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U.S. DOE Spends Billions of Your Tax Dollars Carrying Water for Big Business

7/6/2016

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Mainstream media reports that the U.S. Department of Energy has paid out $5B in legal claims to the energy industry in the last decade.
...the DOE is among the most prominent defendants requiring payment from the Judgment Fund, which pays for claims against the government. The department paid out more in legal claims than any other agency last year and the year before, according to the fund's records — more than $5 billion over the last decade.

And according to the department itself, the bloodletting as far from over. The DOE has failed to make good on some of its most important contractual obligations for years, and its private partners have been collecting billions in damages.
And where does the DOE's billions come from?  Your pocket, little taxpayer, your pocket.

So, how did the DOE get you into this predicament?
The Nuclear Waste Policy Act of 1982 requires that the DOE dispose of nuclear waste being produced at civilian energy plants around the country, which in turn pay fees for a long-term storage facility. The department's contracts with dozens of energy companies said it would start disposing of the waste in 1998.

The companies held up their end, feeding about $750 million into the Nuclear Waste Fund each year. But the department did not manage to set up any facility to receive the waste, forcing energy companies to store it themselves on-site.
Why was the DOE carrying the nuclear industry's water to set up a facility for nuclear waste?  Is it because the nuclear industry hasn't made enough money from consumers over the years to dispose of its own waste?  Or is it because the nuclear industry can't be trusted to properly dispose of its own waste safely?  After all, look at what the coal-fired power industry has done with its waste and how many times that has turned into disaster.  No, it's because
The hang-up has been in finding a location for the centralized storage facility. For decades, Yucca Mountain in Nevada was the only location that could legally be considered, despite fierce opposition from state and local groups. The Obama administration eventually abandoned the site as "unworkable" in 2011.
Who wants a nuclear waste dump in their neighborhood?  Nobody.  So the DOE was tasked to carry the industry's water by using its federal power to force a dump on an unlucky community.

Sound familiar to any of you regular blog readers?  That's exactly what the DOE is doing "partnering" with filthy rich investors to dump a humongous electric transmission line across Midwestern states that receive no benefit from it.  When the affected states said "no," DOE hefted the industry's water and ran with it to forcefully dump the project on communities fiercely opposed.

Why?  Because the U.S. DOE is a politically influenced entity run by a political appointee.  And political agencies are controlled by lobbyists for industry.  DOE has no business trying to regulate the energy industry in the public interest.  It's not about what's best for consumers and citizens, it's about bought and paid for political influence.

But here they are, trying "to transform America's electrical grid to handle much larger quantities of renewable energy" at a taxpayer cost of $220M.  DOE is not a grid planner, it's a political water carrier and there's buckets of money to be made building renewable energy generators and a special, separate electrical grid to serve them.  But only if the DOE uses federal muscle to force it to happen.

How does DOE square this
How will a grid that provides a two-way street to carry and store more renewable energy help resolve this situation? DOE's Hannegan responds with a sports analogy. On a mesh-like grid, the problem, whether it is a computer hacker, a big forest fire or a battery failure, is a threat that can be quickly isolated, allowing the rest of the surrounding grid to operate normally using better controls and quickly dispatched stored electricity.
with "partnering" on a 750-mile DC transmission line that requires obscenely expensive converter stations to connect into the existing grid?  Because the converters are so expensive there are very few of them.  It can't "allow the rest of the surrounding grid" to operate normally and recover.  Because it's not connected to the grid that surrounds it.  It's an entirely separate grid, only connected at a few points.  The surrounding grid continues to operate normally without any help from the DC line bypassing it.  And if this DC transmission line "closes coal-fired power plants" like the Sierra Club idiots believe, the surrounding grid cannot recover.

The "two-way energy street mesh-like grid" of the future is dependent upon many small, local energy sources that can back each other up to "allow the rest of the surrounding grid to operate normally" when trouble happens.  That's distributed generation, the complete opposite of centralized generation and long distance transmission.  When there's no energy source in your community and a major, imported, centralized generation source fails, there's nothing there to pick up the slack.

DOE needs to quit carrying the industry's water.  We can't afford it anymore.
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When It Is About The Eminent Domain

7/2/2016

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Clean Line Grain Belt Express spokesman Mark Lawlor, when discussing his company's recent re-application to the Missouri Public Service Commission, told KMBZ:
Lawlor says this "isn't about eminent domain," which is one of the worries of many who live along the proposed route.  

"We will sit down with every single landowner and negotiate with them on the unique nature of their property. In fact we've been doing that for a couple years now."
If that were true, then there would be no need for eminent domain authority. 

Except the application GBE filed on Thursday stated:
What happens if a landowner doesn’t want to negotiate with Grain Belt Express?

The Company is allowing sufficient time for negotiations with each individual landowner along the route. Grain Belt Express is committed to conducting easement negotiations in a manner that respects the private property rights of landowners and achieves a voluntary easement acquisition. The Company is also committed to working with landowners to minimize the impacts of the Project upon their property. In order to ensure that infrastructure projects in the public interest can be completed, the entities building them need the right to condemn certain easements, particularly in cases of parcels that have title issues, parcels with missing or unlocatable landowners or heirs, or parcels where landowners refuse all reasonable attempts at contact or negotiation. Grain Belt Express views the use of eminent domain as a last resort that is appropriate only after exhausting all reasonable attempts at voluntary easement acquisition and title curative work. In all cases, landowners are entitled to due process and payment of fair market value for any easement acquired, and will retain ownership of their land.


So, no matter how many "landowner protections" Clean Line pretends to dream up, there's only one landowner protection that actually protects the landowner.

THE RIGHT TO SAY NO.

And IT IS ABOUT THE EMINENT DOMAIN to the landowners.

In fact, the eminent domain is at the heart of the opposition to this project.

Without eminent domain, Clean Line would have to:
...sit down with every single landowner and negotiate with them on the unique nature of their property.
But Clean Line doesn't even want to attempt that without having the right to condemn to use as leverage.

None of Clean Line's "landowner protections" will protect you.
9 Comments

Martha Peine:  Artist or Retired Hippie?

6/28/2016

5 Comments

 
Picture
Only a community of "artists and retired hippies" would laugh about being characterized as such in a news story.  I asked Martha which one she was last night, and she said she was a "wannabe" of both.

It must have been the retired hippie who became an activist for a town threatened by a transmission project that was later determined to be unnecessary.  But it was definitely the artist who negotiated a $4.2M transmission rate refund from "behemoth" energy company American Electric Power.

RTO Insider is running a story today that may be the finish line for Martha's media victory lap.

Against All Odds: Ratepayer Wins $4.2M Refund from AEP chronicles Martha as remarkable, and I'd have to agree.  She waded through hell and high water, and jumped every hurdle erected in her path, to right the wrongs in AEP's transmission rate filings.  And she persevered to victory.  She's one in more than 18 million... the only ratepayer in the Southwest Power Pool who took the time and invested the effort to challenge AEP's rates.

While RTO Insider's coverage may be the final story, it's not my favorite.  While attempting to wade into the technical weeds, the reporter got some things wrong (but, hey, at least Ali's name got spelled right this time!)

A story in a retired hippie and artist newspaper, The Eureka Springs Independent, did a great job with accurate coverage.  Local woman wins $4.2 million settlement for power users says Martha will now "relax into the Eureka Springs tempo for the time being."

Looking forward to joining her later this summer!  I'll bring my tie-dye duds and my sketch pad... and a case of Raging Bitch!

Congratulations, Martha, it's been a gift to meet you and call you friend.
5 Comments

Potomac Edison Says No One Was Harmed by its Failure to Read Electric Meters in Maryland

6/24/2016

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Wahhhhhhhh.

I could end this blog post there, but I won't.

In May, a Maryland PSC administrative law judge proposed ordering Potomac Edison to change its meter reading frequency to monthly and fined the company a piddly $25K.

That followed an earlier proposed order issued in April, in which the same ALJ said no harm, no foul, and did nothing to punish the company for its transgressions.  The Commission pulled that proposed order and said it was "inadvertently issued."  I guess the judge didn't check with his boss before filing it.  Therefore, the revised order was issued a month later.

Now Potomac Edison and the Maryland Office of People's Counsel are appealing that decision, and basing it on the illegality of the ALJ's sudden change of heart.  The OPC doesn't think monthly meter reading is a solution to a problem that has since solved itself, and that ratepayers shouldn't have to shoulder the financial burden of this company's despicable actions (or lack of action, as the case may be).

You can find all the above filings here.

I guess OPC has a point, why should ratepayers pay to fix Potomac Edison's failure?  That's what happened in West Virginia, where meters are now read every single month.  Buh-bye incorrect estimated bills and huge "catch-up" bills.  Hello wacky bill schedule!  Since a reading must be done before a bill is issued, bills are never issued and due on the same day each month.  This presents a problem for folks who are only paid monthly, such as social security recipients, where they may receive two bills due within the same pay period.

But the anger is nowhere near that displayed across three states in the wake of Allegheny Energy's merger with Ohio dimwits FirstEnergy.  Perhaps if Maryland's Staff and OPC had paid attention to the West Virginia proceeding several years ago, they'd know that the meter reading failure was directly tied to the company's post-merger actions.  FirstEnergy insisted that Allegheny Energy toss out its perfectly good bill estimation methods designed to mesh with its alternate month reading schedule.  It had been working in WV for 30 years.  Instead, FirstEnergy insisted Allegheny adopt its own estimation routine, which was designed for missed reads in a system based on monthly reads.  That's right, while it may have worked fine for FirstEnergy subsidiaries that read meters monthly, it did NOT work for Allegheny's bi-monthly read system.  Combine that with FirstEnergy's "reorganization" of Allegheny's meter reading department and switch to "contract" meter readers who are paid less and must use their own vehicles, instead of a company-maintained motor pool, and disaster ensued. 

Whose fault was this?  FirstEnergy's!!

Only because of the scrutiny received in West Virginia (and to a lesser extent in Maryland, since the MD PSC was quite effective in preventing the customers from being heard during the heat of the moment) did the company take action to fix their mess.  Because Maryland waited so long to actually DO anything, the problems are long since over.

Now Potomac Edison says their actions didn't actually hurt anyone in Maryland because there's nothing in the record.  And there's nothing in the record because the MD PSC cancelled the public hearing it initially scheduled on this matter.  Then shoved the case off to mediation for years.  Then held a hearing.  Then issued two orders FIVE YEARS after the damage was done.  Justice delayed is justice denied, in this instance.

Potomac Edison also whines about the measly $25K fine the ALJ imposed.  $25K probably wouldn't even pay for two seats in the FirstEnergy CEO's special "luxury suite" at FirstEnergy stadium.  And yet this company has the nerve to cry like a baby over $25K.

So, hot potato passes to the MD PSC Commissioners, who seem to be responsible for the amended proposed order, so we'll assume it's to their liking.  Who knows, maybe Chatty Chuck will invite the Commissioners to watch a game in his luxury suite!  Woo Hoo!
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How Much Does a "Clean" Line Cost?

6/19/2016

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At the beginning of the month, Clean Line issued a press release touting a "contract," or "agreement" with some Missouri municipal electric providers.  But Clean Line neglected to share this wonderful agreement.

Here it is.

What's in the agreement?

Up to 200 MW of transmission service from Clean Line's proposed southwestern Kansas converter station to a proposed DC/AC converter station in Ralls County, Missouri, available in 2 separate, differently priced 100 MW tranches.  Or even any other amount of transmission between 0 and 200 MW.  That's right, zero.  Because this isn't a firm contract at all.  Customer (MJMEUC) can change its mind at any time up to 60 days before "the date on which the Project begins commercial
operations and is capable of providing [...] Transmission Service" and elect not to purchase any transmission at all.  None.  Zero.

Price for transmission service from Kansas to Ralls County, MO: 
$1,167 per MW/month, escalating at 2 percent (2%) annually beginning as of the  Commencement Date for the first 100 MW tranche.

$1,667 per MW/month, escalating at 2 percent (2%) annually beginning as of the Commencement Date for the second 100 MW tranche.
That's $1.167 per kwh, and $1.667 per kwh.  Per month.  With a guaranteed 2% price increase each year.

But that's not all the contract proposes to sell to MJMEUC, if its future "Notice of Decision" is to proceed with the contract.

The contract also proposes that MJMEUC will purchase up to 50 MW of transmission service between Ralls County, Missouri, and Clean Line's proposed converter station in Sullivan, Indiana (in the PJM RTO electricity market).  What is MJMEUC going to be loading onto this "clean" line to sell to customers in PJM?  Will it be "clean" electrons? 

Price for transmission service from Ralls County, MO to PJM:
$2,500 per MW /month.  For the first two years, after which time the contract may be extended for a period up to 26 years.
The contract also requires MJMEUC "to file an
intervention and comments supporting FERC's acceptance of Transmission Provider's FERC [compliance] filing without modification or condition."

As well
the Parties shall cooperate with
each other to obtain all Governmental Approvals that are required for Transmission Provider to construct and operate the Project and put this Agreement fully into effect, including making any filing in support of another Party's application for any such approval as requested by the Party
seeking such approval. From and after the Execution Date, the Parties shall not take any action, or seek any relief, before any other Governmental Authority that is inconsistent with the terms and conditions of this Agreement.
Be a good witness.

So how much would it cost to transmit electricity all the way from Kansas to PJM on a "clean" line?

Add it up.

There is no actual electricity priced in this contract.  Customer shall enter into a separate power purchase agreement with a third party vendor at some future date.  Clean Line cannot sell electricity.
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Ratepayer Complaint Nets $4.2 Million Refund for Arkansas Electric Customers

6/14/2016

5 Comments

 
Eureka Springs, Arkansas – Martha Peine, a local electric customer and non-practicing attorney, went to the Federal Energy Regulatory Commission to challenge the transmission rates of a large, regional electric supplier.  After lengthy negotiations and two trips to Washington, D.C., by Ms. Peine, regional electric customers can now expect a $4.2M refund.
 
In 2013, Ms. Peine decided to learn how Southwestern Electric Power Company (SWEPCO) makes money from its transmission business. Using the transparent, but complicated, processes in place to review transmission rates, Ms. Peine set to work. 
 
After examining the expenses SWEPCO recovered in its 2013 and 2014 FERC-filed formula rate updates, Ms. Peine filed a legal challenge to SWEPCO’s recovery of certain expenses, including what she claimed were improperly recovered charitable and lobbying items. Last August, the Commission determined her challenges raised material issues and set the complaint for hearing. 
 
As Ms. Peine and the other parties prepared for a hearing before a FERC Administrative Law Judge, discussions about settling the case were also taking place.  These negotiations among Ms. Peine, SWEPCO, and FERC lawyers eventually proved successful.
 
On Monday, June 13, 2016, without the necessity of a hearing, Ms. Peine and American Electric Power Service Corporation (AEP), on behalf of its subsidiaries SWEPCO and the Public Service Company of Oklahoma, filed a settlement agreement with the Commission that includes a $4.2 million refund to ratepayers in the region. The agreement also limits the amount of litigation expenses related to Ms. Peine’s challenges, and clarifies that certain expenses, including charitable and lobbying related expenses, cannot be charged to ratepayers by SWEPCO in the future.
 
“While the end result in my case is a win for ratepayers, I will always wonder what mistakes there may be in the years to come,” said Ms. Peine. “The review process is complicated and time consuming. There is no person, entity, or agency that meaningfully reviews the rate updates on a regular basis, so there is always the potential for significant overcharges.”
 
”On behalf of Save the Ozarks, we congratulate Martha for her accomplishment,” said Pat Costner, STO Director. “Every SWEPCO electric customer owes a debt of gratitude to this remarkable woman, who has shown us that one person can make a big difference.”
 
The refund will show up as a one-time credit on ratepayers’ electric bills within 90 days of the Commission’s approval of the settlement, which should be a routine matter.  A copy of the settlement can be downloaded from the Commission’s website here.
 
Background:  The transmission of electricity in interstate commerce is nationally regulated by the Federal Energy Regulatory Commission.  FERC allows regulated transmission companies to utilize what are known as “Formula Rates” to recover their cost of service from electric consumers.  A Formula Rate is a mathematical formula for calculating a rate from yearly expense totals.  While the formula stays the same year after year, the rate changes depending on how much a company spends.  Not all company expenses are recoverable from ratepayers.  FERC regulations and legal precedent prohibit the recovery of charitable contributions, as well as the cost of lobbying to influence the decisions of public officials.  Formula Rate updates are informational filings.  FERC does not review them for accuracy, but relies on those who pay the rates to raise the red flag if it is not calculated correctly.
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Maryland Judge Fines Potomac Edison For Not Reading Electric Meters

5/7/2016

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On Thursday, Maryland Public Service Commission Administrative Law Judge Dennis H. Sober fined Potomac Edison $25,000 for its 2011-2012 failure to read electric meters according to its tariff.

It's been a long time since Potomac Edison's outrageous billing failure caused its customers to receive astronomical bills resulting from the company's neglect of its duty to read meters in a timely fashion.  The West Virginia PSC investigation and subsequent hearing into the same problem resulted in a requirement that the company switch to monthly meter readings back in 2014.

The judge's Proposed Order in Maryland also requires Potomac Edison to increase its meter reading frequency to monthly in that state.

The judge found:
that PE’s initial acknowledgment of the substandard meter reading history was an appropriate and an accurate reply to the Commission's correspondence. Its later reversal on the issue of accepting some responsibility for the substandard performance is troubling and counterproductive for the proper resolution of these issues.
And
It is not a legitimate excuse to blame the weather (which PE can’t control) or the staffing issues it faced (which it can control), as neither of these factors is unique to PE as an electrical utility, nor are they unusual or unknown factors.

PE is obligated to make its decisions as to how to manage and staff its Meter Reading Division in a manner and to a level of industry standards, and I find that PE failed to do so during the time period under review.

I find that the facts demonstrate that the meter reading rate of Potomac fell below an acceptable level of reading for the years 2011-2012, and that was in violation of its tariff and of good engineering practices as required of a utility. I conclude that the failings were due to an inadequate level of staffing and of a failure to have adequate contingency plans in place when PE faced unusual weather events.

The Maryland PSC staff recommended a penalty of $300,000, based on PE's cost of missed meter readings.  Why should the company collect from ratepayers for services it never performed?  While this makes perfect sense to me (and probably to you as well), the judge found that "the basis for the formulation of the financial penalty Staff would impose is not valid and has no basis upon which to rely."  Therefore, the judge pulled a number out of nowhere to impose a much lower, arbitrary penalty of $25,000.  Even a $300,000 penalty is nothing more than a minor annoyance to a company with annual revenue in the neighborhood of $15B.  A penalty of $25,000 is an insult to ratepayers who were harmed by Potomac Edison's failure to abide by its tariff.  But, hey, it's more than the WV PSC fined the company for the same practices, which was a big fat goose egg.  Instead, the WV PSC ordered monthly meter reading at an additional cost to ratepayers of more than $7M annually.  It remains to be seen if Potomac Edison will file a new base rate case in Maryland in order to collect the additional costs it faces for increasing its meter reading to a monthly basis.  Potomac Edison currently enjoys an 11.9% return on equity in Maryland, a rate much higher than that allowed in neighboring states.  A new base rate filing will most likely result in a new, much lower ROE.  In fact, PE would probably lose money in such a deal as the lower ROE would cost them more than they could make collecting a higher cost for monthly meter reading.  But, never fear, Marylanders, FirstEnegy will probably do something like apply for a supplemental rate rider to cover the cost of additional meter reading without having to file a base rate case.  This ain't over until FirstEnergy takes even more money out of your pocket...

And speaking of... the judge's Proposed Order isn't final until June 7, and only then if no party files an appeal.  Do you think Potomac Edison will appeal the Proposed Order, since all its costs to do so come out of ratepayer pockets?

Justice sure is funny in a regulated environment, isn't it?
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FirstEnergy and AEP Flame Out in Ohio; Seek to Strap Ratepayers in Other States

5/3/2016

2 Comments

 
Well, that was completely unsurprising.  FERC said the Power Purchase Agreements requiring captive Ohio distribution company customers to purchase generation from AEP and FE merchant generators don't pass the sniff test.

Even though the Public Utilities Commission of Ohio (PUCO) approved the deals, FERC rules about affiliate transactions cannot be bypassed (or politically influenced).

FERC rescinded previously granted waivers to allow AEP & FE to engage in affiliate transactions without review.  The waivers were granted when the companies spun off their regulated generators into merchant companies because the generation companies no longer had captive customers.  In that case, any deals between regulated distribution affiliates and unregulated generation affiliates would have been subject to market forces.  If the deals were too expensive, then customers could bypass the charges and switch to another, cheaper, generator.  But AEP & FE made the mistake of placing the cost burden of these PPAs on captive distribution customers, and not free choice generation customers.  Because then the customers would choose a cheaper generator.

Contrary to some of the articles I've read, the FERC decision does not reverse the PUCO's decision to allow the cost of the PPAs to become the responsibility of captive distribution customers.  It simply rescinds its prior waiver of review of the PPA itself.  The companies are now free to submit the PPAs to FERC for review.  If FERC approves them, then everything can proceed as planned.  However, it is unlikely that FERC will approve the PPAs because they allow AEP & FE to charge their captive customers to subsidize their shareholders profits.

So, what's a greedy and poorly managed utility to do?  FE initially wanted to pretend that its PPA will be found just and reasonable by FERC.  How much money and political influence would THAT require?  Remember, the cost of civic and political activities is the financial responsibility of shareholders, not ratepayers.  The cost of buying FERC is likely to obviate any temporary profits that may come from an 8-year PPA.  They're not a cheap date like state utility commissions.  However the company has apparently crunched the numbers and come to its senses.  FE is now attempting to bypass FERC review by doing away with the PPA, while still collecting the charge it would levy on Ohio consumers.  AEP is being a little more realistic, if not downright arrogant.  AEP's CEO soothed investor agitation by claiming it will make the Ohio legislature re-regulate generation so that it may collect the cost of service, plus a return, for its Ohio generators.  This would effectively end retail generation choice in Ohio.  Is legislation that will cost Ohio electric ratepayers more money really that easy for AEP that it simply needs to want it and wave its magic wand?  Time will tell.

Meanwhile, FirstEnergy wants to make its regulated Mon Power and Potomac Edison affiliates in West Virginia purchase another non-competitive generator from its competitive generation affiliate.  It's just like re-regulating generation in Ohio, but the legislative work is already done.  And FirstEnergy has already successfully pulled off a similar affiliate transaction a couple years ago when its competitive generation affiliate "sold" the Harrison Power Station to regulated Mon Power and Potomac Edison.  West Virginia electric consumers have already bailed out one of FirstEnergy's uncompetitive generators, what's one more?  This time, FE wants to "sell" its Pleasants Power Station to Mon Power and Potomac Edison.  But Mon Power already owned an 8% share of Pleasants, which it "sold" to FE Generation as part of the Harrison deal.  Now FE Generation wants to sell the same power station back to Mon Power.  Pleasants is like the FE hot potato, bought and sold among affiliates as necessary to generate cash.  The only fly in the ointment this time is that FE put a price on Pleasants when it "sold" it last time.  I'm sure the cost to Mon Power can't be more than what FE Generation paid them for the plant a couple years ago.  It's not like the price of antique coal generation stations has shot up in the past few years.  But, never fear, I'm sure FE can pay the right people to convince the WV PSC that the plant is as valuable as the amount of cash FE needs to raise from its sale.

And don't forget... all this stashing of competitive generators into regulated companies is only temporary.  If power prices recover and these generators once again become competitive, AEP & FE will find a way to "sell" these plants back to their competitive generation companies.  It's all about shareholder return and making as much money as possible.... and ratepayers are the source of investor owned utility profits.  The idea that regulation protects consumers in the absence of competition is nothing more than a fig leaf.  Utilities that operate in both a competitive and regulated environment will continue to shift assets around to generate the most profit for their shareholders.
2 Comments

Utilities Always Win In Current Regulatory System

4/9/2016

1 Comment

 
Odd little bit of filler in a NW Arkansas newspaper this week.  Bloomberg's In East, power costs fall, bills rise, tells Arkansans about utility hijinks in another part of the country.  But these hijinks aren't local only to the east, they're as old as the utility business itself.

When regulation or markets find savings for ratepayers, utilities raise rates elsewhere to make up for it. Utilities, for the most part, are afraid of change.  They refuse to make themselves relevant in a brave, new consumer-driven world.  Instead of offering products and services that consumers actually want, utilities continue to force consumers to accept the products and services the utility wants to provide.  At some point, utilities are going to make themselves irrelevant, because a consumer-driven world is here and it's not going away.

Ohio's utility tedious twins, American Electric Power and FirstEnergy, epitomize utility hijinks to ward off this brave, new world.  While being all for deregulation of generation in Ohio when it was profitable, FirstEnergy has changed its tune and wants its generation to be regulated again.  In West Virginia, FirstEnergy "sold" generators owned by its competitive affiliate to its distribution affiliate.  The problem?
Spot power traded in the market run by PJM Interconnection LLC has averaged about $31 a megawatt-hour this year. That's less than half the $84.55 average in 2008.
Suddenly, competitive plants that were making a profit for the utility were not longer profitable.  PJM's "market" had worked so well that older plants that are more expensive to run (such as antique coal plants) were no longer profitable.  In a market situation, these plants would close and be replaced by cheaper alternatives, such as natural gas plants.  Instead of changing though, the tedious twins sought out ways to make consumers pick up the costs of their plants so they could remain open and "competitive" in PJM's "markets."

After stashing their West Virginia plants in the state's regulated system, the twins came up with an idea to thwart Ohio's supposedly "competitive" generation system by selling the plants' generation into the state's regulated distribution system.  The companies concocted power purchase agreements, whereby all regulated distribution system customers would make up any market shortfalls by purchasing the "competitive" generation at the company's cost.  In turn, the company would sell the generation into PJM's "market" and leave consumers with any balance the "market" didn't cover.  That's the definition of anti-competitive.  No other generators in Ohio have the option of having regulated distribution customers pick up the cost of anti-competitive plants.  If other plants aren't profitable, they close.  That's how the "market" works.

But these utility schemes aren't long term commitments, no matter what the utility promises to score regulatory approval.  The minute these schemes aren't profitable, the utility will propose a new scheme to make sure the profits continue.  Does anyone actually believe that AEP and FirstEnergy will honor these PPAs in later years if they actually do begin to pay consumer returns at the expense of the company?  Hell no.  If that ever happens, the utility will find a way to get out of them and return them to a "competitive" business model.  The utility never loses in our current regulatory system.  The consumers are the perpetual losers.

Another utility scheme is to make up for losses on the competitive generation side by increasing profits on the regulated business side.  Regulated transmission pays great returns and can earn additional financial incentives through federally regulated rates.  It's not like we "need" a whole bunch of new transmission, it's that utilities need a way to make money.  All of a sudden the transmission system, long neglected, has become rickety and failing and must be replaced.  Serendipity!  If a utility can earn double-digit returns building or rebuilding its transmission, then that's what they do.  Utilities with stated rates are paid a set amount for maintenance of their transmission assets.  But what happens if they don't spend all that money?  It's added to share holder dividends.  So, if a utility is hurting and looking for ways to increase share holder returns, the first thing they may do is cut maintenance spending.  A look at any utility's quarterly calls with investors demonstrates that cuts to maintenance happen all the time in order to boost share holder dividends.  But what happens to the transmission assets that aren't maintained?  They become rickety and begin to fail.  Serendipity!  At that time, the utility determines that the transmission line needs to be completely rebuilt and earns a double-digit return on its "investment."

The transmission investment smorgasbord is why rates have increased, despite falling generation prices:
As the price of electricity in the region fell by half over the past decade, utilities raised monthly bills for residential customers by 26 percent, according to government data. Consumer advocates say the power companies are using falling electricity costs as cover to raise other charges. Utilities counter that they are passing on billions of dollars' worth of government-mandated improvements to long-neglected infrastructure.
Consumer advocates say this scheme isn't "fair" to consumers.  But no end to the transmission feeding frenzy is in sight.  While utilities spend their cash on profitable transmission investments, less profitable investments in the distribution system suffer.  When state-regulated distribution investments pay an equal or better return than federally-regulated transmission investments, perhaps we'd see some attention paid to our rickety and failing distribution system.

Here's the lesson:  The utility always wins because regulators have been conditioned to care about the utility's well-being over that of the consumer.  After all, the utility is a constant in the regulatory realm, while consumers rarely show up.  Only when regulators force better solutions will consumers benefit.  Perhaps that's when utilities will realize they need to make themselves relevant to consumers by offering products and services consumers want, instead of force-feeding them the products and services the utility wants to offer.
1 Comment

And Not A Single Wart Was Found!

4/7/2016

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Bob Stevenson's search for Clean Line warts has come to an end.  And not a single wart was found!

In Bob's first weekly Clean Line column, he promised, "to shar[e] all we know about the company, the offer, the risks and rewards, warts and all."  Except in the seven weeks since, he hasn't shared one wart.  Not one.  In Bob's view, Clean Line has no warts.  Week after week, Bob sang Clean Line's praises. 

Bob thinks that his columns helped Hannibal "form an educated opinion."  But I think Bob is the one who got the education here.  Last week, Bob got publicly educated by Missouri electric cooperatives, who corrected some misinformation in one of his columns.  And every week, Hannibal ratepayers educated him about other misinformation.  Bob got educated about regional transmission organizations, electric resource planning, renewable energy certificates, Hannibal's laws about procurement, what was actually in Clean Line's presentation to the City, the MO PSC Order Denying Clean Line a Certificate, Clean Line's business plan, and other topics.  Good times!  So, let's put this baby to bed for now, because these glowing Clean Line sales pitches are getting tiring.

Bob shares that "sometime in the next few weeks we expect to see a more definitive offer from Clean Line with or without other Municipal electric cities."  And this will be made public, Bob?  Or will you simply start the circus over from the beginning?  Let's hope Bob will use his new education to make impartial decisions in the best interests of Hannibal's electric ratepayers.

Bob says, "I have tried to dispel the notion the Clean Line project is dependent on our approval or partnership."  Whose notion is that, Bob?  I've never heard that notion.  Clean Line wants to use Hannibal as "a good witness" in a possible future PSC case.  Does Bob think his testimony will make or break it for Clean Line?  He certainly can't have the notion that Hannibal's puny 25 MW purchase of Clean Line's 4,000 MW capacity will make or break the company's success, can he?  That might just overestimate Hannibal's importance as the attractive Clean Line capital of the free world.

Your opinion about the terrible things that may happen if the Federal government got involved in Grain Belt Express is misinformed.  What makes you think Federal involvement would "leave Hannibal out of the deal entirely?"  This demonstrates how little Bob knows about the Clean Line projects, but yet he is quick to offer his misinformed opinion.

Bob wants you to answer some questions, such as:  "Are the possible savings on our bills worth the possible ill feelings from our neighbors?"  What possible savings?  Remember, Bob, Clean Line's presentation didn't show any savings over other wind options.  Your reason for steadfast allegiance to one company, a company that may not be there when you need a wind resource in the future, is a secret everyone would like to see revealed at this point.  I guess Bob has one more deep, dark secret after all.
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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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