Joseph Krist

Publisher

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CENSUS

The long awaited 2020 Census has begun to yield information on state and local basis. It yielded some surprises at the same time it confirmed some trends which were pretty clearly emerging.

Phoenix’s population grew from 1.4 million people in 2010 to 1.6 million in 2020, a rate of 11.2 percent, according to the Census Bureau. That made it the fifth largest city in the country leapfrogging Philadelphia. Overall, the largest county in the United States in 2020 remains Los Angeles County with over 10 million people. The largest city (incorporated place) in the United States in 2020 remains New York with 8.8 million people. 312 of the 384 U.S. metro areas gained population between 2010 and 2020. The fastest-growing U.S. metro area between the 2010 Census and 2020 Census was The Villages, FL, which grew 39% from about 93,000 people to about 130,000 people.

72 U.S. metro areas lost population from the 2010 Census to the 2020 Census. The U.S. metro areas with the largest percentage declines were Pine Bluff, AR, and Danville, IL, at -12.5 percent and -9.1 percent, respectively. Five counties (metro areas in parentheses) gained at least 300,000 people during that period: Harris County, Texas (Houston-The Woodlands-Sugar Land); Maricopa County, Arizona (Phoenix-Mesa-Chandler); King County, Washington (Seattle-Tacoma-Bellevue); Clark County, Nevada (Las Vegas-Henderson-Paradise); and Tarrant County, Texas (Dallas-Fort Worth-Arlington).

The 10 largest metro areas all grew between 2010 and 2020, led by two in Texas: Dallas-Fort Worth-Arlington and Houston-The Woodlands-Sugar Land each grew by approximately 20%. Dallas-Fort Worth and Houston were also two of the nation’s three metro areas to gain at least 1.2 million people over the decade. New York-Newark-Jersey City, NY-NJ-PA was the third.

Five metro areas crossed the 1million person threshold between 2010 and 2020: Grand Rapids-Kentwood, MI; Tucson, AZ; Urban Honolulu, HI; Tulsa, OK; and Fresno, CA. Among all U.S. metro areas, The Villages in Florida grew the fastest, followed by Austin-Round Rock-Georgetown, TX; St. George, UT; Greeley, CO; and Myrtle Beach-Conway-North Myrtle Beach, SC-NC.

At the state level, Texas experienced the largest numeric increase between 2010 and 2020, followed by Florida, California, Georgia and Washington. Utah was the fastest-growing state, increasing by 18.4% between 2010 and 2020, followed by Idaho, Texas, North Dakota and Nevada, which each grew by 15.0% or more.  California was the most populous state in 2020 (39.5 million), followed by Texas (29.1 million), Florida (21.5 million), New York (20.2 million) and Pennsylvania (13.0 million). The populations of three states — West Virginia, Mississippi and Illinois — and Puerto Rico declined over the decade.

One city which likely surprised people was the weakest big city credit, Chicago. Overall, the city’s population grew nearly 2% from 2010 to 2020 — from 2.6 million residents to 2.7 million, according to data released from the 2020 census. That’s a change from the population decline the city had experienced from 2000 to 2010, when the city lost nearly 7% of its population. It seems that the demise of the City of Chicago was not such a sure thing.

MANAGING THE TRANSITION TO CLEAN ENERGY

A bill has been introduced in the Wisconsin legislature which is intended to assist municipalities that have experienced a power plant closure by lengthening the period over which the payments they receive from the state for hosting those facilities incrementally decrease. Utility aid payments are paid by power companies to the state in lieu of property taxes. In Wisconsin, power plant sites are not subject to local property taxes. The state then passes funding from those payments along to municipalities that have power plants. After a plant is decommissioned, the state phases out the payments by 20% per year over five years.

The bill would lengthen the period over which payments phase out to 10 years. The payments decrease by 10% annually. The new timelines only would apply to power plants that are decommissioned after Dec. 31, 2020.  The idea is to facilitate the transition to other uses for the sites of decommissioned generation plants. This is also designed to offset the usually seen reductions in revenues from property taxes versus the revenues received through utility aid payments.

MANAGING THE RESURGENCE

Cultural facilities which saw their operations heavily impacted were among the first to try to reopen under significant limitations on attendance. In cities like New York, cultural facilities are at the center of tourism development activities. In New York, tourism has become the fulcrum underpinning the City economy with over 60 million visitors pre-pandemic. The resurgence of the pandemic especially with the spread of the Delta variant has put that recovery at risk.

To deal with the situation, the 33 museums and arts groups operating in city-owned buildings or on city-owned land — known as members of the Cultural Institutions Group have announced plans to require visitors to its museums and other cultural institutions to be vaccinated. The plans will require that visitors and employees at the city’s museums, concert halls, aquariums and zoos be vaccinated. Children younger than age 12, who are not eligible to be vaccinated, will have to be accompanied by a vaccinated person and will be encouraged to wear masks.

Broadway is beginning to open and/or reopen at least some its stages with a full reopening scheduled for September. It follows an earlier plan announced by the City that vaccinations would be required for indoor concerts — as well as for gyms and restaurants. New York was the first U.S. city to issue such a mandate.

ANCHORAGE AIRPORT

The airport serving the City of Anchorage has benefitted from its unique location in terms of both geography and world affairs. After it opened in 1951, it served as a refueling stop for airlines serving the Asia- North America market. For many airlines – cargo and commercial – flying by way of Anchorage allowed them to offset the limits of Soviet and Chinese air space restrictions. By the time, those obstacles were removed the role of the airport as a freight transfer facility had been clearly established.

That is where the politics comes in. Ted Stevens name is on the airport for a reason. Senator Stevens secured unique trade exemptions for Anchorage, Fairbanks and the Port of Anchorage in 2004 that allows cargo landed in the state on its way to and from the Lower 48 to be between not only planes but to different carriers at that time without being subject to federal regulations. That enabled the airport to become a significant transshipment hub. The revenue from those operations allowed the airport to transition from a fuel-based stopover to a freight hub.

With ocean ports in the lower 48 straining to handle the demand from a recovering economy and costs for container shipments skyrocketing, air cargo becomes a more cost competitive method. The pandemic also put the Anchorage Airport in good position. Data from the Airports Council International showed that total tonnage among the world’s top 10 busiest cargo airports increased 3 percent in 2020.

Landings at Anchorage were some 15 percent higher on year-over-year basis to over 3.1 million tons of cargo. This allowed Anchorage to surpass UPS hub Louisville, Ky., which saw a 4.6 percent growth in cargo business last year, for the fourth spot behind the Shanghai, Hong Kong and Memphis, Tenn. (Fed Ex), airports.

DROUGHT LIMITS ANNOUNCED

The Colorado River originates in the upper portions of the Colorado River Basin in the Rocky Mountains. The Upper Basin experienced an exceptionally dry spring in 2021, with April to July runoff into Lake Powell totaling just 26% of average despite near-average snowfall last winter. The projected water year 2021 unregulated inflow into Lake Powell—the amount that would have flowed to Lake Mead without the benefit of storage behind Glen Canyon Dam—is approximately 32% of average. Total Colorado River system storage today is 40% of capacity, down from 49% at this time last year.

This led the U.S. Bureau of Reclamation to announce that downstream releases from Glen Canyon Dam and Hoover Dam will be reduced in 2022 due to declining reservoir levels. In the Lower Basin the reductions represent the first “shortage” declaration in the history of the Colorado River system—demonstrating the severity of the drought and low reservoir conditions. The required shortage reductions and water savings contributions under the 2007 Colorado River Interim Guidelines for Lower Basin Shortages and Coordinated Operations of Lake Powell and Lake Mead, 2019 Lower Basin Drought Contingency Plan and Minute 323 to the 1944 Water Treaty with Mexico are: Arizona:  512,000 acre-feet, which is approximately 18% of the state’s annual apportionment; Nevada:  21,000 acre-feet, which is 7% of the state’s annual apportionment and Mexico:  80,000 acre-feet, which is approximately 5% of the country’s annual allotment.

The likely initial loser in this scenario is the agricultural sector of Arizona.

MORE UNCERTAINTY FOR MEAG

An agreement negotiated by the state Public Service Commission staff and Georgia Power proposes that regulators will continue reviewing semi-annual progress reports on the Votgle nuclear project moving forward. However, the commission will now wait until the final two reactors are up and running before deciding if Georgia Power’s expenses are reasonable. The stipulation order replaces a cost review mechanism established in 2017. The change reflects the continuing trend of cost increases which have continually plagued the project.

The decision was also accompanied the approval of $670 million in expenses at Plant Vogtle incurred during the final half of 2020. The moves by the Georgia state regulators clearly reinforce the continuing uncertainty regarding final costs of the expansion. So long as this is the case, we view the uncertainty as a continuing drag on the credit of MEAG and the Oglethorpe Electric Cooperative.

MAINE PUBLIC POWER

This year’s legislative session in Maine saw the legislative approval of and subsequent veto by the Governor of bills which would have enabled voters to decide if the wanted a pubic power agency to one the operating assets of Central Maine Power. Now in the aftermath of those actions, supporters of public power in the Pine Tree State have submitted applications for two initiatives to be placed on the 2022 ballot. The strategy of two proposals is undertaken with the goal of getting at least one question to voters by next fall on whether they would like to buy out the infrastructure of the two investor-owned entities.

Power to create the consumer-owned Pine Tree Power Co. has become a more serious issue especially as it pertains to CMP. The service issues which have plagued CMP’s customer base since it became owned by a subsidiary (Avangrid) ultimately owned by a Spanish company. Those service issues are currently the subject of robust debate in New Mexico where the proposed purchase of Public Service of New Mexico by Avengrid is under regulatory review. (Full disclosure – I am an Avangrid customer through another subsidiary as well) and none of the complaints are surprising. Proponents of the Maine initiative must collect over 63,000 signatures by January to get an item on the ballot.

CARBON CAPTURE STILL IN THE STATION

One hope of fossil fuel generation operators is that carbon capture technology can be developed which could allow older coal fired generation to operate. It has been proposed in connection with coal plants in North Dakota. It is at the center of the debate over what to do with one of the largest coal fired facilities, the San Juan plant in New Mexico. The owners of that plant were not able to attract interest from private investors and failed to fund even their share of a private study for the billion dollar proposal. 

Enchant Energy is a New Mexico-registered company that is acquiring the San Juan Generating Station near Farmington, New Mexico.  Enchant plans to retrofit SJGS with state-of-the-art carbon capture equipment that, when completed in 2023-2024, will transform the facility into the lowest emissions fossil fuel plant in the Western United States. The Department of Energy revised a cost sharing agreement with Enchant in January 2021 to increase the share paid by taxpayers for the study. The agreement was made during the final week of the Trump administration.

Enchant Energy is now also seeking a $906 million loan guarantee from the Department of Energy for the carbon capture proposal, lobbying Congress for expanded 45Q tax credits and other subsidies, and urging the state of New Mexico to accept long-term liability for sequestered carbon dioxide.  quarterly reports submitted by Enchant Energy to the Department of Energy shows that Enchant Energy has not lived up to funding commitments under previous agreements with the DOE.

Here’s the concern. The head of the Department of Energy’s Office of Fossil Energy and Carbon Management has stated “The office has invested a great deal of time and resources in CCS on coal. And it’s clear that carbon capture may not make economic sense on the remaining existing fleet of coal fired power plants in the United States, plants that are mostly based on subcritical efficiency boilers and nearing retirement over the next decade.”

The potential for liability issues to derail the project are real. As Enchant itself says, “No private entity could bear the burden. There’s a concern that the long-term liability is just not supportable by the private insurance industry.” All of the lobbying efforts with the state and federal governments seems to center on the currently uneconomical nature of the technology. Notwithstanding these outstanding concerns, the  Carbon Capture Improvement Act has passed the Senate as part of the Infrastructure Investment & Jobs Act. The Act makes it easier for power plants and industrial facilities to finance the purchase and installation of carbon capture, utilization, and storage equipment, as well as direct air capture (DAC) projects through the use of private activity bonds (PABs).

OKLAHOMA POWER LEGISLATION

The Oklahoma Development Finance Authority approved a series of steps to begin the process of issuing debt to help to ameliorate the financial impact of the February, 2021 winter storm that caused massive spikes in energy prices. This follows the enactment of a couple of pieces of legislation in the Spring and early Summer.  In April, the Oklahoma Legislature passed SB 1049 to create a program to securitize debt owed to unregulated utilities such as, potentially, the Grand River Dam Authority, municipal power authorities and electric co-operatives. Similar legislation was enacted for the customers of the state’s investor-owned utilities.

The plan centers around the issuance of up to $4 billion of securitized debt. It would be paid for from separate standalone charges on customer utility bills. Such securitization techniques have been undertaken for municipal issuers like the Long Island Power Authority. The plan is straightforward. The Oklahoma Development Finance Authority will issue bonds. The ODFA will pay proceeds to the utility companies and other impacted entities. Those impacted entities will pay off their bridge loans they took out to cover their debts to wholesale gas producers and sellers. The impacted entities will pay back ODFA over time with money obtained from higher charges to ratepayers, but the charges will be spread out over a longer period of time and at a lower rate.

One of the entities which could potentially benefit is the Grand River Dam Authority. GRDA is a well-established issuer of municipal bonds. Some opposed giving the financing option to GRDA because of its perceived credit strength. It would not make sense to extend this support to investor-owned utilities without making it available to municipal systems.

AMERICAN DREAM

For some, the recent announcement of a debt service reserve fund draw to cover debt service requirements on bonds issued to finance the American Dream Mall in East Rutherford, N.J. was inevitable. Given the long and winding road the project took to open, the last thing it needed was a restriction inducing pandemic. But that has indeed been the case and operations at the mall have begun behind schedule and without the expected customer market as the pandemic unfolded. In this case, the bonds in question are taxable bonds backed by a portion of sales tax revenues. The shortfalls resulting in reduced economic activity have reduced the funds available for debt service.

The result was an unscheduled draw on the debt service reserve in the amount of $9,285,625.00 was made in order to pay the debt service due on the Bonds for the period of February 1, 2021 to July 31st, 2021 which was payable on August 2nd, 2021. After the draw, $9,286,082.87 remains in the Debt Service Reserve Fund established under the Indenture.  The Bonds mature in 2024. It is not clear what the prospects for the mall are given the increasing likelihood of restrictions on indoor gatherings and masking and vaccination requirements.

ENERGY DEBATE COMES INTO FOCUS

We came across news about a rural electric cooperative in Virginia that is seeking to increase charges for “fixed costs”. As is implied, this portion of the bill contains charges for certain costs which are not dependent upon usage. The effort and the regulatory process are helping to shine a light on the kinds of tactics being employed by legacy energy providers. Recently, rural electric cooperatives have found themselves taking leading positions in the obstruction of the implementation of clean energy.

Shenandoah Valley Electric Cooperative serves 96,000 customers along the I-81 corridor in northwestern Va. It is seeking a 5% increase in the fixed charge of its customers bills. The Cooperative says it needs to fund system upgrades with the increase. Customers however, take a different view. They note that when a utility can shift more of its cost base for ratemaking and regulation purposes, that the value of alternative energy sources in terms of customer bills is reduced. This is especially true for potential solar installers.

Customer advocates estimate that one third of a customer bill would not be related to consumption. Ratemaking like this is seen as regressive in that the fixed portion represents a bigger claim on low in come customer resources. Research shows that poorer folks use less electricity. A customer advocacy group estimates that 17% of the co-op’s households — about 14,800 — would qualify as low-income with an average income of $16,206 per year. 

It will take different forms but the efforts by cooperatives to stymie the growth of alternative energy sources are an emerging factor in the space. As we’ve been following, inflated “exit fees” for cooperative participants are being used to fight efforts to reduce coal generation. These are the sort of “on the ground” tactics which movement advocates overlook. These conflicts over rates will have real consequences while the Green New Deal debate will likely drone on.

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