Did Gov. Christie’s Office Early Involvement Shape Utility Resilience Plans?
Christie Gov.’s Office’s Fingerprints are on the PSEG Plan
Shock Doctrine Applied to Billion Dollar Public Utility Regulatory Review
Was There a Wildstein War Room at BPU?
[Update: 4/10/14 – Holy moly! According to this Bergen Record story, PSEG didn’t even consider sea level rise and climate changeQ
Izzo also said that as the company looks to the future, it sees the need for more work in models by the Federal Emergency Management Agency and other agencies about the effect climate change will have on the state’s coastline and inland rivers.
“There’s a whole slew of assets that, based on new FEMA maps, have some increased risk based on these designations that we haven’t made part of this first request,” Izzo said. ~~~ end update
Back when Gov. Christie was riding high – draped in his blue fleece – responding to the Sandy crisis, I vaguely recall how he demagogued strong public outrage over the utilities’ slow response to restoring power.
I seem to recall the Gov. calling the utilities on the carpet, especially JCP&L, for their poor preparation and performance, and promising reforms.
But now, 18 months later, I don’t think anyone realizes how significant an impact that the Gov.’s intervention may have had on the utility response, including PSEG’s controversial $2.6 billion (over 5 years – $3.9 billion over 10) “Energy Strong” resilience plan now before the Board of Public Utilities.
There are direct fingerprints of the Gov.’s Office on it. I don’t think that has been reported thus far.
So, with a whole new context, i.e. the passage of 18 months, political scandal, and a whole new perspective on how intervention by Gov. Christie’s Office in the GWB toll plan went down, I was just now reading Rate Counsel’s brief opposing the PSEG Energy Strong plan.
I was reminded of this infamous quote by then Secretary of Defense Donald Rumsfeld:
On the afternoon of September 11, Rumsfeld issued rapid orders to his aides to look for evidence of possible Iraqi involvement in regard to what had just occurred, according to notes taken by senior policy official Stephen Cambone. “Best info fast. Judge whether good enough hit S.H.” — meaning Saddam Hussein — “at same time. Not only UBL” (Osama bin Laden), Cambone’s notes quoted Rumsfeld as saying. “Need to move swiftly — Near term target needs — go massive — sweep it all up. Things related and not.“[56][57]
We all know the disaster that became of that Rumsfeld recommendation.
You could say that Rumsfeld was engaging in his own version of what Naomi Klein called the “Shock Doctrine” – i.e. taking advantage of a crisis to ram through a highly unpopular, costly, poorly justified, ideological agenda. Klein provides examples:
At the most chaotic juncture in Iraq’s civil war, a new law is unveiled that would allow Shell and BP to claim the country’s vast oil reserves…. Immediately following September 11, the Bush Administration quietly out-sources the running of the “War on Terror” to Halliburton and Blackwater…. After a tsunami wipes out the coasts of Southeast Asia, the pristine beaches are auctioned off to tourist resorts…. New Orleans’s residents, scattered from Hurricane Katrina, discover that their public housing, hospitals and schools will never be reopened…. These events are examples of “the shock doctrine”: using the public’s disorientation following massive collective shocks – wars, terrorist attacks, or natural disasters — to achieve control by imposing economic shock therapy.
In Rumsfeld’s case for attacking Iraq, this was the stealth Neoliberal imperial agenda laid out in a “Project for a New American Century” – specifically see: Rebuilding America’s Defenses
The reasons I am reminded of that quote stem from Rate Counsel’s devastating critique of the PSEG Energy Strong proposal.
Could the NJ utilities have interpreted Gov. Christie’s intervention as a green light for them, a la Rumsfled, to “Go massive”? Perhaps so.
Rate Counsel’s critique suggests that PSEG corporate managers engaged in their own form of Shock Doctrine – literally capitalizing on the post Sandy crisis.
Numerous examples of this abuse jump right off the pages of Rate Counsel’s brief:
- Early political involvement of Gov. Christie’s Office forced the agenda
In a scathing critique, Rate Counsel describes how the PSEG Energy Strong Plan was initially conceived.
Essentially, there was no planning. The chronology shows it was hurried and justified by after the fact rationales. The proposal was driven by seat of the pants emails, with direct involvement of Gov. Christie’s Office:
No evidence in the record reflects that the development of the Energy Strong proposal included any analysis of whether the proposed investments were cost-justified and cost-effective. Indeed, there is scant documentation of what criteria and standards, if any, were applied to develop the Energy Strong projects. None of the Energy Strong projects were vetted through the Company’s normal budgeting process.
According to a Company response to an AARP discovery request, management’s communications concerning the “initiation and direction” of the Company’s proposals were “primarily oral,” and the only written communication was a January 11, 2013 e-mail from Jorge Cardenas to a “team” of several other PSE&G employees. .
Mr. Cardenas’ e-mail stated that “[w]e have been asked to prepare a filing which addresses ‘infrastructure hardening,’ which filing was “to be completed by January 18th,” one week from the date of the e-mail. As noted by AARP witness Barbara R. Alexander, while the Energy Strong filing was not completed within the originally contemplated one-week time frame, the entire process of developing this $2.6 billion proposal apparently took place between January 11, 2013 and early February, 2013, when the proposal was considered by the Company’s Board of Directors.
With regard to the content of the electric portion of the filing, the recipients of Mr. Cardenas’ e-mail were directed to consult two documents. First, the recipients of the e-mail were directed to “dust off” materials that had been prepared for a “report to the governor’s office in reference to stations impacted and the cost to repair and also costs to pre-empt the situation from occurring again.”. That “report to the governor’s office” consisted in its entirety of three pages of charts identifying Superstorm Sandy-related damage to PSE&G’s electric system and related repair and replacement costs.
Who in the Gov.’s Office was involved? The Office of Inter-Governmental Affairs (Bridget Kelly’s Office). Is there a Wildstein lurking in BPU?
Was There a Wildstein War Room at BPU?
- a non-existent planning process – “Move Quickly – Go Massive – Sweep It All Up”
There was a shocking lack off planning in developing a multi-billion 10 year investment program.
The involvement of the Gov.’s Office, a remarkably short period of time to develop the plan, the lack of standard analysis, and the fact that the PSEG plan bypassed internal review, suggest, at best, a recklessly poor plan.
At worst, they suggest a cynical opportunity to seek windfall profits – a shock doctrine strategy – on the part of PSEG.
Rate counsel calls it a “wish list”:
The Company is asking for pre-approval of projected costs and a leap of faith that the wish-list put together by the Company’s engineers should prevail over the conclusions of several different independent engineers that recognized better and often cheaper alternatives.
- fundamental technical flaws
How to respond to the “climate change resilience” issue is fascinating, and raises a host of complex new scientific, economic, and policy issues.
Rate Counsel raises many of those complex issues, but ignores perhaps the most significant issues, such as:
- would we be better off investing billions of ratepayer dollars in reducing greenhouse gas emissions (renewable energy, conservation and efficiency), instead of trying to “harden” inherently vulnerable infrastructure?
- what are the social costs of climate change? Avoidance of those costs are benefits;
- are there better ways to finance the costs of adaptation, like a carbon tax which also would incentivize emissions reductions?
- can regulatory mandates achieve more cost effective and equitable results? (e.g. polluter pays)
- how does the precautionary principle apply in risk management and capital investment planning?
But Rate Counsel does expose a series of fundamental flaws in the PSEG plan. They are too numerous to go in to detail here – those interested should read the whole brief.
But they include a failure to consider the probability of future extreme storms, to project the impacts of those storms, or to evaluate whether the proposed “hardening” investments would prevent damage to energy infrastructure.
- bypassing PSEG’s own internal project review and selection process
The PSEG proposal bypassed PSEG’s own internal review processes – and with no apparent justification:
Electric Program Review, and Selection Process
PSE&G has a long-standing, multi-level review process for capital projects proposed by its utility operating personnel. Known as the Investment Evaluation System (“IES”), PSE&G’s internal capital spending review process involves scrutiny of both the technical and financial aspects of proposed projects, prior to implementation …
As described above, the Energy Strong Program includes numerous capital projects which are both costly and significant in scope. However, PSE&G did not follow its rigorous IES process for the review and selection of its proposed Energy Strong electric projects. P-2R, p. 9. PSE&G claims that its use of a less rigorous review process was necessary because Energy Strong’s “benefits fall outside of our current scorecard metrics.” P-2R, p. 9; RCR-E-86. So, rather than vetting the proposed Energy Strong projects through the IES process, the Energy Strong projects included in the Company’s filing were selected by a group of personnel from PSE&G’s Asset Management, Engineering and Field Operations staff. P-2R, p. 6.
Rate Counsel concludes that the BPU approval of PSEG plan:
will result in a guaranteed return to shareholders, a transfer of risk from shareholders to ratepayers, and a further erosion of the integrity of the regulatory process.
In sum, it appears that PSEG decided to “Go Massive” in a bald faced Shock Doctrine strategy.
