A mysterious, new group advocating for "more ways to send Iowa's wind power out of state" appeared on TV screens all across Iowa on Monday. The mysterious group claims it includes "wind power activists, vendors and industry leaders" and that is it "neutral" about the Rock Island Clean Line. How could a group advocating for transmission lines in Iowa not be for RICL?
The Rock Island Clean Line is one for-profit company proposing to ship wind power produced in western Iowa to the outskirts of Chicago. None of that power would stay in Iowa and a number of landowners along the proposed 500-mile-long transmission line route have opposed the plan. Some owners and farmers have expressed concerns about potential damage to land from transmission tower construction and the threat of eminent domain to push a route if enough willing sellers aren’t found.
But Lang, and Mike Prior, interim director of the Iowa Wind Energy Association, hope the new organization could serve as a “go-between” to bridge some of the disagreements between land owners and the Clean Line developers.
"Neutral," my eye!
A front group is an organization that purports to represent one agenda while in reality it serves some other party or interest whose sponsorship is hidden or rarely mentioned. [or denied!] The front group is perhaps the most easily recognized use of the third party propaganda technique.
Larson Shannahan Slifka Group (LS2group) is a bipartisan public relations, public affairs, and marketing firm that guides its practices with one goal in mind: what others may do, we strive to do better. We offer clients an unparalleled commitment to excellence and take pride in our consistent delivery of successful outcomes. Our strength lies in the diversity of our team and its determination to apply creative solutions and unique perspectives to clients' needs. We see possibilities others cannot and have a track record of helping our clients reach their goals.
Right. I'm sure other public relations companies cannot "see" the wheels coming off the front groups they set up for their clients at roll out. But, that's neither here nor there.
Who are LS2Group's clients?
"LS2group has a thorough understanding of our needs and responds quickly to our requests, coupled with a vast network of strong relationships with key officials."
- Cary K., Director of Development, Rock Island Clean Line
Who are LS2Group's employees? I saw this one
minding the Clean Line information table at the first Mendota public hearing. Others have reported seeing her at other Illinois and Iowa public events.
This same LS2Group employee is also the named company contact on a recent press release about the Rock Island Clean Line project.
The claims that Windward Iowa is not advocating for Clean Line's RICL project, and has nothing to do with the company, are beyond credible belief.
Windward Iowa incorporated as a non-profit Iowa corporation on December 12, 2013. According to its Articles of Incorporation, its purpose is:
to promote social welfare by seeking to educate and encourage landowners to become familiar with wind energy production and transmission, and expand the wind industry in the state of Iowa to further the common good and general welfare of the people of Iowa and the Midwest.
According to its Articles:
no substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or publication of statements) any political campaign on behalf of or in opposition to any candidate for public office
and must abide by the laws for a 501(c)4 corporation
as determined by the Internal Revenue Service. This also means that donations to this corporation are not tax deductible.
Donations? Yes, that's one of the ways you can "get involved" with this group, in addition to "submitting a letter to the editor or opinion editorial; commenting online through Facebook, Twitter or LinkedIn, or on an article; commenting to the Iowa Utility Board; or contacting your legislator or local government official." Hey, wait a tick, doesn't that last one violate the Articles' prohibition on attempts to influence legislation? That's some pretty thin ice!
I also wonder what the legal implications are of this corporation involving itself in negotiations with property owners that eventually result in eminent domain takings?
Windward Iowa's Facebook
page contains numerous links to stories about RICL.
Windward Iowa's website makes sweeping statements
that it does not back up, such as: "Experts predict the U.S. will soon be in the midst of a transmission crisis. It is important to be proactive in addressing the issue and developing new infrastructure. We cannot afford to wait another 60 years for wind energy development.
The country’s electric grid is outdated and in need of attention and upgrades. Projects that bring wind energy through new avenues are part of the solution to providing clean, dependable, and renewable power."
Who are these "experts" and where have they made these statements? Or did the public relations firm just make it up out of whole cloth?
Compare this information to the signs of a front group here
1. The group does not report who they are really working for, who their members are, or the source of their funding. The idea that three individuals spontaneously decided to start an advocacy group managed by a pricey lawyer and a public relations group defies belief.
2. There is no physical address or list of staff on the website.
3. The group claims neutrality on some hot button issue and appears to be making general arguments about a topic only marginally related to the issue, and yet they mainly focus on a “secondary” issue (RICL).
This is all so classic. I've had experience uncovering and reporting on transmission company front groups in the past, and my opinion is that Windward Iowa is a front group being paid for by Clean Line Energy Partners.
Because RICL and Clean Line Energy Partners are no longer viewed as an impartial and trustworthy source of information in Iowa, the company and its public relations contractor have created a supposedly "neutral" third-party entity that will continue to advocate for its project under another name. If you wouldn't believe a word RICL says, then don't believe anything the company tells you when it is wearing its "Windward Iowa" mask.
Windward Iowa only has the same amount of credibility as RICL, and should be treated accordingly by opposition, elected officials, and the media. It's very disappointing that none of the reporters attending the group's "launch" yesterday had the curiosity to ask where this group is getting its funding. That's the literal "million dollar question."
But some people don't like the project, which is why the bill came forward. Landowners who are wary of eminent domain powers are speaking up against the project. In large part it has become an issue pitting pro-business groups and legislators against people who carry the NIMBY, or Not in My Backyard, mindframe.
Propagandists use the name-calling technique to incite fears or arouse positive prejudices with the intent that invoked fear (based on fearmongering tactics) or trust will encourage those that read, see or hear propaganda to construct a negative opinion, in respect to the former, or a positive opinion, with respect to the latter, about a person, group, or set of beliefs or ideas that the propagandist would wish the recipients to believe. The method is intended to provoke conclusions and actions about a matter apart from an impartial examinations of the facts of the matter. When this tactic is used instead of an argument, name-calling is thus a substitute for rational, fact-based arguments against an idea or belief, based upon its own merits, and becomes an argumentum ad hominem.
Clean Line is so frightened by the righteous concerns of landowners being asked to make a sacrifice for the pecuniary aspirations of a company from Texas, that they have resorted to cheap party tricks like "NIMBY."
News Flash: Use of the "NIMBY" name in transmission battles is passe and ineffective. The Alliance has already overcome that stereotype quite effectively.
And why shouldn't landowners be concerned or, as the editorial puts it, "not like the project." The project is asking them to sacrifice their property, their business, their peace of mind and their physical well-being for the needs of some phantom others in "states farther east." Who wouldn't resist it? Would you resist a similar attack on your own home, income and way of life?
In addition, the "project" isn't even needed for reliability or economic reasons. It's a scheme to make a lot of money supplanting existing generation in "states farther east" that have no desire for the power in the first place.
While the financial windfalls may be shared with a handful of politically-connected landowners in NW Iowa who voluntarily host turbines, the buck stops there. The Alliance landowners are being forced to take a one-time "market value" payment, not share in the wealth. Their contribution to the effort is not being fairly recognized or compensated.
While Clean Line's lobbyists hyperventilate that the legislation will "shut down this project as well as kill jobs,” the proposed legislation merely removed the company's threat of eminent domain against landowners who refused to go along. As the Illinois Farm Bureau said in its Illinois Commerce Commission brief:
"In addition, if granted § 8-503 relief, what Rock Island characterizes as “voluntary” easement negotiations with farmers will actually sound something like “Rock Island has been directed by the Commission to construct a transmission line on an approve[d] route, which crosses your land.” Characterizing the easement negotiations as voluntary under these facts is kind of like giving someone the option of jumping off of a cliff before you push them."
If RICL is a viable and economic project, it shouldn't have any trouble compensating landowners to their satisfaction, and would not need the threat of eminent domain. The use of eminent domain for private gain is the issue here, not jobs or economic development. At what point does a person's right to own and enjoy property become less than another individual's desire to confiscate that property for his or her own pecuniary goals? If you believe this is okay, as long as it's in someone else's back yard and you're sharing in the wealth, you're heading down a very slippery slope. Because if you think it's okay in someone else's back yard, you are also saying it's okay in your own, and some day, the chickens are going to come home to roost and then you will be the "NIMBY."
Why is Clean Line so scared? Think about it.
Lynn Pugh opened her AEP bill this month to see just how much the cold January had set her back, but she found something in her bill that she normally doesn’t see.
“I’ve never seen the consumer rate relief charge,” said AEP customer Lynn Pugh.
Starting in December of 2013, AEP began adding the consumer rate relief charge to customer bills. According to the company, the new charge is a way to help them account for the spike in the price of coal in 2008-2009.
“It’s actually a reflection of a settlement we had with the PSC to recover the cost of coal,” said AEP spokesman Phillip Moye.
Normally AEP pays around $50 per ton for coal, but in ’08 and ’09 they were paying over $100 per ton because of a coal shortage.
The Public Service Commission signed off on the charge and has allowed AEP to keep it on your bill for the next 15 years. Pugh was shocked to learn that the charge would be on her bill for the next 15 years.
Moye said the AEP opted to go with the additional charge rather than increasing the rate on the price of power.
“The impact on the rate would have been tremendous,” Moye said. “30 to 40 percent increase, and that obviously is more than what customers can bare.” [bear!! although maybe customers will tear off their clothes and run naked through the legislature in protest?]
Pugh said she understands why she is paying the additional charge, but doesn’t think it should be on there for the next 15 years.
“I can’t imagine that they paid that much extra for coal that every AEP customer is going to have to pay this.”
The charge is based on how much your bill costs. Pugh’s charge was almost 11 dollars.
Ms. Pugh is only beginning to understand that now, in addition to all the old coal debt, she's also paying for other deferred regulatory assets, plus interest and fees.
We tried to stop this craziness in 2012, but customers like Ms. Pugh weren't paying any attention and took no interest in helping themselves. If Ms. Pugh had known then what she knows now, might she have picked up the phone and called her elected representative, or dashed off an email to the PSC? Probably.
Now APCo customers have the next 15 years to lament their lack of consumer education. When will West Virginia fund an effective consumer advocacy program that includes public education? Or does our legislature prefer us to remain barefoot, pregnant and chained to the coal-fired power station?
We have a lot of work to do, West Virginia!
Big article in the Wall Street Journal yesterday, Assault on California Power Station Raises Alarm on Potential for Terrorism, that reports on a coordinated attack at a California substation that sounds like a scene from an action film.
According to the article, the information came from former FERC Commissioner Jon Wellinghoff, who has taken up lurking around substations in his dotage. Apparently Wellinghoff was horrified at the substation attack last April and the subsequent realization that our grid is astonishingly vulnerable and there's not much FERC can do about it.
I know what FERC can do about it... Stop promoting centralized generation and an increasing network of high voltage transmission lines to trade electricity like a commodity from coast to coast!
If you think substations are vulnerable, spend a few minutes pondering the thousands of miles of high voltage transmission lines strung everywhere. True, an attack on one remote tower may not have much effect and could be easily fixed, but what about a coordinated attack on hundreds of towers that supply our cities at the same time?
Our military isn't dumb enough to rely on a power supply this vulnerable, so why should we? As far back as 2007, the U.S. military was studying electric grid vulnerability and concluded that "distributed generation" (yes, they used quotes, like Dr. Evil with his "laser") was our best defense.
And so it is - our military is practicing distributed generation.
So, when is Congress going to put a stop to the transmission feeding frenzy and start protecting the rest of us?
The target of their legislation is the Rock Island Clean Line, a $2 billion, 500-mile overhead direct current transmission line.
Rogers called private property rights “critically important to our way of life.”
“Many farmers in my district live and work on land that has been in their family for generations, and they want to allow their children, grandchildren, and great-grandchildren to continue to farm that land and feed the world,” Rogers said. “Our laws must adequately protect their property rights.”
requires that any power line project requesting eminent domain authority must deliver at least 25% of its power to consumers in Iowa. RICL intends to export power from northwest Iowa direct to eastern Illinois, where it will be interconnected with PJM Interconnection, the regional grid operator for mid-Atlantic eastern states.
The second bill requires legislative approval of any request to bifurcate an application for a transmission project in order to separate the determination of need from the request for eminent domain authority. RICL tried to use bifurcation to force landowners into a weak negotiating position for rights-of-way, but was rejected by the Iowa Utilities Board.
Be sure to check the lobbyist declarations on both these bills. Clean Line doesn't appear to be happy about them. I suppose fair is fair though... Iowans don't seem to be very happy about RICL, either.
I wonder if our Clean Line heroes envisioned this kind of opposition when planning their get-rich-quick power line scheme back in 2011? I've heard it said that they gleefully dismissed any possibility of trouble, expecting nothing more than "a couple of ticked off farmers." Personally, I'd never want to tick off any farmers. They have pitchforks. And I like the food they grow.
And speaking of eminent domain, legislators in Missouri are livid over the Arkansas Public Service Commission's approval of a SWEPCO transmission route through 25 miles of Missouri. Within 10 days of the APSC decision, legislators had proposed:
The bill states that “the Missouri Public Service commission shall lack jurisdiction to approve the construction of any electric facilities to be built in accordance with Arkansas Public Service Commission Order 33, Docket Number 13-041-U, authorizing Route 109 as a ‘reasonable route’ for the construction of new three hundred forty-five kilovolt electric transmission lines.”
The overbuilding of new transmission of questionable necessity as a utility or investor profit center has finally gone too far. The people have had enough of this nonsense and their elected representatives are taking action. This transmission craze is now making it difficult to build ANY transmission, even that which may actually be needed. Their cash cow is down and slowly bleeding to death, and it's their own fault. Ooops.
It appears that FirstEnergy didn't learn a thing from its recent trip to the PSC hot seat over the company's shocking disregard for its customers who were trampled on the way to "merger synergy savings." FirstEnergy maintains that it never did anything wrong, but has magnanimously offered a few ineffectual parting gifts for its customers as a fig leaf to cover its hoped-for ruling by the Commission that would let the company off scot-free.
The PSC Staff and the Consumer Advocate Division have different ideas, and the Staff, in particular, rakes FirstEnergy over the coals in its own blistering brief. That's all fine and good, but I hope a bunch of scathing words in a brief isn't all we get out of this. Staff says:
The Companies responding to this General Investigation proceeding have provided a lot of excuses to the Commission as to why so many customers received multiple consecutive poorly estimated bills that led to dramatically high “true up” bills.
Originally, the Companies tried to convince the Commission and the public the problems
were mainly caused by the timing and size of the Derecho and Super Storm Sandy.
When the problems continued, the Companies started providing further excuses, but did
not take responsibility for their role in creating many of the problems themselves and compounded the problem further by making unreasonable demands for payments from the impacted customers. In Staffs opinion, they still have not taken that responsibility.
The Derecho and Super Storm Sandy undeniably played a significant role in the problems underlying this case. However, all along the way, the Companies made poor decision after poor decision with little to no thought as to how it might impact their customers.
These poor decisions lead to multiple and continued violations of their tariffs. Staff takes
these violations very seriously and believes it is time the Companies own up to their mistakes and provide the Commission with concrete evidence these types of problems
will not reoccur. Further, the Companies should be required to either correct the ongoing problems with their estimation routine or switch from bi-monthly to monthly meter reading.
Hurricane Sandy struck the service territories with large amounts of heavy, salt-laden, snow that tore down trees and power lines...
Really, FirstEnergy? That's a meteorological first -- it snowed heavy "salt-laden" snow on the trees and power lines? What the heck, FirstEnergy? How does that happen? How does the salt get into the atmosphere and how does it become encapsulated in snowflakes? When "salt-laden" snow melts, does it leave a residue behind? That defies common sense! Got a little carried away there, didn't you?
So, what was the REAL cause of the problems? Staff says:
It is easy, and some may say unfair, to play Monday morning quarterback with the decisions of the Companies. Staff does not believe it is unfair to do so in this circumstance. A poor decision here or there is just that, a decision that did not work out.
What we have here is something completely different, poor decision on top of poor
decision on top of devastating storms on top of more poor decisions with no management
thought of potential impacts to customers. This is a pattern of behavior. It appears FirstEnergy had a plan for integration and was determined to follow through with that
plan no matter the result. Little consideration was given to the customers, “merger
synergy savings” had to be captured. Indeed the Companies suspected as early as
September of 2012 there may be problems, but did nothing to attempt to resolve them
until April 2013. At that point, the problems had become so widespread the Companies
had no choice but to try and address them. However, shockingly, the Companies
continue to act as though they were simply a victim of circumstance. Generally, Staff believes the Commission should send a strong message to the Companies that this type of behavior will not be tolerated, that the Commission believes the Companies did indeed violate their tariff in multiple ways and that continued violations will be looked upon
The Consumer Advocate's brief
was not kind either. The Consumer Advocate is still requesting that FirstEnergy be ordered to read every meter, every month, for one year
Bad historical usage data begets bad data and, thus, CAD believes the only way to correct the problem caused by the Companies’ failure to conduct bi-monthly reads of residential meters is to obtain one year’s worth of reliable data from actual monthly meter reads. It is the goal of the CAD that this matter be resolved in the best possible manner for customers of MP and PE, who have undeniably suffered - and, in some instances, continue to suffer - the ill effects of the Companies’ meter reading and billing practices.
The Consumer Advocate also thinks the companies' storm excuses are a feeble attempt to pretend that the real culprit isn't the company's merger:
Throughout the course of this proceeding, the Companies have attempted to place the
majority of the blame for their billing and meter reading problems on the Derecho that occurred in June 2012 and Superstorm Sandy, which occurred in October 2012. However, while the storms may have exacerbated the Companies’ existing problem, it is inaccurate to contend that the storms caused the billing problems so many customers have faced. In actuality, the evidence shows that the merger of Allegheny Power into FirstEnergy in 2011 and subsequent transition issues in the wake of the merger, including understaffing, transitioning from the Allegheny billing system to the FirstEnergy billing system, and the questionable timing of the meter route “renumbering” project, created this problem.
The Consumer Advocate also noted that, contrary to the company's contentions, customer complaints have been trending up again this winter. We ain't seen nothin' yet!
Underestimations in January bills, combined with this month's prolonged frigid temperatures, are sure to cause a charlie foxtrot of unprecedented proportions in February. Enough is enough.
Even though FirstEnergy's EPRI report still seems to be suspiciously missing, it's time for the Commission to act, if nothing else than from a position of self-preservation. I'm starting to lose track of all the "let's punish the PSC" legislation that's been introduced in Charleston this session. Although we'd rather see the company punished for its transgressions, I guess someone has to take the fall for this.
If you're one of the thousands of Potomac Edison or Mon Power customers who have experienced problems with your billing over the past couple of years, fill out this quick and easy online form to consult with an attorney about your unique situation.
As we noted last week, a Jefferson County customer has filed a civil suit against Potomac Edison. When WHAG asked viewers if they had also been over billed on its Facebook page, response was overwhelming! More than 160 people posted comments, many claiming to have received bills in the hundreds or thousands of dollars.
Now Charles Town attorney Andrew Skinner says, "...more suits may follow against the electric company."
The FirstEnergy subsidiary's billing practices have been the subject of numerous consumer complaints and several public hearings this year. While Skinner says a class-action lawsuit is unlikely, customers may be able to file a mass-action lawsuit, in which there are many individual plaintiffs."
An article in the Martinsburg Journal explains the progression of the initial suit filed by Shepherdstown resident John Kilroy. After many months of wrangling with Potomac Edison, and after going through the formal complaint process at the WV Public Service Commission (where the company signed a settlement agreement forgiving half of the amount in question), the company continued to bill Kilroy the full amount. Every avenue short of a lawsuit was explored, but the company continued to insist that Kilroy owed more than $3000.
Before filing the lawsuit, Skinner sent a letter to Potomac Edison, asking the company to correct its billing inaccuracies as required by the Consumer Credit and Protection Act. Potomac Edison representatives failed to respond.
FirstEnergy's Potomac Edison and Mon Power subsidiaries continue to ignore customer complaints. After all, the legislative interim investigation of utility billing practices has come to an end with nothing being done. Perhaps it was nothing more than grandstanding by Senator Herb Snyder in the first place, but maybe we can try again to get something accomplished when the legislative session begins in January.
After sitting through the evidentiary hearing last week, it looks like the company lacks a healthy and respectful fear of our Public Service Commission. Why does the company treat regulation like it's something that can be "fixed?" When I arrived at the PSC for day 2 of the evidentiary hearing last Wednesday, someone asked me if I happened to notice Sammy Gray on my way in. Sammy Gray is FirstEnergy's West Virginia lobbyist.
What would a lobbyist be doing trying to influence an impartial, quasi-judicial regulatory board? Why would he ever set foot in that building? Is our PSC just another corporate apologist?
I'm starting to think that consumers (or "business partners," as FirstEnergy training manuals call us) could be mistaken if they believe that West Virginia's legislative or regulatory processes are designed to serve them.
Because we can't get justice through our government, it's time to take it to a higher level and quit wasting our time at a PSC that will not exercise its authority.
What's a consumer to do when the legislators and regulators fail him? Take the matter up with a judge in your own county and seek justice through the court system.
Go ahead, fill out the form. It's your only path to justice in West Virginia.
The West Virginia Public Service Commission's evidentiary hearing in the General Investigation of Potomac Edison and Mon Power Meter Reading, Billing and Customer Service Practices is scheduled to take place this week, December 17 - 19.
The hearing will be held in the PSC hearing room in Charleston. The hearing is open to the public as spectators only
. There will be no opportunity for the public to make comments during the hearing. The public comment hearings were held in October in Shepherdstown
If you would like to watch the hearing, but don't have the time or money to travel to Charleston, you can watch the hearing live on the PSC's webcast.
Click here to watch the hearing.
The hearing begins at 9:30 a.m. on Tuesday, December 17 and will probably run the entire day. If needed, the hearing will continue at 9:30 a.m. on Wednesday, December 18, and if still more time is needed, continue again on Thursday, December 19. I really can't imagine it taking that long, there are only 6 witnesses.
The witness order will be:
1. Mon Power/Potomac Edison
a) John C. Hilderbrand
b) Kaye G. Julian
c) Gary W. Grant
d) Kevin Wise
2. Consumer Advocate Division
a) Suzanne Akers
3. Public Service Commission Staff
a) Michael L. Fletcher
Read more about the case and the testimony that has been filed here.
And be sure to check back here, or on the Coalition's Facebook page, for updates during the hearing.
Will justice be done?
Give up, FirstEnergy. You're not going to win this one. Why not try to go out with a little dignity and customer goodwill, instead of as a flaming failure, kicking and screaming all the way to the door?
FirstEnergy filed rebuttal testimony in the General Investigation case yesterday that can only be described as desperate.
FirstEnergy even stoops so low as to single out its customers by name and call them liars. I really hope that FirstEnergy's electronic billing data was not adjusted to hide the truth, as one of those accused of being a liar claims. Does FirstEnergy really want to put its computerized data up against someone's paper bills in a civil suit?
FirstEnergy also admits that it was taking names at the hearings and browsed through its call recordings to see who was rude to who. Without giving any examples, FirstEnergy claims that the customers were rude because they didn't like the answers they were given. Maybe that's because the answers were factually incorrect or completely unhelpful?
FirstEnergy's customer service supervisor guy comes across as arrogant and hateful toward the customers he's supposed to serve. Nice touch! That pretty much illustrates the source of the customer service bad attitude. That's a shame, because there actually are (or were?) a couple of nice people at the call center.
One last thought, FirstEnergy, but I'm sure you're well aware of this already. The long hold times do not come at the beginning of the call under your ASA statistics. They come after your "rude" customers get an incorrect or unhelpful answer from the CSR and ask to speak to a supervisor. That's when they are put on hold for periods up to one hour, hoping they will hang up and go away before a supervisor deigns to pick up the phone. Go ahead... listen to a few calls... you desperate little creatures.
What an admirably nasty, last ditch effort to pull your corporate keister out of the fire. It's hot, isn't it?
It's guaranteed to be quite a drama. Don't miss it!
Every year, the Federal Energy Regulatory Commission issues a report of its enforcement actions. The 2013 report
was issued last month.
There was an interesting section of the report about formula rates. A formula rate is a type of rate setting that involves a forward-looking collection of rates based on a projected budget. Interstate electric transmission rates are set under FERC's federal jurisdiction and simply passed through unscathed in your state ratemaking process to your electric bill. A formula rate is a blank template that calculates the rate
according to set formula in compliance with FERC's accounting and ratemaking guidelines. Each year, the transmission owner populates the formula with numbers from its projected budget to arrive at the amount it is permitted to charge for service, and then collects that amount from its customers during the year. At the end of the year, the transmission owner must file another formula rate calculation that trues up the projected rate by comparing it to actual spending. The company then adjusts the following rate year to make up any difference between the two, whether an over-collection or under-collection.
Now, here's the rub. This is all being done on the honor system. And, as the old saying goes, there's no honor among thieves
. FERC audits a small percentage of formula rates every year, either on its own initiative or through referral when a problem is reported. FERC does not audit every formula rate every year. Instead, FERC relies on the people who pay these rates to raise the red flag if something is amiss. There are special protocols (instructions) attached to each formula rate that detail the procedures to be followed to review the formula rate and file a legal challenge if any discrepancies between transmission owner and customer cannot be resolved. So, who is doing this job for you, little ratepayer? Is it your local electric company? Is it your state public service commission? Is it your state consumer protection office? Chances are it's none of the above, and NOBODY is reviewing the transmission rates you are paying. It's not that these entities don't care that you may be being ripped off, it's that they don't have the resources or knowledge to do the job, so they simply skip it and hope for the best. This situation does not serve your interests.
Transmission owners know that nobody is minding the store, therefore they have been taking advantage of the situation to "accidentally" include all sorts of expenses and incorrect calculations that jack up rates and cost you extra money. I say "accidentally" because there's always the chance that they will get fingered for a FERC audit, or get challenged by a couple of housewives from West Virginia. In case they are caught by FERC, they pretend any misdeeds were an "accident" and promise to issue refunds. It's a gamble the transmission owner is willing to take because chances are they won't get caught. If they do get caught, they may not have to refund the whole amount they stole from customers, either because the entire amount of the thievery isn't discovered, isn't proven, or is negotiated through a settlement. It's a risk that's profitable to take. Therefore, transmission owners are routinely ripping us off.
FERC notes that certain trends are developing in the way transmission owners rip us off.
During the past several years, DAA observed noncompliance in certain areas that warrant highlighting for jurisdictional entities and their corporate officials. Although there are other areas of noncompliance associated with the topics presented below, the areas discussed relate to areas where DAA has found consistent patterns of noncompliance. Greater attention is needed in these areas to prevent noncompliance and to avoid enforcement action.
Formula Rate Matters. DAA rigorously examines the accounting that populates formula rate recovery mechanisms that are used in determining billings to wholesale customers. In recent formula rate audits, DAA observed certain patterns of noncompliance in the following areas:
Merger Goodwill – including goodwill in the equity component of the capital
structure absent Commission approval;
Depreciation Rates – using state-approved, rather than Commission-approved,
Merger Costs – including merger consummation costs (e.g., internal labor and other general and administrative costs) without Commission approval;
Tax Prepayments – incorrectly recording tax overpayments which are not applied
to a future tax year’s obligation as a prepayment leading to excess recoveries
through working capital;
Asset Retirement Obligation (ARO) – including ARO amounts in formula rates,
without explicit Commission approval;
Below-the-Line Costs – attempting to move below-the-line costs into formula rates (e.g., lobbying, charitable contributions, fines and penalties, and compromise settlements arising from discriminatory employment practices); and
Improper Capitalization – seeking to include in rate base (and earn a return on) costs that should be expensed.
This is completely unsurprising to me, since I've seen (and challenged) many of these incorrect practices. But what does continue to surprise me is that nobody has the inclination to stop it. If formula rates are to be used to set transmission rates, and FERC knows that they are subject to manipulation and purposeful over recovery, then there simply must be some entity designated to monitor them in the interest of consumer protection. While states have agencies designated to protect their consumers from greedy utilities, there is no federal counterpart at FERC.
FERC's mission is to "assist consumers in obtaining reliable, efficient and sustainable energy services at a reasonable cost through appropriate regulatory and market means." FERC is failing us on formula rates.