The WSJ reports that Orioles pitching great, broadcaster and underwear salesman Jim Palmer is selling his Florida home and has cut the price to $2.9 million. He wants to spend more time at his house in California, the realtor said.

The Hall of Famer who spent 19 years playing for the Baltimore Orioles and his wife, Susan, an interior designer, purchased the 1940-built home in 2001 and renovated it. The 4,100-square-foot, three bedroom, 3½ bath home is about a block from the beach. The home has a gourmet kitchen, bay windows and a family room surrounded by glass walls that overlooks a swimming pool. Public records show Mr. Palmer paid $1.6 million for the home.

Nice crib. Check out the slide show on the WSJ site. Thanks Stuart for the pointer.

Posted by Jay Hancock at 5:49 PM | Permalink | Comments (0)
        

Commenter Jonathan believes that the opportunity costs of shopping for electricity, poring over your cell phone contract and figuring out how you're getting abused on your cable bill are way too high. Instead of calling WGES to cancel your electricity deal with the intention of switching to a new deal so you can save $10 a month, which will require another phone call and further study, he seems to be suggesting, you could be listening to Brahms or making love to your spouse.

Hard to argue that he's wrong. It's unclear, however, whether his solution is just to pay the extra dough and be happy or to get rid of the cell phone and TV.

We do not have a free enterprise system in this country and never have. Why should we all have to spend countless hours figuring out how the power companies, or the cell phone companies, or any of the other utilities, are screwing us over, and which one is screwing us less, or more, than the others? What a waste! How old are you, Mr. Hancock? How many years do you have left? On your deathbed, will you be happy that you allowed the government regulators/BGE/et al. to waste all of those hours/weeks/months of your time?

Posted by Jay Hancock at 8:55 AM | Permalink | Comments (15)
Categories: BGE/electricity
        

From the NYT:

For between $7 and $10 dollars a pop, he registered 100 domains stretching between beverlyhillsmarijuana.com and modestocannabis.com. He intends to keep them by renewing the registration every year for a nominal fee, until they are worth at least $5,000 each, he says. “I’ll sit on them for as long as I have to,” he said. “And when marijuana is an accepted thing like alcohol, which it eventually will be, these things will be worth a lot.”

Posted by Jay Hancock at 8:17 AM | Permalink | Comments (2)
Categories: Marketing
        

Early in 2009 I signed up for a 3-year, fixed-price electricity deal from Washington Gas Energy Services at 10.8 cents per kilowatt-hour. This was substantially below the default rate being offered by BGE, so I saved a few bucks a month for a while. But starting Oct. 1, BGE's standard price for energy/transmission fell to 10.1 cents. And independent marketers are selling juice for less than that. WGES's best deal is 9.0 cents/kwh for 12 months.

So last week I dumped my old WGES contract, paying a $126 early-termination fee, which I knew would happen. I figured I would go back to the default BGE price for a couple months and then switch back to WGES at 9 cents, eventually saving more than the early-termination cost.

But after I noted my intentions on the blog, WGES director of regulatory and legislative Leah Gibbons called to point out (nicely!) that customers who cancel contracts early can't re-sign with WGES right away. "You're going to be blocked from rejoining WGES for a 12-month period," she said. While the early-termination fee is a disincentive for customers to switch back and forth between contracts, it doesn't cover WGES's cost for the lost revenue for the energy for the remaining period, she said. Blocking people from re-signing is supposed to further discourage people from switching early. The policy covers anybody who gets out of a contract early, and there indeed is language in the fine print that indicates they can do this.

I would have thought WGES would prefer having a customer at 9 cents over having no customer at all, but it's welcome to do business as it likes. The lesson in all this is that electricity shopping contains complications that many of us don't see when we first sign up.

UPDATE: I should have noted that of course I'm still free to sign up with Dominion Retail or some other independent supplier at less than BGE's 10.1 cents, which I intend to do. I got the letter from BGE yesterday confirming the termination of my WGES deal, and they said if they heard by Nov. 14 from another supplier they would switch me to them in time for the next billing cycle. May take them up on that.

UPDATE2: Notes reader Tim:

So not mentioned in your write-up is also the fact that if you want WGES to reduce you to the 10.2 they want to extend the contract through May, 2013.

It's a good point. If you have a long-term deal of 10.8 or 10.9 cents, WGES will often offer to lower your price -- if you agreed to extend your contract. Given the high early-termination fees that WGES charges these days -- even higher than what I had to pay -- this may be an attractive option.

Posted by Jay Hancock at 9:04 AM | Permalink | Comments (20)
Categories: BGE/electricity
        

The French EDF Group and Baltimore-based Constellation Energy seem to have worked out their differences over Constellation's exit from their joint venture to build a new reactor at Calvert Cliffs in southern Maryland. But the challenges to the project that caused Constellation to bail out remain.

The U.S. government is demanding stiff terms to guarantee construction loans for the reactor. EDF's construction of a similarly designed reactor in Flamanville, France is not going well -- cost overruns etc. Maryland's electricity market is deregulated. That means greater risk for EDF and U.S. taxpayers. Without guaranteed revenue ordered by the Public Service Commission, the new reactor will have to sell its electricity in the wholesale market and hope for the best.

Vast new supplies of natural gas will keep prices for megawatts from competing gas-fired generation plants uncomfortably low for nuclear developers and their backers. The failure of a climate-change bill means that non-nuclear energy won't be taxed for its carbon emissions, which would have made coal- and gas-fired plants less competitive.

And EDF apparently still needs to find a U.S. partner to take Constellation's place. Who will fill that spot? Tactically this may have been a smart move for the French. By reaching a comprehensive deal they got Constellation's agreement not to exercise a put option to sell them overvalued fossil-fuel plants. Basically they're taking over UniStar for $250 million when you include the $140 million they're paying for the venture and the $110 million in CEG stock they're paying to settle the option question.

That may be a cheaper outcome for them than if Constellation had decided to pull the option trigger. But it doesn't change the fundamentals of the Calvert Cliffs project.

Posted by Jay Hancock at 8:58 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

A post yesterday highlighted the claims of Laurel residents who say that Laurel Park racetrack is not a legal slots site because it's not within two miles of Maryland Route 295, as required in the slots enabling legislation.

Laurel Park is held out as the great Anne Arundel County slots hope by people who want to defeat David Cordish's proposal to put a big slots palace at Arundel Mills mall. But the road known as 295 that goes through Laurel is really the Baltimore-Washington Parkway and is owned and maintained by the National Park Service, not Maryland, say people who live in Laurel and don't want slots there. So it's really not Maryland 295 at that point and Laurel Park is not a legal option for slots, they say.

Wrong, says Alan Rifkin, a lawyer who represents the Maryland Jockey Club, which owns Laurel Park. "The claim that Laurel Park is not within the authorized Anne Arundel County VLT zone is sheer nonsense as a matter of constitutional law and statutory interpretation," he says via email.

As he notes, the slots enabling legislation mentions Laurel Park many times, and not just as a potential recipient of slots proceeds for purses. It specifically mentions Laurel Park as a potential slots site. To wit:

(4) IF A VIDEO LOTTERY OPERATION LICENSE IS ISSUED TO A RACETRACK LOCATION AT LAUREL PARK, THE VIDEO LOTTERY OPERATION LICENSEE SHALL:

Then it lists a bunch of conditions. This language would seem to make it tough for anybody to argue that Laurel Park is an illegal slots site, even with the argument that the track might not be technically within two miles of "MD RT 295," as specified by the statute.

Here is Rifkin's full message:

The claim that Laurel Park is not within the authorized Anne Arundel County VLT zone is sheer nonsense as a matter of constitutional law and statutory interpretation.

The authorizing statute from which the Constitutional Amendment was drawn specifically references Laurel Park by name multiple times, imposing various conditions upon Laurel Park if it is awarded the VLT license, including preservation of the Preakness and the Maryland Million – references

and conditions that would not be constitutional if Laurel Park was not an authorized VLT site.

Aside from the express references to Laurel Park in the law, the Constitutional Amendment must be given its reasonable interpretation and, thus, be read in conjunction with the plain meaning of the authorizing statute. There can be no serious argument that MD 295 means anything other than the Baltimore/Washington Parkway. The legislative history of the Constitutional Amendment and the authorizing statute make that abundantly clear with countless specific references to Laurel Park.

Just as significantly, in the case of Laurel Racing Association v. Video Lottery Facility Location Commission, the State stipulated and the Court of Appeals reiterated that Laurel Park’s application, other than as to its constitutional challenge to the payment of the initial license fee, “complied with” all other requirements – thus, including being within the authorized Anne Arundel County VLT zone.

While the strained logic of suggesting that Laurel Park is not within the authorized Anne Arundel County VLT zone may make good press, it is wholly inaccurate as a matter of law.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (10)
Categories: Slots
        

Hedge fund billionaire George Soros, long a reasonable voice for reforming this nation's crazy, deadly and expensive drug policy, in the WSJ on why he supports Prop 19 in California:

Law enforcement agencies today spend many billions of taxpayer dollars annually trying to enforce this unenforceable prohibition. The roughly 750,000 arrests they make each year for possession of small amounts of marijuana represent more than 40% of all drug arrests.

Regulating and taxing marijuana would simultaneously save taxpayers billions of dollars in enforcement and incarceration costs, while providing many billions of dollars in revenue annually. It also would reduce the crime, violence and corruption associated with drug markets, and the violations of civil liberties and human rights that occur when large numbers of otherwise law-abiding citizens are subject to arrest. Police could focus on serious crime instead.

These arguments have been made for many many years. Soros passes only lightly over one of the most urgent reasons to decriminalize drugs and make them available in a heavily regulated way in the United States: Drug criminals are killing people and destabilizing society every day from Peru to Mexico to Afghanistan -- not to mention Baltimore. Decriminalization would cripple the bad guys. Maybe some day -- maybe in California -- these arguments will make a difference.

Would legalizing drugs from pot to heroin bring troubles? Yes. Would they be as bad as the troubles brought by the present war on drugs? Not even close.

Posted by Jay Hancock at 1:35 PM | Permalink | Comments (3)
        

The Treasury sells inflation-linked bonds in addition to the ones with fixed interest rates and no principal adjustment. What the TIPS bond pays to investors has two parts: 1) The fixed coupon, or interest rate. 2) Principal repayment that is linked to the consumer price index.

The New York Times reports that expectations for inflation are so high, thanks to the Federal Reserve's promise to crank up the printing press, that TIPS yields went negative in Monday's auction for the first time ever. That is to say, the return to the investor in category 1), above, is negative. Investors are assuming the returns they make from category 2), after inflation awakens from the dead, will compensate them for the losses they suffer in category 1).

Looks like a big protection racket to me. Washington threatens you with the monetary equivalent of broken shop windows and maybe a firebomb. So you are happy to pay Washington to insure against this eventuality.

Posted by Jay Hancock at 9:30 AM | Permalink | Comments (1)
Categories: The Great Recession
        

Andrea Walker reports that labor analysts expect stores to staff the floors with at least 50,000 more folks this holiday season than they did last year. Shoppers are expected to increase spending a little bit, too. But the big picture for American retailing is far from gangbusters. While holiday sales probably will grow, they won't get back to pre-recession levels.

As the graph from Calculated Risk shows below, before the recession Americans were buying stuff at a seasonally adjusted rate of about $380 billion per month. That was in late 2007. It's almost three years later and we still aren't back.

Posted by Jay Hancock at 9:02 AM | Permalink | Comments (0)
        

A big talking point of opponents of slots at Arundel Mills is: Let's put slots at Laurel Park raceway instead of Arundel Mills. Then Anne Arundel County can still get the slots revenue and the casino will be where gambling already happens. Mall-slots opponents want, as the ads say, "to put slots in a better location in Anne Arundel County, Laurel Park."

After all, Laurel Park is within two miles of Maryland Route 295, where slots are allowed under state law. Right? Everybody expected slots to go to Laurel Park, anyway, before the owners stumbled and left the way open for the Cordish Cos. to make a proposal for the mall.

The Constitutional amendment permitting Maryland slots in certain locations specifies one of the locations as: "(I) ANNE ARUNDEL COUNTY, WITHIN 2 MILES OF MD
ROUTE 295;"

But activists who live in the Russett neighborhood, near Laurel Park, say that the racetrack is not within two miles of Route 295. Slots at the track aren't allowed under the Constitution, they say.

They may have a case. True, the race course is within two miles of the Baltimore-Washington Parkway, also known as 295. But the portion of the road near Laurel is under federal, not state control, so you could argue that it's not really "MD Route 295." According to the Maryland State Highway Administration, the state owns and maintains the road from the Baltimore City line in the north to just past the intersection with Maryland Route 175 in the south. (That's more than 4 miles from Laurel Park, according to Google Earth.) After that, says SHA spokesman Charles Gischlar, "the federal government picks it up."

What's more, below 175 and extending through Anne Arundel County, there are no signs on the road designating it as "295," Gischlar says.

What's the road called as it passes Laurel?, I asked National Park Service spokesman Jeffrey Olson. "As far as I know we call it the Baltimore-Washington Parkway," he said.

"I completely understand that I'm splitting hairs here," says Joe Franco, who's on the board of the Russett homeowner association and is trying to draw attention to the federal status of the parkway near Laurel Park.

Maybe, but it looks like the law could

have been made a lot clearer. Maybe opponents of Laurel Park slots have ground to argue before a judge that a federal parkway isn't "Maryland" route anything. If Cordish wins next week, the argument will be irrelevant. But if he loses, this could be another way in which Arundel slots get delayed in the courts.

Here is Wikipedia's definition of the Baltimore-Washington Parkway, which it says bears the 'hidden" designation of Maryland 295.

The road begins at an interchange with U.S. Route 50 and Maryland Route 201 near Cheverly in Prince George's County at the D.C. border, and continues northeast as a parkway maintained by the National Park Service (NPS) to Maryland Route 175 near Fort Meade, serving many federal institutions. This portion of the parkway is dedicated to Gladys Noon Spellman, a representative of Maryland's 5th congressional district, and has the hidden Maryland Route 295 designation. Commercial vehicles, including trucks, are prohibited within this stretch. After leaving park service boundaries the highway is maintained by the state and signed with the MD 295 designation.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (11)
Categories: Slots
        

Constellation Energy Group's board met on Friday, and there was speculation that it would vote to exercise an option to sell fossil-fuel electricity plants to France's EDF Group. The plants are worth $1 billion. The option gives CEG the right to sell for $2 billion. Naturally the French really really don't want CEG to pull the trigger. But CEG seems not to have yet exercised its "put." If the board had acted one would have expected an announcement on Friday. And the French press is reporting that Baltimore-based CEG has not yet moved on the option.

From Enviro2B:

NUCLEAIRE – Constellation n’a pas (encore) levé l’option

Dans le conflit qui l’oppose à son partenaire américain, EDF a gagné du temps. Sur la demande express de l’électricien français, Constellation n’a finalement pas décidé pour l’heure de lever l’option lui permettant de se faire racheter à prix d’or 11 de ses centrales thermiques américaines, pour 2 milliards d’euros.

Posted by Jay Hancock at 8:47 AM | Permalink | Comments (2)
Categories: BGE/electricity
        

As Nicole Fuller reports in today's paper, a Baltimore Sun poll shows basically a tie in Anne Arundel County on the question of allowing slots at Arundel Mills mall.

Forty-seven percent said "yes;" 45 percent said "no." But as the article notes, there is a fairly large margin of error. While Opinion Works interviewed 798 likely voters for The Sun's Maryland-wide poll, they interviewed 422 voters for the Anne Arundel referendum, a smaller sample and one less likely to reflect countywide opinion. Only Arundel residents get to vote on slots.

The people Fuller interviewed seem quite knowledgeable, distinguishing between slots in the mall and slots next to the mall, knowing that Laurel Park is the putative alternative but wondering whether it's likely, etc. Mall-slots backers and opponents are expected to crank up their ads in the last days before the election, but I wonder whether they'll be lost in all the other election-ad garbage that is airing.

Posted by Jay Hancock at 8:26 AM | Permalink | Comments (2)
Categories: Slots
        

Except it's not tax-deductible, it's not voluntary and Constellation Energy, owner of Baltimore Gas & Electric, doesn't need the money. Sunday's column is about an obscure cost that got built into your BGE bill (and Pepco, Allegheny or whoever your utility is) starting in 2007. It pays for generator "capacity" -- the right to buy megawatts from a particular generator at a particular time. Grid managers PJM Interconnection, heavily influenced by Constellation, Mirant, Exelon and other generation company, changed the rules for buying capacity in 2007 in a way that hugely inflated costs for residences, businesses and factories -- especially in the BGE and Pepco areas. The new way of selling capacity is called the "Reliability Pricing Model," or RPM.

Read the column, which reports that the 2007 change is costing Maryland $5 billion extra for the period from 2007 to 2014. People have been angry about the RPM charge for a while, and they just got angrier, because the price for the latest auction headed into the stratosphere. I wanted to calculate what the gimmick is costing Maryland and BGE customers. The extra dough was supposed to incentivize generation companies to build Maryland plants, but they haven't. So the $5 billion, while some of it has probably financed environmental upgrades and other fixes to keep old plants open, is mostly profit for Constellation and other generation companies.

I promised in the column to publish the math behind the numbers. Total Maryland costs for capacity charges for the seven years (we know this because the auctions through 2013/2014 have been completed) are $5.92 billion, according to the Maryland Public Service Commission. (Don't forget -- this is in addition to paying for the electricity, the tree-trimming, the meter readers and everything else that goes into your BGE bill.) That's based on RPM prices, minus CTR credits (don't ask) ranging from of a low of $28 per megawatt day in the Allegheny zone for 2013/2014 to prices well over $200 for the BGE and Pepco zones in some years.

The question is: What would those costs have been without the new RPM rules for reserving capacity? To get an answer we look at what capacity cost in the BGE zone and elsewhere in Maryland in 2006 and earlier. I got a couple numbers. One energy economist said capacity cost about $18 per megawatt-day in the four years preceding the new rules. Another said it was more like $25. In any case capacity was about a tenth as expensive before the rule change as it is now. For purposes of comparison I went with the higher, more conservative "before" figure: $25. And if capacity cost $25 per megawatt-day today, as it did before they rigged the rules, Maryland's capacity costs for the same total demand would be a mere $900 million from 2007 to 2014, not $5.9 billion. Difference: $5 billion. (If anybody's interested I'll send the spreadsheets broken down by utility zones.)

The BGE and Pepco zones receive special pain because of how the auction is designed. BGE households, offices and factories will pay $3.17 billion in capacity charges from 2007 to 2014, according to the PSC -- average capacity price minus CTR credits of

$168 per megawatt-day. If capacity acquisition hadn't changed and BGE customers were still paying $25, they'd have to pay only $470 million -- a difference of $2.7 billion just for metro Baltimore.

What does all this mean on your bill? About an extra $175 on average per year, every year, from 2007 to 2014. The average daily capacity obligation for BGE households is 3.35 kilowatts, according to the Office of People's Counsel, which represents household consumers before the Public Service Commission. From the average RPM/capacity price of $168 for the BGE zone for the 7 years, we subtract the $25 that customers would have been paying without the rule change to get a difference of $143 per megawatt-day. Broken down into the daily household obligation of 3.35 kw and rendered into yearly cost, that becomes $174.85 -- a real burden on many BGE households and one that has given them zero benefits in return. That extra $5 billion Maryland is spending might have been used to build new, reliable, green electricity plants instead of padding energy companies' profits.

Posted by Jay Hancock at 9:35 PM | Permalink | Comments (6)
Categories: BGE/electricity
        

From the NYT's excellent accounts of the latest DOD leaks from WikiLeaks. This is from a piece on the consequences of using private contractors such as Blackwater in Iraq:

The Iraqis who were shot at, and who the documents show were nearly always civilians, not surprisingly saw things differently. To judge by the disgust that seeps through even the dry, police-blotter language of some of the incident reports, American military units often had a similar perspective. That appears to be especially true of reports on “escalations of force” by Blackwater in the years leading up to the Nisour Square shooting, the documents show.

On May 14, 2005, an American unit “OBSERVED A BLACKWATER PSD SHOOT UP A CIV VEHICLE,” killing a father and wounding his wife and daughter, a report said, referring to a Blackwater protective security detail.

On May 2, 2006, witnesses said that an Iraqi ambulance driver approaching an area struck by a roadside bomb was killed by “uncontrolled small arms firing” by Blackwater guards, another report noted.Read the Document »

On Aug. 16, 2006, after being struck by an I.E.D. in the southbound lane of a highway, Blackwater contractors shot and killed an Iraqi in the back seat of a vehicle traveling in the northbound lane, a report said. At least twice — in Kirkuk and Hilla — civilian killings by Blackwater set off civilian demonstrations, the documents say.Read the Document »

And so it went, up to the Sept. 16, 2007, Nisour Square shooting by Blackwater guards that is again noted as an “escalation of force” in the documents. Little new light is shed on the episode by the documents, although in a twist, the report indicated that the street from which the Blackwater convoy charged into the square went by the military code name Skid Row.

The last reference to Custer Battles, which eventually lost a $10 million whistle-blower case in which it was claimed that the company defrauded the United States on billing invoices for the company’s work in Iraq, appears in a report dated March 15, 2005, describing an I.E.D. strike on an exit ramp in western Baghdad. An Iraqi driver for the company received shrapnel wounds in the face from the bomb and was wounded in the chest by gunfire that broke out after the explosion. The driver was taken to a local hospital, ultimate fate unknown.

Posted by Jay Hancock at 2:39 PM | Permalink | Comments (1)
        

David Neubert says yes, if you vote your conscience on the proxy card.

And believe it or not, your shareholder vote may very well make a greater difference than the votes of institutional investors. Most company boards realize that individual investors tend to be more enduring in their views and a whole lot more loyal, making them more desirable shareholders than fickle institutions. If an individual voices an opinion at a shareholder meeting or writes a letter, corporations recognize that there are likely thousands of others just like them and they listen.

Felix Salmon is highly skeptical:

If you consider yourself an ethical investor and you care about global warming, then it’s really hard to justify an investment in Valero, a company which is spending millions of dollars trying to repeal one of the few U.S. laws which takes global warming seriously. Certainly the diversification benefits of owning Valero stock aren’t in themselves sufficient to offset the fact that you, as a shareholder, are ultimately responsible for Valero’s expenditures on the Prop 23 campaign.

Posted by Jay Hancock at 9:05 AM | Permalink | Comments (0)
        

From the WP. Secret clearances are really important in Maryland and the whole D.C. region. HT Big Picture.

The sudden moratorium on many foreclosures across the country has unexpectedly put some federal workers and contractors in jeopardy of losing their security clearances because of the heightened uncertainty clouding their finances, according to lawyers who handle these cases.

Posted by Jay Hancock at 8:58 AM | Permalink | Comments (1)
Categories: The Great Recession
        

From the Contra Costa Times. These letters don't seem to have been part of a mistaken effort to foreclose on homes whose mortgages were current. Rather, they look to be part of a mortgage-rescue scheme that went somewhat awry.

An East Bay law firm says it mistakenly sent out thousands of letters to San Francisco homeowners earlier this month warning them that their houses were in default -- even though the loans weren't delinquent.

The letters were sent out by Provident & Associates, a Pleasanton-based law firm that is attempting to help people with loan modifications.

"I screwed up," said Corey Hill, a marketing executive with Provident & Associates. "I made a mistake that scared the wits out of some people."

Provident sent out what it estimated to be 2,000 letters to people telling them that they faced foreclosure on their mortgage. The letters went primarily to homeowners in San Francisco.

Posted by Jay Hancock at 8:53 AM | Permalink | Comments (1)
Categories: The Great Recession
        

As some of you know I signed up more than a year ago for a three-year, fixed-price electricity deal from Washington Gas Energy Services for 10.8 cents a kilowatt-hour. I saved money for the first year because BGE's standard price for generation and transmission was about a penny more. The rule of thumb is that for a regular house you save about $10 a month for every 1-cent reduction in the kwh price.

Now BGE's standard price has dropped to 10.1 cents (through May), and offers from alternative suppiers are down to 9 cents. So it was time to find out whether the savings from dumping the old contract would be greater than the early-termination penalty I had agreed to pay when I signed up. The answer was yes. So I dumped the deal Wednesday, paying a $126 early-termination fee.

(18 months left on the contract, $7 penalty per month. Unfortunately the early-cancellation fees have gone up for WGES. They're now $20 a month or $150, whichever is greater. They're even more if you buy wind energy.)

I'll be able to make up for the $126 in a little more than half a year by switching to WGES' one-year, 9-cent deal, which is even better than the 9.2-cent contract I was recommending a few weeks ago. For some reason WGES wouldn't let me cancel the old contract and immediately sign up for the 9-cent one. Readers have told me they had the same experience. Instead WGES offered to lower the price of my existing contract to 10.2 cents and extend it.

So I'll go back to the standard BGE price for a month or two and then switch to WGES or whoever has the cheapest price at that time.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (8)
Categories: BGE/electricity
        

Good legal analysis by the Deal Professor in the NYT of the standoff between EDF and Constellation over the dissolution of their nuclear partnership and the option that gives Constellation the opportunity to sell EDF several non-nuclear plants at perhaps $1 billion more than they're worth.

E.D.F. on the other hand has the contrary incentive to tie this up in litigation as long as possible. The agreement provides different litigation rights for E.D.F. The company can bring an action for specific performance in any American court having jurisdiction. E.D.F. can leverage this provision to bring preemptive litigation in a preferred state court. This would be a suit along the lines of “we need an order of specific performance ordering Constellation to honor the agreement.” This is a stretch, but it is enough to tie this up in a litigation morass and prevent Constellation from resorting immediately to the much quicker arbitration procedures.

Posted by Jay Hancock at 9:41 AM | Permalink | Comments (5)
Categories: BGE/electricity
        

Patrick Moran, director of AFSCME Maryland, the government employees union, had a piece in The Sun yesterday responding to pieces by me and others calling for pension reform.

Moran makes some good points. Yes, a big reason for the pension shortfall is inadequate contributions by governors and the legislature in recent years. Yes, state employees do important work and deserve to be fairly compensated. But elsewhere he overreaches. A few responses:

Recent Baltimore Sun editorials and financial commentators have criticized gubernatorial candidates for not coming up with explicit plans to resolve pension and retiree health insurance liabilities. From the tone, it appears that the only thing that would satisfy these critics would be to completely dismantle our retirement systems.

Nobody has suggested completely dismantling the state retirement systems. Pushing back the retirement age, increasing employee contributions and/or changing the system for new hires is not dismantling.

Eliminating the option of participating in the traditional retirement systems for new hires would create new funding problems, since their contributions would not be added to the pool.

This thinking would make sense if new hires contributed more to the pension fund. But all state employees and teachers contribute 5 percent of their pay, which is about average for most states and which doesn't come close to covering the full costs. Raising contributions for new hires -- or everybody -- ought to be considered.

Thousands of employees with 401(k) plans have had to choose between delaying retirement because of stock market turmoil, or an inadequate retirement allowance. Total dependence on individual investments could force retirees to become a financial burden on the next generation — and on the public dollar.

Thanks to Social Security, one of the greatest government programs ever, few Americans have "total dependence on individual investments" in retirement. Most state employees participate in Social Security as well as the state pension plan. Whatever happens to pensions, Social Security will still be there for them. Obviously employees who aren't in Social Security (State Police) need to be treated differently.

Rather than pandering to the "Keep fear alive" crowd by advocating the abandonment of our legal and moral obligations to America's working families, let's work together toward a comprehensive solution.

The reference to "America's working families" is a bit much. America's working families -- all of them, not just government employees -- are striving to make it in a terrible economy. One of the challenges they face is paying taxes to support the kind of benefits for government employees that have gotten scarce for most American working families.

Posted by Jay Hancock at 9:19 AM | Permalink | Comments (9)
        

As Hanah Cho reports in today's paper, a David Cordish project in Indiana -- managing the Indiana Live! casino for landlord Indianapolis Downs -- has hit a setback, as Indianapolis Downs tries to terminate or change the terms of Cordish's contract.

The racetrack is in miserable shape. Its debt is rated way into the junk category. Why it isn't already in bankruptcy proceedings is a bit of a mystery. But its casino seems to be running very well, spinning money for its owners at the high end of the industry scale, Cho reports. If there's any lesson for Maryland here, it's that casinos aren't a guaranteed savior for racetracks. (The Indianapolis Downs casino does, however, seem to have more competition than Cordish's casino planned for Arundel Mills would. And I assume the revenue-sharing terms are different than they are in Maryland.)

How Indianapolis Downs thinks it can terminate the Cordish deal without going into bankruptcy is unclear. As Jeffries analyst John Maxwell told Cho: "The question really becomes 'Are they legally allowed to terminate the management agreement?'"

Cordish's competence in running the Indiana casino doesn't seem to be in dispute. The company has a successful record running other facilities. There's no reason to believe Arundel Mills would be any different, whether you're for it or against it. The Indiana dispute seems to be a fight for the lawyers and a setback for Cordish, but not a reflection on Cordish's managment.

Posted by Jay Hancock at 8:33 AM | Permalink | Comments (9)
Categories: Slots
        

Today's column is on the malign influence of the incentive bonus in politics and business. It mentions the 19th-century Supreme Court case of Marshall v. Baltimore & Ohio Railroad, an early example of condemnation of paying lobbyists for performance. Loyal reader Stuart Levine Esq. will have wished for a link, so there it is.

Supreme Court Justice Robert C. Grier, who wrote the Marshall opinion, was on the (very) wrong side of the Dred Scott decision. But he got this one right, not mincing words to describe the conduct of lobbyist A.J. Marshall. Marshall had a secret deal to collect a bonus from the B&O if he persuaded Virginia's General Assembly to give the railroad a right of way to the Ohio River. (At this point in time Virginia also included what we know as West Virginia.) Marshall kept not only his pay deal secret from the legislature but also his ownership of land near the potential rail tracks. Thus he had a double conflict of interest.

Here's an excerpt from Grier's opinion:

Influences secretly urged under false and covert pretenses must necessarily operate deleteriously on legislative action, whether it be employed to obtain the passage of private or public acts. Bribes, in the shape of high contingent compensation, must necessarily lead to the use of improper means and the exercise of undue influence. Their necessary consequence is the demoralization of the agent who covenants for them; he is soon brought to believe that any means which will produce so beneficial a result to himself are "proper means," and that a share of these profits may have the same effect of quickening the perceptions and warming the zeal of influential or "careless" members in favor of his bill.

The use of such means and such agents will have the effect to subject the state governments to the combined capital of wealthy corporations, and produce universal corruption, commencing with the representative and ending with the elector. Speculators in legislation, public and private, a compact corps of venal solicitors, vending their secret influences, will infest the capital of the Union and of every state, till corruption shall become the normal condition of the body politic, and it will be said of us as of Rome -- omne Romae venale.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (2)
        

This is more symbolic than substantive, but it's another marker in the impending divorce between Constellation and EDF. EDF Group has appointed aggressive mergers and acquisitions lawyer Sam Minzberg to the board of Constellation Energy Group, owner of BGE. Minzberg used to work for the Bronfman family, heirs to the Seagram liquor fortune. (They no longer own Seagram.) By removing good cop EDF proxy Daniel Camus from the board and replacing him with bad cop Minzberg, EDF seems to be backing up last week's leak to Bloomberg by an anonymous source saying the company "supports" the sale of Constellation.

But Minzberg is one guy on an 11-member board, so it's unlikely he'll do anything more than make Mayo Shattuck's blood pressure go up and serve as a symbol of EDF's pique. Constellation stock, naturally, has done barely anything this morning. Here is an amusing excerpt from a book by Jean-Marie Messier, former chief of Vivendi, of his dealings with Minzberg. The excerpt was published in The Times (London). Thanks to Michael Mariotte of the Nuclear Information and Resource Service for the pointer.

In the Bronfman family, Sam Minzberg is the lawyer, the aggressive one, the rude one. Sam, then, has declared war on me on behalf of the family. The fall in Vivendi Universal’s share price obviously represents a considerable loss of assets for the family and I can understand their unhappiness.

This is from EDF's 13D filing today on Minzberg:

On October 18, 2010, Daniel Camus resigned as EDFI’s designated director on the board of directors of Constellation, effective as of October 21, 2010. Under Section 3.2(a) of the Amended and Restated Investor Agreement, dated December 17, 2008 by and between EDFI and Constellation, EDFI is entitled to nominate one director to the board of directors of Constellation and, in case of vacancy, the board of directors is required to elect any individual so nominated to the board of directors. On October 18, 2010, EDFI nominated Samuel Minzberg, a partner in the Montreal law firm of Davies Ward Phillips & Vineberg LLP, to fill the vacancy created by Mr. Camus’ resignation. Mr. Minzberg is thus expected to be elected to the board of directors of Constellation at the regular board meeting scheduled for October 22, 2010.

Posted by Jay Hancock at 11:33 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

Piece from The Age of Victoria state, Australia:

SMART meters, the new technology pushing up Victorian power bills, will provide little benefit to customers over the next five years, as the big electricity companies reap hundreds of millions of dollars from the rollout, a Sunday Age investigation has revealed.

Findings by the Australian Energy Regulator have undermined the state government's position on smart meters - which will be fitted to every Victorian home by the end of 2013 - and the most recent cost-benefit analysis shows the implementation will deliver $1.5 billion in cost savings to power companies over 20 years and few real benefits to customers.

The article doesn't really back up the lede. Regulators are empowered to pass on smart-meter savings to customers. Much of the savings in this case includes doing without meter readers and people to manually connect and disconnect houses. But it's another example of smart-meter uneasiness. Thanks to Carol for the pointer.

Posted by Jay Hancock at 10:44 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

A post last week remarked upon the parallels between the rise and collapse of the mortgage bubble -- extremely poor paperwork in both the mortgage issuance process and the mortgage foreclosure process. The Washington Post had a terrific story over the weekend about a corollary parallel -- indeed, the common factor that is at the root of problems on both ends of the mortgage process: rich rewards that paid people to cut corners.

Up to 2007 mortgage originators and brokers were making ridiculous amounts of money issuing loans to people who shouldn't have qualified. The more loans they made, the more money they made. Turns out it's the same deal with foreclosures. The more house seizures the foreclosure mills can implement, the more money they make, too. One law firm in Florida got $1,300 for each case processed without a challenge from the homeowner. It's another indictment of the culture of manufactured financial incentives that has infected the American economy, starting at corporate executive pay and moving on down. From the Post:

The financial incentives show that the problems plaguing the foreclosure process extend well beyond a few, low-ranking document processors who forged documents or failed to review foreclosure files even as they signed off on them. In fact, virtually everyone involved - loan servicers, law firms, document processing companies and others - made more money as they evicted more borrowers from their homes, creating a system that was vulnerable to error and difficult for homeowners to challenge.

Posted by Jay Hancock at 9:04 AM | Permalink | Comments (0)
Categories: The Great Recession
        

I haven't had time to watch all of it, but it has already become famous in certain circles.

Posted by Jay Hancock at 2:18 PM | Permalink | Comments (13)
Categories: BGE/electricity
        

In yesterday's debate O'Malley and Ehrlich offered a little more information on how they would/wouldn't fix Maryland's pension problem. Ehrlich said he would shift new state employees away from the traditional pension, which has a multibillion-dollar unfunded shortfall. O'Malley said he opposed such a move. As I said, a little. But, as with Ehrlich's statement on how he would finance the cut in the sales tax, give the former governor credit for giving voters information on how he would handle one of the tough choices of governing.

Ehrlich said he would move the state away from traditional pensions of defined benefits for new employees, while preserving the existing system for current employees. He said suburbs would have to shoulder some of the pension burden for teachers — a shift he said would need to be undertaken slowly and carefully.

O'Malley said he would wait for a report from a commission studying the pension issue. After the debate, the governor reiterated that he does not favor defined contributions such as 401(k) and predicted that a "mix" of ideas would be needed to preserve the pension system.

Tuesday's column and a Wednesday Washington Post editorial had criticized them for ducking the issue.

Posted by Jay Hancock at 8:54 AM | Permalink | Comments (11)
Categories: Slo-mo fiscal train crash
        

Not much time. On the way to the PSC's hearings on the electricity grid's notorious reliability pricing model, which basically pays generation plants for merely existing and hasn't done its promised job of luring new generation projects to Maryland.

The EDF Group offer to take over development of Calvert Cliffs 3 is a long long shot. A million things have to go right. If EDF were to take over UniStar, it and Constellation Energy Group would have to come to terms. They would have to agree on a price for CEG's 50 percent UniStar stake. It would be contentious . Same goes for EDF's alternative offer to take over 100 percent of the development costs but keep CEG as UniStar partner. If that happened EDF would almost certainly want more equity in the Calvert Cliffs project, or if it didn't it would be crazy. That again would be subject to tough negotiation.

If EDF takes over all of UniStar, it would eventually need a new U.S. partner for the whole venture or at least for Calvert Cliffs. Who would do it? Not to mention all the other challenges to the project already mentioned: DOE's reluctance to extend loan guarantees, problems with EDF's reactor project of the CC3 model in France, newly cheap natural gas, which makes new nuclear plants less likely to be profitable, etc.

Posted by Jay Hancock at 8:17 AM | Permalink | Comments (5)
Categories: BGE/electricity
        

There's more than a little symmetry to the mortgage disaster. The steep upward slope of housing prices up to 2007 is now matched by a mirror, downhill line. And the irregular paperwork that characterized the issuance of subprime mortgages seems to be matched by new problems as homes are foreclosed upon.

Few want to admit it, but the housing bubble was inflated to a substantial degree by mortgage-applicant fraud. People lied about their incomes to get loans they couldn't afford. True, they often seem to have done this with the knowledge and perhaps encouragement of the mortgage originators. But I haven't heard of any home buyers who took out "liar loans" who have been prosecuted. The accepted idea seems to be that they were "victims" who shouldn't be held responsible for their misbehavior. There is also the issue of criminal-justice resources: Prosecuting all those people would overwhelm the system.

Just as selling all those houses took some corner-cutting, now repossessing them seems to be associated with irregularities, too. Bank of America has halted all foreclosures because of paperwork problems. The phenomenon of "robo-signing," in which people sign foreclosure documents without verifying their contents, seems to be widespread. The Washington Post reports that today attorneys general from several states including Maryland will announce an investigation into foreclosures.

Hard to tell what the effect of a foreclosure holdup will be on the national economy. The process was already taking years. A home in my neighborhood has been vacant since 2008 -- waiting, I assume, for the bank to repossess or for the bank's overwhelmed staff to put it on the market. Perhaps foreclosure problems will make banks like Bank of America more willing to grant relief to home owners -- cut their principal and set up a payment plan instead of kicking them out of the house.

Posted by Jay Hancock at 9:09 AM | Permalink | Comments (8)
Categories: The Great Recession
        

Mutual fund manger John Hussman thinks Martin O'Malley has been a good governor and sent me an employment chart to demonstrate it. The highly rated Hussman Funds are based in Ellicott City. Hussman says he has met O'Malley at a fundraiser but has no official connection to the campaign.

His chart shows Maryland's job performance relative to that of the nation. Specifically, it shows Maryland's share of U.S. employment during the Ehrlich and O'Malley administrations. As you can see, Maryland's job share rose significantly in 2009 and 2010. Of course this is all about this state's relative insulation from the U.S. recession and prolonged slump. But I'm far less ready than Hussman to credit O'Malley -- or any governor -- with short-term economic performance.

There are too many variables outside of gubernatorial control. I believe Maryland's relatively superior performance has much to do with its large share of government and health-care jobs, which have been insulated from the worst economic pain, and about its proximity to Washington. It's hard for O'Malley to claim credit for those factors.  

Here's Hussman:

Any assessment of the relative economic records of Bob Ehrlich and Martin O’Malley should begin by taking those records in context of the national economy. A rising tide tends to lift all boats, and a falling tide tends to lower them. As a result, the effect of leadership is properly measured by examining how Maryland has fared relative to the rest of the United States under each governor.

Clearly, the recent downturn in the U.S. economy was caused by factors that had little to do with anything specific to Maryland - weak lending standards, mismanaged financial companies, and the collapse of a national housing bubble. There was no way for Maryland to sidestep what happened to the rest of the nation.

However, while the U.S. economy has clearly suffered a significant downturn in recent years, the Maryland economy has been much more resilient. The performance of Maryland's economy, compared with the rest of the nation, can be seen by looking at the number of jobs in Maryland as a percentage of total U.S. jobs (non-farm payroll employment). Under Bob Ehrlich, Maryland's job share fell persistently relative to the rest of the nation. In contrast, Maryland's share of the nation's jobs has increased significantly during Martin O’Malley’s term. 

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (6)
Categories: The Great Recession
        

Today's column is about Maryland's big pension problem and how the gubernatorial candidates aren't talking about it. I asked both O'Malley and Ehrlich for their thoughts on how to solve the pension difficulties. Here are the complete responses below. Neither candidate proposes specific remedies.

Ehrlich:

Pension obligations are a serious threat to Maryland’s long-term fiscal solvency. Our state has only about 65% of the funds needed to meet the current $33 billion in obligations to retirees.

Bond rating analysts recently called Maryland’s depleted retirement system a “credit challenge.” At current trends, Maryland’s teacher pension costs will soon outstrip the state’s current spending for the entire higher education system. There is no question that reforms are needed for the state to remain solvent, for our economy to improve, and for taxpayers and beneficiaries to be treated with fairness.

Sadly, politicians in Annapolis have done nothing in four years to fix the problem. In fact, they’ve delayed a task force report on pension reform until 2011 – five years after it was created.

If elected Governor, I will introduce bipartisan pension reform in the General Assembly. The measure I’ll support will have to be fair to the retirees receiving benefits and to the taxpayers financing the system. We cannot break our obligations to the state employees who have worked in good faith and accrued benefits under the current system.

I know this will not be easy, and I am prepared for serious discussions with the legislature about the fiscally responsible way forward. Most importantly, I believe all sides in this debate should be given equal consideration before a final proposal is enacted.

Many states are facing identical issues, and Maryland will be part of the discussion at the national level about creative solutions and best practices. Since my Secretary of the Department of Budget and Management and other gubernatorial appointees sit on the Board of the State Retirement Agency, we will be involved intimately with the SRA’s proposals for the future.

I am committed to finding the bipartisan way forward for the sake of Maryland’s fiscal solvency. My opponent has yet to make the same commitment.

O'Malley, being channeled by spokesman Rick Abbruzzese:

Maryland’s situation with regard to unfunded pension and other post-employment benefits liabilities is not unique. As a recent report by the Pew Center on the States indicates, only four states have fully funded pension systems and only two states have fifty percent or more of the assets needed to fund their other post retirement benefit liabilities. Our challenge in Maryland is meeting our commitments to State retirees and employees in a manner that is financially sustainable for our state and fair to our state employees.

It is important for our State retirees to know that their pensions are secure. Governor O’Malley has demonstrated his commitment to adequate funding of the pension system by fully funding the contribution rates certified by the State Retirement and Pension System in all four of the budgets he proposed. During his four year term, the State of Maryland dedicated about $5.5 billion to retirement and pension costs for public school teachers and State employees. While the national recession has forced the State to implement cumulative spending reductions totaling more than $5.6 billion over the last four years, the State has never withheld scheduled payments to the pension system. In contrast, the Governors of Virginia and New Jersey both proposed skipping pension payments during fiscal 2010 in light of the financial burdens they faced.

It the next term, developing a comprehensive solution to our long-term pension and post-retirement liabilities will be a top priority, but we must do so through a process that involves all stakeholders. To that end, the President of the Senate, Speaker of the House, and Governor O’Malley recently appointed members of the new Public Employees’ and Retirees’ Benefit Sustainability Commission. The Commission is charged with reviewing and making recommendations concerning State-funded benefits and pensions for State and public education employees and retirees in Maryland, including long-term costs, sustainability of State-only funding, and cost-sharing proposals. Commission members represent some of the State’s leading experts on fiscal, public employee, and financial investment matters, and include a former Speaker of the House as chair. The Commission is expected to issue its report later this year.

It’s important to note that because of the initial steps we have take to address pension liabilities and other post-employment benefits, Maryland continues to enjoy a strong reputation for a willingness and ability to act in a fiscally responsible fashion when faced with budget challenges. Maryland remains one of only eight states to hold a AAA bond rating certified by all three bond rating agencies. In reaffirming Maryland’s AAA status in July 2010, the rating agencies highlighted our: “…well-defined financial management policies and (a) commitment to reserves despite budget challenges” (Standard and Poor’s), our “…strong financial management” (Moody’s); and our“…commitment to maintaining budgetary balance.” (Fitch).

Posted by Jay Hancock at 9:36 AM | Permalink | Comments (7)
Categories: Slo-mo fiscal train crash
        

Take this with a truckload of salt. One anonymous source tells Bloomberg that EDF Group would support the sale of one of Maryland's biggest corporate citizens, Constellation Energy, parent of Baltimore Gas & Electric. The French EDF, which holds a large stake in Constellation, is in the process of divorcing Constellation over their troubled joint venture to build a third nuclear reactor at the Calvert Cliffs electricity plant.

EDF has several reasons to rattle this saber. 1) It's mad at Constellation for what EDF describes as Constellation's unilateral withdrawal over the weekend from the Calvert Cliffs project. Unable to obtain satisfactory government financing guarantees for the project, Constellation told the Energy Department it would no longer pursue the guarantees. 2) It's pressuring Constellation boss Mayo Shattuck not to exercise an option to sell EDF several older, fossil-fuel electricity plants for perhaps $1 billion more than they're worth. The option is a vestige of a 2009 deal in which EDF outbid Warren Buffett in a deal to rescue Constellation from bankruptcy. After having saved Shattuck's job a year ago, EDF, by seeming to agitate for a sale, now threatens it.

3) EDF owns 8 percent of Constellation's common shares and nearly half of its existing nuclear plants. An outright sale of Constellation would bear a good chance of letting EDF unload these assets at better prices than if it sold them in pieces. Bloomberg, however, puts a potential sale in a different light, quoting the source as saying that a new Constellation owner could salvage the partnership with EDF. That seems even less likely.

In any event, 8 percent of the common shares and one seat on Constellation's board aren't very effective tools for EDF to put Constellation in play. And with the story quoting only one anonymous source "with knowledge of the matter," it's hard to tell what EDF's intent is. But this sounds more like EDF being grouchy and contrary and less like a real threat to Constellation.

Posted by Jay Hancock at 8:57 AM | Permalink | Comments (4)
Categories: BGE/electricity
        

Barry Ritholtz gives the best explanation of foreclosure fraud I have seen, not to mention trenchant criticism of what's going on. Below are the steps of the foreclosure process that have been contaminated by fraud, according to Ritholtz. His whole post is worth reading.

4) Affadavit by the bank’s representative are signed attesting to: Ownership of the note, who the borrower is, the property in question, the date of last mortgage payment, amount of delinquency, tax escrow owed, other payments (such as homeowners insurance);

5) Notarized documents: A Notary Public affirms that the affidavit was actually signed by the signatory, and this allows it to be entered into the court as documentary evidence;

6A) Notice of Pendency (Lis Pendens) is filed with the County Clerk putting the world on notice as to the foreclosure action;

6B) Summons and Complaint are prepared by bank attorneys, who further verify the specific information attested to by the bank executives. The attorneys then file the Complaint, commencing the Foreclosure Action;.

7) Service of Process is filed, either hand delivered to the home owner, or nailed to the door of the home;

Posted by Jay Hancock at 8:18 AM | Permalink | Comments (2)
Categories: The Great Recession
        

Apropos of an earlier post on how rich folks can distinguish themselves in consuming ordinary products, regular reader Pete says:

Actually one of the easiest ways to tell ifsomeone is middle to upper -middle class is to see what kind of Coke they drink.I hate ti stereotype.But all of the upper-middle class proffesionals that i know drink Diet Coke instead of regular [ i prefer regular Coke myself]

Posted by Jay Hancock at 12:41 PM | Permalink | Comments (4)
Categories: Marketing
        

Not surprised that election-finance filings show more contributions and ad-spending from opponents of slots at Arundel Mills than from proponents. Anti-slots TV ads have been much more abundant. I am surprised, however, that the Cordish Cos. so far have spent less so far than mall owner Simon Property. As Nicole Fuller writes in the paper, Simon subsidiary Arundel Mills LP has contributed $2 million while Cordish companies have put in $600,000.

The campaigns raise questions about timing. Anti-slots ads have been running in heavy volume since August. Did opponents spend too much too early? Slots backers, on the other hand, seem to be saving their powder for the final weeks -- or maybe they have private polls that show they don't need to go crazy. In any event expect spending numbers to go up sharply for both sides before it's all over, after which TV viewers will be very happy.

Posted by Jay Hancock at 9:00 AM | Permalink | Comments (0)
Categories: Slots
        

A column about BGE's smart meters last month had a throwaway line about how digital meters could blow the whistle on your marijuana grow lights. I hadn't thought much about it, but that's what people seem to believe will happen on a large scale in British Columbia, which is to pot what Texas is to oil.

It's not that pot growers are using metered kilowatts to grow their weed. Rather, they're pirating electricity by tapping the lines and routing it, unmetered, to their nurseries. Apparently it's difficult for the utility to detect unless they see the illegal lines because they have so little information about what's going on on the grid. Smart meters measure in real time how much energy goes into a network and how much is used at the other end by paying customers. Any difference, apart from normal resistance and line loss, is theft.

Here's Fiona Taylor, British Columbia Hydro's smart-meter czar, talking to the Vancouver Sun:

“Today we are operating blind. This system will allow us to follow the flow of electricity from point to point. We will be able to see at a macro-level what is happening.

“We’ll be able to see how much came into a line. We’ll know what the residential meter reads so we will be able to detect any anomalies, and special software will detect if there’s been a theft from a power pole,” she said.

Illegal electricity use by pot growers adds three percent to BC Hydro customers' bills, the story says. Shutting down the nurseries in barns and attics and basements is supposed to pay for the smart meters in less than 10 years. Here's another piece in the Vancouver paper quoting a knowledgeable source on how sophisticated growers are likely to get around smart meters.

Thanks to loyal reader Carol for the pointer.

Posted by Jay Hancock at 6:06 AM | Permalink | Comments (6)
Categories: BGE/electricity
        

Shame about the demise of Constellation Energy's and EDF Group's plan to build a third nuclear reactor at Calvert Cliffs. There are many reasons behind it, but a huge one is the failure of Congress to pass climate-change legislation. If carbon emissions were taxed or otherwise penalized, carbon-free nuclear energy would be quite competitive economically. The plant would have created thousands of jobs as well as badly needed megawatts for Maryland and displaced some of the filthy and carbon-emitting coal electricity plants we rely on now.

And make no mistake, the project is dead. In its press release, Constellation said: "UniStar [the joint venture with EDF] has not withdrawn its application for a federal loan guarantee and no decisions have been made regarding the future of Calvert Cliffs 3." But this effectively ends it.

The way this came about is somewhat surprising. The fact that the project collapsed is not. Constellation pulled out unilaterally from the deal, snubbing its French partner EDF by not consulting it. I suppose this means Constellation's negotiations with EDF over a put option to sell EDF several of Constellation's fossil-fuel electric plants are not going well. Constellation holds an option to sell the plants to EDF for up to $2 billion -- perhaps $1 billion more than they're worth. Naturally EDF is trying to persuade Constellation not to pull the trigger.

The companies have not divorced yet, however. EDF still holds large investments not only in Constellation's existing nuclear fleet but also in Constellation common stock -- levers that it can use in negotiations over the put option. The prospect looms for EDF to dump its nearly 10 percent stake in Constellation stock. Still, I bet Constellation shares rise on Monday as investors express relief that the company isn't taking on the large risks of building a nuclear plant.

I thought the Calvert Cliffs project would die after the Energy Department denied loan guarantees. But DOE never made a hard decision, apparently insisting on conditions unacceptable to Constellation instead. At this late date it amounts to the same thing. DOE probably balked at the fact that this was a spec deal on Constellation and EDF's part. That is to say, in deregulated Maryland there was no way the cost could be passed onto customers in a guaranteed way by the Public Service Commission. The project would have to sell its megawatts

in the open market and hope to recover its costs. Nuclear projects have come to grief in the past. Without a guaranteed revenue stream, even the government pulled up short of guaranteeing the construction loans.

If the deal seemed dodgy to DOE, it wasn't looking so great lately for Constellation, either. As mentioned, the absence of climate-change legislation hurt the economics. But so does new and surprising access to deep pockets of natural gas across the Appalachians. The price of natural gas has plunged, making it a more attractive fuel for electricity generators compared with uranium.

So we're getting setbacks on several game boards. A project that would have juiced the economy is dead. Maryland again his no long-term plan for electricity to support growth in coming decades. (The end of the Calvert Cliffs project makes it even more crucial to approve the PATH and TRAIL transmission lines from the west.) And as the planet cooks, the nation takes another step back from addressing climate change.

Posted by Jay Hancock at 10:20 AM | Permalink | Comments (9)
Categories: BGE/electricity
        

Huge federal spending and BRAC have/are juiced/juicing Maryland's economy, keeping it in much better shape than that of the nation as a whole.

The Greater Baltimore Committee's Don Fry thinks this is very bullish. I think the inevitable plateauing of federal spending will eventually harm Maryland's economy. We can't keep on invading countries, bailing out banks and paying for unlimited, needless health care for much longer. Still, I think the military/espionage industry will undergird Maryland's economy for a long, long time. Here are WMPT's Jeff Salkin and me talking about it.

Posted by Jay Hancock at 12:29 PM | Permalink | Comments (1)
Categories: Government & Business
        

What a miserable piece of news. The economy lost 95,000 jobs in September, based on payroll surveys by the Bureau of Labor Statistics. Economists were expecting a gain of around 25,000. There are nearly 15 million unemployed people (9.6 percent). Nearly 10 million others are working part time but want to work full time. The only sort-of, tarnished silver lining is that the private sector gained 64,000 jobs. But the stimulus money is running out and local governments are starting to lay people off.

There are now more than 400,000 fewer jobs in the country than when the recession officially "ended" in June 2009 and the "recovery" began. Some recovery. This is the last monthly employment report before the November election. Looks bad for the Democrats. Whether or not they deserve the blame, they'll get it. This also makes it more likely that the Federal Reserve will engage in some sort of "QE II" -- another substantial round of quantitative easing, in which the central bank tries to bring down long-term interest rates. Short-term rates are already as low as they can get. Look for 30-year mortgage rates to flirt with 4 percent.

UPDATE: Here are WBAL's Bill Vanko and me talking about it on the radio.

Posted by Jay Hancock at 8:54 AM | Permalink | Comments (7)
Categories: The Great Recession
        

Throughout the recent drama over M&T Bank, Allied Irish Banks, Spain's Banco Santander and Pennsylvania's Sovereign Bank, M&T management has declined to comment. AIB had to sell a 22 percent stake in M&T to raise capital. To avoid having so many shares dumped on the market, M&T was in talks with Santander, according to news reports. Santander was going to buy AIB's stake in M&T, and M&T would transfer additional shares to Santander to buy Sovereign, Santander's U.S. subsidiary. But the talks reportedlly broke down over control issues: Who would be in charge? The Spaniards? Or M&T management in Buffalo?

Now, in a memo to employees today, M&T boss Robert G. Wilmers says that yes, there were talks to acquire "a large banking franchise in the northeastern United States," that yes, the talks are over and that yes, they broke down because M&T was "not going to agree to something that would change the nature of that relationship" -- the relationship with the owner of the 22 percent stake. When AIB was the owner it was passive. Santander would have been active.

Here are the relevant paragraphs from the Wilmers memo:

I’m sorry that, legally, we couldn’t comment on those stories, and I’m sorry that we couldn’t do anything to alleviate your concerns. I know that many of you and many of your employees were worried about those reports, and I know that your customers, families, friends and neighbors were worried too. While I wish I could have told you what was going on or told you when those stories were inaccurate, we’re obligated to follow the law, and the law prohibits us from disclosing information that isn’t available equally to all investors.

But there are some things that I can tell you now. Our negotiations to acquire a large banking franchise in the northeastern United States have come to an end. We were considering, over the past several months, a very significant and strategic opportunity for M&T Bank. Such a deal would have expanded our size and reach, generated many new jobs in our Buffalo headquarters and created exciting new career opportunities for our existing employees across the bank.
We looked at this for quite awhile. The situation was complex, as you can imagine, so there were lots of issues to consider. But the opportunity was so big—we thought it was well worth the time.

Throughout it all, however, we knew that if the right opportunity presented itself, we would be willing to take on a new partner—but not a new kind of partnership. In other words, for us to allow some other party to acquire the AIB shares, we would have wanted a relationship like the one we’ve always had with AIB. We were not going to agree to something that would change the nature of that relationship. In the end, we determined that we just couldn’t make it work in a way that remained true to our longheld principles, or in a way that we were certain would advance the long-term interests of our shareholders, our customers, our communities and our employees.

Posted by Jay Hancock at 5:54 PM | Permalink | Comments (5)
Categories: Finance
        

This sounds good. 60 Minutes continues to produce really great stuff. Their fall season has been of consistently outstanding quality. This piece looks like it'll stick to that standard:

New Jersey stock trader Manoj Narang says his firm has never had a losing week because his super computers are fast enough to capitalize on split-second opportunities in the market. Narang and other traders are using a legal but controversial technique called "high-frequency trading." It played a role in a 15-minute, 600-point market meltdown last spring now known as the "Mini Market Crash." Steve Kroft talks to Narang in a rare chance to see such a business up close. He also speaks to SEC Chair Mary Schapiro - who has high frequency trading in her regulatory sights - and others for a 60 MINUTES report to be broadcast Sunday, Oct. 10 (7:00-8:00PM, ET/PT) on the CBS Television Network.

Posted by Jay Hancock at 1:45 PM | Permalink | Comments (1)
Categories: Finance
        

Great discussion at Marginal Revolution on the status/quality ceiling for various products. As is often the case at MR, the comments are just as good as the post. An MR reader notes that the status range for smartphones is not particularly wide. That is to say, even if you're Bill Gates about the best you can do is a really good Blackberry. (Or an iPhone? Who knows?) Well, even newspaper columnists and plumbers have Blackberrys these days, so how is the status-conscious rich person supposed to boost his self esteem?

That leads to a discussion about what other product lines have status plateaus, ie., what else do rich and not-so-rich consume alike, side by side?. Newspapers? Movies? MR commenter JCL suggests this is more common in the U.S. than you think and posts a great quote from Andy Warhol.

"What’s great about this country is that America started the tradition where the richest consumers buy essentially the same things as the poorest. You can be watching TV and see Coca-Cola, and you know that the President drinks Coke, Liz Taylor drinks Coke, and just think, you can drink Coke, too. A Coke is a Coke and no amount of money can get you a better Coke than the one the bum on the corner is drinking. All the Cokes are the same and all the Cokes are good. Liz Taylor knows it, the President knows it, the bum knows it, and you know it."

Posted by Jay Hancock at 8:52 AM | Permalink | Comments (5)
Categories: Marketing
        

Republican Bob Ehrlich, running to regain the governorship against incumbent Democrat Martin O'Malley, wants to cut the Maryland sales tax from 6 percent to 5 percent. O'Malley raised it from 5 to 6. Unlike most politicians promising tax cuts, Ehrlich at least gives voters specific information on how he might partly pay for those cuts. He might cut $126 million in education funding that goes mainly to mainly to Baltimore and Prince George's and Montgomery counties. Holding back that much in "geographic aid" to supplement teacher salaries in jurisdictions with high-costs or challenging teaching conditions probably wouldn't pay for the entire sales-tax cut, but it would go a substantial way.

O'Malley's taking credit for funding geographic aid, but he relied largely on federal stimulus money to do so, news accounts say. Ehrlich's plan to cut the sale tax is a dumb idea. It won't really stimulate retail spending and it won't make much difference in the habits of people shopping in Delaware. Will you really stop going to Delaware because Maryland's sales tax will be 5 percent vs. Delaware's 0 percent instead of 6 percent vs. Delaware's 0? Instead Ehrlich ought to be proposing to cut Maryland's personal income tax, which also falls heavily on business (through pass-through entities such as S corporations and partnerships) and makes the state uncompetitive with its neighbors.

But at least Ehrlich is being up front with how to pay for it. Usually politicians promise to pay for tax cuts by wiping out waste, fraud and abuse, which never happens. Now the voters can decide.

Posted by Jay Hancock at 8:30 AM | Permalink | Comments (11)
Categories: Politics
        

Discouraging news for those who believe that someday Americans might adopt carbon standards, downsize their cars and stop living in 5,000-square-foot houses. They won't even buy a biodegradable chip bag if it makes crinkly sounds. From the WSJ:

Frito-Lay, the snack giant owned by PepsiCo Inc., says it is pulling most of the biodegradable packaging it uses for its Sun Chips snacks, following an outcry from consumers who complained the new bags were too noisy.

Touted by Frito-Lay as 100% compostable, the packaging, made from biodegradable plant material, began hitting store shelves in January. Sales of the multigrain snack have since tumbled.

Posted by Jay Hancock at 4:34 PM | Permalink | Comments (5)
Categories: Marketing
        

I don't have time to embed the graphic, but it's great. Mother Jones suggests we organize senate and house seats not by political party but by which special interest is paying off the member. "I yield to the honorable member from Goldman Sachs...."

Check it out.

Posted by Jay Hancock at 7:53 AM | Permalink | Comments (0)
        

Daniel Gross, formerly of Newsweek, is already breaking stories for his new employer, Yahoo.

Given that Congress authorized up to $700 billion to be spent on the Troubled Asset Relief Program to bail out Wall Street, many assumed the final cost would approach that amount. In fact, it's turning out to be much less. As Gross notes, TARP was a huge success, given the circumstances, even if that's not understood by many voters. Some voters also blame Obama for TARP, even though it was a Bush scheme. Gross:

The price to taxpayers of the bailouts and financial rescue of 2008 and 2009 continues to fall sharply. In figures to be released later today, the Treasury Department will report that the final net cost of the TARP is expected to be about $50 billion,Yahoo! Finance has learned. Add in expected returns from Treasury's interest in insurance company AIG, and the final net cost will be closer to $30 billion.

The news of the shrunken cost, which comes on the two-year anniversary of the legislation that created TARP, represents a dramatic improvement. It highlights the resilience of the markets, as well as the folly of short-term financial projections. In August 2009, the TARP cost was projected to be $341 billion. In its mid-session review, released in August of this year, the Office of Management and Budget projected the total cost would come to $91 billion.

Posted by Jay Hancock at 1:54 PM | Permalink | Comments (2)
Categories: The Great Recession
        

A disturbing dynamic is going on in which countries are competing to devalue their currencies in order to make their exports more competitive. China, of course, is the main culprit, using its trade surplus to buy huge amounts of dollars each day, thus driving up the value of the dollar and keeping the renminbi artificially low.

The U.S. dollar is naturally weak because of the enormous budget deficits in Washington, low interest rates and the miserable economy. The Fed's policy of "quantitative easing," an unnecessarily obscure term that signifies the central bank's purchases of longer-dated and sometimes non-government debt, to lower long-term interest rates, exacerbates the dollar's weakness. (Even so, China's policy keeps the renminbi undervalued even against the dollar.) Many are waiting for another bout of QE from the Fed, dubbed "QE II," to juice the economy before the election.

Now Japan is escalating the currency war, cutting short-term interest rates to nearly zero, like those in the U.S., and throwing in a little quantitative easing to boot, the WSJ reports. During the Depression governments tried to protect domestic industries with barriers to imports. Such tariffs and quotas got a bad name for prolonging the slump and are now more or less taboo. The preferred state policy to protect domestic industry during this crisis seems to be debasing one's currency, a tactic which may not be as harmful as the 1930 Smoot-Hawley Tariff but which is not without risks, either. Small wonder gold is hitting record prices of more than $1,300 an ounce.

Posted by Jay Hancock at 9:34 AM | Permalink | Comments (3)
Categories: The Great Recession
        

As Hanah Cho reports, BGE wants a rate increase for distributing gas and electricity that could add up to $20 a month year to the average electric bill and $30 to the average natural gas bill. Nice try, BGE. These are charges for BGE's network of local pipes and wires to get the energy to your door. They're separate from the energy and transmission charges that create the energy and ship it cross country to the Baltimore region. Distribution charges are still fully regulated by the Public Service Commission; energy charges aren't. BGE will probably get some sort of increase.

Perhaps they're due after nearly two decades of frozen or declining distribution reimbursement. Even the Office of People's Counsel, which represents residential ratepayers, seems to think BGE is entitled to something. Its expert said BGE needs an increase of about $21.5 million for distributing electricity and about $8 million for distributing gas rather than the $47 million for electricity and the $30 million for gas that BGE wants. BGE is presumably hoping that falling energy prices will help regulators and consumers forget about the disaster of deregulation, which led to huge cost spikes for all users. (And no, the BGE increases of the 2000s were NOT caused merely by energy inflation. An open market with fungible megawatts allowed BGE parent Constellation Energy huge markups on the cheap energy generated by its Calvert Cliffs nuclear plants.

Under regulation those low costs would be passed on to customers.) But nobody has forgotten. The BGE energy increase was topic A of the first gubernatorial contest between Bob Ehrlich and Martin O'Malley. The reprise of that match has made the memories keener, and this PSC knows that. BGE won't get anything close to what it wants. Here is today's column on how to save money from falling electricity prices by switching from the standard BGE product to an alternative provider.

Posted by Jay Hancock at 9:06 AM | Permalink | Comments (3)
Categories: BGE/electricity
        

The 30-year fixed mortgage rate is 4.32 percent, a record low. The 15-year is at 3.75 percent, also a record. Calculated Risk has the story.

Posted by Jay Hancock at 9:10 AM | Permalink | Comments (1)
Categories: The Great Recession
        

Montgomery County thought it spent $2 million on the building that inspired Uncle Tom's Cabin, the Harriet Beecher Stowe novel. But it bought and rehabbed the wrong cabin, according to the Washington Post.

The house was once home to the Riley family, who held Henson as chattel, and the years Henson spent on the 3,700-acre Riley plantation, from 1795 to 1830, did form the basis of his memoirs, which Stowe, in turn, relied heavily on. But historians have determined that Henson never lived in either the house or the cabin, which was then a kitchen. He lived in slave quarters that are long gone.

"I seriously doubt the county would have spent upwards of $2 million if they had known the cabin was not the real Uncle Tom's Cabin," said David Rotenstein, who was on the county Historic Preservation Commission at the time of the purchase.

Posted by Jay Hancock at 8:54 AM | Permalink | Comments (2)
        

Very good piece in the Annapolis Capital by Liam Farrell on what happens if the Cordish slots proposal for Arundel Mills mall is defeated in referendum next month. The short answer: It's far from clear.

The commission's members have already staked their position on such a scenario. Chairman Donald Fry said last week they will not do anything - they will not revoke Cordish's license award, they will not start the process for seeking new bids on the Anne Arundel site - until the County Council moves with zoning legislation again.

This game of chicken has been done before. In 2009, the commission and council stared each other down for months over whether Cordish should be awarded a license before Arundel Mills was properly zoned.

Eventually, the commission moved first, but Fry said this time they would wait to not only see what the council does with zoning, but also to make sure such legislation can no longer be petitioned to be overturned.

Posted by Jay Hancock at 8:48 AM | Permalink | Comments (2)
Categories: Slots
        

Everybody is trying to knock down Janet Ademy's story in the Wall Street Journal on McDonald's health plan. The fast-food chain told HHS that it might have to drop its "mini-med" plan for thousands of workers because of requirements in the new health-care law.

McDonald's and the Obama administration took issue with the accuracy of a published report on the dispute Thursday, saying the restaurant chain has no plans to drop health coverage for employees. But McDonald's said it may have to replace its plan with another form of insurance.

But there's nothing wrong with the WSJ story. It quotes a letter McDonald's sent to HHS saying it might scrap the plan.

"Having to drop our current mini-med offering would represent a huge disruption to our 29,500 participants," said McDonald's memo, which was reviewed by The Wall Street Journal. "It would deny our people this current benefit that positively impacts their lives and protects their health—and would leave many without an affordable, comparably designed alternative until 2014."

McDonald's won't have to drop the plan. It'll get an exemption. But the story shows what happens with such complex legislation and the jerry-rigged health system we have built for ourselves. Dare I say -- Universal health care would have been a lot simpler (and cheaper) with a single-payer system instead of the crazy quilt of employer sponsors and private-insurance carriers that we have.

Posted by Jay Hancock at 8:53 AM | Permalink | Comments (13)
Categories: Health Care