The Public Service Commissions of both Delaware and Maryland have filed a complaint
at FERC over PJM's new transmission cost allocation process, specifically the cost allocation of PJM's Artificial Island transmission project. Under PJM's cost allocation rules, ratepayers of Delmarva Power in Maryland and Delaware would pay nearly 90% of the cost of the project, which is intended to improve transmission from the Salem/Hope Creek nuke in New Jersey. However, Delmarva customers will receive only 10% of the benefits flowing from the project.
Whoopsie, PJM! Your formulas still don't work! Didn't FERC's Order No. 1000 determine that costs would be commensurate with benefits? And didn't the 7th Circuit remand your prior cost allocation method TWICE because PJM and FERC couldn't show a correlation between benefits and costs?
It seems that PJM and FERC still haven't gotten it right on cost allocation. And the legal battle is just beginning. This could muck up PJM's cost allocation process for the transmission it orders up for years! As a result... transmission won't get built. Nice going, knuckleheads!
We have yet to see a massive transmission build out intended to ship renewables thousands of miles in an attempt to subvert state planning for compliance with the Clean Power Plan. Expect problems there, too! After all, not every state is going to receive the same kind of benefits from long-distance transmission that passes through in an attempt to meet the CPP goals of a different state.
I guess that's what happens when "regional" and federal interests attempt to overrun state regulators. This complaint is going to be interesting and eat up a lot of ink. Woo Hoo!
Couple of interesting complaints at FERC recently.
First, one that doesn't take a whole lot of explaining. Electric ratepayer Eric Morris filed a complaint against The North American Electric Reliability Corporation (NERC) and SERC Reliability Corporation (SERC) for violating the NERC Rules of Procedure (ROP) Appendix 4B Sanction Guidelines in NERC Full Notice of Penalty regarding Entergy, FERC Docket No. NP15-31 filed July 30, 2015.
In essence, the issue here is that
NERC has filed a settlement for your [Commission] review and approval in NP15-31 regarding Entergy. The settlement
involves six separate violations for two reliability standard requirements. The total penalty is $55,000. These violations had durations of multiple years.
The appropriate penalty (sanction) should be:
This violation is classified as Medium/Moderate on the VRF/VSL Table, which would associate to a base penalty range of $4,000 to $100,000 pursuant to Appendix A of NERC ROP App 4B.
For each day the violation persisted. SERC determined the duration of the violation to be from June 18, 2007, the date the Standard became mandatory and enforceable, through June 30, 2015, when Entergy completed its Mitigation Plan. Mr. Morris calculates that should amount to:
By my math, that is eight years and twelve days, or 2,934 days. Therefore, the base range should be $11,736,0004 to $293,400,000.
But FERC and the parties are okay with just $55,000. After all, penalties cannot be recovered from ratepayers and must be borne by utility stockholders.
Mr. Morris filed his complaint because he is not and cannot be a party to the settlement, however he has calculated that this egregious wrong could personally cost him $0.0179, therefore he has standing to file the complaint.
What I want to know is why FERC is okay with a measly $55K penalty for Entergy violating reliability standards that affected millions of people, while they went for the maximum penalty against Powhatan Energy Fund? Are there different standards for different market participants? Is reliability much less of a concern to FERC than traders profiting by exploiting a loophole in its loose market regulations? FERC fined Powhatan something north of $30M for what it says was $4M in unjust profits that should have gone to certain big utilities. Where's the logic?
Or is it just that FERC serves the interests of utilities, not consumers? I guess we'll find out if we watch Docket EL15-93. I really hope FERC can pull itself out of the gutter to restore consumer confidence in the fairness of its regulatory actions. Call me a dreamer.
From Indiana, where investigative journalists are on the trail of Gov. Mike Pence and his curious "economic development" junkets with his utility executive buddies...
When are a utility's "economic development" donations a back door to corporate favors and lobbying, and when do they benefit the consumers the utilities serve?
Curiosity was raised when Gov. Pence took several foreign and domestic junkets, with his utility executive buddies in tow, for the purposes of "economic development" in Indiana.
Gov. Mike Pence took a quick trip to New York City this week with a "delegation of Hoosier business leaders and economic development professionals" in an effort to coax businesses to relocate to Indiana to escape the "high-tax metropolitan area."
Oddly, the only business leaders from Indiana who accompanied Pence and eight economic development staff folks on the trip are all executives at public utility companies.
IEDC staff posted pictures of Pence in a corporate suite at a New York Yankees game where the home team was taking on the Boston Red Sox.
Who's paying for this?
Apparently the utilities are
, by "donating" to the Governor's Indiana Economic Development Corporation, a nonprofit subsidiary of the state's economic development agency.
Donors have paid for Gov. Mike Pence to travel overseas, rent luxury sports suites, lobby lawmakers and fly to Iowa ahead of its first-in-the-nation presidential nominating contest.
The list reveals that more than 50 companies, trade groups and governmental entities contributed $2.19 million to the foundation from January 2014 to June 2015.
The majority of that money — about $1.7 million — came from utility companies. Duke Energy and its foundation gave the most — more than $456,000. Other contributors included lobbying firms, industry groups, regional economic development agencies, universities and large Indianapolis companies such as Eli Lilly and Co. and Dow Agro Sciences.
"We continuously seek donations for the foundation to support our business development efforts," said Indiana Economic Development Corp. spokeswoman Abby Gras. "As you can see, there are a number of donors from economic development groups to businesses who donate to the foundation. I can't speak for those donors, but I imagine they donate because they see the value of the state's economic development efforts and support the continued growth of business and job creation in Indiana."
Or maybe they donate for a different reason:
"It creates another opportunity, for example, with utility companies, which are heavily regulated at the state level, whose profits are really dependent on how they are treated by state government, it gives them the opportunity again to build relationships to be seen more as friends than somebody who needs some careful watching," said Julia Vaughn, policy director for Common Cause Indiana.
Executives from the same companies that fund the trade missions often accompany Pence on those trips, providing valuable access to the state's top executive.
"What they are effectively doing is looking for business, and so what we have as a result are policies at the administration level and the legislative level that favor the utility business plan, which isn't necessarily in the interest of the public," said Kerwin Olson, executive director of the Citizens Action Coalition.
And the line between economic development and lobbying is very blurry.
The foundation's funds have even been utilized for lobbying efforts.
Since November, the Pence administration has spent at least $2,950 on a website to promote his $84 million "regional cities" initiative, which is intended to boost economic development across the state by leveraging private investment. During this year's legislative session, when lawmakers threatened to reduce the amount Pence was seeking, the website criticized his fellow Republican lawmakers and urged people to "TAKE ACTION!" by sending a form letter to their legislators.
Foundation money also was used to purchase gift bags for 25 key lawmakers. The bags included letters of support for the initiative from local mayors and a magnetic paperweight with paper-clip men.
Indiana Michigan Power $424,000
Duke Energy $381,654
Northern Indiana Public Service Company $260,000
Indianapolis Power & Light $157,500
Duke Energy Foundation $75,000
Hoosier Energy $37,500
Indiana Municipal Power Agency $28,883
American Electric Power $10,000
That's a lot of donations. Assuming the IEDC's purpose is purely the creation of jobs and tax revenue in Indiana to benefit the citizens, what do utilities get out of it, aside from a private conversation with Gov. Pence in a suite at a baseball game?
"Economic development benefits everyone," said Brian Bergsma, director of communications and government affairs for Indiana Michigan Power. "Job creation creates better streets, better schools, better economic opportunities for everyone."
Duke Energy spokesman Lew Middleton said the company has an ongoing relationship with the IEDC, where it meets with state economic development officials on a regular basis.
"We do hope to attract new businesses to our service area," Middleton said, "and at the same time, then be able to increase the number of jobs in any given community where a business might be thinking about locating. It sort of helps raise the quality of life for all the citizens in a particular community when new jobs come to the area."
And jobs and economic development increase power company sales of electric power, increasing a utility's profit. The utilities may also argue (but they didn't think of it yet, so I'll help them out) that spreading their fixed costs over a bigger customer pool lowers each customer's overall share of those costs, incrementally lowering their bills.
But who's doing the math? Will each customer's savings outweigh his share of the "economic development" donations, plus the utility's increased costs to serve additional customers? In addition, the donations are spread over all customers of the utility, while the economic development is actually taking place in a very small portion of its service area.
For example -- Indiana Michigan Power serves customers in both Indiana and Michigan. What benefits are the customers in Michigan getting from economic development in Indiana?
And how much of the "economic development" donations are really being spent on economic development? Could economic development be undertaken without expensive sports junkets? How many other benefits are being given away at these "economic development" schmooze-fests? Are the utility executives there to promise cheaper (or free?) electric rates for industries that relocate to Indiana? If so, are the captive ratepayers picking up the tab for that in exchange for a few jobs? Why do only a few benefit at the expense of the majority? And when does "economic development" cross the line into straight up political pandering and lobbying?
The list of "donors" also includes many non-utility corporations, however the amounts of these donations were small. Non-utility corporations must balance their "donations" against their profit margin. They must include the costs of their donations in the cost of their product, so that holds "donations" in check. If generous giving increases the cost of a company's product, it will suffer in the marketplace as customers go elsewhere for a cheaper product.
However, in the case of a regulated utility monopoly, customers are captive, and must pay whatever costs a utility incurs, subject to regulatory approval. Does sharing a red hot and a beer with Pence at a ball game grease that approval? Everybody wins! Except the consumers. They lose.
More uproar this morning as word spreads that yesterday FirstEnergy subsidiaries Potomac Edison and Mon Power filed for ANOTHER 3.6% (Residential) rate increase
to cover the cost of its vegetation management program ordered by the PSC in 2013.
Just like the ENEC case filed mid-August, this rate increase is simply the result of more bad decision-making by the WV PSC. The vegetation management program (VMP) has already been ordered and the company has already spent this money. They will recover it. What remains to be seen is how much.
According to FirstEnergy's filing, the Commission decided to cover the cost of the VMP with an additional surcharge, instead of including it in base rates. However, the surcharge didn't go into effect until 2015, so now FirstEnergy wants to collect all the money it spent before the surcharge, the amount of the surcharge it undercollected to date, and the amount of the surcharge it is predicted to undercollect in 2016 and 2017 if the surcharge rate remains unchanged. Total for you: $75.8M.
So, what's in this filing, and what are you getting for your money?
FirstEnergy says its program has increased your reliability by demonstrating "a remarkable decline in the
customers affected per mile from tree-related outages."
And it demonstrates with a evidentiary slide show of some before and after photos of its tree hacking prowess. Here's just one example of the work FirstEnergy did on its unfortunately named circuit "Hacker Valley." Indeed!
Prior to the VMP surcharge, the company recovered its cost of maintaining rights-of-way through its base rates. Base rates are determined in periodic filings, where the company demonstrates its costs. A fixed rate is set allowing the company to recover the costs. The rate is not changed until the company files another base rate case at their own prerogative. In between base rate cases, nobody is minding that the company is actually spending its base rates on what it said it was spending them on. Therefore, a company can cut services, while still recovering the cost of them, and increase its profits.
So, you may be asking yourself... how did the rights-of-way get so overgrown that they were seriously affecting reliability? What in the hell was the company doing with all the tree-trimming money it was collecting in base rates? Obviously, not trimming trees.
Instead of asking this question, the PSC acted proactively to fix the problem by making ratepayers responsible for the cost of all this unperformed maintenance. FirstEnergy got off scott-free in terms of financially owning up to its years of neglect. However, the PSC, in removing VMP costs to a surcharge, are now going to be monitoring that your money is actually spent on tree-trimming. Hurray! So now you will notice how much it actually costs.
How much does it cost? Customers have reported, "...they cut HEALTHY trees for no reason on our driveway. Some sat in the truck hidden back on the power lines for hour at a time waiting for quitting time." Yup, plenty of job milking going on by the tree contractors. In addition, FirstEnergy says that their costs to begin this program were high because it needed to double its work force in order to actually do something, and it was in competition with rival power company Appalachian Power to find new workers for this new program. Because of that, FirstEnergy needed to import tree hackers from out-of-state and pay them travel costs and per diem. Also, the company had been paying its contractors on a time & materials basis, instead of a firm bid, job-based contract.
But don't you worry, little hack-ee, FirstEnergy has been looking out for your interests by finding ways to reduce the cost of the VMP. They have now switched to 70% firm bid contracts, have managed to train all the new employees (and supervisors, you know, those guys who sit in the truck and sleep) and are diligently looking for ways to cut costs.
And if you believe that, I've got a bridge to sell you. That's because the cost of the VMP is projected to be split almost evenly between captial costs and operations and maintenance costs. An O&M cost is reimbursed dollar for dollar as incurred. However, capital costs are depreciated over the life of the line trimmed, taking many years to pay off. And guess what? Capital costs will earn FirstEnergy 8.19 percent interest yearly! The more "capital" they spend, the more profit they make! Who's minding the capital and expense split? Nobody.
FirstEnergy also says they will cut costs by increasing the amount of herbicide spraying they do vs. manual clearing. Get ready for lots more dead, brown, right-of-way strips and overspray killing adjacent vegetation and polluting your water supply. But don't worry, your government would NEVER let a company use chemicals that could harm you.
FirstEnergy has also changed its tree hacking game plan, to include many new trees outside its right-of-way that could fall on the line... maybe... if the stars align... or something. So this means they're widening their rights-of-way without paying the property owners for this additional taking. Tsk, tsk!
As of June 15, the company has trimmed over 1.8 million trees, removing over 400,000 trees and
controlling/clearing over 19,000 acres of rights of way. To provide some perspective, the 19,308 acres of right of way cleared and sprayed during the 14 month Review Period is the equivalent of the size of 19,000 football fields, since a football field approximates one acre in size.
I think the trees are screaming! Can you hear them?
So, what should you do about all this? Participate in any upcoming opportunities for public comment!
You also need to support your underfunded Consumer Advocate, who is run ragged trying to protect consumer interests in all these smaller, frequent rate increases.
But that effort was criticized by the Consumer Advocates Division, which said the move set a bad precedent and weakened the traditional rate making policies of the PSC, where nearly all facets of a utility’s business were considered in a single rate case.
At that time, Jackie Roberts, the CAD director, said allowing electric companies to assess additional surcharges to customers’ bills for tree trimming programs was just the most recent step in a trend toward companies filing a number of smaller rate cases.
According First Energy’s testimony, the company is expected to receive an 8.19 percent return on the cash expenditures under the program before taxes.
In these cases, Roberts said the commission needs to weigh what is needed for the utility to provide safe and reliable service against the customers interest in having reasonable rates.
“On its face, it certainly appears this filing would fail that test,” she said.
And wait... we're not done yet! The Gazette article mentions another rate increase that has not yet received much public scrutiny... MonPower and Potomac Edison customers are being asked to pay an additional $85 million between 2017 and 2036 in order to save the financially-troubled Grant Town Power Plant in Marion County
through a new power purchase agreement. Here we go again with the WV PSC saddling ratepayers with additional costs to prop up West Virginia's coal industry through over-priced power produced by old, inefficient, coal-burning power stations.
Just hand over your wallets, little ratepayer, and nobody gets hurt. Except when they can't pay their electric bill...
Will enough ever be enough for FirstEnergy?
Because the rest of us are grossed out by such barbaric behavior.
But it does help us to assign nicknames. So that when someone refers to "Nosepicker" in a sidebar, no further description is needed. We all saw you do it. Numerous times.
FirstEnergy tries to block filmmakers at hearing.
Yes, we're laughing at you.
"Doesn't have timeline" or just doesn't have time? I got the "doesn't have time" excuse from the horse's mouth back in 2011
when he was running for Governor and I asked him why he was waiting to fill a PSC seat. "Too busy campaigning." Right. Along with the lies, I also noticed his smile was completely fake... it didn't reach his eyes. He needs to take some lessons on fake smiling from pro fake-smiler Joe Manchin. But, I digress.
Tomblin has been "too busy" to either re-appoint Commissioner Jon McKinney, or appoint a replacement for him since 2011. That's FOUR YEARS that McKinney served at the daily whim of Tomblin. Now McKinney has finally left the utility stable, and Tomblin is content to leave his seat open.
PSC Commissioners that are appointed are supposed to be insulated from political influence by becoming independent once appointed. The appointer (Governor) supposedly loses power over the Commissioner once he/she is appointed. However, by allowing appointments to expire, and the expired Commissioner to continue to serve, a Governor may control the day-to-day decisions of the Commissioner as long as this lasts (4 long years!). If the expired Commissioner makes one misstep, he can be gone the next day if the Governor suddenly decides to appoint someone else. This is a filthy practice that should be illegal. But it's also how Governor-schmoozing corporate utility companies continue to stomp on West Virginia ratepayers.
It's not like Tomblin "doesn't have time" to make any appointments to the PSC. He managed to promptly re-appoint utility lawyer Michael Albert in 2013, when his second term expired. He also managed to appoint Brooks McCabe to the empty seat of former Commissioner Ryan Palmer, when he left in 2014. McCabe is a former legislator who has absolutely no background or education in utilities regulation or consumer protection.
So, who shall fill McKinney's seat, now that it's finally vacated? That's what the Gazette-Mail investigated:
Gov. Earl Ray Tomblin has no plan to appoint a third member to the West Virginia Public Service Commission, even though several people have expressed interest in the position or recommended others they believe would fit the post.
Emails and communications obtained through a Freedom of Information Act request show that numerous people have contacted the Governor’s Office since January, asking Tomblin to confirm them for the post or to consider their preferred candidates.
The list of people seeking the governor’s attention include a former state senator, a city mayor, a retired engineer, a member of the state’s rural water association, a managing member at one of Charleston’s largest law firms and a lobbyist for First Energy, the parent company of MonPower and Potomac Edison, two of the state’s largest electric utilities.
Hmm... sounds like a bunch more utility puppets, political favors, and inexperienced stooges. Don't we have anyone in West Virginia with a background in consumer issues?
Here's two people you DO NOT want to see appointed:
An undated note left for the governor shows that Sammy Gray, the state affairs director and a registered lobbyist for First Energy, called to recommend two people for the commission spot. According to the note, Gray called to let Tomblin know that he supported Mike Castle, the Department of Environmental Protection’s director under Gov. Cecil Underwood, and Sam Cann, a former Democratic state senator from Harrison County, for the seat.
And what experience do these two have with consumer protection? None. However,
When contacted about his recommendations, Gray sent the request for an interview on to communication officials at First Energy.
“We believe both individuals possess solid experience with policy and energy matters that would help them make rulings in complex regulatory cases,” Todd Meyers, MonPower and Potomac Edison’s external communications manager, wrote in an email response. “Of course, the ultimate decision on who is appointed rests solely with the governor.”
First Energy’s recommendation of candidates for a utility commission, which ultimately regulates the company, is not out of the ordinary, according to Meyers.
“In the past, we have recommended individuals whom we believe to be qualified candidates for similar positions, both in West Virginia and elsewhere in our service territory,” Meyers wrote. “Again, others ultimately make the decisions on who is selected.”
Of course. The utilities that own the governor own his appointments to the PSC, however the utility recommendations protect the utilities, not consumers.
Who else has been recommended?
In an email from April, Michael Basile, a managing member at Spilman Thomas & Battle, a Charleston law firm that represents clients like the West Virginia Energy Users Group in front of the PSC, asked the governor to consider attorney Susan Basile, his wife.
In the 1990s, Michael Basile worked for Gov. Gaston Capterton, the Attorney General’s Office, the West Virginia Development Office and later assisted in the transitions of Gov. Bob Wise and Gov. Joe Manchin. Basile, who has served as chairman of the Charleston Area Alliance and the Charleston Regional Chamber of Commerce, also is a registered lobbyist at the state capitol, where he has represented companies like DuPont, Chevron, Chesapeake Energy, DIRECTV and Dish Network.
In his email, Basile credited his wife’s qualifications and said she was a “big fan/supporter of GERT,” apparently referencing an acronym for Governor Earl Ray Tomblin.
Right... because being a fan of "GERT" translates to utility experience and a background in consumer protection. Not.
Amy Swann, director of the West Virginia Rural Water Association, suggested the governor should consider one of her longtime colleagues and former PSC employee, Dina Foster.
Swann said Foster — now the manager of the Pea Ridge Public Service District, in Cabell County — has first-hand experience in utility issues and has the personal characteristics needed to make a good commissioner. With so many important issues being decided by the PSC, Swann said, Foster would be a valuable addition to the commission.
When Bill Wooten, a former Democratic state senator from Raleigh County, contacted the Governor’s Office earlier this year, he was hopeful he would be appointed.
With his experience in utility regulation from a legal and legislative policy perspective, Wooten thought he was qualified for the position, and he believed in his ability to weigh the needs of utility companies and their customers.
And then there's
John Manchester, the mayor of Lewisburg, also submitted his credentials for consideration.
Manchester, who previously worked for the Tennessee Valley Authority and has dealt with utility regulation as Lewisburg’s mayor, said his experience has prepared him for the position.
“I pride myself on being a mediator, a man who tries to find solutions to issues,” Manchester said.
Allan Tweddle, a resident of Kanawha City and a semi-retired engineer, put his name in after having several people ask him to apply.
In his communications with the Governor’s Office, Tweddle listed a long list of people who could testify to his “commitment” and “open-mindedness.” While Tweddle worked with Southern California Edison, an electric utility on the West Coast during his career, he said he has absolutely no connection to any regulated utility in the state.
Which one is your favorite? Or would you just like someone who's not part of the utility industry, a captured regulator, or a political favor? Here's an idea:
“We urge you to appoint a new commissioner as quickly as possible so that this investigation can be resolved,” Cathy Kunkel, a member of the Advocates for a Safe Water System’s steering committee, wrote in a letter to the governor in April. “Furthermore, we hope that anyone you appoint to the Public Service Commission will have experience in utility regulation and be independent of West Virginia’s major utility interests.”
"While the utilities are experts at running their business, it doesn’t always mean that they are right,” said Jacqueline Roberts, director of the consumer advocate division.
And they're definitely not right for West Virginia's utility consumers, because utility guys will always view any conflict from the perspective of the utility.
We've got enough utility influence from Chairman Albert already. And we've got our political favor in Commissioner McCabe. Now it's time to appoint one for the consumers.
Tell "GERT" to get off his dead ass and get busy. Maybe your suggestion can be featured in a future Gazette-Mail article?
This ESP has been controversial. The reason is because FirstEnergy, as part of its plan, has asked the PUCO to pass a fee through to its ratepayers to support its subsidiary’s struggling coal and nuclear generation. The subsidy would be supported by all of FirstEnergy’s Ohio distribution customers, regardless of whether they acquire their generation from FirstEnergy’s subsidiary. The subsidy would be assessed through a rider that is based upon a power purchase agreement (PPA), pursuant to which the ratepayers would guarantee for 15 years a price for the electricity generated, regardless of market conditions.
What I want to focus on now is the tactic FirstEnergy has used to assimilate support for its ESP. In my January blog, I noted that FirstEnergy had assembled what Edward “Ned” Hill, the then-dean of Cleveland State University’s Maxine Goodman Levin College of Urban Affairs, called a “redistributive coalition.”
A redistributive coalition, according to Professor Hill, exists when a small group of stakeholders band together to seek mutually favorable policy treatment at the expense of the public at large. Typically, the coalition incurs little cost in coordinating its efforts. However the public, being heterogeneous and widely dispersed, incurs great cost and difficulty in organizing a response.
FirstEnergy was able to induce companies to support its ESP by including special rates or programs for the coalition members — with the costs therefore borne by the ratepayers. In his original testimony, Hill pointed that the redistributive coalition was assembled to present to the commission (and the public) the appearance of not only broad support for the ESP, but also a broad range of benefits that would flow to varying classes of customers, including those with low income. However, Hill demonstrated that the benefits would only flow to the members of the coalition — a very small group.
The audience: Mostly ignorant!
But what really caught my attention in Hill’s testimony was his discussion of another concept that FirstEnergy cynically exploits: “rational ignorance.” Rational ignorance is the term used to describe reasonable disengagement by a public unable to digest complex technical arguments set forth by more knowledgeable industry experts.
In this context, Hill noted that FirstEnergy looks to exploit the general public’s inability to understand the nuance of the coalition support. On its face, the coalition seems to be asking for policy that the public should support — things such as price breaks for the poor, energy efficiency programs for small businesses, and so forth.
But under close examination, it turns out that the programs are narrowly crafted to help only those in the coalition. Why, for instance, would we only support the city of Akron and no other urban areas in northern Ohio? And why only support the members of the Council of Small Enterprise and not other small businesses?
Utilities AEP and Duke also sought PPAs. Yet neither sought to assemble redistributive coalitions for PPAs to try to fool or confuse the public. But then again, they were unsuccessful in their applications.
Break a leg, fellas (or any other parts necessary to enable quarterly dividends)!
There's nothing as certain as death, taxes and yearly FirstEnergy rate increases. On August 14, the company filed a request to increase its WV ENEC rates by $165M. If you're a hypothetical customer, using a hypothetical amount of electricity each month, you'll pay an extra hypothetical amount of nine bucks or so a month. Of course, you can't pay your debt to FirstEnergy in hypothetical dollars. This rate increase is very real, despite all the hypothetical blather.
So, what kind of kool-aid is FirstEnergy and its PSC minions serving up to help the medicine go down this time? The PSC's windbag says:
“It’s an annual true-up, and it is to cover the cost of fuel and purchased power,” PSC spokeswoman Susan Small said. “There’s not profit for the company. It’s not going to staff salaries. It’s not operations and maintenance fees. It doesn’t go to rent and pension plans or anything like that.”
Say what? Of course there is profit for the company built into the transmission costs being recovered, since FirstEnergy owns the transmission capacity being billed in this filing. Transmission rates also contain staff salaries, operations & maintenance, rent and pension plans.
And about those O&M costs? The $44.5M correction for under-recovery of the "Temporary Transaction Surcharge" ("TTS") that is being recovered in this rate increase consists of $26.1M of unexpected Operations and Maintenance expense for the Harrison Power Station. It also includes $5.7M of profit for the company. I guess Susan Small doesn't know what's she's talking about... again. Maybe she should read a case filing or two before activating the ol' pie hole?
The TTS was "designed to recover the net increase in non-fuel operation and maintenance expenses, depreciation and amortization expenses and taxes other than income taxes, and a return on incremental net plant, fuel inventory and materials/supplies resulting from the completion of the transaction [sale of Harrison]. The TTS also reflected reduction in non-fuel O&M expenses associated with the deactivation of Albright, Rivesville, and Willow Island power stations on September 1, 2012," according to the testimony filed by FirstEnergy at the PSC. Sounds like it IS operations and maintenance, Susan...
The TTS was a temporary rate increase approved by the PSC to allow the company to recover the base rate cost of the Harrison power station from ratepayers for the period October 2013 and February 2015, when the new base rates that included Harrison went into effect. At the time, the company calculated that it would need $199.8M to cover the cost of Harrison for 17 months. It designed its TTS to produce $160M of this revenue. However, the case settlement (negotiated between parties without PSC ruling) only allowed for collection of a $113M TTS. According to the company's most recent calculations, there is a $44M shortfall, which it is requesting to recover over the next year. The biggest part of this shortfall is $26M of "higher than anticipated expense related to maintenance outages at Harrison." In addition, there was an additional $9M O&M expense related to employee pensions and benefits at Harrison.
Hmm... what should you expect when your electric distribution company buys an antique coal plant? Once the ratepayers own it, the company spends generously performing all the maintenance it has put off while it was the owner responsible for the bills.
There were also some mysterious increases in the book value of Harrison, decreases in the book value of the purchased Pleasants power station, and a $10M increase in the illegal "acquisition adjustment" FirstEnergy scored from the PSC. The "acquisition adjustment" was the difference between what Harrison was actually worth and its book value, which produced $256M (now $266M) of pure profit "funny money" for FirstEnergy. Federal accounting regulations do not allow the recovery of "acquisition adjustments" from ratepayers, but the WV PSC ignored that in its haste to bless the Harrison purchase transaction. The acquisition adjustment and any adjustments related to it are pure nonsense.
Adding insult to injury, forecasted sales of power from Harrison were much higher than actual... because power market prices were low and Harrison's coal-fired power was more expensive than other resources during the period, reducing Harrison revenue that might have offset some of the costs of owning the power station.
Upon further contemplation, it looks like most of the testimony of FirstEnergy witness Kevin Wise is nonsense. What else could explain the general advertising expenses totaling nearly $5K booked to the TTS in October 2014, January and February of 2015? Did you ever see any advertising about Harrison on your TV or in your newspaper? Hear any radio commercials? Of course you didn't. This is probably just a misallocation of general FirstEnergy corporate expenses. *sigh* I hope someone goes over this nonsense with a fine tooth comb. There's probably plenty of "mistakes" in here that don't belong but coincidentally increase the rates you pay and the profits of FirstEnergy. Thank goodness for West Virginia's Consumer Advocate, who gets the blinding and thankless task of separating the legitimate from the nonsense in FirstEnergy's filing.
In addition to the $44.4 TTS adjustment, the company wants to recover around $96M of inaccurately estimated fuel, purchased power and transmission costs for the past 2 years, along with $23.6M of new rate increases for 2016, the amount it would be short if it keeps collecting at the current rate through June of 2016. Total rate increase $165M.
How did the company estimate its rate so badly that ratepayers are so far into the hole, requiring a 12.5% rate increase? This increase is for ENEC rates, which are supposed to be filed yearly to cover variable costs incurred by the company. ENEC rates are based on an estimate of the yearly costs. At the end of the year, a true-up occurs, where the company compares its actual costs to the estimate it collected, and either issues a refund, or asks to recover the shortfall. In contrast, base rates cover the company's fixed costs and are determined through occasional base rate cases, where a fixed rate is established. The company must operate within that rate until the next base rate case is filed. The last rate increase was a base rate increase where the company added Harrison to its rate base. But that wasn't the end of the Harrison costs, because as this most recent filing shows, Harrison was also racking up additional costs that the PSC said it could recover in this delayed ENEC filing. This filing got delayed because of the Harrison purchase, so now ratepayers are on the hook for 2 years of ENEC true-up, in addition to the Harrison TTS true-up.
Hey, remember when FirstEnergy told everyone that purchasing Harrison would offset itself because Harrison would sell its excess power capacity into the PJM electric market and credit the proceeds to ratepayers? Well, guess what? There were no proceeds! Prices and sales were much lower than FirstEnergy anticipated, making the ratepayers subsidize the Harrison plant, instead of profit from it. There was no offset, just more expense. Gee, that's exactly what all the other parties told the PSC during the Harrison proceeding. "I told you so" x multiple rate increases. The purchase of Harrison was nothing but a ratepayer-funded subsidy for FirstEnergy and the coal industry. The plant wasn't economic without these subsidies and should have been closed, instead, FirstEnergy "sold" it to West Virginia ratepayers and collected a huge windfall. We'll be paying for this mistake made by the WV PSC for a long, long, long time.
This article introduces something I haven't had to contemplate for a long time (and what a nice time that was!), the senseless babble of FirstEnergy spokespuppet Toad Meyers. As regular readers will recall, Toad uses "Magic Math" to explain the benefit of rate increases.
FirstEnergy spokesman Todd Meyers said the $165 million increase proposed in the Aug. 14 filing is largely the result of lower-than-expected wholesale electric prices over the past year.
Meyers noted the current rates were set partly based on projections of what amount of revenue the utility would be able to pass on to customers as a result of selling the excess electricity generated at its power plants.
“When we set the rates ahead of time based on where we think power prices are going to be, and then power prices aren’t there, we’ve already built in what we project the net benefit of sales to come back to customers will be. That’s built into the rates as they stand,” Meyers said. “That’s why the lower sales then really have an effect in the next true-up.”
Meyers said the Harrison Power transaction was never meant to be evaluated on the basis of a single year, but over the entire projected life of the plant. Prices can change year to year, sometimes in unforeseen ways, he said.
“We’re never looking at things to be a benefit to customers at one particular snapshot in time. We’re looking at what the best-case scenario is over time,” Meyers said. “You just don’t know what’s going to come around the corner, and we thought that having our whole strategy dependent on market purchases, then you’re really at the mercy of the market.
While recent case filings may create the impression that FirstEnergy has continued to seek rate increases, Meyers noted that there have also been decreases, such as the 5 percent rate decrease resulting from the 2012 ENEC filing.
At that time — roughly a year before the Harrison Power transaction was approved — the companies cited lower fuel and wholesale electric costs as reasons for the decrease.
“The perception that we keep raising the rates lately — that perception may be true — but there’s also times that we lower the rates, and people forget about the downswings,” Meyers said. “I wouldn’t call it a pattern. Every year, it’s a different look based on different circumstances.”
Oh, shut up, Toad! Cathy Kunkel told you what was going to come around the next corner when your company proposed buying Harrison in the first place.
Cathy Kunkel, a fellow with the Institute for Energy Economics and Financial Analysis who testified against the Harrison Power transaction, said the PSC’s 2013 decision has a direct correlation to the scope of the proposed ENEC increase.
Had the transaction never occurred, Mon Power and Potomac Edison would have purchased more electricity from the market than what they generated at the power plants under their control. This means ratepayers would have directly benefited from the low wholesale electric rates during the current ENEC review period, Kunkel said.
“One of the fundamental things we were saying at the time is the transaction was about risk, and it was about shifting risk from shareholders to ratepayers. And whether or not the risk actually materializes, it was still a shift of that risk,” Kunkel said. “And I think now we’re seeing the risk has materialized, and we’re seeing it in this rate increase.”
In recent years, wholesale electric rates have been driven down by low-cost natural gas, Kunkel said. But with a lack of fuel diversity in Mon Power and Potomac Edison’s generation fleet, West Virginia ratepayers haven’t seen as much benefit from this downward pressure on the wholesale electric market, she said.
The Harrison Power Station is one example of a larger strategy that FirstEnergy has adopted in recent years of moving more of its largely coal-fired generation fleet into regulated markets where the company is able to pass on more costs to ratepayers, according to Kunkel.
“I think the big picture is we’re just seeing coal less competitive in the marketplace than it used to be, and ratepayers are paying the difference, because Mon Power has invested so heavily in coal,” Kunkel said. “No one can say what the power prices are going to be, but it looks like a bad deal at least in the short run. It’s a high-risk investment for ratepayers. Let’s put it that way.”
So, what should you do about this proposed rate increase? Simply whining to the PSC that you can't afford it does no good. The PSC has already approved the Harrison transaction and the company has already spent this money. The best you can do is to support the efforts of your Consumer Advocate, who will be busily chopping down the total rate increase and fishing out all the financial funny stuff.
“We are very concerned about the level of rate relief the company’s requesting,” Jackie Roberts, executive director of the PSC’s Consumer Advocate Division, said. “We are in the process of evaluating the filing to understand what drives their cost request.
“This is a very large rate increase following on the heels of other large rate increases, and we will be carefully scrutinizing this case.”
Unless, of course, you want to take on the task of auditing FirstEnergy's filings
yourself to come up with a more reasonable rate. Good luck with that! Just a cursory review of the thousands of pages filed will make you deeply appreciate what your Consumer Advocate does with little money, and even less respect from the company and the PSC Commissioners. Maybe you should direct your efforts toward funding and strengthening your advocate?
Because... I've saved the best part for last. FirstEnergy has proposed doing away with these annual ENEC filings in favor of quarterly filings that raise your rates 4 times per year. Can you imagine having to go through these thousands of documents 4 times a year, instead of just once? Your Consumer Advocate won't be able to keep up, unless its funding is increased three-fold in order to hire more staff to do nothing but pore through FirstEnergy's quarterly ENEC filings. And if the PSC allows FirstEnergy to switch to quarterly filings, then all the other utility kids are going to want the same treatment, until your advocate gives up in desperation. As well, the news media would soon tire of reporting on small quarterly increases, and there would be no bad publicity for FirstEnergy or the PSC. Get in line and eat what you're served, little ratepayer...
Ever heard the idiom "qui cum canibus concumbunt cum pulicibus surgent." Probably not, but you must be familiar with its English translation, "when you lie down with dogs, you get up with fleas." Clean Line has recently exposed its dirty underbelly by publicly scratching its fleas.
Clean Line is now a proud "member" of the Consumers Energy Alliance (#25 under "Energy Providers and Suppliers").
What is the Consumers Energy Alliance? According to SourceWatch:
The Consumer Energy Alliance (CEA) is a nonprofit organization and a front group for the energy industry that opposes political efforts to regulate carbon standards while advancing deep water and land-based drilling for oil and methane gas. The CEA supports lifting moratoria on offshore and land-based oil and natural gas drilling, encourages the creation and expansion of petroleum refineries and easing the permitting process for drilling. The group also says it supports energy conservation. CEO portrays itself as seeking to ensure a "proper balance" between traditional non-renewable and extractive energy sources and alternative energy sources. The group also supports construction of the Keystone XL Pipeline.
According to Salon.com, which obtained over 300 emails of personal messages between lobbyists and Canadian officials, the CEA is part of a sophisticated public affairs strategy designed to manipulate the U.S. political system by deluging the media with messaging favorable to the tar-sands industry; to persuade key state and federal legislators to act in the extractive industries' favor; and to defeat any attempt to regulate the carbon emissions emanating from gasoline and diesel used by U.S. vehicles.
So, the CEA is a well-known front group for the fossil fuel industry? But, wait a tick, I thought Clean Line was all about "clean" energy and shutting down the fossil fuel industry? Money makes strange bedfellows.
What is a front group?
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. The front group is perhaps the most easily recognized use of the third party technique. For example, Rick Berman's Center for Consumer Freedom (CCF) claims that its mission is to defend the rights of consumers to choose to eat, drink and smoke as they please. In reality, CCF is a front group for the tobacco, restaurant and alcoholic beverage industries, which provide all or most of its funding.
Of course, not all organizations engaged in manipulative efforts to shape public opinion can be classified as "front groups." For example, the now-defunct Tobacco Institute was highly deceptive, but it didn't hide the fact that it represented the tobacco industry. There are also degrees of concealment. The Global Climate Coalition, for example, didn't hide the fact that its funding came from oil and coal companies, but nevertheless its name alone is sufficiently misleading that it can reasonably be considered a front group.
The shadowy way front groups operate makes it difficult to know whether a seemingly independent grassroots is actually representing some other entity. Thus, citizen smokers' rights groups and organizations of bartenders or restaurant workers working against smoking bans are sometimes characterized as front groups for the tobacco industry, but it is possible that some of these groups are self-initiated (although the tobacco industry has been known to use restaurant groups as fronts for its own interests).
“Unfortunately, virtually all energy projects face at least some level of opposition. But, in most cases, the opposition comes from the vocal few who stand in the way of the silent majority who see these necessary projects providing tremendous job and economic development opportunities on many levels. The EDJ Alliance will help taxpayers, energy consumers, landowners and businesses to voice their opinion to elected officials so that they embrace the opportunities associated with energy development.”
Vocal few? Silent majority? You mean landowners and consumers who object to the Plains & Eastern project vs. Clean Line Energy Partners? CLEP is hardly silent (paid mouthpieces like HBW stand in evidence) and it's certainly not any kind of "majority" in Arkansas. In addition, CEA does not represent any actual "consumers" or other "grassroots" interests. It simply pretends to speak for them.
Support landowners in Arkansas and Oklahoma! Support energy infrastructure! Support the Plains & Eastern Clean Line!
We need your help!
America's energy infrastructure needs your help! Lobbying efforts at the white house level have inhibited the passage of an energy infrastructure project beneficial to citizens and landowners in Arkansas and Oklahoma!
Support energy infrastructure, land owners, and the Plains and Eastern Clean Line project by simply clicking the link below to sign the petition! Every click makes a difference!
It is absolutely imperative to demonstrate support as a citizen! The future of America's energy infrastructure is in your hands!!
When a couple of the landowners CEA claims to represent questioned the group's claims, HBW promptly removed the claims from its facebook page.
How stupid does HBW think the American people are? Do they ever type a sentence that doesn't end with one (or two!!) exclamation points? This is ridiculous, ineffective drivel. C'mon!!!!!!!!
What "lobbying efforts at the White House level" have inhibited "passage" of an energy infrastructure project? Do you mean the DOE's consideration of Plains & Eastern's Section 1222 application to "participate" in the project in order to override state authority to site and permit transmission? That decision won't be made until next year. And it's supposed to be made by DOE secretary Ernest Moniz, not the "white house." Does HBW and Clean Line know something about some dirty dealings that the rest of us aren't privy to?
So, who are the faces of CEA's "initiative?"
Ryan Scott, Outreach Director
Since 2005, Ryan has provided strategic advice to clients across a number of industries with a focus on the oil and gas sector in particular.
While working as an attorney, before joining HBW, Ryan focused on commercial litigation, often representing business clients in contract disputes. Prior to practicing law, Ryan worked at Deloitte & Touche’s Strategy & Operations Consulting practice. While with Deloitte, he worked with clients such as Bristol-Myers Squibb (BMS), developing and delivering Financial Reporting & Legal training to a BMS executive team. Ryan evaluated Finance function processes to improve and transform them leading up to a major SAP implementation for Wal-Mart.
Ryan received a B.A. in Economics from the University of Southern California, and a JD – MBA from Case Western Reserve University in Ohio. Ryan is licensed to practice law in Illinois and is a member of the Illinois State Bar Association.
Here's Ryan Scott trading papers with Clean Line public relations "manager" Amy Kurt at the second Mendota Illinois Commerce Commission public forum in the fall of 2013:
And here's Ryan Scott interacting with the ICC judge at the forum:
Here's what Ryan Scott
had to say about the Rock Island Clean Line at the forum:
MR. SCOTT: My name is Ryan Scott;
R-y-a-n, S-c-o-t-t. I'm here as a resident of Illinois and representative of Consumer Energy Alliance. We're a trade association representing virtually every sector of the economy from trucking, to organized labor, to energy producers. The reason I'm here to speak in favor of Rock Island is simple. Consumer Energy Alliance and I support this project because it represents an important piece of the energy puzzle to supply consumers with affordable and reliable energy. Anyone who plugs in their smart phone into an electrical outlet, fires up their television to watch the Bears or perhaps a better football team or just uses their air conditioner will benefit from this project. The bottom line is in the United States demand is increasing. As one of the previous speakers stated, according to the Department of Energy and Energy Information Administration, forecasts of 25 percent increase in demand for electricity over the next three decades are expected in the United States. At the same time, the supply of electricity is expected to decrease due to aging plants and tightening Federal regulations. Many coal-fired power plants will be shuttered in the coming decades. In Illinois coal, which we expect to be decreasing in production, actually makes up approximately 40 percent of the State's energy base level. So that's an important piece of the puzzle that will no longer be available to Illinoisans. For all the reasons stated above and in order to meet Illinois' energy needs, the Consumer Energy Alliance and I support the Rock Island Clean Line project. Thank you.
That's funny. Ryan didn't mention that Clean Line Energy Partners is a member of the CEA.
Who does Ryan Scott work for? It's not CEA or its "initiative," it's HBW Resources. HBW doesn't do anything for free, so I believe that Ryan was paid to appear at the ICC forum and make that statement.
Didn't Clean Line have the opportunity to present its case to the ICC as the applicant? Why, then, did Clean Line feel it necessary to have paid speakers posing as third party "consumer" interests supporting its project at the forum? Did Clean Line think it was fooling the ICC into believing that consumers supported RICL?
And now Ryan, HBW, and its new "initiative" think they're fooling a whole new bunch of folks at the "white house" and in the Mayberry towns of Arkansas and Oklahoma?
I wonder what Clean Line's big green supporters think about its getting into bed with fossil fuel interests in the CEA? At what point are these environmental fools going to conclude that Clean Line isn't about "green" energy, but a different kind of $green$?
And, as far as Clean Line's attempted deception about the "benefits" of the Plains & Eastern Clean Line? Report to your battle stations, Mayberry! We're going to have some fun! You've got to get up pretty early in the morning to fool a farmer. Also an idiom you've probably heard. Not translated into Latin.
I saw lots of your tax dollars at work over the past couple weeks. They're everywhere.
Long, boring road trips allow lots of time for pondering. Lots of wind farms allow for lots of comparison.
Why were some turning while others were not? It sure seemed like the closer to the road they were, the more they turned. Like stage dressing for eager Sierra Club motorists, puttering along in their polluting conveyances. Or perhaps the ones encroaching on highways were newer and earning the $0.023/kWh production tax credit, while the ones farther away had been abandoned or were simply priced out of the market at the time? Why was a wind farm on the right hand side of the road turning away, while one on the left hand side sat idle? I did see more turning than not, which probably means there's adequate wind transmission capacity for what's been built.
This report says that wind is curtailed for 3 main reasons:
1. Transmission constraints. Not enough transmission for peak periods. Since the capacity factor for wind averages 35%, is it economic to build additional transmission for the odd times when wind is producing at a higher rate? Probably not.
2. System balancing. High wind penetrations make it hard to keep the system in balance because they require curtailment of base load generators during periods of low load. That's not economic either. "Some utilities or grid operators have curtailed generation from wind plants when minimum generation levels on fossil-fuel plants are reached, because stopping and restarting fossil units within a few hours can be significantly more expensive than paying for a few hours of wind curtailment."
3. Other reasons: voltage issues, interconnection issues, frequency and stability issues. Too much intermittent wind can make the grid unstable. Wind generators also "self-curtail" to protect bats and enable de-icing. Probably not a problem, since it was well over 100 degrees when clusters of wind turbines sat idle.
The expired production tax credit pays wind farm owners $.023/kWH generated. How much is that on an annual basis? Not information easily found. Why not? This article says that the PTC has cost American taxpayers $30B over the past 35 years. Of course, the Koch monster gets blamed for spreading "misinformation," but nobody offers a corrected figure.
Warren Buffet has bragged that the production tax credit is the only reason to build wind farms, "they don't make sense without the credit."
The PTC allows wind generators to bid into energy markets at low, or even negative, prices. This makes it harder for unsubsidized base load generators to stay afloat. As a result, these generators beg for ratepayer subsidies and foist the cost of their failing generators off onto ratepayers. Who thinks that we can replace all fossil fueled electric generation with intermittent renewables like wind?
Not PJM, whose recent capacity auction provides additional money to generators who can produce when called upon (you know, those baseload fossil fueled generators). This is going to cost consumers an additional $3.4B in yearly capacity charges.
And there we are. New intermittent wind capacity is being built at an alarming rate because it is profitable. New wind transmission capacity is being overbuilt at an alarming rate because it is profitable. All this intermittent generation is causing increased costs for consumers.
But the industry is raking it in. Thoughts to ponder...