Electric woes caused by industry restructuring, weak regulation

Note: While I mention CMP, Maine's largest electric utility, the subject is relevant across the U.S. 

 

The news is full of reports about skyrocketing electric bills across the country and numerous outages in the Northeast. Maine gets it share of both.

Something is wrong when the complaints occur as often and as loudly as they do now. Utilities and their friends have come up with ready responses that squarely place the blame on somebody else.

Customers are faulted for not recognizing their power consumption increases as they run electric heaters or oil burners. And frequent nor'easters get the blame for what seems to be an unusually high number of outages.

Of course, electric consumption increases in cold, dark winters. And, this year, the cost of fuel to run utility generation may also have increased. So it is not surprising that as usage increases, bills are higher. And some customers look only at the bottom line and ignore the number of kilowatt-hours.

But this is not the most severe winter ever, so some huge increases seem to be caused by more than usage. CMP, for example, has removed the prior year's monthly usage from the bill, making ready comparisons impossible. That deletion makes it more difficult to accept the explanation that it's all a matter of usage.

One obvious culprit is the meter. Utilities have installed so-called “smart” meters, supposedly because they will allow customers to manage their usage better, obtaining greater efficiency and lower costs. While that promise mostly goes unfulfilled, it has worked well for utilities that can eliminate meter reader jobs.

During a major, recent nor'easter, smart meters turned out to be dumb. They could not highlight outage locations very well, nor did they provide good data to the central office, which would help it efficiently assign repair crews. Despite their shortcomings, a big part of the meter’s cost is recovered in a customer's rates and will be for many years.

Given these known defects, it just might be possible that bills, way out of line with past experience, may be caused by defective meter information. To relieve customer worries while the cause is being investigated, the regulators should announce that their payment obligation will be limited to the previous year's level.

Without such action, customers bear all the risk when their bills shoot up. And when a utility falsely warns them they may be cut off if they don't pay the bill, they can rightly feel they are victims, not customers. CMP and others should not only withdraw such bills, but be fined for issuing them.

While customers, utilities and regulators scramble to figure out what went wrong, they will miss the big picture that can reveal underlying problems. It began with industry restructuring. Electric power supply was separated from wires. Many utilities ended up as wires companies.

The utilities’ monopoly position as wires companies was an opportunity to coin money. With a limited commitment to maintenance plus government incentives to build more transmission lines at customer expense, their outlook brightened. The cost of power was reduced by competition, but the cost of wires in the customers' bill zoomed up.

Federal utility regulators allow higher rates to encourage more transmission. State regulators mostly stay on the sidelines until problems arise.

Regulators depend on technical input from utilities rather than having staff capable of conducting continuous, independent review. While they may hire outside consultants when a problem arises, this approach does nothing to prevent problems.

To top this situation off, as Congress and state legislatures restructured the industry, they levied new burdens on ratepayers. They imposed public policy mandates on customers' bills, ranging from low-income assistance to promoting renewables. It was a lot easier to load these costs on electric customers than to increase taxes.

The failure of regulators to be more aggressive contributes to both the frequency of weather-caused outages and billing alarms such as are now occurring. Studies to find the causes of these problems are no substitute for continuing surveillance to prevent them.

Beefed-up regulation would undoubtedly cost more. But electric rates increase to cover utilities' costs of dealing with storm outages or fixing meter problems. Adequate regulation should reduce some of these cost increases.

The bills add up. Customers struggle with outages. Regulators belatedly investigate. Customers subsidize the very meters that may be causing their problems. Utilities maximize profits by cutting field personnel. Customers foot the bill for the utility lawyers who defend company practices.

Instead of viewing the current problems as likely to be soon forgotten, now is the time for legislators to take a new look at the electric industry and how it is regulated.

Trump’s trade policy isolates U.S., boosts prices

Imagine you are the commanding general of your nation’s armed forces and head the national government.

You decide that another country is getting “cute” and is harming your country. The only way to take on that country is to declare world war, even though your closest allies will be hit far harder than your intended target.

So you suddenly declare war, proclaiming that wars like this are “easy to win.” While there are always dead and wounded on both sides in any war, you think the other side will surrender immediately, and your country will suffer no casualties.

This is not fiction. It happened last week when President Trump announced high tariffs on imports of steel and aluminum. He ignored the negative reactions of many other countries and congressional leaders of his own party.

“Cut off imports,” he tweeted. “When we are down $100 billion with a certain country and they get cute, don’t trade any more. We win big. It’s easy.”

Trump attended Wharton, a top university for economic studies, but he must have missed a few classes. He failed to learn that if the U.S. cuts off some imports from another country, that country can retaliate by cutting imports of at least equal value from the U.S.

The country Trump wanted to hit was China. The country Trump did hit was Canada, the leading foreign supplier of steel. China doesn’t even make the top ten suppliers

Even worse, Trump justified the tariff hike on national security grounds, finding that steel was crucial to defense and the country could not become dependent on foreign suppliers, which account for about one-third of steel used in the U.S. Of the top four domestic steel producers, two are foreign owned.

Canada shares defense of the North American airspace with the U.S. and is one of the most trusted U.S. allies. It has fought at the side of the U.S. in major wars. It is hardly a security threat.

When Trump learned of the impact on Canada, his administration said the U.S. would temporarily suspend the tariff increase for Canada and Mexico as a way of forcing them to come to an agreement in the NAFTA negotiations.

In those talks, Canada says the Americans have adopted a my-way-or-the-highway approach. In short, only if Canada does what the U.S. wants can it avoid the steel tariffs. In war, that’s called unconditional surrender. But this isn’t really war, so it amounts to bullying your best friend.

Trump’s policy would hurt his own people in two ways. First, Canada has declared the tariff increases are “absolutely unacceptable” and has said it would retaliate. It would identify important imports from the U.S. and levy high tariffs on them to cut American sales.

Here’s how that could hurt. Some 45.5 percent of Maine exports abroad go to Canada. That amounts to about $1.2 billion in sales each year. If Canada chooses to hit some items Maine exports, some Mainers could lose their jobs.

Mainers and workers elsewhere would be unemployed so that steelworkers could keep their jobs. In effect, that’s a federal tax on Maine. But it’s not the only one.

The other effect on Americans will be higher retail prices. The reason imports displace domestic production is that they are cheaper. Everything made using imported steel costs less than it would if manufacturers had to use domestic steel. When you buy a car, its price will reflect higher cost steel.

Bath Iron Works, one of the nation’s two builders of Navy destroyers, will be forced to charge taxpayers more for the vessels. Even if BIW has always used American steel, if Canadian competitors were driven from the market, domestic prices might increase.

Trump seems to believe that the U.S. should have a favorable trade balance with every other country, even if that means higher prices for American goods. He sees all trade relationships as a form of war, which somehow the U.S. can easily win.

For about a century, the world has come to understand that greater efficiency and hence lower costs can come through international trade. National economies have become tied together.

Trump wants out of these relationships. The risk is that other countries will take him seriously and replace American imports with those from the rest of the world, especially China.

If the criticism gets to Trump, leading him to soften his policy, he may have learned the rest of Wharton’s lessons on trade.

Otherwise, Trump’s economic policy can turn the United States, a continental nation, into an island.

Gun debate: individual right versus community safety

The mass shooting in Florida and the inevitable pro-gun and gun control reactions are about much more than firearms and their use.

The issue is really about the nature of our society and government. The NRA makes sure we don't forget that. After every shooting, it opposes gun control advocates by saying that what they propose threatens personal freedom.

Among truly democratic, developed countries, people see society and government in one of two ways. On one side, people believe they have a right to the greatest possible personal freedom and that government should guarantee it. Possibly, the only democracy where that is the rule is the U.S.

On the other side are countries in which the interest of the community prevails and personal freedom is subject to limits that protect the entire society. Democracies in which this view prevails include Canada and the countries of Western Europe.

In countries where the community interest dominates, gun use is controlled, people have fewer guns, and there is little gun violence. In the U.S., gun use is subject to few controls, gun ownership is widespread, and there is much gun violence.

People under both systems enjoy natural rights. In the U.S., some of those rights are protected from being overridden by government by the Bill of Rights. Among the protected rights is the Second Amendment's right to own and use firearms.

The Supreme Court held that the Second Amendment means that individual Americans have that right. But it also said that, like all guaranteed rights, this freedom is not absolute and may be subject to some reasonable limits short of denying the right itself. Some gun owners refuse to accept that government can impose any limits.

The issue boils down to the difference between how many Americans view the relationship between government and the individual and how that relationship is viewed in other free and democratic countries.

The reason for the difference may be that Americans inhabited a frontier nation in which the use of guns was essential for activities ranging from subsistence hunting to keeping the peace. The Mounties preceded settlers in the Canadian West, and there was no frontier in England or France.

The American frontier is gone, though some of its rules and practices continue. Australia, with its own frontier, was like the U.S. until a mass shooting there brought stronger gun control.

The frequency of mass shootings by people using automatic weapons has fueled more discussion than usual about guns and limits on their type and use. But there would still be quite a way to go until state and federal legislators adopt some limits and people understand that reasonable limits will not cost them their rights.

President Trump's solution is more arms, this time in the hands of teachers, but possibly no more limits. He accepts the NRA's thesis that we can stop mass shootings by finding all mentally ill persons and denying them guns. That is so impossible that it must be recognized as a tactic.

We should not forget that Trump is a Republican and his party and the NRA are firmly linked. The GOP harvests gun owner votes thanks to its loyalty to the NRA's stance.

For many years, the Republican Party has adopted positions designed to motivate and attract single issue voters. If a voter cares deeply about gun rights and fears any limits, that person may vote for the GOP for that reason alone, regardless of its positions on matters ranging from health care to warfare.

Such a voter may even come to support Republican positions on issues far removed from guns and possibly even against their own interests. For example, a person without health insurance could oppose the Affordable Care Act, because the GOP supports his or her gun rights.

Issues like gun rights and gun control can become so-called “wedge” issues. Others are opposition to abortion and same sex marriage. Wedge issue voters oppose government action on their single issue and arrive easily at the GOP view that government is too big and powerful.

Voters favoring gun control do not treat it as a wedge issue. Though a majority of Americans want tougher gun laws, most have not been willing to allow that to become the driving issue for them.

The ultimate resolution of the gun issue would signal an historic change in how Americans view society and the government. Undoubtedly, its historic importance explains why change is so slow and difficult. It may only come at the point of a gun in Parkland, Florida, or your hometown.

Trump dealt with Russians, collusion or not

“Our job is not done,” said Maine Gov. LePage told the Legislature in his State of the State address.

He stressed that he plans to be an active, if not downright aggressive, governor until the last minute of his term at the end of the year.

And he was right. We elect governors and presidents for fixed terms of office, and they owe us their active service for the full period – to the last day. Lame duck status, after a successor has been elected but has not yet taken office, should not be an excuse for fading out or, worse, allowing the successor to take charge prematurely.

The newly elected person may begin to think they already have official powers. In fact, they have no more right to govern than any unelected, private citizen.

During the campaign, Obama had held back on strong presidential action on Russian involvement in the election, because he did not want to seem overly partisan by countering attacks on Hillary Clinton, his party's candidate.

The president is not a neutral, saintly figure, who must avoid tough talk and remain above the political fray. Obama should have done a better job alerting the public to Russian attempts to influence their votes. He should have worried less about the effect on the campaign and more about the effect on the country.

After the election, Obama placed tough sanctions on Russia for its election meddling. But Trump's staff undermined this Russia policy by promising the Russians the new president would back off Obama's sanctions.

President-elect Trump seems to have thought that his victory gave him some official powers, and he and his staff began taking on presidential attributes to which they were not entitled. Like LePage, Obama should have forcefully reminded Trump that he remained in charge.

It is hardly a mystery that Trump wants to erase every trace of the Obama presidency he can. One way was to project friendship with Russia and Putin, its president, while Obama was struggling to maintain a policy opposing Russia's takeover of Crimea and meddling in American politics. Obviously, Trump intended to undermine the sitting president.

Whatever comes out of the Robert Mueller's Special Counsel investigation, there is ample evidence that Trump staffers made quasi-diplomatic contact with the Russian and other governments, well before he took the oath of office. They apparently believed that such contacts were allowed and appropriate.

Much has been made of the contacts between past presidential winners, not yet inaugurated, and foreign officials. These exchanges have been designed to allow people to become personally acquainted, not to undermine the current president. Certainly, presidents-elect should not conduct their own foreign policy before taking office.

The Trump staff contacts in the lame duck period look like violations of the Logan Act, aimed at preventing private individuals from acting like they were official government negotiators with foreign governments.

The Trump team may be more vulnerable for overstepping their legal limits than for the still unproven collusion with Russians during the campaign. It is unlikely he will suffer any adverse consequences for his lame duck period actions.

Mueller has revealed hard evidence that the Russians aimed at disrupting the American political system, including helping Trump and undermining Hillary Clinton. There is no remaining doubt that the Trump campaign knew what the Russians were trying to do and did not blow the whistle.

As Trump regularly insists, no evidence has been provided that his campaign colluded with the Russians in this effort. But Mueller's investigation goes well beyond the question of links between the Trump campaign and the Russians. Russia has tried to disrupt American democracy. His findings should be a cause of great concern.

Trump focuses on whether foreign support made his surprise victory possible, not the broader harm from Russian meddling. He is more concerned about protecting himself than protecting the sanctity of the American political system.

Trump worries about whether his presidency will lose its legitimacy if it is found that the Russians helped him. His surprise victory, until now his most important political accomplishment, seems to mean more to him than being president.

Americans have accepted the 2016 result, like the 2000 Bush-Gore election, because they want stability. Trump is in far less danger from questions about how much the Russians helped him than from his own current actions.

The country needs a president who will spearhead massive efforts to halt Russia's cyber attacks and protect American democracy from foreign influences. Trump should worry less about his own election and get on with doing his job.

Wealthy in real estate, he became president

Most of the assets of the man reputed to be the wealthiest American president were in real estate, like those of one of his successors.

Unlike that successor, he was moderate in speech and open to all views before deciding. He set a model for his country. On Monday, we celebrate George Washington’s official birthday.

Not Presidents’ Day. Washington's Birthday is the legal U.S. and Maine government designation of the day. In remembering all presidents, some outright failures, the day meant to honor Washington has become a commercial holiday. 

 

But we should recall this country’s good fortune to have been led by this exceptional man. This is my annual column to recognize and remember him. 

 

While we sometimes believe he had an easier job in simpler times than faces today’s president, he had to set up a federal government designed to last for centuries. He acted while being viewed with suspicion by some who feared he would end up as king.

Washington was an even better statesman than military leader. His strength was his unwavering commitment to the idea of the American republic. His chief personal ambition was not to rule, but to retire to Mount Vernon. He declined his pay in public service.

Drafting the Constitution, accomplished under his presidency of the Constitutional Convention, was only part of the task. How would the first president apply the Constitution?

Washington believed in what might be considered “big government.” During the Revolutionary War, he had depended on voluntary state financial and military contributions. The experience made him a supporter of a strong national government.

He aligned himself with constitutional drafters who argued that the United States could only become a great nation if powers were transferred from the states to the federal government. He advocated the expansion of the government he led. 

 

He faced strong opposition from those worried that the national government would override states’ rights and individual freedoms. Washington accepted the Bill of Rights as an essential part of the deal to make a new country. 

 

No American has ever enjoyed more prestige in his own lifetime than Washington. But he wore the mantel of power with modesty and showed great respect for the views of others.

Washington worried about the growth of political parties that he witnessed. He predicted “the spirit of revenge, natural to party dissension ....” He concluded that strong partisanship could undermine the functioning of government. 

 

In proposing an accord with the British, his former enemy, Washington subscribed to a view later formulated by a British statesman: "Nations have no permanent friends or allies, they only have permanent interests." Jefferson and his supporters disagreed, years later launching the disastrous War of 1812 against the British.

Jefferson had attacked him openly. Though Washington would ultimately cut off contact with him, he refrained from any personal attacks on his fellow Virginian. Such values seem lost in today’s politics.

Washington, a southern slave owner, agonized over slavery. He recognized that the country might break apart over the issue. If it did, a friend reported in 1795, "he had made up his mind to remove and be of the northern."

He believed that slavery would disappear as the nation's economy developed, though he was overly optimistic about its end. He recognized that the future lay in the development of "manufactures" produced by wage labor, as was beginning to happen in the North.

 

Thus, 70 years before Lincoln's defense of the Union in the Civil War and his willingness to compromise on slavery, Washington used his national standing to hold the country together. His will freed his slaves after his death, and, against Virginia law, he left money for their education.

Washington had a deep religious belief and was a practicing Christian who often prayed. Yet he did not believe that the United States was a Christian nation, writing to a Jewish congregation, "All possess alike liberty of conscience and immunities of citizenship."

 

He resigned as general and declined to serve more than two terms as president. When Britain’s King George III, America’s old enemy, was told that Washington would walk away from high office, he said, “If he does that, he will be the greatest man in the world.”

Washington created the aura of the presidency. Despite his divisive personal style, Donald Trump benefits from the respect for his office that is Washington’s legacy.

Washington has become a symbolic figure, causing us to lose sight of him as a real person. He was a general, a president, a statesman and, above all, a great man. We should remember that man.

Economy up, stocks volatile – who gets credit, blame?

 

The American economy remains in one of its longest recoveries in history. Does President Trump deserve the credit?

The memory of the 2007 financial meltdown fades. Unemployment is down. Incomes are beginning to increase. Consumer spending, the driver of the economy, is picking up. The recovery, begun years ago, remained strong during Trump’s first year in office.

A close look reveals a far more complicated explanation for the recovery in which Trump plays only a surprisingly small part.

Government is a player in the economy, but does not drive it. Businesses and individuals decide on its direction. Their actions don’t all head the same way at the same time. In a free enterprise society, the big decisions are not made by government, though it provides incentives and controls.

Government economic action is composed of two elements, fiscal policy and monetary policy. The president and Congress manage fiscal policy – taxes and spending, while the Federal Reserve, independent of the president, runs monetary policy – interest rates and the supply of money.

From the moment he took office in 2009, President Obama tried to boost government spending to stimulate the economy. At first, he was successful, and Congress agreed to a $787 billion stimulus. Republicans opposed any added government efforts, arguing they would increase the national debt.

Fiscal policy would go no further, leaving recovery to the Federal Reserve. Under recently departed Fed chair Janet Yellin and her predecessor, interest rates were cut close to zero and the money supply expanded. The Fed made it easier for people to borrow and then spend to boost the economy.

Yellin’s team managed to promote growth without high inflation. While personal income did not grow much, neither did prices.

Most presidents reappoint a Fed chair to a second term even if he or she is a member of another party. But Trump wanted to put his own stamp on the office. He picked a person remarkably similar to Yellin, but who might give Trump some room to claim credit for the appointment and for monetary policy.

Trump’s contribution to recovery was limited to his signature on a tax cut bill entirely developed by others, the congressional GOP. The bill created expectations that money saved on taxes will grow the economy, thus producing more tax revenues. Meanwhile, it increases the national debt far more than Obama’s proposal would have.

Trump has taken credit for economic gains, including some under Obama. The same positive statistics he scorned as a candidate, because they made Obama look good, he now claims have become accurate under his regime.

Putting presidential politics aside, Yellin deserves more credit for the recovery than either president.

Government spending sets the priorities for only a portion of the economy. Obama’s effort promoted basic developments like roads and hospitals. Tax cuts allow companies and people to set their own priorities, which do not usually include public works. That’s why more money will be needed for those purposes.

Consumer spending may increase, but what people buy may be more expensive. Trade policy is beginning to have the effect of raising the price of imports, which are a large part of our shopping carts.

One other problem with the recovery is that its benefits are uneven. Most economic gains have gone to the top 10 percent, while incomes for others have been relatively flat. Even if the 90 percent is beginning to see some progress, they have a long way to go to close the gap.

The same kind of gap also exists between urban and rural areas. Gains have been going to areas classified as urban and not to rural America. According to the census, Maine has fewer people living in urban areas than any other state. So many Mainers still await the chance to catch up.

Beyond taking credit for the economy, Trump has boasted of the big increases in stock prices, the “Trump Bump.” However, despite impressive gains, the stock market’s future is unclear. It is quite different from the economy. Speculation, normal in investing, is unlike decisions about what goes in the shopping cart.

The stock market can swing rapidly. Investors are now worried about higher interest rates and wage growth that will boost prices, causing inflation, and harming some corporations.

A president’s risk in claiming credit for the economy or stock market that he or she doesn’t really control puts the president in line for the blame when either declines, which is inevitable.

Modesty, now in short supply, would be a good idea.

Politicians use jargon to disguise the truth

 

“If you can’t convince them, confuse them.” President Truman supposedly said that.

It still seems to apply to the way the federal government communicates with us voters. To clarify a bit, here are some things politicians say and what they mean.

Congress adopts a “continuing resolution” when it cannot agree on a budget. A continuing resolution extends the previous year’s spending temporarily for a few weeks or months. The current budget year began last October, but we are still “temporarily” living hand-to-mouth with a previous budget.

“Regular order” means Congress acts normally by holding hearings and debates and then working out compromises between the House and Senate. Sen. McCain famously asked for it, and Sens. Collins and King want it. But congressional leaders push bills through using speeded up procedures.

“Democratic republic” is what we supposedly have, which should allow any member of Congress – they’re all equal, right – to bring up a bill. Only two people can allow a bill to get to a vote, the Speaker of the House and the Senate Majority Leader.

The “Freedom Caucus” is the strongly conservative group in the House that opposes government spending. It has enough votes to deny the House the freedom to vote on many proposals, because of Speaker Ryan’s practice, explained next.

The “Hastert Rule” isn’t a rule but a Republican practice begun by an earlier speaker, saying that no bill will reach the House floor unless “a majority of the majority” GOP supports it. Speaker Ryan adds to it by requiring that no bill may reach the floor unless it can pass with only GOP votes.

“Cloture” means getting the 60 votes it takes to allow a bill to face the final simple majority vote in the Senate. That can give the minority, now the Democrats, some influence in it. President Trump wants the “nuclear option” that would end the 60-vote requirement, but the GOP worries about when it will be the minority.

“The [Obamacare] individual mandate is now gone” said President Trump. The mandate was not repealed. The penalty for violating it was cut to zero. Some will obey it anyhow, thanks to government subsidies for insurance premiums. By the way, we obey the flag code and there’s no penalty for violating it.

“The bill is a thousand pages long” implies that Congress lets matters get too complicated for average people. Any time even one word of a section of law is amended, the whole section must be printed. Small changes can take many pages.

“An obscure law” means a law that the writer never heard of. Most laws are, by nature, obscure. One is the Logan Act, banning private citizens from carrying on foreign relations for the government on their own. Nobody has been prosecuted in 200 plus years. That makes it “obscure,” when perhaps it has simply been obeyed.

“The American people want” is a phrase based on polling. But, because of the way the GOP has designed congressional districts in many states, the Democrats have to be well ahead in the polls to hope to gain control of the House. Polling meets political game playing.

“Russian attempts to influence the election” are illegal, because foreigners cannot participate in or contribute to campaigns. This is mixed up with “collusion,” working with foreigners. It’s possible that, even without working together, merely knowing about foreign activity and accepting it should be rejected.

“Bipartisanship” is what candidates promise but don’t produce. They claim they are ready “to work across the aisle,” doing the public’s business through compromise with members of the other party. The Freedom Caucus is exempt from this promise. Candidates say this, because that’s what voters want, but it doesn’t happen.

“Compromise” is thought to mean that each side makes concessions to the other to achieve a result. For many in the GOP majority, it means they are willing to accept Democratic support for their positions, but won’t make any concessions. The Dems reciprocate and “compromise” remains as rare as the dodo.

‘Switzerland” is what some call Sen. Susan Collins’ office. That makes it neutral territory for Republicans and Democrats who like to consider themselves moderates to try to reach agreement on immigration and force the Senate Majority Leader to allow a vote on their deal.

What Collins is doing is positive. The would-be moderates need first to agree and then stick together to insist they carry as much weight as the Freedom Caucus. Then, we voters might get some of the bipartisanship we were promised.