The regulated investor-owned utility business model has ingrained a wholly unwarranted sense of entitlement in companies such as PATH. Regulation allows these companies to recover their expenses incurred to provide a public service, along with a guaranteed profit averaging around 10%. Not too shabby -- what investments do you own that are guaranteed a 10% return?Sound like a pretty sweet set up? However, it's just not good enough for the investor-owned utilities, who are under enormous pressure to produce bigger and bigger shareholder profits every quarter. Ten percent isn't shabby, but management's spending on items that cannot legally be passed to ratepayers in a regulated environment cuts deep into profit margins. Therefore, the game is to find ways to cheat the system and create a way to meet profit targets without cutting expenses on the shareholder side of the balance sheet, such as lobbying, promotion, and political contributions, which the utility finds essential to a favorable regulatory environment.Experiments with deregulation haven't worked out so well. Remember Enron? Deregulation and competition have been a miserable failure that usually ends up costing consumers more
than a regulated environment.Interstate high-voltage transmission lines are regulated by the Federal Energy Regulatory Commission, whose mission is to ensure that rates are just and reasonable and not unduly discriminatory. FERC also ensures that transmission is open access, in an effort to keep costs low through competition. What you end up with is another regulatory hybrid
that may fail the consumers who are supposed to benefit.Transmission owners are allowed to apply to FERC to be awarded "incentives"
that encourage new investment in transmission. They are not required to apply, and the bar is set pretty high for companies that aren't part of the good ol' boy utility scene. PATH applied for and was awarded, among other incentives, a 14.3% return on equity (since reduced to 12.4%), and "recovery of 100 percent of prudently-incurred costs associated with abandonment of the Project, provided that the abandonment is a result of factors beyond the control of PATH, which must be demonstrated in a subsequent section 205 filing for recovery of abandoned plant." The incentives were awarded under the condition that the PATH Project was included in PJM's Regional Transmission Expansion Plan (RTEP). All risk for the PATH Project was shifted to consumers.
PATH was also awarded use of a forward-looking formula rate to collect expense and profit from the captive PJM-region customer base through the setting of a yearly rate. The formula rate allowed PATH to collect yearly expenses (such as taxes, certain types of advertising, certain contracted services, an allocation of corporate expenses, and other routine operation and maintenance expenses for the project), along with a yearly profit (ROE) on the amount of PATH's capital investment in the project. Capital investments included land, engineering, routing and siting, regulatory expenses, legal fees and other expenditures they made that were necessary for the construction of PATH.PATH behaved as if their formula rate was a bottomless money fountain from which they could draw to buy whatever they wanted. How many of you thought it was outrageous that PATH was allowed to have all their costs at the PSC paid for by us (and even earn a profit on them!) while we were forced to spend our own money to defend our interests?
We paid for them to fight us, and then we paid for us to fight them, which gave PATH a sense of superiority and entitlement. They felt entitled to spend our money on whatever they wanted to accomplish their goal of building the project.How about being forced to pay for PATH's public relations campaign and millions of dollars of propaganda advertising?
How outrageous was that? PATH's sense of entitlement, and greedy, perfidious public relations contractor Charles Ryan Associates, encouraged them to spend freely on an effort to sway public, political and regulatory opinion in PATH's favor. The more of our money PATH spent on this effort, the more Charles Ryan Assco. earned. However, in the case of these promotional expenses, it turns out that they should not have ever been billed to ratepayers, but absorbed by stockholders unless and until PATH made a sufficient showing at FERC that they provided benefit to ratepayers
. PATH failed to do its homework before going on its spending spree.
If PATH's stockholders (which only include parent companies FE & AEP) knew up front that they would be required to absorb these costs, would they have spent less? Of course!Now PATH finds itself in a precarious position with a $130M stranded investment of its stockholders money that may not have exactly been prudently incurred, and a dead project that has been removed from the RTEP, on its hands. Never fear, the PATH project geniuses will just dump the whole stinking mess on its accounting and legal team for the daunting and impossible task of recovering the money and cleaning up
the mess these arrogant blowhards created with their little spending spree. Won't we have fun!PATH windbag Todd Meyers had a lot to say about PATH's sense of entitlement in a recent article in the Spirit of Jefferson newspaper."Potomac Edison spokesman Todd Meyers said only prudently incurred costs will be recovered and would not acknowledge that Newman's figures were accurate. "We will have to do a cost recovery filing to FERC" Meyers said. "We will only know then the amount of cost to be recovered"
. Well, what do you know, it looks like Todd acknowledges that a portion of that current $130M rate base total might not be prudent
and that there's going to be a need for a lot of legal and accounting skulduggery before PATH makes its FERC filing. Todd passes the hot potato to others, after upping the temperature a few degrees."Meyers said recovering costs is an allowable part of doing business because no company would take on a project that is as expensive as a large transmission line without it. "There are many risks associated with that" he said, citing a possible regulatory denial of the project. He said no one would attempt such projects without this assurance.
"Todd's sense of entitlement deserves a medal for that little gem
! PATH wanted
to build the project and collect a 14.3% ROE from here to eternity. The "PJM ordered us to build it" line has worn threadbare long ago. What's that you said? "Regulatory denial?" I like the sound of that! As far as Todd's contention that "no one would attempt such projects without this assurance," I'd like to introduce Todd to the concept of merchant transmission lines
. Or perhaps Todd wasn't paying attention when an independent company without a sense of entitlement or bottomless fountain of ratepayer cash proposed the Liberty Line
as an alternative to the PATH project. Yes, it's true, other companies have proposed such projects without this "assurance," or the ability to shift all financial risk to consumers.
"Cost recovery will be spread across the entire PJM area, because they all would have benefited from PATH, had there been a need for it".This is so crazy that it makes my head hurt. There wasn't a need for it! Todd finally admits there was no need for PATH! Progress. :-)
Although PJM and PATH tried to sweep the project's cancellation under the rug, or bury it under an avalanche of idiotic paid media masquerading as earned media, they couldn't stop the news.The State Journal has the best, factual coverage.
Be sure to leave a comment and tell Pam how much you appreciate her timely, factual, knowledgeable reporting!Associated Press distributed this story. Who are the "environmental groups" that are celebrating?
I haven't seen or heard anything out of the environmental groups. Did AP mean the citizen groups who had their lives disrupted by the PATH project for the past four years? Perhaps.And, if you missed Panhandle Live this morning, you can listen to a podcast of the show here.The Journal provides an important lesson to take away from this experience:"We exposed the truth and we used our democratic processes to oppose the project, and it worked," she said. "Citizens getting together can change corporate initiatives and can change governments. The processes are there; we just have to use them."
Unfortunately, the Spirit of Jefferson's "Opponents cheer PATH project's end"
is behind a pay wall. Reporter Bryan Clark and editor Rob Snyder present some really interesting quotes in a well-written story. If you're in the panhandle, go out and buy a copy, and if not, it's probably worth the $.15 charge (really, Spirit? are you planning to get rich fifteen cents at a time?)And there's more to come. Generating press is like planting a garden. PJM and the power companies may decline to dirty their hands this season, but that's not going to stop the seeds from sprouting. It just means that this year's harvest is going to be planned and enjoyed by us, and not them. What fun!
Finally, PJM has issued PATH's official Death Certificate. Read it and rejoice!
Patience and I are on the radio this morning at 9:00 with Hans Fogle on Panhandle Live. You can listen online here.
Let the joyous news be spread,
The wicked, old PATH, at last, is dead!
"The PJM Board during a phone conference Friday decided to remove the Potomac-Appalachian Transmission Highline (PATH) and Mid-Atlantic Power Pathway (MAPP) lines from PJM’s regional transmission plans, based on the PJM staff’s recommendations."
But we've got to verify it legally, to see
Is morally, ethic'lly
Undeniably and reliably Dead.
As Regional Transmission Operator they must aver, they've thoroughly examined her
And PATH's not only merely dead, it's really most sincerely dead!
Then this is a day of independence
For all PATH opponents and their descendants!
Yes, let the joyous news be spread
The wicked, old PATH at last is dead!
Ah... now I see why PJM needed the weekend "to brief the project developers" before releasing their decision on the PATH and MAPP projects.It was so a propaganda snow job using Gannett newspapers could be effected to blanket the media with stories about our "fragile" transmission system and how it needs rebuilding.
I wonder how much that cost?I won't say PJM is behind this, but it certainly had a hand in it. It looks like a bigger effort... perhaps EEI or our federal government at work?The industry is crying about the demise of MAPP.Or, alternatively, they're using a whole bunch of "expert" opinions to convince the sheeple that the transmission grid is vulnerable.Of course, every last one of these articles is utter hogwash. But, we'll deal with that later.Whatever decision is coming out of PJM today, it looks like it's going to be a doozy! Stay tuned.
Wondering what happened at the PJM Board of Managers meeting this morning? So are the rest of us. Of course, some folks already know... isn't that right?
Anyhow... PJM says they will be releasing a statement at mid-day Monday because they need to "brief the project developers."
Uh-huh, PJM. Transparent.
See you Monday!
Only the greedy schemers at FirstEnergy could concoct a way to use a state renewable mandate to rip off their customers. "Ohio law requires utilities to generate a percentage of power through renewable energy or buy credits from people and organizations that do.
The cost of renewable-energy credits can be passed on to consumers, but fines cannot. Rather than pay fines, FirstEnergy bought credits at prices higher than anywhere in the country, before or since, an independent audit found."
So, why should you care about what happens in Ohio? Because another of FirstEnergy's money-making schemes caused by Ohio's regulatory environment is going to cause huge rate increases for their West Virginia customers. FirstEnergy is outta control.
The latest scheme involves dumping the liability of their Ohio subsidiary's ownership of several coal-fired generation plants into West Virginia's regulatory system through a "sale" of these assets to their West Virginia subsidiaries. Pam Kasey at the State Journal does a fabulous job explaining this scam
. Bill Howley at The Power Line also has some rather bald criticisms about FirstEnergy's latest scam.
And to top it all off, FirstEnergy is merely copycatting AEP's earlier plan do the same thing with its Ohio subsidiary. Once again, the consumers are the ones who get pelted with corporate dodge balls
.Just this year, FirstEnergy gamed PJM's capacity auction to increase their profits through strategic closing of coal plants to create capacity shortages and
increase prices, force RMR contracts at plants it owns, and propose $1B of new transmission to move generation from its own plants into Cleveland. FirstEnergy also gamed the market by failing to bid energy efficiency into the auction. There's FirstEnergy again, manipulating a statute in order to squeeze money out of it and turn what should have been a consumer asset into a consumer liability.Then came the silly TV commercial battle in Ohio over AEP's proposal to jack up capacity charges that its competitors would have to pay. FirstEnergy focused on AEP's rate case to distract attention from its own, where the PUCO Santa Claus delivered everything on FirstEnergy's wish list.
In the end, PUCO cut AEP's requested capacity rate in half, but also granted FirstEnergy their wish to pay a much lower rate. The difference between what AEP can charge and what FirstEnergy has to pay was, of course, added to consumers' bills. This enables FirstEnergy to continue to offer lower rates that encourage AEP's customers to switch suppliers -- but the consumers end up paying the difference somewhere else, so the rates aren't really "lower."Earlier this year, a "prairie fire" of public outrage caused PUCO to rescind its approval of AEP's rate case and start over. Many accused PUCO of being biased toward AEP. Nothing could be further from the truth -- PUCO is currently stacked with commissioners who are biased in favor of FirstEnergy. FirstEnergy has set themselves up to do whatever they want in Ohio's regulatory system, and this means consumers will pay more.So, what's the difference between FirstEnergy and AEP? They're both shameless money grubbers, always seeking to increase their quarterly profits for the benefit of shareholders at the expense of the consumers they supposedly "serve." Perhaps this article will provide a little insight into what makes FirstEnergy just a little more despicable.
"AEP, based in Columbus, is quiet and careful, run by an electrical engineer. FirstEnergy, based in Akron, has a scrappy reputation and is run by a tough-talking lawyer."
“Historically, AEP always has been thought of as a very top-hat, well-managed company, and FirstEnergy did not have that reputation,” said OSU’s Jones.
But the past few years have been much more chaotic. FirstEnergy has shown itself to be nimble in a rapidly changing market, Mason said.
“Using a football analogy, (FirstEnergy) has learned to run the spread offense, and AEP is primarily a solid team with a big line and great running game,” he said."It's an observation that was made 18 months ago in the first Formal Challenge to PATH's rates -- that Allegheny (now absorbed into the FirstEnergy empire) was the source of most of the accounting mistakes and imprudent expenses recovered from ratepayers in error."The advertising, lobbying, and imprudent expenditures are all the more glaring when compared with the similar TrAIL project expenses. Many of the same contractors and one of the same parent companies were involved in the TrAIL project.... Most of these same objectionable strategies began during the TrAIL project, under the management of one of PATH’s parent companies, Allegheny Energy.... a comparison helps to illustrate the manner in which this company has transgressed.... In fact, we now suspect that if this same process were to be embarked upon concerning TrAILCo.’s Formula Rate, substantially similar errors and imprudent expenditures
would quickly make themselves evident. We would urge the Commission to require a thorough review of all of Allegheny Energy’s rate recovery processes, as the party in common on both projects."
FirstEnergy is just a little more eager to tippy-toe along the borders of legality, hoping to get away with these continual consumer ripoffs. It's risky business, because with each episode of questionable business practices, FirstEnergy makes a few new enemies. When your closet is bulging with skeletons, a few are bound to come tumbling out at the most inopportune moments. FirstEnergy's enemies are watching and waiting because the big scandal that FirstEnergy will be unable to recover from is coming.
While trying to participate in the U.S. Dept. of Energy's "consultation" process for development of their 2012 congestion study
and national interest electric transmission corridor designation yesterday, I had to pick my chin up off the floor when DOE's answer man, David Meyer, told me that "offshore wind is experimental
" in response to my question about how offshore wind potential will be modeled into the congestion study. Meyer said that because "offshore wind is experimental
" it will play no part in the congestion study and be given no consideration.Really
? Maybe Meyer can let Europe know that offshore wind is only an experimental fantasy that doesn't deserve serious consideration."The European Commission anticipated, in its 2008 Communication on offshore wind energy (EC, 2008) that “offshore wind can and must make a substantial contribution to meeting the EU’s energy policy objectives through a very significant increase - in the order of 30-40 times by 2020 and 100 times by 2030 - in installed capacity compared to today.”
150 GW of offshore wind projects are already in various stages of planning.
A total of 1,503 offshore turbines are now installed and grid connected in European waters, bringing total installed capacity to 4,336MW, spread across 56 wind farms in ten European countries.
In the first six months of 2012, 132 new offshore wind turbines, totalling 523,2MW were fully grid connected (up 175MW or 50% compared to the same period last year). Overall 13 offshore wind farms were under construction during the period. Once completed, they will represent a total installed capacity of 3,762MW."
And maybe Meyer should also let the developers of numerous Atlantic offshore wind projects know that they can quit wasting their money on "experiments:"Atlantic Wind ConnectionFisherman's EnergyDeepwater WindJust to name a few...Perhaps what Meyer meant to say is that offshore wind is not a "preferred potential renewable resource" (page 8). Although when I asked a question last week about who designates (or "prefers") certain renewable resources, he told me that DOE wouldn't be designating which resources are preferred. But yesterday, he "preferred" onshore wind to offshore wind. Slippage! Dr. Freud? Paging Dr. Freud! Is there a doctor in the house?If the United States ever manages to develop its incredible offshore wind resources, it won't be with the support of the Department of Energy, but in spite of it. How does this serve the taxpayers who fund DOE?
How many times can the trade press rehash the PATH cancellation story? Answer: As many times as necessary to ensure that they don't have to actually cover any REAL stories about ordinary citizens organizing and kicking PATH and other unneeded transmission projects to the curb.Another version of AEP's "disappointment" showed up this morning in Energy Biz (
For Leaders in the Global Power Industry!)AEP:“We put a lot of work into the PATH project,” a company spokesperson told Energy Central’s TransmissionHub Aug. 8. “Obviously, we’re disappointed that it’s not going to go forward, but we’ll turn our focus now onto other transmission projects that we have in other areas that are active projects.”FirstEnergy:"We remain responsive to what PJM recommends and we will focus on the projects that they do see necessary to strengthen the electric grid,” a FirstEnergy spokesperson told TransmissionHub Aug. 8. “In fact, we have a number of transmission projects at FirstEnergy that we are pursuing at this time that were recommended by PJM in its latest regional transmission plan, so we’ll be focusing our efforts on those projects, particularly projects in Ohio and New Jersey.”Is that the best these two corporations can do after wasting nearly a quarter billion dollars of electric consumers' money on a for-profit initiative
that was never needed in the first place? You guys just suck.AEP & FE just don't care that their project failed because both companies have moved on to other profitable transmission ventures. No big deal. No apologies.However, PATH used to be such a big deal that promoting it through propaganda and secret back room deals
wasted millions of dollars of hard-working electric consumers' money. And still PATH got soundly beaten in the all-important court of public opinion by a bunch of untrained nobodies (but we're quick learners, right?)Also despite their current "no big deal" attitude, some of the PATH employees actually got angry at our humorous campaign to humanize a faceless corporation and make it less scary for us "little people." While most had the smarts to laugh along with us, there were a couple who made our job more fun by reacting. To the few who embarrassed themselves making faces at public meetings, posting filthy names on an internet blog, or wasting time and money continuing to fight us in regulatory venues
-- thank you for making my job so much fun! You fellas might want to develop a sense of humor. It helps. So, good luck with your new transmission projects, AEP & FE, and hopefully our "paths" will never cross again.