StopPATH WV

Those of you who filed comments on FERC's Transmission Incentives NOI probably got this from FERC yesterday.  So, what does it mean?  Nothing, really.  It's FERC's way of nicely saying that they haven't forgotten about the NOI and to go away until they want to rattle your cage.

Do you suppose FERC reads the blog?  After all, PATH has been trying to get them to check out the blog for the past two years...

Nudge, nudge, FERC.  Some people are getting impatient that you seem to have clammed up about transmission incentives after being deluged with comments from states, environmental and consumer groups, and angry citizens.

Spiegel & McDiarmid submitted a letter today on behalf of numerous organizations and states summarizing the general gist of the comments, in case FERC is having trouble sorting them out.

It makes perfect sense.  But it doesn't make a bunch of unearned profit for transmission owners.  Cue the whining... the IOUs should be responding in... 3, 2, 1...

It could have been better if they hadn't started out spelling two out of four Commissioners' names wrong.  And, that word "incentive" is such a toughie!  It isn't a verb.  Even grammar experts can't agree on how to turn it into an action word.  However, once you've picked one of the bastardized verb versions, please stick with it throughout the document.  I'm glad this isn't an English 101 test.

But, hey, something amazing happened with this letter... WV's Consumer Advocate finally weighed in on the matter of FERC's transmission incentives!  If he'd gotten involved sooner maybe they would have found out that there's already plenty of transparency between costs and reward in a formula rate.  It's that line item called "Return."  It's not that hard, Byron.

Back in October, the Congressional Research Service wrote a report summarizing FERC's Transmission Incentives NOI and analyzing the law and policy behind the transmission incentives themselves.

They make some interesting observations:

When FERC codified the EPAct language, they made a minor wording change that makes a huge difference, costs consumers billions, and perverts the original intent of the Act.  The EPAct language states "...the Commission shall establish, by rule, incentive-based (including performance-based) rate treatments for the transmission of electric energy in interstate commerce by public utilities for the purpose of benefitting consumers by ensuring reliability and reducing the cost of delivered power by reducing transmission congestion."  FERC's Order No. 679 changed this language to read, "... either ensure reliability or reduce the cost...".  Right away, consumer rates take a jump because reliability projects that only increase costs are allowed under Order No. 679.

The history of the EPAct supposedly trickled down from this 2003 blackout task force report recommendation:

Clarify that prudent expenditures and investments for bulk system reliability (including investments in new technologies) will be recoverable through transmission rates.

Do you see anything in there that recommends incentives for the construction of a whole bunch of new transmission lines running parallel to existing, outdated, inefficient transmission lines?  Me neither.  It recommends that we improve transmission without specifying how.

But, Congress specified exactly how this would be accomplished in the EPAct, Sec. 219 (b) (1) & (3):

(b) CONTENTS.—The rule shall--
(1) promote reliable and economically efficient transmission and generation of electricity by promoting capital investment in the enlargement, improvement, maintenance, and operation of all facilities for the transmission of electric energy in interstate commerce, regardless of the ownership of the facilities;
(3) encourage deployment of transmission technologies and other measures to increase the capacity and efficiency of existing transmission facilities and improve the operation of the facilities; and

This is a point that StopPATH made in their NOI comments last year.  FERC has interpreted and codified Sec. 219(b) as (1) applying to new facilities only; and (3) applying to existing facilities.  This is also a perversion of interpretation on FERC's part.  In the NOI, FERC expressed their puzzlement that no one had applied for incentives on existing facilities.  Really?  It's quite simple, Sherlock, improving existing facilities doesn't require as large a capital investment on the part of the transmission owner as building new facilities does.  That capital investment is what earns outrageous ROE rates as high as 14.3%.  The more they invest, the more equity profit they make.  As well, FERC policy says that "routine" project and upgrades are not eligible for incentives.  That wasn't the intent of Congress in the EPAct.  In addition, FERC uses the price tag of a project as one of the factors in the nexus test.  FERC's policy is geared toward enriching transmission owners to the detriment of consumers.

Building new transmission while allowing interconnected, existing infrastructure to continue to deteriorate, fail and cause blackouts is not what Congress had in mind.  FERC's approach is like putting a piece of cardboard over a broken window and then cutting a hole and installing a new window right next to the broken one.

The CRS report opines that transmission investment over the next 20 years will be in the neighborhood of $298B.  It also states that FERC may opt to do nothing about its incentives policy.  Perhaps it's time for Congress to step back in and assert its authority to ensure its orders are being properly carried out before electricity costs completely bankrupt struggling consumers.

Although they've had four months to get it accomplished, the vast majority of the regulatory bodies, special interest groups and corporate interests waited until the last moment to submit comments on FERC's NOI Promoting Transmission Investment Through Pricing Reform.  As I'm sure many of you who submitted individual comments and were added to the service list noticed, FERC was flooded with at least 50 sets (or more?) of comments yesterday.  I haven't even had time to count them all, and another one just appeared from Morgan Stanley a few minutes ago.  Really?  A day late and a dollar short, fellas!

Due to a bunch of other issues going on, I haven't even had time to read the vast majority of them.  (I'm still hoping my Acme cloning machine will arrive in the mail any day now...)  If you're not on the service list and want to do some great reading (not all of them are technical, confusing minefields) here's how to find them.  Go here and change the date range to "previous 1 year" and then type "RM11-26" into the Docket Number field and click "submit."  That should bring up a long list of comments filed specified by author.

Some of the ones I have read that I recommend are the comments of the Virginia State Corporation Commission -- short, sweet and very much to the point.

Also recommended are comments of Transmission Access Policy Study Group.  Although I disagree with their love of all things transco and their love of transmission projects in general, the law firm that wrote their comments managed to point out everything wrong with FERC's incentives policies and defended the consumers who end up paying for them.  I noticed that Spiegel McDiarmid also authored some comments from other groups, but I haven't had time to read them yet to see if the theme continues.

Just about any set of comments from a state public service commission is guaranteed to be a good read, although I have only sampled a few.

On a humorous note... the comments of FirstEnergy gave me a giggle.  Check out the signature block at the end.  What's missing?  The PATH companies!  FE is backing away from their poster child that represents all that's wrong with transmission incentives.  Too funny!!!

I heard that AEP made mention of PATH in a "hands off" kind of way as well.  I guess the PATH parents are too proud to claim the juvenile delinquent they gave birth to.

Overall, from what little I've read, it looks like FERC is getting an earful.  The comments against seem to be greater in number, but the comments from the industry are whining much louder.  So, let's take a look at who's on what side of the fence:

Against Incentives - States, an couple of mystery financial analysts, some industry groups, and tons and tons of citizens who act as the Transmission Line Savings & Loan.

For Incentives - Energy and transmission corporations, some investment companies.  You know, the ones who are robbing the citizen-funded Transmission Line Savings & Loan.

Could it be any more obvious?  And if you think FERC still needs to have it explained to them in perfect detail, read the comments of Steven, Shirley and Samuel Smith of Charles Town.  The only thing left undone was drawing them a picture.

So, what good comments have you read lately?

Citizens Against Kemptown Electric Substation (CAKES) filed their comments on FERC's NOI Promoting Transmission Investment Through Pricing Reform this morning.  They did a fantastic job of making insightful suggestions for reform.  I think my favorite, in light of recent events, is:

"9. FERC’s Conflict of Interest
It is not possible to serve public ratepayers’ interests when FERC is both promoter and regulator of the utility industry. It has been shown by several Federal agencies that being responsible for both promotion and regulation of an industry leads to ineffective performance of both responsibilities and is a violation of public trust. One historical example for resolving this problem in 1974 was the splitting of the U.S. Atomic Energy Commission (promoter and regulator) into the Nuclear Regulatory Commission (regulator) and the Energy Research and Development Agency (now Dept. of Energy) (promoter). It is time for the U.S. Congress to split FERC into two separate agencies in order that the two responsibilities can be carried out effectively.

One particular example of this FERC conflict of interest is FERC’s gathering of coalbased utilities, PJM, and FERC officials in Charleston West Virginia on 13 May 2005 at
the FERC-sponsored conference "Promoting Regional Transmission Planning and Expansion to Facilitate Fuel Diversity Including Expanded Uses of Coal-fired Resources". The conference record shows a blatant bias toward promoting both generation and transmission by coal-based utilities, which FERC also is supposed to be
regulating. This bias has been perpetuated by FERC since 2005 while loading up coalbased utilities with multiple layers of incentives for building long-distance coal-based energy transmission lines (e.g. PATH Project) cross-country to the East Coast instead of supporting the construction of local renewable wind-based energy generation and distribution lines locally on the East Coast near the load centers. In the interest of credibly serving U.S. Administration energy policy regarding incentives and alternatives, FERC should take the initiative to assess its own dual responsibilities and request the U.S. Congress to split FERC into two independent agencies.

Regulatory reform is needed for FERC. The U.S. Courts already have indicated this need by their recent decisions. The U.S. 9th Circuit Court of Appeals in 2011 curtailed FERC’s free-wheeling promotion of National Interest Electric Transmission Corridors and coal; and the U.S. 4th Circuit Court of Appeals curtailed FERC’s “backstop” siting authority over state public service commissions. Unlike other regulatory agencies, for
example the NRC, FERC has not maintained its  independence and does not keep utilities and RTO’s at arm length distance in FERC decision making. This is a
worthwhile topic for further investigation by the General Accounting Office (GAO).  Moreover, RTO’s like PJM are not agents of the U.S. Government and, therefore, are
not bound by the ethics laws for protecting the interests of the public and public trust that U.S. Government agencies, such as FERC, are bound to, in particular with regard to agency actions and public perceptions  concerning waste, fraud, and abuse. PJM is,
in effect, a trade association of selected share-holder owned electric companies and has a built-in bias toward representing influential electric company members of PJM."

In a time of universal deceit, telling the truth is a revolutionary act. --George Orwell

Read the CAKES comments in their entirety here.

The Coalition for Reliable Power filed their comments on FERC's Promoting Transmission Investment Through Pricing Reform Notice of Inquiry on Friday.

Click here to read the Coalition's comments.  These comments center on how FERC can utilize existing state transmission project approval processes to assist them in evaluating projects when granting incentives.  It's too bad FERC is considering usurping state authority and making transmission project siting a federal process because they could make great use of the state processes already in place, which are the result of many years of experience in evaluating and siting transmission projects.

Sugarloaf Conservancy filed their comments on FERC's NOI Promoting Transmission Investment Through Pricing Reform yesterday.

Sugarloaf wants FERC to do more to promote the use of advanced technology in transmission projects and the rebuilding of existing lines in lieu of new projects.  They also pointed out to FERC that PATH should be abandoned.

Read Sugarloaf's comments here.

So, where are YOUR comments?

Apparently the utility industry has been sitting around twiddling their thumbs all summer and now they don't have time to file requests for rehearing on Order No. 1000 and comment on transmission incentives all in the same week!

Therefore, FERC has extended the deadline again until September 12.

But that also gives you extra time to get your comments in, so get busy!

The deadline for filing your comments on FERC's Notice of Inquiry - Promoting Transmission Investment Through Pricing Reform is fast approaching on August 25.

StopPATH WV, Inc. filed comments yesterday.  Now the only thing left for me to do is to encourage you to do the same.  We all know that incentives are what has driven the PATH project and are what motivates them to continue to hang on by their fingertips.  This is your opportunity to have your say!

If you need help writing or filing your comments, check out our FERC Transmission NOI category, or just ask.  If you don't have time or inclination to file extensive comments (yes, I realize I'm a nerdy bean-counter), you can always file shorter comments and/or simply document your support of other comments on the docket (however, this doesn't mean copying them and re-submitting them form letter-style).

Remember the SCC Public Hearing in Virginia back in February?  Nearly every person who got up and spoke during the sessions I attended remarked that PATH was motivated solely by that 14.3% ROE.  Now it's time to quit complaining and take action!

There's only two weeks left!

Here's your quick reference guide to the resources available at StopPATH WV to assist you in crafting your comments on FERC's Notice of Inquiry Promoting Transmission Investment Through Pricing Reform.  Hopefully this contains everything you need to know, but if you have additional questions, email me.  You can also leave comments in the individual blog entries, but there's no guarantee I will see them in a timely fashion.

Extended comment deadline - August 25, 2011
How to submit your comments
General Overview of NOI

Overarching Questions pp. 1-10
Sec. 219(a) Statutory Threshold (Rebuttable Presumption) pp. 10-12
Additional Goals in Sec. 219 pp. 12-14
The Nexus Test pp. 14-19
Interrelationship of Incentives pp. 19-20
The Role of Cost Estimates pp. 20-21
Incentive ROE Adders pp. 23-27
Abandonment pp. 27-30
CWIP in Rate Base pp. 30-33
Hypothetical Capital Structure pp. 33-34
Pre-Commercial Cost Recovery p. 34-36
Accelerated Depreciation and Advanced Technology pp. 36-40

We encourage both groups and individuals to submit comments.  For individuals, it might be easier to concentrate on just one aspect of the NOI.  Detailed comments on a particular incentive or aspect are better than generalized comments on the entire NOI.  We are encouraging groups to combine resources and file a comprehensive set of comments.

FERC's Transmission Incentives are the "root of all evil" and the impetus for all the unneeded transmission projects that we've been plagued with.  These projects have cost consumers and landowners hundreds of thousands of dollars in defensive legal costs, years of stress and aggravation, and in some unfortunate cases caused complete financial ruin.  If you want to put a stop to this nonsense once and for all, don't miss this fortuitous opportunity to have a voice.