FERClitigation.com has published a new letter to the U.S. Department of Energy's Inspector General from Senators Collins and Barrasso
The Senators are asking the same questions that have been stinking up the FERC's aura for months.
1. Are parties who "do not otherwise appear frequently before FERC" held to different standards than the utilities who are part of the daily scenery at FERC?
2. Are there clear rules about what constitutes market manipulation? Are market participants given adequate notice about what constitutes a violation and treated fairly during an investigation? Is FERC pursuing "market manipulation" that was perfectly legal when it occurred?
3. Are deals made with utilities that could be construed as quid pro quo enforcement settlements in order to receive FERC approval for a different transaction?
Tough questions. Where are the answers?
You don't have to be one of the "white shoe" FERC regulars to think that something's off here. There's been enough written to make even common consumers question whether our recently politicized FERC plays favorites with its incumbent utility friends while saving its scary investigations and worst punishments for energy "outsiders" that dare to venture into its lair.
The Wall Street Journal gets right to the point:
Ad hoc settlements win political plaudits, but because companies usually neither admit nor deny wrongdoing, the settlements set no meaningful or coherent legal precedents.
Does FERC's mindless pursuit of settlements really serve consumers? Or is it all about the occasional big headline to draw the passing attention of the common consumer and give him a false sense of security that regulation is working to protect his interests?
Does FERC play footsie with gigantic utility holding companies? Case in point: FirstEnergy's 2012 scheme to drive up capacity prices in ATSI, which cost consumers hundreds of millions of dollars. Regulators didn't bat an eye because what FirstEnergy did was legal when they did it. But, not so for some of FERC's red-headed step children that aren't regulars at the Sunrise Cafe. Their ignorance of FERC's mysterious enforcement methods has cost them dearly.
Will DOE's Inspector General shake some of the political rot and decay out of 888 First Street and restore the public's respect and trust in the important work of the Federal Energy Regulatory Commission?
I hope so.
The Pufferfish Foundation
wants to let folks know that the U.S. Department of Energy's Inspector General would like people who have been harassed by FERC's Office of Enforcement to contact their office.
They can contact the IG hotline at:
D.C. Metro Area: (202) 586-4073
Toll free: (800) 541-1625
FAX: (202) 586-4902
This information comes from U.S. Senator Robert Casey's office, and may be a response to the Senator's inquiry
into FERC's investigation of Powhatan Energy Fund. The investigation has been made public on the website ferclitigation.com
Powhatan sent this letter to the Inspector General in July.
So, if FERC's bullies come knocking on your door, who ya gonna call?
“Your preliminary findings make no sense. Should you choose to proceed with a public notice against Powhatan and/or Huntrise, please be advised that they will respond publicly and forcefully.”
So, just when FERC manages to get all its commissioner seats filled, a major public relations battle and search for a politically suitable commissioner starts all over again. Here's a better idea: Since FERC is all political now, maybe we should just start electing FERC commissioners, since they're supposed to regulate in the public's best interests?
I think PPL needs to do a round of drug testing of its employees. Whoever came up with this idiotic idea must be on something.
PPL announced today that it had "submitted an application to PJM" to build a 725-mile 500kV line, estimated to cost $6B, through four mid-Atlantic states.
Never going to happen.
Residents of affected states are still reeling from PJM's last big transmission building idea, Project Mountaineer, that cost them billions, including nearly half a billion dollars for planned projects that were never built. Try it, PPL, and you will experience coordinated, strategic opposition like you've never seen before!
The Morning Call seems to be the first media outlet to... err... call PPL out on its outrageous money-making scheme. PPL interstate transmission project both costly and lucrative: Project would fill utility coffers while costing ratepayers billions of dollars.
Morning Call says:
The project also would be a significant source of revenue for PPL Corp., PPL Electric Utilities' Allentown-based parent. Under Federal Energy Regulatory Commission rules designed to encourage infrastructure investment, utilities may earn a profit of 11.68 percent on transmission projects.
That translates into a profit of up to $700 million. PPL would share the money with any other utilities that participate in the project.
PPL customers, meanwhile, would see the cost, including utility profits, reflected in their rates — though the burden of paying for the project would be shared by ratepayers in all four of the states involved.
But, Morning Call only sees the tip of this iceberg. PPL can apply to the Federal Energy Regulatory Commission for transmission rate incentives that would up its profits significantly. In addition to incentive ROE adders that can increase the 11.68 percent several percentage points, PPL can also ask for guaranteed cost recovery in event of abandonment, a return on construction work in progress that enables them to begin earning that juicy return immediately, even before the project is completed, and many other outrageous financial rewards.
In addition, Morning Call's math is wrong. The $700 million profit the reporter calculated is only that earned in THE FIRST YEAR of operation. Transmission project rates work sort of like a 40-year mortgage. The return is calculated and paid on the depreciating balance of the project cost every year! So, in the first year of operation, PPL would earn a return on $6B and collect a certain amount of depreciation on the project assets that would lower the balance owed by ratepayers. The second year, PPL would earn a return on the depreciated balance, and additional depreciation. And so on, over the 40 year (or more) life of the capital assets. PPL's possible profit from this ridiculous project is a nearly endless goldmine!
And, one last thing Morning Call gets wrong -- this project will be paid for, in part, by ratepayers in all 13 states in the PJM region because of its size. A 500kV project built in PJM is cost allocated at 50% to all ratepayers based on peak usage, with the other 50% being assigned to the cost causers/beneficiaries.
Moving right along into PPL's feeble assertions that its project will:
If approved, PPL predicts, the project will improve energy reliability and security and provide customer savings by eliminating transmission bottlenecks and encouraging development of lower-cost natural gas-fueled generation plants.
The new plants would help replace energy supplied today primarily by coal-fired plants that, under increasingly stringent federal air quality standards, are expected to be retired in coming years.
This doesn't even make sense. The coal-fired plants that will be closing are located in the Ohio valley, not on the east coast. Once those coal-burners are offline, it will free up significant transmission capacity for any new "mine mouth" Marcellus shale gas-fired plants built in the Ohio valley. Why would we need to build a new west to east transmission line when there's already plenty of them sitting idle due to coal-plant closings?
PPL says they will have a robust public input process to find out where to site the line. Seriously? That strategy doesn't work anymore. It's all about need for the line in the first place, not where to put it. Get with the brave new world of transmission opposition, PPL!
And speaking of siting the line... where is that new Maryland substation supposed to be on that featureless map? If you compare it to a real map of Maryland, it looks like it's in Howard or Carroll counties. But, what if there was land available in neighboring Frederick County for a proposed substation? Oh, deja vu!
This has got to be the most thoughtless transmission proposal I've ever seen.
Never going to happen.
So, what's been happening in the aftermath of the recent confirmation of a new and a returning FERC commissioner?
Pennsylvania Senator Robert Casey sent a letter to Energy Department inspector general Gregory H. Friedman asking some hard questions about FERC's enforcement office and requesting an "examination."
The Philly Inquirer wants to inquire why Senator Casey voted for Norman Bay before sending his letter:
Except, shouldn't the investigation come before a guy's promoted?
How assertive will Acting Chair Cheryl LaFleur be as a lame duck? And will she remain for her five-year term after she has to relinquish the gavel?
With Commissioner John Norris openly musing about his post-FERC future, who will replace him and how soon?
How will Bay resolve the investigation into Powhatan Energy Fund, whose principals have been running a public relations campaign accusing FERC of heavy-handed enforcement tactics?
And, this morning, an opinion piece by investigative reporter David Cay Johnston
accuses that federal regulators let utilities gouge customers.
Although my understanding and consumer's perspective of FERC probably differs from Johnston's, it seems that his nose works just fine. Something stinks here!
Regulator, regulated, regulator, regulated, regulator, regulated, regulator, regulated.... the door is spinning! Johnston gets right to the root of the problem:
FERC commissioners, however, disregard the just and reasonable standard, routinely ignore evidence and act more as agents of utilities than fair-minded regulators.
Absent from the commission is anyone who represents the rights of consumers.
Johnston ends by painting Norman Bay as a "ray of hope" for consumers.
I think perhaps FERC needs some public relations polishing. Maybe these guys would be willing to help?
Norman Bay barely squeaked by a Senate vote yesterday to officially become a FERC Commissioner. The vote on Bay was close, 52 - 45, and RTO Insider reports
that it was a "party-line vote." Just what we need... more political manipulation inside a federal regulatory agency.
Incumbent Commissioner Cheryl LaFleur was easily confirmed for a second term.
And here's where the political manipulation happened... it has been reported that a political deal was struck to allow LaFleur to remain as Acting Chairman for 9 months, at which time newcomer Norman Bay will ascend the throne. I'm not sure what that was supposed to accomplish... what's on the agenda for the next 9 months that's so crucial? Maybe FERC is planning a long, hysterical pregnancy of some kind.
The Senate doesn't have any say over who is appointed Chairman, it can only confirm or deny Commissioners in general. Or at least that's the way it's supposed to happen according to the law...
As if consumers don't already have enough problems with regulatory capture and the revolving door whereby regulated and regulator switch places with amazingly incestuous ease, now Harry Reid wants to run FERC.
Why? In order to turn his state into the "Saudi Arabia of renewable energy," says Trib-Live. Because none of the other 49 states want to produce their own renewables and reap the economic benefits of a distributed generation energy renaissance within their own borders. Or maybe the other state representatives just don't have the cojones to stand up to Reid and serve their own constituents?
At any rate, it looks like the beatings will continue until morale improves. I wonder what's going to happen to the guys at Powhatan Energy Fund now, in the wake of their very public campaign against Bay's nomination?
FERC is turning into a real circus lately. The environmentalists have finally located the headquarters in DC and tried to block the entrance the other day.
FERC has even been serenaded.
I think this situation calls for more lobbyists! Or perhaps just some comedy...
Read the recent Motion to formally Lodge this as the longest filing name in Commission history, where a former energy insider has gone rogue and spills... in a most delightfully humorous way.
I am just a private citizen with an unnatural interest in (a fetish, if you will) and some history in dealing with unreserved use. I apologize to any and all for my cheekiness and informality, but I ain’t getting paid to do this and if I never see the information for which I am asking I will not miss any meals. With that said, I’ve got nothing better to do except enjoy a glass of tequila and write this quickly, so here goes....
Whatever happened to regulation in the interest of protecting consumers?
Is that song stuck in your head now, too?
In a predictable move, the U.S. Court of Appeals for the 7th Circuit kicked the Illinois Commerce Commission v. FERC can back to Washington today.
This case has been dragging on for nearly 5 years. When it first started, ratepayers in PJM's Illinois territory were looking at sharing a huge chunk of the cost of PJM's multi-billion dollar Project Mountaineer collection of unneeded transmission projects. Although the bill has shrunk considerably with the cancellation of PATH and MAPP, the argument has only grown.
It centers on PJM's 2006 adoption of the "postage stamp" cost allocation methodology. This method assigned costs of new transmission 500kV or greater to all ratepayers in the region based on their share of regional electricity sales. The more power an area used, the greater its share. PJM did this to spread out (socialize) the cost of its Project Mountaineer venture over more customers so it could get that transmission built before the hoi polloi noticed, "before it became common dinner table talk."
However, it's important to realize that PJM no longer uses the 100% "postage stamp" cost allocation method and hasn't since last year. Today's 7th Circuit decision will have no effect on any proposed or future transmission projects in PJM, or any other RTO. Today's decision will only affect those projects that were built (or not!) before last year's new allocation method went into effect. PJM's new, FERC-approved cost allocation methodology relies on a 50-50 split of two different methods for transmission lines of at least double-circuited 345kV or greater. The first 50% is allocated according to the old postage stamp method, and the remaining 50% is allocated either to the cost causers or the beneficiaries, depending on the reason for the project. Costs for transmission projects based on "public policy" clean energy state laws will be allocated to the states that require them under PJM's "State Agreement Approach." If a state doesn't agree to shoulder the cost burden for a project designed to meet its renewable portfolio standard, then it will not be built.
Today's decision echoed the first remand from the 7th Circuit, that found that FERC had not done enough to show that utilities in "western PJM" received benefit from Project Mountaineer that was commensurate with their cost responsibility under the old "postage stamp" allocation method.
FERC dealt with the first remand by rolling its eyes and making up more crap about how "western PJM" benefited from Project Mountaineer. It pulled an even bigger diva act on rehearing. But FERC just can't out-diva Judge Posner of the 7th Circuit.
Posner hates coal, and transmission lines that carry it. But, he loves postage stamp rates for transmission lines that are supposed to be "for wind."
This Sybil act must also be confusing to FERC, but hopefully they can get it right this time... because third time's a charm, right?
Go ahead, read today's decision. It's quite chatty and reads like some guy's geeky blog post about electricity and cost-benefit analyses, until you get to the 9-page dissent by Judge Cudahy, who seems to be writing from the other side of the political spectrum. It's fairly entertaining. However, I suspect FERC is not as amused as you are.
After enough wrangling to make a cowboy cry, the Senate Energy and Natural Resources Committee confirmed the nomination of Norman Bay as Chairman of FERC... as long as he keeps the training wheels on his regulatory tricycle for the next 9 months.
Bay can be a FERC Commissioner, as long as Acting Chairman Cheryl LaFleur gets to continue to "act" for the first 9 months of Bay's tenure.
RTO Insider has the best coverage of today's events here.
RTO Insider notes that our own Plastic Senator Joe Manchin sold out in a hurry.
Among those who had expressed concern over Bay’s limited energy policy experience was Manchin, who helped sink the bid of Obama’s previous nominee, former Colorado regulator Ron Binz.
That sparked a flurry of negotiations over the last several days among the White House, Murkowski and Energy committee Chair Mary Landrieu (D-La.), which resulted in the president’s concession not to appoint Bay chairman immediately.
Poor, old Plastic Joe. Some days, he just can't seem to make up his mind.
I came across an interesting FERC filing
the other day. It's about something called "unreserved use," which is kind of a geeky, complicated subject, but the real issue here seems to be FERC's deference to one of its regional transmission operator pets, and a contradiction about whether specific information should be public or privileged.
Now where else has FERC had issues with that lately?
Unreserved use is failing to reserve transmission before utilizing it, so planners cannot account for the usage until they see it in real time, some call it "leaning on the system." In most tariffs, a company gets a 200% penalty for the extra stuff it puts on the system. FERC has asked that RTOs annually account for those penalties. FERC also wants the RTO to distribute the penalty amounts to non-offending customers, so it's a two-pronged incentive to follow the rules.
In FERCenese, here's how it's supposed to work:
In Order No. 890, the Commission required each transmission provider to report its operational penalty assessments and distributions in an annual informational filing. The annual filing must contain the following information: (1) a summary of penalty revenue credits by transmission customer; (2) total penalty revenues collected from affiliates; (3) total penalty revenues collected from non-affiliates; (4) a description of the costs incurred as a result of the offending behavior; and (5) a summary of the portion of the unreserved penalty revenue retained by the transmission provider. Each transmission provider must report on its penalty assessments and distributions in an annual compliance report submitted on or before the deadline for submitting its FERC Form No. 1.
Sounds rather routine, right? Except that some RTOs make their compliance filing as a public filing, but MISO has decided that its compliance filing is privileged because:
MISO contends that this type of information could be used by other "MISO market participants to discern trading patterns, and even trading strategies, adopted by other MISO market participants.
Well, yee-haw, cowboys! SPP files this information publicly! Cue the crooked traders.... And PJM has NEVER even made a compliance filing. FERC has so many clear rules it doesn't try to enforce, yet sticks its nose into the murky but headline grabbing world of supposed market manipulation where it doesn't even know its own rules.
Just what IS it about MISO's unreserved use filing that can't stand public scrutiny, anyhow? Something doesn't add up here...