The Biggest Billion Dollar Corporate Ripoff You Never Even Heard Of

Energy Deregulation Put Corporations In Charge Of Monopoly Prices

Rigged By Design: “Market” Price Is Absurdly Set Based On The HIGHEST BID

And now a word from our sponsors – “THE BGS CARTEL”

The Murphy BPU is preparing to conduct the annual power “auction” that determines the prices you will pay for energy. I’ve tried – unsuccessfully – to warn about this before:

6. The price of power is set based on the HIGHEST COST GENERATION SOURCE

When I first read about the PJM power auction, it was so absurd that I was sure that I was misunderstanding how the auction set the [wholesale] “market” price of power.

I don’t think the public has a clue about how the so called deregulated “free market” in energy actually works or how the so called competitive “BGS power auction” actually works. …

In a must read story, David Kay Johnston exposes how the auction markets are rigged by industry fraud.

But PSEG explains clearly how the auctions lead to high prices and consumer ripoff even when they work as designed and are not rigged:

“The price that each generator receives for the power it produces is not ordinarily established by its own bid. Wholesale markets operate on the principle of the “single market clearing price.” All generators are paid the same price based on the bid of the last unit that “cleared the market,” that is, the most expensive unit needed to meet demand. “

Did you get that? The price is set based on “the most expensive unit needed to meet demand. “ This is a statement of fact by PSE&G itself, not an accusation from me.

You won’t read about any of this in the standard puff piece from NJ Spotlight about the price outcome of the annual “Basic Generation Service” (BGS) power auction. That auction does not simulate a “competitive market”, it creates a cartel.

So I want to again explain how the BGS “auction” actually works, because it is exactly the opposite of what you think an auction is.

If government were SELLING at an auction, they obviously would seek the HIGHEST bidder.

In contrast, if government were BUYING a commodity, e.g. auctioning power, the “market” price would be set by the LOWEST bidder – with higher prices only as needed to meet the amount of power bid.

For a purely hypothetical example: if BPU were auctioning the monopoly privilege to supply 100 Megawatts (MW) of power, and the low bid came in at $120 per MW but for only 75 MW of capacity, BPU would then go to the next lowest bidder to obtain the additional increment of 20 MW, likely at a higher cost, lets stay $150 per MW. And a higher price yet ($200/MW) for the final increment of 5  MW to get to 100 MW of total capacity needed.

That’s the way a real “market” would work – consumers would buy the cheapest commodity first until the supply were exhausted and then move to the next higher priced supply.

The capacity weighted “market” price of power under this real auction would be $130 per MW.

[(75 X $120) + (20 X $150) + (5 X $200)]/100 =$130 per MW]

But that’s now how the BGS auction works. Just the opposite.

The HIGHEST BID sets the “market price” and all the other bids – including the lower and lowest bids – are paid uniformly at the HIGHEST BID PRICE (i.e. “single market clearing price.”).

In my hypothetical above, that would be $200 per MW (a price paid even to the corporation that bid $120!!!)

The difference between paying for energy at the lowest bid based weighted price ($130) versus the highest bid “single market clearing price“ ($200) is huge: it amounts to billions of dollars in consumer ripoffs that go straight to corporate windfall profits.

This is obviously absurd.

Check out how BPU obscures that absurdity – note especially how they define “market conditions” as the result of the BGS auction itself, not any real competitive “market”:

“Basic Generation Service (BGS)

Pursuant to the Electric Discount and Energy Competition Act of 1999 (Act), the local electric distribution companies (“EDCs”) are obligated to provide basic generation service (BGS) until the Board determines that it is no longer necessary.  BGS refers to the EDCs’ obligation to obtain and provide the supply of electricity for customers who do not switch to an alternative retail supplier, known as a Third Party Supplier.  The Act requires that power procured for BGS by a utility be purchased at prices consistent with market conditions.  The charges assessed to customers for BGS are regulated by NJBPU, and are based on the reasonable and prudent cost to the utility of providing the service, including the cost of power purchased at prices consistent with market conditions by the utility in the competitive wholesale marketplace, and related, capacity, ancillary and administrative costs as determined by the Board.

The auction itself was privatized and designed by a private corporation, not BPU regulators: (About US)

Optimal Auctions designs and administers valued-added expert auctions. Our team has developed the most advanced online auctions in the world to assist companies and regulators to realize the full potential of microeconomics, game theory, leading technology, and best business practices. We have administered over $105 billion in auctions in a variety of vertical markets including computer/high tech, energy, telecommunications, petrochemicals, pharmaceuticals, and natural resources.

This is what energy deregulation has done. This auction does not simulate market conditions it creates a cartel. The cartel is administered by a private corporation.

The corporations, via the HIGEST bid, determine the “market conditions” (i.e. the wholesale price).

They then build their profits and administrative overhead costs in addition to the auction wholesale price they themselves set. And that is what you pay per month. A RIPOFF!

The energy companies themselves note that billions of dollars are involved. And it looks like the energy corporations actually register bidders and administer the auction:

Each year since 2002, the four New Jersey Electric Distribution Companies (EDCs) – Public Service Electric and Gas Company (PSE&G), Jersey Central Power & Light Company (JCP&L), Atlantic City Electric Company (ACE), and Rockland Electric Company (RECO) – have procured several billion dollars of electric supply to serve their Basic Generation Service (BGS) customers through a statewide Auction Process held in February.

If you want an excellent breakdown of this massive billion dollar scam, listen to academic economist and Greek leader Yanis Varoufakis explain how they are now pulling the same kind of scam in the European Commission to respond to energy crisis of the loss of Russian gas. It is the best detailed explanation I’ve seen on how this auction actually works: WATCH.

Energy deregulation is a scam that has not brought lower prices and more efficient and cleaner energy – just the opposite.

Any real climate or renewable energy reform must begin with repeal of energy deregulation, followed by termination of the power of corporations, and providing for public ownership and control over this vital monopoly public utility.

This Is What Leadership, Truth Telling, And Vindication Look Like

Today, we bring you an Op-Ed from the Sunday October 7, 2007 Star Ledger (link).

Please read and act on it. No further comment required.

What’s the Secret “available delegated state authority”?

Tennessee Gas pipeline (8/18/11)

No immediate end to fossil-fuel use

Department of Environmental Protection Commissioner Shawn LaTourette said he has told advocates pushing to shut down all fossil fuel projects that that is not going to happen anytime soon.

“We need carbon-based fuels to power our economy,’’ LaTourette said. “It is why we don’t see the DEP responding to calls for a fossil fuel moratorium.’’ ~~~ NJ Spotlight

In yesterday’s post, I explained why the NJ Global Warming Response Act (GWRA) is a sham and always was a sham. The goals always were aspirational and unenforceable. (The legal eagles and wonks out there can even see how it was done, see:

• How The Global Warming Response Act Was Stripped

That sham has been defended for 15 years by faux climate activists who refuse to fight for implementing legislation to put teeth in the GWRA. Instead of admitting this, they knowingly misled the public and repeatedly praised a series of sham political efforts that they knew would not produce real greenhouse gas emissions reductions or come anywhere near meeting the goals of the GWRA.

I also linked to a prior post that explained, in contrast to the GWRA, exactly how New York State’s climate law had teeth. I again implored NJ climate activists to campaign to demand that such a law be enacted in NJ.

Almost on cue, NJ Spotlight came along and made my point, in spades.

Today, let me quickly translate NJ’s Spotlight’s story about another FERC pipeline approval and the faux opposition of faux climate activists at Rethink Energy NJ (that’s you Tom Gilbert).

The FERC approval and the arguments of Tom Gilbert’s crew expose the sham of the NJ GWRA, because that law does not apply to and can not be used to stop a major expansion of fossil infrastructure that blatantly contradicts the emissions reductions goal of the Act:

The project will lead to a 16% increase in the state’s emissions of greenhouse gas annually, undermining New Jersey’s goal of slashing such pollution by 50% by 2030, according to Ed Potosnak, executive director of the League of Conservation Voters of New Jersey.  

See how the criticism is to “NJ’s goal” and what follows is the 50% by 2030 goal set by Gov.Murphy’s Executive Order, and not the goals of the Global Warming Response Act? Once again, this coverage obscures a critical fact. As a result, the public and climate activists are misinformed and the Gov. and Legislature get a pass.

Although environmentalists mislead the public about this too, everyone knows that a Gov.’s Executive Order is only binding on the Executive Branch and does not and can not create law. An EO has no binding legal effect on polluters who emit greenhouse gases and can not authorize DEP to regulate GHG emissions. It’s little more than a press release, yet environmental groups mislead the public into believing that it is real and significant. (just one example of many below)

In addition to misleading the public about the GWRA and the effects of a Gov. Executive Order, for years now, I have criticized these groups for a misguided and demonstrably failed strategy that focuses on FERC instead of: 1) the DEP’s powers under the Clean Water Act Section 401 Water Quality Certification; 2) demands for a moratorium on new fossil infrastructure; and 3) efforts to educate the public and expose the fraud of the GWRA – which does not even apply to these pipeline projects – and work on implementing legislation to put teeth in that law.

Once again, we see that all those issues were neglected and NJ Spotlight’s coverage again ignores them too.

But curiously, the last sentence in today’s Spotlight article cryptically refers to unspecified “delegated state authority”:

The coalition of environmental groups plan to file a motion for a rehearing with FERC and are asking the Murphy administration and its Pennsylvania counterparts to do the same. They want both states to use available delegated state authority to deny the project.

What “delegated state authority” might that be? Is it a secret? Talk about burying the lede! In a vague allusion in the last sentence! They can’t even name the authority, lest it expose their sham and vindicate my criticism.

Could it be the Clean Water Act Section 401 Water Quality Certification authority I’ve been criticized them for years for failing to focus on and criticizing NJ Spotlight for failure to cover?

In conclusion, let me again summarize why a focus on FERC is a fools errand and a total waste of time, money, and activists’ efforts, while diverting attention from far more effective strategies and tools:

1. The federal Natural Gas Act was written by the fossil energy companies to promote and expand fossil energy. It is not an environmental law and gives short shrift to environmental considerations.

2. The FERC is captured by fossil energy industry and routinely rubber stamps virtually all pipeline projects seeking their approval.

3. But even if the Natural Gas Act was balanced and considered environmental concerns and even if FERC were a neutral agency devoted to the public interest, the arguments made by NJ Rethink would still be absurd and fail. Here’s why and it doesn’t take a lawyer to understand these obvious arguments:

First, the NGA and FERC are designed and authorized by Congress to consider and advance the NATIONAL interest.

Second, there is also a Constitutional doctrine known as the Commerce Clause that prohibits unreasonable State restrictions on inter-state commerce. This national market based perspective and discouragement of State barriers doctrine influenced the NGA and FERC.

Third, Rethink and the NJ offer up narrow State based economic arguments that focus on the exclusive economic interests of NJ. Their arguments based on need and the energy demand and natural gas capacity are limited to NJ (instead of the region and other states that would be served by the pipeline).

By definition, those NJ based arguments have zero weight before FERC.

Both Rethink NJ and the NJ State government opponents are not serious, because they surely know that the arguments they offer are absurd and violate FERC law and policy.

They only pretend to oppose the pipeline and do so for self interested political reasons. They can tell the public that they’re trying. Arguments opposing the pipeline before FERC by State officials create a false appearance that the Murphy administration is opposing fossil infrastructure and fighting for climate goals, when exactly the opposite is true. (see above quote by DEP Commissioner LaTourette).

Environmental groups can fundraise. They can pay their friends the legal and economic consultants and feel important in “managing” them. They can hold press conferences and meet with the Governor and DEP Commissioner. They can use all this activity as “metrics” in their grant reports to their Foundation funders. They can praise their “grassroots activist” supporters and get emotional support and donations from them. They can protect their backyards and their pastoral private preserved lands. But they are not really trying. They know their arguments to FERC will fail. They are posing and virtue signaling. You can tell this is true because they refuse to make serious arguments and fight for efforts that have won in other states, like New York.

Yet this incompetence is well funded and reported by news media as serious advocacy, while real solutions, used by our neighbor in New York, are completely ignored.

[End Note: We have been vindicated by history –

In an October 7, 2007 Sunday Star Ledger Op-Ed, we warned everyone and explained why the law was designed to fail (for full text, see: No teeth in ‘tough’ pollution law):

The law — contrary to widespread media coverage — does not legally cap greenhouse gas emissions or mandate emissions reductions on any major pollution sources. As a result, the law’s theoretically “mandatory” goals are unenforceable and therefore a fiction. They amount to the same voluntary approach backed by the Bush administration.

Specifically, the law provides no regulatory authority, funding or staff for the DEP to take the necessary steps to implement and enforce the emission reduction goals. Instead, the DEP is kept on a tight leash and merely directed to develop a set of recommendations on how to meet the goals and to submit that proposed plan to the Legislature by June 2008. In passing the law, the Legislature merely kicked the can down the road, postponing hard choices for well over a year.

Perhaps even worse, any DEP powers to implement the goals of the law were explicitly narrowed. DEP’s role is limited to emissions monitoring and reporting progress in achieving the goals.

Big Oil And Gas Won’t Sue To Block NJ Law Because They Like It The Way It Is – Toothless

Fossil Energy And Major Polluters Not Impacted By Lame DEP Regulations

For decades, big oil and gas and the fossil energy industry have mounted a series of successful lawsuits to block US EPA regulations to reduce greenhouse gas emissions, arguing that EPA lacked authority under the federal Clean Air Act to regulate GHG emissions.

EPA only adopted climate rules in response to the permission granted by the US Supreme Court in the famous 2006 “Massachusetts v. EPA” case, which ruled that EPA had authority under the Clean Air Act to regulate GHG emissions (upon an EPA “endangerment” finding).

But the same corporate polluters have been silent in New Jersey – they have not politically or legally challenged the NJ Global Warming Response Act or the NJ DEP’s assertion of regulatory jurisdiction over greenhouse gas emissions under the NJ State Air Pollution Control Act back in 2004.

What explains the difference between the ballistic legal and political assaults at the federal EPA level and the lack of any engagement at all in New Jersey, the home of major fossil polluters like refineries, power plants, petrochemical, pharmaceutical, and pipelines?

The reason that the same powerful fossil polluters that politically attack and sue EPA don’t do anything in NJ is because they LIKE the NJ Global Warming Response Act (GWRA) and DEP regulations just they way they are: toothless and weak, respectively.

The GWRA is toothless and unenforceable and the DEP GHG emission regulations have no impact on their emissions and impose little if any compliance costs. DEP has never enforced the Act. There are no DEP permit limits that mandate emission reductions on any greenhouse gas emission source. So, they have no economic or other incentive to sue to block anything.

• Murphy DEP Issues Another Climate Science Report – And Does Nothing

Even Senator Smith knows that (and his bill has gone absolutely nowhere, see:

• Senate Environment Committee Chairman Smith Introduces Legislation To Put Regulatory Teeth In The Global Warming Response Act

They like things just the way they are.

A controversial lawsuit would generate awareness that the GWRA is toothless and give up the game. A NJ Court might strike down DEP regulations or invalidate the GWRA, sending the issue back to the Legislature.

That might prompt environmentalists to pressure the legislature for passage of a law with teeth, like New York State climate activists recently did. For that story, see:

• What A Difference A State (Law) Makes

The issue is framed and teed up perfectly by comments on the DEP’s proposed carbon dioxide (CO2) regulations.

I submitted the following comment (see comment #3 for the entire comment, starting on page 21). This comment was intended to lay the groundwork for one of two things to happen in response:

1) a lawsuit by industry challenging DEP’s authority to regulate GHG emissions under the Global Warming Response Act (GWRA); or

2) an admission by DEP that DEP lacked statutory authority under the GWRA to enforce the goals of the Act in DEP permits.

Here is the core of the comment:

3. COMMENT: As a statutory basis for regulatory authority to limit CO2 emissions, the Department relied primarily, if not exclusively, on the 2007 GWRA, as amended. The rulemaking conflated the New Jersey APCA and the GWRA, which can reasonably be interpreted as asserting the Department’s authority pursuant to the GWRA to mandate emissions reductions to meet the goals of the Act. However, there are strong legal arguments that the GWRA did not authorize the Department to regulate greenhouse gas emissions or establish emission limits for permitted sources. This can be confirmed by reviewing the legislative history, specifically by comparing the introduced version of the bill, which expressly provided authority to the Department to regulate emissions, with the final version enacted into law. The enacted version stripped this authority. The enacted version limited the Department to emissions monitoring and reporting functions.

Unfortunately, my plan will not work for two reasons:

1) the clueless NJ climate activists made absurd and false comments that undermined my arguments and did DEP’s dirty work for them.

The incompetent cheerleading clowns that pose as climate activists don’t understand the difference between a statute, a regulation, and an Executive Order (an EO provides NO LEGAL AUTHORITY OR BASIS FOR RULEMAKING)..

It’s embarrassing. I won’t even repeat their comment here. Go and read it for yourself. It’s comment #2, which DEP conveniently grouped with my comment, to further obfuscate the issue.

2) DEP lied in its response to this comment.

Here’s how DEP dissembled in response to the distinctions between the GWRA and the NJ Air Pollution Control Act I accused them of conflating (important note: I never claimed that DEP lacked authority under the NJ Air Pollution Control Act to regulate GHG emissions. I argued that the GWRA did not provide authority to regulate emissions to meet the emission reduction goals of the GWRA. DEP repeated this erroneous conflation in their response and responded to a straw man comment and argument I never made).

DEP Response:

New Jersey’s APCA gives the Department broad authority to promulgate rules “preventing, controlling and prohibiting air pollution throughout the State.” N.J.S.A. 26:2C-8. ….

The Department’s discussion of the GWRA, Executive Orders, 2019 Energy Master Plan (EMP), and 2050 Report provided the necessary context for the public to better understand the evolution of the State’s overall strategy to address climate change. The APCA authorizes the Department to regulate CO2 as the Department works toward achieving the emission reduction goals set forth in the GWRA, Executive Orders, 2019 EMP, and 2050 Report. Accordingly, the Department both has and cited to the necessary authority to promulgate this rulemaking.

Murphy DEP Gaslights The Public By Bragging About Meeting Outdated Standard

New EPA Standard & NJ DEP Monitoring Data Shows NJ Air Is Unhealthy

NJ monitoring data is in blue. Red line is EPA’s proposed new standard (I added to DEP chart). I realize that I inserted EPA proposed primary annual standard over NJ DEP’s 24 hour data. This is technically apples to oranges, but I did it on purpose to force DEP to explain how they collect, average and present data. YOUR LUNGS DON’T DO STATISTICS.

[Update: My above graphic juxtaposition of daily and annual monitoring data is consistent with DEP policy, which recognizes the importance of daily peak exposures: (DEP Ozone SIP. p. 6-17):

The US EPA just announced that they were proposing more stringent national air quality standards for fine particulate pollution (NAAQS for PM 2.5, AKA “soot”) to protect public health. EPA announced:

Rule Summary

On January 6, 2023, after carefully reviewing the most recent available scientific evidence and technical information, and consulting with the Agency’s independent scientific advisors, EPA announced its proposed decision to revise the primary (health-based) annual PM_2.5 standard from its current level of 12.0 µg/m³ to within the range of 9.0 to 10.0 µg/m³.

The scientific basis for EPA’s ratchet down was compelling: (@page 11-12, hit this link to read the entire 569 page proposal): (emphases mine)

The EPA is reconsidering the December 2020 decision because the available scientific evidence and technical information indicate that the current standards may not be adequate to protect public health and welfare, as required by the Clean Air Act. […]

The health effects evidence available in this reconsideration, in conjunction with the full body of evidence critically evaluated in the 2019 ISA, supports a causal relationship between long- and short-term exposures and mortality and cardiovascular effects, and the evidence supports a likely to be a causal relationship between long-term exposures and respiratory effects, nervous system effects, and cancer.

The science supporting EPA’s proposed new standard shows that the air in NJ continues to be unsafe to breath.

This is a highly significant EPA decision, yet you would not know any of that from recent communications from the Murphy DEP air quality program (or from reading the NJ press corps or the ‘alerts” from NJ environmental groups, who both seem to have given the Murphy DEP a pass on everything).

Just the opposite: instead of warning the public of unsafe pollution, expanding monitoring, and ratcheting down on polluters, the Murphy DEP is bragging about the good news on NJ’s compliance with EPA air quality standards for fine particulates.

Just 4 days after US EPA announced the need for this stricter standard to protect public health, the Murphy DEP air quality program distributed an email which transmitted DEP’s proposed amendment to the NJ’s Clean Air Act mandated “State Implementation Plan” (SIP) for fine particulates – based on an outdated 2006 standard. The DEP proposal requires EPA approval.

The DEP announcement essentially bragged that NJ was in compliance with EPA national air quality standards for particulate matter:

Proposed State Implementation Plan (SIP) Revision: Maintenance of the Fine Particulate Matter (PM2.5) 24-hour 35 µg/m3 NAAQS, Limited Maintenance Plan (LMP)

Date Posted: January 10, 2023

This proposed SIP revision is the second PM2.5 maintenance plan for the 2006 24-hour PM2.5 standard of 35 µg/m³ for both of New Jersey’s multi-state areas (the Northern New Jersey, New York and Connecticut area, and the Southern New Jersey, Pennsylvania and Delaware area) in accordance with the requirements of CAA Section 175A.  This SIP revision demonstrates New Jersey’s continued compliance with the 2006 PM2.5 24-hour 35 µg/m³ NAAQS. 

In seeking EPA approval of a “Limited Maintenance Plan”, the DEP is basically doing the absolute bare minimum that the Clean Air Act legally requires.

Here is the DEP public notice on the proposed SIP revision. Note this:

A public hearing concerning the Department’s proposed SIP revision will be conducted only if requested in writing by January 25, 2023. [..]

Written comments may be submitted by close of business, February 17, 2023. Please email comment(s) as a document attachment to: NJDEP-BAQP@dep.nj.gov and include “PM2.5 Maintenance Plan 2023-1” in the subject line of the e-mail.

Here is the DEP proposed SIP revision.

This is just an initial heads up post – I’ll followup up with a substantive post after I get to read the EPA and DEP documents.

Maybe some intrepid journalist might want to hold DEP accountable and educate the people of NJ about unhealthy air pollution that destroys their health.

Of course, maybe former DEP air pollution staffer Anjuli Ramos now over at Sierra Club might weigh in and hold her former employer accountable. I’m not holding my breath on that.

I will assume that the national clean air focused groups have the resources and will respond to the far more important EPA NAAQS proposal and limit my review to the NJ SIP revision.