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.
Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has. --
US social anthropologist (1901 - 1978)
It appears that EUCI has knuckled under from citizen pressure and kicked Clean Line's executives off the speakers line up for its 8th Annual Public Participation for Transmission Siting Conference
scheduled for January 23-24, 2014 in Houston. Clean Line is also no longer sponsoring the conference.
The original agenda put together by Clean Line included offensive sessions entitled "Going BANANAS with NIMBYs - Best Practices in Dealing with Community Based Opposition Groups" and "Marketing to Mayberry: Communicating with Rural America."
The new agenda has been "cleansed" of Clean Line influence and the offensive sessions have been renamed "Best Practices in dealing with community based opposition groups" and "Communicating with rural America," dispensing with the offensive and cutsey-poo insults of transmission opposition groups.
But, does this make EUCI's continuing education conference any more useful? Probably not. It still more closely resembles a transmission industry echo chamber, where industry blowhards make crap up and feed it to the attendees as a successful example to follow. The truth is that "the public" continues to laugh at these idiots' attempts to "participate" with us to successfully site their projects. It's not about "participating" with the public at all... it's about sharing ideas for ways to lie and cheat the public in order to win project approval.
The only way to successfully "participate" with the public is to actually dirty your hands consorting with them, and EUCI isn't about to let THAT happen. Offhand, I can't think of a more useless conference for the industry. For the opposition, however, it's a fun opportunity, as protestors at a Missouri EUCI conference found out a couple months ago. See you there!
“This company’s going to experience a thousand points of pain,” UWUA Local 102 President Bob Whalen said.
And FirstEnergy thinks I'm mean? Good one, Bob!
According to a news report, the standoff between FirstEnergy and locked out union employees in Pennsylvania continues.
Whalen said, however, that after a 20-minute preliminary meeting, representatives only spent five minutes around the negotiating table on Monday. He said after reading the first item on the union’s list of contract change requests, the extension of health care benefits for retirees, FirstEnergy ended the discussion.
“They said, ‘No, the meeting is over.’ They did not listen to the rest of our proposals,” Whalen said.
FirstEnergy says it can continue to operate indefinitely with its managers and supervisors doing the work of the locked out employees. That will last until someone wants the afternoon off to go Christmas shopping...
The thing is, FirstEnergy is quite capable of punishing itself, over and over. A more incompetent multitude of management morons would be hard to find. Oftentimes the only effort needed is to stand back and stifle your giggles. For instance:
The Nuclear Regulatory Commission has recon$idered an earlier decision that FirstEnergy's Beaver Valley nuke failed a force on force exercise earlier this year. Apparently they only failed because of the way the exercise was set up.
Defending against militant goldfish is just such an inexact science! Never fear though, the NRC still wants to keep a closer eye on Beaver Valley's operations because some of the issues that convinced inspectors a violation had occurred apparently can be seen in other areas of plant operation.
In other news, another lawsuit has been filed against FirstEnergy over contamination from its Little Blue Poison Pond, this time from neighbors in Pennsylvania.
Evidentiary hearings begin next Tuesday in Charleston in the matter of FirstEnergy's failure to read meters and bill its customers properly. The staff of the WV PSC is recommending the company issue refunds for work not performed, and the WV Consumer Advocate is recommending that the company hire enough people to read every meter every month for at least a year in order to provide accurate usage data for future estimates.
And a new legislative session opens January 8, 2014! Won't we have fun?
Kansas citizens got rid of a huge threat to their wallets and due process rights today with the "retirement" of Kansas Corporation Commission Chairman Mark Sievers.
Sievers and his overlord, Governor Sam Brownback, pretended that it was a "retirement" so Sievers could spend more time with his family. Poor family.
Too bad Sievers didn't retire before stomping on the due process rights of Kansas citizens in order to approve Clean Line Energy Partners' Grain Belt Express transmission siting application. That might have saved a whole bunch of future time and effort righting Sievers' wrongs. And it might have prepared the arrogant leadership of Clean Line Energy Partners for the scrutiny of a state regulator not in someone's pocket so they didn't look so perplexed at the Illinois Commerce Commission last week. They're definitely not in Kansas anymore!
Sievers leaves a tawdry legacy behind. Some of his stellar moments as Chairman of the KCC include:
- Last month, a judge ruled that the panel had violated the Kansas Open Meetings Act by using a process called “pink sheeting” to approve commission orders. The Commission was fined $500, the highest fine permissible.
Under that process, staff members would circulate proposed orders to all three commissioners, who would sign the orders to indicate approval rather than voting in an open meeting. The process drew its name from the color of the slips of paper used to obtain commissioner signatures.
- In one of the last acts of Sievers’ chairmanship, he attempted to file a statement attached to a Westar Energy rate case decided late last month. Westar had originally proposed to shift tens of millions of dollars in rate costs from its large industrial and commercial customers to residential and small-business ratepayers.
Sievers objected that the case was settled by Westar, CURB, KCC staff and other parties before the commission got to discuss the division of cost between large and small ratepayers and said the current methods for allocating those costs are deeply flawed.
The other two commissioners approved the settlement and declined to include Sievers’ statement in the official file of the rate case.
- Sievers’ tenure also suffered from the departure under fire of the executive director who had been hired to lead the commission staff shortly after Sievers took over as chairman. Patti Petersen-Klein left the agency in June, shortly after the Topeka Capital-Journal disclosed results of a confidential consultant report on Petersen-Klein’s management of the agency.
The report said Petersen-Klein ruled the agency under an assumption that its employees were lazy and unreliable and had to be driven relentlessly by management to accomplish anything. That atmosphere led to the departure of numerous longtime staff members and cratered morale for those who stayed.
- Sievers also clashed with fellow commissioners Thomas Wright and Shari Feist Albrecht about propriety of the chairman attaching personal statements to formal commission orders. Oh yes, the Sievers "statement" -- like this work of fiction attached to the Grain Belt Express order.
- Rumors that Sievers lives in and is registered to vote in the state of Colorado. No wonder he routinely kicked Kansans under the bus.
- Rumors that the KCC was tasked with providing a smokescreen for the machinations of Governor Sam Brownback so that nothing nasty would stick to ol' Sam. Check back on that one in 2014. I think Kansas voters haven't been fooled.
- Last summer KCC staff shut down a video conference feed of an open meeting to its Wichita office after an Eagle reporter tried to watch it.
- The Citizens’ Utility Ratepayer Board, a small state agency that represents residential and small-business utility customers, was already in the doghouse with KCC Chairman Mark Sievers. He recently said the KCC should investigate whether CURB’s expenses are reasonable - raising concerns that the KCC was trying to control CURB.
- Sievers recently proposed rubber stamping any utility rate increases less than 10%. Sievers said he favored bypassing rate studies and implementing his 10 percent rate threshhold “because it reduces the discretion of advocates and lawyers to engage in unproductive litigation…”
So long, Sievers. Good riddance to bad rubbish.
The PSC staff
, the Consumer Advocate
all filed testimony in the General Investigation of the company's billing and meter reading practices on Friday. While a satisfactory solution could possibly be cobbled together from the staff and consumer advocate testimony, they both overlooked the obvious.
The change in meter reader duties and the resulting employee exodus was a direct result of Allegheny Energy's merger with FirstEnergy. The computer system change was a direct result of the merger. The "renumbering" of meter reading routes was a direct result of the merger. None of these causes of (excuses for?) FirstEnergy's billing and meter reading failure would have happened but for the merger.
FirstEnergy told the WV PSC that "...the Merger would not have any adverse impact on Allegheny, the West Virginia customers of Mon Power and Potomac Edison, other public utilities in West Virginia, or the public in general, Rather, Joint Petitioners projected that the Merger would result in a stronger combined company and would benefit the public generally, the WV Subs, and Allegheny’s West Virginia customers."
This is reality: FirstEnergy's merger integration has caused great harm to hundreds of thousands of its West Virginia customers in the form of inaccurate bills. These bills resulted in financial hardships and service shutoffs. End of story. It is now FirstEnergy's financial responsibility to right its wrongs and make amends to its customers.
From the FirstEnergy merger settlement (not that any of these stipulations have been enforced by the PSC):
During the Merger integration process, FirstEnergy and Allegheny will review existing procedures and policies to determine “best practices” and how to implement them, ensuring that customer benefits appropriately outweigh the associated costs and considering any related effects on customer service and customer satisfaction levels.
FirstEnergy failed to "consider" the effects of its failure to read electric meters on customer satisfaction. Customers are so thoroughly disgusted with this company and its regulators that a mere slap on the wrist and promise to do better just aren't going to cut it.
The WV PSC staff fails to grasp the real causes and magnitude of the problem. The Consumer Advocate does better, but both of these regulators have only seen the tip of the iceberg. The failure to read electric meters has been going on since the fall of 2011, shortly after the merger. The high "catch up bill" complaints actually began in the spring of 2012, months before any "storms." "Storms" is just an excuse.
The staff also seems to fail to grasp that no matter which estimation routine is used, FirstEnergy's estimations will be inaccurate because they are based on inaccurate prior estimates. A weather-adjusted estimate based on garbage is still going to be garbage, no matter how much FirstEnergy or EPRI tweak it. No amount of mathematical tweaking can overcome a lack of accurate base data.
Although the staff seems content to wait and see if the inaccurate estimates trigger another billing charlie foxtrot this winter, I'm not. I'm going to start handing out staff's phone number because I've heard and seen enough. The inaccurate bills continue. Perhaps the WV PSC would rather let the legislators solve this problem through their own investigation and enactment of new legislation?
As well, none of the regulators seem to notice or care how FirstEnergy is fudging their monthly statistical reports.
And isn't it interesting that FirstEnergy keeps slipping down the slope toward reading every meter every month? Just last month, the company admitted that it had selected "several thousand" accounts for monthly reading. In its testimony filed Friday, the number of monthly read accounts has ballooned to 10,000. Give up, FirstEnergy: Every meter, every month, one year.
So, what can we do to cobble together something good out of the recommendations in the testimony?
- The Consumer Advocate recommends "...that the Companies increase their number of meter readers in order to perform actual reads every month for at least a year to obtain 12 months worth of actual reliable data for every customer. Once there is reliable customer usage data, it can be determined whether there are systemic problems with the new FE software estimation procedures that should be addressed." However, it should be stipulated that the company bears the financial responsibility for the monthly read expenses and that they shall not be recovered from customers nor included in any cost of service study for a future rate case.
- The Staff recommends "If a customer’s scheduled actual meter read is instead estimated for any reason other than demonstrable inclement weather or Federal or State Emergency Declaration, the customer shall receive a refund of the applicable customer charge for each month estimated usage occurs between utility performed actual meter readings. Applicable customer charge means the tariff customer charge for the customer’s class of service. For example, a residential customer receiving three (3) consecutive estimated meter readings would receive a $15 credit on his next actual bill." However this should be applied retroactively from the date of FirstEnergy's merger and refunded to customers to act as a punitive measure to mollify public anger.
That's it! Can we stop screwing around here and just get this over with? I'm pretty sure that FirstEnergy and its regulators have wasted way more time and money on this investigation than the company would have incurred to simply fix the problem months ago by reading meters every month. It's simply obvious.
Six New England governors signed an "energy agreement"
the other day. The rest of the world has been trying to figure out what the agreement means ever since. The governors commit to continue to work together to accomplish a whole bunch of contradictory goals:
- investments in additional energy efficiency, renewable generation, natural gas pipelines, and electric transmission
- balance intermittent generation, reduce peak demand, and displace some of the least efficient and most polluting fossil fuel generation
- meet clean energy and greenhouse gas reduction goals
- improving the economic competitiveness of our region
- advance a regional energy infrastructure initiative that diversifies our energy supply portfolio while
ensuring that the benefits and costs of transmission and pipeline investments are shared appropriately among the New England States
- respect individual state perspectives, particularly those of host states, as well as the natural resources, environment, and economy of the States
- ensure that the citizens and other stakeholders of our region, including NEPOOL, are involved in the process
- consistent with laws and policies across the region
- investments in local renewable generation, combined heat and power, and renewable and competitively-priced heating for buildings will support local markets and result in additional cost savings, new jobs and economic opportunities, and
- maximize ratepayer savings and system integrity
- greater integration and utilization of renewable generation
- development of new natural gas pipeline
- maximizing the use of existing transmission infrastructure
- investment, where appropriate, in new transmission infrastructure
- inclusion of energy efficiency, and the addition of distributed generation, in load forecasting and transmission planning
- expand economic development, promote job growth, improve the competitiveness of our industries, enhance system reliability, and protect and increase the quality of life of our citizens
But Joel Gordes, a West Hartford-based energy consultant, said the regional approach toward addressing energy issues has a downside as well.
“This is a compact region, but each state has its wants and needs that are in conflict at times,” Gordes said. “If this leads to building more transmission lines across New England instead of focusing on other areas that decentralize energy production, like microgrids and solar energy, than I see this as something that weakens our safety net in the aftermath of some of the large storms we’ve seen. Distributed energy projects, like microgrids, would make us more resilient.”
But maybe it's just all about the money?
The goal of the agreement, which was announced jointly late Thursday by the governors, is to reduce energy costs in the region.
The agreement calls for the states to jointly determine how to spend billions of dollars in ratepayer money from all six states to develop additional transmission projects for both natural gas and electricity.
Connecticut, with the second highest electric rates in the region
, sees it as a way to reduce electric prices in the state. But, this would come at the expense of the other states, since Connecticut has a victim mentality about energy:
"...the commitment to an initiative that can support additional transmission lines to bring cleaner electricity into Connecticut is essential to reduce our carbon emissions and help mitigate the devastating impacts of climate change that we have felt so severely here in Connecticut.”
Connecticut has recently continued its moratorium on wind farms
, but yet it wants other states to build renewables and export the energy produced to Connecticut? No wonder their electricity prices are so high.
While Connecticut sees the agreement as a way to import energy it refuses to produce on its own, the sacrificial cow of New Hampshire (which is targeted as the host of Northern Pass to serve Connecticut's power needs) sees it as a step forward to prevent the ruination of its state for the needs of others.
[New Hampshire] Governor Maggie Hassan says the agreement - which she calls a "mission statement" - commits to expanding infrastructure like transmission lines and natural gas pipelines, which would help lower energy costs in the whole region. “But we want to make sure we do that in a way that really honors each state’s needs, and doesn’t disproportionately or inappropriately burden the people of any one state,” said Hassan in a cell phone interview on Friday.
The announcement comes at a time when the governors of Southern New England, with their more aggressive renewable energy goals, are especially concerned with rising energy rates. But some in Northern New England are worried about becoming a thoroughfare for renewable electricity destined for Boston and Hartford.
“I just think it’s a really positive an encouraging development,” said Hassan.
Well, that's about as clear as mud. I'm thinking this agreement is nothing but a publicity stunt and actually means nothing, except that ratepayers should be prepared to open their wallets once again.
The only thing that seems to be clear here is that New England doesn't want any of this:
Eat more sage grouse!
Scott at Ridiculous RICL blog
dug up a circa-2009 video
over the weekend that Clean Line Energy Partners' President Michael Skelly probably wishes would disappear. In it, Skelly says a whole bunch of things he probably wishes he had not, in retrospect. Too bad, so sad, we've found it now! And we're going to have lots of fun with it! Here's just one of Skelly's verbal faux pas:
In Wyoming, the industry was surprised when the governor came out and said this area of Wyoming is now off limits to wind energy and it's about 28% of the developable wind resources in Wyoming. That's a non-trivial amount This is one of the windiest states in the country, there's lots of projects planned in Wyoming, people are trying to develop transmission lines to Wyoming. People wrote off millions of dollars of development expenditures when this happened, including my old shop [Horizon Wind Energy]. Now you can make lots of arguments about why the governor made the right decision here. Some claim that there were more nefarious motives at work because the sage grouse, as many of you know, its a poster species for areas west of the Rockies.
And then he starts grinning like a lunatic. Apparently, species extinction of a cool bird is funny to uncool people like Skelly.
There's lots of concerns about sage grouse viability and so there are real issues here. The question is we're going to have to make some tough choices here... and some of these tough choices... and think about why we're doing this renewables stuff. We're worried about climate change. And we're worried about climate change because it might cause a massive species die-off. It's possible that along the way, we may have to make very tough decisions about which species are going to do well in this massive renewables build-out and which species aren't going to do well, and those are tough decisions that our current legislation... we don't really have a mechanism to sort of figure that out. That is a real question.
No, the real question is will Skelly's environmental group friends still love him after they hear about his plans for the sage grouse?
And what if there was a way to "do this renewable stuff" that didn't cause us to have to sacrifice people or animals? It's called distributed generation -- the development of small scale on-site renewables, such as adding solar panels to your own roof.
Otherwise, the sage grouse gets it!
I've been following the story of PJM's new capacity import limit via RTO Insider
over the past couple months. Last Friday, PJM made its filing with FERC to change an agreement and tariff to impose the new limits before the next base residual auction.
It seems there is a B-I-G problem with low capacity prices. In addition to causing havoc with incumbent generator profits, PJM has come up with other reasons to "fix" its capacity market.
First though, let's look at how PJM's capacity market works. Capacity is a generator's ability to produce electricity. This is unrelated to energy actually produced in real time. Because PJM has to make sure there is enough electricity available to meet peak demand every year, it secures capacity, or the ability to produce electricity, three years in advance. Generators submit capacity bids in the auction. PJM stacks the bids by price. Beginning with the lowest price, bids are accepted until the capacity target is met. The highest price accepted is the uniform capacity price paid to all generators whose bid cleared.
Now let's move on to imported capacity. Generators outside PJM have been bidding higher and higher amounts of generation into PJM's auction, often at low prices. PJM's rules have allowed imported capacity into the auction even though it has no firm transmission path to be used by load in PJM. This sets up a scenario where PJM has cleared capacity that may never be delivered. The effect of this is that PJM may not have enough capacity to serve peak load. It also creates an effect where it can lower capacity prices for other generators in PJM because acceptance of low bids of imported capacity lowers the high bid that sets the capacity price for all generators.
So, on the one hand, it's a reliability problem, but it's also an earnings problem for PJM incumbent generators. PJM believes that artificially lowered capacity prices created by generation that may never serve PJM load is also causing retirement of existing generators in PJM, as well as preventing new internal generation from being built. PJM's market is supposed to encourage new generation to develop when capacity prices are high, adding more supply to meet demand. Instead, it was getting fake bids from outside the region, and that has skewed capacity prices.
Maybe generation from other regions can supply PJM cheaper than existing internal generation, but who wants to rely on generators thousands of miles away to supply their electricity? The longer electricity has to travel between generator and user, the more unreliable the supply becomes and the more electricity is simply wasted by losses along the way. It's encouraging that PJM finally acknowledges these simple physics of electric transmission, but the challenge now is to see if this new found realization is going to have any effect on the midwest wind transmission gold rush.
PJM's new rules make an exception for any external generator with firm transmission service that can be controlled by PJM and agrees to PJM's "must offer" requirement. This still allows external generators like the hated Clean Line Energy to be excepted from the limit. However, Clean Line only has 700 MW of firm transmission service for one of its lines with a capacity of 3500 MW. This still doesn't make Clean Line imports any more reliable than other imports though, nor does it provide this merchant transmission company with any of the east coast customers forced to buy renewables at any price that it seeks.
Let's keep an eye on this one and see who intervenes and complains at FERC (Docket No. ER14-503).
Well, there they go again… the geniuses at FirstEnergy have devised another not so ingenious way to encourage you to pull their money-losing corporate keister out of the fire.
If you live in FirstEnergy's JCP&L or MetEd service territories, the company invites you to engage in some holiday excess that will put some excess cash in its own pocket. The company's "Merry & Bright"
Christmas lights contest invites you to create an electrical charlie foxtrot on your home and front yard that would put Clark Griswold
to shame and then "like" the company Facebook page
to enter a photo of your creation.
You could win a $250 gift card! I don't think the company accepts gift cards to pay your $250 Christmas lights extravaganza electric bill though.
Ho, Ho, Ho, Big Daddy Tony
needs a new Rolex for Christmas!
If you live in FirstEnergy's Penelec territory, run, don't walk, to your nearest Yankee Candle outlet.
Union buster FirstEnergy has lockedout union workers
after they refused the company's "best offer" during contract negotiations.
FirstEnergy plans to replace line and substation workers, meter readers, technicians and other employees with managers and supervisors. It's about time Toad Meyers completes his route
Ha ha ha ha, and they expect these do-nothings can keep the lights on?
Good luck there, Penelec customers.