Kent Chandler

286 posts

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Kent Chandler

Kent Chandler

@kchan55

I’m just here for the thoughtful conversation

Georgetown Ky Katılım Mayıs 2009
995 Takip Edilen738 Takipçiler
Kent Chandler
Kent Chandler@kchan55·
@duncancampbell I cared some, but like O&M (which I also cared about, but not as much as capital spending or equity cost) higher than necessary debt rates take up bill headroom, and thus impacts utilities’ ability to maximize returns through additional investment. They should want it lower.
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Duncan S. Campbell
Duncan S. Campbell@duncancampbell·
I have an ignorant question. Why do we trust utilities to find the best debt they can when we acknowledge all they care about is using less debt and increasing regulated equity return? Or does this just not matter much?
Duncan S. Campbell tweet media
Mike Bloomberg@BloombergME

1) Utility ROE's are too high 2) This increases rates 3) It creates a feedback loop that encourages more CapEx that regulators struggle to determine the prudency of. Addressing high ROE's is not easy. Thats what the latest post on #BasedRates is about. basedrates.substack.com/p/the-circle-g…

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Xiao Wang
Xiao Wang@xiaowang1984·
@kchan55 This is kind of a "trust me the market is working " sorta argument
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Xiao Wang
Xiao Wang@xiaowang1984·
Going to this point in 2025 trumpting money savings from making gas plants smaller than they would have been seems like a penny wise pound foolish thing when now you need very large investment in a constrained market to meet load that showed up. 🤷
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Kent Chandler@kchan55

And finally, back to the investment vs. efficiency assertion. There are real efficiency gains from restructuring beyond "short-term operational efficiency" that shouldn't be ignored in this broader conversation. For instance, see below!

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Kent Chandler
Kent Chandler@kchan55·
@xiaowang1984 Load’s effective cost for the volume of the PPA should be the cost of the PPA. The rest of demand should be the default procurement cost.
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Xiao Wang
Xiao Wang@xiaowang1984·
@kchan55 So standard offer service still ends up being $130 even tho the PPA is at 50? That is the competitive market result for the risk management?
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Kent Chandler
Kent Chandler@kchan55·
@xiaowang1984 I’d assume the gen from the ppa is offered into the mkt and the amount of the generation is a wash relative to the amount procured via default procurement. It’s just like a generator would be for a vertically integrated utility in a RTO, sell in and buy back, only paying the net
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Kent Chandler
Kent Chandler@kchan55·
@pcriley Cost of equity is maybe what I should have said. They think ROR = cost of capital.
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pcriley 🌾
pcriley 🌾@pcriley·
@kchan55 Doesn't that have to be the case though? Debt is necessarily cheaper than equity due to the risk profile.
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Kent Chandler
Kent Chandler@kchan55·
This post is a lot to take in. While I agree "We should be thinking bigger about utility reform," the author's ultimate opinion seems to be based on confusion or misinformation regarding the status quo. A thread 🧵
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Kent Chandler
Kent Chandler@kchan55·
@StrapCap Regulators think they’re setting ROEs at the cost of capital today. Ask them. They don’t think there’s a spread between the two. That’s the problem
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Strap Cap
Strap Cap@StrapCap·
@kchan55 I agree regulated entities should have lower allowed ROIC, but the IOU competition for capital is other US equities, which earn much higher ROIC and spreads vs CoC…the “too high ROE” argument essentially frames it as if the competition is bonds. ROIC>WACC to compete for capital
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Kent Chandler
Kent Chandler@kchan55·
@xiaowang1984 Sure, but then he also expanded on it for the next four paragraphs. I get that you enjoy being the platform’s resident contrarian, but his words need to stand on their own, and they don’t. Not sure why that’s hard to acknowledge.
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Xiao Wang
Xiao Wang@xiaowang1984·
@kchan55 I mean he only said one sentence so we are free to interpret that as we wish right
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Kent Chandler
Kent Chandler@kchan55·
@xiaowang1984 You’re welcome to argue that until you’re blue in the face, but it’s not at all what he said and is entirely beside the point.
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Xiao Wang
Xiao Wang@xiaowang1984·
I would argue that generators not needing to fund upgrades makes the cost allocation for transmission far more centralized since it basically all goes to load under connect and manage and doesn't reflect as directly in the PPA cost of the generator. And his link pointing to the RTP projects is a manifestation of that imo with a larger centralized result than what would arise from a participant funded cluster process
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Kent Chandler
Kent Chandler@kchan55·
@StrapCap Are those other public companies rate regulated? Are their prices set based on a regulator’s perception of the companies cost of capital?
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Strap Cap
Strap Cap@StrapCap·
@kchan55 Think the ROE argument is wildly overstated…Every single publicly traded equity in the market aims for ROIC > cost of capital…the value creation spread for utilities is actually tighter than most other businesses…and if you cut ROEs, the cost of capital will likely go up
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Kent Chandler
Kent Chandler@kchan55·
@xiaowang1984 One could make these arguments, but I don’t believe they make his assertion true. Regardless, he provided a link to support his position and 1) it doesn’t include anything you mentioned, and 2) it isn’t really relevant to his claim. The onus is on the author here
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Xiao Wang
Xiao Wang@xiaowang1984·
@kchan55 In the sense that all transmission costs are paid for by load and upgrades done under a central benefits test that would seem to be unique. And stronger proactive planning?
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Kent Chandler
Kent Chandler@kchan55·
The TL;DR of @mattyglesias piece this morning is that vertically integrated utilities are good because *hand-waving* I agree we need to dispense with chintzy electricity proposals that don't help and serve as distractions. But Matt's post doesn't support reregulation. End
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Keşfet

@duncancampbell @xiaowang1984 @pcriley @StrapCap @elonmusk @BarackObama @taylorswift13 @cristiano