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If you've been following along on the Primary Power SVC issue at PJM that we've featured here and here, your wallet should be thrilled that PJM has awarded the projects to incumbent transmission owners FirstEnergy and Dominion.

As you will recall, Primary Power claims to have spent $5M developing this project over the past few years in cooperation with PJM engineers, and they were awarded a 200 basis point incentive by FERC for the project in 2010.

Meanwhile, a couple of PJM's favored incumbent utilities have swooped in at the last minute and taken the project away from Primary Power.  As I recall, the last letter Primary Power sent to PJM's Board of Managers was cc'd to their attorney.

The cartel has placed themselves in a precarious legal position, but that's nothing new.  As we've seen many times before, they will stoop to amazing depths of depravity in order to make sure their favored "stakeholders" continue to receive all the tastiest morsels.  Apparently "right of first refusal" (where incumbents get first crack at needed upgrades) isn't dead at PJM, despite FERC doing away with it in Order No. 1000.

Now, here's the stupidest part of the whole thing (and where your wallet comes in).  If Primary Power ends up filing a lawsuit against PJM and is successful, guess who will pay the award?  YOU will!  That's right, because PJM is a "not-for-profit" and generates no profits, you ratepayers are PJM's piggy bank.  So, let's assume the court sees fit to punish PJM for their arbitrary and capricious award of the SVC projects... PJM doesn't care because they will just pass any punishment on to you in the form of a higher electric bill.

The cartel has got to go.
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Back in February, FirstEnergy announced closure of three antique, coal-fired, electric generation facilities in West Virginia in September of this year, Albright, Rivesville and Willow Island.  On March 9, FirstEnergy's Mon Power and Potomac Edison subsidiaries submitted what they called an "informational filing" to the WV Public Service Commission, notifying them of the closures and reasons therefore.

Like a bolt of lightning out of a clear blue sky, the WV PSC issued an Order yesterday reopening the companies' ENEC filing and requiring more information on the retirements.  Meanwhile, FirstEnergy is forbidden to take any further action toward the retirements.

The PSC's Order made a lot of people and entities insanely curious about what's driving the PSC's Order, and apparently, the curious include FirstEnergy itself.

Is the WV PSC being driven by the politics and influence of coal?  It happened in Kentucky when AEP changed course and decided to install scrubbers on Big Sandy instead of retirement/repowering.

Is the WV PSC concerned about reliability issues?  A "Reliability Status Report" on the plant retirements has been completed by PJM, however PJM won't publicly release the information at this time.

Is the WV PSC concerned about the economic/jobs issues?  Preston County is begging the Commission to keep Albright open.

Or, is the WV PSC concerned about rate increases for the companies' West Virginia customers?  Perhaps the Commission got wind of a curious little news blurb that appeared briefly back in February, and then disappeared from major news outlets.  Fortunately, there's at least one copy still hanging around.  The article claims that FirstEnergy is gaming the markets with plant closures in order to score a huge financial windfall.

"First Energy’s nuclear plants and baseload coal plants with environmental controls are the primary beneficiaries of the EPA rules," Hugh Wynne, an analyst at Sanford Bernstein, told AP.

Who wouldn't be suspicious when FirstEnergy's "informational filing" reads like they are making a sensible decision... for a change.

Ya know, if West Virginia statute required electric utilities to do least cost planning (S.B. 162, which failed), the PSC would probably already have all the information it is now ordering FirstEnergy to produce, and there would be no need for curiosity.

"Curiouser and curiouser," said Alice...

More to come.
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FERC issued an Order on Remand last Friday.

Back in 2007, while gearing up for the billions of dollars that PJM's coal-fired Project Mountaineer transmission projects would cost, FERC issued Order No. 494, which socialized the cost of these exorbitantly expensive, unneeded projects over a larger customer base. Once authorized by FERC in the Order, PJM changed its cost allocation methods to adopt the “postage-stamp” method of allocating the cost of new transmission in its RTEP that operates at or above 500 kV.  Prior to Order No. 494, all new transmission was paid for through a “license plate” methodology whereby those who directly benefited from the project would shoulder the cost.

Under a license-plate (or zonal) rate design, a customer pays the embedded cost of transmission facilities that are located in the same zone as the customer. A customer does not pay for other transmission facilities outside of the zone, even if the customer engages in transactions that rely on those zones.

Under a region-wide, postage-stamp methodology, all transmission service customers in a region pay a uniform rate per unit-of-service, based on the aggregated costs of all covered transmission facilities in the region.

Due to these new postage stamp rates, a high percentage of regional load, and the  wide geographic reach of the PJM region, customers in Illinois suddenly found themselves being charged the second highest percentage of eastern PJM’s Project Mountaineer costs.

“However, the cost shifts that would be incurred by switching from the DFAX methodology to the postage-stamp methodology are significant, resulting in western zones paying between 1,260 percent and 22,500 percent more for these facilities.”

The Illinois Commerce Commission objected to this inordinate cost, compared to “benefits” received, and the issue ended up before the 7th Circuit Court of Appeals.  In October of 2009, the Court remanded the rate methodology back to FERC, finding that the Commission had not provided sufficient record evidence to justify its findings that the existing allocation practice for new facilities at and above 500 kV was unjust and unreasonable, and the Commission had not adequately supported its conclusion that the postage-stamp methodology was just and reasonable. The court found that the Commission’s reliance on the difficulty of measuring benefits for above 500 kV facilities, and the resulting likelihood of litigation, failed to justify the Commission’s decision. The court stated that the Commission had failed to show “the absence of any indication that the difficulty exceeds that of measuring benefits to particular utilities of a smaller-capacity transmission line.” The court further found that the Commission failed to justify requiring PJM to adopt a region-wide, postage-stamp cost allocation methodology for new transmission facilities that operate at or above 500 kV.

However, the court also recognized that, in comparing costs and benefits, the Commission “does not have to calculate benefits to the last penny, or for that matter to the last million or ten million or perhaps hundred million dollars.”  FERC seems to have taken this to heart in their Order on Remand, issued on Friday.  To summarize, the Order determined that allocating costs of transmission enhancements that operate at or above 500 kV to utility zones using a postage-stamp cost allocation methodology is a just, reasonable and not unduly discriminatory method of allocating the costs of these new facilities.

In order to get there, FERC provided what it feels is the justification the court found missing in Order No. 494.

“In summary, ComEd, along with the other western utilities, will receive significant benefits from the new 500 kV and above projects that prevent the degradation of the PJM transmission system and maintain the capability to continue to produce up to $2.2 billion in estimated system-wide savings each year, as indicated by the ISO/RTO metrics report, along with additional estimated annual savings associated with decreased service interruptions and power quality disturbances, reduced line losses, and reduced congestion. These estimated annual, system-wide savings totaling approximately $2.2 billion compare favorably to the annual, system wide costs of approximately $1.3 billion for the facilities at issue here. In total, PJM’s transmission system provides ComEd’s customers with access to savings of approximately $320 million to $468 million each year.  While we recognize that there is imprecision in valuing the benefits of new 500 kV and above facilities, these estimated savings identified herein provide sufficient justification for allocating approximately $198 million per year in costs to ComEd under the postage stamp methodology for new transmission facilities necessary to maintain the integrity and reliability of the existing system so that customers will continue to have access to savings and to provide for future needs.”

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I suppose it shouldn't come as any real surprise, since the "fix" has been in on the sale of three national parks since last fall, so let's call it outrageous, disgusting and contemptible.  The Obama Administration, Secretary of the Interior Ken Salazar, and the upper echelon of the National Park Service sold something that belongs to YOU to two huge energy corporations today.  And guess what?  YOU will pay for the energy corporations' bribe!

After recommending the "no action" alternative for the Susquehanna-Roseland Transmission Line last fall, the NPS reversed themselves today and selected the power companies' preferred Alternative 2, the most damaging route across the Delaware Water Gap National Recreation Area, the middle Delaware National Scenic River, and the Appalachian Trail.

“In identifying the preferred alternative, we closely examined the existing easements owned by the utilities, the impacts of the proposed transmission line, alternatives to the proposal, and mitigation measures to avoid and minimize adverse impacts to park resources,” said Dennis Reidenback, the Park Service's Northeast regional director.

Oh, and those "mitigation measures?"  That is the $40M land-bribe that the power companies are offering to the NPS in exchange for license to ruin three parks that belong to the citizens of the United States.  And, under federal electric ratemaking schemes, the power companies won't be paying that $40M.  They are permitted to recover the full amount from ratepayers in 13 states and the District of Columbia over the next 50 years.  Under the same ratemaking scheme, the power companies will also make a profit on this $40M through the 12.9% interest they will earn on the unpaid balance of the $40M bribe each and every one of the next 50 years.  The Obama Administration and the National Park Service has sold YOUR parks to corporations and is making you pay for the bribe they received in return for agreeing to the sale of YOUR assets!  

Although the power companies and the Obama Administration are pretending that the Susquehanna-Roseland line will "save you money" by alleviating made-up "congestion," it's all a bunch of phony invention.  Susquehanna-Roseland is going to do nothing but make my electric rates go up.  Hmm... wouldn't this make a delicious formal complaint?  

Check out the comments of New Jersey Sierra Club Director Jeff Tittel, who isn't afraid to call a spade a spade.

"Today the Obama administration sold out our National Parks.  Lands that are supposed to be protected for future generations, they turned over to power companies. This is a shameful day in the long history of our parks and may set precedent for more gas and power lines through our parks.  This decision is an insult to the more than 5 million people that visit the Water Gap every year," said Jeff Tittel, Director, NJ Sierra Club.

"We will continue fighting this project, even in the Courts if necessary.  We will stand up for the integrity of our National Parks, even if the Department of Interior will not."

"This is all about the power of money, whether it is coal companies and utilities pushing a power line that will cut through a national park, or people standing in line to get mitigation money so that they can profit on the destruction of a National Park's resources."

Perhaps worst of all, the environmental destruction could cause a severe infestation of bolt weevils in the Parks!!
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The Colorado Public Service Commission is a bit disturbed by electric utility Xcel's cost of corporate jets for which they are seeking reimbursement from ratepayers.  And if you think they're disturbed, you can imagine how the consumers feel about it.

Xcel added $1.1M of their $5.7M cost of the aircraft to their recent request for a rate increase.  Xcel says the expense is prudent to jet their execs around like mass transit for hoity-toity commuters.  This isn't a rare occurrence.  All the big investor owned utilities feel entitled to live like kings at your expense.  You might even come across the words "corporate jet" in the PATH Formal Challenge (page 60).

These clueless plutocrats need a few lessons in humility and a day or so spent inhabiting the real world in which the rest of us live.  News flash:  The economy is in the dumpster and we can't afford your sense of entitlement any longer!  Your train has run off the rails.  All passengers must disembark!


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Word is that NPS personnel working on the Susquehanna-Roseland transmission project's EIS have been called to the Delaware Water Gap National Recreation Area this week for meetings.  They may not come out of it with their integrity intact!  Help them out by signing this petition.  Do it right now!

Have you signed it yet?  If you just said "no" then you're not allowed to finish reading this blog post.  Go away.

NPS personnel have been under increasing pressure to permit profit-seeking utilities PSE&G and PPL to destroy the most scenic vistas of the park with one of PATH's sister Project Mountaineer unneeded transmission lines.  In exchange for rolling over and selling your public resources to the highest corporate bidder, the Park Service will receive some inferior land on the fringes of the current park as "mitigation."  Those on the inside report that Interior Secretary Ken Salazar has already cut a deal with power company lobbyists to approve the destruction, before the EIS is even finished!  The NPS personnel working on the project have been put into the compromising position of just going through the motions when approval is already in the bag, bought and paid for.  And guess who's paying?  YOU ARE!  Cost of the mitigation bribe will be rolled into the project's rate base that you'll be paying off for the next 50 years in your electric bill, along with 12.9% interest for the power companies every year.

Show your support for the honest NPS personnel who are facing a serious moral dilemma that risks their jobs by signing this petition today!
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West Virginia's penny wise and pound foolish legislators have passed a bill that would enable the Public Service Commission to approve the issuance of bond debt which would allow Appalachian Power to recover its cost of coal over the past 4 years.  The long-term debt will be repaid by electric consumers in their monthly bills over the next decade.  Coal prices are expected to continue to increase in the future.

I'm not going to harp on why this is completely wrong anymore.  I'll turn it over to an expert - James M. Van Nostrand, Director, Center for Energy and Sustainable Development and Associate Professor of Law, West Virginia University College of Law.  Read his analysis of West Virginia's big mistake here.  When our legislators and Public Service Commission won't listen to learned experts, but instead choose to buy into the pie-in-the-sky promises of corporate lobbyists, it's time to clean the state house, before we go bankrupt trying to stay warm in our own house.
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It looks like Primary Power has had another revelation about the shifty state of affairs at PJM.  If you've been following the SVC issue, here's the latest.

Primary Power submitted a letter to PJM on February 29 to make a final plea to retain their prior selection to construct the projects.  FirstEnergy wants to swoop in at the last minute and take over the project and they have been whining like a milksop champ.

In the letter, Primary Power makes a couple of astute observations:

"Continuing to allow a re-opening of the original recommendations made by the OI is tantamount to allowing the incumbent transmission owners to take over PJM’s role as the Transmission Planner in its NERC reliability regions, and PJM’s management of the stakeholder process."

and

"There are real problems with FirstEnergy’s claimed estimate that make it not credible, and not a valid basis for comparison to Primary Power’s well-founded estimate. First, Primary Power’s estimate is based on five years of development work on the Meadowbrook SVC and a design-basis cost estimate provided by the EPC contractor for the Primary Power SVC projects. In comparison, FirstEnergy has done no development work on a Meadowbrook SVC and its estimate is just an unvetted assumption.

Second, FirstEnergy’s track record on cost estimates for this very type of facility demonstrates that FirstEnergy grossly underestimates the cost of the facility in its initial estimate.

In the case of FirstEnergy’s Black Oak SVC facility, which was designated to FirstEnergy in the 2005 PJM RTEP, FirstEnergy’s initial estimate was $35 million. Within a year after FirstEnergy was designated to build the facility, the original cost estimate had ballooned from $35 million to $50 million. FirstEnergy underestimated the cost by almost 50 percent, and PJM selected the project based on that estimate.

If FirstEnergy has similarly underestimated the costs here, which is likely given that FirstEnergy has done no development or design work on the Meadowbrook SVC, then FirstEnergy’s $60 million initial estimate could easily escalate to $90 million, well in excess of the cost for Primary Power’s Meadowbrook SVC project. The lesson learned from FirstEnergy’s prior cost estimating and its off-the-cuff estimate for a project that it has not developed, is that care should be taken when comparing cost estimates."

So, FirstEnergy severely undervalues their "off the cuff," unvetted cost estimates in order to have them selected by PJM.  And PJM continues to defer to the profit-driven bullying of its largest members.  Anything new and striking in that for you PATH opponents?  Nah, didn't think so.  PJM is a dangerous cartel and its continued biased favoritism of projects awarded to certain incumbent TOs keeps cropping up again and again.  Like water dripping on a stone...
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TrAILCo recently made a filing with the WV Public Service Commission requesting blanket permission to divest itself of real property it currently owns that is "not useful or necessary to TrAILCo’s performance of its public service obligations."  Why would TrAILCo have imprudently spent ratepayers' money purchasing property that wasn't useful or necessary?  Some (but not all) of these properties are ones that TrAILCo was obligated to purchase, at owner's option, under one of the stipulations in its settlement.  In order to buy itself the necessary Certificate of Public Convenience & Necessity it needed from the WV PSC, former Gov. Joe Manchin engineered what were called "concessions" from the company.  The rest of us may view them as bribes.  The cost of these "concessions" to West Virginia were then recovered from ratepayers throughout the 13-state PJM region, except for TrAILCo parent company subsidiaries Mon Power and Potomac Edison's customers in West Virginia.  In another stipulaton, the parent company agreed to absorb those customers' cost of the TrAIL Project for a period of 7 years.  That date with a big rate hike is looming just over the horizon for those electric consumers, who will not be easing into the cost of TrAIL gradually over a period of years during construction as the other ratepayers did, but all at once.  The rate shock is coming, my friends.

The stipulation causing TrAILCo's current filing reads:

Staff General Condition #2 - “The Company shall purchase any property containing residences that are within 400 feet of the centerline if the owner desires to sell their property.”
TrAILCo accepts this condition, provided that in each case the property owner will have until the first anniversary of the inservice date of the West Virginia Segments of TrAIL to notify TrAILCo in writing that the property owner has elected to exercise the option to require TrAILCo to purchase the property at a fair market value based on the median of three appraisals. One appraisal shall be prepared by a qualified appraiser selected by the property owner, another appraisal shall be prepared by a qualified appraiser selected by TrAILCo and a third appraisal shall be prepared by a qualified appraiser selected by agreement of the two other appraisers. TrAILCo shall pay the reasonable costs of all three appraisals.

So far, TrAILCo says it has purchased 24 properties, although they admit that they purchased some of these properties "through [their] own initiative." The properties purchased at TrAILCo's own initiative were not a requirement of the stipulation.  Why are ratepayers subject to the cost of "unneeded and useless" property that TrAILCo voluntarily elected to purchase?  Exactly how much unneeded property did they purchase on their real estate buying spree?  The offer to buy properties under the stipulation is valid until May 18, 2012.  How many more unneeded properties will TrAILCo buy and add to its "unneeded and useless property" list before the deadline?

TrAILCo does not put a purchase value on these properties in their filing, although the amount is certainly known.  The stipulation required TrAILCo to purchase these properties at "fair market value."  However, in its filing, TrAILCo says the properties will be revalued at "fair market value" before selling.  So, which "fair market value" is actually "fair market value?"  Apparently it's not the "fair market value" at which they purchased the properties.  Were these landowners cheated out of true "fair market value?"

TrAILCo's filing is made necessary by WV Code that requires approval of any sale of utility property by the WV PSC.  In order to consider the sale, the PSC requires all the information listed in TITLE 150 PROCEDURAL RULES PUBLIC SERVICE COMMISSION, Sec. 10.6. Sale of franchises, permits and plant.  However, TrAILCo does not provide all of the information and claims in their filing that the information "has little bearing, if any, on the Commission’s decision."

Some important, required information that TrAILCo conveniently omits from their filing is:

10.6.e. accounting history of the franchises, licenses, equipment etc., to be sold, assigned, etc., including the account numbers used, the original cost, and the date of purchase by the petitioner,
10.6.f. the proposed journal entries associated with the sale of the franchises, licenses, equipment etc., to be sold, assigned, etc., including account numbers and amounts,

This information is crucial to the Commission's decision since "Any gains or losses incurred will be recorded below the line, protecting ratepayers from any adverse impact from the sales.    Further, as TrAILCo will not include any costs, gains or losses associated with selling the Properties in its revenue requirement, TrAILCo’s customers will not be adversely impacted by the Properties’ sale."  TrAILCo says sale of the properties "will have no adverse impact upon TrAILCo, West Virginia ratepayers, or other public utilities within the Commission’s jurisdiction."

But what about the ratepayers in the other 13 states?  TrAILCo's claims of "no impact" are not necessarily true.  The "gains or losses" are to be recorded "below the line."  Below the line expenses are those that are absorbed by the company and not recovered from ratepayers.  Conversely, above the line expenses are those that are the responsibility of ratepayers and are recovered through rates.  TrAILCo does not provide a clear picture of where the expense of purchasing the properties, maintaining the properties, paying taxes on the properties, and other costs such as the demolition of several buildings on the properties, was originally booked.  TrAILCo merely states, "TrAILCo will record each sale of Property in accordance with the Uniform System of Accounts."  That's hollow assurance, since TrAILCo's parent's accounting practices have been proved incorrect in numerous corrections to its FERC Formula Rate filings, and TrAILCo is currently the subject of an audit being performed by FERC's Office of Enforcement.  TrAILCo is seeking the West Virginia PSC's permission for rate accounting over which they have no jurisdiction.  TrAILCo wants to book any gains on the sale of these properties below the line.  The proceeds will go directly to TrAILCo's shareholders, which happens to be the parent company, FirstEnergy.  If the property purchase and expenses were the responsibility of ratepayers, any gains should flow back to ratepayers, not to FirstEnergy's pocket.

TrAILCo insists, "TrAILCo needs to sell the Properties in order to prevent deterioration and to maximize their resale value."  Isn't it ironic that TrAILCo's related subsidiary's PATH Project has purchased numerous properties at ratepayer expense that they continue to hold, year after year, while those properties "deteriorate" while that project sits "in abeyance."  PATH is in no hurry to sell properties it purchased in order to protect ratepayers' investment.

In addition, TrAILCo claims that the information required in Sec. 10.6.h (description of how purchaser became aware of TrAILCo’s intent to sell the Property) "would have little, if any, impact..."  That requirement is in there to ensure that all sales are "arm's length" transactions.

TrAILCo states, "The sales of the Properties will benefit TrAILCo..."  Well, that much is clear.  The rest remains ambiguous.


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In this press release the Coalition for Fair Transmission Policy (CFTP) points out that investment in new transmission is expected to increase 43% between 2011 and 2014.

"According to the Edison Electric Institute, shareholder-owned electric utilities and stand-alone transmission companies for the first time in 2010 surpassed the $10 billion mark for a yearly investment in transmission infrastructure. Spending on transmission increased nine percent from 2009 to 2010, EEI reported. Utilities and others are expected to invest $54 billion on transmission between 2011 and 2014, a 43 percent increase over transmission investment during the previous four-year period, 2007-2010, EEI reported."

That's because transmission is a tidy profit center for investor-owned utilities.  In return for their investment, these companies earn an immediate, guaranteed double-digit return on equity courtesy of federal transmission incentives and formula rates, even if the projects they invest in never get built!

While the CFTP makes some good points about broad socialization of transmission costs, the wisdom and ultimate cost of a "national grid" build out to support on-shore wind, and federal control of transmission siting and permitting, it's pretty hard to take them seriously or to want to support their "coalition."

That's because their membership (bankrollers) is composed of some of the worst perpetrators of the same bad policies they denounce.  For instance, member PSE&G is currently gouging over 60 million ratepayers throughout the 13-state PJM region for their unneeded Susquehanna-Roseland Project, as well as multiple other transmission projects they are undertaking.  If Susquehanna-Roseland had to be paid for solely by the ratepayers that benefit from it, it would not be cost effective.  S-R will purportedly reduce electric costs in New Jersey and load centers located at its eastern terminus.  According to CFTP, that's who should pay for the entire line.  Instead, PJM's cost recovery policy socialized PSE&G's cost across their entire region.  If we believe that S-R will reduce prices in New Jersey, we also accept the fact that S-R will increases prices to the west of it's starting point.  This "levelizing" of prices within the region is what PJM's screwed up markets promote.  Why is it that ratepayers who bear the direct brunt of proximity to "cheaper" generation must not only pay the cost of new transmission to make electricity cheaper for other load centers without enough generation to support their needs, but also have the prices they pay for electricity raised by the ultimate "benefit" of these same transmission projects?  This is the bad logic that PJM has been getting away with for years with their destructive "markets."

CFTP is just another corporate-funded "coalition."  These "coalitions" always have ulterior motives because, let's face it, corporations aren't in the "warm & fuzzy" business of helping consumers.  They exist to turn a profit every quarter.  Every expenditure is geared toward increasing those profits.  So, while their "coalition" has some good arguments, they're also a bunch of hypocrites.
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