In the NOI, Promoting Transmission Investment Through Pricing Reform, FERC is seeking comments about the effect of its incentives on promoting transmission.  If you're going to comment, you need to understand what the incentives are, and what they are intended to do.

The nexus test is the next step after the statutory threshold (rebuttable presumption) has been met.  The nexus test is supposed to ensure that the incentives granted are "rationally tailored to the risks and challenges faced by a project."  There is no actual "test."  The Commission states that the test is "not prescriptive by design."  In other words, it's completely subjective and hard to pin down.  Perhaps this is because it's impossible to make a rational decision based on subjective analysis. 

FERC believes that the "most compelling candidates for incentives are new projects that present special risks or challenges, not routine investments made in the ordinary course of expanding the system to provide safe and reliable transmission service."  Hey... wait a minute here!  Section 219 (b), which gives FERC their authority in granting these incentives says nothing about "new" projects.  In fact, Sec. 219 (b) specifically requires that FERC's incentive rule promote transmission improvements that:  Are economically efficient; that enlarge, improve, maintain and operate facilities; are related to transmission technologies; that increase the capacity and efficiency of existing transmission facilities and improve their operation; comply with mandatory reliability standards; and relate to transmission infrastructure development.  I don't see a thing in there about limiting incentives to "new projects," and in fact, it specifically calls for improving existing transmission facilities.  It also allows for "routine" projects such as those necessary to comply with mandatory reliability standards.  FERC has completely perverted the original intent here to encourage "new" transmission projects.  Is it any wonder that hugely expensive and totally unnecessary projects such as PATH have begun to proliferate while existing transmission lines like Dominion's Mt. Storm - Doubs and FirstEnergy's Mt. Storm - Pruntytown deteriorate to the point that they are in danger of falling down?  The PATH project satisfies NONE of the Sec. 219 (b) requirements.  PATH is just more of the same old technology we've been using for 100 years, just bigger, more expensive and more destructive.  There's nothing "technologically advanced" about PATH.  In fact, PATH ultimately became the rotten apple in the barrel that spoiled things for everyone else and caused FERC to re-examine their transmission incentives policies. 

But, back to the nexus test.  One of the Commission's criteria used in evaluation is whether the project is routine or non-routine.  According to the Commission, routine projects aren't eligible for incentives.  Again, this isn't in keeping with Sec. 219 (b).  However, in order to make a determination of the non-routine nature of the project being evaluated, FERC's criteria are:

• the scope of the project, including the cost, increase in transfer capability, and size
• the project's effect on reducing congestion and/or improving reliability
• the challenges or risks faced by a project, such as siting, long lead times, regulatory and political risks and financing challenges

What does the size of a project have to do with Sec. 219 (b)?  Bigger is not always better!  Project cost also doesn't correlate -- just because a project has a huge price tag on it doesn't necessarily mean it should be encouraged with incentives.  In fact, since the Commission is supposed to guarantee that rates are just and reasonable and not unduly discriminatory or preferential and Sec. 219 is supposed to reduce the cost of delivered power, this is diametrically opposed to their mission.  It's not about encouraging projects just because they are expensive!  Regarding a project reducing congestion and improving reliability, isn't that a separate test that's already been covered by the rebuttable presumption before a project actually reaches the nexus test?  And last, but certainly not least, utilizing a project's "risks" to evaluate its award of incentives is just plain wrong.  By categorizing as incentive deserving "risk" a project's siting, regulatory and political risks, FERC is encouraging and incentivizing bad behavior by project owners, which only compounds any risks of this nature.  As an example, let's look at the PATH project (oh, come on, you knew that was coming!).  PATH has engaged in a multi-million dollar propaganda, state regulatory commission lobbying and influence buying campaign that has been recovered from ratepayers.  They have defended themselves by stating that this campaign was necessary because of the siting, regulatory and political "risks" FERC recognized by granting them incentives.  And I suppose PATH also feels justified in their harassment, coercion and lying to landowners in an effort to get them to sign ROW and purchase agreements without the advice of a lawyer because of "siting risks."  This is outrageous!

Another of FERC's nexus test evaluations involves whether the project is individual or a group of projects.  FERC allows applicants to group projects so that one set of incentives covers them all.  This is bad practice considering FERC's decision in the partial abandonment of the TrAIL project.  When a distinctly separate portion of the TrAIL project (Prexy) was abandoned due to its failure to be granted approval in Pennsylvania, FERC determined that its abandonment was merely "an engineering and siting change" and instructed TrAILCo to recover all Prexy's costs, plus a 12.7% ROE, along with the rest of the project costs.  Prexy was never needed, as evidenced by it's willful abandonment by TrAILCo when denied a permit, but it was originally added in by TrAILCo to sweeten their profit margin.  If FERC will not allow abandonment of distinct project segments but only abandonment of entire projects, then projects should never be grouped and should be broken down into even smaller segments so that partial abandonment does not end up costing ratepayers additional unnecessary expense.

Now that you've been so patient reading along while I ejected a huge blast of steam, go look at FERC's questions about the nexus test beginning on page 16 of the NOI and formulate your comments/suggestions for FERC.  I'm sure you creative consumer "stakeholders" can make suggestions that the industry won't even ponder.  The industry will be letting FERC know how they can and should sweeten the pot even further for them.  It's up to you to provide balance with a little real world sanity.

If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material.  You don't have to comment on all aspects of the NOI if that's too burdensome.  In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.