LSJ Blogs: Derek Melot is Just Asking

Lark's list

I made a promise to BWL chief Peter Lark this morning during his visit to the LSJ, so see below a list that Lark had generated on BWL’s cost-cutting measures. (All I did to it was change it from all caps to lower case.) Take a look. If you have questions, forward them to me. I'll try to get the answers and post them to the blog.

State's take on natural gas prices

There’s nothing strange going on with natural gas prices to heat mid-Michigan homes. That’s the word from the Public Service Commission, the agency detailed to oversee utilities such as Consumers and DTE’s natural gas division.

Prompted by the recent coverage of BWL’s doings, an LSJ reader called to suggest a look into natural gas prices. The price on the bill was much higher than the price of natural gas, I was told.

And that’s true. But it’s also true that Consumers and DTE aren’t making up gas prices.

Judy Palnau of the PSC tells me that the state only allows the utilities to recover their cost of acquiring the gas. And why are prices higher than the market prices seen now?

Simple: Utilities got a bad result from buying at a good time.

Palnau explained that Michigan is unusual in having a great deal of storage space for natural gas. This situation leads utilities to buy gas during the summer months, when demand and prices are lower, to deploy in the winter months. Unfortunately, prices were higher this summer than they are now. The public’s paying eight-month-old prices. (The Energy Information Administration reports the “wellhead” price of gas went from 10.82 in June 2008 to 5.97 in November 2008.)

In most years, that would mean they were saving. This winter, they are not.

As for complaints about higher bills, which the PSC has received, Palnau offered another simple explanation: It’s been colder than in recent years — it takes more gas to keep your house heated.

Kellogg, call your PR experts

It seems I wasn’t the only consumer a bit peeved with Battle Creek’s Kellogg for its handling of Michael Phelps and the bong.

“When Kellogg announced it would not renew its endorsement contract with Olympic medalist Michael Phelps after a photo of the athlete smoking pot surfaced, it may have cost the food company its sterling reputation, reports company reputation index Vanno. Out of the 5,600 company reputations Vanno monitors, Kellogg ranked ninth before it booted Phelps. Now it’s ranked 83. Not even an industry-wide peanut scare inflicted as much damage on the food company’s reputation,” reports the businessinsider.com. (Hat tip to andrewsullivan.com for highlighting the report.)

Could a rational consensus be emerging in a grass-roots America bombarded for decades with ridiculous “War on Drugs” propaganda?

Tax bills going one way

The biggest losers on Oscar night were property owners -- at least on Lansing’s west side.

I attended an impromptu Oscar event in my neighborhood and the issuance of city property tax bills came up. Of the four households represented, all saw reductions in the assessed value of their homes.

The good news is that everyone involved can look for a property tax break in 2009. The bad news is that property values are down in a city neighborhood only recently seen as on the rise. I would imagine this decline is citywide. Does anyone have information to share on that point?

The unspoken hope at the party, of course, was that this decline will end up being temporary and property investments in Lansing will regain strength. Oh, and for those of you out there who don’t have to sell a home on the back end ... it’s a great time to buy.

Sure-fire energy plan wasn't so sure

So, BWL’s energy plan for the future was so well-tuned the utility now needs a three-month “time out” to revamp it before a citizen advisory panel  continues its review?

That was the message BWL’s George Stojic delivered to the citizen panel, according to a report in the City Pulse.

Circumstances have changed, Stojic says, in explaining the delay. What happened to the certainty BWL once displayed when it first unveiled its plan to build a new coal/biomass electric plant?

Understand, I think it likely that BWL will build some kind of coal-fired plant to replace the aging Eckert station downtown. Coal remains the cheapest fuel for the near term. The exact size of the new plant and its timing aren’t clear-cut, though.

Michigan’s energy policies generally have been awry for a couple of years now because they were predicated on the belief the state was going to need a boost in baseload power. “Michigan’s load growth is expected to grow an average of 1.2 percent per year over the next 20 years,” stated the report from the Public Service Commission in 2007, written when Peter Lark was PSC chairman.

With Michigan’s economy slumping, those projections are most likely inoperative. In fact, one could argue that a truly aggressive energy efficiency campaign might be enough to cover additional demands for power.

That still leaves the case of what to do with aging power plants like BWL’s Eckert. Unless there are huge changes in the effectiveness of wind and solar power, they won’t be enough for a new baseload plant in Lansing. Maybe the best bargain for Lansing will be a smaller coal plant backed up with a variety of alternatives.

For now, BWL ratepayers will have to wait and see what Plan B is from the folks over at Haco Drive.

Confusion on energy

Gov. Jennifer Granholm has started some serious head-scratching over what exactly her policy is about coal-fired power plants. Some are saying she has “flip-flopped” this year because she wants the breaks put on permitting for such plants.

The environmental community disputes that. The Michigan Environmental Council sent out an e-mail Friday saying Granholm has done nothing of the kind. Coal advocates, they argue, don’t seem to understand that last year’s big energy rewrite wasn’t to spur on new coal plants, but to actually “to delay the need for construction new electric generating facilities through efficiency measures and other tools.”

I seem to recall that the administration’s argument last year was that a rewrite was needed to get Consumers and DTE to commit to new generation, not delay it. But memory is a fickle thing.

As this story plays out, though, I think the real tale isn’t about coal plants or energy efficiency at all. This was about the state’s two big utilities getting the state to promise them 90 percent of their electric markets. Remember, that anti-competition piece just had to be included with all these greeny-green renewable energy promises when the Legislature acted in 2008.

It’s been clear for some time that Michigan wasn’t going to need a huge amount of new electric generation. And other states have imposed requirements for renewable power generation or use without tying them to restrictions on competition for electric customers.

So, why exactly was it such a huge crisis to pass “comprehensive” energy changes last year?

Simmer down now

A time-out is needed in East Lansing over this whole East Village property dispute. Frustrations are leading to rhetoric that’s less than constructive.

The latest round in this dust up started in the Feb. 13 LSJ. Russ Harding of the Mackinac Center was critiquing the city’s use of environmental reviews. He suggested that the city’s motivation might not be the environment, but its own development plans.

And, finally, he wrote, “City officials apparently believe things would be better if MSU were not in East Lansing ...”

Ouch. Hyperbole is part of punditry, but I seriously doubt Harding thinks the city of East Lansing wants MSU to evacuate to Ionia or anywhere else.

In today’s LSJ (Feb. 19), East Lansing City Manager Ted Staton responded. He noted that the city has joint ventures with MSU. He detailed a number of environmental policy points.

And he attributed the motive of the people who believe as Harding does to “doing the bidding for commercial property owners and student landlords looking to extort higher prices from government for their properties.”

Whoa, whoa, whoa. Staton’s entitled to his opinion on motive, but the form of his message overwhelmed the message itself.

After all, what private property owner is looking to ever sell property at a discount? What private property owner is going to rely on others to protect his interests?

Staton’s job is to efficiently lead East Lansing’s day-to-day operations. But efficient government is not a responsibility of a private property owner. Getting more money for your property isn’t a sign of nefarious action, but of financial acumen.

I know several of the principals in this dispute to varying degrees professionally. I find them all to be earnest, able people who take their jobs seriously.

I have my own opinions on the East Village area and its use. I guarantee some of them would displease Harding and some would displease Staton. But I’m confident that all involved are merely pursuing their agendas with all due diligence. That’s how human society works ... the pursuit of self-interest and the myriad negotiations, big and little, we have with each other when self-interests diverge or collide.

Let’s rein in the rhetoric, folks. I speak from the experience of making similar mistakes ... the cutting-edge rhetoric usually cuts the author more than the intended target.

The money will flow

Ever wonder how in the heck the state government can spend so much money.?It’s not hard, actually. Here are two numbers to chew on:

90 percent -- that’s the amount of the budget of the Department of Community Health that goes to a single program: Medicaid. DCH’s overall budget, by the way, is more than $12 billion. (Fortunately, the vast majority of those dollars don’t come from the state, but from the federal government.) So, 90 percent of $12 billion is, what, almost $11 billion.

$345,717,900 -- that’s the amount budgeted through the Department of Human Services on “child day care services.”  This spending represents about $1 in every $12 that DHS spends.

(Both figures are courtesy of the handy-dandy www.michigan.gov/budget site.)

It adds up quickly folks, even when you aren’t talking about legislative salaries and perks for the pols.

Got ideas to fix the state budget? Send them to budgetideas@lsj.com.

MEA "not trying to sell anything"

Kerry Birmingham of the MEA wanted to get their side across in response to my Feb. 17 column about the union's proposed retirement incentive. Quick summary: They think I'm all wet. Full comment below ...

No Florida room in home (industry)

It’s fair to assume Richard Florida won’t be invited to speak to any confabs of Realtors or housing developers anytime soon. The author of “The Rise of the Creative Class” and the headliner of Gov. Jennifer Granholm’s initial cool cities gathering in 2003, is arguing that people shouldn’t be buying homes.

Writing in the latest edition of The Atlantic magazine, Florida argued:

“The solution begins with the removal of homeownership from its long-privileged place at the center of the U.S. economy. Substantial incentives for homeownership (from tax breaks to artificially low mortgage-interest rates) distort demand, encouraging people to buy bigger houses than they otherwise would. That means less spending on medical technology, or software, or alternative energy—the sectors and products that could drive U.S. growth and exports in the coming years. Artificial demand for bigger houses also skews residential patterns, leading to excessive low-density suburban growth. The measures that prop up this demand should be eliminated.

“If anything, our government policies should encourage renting, not buying. Homeownership occupies a central place in the American Dream primarily because decades of policy have put it there. A recent study by Grace Wong, an economist at the Wharton School of Business, shows that, controlling for income and demographics, homeowners are no happier than renters, nor do they report lower levels of stress or higher levels of self-esteem.

“And while homeownership has some social benefits — a higher level of civic engagement is one — it is costly to the economy. The economist Andrew Oswald has demonstrated that in both the United States and Europe, those places with higher homeownership rates also suffer from higher unemployment. Homeownership, Oswald found, is a more important predictor of unemployment than rates of unionization or the generosity of welfare benefits. Too often, it ties people to declining or blighted locations, and forces them into work—if they can find it—that is a poor match for their interests and abilities.”

I’m not quite sold on this concept of homeownership as a predictor of unemployment, still, talk about a contrarian viewpoint in our culture. And with the U.S. economy in shambles due in part to a huge housing bubble, who’s to say that Florida’s all wet?