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PJM Charges Ratepayers in Other States for Data Center Extension Cords

2/11/2024

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Virginia has a problem with data centers.  It created tax exemptions to draw them in.  Northern Virginia is situated near a bloated federal government that needs a place to store all its data.  And "data center alley" was born.  It has since reached outlandish proportions, and more data centers are being approved every day.  Data center sprawl is a serious problem.

Perhaps the biggest problem for the largest concentration of data centers in the world is powering them all.  Data centers use huge amounts of electricity, and as new technology created more ways for data centers to burn electricity, it soon became impossible to power them with the electricity available.  Couple this with state "clean energy" policy that prohibits the building of any new fossil fuel generation, and you've created a recipe for disaster.

This disaster recently manifested as PJM's 2022 Window 3 transmission plan.  Regional grid operator and planner PJM Interconnection was tasked with finding a solution to the closing of 11,000 MW of existing fossil fuel generation in Virginia and Maryland combined with 7,500 MW of new data center load in Northern Virginia.  PJM did the only thing it knows how to do... create new electric extension cords across the region that will import electricity to data center alley from fossil fuel generators in other states.  The only two states in PJM that export electricity are Pennsylvania and West Virginia, where coal is still king.  Pennsylvania produces electricity mainly from natural gas and nuclear, with a significant amount of coal still in its mix.  West Virginia's electricity mix is over 90% coal.

The new extension cords are 3 new 500kV transmission lines pumping electricity to data center alley from Pennsylvania and West Virginia.  It's bad enough that the new extension cords will plow through communities in other states, expanding transmission easements and cutting new ones, but PJM also expects electric customers in other states to pay for a significant share of the cost of these new extension cords.  What do Pennsylvania and West Virginia get from this?  New transmission lines, property destruction and devaluation.  They don't get any electricity... that's all going to Northern Virginia.

When approving this destructive (and unlikely to actually happen) transmission plan, PJM selected the cost allocation scheme that spreads the costs of the projects as widely as possible across its region.  The thinking there is that spreading the $6B cost among as many people as possible won't be noticed by individual electric consumers.  If PJM allocated the costs solely to the causers of the new transmission lines (the state of Virginia) then the rate increases they cause will be very noticeable.  In fact, it may be so noticeable that businesses and residents may begin to leave Virginia for neighboring states where electricity is more affordable.

PJM is complicit with the State of Virginia to cover up its data center disaster by inflicting new transmission on other states instead of the state that caused it.  Sure, Virginia is being allocated a huge chunk, but not all.  Another huge chunk is still being spread among all PJM consumers as far away as Illinois, Indiana, Ohio, New Jersey, Kentucky, Tennessee, North Carolina, Maryland, Pennsylvania and West Virginia.  This is because PJM selected the cost allocation scheme that allocates 50% of the cost of the new projects to everyone in the region based on their peak load percentage from the prior year.  An area that uses a lot of electricity gets a bigger share, for instance electric customers in Northern Illinois are paying a larger share of this 50% than electric customers in Virginia that will actually use the electricity piped in on the new extension cords.  Why is anyone in any state other than Virginia paying for this new data center transmission?

The other 50% of the costs are allocated based on cost causation, with load areas at or near the data centers paying a higher percentage.  However, the load areas near the data center are enormous.  The Dominion zone where the data centers are being built also consists of customers in all parts of Virginia, plus some in North Carolina.  The Allegheny Power zone contains customers at/near the data centers, but it also spreads to cover a huge chunk of West Virginia and Pennsylvania.  Why are consumers hundreds of miles from the data centers paying so much money to build extension cords for Virginia's new data centers?  This isn't fair.

PJM's cost allocation schemes are part of its FERC-approved tariff.  However, PJM must receive FERC approval for each individual collection of transmission projects to ensure they have chosen the correct cost allocation scheme for the projects.  PJM filed to spread the costs across the region back in January, which opened a 30-day comment period.

While lots of entities intervened in the FERC docket for this cost allocation, only 3 comments were received.  That's right... only 3 entities thought this was unfair.  Two of them are residential ratepayers, and the other is the Maryland Office of People's Counsel.

I filed these comments.  I asked FERC to open an investigation into the justness and reasonableness of PJM's cost allocation and took the position that the "clean energy" policies of Virginia and Maryland caused the retirement of 11,000 MW of baseload generation in their states.  Also, only Virginia is responsible for the 7,500 MW of new data center load.  West Virginians should not be paying for these new transmission lines.  Being the "power house" for the electric supply for Virginia's data centers ties West Virginia into many more years of coal-fired electricity production.  Even if West Virginia wanted to close those old, dirty plants, they cannot because Virginia needs the power for their data centers.
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Pennsylvania electric consumer Barron Shaw filed these comments.  Barron's comments are similar and underscore the way Pennsylvania and West Virginia are being used to power some of the wealthiest companies in the world.  People in Pennsylvania and West Virginia get little to no benefit from these companies or their new extension cords and will actually end up paying higher power prices in their own states as all the "cheap" electricity is sucked out of their own states to power a wealthier economy in Northern Virginia.  It's basic supply/demand.  Plenty of power makes cheap electricity prices.  When so much power is exported that electricity becomes scarce, prices rise.
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Those two comments are probably understandable to the average reader.  However, the Maryland Office of People's Counsel also filed comments and expert testimony purporting that PJM picked the wrong allocation scheme and should have used the one that allocates all the costs to the state responsible.  PJM's other cost allocation scheme is called the "State Agreement Approach" and is used when a state agrees to shoulder the entire cost of transmission made necessary by its public policies.  SAA has been used for New Jersey's offshore wind planning.  PJM planned new transmission to support NJ offshore wind, and NJ agreed to pay for it.  Maryland OPC believes PJM must break down the suite of transmission projects to determine which ones are for other reasons, and which ones are for the data centers.  Once this breakdown is made, Virginia should be charged for the entirety of the data center portion.  Maryland's filing is probably a hard read if you don't speak FERC though, so read at your own risk.  It may seem like you're reading a foreign language.
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Now it's up to FERC to decide... should electric consumers in other states be charged for Virginia's data center extension cords?  Maybe if Virginia had to shoulder the entire cost of its data center debacle it would have to realize that approving a whole bunch of new data centers comes at a cost.  Outrageous electricity prices in Virginia are the consequence of out-of-control development.  PJM is helping Virginia avoid the true cost of its policies and shuffling costs off onto other states that had no part in approving the data centers and certainly will not see any benefit from them.  PJM also selected new transmission projects that put most of the burden on other states.  PJM could have selected the proposal that kept new transmission lines in Virginia by connecting to AEP's 765kV transmission system west of Richmond.  But it did not.  PJM is complicit in Virginia's irresponsible energy policies and therefore responsible for the energy crisis that is the logical result of continued data center development.  Why, PJM, why?  

PJM won't be successful in getting all these new transmission lines built in other states, and certainly not by their projected "need" dates in 2027.  What then?  Will the lights go out?  PJM made the wrong choice and we're all going to have to pay.
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The Meaning of Collaboration

1/24/2024

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What does "collaboration" mean?
Collaboration is a partnership; a union; the act of producing or making something together. Collaboration can take place between two people or many people, strangers or best friends. To collaborate is to commit to the possibility of producing an outcome greater than one that would be developed in a silo.
NextEra, one of the utilities assigned to build PJM's coal-fired transmission extension cord from West Virginia to the data centers has been bandying that word about, but I don't think they know what it actually means.  If they actually do know what the word means, then they must be intentionally rebuffing concerned citizens while pretending they are "collaborating."  Either way, it's disingenuous.  And it will be the root cause of future project delay... and ultimate failure.

MidAtlantic Resiliency Link partner NextEra has begun its "collaboration" with a shell of a website.  The website says:
The company’s goal is full transparency and collaboration with communities and stakeholders...
The website includes a form at the bottom if you "have questions."  This seems to be the only avenue for a concerned citizen to begin "collaborating" with NextEra.

​So, I did.
Have you considered a direct route from the new Woodside substation to Aspen in order to avoid all the opposition?  Yes or no?
This is what I'm talking about. 
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It's a conceptual point-to-point connection from coal-fired generators to data centers that has not been subject to the "routing" lens.  You can see a bigger version here on slide 41.  When routed directly from generator to load, this line does not cross Jefferson County, WV and does not require a new 500kV transmission line across Loudoun County.  So, is it even being considered?  Yes or No?

NextEra's reply sounded like it was written by a Magic 8 Ball.
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Thank you for your interest in the MidAtlantic Resiliency Link.  No route has been confirmed at this time. Any route that has been circulated at this stage is conceptual. We are in the process of developing a detailed routing study to evaluate route options. As part of this process, we will work with First Energy, the other transmission developer assigned a portion of the route, to identify a point of interconnection.  

Once again, we appreciate your engagement, and we look forward to working with you as the project progresses. Thank you.

Best regards
MARL Team members
MARL Team members?  How many were crowded around the keyboard typing that reply?
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Yes or no?  Can I get an answer here?  I tried again:
So, yes or no?

I didn’t order a word salad.

Is a direct route from Woodside to Aspen  even being considered?
And here's the reply from "the Team."
Thank you for your email. 

Yes, all options are being evaluated as part of the routing study. In general, the main goal of the routing study is to collaborate closely with local communities, stakeholders, regulators and landowners to identify a route that meets the technical specifications and economic needs of the project while avoiding or minimizing impacts on landowners, local communities and the natural environment.  At the same time, this project was selected by the regional grid operator to meet regional reliability needs and any final route must meet that criteria. Thank you.
​
Is that a yes?  I don't think so.  If the answer was simply "yes" then none of that other stuff was necessary.  So, this must mean the answer is actually "no"?  But our slippery "Team" can't actually "collaborate" with anyone to answer a very simple and basic question.  How is any "collaboration" happening when inquiries are met with total nonsense and local communities are being rebuffed from participating in the routing process?  

So, I tried one last time to appeal to "the Team's" strategic thinking (such as it may be):
​Dear “Team”,

You should have stopped at “yes,” unless the answer is actually no.  I still don’t know.  Are you looking at any routes that cross the Appalachian Trail further south than the current crossing?


Your latest word salad raises more questions than it answered.

1.  Who are the “stakeholders” if they are not local communities, regulators and landowners?

2.  What are the technical specifications of the project?

3.  What are the economic needs of the project?

4.  What are the “regional reliability needs” criteria of the route?

If your goal is to collaborate closely with local communities, you are not developing a good relationship with the communities if you cannot answer a simple question.  Trust is the most important factor in developing community relationships and it is severely lacking right now.  Keeping communities in the dark while you develop a route is not collaboration.  If you cannot provide clear and accurate information, impacted communities will get their information elsewhere, from people they can trust.

The “team” stuff is also off-putting to impacted communities.  Can’t you be a real, accountable person, instead of hiding behind a vague moniker like “team”?
Well, I guess I must have hurt "Team's" fee-fees because I haven't heard from them at all this week.
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I guess I'm going to have to "collaborate" with myself to answer my own questions.  No big deal, I've been doing this for more than 15 years now.

Who are the “stakeholders” if they are not local communities, regulators and landowners?

Perhaps they are greedy elected officials, lobbyists, the data centers, other corporations with tons of money, astroturf front groups, hired advocates, environmental and other special interest groups whose agenda can be directed with generous donations, and other entities nowhere near the proposed route.  Why would any of these "stakeholders" have an interest in the route of the project?  It's not going to be in their backyard.  In fact, they may only be "stakeholders" in order to make sure it doesn't end up impacting any of their own interests and, instead, impacts yours.
What are the technical specifications of the project?

I think the technical specifications of the project are to connect over 10,000MW of coal-fired electric generators in the Ohio Valley to data center alley via a new 500kV electric transmission project.  Of course, this has no correlation to routing... the project could go anywhere and still make the connection.  But it's supposed to sound official and you're not supposed to question a statement like this because you're supposed to be dumb.

​What are the economic needs of the project?

This one is easy!  Let's refer to PJM's Constructability and Financial Analysis Report for this project.  NextEra bid that it could complete MARL for $683.5M.  PJM's analysis of project cost put the project more in the neighborhood of $1.2B, a 30% increase.  But, hang onto your wallet... NextEra included a contingency budget of 14%.  NextEra also offered some cost control promises.  NextEra's Return on Equity is capped at 9.8%.  Its equity share is capped at 45%.  These numbers are important because the ROE is the amount of interest NextEra earns on the capital costs of MARL for the next 40 years while we slowly pay them back for the project (think mortgage, or car loan, where you finance a big purchase over time).  NextEra can only contribute 45% of project costs that will earn that 9.8% ROE, the other 55% of project costs will have to be debt, which we repay at its own interest rate.  NextEra offered a "soft cap" on its expenditures that promises any expenses that exceed the estimate earn no return at all -- 0%.  However, regardless of any of these provisions, NextEra's earnings cannot be lower than 7 or 7.5%.  Then NextEra promised a schedule guarantee that the project would be completed by its June 2027 deadline.  For each month the project is delayed past then, NextEra's ROE falls 2.5 basis points, with a maximum drop of 30 points.  What is a basis point?  100 of them make up 1 percent of the ROE.  Therefore, a 9.8% ROE contains 980 basis points.  

Wow, we're just going to be saving buckets of money here!  Or maybe not.  Anyhow, all this is relevant to know that NextEra must control its costs.  It cannot make any routing changes that increase its costs such as different routes, different structures, different land acquisition.  NextEra is also sensitive to staying on schedule.  If "collaborating" with you delays things, then your opinion doesn't matter.

What are the “regional reliability needs” criteria of the route?

This is pretty nonsensical.  Regional reliability needs are rooted in technical specifications and inservice date.  The "Team" is just repeating itself and trying to make it sound like something different.

Yesterday, I was reading a news article about MARL and I ran across the same ridiculous phrases that populated. my own email exchange with "the Team."  Maybe "the Team" is nothing more than an automated robot choosing from a list of approved phrases to respond to inquiries that are used by many big companies.  If so, is it programmed to "collaborate" or simply to pretend?

Do you trust NextEra?  I don't.  NextEra can't answer a simple question.  Much of what they said is meaningless gibberish.  Trust is first and foremost and NextEra has already blown it.  Of course, gaining the trust of a public that suspects NextEra wants to take their property and construct a huge transmission line on it is an uphill battle to begin with, but hiding behind "the Team" and refusing to answer a simple question with a straight up answer destroys whatever trust ever might have existed.  Get your information elsewhere.


True "collaboration" on developing a project route means that impacted communities should be participating in the route development and evaluation process.  However, they are not.  Instead, NextEra is developing the route all on its own, using its own criteria, and will only "collaborate" with the community to show them the finished route selections and accept their feedback.  None of the routes are proposed by impacted communities.  Impacted communities are estranged from NextEra's actual routing process.  This isn't "collaboration."  It's route consultation by fait accompli.

And that never works.  Impacted communities want to know what problem is being solved and to be active collaborators in developing the solution.  Keeping them in the dark until the route is selected is not "collaboration."  It's a route developed in a silo.  And it's a recipe for project delay and failure.

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The Big Transmission Lie

1/16/2024

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As part of the "energy transition" big green, big government, and the electric industry have been promoting an overwhelming need for new high-voltage electric transmission.  The message goes like this:  we need more transmission to move electricity from new renewable energy generators (solar and wind) to big cities that "demand" more renewable energy. 

That message is pure propaganda.

The "energy transition" is squeezing existing fossil fuel generators financially and many are shutting down.  This phenomenon is caused by federal taxpayer-funded subsidies for renewable generators and state/local energy policy that requires your electric company to cut its carbon to zero by a certain date.  Government policy has finally been successful in forcing the closure of fossil fuel electric generators.  Perhaps this is a good idea, environmentally, but it absolutely doesn't work to keep the lights on.

One of the biggest problems is that new renewable generators are not coming online in time to replace closing fossil fuel generators.  Instead, we just have less generation.  The liars point to regional interconnection queues to demonstrate that thousands of megawatts of wind and solar are waiting patiently to connect to the grid, and blame grid operators and utilities for holding up their connection.  Except this is just another lie.  Generators in the queue have not yet been built and may never be.  Vast numbers of generators drop out of the queue before constructing anything, even more now that the government has completely hosed up the supply chain.  

When big, baseload fossil fuel generators close, there is often nothing in the state or locality to replace them.  Regional grid operator PJM Interconnection is struggling to replace over 11,000 MW of closing generation.  The continuing closures keep pushing our electric grid further and further to the edge.  Closure of the last of Maryland's coal-fired electric generators causes widespread grid impacts that can destabilize the grid and cause power outages.  But does Maryland care?  Not really.  Maryland leaves replacing the retiring generation to PJM and other states.  Maryland is an energy parasite.  Maryland's energy policies are causing unreliable electricity for everyone in the region.

PJM is also struggling with a 40% increase in electric demand caused by Virginia's out-of-control approval of new data centers.  Data centers use incredible amounts of electricity that cannot be satisfied with variable forms of renewable energy like wind and solar.  Data centers need 24/7 on-demand electricity, even after dark and on calm days.  The capacity factors for renewables are much lower than fossil fuels.  While fossil fuel generators can stockpile fuel and be prepared to run when needed, renewable generators only run when nature makes their fuel available.  Therefore, you'd need many more renewables than fossil fuel generators to maintain reliable power.  The big lie pretends that if we only build transmission to connect everything then some renewable generator, somewhere, will be producing electricity.  But it won't be producing enough to replace everything else that isn't producing.  Pretending that is so is an unproven fantasy, and one we engage in at our own peril.  The cost of new generation and new transmission to connect it all is also going to make electric bills skyrocket.  The liars say that renewable generation is cheaper than fossil fuel generation, but they don't tell you that's because of government subsidies, and they also don't add in the cost of all that new transmission needed to connect all the renewables.  Unsubsidized remote renewables plus transmission is more expensive than existing fossil fuel generation that relies on existing transmission.  Fact.

This whole lie has been spoon fed to a trusting public for years.  But what happens when the largest grid planner in the country approves a new transmission expansion plan?  Is it connecting renewables to load using new transmission?

NO.

PJM's recently approved transmission plan replaces closing fossil fuel generators, and increases electric supply for new data centers, by connecting these areas with existing fossil fuel generators in other states.  This isn't about the "energy transition"; it's going backwards to increase the use of coal and other fossil fuels from states without impossible clean energy goals.

PJM's MidAtlantic Resiliency Link, or MARL, directly connects the data centers in Northern Virginia to over 10,000 MW of coal-fired generation.  The MARL will enable the export of electricity produced at Ft. Martin (1,100MW), Harrison (2,000MW), Long View (860 MW), Mitchell (1,600 MW), Cardinal (1,800 MW), Sammis (1,700 MW) and Mt. Storm (1,700 MW).  Wind, solar, biomass and hydro in this area add up to less than 10 MW.  It is indisputable that the electricity carried by MARL will be overwhelmingly created by burning coal.

When will the environmental groups and people who will use this new supply of dirty power wake up and object?  Transmission divorced from its source of power is a giant lie.

While Maryland sits around playing "victim" of its dwindling power supply, Virginia is planning a slew of new legislation supposed to make its data center problem "better."  However, none of Virginia's legislation addresses the REAL problem -- the generation of electricity.  Virginia's legislators try to pretend that electricity comes from new transmission lines.  
It would also require the SCC to evaluate current rate structures to see if transmission project costs linked to data centers are being fairly applied or are being spread too widely among the broader customer base.
“One of the benefits of data centers is how much money it brings to a locality,” Subramanyam said. “And we like that, but I also want to make sure that the infrastructure needed to power those data centers, that those costs are reasonable to ratepayers and are not essentially defeating that purpose of the data centers, which is to be an economic boon for a locality.”
Transmission lines are nothing but giant extension cords that are not plugged in.  It is only when the transmission line is connected to the generator that it supplies electricity.  Looking at transmission while ignoring where the line plugs in is also a giant lie based on denial.  Of course, it is a convenient lie for Virginians who want it all... they want the tax money data centers bring, but they don't want to host the infrastructure necessary for those data centers to operate.  Attempting to shift the cost of new interstate transmission is a tricky puzzle because interstate transmission rates are a federal issue.  While Virginia could direct its electric companies to allocate more costs of Virginia's portion of new transmission to certain rate classes, it cannot do a thing about all the transmission costs being allocated to the 13 other states in the PJM region.  As well, data centers most likely don't have their own rate class, so any shifting of costs would also impact other industries in Virginia.  This whole cost shifting thing is not solvable at the state level.  Virginia needs to stop lying to everyone and trying to have it all.

If Virginia really wanted to take responsibility for its data center problem, it would deny any new data centers that did not have a firm power supply from a Virginia generator.  Building new generation near the data center load is not only more reliable, but it's also cheaper than building hundreds of miles of new transmission to existing coal-fired power plants.  Does Virginia think those coal plants in other states are going to operate forever?  At some point, those aging plants are also going to close, and then what good is Virginia's extension cord when it's not plugged into anything?  Are we all being forced to sacrifice for a new transmission line that may only be useful for 10 years or so?  It's going to take more than 10 years to get it permitted and built!

Solution:  Require Virginia localities that want to approve new data centers to also approve new power generation to support that load in the same locality.  If that happened, data center building in Virginia would come to a screeching halt.  Virginia doesn't want to shoulder the burden of providing electricity to the data centers that are increasing its tax base.  Citizens of other states, such as West Virginia, want to carry your burdens even less.  Stop being a parasite, Virginia!

When you hear the word "transmission" remember that it is NOT for the "energy transition" and that it cannot be divorced from the power it transmits.  Virginia needs to own the fact that is is profiting off the misery of other states and increasing carbon emissions.  And it's not just the data centers that will be using coal power... everyone in Virginia will now be using a lot more coal power from West Virginia, courtesy of the new MARL transmission line.  Own it!
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Maryland Clean Energy Plan Relies on Dirty Imports

1/7/2024

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Maryland has ambitious climate goals for 60% reduction of greenhouse gas emissions by 2031 relative to 2006 levels, and to attain a net-zero economy by 2045. Maryland’s plan, just like Virginia’s, can only apply to power generation within the state. Maryland is poised to eliminate coal generation within its borders with the upcoming shutdown of the last three remaining plants, Brandon Shores, Wagner and Warrior Run, already announced to happen in 2025.

​But does that eliminate Maryland’s reliance on coal to keep the lights on? No, it doesn’t. Maryland already imports more than 40% of the energy is uses from surrounding states. Maryland’s plan calls for significant new imports after all coal-fired generation in the state retires.
Imported electricity from surrounding PJM states makes up over half of the electricity demand in Maryland in 2031 and contributes to over 95% of the remaining emissions in the power sector. In this pathway, although Maryland achieves its renewable and clean energy targets for in-state generation, the rapid expansion of solar and wind from current levels in this scenario is not sufficient to meet the growth in electricity demand from end-use sectors and to make up for reductions in natural gas generation. This means that Maryland must also increase imports from other states.”
That’s right... in order to keep the lights on in Maryland, it must import staggering amounts of electricity from other states in the region, including West Virginia (91% coal) and Pennsylvania (predominately natural gas and nuclear). There’s no invisible barrier that prevents downwind emissions from Pennsylvania and West Virginia from fouling Maryland’s air. Maryland is a filthy parasite.
Maryland has historically dealt with its failure to build enough of the clean energy it loves by filing lawsuits to force the shut down of dirty generation in other states.
“The petition asks the EPA to issue a finding that 36 electric generating units located in Indiana, Kentucky, Ohio, Pennsylvania, and West Virginia are in violation of the prohibition of 42 U.S.C. § 7410(a)(2)(D)(i), commonly referred to as the “good neighbor provision.” The petition alleges that nitrogen oxides emitted by these units significantly contribute to Maryland’s nonattainment, or interfere with its maintenance of certain National Ambient Air Quality Standards (“NAAQS”)”.
Maryland admits that it has no hope of building enough clean energy generators to power its own state. Why, then, does it continue to shut down power generators without a viable plan to replace them?

The generators are shutting down because of a settlement between Sierra Club and Talen Energy that was the result of a lawsuit. Neither Maryland, nor regional grid operator PJM Interconnection was party to the lawsuit. They just got left picking up the pieces to make sure the lights stay on. Maryland seems to be doing nothing except hoping for more solar, storage and offshore wind to offset a portion of Maryland’s energy deficiency. This is not realistic. Offshore wind has taken a beating recently. Maryland’s big project has recently been paused and is in danger of being cancelled. 

But Maryland chooses to bury its head in the sand and push its responsibility to keep the lights on to regional grid planner PJM Interconnection. It’s up to PJM to keep the lights on despite Maryland’s electric suicide plans. PJM employs the only tool it has... new transmission to Maryland from surrounding states with excess fossil fuel generation. PJM seems quite pissed about it too, judging from its recent letter defending against Maryland’s attacks on who will pay for the new transmission. 

And then you’ve got Sierra Club, jumping in to shift the blame and telling Maryland what PJM ought to do about the situation Sierra Club has created with its lawsuit against coal-fired generators. Sierra Club thinks PJM should just sit back and indulge in the fantasy that the lights will stay on because Sierra Club thinks they should. Sierra Club doesn’t have a realistic plan, but it doesn’t want to take any blame for what it has done. 

Who is running the state of Maryland? Elected representatives or Sierra Club? Meanwhile, electric rates will skyrocket and Maryland will be using more coal-fired electricity than ever. This isn’t an energy transition and it’s not helping the environment. In fact, Maryland seems to be going backwards, put pretending that is is “clean”.
Maryland, just like Virginia, is nothing more than a filthy parasite. But the parasitic “clean energy” policies of Maryland and Virginia aren’t just hurting Maryland and Virginia. The misery caused by their incoherent energy strategies is spreading to other states. West Virginia will mine more coal, burn more coal, and transmit more coal-fired electricity to Maryland and Virginia via new high-voltage electric transmission lines. New transmission lines take property from residents of other states using eminent domain in order to make way for the new lines. And that’s just the physical impacts, residents of other states will also have to pay for the new transmission because Maryland and Virginia’s parasitic energy policies threaten reliability of the entire PJM grid, stretching as far west as Chicago, and as far south as Tennessee.

We cannot continue on this way and package this disaster as a beneficial transition. When the rubber meets the road, state clean energy policies are destroying electric reliability and affordable electricity for everyone. 
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The Hypocrisy of Virginia's Clean Economy Act

1/4/2024

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I don’t hate clean energy. I’m all for it, if it works in an economic and equitable manner. But that’s not what’s happening. Clean energy has become a virtue signal, all talk and little action.  It's just words Virginia hides behind so its citizens think it's a "clean energy" state.  When the rubber meets the road however, Virginia is actually using more dirty energy than ever!

Virginia passed its Clean Economy Act in 2020. On its face, it sounds promising. It establishes a renewable portfolio standard that mandates that the two utilities in the state, Dominion Energy and Appalachian Electric Power, produce 100 percent renewable electricity by 2045 and 2050, respectively. It also established energy efficiency standards. It sounds like a great plan, but can they pull it off? 

In 2023, Dominion filed its Integrated Resource Plan, or IRP. An IRP is a utility plan for how it will meet anticipated electric load, and what resources the utility will use to keep the lights on. Dominion’s plan for future resources that comply with the VCEA and meet an unprecedented annual 5-7% increase in load created by the proliferation of new data centers in Northern Virginia consists of new solar and offshore wind additions, energy storage, and thousands of megawatts of incremental small modular nuclear reactors, or SMRs in order to retire all company-owned, carbon-emitting generation by the end of 2045. Dominion also plans to construct several new gas combustion turbines to address future energy system reliability needs. But that’s not all. Dominion also needs to increase its imports of electricity from other states to more than 10,000 MW. Dominion stated that this amount of imports “raises significant concerns about system reliability and energy independence, including over-reliance on out-of-state capacity to meet customer needs.”

Considering that one good-sized fossil fuel or nuclear power generator produces around 1,000 MW, that’s at least 10 electric plants in surrounding states that would exclusively serve Virginia’s needs. Virginia’s clean economy act is coming at the expense of the clean economies of surrounding states. Virginia’s law only concerns itself with power generation in Virginia, but in doing so, it places greater burdens on the surrounding states to power Virginia's economy. Virginia has turned itself into a power parasite – crowing about its clean energy economy while ignoring the fact that it is importing more and more dirty generation from other states in order to power that economy. There is no invisible barrier that keeps emissions from surrounding states from fouling Virginia’s air. Virginia’s “clean economy” is nothing but a virtue signal, and a very expensive one at that.

Would it be cleaner for Virginia to support its own load by building enough of its own new generation to meet VCEA, instead of importing dirty energy from surrounding states? Of course it would. But it would be much more expensive. Virginia’s clean virtue only extends as far as it can raise electric rates without killing its own economy. If Virginia really got 100% of its electric supply from non-emitting sources located within the state of Virginia, electricity would be so expensive that nobody would want to live or do business there. Instead, Virginia is virtue signaling and building its own economy at the expense of surrounding states.

Recently, the Virginia State Corporation Commission rejected Dominion’s IRP because the proposed new gas turbine generators failed to meet the standards of the VCEA. Dominion must come up with a new plan that does not build any new emitting generators. At what point does Virginia’s virtue signaling end and the real work of creating an actual clean economy begin?

Something has to change. Either Virginia has to build its own clean generation to serve its ever-increasing load and actually have a clean economy, or Virginia has to stop building the data centers that are creating that load. More transmission to import fossil fuel electricity from West Virginia to meet load is not the answer. 

It’s simply hypocrisy at the highest level. Virginia is not clean, despite its clean energy laws. It’s a filthy parasite feeding off the misery and ruined environments of neighboring states. At some point, those dirty plants in West Virginia will shut down. They’re getting older and more expensive to operate, and they’re getting squeezed by federal energy policy. If Virginia thinks that there will be more than 10,000 MW of generation available to import in 2045, it needs to think again. Shoving Virginia’s energy burden off onto neighboring states and thinking we won’t notice is not sustainable.

It’s up to you, Virginia. Clean or dirty? Energy freedom or filthy parasite? The choice is yours.  
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Understanding NIETCs

12/29/2023

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What's a NIETC (pronounced nit-zee)?  Just when you thought the energy alphabet soup couldn't get any thicker, here's another federal program meant to enable a massive buildout of high voltage electric transmission, whether we need it or not.  NIETC stands for National Interest Electric Transmission Corridors.  NIETCs were dreamed up by Congress in the Energy Policy Act of 2005 as a way to give the Federal Energy Regulatory Commission (FERC) "backstop" permitting authority for certain transmission lines.  Transmission line siting and permitting is state jurisdictional.  It is up to the states to decide whether a new transmission line is needed and, if so, where to put it.  However, Congress wanted to give the federal government authority to permit transmission where states did not use their own authority.  In its original form, designation of a NIETC by the U.S. Department of Energy (DOE) would bump permitting to FERC if a state did not possess the authority to site and permit, or if it took too long, or if it burdened its permit with unworkable conditions.  Importantly, Congress did not give FERC jurisdiction to permit a transmission project if a state issued a denial within one year.  But our federal government overstepped its boundaries by interpreting the statute to mean that a state denial could be overruled by FERC.  The NIETC process was killed by two court decisions that said the government failed to consult with states in making its designations, and that it had no authority to permit if a state issued a denial.  NIETCs were shelved and we moved on.  In 2021, NIETCs were dusted off and a new Congress decided that FERC could overrule a state denial for a transmission project in a NIETC.  This overreach into areas of state jurisdiction has not yet been challenged in court, but I guarantee you it will be.

Meanwhile, the U.S. DOE has been busy re-imagining the NIETC process so that it can designate new corridors.  The purpose of a corridor is to turn FERC into an appeals court for new transmission lines in the event that a state denies a permit to build.  For its part, FERC has initiated a rulemaking to set up its new permitting authority.  After proposing the rule, FERC accepted comment on its proposal, and then let the matter die.  FERC has not yet set the rules for applying for a permit for a project in a NIETC.  Nothing can be done until this process is finished.  However, DOE is moving ahead to designate corridors.

DOE'S first proposal was to allow transmission developers to apply for NIETCs for transmission projects they wanted to build.  In order to inform its process, DOE also conducted a National Transmission Needs Study.  It came a no surprise that DOE determined that the entire U.S. is in need of lots of new transmission, although the regional transmission planners (like PJM Interconnection) have been planning the transmission we need for decades.  Although DOE does not have any authority to plan the transmission system, or decide who pays for it, DOE issued its biased report in order to enable the designation of NIETCs.  Now that the entire country needs new transmission according to DOE's report, DOE has issued what it calls a "guidance document" to create the rules for designation of NIETCs.  It's not a rulemaking (sez DOE), it's a "guidance" and there are no formal rules.  Of course, this does not comport with administrative policy rules that require public notice and comment on agency rules, but DOE isn't bothered by that.... it's simply plunging ahead.  As if that won't be litigated...

Anyhow, on December 19, DOE published its "guidance".  The guidance says that any person can suggest a NIETC anywhere, and DOE will evaluate the suggestions it receives and publish a short list of possible NIETCs by the spring of 2024.  After the list is published, DOE will accept comments on the possible NIETCs.  It doesn't look like DOE will bother to undertake any local community notice so that impacted landowners and communities will be made aware of the comment opportunity.  You're supposed to be in the dark about this (so spread this around and educate yourself).  Once DOE receives comments on its list of possibilities, it will further winnow it down to select a number of "draft" corridors.  The draft corridors will be subject to an environmental statement under the National Environmental Policy Act.  This is where DOE will finally begin "robust" public notification and invitation to comment.  However, the NEPA report only concerns itself with environmental issues, not issues of need for the project in the first place.  While you should comment on the Environmental Impact Statement, you should also comment before the draft corridor is designated.

I know the guidance document is long and perhaps confusing, but you shouldn't ignore it.  I expect that every transmission proposal that has not yet been approved by state utility commissions will be proposing a new corridor as insurance in case it cannot get the state approvals it wants.  Your goal should be to prevent designation of a NIETC in your own community.  DOE will be holding one of its silly webinars to explain its process on January 3.  You can register to attend here.  The webinar will consist of some DOE employees reading the slides of a power point presentation.  DOE rarely allows attendees to ask questions during the webinar.  When it allowed questions in the past, it never seemed to like the questions asked by real people.  Therefore, in order to avoid embarrassment for DOE, there is unlikely to be any actual interaction during the webinar.  However, if you are new to NIETCs, you may get some information from reading the slides yourself.  What the hay, it's only an hour.

DOE pretends that its "guidance" was informed by the comments it received on its initial plan.  But reality is that DOE cherry picked the comments that supported what it wanted to do, and ignored the rest.  I submitted extensive comments on this (and also all the other related rulemakings and studies at FERC and DOE), however DOE ignored everything that didn't fit in with its plan.  Here's what I found wrong with DOE's process:
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The U.S. DOE is like a kid with a new Christmas toy.  In the name of "clean energy" DOE has been given limited new authorities by Congress that clash with other authorities already possessed by grid planners, state regulators, NERC and FERC.  DOE doesn't know squat about transmission for reliability or economic purposes.  It is only concerned about building a bunch of transmission willy-nilly because Big Green says we need a bunch of new transmission to connect more unreliable wind and solar generators.  Wind and solar alone are not a viable means of powering our society.  But certain companies are getting very rich on all the government handouts for "clean energy" so they make up all sorts of new ways to pick our pockets, claiming that there's just one more thing we need to pay for in order to make wind and solar work.  Several years ago, they complained that wind and solar weren't working because it was too hard to connect new projects to the existing grid.  So, all the grid interconnection rules were reformed and a huge amount of new connections were approved.  But guess what?  Most of the approved projects dropped out because they were not economic or profitable.  Now Big Green says we need to build new transmission in order to connect new wind and solar.  As Rosanne Rosannadanna once said:
The U.S. DOE is not a grid planner.  It is not a grid regulator.  It's not a cost allocator.  It's just a gigantic waste of everyone's time and money... but it's a waste that we would ignore at our own peril.
Who does our government work for? If not the citizens who fund and enable it, then it is not part of a functioning democracy. DOE has been working steadily over the past several years to gaslight stakeholders to believe that new transmission and generation is the ONLY solution to a cleaner energy future. There are many other tools in the toolbox that can aid the transition that do not depend on commandeering hundreds of thousands of square miles of private property. DOE’s role is to examine all the tools available and determine which scenario, or combination of scenarios, best serves all citizens. DOE should be purposefully engaging all stakeholders in consultation and making all its actions public, instead of carrying on programs like NIETC designation in secret, lest the hoi polloi find out about it before they are supposed to and become a fly in the ointment. 
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Lessons from a Bad Omen

12/20/2023

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The Potomac-Appalachian Transmission Highline, or PATH project died yesterday.  It was nobody's friend at the end.  I don't think anyone is going to miss it, even PATH itself.  It's been an albatross around everyone's neck, including mine, ever since FERC decided to second-guess itself on the matter in 2020.

An uncontested settlement was filed at FERC on November 17 that created a lump sum refund for PJM ratepayers of $9.5M.  The refund came as a result of the DC Circuit Opinion back in 2021 that determined PATH's advocacy and advertising costs should not have been collected from ratepayers.  Also included in the lump sum was a final accounting for money due under PATH's formula rate.  The settlement also provides for the cancellation of PATH's formula rate and cancellation of the companies themselves.  In several months, PATH will be nothing but a bad dream and a lightness in your wallet.

Because FERC had failed to act (again) on the DC Circuit remand and a paper hearing FERC opened on PATH's return on equity in 2020, the parties to the long-running formula rate and abandonment cases took it upon themselves to ink out a deal and present it to FERC for approval.  FERC allowed PATH to begin collecting money for its project beginning in 2008, and it won't stop collecting until 2024.  That's 16 years.  Much of that time came courtesy of an overworked and tone-deaf FERC simply ignoring the issues PATH created for years on end.  Two years to grant our formal challenges, 3 more years to get them to hearing, 2 more years to issue an order, 3 more years to grant rehearing and do a 180 on FERC's first decision, only a year at the D.C. Circuit Court of Appeals straightening that out, and then 2 more years before the settling parties, including yours truly, finally pulled the plug to short circuit another long period of waiting for FERC to act.  To its credit, FERC jumped right on the settlement when it was presented and approved it yesterday, just a mere month after it was filed.  But why did it take us doing FERC's job for them to get this resolved?

Yesterday, a public shaming of PATH, utilities, PJM, and FERC itself came courtesy of FERC Commissioner Mark Christie during the monthly Commission meeting.  You can watch it here beginning at minute 13:48 and ending at 18:24.  Just five minutes of your time to get the satisfaction you've been seeking for 16 years.  I love a happy ending like this!  PATH was a terrible idea that has caused harm to consumers.
Commissioner Christie also issued a written statement to append to the Commission's Letter Order approving the PATH settlement.  You can read it here.
Christie used PATH as a reason to take issue with FERC's overly generous incentives, formula rates, and long-term planning for transmission that is purposed to serve needs that never materialize.

Commissioner Christie has been on the warpath against certain overly-generous FERC incentives, issuing strongly worded statements in 13 cases over the past 2 years (all footnoted in yesterday's statement).  He pointed out that FERC has opened several proceedings to investigate and change the Commission's incentive rules since 2019, but still has not managed to conclude those proceedings (PL19-3, RM20-10).  Christie also noted that the Commission proposed discontinuing the CWIP incentive in its also pending Rulemaking on Transmission Planning (Docket RM21-17).

A highly politicized FERC means the agency can't get anything done and has found itself at a standoff over many issues over the past 8 years.  Commissioner Christie stands alone as the most consumer-focused Commissioner FERC has ever had.  He has tirelessly fought for consumers and will continue to do so.  Commissioner Christie came to FERC from the Virginia State Corporation Commission in 2021, and will serve until 2025.  We need more commissioners like Christie, who have a history of serving at state utility commissions, and less Commissioners from the political and special interest realms that have dominated appointments over the past 8 years.  FERC needs to go back to its  function as an impartial regulator, not a political vehicle for the policies of the administration in charge.  Sadly, I don't see things changing much in 2024.  

Commissioner Christie used yesterday's PATH settlement as a lesson and a warning, referring to it as an "omen" of more bad things to come if FERC's policies are not reformed.  He used PATH as an example of how these different policies come together to create zombie projects that can pick ratepayer pockets for decades.  According to Christie, PATH was originally part of Project Mountaineer, a PJM scheme to import electricity to eastern load centers from the Ohio River Valley's massive fleet of coal-fired generators.  Once PJM approved PATH and added the project to its regional plan, that turned on the money spigots.  Thanks to FERC's overly-generous award of every incentive possible and its use of formula rates, PATH began collecting its costs from ratepayers in 2008, during its development and permitting stage.  The Commission's policies allowed PATH to continue to collect its costs during the long period between PJM's approval and state regulatory approval.  Although PATH never received any state approval, and nothing was ever built, its formula rate continued to recover costs from consumers, even after PJM abandoned the project in 2012.  PATH is still collecting a cool million (or more) from consumers every year to this day.  The Commission's approval of the settlement yesterday shuts off the money spigot... finally.

Commissioner Christie cautioned against making long-term transmission plans based on today's generation choices. PATH demonstrates that those choices can change quickly, although the transmission projects set in motion to achieve them cannot.  It was wise advice to a Commission that is poised to pass new long-term transmission planning rules in 2024 based on today's generation choices of wind and solar.  The Commission needs to think carefully about saddling consumers with the cost of new transmission that could become obsolete before it is even built, such as PJM's recent slate of projects for the purpose of importing fossil fuel electricity to Virginia's data centers from the Ohio Valley.  PJM has acknowledged that new wind and solar additions are not keeping up with fossil fuel generator retirements in its eastern regions, but yet the generators keep closing and the data centers keep being built.  Something has to change, or the lights are going to go out.  PJM chose to approve a bunch of new PATH projects from the west, including the NextEra/FirstEnergy project from southwest Pennsylvania to Loudoun County.

We should all heed Commissioner Christie's warning, and support needed changes to FERC's incentives and transmission policy choices.  A group of consumers filed comments on FERC's transmission planning rulemaking back in 2021.  Check out the discussion of the PATH project beginning on page 21.
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This is the same history lesson Commissioner Christie taught yesterday.  Christie said the PATH debacle has cost consumers nearly a quarter of a billion dollars over the past 15 years... all for nothing.  Christie quoted what Willy Loman’s wife Linda said in Death of a Salesman, "attention must be paid."  Let's hope proper attention is paid to the demise of PATH.  I, for one, won't miss it.  It frees up my time to pay attention to things ahead, such as the new PATH-like projects recently approved by PJM.

Let the funeral dirge play... we beat you, PATH.  We beat you BAD.
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How Transmission Lines are Routed

12/18/2023

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New transmission lines are routed by utilities using an extensive process.  The actual proposed route is unlikely to resemble preliminary maps created by PJM Interconnection, or Piedmont Environmental Council.  PEC simply laid PJM's generalized maps over an interactive map with actual detail.  These maps may have shown transmission lines cutting through homes, historic districts, and other valuable assets.  That's unlikely to happen when actual proposed routes are released by the utilities building the MidAtlantic Resiliency Link (MARL).

So, how DO utilities develop proposed routes?  Here's a look at how they developed the proposed routes for the proposed, but never built, PATH transmission project 15 years ago.  Utilities still use the same process today.
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Certain lands and structures are avoided.  Here's a list:
The Routing Team developed specific routing criteria in identifying, evaluating, and selecting routes, attempting to minimize:

Route length, circuity, cost, and special design requirements.

The removal or substantial interference with the use of existing residences.

The removal of existing barns, garages, commercial buildings, and other nonresidential structures. 

Substantial interference with the use and operation of existing schools, existing and recognized places of worship, existing cemeteries, and existing facilities used for cultural and historical, and recreational purposes.

Substantial interference with economic activities.

Crossing of designated public resource lands such as national and state forests and parks, large camps and other recreation lands, designated battlefields or other designated historic resources and sites, and wildlife management areas.

Crossing large lakes and large wetland complexes, critical habitat, and other scarce, distinct natural resources.
​

Substantial visual impact on residential areas and public resources.
While trying to avoid those things, the utility must also take these safety and engineering considerations into account:
Avoid double-circuiting or crossing existing 765 kV lines.

Do not parallel existing 765 kV lines for more than 1 mile in any particular location.

Minimize the crossing of 345 kV and 500 kV transmission lines.

Minimize paralleling corridors with more than one existing 345 kV or 500 kV circuit.
​

Maintain 200 feet of centerline-to-centerline separation when paralleling existing 345 kV, 500 kV, and 765 kV transmission lines.

Maintain 150 feet of centerline-to-centerline separation when paralleling 138 kV or lower voltage transmission lines.

Minimize angles greater than 65 degrees and sloping soils more than 30 degrees (20 degrees at angle points).

Do not triple-circuit lines of
345 kV or greater voltage. 
Of course, it's impossible to avoid everything in the first list.  The second list consists of engineering and safety standards and cannot be changed.  Therefore, while the utility may attempt to avoid your home, it may not be able to avoid your property.  Instead of going over top of your home and making it uninhabitable, they may go 200 ft. from your back door.  Might as well have taken your entire home, right?  I urge you to read this report carefully so you can get a feel for the things that can change transmission line routes so that you are well-armed when MARL holds public meetings in your area to present its initial proposed routes and get your feedback.

Something interesting in this report is the claim that "paralleling" existing transmission lines is somehow preferred... as if the people who live with them won't notice another gigantic transmission line across their property, or simply won't care.  Think about it... if you are unlucky enough to have a transmission line routed through your backyard, would you welcome another one?  Of course not!  A new idea has been formulated since the PATH project called "energy justice."  Energy justice means that we cannot keep forcing more and more energy infrastructure on the same people.  These unlucky people have already "taken one for the team" by hosting a transmission line (or power plant) nearby.  Isn't it someone else's turn?  Inherent in this status quo is that objectionable infrastructure projects historically end up in the backyards of populations at a disadvantage.  They are not as able as other more fortunate places to fight back and win.  Therefore, the disadvantaged communities get the infrastructure thrust upon them time after time.  This is not only unfair, it is morally reprehensible.  We ALL deserve to live safely and happily on our own property.  Nobody is a "throw away" to be ground down under the boot heel of "progress."

Another problem with paralleling is that homes and communities have been built up around old transmission lines that have been in place for decades.  In some places, the development is so thick that paralleling causes the taking of improvements made just outside the right of way, whether it is a shed, barn, fence, pool, swing set for the kiddos.  It also can include land the homeowner is using for a well and/or septic system.  None of these ordinary residential land uses are compatible with transmission easements and will have to be removed.  If a home's water and sewage disposal is made unusable, that can make the home uninhabitable.  Paralleling is an idea that needs to die.

Also interesting in this report are the routes where the utility proposed tearing down an existing transmission line and rebuilding it on new structures that include both the old circuit and the new one.  The unfortunate part of that situation is that the easement must always be expanded to house the bigger structures.  This is exactly what FirstEnergy is planning to do with its portion of the MARL -- tear down an existing 138kV line on wooden poles less than 100 ft. tall that is situated on a 75 ft. wide easement, and replace it with a 500kV/138kV 200 ft. tall double circuit on big, new lattice steel towers.  The existing easement must be expanded to accommodate this new line.  

How much?  Well, that seems to be mired in layers of murk.  When NextEra originally proposed the MARL, it said it could do this amazing rebuild with only 30 additional feet of right of way.  30 added to the existing 75 equals 105 feet.  No way they are putting this double-circuit monstrosity in 105 feet, right next to a parallel existing 500kV line.  It doesn't even meet safety code.  So, NextEra was either ignorant of the width of the existing ROW, or simply making things up in order to make its project more likely to be selected by PJM.  However, PJM decided to give that rebuild section to incumbent line owner FirstEnergy to rebuild its own line to include MARL.  FirstEnergy has not yet announced how much it would need to expand the existing ROW.  We're in the dark on the rebuild section.  However, when routing PATH 15 years ago, FirstEnergy had this to say about expanding that 138kV ROW:
In these cases, the existing transmission corridor already runs through theses areas, and in order to keep the height of the structures lower, the Applicant would work with the holders of these easements to modify them in order to acquire approximately 105 feet of additional ROW. 
PATH proposed expanding the existing 138kV easement in Northern Loudoun by 105 feet.  105 plus the existing 75 feet comes to nearly 200 ft.  200 feet is the standard easement required for a 500kV line like MARL.  I guess we can expect that FirstEnergy is going to ask landowners for another 105 feet of easement for the 36-mile section stretching from Frederick County, VA to the point in Loudoun where the line turns south towards Waterford.  This includes the section in Jefferson County, WV.  If you live along this stretch, you may want to measure an additional 105 ft. from the edge of the existing ROW to see how much of your property is going to be gobbled up by expanded ROW, and how much closer it is going to be to your home.

It is our job to educate ourselves if we're going to be successful in stopping the MARL.  Taking a look at how utilities actually route transmission lines is the next logical step.
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NextEra Files for Transmission Rate Incentives for its MARL Project

12/16/2023

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On November 22, NextEra filed an application at FERC to be granted certain transmission rate incentives for its MidAtlantic Resiliency Link, or MARL transmission project.  Of course, we know that the PJM Board of Managers didn't approve the MARL project until December 11.  But somehow NextEra was so certain it would receive the assignment that it felt free to apply for incentives for its proposed project ahead of time.  And let's just leave that fact on the table to contemplate.

Here's a link to MARL's filing.  It's huge, but you may want to only pay attention to the first 17 pages and the supporting testimony... for now.  The weird-looking multi-page tables appended at the end of the filing are MARL's formula rate.  This is how MARL determines how much to charge ratepayers for the project.  The ones attached to this filing are blank, but MARL will be making future filings with the numbers filled in.  That's a whole different process that perhaps we'll examine in the future.  The request for incentives is enough complicated crap for today's menu.

FERC's transmission incentives -- a long, complicated story.  Pull up a chair and get a cup of coffee, you're going to need it.

Back in 2005, Congress decided that not enough electric transmission was being built.  They reasoned this was what caused the 2003 Northeast blackout (I beg to differ, but that's a whole different blog for another day).  Congress passed Sec. 219 of the Energy Policy Act directing the Federal Energy Regulatory Commission to establish, by rule, incentive-based rate treatments to promote capital investment in electric transmission infrastructure.  Over the course of several proceedings, FERC developed a number of incentives to financially reward and protect utilities who undertook new transmission projects.  The incentives have been looked at several times since, with the most recent Notice of Proposed Rulemaking issued in 2020.  Although hundreds comments were filed by regulators, utilities, special interest groups, and consumers, FERC has not yet acted.  That docket, RM20-10, is still sitting around collecting dust.  No one seems to find this more frustrating than FERC Commissioner Mark Christie, who finds himself obligated to approve them every time, but issues virtually the same opinion every time that several of them are unjust and unreasonable and need to be reformed.  FERC is at an impasse.

FERC's incentives include ROE adders, hypothetical capital structure, pre-commercial cost recovery, accelerated depreciation and advanced technology, and two that MARL has requested, abandonment and CWIP in ratebase.  I've explained them ad nauseam in a special section of this blog, here.

MARL begins by telling FERC that it has already requested and been approved for several incentives, along with a formula rate, for an earlier transmission purchase.  Those incentives are:  
(i) recovery of all pre-commercial costs not capitalized and authorization to establish a regulatory asset that will include all such expenses that are incurred prior to the time costs first flow through to customers, including authorization to accrue carrying charges and amortize the regulatory asset over five years for cost recovery purposes (“Regulatory Asset Incentive”); (ii) use of a hypothetical capital structure of 60% equity and 40% debt until NEET MidAtlantic Indiana’s first project achieved commercial operations (“Hypothetical Capital Structure Incentive”); and (iii) use of a 50-basis point return on equity (“ROE”) adder for Regional Transmission Organization Participation (“RTO Participation Adder”). 
Now NextEra wants two additional incentives for MARL, along with the ability to use them for any subsequent projects.  
(i) recovery of 100 percent of prudently-incurred transmission-related costs of the Project if it is abandoned or canceled for reasons beyond the control of NEET MidAtlantic Indiana (“Abandoned Plant Incentive”); (ii) authorization to include 100 percent of prudently incurred Construction Work in Progress (“CWIP”) in rate base for the Project (“CWIP Incentive”); and (iii) authorization to assign the requested Abandoned Plant and CWIP Incentives, if approved, to any newly-formed PJM affiliate of NEET MidAtlantic Indiana that is involved in the development and construction of the MidAtlantic Resiliency Link Project.​

What are these two incentives, and what do they do?

First, let's look at the abandonment incentive.  It guarantees that the transmission owner (MARL) may collect all its prudently incurred costs for the project in the event that it is subsequently cancelled (abandoned) before being built.  First of all, the cancellation has to be out of the control of MARL, such as PJM cancelling the project due to an inability to get approvals or meet in-service dates.  PJM could also discover in a subsequent analysis that the project is no longer needed.  If that happens, MARL would need to make another filing with FERC detailing all the money it has spent on the project and a statement that they were all prudently incurred.  If FERC approves that filing, ratepayers would have to reimburse MARL for its costs, even though nothing is ever built.

Abandonment happens all the time.  One of the most famous is the PATH project that was abandoned in 2012 before a shovel ever hit the ground.  That debacle cost ratepayers around $500M, for a project that never happened.

In deciding whether to grant the abandonment incentive, FERC evaluates project risks.  If the project presents financial or other risks to the utility, then FERC grants it.  Therefore, MARL has told FERC that its project is extremely risky in order to be granted this incentive.  Some of the things MARL told FERC:
In addition, the Project requires construction of approximately 129-line miles of 500 kV transmission lines, 24 miles of which is located in a greenfield corridor that crosses through Loudoun County, Virginia, which is one of the wealthiest counties in America. Project opposition from residents in this County is foreseeable and may result in permitting delays, undergrounding requirements that may increase the costs associated with the Project, and/or litigation over the Project’s scope and construction. The Project also spans across four different states—West Virginia, Virginia, Maryland, and Pennsylvania—which will require NEET MidAtlantic Indiana to obtain necessary permits and approvals from a large number of different state and local regulatory bodies and will subject the Project to numerous different environmental and other regulatory standards and requirements. Finally, the Project is directly reliant on the construction of a 36-mile increment of 500 kV transmission lines being developed by First Energy as the incumbent transmission owner. Delays or cancellation associated with First Energy’s construction of its 36-mile increment may impact NEET MidAtlantic Indiana’s ability to obtain permits, finalize construction, and place into service the MidAtlantic Resiliency Link Project in a timely fashion. 


Additionally, the Commission has also recognized that large, new interstate projects can face substantial risks and challenges not presented by more ordinary transmission investments. Like other large interstate projects, the MidAtlantic Resiliency Link Project will span across four different states and many more localities, each with its own regulatory permitting requirements. The Project also traverses across regions of Virginia, such as Loudon County, that have traditionally been litigious when it comes to new, significant transmission build, and similar opposition is expected here. This opposition could result in Project delays or the inability to obtain certain required permits, such as a certificate of public convenience and necessity, ultimately resulting in cancellation of the Project for reasons outside of NEET MidAtlantic Indiana’s reasonable control.
Could those things happen?  Of course, but consider that MARL is making more of them for FERC's benefit.  Perhaps it's more useful as a list of vulnerable spots for opponents to attack.

The second incentive MARL requested is CWIP in ratebase.  CWIP stands for "Construction Work in Progress."  CWIP (pronounced "quip") is the financial account where all the project's capital costs are recorded until it is completed and enters service.  It can be treated two different ways.   

The first is for the company to add interest to the account each year as it slowly builds during construction, and to begin collecting the costs (plus interest) once the project goes into service.  Utilities find this difficult because they have to handle their debt until the project is finished.  It hurts their financial health to have huge amounts of unreimbursed debt on their books.  It can also hurt ratepayers because when collection begins, it can create huge, lumpy rate increases.

The second is for the company to include CWIP balances in their ratebase and earn a return (interest) on them right away, while the project is being constructed.  With this incentive, MARL will begin earning a profit on the money it spends as it spends it.  This allows MARL to pump this profit back into the project, instead of investing more of its own money or borrowing.  It helps their finances.  It can also help ratepayers because they begin paying for the project during construction, little by little, as the costs of the project add up.  Instead of a huge rate increase all at once, ratepayers pay increasing costs over time.

What's a ratebase?  Now we're going down the rabbit hole of transmission rates.  It's extremely complicated, but I'll try to give you the Cliff's Notes version.  FERC uses formula rates for transmission.  A formula rate is a formula that determines the utility's rate each year so that rates can change without a full rate process each year.  Instead of a dollar amount, the utility's rate is the formula itself.  The formula is that set of schedules, tables, and attachments that is stuck onto the end of MARL's filing.  That's MARL's formula rate.  Each year, the formula is populated with amounts from MARL's financial records and calculated using the formula to come up with an actual dollar figure.  Ratebase is the sum of all the accounts that earn a return (interest).  Ratebase, plus return, is added to the utility's Operations and Maintenance, Administrative and General costs, plus taxes, to come up with the yearly revenue requirement.  We pay the revenue requirement each year.   It is filtered through PJM's billing system and then the billing systems of the local utilities who send us our bills.  The utility must hold public rate meetings each year to present the result of their formula rate calculations.  Interested parties, described as those that pay the rates, can ask questions and submit discovery requests to see how the rate was calculated.  Yes, that includes people like us who pay an electric bill that includes some portion of these costs.  But that's all information for later...

A very simple explanation for how ratepayers pay for transmission is to liken it to the home mortgage that we're all familiar with.  The utility pays to construct the project (like the bank pays for your home) and then we pay the utility back over time, plus interest, just like we pay our home mortgage.

Because MARL made this filing so early, before its project was even approved by PJM, the window to intervene and file comments on its request for incentives has already closed.  We cannot act on it.  However, I can pretty much tell you how it's going to end... FERC will approve it and Commissioner Christie will file a statement saying that those incentives need to be re-examined and possibly cancelled.  Therefore, I can't feel too bad about not having to write another FERC filing that does no good.  Comm. Christie has got our backs.

And, in closing, I'm going to make one more observation.  As we all saw during PJM's planning process, these utilities are falling all over themselves to be selected to build new projects.  It is a COMPETITIVE process, and that only happens when participants WANT to be selected.  FERC's incentives are meant to encourage utilities to build transmission even though they may not want to, or if it is financially risky for them to do so.  Are incentives really necessary in a competitive planning process?  Without them, would these utilities still be competing to be selected?  Transmission is still incredibly profitable, even without incentives.  Transmission owners earn hefty returns on the money they invest building them.  Transmission returns on equity are set much higher than other market returns, so that building transmission is the most profitable place the utility can invest its money.  They have been as high as 16% when interest rates are up, and as low as 9% when the markets are down.  Even then, they are still much higher than anything you can find to invest your own money.  FERC returns are loosely tied to markets, so they fluctuate, but once FERC sets the ROE for a transmission project, it is set in stone until another proceeding is opened to re-examine it.  Begin a project when the market is up, and you get a high return that can persist for years, even when the markets change.  Transmission is a long-lived asset, and it is paid for by ratepayers over its useful life.  The expected life of many transmission projects is 40 years.  It's like a 40-year mortgage that we're going to have to pay.
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    About the Author

    Keryn Newman blogs here at StopPATH WV about energy issues, transmission policy, misguided regulation, our greedy energy companies and their corporate spin.
    In 2008, AEP & Allegheny Energy's PATH joint venture used their transmission line routing etch-a-sketch to draw a 765kV line across the street from her house. Oooops! And the rest is history.

    About
    StopPATH Blog

    StopPATH Blog began as a forum for information and opinion about the PATH transmission project.  The PATH project was abandoned in 2012, however, this blog was not.

    StopPATH Blog continues to bring you energy policy news and opinion from a consumer's point of view.  If it's sometimes snarky and oftentimes irreverent, just remember that the truth isn't pretty.  People come here because they want the truth, instead of the usual dreadful lies this industry continues to tell itself.  If you keep reading, I'll keep writing.


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