JULY 30, 2010
New U.S. and European renewable energy capacity topped new conventional generation capacity for the second consecutive year, according to a United Nations Environment Program (UNEP) report. In 2009, renewables made up more than 50 percent of new U.S. capacity and 60 percent in Europe.
Tags: Cooperative Finance Corporation, NRUCFC, United Nations Environment Program
JULY 23, 2010
A beta website for the U.S. Department of Energy-funded Smart Grid Information Clearinghouse was launched this month. The site—now in a public testing phase—is designed to appeal to a wide audience, including consumers, utilities and regulators, and is managed and run by the Virginia Tech Advanced Research Institute (ARI) in Arlington, Va.
Educating consumers is a top goal of the portal. “We believe that by providing information about electricity usage, pricing and incentives, we can help motivate better consumer purchasing patterns,” said Saifur Rahman, ARI director. “Active consumer participation is very important to achieving a more efficient and reliable operation of the overall grid.”
Tags: CFC, DOE, smart grid, Smart Grid Information Clearinghouse
JULY 23, 2010
By Dwight Brown, CFC Derivatives Supervisor
Overall corporate profits have recovered from declines experienced during the recession. Profit levels through Q1 2010 were 5.7 percent higher than Q4 2007. And yet the labor market is far from its pre-recessionary level, having lost a net 7.5 million jobs over the same period. Despite the rebound in profits, companies remain on the sidelines pending stabilization of economic conditions.
JULY 23, 2010
Industrial production edged up 0.1 percent in June, marking the fourth straight monthly increase in overall production. Although the increase was relatively soft, it did beat analyst expectations of a 0.2-percent drop for the month. Production during Q2 increased at a 6.6-percent annualized rate, down slightly from Q1’s 7-percent rate.
The small gain for June was concentrated entirely in mining and utilities, where output rose 0.4 percent and 2.7 percent, respectively. The utility output gain, spurred mostly by one of the warmest Junes on record, followed a 5.6-percent jump in May. Manufacturing dropped 0.4 percent for the month, the largest drop this year. Capacity utilization was unchanged at 74.1 percent. Manufacturers have helped lead the economy out of the recession, but continued growth will depend on recovery of the labor market over the next several quarters.
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| Source: Federal Reserve |
Tags: consumer price index, Cooperative Finance C, NRUCFC, Wall Street
JULY 23, 2010
Better service reliability and lower monthly bills led to an increase in the satisfaction level of residential electric utility customers this year, according to J.D. Power & Associates’ annual satisfaction study, released last week. Several electric cooperatives scored strongly in the study and received high satisfaction rankings.
Overall customer satisfaction averaged 630 on a 1,000-point scale in this year’s study, increasing from 618 in 2009. Customer-reported bill amounts decreased by 5 percent from 2009, and power reliability improved, with service interruptions falling by 8 percent.
“Utility companies are continuing to improve when it comes to managing customer expectations around power outages and restoration of service,” said Jeff Conklin, senior director of the Energy and Utility Practice at J.D. Power. “Even though outages can have a negative impact on satisfaction, utility providers who manage these incidents properly—by providing sufficiently detailed information about the outage and restoring power when they say they will—may be able to mitigate declines, or even improve satisfaction.”
Tags: CFC, Cooperative Finance Corporation, Electric Cooperatives, electric utility satisfaction, J.D. Power
JULY 23, 2010
By John Grant, Senior Consultant, CFC Financial Advisory Services
Distribution plant inflation fell to 2 percent in 2009, a rate more commonly seen before the cost run-up began five years ago. Since 2004, inflation has had a significant impact on cooperatives’ capital plant expenditures.
Leading up to 2004, the annual increase in the cost for distribution plant averaged around 2 percent. Between 2004 and 2008, however, costs rose dramatically—by 6 to 12 percent per year. Had that spike not occurred—and if the cost had instead increased by a steady 2 percent per year over that five-year period—plant costs would be nearly 30 percent less than they are now.
One big reason for the dramatic cost increase has been international economic growth. From 2004 to 2008, the emerging economies in Asia underwent a boom in growth. China and India experienced particularly significant growth: The International Monetary Fund reported 2006 growth rates of 11.1 percent and 9.7 percent, respectively. This level of growth resulted in price increases across the board—not only for raw materials used for power plant construction, but also for finished products like transformers, wire and poles.
Tags: Cooperative Finance Corporation, International Monetary Fund
JULY 16, 2010
Smart Spending | Cumulative global investments in smart grid technology will approach $46 billion by 2015, according to a new report from Oyster Bay, N.Y.-based ABI Research. The majority will have been spent on transmission and distribution upgrades, the report estimates, with $41 billion in investments worldwide. Smart meter deployment will account for roughly $4.8 billion through 2015. ABI notes the investments are driven primarily by needed upgrades to an aging transmission and distribution infrastructure, and new demands placed on the system by intermittent renewable sources of energy. More information on the study, “Smart Grid Applications: Smart Meters, Demand Response and Distributed Generation,” is available on ABI’s website.
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CFOs Play It Safe | U.S. corporate finance executives are turning to safe, conservative investment patterns in the wake of the recession, according to the Association for Financial Professionals (AFP). AFP’s 2010 Liquidity Survey found many corporations are expanding cash stockpiles and investing in more conservative vehicles: Organizations are allocating an average 74 percent (up from 56 percent in 2006) of short-term investment balances in bank deposits, money market mutual funds and Treasury securities. Many companies have no immediate plans to start deploying cash in their businesses. AFP notes that although it is uncertain when investment comfort levels will begin to recover, increased cash holdings will make it possible to act quickly when organizations do choose to seize opportunities. Full survey results are available on AFP’s website.
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Ratings Upswing | U.S. credit-rating upgrades may exceed downgrades this quarter, a balance that has not occurred since the second quarter of 2007, according to data compiled by Bloomberg. At the end of last month Standard & Poor’s had lifted ratings of 238 U.S. issuers, while cutting 210. Moody’s Investors Service had upped ratings on 200 borrowers while downgrading 129. Investors look to the ratio for insight into the overall business cycle because credit quality varies with the state of the economy as a whole, according to Bloomberg.
Tags: Moody's, smart grid, Standard & Poor's
JULY 16, 2010
FINANCIAL FEATURE
By Josh Silverman, Director, Term Funding & Risk Management
Even though the Federal Reserve continues to hold short-term interest rates at a range of zero to 0.25 percent and the economy is growing, the overall availability of credit continues to be tight—especially for small businesses and consumers. Fed Chairman Ben Bernanke is particularly concerned about the lack of available credit for small businesses, which account for about 60 percent of job creation.
In a speech at the Fed’s forum on restoring credit to small businesses, Bernanke said the scarcity of credit is slowing the economic recovery and keeping the unemployment rate close to 10 percent. During a typical recovery, small businesses create jobs at a faster pace than large firms. That has not recently been the case, in part because many small businesses cannot get loans.
In his prepared remarks, Bernanke said “making credit accessible to sound small businesses is crucial to our economic recovery and so should be front and center among our current policy challenges.” Bernanke also noted that “the formation and growth of small businesses depends critically on access to credit.” According to a recent bank survey by the Fed, however, lending standards among local banks—the lending institutions that small businesses rely upon—remained restrictive during the first quarter. Interestingly, the survey also revealed that major banks eased loan conditions to large firms during the first quarter, indicating that credit for big, investment-grade companies is becoming more available.
Banks say they are restricting credit because of an uncertain regulatory climate pending the passage of the U.S. financial reform bill and the likelihood of new capital requirements from international regulators. Additionally, some lenders have said current lending standards reflect more normal conditions following a period of lax standards. Demand for credit also has been depressed, with a still-fragile economy making many small businesses reluctant to hire and invest. It is a challenging cycle, as credit availability needs to improve in order to stimulate the recovery; but weak economic fundamentals are making cautious lenders less willing to supply credit.
Tags: Ben Bernanke, CFC, Cooperative Finance Corporation, Federal Reserve Board
JULY 16, 2010
The U.S. Environmental Protection Agency (EPA) proposed new regulations last week that would impose tougher limits on power plant emissions of smog- and acid rain-forming sulfur dioxide (SO2) and nitrogen oxides (NOx). The revamped rules would rely less on emissions trading across state lines, striking a blow to the cap-and-trade system currently in place.
The proposed “Transport Rule” would require 31 states and the District of Columbia to reduce “transported” emissions, which can travel long distances over state lines. The new rule seeks to replace and improve the 2005 Clean Air Interstate Rule (CAIR)—the U.S. Court of Appeals for the D.C. Circuit ordered EPA to revise CAIR in July 2008, citing conflicts with existing Clean Air Act regulations.
EPA anticipates power plants can meet new reduction requirements by operating currently installed scrubbers, investing in more control equipment or using low-sulfur coal. The annual cost of compliance would reach $2.8 billion in 2014, according to EPA estimates. Emissions trading would be allowed within an individual state but limited between multiple states.
Tags: cap and trade, Chicago Climate Exhange, Clean Air Act, Cooperative Finance Corporation, EPA
“Charting a path toward clean coal is essential to achieving our goals of providing clean energy, creating American jobs and reducing greenhouse gas emissions,” said U.S. Energy Secretary Steven Chu.
While coal-fired generation represents 33 percent of total U.S. CO2 emissions, it accounts for 83 percent within the electricity sector, according to a white paper by CFC Senior Consultant Rod Nefsky. Trimming these emissions with currently available, post-combustion capture technologies is possible, although significant energy is required to do so. “It is estimated that a plant’s net capacity could drop by as much as 30 percent,” Nefsky said in the paper. “This means an existing coal plant rated at 300 mw would drop to 210 mw.”
Tags: CO2, Cooperative Finance Corporation, DOE