Archive for the ‘Consumer Protection’ Category

A version of this appears on the National Journal Energy Insiders blog.

Our energy infrastructure leaves consumers exposed to volatile, fossil-fuel linked prices under centralized utility and oil company control. We need an energy consumer “Bill of Rights” that gives households the tools they need to generate more of their energy from onsite renewables, afford energy efficiency retrofits, and have improved access to mass transit in their communities. Record US oil production can’t lower retail gasoline prices, and today’s inexpensive natural gas won’t last long. But entrenched industries are fighting so-called “disruptive” technologies like rooftop solar, and instead seek to maintain the status quo. But the status quo is no longer affordable, both from an economic and a climate perspective.

Let’s start with oil: it’s a globally priced commodity driven more by Chinese demand than domestic production. That’s why record US oil production has failed to deliver cheaper gasoline to motorists.  Oil production efficiencies and fracking’s technology improvements aren’t translated into lower prices because consumers are charged for the price of the commodity, and Wall Street traders’ strategies price oil with irrelevance for efficiency. As a result, drilling and fracking technological efficiencies are pocketed by oil drillers, as gasoline and oil prices have actually increased for consumers during the oil boom. Contrast this phenomenon with the iPhone, microchips or solar panels, where technology efficiency gains are translated into ever-lower prices for consumers (and where renewable energy features zero fuel commodity costs). Solar PV costs are plummeting, from $3.80/watt in 2008 to $0.86/watt in mid-2012. And of course there’s all of the wasted water of fossil fuel production. The equity prices of fracking companies benefit from the fracking boom—consumers don’t.

Natural gas is problematic too. It’s imprudent policy to assume that gas will remain cheap, or even affordable for that matter. While we most likely have a few more years of moderately-priced natural gas, we will see a return to the Bad Old Days of natural gas price volatility as soon as emerging and proposed infrastructure changes accelerate. Natural gas’ emissions benefits are no match for zero-emission competitors, but today’s cheap gas prices are luring crucial support away from the long-term renewables solution.

In the power sector, decisions are being made based on today’s low prices that commit significant parts of our electricity infrastructure to gas for the next generation. This will come at the expense of renewables, which, unlike natural gas, will only have a plummeting future cost curve. It would be one thing if the oil & natural gas boom was producing affordable, clean and safe energy. It’s not and it can’t. The more money we spend to build oil and natural gas infrastructure is less money we have to invest in the true technological revolution that will actually deliver for consumers: renewables and efficiency.

Some utilities, with management styles enshrined with state utility commissions, lack the acumen to efficiently respond to changing market dynamics. They remain beholden to outdated supply chains that led them to believe that they must continue to stick with coal, economics be damned. Maximizing investment in a decentralized electricity structure has to be a significant part of policy going forward. Indeed, FERC Chairman Jon Wellinghoff promoted the idea of replacing centralized, baseload generation with small-scale, distributed renewable energy in an April 2009 interview.

A progressive price on carbon, with money directed to households, coupled with limits on greenhouse gas emissions are needed to transition to a sustainable energy economy that puts consumers first. The Obama Administration has begun the process at the EPA, and when the Administration calculated the social cost of carbon at $38 per metric ton for 2015 as part of a rulemaking on microwave oven efficiency standards.

An Energy Consumer Bill of Rights—complete with a progressive carbon price, limits on greenhouse gas emissions, billions of dollars in annual funding for a consumer-centric sustainable energy infrastructure and the establishment of an Office of Consumer Adovcate are all needed to move us away from centrally controlled fossil fuel system to the Solar Rooftop Revolution.

Tyson Slocum is Director of Public Citizen’s Energy Program. Follow him on Twitter @TysonSlocum

Barclays should “take its medicine” and pay the $435 million civil penalty to the U.S. Treasury and $34.9 million in unjust profits that federal regulators say it owes to low-income families primarily on the West Coast, whom it harmed through market manipulation for two years, seven organizations said today in a joint statement.

Barclays is one of several banks found by the Federal Energy Regulatory Commission (FERC) to have manipulated energy markets between 2006 and 2008. In July, FERC ordered Barclays to pay a penalty as well as a refund to families in California, Arizona, Oregon and Washington. Barclays has refused to pay.

FERC also imposed fines on JPMorgan Chase and Deutsche Bank as well for manipulating the California energy market; those banks paid their fines.Yesterday, FERC took Barclays to federal district court to force it to pay up. Some of the money owed is to go to help low-income families with energy bills.

“Millions of working families pay their bills on time. Why can’t Barclays?” asked Tyson Slocum, director of Public Citizen’s Energy Program. “Barclays should pay up and not drag this case out as the winter approaches, which is when families will face thin budgets and decisions between food and heat.”

FERC issued an 85-page order on July 16 describing how Barclays engaged in complex “financial swap” transactions by manipulating West Coast power prices for two years. It noted that Barclays’ physical trades weren’t responding to supply/demand fundamentals but rather allowing the bank to profit on artificially high prices from its related financial swap positions.

FERC also released excerpts from messages written by Barclays traders involved in the price-manipulation that reveal full intent and knowledge of the malfeasance. This message from 2006, for example, refers to the California market: “I just started lifting the piss out of the [P]alo [Verde Hub, a key price-point for the state’s electricity market].” The trader commented, “was fun. need to do that more often.”

The manipulation continued for at least another two years, with FERC estimating a market cost to consumers of $139.3 million. Despite costing the market so much, Barclays, worth about $2.4 trillion, has been told only to refund ratepayers $34.9 million, its profits during that time. The refund represents .0015 percent of Barclays’ net assets.

Recognizing the harm to consumers caused by Barclays’ market manipulation, FERC ordered all of the unjust profits to go to the four affected states’ Low Income Home Energy Assistance Programs (LIHEAP), which provides critical assistance for struggling families to help pay utility bills. This critical program has already suffered severe cuts of 36 percent in federal funding since FY 2010.

“There is an urgent need for LIHEAP to help to struggling low-income families pay their energy bills,” said National Consumer Law Center attorney Olivia Wein. “These funds will help the most vulnerable households in California, Arizona, Oregon and Washington, which include low-income elderly and families with small children at a time when the federal LIHEAP program is severely underfunded.”

“Barclays essentially defrauded countless families, and at the end of the day will get to keep much of the profits it made that way,” said Slocum. “If we allow banks like Barclays to simply make fines a cost of doing business, we can expect to continue being gouged by unscrupulous corporations engaging in market manipulation.”

“FERC should not allow unscrupulous energy traders to continue to prey on Californians,” said Mark Toney, executive director of The Utility Reform Network (TURN), California’s nonprofit consumer advocacy organization. “Barclay’s, one of the wealthiest companies in the world, owes California consumers millions of dollars and should return its ill-gotten gains immediately.”

Noting how many bank manipulation schemes have been revealed recently – reflected in recent FERC actions against Barclays, JPMorgan and Deutsche bank – the organizations signing the joint statement argue that FERC should undertake an evidentiary hearing to examine whether or not the organized markets deliver just and reasonable rates.

“There is nothing in these settlements that addresses whether the inherent structure of the markets is adequately protecting consumers,” the letter says.

The letter also calls for the creation of an office of consumer advocate at FERC that would authorize funding for groups that represent household consumers, thereby providing critical assistance for consumers and enhancing the representation of households before FERC.

The joint statement, written by Public Citizen; Americans for Financial Reform; Arizona Community Action; A World Institute for a Sustainable Humanity (AWISH); Citizens’ Utility Board of Oregon; National Consumer Law Center (NCLC), on behalf of its low-income clients;, The Utility Reform Network (TURN), and is available here.

Tyson Slocum is Director of Public Citizen’s Energy Program. Follow him on Twitter @TysonSlocum

The impact of the government shutdown varies from agency to agency: 52 percent of workers at the Department of Health and Human Services are furloughed, for instance, while at the Environmental Protection Agency, 94 percent are at home, off the job.

The shutdown is highlighting the importance of health, safety, environmental and consumer regulations. They help ensure we have clean air and water, safe food and toys, workplaces free of hazards and so much more. Even die-hard anti-government politicians are realizing that safeguards are popular with the public. That’s why, for instance, the GOP tried to pass a measure that would put food inspectors back to work.

What happens when you take worker safety inspectors off the beat? When environmental regulators aren’t able to do their work?

Here’s some of the best reporting from the past couple days on the impacts of the shutdown:

•    Bloomberg: Furloughed Inspectors Leave Gaps in Safety Oversight
The partial shutdown of the U.S. government has sidelined thousands of inspectors who monitor everything from air and water pollution to safety hazards at factories and the condition of nursing homes.

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Investor choice is so overrated.

That’s what a securities industry executive and lobbyist wants us to believe about a bill in Congress that aims to restore investors’ legal rights.

Overwhelmingly, brokerage firms use their contracts with investors to force their customers to resolve disputes in a private system called arbitration. This means that if an ordinary investor thinks she was wronged by her broker-dealer, she cannot exercise her basic right to go to court because the non-negotiable contract terms forbid her from doing so.

Kevin Carroll of the Securities Industry and Financial Markets Association complains about “the unilateral right” that investors would have if they could choose to go to court instead of being forced into arbitration. To Carroll, it is more appropriate for the industry to be able to unilaterally eliminate investors’ access to the courts and to dictate how disputes should be resolved, then to let individual investors have their day in court.

Carroll laments that restoring investors’ choice would lead to the decline of an arbitration process that his industry controls and influences through the industry-run Financial Industry Regulatory Authority (FINRA).  But why should he worry? If the arbitration system is fair, as his industry contends, then investors will continue to use it after they are able to weigh their options.

He further asserts that if investors had the option to choose arbitration or court, they may make the wrong choice. And he suggests that investors don’t need the court system, because “reasonable people, familiar with the (arbitration) process,” will work to improve  it. His paternalistic stance is a clear admission of a fox who wants to continue guarding the henhouse.

Millions of us are ordinary or small investors who use brokerage firms and broker-dealers to help us invest our life savings. We rely on broker-dealers to provide expert advice on investments. But sometimes things go wrong.  Sometimes customers suffer financial losses, not because of the usual risks posed by investing money, but because of misconduct by unethical or careless broker-dealers.

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"Robert Weissman" "Public Citizen president"Averting catastrophic climate change is the greatest challenge facing humanity. We’re decades late in responding appropriately, and there is absolutely no time left to waste.

That makes today’s announcement by the Environmental Protection Agency of revised performance standards for new power plants so critically important.

It’s a certainty that industry will claim this rule will injure consumers. We’re past time for policymakers to be distracted by such misleading claims.

Power plants account for 40 percent of U.S. carbon pollution. We have the technology and solutions — starting with scaled up investments in energy efficiency — to transition to a clean energy economy in a way that creates jobs and does not result in higher energy prices for consumers.

Moreover, consumer well-being depends on preventing the worst climate change scenarios, which constitute the greatest long-term threat to our economy.

The proposed rule for new power plants will limit carbon dioxide emissions for any new coal fired power plant to roughly match those of new natural gas power plants, and will finally begin to level the playing field for technologies such as wind, solar, geothermal and energy efficiency, which have been forced to compete against heavily subsidized fossil fuels, including coal.

We look forward to working with the EPA and other stakeholders to ensure the successful implementation of this important consumer and public health safeguard.

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