Building transmission (whether it's needed or not) has been a utility profit center for years. But now investor owned utilities are really shaking the transmission money tree to make up for the fact that the rest of their business is failing
And like all good utility money-making schemes, West Virginia's out-of-state utility tedious twins go head-to-head to see which one can make the most money doing it fastest and "bestest."
Last week, FirstEnergy's Tony the Trickster made some big deal about a new transmission money making scheme approved by FirstEnergy's Board of Bamboozlers. This $2.8B "transmission spend" was given cover by being dubbed the "Transmission Reliability Excellence Plan 2014-2017," like it's all about reliability and not about "target[ing] annual transmission Net Income growth of 20+%." At what point do the reliability needs of customers intersect with FirstEnergy's need to make money? Wow, serendipity! FirstEnergy's system is going to be as "unreliable" as needed to grow income 20+%. The more "unreliable" FirstEnergy's system is, the more money FirstEnergy makes!
The "near term" plan consists mainly of rebuilds and upgrades to FirstEnergy's ATSI and TrAILCo systems. FirstEnergy will concentrate on its 69 & 138kV systems in order to avoid regulatory or community opposition hurdles that could slow down the "investment." FirstEnergy also reasons that an improved system will cut down on future maintenance costs, and that will help keep O&M in check.
But, wait a tick, how much of this "need" for re-building has been caused by FirstEnergy's long-term failure to maintain its system, and therefore should properly fall under the category of ordinary maintenance expense that the company has already been reimbursed for? If it were this easy, utilities could simply refuse to perform any maintenance on their transmission systems, and then wrap all the ordinary course repairs into some fancy package called a "Transmission Reliability Excellence Plan" and get reimbursed for it separately (and at higher rates) when a need to grow income arises. This isn't "reliability," it's a ratepayer shakedown. If FirstEnergy gets away with it, the company plans to increase their "reliability" to the tune of $12B "over time."
FirstEnergy reasons: The majority of these projects located in the ATSI region will target 69kV lines, which are outside of the RTEP approval process, and that construction would occur on land where most rights- of-way are already secured. But, assets assigned to TrAILCo must receive PJM RTEP approval and operate at 100kV and above, therefore these will be secondary to the low-hanging fruit in ATSI.
You'll be happy to know that public-money-sucker Burns & McDonnell has been hired to manage the engineering, procurement, construction and completion of the capital portfolio created for the plan and has established an office in Akron, OH. It's full steam ahead to spend as much of your money as fast as possible, little ratepayer!
FirstEnergy plans to put all its "transmission spend" eggs into its FERC jurisdictional formula rate baskets -- ATSI with a return of 12.4%, and TrAILCo, with a return of 11.7% for non-TrAIL projects and 12.7% for rebuilds and upgrades to the two-year old TrAIL line.
Is this really about "energizing the future by improving the health, capacity, and reliability of the transmission system for existing and new customer loads," or is it more about "energizing the future by improving the health, capacity, and reliability of the FirstEnergy balance sheet for existing and new shareholders"?
Meanwhile, not to be outdone, AEP has also announced its own plan to spend around $5B on the "reliability" of its transmission systems over the next 3 years.
AEP CEO Nick Akins said the company’s infrastructure investments will be aimed at improving the reliability of electric service to customers. He said the company expects to invest nearly $5 billion in its AEP Transmission Holding Co. unit through 2016, adding the holding company’s contribution to earnings will nearly double in 2014 alone.
However, AEP isn't afraid to invest in joint ventures and big, new projects outside its footprint.
Both companies have also submitted numerous bids on the first two PJM transmission project bidding windows.
Which transmission investment business plan will be the winner? And how much is this going to cost us before regulators catch on to the "reliability" scam and challenge it? And what if someone goes after the companies' FERC ROEs? The fun is only just beginning...
Maybe we should distract their attention by challenging these two companies to see which one of them gets into the solar business first? How much money is there to be made putting solar on every residential roof and then charging the customers "rent" for the investment? Or will they continue pumping the transmission "reliability" well until it runs dry before taking any positive action to make themselves relevant in a brave, new, distributed generation world?
- Too much generation and equipment offline for routine maintenance. PJM pretends to be surprised that the weather was really hot during the first part of September. I wasn't. September can produce some really hot days -- do these guy live on the same planet as the rest of us? Maybe PJM's historical data didn't warn them that this could happen, but have they noticed that climate change has produced some really "unusual" weather over the past few years? Also, we could ponder what effect an odd really hot day would have on a system that keeps getting bigger and more interconnected while generators get bigger and farther away from load.
- Equipment failures. Transformers and transmission lines in AEP & FirstEnergy's service territory failed, causing operators to have to shift loads, which caused overloads elsewhere. Maybe if PJM didn't promote the building of new transmission to the detriment of maintenance and upgrading of existing transmission lines, equipment wouldn't be so vulnerable to failure at the first sign of stress. As well, both companies involved routinely brag to investors about cutting their maintenance costs in order to toss a few more cents into quarterly dividends. When is PJM going to enforce proactive maintenance over shareholder dividends? And, again, what if the PJM region wasn't increasingly dependent on long distance transmission to deliver electricity from greater and greater distances? "Economies of scale" mean nothing when they cause expensive "load shedding" (aka BLACKOUTS).
- Reserve generation didn't come online when called. We pay these clowns to be ready to provide extra generation when PJM says it's needed. But they just couldn't get it together -- because they weren't ready.
And speaking of clowns, let me introduce you to my "friend" Raymond from International Transmission Company (ITC) who opines:
Why would you say we need less transmission if a transmission failure triggered a brownout or blackout. I work for a transmission company and we have been prevented from building transmission between regions designed solely to prevent situations like happened. Also, what you don't know much about is that whereever there is a lack of transmission, power plants must be run out of economic order to relieve the line congestion. This causes electric customers (everybody) to pay more. Not only are lines needed for reliability (keep the lights on) but also for economics. Economic studies determine if it's cheaper to add new lines/equipment or just redispatch generation occasionally. If done properly based on well thought out criteria, tranmission is only added when needed and is economic.
Ray needs to ponder number 1 and 2 above. This "event" can probably be blamed on increased transmission, which wasn't really "economic" at all when the lights went out in Michigan, Pennsylvania and Ohio. Bigger, inter-regional transmission lines aren't the answer.
Ray also needs to ponder the wonders of distributed generation microgrids, but that's not what ITC pays him to do.
Who wants to guess how much time and money PJM spends "investigating" itself... and will the lights stay on while they dither over avoiding the obvious?
Don't you just love that headline? Hopefully the first of many well-deserved slaps upside the head for this crooked company.Yesterday, the Public Utilities Commission of Ohio (PUCO) ordered that FirstEnergy refund $43.3M to its Ohio distribution affiliates' customers within 60 days.
The PUCO found that Ohio Edison Company, The Cleveland Electric Illuminating Company, and The Toledo Edison Company had grossly overpaid for renewable energy credits purchased from their own FirstEnergy Solutions affiliate and then recovered these exorbitant costs from consumers. In other words, FirstEnergy bought something from itself that was overpriced.That's the good news. Now for the bad news.FirstEnergy has vowed to appeal the decision. Any refunds due to customers will thus be held until the appeals process has exhausted itself. FirstEnergy intends to continue to pour millions into avoiding refunds due to struggling electric consumers, and if they are successful, consumers will end up footing the bill for the cost of that too, adding insult to injury. How long will FirstEnergy deny the consumers their refund? Maybe forever.This whole thing smacks of a badly executed bit of play acting by PUCO and FirstEnergy executives. Everyone knows that FirstEnergy has stacked PUCO with its bought and paid for "yes" men. This investigation has been going on for years. A decision was expected last week, but PUCO delayed it a week "to allow time to fine tune an order addressing whether the Akron-based utility overpaid for renewable energy credits and passed those excess costs on to customers."
Fine tuning my eye, the decision was delayed until AFTER FirstEnergy's 2Q Earnings Call on Tuesday
so that FirstEnergy's executives wouldn't have to suffer through questions about it, and so it wouldn't drag down FirstEnergy's already disappointing financial results for the quarter. So, FirstEnergy, where are you going to get the money to pay back this $43.3M that you stole from your customers? Inquiring minds want to know...PUCO ruled that all the financial information related to its decision must be kept secret. This prevents the public from doing its own independent calculation of just how much they were ripped off
. Other parties in the case contend that the theft from consumers actually amounted to more like $130M.So, if FirstEnergy profited by selling RECs to itself in the amount of $130M, a refund of $43M is a small price to pay. FirstEnergy still comes out ahead by $87M. The company has actually been rewarded for stealing from its customers.
What PUCO should really be looking into is FirstEnergy's corporate separation issues. The company is selling things to itself at outrageous prices because ratepayers are paying the bill. "Arm's length negotiation" means nothing when Tony's left arm is shaking hands with Tony's right arm, just before plunging both arms into YOUR pocket.It's well known that PUCO is stacked with bought and paid for FirstEnergy puppets. This decision and its timing evokes imagination of the negotiations that must have occurred between FirstEnergy and PUCO to set it up to look like FirstEnergy was punished, when it was actually rewarded for stealing from the customers PUCO is sworn to protect.
Read about it here.Meanwhile, FirstEnergy has attacked Ohio's Renewable Energy and Energy Efficiency standards as "too expensive for consumers." Maybe someone needs to look into all FirstEnergy's programs to find out why they are "too expensive." Is FirstEnergy cheating on EE recovery too?And the bad juju continues to build...
Interesting article in the Pittsburgh Post-Gazette
. It seems like the locals are a bit miffed at the way Ohio-based FirstEnergy has been slowly cannibalizing former Pittsburgh energy star Allegheny Energy.That echoes an anonymous sentiment I saw in an online forum yesterday
, where it was said that FirstEnergy is wrecking what used to be a good company. It's all about the stockholder dividends
anymore. FirstEnergy doesn't give a damn about its customers, or the communities where it does business.FirstEnergy made all sorts of glittering promises to regulators and communities in order to get its merger approved, and has been systematically violating its promises ever since.FirstEnergy just doesn't care if you don't like it
, little customers. The company has a monopoly in this state, step in line and take what you are served
But, FirstEnergy's monopoly state franchise isn't irrevocable. Look what's happening in another town
that got fed up with a different out-of-state utility conglomerate...
On May 20, Governor Tomblin quietly reappointed Michael Albert as Chairman of the Public Service Commission. The appointment was not announced publicly, in fact, State Journal reporter Pam Kasey had to go on a hunt for this information
. Kasey also found out that the Governor has done nothing about filling the expired term of PSC Commissioner McKinney, two years after his seat expired.Yesterday, The Journal's Rachel Molenda reported that FirstEnergy (under the guise of its employees and political action committee) has become Governor Tomblin's biggest campaign contributor.
It sure looks like FirstEnergy has bought itself a seat on the Public Service Commission. And according to The Journal, it only cost $94,000. It only took $94,000 in campaign contributions for your Governor to throw you under the bus by "fixing" a supposedly independent commission with a corporate insider.Chairman Albert "previously served as a Manager and Member in the Business Law Department of Jackson Kelly, PLLC, in Charleston, West Virginia, focusing on public utilities and business and commercial transactions."
In this capacity, Albert represented Allegheny Energy (now FirstEnergy) in all their cases before the PSC. Chairman Albert is FirstEnergy's boy.Commissioner McKinney is AEP's boy. One of these two has to go. The Public Service Commission is not fulfilling its mission.
We will work tirelessly to assure:
1. Impartial and efficient resolution of all jurisdictional issues;
2. Public safety through inspections of motor carriers, railroads, and natural gas pipelines;
3. An increase in business investment, job creation/retention and the state’s overall competitiveness;
4. An improvement in the standard of living and quality of life for the people of West Virginia;
5. That consumers receive the best value in utility service from financially viable and technically competent companies; and,
6. That utilities receive an opportunity to earn a fair return on their investment in regulated services.
PSC Chairman Michael Albert’s recent remarks before a West Virginia legislative Joint Standing Committee on Judiciary epitomize the stagnant and captive nature of our current PSC leadership. Albert told the committee that the days of cheap utilities are over and that the only remedies for consumers who cannot afford higher utility costs are conservation or budget and consumer assistance programs. Instead of investigating creative solutions, which the PSC is empowered by law to do, Mr. Albert throws in the towel and goes along with the claims of West Virginia’s Ohio-based electric companies.
Governor Tomblin is empowered to appoint the members of the Public Service Commission "with the advice and consent of the Senate."
§24-1-3. Commission continued; membership; chairman; compensation; quorum.
(b) The Public Service Commission shall consist of three members who shall be appointed by the Governor, with the advice and consent of the Senate. The commissioners shall be citizens and residents of this state and at least one of them shall be duly licensed to practice law in West Virginia, with not less than ten years' actual work experience in the legal profession as a member of a state bar.
Governor Tomblin has appointed Chairman Albert. Albert has not yet been confirmed by the Senate. The Governor makes hundreds of appointments every year. The appointments are gathered up periodically and forwarded to the Senate for confirmation. The next set is expected to come before the Senate for confirmation in January 2014. The Senate has a Confirmations Committee to deal with this function. The Senate can confirm the Governor's appointment, or the Senate can
reject the appointment, in which case the Governor must appoint someone else.It has become crystal clear, both to the citizens of West Virginia and their elected representatives, that change is desperately needed at the Public Service Commission. We simply cannot afford another 6 years of uninspired, bought and paid for,
corporate-influenced leadership. Let your senator know that you want change!
It seems that FirstEnergy has managed to steal 49% of AEP's customers. In response, AEP has required FirstEnergy (and other competitors) to provide collateral to meet credit requirements in the event that FirstEnergy goes belly up and AEP has to take over serving their former customers. In retaliation, FirstEnergy has filed a complaint at the Public Utilities Commission, alleging that AEP is being unreasonable and is causing harm to FirstEnergy.
AEP said in a filing that, “While AEP Ohio made various attempts to informally resolve this issue, both before and during commission-assisted mediation, it is clear that (FirstEnergy) has no intention to provide any collateral.”
Of course FirstEnergy has no intention of playing well with others. AEP is just now figuring this out? Where ya been, AEP?Anyhow, AEP has now launched a collateral attack by intervening very late in the game in PUCO's investigation of FirstEnergy's renewable energy credit ripoff
. It seems that FirstEnergy bought renewable energy credits from itself at outrageous prices, and then recovered these costs from consumers in Ohio, instead of paying a much cheaper fine for failure to buy the credits in the first place. FirstEnergy's reasoning is suspected to be that the cost of buying the credits could be foisted off on ratepayers, while the cost of fines would be the shareholders' responsibility. AEP makes another stunning realization in its brief:
AEP Ohio has been monitoring the proceeding as best it could with the prevalent confidential treatment claims in the record that culminated in FirstEnergy filing its initial post-hearing brief as only a cover page with no attempt at redactions of the limited confidential material. That document was recently filed (redacted) in the docket for outside parties to examine. As an observer of this docket and a market participant, AEP Ohio questions FirstEnergy’s motives for its repeated attempts to shroud the market-related issues in this case under a veil of secrecy.
Scary, huh? Evil personified up there is just begging for you to draw some horns and a tail on him to complete the picture.
"The Akron power company tried but failed to get the standards scuttled or frozen just before Christmas by asking legislators to slip an amendment into unrelated legislation. But lawmakers scattered when the tactic was publicly revealed.
This time, FirstEnergy is sending a form letter written by its lobbyists to some of its larger commercial and industrial customers, asking them to fill in their company's name and send it by Friday to the Ohio Senate, which is trying to decide whether to tinker with the efficiency rules.
The company defended its tactic to gin up support for its position.
"FirstEnergy remains concerned that meeting the state's energy efficiency goals will continue to place burdensome costs on our customers, particularly Ohio businesses," the company said in a prepared statement."
Why does FirstEnergy want to do away with energy efficiency programs in Ohio? It's hurting their bottom line and working as intended to save consumers money. More money in consumer pockets through energy efficiency, less money in FirstEnergy's pocket. Investments in energy efficiency cost much less than investments in new power plants. The cheapest resource is the one you never have to build.
"FirstEnergy CEO Anthony Alexander [aka "Satan"] has said in public meetings that the rules have interfered with normal market growth, already made tough by the recession."
Right... and FirstEnergy thinks its customers are dumb enough to hurt their own bottom line by signing form letters opposing energy efficiency programs. Good luck with that, FirstEnergy, your arrogance is stunning. Some things just can't be fixed by lying to your customers, legislators, regulators and the media.
FirstEnergy has been swirling round and round the bowl
for the past few weeks.
Now the wheels have come off FirstEnergy's poorly executed plan to dump antique coal-fired electricity plants on it's West Virginia customers.Despite FirstEnergy's desperate pleas for the WV Public Service Commission to approve the company's transfer of coal plant assets from their unregulated (company financed) Ohio subsidiaries to West Virginia's regulated (ratepayer financed) subsidiaries before early May, the PSC issued an order on Feb. 11 setting a procedural schedule that won't hold hearings until the end of May. A decision won't come until several months later. FirstEnergy needs to transfer these plants between their subsidiaries to raise over a billion dollars cash that the company desperately needs to pay down its debt.It's not "
to help ensure reliable power for our Mon Power and Potomac Edison customers in West Virginia for many years to come," it's to raise desperately-needed corporate cash that West Virginia's captive ratepayers will be stuck repaying for years to come. Let's at least be honest about it, shall we, FirstEnergy?Last week, Fitch cut FirstEnergy's ratings
.On Monday, FirstEnergy reported a loss for the fourth quarter
.Yesterday, FE's stock was downgraded.Today, FirstEnergy announced a tender offer to buy back some of it's high interest rate debt.
The scheme here is to offer a premium to holders of these high interest rate bonds FE issued so that they will sell their bonds back to the company. To finance this buy back, the company will borrow money at a lower interest rate than they would have paid the holders of these bonds.Kind of reminds you of watching sick water buffalo flounder and drown, doesn't it?
Note: This post has been updated Jan. 22 to include even more bad news for FirstEnergy!
FirstEnergy may have intended its purchase of naming rights to a football stadium as a "regional branding opportunity [that] makes good business sense...,"
however the transaction will probably be written in the history books as a public relations fail of epic proportions instead.Reaction has been swift and cutting. There's been derision, anger, mockery and suspicion
, but I have yet to find one public comment that says, "Wow! Isn't that great? Now I'm going to switch my service to FirstEnergy because the company's name on a football stadium means I will receive economical, reliable, electric service." Nope, not one comment praising the deal anywhere.Rather than excitement, the people want to know:How much did this cost and is it going to find its way into my electric bill?Despite FirstEnergy refusing to disclose details of the transaction
, it didn't take long for the press to fish out that the deal cost $102 MILLION over 17 years -- that's $6M every year
that FirstEnergy will pay to have its "brand" displayed all over the stadium so that sports commentators and fans alike can make sneering comments about the company. This begs the question... Just how out of touch with the real world are FirstEnergy's executives that they wouldn't see this kind of reaction coming? There may be only 274 other CEOs who think this is a great idea. The rest of us? Yeah, not so much.FirstEnergy fails to understand that it differs from other corporations who have made similar deals because it will always be viewed by the public as providing service in a monopoly construct. Any unnecessary frills will always be seen as excess passed to captive customers.Nice going, knuckleheads.Jan. 22: Update! Jefferies Downgrades FirstEnergy to Underperforms on Rating Agency Headwinds
"We are downgrading FirstEnergy to Underperform based on growing rating agency pressure to enhance the company's credit metrics and regulatory exposure in rate proceedings in West Virginia and New Jersey."
Perhaps FE should rethink their recent actions attempting to dump uncompetitive assets into WV's regulatory system and milk ratepayers in NJ. But then again, that doesn't raise cash and improve the old balance sheet, does it.But, back to FirstEnergy's public relations fail of epic proportions...Some knucklehead thought it would be a good idea to give The Akron Beacon Journal an exclusive "behind the scenes" look at the Cleveland Browns naming-rights deal. Was that supposed to help the public identify with FirstEnergy execs.? If so, massive fail, again.The article is so bad it makes FirstEnergy look like a bunch of extras from The Godfather. Chatty Chuck (who raked in $4.7M in 2011) tries to be a "regular guy"
by proving his humility:“I do a lot of entertaining and a lot of politicking and a lot of community work. Not at Browns games. When I go there, I go as a fan,” he said. “But having said that, this was a business decision.”And where does he do his "politicking?":"Even now, when FirstEnergy has a suite at the stadium, Jones sits in seats outside."Oh yeah, slummin' with the hoi polloi. It's just too far beyond belief, especially when followed up with a little exercise in threatening/bribing the wait staff at the restaurant where the deal went down:"Jones and Ross said there was a little damage control to do after that meeting, since it was pretty clear to the wait staff what the diners were talking about. Ross said at one point, a server came in to say that the chef was a huge Browns fan and wanted to come in to say hello. The diners declined.
“We actually thought the next day we could be talking to” the media after a leak, Jones said.
Said Ross: “I don’t know what happened. Somehow they didn’t call sports radio or the newspapers.”
Said Jones, “Let’s just say we figured out how to keep it under wraps.”First of all, Chatty Chuck needs a little education: NEVER, and I do mean NEVER, piss off the people who are preparing and handling your food.
Second, your condescending attitude toward restaurant staff is not endearing to the rest of us and actually showcases your arrogance. Revolting.Football stadiums aside, the article is also a frighteningly accurate picture of the art of the corporate deal. This is how politicians get elected, regulatory cases are decided, and laws are "put in place," as our pal Michael Morris once phrased it. It all happens out of view of the public, through wining and dining, persuading and dealing, and all done on your dime through the bill you must pay for a necessary service, like electricity.Looks like FirstEnergy's public relations band-aid "tell all" confessional only added to the public derision they are currently facing.
Once again, nice going knuckleheads, and thanks for the delicious helping of schadenfreude!
"First Energy, why not cut consumers a break instead?"