... and this one goes to Sprouse!

We're still living in America, where money apparently can't buy everything.  And that's a cheery thought!

The Kansas City Star continues its excellent coverage of the Grain Belt Express debacle in the wake of yesterday's denial of the project by the Missouri Public Service Commission. 

The Star focuses on impacted Missouri landowner Loren Sprouse, who, along with his brothers, operates a farm in Caldwell County.  Read the article and watch the video here.
A week before the vote, Loren Sprouse — along with two brothers, he farms land in Caldwell County that’s been in the family since 1919 — said of Grain Belt: “This is a giant land grab by a huge company. They (Clean Line) are a private, for-profit company trying to masquerade as a public utility.”

After Wednesday’s vote, Sprouse said: “Now we can get back to the important business of feeding America.”
Clean Line Investor Corp. is a subsidiary of ZAM Ventures, L.P., which is one
of the principal investment vehicles for ZBI Ventures, LLC. ZAM Ventures, L.P. has a consolidated net worth of $500 million based on U.S. GAAP measurements. ZBI Ventures,
LLC is owned by Ziff Brothers, a multi-billion dollar family investment fund.
The Order stopped short of revealing how much of this particular $500M chunk their multi-billion dollar fortune the Ziffs have invested in Clean Line's struggling projects, but Clean Line's recent application to the Illinois Commerce Commission revealed it's in the neighborhood of $70M.  That's nearly 1/5 of ZAM's fortune tied up in Clean Line with no hope of recovery if the projects fail.  Maybe this will give the Ziffs some empathy for the Sprouse brothers, who stand to lose a huge chunk of their investment if the project is built.

And let's think about that for a second... how much potential profit is in these projects for the Ziffs if they're willing to invest such a huge chunk of their fortune?  Will they recoup their entire investment if only one of Clean Line's five projects gets built? 

So, who watched the Missouri PSC meeting yesterday?  It was lovely of Mike Skelly and Mark Lawlor to choose seats that put them within range of the streaming video camera.  Everyone got to watch them lose!  Here's what it looked like:
Schadenfreude?  You betcha!

Skelly originally took his classic "arms folded" defiant pose while Lawlor awkwardly stood in the doorway with a hang dog expression.  I guess someone told them that their body language was unbecoming for the occasion, because Skelly switched to the "hands tightly clasped between his knees" pose and Lawlor sat down to take notes.  Although, in this shot, it looks like Lawlor is about to bolt from his seat and run screaming from the room. 

So, what did Clean Line have to say afterwards?  It took forever for them to issue a press release (because the victory one they probably had prepared ended up in the shredder).  Clean Line says:
...there appears to be some confusion at the Missouri Public Service Commission about how the project will benefit Missourians.
Confusion?  Hardly.  The MO PSC's Order was clear as a bell.  It weighed the evidence and made a decision that actual benefits to the general public from the Project are outweighed by the burdens on affected landowners.

Who does that Clean Line?  Who calls a state regulatory board "confused" when they don't get their way?  This isn't boding well for another application down the road...

The profit-seeking needs of the Ziff Brothers were outweighed by the burden the project proposed to the Sprouse Brothers.

What a great thought as we celebrate America this weekend!

And let's end with a final photo of Mike and Mark, who finally managed to have a word with each other as the meeting was ending.  What do you suppose they said?
At a meeting today, the Missouri Public Service Commission issued an order finding that Grain Belt Express has failed to meet, by a preponderance of the evidence, its burden of proof to demonstrate that the project is necessary or convenient for the public service. The Commission therefore denied Grain Belt's application to construct a high voltage direct current electric transmission line across the state of Missouri to serve eastern electric markets.

Block Grain Belt Express-MO is pleased that their pleas to the Missouri PSC were heard by the Commissioners, who found that any actual benefits to the general public from the Project would be outweighed by the burdens on affected landowners.

Blake Hurst from Missouri Farm Bureau stated, "Farm Bureau is extremely pleased with the action the Public Service Commission took today denying Clean Line Energy's request to build a transmission line across northern Missouri. Property owners and members of our organization in the area affected by the line - the line going through their farms - talked about the difficulty of farming around the lines and talked about the importance of private property rights. They strongly oppose the granting of eminent domain for a private project. The Public Service Commission heard their concerns, understands the importance of private property rights, and protected Missouri landowners with their decision today."

"Now we can get back to the important business of feeding America," said impacted farm operator Loren Sprouse.

Block GBE has maintained that the project is not economically feasible and that the impacts to affected landowners were not given adequate consideration by the project's backer, Clean Line Energy Partners.

"This is democracy in action," said Jennifer Gatrel, Block GBE-MO Vice President, who has spent the past several years speaking out against the project and keeping others informed. "You can stand up to corporate interests and protect your property rights," she added.

But the work of Block GBE-MO is not over yet. Clean Line may still revive its application to the U.S. Department of Energy in an attempt to have federal power marketer Southwestern Power Administration "participate" in its project in order to wield its power of federal eminent domain and overrule Missouri authorities on the project.

"It's going to be a long and expensive process if Grain Belt Express chooses to go the federal route," said Russ Pisciotta, President of Block GBE. "We're in it for the long-haul."

The grassroots group of landowners and citizens will continue their efforts to foster sensible energy policy and projects that move our country toward a sustainable energy future.
Federal energy agencies are a puzzle to most people.  FERC and DOE?  What's the difference?  Is there a difference?  What do these agencies do, and how can you participate in their processes?

It's helpful to start at the beginning, with the creation of these agencies.  The Department of Energy Organization Act of 1977 reorganized a hodge podge of federal energy departments to separate energy policy from energy regulation to prevent too much coziness and to create a national energy program.

The U.S. Department of Energy was established as a cabinet-level department to deal with energy policy.  Within the DOE hierarchy, Congress also created an independent energy regulatory Commission known as the Federal Energy Regulatory Commission, or FERC.  The DOE organizational chart looks like this.

FERC was given jurisdiction over narrow and specific energy issues.  FERC is NOT a national appeals court for state energy decisions you don't like.  FERC does NOT have jurisdiction over the actions of DOE, or any other agency over which it is not specifically granted jurisdiction by Congress.  Sometimes the DOE can delegate specific authority to independent agencies like FERC, in order to work cooperatively with them to develop rules or policy over which DOE has jurisdiction.

Here's a simple list of what FERC does and what FERC does not.  If you think you have an issue that FERC should do something about, please check the list before wasting time and resources filing frivolous complaints or petitions with FERC.  If you don't understand this list, or need more information, please ask someone who does know or do some research before running to DC with your pop gun loaded with blanks.  Not only do you look silly, but you waste incredible amounts of time and resources and damage your reputation.  Federal energy regulation and policy is not a game of flinging poop on the wall to see which pieces stick.  Get educated, get your game plan organized, and target your requests with efficiency for best results.

FERC has its own set of rules that apply to matters under FERC's jurisdiction.  If your issue isn't within FERC's jurisdiction, FERC's rules don't apply.

Unless operating under the rules of a different agency that has some jurisdiction in one of its actions, the DOE operates under 5 U.S. Code Chapter 5, Subchapter II - ADMINISTRATIVE PROCEDURE.

If you want something, you have to legally support what you're asking for.  Remember, only monkeys throw poop.
The Beckley Register-Herald published a spot on editorial last week regarding the captive West Virginia PSC's continual rubber stamping of utility rate increases.


The editorial lambasted the PSC for not even bothering to act like they care to listen to public commentary.

At a hearing last week in Beckley, one citizen clearly believed the PSC acts more as a rubber stamp for the utilities than an advocate for the people. His notion was not hindered by a PSC staffer who was perceived to be texting or playing with her phone throughout the meeting.
The editorial points out that at some point, the continued advancement of utility bill increases are going to meet the immovable object of consumer ability to pay.

In the past, the PSC has shown little concern about consumers, except to scam them with "consumer rate relief bonds" designed to simply hide huge rate increases with slick PR campaigns and additional financing fees.

The WV PSC must balance the interests of consumers with those of utilities.  Simply denying a rate increase needed to keep the utility solvent isn't an option.

What's a regulator to do?

Break those utility chains that bind you, Commissioners!  Instead of being lead around by the utilities like a monkey on a leash, how about leading for a change?  We're only going to get a handle on utility rate increases when regulators start acting like regulators and stop acting like utility sycophants. 

Only when regulators use their authority to lead utilities can true balance happen.  Perhaps our Governor should start appointing Commissioners with the proper skills, instead of appointing his cronies to the PSC as political favors.
It's about time!

Clean Line President Michael Skelly told a reporter the other day:
“There’s also a chance we might abandon the project,” he said.
Do it!  Do it!  Do it!  Do it! Do it!

Let's all encourage Skelly to finally do the right thing.

Did you think I've been on vacation for the past couple of weeks?  Hardly.  But I've been having so much fun it sort of felt like a vacation.

Today was the filing deadline for initial briefs in the consolidated FERC proceeding dealing with the formal challenges to PATH's 2009, 2010 and 2011 rates and the recovery of PATH's capital investment in the cancelled PATH project.

The briefs summarize the evidence and positions of the parties.

You can download them here:

Newman-Haverty Initial Brief
(deals with formal challenge only)
66 pages

FERC Trial Staff Initial Brief
(deals with formal challenge and abandonment)
99 pages

Joint Consumer Advocates Brief
(deals with abandonment only)
268 pages

PATH Brief
(deals with formal challenge and abandonment)
168 pages

Happy reading!  They're much shorter than War and Peace.  I think.

Why do they call them briefs?  Is this some sort of sick joke?
Holding this proceeding in abeyance and allowing the Company to obtain such additional information and to work with Staff to develop additional production cost models would prejudice no one.
They also claim it would be "in the public interest" to allow the application to languish in limbo until Grain Belt Express can actually provide the information the Commission asked for back in February.

"The public" has been inconvenienced and financially harmed by Grain Belt Express every day of the past 2 years this thing has been an active threat to their lives and livelihood.  Targeted landowners have been living in stasis, afraid to invest in their properties, unable to sell their properties without disclosing the possible intrusion of a gigantic power line that will lower its value.  Thousands have been spent legally defending their rights.  There has been many a sleepless night, an uneaten meal, and way too much family time foregone in favor of meetings, hearings, and other related events.  These folks have been put through the wringer, but they have persevered.

Now, when denial of Clean Line's application is imminent, the company suddenly wants the Commission to slow down, after urging it to hurry up all these months it thought it was on the way to victory.

The Commission has given GBE way too many chances already.  A full evidentiary hearing was held.  The record was closed.  But, the Commission gave GBE a second chance to supplement the record months after the record had closed.  Clean Line couldn't be bothered to provide the necessary information or evidence.  Now GBE wants a third chance to get it right, and for thousands of affected landowners to continue to live in suspended animation for however long it takes GBE to get its act together.

Obviously Lawlor's threats to march right to the U.S. DOE to revive his application for federal eminent domain authority under Sec. 1222 of the U.S. Energy Policy Act was a big, fat bluff.  He's not going anywhere, except to drop to his knees right there in Missouri and beg for a third chance.

"Do overs" are best left on the playground.  Release the landowners from this corporate game-playing purgatory.  Deny the application.
Yesterday, The Coalition of Eastside Neighborhoods for Sensible Energy and Citizens for a Sane Eastside Energy, et al, filed a complaint at FERC against Washington State utilities Puget Sound Energy, Seattle City Light, Bonneville Power Administration and ColumbiaGrid.  The complaint alleges that the utilities violated the Federal Power Act, FERC Orders No. 1000, 890 and 2000, and contractual obligations that the respondents made with the Commission that incorporate the referenced Orders, as well as the terms of their respective Open Access Transmission Tariffs.

Whew!  That's a mouthful, huh?  In plain English, it looks like the complainants are accusing Puget Sound Energy of trying to permit and build a transmission project that was not developed in a plan by an independent grid operator (or a reasonable facsimile, since the Northwest doesn't have a traditional RTO/ISO).

ColumbiaGrid is supposed to be taking the place of a RTO for all the named respondent utilities, and according to the complaint, the utilities promised FERC that ColumbiaGrid would serve in a role to make the area Order 1000-compliant.

The complaint alleges that Puget Sound Energy developed its "Energize Eastside" project without proper load flow studies, no study of alternatives, no RFP to evaluate alternate proposals, and that ColumbiaGrid is an entity controlled by its member utilities, including Puget Sound Energy, and does not meet independence requirements for RTOs.

The complaint also alleges that the project is not the "local load flow" project it claims to be (to escape FERC jurisdiction) but also includes a new 1500MW transmission path to Canada that fulfills a decades-old agreement about shared hydro resources.  The addition of the Canadian firm capacity also elevates the project to one that should be regionally allocated, and not charged 100% to local load in the Eastside neighborhoods, as Puget Sound Energy is attempting to do.

Sounds complicated, but the affidavit of J. Richard Lauckhart is a great read to get an easy handle on the problem here.  These guys really did their homework on FERC process and policies, and provided evidence in the form of expert testimony.  Well done!

Looking forward to seeing where this leads...
A friend sent me a copy of this recent FERC OE audit of Kinder Morgan, Inc.  He found it unusual because there was no dollar amount of refund in it anywhere.  What was the point?

FERC has never met a utility merger it didn't like.  In exchange for some divestiture and a promise not to charge ratepayers for merger costs, FERC approves every merger I've ever read about.

The divestiture is what it is.  It happens, and then it's over.  However, merger costs happen over a period of several years, and may not appear in rates until after the fact.  How does FERC know that the utility has kept its promise and not passed on merger costs to ratepayers?

It audits them.  It's happening a lot more frequently lately, as the Commission has realized that nobody minds their merger cost promise.  "Mistakes" happen.  If an audit doesn't happen, then the utility keeps the money.  If an audit does happen, then the utility says, "Oooops!  My bad!" and refunds the amount FERC recommends.  No penalties happen.

So, it was really no surprise that FERC's OE commenced an audit of Kinder Morgan a couple years after the merger happened.  FERC audits routinely turn up merger costs "accidentally" included in rates.

But what's interesting in Kinder Morgan's case is that although FERC found four different violations of its accounting rules, the corrective action was prospective.

FERC found that Kinder Morgan had incorrectly recorded some maintenance expenses and
incorrectly expensed some abandoned projects.  That ended up pretty much being a wash.  No big deal.  Nobody but a bean counter cares.

But then FERC discovered that Kinder Morgan had not correctly recorded its merger labor costs in special merger accounts. 

KMI stated that it made a corporate decision not to track merger-related labor costs not due to the lack of process or system, but rather due to the fact that management did not consider the labor-related costs to be incremental costs. Also, KMI asserted that no existing employee costs were shifted to merger activities, since all pipelines continued to receive the same level of service before the
merger and all merger activities were completed as well as employees' regular tasks. KMI stated that more than 300 employees made meaningful contributions to merger activities and received a bonus for their efforts.

Audit staff noted that KMI had the requisite processes, accounting practices, and systems to track the cost of labor for merger activities. However, audit staff found written communication specifically instructing employees not to record any labor costs as a cost related to the merger. By not tracking merger-related labor expenses for more than 300 employees, the KMI jurisdictional entities were unable to accurately record the allocation of labor costs to various USofA accounts based on the time engaged in various classes of work during the period of merger activity.

Audit staff also noted that activities for pursuing, considering, and consummating a corporate merger are nonoperating, so their costs should be recorded in Account 426.5, which includes miscellaneous items that are nonoperating in nature. For accounting purposes, the Commission has consistently stated that costs involving mergers of public utilities are nonoperating and are to be recorded in Account 426.5. By not tracking the cost of employees involved in merger activity, the KMI jurisdictional entities could not distinguish the cost of labor related to the merger from labor costs for pipeline operations. As a result, the KMI jurisdictional entities failed to record such costs consistent with their nature, and the entities were unable to properly allocate labor costs to utility and nonutility operations as required by General Instruction No. 10. This resulted in the KMI jurisdictional entities recording internal labor costs in operating expense accounts that should have been recorded in Account 426.5.
While audit staff believes that the KMI jurisdictional entities should have recorded merger-related labor costs in a nonoperating expense account, KMI stated that the accounting misclassification did not affect customers' rates. Audit staff also did not find that this misclassification affected rates for jurisdictional customers.
So, apparently now it's okay for a merging utility to fail to record its merger labor separately, causing a massive transparency fail that not even FERC can figure out?  What was the point of this audit?  Was FERC trying to make KMI admit to certain dollar amount of merger labor cost and failed?  This is clear as mud, but it looks like KMI's deliberate failure to separate its merger labor costs made it impossible for FERC to determine how much labor cost there was, and where it ended up.  I'm not buying that the merger duties didn't cause any additional labor on the part of the employees.  FERC came away empty-handed.  What a waste of time and money!

But wait.. FERC also discovered "several" accounting misclassifications in their dig for merger costs.  Some of the misclassifications were a wash, rate-wise, but FERC still felt the reclass was necessary to bring KMI into compliance.  Some of them, however, were not.  FERC found donations, civil penalties, and environmental legal reserve in accounts that are recovered from ratepayers.  These transactions should always be recorded in accounts that are not recovered from ratepayers.  So, did FERC dig deeper to at least correct this violation and come away with something for ratepayers? 

Nope.  They recommended that KMI "[e]stablish and implement procedures to ensure proper coding and accounting of expenses under Commission regulations."

So, there was a big stare down about merger labor where FERC blinked first, but when FERC actually found some real money here, it didn't bother to correct it.  It gave KMI a pass, as long as it pretended to do better next time.

I hope future audits do better for ratepayers than this one.  FERC's OE isn't helping ratepayers, it's apparently too busy making headlines with banks and traders.
He's done it again.  Former FERC Commissioner Jon Wellinghoff recently spilled some more "confidential" FERC secrets.

This report by the DOE IG says that Mr. Wellinghoff showed an excerpt from a video of a FERC Office of Enforcement (OE) interrogation... err...deposition of an "unnamed" electricity market trader to the audience at an industry conference in March.

The video was supposed to illustrate how not to behave in front of regulators. The IG says the video "
was meant to demonstrate that the witness portrayed in the clip was being evasive and uncooperative, arguing over such things as the meaning of the words 'from' and 'to' in the context of email communications."

Except this video wasn't publicly available, until Mr. Wellinghoff shared it.
  Mr. Wellinghoff disagrees.

So, what's to be done about this?  Shall we shut the barn door now that the horse has gotten out and crapped in the garden?

Apparently.  The IG's report recommends:

  1. Determine if the former Chairman violated the Confidentiality of Investigations requirement and ascertain what, if any, sanctions are available to address the former Chairman's actions.

  2. Determine if the Commission currently has the necessary authorities it needs to prevent the disclosure or misuse of sensitive or nonpublic information; and, the authorities to impose sanctions on those who engage in such action, whether employed at FERC currently or in a postemployment status. If statutory or regulatory changes are needed in this regard, take appropriate action to expedite such changes.

  3. Expedite the current effort to update and strengthen the Commission's postemployment guidance and exit processes, including ensuring that departing Commission members and other employees are aware of what constitutes "nonpublic information" and their ethical duty to protect such information after they depart.
Sanctions?  Don't laws covering this already exist?
5 CFR § 2635.703
§2635.703   Use of nonpublic information.
(a) Prohibition. An employee shall not engage in a financial transaction using nonpublic information, nor allow the improper use of nonpublic information to further his own private interest or that of another, whether through advice or recommendation, or by knowing unauthorized disclosure.
(b) Definition of nonpublic information. For purposes of this section, nonpublic information is information that the employee gains by reason of Federal employment and that he knows or reasonably should know has not been made available to the general public. It includes information that he knows or reasonably should know:
(1) Is routinely exempt from disclosure under 5 U.S.C. 552 or otherwise protected from disclosure by statute, Executive order or regulation;
(2) Is designated as confidential by an agency; or
(3) Has not actually been disseminated to the general public and is not authorized to be made available to the public on request.

Example 5: An employee of the Army Corps of Engineers is actively involved in the activities of an organization whose goals relate to protection of the environment. The employee may not, other than as permitted by agency procedures, give the organization or a newspaper reporter nonpublic information about long-range plans to build a particular dam.
18 USC § 2071(b)
(a) Whoever willfully and unlawfully conceals, removes, mutilates, obliterates, or destroys, or attempts to do so, or, with intent to do so takes and carries away any record, proceeding, map, book, paper, document, or other thing, filed or deposited with any clerk or officer of any court of the United States, or in any public office, or with any judicial or public officer of the United States, shall be fined under this title or imprisoned not more than three years, or both.
(b) Whoever, having the custody of any such record, proceeding, map, book, document, paper, or other thing, willfully and unlawfully conceals, removes, mutilates, obliterates, falsifies, or destroys the same, shall be fined under this title or imprisoned not more than three years, or both; and shall forfeit his office and be disqualified from holding any office under the United States. As used in this subsection, the term “office” does not include the office held by any person as a retired officer of the Armed Forces of the United States.
18 USC § 641
Whoever embezzles, steals, purloins, or knowingly converts to his use or the use of another, or without authority, sells, conveys or disposes of any record, voucher, money, or thing of value of the United States or of any department or agency thereof, or any property made or being made under contract for the United States or any department or agency thereof; or
Whoever receives, conceals, or retains the same with intent to convert it to his use or gain, knowing it to have been embezzled, stolen, purloined or converted--
Shall be fined under this title or imprisoned not more than ten years, or both; but if the value of such property in the aggregate, combining amounts from all the counts for which the defendant is convicted in a single case, does not exceed the sum of $1,000, he shall be fined under this title or imprisoned not more than one year, or both.
The word “value” means face, par, or market value, or cost price, either wholesale or retail, whichever is greater.
Well, ut-oh.  Wellinghoff just doesn't look like the prison type to me.  I hope he knows how to rap.  Survival, man!
But don't worry.  Nothing like that ever happens to the important people.  And I'm sure Mr. Wellinghoff won't be fined... oh... say... $30 million or anything.

It simply can't happen again because Mr. Wellinghoff has lost his secret cache of FERC videos in a computer crash.
According to the memorandum, Mr. Wellinghoff stated that his computer "crashed" and all of his documents were permanently lost. A Commission attorney who participated in the March 20 telephone call told us that Mr. Wellinghoff had indicated his computer crashed in February 2015 and that all of his documents were lost. However, we were told that Mr. Wellinghoff used a personal computing device to show the video clip during the March 9 presentation, despite having told Commission attorneys that all of his documents were lost due to the computer crash. Thus, despite Mr. Wellinghoff's assertions about the loss of materials in February 2015, the events of March 2015 suggest that additional documents may remain on other personal computing devices. We were unable to reconcile this inconsistency. Despite multiple attempts on our part, Mr. Wellinghoff declined to speak with us regarding this matter.
However, Wellinghoff did become "available" to speak with the press.

What I want to know is did current Chairman and former OE Director Norman Bay give the video to Wellinghoff  when the investigation that spawned it was active?  Did this happen before Mr. Wellinghoff would have had to make a decision in the case (which never got that far because it settled)?  Or was it shared afterwards, when Wellinghoff wouldn't have been influenced by it?  How many hours of the video deposition do you suppose Wellinghoff watched to find that particularly entertaining scene?  Or was the excerpt the only part he saw?  Is that what passes for entertainment at FERC?  Watching investigation targets squirm on video?  I thought it was about protecting consumers?

Doesn't seem like Wellinghoff cares one bit. 
That hard-knock life stuff never happens to people like him.