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New FERC Transmission Permitting Rules

5/18/2024

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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FERC To Announce New Transmission Rules May 13

4/21/2024

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The Federal Energy Regulatory Commission (FERC) has announced an open meeting where it will present its new rules for transmission planning AND its new rules for transmission permitting in a National Interest Electric Transmission Corridor (NIETC).

Both of these rulemakings have taken years to get to this point. As you may know, rulemakings are public participation proceedings where the agency proposes a new rule, accepts comments from the public, and then issues a final rule. The transmission planning rulemaking began in 2019 -- 5 years ago! Five years to get a new rule in place isn't uncommon... things move at a glacial pace at FERC. In addition, FERC's commissioners have come and gone over that time period, making FERC flip-flop on several different new rule proposals. The transmission permitting rulemaking hasn't been in the works for as long, but it is going to have a profound impact on landowners so unlucky as to be targeted for new transmission projects.

First, the transmission planning rulemaking. This is all the media has been talking about. Fans of doubling or tripling transmission lines to ostensibly connect remote wind and solar generators are chomping at the bit, convinced that it will finally make intermittent renewables viable. That proposed rule contains, among other provisions, a plan to prospectively build new transmission to remote "zones" where some unnamed authority believes new wind and solar can be built. This would shift the cost of transmission to connect renewables from the owner of the generator to ratepayers across the regions connected. As it has been for years, the owner of a new generator must pay the costs of connecting its new generator. These companies want to shift this cost burden to ratepayers. If a generator has to pay for its own connection, it makes economic choices about where to site new generation in order to build at the most economic sites. If we're paying, generators can build stuff anywhere, even if it doesn't make economic sense, and stick electric consumers with the bill.

Another thing the transmission planning rule is going to do is create some hypothetical list of "benefits" from new transmission in order to spread the cost allocation as wide as possible. Even if you don't "need" transmission for reliability or economic reasons, if the transmission owner makes up some hypothetical "benefits" for you, then you're going to be charged for it. The idea is to spread the trillions of dollars needed for new transmission as wide as possible in the hope that if everyone pays a little that nobody will notice how their money is being wasted building transmission that they don't need.

Finally, the transmission rule will require planning authorities, like PJM or MISO, to plan transmission on a rolling 20-year timeline. What are you going to need 20 years from now? You have no idea, and neither does the planner. By planning so far into the future, the idea is to drive generation choices through transmission planning, and not to plan the transmission system based on need. It will also attempt to roll state and federal "public policies" into transmission planning so that we all pay a share of other state energy policy choices. Is Maryland shutting down all its gas-fired generation? You're going to pay for new transmission to replace it, even though you don't live in Maryland and had no say in the creation of their energy policies.

The transmission planning rule will be prospective only and will not affect any transmission already included in regional plans. After this rule is issued, planners will have to submit what are known as compliance filings, which detail how the planner will adjust its rules to carry out the new transmission planning process FERC orders. In addition, I fully expect that this rule will be litigated for several more years, which is going to hold the whole thing up.

Now onto the Transmission Permitting rule, which is something that is going to impact anyone currently battling unwanted transmission, and anyone doing so in the future. As you probably know, the U.S. Department of Energy is poised to release its preliminary list of potential NIETCs at any time. That's a whole battle unto itself that I'm not going to cover here, but if a corridor is designated in your area, it means that one or more proposed transmission projects may be built in that corridor. A transmission project sited in a NIETC is subject to "backstop" permitting by FERC. If a state has no authority to permit transmission, or denies a permit to a project in a NIETC, then it can be bumped to FERC for permitting. FERC will require the transmission company to file an application and then will hold a full-blown permitting process very similar to the state process. If FERC permits the project, then FERC has authority to say where it goes and to grant the utility building it federal eminent domain authority to take property for it.

In FERC's rulemaking on transmission permitting, it proposed that a utility could begin the FERC process as soon as an application is filed at the state level. This would mean that there will be TWO simultaneous permitting processes going on at the same time. Two permitting cases, two interventions, two sets of lawyers, double your time and double your money. The drawback here is that the FERC process may not even be necessary if the state approves the project in its own permitting process. If a state approves, FERC doesn't have jurisdiction to get involved. FERC said that it needed to speed up this process by running its own permitting process at the same time as the state process. It's foolish and a waste of our time and money. Let's see what FERC does with this as it was widely panned by those who commented on this rulemaking.

Another horrible idea in FERC's proposal is an "Applicant Code of Conduct" to meet the statutory requirement for "...good faith efforts to engage with landowners and other stakeholders early in the applicable permitting process." FERC proposes a voluntary, generalized, unenforceable "Code" that does little to protect landowners. The "Code" is merely an idea of how a company should behave, not how it will behave. FERC does not plan to enforce it, or intervene when landowners report violations. The landowner should report violations to the company! Don't laugh... they're serious! FERC's proposed "Code" advises that the company should "avoid" coercive tactics, but it doesn't prohibit them. That does NOTHING to meet the statutory requirement. It's a big joke!

The new transmission permitting rule will become operational once it is issued. Many readers will be subject to this government-sponsored landowner abuse immediately. This is one you should not ignore!

Over the years, I have worked with a large group of transmission opponents from across the country to file extensive comments on both of these rulemakings on behalf of impacted landowners. In particular, you should read our comments about the transmission permitting rule to familiarize yourself with what's about to happen to landowners.

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Please plan to (virtually) attend FERC's May 13 Open Meeting where they will release these two new rules and make comment and explanation. The meeting is "listen only". There is no opportunity to make comment or interact with the Commissioners. This is an informational presentation, not a participatory event. FERC's meeting begins at 11:00 a.m. and is expected to last about an hour. You can watch it live on YouTube using a link that will appear on FERC's website the week before. Later on that day (or the next day, remember FERC works at a snail's pace) the text of the rules will be released and then discussed over and over by lawyers and the media. If you're impacted by a new transmission proposal, you can't miss this presentation!

You don't need to sign up in advance... simply click the link to view when the meeting starts. You can find that link and minimal information about this special meeting at FERC's website.

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As the Dollar turns: Episode 2

4/10/2024

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In our last episode of the FERC cost allocation soap opera, we saw a record number of intervenors for this kind of case, and were left breathlessly waiting for FERC to act.

FERC acted on April 8.

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As expected FERC approved PJM's cost allocation filing because projects necessary for reliability are allocated across the region, as PJM proposed. An attack on the existing cost allocation formula for reliability projects is outside the scope of the proceeding because the formula was approved by FERC long ago. The only thing FERC was considering here was whether PJM's cost allocations were in line with its approved formula.

Maryland's Office of People's Council tried to make the argument that PJM selected the wrong formula and that the projects were actually public policy projects that should be allocated 100% to the state whose public policy is causing the need for the projects. FERC rebuffed that argument.

It's all over, save for the requests for rehearing or appeals. This may happen, but that's a drama for another episode.

But all is not lost, avid followers. Commissioner Mark Christie filed a delightful concurrence and opined

...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.

However, the other two commissioners apparently weren't feeling it, with Commissioner Clements filing her own concurrence stating that she believes FERC should assign costs based on the allocation of reliability and economic (and perhaps other demonstrable) benefits. In her world, it doesn't matter who causes the reliability issue or why... just that if one is created, everyone pays for it.

Commissioner Christie's concurrence is logical and thoughtful.

As a factual matter, there is no question that the Commonwealth of Virginia has – as a matter of public policy – for years given generous tax subsidies directly to one very specific type of industry: data centers. Virginia’s entire I-95 corridor between Northern Virginia and Richmond may accurately be called “Data Center Alley.” Did these tax subsidies cause Data Center Alley? Under the economic principle of “if you want more of something, subsidize it,” it is logical to assume that Virginia’s tax subsidies did incent the construction of more data centers than would otherwise have located in this corridor, although the exact marginal impact remains unknowable. But the Maryland People’s Counsel and Intervenor Newman make a logical argument to consider the necessary construction of reliability lines in PJM due to load growth from the explosion of data center development in Virginia, as driven – at least at the margin – by Virginia’s own public policy of subsidizing data centers.

But it's not just Virginia causing transmission projects that get allocated to other states, Maryland also gets called out for its "clean energy" policies and the costs for new transmission to take the place of closing coal-fired generators.

These comments logically raise the question whether a law such as Maryland’s mandate to close fossil-fueled generation units located in Maryland has a more direct, intentional and causal impact on the need for new reliability transmission lines than state tax subsidies to high-load customers such as data centers. At a minimum, both Maryland and Virginia state commenters make arguments that are worthy of serious consideration.

I agree with what Commissioner Christie didn't say... both Virginia and Maryland are hypocrites when it comes to cost allocation. Neither one wants to accept the costs of transmission made necessary only by their state policies. Instead, when it benefits them, they want to share the costs with other states whose residents had no part in creating the policies that cause new transmission, like approving more data centers than you can power, or shutting down all your baseload generation and relying on transmission imports from other states to keep your lights on.

Here's the cliffhanger for this episode... Will Commissioner Christie be successful in opening some sort of inquiry or investigation into cost allocation policies when reliability issues are caused by certain state policies? He seems pretty determined to solve this issue. Commissioner Christie's concern for ratepayers above all else is much appreciated, especially considering the political swamp he wades through every day to regulate in the public interest. Regulation is an art, a skill, that comes with a huge learning curve. We need more experienced state regulators like Commissioner Christie at FERC, and less political appointments. FERC's work is too impactful to rest in the hands of political animals.

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What's an NIETC and what can I do?

4/7/2024

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The U.S. Department of Energy (DOE) is due to release its preliminary list of National Interest Electric Transmission Corridors (NIETC) that it is considering any day now. In order to understand what an NIETC is and how you can participate in the process of designation, let's take a look back at the history of NIETCs.

In the Energy Policy Act of 2005, Congress passed legislation to give the DOE authority to study electric transmission congestion and designate NIETCs that would give the Federal Energy Regulatory Commission (FERC) jurisdiction to site and permit an electric transmission line in the event that a state either did not have the authority to approve a transmission line or failed to act on an application for a transmission line for one year. This became known as "Backstop Permitting." States traditionally have authority and jurisdiction to regulate the siting and permitting of new transmission lines within their borders. This hasn't changed, but now there was a backstop measure to prevent a state from holding up a needed transmission project.

The legislation tasked FERC with developing rules for its backstop permitting process and FERC did so. FERC interpreted the statute to mean if a state denied an application for a transmission project then it bumped permitting to FERC. But that's not what the statute said! Piedmont Environmental Council and several states appealed FERC's rulemaking in the Fourth Circuit Court of Appeals. The Court found that state denial did not activate backstop permitting in PEC v. FERC. This allowed states to deny a permit to build transmission and end the matter.

Meanwhile, DOE had performed its congestion study and designated two huge corridors, one in the southwest, and one along the east coast stretching from New York to Virginia. The designation of those corridors was also appealed in the Ninth Circuit and the Court vacated the corridors due to DOE's failure to consult with states and its failure to perform an environmental assessment on the huge corridors it had designated. That decision is California Wilderness Coalition v. DOE.

These two court decisions made DOE's NIETC program effectively worthless and the entire thing was put on a shelf and forgotten about. But, in 2021, Congress passed the Infrastructure Investment and Jobs Act that contained a section that is meant to cure the problems with NIETCs, reviving the program. In addition to broadening the reasons for designating a corridor, the new statute allows FERC to site and permit a transmission project in an NIETC that is denied by a state. The law tells states -- either approve it or FERC will do it for you. It does not take the place of state permitting, the states still have authority to site and permit, as long as they don't say "no." Transmission projects cannot go directly to FERC without first applying at the state and going through the state permitting process.

DOE has been busy trying to revive its NIETC program ever since. In May of 2023, DOE issued a Notice of Intent and Request for Information proposing a new procedure for designating transmission corridors. DOE proposed that it accept applications from transmission builders to designate a NIETC that corresponded with transmission they wanted to build. That's not what the statute says... it says

Not less frequently than once every 3 years, the Secretary, after considering alternatives and recommendations from interested parties (including an opportunity for comment from affected States and Indian Tribes), shall issue a report, based on the study under paragraph (1) or other information relating to electric transmission capacity constraints and congestion, which may designate as a national interest electric transmission corridor any geographic area ...

It says DOE must study and designate corridors, not farm it out for suggestions from for-profit transmission builders to come up projects that provide profits. The DOE is supposed to be studying and designating corridors that accomplish the criteria in the study and benefit consumers. There can be a huge difference between a project proposed simply for profit and one that is actually needed by consumers. Designating corridors is supposed to be a government tool to incentivize the building of the right kind of beneficial projects. If DOE thinks (all by itself) that a project is needed, then it designates a corridor that will attract transmission builders to propose a new project in the corridor. Instead, DOE is, as I mentioned in my comments to the DOE, allowing the inmates to run the asylum. And I wasn't the only one, DOE received more than 100 comments on its proposal for designating NIETCs. Many commenters also thought allowing transmission builders to apply for NIETCs was a bad idea. Some thought DOE should perform a legal rulemaking to set parameters for its new program.

Meanwhile, DOE had been working on a National Transmission Needs Study required by the statute as the first step to designating NIETCs. That study was published in October 2023. The study found transmission congestion everywhere, meaning that NIETCs were needed everywhere. Many comments were also submitted panning that study. Mine are posted here.

In December 2023, DOE released a "Guidance" document on NIETCs, in lieu of the requested Rulemaking. The Guidance says that it changed DOE's approach to allowing transmission builders to apply for NIETC corridors. Instead, DOE opened a 60-day window for any person to submit a request for a corridor. Supposedly this cured the DOE's problem with allowing transmission builders to control the process. But it really doesn't. Who else would submit a request for a corridor but a transmission builder? It's a legal sleight of hand that is due a day of reckoning.

Many blog readers got involved in NIETC at this point and attended DOE's webinar explaining its process in early January. DOE was not really forthcoming about all the process that came before that webinar, but hopefully this blog will help you to understand that this didn't just drop out of the sky, but had been in process for more than a year.

DOE's 60-day window for submission of "information and recommendations" for corridors ended on February 2. Many thought this was the one and only comment period for NIETCs, but it was actually designed for transmission builders to submit requests for DOE to study corridors to correspond with the projects they want to build. After DOE's window closed, it began to take a preliminary look at the corridor recommendations it has received and promised to release a list of corridors it was considering within 60 days (which would be April 2). DOE hasn't released anything yet, we are still waiting.

However, NextEra notified Piedmont Environmental Council that it had applied for a corridor in Western Loudoun for its MARL project. I'm pretty sure that is not the extent of NextEra's corridor proposal... the corridor will cover the entire MARL transmission line, from 502 Junction substation in Pennsylvania to Data Center Alley. It makes no sense to request a corridor for only part of a transmission project. However, we will have to wait and see what DOE's list looks like before we proceed with our own response.

Our own response? Oh yes, anyone can make comment on DOE's list for 45-days after it is released due to the way DOE expanded who may submit "recommendations." I urge you to read DOE's Guidance, that separates the designation process into four phases. Phase 1 began in December, when anyone (like NextEra) could submit recommendations for corridors. Phase 2 begins when DOE releases its list of preliminary corridors to be studied. In the 45-day Phase 2 window, any person may submit information and recommendations. DOE is asking for specific information about each preliminary corridor. It seems to be intended for transmission builders who submitted recommendations for corridors in Phase 1 to supplement their applications, err... "recommendations." It does not seem to be intended for people concerned about the designation of an NIETC to submit their own information and recommendations, but we're going to crash this party and give DOE an earful about corridors that concern us. More information about how to participate will be forthcoming after I see DOE's list. After the 45-day Phase 2 process, DOE will decide which corridors will proceed to Phase 3. Phase 3 opens the federal environmental study process required by NEPA. DOE will also evaluate historical resources and endangered species. During Phase 3, DOE will create a draft designation report and open it to public comment. Phase 3 requires "robust" public engagement and notification. This is where DOE wants you to join its NIETC party and make comment, and comes very late in the process, after DOE has already made up its mind in the draft designation report. When all the studies and comment periods are complete, DOE will move onto Phase 4. Phase 4 publishes a completed environmental study and DOE's Record of Decision and final Designation Report. That's the end of the process.

However, a designation may be appealed, first through a Request for Rehearing at DOE, and afterwards through a formal appeal in the D.C. Circuit Court of Appeals (or other circuit where the transmission builder is headquartered).

Is it worth engaging in the NIETC process? Absolutely! Unfortunately it is just one more thing to deal with and will play out during the state permitting process for MARL. If you do nothing on NIETC, you risk all your hard work opposing MARL at your state utility commission being for naught. If your work in the state process causes the state to deny a permit, NIETC can bump it to FERC and start the permitting process all over again.

And speaking of FERC, it also needs to update its process for permitting transmission projects in a designated NIETC. Back in 2005, FERC engaged in a rulemaking for a permitting process. That rulemaking has to be updated for the new process. FERC opened a rulemaking proceeding for siting and permitting transmission in a NIETC back in 2022. The comment window closed way back in May of 2023. However, FERC has not yet issued an order or taken any further action. FERC cannot accept any applications for NIETC projects until it completes its rulemaking. A group of nationwide transmission opponents submitted timely comments on FERC's rulemaking. You can read their initial comments here, and their reply comments here. This group was the only one to speak up for impacted landowners at FERC. You can read other comments on the docket and monitor its progress by going to FERC's eLibrary and searching for Docket No. RM22-7.

As you can tell from the length of this blog post, NIETCs have been quietly in the works for a long time and there are a lot of moving parts. I know it's a lot to understand all at once, that's why I will be publishing some guidelines for landowners who want to kick NIETCs to the curb just as soon as DOE releases its Phase 2 list.

Stay tuned!

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Illinois Groups Ask for Rehearing on GBE FERC Case

4/3/2024

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As you may recall, FERC issued a very confused and contradictory order granting Grain Belt Express continued negotiated rate authority de novo. This would be like selling a used car as a new car that has been continuously driven for the past 10 years. As Illinois attorney Paul Neilan explains in his inimitable fashion:

1. The Meaning of “De Novo.”
De novo is Latin for "anew." De novo, Black's Law Dictionary (11th ed. 2019). In this Docket the Commission is evaluating GBX’s entire project anew, on both facts and law. “A trial de novo is a trial on the entire case – that is, on both questions of fact and law – conducted as if there had been no trial in the first instance.” Trial de novo, Black's Law Dictionary (11th ed. 2019). When a court decides a case de novo, that court owes no deference to any finding of fact or conclusions of law in the prior decision. See Zervos v. Verizon New York, Inc., 252 F.3d 163, 168 (2d Cir. 2001) ("[O]ur review is independent and plenary; as the Latin term [de novo] suggests, we look at the matter anew, as though it had come to the courts for the first time."); see also SEC v. Callahan, 103 F. Supp. 3d 296, 301-302, 2015 U.S. Dist. LEXIS 57996, 13-14 (E.D.N.Y. May 2, 2015).
2. The Meaning of “Continuing.”
The term “continuing” means "uninterrupted; persisting" or "not requiring renewal; enduring." Black's Law Dictionary (11th ed. 2019). The term "continuing" means a state or condition that persists from some prior time into the future. See In re Neosho Concrete Prods. Co., 2021 Bankr. LEXIS 1198, 11-12, 70 Bankr. Ct. Dec. 61, 2021 WL 1821444 (Bankr. W.D. Mo. May 6, 2021).

So when the Commission said in its order that it was granting Grain Belt’s request for continued authority to sell transmission rights at negotiated rates, on a matter that it reviewed de novo, FERC contradicted itself.

Read the whole Request for Rehearing of the Illinois groups here. I guarantee you won't be as confused as FERC. It's pretty simple and straightforward and beautifully written.

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FERC staff who wrote that order (Jignasa Gadani; Valerie Teeter; Maria Farinella; Natalie Tingle-Stewart; Michael McLaughlin?) absolutely tied themselves in knots trying to give GBE the best of both worlds. We knew something was amiss when GBE filed this letter on the outstanding docket earlier this year:

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GBE said... hey FERC, we need you to hurry up and give us what we want... and BTW, here's a CC of this letter to all the staff people we have been schmoozing. Right. The staff got it done on GBE's timetable, but they did a really crappy job that cannot withstand any legal scrutiny. Shame on the Commissioners for allowing their names to be placed on that less than stellar piece of work. Now it's time for FERC to actually give this docket the scrutiny it should have received in the first place or else the are going to be standing up before the D.C. Circuit looking like idiots trying to defend the indefensible.

It's been more than 30 days since FERC gave GBE what it wanted because GBE was in such a big hurry to advertise its project for sale to customers. GBE hasn't advertised anything yet. Guess there wasn't much of a hurry after all.

And why does GBE need to "amend" its prior grant of negotiated rate authority that expired when Clean Line sold the project to Invenergy without FERC approval? Because the contract with the Missouri municipalities for less than 5% of the project's capacity was negotiated under Clean Line but never submitted to FERC for approval. FERC cannot "continue" that unapproved contract to be approved at some later date if it actually did review GBE's negotiated rate authority de novo and issue new authority. FERC needs to boot that contract to the curb because it was not filed by the deadline in FERC's original grant of negotiated rate authority that Clean Line agreed to. Sorry, the instructions were clear and they were intentionally not followed. That contract is toast.

FERC also has a huge problem with the contradiction it created saying that GBE didn't need approval to transfer the project from Clean Line to Invenergy, but that Invenergy's sale of undivided interests in the project would somehow require approval. Either a sale of project assets requires approval under Sec. 203 of the Federal Power Act, or it doesn't. Can't have it both ways. FERC needs to think carefully before it does something that can impact its authority under Sec. 203 going forward.

FERC didn't think this thing through, and it needs to correct its errors. Thank goodness the Illinois groups are there to clean up the mess. If it doesn't make sense, it can't withstand the legal scrutiny of the DC Circuit. Been there, done that.

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GBE's Epic Meltdown

3/9/2024

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I've seen a lot of temper tantrums in my lifetime, and this one is screaming, red in the face, epic.

Yesterday, Grain Belt Express made another filing on its long-ignored complaint at the Federal Energy Regulatory Commission, having an absolute conniption fit that MISO is working on another package of transmission projects that ignores GBE. Time waits for no man... and the transmission world waits for no bloated, limping merchant transmission project either. GBE has taken so long to get its project together that it has been eclipsed. So sad, too bad!

In the complaint GBE filed against regional grid planner MISO last year, GBE was ticked off that MISO's Tranche 1 transmission plan ignored its speculative merchant transmission project and approved a series of new projects that would deliver renewable energy into Missouri from Iowa. MISO's new lines follow a similar path across Missouri and into Illinois and are expected to be online around 2030. This raises the question... what's cheaper for Missouri utilities? Purchasing energy from Kansas and service on the $7B GBE project, or purchasing energy from Iowa and taking service on MISO's new projects that cost a lot less? This could create direct competition for GBE, who may have been banking on the fact that it had cornered the market on delivering renewable energy to Missouri. Competition works to provide options for cheaper service for Missouri's ratepayers.

And now MISO has opened a solicitation for its Tranche 2 transmission project portfolio.

Tranche 1 is represented by the gray lines. The new Tranche 2 is represented by the new red (345kV) lines and the new green (765kV) lines. That's right... MISO has included a new 765kV project that begins in Iowa and ends in Missouri, not too far from where GBE wants to interconnect, if it ever gets its crap together and finds customers. It's even MORE competition for GBE in Missouri. Good luck with that customer thing, GBE.

Here's part of GBE's ranting tantrum filed with FERC:

MISO recently proposed a new 765 kV transmission line in Missouri close to where the GBX Project will connect. This is absurd given the advanced stage of GBX, disincentivizes the development of interregional merchant transmission, is contrary Commission policy, and is neither just nor reasonable transmission planning.

MISO continues to march on blindly, act as if GBX does not exist and propose even further transmission in Missouri close to where GBX is fortifying the grid with significant network upgrades and will inject 6.3 TWh of energy annually and be online well before the new proposed 765 kV Tranche 2 Missouri transmission project would come online. This is not only unjust and unreasonable transmission practice but absurd transmission practice. It is irrational for MISO to propose even further transmission in Missouri and ignore that GBX that has obtained all its Certificates of Public Convenience and Necessity, including in Missouri, spent hundreds of millions of dollars, is committed to spend hundreds of millions more and has a TCA with MISO.

But GBE doesn't have customers. No customers, no project! MISO can't wait another 10 years to see if GBE can actually get its project built. It is far from a sure thing, therefore MISO planning marches on.

GBE's second addition to its original complaint contains a bunch more technical mumbo-jumbo concocted by GBE's consultant that says that the MISO projects won't provide any value to MISO customers because GBE will be online. GBE is oh so concerned about MISO consumers getting the most bang for their buck and it doesn't want those consumers to pay for projects that don't have a significant cost/benefit ratio. Blah, blah, blah. GBE insists that its project will be operating soon and will make the MISO lines unnecessary.

Here's what GBE does not say...

GBE does not say that its project will be cheaper than the MISO projects and provide cheaper energy to Missouri. It's just claiming that the MISO projects won't provide benefit to Missouri if GBE is built. All GBE's fake concern for Missouri ratepayers is nauseating. GBE is only looking out for its own bottom line here, not yours. In contrast, MISO doesn't have any skin (or a risky investment) in the transmission planning game. MISO is only looking out for your bottom line, not its own. It sure looks to me like GBE is simply trying to eliminate its competition. If MISO's lines are not built, then consumers may not have any other choice than service on GBE. And that's the bottom line.

If GBE thought that its project could provide cheaper energy to Missouri than the MISO projects, it absolutely would not care if MISO planned other projects that were not such a good deal for consumers. If GBE was such a great deal, then it would welcome competition.

Instead, GBE just had an epic meltdown at FERC. Just like any toddler having a tantrum, its motivation is plain for everyone else to see. Seems like GBE hates the idea of having competition. Quick, someone call a WAHHHmbulance.

Despite (1) over three years of discussions with MISO and its transmission owners regarding the Project; (2) GBX acquiring final state siting approvals in all 4 states as well as over 96% of the HVDC route’s right of way among other indicia of Project advancement; and (3) GBX having an effective TCA with MISO in hand, on March 4, 2024, MISO released its initial Tranche 2 Draft Portfolio which again does not consider the impact of advanced-stage merchant transmission and worse still proposes a new 765 kV transmission line that is redundant to the far more advanced GBX Project and will interconnect to the same portion of MISO’s system. Thus, MISO has not only ignored GBX in its planning, but it has intentionally leveraged the lack of clarity in its Tariff to discriminate against it.

The Commission has long recognized that a lack of transparency and standardization of market rules impedes competition and enables the exercise of market power and undue discrimination, and that exact outcome has occurred here. The lack of a clear standard in the MISO Tariff for how advanced-stage merchant transmission will be considered in regional planning has opened up the opportunity to discriminate against merchant transmission projects, which are sorely needed to provide critical geographic diversity and interregional transfer capability during the energy transition. In the end, MISO’s behavior will not only lead to unjust and unreasonable rates, but it will rob the region of competition, access to geographically diverse resources and potentially important ties to adjacent RTOs. This should be unacceptable to the Commission, to State regulators and to ratepayers. The Commission should act now on this Complaint to protect ratepayers, prevent further delay and waste and to rectify this baffling outcome which is a direct barrier to the development of much needed interregional transmission. Therefore, Invenergy renews its request for the following relief

Invenergy urges the Commission to issue an order as soon as possible and no later than May 15, 2024, to ensure that just and reasonable transmission practices are implemented and ratepayers are protected at the soonest possible date.

As that great philosopher Pee Wee Herman once stated... "I know you are, but what am I?".

Does GBE actually think FERC is going to come to its rescue, shut down MISO's planning efforts, and vaporize GBE's competition by May 15?

Fat chance.

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FERC Tosses GBE's Negotiated Rate Authority and Issues New One

3/3/2024

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The Federal Energy Regulatory Commission has finally gotten around to solving one of GBE's little problems... for now.

Last year, GBE asked FERC to "amend" the negotiated rate authority issued to the project in 2014. However, FERC conducted a review de novo, as it would have a reviewed a new application. GBE's original authority is history, but FERC also granted new authority based on GBE's application. FERC also said that GBE did not need to file for negotiated rate authority before selling capacity (d'oh GBE). Under Commission policy, a merchant transmission developer can either opt to file in advance to show it has met the Commission's four factor analysis, or it could just submit everything after the fact and hope it got things right.

While FERC said that GBE met the first and forth factor, it is reserving judgment of the second and third factor until after GBE makes a later filing. But there were some leaps of logic in there that makes me wonder what FERC is up to.

First leap...

Grain Belt notes that this area is within the geographic footprint of Southwest Power Pool, Inc. (SPP), but the generation will not be interconnected to the SPP transmission system.

So, GBE is NOT connecting to SPP and will simply connect directly to the generators? GBE will not have a connection to the SPP transmission system.

But then FERC turns around and says these things:

The GBE system consists of (in part): AC overhead transmission lines to connect the converter stations to portions of the SPP, MISO, and AECI managed electrical systems in Kansas and Missouri.

And that...

Grain Belt contends that Phase 1 will increase resilience for the SPP, MISO, and AECI Balancing Authority Areas (BAAs) by allowing the potential of one BAA to import a large amount of power from another BAA to bolster system reliability and improve the ability of each BAA to recover after a power failure.

That's right... GBE does connect to SPP. Someone at FERC overdosed on contradiction cookies while writing that order.

But it doesn't stop there, and the rest of them are not so inconsequential.

In the 2014 Order, the Commission directed Grain Belt “to make a filing disclosing the results of the capacity allocation process within 30 days after the close of the open solicitation process.” Grain Belt did not submit a compliance filing during the required timeframe and, as such, has not satisfied the conditions of its initial grant of negotiated rate authority. Grain Belt indicates that it will seek approval of the Initial TSAs in a future compliance filing. Given the Project changes described in the instant filing and the passage of time, the Commission will conduct a de novo review of the Initial Open Solicitation and the Initial TSAs at such time as Grain Belt submits a filing providing sufficient detail to evaluate whether the capacity allocation process satisfied the Commission’s requirements.

FERC acknowledges that GBE did not follow its order, but says that doesn't matter. Why even bother with the 30 day deadline if utilities don't have to follow it, but can take 8 years or more to make a required filing under a different order? FERC has turned itself into a paper tiger. Anyone can violate any FERC order it likes in the future and suffer no repercussions. Hear that, market manipulators? FERC says you can break its rules whenever you like and there will be no penalties. Ridiculous!

And here's the worst leap of logic in the whole thing...

GBE says it was not required to get FERC's approval for the sale of the project (and its Negotiated Rate Authority). The Illinois protestors say that approval was required and made extensive arguments to support their contention. And what did FERC do? It chucked that whole argument because it ruled that GBE's prior negotiated rate authority does not exist because they reviewed and granted new authority de novo. That makes the entire argument moot and FERC does not need to make a decision on whether it should have approved the sale.

Given that we are reviewing Grain Belt’s filing de novo, we find moot protestors’ argument that Grain Belt may not rely on the Commission’s prior grant of negotiated rate authority in the 2014 Order because Grain Belt failed to obtain section 203 approval. Our findings here are based on Grain Belt’s current ownership structure and project design, and thus do not turn on whether prior section 203 authorization was required for either Invenergy’s acquisition of Grain Belt, or the transfer of Grain Belt’s negotiated rate authority.

And then FERC says:

Grain Belt’s request for continued authority to sell transmission rights at negotiated rates is hereby granted in part, as discussed in the body of this order.

But the Commission tossed its 2014 order finding that GBE met all four factors and its new order only finds that GBE complies with two. GBE lost serious ground here. FERC was not snowed that it should simply rubber stamp a renewal of the 2014 order. GBE is going to have to go back to square one and prove factors two and three all over again... if it can.

And here's another easter egg for FERC... GBE said approval for a sale is only required if the sale was made AFTER the project was energized. Therefore, GBE won't actually have to get approval of any sales it makes before the project is in service, which includes all the sales it intends to make now during its sale of capacity and undivided interests in the project. Again... FERC says do whatever the heck you want, GBE, we'll settle up later. The only hazard there is one for GBE... perhaps a different group of Commissioners and staff is going to be scrutinizing your compliance filing after you finish selling your project, and maybe they don't have such a permissive style of regulating based on one administration's push for "clean energy". GBE is cocked and ready to make as many fatal mistakes as necessary... well, if anyone is even interested in buying transmission capacity from Kansas to Missouri. Will they be interested in a $7B project from unspecified generators to a connection point in Missouri that may be ready in 2030 when MISO is building a competing project that costs a lot less and is scheduled to be online in 2028?

Have at it, GBE, but watch your back, FERC's not done with you yet.

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As The Dollar Turns

2/24/2024

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Cost allocation for PJM's 2022 Window 3 projects has now officially turned into a long-running soap opera at FERC, and eventually through the courts.

Last year, PJM solicited new transmission to solve future issues with the retirement of 11,000 MW of existing generation in the eastern part of its region due to state "clean energy" policies, and the addition of 7,500 MW of new data center load concentrated in Northern Virginia. In December, PJM selected and approved a huge portfolio of new transmission that looks like this.

You don't need to be a transmission engineer to notice that the majority of the new lines have a concentrated end point -- data center alley in Loudoun County, Virginia. Power from southeast and southwest Pennsylvania (feeding from huge coal-fired plants in West Virginia) and power from central Virginia is being piped into data center alley on new transmission extension cords. In the eastern portion of the map, power from southeastern Pennsylvania is being piped into the Baltimore area via new transmission extension cords. The destinations for the new power is directly tied to PJM's statement of need -- new power for data centers and to replace closing coal-fired plants in the Baltimore area. These are the causers of the new transmission.

In January, PJM made a filing at the Federal Energy Regulatory Commission (FERC) to allocate the more than $5B cost of this new transmission according to its regional cost allocation formula for big, regional lines. Lines needed for regional reliability are allocated 50% to all load-serving utility zones across the region based on each zone's share of peak load for the preceding year. The zones with the largest load receive a bigger share of this 50% of the cost of the lines. The other 50% of the cost is allocated based on zones who will use the new lines. Here's a map of PJM's utility zones.

PJM's territory is vast and stretches from the east coast as far west as Chicago, and as far south as North Carolina. Under the 50% to load allocation, the ComEd zone around Chicago uses the most power so therefore it receives the largest share of these costs. What benefit is Chicago getting from data centers in Virginia or "clean energy" in Maryland? The correct answer is... zippety do dah! However, the old thinking goes that since PJM is a connected region, any threat to reliability anywhere in the region could black out the entire region. Therefore, everyone "needs" transmission to ensure reliability.

The old thinking also went that load increased incrementally around the entire region, with it being impossible to finger just one region for increased load, therefore everyone paid for regional increases in load. It was too hard to measure exactly where load was increasing over time, and no new user created an outsized increase in load that could be isolated and allocated to the cost causer. PJM cannot be changing its cost allocations constantly every time a new industrial plant asks for a connection, and these new users didn't cause a huge jump in power use when compared to the amount of power flowing across the region.

Toss that old thinking out the window! PJM's latest portfolio of projects CAN be tied to just two things... closing baseload generators in eastern PJM and increased data center load concentrated in a tiny spot on PJM's vast map. And what is causing that? State "clean energy" policies that require the closing of existing fossil fuel baseload generators and prohibit their replacement with similar generators that can produce hundreds of megawatts of electricity when needed. Replacement with renewables is a fairy tale. Renewables take too much land for the amount of power they produce, and the power they produce is not reliable. It takes many more megawatts of renewable power to equal one megawatt of fossil fuel power because renewables are such weak generators and they are intermittent and cannot be relied on to produce power when needed. If we rely on renewables to keep the lights on, we're only kidding ourselves. We cannot build enough renewables to take the place of all the fossil fuel generators in PJM that keep the lights on. Here's a graph showing the source of PJM's power this morning that is powering this computer, and everything that's making your Saturday happy.

Without coal, gas and nuclear, we wouldn't have electricity. This isn't a one-off, PJM's graph looks like this on a daily basis. If we are ever going to get to zero carbon, we need to start building lots of nuclear power... yesterday. Wind and solar and "other renewables" are not going to get there... EVER. PJM has no control over power generation. It only has control over transmission to get available power to load. Generation is a state issue... except we deregulated it years ago so the states have no control over it either. Generation is controlled by market, that is when it's profitable to build new generators, the market will inspire new builds. However, PJM steps in long before the market can actually work and builds transmission to ensure reliability. In certain states with "clean energy" policies, it is impossible to build new fossil fuel generators. And it doesn't help that Big Green is putting pressure on existing generators to retire early with threats of lawsuits. It's accelerating, and we are so screwed! When The Sierra Club is in charge of your power supply you should be frightened. They have but one goal... to shut down fossil fuels. They have no responsibility to keep the lights on.

Now that I've set the table (or maybe it was just a rant), let's get back to PJM's cost allocation filing. PJM makes numerous filings like this every year, and other regional grid operators do as well. It's usually routine... filing is made and FERC rubber stamps it. Sometimes a few entities will file objections, but they are rarely sustained. Once, about 20 years ago, numerous states objected to PJM's cost allocation for its Project Mountaineer transmission projects. These 500kV projects were for the purpose of increasing the use of coal-fired electricity in eastern PJM by 5,000 MW, and states in the other parts of PJM objected to paying for them. That case (Illinois Commerce Commission v. FERC) ended up at the 7th Circuit Court of Appeals... twice... before PJM adopted its current cost allocation methodology. The Court said that FERC had to demonstrate that the costs of those projects were allocated to the cost causers. Since then, things have settled down.

However, PJM's latest projects have lit another fire that is probably going to burn as bright as the last one. Something extraordinary is happening in PJM's cost allocation FERC docket. In addition to the comments filed by consumers, and the protest of the Maryland Office of People's Counsel that more of the cost should be allocated to Virginia than Maryland, last week the Virginia State Corporation Commission filed comments basically calling Maryland a hypocrite and stating that Maryland is equally to blame for these new transmission lines. I tend to agree... that both Maryland and Virginia are hypocrites! These are the two states causing all the "need" for new transmission lines that will be paid for by other states.

But it's not going to end there... a giant parade of entities have intervened in this case at FERC. Being an intervenor means you are a party to the case. Only parties have standing to request rehearing at FERC and eventually appeal the case in federal court.

Intervenors include:

FirstEnergy (utility building some of the new lines)
New Jersey Board of Public Utilities
American Electric Power (utility building lines)
Dominion (utility building lines)
Exelon (parent company of utility building lines)
Delaware Division of Public Advocate
PPL (utility building lines)
Calpine (generation company)
Rockland Electric (utility in PJM assigned costs)
Duquesne Light (utility assigned costs)
New Jersey Division of Rate Counsel
Old Dominion Electric Co-op (utility assigned cost)
Organization of PJM States
North Carolina Electric Membership Corp. (utility assigned cost)
Pennsylvania Office of Consumer Advocatte
Maryland Office of People's Counsel
Maryland Public Service Commission
PSEG (utility building lines)
West Virginia Public Service Commission
Southern Maryland Electric Co-op (utility assigned costs)
Pennsylvania Public Utility Commission
Dayton Power and Light (utility assigned costs)
Ohio Consumer's Counsel
American Municipal Power (utility assigned costs)
Long Island Power Authority (utility assigned costs)
Virginia State Corporation Commission
Northern Va. Electric Co-op (utility assigned costs)

That's a lot of intervenors! Many more than a normal FERC docket. You may even be able to sort them into "camps" based on whether they are entities that will pay these costs, or whether they are entities that will benefit financially from building these projects. It really sucks when they can be placed in BOTH camps, such as the utilities assigned costs that also benefit from building new projects. Do you think these entities will side with their ratepayers against being assigned costs for these projects, or will they side on gladly accepting costs because their financial interests are greater than their public utility responsibilities to their customers?

So, what happens next? There may be more intervenors and more comments, but eventually FERC will issue an order. No matter what FERC decides, one "camp" or the other isn't going to like it. That camp will file for rehearing. FERC will reconsider the matter and issue another order. One camp won't like that and will file an appeal in the federal circuit court(s) of appeal. The Court will decide the matter and remand it to FERC with instructions to issue a new order that comports with the Court's instructions. Once FERC issues the new order, it may be appealed again, and back to the courts it goes. One camp may decide to appeal the federal court's order to SCOTUS. It's going to drag on for years, like a bad soap opera.

Meanwhile, PJM will continue to pursue its projects. If any cost allocation adjustment are made due to the appeals, that's a money issue that will be taken care of through rates. The utilities assigned to build these projects will file applications for permits to construct with some of the intervening states. Think about how that will go... If a state denies a permit, permitting may be bumped up to FERC under new backstop permitting laws created by the Infrastructure Investment and Jobs Act in 2021. The longer the permitting process for these projects, the higher their costs climb.

And what about those costs? Will the possibility that zones in Virginia and Maryland are eventually assigned more of the costs become a risk factor that will impact the need for these projects in the first place? Will data centers want to continue to build in Virginia and accept the risk that the cost of their electricity is going to skyrocket in the future when the legal cases are finally settled? Or will they decamp to cheaper pastures without the risk? (Don't let the door hit you in the ass on the way out!). And what about Maryland? Will skyhigh electricity costs cause Maryland to re-think its clean energy policies that prohibit the building of new fossil fuel plants? Will Maryland begin a nuclear generation renaissance that could be equally expensive?

Those are the only changes that will make a difference in PJM's load forecast, but getting there will be rough. PJM never changes its mind, once it is made up. FERC should require PJM to create a new cost allocation method for new transmission due to state "clean energy" policies that is involuntarily allocated to the states whose policies cause the new transmission. PJM should also create a new cost allocation policy dealing specifically with data centers. This relatively new electric user stands out as a huge load that must be separated from normal, incremental load increases. Data centers use so much power, they are in a class by themselves. While FERC cannot allocate costs directly to data centers, it can allocate costs to the zones in states where the building is causing need for new transmission. It would then be up to the state whether to spread the costs of the transmission among all users, or allocate it to data centers directly. Whatever happens, it won't be an easy decision, and someone isn't going to like it.

Probably you. Your electric bill is going to skyrocket.

Be sure to tune in to our next episode when FERC issues an order on PJM's cost allocation filing... this is going to be the longest running soap opera in history!

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