Category Archives: Regulation

Brat’s Strange Immigrant-Bashing

BratBy Peter Galuszka

It must have been an interesting scene. Congressional candidate David Brat had been invited to a meeting of the Virginia Hispanic Chamber of Commerce along with his Democratic rival Jack Trammell to outline his views on immigration and undocumented aliens.

Brat, an obscure economics professor who nailed powerhouse Eric Cantor in a Republican primary for the 7th Congressional District in June, danced around the topic, according to a news account.

It took several attempts to get him off his spiel on just how wonderful free market capitalism is to actually address the issue at hand. Before him were a couple dozen business executives, many of them Hispanic.

They, naturally, were interested in Brat’s views because of his over-the-top Latino-baiting during the primary campaign. One of Brat’s ads trumpeted: “There are 20 million Americans who can’t find a full time job. But Eric Cantor wants to give corporations another 20 million foreign workers to hire instead.”

Finally, Brat claimed, “I have never said I’m against legal immigration.” He later said, “nations that function under the rule of law do well.” Brat also said he wants to “secure” the U.S. border with Mexico. Trammell said he supports the DREAM Act that could provide a path to U.S. citizenship for some of the 11 million undocumented aliens in this country.

Brat’s immigrant-baiting and his “rule of law” smacks of a lot of ugliness in American history. “Know–Nothings” of white Anglo Saxons beat and harassed Catholic immigrants, primarily from Ireland. Chinese were harassed on the West Coast and Japanese-Americans were locked up in concentration camps during World War II. Jewish newcomers were met with restrictive covenants and college quotas.

In Richmond during the 1920s, efforts by Catholic Italian-Americans to build a monument to Christopher Columbus were fought by the Ku Klux Klan, which insisted that any such statue not dirty-up Monument Avenue and its parade of Confederate generals. Columbus had to go elsewhere in the city.

There’s a new twist and judging from Brat’s behavior on Tuesday. He seems uneasy by getting so out front on immigrant-bashing. He’s not the only Republican to take such strident stands. Look at New Hampshire, where Scott P. Brown, a Republican, faces Jeanne Shaheen, a Democrat, in a closely-watched race for the U.S. Senate.

Groups backing Brown, such as John Bolton, the surly former U.S. Ambassador to the United Nations, have run anti-Shaheen ads showing throngs of people clambering over a border just before showing Islamic militants beheading James Foley, a journalist and New Hampshire native, according to the New York Times. The ad was pulled after the Foley family complained, the Times says.

A major coincidence is that the Times‘ description of New Hampshire almost matches that of Virginia’s 7th Congressional District. Neither seems a hot bed of immigrant strife and threats.

The Granite State has one of the smallest populations of illegal immigrants in the country, the Times says. Of the state’s 1.3 million residents, only 5 percent are foreign-born and 3 percent are Hispanic.

The Virginia district has a population of 757,917 of whom 12.7 percent are foreign born and 4.9 percent are Hispanic. Most of the residents, 74.3 percent are white.

The district runs from the largely white and well-off western Richmond suburbs in Henrico and Chesterfield Counties and scoots northwest across mostly rural farmland to east of Charlottesville and up to Madison. With only 7.6 percent of the people living below the poverty level, it isn’t exactly a barrio of Los Angeles.

It is hard to imagine hordes of brown-skinned people swarming from up Mexico or Central America displacing the managerial executives, small business people and farmers in the Seventh. People that Brat seems to be worried about are employed in other nearby areas, such as the poultry plants of the Shenandoah Valley. But those workers are there because of local labor shortages. One wonders where Brat gets his ideas that illegal immigrants are going to steal true-blue American jobs in his district.

Last June during the primary, there was plenty of news about thousands of young Hispanic children coming across the southern border from Central America. At the time, there were estimates that up to 90,000 such children might come illegally into the U.S. this year. Many are fleeing gang violence in their homelands.

This is apparently what Brat is running against – a bunch of poor, 12-year-old Nicaraguans out to steal jobs and provide cover for Islamic terrorists. Their plight is a serious issue, but it is a humanitarian one. Brat chose to make it an odd classroom lesson in economics. He says the U.S. should not put up “green lights” and “incentivizing children from other countries to come here illegally and at their own peril.”

The news from the border seems to have calmed down since June. Brat may have found that now it is likely he’s going to Washington, playing the Hispanic-baiting card may not work as well on the national scene as it apparently did in his mostly-white district. It could be why he was hemming and hawing so much before the Virginia Hispanic Chamber of Commerce.

Illegal immigrant Ayn Rand

Illegal immigrant Ayn Rand

Perhaps other Republican politicians are having the same epiphany. As the New York Times writes: “Republicans have long relied on illegal immigration to rally the conservative base, even if the threat seemed more theoretical than tangible in most of the country. But in several of this year’s midterm Senate campaigns — including Arkansas and Kansas, as well as New Hampshire — Republicans’ stance on immigration is posing difficult questions about what the party wants to be in the longer term.”

There’s another strange contradiction with Brat. He’s a former divinity student interested in probing how unfettered free market capitalism can magically make the right choices for the betterment of mankind.

He draws a lot of his thinking from Ayn Rand, the famous thinker, refugee from the Bolsheviks and backer of her own brand of anti-government capitalism.

It may interest Brat that by today’s standards, Rand would have been an illegal immigrant.

EPA Carbon Rules: Ask the SCC

The SCC: An Emerald Palace?

The Emerald Palace or the SCC?

By Peter Galuszka

Last week, State Corporation Commission drew attention when its staff wrote to the U.S. Environmental Protection Agency, at the EPA’s request, to respond to one of the biggest proposed steps the nation has seen in cutting carbon dioxide emissions.

The report sparked considerable interest and confusion over what the SCC staff actually meant when it predicted that proposed EPA rules to cut carbon emissions 30 percent below 2005 levels by 2030.

The staff report, written by William H. Chambliss, SCC general counsel, said that EPA’s proposed limits would cost Virginia ratepayers from $5.5 billion to $6 billion extra. It claims that the state would have to shut down fossil-fuel, predominately coal-fired, plants producing 2,851 megawatts and replace it with only 351 megawatts of land-based wind power. This would badly impact the reliability of the state’s power supply, the staff said.

My immediate question was why so much and where, exactly? Precisely what power stations would have to be shut down? Where did the ratepayer increase numbers come from? Is there is a list of all the coal-fired plants affected? Dominion Virginia Power, the state’s largest utility, has long-standing plans to shut down two aging power stations at Yorktown and Chesapeake with about 920 megawatts of power? How does that factor in?

So, I contacted Ken Schrad, the spokesman for the SCC, by phone and email and asked some questions. He kindly provided the following answers (in italics):

Where are the affected plants precisely?

The numbers come directly from the EPA’s own spread sheets and the EPA does not identify the specific units.” 

How many plants are coal-fired?

Of the 2,851 MW, EPA predicts 2,803 MW of coal units and 48 MW of combustion turbines which could be natural gas or oil-fired CTs. Assuming Yorktown and Chesapeake are included in the EPA estimate, SCC staff knows that those planned retirements total approximately 920 MW.  The output of those units varies depending on when operating (summer or winter).”

Where does the 351 megawatt of land-based wind power, the only available replacement source for the lost fossil-fuel power, come from?

“The 351 MW figure is also direct from the EPA’s analysis which does not identify where EPA believes these undeveloped projects would ultimately materialize.  As staff noted in its comments, the SCC has approved the only request the Commission has received for a certificate for a wind project (Highland New Wind).  Approved in December 2007, the project envisioned up to 20 turbines with each turbine capable of producing up to 2MWs.  That project has not been built.   DEQ now has regulatory responsibility for permitting most solar and wind projects in Virginia. “

How do you answer criticism from environmental groups that Virginia has already attained 80 percent of the EPA’s carbon reduction already?

“Staff has no information regarding this assertion, the costs incurred to reach such a figure, how that attainment level was achieved, or the starting point from which such has materialized.”

The SCC staff recommends that the EPA adopt “an alternative carbon emission rate of 1,216 pounds of carbon dioxide per Megawatt hour of power. The EPA is proposing tighter limits of 843 of CO2/MWh for plants to attain by 2020 and levels of 810 pounds of CO2/MWh for plants to comply by 2030 because it would be more affordable. How much more affordable would the SCC’s suggested rate be?

” Staff recognizes there will be a considerable amount of expenditures to achieve the alternative emission rate.  It is a level envisioned in the integrated resource plan (IRP) filed by the utility company and reviewed every two years by the Commission.  The projected cost to achieve that level has not been quantified.  Instead, staff made a conservative analysis of the impact of the EPA proposed standards resulting in its determination that the alternate carbon emission rate would not require an additional expenditure of $5.5 to $6 billion.”

The SCC staff says that attaining EPA goals could cost ratepayers an extra $6 billion. Dominion is considering a third nuclear unit at North Anna that might cost from $10 billion to $14 billion. Wouldn’t the ratepayers have to pay for that, too?

“If built, the costs of another nuclear unit would be recovered over the expected life of the unit which could be 60-80 years.  There is a disconnect between taking a net present value figure (staff comments) and comparing it to something that is not.  Also, the added nuclear unit is envisioned in one of the IRP compliance plans. So, that was factored into the conservative analysis performed by staff which produced the projected additional $5.5 – $6 billion figure.”

I also asked Ken why the SCC did not issue a press release about the SCC reply to the EPA. He said that the SCC does not normally issue a press release when it responds to requests by federal agencies for comment.

Fair enough, but I have a few takeaways on the other answers. I am still not exactly sure where the 2,851 megawatts-to-be-shut-down figure comes from.

Next, the SCC staff complains that when this amount of generation goes offline (assuming it actually does), there will be pitifully little left on the renewable side to replace it. The only plant sited is a 40 megawatt one in Highland County that was approved by the SCC in 2007 (a lifetime in renewable energy terms) and has yet to be built.

What about plants for offshore wind farms, not to mention Dominion’s own plans for an experimental offshore wind station? The answer seems to be that we don’t know because another agency (DEQ) now licenses that sort of thing. If that’s the case, one wonders why the SCC staff didn’t give the DEQ a ring on their phone and ask for a seven-year update on what’s doing in wind and solar? Instead, they used seven-year old figures, apparently to minimize the importance of renewable power in rather sweeping terms.

One reason why Virginia’s renewable percent is a low 6 percent, compared to its neighbors, is that the General Assembly has refused to set mandatory renewable portfolio standards that require 20 percent or so of future generation to come from renewables.

Why so? The first ones to ask are the utilities – Dominion, Appalachian Power and the cooperatives. It seems that they don’t want any threat to their grids that they have poured billions into over the decades. Talk renewable and they’re like babies crying for the base-loaded bottles.

In any event, Virginia is not the only state to question the EPA rules. Oklahoma has as well. Big industry doesn’t like the proposed rules either. And the EPA is asking regulators like the SCC for input. One can’t blame them for responding. Forgive me if I don’t understand their response.

Could Surry Be an 80-Year Nuke?

Surry1By Peter Galuszka

Here’s a new twist on the carbon emission debate: Dominion Virginia Power is considering seeking federal approval run its 40-plus year-old Surry nuclear power station for another 40 or so years.

The arguments in favor are that keeping the two-units at Surry (1,600 megawatts) going would be a lot cheaper than building a brand new plant. Nukes do not contribute much at all to greenhouse gases and climate change compared to coal or natural gas plants.

The huge issue, however, is safety. Can you really expect a nuke whose design dates back to the 1960s to run until 2054? Surry’s plants near Jamestown were once the most heavily fined in the nation because of their repeated safety problems. Constant use can affect any number of crucial components such as making reactor metal brittle, pulverizing concrete and becoming more susceptible to earthquakes and storms.

According to the New York Times, Dominion hasn’t decided whether to apply to extend Surry’s life span. Other possible extended life reactors are Duke’s three Oconee units near Seneca, S.C. and Exelon’s Peach Bottom not that far from Three Mile Island in Pennsylvania.

Dominion is also pushing ahead with a third new unit at North Anna, but the price tag for that apparently would be many times what extending Surry would be. But there are no hard figures about the cost of the new nuke ($10 billion to $14 billion, maybe) or how much Surry would cost.

The news is curious coming just as the staff of the State Corporation Commission came out with a curious report slamming proposal EPA rules on cutting carbon emissions. Although the SCC’s opinions are murky and badly-documented, it raises fears that a bunch of coal-fired generation in Virginia will be shut down due to EPA regs. Hot flash: a bunch was going to be shut down anyway because it dates back to the 1940s and 1950s.

I don’t know enough about the current Surry operation to know what and how extending its life would proceed and whether it would be safe.

That said, I refer to my own reporting past – the 1979 when I was a reporter at The Virginian-Pilot. Another reporter and I spent weeks at the Nuclear Regulatory Commission’s archives in Bethesda, Md. poring over safety documents. This was back when newspapers had the money to do that kind of reporting.

Our result was a big investigative piece that made banner headlines on the front page one Sunday with two full pages inside. I’d include the cite since it is too old to have one. We found a multitude of issues at Surry ranging from faulty radiation monitoring for workers to faulty snubbers which are rod-like shock absorbers to mitigate earthquake-like movements.

Dominion, then Vepco, hated the story and tried to tear it down. But Vepco was undergoing a corporate sea-change away from its institutional arrogance related to some extent by the former Navy submarine officers were not used to being questioned by outsiders. Vepco was getting hit by Wall Street because its sloppy nuclear program resulted in extended outages. They ended up hiring a ringer engineer who cleaned up their act and later the company transformed into something more modern.

Even so, a decade after we did our story, there were still plenty of concerns about safety at Surry.

The big question is how can you keep a car designed in the 1960s going strong nearly 100 years later? Maybe they have the answers in Havana.

More Coal Industry Propaganda

coal woman By Peter Galuszka

If you read a blog posting just below this (the one with the coal miner with an intense look on his grit-covered face), you will see how hyperbole, confusion, misunderstanding, ignorance and one-sided arguments twist something very important to all Virginians – how to deal with carbon dioxide and climate change – into a swamp of disinformation..

The news is that the State Corporation Commission has responded to the federal government’s proposed rules that carbon emissions be cut 30 percent below 2005 levels by 2030 by complaining that it would cost ratepayers up to $6 billion.

This is because Virginia utilities may have to shut down 2,851 megawatts worth of electrical generation with only 351 megawatts (at present) of “unreliable” wind power to replace it.

The image one gets from the presentation of the blog post is that it is “The EPA’s War on Virginia” with the haggard-looking miner thrown in, we are given the impression that it is more of the “War on Coal” that the coal industry has been promoting in recent years to blunt much-needed mine safety laws and moves to police highly destructive mountaintop removal practices.

The author does not address any of this. But since he’s handing us the “War on Coal” propaganda line, let’s take his arguments apart. This won’t take too long.

  • The author fails to note part of the Richmond Times Dispatch story upon which he bases his opinions. There is a very important comment: “It appears the staff has misread the rule,” said Cale Jaffe, director of the Southern Environmental Law Center’s Virginia office. “Analyses that we have reviewed show that Virginia is already 80 percent of the way to meeting Virginia’s carbon pollution target under the Clean Power Plan. “Almost all of those reductions are coming from coal plant retirements and natural gas conversions that the utilities put in place long before the Clean Power Plan was even released,” Jaffe said.
  • That said, let’s take a look at coal-fired plants in the state which are the biggest carbon offenders. For starters let’s look at Dominion Virginia Power, the state’s largest utility. It has already converted three coal-fired plants – Altavista, Southampton and Bremo Bluff – to biomass. The 50-plus-year-old Yorktown plant (335 megawatts) is due to retire in 2015. Another aging plant – Chesapeake (609) megawatts — is also due to retire by 2015. The point here is that these plants are being closed because Dominion realizes that it is just too hard to keep 50 or 60 year plants operating efficiently and cheaply. It would be like keeping that 1960 Corvair because you don’t want to put oil workers out of work.
  • Dominion’s biggest problem and the biggest single air polluter in the state is the Chesterfield station with 1380 megawatts. Yes, it does need more controls. Then there’s Clover (882 megawatts) and Mecklenburg (138 megawatts). That brings us up to 2400 megawatts that might need upgrades. Let’s see. The two nuclear units at North Anna put out a little more than 1,700 megawatts just so we get some scale here. Dominon also has Virginia City (585 megawatts) which just opened, uses coal and biomass and has advanced fluidized bed burning methods.
  • Out west, Appalachian Power has 705 megawatts at Clinch River and 430 megawatts at Glen Lyn. Two of those three units there were built in (my God!) 1944 so I guess the blog author wants to keep those great granddaddies running to save miners’ jobs. Actually they are so unneeded that they have been on extended startups.Besides these Cogentrix has a couple small, modern plants in Portsmouth and Hopewell.
  • One reason there so little renewable generation (6 percent) is that the utilities do not have mandatory renewable portfolio standards to force them into wind and solar, etc. Virginia’s neighbors do.

All of this gets back to Jaffe’s point that the blog author so easily ignores. A lot of the carbon cuts are going to come from plants that are aging and are going to be closed anyway.

The SCC may complain about the $6 billion but guess what, you beleaguered electricity users? If Dominion puts a third nuke at North Anna, that’s easily $10 billion. Is that going to raise rates sky high? Where’s the outcry? It’s almost double what helping save the planet from carbon dioxide will cost.

The blog author’s hyperbole about the poor coal industry shows his ignorance of the topic. Virginia’s rather small coal industry (No. 12 in production) reached its peak in 1991. Natural gas has displaced a lot of expensive coal. Gas prices would have to triple to make Central Appalachian coal competitive again. There’s lots of metallurgical coal for steel, but the Asian economic slump has dropped prices maybe 60 percent.

I won’t comment on the author’s lame and misunderstood point about climate change not happening.

The blog author may want to blame that on Obama and the EPA but that would be almost as ridiculous as his blog post. I decline to name him because I don’t want to embarrass him.

Why We’re Being Railroaded On “STEM”

 csx engineBy Peter Galuszka

When it comes to education, a constant mantra chanted by the Virginia chattering class is “STEM.”

How many times have you heard that our students are far behind in “STEM” (Science Technology Engineering and Mathematics)? We have to drain funding from more traditional areas of study (that actually might make them better human beings like literature, art or history) and give it to STEM. The two types of popular STEM are, of course, computer science (we’re all “illiterate” claims one journalist-turned computer science advocate) and biotechnology.

But how important is STEM, really? And if Virginia joins the STEM parade and puts all of its eggs in that basket, will the jobs actually be there?

The fact of the matter is that we don’t know what jobs will be around in the future and like the famous generals planning for the last war, we may be stuck planning for the digital explosion of Bill Gates and Steve Jobs that is like, so, 25 years ago.

To get an idea where markets may be, look at today’s news. Canadian Pacific is making a play for CSX railroad (headquartered in Richmond not that long ago) because of the unexpected explosion in fracked oil.

CP handles a lot of freight in the western part of Canada and U.S. where some of the most impressive new fracked shale oil are, namely the Bakken fields of North Dakota and Alberta. CP wants access to eastern U.S. refineries and transshipping points, such as a transloading spot at the mouth of the York River. CSX is stuck with dirty old coal where production and exports are down, although it has an extensive rail network in the Old Dominion.

The combined market value of the two firms is $62 billion — a far bigger potential deal than the $26 billion Warren Buffett paid for Burlington Northern Sante Fe in 2010. There are problems, to be sure. CSX isn’t interested and the Surface Transportation Board, a federal entity, nixed a matchup of Canadian National and Burlington a little while back.

But this isn’t really the point. The point is that the Old Steel Rail pushed by new sources of oil and to some extent natural gas has surprisingly turned domestic economics upside down. Many of the new oil fields are in places where there are not pipelines, so rail is the only answer. In 2008, according to the Wall Street Journal, six or so American railroads generated $25.8 million in hauling crude oil. Last year that shot up to $2.15 billion.

So, what does that mean for students? A lot actually, especially when we blather on about old-style STEM that might have them inventing yet another cell-phone app that has a half-life of maybe a few months. Doesn’t matter, every Virginia legislator, economic development official and education advocate seems to be hypnotized by the STEM genie.

A piece I just did for the up-and-coming Chesterfield Observer on vocation education in that county:

“The recent push to educate students in so-called STEM (Science, Technology, Engineering and Mathematics) may be case in point. The goal is to churn out bright, highly trained young people able to compete in the global economy with their counterparts from foreign lands.

“A subset of this area of concentration is computer science, which goes beyond knowing the basics and gets into the nitty-gritty of learning code and writing computer languages. By some accounts, such skills will be necessary to fill more than 2 million jobs expected to become open in the state by 2020.

“Critics question, however, if overspecialization in technology at earlier ages prevents students from exploring studies such as art and literature that might make them better rounded adults. And, specialization often assumes that jobs will be waiting after high school and college when they might not be.

“Peter Cappelli, a professor of management at the Wharton School of the University of Pennsylvania, has written about such problems of academic overspecialization in national publications such as The Wall Street Journal. He recently responded to questions from the Chesterfield Observer via email.”

“Not many science grads are getting jobs in their field,” Cappelli says. “The evidence suggests that about two thirds of the IT (information technology) grads got jobs in their fields, about the same for engineering. There is no guarantee in those fields. It’s all about hitting the appropriate subspecialty that happens to be hot. There are still lots of unemployed engineers and IT people.”

So there you have it. In my opinion, the over-emphasis on STEM training has the unfortunate effect of producing young adults who have one goal in mind – getting a job and making money, not helping humankind. And, if you insist on STEM, why not branch into something where there are actually jobs namely petroleum engineering, geology and transportation engineering.

I’ll leave the dangers of added petroleum cargoes in trains to another post.

Virginia: The Energy Guzzler Capital of the East Coast

WalletHub

by James A. Bacon

Virginia is the 43rd most energy efficient state in the country, which is another way of saying that it is the 6th most energy inefficient among the 48 states included in a national ranking by the number crunchers at WalletHub. The finding is based on the publication’s energy efficiency rankings in homes and automobiles, two of the largest categories of energy consumption. The methodology has lots of limitations but it does provide an interesting place to start thinking about measuring energy efficiency.

WalletHub calculates home-related energy efficiency by tabulating the total amount of energy consumed per capita by residential homes and adjusting for degree days. (Degree days are a measure of how much temperatures vary from a base of 65° Fahrenheit.) Houses in a state like Virginia, with a relatively mild climate, might require less energy for heating and cooling than, say, a state like Arizona, which is subject to scorching heat, but that doesn’t mean Virginia houses are more energy efficient. Adjusting for degree days gets closer to an apples-to-apples comparison. By this measure, Virginia ranked 35th among the 48 states.

The calculation for automobile energy efficiency measures what is essentially the average miles per gallon of the state’s automotive fleet — annual vehicle miles driven adjusted by the gallons of gasoline consumed. By this measure, Virginia also ranked 35th in the country.

The most obvious limitation to this data is that miles per gallon measures the energy efficiency of cars, not transportation systems. You could put every Virginia driver in a Toyota Prius (50 miles per gallon), but if every worker drove solo to their job and racked up 20,000 miles per year, you’d still have an energy-guzzling state. Human settlement patterns that enable people to walk, ride bicycles, carpool, take transit and drive shorter distances to their destinations are more energy efficient, all other things being equal, than human settlement patterns that put everyone in a car and requires driving long distances between destinations. Accordingly, gasoline consumption per capita might be a better measure. (And even that is a rough measure that does not take into account the use of electricity and natural gas as transportation fuels.)

WalletHub’s calculation for housing energy-efficiency is more defensible, although it does not tell us everything that would be useful to know. To what extent does energy consumption in Virginia’s residential housing sector simply reflect a stock of bigger houses? Maybe Virginia has more McMansions than other states! I’ll bet a lot of McMansions have state-of-the-art heat pumps, zone heating and Nest thermostats. But no matter how much insulation and no matter how many Energy Star appliances,  McMansion won’t be as energy efficient as a Manhattan apartment building, even adjusted for square footage, which limits reduces exposure to the fluctuating temperatures of the outdoors. And that gets us back to human settlement patterns. Some patterns are more energy-efficient than others. Virginia’s housing sector may be energy intensive not because of a failure to adopt Energy Star standards but because people are more likely to abide in single family dwellings, which are inherently less energy efficient.

Bacon’s bottom line: Measuring and ranking energy efficiency is a worthwhile exercise. WalletHub at least prompts people to start thinking about these issues. Its methodology is far too primitive to give us much useful information, much less to suggest meaningful public policy solutions. The experts consulted by WalletHub focused mainly on technology solutions — solar photo-voltaic electricity, LED lights and the like — and what kind of government incentives it might take to get people to adopt them. None of them touched upon the role of human settlement patterns. But that’s where the big savings will come from.

– JAB

Good Luck With McAuliffe’s Ethics Panel

Image: Verdict Reached In Corruption Trial Of Former Virginia Governor McDonnell And His WifeBy Peter Galuszka

Despite the obvious need, Virginia still has done very little to address its monumental problems with ethics reform. The latest endeavor was announced yesterday by Gov. Terry McAuliffe, but it seems too much like just another panel.

And panel it is. McAuliffe has created the 10-member Commission to Ensure Integrity and Public Confidence in State Government. The good news is that it is bipartisan and seems filled with reasonable people, including Christopher Howard, president of Hampden-Sydney College and Sharon Bulova, chairwoman of the Fairfax County Board of Supervisors.

Leading it will be for Lt .Gov. Bill Bolling, a Republican who has shown good sense in recent years and got screwed over by party hardliners who maneuvered to get former Atty. Gen. Kenneth Cuccinelli, a wild man, to run and lose in the 2013 governor’s race. His Democratic counterpart will be Rick Boucher, a former legislator from southwest Virginia.

The plan is to present a package of reforms that will deal with gift-giving and donations to politicians, and redistricting, or possibly redesigning some districts away from the madness that some, and mostly Republican legislators have created.

The impetus, naturally, is the first-ever conviction of a governor for corruption. Three weeks ago, a federal jury gave a resounding “guilty” on felony charges against Robert F. McDonnell and his wife Maureen. The U.S. Justice Department stepped in because Virginia’s state ethics laws were so ridiculously lax no one could ever have made the case. There had been lots of “gee, I don’t see a smoking gun” jabber on this blog and elsewhere, but, hey, why not poll the jury?

Just as the McDonnells were being indicted last January, the 2014 General Assembly considered ethics reform but did squat. It made accepting more than $250 in gifts verboten and expanded disclosure requirements to immediate family but the Republican-led led legislature left in a pile of loopholes. “Intangible” gifts, such as African safaris or trips to the Masters golf tournament are A-OK.

What’s needed is a real ethics commission with subpoena power. McAuliffe’s action was quickly derided by such leading lights of ethics reform as House Speaker Bill Howell and Senate Majority Leader Thomas K. Norment. These two Ayatollahs of the Status Quo claimed that McAuliffe was a “latecomer” to an issue that they obviously have done nothing to improve despite their many years in office.

GOP Party Boss Pat Mullins took an irrelevant swipe at McAuliffe’s perceived ethics problems long before he was even governor.

Redistricting is just as important as ethics and I’m glad it is being addressed. Many Virginia districts have been gerrymandered to keep a particular party in office in ways that  protect the status quo and prevent change. Of 100 House of Delegates races in 2013, “only 12 to 14 were competitive,” notes Leigh Middleditch Jr., a Charlottesville lawyer and a founder of the Sorenson Institute for Political Leadership at the University of Virginia, told me earlier this year.

Stephen Farnsworth, a political analyst at the University of Mary Washington, has studied gerrymandering for years and believes it negates general elections in favor of party primaries where a handful of hard right radicals can dominate.

This is especially true in some rural districts where tiny cadres of activists, again mostly Republicans, dominate the picks for primaries. It doesn’t matter what the general public thinks or wants. A narrow minority worms its way in power and becomes beholden not necessarily to the party overall, but a little slice of it.

That is why so little gets done.

The very fact that leaders like Howell and Norment are in place and the primary system will make McAuliffe’s efforts very difficult. One wonders if you could go outside the diseased legislative system and forced change through the courts.

It worked before against such Virginia travesties as Massive Resistance. Something to consider.

In the “If Your Like Your Health Care Plan, You Can Keep It” Department…

then-i-saidFrom the Times-Dispatch: “After a year’s reprieve, up to 250,000 Virginians will receive notice by the end of November that their health insurance plans will be canceled because the plans do not comply with the Affordable Care Act and accompanying state law.”

Now those Virginians will have to buy new, Obamacare-compliant plans, which means they will have more benefits they may or may not want… and will cost more.

The Virginia Association of Health Plans, which has become a wholly owned subsidiary of the Obama administration, defended the forced switch. Said Executive Director Doug Gray: “I don’t call that cancellation – I call that an adjustment to the new law.”

I call it a cancellation. I’ll be that the people affected by the law call it a cancellation, too.

– JAB

Richmond’s Tech Star in Kickback Scheme?

HDL LogoBy Peter Galuszka

Critics of the American healthcare system have long cited hidden charges as one reason why costs are so high and why reform is needed.

So, it is disturbing to read a report on the front page of today’s Wall Street Journal that Health Diagnostic Laboratory, arguably the most successful of the biotechnology firms to come out of a much-touted research park in Richmond, is implicated in a possible scheme to pay kickbacks to doctors who use its blood testing services.

The Journal reports:

Until late June, HDL paid $20 per blood sample to most doctors ordering its tests — more than other labs paid. For some physician practices, payments totaled several thousand dollars a week, says a former company employee.

HDL says it stopped those payments after a Special Fraud Alert on June 25 from the Department of Health and Human Services, which warned that such remittances presented “substantial risk of fraud and abuse under the anti-kickback statute.

HDL Chief Executive Tonya Mallory told the Journal that her firm “rejects any assertion” that the company grew as fast as it did “as a result of anything other than proper business practices.”

Meanwhile, HDL has sent Bacon Rebellion this updated response.

Others say that paying doctors fees sets up the chances for fraud, especially in Medicare, one of HDL’s biggest markets, the Journal reports. Other testing firms, the Journal reports, pay doctors nothing for using their services.

This is bad news for what was Richmond’s Poster Child of successful high tech startups after years of flops at the Virginia Biotechnology Research Park. Founded in 2008 under Mallory’s leadership, HDL zipped up to $383 million in revenues with 41 percent of that coming from Medicare,” the Journal says.

Much of the issue seems to be related to how accurately and fairly to define what is merely drawing a patient’s blood and how much goes for “P&H” or processing and handling. A problem is that Medicare doesn’t pay any more than $3 for merely drawing blood. HDL has estimated that the “P&H” part is worth about $17. The firm claims it has special proprietary methods that give it an edge.

According to Virginia Business magazine, which named Mallory its person of the year last year:

Mallory, 48, founded HDL in the summer of 2009. Since then, it has grown from a kitchen-table business plan to a corporation earning more than $420 million in annual revenue, employing 750 people, processing 4,000 lab samples and running more than 60,000 lab tests each day. HDL has driven near constant construction at its home in downtown Richmond’s Virginia BioTechnology Research Park, where a $68.5 million expansion soon will triple the company’s footprint to 280,000 square feet.

Last year Mallory received the Ernst & Young National Entrepreneur of the Year award in the Emerging Company category. One of the country’s most prestigious business awards for entrepreneurs, it recognizes leaders who demonstrate innovation, financial success and personal commitment as they build their businesses.

The Journal, however, quotes several disgruntled employees and notes that Mallory had worked for a California firm called “Berkeley Heart Lab Inc,.” which began using tests called “biomarkers” which can predict future health problems by analyzing blood.

Mallory, who was raised in Hanover County and attended Virginia Commonwealth University, was senior lab-operations manager at Berkeley until she left for Richmond in 2008, the Journal says. Two Berkeley sales executives went with her and formed a company that ended up marketing HDL’s products.
Berkeley sued HDL, accusing it of stealing its business. HDL denied the allegations. HDL settled one case for $7 million, the Journal says, but other cases are pending.

A Better Route

Yeah, GRTC buses have bicycle racks now. But bus companies aren't pursuing disruptive innovation.

Yeah, GRTC buses have bicycle racks now. But bus companies aren’t pursuing disruptive innovation.

by James A. Bacon

The GRTC Transit System, like most municipal bus systems, provides a one-size-fits-all transportation service. Whatever the route, time of day and level of demand, GRTC runs a standard city bus capable of carrying nearly 60 seated and standing passengers along fixed routes. Everyone pays the same fare ($1.50 on local routes), regardless of time or distance traveled. We’ve all seen the big GRTC buses driving around with two or three passengers. We all know that, given the cost of paying a driver and operating a vehicle, many if not most bus routes operate at a loss. It would surprise few to hear that GRTC costs U.S., state and local taxpayers $33 million in subsidies to operate in fiscal year 2014.

Many people justify this significant subsidy on the grounds that buses provide a way for car-less poor people to get to their jobs. What the Richmond metropolitan region needs, they say, is more bus service so poor people can reach a broader range of job opportunities. Environmentalists also favor buses on the ground that they generate less pollution and carbon dioxide emissions than automobiles do. Local government officials in Henrico and Chesterfield counties tend to oppose the expansion of bus routes not on grounds of principle but on grounds of economy. Their argument: We just can’t afford it.

If we count on fiscally strapped local governments to loosen up the purse strings to pay GRTC to open new routes, we’ll be waiting a very long time. Maybe it’s time to start thinking differently: how to expand mass transit without GRTC. A free market in transportation services, I contend, would provide superior service to poor people. It would increase shared ridership and reduce pollution emissions. As a bonus, it would save taxpayers millions of dollars in subsidies.

Yes, mass transit in the United States is that bad. GRTC is reasonably well run by the standards of other government-owned monopoly transit systems. Government-owned monopolies worked adequately for decades when innovation in cars and buses was incremental in nature – installing seatbelts or switching from diesel to natural gas. But the traditional model is hopelessly inadequate when the transportation industry stands on the edge of the most momentous transformation since Henry Ford’s invention of the assembly line.

The information technology-communications revolution is sweeping through transportation, just as it is through consumer electronics, building automation, health care, manufacturing and every other sector of the economy. Thanks to smartphones, it is easier than ever for drivers and passengers to locate one another. Thanks to Big Data analytics, it is easier for transportation-service companies to predict where and when transportation demand will occur and to mobilize assets accordingly. New technology is inspiring new business models that literally no one was thinking about 10 years ago.

The heralds of this new wave are Uber and Lyft, Silicon Valley-funded companies that have started competing with taxicab services in many metropolitan regions across the country. These companies are targeting the high end of the transportation services market, charging premium rates for customers willing to pay for a limousine-like ride at a moment’s notice. Predictably, they are getting pushback here in Virginia from taxicab companies. The regulatory future is uncertain. But whatever happens to Uber and Lyft, the new technology is here to stay. Taxi companies are already adopting it themselves.

Bridj, a Boston-area company, charges $6 per ride in comfortable, Wi-Fi- equipped coaches to travel from suburban locations to downtown Cambridge and Boston. Thousands of riders, it appears, are willing to pay a premium price for a premium service that municipal bus companies can’t match with their one-size-fits-all mind-set. As this new industry continues to innovate, it’s just a matter of time before entrepreneurs use the same technologies to serve lower price points. In a free market, there are few barriers to entry; someone will figure out how to serve poor people and do it cheaper than the transit companies can.

Eventually, someone will devise a smartphone driver-rider matching service open to all comers. Anyone with decent credit and a good driving record will be able to fork out $32,000 for a 12-seat van and start his own jitney service. In developing countries around the world – even in countries where $32,000 is a lot of money – jitney service is affordable to poor city dwellers. Surely in America, where we have some of the richest poor people in the world, someone will figure out how to convey them to major employment centers.

The transportation revolution doesn’t end there. Automobile companies are rethinking the idea that everyone needs to own his or her own car. Some think that the future is transportation-as-a-service. Outside San Diego, Calif., real estate developer Rancho Mission Viejo is partnering with Daimler AG, owner of Mercedes Benz, to roll out a service that provides subscribers access to cars, scooters, buses, shuttle vans and car-pooling, primarily for use in its Ladera and Sendero communities. The aim isn’t to persuade residents to go totally car-free, just to go car-lite. The goal is to cut the cost of mobility – $9,000 yearly to own and operate the average car – in half.

Environmentalists and anti-poverty warriors will continue to pressure Henrico and Chesterfield officials to subsidize the expansion of GRTC into the two counties. Given the paucity of walkable, higher-density neighborhoods in suburban Richmond and the lack of congestion – it’s the least congested of America’s 51 largest metros – the economics for mass transit will always be difficult. Rather than throwing money at an antiquated business model, government officials should encourage the emerging free-market alternatives. Roll out the welcome mat to Uber and Lyft. Ask Bridj to check out our market. Sweep away barriers that prevent jitneys from going into business. Beg Daimler AG to bring its transportation-as-a-service to the Richmond region.

We have a choice: Embrace the transportation past or the transportation future. I’ll take the future.

This column was published originally in Henrico Monthly and Chesterfield Monthly this month.