridership, service area population, or fleet.

Agencies reported that 45 percent of departing employees left to take jobs outside the transit industry, more than those who retire or left the workforce combined. The survey of agencies indicates that concerns about schedule and compensation were responsible for more departures than assault and harassment or concern about contracting COVID-19.

The problem is not limited to mass transit providers. States across the country are dealing with a shortage of snowplow drivers.  The Missouri Department of Transportation reports that it is nearly 30 percent below the staffing it needs in order to cover more than one shift. The Kansas DOT is about 24 percent short of snowplow operators needed to fully staff offices across the state. 

WESTERN DAMS

The Federal Energy Regulatory Commission (FERC) voted unanimously to approve the removal of four dams on the lower Klamath River to facilitate the return of salmon to the river. The move culminates a two- decade effort to restore the salmon runs on the river. The irony is that hydroelectric generation is being removed at the same time that carbon-free energy production is being favored.

As a result of the vote, FERC is ordering the surrender of the Lower Klamath Project License, which is currently held by energy company PacifiCorp. That license will be transferred to the entities in charge of dam removal: the states of Oregon and California, and the Klamath River Renewal Corporation, a nonprofit created to oversee dam removal that is made up of tribal, state and conservation group representatives.

PacifiCorp, their owner, had concluded that these outdated, inefficient hydroelectric dams would be more difficult to update than to remove.  In early 2024, the reservoirs are scheduled to be drawn down between salmon runs. In mid-2024, demolition will begin and by October 2024, the river should be open for the salmon’s return.

CRYPTO AND POWER

The recent downfall of FTX, the cryptocurrency exchange, does not help the image of the industry in ways obvious and not so obvious. Of the many factors cited by opponents of crypto, the enormous electric power needs of the industry and their increasing use of fossil fueled generation plants is gaining ever increasing attention. In that environment, legislation was passed in New York State limiting the expansion of crypto mining at abandoned fossil fueled facilities.

The legislation will impose a two-year moratorium on crypto-mining companies that are seeking new permits to retrofit fossil fuel plants in the state into digital mining operations. Many of these are some of the oldest and dirtiest generation in the state. The legislation will not impact existing mining facilities or stop all crypto-mining activities in the state. The restrictions will only apply to those seeking permits to re-power fossil fuel plants. Those that connect directly into the power grid or use renewable energy sources will remain unaffected.

It also requires New York to study the industry’s impact on the state’s efforts to reduce its greenhouse gas emissions. The industry resists these sorts of limits and study periods which may tell you something. It is feared that the New York law’s enactment could stimulate similar actions in other states.

MEMPHIS POWER SAGA

Memphis Gas, Water, and Light the municipally owned electric utility serving the city find themselves at the center of another to the ability of the TVA and the city to enter into a long-term power supply contract. This week, three nonprofits — Memphis-based Protect Our Aquifer, Energy Alabama and Appalachian Voices are challenging the long-term contract model with which TVA agrees to provide power to retail distributors.

The plaintiffs have argued the contracts violate the Tennessee Valley Authority Act of 1933, the law that governs TVA, and the National Environmental Policy Act, which requires environmental review of federal agency policy decisions. The case comes as MGWL decides whether to enter into a 20-year supply contract with TVA or to acquire supplies from other providers. The environment around the decision is also poised to change.

After a two-year period of bid solicitation and review, the outgoing CEO and a consultant hired on his watch recommended renewal of the relationship with TVA on a long-term deal. A new CEO began this week. The MLGW board delayed a vote on the 20-year deal this month because one company that bid on its electricity protested the decision to award TVA the contract. The ultimate decision rests with the Memphis City Council.

RENEWABLES AND PROPERTY TAXES

The Oklahoma Supreme Court unanimously affirmed a trial court’s ruling that federal production tax credits used to finance the construction of wind and solar farms can no longer be included in county assessors’ property valuations that determine the local taxes paid by energy companies. The Court said federal production tax credits (PTCs) are intangible property not subject to ad valorem taxation, according to the Oklahoma Constitution. PTCs are instead a tax incentive.

The ruling noted that while there is no doubt that tax credits may enhance the value of real property or have value for IRS taxation purposes, the Oklahoma Constitution states that intangible personal property is not taxable and that PTCs are intangible personal property. The ruling also stated that if the Oklahoma Legislature wanted to statutorily define PTCs as tangible property, it could do so but has not.

The current system leads to wide variations of similar properties especially those which cross county lines. Local assessments of energy properties can be “farmed out” to third-party assessors hired by elected county assessors to value more complicated assets, such as wind farms, pipelines and petroleum production assets. Multiple bills aimed at addressing property valuation disputes between county assessors and energy companies were introduced during the 2022 legislative session, with two of the measures being enacted.

One law requires energy companies protesting their tax valuations to file the correct paperwork in a timely manner and requires that county assessors inform school districts and tax jurisdictions of the property tax protests taking place within the county. In a concession to the industry, the law also prohibits the use of a third-party assessor during informal valuation negotiations between county assessors and energy companies. The second law moves valuation appeals of $3 million or more from the district courts to the existing Court of Tax Review.

The last provision reflects the fact that this tax dispute has gone on for six years and that the ruling potentially has implications for school districts across the state. The valuation changes will impact the amounts receivable by school districts from the state. The concern is that the law will raise uncertainties about school district bond financings. In 2021, about $80 million in property tax payments sat in escrow owing to valuation protests.

VIRGIN ISLANDS

We waited to see what rabbit the USVI Water and Power Authority would pull out of its hat before December 1 to keep its power generation system running in the face of a fuel cutoff by its propane supplier. The utility’s long standing financial problems have led to regular threats to its fuel supply.  Now, the Authority will use short term authority to acquire diesel fuel to run old power plants while a longer-term plan can be crafted. Electrical production by diesel costs twice as much as it does it by propane. WAPA had been paying $380,000 to $400,000 a day for propane. The Authority’s board authorized WAPA to spend up to $500,000 per day for propane because of the possible higher prices. The board authorized the amount through January 6.

A long-standing dispute between the USVI government and the estate of Jeffery Epstein has been settled. The estate of Jeffrey Epstein has agreed to pay what could amount to more than $105 million to the U.S. Virgin Islands to settle claims The estate of Jeffrey Epstein has agreed to pay what could amount to more than $105 million to the U.S. Virgin Islands to settle claims that he fraudulently obtained tax breaks for operating a financial advisory firm. Mr. Epstein’s estate agreed to repay in cash more than $80 million in tax benefits that one of his companies had received. It will also split the proceeds of the sale of a private island held by the estate.  The estate will have up to a year to come up with the necessary cash to fulfill its settlement terms.

INTERMOUNTAIN POWER

The Intermountain Power Agency has revealed that two private companies, apparently with understandings with state legislators offered to buy the Agency. Last month a proposal was offered that included the companies buying out all of IPA and its assets—its land and water rights, outstanding bonds and power contracts, as well as its transmission systems and generating station.  The plan was to use carbon capture and sequestration to extend the life of IPA’s two coal fired generating units. The power would be used for a data center.

One of the companies even sought to become a member entity of IPA, which is comprised of 23 Utah municipalities, as part of the proposal. That would raise all sorts of issues. All of it would seem to be moot as by agreement with the Environmental Protection Agency, IPA is allowed to operate the coal units until 2025, otherwise IPA would have to spend hundreds of millions of dollars building new coal ash disposal facilities in order to comply with federal regulations. 

If EPA believed IPA was set to diverge from the approved closure timeline tied to the ash disposal agreement, a 135-day deadline could kick in whereby IPA would need to open new ash disposal facilities or face imminent shut down. IPA received an approval order from the Utah Division of Air Quality in 2021 that allowed work to commence on IPP’s gas plant. Provisions of the order contain language about the closure of the plant’s coal-burning units.

Reopening that order to delay the closure of the coal units would likely trigger an 18-month delay in construction of the gas plant and could add costs of up to $50 million to the effort, according to IPA. 

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