Jay Hancock's blog

BGE, Shattuck make offer on rates, pay to O'Malley

Fri, 17 Jul 2009 14:56:54 -0500

Constellation Energy Group, parent of Baltimore Gas & Electric, led by CEO Mayo Shattuck, have made a counteroffer to Gov. O'Malley in the tussle over Electricite de France and what concessions CEG would make for approval of EDF's proposal to invest in CEG's nuclear power business. Basically CEG has decided again to play ball with O'Malley rather than telling him to jump in a lake. Here is what jumps out:

Although the EDF transaction will not have any negative impact on BGE's rates, Constellation nevertheless is willing to discuss commitments regarding BGE's rates.

In particular, CEG would delay asking for an increase in BGE's distribution rates for 10 months, to January 2010 "at the earliest." It would also promise not to seek an increase of more than 2.5 percent, down from 5 percent. They would also talk about delaying requested increases for natural gas. This is pretty small stuff. The distribution portion of the BGE bill is small, and a 2.5 percent increase in THAT is even smaller. But, again, this signals that CEG and Shattuck are willing to deal.

... our Board of Directors has agreed with our CEO's recommendation to terminate his change in control agreement, and any other rights to severance in a change in control transaction, in order to remove the issue so that it does not continue to serve as a distraction to possible settlement discussions...

Again, more symbolic than substantive. They obviously don't expect a change in control at CEG anytime soon. The biggest bonus for Shattuck in the change in control agreement was accelerated vesting for his pension. The board already made sure he becomes eligible for the pension soon irrespective of any change in control. So it doesn't look like he's giving up much here.

Constellation would be willing to provide BGE access (from one of its existing generation sites) to a potential generation site at no cost to BGE's distribution customers, if following such evaluation BGE pursues the contstruction of a new generation facility.

This is interesting. The state may eventually order BGE to build a new power plant and pass the cost along to BGE ratepayers. If this happens, it sounds like CEG is offering free land for hte plant to be built on, which would save some cost.

Republican Bruce Bartlett: We must raise taxes

Fri, 17 Jul 2009 14:05:34 -0500

Bruce Bartlett says it's unrealistic and risky to rule out tax increases. From Ezra Klein's Q&A:

An Interview with Bruce Bartlett Bruce Bartlett's conservative credentials are impeccable: He's worked for Ronald Reagan and George H.W. Bush, Jude Wanniski and Gary Bauer, Ron Paul and Jack Kemp. But he's also an economic realist: Government spending is growing, he says, and taxes are going to have to grow with it. The question for his party is whether it wants to get to work crafting those tax increases in a responsible way, or whether it wants to let Democrats levy inefficient hits on the rich and strange changes to the tax code. The health-care debate is a perfect example: A VAT could pay for this efficiently. But without Republican support, a surtax on the rich is likely to pay for this inefficiently. We spoke yesterday. EK: Start at the beginning. Why do we even need taxes? Why pay for anything? BB: We have a stream of revenue we'll continue to get in the future from the policies in place. But spending is projected to rise much more rapidly. So the question becomes what is the politically and economically tolerable level of the deficit? The Republican position seems to be, as Dick Cheney once said, that "deficits don't matter." I don't know when we reach that threshold. But I think we were getting close even before the current problems. And federal spending is supposed to rise by about 50 percent over the next 25 years or so, and that was before any of the recent events. I think long before we'd reach the year 2030 we'd have a deficit large enough to create massive economic and political problems. Since the deficit has gotten so much larger so much faster, we're starting to see those problems on the horizon: Weakness of the dollar, increased efforts of foreign countries to diversify, unwillingness of other countries to hold the dollar. Eventually, we'll have a lot more trouble selling our bonds because our foreigners won't want them any longer.

Tyler Cowen says Bartlett is "courageous."

Recession can't stop Otakon

Fri, 17 Jul 2009 10:30:11 -0500

Otakon has apparently blasted the recession to smithereens, or at least fought back valiantly against bad-economy rays. On Sunday Otakon president Matt Smiechowski said of this year's pre-registration:

"I was actually expecting it to be on par with, if not lower than, last year's pre-registration total of 17,186, due to factors such as the economy. It's better than I could have hoped." He said he's expecting around 27,000 to attend this year. That would represent 2.8% growth over last year.

We'll see if that happens. Last year they had 26,000. Otakon, an "annual celebration of Japanese and East Asian popular culture" is a nice little updraft for the Baltimore hospitality industry, which could use it.

Bank of America credit cards belie green shoots

Fri, 17 Jul 2009 09:52:32 -0500

Bank of America, which reported second-quarter results this morning, has a nearly 12 percent delinquency rate on its credit-card loans. Says Bloomberg:

Card services swung to a $1.62 billion loss from a $582 million profit last year as more borrowers fell behind on payments. Earnings at the deposits business declined 59 percent to $505 million and the net interest margin, the difference between what it pays on deposits and the rates earned on loans and securities, narrowed to 2.64 percent from 2.7 percent in the first quarter and 2.92 percent in the year-earlier period. The provision for credit losses, money set aside to cushion against bad debts, was $13.38 billion, unchanged from the previous quarter. Assets no longer collecting interest rose to $30.98 billion from $25.6 billion on March 31 and debts the bank doesn’t expect to be repaid jumped 25 percent to $8.7 billion. Bank of America said it can’t collect payments on 11.73 percent of its $170 billion credit-card portfolio as of June 30, up from 8.62 percent on March 31.

China's currency: Where's the beef?

Thu, 16 Jul 2009 11:55:43 -0500

The Economist is out with its annual Big Mac index, a "lighthearted" look, the magazine is always careful to note, at currency values and purchasing power parity. The idea is that the Big Mac is a commodity -- the same in Beijing as in Barcelona -- so differences in Big Mac prices around the world should tell us something about currency distortions. It's not that simple, but this year's index surely shows how the Chinese have manipulated and underpriced the yuan to goose their exports. Says the press release:

So which countries has the foreign-exchange market blessed with a cheap currency, and which has it burdened with a dear one? The dollar buys the most burger in Asia. A Big Mac costs 12.5 yuan in China, which is $1.83 at today’s exchange rate, around half its price in America. Other Asian currencies, such as the Malaysian ringgit and Thai bhat, look similarly undervalued. Businesses based in continental Europe have most to be cheesed off about. The Swiss franc remains one of the world’s dearest currencies. The euro is almost 30% overvalued on the burger gauge. Denmark and Sweden look even less competitive. However, The Economist says: “The markets have been kindest to British exporters. A year ago the pound was overvalued by more than a quarter on the Big Mac gauge. Now it is close to its fair value against the dollar and looks cheap against the euro. That shift has upset some other EU countries that had relied on selling to spendthrift British consumers. But after years of struggling with an overvalued currency, British firms will feel they deserve a little mercy.”

Top income-tax rate for Marylanders hits 57% if health tax goes thru

Thu, 16 Jul 2009 08:30:37 -0500

The House plan to finance national health care would tax income of more than $1 million annually at an additional 5.4 percent. The Tax Foundation calculates that would bring the top income-tax rate -- combined local, state and federal levies -- to more than 50 percent in 39 states. In Maryland the top rate would be 55.61 percent, the 7th highest in the nation, according to the foundation. Oregon would be No. 1, at 57.54 percent. Actually, in some places Marylanders would pay more. The Tax Foundation used the average local tax rate for Maryland, which is 2.98 percent. But taxpayers in many counties pay more than 3 percent. In Howard and Montgomery counties it's 3.2 percent. That gets you to 57.35 percent, just ahead of Hawaii for spot No. 2. (Math for Maryland: Local tax: 3.2%; top state rate: 6.25%; health care surtax: 5.4%; top federal rate: 39.6%; Medicare tax: 2.9%)

Health care reform MUST address costs

Wed, 15 Jul 2009 12:20:58 -0500

David M. Walker, former comptroller general and CEO of the Peter G. Peterson Foundation, in the NY Daily News: Rein In Insane Health Costs.

For example, we need some level of universal coverage. But what level of coverage is actually affordable and sustainable? Few are bluntly asking the question about where to draw the line. We need comparative effectiveness research - comparing treatments, costs and outcomes to maximize efficiency. But beyond that, shouldn't we also improve standards across the board for medical practices by designing and implementing a set of national evidence-based practice standards that will enhance quality, reduce health care costs and dramatically bring down malpractice litigation risks? Meanwhile, less popular - but more immediate - proposals to reduce health care costs and reform our existing outdated programs and policies need to happen without delay.

Jim Cramer: Lenny Dykstra "one of the great ones" in finance

Wed, 15 Jul 2009 11:14:52 -0500

Financial seer Jim Cramer, in a clip on the Daily Show, naming Lenny Dykstra, now proceeding through bankruptcy court, "one of the great ones" in the investment business.

The Daily Show With Jon Stewart

Mon - Thurs 11p / 10c

Lenny Dykstra's Financial Career

www.thedailyshow.com

Daily Show
Full Episodes

Political Humor

Joke of the Day

Artists to blow stimulus $$$ like Rimbaud on a lost weekend

Wed, 15 Jul 2009 10:08:12 -0500

I think a memo went out to Maryland arts organizations soliciting comment on this post: Should O'Malley give taxpayer $$$ to puppet theaters? My favorite comment so far:

I'd say it's actually much more efficient to give bailout money to arty types than respectable business executives. How many artists do you know who are good at hanging on to money? They will happily fling the stuff all over the local economy, boosting small businesses, eateries, taxis, etc. Everybody wins! The artists get to spend a day being rich, and everyone else will be a little better off for much longer.

Ex-GM boss yanks $10 million ripcord

Tue, 14 Jul 2009 21:53:37 -0500

For steering General Motors into bankruptcy, wiping out the shareholders he worked for and sticking taxpayers for billions in bailout costs, Rick Wagoner gets a $10 million golden parachute, says AP.

Wagoner, 56, who was ousted by the Obama administration on March 30, will get $1.64 million in benefits annually for each of the next five years, plus an annual pension of $74,030 for the rest of his life, according to company documents filed Tuesday with the U.S. Securities and Exchange Commission. The former CEO, who spent 32 years with the company, can also choose to cash out his company-provided life insurance policy at $2.6 million, according to the filing. The benefits are worth about half the $22.1 million value that the company placed on Wagoner's retirement package at the end of 2008. The severance package is also far smaller than those afforded to many other large-company CEOs in the past, before the market meltdown made compensation practices a touchstone for public and congressional outrage.

Should O'Malley give taxpayer $$$ to puppet theaters?

Tue, 14 Jul 2009 10:42:42 -0500

The state is giving $306,050 in taxpayer money to arts & culture enterprises under the "Maryland Arts Employment Stabilization Program." As the economy struggles and the state faces further budget gaps, is this a good way to spend resources? Discuss.

GOVERNOR O’MALLEY ANNOUNCES ARRA GRANTS AWARDED TO 29 MARYLAND ARTS ORGANIZATIONS Maryland State Arts Council Grants $306,050 to Preserve 40 Jobs in Nonprofit Arts Sector Maryland Arts Employment Stabilization Program Grantees ($306,050) Organization Name Grant Amount County Academy Art Museum $10,000.00 Talbot Art Institute and Gallery $8,500.00 Wicomico Art on Purpose $10,000.00 Baltimore City Ballet Theatre of Maryland, Inc. $10,000.00 Anne Arundel Black Cherry Puppet Theater $15,000.00 Baltimore City Candlelight Concert Society, Inc. $12,500.00 Howard Caroline County Council of Arts, Inc. $10,000.00 Caroline Cecil County Arts Council Inc. $7,500.00 Cecil Chesapeake Arts Center $7,500.00 Anne Arundel CityLit Project $12,500.00 Baltimore City Collective, Inc., The $1,000.00 Baltimore City Contemporary Arts, Inc. $6,800.00 Baltimore County Delaplaine Visual Arts Education Center $10,000.00 Frederick Dorchester Arts Center, Inc. $15,000.00 Dorchester Footworks Percussive Dance Ensemble $15,000.00 Anne Arundel Garrett Lakes Arts Festival $10,000.00 Garrett Imagination Stage, Inc. $12,500.00 Montgomery Jewish Museum of Maryland $17,500.00 Baltimore City Maryland Hall for the Creative Arts $10,000.00 Anne Arundel Maryland Historical Society $10,000.00 Baltimore City Maryland Symphony Orchestra, The $12,500.00 Washington National Philharmonic $12,500.00 Montgomery Olney Theatre Center for the Arts $10,000.00 Montgomery Pro Musica Rara $5,250.00 Baltimore City Pyramid Atlantic Art Center $15,000.00 Montgomery Queen Anne's County Arts Council $2,000.00 Queen Anne's Round House Theatre $15,000.00 Montgomery World Arts Focus $12,500.00 Prince George's Young Audiences of Maryland, Inc. $10,000.00 Baltimore City

Can't find a link. The whole press release is below the fold.

This post not manufactured with MS Word

Tue, 14 Jul 2009 08:23:30 -0500

Attention: This post was not made using MS Word's "New Blog Post" feature. Has any post on any subject for any blog ever used this useless appendage that slows down Word even more? Coming next from Word: "New Tweet" ? "New Text Msg" ? The one I want: "New Great American Novel"

Sinclair bankruptcy? Here's why analysts make the big money

Mon, 13 Jul 2009 16:46:24 -0500

From Lorraine Mirabella's breaking story on Sinclair Broadcast : "Mentions of a potential equity raising and bankruptcy are clearly not in equity investors' favor, in our view," Wells Fargo said in a research report.

BGE: Smart meter surcharge less than $1.60/month

Mon, 13 Jul 2009 11:08:53 -0500

Baltimore Gas and Electric released some details of its ambitious smart-meter program. A few highlights. 1) It's hoping to get up to $200 million in federal stimulus money to help pay for the program. 2) Rather than instituting "real time" pricing, putting all customers at risk of incurring expensive peak charges, the program would pay customers rebates for avoiding peak use. 3) Customer charges to pay for meters would be from $1.24 per month to $1.52. Without having gone over this in detail, I can say that I suspect it's not a perfect proposal. But the world and Maryland need smart meters to cut energy use, and using stimulus money to help install them is a great idea. Yes, it looks like it'll cost customers $20 a year or so in up front costs. But it''ll save lots of money and carbon over the long term. If everything works as planned, it will be worth it.

The first phase of BGE's Smart Grid proposal would be the installation of 2 million advanced, or "smart," electric and gas meters, operating through a robust utility-to-customer, two-way communications network, which forms the foundation for an automated, digital intelligent grid. The utility is also planning to roll out a new Smart Energy Pricing (SEP) program as its standard rate schedule, which would pay customers rebates for reducing power consumption during peak periods. In the pilot of advanced metering technology and Smart Energy Pricing, participating residential customers reduced their consumption during peak periods by 26 percent to 37 percent, saved more than $100 on average and gave the program a 93 percent satisfaction rating. BGE's ability to rapidly and most cost-effectively carry out the Smart Grid initiative depends upon PSC approval and cost recovery in a timeframe that would allow the utility to qualify for a competitive Department of Energy (DOE) grant of up to $200 million to partially fund the initiative. BGE anticipates filing its DOE grant application in early August 2009, and it is anticipated that DOE would begin announcing grant awards in October 2009. The utility estimates initial deployment and operating costs of nearly $500 million over five years, and expects that over the project's lifecycle customer savings will exceed costs by a ratio of more than 3 to 1. Under the cost recovery mechanism proposed by BGE, the monthly customer surcharge would be 38 cents per month for electric-only customers and 44 cents per month for gas-only customers in the first year of implementation, and the customer cost would increase slightly over time as benefits also ramp up. Over the life of the program, the monthly surcharge would average approximately $1.24 and $1.52, respectively, for residential electric and gas customers, and would be reduced based on the award of a DOE grant. Customer savings from reduced energy and operating costs will be several times greater than the amount of the surcharge.

The odds catch up to Meredith Whitney

Mon, 13 Jul 2009 10:35:10 -0500

Investors who are too lazy to do their own research want desperately to believe that somebody out there has Wall Street figured out, has untangled the skein of emotion and economics that drives invesment and can tell investors what to do or manage their money for them. There's always somebody. Unfortunately it's a different somebody every few years. Given the glut of financial prognostication, every time the market does something radical it's almost a necessity that SOMEONE will have called a warning or a "buy" call. That's their cue for fame and riches. It's not the cue for the public to start listening to their every word. In 1987 it was Elaine Garzarelli who "predicted" the stock market crash. In the 1990s it was Abby Joseph Cohen who "predicted" the bull market. Now it's Meredith Whitney, who made a bearish call on Citigroup in the fall of 2007. The Call was good but it wasn't omniscient, David Weidner noted in April.

Well, almost. The Call did not say Citigroup was stuffed with hundreds of billions of dollars in toxic assets. It did not say that multiple banks will fail unless the government intercedes. It didn't mention Bear Stearns (which she once expected to earn more than $11 a share in 2009), Lehman Brothers or American International Group Inc. It was a call that Citi was losing money and would have to take drastic action to raise capital.

Now Whitney is moving markets again by upgrading Goldman Sachs to a "buy" after newspapers reported over the weekend that Goldman is set for a blockbuster quarter. Goldman is up $4 to $146, and the market is up modestly. But where was Whitney last fall, when Goldman was $50? She will continue to be in the spotlight until, like Cohen and Garzarelli, she proves she is mortal and fallible. It's already happening.