In its Order on PATH's abandonment filing last week, FERC tossed thousands of opponents of the Project Mountaineer transmission line projects a bone.  It won't reimburse you for all the time and money you've invested fighting transmission projects that were never needed in the first place, and it won't unbuild the TrAIL Project or make affected landowners and consumers whole, and it won't stop the unneeded Susquehanna-Roseland Project from continuing to proceed with stunning haste.  But if a little validation and personal satisfaction makes a tasty snack for you, here's your bone:

"The PATH Project concept was originally introduced by PJM in May 2005 at a Commission technical conference as Project Mountaineer- a major east-to-west transmission corridor.  In early 2006, AEP and Allegheny separately filed petitions for declaratory order with the Commission requesting transmission incentives to build this multi-corridor concept in their respective zones in Docket Nos. EL06-50-000 and EL06-54-000,  respectively. The Commission affirmed abandoned plant recovery for the proposals subject to approval in the PJM Regional Transmission Expansion Plan (RTEP) and requiring a future section 205 filing, among other things. On June 27, 2007, PJM’s Board of Directors approved the projects for inclusion in PJM’s RTEP, changing the route and scope from those originally conceived, combining portions of both AEP and Allegheny’s projects into a single project (the PATH Project) with a requested completion date of June 2012."

That's right... FERC says that the PATH Project (and TrAIL, MAPP and Susquehanna-Roseland) originated as a concept in 2005.  The Commission technical conference referred to is what we've been calling "The Coal Love Fest."  Its goal was to increase the use of coal-fired resources.  It wasn't about increased demand, congested transmission lines or reliability.  It wasn't until 2007 that PJM created the reliability violations that caused a "need" for the PATH Project under the guise of reliability and "ordered" AEP & Allegheny (now FirstEnergy) to build PATH.

1.    Project Mountaineer.
2.    Creation of PATH Project concept.
3.    Creation of "need" for PATH Project.

Nibble slowly, PATH opponents.  It's all you're going to get.

Of course, this isn't news to any of you.  We've been telling you this for the past 4 years.  But now FERC agrees with us.

The PATH Project is a bit of ugly and expensive history now.  However, the lesson could live on.

PJM, FERC and the midwest wind industry are busy concocting a new Project Mountaineer right now but instead of coal, this time it's about moving "midwest wind" to both coasts via $300B of new transmission lines.  We don't need that anymore than we needed Project Mountaineer in 2005.  Those who fail to learn from history are doomed to repeat it.  Consumers can't afford another expensive mistake.

In an order issued today, FERC set the prudence of every last penny of PATH's claimed $121.5M of abandoned project cost for settlement and hearing.

What this means is that despite PATH's claims in their abandonment filing that all expenses were prudently incurred, and although PATH enjoys a presumption of prudence, contentions and evidence submitted by intervenors in the case raised enough doubt to set the matter for a trial-type evidentiary hearing by a FERC Administrative Law Judge.

FERC found that PATH had not demonstrated the prudence of costs it incurred while trying to site and permit its project.  Every issue raised by intervenors was set for settlement and hearing.  Intervenors raised doubt in every category of cost, therefore, the entire cost will be examined.

The only point PATH won was the finding that abandonment of the project was beyond the company's control (blamed on PJM).  Therefore, PATH can collect abandonment costs that are prudent.  The prudence of PATH's expenses will be examined to determine the amount they will be able to collect from ratepayers over the next 5 years.

The ordered hearing has been held in abeyance so parties can attempt a negotiated settlement before spending time and money on a hearing.  Settlement conferences will be conducted at FERC, administered by an Administrative Law Judge, and are confidential, so don't expect to be reading any news about what's going on in settlement.  Settlement could last a while.

In addition to the prudence of expenses, FERC also set the issue of PATH's disposal of land for settlement and hearing, where certain controls can be placed on how PATH disposes of land it currently owns.

FERC also found that PATH is no longer entitled to the 50 point adder for continued membership in PJM because the PATH Project will never be built and turned over to PJM, which was the intent of the incentive.  The extra half percent interest that this incentive adds to a transmission project's ROE has now been attached to the specific project.  If the project is not built and turned over to the RTO for control, then it cannot be continued.  PATH was at a distinct disadvantage here because the company had only one project.  When the one and only project died, there was nothing to turn over to PJM.  This reduces PATH's ROE to 10.4% (from the previous 12.4%).  The PATH project has now lost ALL their above-cost incentive ROE adders.  No rewards for failure, PATH!

FERC was not convinced to consolidate the abandonment with the ongoing formal challenges settlement and hearing in its Order.  Instead, the Commissioners punted that off to the Chief Administrative Law Judge to decide in the future.

In addition, FERC determined that PATH had made errors in its proposed changes to the formula rate and erred in transferring abandoned plant to create a regulatory asset.  FERC ordered PATH to correct its accounting mistakes, submit additional detail of project costs for which PATH had requested a waiver, and resubmit its proposed rate within 30 days.  Merry Christmas, PATH!  :-)

PATH has been reduced to nothing but a contentious battle about money.  But isn't that what it's always been about?

One of PJM Interconnection's purposes is to provide reliable power at the lowest possible price.  As part of its attempt to accomplish this goal, PJM plans for transmission "enhancement" and administers an artificial market construct that is supposed to foster competitiveness that will ensure market prices for electricity are "the lowest possible."

Although PJM can order new transmission to artificially adjust electricity markets, they cannot order new generation to shape the market.  This unbalanced "market" is what set up the investor owned incumbent utility transmission feeding frenzy we've had to put up with over the past few years.  Instead of ordering new economic generation near load, PJM orders expensive new transmission lines that source from existing generation farther from load.  PJM believes that "the market" (that is the REAL economic market, not PJM's artificially constructed and controlled market) will stimulate new generation without interference.  However, PJM will not rely on "the market" to drive transmission expansion.  If they did, would the lights go out while we wait for "the market" to catch up?  PJM thinks so.

Because PJM cannot order new generation, the states of New Jersey and Maryland took matters into their own hands and ordered new generation in their own states.  This upset PJM, the Market Monitor, and the incumbent generators, who have been scheming to actually prevent new generation.  So much for allowing "the market" to encourage new generation.

PJM "ordered" four new high capacity long distance transmission lines between 2006 and 2008 in order to increase the use of coal-fired resources.  These lines were supposed to bring lower cost electricity to the east coast, instead of waiting for "the market" to encourage new east coast generation.

The lines were economic projects, designed to decrease the "congestion" on existing lines that prevented the import of additional coal fired generation to the east coast during peak load.  However, PJM also floated these projects as reliability projects, insisting that eastern load would continue to attempt to draw cheap coal fired power from the west over congested lines until the lines simply overheated and failed, pitching the entire region into the dark.  That would never have happened because the east coast had plenty of their own generation, albeit more expensive (at the time) gas fired generation, that would increase prices when relied on to support peak load.

In order to decrease prices on the east coast through the building of these new lines, the cost of the lines is shared by all consumers in the entire PJM region.  The east coast only paid a fraction of the cost of the lines that lowered their prices.  And, in fact, the lowering of prices on the east coast by building new transmission actually increased prices in the western region by providing new markets for previously constrained generation.  Eliminating "congestion" serves to levelize prices between different markets.

But, something amazing happened between 2006 and 2012.  Demand for electricity on the east coast tanked due to increased energy efficiency and demand side management.  By shaving peak load, the east coast made great strides to solving the "problem" of not having access to cheaper, western coal fired generation.  Something else happened during that time as well.  Shale gas flooded the market, opening up a cheap, plentiful, new supply of natural gas that lowered the cost of previously expensive gas fired generation on the east coast and motivated new gas fired generation builds near east coast load.

The combination of decreased load and more economic east coast generation completely obviated PJM's "need" for the four new transmission lines.  Unfortunately, TrAIL had already been built at enormous cost and personal sacrifice by the people of West Virginia.  However, two other projects, PATH and MAPP, have finally been abandoned by PJM and won't be built.  But, the PJM consumers will still pay for these abandoned projects they never wanted and no longer need.  PJM's transmission planning has failed on a massively expensive scale.

But I've only accounted for three of the four projects thus far.  The last one is PSEG & PPL's struggling Susquehanna Roseland project in Pennsylvania and New Jersey.  Although there is no economic or reliability need for this project anymore either, the project owners and PJM continue to insist on constructing it at enormous cost to consumers, landowners and the citizens who own the Delaware Water Gap National Recreation Area.

PSEG & PPL read the economic writing on the wall over the past few years and stepped up their efforts to ramrod their project into reality by making it "too big to fail" even though the economic justification for it had evaporated.  The companies still claim that S-R "will save consumers $200M per year in congestion costs," therefore it is urgently needed and justifies enormous cost that will raise electric prices, take land from property owners, force those living in close proximity to risk their health being bathed in the line's continuous EMF soup, and destroy a priceless and irreplaceable national park.

In order to do so, PSEG & PPL bribed towns and landowners with "mitigation" payments and began a lobbying program that reached all the way to the White House with the goal of obtaining the approval of the National Park Service.  The cost of all this, of course, will be borne by all consumers in PJM.

Last week, I watched FERC Commissioner Moeller extoll the virtues of new transmission while disparaging the efforts to hinder Susquehanna Roseland, a project that "would save consumers $200M a year in congestion costs," according to Commissioner Moeller.

So, where did that congestion figure come from?  PJM and the project owners floated it at the time the project was approved, many years ago.  Does that figure still bear any resemblance to reality?  No. The "congestion" driving S-R has evaporated.  The building of S-R will actually cost consumers more than any subset of consumers will ever save on their electric bills.  Whether or not there is a "reliability" need for this project I really can't say, but if there is one, a simple rebuild of the existing line may suffice to fill that void.  S-R as planned is overkill.

Every quarter PJM's Market Monitor publishes a "State of the Market" report.  The one for the third quarter of 2012 was released the other day.  The report has a section about "congestion."  If S-R was still going to save consumers "$200M per year" that information would show up in the report.  It does not.

The SOM report says, "The AP South interface was the largest contributor to congestion costs in the first nine months of 2012. With $50.9 million in total congestion costs, it accounted for 12.0 percent of the total PJM congestion costs in the first nine months of 2012.
The top five constraints in terms of congestion costs together contributed $112.5 million, or 26.5 percent, of the total PJM congestion costs in the first nine months of 2012. The top five constraints were the AP South interface, Graceton – Raphael Road transmission line, Woodstock flowgate, Belvidere – Woodstock line and Clover transformer."

None of these congestion contributors is located anywhere near the Susquehanna Roseland project area.  And the biggest contributor to congestion costs is $50.9M per year, not $200M.

The SOM report also provides a nifty map on page 221 that shows congestion points.  There's no congestion showing up in the geographic area where S-R is being constructed.

Need and justification for Susquehanna-Roseland have completely evaporated.  If the project is abandoned now, or reconfigured to more closely align with any actual need, the cost to consumers will be dramatically lowered.  Stop constructing this project now.  Just stop.  Consumers can't afford PJM's artificial markets and planning failures any longer.  Stop it.

Yesterday, FERC issued a Policy Statement intended to further refine their policy for awarding financial incentives to transmission projects.  The Policy Statement was the Commission's response to the extensive, 42-page, 74-question Notice of Inquiry it issued in May of 2011.

The financial feeding frenzy has been scaled back for now and transmission owners have had their bag limits on consumer wallets reduced.

If you want the quick and dirty summary, here's FERC's press release.

If you want to know exactly what was in the Policy Statement, read on.

"In particular, the Commission: reframes its nexus test to focus more directly on the requirements of Order No. 679; expects applicants to take all reasonable steps to
mitigate the risks of a project, including requesting those incentives designed to reduce the risk of a project, before seeking an incentive return on equity (ROE) based on a project’s risks and challenges; provides general guidance that may inform applications for an incentive ROE based on a project’s risks and challenges; and promotes additional transparency with respect to the impacts of the Commission’s incentives policies."

1.  "The Commission will no longer rely on the routine/non-routine analysis adopted in BG&E as
a proxy for the nexus test."

What this means:  The nexus test requires an applicant for incentives to demonstrate a connection between the incentive(s) requested and the risks and challenges that a project faces.  Previously, once an applicant demonstrated that a project was not routine, the nexus test was satisfied and the project was deemed to face risks and challenges that merit incentives.  In the refined policy, FERC tosses out the routine/non-routine analysis and will require project applicants seeking incentives to demonstrate how the total package of incentives requested is tailored to address  demonstrable risks and challenges and must provide sufficient explanation and support to allow the  Commission to evaluate each element of the package and the interrelationship of all elements of the package. If some of the incentives would reduce the risks of the project, that fact will be taken into account in any
request for an enhanced ROE.  In short, applicants will have to do more to demonstrate risks and challenges that merit incentives.

2.  "The Commission expects incentives applicants to seek to reduce the risk of transmission investment not otherwise accounted for in its base ROE by using risk-reducing incentives before seeking an incentive ROE based on a project’s risks and challenges."

What this means:  A transmission's base ROE (the interest a project earns on its investment) is already set to account for the riskiness of transmission investment.  However, when a transmission project is riskier than a "normal" transmission project, it can be granted additional incentives to compensate for additional risk.  However, a project must request and utilize risk-reducing incentives before requesting an incentive ROE (extra interest) on a particular project.  A project owner must show how their project is riskier than "normal" and then how certain risk-reducing incentives will compensate for or reduce risk.  If the project is still so risky that risk has not adequately been reduced through the base ROE and risk reducing incentives, it may also request further risk compensation in the form of an enhanced ROE (extra interest).  The Commission is getting tougher judging risk and the need for a full spectrum of every available incentive.  No more using the same risk as the basis for every incentive.  Each incentive granted will reduce risk and a company would have to prove further risk that has not already been compensated for with other incentives in order to be awarded an incentive ROE.

3.   "Investments in the following types of transmission projects may face the types of risks and challenges that may warrant an incentive ROE based on the project’s risks and challenges that are not either already  accounted for in the applicant’s base ROE or could be addressed through risk-reducing incentives:

1. projects to relieve chronic or severe grid congestion that has had demonstrated cost impacts to consumers;
2. projects that unlock location constrained generation resources that previously had limited or no access to the wholesale electricity markets;
3. projects that apply new technologies to facilitate more efficient and reliable usage and operation of existing or new facilities."

What this means:  I think it's pretty self-explanatory.

4.  "The Commission will no longer consider requests under Order No. 679 for a stand-alone incentive ROE based on an applicant’s utilization of an advanced technology."

What this means:  No more incentive ROEs based solely on advanced technology, this will be considered as part of a project's risks and challenges (see 3 above).

5.    "Risks may be reduced through the risk-reducing incentives described in section II.B, or through mitigating costs by implementing best practices in their project management and procurement procedures. Applicants should consider taking measures tailored to mitigate the various risks associated with their transmission projects and to identify such measures
in their applications."

What this means:  Transmission Owners need to stop creating risks through poor management or bad choices and then asking to be compensated for it.

6.   "The Commission expects applicants for an incentive ROE based on a project’s risks and challenges to demonstrate that alternatives to the project have been, or will be, considered in either a relevant transmission planning process or another appropriate
forum. Such a showing should help identify the  demonstrable consumer benefits of the proposed project and its role in promoting a more efficient, reliable and cost-effective transmission system."

What this means:  No more PATHetic projects!  An applicant must demonstrate to the Commission how its project was compared to alternatives and found to be the most cost-effective solution.  Of course, a showing could be that an RTO/ISO has made this determination.  And since RTO/ISOs are nothing but industry cartels that will choose the projects of their favored incumbents and then make up a justification to support their choice afterward, this really doesn't solve the problem.  However, the transmission owner now has to convince the Commission that it was done properly.

7.   "The Commission expects applicants for an incentive ROE based on a project’s risks and challenges to commit to limiting the application of the incentive ROE based on a project’s risks and challenges to a cost estimate."

What this means:  Any incentive ROE will only be applied to a project cost amount that was used to determine the project's cost effectiveness as evaluated by an RTO/ISO.  So, say a project is found to be superior to other alternatives at a certain price when evaluated by an RTO/ISO, and then is awarded an incentive ROE by FERC.  The project can no longer apply the incentive to amounts that go over budget.  Historically, projects have floated bogus cost estimates at RTOs in order to get projects approved, and then spent a lot more actually building the project, and collected extra interest on the overspend.  This situation perpetuated the "the more you spend, the more you make" scenario that has plagued transmission projects and is breaking consumers while unjustly enriching transmission owners and contractors.  The Commission also gives a nod to SPP's cost containment proposal submitted in comments as a reasonable example.

While these are generally positive changes, they don't go nearly far enough and completely fail to tackle the underlying problems with FERC's transmission incentives policy.  FERC has merely set the stage for another long, slow decline toward lazy rubber stamp approval of ridiculous incentive packages that cause consumer concern.  The PATH project was the impetus for the NOI and the refinement handed down yesterday.  How long before another PATH happens?

I'm not sure what happened between FERC's rather auspicious and ambitious beginning in issuing such a great NOI, and this Policy Statement that feels like a punt.  It could be that there was too much controversy among the Commissioners.  It could be that there was too much political pushback from a greedy industry.  And don't forget those personal visits to the Commissioners from transmission owning CEOs.  Whatever happened, it looks like the Commission lost their nerve and took what they feel is the easy way out.

See statements of Commissioners Norris and LaFleur here.  It's interesting that they didn't publish a statement from Commissioner Moeller, since he had plenty to say yesterday.  Maybe he's part of the problem.  Wellinghoff didn't have much to say about it, and Clark was not participating.

It seems like the Commission was afraid if they came down too hard on transmission incentives that they would stifle investment.  However, they have quite effectively managed to do just that with their Policy Statement.  Which transmission owner do you think is going to be brave enough to step into the void and be the first to apply for incentives under the refinement (which was effective yesterday, btw)?  Not a one of them.  They're all going to hang back and wait for someone else to poke the first stick into the lion's cage so they can begin the process of finding ways to work around well-intended changes in order to continue to unjustly enrich themselves building unnecessary transmission.

I guess if Congress really wants transmission incentive policy reform, they're going to have to do it themselves through amendments to the Energy Policy Act.  I can only wish them luck.

PATH never could resist having the last word in any argument, even if doing so burned PATH like a moth circling too close to an enticing flame.

PATH didn't disappoint today and filed a second "response" to the answer of one of the other parties to PATH's answer to protests of its abandonment filing at FERC.

Old Dominion Electric Cooperative filed an answer to PATH's answer last week pointing out that PATH was only remaining a "member" of PJM in order to collect an extra half a percentage point of interest over the amortization period.  Since PATH does not plan to own any transmission that would receive benefit from a PJM membership, the extra interest to be derived from this "membership" is just another way to gouge consumers without any corresponding benefit.  ODEC also pointed to PATH's ridiculous contention that its parent companies' memberships in PJM entitled PATH to receive this benefit.

What is it that PATH fails to understand here?  Sec. 219 of the Energy Policy Act directs FERC to "provide for incentives to each transmission utility or electric utility that joins a Transmission Organization."  Now that PATH's project is abandoned and PATH has no plans to own any other transmission, ever, PATH is no longer a "transmission utility or electric utility."  Therefore, PATH is no longer eligible to retain this incentive.  Does someone need to draw PATH a picture?  Any further answers or responses should include artwork, preferably in crayon.

In their "response" today, PATH rambles on accusing ODEC of conflating and confusing PATH's answer.  Fail!  Considering that I read the same thing in PATH's answer that ODEC did, chances are that the Commission will also read it that way, despite PATH's suicidal attempt today to rehabilitate its own bleary legal work.  And speaking of bleary legal work... who is the "Virginia Service Corporation Commission" that PATH mentioned in their "response" today?  Any parties here by that name?  Didn't think so.  Thanks for the laugh, PATH!  Watch out for that fire, it's hot!

Although FERC rules prohibit an answer to a protest, PATH has 121 million reasons to ignore the rule and waste everyone's time simply rehashing and reiterating its original section 205 filing to collect its stranded $121M investment in its failed PATH project.  Exceptions can be made by the Commission if the answer provides new information that informs the Commission's decision.  Did PATH bother to provide any new information in its answer?  Perhaps they should have highlighted any actual "new" information to make it more easily detected among all the flimsy excuses and incorrect information.

PATH tells the Commission that although it has the ability to suspend proposed changes to existing rates, that PATH's changes to the Formula Rate (which is PATH's rate) aren't changes to its rate after all.  PATH also urges the Commission to hurry up and approve the changes to its Formula Rate without hearing because PATH has submitted a fraudulent 2013 Projected Transmission Revenue Requirement that they need to revise before January 1, 2013.

PATH believes the Commission should summarily reject protests that the company had control over the abandonment of its project, otherwise, PJM's authority will be undermined!  Would that be a bad thing, really?  PJM's imprudent actions brought about by its Project Mountaineer initiative to build new transmission to increase the use of coal-fired resources, and intended to provide significant profit to its favored incumbents, has just cost millions of consumers in its region a quarter billion dollars for the failed PATH project alone, not to mention the additional amount wasted on the also-cancelled MAPP project.  How much more will PJM's erroneous and failed initiatives be permitted to steal from struggling electric consumers if this costly failure is swept under the rug and not examined?

PATH believes that it is entitled to receive an extra half of a percent interest on its abandoned plant during the amortization period.  The extra interest is a reward for membership in PJM.  PATH states that it intends to remain a member until the consumers finish paying for its project, although it does not intend to own any transmission during that time.  PATH is simply maintaining its membership to receive the extra interest.  Is this really prudent?  PATH whines that the Commission should not discriminate against it for the business structure it voluntarily constructed.  "Revisiting the 50 basis point ROE adder would deny AEP and FirstEnergy an opportunity to apply the ROE-based incentive adder to their abandoned plant investment in the PATH Project merely because of the business structure they chose as a vehicle for fulfilling the construction obligations assigned to them by PJM."  Bingo!  Ya know what, PATH?  Life ain't fair.  You set up that business structure voluntarily because it benefited you and now you're stuck with it.  Quit your sniveling and take your lumps.  Your parent company memberships in PJM do not make PATH eligible to receive this incentive either.  That was really PATH-etic!

PATH has 121 million excuses for why its spending wasn't imprudent.  After asking the Commission to set the issue of prudence for a hearing wherein the prudence of its expenses can be debated, PATH wastes page after page trying to justify its spending on things like property and option purchases.  So, PATH, do you want a hearing or do you want the Commission to rule here?  It's hard to tell.  PATH falsely accuses protestors of not providing any "basis or support" for prudence challenges and proceeds to neglect to provide any "support or basis" for its own contentions that the spending was prudent, except for the ridiculous assertion that AEP and FE routinely buy property before a permit is received.  PATH holds its parent companies up as the industry standard in the face of evidence showing that one of these same parents doesn't buy land prior to the issuance of a permit.  So, was AEP lying to the Department of Energy earlier this year or are they lying to FERC now?  Inquiring minds want to know.

PATH attempts to color all its property purchases the same.  The reality is that PATH was split into two different companies, PATH-West Virginia (owned 50-50 by AEP and FE) and PATH-Allegheny (owned 100% by FE).  PATH-WV made minimal land purchases for substation sites and was slower to option property.  However PATH-Allegheny purchased lots of property that had nothing to do with substations and was quick to option property long before the permit process had even begun rolling.  This is a distinction that most likely has roots in the two different corporate philosophies behind the PATH project.  Now AEP gets to help FE hold its little doggie bag of imprudence, however.  Didn't your mommy ever tell you that you will be known by the company you keep, AEP?

PATH goes out of its way to admit that its property purchases in River's Edge were for the purposes of forcing the release of a conservation easement.  PATH goes into a long diatribe attempting to justify its imprudent property purchases as cost saving measures.  Yes, that's right, if PATH had not attempted to nullify a conservation easement in which Loudoun County had invested taxpayer funding, it would have cost more to re-route the line around it (using the most destructive route possible in an attempt to make releasing the conservation easement and allowing PATH's preferred route look preferable).  This same theme continues in flimsy justifications for other purchases.  PATH claims if it had not bought certain properties, it would have had to route its line around them in order to avoid homes or other obstacles.  Is this what PATH told landowners?  That if they didn't prefer to voluntarily sell their property that PATH would simply route their line around the property?  No, of course not.  PATH told landowners that if they didn't sell voluntarily that the company would take the property by eminent domain or simply "run the line right over the top of your house."  So, now PATH wants to test its word against that of thousands of landowners?  Isn't this going to be fun?

PATH also points out to the Commission that other abandoned projects that requested much, much smaller recoveries were not RTO-ordered projects.  So, I guess PATH's point must be that when there is some risk to the transmission owner that spending is prudently curtailed.  However, in PATH's case it was a giant, bleeding spend-a-thon because PATH believed that ratepayers were on the hook for all of it.  Now when the specter of shareholders being responsible for some or all of PATH's spending spree rears its ugly head, all of a sudden the amount of spending becomes a big deal.  Don't you just love karma?

So, now it's up to the FERC Commissioners to wade through the facts presented and make a decision that ensures that PATH's rates are just and reasonable.

PATH wants FERC to consolidate its recently-filed request to recover capital in abandoned plant with outstanding Challenges to their expenses in 2009 and 2010 because "administrative efficiency strongly supports consolidation of all issues in Docket Nos. ER09-1256-000 and ER12-2708-000."

The same way oil and water mix to create koolaid, I'm sure.  Read the Motion Opposing Consolidation filed October 29.

In typical PATH fashion, the filing wasn't properly served on parties and wasn't properly docketed in ER12-2708-000, so here's your unofficial notice.

West Virginia Consumer Advocate Byron Harris has a bad case of Halloween-itis.  In his comments on PATH's abandonment cost recovery case at FERC, Harris said of PATH:  "If you set out a big bowl of candy, people are going to reach their hands into it," said Byron Harris, director of the Consumer Advocate Division of the Public Service Commission of West Virginia. "That's what they're doing."

If Byron thinks that the $121M is "candy" that PATH is eating, he's wrong.  The candy got eaten by landowners who sold or optioned property, fancy $500/hr DC lawyers who were only too happy to do PATH's dirty work, government-parasite contractor The Louis Berger Group, snake oil salesman supply company Contract Land Services, perfidious public relations contractor Charles Ryan Associates, gun-jumping land clearing company Supreme Industries, and many other companies and individuals that had their hand in PATH's candy bowl.  They ate the candy and PATH is left with the empty bowl, which they now want to refill at consumer expense.

The $121M Byron is protesting is PATH's money that they (over)spent, without a care in the world.  After all, FERC had granted them an incentive guaranteeing  recovery of whatever they spent.  PATH's project managers, gladhanders and schmoozers neglected to read the fine print, however.  The fine print said "... prudently-incurred expenses if project is abandoned through no fault of the company."

Ut-oh, PATH, UT-OH!

Yesterday was the deadline for parties to intervene, comment or protest on PATH's proposal to collect its $121M investment in the PATH Project.  This amount is in addition to the $95M PATH has already collected from consumers in 13 states and the District of Columbia since 2008.  In order to collect on the abandonment incentive they were granted by FERC in 2008, PATH has to prove that the abandonment was beyond their control and that all costs they propose to collect were prudently incurred.  The burden is PATH's.  Of course, other parties can intervene and protest PATH's contentions.

And then the flood gates opened.  Thirty parties have intervened and some have filed comments and protests.  Nine state PSCs and/or consumer advocates intervened.  Many filed comments or protests.

The consumer advocates of six states (PA, VA, DE, WV, NJ & MD) filed a joint motion and protest.  In their protest, the Joint Consumer Advocates question the prudence of PATH's expenditures, especially in the last few years in light of the fact that PATH misfiled applications, withdrew and tolled their cases numerous times, and PJM's continuing analysis of the project pointed to serious questions about the need for the project.  The JCA question PATH's $30M expenditure on land in light of the fact that they had no permits to build.  They point out that PATH's proposed 5-year recovery period for the $121M will end up costing consumers an additional $25,782,017 of carrying costs & return.  The JCA dispute PATH's proposed ROE, both the base ROE of 10.4% and the .5% PJM membership adder.  They do some math to show that the amount PATH spent on its project is more than 1,000% higher than similar transmission projects that have applied for abandonment.  They also point out that the Commission has set all these other cases for hearing and therefore must set PATH's for hearing as well.

The Illinois Commerce Commission filed a motion to intervene and comments.  The ICC takes issue with PATH's assertion that costs were prudently incurred.  The ICC wants the Commission to assert some control over PATH's sale or transfer of assets to maximize the sale proceeds, such as requiring PATH to sell them via public auction or requiring PATH to file FMV determination documents before a sale.  The ICC argues that PATH did not make a proper showing that its proposed ROE is just and reasonable.  They also bring up all the same old cost allocation arguments that aren't particularly germane to this proceeding, but still valid arguments.  Then they went a bit crazy talking about having the prudence of PATH's costs challenged yearly through the Formula Rate Protocols.  Obviously they don't understand the process or the fact that the bulk of the costs aren't going to change year to year and that perhaps they should have been involved in the process all along.  Just because PATH filed for abandonment does not mean ICC cannot monitor and challenge the prudence of costs in successive formula rate filings.  The process is still going to be there, and has been there all along.  But ICC isn't the only state that doesn't seem to understand FERC formula rates, and sadly none of the states seem inclined to learn the process.  As long as the states that supposedly protect consumers continue to fail to educate themselves and get involved in this process, transmission owners will continue to rip off consumers.  States complain that they do not have in-house expertise or funds to hire any so therefore they don't get involved.  It ain't rocket science, and if the JCA can get together to file a joint petition in this matter, what's stopping them from joining together to fund joint participation in formula rate filings on a yearly basis?

The Maryland Public Service Commission filed a protest and comments.  The PSC questions the prudence of PATH's expenses and other requests and asks that the Commission set the matter for hearing.  They also take the opportunity to continue their opposition to FERC's transmission incentives policy as "overly generous and incompatible with the risks faced by project developers," and suggest that FERC consider the quarter billion dollar waste of consumer money the PATH project represents as they continue their deliberations about the incentives Notice of Inquiry currently in progress.

The Virginia State Corporation Commission filed a motion to intervene and protest.  The SCC protests PATH's proposed 10.9% ROE and, like the ICC, contends that PATH did not make a showing to support it.  They further argue that that the risks and need to raise capital upon which PATH's original ROE was based have died with the project.  Then the SCC urges the Commission to compel an audit of PATH to ensure the prudence of the $121M to make sure PATH wasn't "throwing good money after bad."  That's what the Formula Rate Protocols are for - the VA-SCC should have been participating all along.  Now because the SCC hasn't been doing its due diligence, they want FERC staff to do it for them.  Perhaps the SCC should raise this issue with FERC enforcement staff because the Commission said in P. 27 of a recent order that only OE decides who to audit when.  The SCC also asks that FERC staff monitor PATH's sale and transfer of assets.

The Indiana Utility Regulatory Commission filed a motion to intervene and protest.  The URC states that PATH has not supported the prudence of their expenses nor explained why it kept moving toward completion of its project despite in-service delays.  They point out that PATH witnesses used the word "aggressive" six times in their testimony to describe the project schedule, but failed to provide a copy of the schedule.  URC believes PATH put the cart before the horse when they purchased land before receiving a CPCN in any state.

In addition, to the above, the Ohio Consumer's Counsel, the Pennsylvania Public Utilities Commission and the West Virginia Public Service Commission filed motions to intervene without comment or protest.

Four consumers from West Virginia and eight from Maryland also filed motions to intervene, some with protests.

Ken Sanders, Dave Fenstermacher, Catherine Combs, Ginny MacColl, Ricky Young, Lisa Jarosinski, Brent Simmons and Mary Ann Aellen from the Frederick area filed petitions to intervene.

Bill Howley of Chloe, WV filed a motion to intervene and protest.  Bill questions whether PATH's abandonment was beyond PATH's control and points out that PATH failed to disclose PJM trends and analysis that undermined their state CPCN cases.  Bill questions whether any of PATH's costs after 2009 were prudent due to PATH's failure to support their cases at the PSCs.  He questions PATH's purchase of the Kemptown substation property before fully exploring Frederick County's zoning requirements.

Patience Wait of Shepherdstown, WV filed a motion to intervene and protest.  Patience contends that PATH has not carried its burden in its filing.  Patience says "...there is evidence to indicate that PATH incurred excessive costs in order to manipulate state-level  regulatory processes, to try to create a sense of “inevitability” to the project and avoid rejection of their application – which would indicate, to a “reasonable person,” that PATH recognized its justification for the project was fatally flawed."  She documents her contentions with examples from each state, including PATH's February 25, 2011 purchase of property in Hardy County, WV (just 3 days before the suspension) and PATH's premature clearing of land at their Welton Springs Substation before PATH had a permit, a violation of WV law.

Alison Haverty of Chloe, WV, filed a motion to intervene and protest.  Ali contrasts PATH's continued project spending to PSEG's curtailment of spending on another project they subsequently abandoned.  Ali states, "PSEG didn't wait for PJM to do their thinking for them."  Ali also contends that PATH did not seek a refund for amounts paid prospectively to the NPS and NFS for the EIS process, after PATH delayed that process.  Ali contrasts PATH's lack of detail with the TrAILCo Prexy abandonment filing, where 10 pages of cost detail was included.  Ali asks the Commission to suspend PATH's rates and replace the tariff sheets at a later date.

Keryn Newman of Shepherdstown, WV, filed a motion to intervene and protest.  (exhibits to filing can be found here.)   Keryn states that the PATH project will cost consumers $242,559,680.48, nearly a quarter billion dollars and deserves the Commission's scrutiny.  She also raises the issue of PATH's recently filed 2013 Projected Transmission Revenue Requirement, which she calls "completely invented" because PATH has recently transferred all CWIP totals to a regulatory asset account.  She asks the Commission to suspend PATH's rates until this matter is settled.  Keryn contends that PATH had fault in the abandonment, bungled state permitting and made no showing of the prudence of their expenses.  She also contends that "a reasonable utility manager" would not have purchased property before receipt of a CPCN, and provides several examples of other utilities that do not purchase land until CPCN completes.  Among the examples are PATH parent AEP's transmission line construction time table.  Keryn provides a list of the properties PATH purchased or optioned and presents specific examples backing up her contention that, "PATH had ulterior motives for purchasing or optioning certain properties at inflated prices that had nothing to do with simply acquiring necessary ROW," including PATH's land purchases in the River's Edge subdivision and an inflated option price in Jefferson County, WV.  Keryn contends that PATH has serious accounting deficiencies, protests PATH's proposed ROE, and compares PATH's abandonment to other recent cases, showing that PATH's $121M expenditure was incongruent with other cases.

Old Dominion Electric Cooperative filed a motion to intervene and protest.  ODEC protests PATH's proposed ROE.

In addition, American Municipal Power and the North Carolina Electric Membership Corporation filed motions to intervene.  These are non-profit municipal electric cooperatives.

The PJM Industrial Customer Coalition filed a motion to intervene.  This "coalition" includes large, industrial power customers who will pay a portion of the rate set in this proceeding.

The following investor-owned utilities filed motions to intervene:  PSE&G, Dominion, Exelon, Rockland Electric Co. and LSP Transmission Holdings.

And, of course, the PJM cartel, the ultimate perpetrator of this whole stinking mess, filed a motion to intervene.

I don't envy the Commission here.  The thirty parties raised a lot of issues to be considered.  What is obvious here is that there's no way FERC is going to approve PATH's filing before January, which is the absurd contention Becky Bruner was making on PATH's 2013 PTRR "Open meeting" phone conference last week.  I wonder if she's still insisting to her PATH masters that collecting this $121M is a "sure thing?"

PATH made a filing at FERC today to collect their stranded investment in the PATH Project over a 5 year period.  This $121M is in addition to the $95M PATH will have collected from ratepayers through the end of 2012, and the $20M they propose to collect from ratepayers in 2013.  That's a total of $236M, for a project that was never built.  PATH even has the audacity to ask for a return on the abandoned project costs over the 60 month amortization period.

PATH says:

"The PATH Project was abandoned for reasons beyond the control of PATH LLC, the PATH Companies or their upstream owners, and the Commission previously determined that the PATH Companies may recover their prudently-incurred costs under such circumstances.
Accordingly, the PATH Companies seek authorization to recover abandoned plant costs over a sixty-month amortization period, including a return on the average unamortized balance under the transmission cost-of-service formula rates contained in Attachment H-19A of the PJM Tariff (“Formula Rate”), as revised herein, effective December 1, 2012. The abandonment plant costs for which the PATH Companies seek recovery are previously unrecovered costs incurred from January 1, 2008 through August 31, 2012, of approximately $121 million, subject to goingforward  accounting entries to reflect proceeds and costs associated with the orderly closing of transactions, including transfers or sales of land acquired by the PATH Companies for development of the PATH Project (“Abandonment Costs”)."

Read the whole 200 page filing here.