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Valley Link Transmission Files for Incentives and Formula Rate at FERC

3/18/2025

On Friday, Valley Link Transmission filed at the Federal Energy Regulatory Commission (FERC) for approval of a formula rate to collect their costs from ratepayers, along with a request to set a Return on Equity (ROE) and additional financial incentives. They're wasting no time trying to ram their transmission projects through and make a ton of money doing it.

Applying for CPCN/CCNs from the Maryland, Virginia, and West Virginia state commissions is a threshold step for Valley Link during the pre-construction phase, because obtaining CPCN/CCNs will improve Valley Link’s ability to secure the needed land rights to support the Project Portfolio. Because the PJM Board only recently approved the Valley Link Portfolio Project on February 26, 2025, Valley Link has not yet initiated the CPCN/CCN process. Valley Link faces significant time pressure to initiate the CPCN/CCN process within the next few months because CPCN/CCN proceedings in these states can be lengthy.

That's right, Valley Link wants to file its state permitting applications within the next few months, even though we've been waiting 18 months for FirstEnergy to take any interest whatsoever in building their section of the 500kV MARL project in Jefferson County. They're in an awful hurry on Valley Link and landowners and communities are going to be mowed down if they can't keep up.

"Valley Link is committed to collaborating with residents, local governments and other stakeholders in the project communities at every stage of the process."

Well, except this stage. Valley Link doesn't want you to "collaborate" on their request for FERC incentives or in their rate process. All the more reason to do it!

Your first task? Valley Link's 1500 page rate/incentive filing. Go ahead, take a look. I hope you understand FERCish. You don't? Fortunately, I do so here's a summary of the important points included in this filing. You are encouraged to intervene and/or file a comment on this proceeding. Deadline to do so is April 4.

Valley Link is a 765kV transmission project proposed to connect the John Amos coal-fired power station in Putnam County, WV to Loudoun County's "data center alley." It will cross 14 counties in West Virginia on its way, including Jefferson. It will require a new 200-foot wide right-of-way for its entire length. In Jefferson County it is proposed to expand the existing transmission line corridor through the southern part of the county and add a third transmission line to the existing configuration that is surrounded by hundreds of existing homes, schools, businesses, parks, historic resources and even our national parks!

Valley Link's filing asks FERC to grant financial incentives to the project and set up the rate it will use to collect its costs from captive electric customers across the PJM region.

First, let's examine the incentives Valley Link has requested. In order to qualify for incentives, the transmission line must be the product of a fair and open transmission planning process. Competition is an important and required part of this process so that consumer costs may be reduced through competitive cost concessions. Except there were no such concessions for Valley Link. They not only bid their projects in at full price, they also did not include any cost caps. Consumers will pay whatever it costs to build these projects, even though the initial "competitive" bid may have been much lower. The sky's the limit! The idea of competitive transmission is that it allows incumbents and non-incumbents to compete on a level playing field to construct the most cost-effective project. Incumbents hate it because they'd rather not compete at all, and instead be awarded all new transmission in their territory at whatever price they want to charge. For years after FERC's Order 1000 required competitive transmission windows, incumbents simply declined to participate in region-wide competitive planning, preferring instead to concentrate on smaller projects in their own territory. PJM's 2022 Window 3 competitive planning process actually allowed several non-incumbent companies to offer cost caps and financial concessions that actually saved ratepayers money, and those projects were selected, much to the chagrin of the incumbents. But they weren't about to be fooled again, so they created an incumbent cartel and agreed not to compete with each other so that none of them had to make any financial concessions. If they didn't compete with each other, they could create ostensibly "joint" projects that shut out all competitors and took control of PJM's Planning Process. And that's how we got Valley Link's $3B project portfolio, with no limit on how much these projects might eventually cost. Who does that? PJM ought to be ashamed of itself! Valley Link Transmission was not the result of a fair, open and competitive planning process.

Financial incentives for transmission must be rationally tailored to a project's risks and challenges. "Rational" has long ago left the incentives building... it's nothing but a free buffet where utilities gorge themselves on ratepayer cash. That's right, ratepayers fund all these financial "extras" that encourage transmission developers to build "much needed" projects. Except if you attended any of the PJM meetings, you know that these developers are beating each other down to get awarded these projects. And that's precisely because they want to gorge on the unnecessary incentives. Even if FERC stopped offering these incentives tomorrow, these companies would *still* be falling all over themselves to build new projects. Incentives are a give away that is not needed to encourage new transmission.

These are the individual incentives Valley Link has requested, with a brief explanation of each:

Recovery of 100% of prudently incurred costs in the event that all or part of the Project Portfolio must be abandoned for reasons outside the control of Valley Link (“Abandoned Plant Incentive”)

This means that Valley Link is guaranteed to be able to collect ALL its prudent project costs from ratepayers if the project is cancelled. Essentially, ratepayers are providing insurance for the project's success. If it fails, then the utilities can't lose. Only ratepayers can lose. In the case of the failed Potomac-Appalachian Transmission Highline (PATH) project, ratepayers ended up spending more than $250M on a cancelled project that never put a shovel to the ground. This is outrageous! Utilities must have some skin in the game and accept some of the risk that they are being rewarded for through incentives.

Inclusion of 100% of construction work in progress (“CWIP”) in rate base during the development and construction of the Project Portfolio (“CWIP Incentive”)

This means that Valley Link will be able to collect a return (interest) on the amount of money it has spent to construct the project while it is building the project. It begins collecting money from ratepayers as soon as FERC approves the incentive, although the project may not actually be built and serving ratepayers for many years. It makes ratepayers responsible for paying for projects that are not being used, and haven't even been finished yet. Ratepayers are being used as the utility's "bank" to pay the companies while they are building.

Recovery of pre-commercial costs through establishment of a regulatory asset that will include all expenses, including expenses incurred prior to the filing of this application, that are incurred prior to the time costs first flow through to Valley Link customers under the PJM Tariff, including authorization to accrue monthly carrying charges (“Pre-Commercial Incentive”)

This means that Valley Link can put all its costs from its first idea to make a "joint project" through the time its formula rate is approved into a regulatory asset and collect them from customers in the future. It's a way to retroactively open the money spigots so that ratepayers pay Valley Link's costs to compete at PJM as well as their costs to create their fake shell company, and ask for incentives and a formula rate. It makes sure that the utility never has to spend a dime of its own money on this project.

Inclusion of a 50 basis point return on equity (“ROE”) adder for Valley Link’s participation as a new member in a Regional Transmission Organization (“RTO”) (“RTO Participation Adder”).

This means that Valley Link's Return on Equity (ROE) will be raised one half of one percent because its "joint venture" will be a separate new member of PJM. Keep in mind that each one of these three joint venture companies (FirstEnergy, Dominion, and Transource) is an existing member of PJM and collecting their own RTO Participation Adder. But because they formed a new fake shell company, they can pretend to be "new" and collect again. This is also outrageous. It's not a new entity, and it would only encourage utilities to keep creating new shell companies in order to receive financial reward.

Valley Link says it needs incentives to reduce "risk" for its project. What risk is that? Valley Link speaks out of both sides of its mouth. First they say this: "Valley Link Transmission’s joint venture structure allows the Participants to combine their diverse experience and knowledge to successfully develop projects of significant size and scope, while sharing the risks of such projects. The geographic and financial scale of new competitive transmission projects sought by PJM in the RTEP process in recent years lends itself to this structure to adequately manage the risks associated with infrastructure projects of this scale." Somehow the joint non-competitive project was able to "manage risk" but yet on the other hand, the project is just so risky that it needs a bunch of financial incentives. "Valley Link will
face significant permitting, siting, construction, procurement, and financial risks that present challenges to developing and constructing the Project Portfolio." So, which is it? Is Valley Link risky or not? It can't be both!

Of course, Valley Link plans to lower its risk that you're going to go all torches and pitchforks on them by "collaborating" with you. Of course, that "collaborating" doesn't mean they will make any adjustments to their plan or anything like that... they just want to pretend they're considering your ideas while they laugh at you behind your back.

Valley Link is committed to collaborating with residents, local governments and other stakeholders in the project communities at every stage of the process. Community engagement is crucial for making informed decisions that reduce or prevent potential impacts while delivering for the public essential infrastructure necessary to address large-scale reliability needs that the PJM grid faces both in the short term and for years to come.

Valley Link also requests three identical new formula rates, one for each of its state-specific sub-companies (it's like Russian nesting dolls). A formula rate is a set of calculations that devise a yearly revenue requirement for each company. It includes O&M, A&G, taxes, and return (interest) on capital expenses that are paid for over the project's useful life (approximately 40 years) as these assets slowly depreciate because we pay for them. I've long since given up trying to explain formula rates to people who don't understand them, but let's just say it's extremely complicated. If you don't believe me, take a look at the proposed formula rates in the filing. I will sum it up by sharing that we pay for transmission much the same way we pay for a home using a 30 year mortgage. While the bank loans us the cash to purchase the home, we will pay much more than we ever borrowed over that 30 years because the interest is calculated monthly. We slowly pay the bank back, and they earn a huge profit over 30 years. It works the same way with transmission, except the utility is "the bank" and the transmission line is our house that we have to pay for over 40 years, with interest calculated every year on the remaining unpaid balance.

And speaking of interest... Valley Link has requested a base ROE of 10.9%. But they're not stopping there... they are also requesting .5% for their new membership in PJM (see above). Total Return on Equity for this project is proposed at 11.4%. That means Valley Link would earn 11.4% on the unpaid project balance every year for 40 years. Do you earn 11.4% on your investments? Probably not. Transmission ROEs are already incredibly generous.

The important thing to think about with the formula rate is transparency so that we can check the utility's math from time to time to make sure they are doing it correctly. Valley Link's formula rate is not transparent and leaves certain terms undefined. That's probably because of this. However, lack of transparency is not just and reasonable and FERC cannot approve a formula rate that is not just and reasonable.

And I think I'll stop there. If you have any additional questions after reading the filing, I'd be happy to help.

So, let's sum it up:

FERC should not grant transmission incentives to Valley Link because Valley Link was not part of a transparent and competitive transmission planning process.

FERC should not grant the costly transmission abandonment incentive to Valley Link because the project has not been found needed by any state where the public may actually participate in the decision making.

FERC should not grant the CWIP in Ratebase incentive because that starts the money flowing out of ratepayer pockets before any state has approved it.

FERC should not grant the RTO Participation incentive to Valley Link because it is a shell company managed by incumbent utilities that have already been granted this incentive. The "joint venture" is a charade.

FERC must ensure that Valley Link's formula rate is transparent and allows any person to participate in annual updates, seek information, and file challenges.

And keep this in mind when you file your comments at FERC. (File on Docket No. ER25-1633). FERC Chairman Mark Christie had this to say about the cancelled PATH project just over a year ago. (Begin at minute 13:48 and watch for about 5 minutes until he's finished). Attention must be paid! Valley Link is a second attempt to build the PATH project, but it also presents FERC with a second chance to correct all the things Christie said they got wrong with the original project.

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Invenergy Asks To Dismiss Illinois Landowner Suit

1/14/2025

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As you may be aware, a group of Illinois landowners appealed a recent decision by the Federal Energy Regulatory Commission to somehow "continue" Grain Belt's Negotiated Rate Authority at the same time it granted completely new authority. Of course, FERC can't do these completely opposite things at the same time. The basis for Invenergy's intervention in the case and request to dismiss the case is that the Illinois landowners have no standing to bring the case because they have no interest in the outcome.

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The landowners responded to Grain Belt's weak motion, asking, "What's it to ya?" Only Paul Neilan could write a brief with that phrase in it! His response was engaging and spelled out exactly why the Illinois landowners had an interest to bring this case. When GBE applied for its Illinois permit, it told the ICC that it had negotiated rate authority from FERC. The ICC based their approval on that fact, along with others. If it turns out that GBE did NOT have negotiated rate authority at that time, then that is grounds to have the approval thrown out and GBE would have to reapply. Of course, GBE's bespoke legislation that allowed it to apply for a permit in the first place has expired. Therefore, GBE would have to get new legislation passed in Illinois that allowed them to apply again. Because what FERC did in the Order under review tried to say GBE had "continuing" negotiated rate authority when FERC also claimed to have reviewed GBE's request anew, what happens in the FERC case is pivotal to what happens in Illinois. Even a dense person could see that the Illinois landowners have standing. You can read a copy of the landowner's brilliant response here:

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GBE and FERC are caught between a rock and a hard place, claiming that FERC never needed to approve the sale of GBE from Clean Line to Invenergy under Sec. 203 of the Federal Power Act. If that's true, then why didn't Invenergy notify FERC when it bought the project?

Neilan writes extensively about GBE's attempt to belittle Illinois landowners by calling them "A group of citizens who roam the country in search of governmental wrongdoing." How disrespectful can you get?

GBX's Motion states that building an interstate transmission line across their properties does not constitute any “invasion of a legally protected interest.” (GBX Motion at 15). As GBX sees things, Petitioners’ objections to GBX’s likely condemnation actions, its subjection of Petitioners to forced sales of their lands, and its construction of its transmission line across their farms and properties are "purely academic concerns." (GBX Motion at 19).

GBX wants this Court to ignore the Illinois landowners' objections to GBX's entry on their lands because Petitioners’ objections are nothing more than "...general...moral, ideological or policy objection[s] to a particular [FERC] action" (GBX Motion at 15).

GBX’s contempt for the property rights of Petitioners would be bad enough if it stopped there. But having hit rock bottom, GBX begins to dig. After omitting any mention of its need for eminent domain power and belittling Petitioners’ interest in avoiding forced sales of their properties, GBX tells this Court that Petitioners are a group of “…citizens who … roam the country in search of governmental wrongdoing." (GBX Motion at 3).

But it was GBX, not Petitioners, who lobbied the Illinois General Assembly for custom-tailored legislative changes to provide a glide path for its transmission line project. (Petitioners’ Initial Brief, at 21).

It was GBX, not Petitioners, who inserted in its custom-tailored legislation a route through the nine Illinois counties in which Petitioners’ farms and properties are located. (Petitioners’ Initial Brief at 22).

And it was GBX, not Petitioners, who sent minatory letters to Petitioners stating that, if they didn’t sell their property to GBX voluntarily, GBX would file an eminent domain lawsuit against them to take their property anyway. See Exhibit B to this Response.

So GBX is partly correct: there is one party to this appeal who has been roaming across the country looking to pick legal fights with strangers. But it’s not Petitioners.

FERC’s unlawful order makes possible GBX’s exercise of the power of eminent domain against Petitioners. GBX’s plan to take Petitioners’ lands involuntarily and to build its high voltage transmission line across their properties presents precisely the kind of particularized injury that affects Petitioners in a concrete and personal way required for standing. TransUnion LLC v. Ramirez, 594 U.S. 413, 424 (2021).

Someone is respecting landowners and their rights, and it's not GBE or FERC. Let's hope the DC Circuit Court of Appeals can set things right again!

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Who Pays for Data Center Extension Cords?

11/13/2024

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Virginia is trying to shove the barn door closed after the horses escaped by holding a technical conference regarding its proliferation of data centers and who pays to provide their electric service. Questions to be addressed include:

Whether certain transmission costs should be directly assigned to a new large-use customer class?

In other words, should Virginia create another rate class for electric service to "large users" (aka data centers) and assign them the cost of all the new transmission lines they make necessary?

Well, bravo, Virginia! However, Virginia only has jurisdiction to assign the costs that are assigned to Virginia load serving utilities, like Dominion. The cost allocation of these big lines is a federal responsibility under the jurisdiction of the Federal Energy Regulatory Commission (FERC). FERC approves the assignment of costs made by regional grid operator PJM Interconnection. PJM's current approved cost allocation methodology assigns the costs of lines 500kV and above to the entire PJM region. The PJM region includes all or parts of 13 other states: West Virginia, Maryland, Delaware, Pennsylvania, New Jersey, Kentucky, Ohio, Illinois, North Carolina, the District of Columbia, Indiana, Michigan and Tennessee. When PJM orders a new line 500kV or above, it allocates the costs among all 13 states based on the percent of the entire system that state has used over the past year. Every state in the region uses the PJM system, and every one of those states gets a portion of the cost. Each state then assigns the costs to its electric consumers using state rate classes. Virginia is thinking about taking its portion and charging it directly to the data centers that take service in Virginia.

But what about all the costs for data center transmission lines that are assigned to other states? The other states cannot charge them to Virginia's data centers, they can only charge them to the customers who take service in their own state. We're all still stuck with the cost of transmission extension cords that serve Virginia's data centers.

How can this change? It can only change at the federal level where PJM's transmission cost allocation formula is approved. That's FERC's jurisdiction. When consumers and consumer advocates asked FERC to make PJM change its cost allocation formula to make the state with the data centers needing new transmission responsible for their entire cost, they were rejected 2-1. Only when the entire cost of the transmission gets allocated to the state where the data centers take service can it be properly allocated to the actual users of these new extension cords through the very process Virginia is currently proposing. Virginia's proposal only passes Virginia's share of the transmission line costs to Virginia's data centers. The data centers that need the new transmission are not taking service in those other states and therefore the other states have no choice but to allocate the costs of new transmission service for Virginia's data centers to their own consumers.

Perhaps Virginia should first be asking FERC to change PJM's cost allocation formula so that Virginia is responsible for the entire cost of their transmission needs. Instead, Virginia is happy to be a parasite and let other state electric consumers pay the cost of serving their data centers.

When consumers and consumer advocates questioned PJM's cost allocations for its Window 3 projects last year, the majority of the Commissioners were of the opinion that since PJM's cost allocations are already set and the cost allocations for Window 3 followed that cost allocation scheme, the only thing the Commission could do was approve them. However, Commissioner Christie had a different opinion (although he legally had to concur). He thought that the Commission should take up the issue of who pays for state public policies that cause new transmission, such as building data centers, or closing fossil fuel power plants.

While this matter (and the November 2023 RTEP Order) both arise in PJM, the issue of the proper regional cost allocation for public policy-driven transmission projects is not confined to PJM, but is applicable across all of the nation’s multi-state RTOs. Since RTOs are regulated by this Commission, I believe that the time has come for this Commission to take the lead in its convening role to initiate a proceeding, such as a Notice of Inquiry, a series of technical conferences, or by initiating an FPA section 206 proceeding outside this docket, posing such important questions, among others, as: What is the proper definition of a public policy transmission project? Does the definition of public policy transmission project need to be changed for purposes of regional cost allocation? How should public policy transmission projects be cost-allocated in a multi-state RTO? In my view the states themselves need to be at the forefront of deciding these questions, as it is their own state policies that are largely making these questions unavoidable, as these two recent PJM RTEP cases graphically illustrate.

So while Virginia is acting parochially to solve problems for its own ratepayers, it is avoiding asking FERC to weigh in on this issue and solve the transmission extension cord rate burden on other states. What's it going to take to solve this issue at FERC? The other states need to speak up to ask FERC to solve it.

Meanwhile, Virginia will be taking comments after it holds its technical conference on December 16. You don't need to live in Virginia to submit a comment asking them to raise the issue at FERC so that ALL its data center extension cord costs are allocated to Virginia, who can then re-allocate them to the data centers. Nothing is ever going to change unless the other states speak up.

Click here for more information about Virginia's technical conference, Case No. PUR-2024-00144.

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The Politics In Your Electric Bill

9/10/2024

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No, it's not the "lobbying, campaign money, and bribes" purported to be in your electric bill in this stunningly incorrect article, it's the supposed "advocates" (as the article calls them) who are meddling in your electric rates for political reasons. This whole article is a political stunt targeting fossil fuels and the electric industry after those same "advocates" didn't get their way trying to change FERC's accounting rules three years ago. These crafty shysters are just using you as a battering ram to try to get their way through new overly prescriptive laws written by people who don't understand utility accounting in the least. And it pisses me off.

First, let's take a look at those self-proclaimed "advocates" who shopped this article to the USA Today reporter. The "advocates" do not have a mission or responsibility to advocate for electric consumers. Their mission is simple.

By disseminating our information to media, allies, and decision makers, we seek to disrupt fossil fuel-funded misinformation, separate polluters from policymakers, and accelerate the transition to a clean economy.

It's all about climate change and employing sensationalism and made up bullshit to make people angry at certain targeted corporations. It's not about saving you money on your electric bill, or stopping corruption. These advocates don't actually DO anything to help ratepayers, except spew ignorance. They have very little knowledge of electric rates and have never ever brought or prosecuted an electric rate case. They are not consumer advocates, or even watchdogs. They don't "watch" anything on behalf of consumers, they exploit tidbits they dig up by turning them into something they are not.

The charges in the electric bill you pay are determined by two different places: your state utility board and the Federal Energy Regulatory Commission. Your state determines the rate you pay for generation and distribution, and FERC determines how much you pay for transmission. Both systems already prohibit the recovery of money paid for lobbying, campaign money, and bribes. What these climate change fanatics are doing is exploiting certain utility accounting failures to pretend they happen routinely. No, they do not. All the examples are one off instances of regulatory failure that were not uncovered by these self-proclaimed "advocates," but by REAL consumer advocates and even by actual consumers themselves.

Utility accounting is complicated, but I managed to master it over a number of years when I actively investigated a utility's recovery of advocacy and advertising costs to influence public officials to approve a transmission project. I investigated, I challenged, I went through hearings, and I ended up before the DC Circuit Court of Appeals. Over that time period, I learned all there is to know about FERC's ratemaking process.

Utilities record their expenses according to a chart of accounts. A chart of accounts separates and organizes a utility's expenditures by type or purpose. Each category of cost is defined in the chart of accounts. A chart of accounts describes the different categories of expenses. Here's FERC's Chart of Accounts. States use a very similar system based on FERC's chart for consistency. Rates are set based on these cost categories from the Chart of Accounts.

At the state level, distribution utilities (the ones who send you your monthly bill) use what are known as stated rates. A stated rate is a dollar figure set by the state commission after examining a utility's typical expenses for a test year. Once the rate is set, the dollar figure doesn't change until a new rate case is filed many years down the road. The utility gets the same set amount of money every year and how it spends it is the utility's business. Certain categories of costs such as lobbying, campaign contributions, and bribes are excluded from the rate. The Chart of Accounts instructs that these expenses be placed into accounts that are not recoverable in rates. However nobody is checking because it's a moot point... the amount collected cannot change.

Transmission rates that are set at FERC end up billed to your distribution utilities to be passed on to you in your bill. The distribution utility and the state commission cannot change these rates but must pass them through to your bill without adjustment.

At FERC, transmission utilities use what are known as Formula Rates. A formula rate is a set of tables that the utility fills out each year with account totals according to its Chart of Accounts. The formula is the rate, not a set dollar amount. All accounts, such as the one for lobbying and political contributions (bribes aren't legal and don't have an account), is either included or excluded from the formula rate. The formula rate excludes these types of accounts from recovery. Once FERC sets a formula rate, the utility is responsible for filling out the formula every year and calculating a monetary amount that it can recover as a rate. The utility must do this in accordance with the Chart of Accounts and the formula. The utility can then recover that amount without further supervision because the formula and Chart of Accounts limits recovery. FERC does not review or approve the yearly filings. They go into affect automatically.

However, there is transparency where anyone who pays these rates (and their legal advocates from the various states) can examine the charges that flow through the formula into rates. If an error is detected, the ratepayer can challenge the rate and FERC may order corrections.

The real problem here (and in any rate process) is the process of assigning account numbers to expenses. Since some accounts are recoverable and some are not, assigning an expense to an incorrect account can make it recoverable in error. Utilities have A LOT of these errors.
The way to keep these inappropriate expenses out of consumer electric bills is to actually examine and challenge rates, however the "advocates" can't be bothered to do that. It's a lot of work.

Back in 2021, these "advocates" and some other clean energy and progressive political groups asked FERC to change the way its formula rates handle industry trade association dues. They claimed FERC should make these unrecoverable and require the utility to get special permission to recover them during an approval process that doesn't exist for formula rates. FERC opened a rulemaking proceeding (Docket No. RM22-5) to consider making changes. These "advocates" and friends wanted FERC to require disclosure of all trade group expenditures and other political contributions so that it could easily use this information in anti-utility public relations campaigns. They didn't want to have to waste time using the investigative process to find out information they could use against utilities, they wanted it handed to them on a silver platter. They filed all sorts of cute suggestions that demonstrated their complete ignorance of FERC's ratemaking process. FERC is supposed to destroy a system that works in order to play politics with special interest groups? I filed initial and reply comments with a couple of other ratepayers who had successfully challenged transmission rates. You can read them here

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and here

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Our comments schooled these political dummies and advocated for minimal process changes and more training for utility accountants. And then FERC just abandoned the whole thing without taking any action. What started as political meddling in order to scrape up information that could be used to attack utilities in advertising and social media campaigns was foiled by people who had actually successfully used FERC's process to challenge rates and score refunds for consumers. Honestly, if we can figure it out and use it, then any "advocate" could do the same. It doesn't need to be further dumbed down for you.

But the political schemers weren't done yet. They took their manufactured complaints to state legislatures and told elected officials that they needed to change the ratemaking process to prevent the inclusion of lobbying, bribes, and campaign contributions in rates. Because legislators know even less about utility ratemaking than the advocates, they were easily led by the nose. You'd think the legislators would ask the state utility commissions and real ratepayer advocates if these changes were a good idea, but apparently not in at least three states where political special interests rule the legislature.

And they even got one Congress critter to file their legislation on the federal level. It's an eye-watering display of micro-management of utility ratemaking that really doesn't change anything because none of it is workable. The legislation attempts to change FERC's Chart of Accounts, which is a regulation written and approved by the Commission. Legislators pass laws that do something or other... and regulators write regulations that define the process by which the agency will carry out the law passed by Congress. Congress rarely gets into the weeds with this kind of detail because it is not an expert on ratemaking. It wisely leaves the details to the experts. However, that's not what happened here. The "advocates" and their liberal political friends wrote the regulations they way they wanted them to be (usurping FERC's authority to write its own regulations) and then sent them to their Congressional pet for passage. This is a stunningly bad idea. Fortunately, it appears that the federal legislation has been DOA for more than a year.

Wake up, folks! These political schemers have no business destroying the system that sets the electric rates you pay. They don't know how the system works!
Don't believe everything you read in the main stream media these days. It is often the brain farts of idiots.

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How PJM and FERC Caused Huge Spikes in Regional Power Bills and New Transmission

8/9/2024

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PJM's recent capacity auction resulted in huge price spikes in the cost of supplying power to electric customers in the PJM region for the 2025-2026 year. It was directly caused by the actions of PJM and FERC. These entities aren't protecting ratepayers, they are harming them! Let me explain...

PJM holds annual capacity auctions to secure the provision of electricity three years in advance. A capacity auction is not actual electricity, it is a promise from a generator to supply a certain amount of energy at a future point in time. This is how PJM ensures that it will have enough electricity supply available three years from the auction. PJM is paying these generators to be available to produce energy when needed during the auction year. PJM starts by announcing a certain amount of electricity is needed for the auction year. Generators submit bids of how much it will cost to be standing by to produce that electricity during the auction year. PJM stacks the bids by price, and each bid is represented by an amount of electricity and a price. PJM then looks at its bid stack and finds the place where the capacity need is met. Whatever the price of that bid is the clearing price for all the capacity bids lower in the stack. Those bids that go over the capacity price are not accepted. At the end of the auction, PJM has a stable of committed generators sure to provide the power when needed 3 years from the auction date.

PJM does not order generation. Generation is a market construct, where generators build when the capacity prices are profitable. If the clearing price at auction is high, it would entice the development of new generation. If the clearing price is low, many generators may not have enough revenue to continue to operate at a profit. This is how PJM manages generation to make sure there is always enough, but not too much. The auction serves as an important warning bell... when clearing prices are high, it means more generation needs to be built. The auction sends a signal to generators to build more when the prices are high. More generators lowers prices because there is more competition in the supply. But what happens when the prices are high at the auction and no new generators get built? That's exactly what just happened... there is a dearth of needed generation in PJM so prices shot through the roof to record highs.

The problem here began with PJM making a proposal to change the parameters of its auction. In order to do so, it needed FERC's permission. A battle broke out at FERC, with many other parties objecting to the auction changes. FERC moves at a snail's pace and can take years to make a decision on a request. The more parties to a case, the longer it takes to resolve it.

Because of the battle going on at FERC, the auctions got put on hold. As Power magazine says,

BRA auctions are usually held three years in advance of the delivery year. While the 2025/2026 auction was originally scheduled to be held in May 2022, it was suspended while the Federal Energy Regulatory Commission (FERC) considered the approval of new capacity market rules. The recent July 2024 auction stems from a compressed schedule that aims to return to the three-year forward basis. According to PJM, the next BRA—for the 2026/2027 delivery year—is scheduled for December 2024.

FERC suspended PJM's capacity auctions while it resolved the issue. That's like turning off the warning system. PJM's annual capacity auction couldn't send the market signal to build new generation because it wasn't being held.

During this time, an extreme change in the power needs of the PJM region was underway. Many baseload fossil fuel generators closed, either the result of the last auction's low capacity prices, or because they were "dirty" and no longer socially acceptable. The new generation that entered the market could not keep up with the amount of generation that was closing. As a result, we had less generation available. Also during this time, the building of new data centers and increasing power demands for AI shot through the roof. No new generation to supply power for these data centers was proposed or built because PJM's auction warning bell was not sounding due to the auctions being suspended.

PJM used the only tool it had available to meet regional need... transmission. PJM conducted a competitive transmission window to connect the remaining generators with the new data center load. Unfortunately, the majority of the available generators are located in WV and PA, and the data center load is in Northern Virginia. PJM asked for new transmission to connect the two, and it ended up with a whole bunch of new projects, including MARL and MPRP. PJM says they are "needed" to supply power to the data centers because no new generation has been built anywhere near the data centers.

Now that FERC has finally resolved the issue and PJM has its new market parameters, PJM recently began holding auctions again. The first new auction for the 2025-2026 year was held just 10 months before the auction year begins, instead of 3 years in advance. There's no way new generators can be built in 10 months, even if the prices are generous enough to support them economically. That's why the auction is always held 3 years in advance, in order to give time for new generation to be built to reduce auction prices.

Instead, we're looking at a transmission bandaid to keep the existing generation flowing to the places that need it. And PJM has opened another transmission planning window to add another 4,500MW of generation imports to Northern Virginia because there is no generation currently proposed to fill that need.

Eventually, if PJM's market signal works as intended, new generation will be built near the load. However, certain states like Virginia and Maryland have passed laws that prevent the building of new fossil fuel generation. That leaves only the nuclear option to supply the outrageous amount of power needed by the data centers. Can you imagine how long it would take to build a new nuclear plant in Northern Virginia? It would be completed on the 12th of Never. Meanwhile, transmission is the only viable option.

PJM's market system didn't work to get generation built in time to meet new need because PJM and FERC had turned it off and were asleep at the switch. Now we have a disaster of epic proportions on our hands.

What's going to happen first? The construction of hotly opposed transmission projects, or the building of new generation? And where will that generation be built? Continuing to build in PA and WV only perpetuates the transmission problem. We need new generation at load. It's probably cheaper than billions of dollars of new transmission, but it takes a willingness to sacrifice for its own benefit on the part of the data center loving states.

New generation is coming to market... and how much of it will obviate the need for new transmission? That's an unknown at this point, but it's going to happen. PJM's transmission project needs will change and fall apart. Let's hold the line, folks! This battle is far from over!

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FirstEnergy Files For Incentives For MARL, Delays Project

7/3/2024

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The MidAtlantic Resiliency Link, or MARL, transmission project has been assigned by PJM Interconnection to two different transmission builders. NextEra is assigned to build the majority of it, but FirstEnergy ended up with the portion that runs through Frederick County, VA and Jefferson County, WV.

Long ago, even before PJM ordered MARL, NextEra filed an application for transmission incentives with the Federal Energy Regulatory Commission. FERC approved them back in January. Nobody bothered to get involved and comment or protest.

Everyone's been treading water, waiting to get more information, but neither NextEra or FirstEnergy has held public meetings to share information with impacted communities. Seems like nobody is in a hurry at all.

Remember that when PJM ordered MARL, it said the project was needed to be operating by June 1, 2027 or else there would be darkness.

Back in May, FirstEnergy finally got around to requesting transmission incentives for its portion of the MARL. It asked FERC to grant it the abandoned plant incentive. Grant of the abandoned plant incentive begins the tally of project costs that can be recovered if the project is abandoned (cancelled) before being built. Anything FirstEnergy spends before receiving this incentive is only eligible to be recovered at 50%. That would mean that FirstEnergy could only collect half of the money it spends on MARL in the case of abandonment. The other half would come out of FirstEnergy's pocket. Fitting, don't you think, since FirstEnergy insisted on being assigned this portion that rebuilds and expands lines FirstEnergy already owns? However, that's not what FirstEnergy asked FERC for... it asked FERC to allow it to recover 100% of whatever it has spent (plus interest) if the project is abandoned.

FERC Commissioner Mark Christie is at war against certain transmission incentives. FERC opened a rulemaking to examine and revise its incentives more than 4 years ago, but has punted it to the side without action, allowing the overly generous incentives to continue.

I'm taking this opportunity to object to FirstEnergy's request for the abandoned plant incentive. Do they really need it, since they were so eager to have this project that they engineered some secret deal behind the scenes at PJM?

NextEra's cost cap for MARL (as crappy as it is) did not transfer to FirstEnergy when it took over this section of the project. FirstEnergy can and will spend however much it wants... currently estimated at $341M for a very short "rebuild" segment. How much will they actually spend, and how soon will they spend it? How much spending is planned *before* state approvals, which if denied can cause abandonment? FERC should place a limit on running up the spending before project approval.

These are the comments I submitted to FERC.

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And here's the worst part! As part of their filing, FirstEnergy included a copy of its acceptance letter of PJM's designation of a portion of the MARL. In their acceptance, FirstEnergy has changed the in-service dates for its portion of the MARL. The Virginia portions (both in Frederick and Loudoun counties) are supposed to be in-service by June 1, 2028, delayed a year from the date PJM said they were needed. The in-service date for the West Virginia portion in Jefferson County is delayed until June 1, 2030. That's right... 2030! MARL is not planned to be completed and transmitting energy until 2030! That's six years from now! Are Virginia's data centers going to hang around waiting to build and be connected to the electric grid for another 6 years?

NO! They won't wait. They will go somewhere else where they can build a data center and get electric service before 2030. The bottom may be about to fall out of Virginia's data center craze.

Here's what FirstEnergy's acceptance letter looks like:

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Once the in-service date for PJM's transmission projects starts slipping, it often keeps slipping... right off into oblivion. It can be delayed if expected load doesn't show up (but goes elsewhere). It can be delayed if the utilities run into permitting problems, such as taking a state denial in a NIETC to FERC for permitting. It can be delayed if the utilities have difficulty procuring project components; there is a huge supply chain issue for transmission components right now. It can be delayed if there are issues with land acquisition. It can (and will) be delayed even further. And, as I said in my comments...

MARL’s in-service date is already slipping. Why is that relevant? Because the electric grid abhors a vacuum. When a planned transmission (or generation) project fails to come online when needed, other projects will take its place. That’s exactly what happened with the PATH project, and what is likely to happen with the MARL project, including the Potomac Edison portion that is the subject of this filing.

Giving these transmission companies the greenlight to spend as much of our money as they want before they finally abandon MARL many years in the future is not just and reasonable.

This transmission project may never happen, but PJM and the utilities involved feel they should pursue it anyhow. Is that because there are no other options? Or is it because there’s no harm done to them if it fails. All the burden of failure falls on ratepayers, and this encourages the utilities to take more of a chance than they would it they had some skin in the game. Utilities shoulder no risk, while collecting all the rewards.

Consumers have zero control over the project’s risk factors, but they are the ones left holding the bag when it fails. As consumers, we simply cannot afford to continue to financially cover the failures of grid planners and transmission developers simply because we are the one entity without a voice in incentive awards.

FirstEnergy has asked FERC to approve its incentive request before July 15. Once consumers have thus insured the reimbursement of FirstEnergy's project spending, then maybe FirstEnergy can actually start working on MARL.

But what happens if FERC doesn't grant this incentive? Will FirstEnergy still want to build its part of the MARL? Or will it have to go back to PJM for revision?

Stay tuned...

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Illinois Coalition Files Appeal of GBE's Negotiated Rates at the DC Circuit Court of Appeals

6/29/2024

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A coalition of Illinois landowners and Farm Bureau made good this week on their threat to appeal a recent FERC decision approving "continued" negotiated rate authority for the Grain Belt Express.

A couple months ago, FERC made an incomprehensible decision to rubber stamp GBE's request for "continued" negotiated rate authority, and then ignored the Illinois group's request for rehearing simply because it ran out of time. In my opinion, FERC will find itself between a rock and a hard place trying to explain how its decision was logical to the court. There's still time for FERC to change its mind and bolster its contradictory order, but that window is closing fast.

Perhaps FERC didn't think that the Illinois group would actually file an appeal. Basing the legal durability of its decisions on whether or not FERC thinks the appellant has enough money and skills to file an appeal (and therefore making bad decisions that affect parties without means) doesn't always work out so swell. Sometimes those parties win the stare down contest and FERC ends up trying to defend the defenseless before some judges. I might actually feel sorry for the FERC attorney who gets handed this dud, if it didn't cost so much time and money for the appeal to be filed.

Here's what the Illinois group filed.

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In October 2023, GBX filed with FERC its Application for Amendment to Existing Negotiated Rate Authority (the “2023 GBX FERC Application”), for which FERC opened its Docket ER24-59. Absent from the 2023 GBX FERC Application is any mention of its failure to obtain FERC’s prior approval under FPA Section 203 for the 2020 upstream ownership transfer of GBX to Invenergy. GBX instead continually characterizes certain noncontroversial changes to its transmission project as amendments to its existing negotiated rate authority. Because FERC never approved the upstream ownership transfer of GBX to Invenergy under FPA Section 203, after the January 2020 closing of that transaction GBX had no negotiated rate authority to amend.

While FERC claims in its Order that it is reviewing GBX’s negotiated rate authority de novo based on its current ownership structure (Order, ¶71), it plays right along with GBX, dismisses as irrelevant GBX’s failure to obtain prior FPA Section 203 approval for the 2020 upstream ownership transfer, and expressly recognizes GBX’s continuing negotiated rate authority (Order, pg. 27). FERC thus backdates GBX’s negotiated rate authority to January 2020.

FERC’s recognition of GBX’s negotiated rate authority as continuing from any time prior to February 29, 2024 not only gives the lie to its claim that it has conducted a de novo review of that authority, it is a patently unlawful retroactive approval of an upstream ownership transfer that closed more than four years before FERC issued the Order.

What happens next? The Court will assign a procedural schedule that allows for initial and reply briefs, and may set the case for oral argument before the Court.

Stay tuned!

Bravo to the Illinois group for questioning what FERC wrote in its Order and filing an appeal!

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New FERC Transmission Permitting Rules

5/18/2024

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Let's move on to FERC's new rules for permitting transmission projects in a National Interest Electric Transmission Corridor. FERC also released this rule on Monday. It's another instance of FERC batting away any constructive criticism and doubling down on a bad idea. What's in the water down there anyhow?

If the U.S. Department of Energy designates a National Interest Electric Transmission Corridor, and a transmission project is planned for that corridor, first the transmission developer must attempt to get state permits for its project. In the event that a state denies a permit for a project, then the transmission developer can go to FERC, denial in hand, and ask that FERC overrule the state and site and permit the transmission project anyhow.

This may be the situation with MARL, and any other transmission project that DOE creates a corridor for.

FERC was given authority to site and permit transmission as a "backstop" to state inaction back in 2005. FERC subsequently created rules for its process to do so. When Congress changed the "backstop" law in 2021 to allow FERC to permit even when a state denied a project, FERC released a rulemaking to update its process. During the rulemaking, FERC received numerous comments on its proposed rule and suggestions to make it better. Across the board, FERC rejected most of these changes.

If you find yourself in a situation where the project you oppose ends up before FERC, you're going to need to know the rules for participating in that process.

FERC made only one useful concession between its proposed rule and the final rule issued on Monday. The proposed rule allowed a transmission developer to begin the pre-filing process at FERC at the same time it filed its applications with state commissions. That idea, which was widely panned by states and landowners, would have required landowners to participate in the FERC process at the same time as the state process. Two permitting processes, two sets of rules, two sets of lawyers, two sets of headache. All with the knowledge that the FERC process would become unnecessary if the state approved the project. A complete waste of time. However, FERC dumped that proposed rule and now says that a developer cannot begin its pre-filing until one year AFTER it files its state applications. This gives the state a year to complete its permitting before the FERC process begins. At least you won't be engaging in two permitting processes at the same time. However, FERC did not speak to landowners' question regarding whether the FERC process would proceed while state appeals are pending. For instance, if a state denies, the transmission developer could appeal that denial in state court, instead of engaging in the more expensive and lengthy FERC process. Conversely, if a state approved and the landowners appealed that decision, when would the FERC process begin? This means that this process is still subject to being shaped in practice.

The part of FERC's new rule that is truly awful is its insistence that an "Applicant Code of Conduct" will ensure that the transmission owner has "made good faith efforts to engage with landowners and other stakeholders early in the permitting process" as required by the statute.h

FERC has turned this into a box-checking exercise, not an actual determination of whether the transmission developer has complied with any "Code", as specious as it is. The "Code" is generalized garbage and anyone who has ever had to deal with a transmission developer land agent would be able to drive a truck through its many holes. It's not like any "Code of Conduct" you've ever seen used on any transmission project. In fact, it's so short and devoid of any landowner protections, I can copy the whole thing right here. Applications

Ensure that any representative acting on the applicant’s behalf states their full name, title, and employer, as well as the name of the applicant that they represent, and presents a photo identification badge at the beginning of any discussion with an affected landowner, and provides the representative’s and applicant’s contact information, including mailing address, telephone number, and electronic mail address, prior to the end of the discussion.

Ensure that all communications with affected landowners are factually correct. The applicant must correct any statements made by it or any representative acting on its behalf that it becomes aware were:
(i) Inaccurate when made; or
(ii) Have been rendered inaccurate based on subsequent events, within three business days of discovery of any such inaccuracy.

Ensure that communications with affected landowners do not misrepresent the status of the discussions or negotiations between the parties. Provide an affected landowner upon request a copy of any discussion log entries that pertain to that affected landowner’s property.

Provide affected landowners with updated contact information whenever an applicant’s contact information changes.

Communicate respectfully with affected landowners and avoid harassing, coercive, manipulative, or intimidating communications or high-pressure tactics.

Except as otherwise provided by State, Tribal, or local law, abide by an affected landowner’s request to end the communication or for the applicant or its representative to leave the affected landowner’s property.

Except as otherwise provided by State, Tribal, or local law, obtain an affected landowner’s permission prior to entering the property, including for survey or environmental assessment, and leave the property without argument or delay if the affected landowner revokes permission.

Refrain from discussing an affected landowner’s communications or negotiations status with any other affected landowner.

Provide the affected landowner with a copy of any appraisal that has been prepared by, or on behalf of, the applicant for that affected landowner’s property, if any, before discussing the value of the property in question.

That's all the "protection" you get. As long as a transmission developer files this and says it will follow it, then the box is checked and the transmission developer is "acting in good faith" no matter what it does. "Avoiding" certain behavior is not the same as prohibiting it.

Compare this crappy "protection" to what a group of experienced transmission opponents asked FERC to do in their comments.

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You can expect to experience the same things landowners described in their comments, not FERC's rosy "landowner protections," which do little to actually protect landowners. FERC believes that its "success" permitting natural gas pipelines will ensure landowners are treated fairly in the process. If FERC's future permitting of electric transmission lines is anything like it's prior permitting for natural gas pipelines, we'd all better learn the words to this song:

FERC has chosen to become, in the words of Impacted Landowners, "...just another flashpoint that draws protestors to the Commission’s headquarters because the people understand they have been stripped of the last vestige of any fair process to defend their rights by a federal agency captured by the industry it is supposed to regulate."

See you at FERC, friends. Bring your singing voice!

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The Big Green Shell Game

5/18/2024

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What a busy week in the energy world! Not only was NIETCs on everyone's radar, but FERC dropped two huge new rules that have been in the works for years.

Let's take a look at one of them now, FERC's new Transmission Planning and Cost Allocation rule. It's nearly 1,300 pages. Ain't nobody got time for that this week!

The rule was passed on a 2-1 vote by the Commissioners. Commissioner Christie dissented and he seemed pretty steamed up about it during the meeting. Commissioner Christie has been the most consumer-focused Commissioner FERC has had in recent memory. If he thinks the rule is awful, I'm pretty sure I will, too. So, I went right for the dissent, all 77 pages of it. It's full of wisdom and truth, and lots of references to movies and books, (The Wizard of Oz, The Godfather and George Orwell to name but a few) that makes an enjoyable and thought-provoking read. So here's one more from me...

"In a time of universal deceit, telling the truth is a revolutionary act." -- George Orwell

Commissioner Christie is a revolutionary because he didn't stray from his duty to protect consumers. It's FERC's whole reason for existing.

Let's start with this bold title, "The Final Rule Is a Pretext for Enacting a Sweeping Policy Agenda Never Passed by Congress, Denies the States the Authority Promised by the NOPR, and Fails the Commission’s Consumer Protection Duty under the Federal Power Act."

Not mincing words there.

Here's my nutshell summary, but I urge you to read the whole thing for yourself.

FERC's new rule requires planning on a 20-year horizon. Nobody knows what our energy needs are going to be 20 years from now. FERC's rule enables a political agenda by driving transmission that will create a preferred energy mix. It's not about need driving transmission, it's about transmission driving energy mix and corporate profits.

FERC's rule requires planners to throw all sorts of "needs" into a common bucket: reliability, economic, generator interconnection, public policy and corporate energy demands are all stewed together to create regionally "needed" projects. Wait... what? Interconnection needs? Public policy and corporate energy demands? Yes, that's right, those are the "needs" planners must now put into their plans.

Historically, a new generator (or merchant transmission project) pays its own costs to connect to the existing system. It only makes sense because the generator is the one profiting from the connection it needs to sell power to consumers. Requiring generators to pay for their own connection also requires them to plan generators in economic places, where connection costs are cheapest. When consumers are paying, generators will site where it's most profitable for them, not cheapest to connect. It's like requiring you to pay for a new road to access a WalMart in the middle of nowhere so that you can buy WalMart products you don't want or need.

Once all these needs are mixed up in the bucket, the planner must assign certain "benefits" of these projects to all consumers. "Benefits" you probably didn't need in the first place. But once you are receiving "benefits", you have to pay for them. Therefore, we are all going to be paying for new transmission to meet the public policies of states we don't live in, and the corporate energy goals of corporations who increase profits by virtue signaling about how piously "clean" they are (on our dime). How about if I demanded energy created from burning tiddlywinks? Will regional planners have to plan that system and make everyone else pay for it? No, I don't matter because I'm just a consumer, not a corporation spreading my lobbying dollars in all the right places.

Public policies regarding energy created by states, localities or other political subdivisions should only be paid for by the citizens who have the ability to vote for them. I should not have to pay the costs of transmission so that Virginia or Maryland can meet their own policies to only generate clean electricity (but I'm already doing that with new transmission for data centers). FERC has doubled down and decided that everyone in the region must pay for the energy policies of certain states.

On top of that, FERC has created a new cost allocation scheme that cuts states out of the mix. Even if states agree that certain states should pay for their own energy policies (like offshore wind), that agreement can be trashed in favor of making everyone pay. What a joke! FERC spent lots of time over the past couple years holding meetings with state regulators to find out what they wanted to see in this transmission rule... and then tossed it all out the window. I'm going to guess states are as steamed up as Commissioner Christie, and that doesn't make them eager to permit all this new transmission that's supposed to come out of this rule.

During the rulemaking process, FERC published an "Advanced Notice of Proposed Rulemaking" that contained a lot of these awful new policies. Later, it published a "Notice of Proposed Rulemaking" that reined them in to an extent and created something less awful. But then the rule FERC actually created tossed that out the window and reverted to the first awful ANOPR. What gives here?

In the words of Commissioner Christie:

The final rule should be seen for what it is: a pretext to enact, through administrative action, a sweeping legislative and policy agenda that Congress never passed. The final rule claims statutory authority the Commission does not have to issue an absurdly complex bureaucratic blizzard of mandates and micromanagement to be imposed on every transmission provider in the United States for the transparent goal of spending trillions of consumers’ dollars on transmission not to serve consumers in accordance with the FPA, but instead to serve political, corporate, and other special-interest agendas that were never enacted into law. The rates for transmission that will result from the final rule will not only be unjust, unreasonable, unduly discriminatory and preferential, but grossly unfair to tens of millions of American consumers already burdened with rapidly growing monthly power bills.

That's right, this rule is a special gift to the Biden Administration and its pet special interests that will profit from it. It's not for me and you.

...the final rule inflicts staggering costs on consumers by promoting the construction of trillions of dollars of transmission projects, not to serve consumers in accordance with the FPA, but to serve a major policy agenda never passed by Congress, to serve the profit-making interests of developers of politically preferred generation, primarily wind and solar, and to serve corporate “green energy” preferential purchasing policies.

It's the "Green New Deal", Transmission version, all tucked neatly into place by corporate lobbyists and special interests. How has FERC sunk so low? It is supposed to be an independent regulator, protecting consumers from corporate greed, but now it's just another politically captured federal agency unhinged from democracy.

In fact, the final rule is not even about planning transmission, but is about planning policy, and it is very preferential about the policies it wants to promote. As with the Great Oz, pulling back the curtain exposes the final rule for what it really is: An essential component in a comprehensive plan by the current presidential administration to push what the media describe as “green policies” designed to prefer and promote the wind and solar generation it favors while simultaneously forcing the shutdown of the fossil fuel generation it disfavors, both needed to meet its political commitment. Let me emphasize: Whether the policies being promoted in this final rule can be described as “green, purple, red or blue” is irrelevant. The point is that FERC, as an independent agency, has no business promoting the policies of any one party or presidential administration, especially when, as here, the effort to do so goes far beyond FERC’s legal authority and fails to perform our consumer protection function under the FPA.

Commissioner Christie calls FERC's new rule a shell game 16 times in his dissent. Here's the first.

Put most simply, the final rule is a shell game that plays this way:
Step One: For planning and cost allocation purposes, throw transmission projects that solve specific reliability problems or reduce congestion costs into the same bucket as projects designed to promote public policies or corporate “green energy” preferences and disguise the purpose of very different projects by re-labeling all projects in the new bucket with the innocuous-sounding name “Long-Term Regional Transmission Facilities.”
Step Two: Mandate planning inputs that must be used in determining which projects get selected for regional plans, which starts the money flowing from consumers to developers before any state has even evaluated the need for, or cost of, the projects.
Step Three: Mandate benefits that will ultimately affect the allocation of costs to consumers across a multi-state region. Combined with Steps One and Two, this makes consumers involuntary “beneficiaries” who will then be forced to pay for projects that promote another state’s public policy or corporate “green power” commitments.
Step Four: Order all transmission providers to develop and file a cost allocation formula that will automatically be the default applicable to the entire bucket of Long-Term Regional Transmission Facilities.
Step Five: Remove the NOPR’s requirement that states must consent to the details of Steps One through Four before their consumers can be burdened with costs.

Another great term to search in this dissent is "regulatory capture." (“In simple words, regulatory capture exists when a regulatory agency, created to act in the public interest, ends up advancing interests of the industry it is charged with regulating.”)

Instead, what we have in today’s final rule is a patent instance of regulatory capture with the singular goal to build out preferential policy and corporate-driven projects, steamrolling the states and consumers alike.

Today’s final rule is much less the product of reasoned decision-making or the agency’s specialized expertise, as of political pressure and special interest lobbying. In the chapter on “regulatory capture” in future economics textbooks, today’s final rule should be a featured case study.

Commissioner Christie sounds off on FERC pulling a bait and switch by removing the promise to end one of its "FERC Candy" incentives from the final rule.

By doing nothing about the consumer-paid “FERC candy” incentives that this Commission regularly hands out to developers, and even removing the provisions dialing back the CWIP incentive—and with its overall aim to pile trillions of dollars of additional costs for big corporate and politically-driven transmission on consumers, which will largely flow to the increased profits of wind, solar and transmission developers—the final rule could be the inspiration for one of the great country and western songs “Lord Have Mercy on the Working Man.” Warner Bros. Nashville 1992 (“Why’s the rich man busy dancing while the poor man pays the band? Oh they’re billing me for killing me, Lord have mercy on the working man!”).

Ever wonder where that "FERC Candy" term came from? Commissioner Christie tracks it down...

Mary O’Driscoll, FERC approves incentives for AEP, Allegheny grid projects, Greenwire, July 21, 2006 (“The approvals came as the commission finalized rules intended to promote transmission-grid additions that outline specific rate and other incentives that FERC will consider for future construction projects — the ‘FERC candy’ that critics contend gives the utilities incentives but not much in the way of corresponding requirements.”) (emphasis added), https://subscriber.politicopro.com/article/eenews/2006/07/21/ferc-approves-incentives-for-aep-allegheny-grid-projects-234508.

I really could be here all day pulling quotes that resonated, but this is already long enough. READ THE DISSENT.

Commissioner Christie points out seven ways to Sunday why the Commission's rule is not going to pass legal muster, and he's spot on. I'm going to predict that this rule ends up before SCOTUS before being chopped off at the knees.

Meanwhile, by trying to have it all, the special interests that were served by this rule have instead created a situation where nothing gets done at all. I agree with Commissioner Christie that the way to get the transmission we need to keep our lights on is to seek out agreement, not disagreement, with the states. And to be fair to the consumers who are paying the bills. End of story. A lighter touch may have spurred beneficial energy policy changes because we really are all rowing in the same boat. Instead, FERC has created a giant waste of time and energy that will prevent the very energy utopia it envisions.

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FERC Allows Rehearing on GBE Rates to be Denied, BUT...

5/5/2024

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...it's complicated!

When is a denial not a denial? When FERC is trying to skirt around the law, that's when!

Last week, FERC issued a "denial" of the Request for Rehearing filed by landowner groups in Illinois in Docket No. ER24-59.

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It says the Request is "denied by operation of law." But in the second paragraph it also says the Commission will address the request in a future order that may modify or set aside its original order. It's like FERC both denied the request and granted it at the same time. What is FERC up to?

It's trying to get around the law, that's what. A brief history lesson is needed. The law says FERC must make a decision on a Request for Rehearing within 30 days or it is deemed denied "by operation of law." If FERC wants to deny a request, it simply does nothing and it is automatically considered denied after 30 days. FERC does not need to issue an order of denial. It is simply presumed by FERC's lack of action.

But, FERC operates with all the alacrity of a sleepy sloth. It simply can't get its stuff together to act on a request for rehearing within 30 days. FERC action on a Request for Rehearing most often consists of a modified or reversed order. It rarely results in an actual rehearing of the case and the taking of new evidence. When it does, it's usually what's known as a "paper hearing" where everything is done through filings and there is no actual physical hearing. FERC actually has to produce something during that 30-day period, and it rarely gets those things out the door by the deadline.

FERC used to deal with this problem by granting the Request for Rehearing "for further consideration." This meant that FERC had not made a decision on how it wanted to act, but it was preventing the Request from being denied by operation of law. FERC would eventually issue a new order, but it would be well past the 30 days allowed for reconsideration under the law. In fact, FERC began to use this scheme as a tool to trap parties in an endless purgatory of having their request granted but not acted upon. By doing this, FERC was preventing the losing party from appealing its order while they waited for the rehearing order. Sometimes, this took many years, sometimes never, and the matter sat at FERC forever but couldn't be appealed.

That all came crashing down in 2020, when the D.C. Circuit Court of Appeals issued an order on a case known as Allegheny Def. Project v. FERC. The Court said that FERC could no longer prevent appeal by granting rehearing for further consideration. It had to act within 30 days or the request was denied and the losing party could appeal FERC's order in court. Of course, this set up an impossibility at FERC, who couldn't pump out its rehearing orders within the 30 days allowed by law. FERC came up with a new scheme technically within the law, but producing absurd results in practice.

FERC's new procedure allows it several months to act (no longer unlimited) but it also sets up appeals that may never proceed. FERC must deny a rehearing that it has not acted upon within 30 days, but the law allows FERC to change its mind and modify or set aside its original order before the case record is filed at the appeals court. FERC buys itself time, but that time extends past the deadline for a party to appeal. A party has 60 days to appeal a FERC order once request for rehearing is denied. But FERC has 40 days after the appeal is filed to file the record with the court. This way FERC can buy itself an additional 100 days to act on the request for rehearing, even when it has been denied "by operation of law." If FERC has not issued a new order within 60 days, an appeal must be filed. An appeal requires a $500 filing fee and several documents to be filed and served. It's not cheap or easy. The appellant is forced to file an appeal of an order it has not yet seen. If FERC acts after the appeal is filed and before the record is filed, it may change the grounds for appeal. If the appellant then withdraws its appeal, it's not getting its time and money back. It's an procedure that is unfair to appellants and causes everyone a bunch of unnecessary work and expense.

That's what FERC has chosen to do in this case, where it approved Grain Belt's request for negotiated rate authority, then denied the landowners' request for rehearing by operation of law but intends to issue a future order before the record is filed.

The landowners may have no choice but to proceed with appeal while they wait for FERC to quit dithering and issue an order. FERC's future order could modify or set aside its original order. If FERC subsequently decides to change its mind on this matter, then maybe it's Grain Belt who would want to request rehearing and appeal the new order. The only certainty here is uncertainty. FERC has stated its intention to act on the Request for Rehearing, but nobody knows how that will change the outcome.

Stay tuned... when FERC finally issues its new order within 100 days, things could change significantly.

When is a denial not a denial? When FERC is trying to skirt the law!

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