JIM GORDON IS NO MYSTERY TO ME
THE DEVALUATION OF TRUST ME
Trust me, two words than can send shivers down the stoutest spine, mine included. These two short words are an invitation to ruin. Rolling off the lips of con artists, candidates and exploiters everywhere since the beginning of time they should signal immediate vigilance, doubt, skepticism and caution. It is perhaps wise when we hear these two words to wonder why anyone who is trustworthy feels it necessary to tell us he can be trusted.
Case in point; Boston energy developer James S. (Jim) Gordon. Originally Gordon with his Cape Wind project was going to save everyone in New England money, not much but better than nothing. Then he was going to exert a "downward pressure" on New England energy prices. Then the story changed again - his wind energy would at least offer a stable price, high for now but far better than other energy years down the road when oil and gas would again skyrocket in price. Now, finally, the truth has come out that he actually needs to sell his Cape Wind energy for between two and three times what other energy costs. Conveniently this fact comes out after the Department of Interior has approved the project. But, his temperatmental offshore wind mills, in spite of the unreliable nature of wind itself, will somehow stabalize New England's energy supply.......trust me.
Some history might help us understand Jim Gordon and what he is up to these days. In the nineteen nineties Gordon was a pivotal figure in the movement to deregulate energy. In fact, he appears to have been the founder and was for some time the head of the New England Competitive Power Alliance. Gordon pushed to separate the generation and delivery of electricity. His argument, one shared by many others, was that deregulation would open the generation side of energy to competition while existing energy companies would continue their ownership of distribution networks and would simply charge for their delivery services while competing in the new open market for the best energy prices they could find. Massachusetts and now many other states obliged and passed laws allowing deregulation. Thus the merchant energy business was born and Gordon plunged in without hesitation as large utility companies began to sell off their power plants. That was probably his plan all along.
Apparently no one remembered the fundamental truth of deregulation: when public utilities are regulated by government, their prices will increase constantly. But, when these same public utilities are deregulated, opened for free market competition, their prices will rise constantly. Simply stated, people in the business of providing public utilities will raise their prices at every possible opportunity.
Gordon had already built and sold a small biomass plant in Alexandria, New Hampshire in the 1980s. In the late nineteen nineties he built six gas fired power plants in Rhode Island, Massachusetts and Maine. He owned at a least a healthy part of all these plants and soon after completing them sold all of them. Already well off from his twenty plus years in the energy business Gordon cashed in handsomely, into the nine figures. At his peak Gordon produced 8% - 10% of the total electricity load for New England. He sold part of his portfolio to a company, Bay Corp Holdings, that owned 15% of the nuclear power plant in Seabrook, New Hampshire and thereby garnered a seat on Bay Corp's board of directors, voting around 5% of their shares. He held this seat until November of 2005.
During his time developing gas fired power plants Gordon appears to have encountered people who did not accept his energy math. Apparently some of them were executives and decison makers at Boston Edison Co., now a subsidiary of NSTAR. Gordon's pitch was that he would sign a long term power purchase agreement with Edison but his price would initially be above the price available on the open market (above market). He reasoned, as he confidently marched through his trademark snappy patter that although his price would be higher initially it would actually save Edison money in the long run because natural gas prices were sure to rise. His up-front premium would guarantee, in some mysterious way, that he could afford to pay the higher gas prices he assured would occur and still be able to generate electricty at a profit. Magic! Trust me.
It may have occurred to Edison's executives that what they were being sold was a bill of goods designed to allow Gordon a very large and quick score while he prepared to sell off his newly completed power plants. Sell them off he did and score he did. So far it appears that Edison had it right. All this, of course, would be done on the backs of Edison's rate payers and or at the expense of their own bottom line. They had other worries, however, as the Boston press fired a few salvoes at the company's top management because of their compensation packages, claimed to be excessive. Was the press attack merely coincidental with Gordon's frustrated attempts to achieve greater personal wealth by doing a bad deal with these same overpayed Edison folks?
Then, when Gordon announced his Cape Wind scheme he played to Cape Cod audiences by declaring that Cape Cod and Martha's Vineyard would receive 75% of their energy directly from Cape Wind; clean energy and at a cost savings. Gordon blew into town, flush with the many, many tens of millions of dollars he had pocketed from the sale of his power plants and went to work selling his latest deal. What Cape Cod did not know, skeptical as people there can be, was that Jim Gordon's entire career as a merchant power generator had been based on above market power purchase agreements. And his pitch was always the same: pay me more now to save a lot more later. Trust me.
One simple questions keeps coming to mind: If such arrangements are so beneficial, mutually, for both the merchant power producer and the utility company that buys his power, why is it that Gordon consisitently sold his power plants soon after completion? Why did he not hold on to them so he could wallow in the money they produced year after year? Could it be that he knew up front what Calpine discovered too late, after they had bought two power plants from him and several others nationwide only to be caught up in the mess that was the initial stages of energy deregulation followed by the Enron debacle? Calpine, after all, filed for chapter 11 protection and spent a few years digging out of a deep hole. Smart guy, Jim Gordon, at least smarter than Calpine but not Boston Edison.
Now, it seems that NSTAR (Boston Edison's parent) does not want to do business with Cape Wind. They have agreed to buy 32 megawatts of electricity from TransCanada, wind energy produced on land in Kibby, Maine. They are not presently involved in any power purchase agreements with Gordon. Only National Grid has taken that leap of faith. And, because National Grid is going to buy Cape Wind's power. Cape Cod and Martha's Vineyard are going to forego the honor of paying Gordon's obscenely high price for electricity. Gordon has simply found a different lamb to shear.
There is more to Jim Gordon's history as a source of energy wisdom. I was invited to attend a cookout on the Sunday of Labor Day weekend in 2007. I accepted. The event was held at the Portuguese American Club in Falmouth on Cape Cod and its featured guest was Jim Gordon. Of course I was the token Cape Wind opponent, but I had been invited because someone felt I could be led over to the dark side. Gordon and I had met on a few prior occasions, both of us remaining polite, even cordial. This time was no different...except for the sales pitch. Jim Gordon has a way of remaining low key and affable while actually delivering the hardest sell imaginable. The man has skills. Look how completely he has fooled our governor and hundreds of government officials plus thousands of wide eyed supporters and almost all of the press locally and nationally.
As he prowled the front of the cookout area in his subdued polo shirt and chinos Gordon, the acknowledged energy expert, told how we would not be seeing any new gas fired power plants being built because gas prices were too high and volatile and because there simply were no untapped gas reserves to be had. He said confidently but with his usual ease and restraint that only wind could satisfy our anticipated growth in energy demand. Cape Wind will lead the way to a more stable and cost effective and clean energy future. Trust me.
By the way, since that day's sales pitch natural gas prices have fallen by fifity percent and net demand for electricty has declined as much as ten percent. Trust me.
There was a problem with the presentation which I had the courtesy not to bring up. After all, I could have left that cookout in a plastic bag if I had told what I knew. While telling us there would be no new gas fired plants Gordon himself was in the permitting process for a new plant in the Pioneer Valley Energy Park in Westfield, Massachusetts. Energy Management Inc. Gordon's umbrella company based in Boston, had initiated the state review process for his application. The plant would be built by the Westfield Land Development Company LLC, a Delaware corporation. To produce its 400MW it would need two million gallons of fresh water daily to cool its turbines and it already has, at this writing, state permits for a one million gallon oil storage tank so that it can burn oil whenever it suits Gordon's needs to do so. Apparently Gordon has just the right story for every occasion.
I spoke with an official from the city of Westfield and asked how he found dealing with Gordon's company. His answer, accompanied by a hearty laugh, was telling. "Oh, they're great, nice guys. Really easy to deal with....as long as you agree with them."
As for Gordon and his expert opinion that both oil and gas supplies and prices will remain unacceptably volatile, making wind of all things a preferable saource of energy: remember Bay Corp Holdings? The principles of Bay Corp Holdings appear to be the same as the principles of a company called Houston Street Exchange. Houston Street Exchange is a trader in oil and gas...energy. One has to wonder if all these years while beating the drum of let's get off the oil and gas treadmill Gordon has been speculating in energy with his friends from Bay Corp Holdings. Recently, for an entire year Gordon was saying that gas would become short in supply and prohibitive in cost while at the same time huge new gas reserves were being discovered and the actual price of gas decreased by half. Yet, a lot of people, people in positions from which they manage our energy future, seem to believe that Gordon's pronouncements about our energy future are true. The most frightening thing I could ever hear is Jim Gordon saying, trust me.
Copyright 2010 by Peter A. Kenney