the firm’s income, reducing taxes. The
alternative to debt in the firm’s capital
structure is equity. Dividends paid out
to shareholders on that equity are first
taxed as earnings at the company level,
and then again when shareholders pay
taxes on their dividend income.
According to the Wall Street Journal,
nonfinancial Standard & Poor’s 500
companies are hoarding more cash than
ever before, nearly $1 trillion. Most of
stimulating our economy even further.
In the long run, this proposed change
to the tax code also would increase corporate stability. Key research by the late
Nobel laureate Merton Miller suggested
that dividends don’t influence a firm’s
value. His logic was that one dollar
retained would fund company growth,
while one dollar of dividends lowered
growth but created a cash flow to the
investor. Either choice is of equal value
As a nation, we want companies to
have a capital structure that relies more
on equity and less on debt. When times
get tough, the dividend can be reduced.
Such a dividend reduction will hurt the
stock price, but that’s a much better
result than the meltdown that occurs
when a company fails to make its interest payments and goes bankrupt. Bankruptcy is certain to cost many, if not all,
employees their jobs. Pensioners see a
this d
Th
nativ
is an
on co
is now
to ac
MAR
Land,
focused
MAY 1-7, 2009
Stimulus
for smartfor
grids
is welcome,
faces challenges
Stimulus
smart
grids isbut
welcome,
but faces
A
As money starts flowing from the economic
s money
startsbyflowing
from
stimulus package
passed
Congress
and signed
the economic
stimulus
package
by President
Obama, there
is plenty
of good
news for passed
supporters
energy conservation
by of
Congress
and signedand
by
renewablePresident
energy, butObama,
also some
challenges.
The
there
is plenty
American
Recovery
and Reinvestment
Act of con2009
of good news
for supporters
of energy
contains
several
provisions energy,
for increased
fundservation
and renewable
but also
ing,
extended
tax incentives,
or outright
grants to
some
challenges.
The American
Recovery
encourage renewable energy projects, energy
and Reinvestment Act of 2009 contains
savings and green jobs. One key feature of the
several provisions for increased funding,
bill is $30 billion in funding to upgrade the power
extended tax
incentives,
or outright
grants
transmission
system
and develop
so-called
smart
to
encourage
renewable
energy
projects,
grid technology. While funding is certain to help,
energy savings
and green
jobs.
One
upgrading
an overburdened
power
grid
andkey
implefeature
of
the
bill
is
$30
billion
in
funding
menting smart technology both come with issues that
to upgrade
the power
transmission system
money
alone may
not solve.
Ourdevelop
demands
for energy,
withgrid
bigger
houses
and
so-called
smart
technoland
appliances
electronictogadgets,
ogy.more
While
fundingand
is certain
help, have
consistently
the growthpower
in the grid
system’s
upgrading outpaced
an overburdened
ability
to transmit that
electricity
over anboth
aging
and implementing
smart
technology
power
grid.
State
requirements
add
further
strain.
come with issues that money alone may
Washington’s
not solve. renewable portfolio standard says
utilities should obtain more of their electricity
Our demands for energy, with bigger
from wind, solar, and geothermal sources. Gethouses
and more appliances and electronic
ting the energy from the renewable source to the
gadgets,
have consistently
outpaced
user has become
a significant issue
becausethe
many
growth
in thelocations
system’s
to transmit
of
the optimal
forability
large scale
renewable
that electricity
aninaging
powerwell
grid.
projects
often are over
located
rural areas,
away
Statethe
requirements
further
strain.
from
urban marketsadd
where
the power
is used,
Washington’s
renewable
portfolio
standard
and
those projects
either lack
access to
existing
transmission
or the
lines more
cannotofhandle
says utilitieslines
should
obtain
their the
additional
forecast
in and
the coming
years
electricityloads.
fromThe
wind,
solar,
geotheris
for sources.
twice as much
new generation
supply
new
mal
Getting
the energy
fromasthe
transmission
to carry that
supply.
renewable source
to the
user has become
One solutionissue
might because
be to buildmany
more power
a significant
of thelines,
but that is no simple task. The costs of a new transoptimal locations for large scale renewable
mission line can be significant, running well over
projects often are located in rural areas,
a million dollars per mile. Although the stimulus
well away
from the
urban
where
package
certainly
provides
a markets
partial answer
with
the funding,
power isitused,
and
thosetheprojects
either
new
does not
address
other major
islackwith
access
to existing —
transmission
lines
sue
new transmission
the seven to 10
years
the to
lines
cannot
handle
thenew
additional
itortakes
obtain
permits
and build
towers and
loads.farThe
forecast
in the coming
years is
lines,
longer
than permitting
for a renewable
for twice
as much new generation supply as
power
project.
A primary
reason for
extended
development
new
transmission
to the
carry
that supply.
period
that new transmission
frequently
Oneis solution
might be toprojects
build more
encounter
significant
local
opposition.
power lines,
but that
is no
simple The
task.experiThe
ence
Green
Path
North in California
is one
the
costsofof
a new
transmission
line can
beofsiglatest examples. The Los Angeles Department of
Water and Power (LADnificant,
running
well
WP)
proposes
to develop
million
dollars
aover
two-ato
five-mile
wide
corridor
from
per mile.running
Although
Desert
Hot Springs
to
the stimulus
package
Hesperia,
The projcertainlyCalif.
provides
a
ect
designers
envision
partial
answer
with a
500-kilovolt
transmission
new funding, it does
line for access to as-yet
not address the other
undeveloped geothermal
major issue with new
Mike
resources in the Imperial
transmission
—use
theof
Nesteroff
Valley,
and shared
seven
to
10
years
the corridor by other oil,
it takes
to obtain
gas, and water line projects.
Opponents
of Green
permits
and
build
new
towers
lines,and
Path North, including the cities of and
Riverside
far longer
than permitting
for a renewable
Desert
Hot Springs
and San Bernardino
County,
along
with
numerous residents and environmental
power
project.
groups,
cite the project’s
to the fragilededesA primary
reason impacts
for the extended
ert,
including period
Joshua Tree
National
Park; increased
velopment
is that
new transmission
fire
hazards,
illegal dumping
and trespass;
adverse
projects
frequently
encounter
significant
impacts
to
property
values;
and
concerns
about
local opposition. The experience of Green
whether
LADWP
instead will is
use
theof
line
forlatest
coalPath North
in California
one
the
fired power generated across the border in Mexico.
examples. The Los Angeles Department
Green Path North, at least in terms of its 85-mile
of Water and Power (LADWP) proposes
length, is fairly modest compared to proposals for
to developlong
a twoto five-mile
wide cor1,000-mile
projects
in the Rocky
Mountain
ridor
running
from
Hot
and
Midwest
states,
butDesert
it serves
as Springs
a cautionary
to Hesperia,
Calif. and
The
project
designers
tale
for the permitting
siting
issues
that arise in
envisionnew
a 500-kilovolt
line
proposing
transmissiontransmission
lines.
forProposals
access to
as-yet
geotherto have
theundeveloped
Federal Energy
Regulatory
Commission
overImperial
transmission
line project
mal
resourcestake
in the
Valley,
and
permitting
have
met corridor
with strong
shared use
of the
byopposition
other oil,from
local
regulators.
gas,and
andstate
water
line projects. Opponents of
The stimulus
bill also
providesthe
for cities
smart of
grid
Green
Path North,
including
technologies,
which
represent
a shift away
Riverside and
Desert
Hot Springs
and from
San
building more generation and transmission to adBernardino County, along with numerous
dressing demand in ways that could help utilities
residents and environmental groups, cite
and consumers. Smart grid encompasses stratethe ranging
project’s
impacts
the fragile
desert,
gies
from
remoteto
monitoring,
time-of-use
including
Tree
National
Park; inpricing,
and Joshua
managing
demand;
to distributed
gencreased
fireashazards,
illegal
eration,
such
rooftop solar
ordumping
individual and
wind
trespass;
impacts
to property
turbines;
to adverse
fuel cells and
other storage
media.valUnues;traditional
and concerns
aboutprograms
whetherthat
LADWP
like
conservation
require
instead will
use
the line for
consumers
to do
something,
suchcoal-fired
as turn offpower
lights
and
appliances,
smartthe
gridborder
promises
to be largely
generated
across
in Mexico.
passive
having
software
and in
hardware
do its
most
Greenby
Path
North,
at least
terms of
of
the work.
85-mile
length, is fairly modest compared
U.S. Department
of Energy
a smalltoThe
proposals
for 1,000-mile
longran
projects
in
scale smart grid experiment in 2006 with the Pa-
GUEST
OPINION
cific Northwest Gridwise Demonstration Project
the
Mountain
and
on
theRocky
Olympic
Peninsula.
In Midwest
one phase,states,
participants
newa cautionary
electric meters,
but itreceived
serves as
talethermostats,
for the
water
heaters, and
and siting
dryers,issues
together
with
software
permitting
that
arise
in
toproposing
monitor and
their lines.
electricity use.
newcustomize
transmission
During
peak demand
periods,
software
lowProposals
to have
the the
Federal
Energy
ered
thermostatsCommission
or shut off water
heaters
to translevels
Regulatory
take
over
pre-set
by homeowners.
received
mission
line projectParticipants
permitting
haveconmet
stant pricing information over the internet so they
with strong opposition from local and state
could adjust their electricity use. By the end of the
regulators.
study, participants’ electricity bills had declined by
The stimulus
bill also provides for
an average
of 10 percent.
smart
gridhas
technologies,
The DOE
outlined $4.5which
billion represent
in funding
a shift
buildingand
more
genfor
smartaway
grid from
development
demonstration
eration
and
transmission
to
addressing
projects. The Bonneville Power Administration is
demand
in ways
that utilities
could help
utilitiesin
asking
Pacific
Northwest
to participate
aand
demonstration
project
to determine
if smart grid
consumers.
Smart
grid encompasses
models
will work
“at afrom
scale remote
that can monitorbe readily
strategies
ranging
adapted
and replicated
around and
the country.”
ing, time-of-use
pricing,
managing deTakingto
smart
grid from demonstration
to nationmand;
distributed
generation, such
as
alrooftop
scale can
be
a
hard
sell
because
it
requires
both
solar or individual wind turbines;
a new mindset and new technology. The producto fuel cells and other storage media. Untion and delivery of electricity over the past hunlike traditional conservation programs
dred years has provided utilities with little financial
that require
consumers
do something,
incentive
to depart
from the to
familiar
flat pricing
such
as
turn
off
lights
and
appliances,
model that produced more revenue as people used
smart
grid promises
toofbenew
largely
passive
more
electricity.
As the cost
generation
and
by
having
software
and
hardware
do most
transmission has made addressing the demand
side
of the
work. the challenge will be to ensure that
more
attractive,
Thecan
U.S.
Department
of Energy
utilities
obtain
a reasonable
return onran
investments
even as smart
gridgrid
enables
consumersin
to cut
a small-scale
smart
experiment
their
usage
2006
withand
thebills.
Pacific Northwest Gridwise
Another issue is that
the considerable
investment
Demonstration
Project
on the Olympic
for
smart
grid
technology
is
made
more
difficult
Peninsula. In one phase, participants re-by
lack
of uniform
standards
for the technology.
Early
ceived
new electric
meters,
thermostats,
adopters face a significant risk of guessing wrong
water heaters, and dryers, together with
on systems that might become outmoded. The
software to monitor and customize their
National Institute of Standards and Technology is
electricity
use.of During
peak demand
holding
summits
industry leaders
this monthpeand
riods,
the software
lowered thermostats
next
to develop
standards.
orWhile
shut there
off water
to levels
still isheaters
a long way
to go pre-set
to full imby homeowners.
received
plementation
of smartParticipants
grid, the stimulus
package
constant
pricing
the inprovides
a major
shotinformation
in the arm and,over
consequently,
ternet
so they
couldsteps
adjust
theirreaching
electricity
takes
some
important
toward
the
promise
a more
grid. participants’
use. Byofthe
endefficient
of the study,
electricity bills had declined by an average
MIKE
NESTEROFF chairs the sustainability and
of 10 percent.
climate
teamoutlined
at Seattle-based
lawinfirm
Thechange
DOE has
$4.5 billion
Lane Powell PC.
Reprinted for web use with permission from the Puget Sound Business Journal. ©2009, all rights reserved.
Reprinted by Scoop ReprintSource 1-800-767-3263.
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