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FERC Orders PATH To Make More Refunds

1/18/2019

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What happens when a transmission company can't keep track of its own finances?  FERC to the rescue!  In the wake of FERC's Opinion No. 554 ordering PATH to refund all of its advertising, civic and political costs at issue in the formal challenge proceeding, PATH was ordered to make a compliance filing and refund report.  Except what PATH filed was incomprehensible gibberish.  FERC has tried valiantly to make sense out of it ever since.  PATH made additional compliance filings to correct previous errors which created nothing more than a huge quagmire of inconsistency.  That's pretty much standard procedure for PATH's accounting.  *I'm not sure these people know what they're doing!*
But FERC did not give up and run exasperated and screaming from the room.  I appreciate that.  FERC says
We find discrepancies between the General Advertising amounts reclassified by PATH in its Compliance Filings compared to the General Advertising amounts the Commission required PATH to reclassify in Opinion No. 554.

On compliance, PATH must eliminate all General Advertising costs from its recoverable amounts, or else specifically justify each item in light of Opinion No. 554.  In making the compliance filing, PATH must provide the journal entries to reflect the adjustments, and workpapers necessary to explain the accounting corrections for that FERC Form No. 1 input that references back to the journal entries; and the revised/corrected draft Form No. 1 inputs.
FERC has found further errors on PATH's part and ordered them corrected.  Let's put an end to this quagmire and drain the PATH swamp!

Meanwhile, PATH wants the Commission to approve its request to liquidate the $70M of profit PATH has accumulated and give it to the parent companies, FirstEnergy and AEP.  $70M!  For a transmission line project that never put a shovel in the ground.  That's quite a participation trophy!

But first, the Commission needs PATH to make a COMPLIANCE FILING detailing its post-Opinion No. 554 land sales.
Did you make a compliance filing, PATH?

No!  We don't need to!  We made an informational filing!

Are you sure you don't need to make a compliance filing, PATH?

No!  FERC meant an informational filing, not a compliance filing!

Where's our $70M?

It would almost be funny, if it wasn't so costly to ratepayers.

PATH has 30 days to make the compliance filing it should have made after its land auctions, and 30-days to make its compliance filing on the removal of advertising costs.  PATH has 60 days to make its refund report.  PATH was also ordered to wrap up its business at the Commission.  Won't we all be happy when PATH quits sliding its claws into our ratepayer wallets?  As much as I look forward to the twice yearly phone gab fests, I would like to see this done.  It's time to move on!
PATH must submit a compliance filing with the Commission describing either:  (1) its plan for ending its operations and a timeline for when it intends to file a notice of cancellation of its transmission formula rates, or (2) the type of “transmission or sale of electric energy” that requires its rates to stay in effect.  We direct PATH to submit this compliance filing within 30 days of the date of this order.  To the extent that PATH intends to unwind, PATH must make the appropriate filings under FPA section 205, as necessary, to implement this action.  PATH shall notify the Commission within 10 days of the date that the closing out of business is complete.
Can we get a hallelujah, brothers and sisters?

Except there's this... "Interested parties may “file comments on PATH’s compliance filing 30 days from the date PATH makes its compliance filing.”

And this...

"We note that PATH’s refund obligations may change as a result of further Commission orders in this proceeding."

Can PATH find its way out of the FERC maze and collect its $70M?  Or will FERC snatch it out of their hands before they get to the exit?  Stay tuned... 
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PATH's Long Run Costs Consumers Millions

8/22/2017

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Stop, hey, what's that sound
Everybody look what's going down
That's the sound of electric ratepayers taking a $7.4M kick in the shorts.

This afternoon, PATH auctioned off its last remaining properties in the tri-state area that it senselessly purchased for a high-voltage transmission line that was never built and never even needed.

PATH paid $8,714,553 for the seven parcels of land that were auctioned today.  The total auction sales today amounted to $1,240,100.  This leaves a delta of $7,474,453.  And who pays for that?   You do.  I do.  Every one of PJM's 65 million ratepayers pays a share.

But that's not all.  We've also paid PATH a return (interest) on these properties ever since they were purchased.  We continued to pay a return on these properties even after PATH was abandoned in 2012.  While PATH marketed and sold some of the properties it owned during the last 5 years, it never marketed the very expensive substation properties.  Instead, PATH told federal regulators it was going to transfer these properties to its affiliates "in the future."

Well, the future finally arrived today, and the Kemptown substation site was sold to the highest bidder.  PATH was so anxious to have the site that it paid $6,830,553 for it back in 2008.  Wanna know what it fetched at auction?  You're a glutton for punishment, aren't you?  The proposed Kemptown substation site sold for only $960,000.  That's a difference of $5,870,553.  I think perhaps PATH overpaid, and then failed to get a good price for it by complete and utter failure to market the property.  But why should they?  You picked up the tab, and the more PATH spent, the more it made.

PATH also sold a couple of lots on Big Woods Road.  It purchased the lots for $860,000.  The lots sold for $105,000.  That's a loss of $755,000.

PATH sold the last two of several lots it spent $4.5M purchasing at Rivers Edge Subdivision in Loudoun County for the purpose of trying to force the release of a conservation easement held by the county.  Lot 5, containing 17 acres, with a 500kV transmission line cutting it right in half, fetched a whopping $64,000.  PATH paid $285,000 for the same lot back in 2009.  That's a loss of $221,000.

Lot 12 in Rivers Edge, an irregularly shaped lot consisting of 43 acres chopped all to hell and back by the same 500 kV transmission line went for $111,000.  PATH paid $689,000 for it.  That's a loss of $578,000.

And, finally, just over half an acre of West Virginia property bisected by a subdivision road fetched a whopping $100.  Yup, that's right.  A piece of property PATH wanted so badly that it paid $50,000 for it has pretty much no value whatsoever.  Not only does the new owner get to pay taxes on their purchase, but also subdivision road fees.  What a bargain!  This property is a loss of $49,900, but I think we should be thankful that we didn't have to pay anyone to take it.

So, who bought these properties?  I don't know.  The bidders were identified only by numbers.  What will the new owners do with the properties?  Who knows... but I think one of them is still zoned agricultural...
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Nice touch holding the auction in the same hotel where PATH held its "Open House" meeting for landowners back in the fall of 2008.  Hey, remember when PATH made the Holiday Inn staff go outside and take away the table borrowed by the opposition to display literature?  Good times, good times.  Getting the stink eye from the two old farts in AEP logo polo shirts was just like old times, too bad they ran for their lives before we could stop and say "hi."

Is this what PJM means when they say, "PJM is charged with planning for the future so that consumers have the most cost-efficient power when they need it.  This solution is the most reliable and cost effective and will save consumers million in the long run."?  I'm pretty sure PJM said those same things about PATH.  And PJM was wrong.  And that's cost consumers millions in the long run.  And what a long, long, loooooong run it's been.
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Abandoned PATH Properties, Get Your Abandoned PATH Properties Here!

8/8/2017

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PATH is holding a fire sale this month on all those abandoned properties it purchased nearly 10 years ago.  Need a gigantic farm property that's not zoned for an electric substation? 
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How about a nice vacation cabin in West Virginia that's been sitting vacant and rotting for years? 
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Or perhaps you're in the market for a big lot in a very exclusive Loudoun County, Virginia, subdivision and you don't mind having high voltage transmission lines running through the middle of your property?
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Then don't miss these PATH absolute auctions on August 22 and August 23!

Finally, 5 years after the PATH 765-kV transmission line project was officially abandoned by PJM Interconnection and the PATH companies, the property PATH bought with your money is being auctioned off.  PATH has been marketing some of these properties for years, with no takers.  What kind of a property is marketed for 5 years with no offers?  What's wrong with these properties?  Buyer beware!

While actively seeking to build the project between 2008 and 2011, PATH purchased outright around $30M worth of real estate to be used as future substations and right of way for its transmission project.  Each property has some story attached that serves as an excuse for purchasing it way above its market value at that point in time.  Need an ending point for your project?  Purchase a farm zoned agricultural and then set about battling the county about re-zoning it.  Need to have a conservation easement lifted?  Purchase a bunch of property near the easement and then hire lobbyists to influence the governmental entity that holds the easement to release it.  See an opportunity property where the owners are struggling financially?  Purchase it now and worry about how you may use it later.  After all, it's not YOUR money, it's coming out of electric ratepayer wallets, and you're earning a big fat return on every dollar you spend.

How much return?  Well, initially, 14.3%, later 12.9%, later still 10.9%, even later 10.4%, and finally, 8.11%.  As long as you own those properties, you may collect the corresponding return on your investment from ratepayers. 

But when you sell the properties, you must credit the sale price to your unpaid balance upon which the return is calculated.  For example, if the balance of your investment is $100, and you sell a property that is included in that balance for $5, then your new balance is $95.  An 10% return on $100 is $10.  A 10% return on $95 is $9.50.  So, by holding onto your properties as long as possible, you will collect the maximum amount of return.  So it really wouldn't help your profit margin to sell these unneeded properties quickly.  You must hold on to them until the rest of the ratepayer debt is paid and a regulator orders you to dispose of them, then auction them off at fire sale prices and make the ratepayers pay all the auction and commission expenses off the top of the credit they will realize from the sale of property.  And then you can hope the ratepayers don't find out about it.

Whoopsie!!!

So, for all those PATH opponents who have been living in suspended animation for the past 5 years wondering if PATH was going to dream up another project to use those properties for a transmission line, you're released from your continuing torture.  The PATH companies are finally going away and won't be using the properties for a future transmission project.  Now you only have to worry about what a new owner may do with the properties.  And how much you ultimately paid, of course.  Creative accounting, and feigned uncertainty combined with a failure to effectively market vacant property, will squeeze the last possible penny out of your wallet.

PATH... the gift that keeps on taking.

How do these guys sleep at night?
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Your Tax Dollars At Work Making Useless Conclusions

10/5/2016

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Our government loves to spend money on studies and reports to inform its actions.  However, some government reports just leave the governed scratching their heads.  That's the case with the U.S. Department of Energy's Building Electric Transmission Lines:  A Review of Recent Transmission Projects.

The administration's Quadrennial Energy Review "...recommended that the Department of Energy (DOE) conduct a national review of transmission plans and assess barriers and incentives to their implementation."  The DOE tasked its Lawrence Berkeley National  Laboratory (LBNL) to prepare a report to support its response to this recommendation.  Lawrence Berkeley is an expert on the physical sciences.  Maybe the idea was to apply physical "science" to administrative and social problems?  But it doesn't work.  There's nothing scientific about transmission planning, permitting and siting.  In fact, the biggest problem with this issue is that industry and government has been attempting to make it purely scientific for years and have failed miserably because human factors not considered in science keep derailing the best laid plans of business and government.  DOE might as well have sent a carpenter to install plumbing.

But LBNL bravely soldiered on.  It "selected" nine recent transmission projects for its study.  No mention of how these projects were selected.  It's almost like they cherry picked a representative sample based on secretive criteria.  Who selected these nine transmission projects, and why?  I'd sort of expect something at least equivalent to the standards applied to elementary school science fair projects from LBNL.  Is this how they set up all their experiments?  Any teacher can tell you that the subjects of your case study can drastically affect your conclusions when not selected scientifically.

LBNL selected a mix of both failed and successful merchant and regionally cost-allocated transmission projects.  But it failed to delve very far into how the merchant vs. regionally allocated factor alone affected the projects' success.  A regionally cost-allocated project enjoys a rebuttable presumption of need during the permitting process, while a merchant project relies on committed customers to demonstrate need.  Beyond this broad statement, no attention was paid to how lack of committed customers for merchant projects may have played into failure in the state permitting process.

LBNL used four criteria to evaluate its selected projects. 

1.  The State Approval process.  States have authority for siting and permitting transmission projects.
2.  NEPA Compliance.  Projects sited on federal land must go through the administrative quagmire of the NEPA process.
3.  Public and Stakeholder Involvement.  Why isn't "the public" a stakeholder?
4.  Economic and Commercial Circumstances.  Transmission project economics is always changing.  When combined with a long approval process, transmission economics almost always die a slow, painful death.

So, let's talk about some of the samples.

The Champlain Hudson Power Express.  This project has sailed through permitting.  LBNL thinks this was due to a "proactive" effort on the part of its developers to negotiate with stakeholders during permitting.  The real secret here is that this project is routed entirely underground along road and railway rights of way.  Because it wasn't routed through or visible from private property, it did not inspire any opposition.  Since there was no public opposition, it was not delayed and did not have to waste money on third party advocacy and propaganda efforts to create an aura of artificial support.  This is the most important conclusion revealed in LBNL's study, but sadly LBNL failed to recognize it.

The Potomac-Appalachian Transmission Highline (PATH).  Talk about stating the obvious:

The PATH project is an example of a project that faced significant public opposition.
All of these projects, save the Champlain Hudson project, probably faced significant public opposition.  Public opposition drives the state approval and NEPA processes and causes expensive delays which affect the economic and commercial circumstances.

The Grain Belt Express project.  Another example of significant public opposition driving the state approval process.
As part of its analysis of the public interest, the PSC acknowledged the substantial opposition to the project expressed by business owners, farmers, and individual landowners across whose properties the project was proposed to cross. The Missouri PSC noted, “In this case, the evidence shows that any actual benefits to the general public from the Project are outweighed by the burdens on affected landowners.”
And has GBE done anything to ameliorate that public opposition?  What if it had decided to re-route its project underground along roads and railways?  But, it didn't.  Instead it came up with that weak tea of the MJMEUC "contract" (obviously LBNL didn't bother to scientifically READ that contract and simply took GBE's word for its efficacy).  Seems like it's getting more and more expensive to be GBE with no clear avenue to success.  How much money could this project have saved if it had been properly routed to avoid public opposition in the first place?  Maybe enough to route it underground?  And what if it actually had customers in order to "...rely on buyers of bulk transmission services to establish a project’s financial viability"?  LBNL skates over the fact that Clean Line's problems are of its own making by proposing a purely speculative project with no customers.

The Susquehanna Roseland project.  LBNL seems to think that "mitigation," aka bribes, paid to the National Park Service cost the developer money.

The National Park Service, for example, required significant and expensive mitigation measures from the developers for the Susquehanna-Roseland project in order to gain its approval for completion of the portion of the line that crossed the Delaware Water Gap National Recreation Area, which it is mandated to protect.
The "mitigation" actually turned into a cash cow for the developers.  The ratepayers ended up footing the bill for the $60M "mitigation," as well as an obligation to  pay the developer 12.9% interest on the money over the 40 year life of the project.  It didn't cost the developers a dime.

So, what were LBNL's conclusions?
The development of a transmission project is a commercial venture involving investors who are prepared to incur significant, yet ultimately limited, up-front development costs in return for the opportunity to earn future profits from the sale of transmission services and/or a regulated return on invested capital. Adopting a developer’s perspective enables us to look at the factors reviewed in this report as ones that affect either the cost or time required to construct a transmission project. The extent to which these factors represent barriers to the implementation of transmission projects is thus an assessment of whether these costs or time requirements are avoidable or necessary.
LBNL concluded that these costs are necessary, but that some could be avoided.
There are documented examples of project developers who have sought to reduce these costs and associated time requirements through up-front information sharing and joint (and early) development of mitigation approaches (including abandonment of early proposed and development of new routing options). The success of these activities has hinged largely on the extent to which they lead to meaningful engagement and tangible commitments to address public concerns over line routing.
In other words, coming to a community with a problem and allowing constructive engagement into crafting a solution allows the community to buy into and own the solution.  None of the sample projects actually accomplished this in practice.  They just made smarter routing decisions (underground on public rights of way) in the first place.  Schmoozing and buying off local governments and other "stakeholders" (such as native American tribes, environmental groups, chambers of commerce, etc.) in advance of revealing agreed upon routes to the public doesn't work.  If the newly affected  public (i.e. landowners) did not have a role in crafting the solution, they will oppose it.  The trick is not to propose anything that the landowners can get upset about, such as burial on public transportation rights of way.
The state-centric public-interest issue that arises most vividly for multi-state transmission projects involves the so-called “fly-over” states. These states are situated between the states that are the starting and ending points for a long-distance transmission project. The initial decisions by the Missouri PSC to deny the CPCN application for Grain Belt Express exemplify this issue. The public-interest issue raised by states in the middle is that, at bottom, they are being asked to bear significant portions of the cost or adverse impacts of a project, yet they do not believe they are being provided with sufficient opportunities to share in the benefits of the project.

The LBNL acknowledges the cost of what it calls "side payments" to fly-over states to provide the appearance of some state benefit.  What they mean is construction of substations in fly-over states, claims of jobs, taxes and economic development, political donations to state elected officials, funding for other state or local projects, donations to local universities or public interest organizations, and non-binding "contracts" with local businesses.  It's nothing but smoke and mirrors used to create the appearance of local benefit.  When the smoke clears, the fly-over state is left with nothing, but by that time it's too late and the project is built.  Instead, how about actual benefits for fly-over states, instead of hot air and empty promises?  If a project is not needed in a state, then there can never be a "benefit" from it.  You can't create "benefit" from something unneeded, otherwise it's just a straight up bribe.  The transmission industry needs to quit wasting its money on this stuff and simply design better projects that have a natural public benefit.

The need to satisfy a middle state’s public-interest requirements is a classic example of what economists describe as the role and importance of “side payments.” In this instance, the gains from trade must be sufficient to cover side payments to affected parties who have standing but who would not otherwise benefit from the transaction. Thus, the situation faced by developers, such as those for the Grain Belt Express project, is tangibly and fundamentally (but not solely) commercial in nature. Notably, as discussed, the developers for Grain Belt Express recently reached an agreement to sell power from the project to an association of municipal utilities in Missouri and, based on this agreement, plan to re-file their request for state regulatory approval. It remains to be seen whether the fact of a Missouri entity signing an agreement that could be seen as demonstrating the public-interest value of the project in Missouri will result in the Missouri PSC approving the project on its third attempt in the state.

By the way, GBE did not reach an agreement to "sell power" from the project to MJMEUC, or anyone else.  GBE sells transmission capacity.  It does not sell power.  The only thing GBE has "sold" is space on a wire.  Power sold separately from another vendor.  LBNL needs to apply a little physics to its thinking process to avoid allowing industry propaganda to infiltrate its conclusions.

LBNL also concluded that the federal government is a circus without a ringmaster and the NEPA process is FUBAR.

Wrapping all its conclusions together, LBNL comes up with this:
Developing a transmission project involves simultaneously managing two categories of commercial risk. One is the risk associated with securing the capital necessary to build the project. Eto (2016) focused on one example of capital risk: that associated with seeking regional cost allocation. The other category encompasses risks associated with the actual construction of a project. This report is focused on a key subset of these project-construction risks: the cost of satisfying the due process requirements of state and federal agencies involved in permitting and siting lines, which is often increased when there is organized public opposition to the project. These are necessary costs associated with transmission-line construction. Some can made more manageable through proactive actions by developers. Still others can be made more manageable through the actions of federal and state agencies to enhance the efficiency and accountability of their processes. Thus, while the project review process can be slow and add costs to project development, on the whole transmission lines are being built. Moreover, there are promising signs that both groups are taking actions to improve the processes, both in terms of their duration and the quality of the decisions that get made. We found examples of merchant transmission projects successfully gaining needed approvals and being constructed. Their experiences, in particular, suggest that if the economics of potential projects are sound, someone will find a way to build them.
These costs, ultimately borne by electric customers, become completely unnecessary when projects are designed properly in the first place.  A project that doesn't intrude on the community won't foment opposition.  Underground that thing on public rights of way!  Projects that provide no benefit to fly-over states don't belong in those states to begin with!  Solve your transmission problems with resources closer to home.  It doesn't take a rocket scientist...

As far as the inefficiency of the federal government, can't help you there.  Maybe another report on how to reform the federal government to make it work for the people instead of the special interests?  Maybe the special interests can fund it next time around.
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Constructability Calamities

8/10/2016

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Who comes up with the "constructability" summaries for PJM's transmission projects?  Do they hire a professional blackjack player to study the odds of approved projects pissing off the wrong people?  Where's the surety in spinning the wheel to determine whether a project is "problematic," when actual results depend entirely on circumstances beyond PJM's control?  The human factor is going to get them every time.

So, PJM's eternal Artificial Island project has been "suspended."  It's ever-changing scope and price tag have affected its "constructability."  The states of Maryland and Delaware were outraged that PJM's cost allocation assigned the majority of the project's costs to them, when they would receive little benefit.  "Suck it up, buttercup, we'll do better next time," said PJM.

Oddly enough, PJM's suspension of Artificial Island didn't even mention the cost allocation issue.  But nevertheless, the states are claiming victory.

Lesson:  With enough opposition, even PJM can change its mind.  And as the Delaware Public Advocate reminded PJM, this isn't the first time.
The DPA is not asking PJM to do something it has never done before. PJM has reevaluated
projects in the past. After reconsideration, PJM canceled the Mid-Atlantic Power Pathway ("MAPP") and the Pennsylvania-Allegheny Transmission Highway ("PATH") projects.

While the reasons for cancellation may be different in this case, the fact of the matter is that simply because PJM has approved a project does not mean that it gets done come what may. In cancelling the MAPP and PATH projects, PJM acknowledged that changed circumstances had caused it to reevaluate the projects; unfortunately, however, ratepayers are paying significant abandonment costs. We ask PJM to re-evaluate this Project before LS Power and PSE&G incur costs that will ultimately be recovered from ratepayers of all PJM members.

The DPA asks PJM to remember that end-use customers are ultimately the ones that pay
for projects such as this. Indeed, neither PJM nor its member companies would exist if not for customers. And those customers are not a wallet from which PJM and its member utilities can obtain unlimited funds.

Stop making poor "constructability" choices, PJM!

Speaking of... PJM approved a bunch of new projects yesterday.  Among them is a scheme to construct two new greenfield transmission projects across the Maryland/Pennsylvania border.
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Sorry, but the PJM-supplied project map really is that crappy and devoid of recognizable locations.  PJM's world revolves around a map of substations and transmission lines.  Ringgold is really a place though, so that narrows down the approximate location of the western line.  Furnace Run is a town in western Pennsylvania, but the eastern line on this map begins south of York and Lancaster and probably ends somewhere near Towson, Maryland.  But don't worry about the lack of any recognizable places, because PJM's constructability summary has determined this project "is located on undeveloped land" and therefore the only likely obstacles may be bats, acquiring easements on Pennsylvania state land, and a few permitting hurdles.  No human factors acknowledged.

But I'm pretty sure people own that "undeveloped land," and those people probably will mind having a transmission line constructed on their property.  What remains to be seen is how big a squawk they can make about it.  Because, as PJM has demonstrated numerous times already, its planning isn't infallible, and when approved projects run into a buzzsaw of opposition, PJM has no choice but to go back to the drawing board and come up with a better project.

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R.I.P. Big Transmission, We Hardly Knew Ye

6/2/2016

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I'm late for the funeral!  Ran across this article yesterday when searching for something totally unrelated, but it speaks so much truth, I couldn't dismiss it.  Back in September of last year, utility rag Fortnightly ran an article headlined, "The Rise and Fall of Big Transmission:  The alternatives may make more sense."  Author Steve Huntoon chronicles the big transmission building phase that was created by Congressional action to provide incredible financial incentives for Big Transmission.  In the Energy Policy Act of 2005, Congress tasked the Federal Energy Regulatory Commission with creating a system to award incentives to transmission builders, such as double digit returns, the ability to collect project costs in rates during construction, guaranteed recovery in the event a Big Transmission project was abandoned, and many more (I'm not going to list them all here because only utility rate geeks would understand them all without lengthy explanation).  Creating incentives to build more transmission was a Congressional knee-jerk to the 2003 northeast blackout.  Nevermind that a complicated, expansive transmission system was to blame for the blackout, industry lobbyists spun the blackout its clients created through mismanagement into a huge financial windfall.  And the Big Transmission building boom began.

Huntoon walks the reader through the bad ideas that sprang from utility greed, analyzes why many of them failed, and applies his analysis to the remaining Big Transmission bad ideas to demonstrate why they, too, must fail.

And he does it in an entertaining and easily understood fashion.  Big Transmission becomes a proper noun, a name for an entity that took on a life of its own for a brief period in utility history.  But, in the end, Big Transmission had to die.
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The author explains six points that make Big Transmission fail:
Big Transmission never did and never will make sense. Let’s look at a half-dozen reasons why: 1) the laws of physics, 2) higher reliability risk, 3) stricter contingency limits, 4) lumpiness and investment risk, 5) rigidity of source and sink, and 6) better alternatives.
 Concise explanation of each point is in the article, so I won't belabor them here.

But the purist in me simply can't overlook a couple of glaring errors.  First, the Figure 2 national transmission overlay map is mislabeled.  Existing and New 765kV transmission have their colors reversed.  The Existing 765 system is red on the map, and the New 765 system is green (the legend in the upper right is incorrect).  It makes a great, big difference when studying the map to figure out which lines are new Big Transmission and which lines are incremental existing builds.  Second, the author places the PATH project on the wrong line in the Figure 1 Project Mountaineer Map.  He says, "PATH was essentially the western half of the #2 project in the overall Project Mountaineer plan."  No, PATH was the western half of the #3 project in the Project Mountaineer map.  PJM's original Project Mountaineer called for a Big Transmission line from the John Amos power station to the Deans substation in New Jersey.  PJM combined several proposals into the Frankenstein monster that became PATH, and then cut it off at Kemptown, with plans to build a separate Big Transmission project from Kemptown to Deans at a later date.

But, other than those two mapping boo-boos, the article gets the demise of the PATH project exactly right.  The demise of PATH has been wrongly portrayed by many people, with claims covering everything from reduced demand to coal plant retirements.  In his note 29, the author correctly notes that the demise of PATH was a combination of factors:
It is difficult to apportion the demise of PATH among reduced load growth, the Mt. Storm-Doubs alternative, new generation, and sophisticated statelevel opposition. However, it is fair to observe that reduced load growth had only postponed PATH in the past (three times). What was different in 2010 was the emergence of the Mt. Storm-Doubs  alternative, and the focus of a state regulator on that alternative.
That's right... every factor, except Mt. Storm-Doubs, simply delayed the PATH project.  Mt. Storm-Doubs, and the "sophisticated statelevel opposition's" overwhelming support of this alternative to change the political climate supporting the PATH project, is what killed PATH.  Better, cheaper alternative that the people support?  It's the winning PATH of least resistance!

The realities of the "need" for PATH, and its opposition, merely delayed the project long enough for Dominion Virginia Power to step onto the stage with its proposed rebuild.  But even that wasn't simply about a better idea... the Mt. Storm Doubs line's existing towers were built out of a certain kind of steel that had not stood the test of time.  The tower bases were deteriorating and patchwork fixes were no longer effective.  The towers needed to be replaced before they started falling down.  And while they were replacing the towers, everything else got an upgrade that increased the line's thermal capacity 65% (allowing it to carry more power).  Dominion smartly took advantage of the PATH debacle to get its line rebuilt with minimal opposition, and even the outright support of affected landowners.

Would this situation repeat itself to kill other Big Transmission proposals?  Probably not.  But it does support the idea that incremental transmission projects and rebuilds are much easier to build than Big Transmission.  So, why does the utility industry continue to propose and/or support Big Transmission?  Because it comes with Big Profits and they're willing to risk protracted planning and permitting processes in order to increase their profits.  It's not about building reliability, economic benefits for consumers, or even "cleaner" power...  and all the risk of Big Transmission ends up on the backs of consumers.  What's not to like for them?  The facts in this article -- Big Transmission must fail.

There's even some hard truth about the last of the Big Transmission projects that have yet to realize they're dead.  Clean Line Energy came up with its idea to build thousands of miles of Big Transmission to ship renewables from coast to coast in 2009, when Big Transmission was in its heyday.  But, unlike utility proposals where risk and cost is shouldered by ratepayers, Clean Line has spent millions of dollars of private investment cash to keep its idea alive.  Once Clean Line gives up, its investors lose everything.  There is no federal guarantee to recover sunk costs on speculative, market based Big Transmission.  And Clean Line, itself, will die along with its projects, and its executives currently living high on the hog of private investor cash, will be in the unemployment line.  This is what keeps Clean Line on life support long after it's been pronounced brain dead.  And here's why Clean Line will never happen:
But certainly when Big Transmission is dependent upon market conditions the lumpiness and risk factors are all the more daunting. Big Transmission somehow needs to bring together generation resources and market demand – to the exclusion of alternatives – to forge a level of commitment that will last for many years. That’s a prerequisite for financing. So the entities at each end need to perceive such a compelling business proposition that they will forego other alternatives and cast their fate with Big Transmission. That’s a tough sell.

FERC requires that utilities interconnect all new generation. So a new generator is assured of being able to interconnect its project to the utility serving the territory it is located in; the issue is solely how much money and time it will take for the interconnection. Given this legally assured ability to access the grid through the resident utility, market-based Big Transmission is effectively competing with that utility and thus must offer substantial value added.
And there is no value added by a Clean Line.  Clean Line stupidly demonstrated just this point to the City of Hannibal, Missouri, earlier this year with its chart of wind options for the city.  The Clean Line prepared (and tweaked) chart showed that wind delivered over the existing incremental transmission system was just as cheap as wind delivered over a "clean" line.

Why would any company buy capacity from a risky new transmission line when existing lines are just as cheap?  This probably explains why Clean Line has no customers.  And without customers, Clean Line's Big Transmission will also fail.
1 Comment

Clean Power Plan Does Not Require "A Tangled Mess of Hulking, Long-range Transmission Lines"

1/12/2016

3 Comments

 
The Pittsburg Post-Gazette's "Power Source" energy news believes the Clean Power Plan will require "a tangled mess of hulking, long-range transmission lines."  Not true, and the report's "facts" are fallible.

The reporter seems to rely on energy platitudes, pasted together with quotes from people who should have been asked about the conclusions the reporter made.

Such as:
Opponents used some of those arguments to successfully derail the Potomac-Appalachian Transmission Highline, a 290-mile line from Putnam County, W.Va., to Frederick County, Md., proposed by Allegheny Energy in 2008. The Greensburg company, acquired by FirstEnergy in 2011, suspended the project after it could not convince regulators the line was necessary.
This guy calls up Steve Herling, but doesn't bother to ask him why PJM terminated the PATH project.  It's not that "opponents" proved there was no need in any state regulatory process.  It's that PJM first suspended, and later terminated the PATH project because
PJM staff reviewed results of analyses showing reliability drivers no longer exist for the project throughout the 15-year planning cycle. The analyses incorporated the continued trends of decreasing customer load growth, increasing participation in demand response programs and the recent commitment of new generating capacity in eastern PJM.
This reporter also seems to be under the impression that all transmission opposition comes from "citizens groups" who oppose transmission due to environmental reasons.
While citizen groups have fought transmission projects — often successfully — by attacking the developer’s need to build them, the environmental regulations could usher in more projects and complicate opposition.

Changing drivers of transmission
In the past, environmental groups have glommed onto transmission battles and used citizen group opposition to fuel the push on environmental grounds.  Those days are over.  This reporter seems to be the last to find out, but environmental groups are the newest and biggest fans of transmission lines.  Numerous environmental groups have intervened in favor of big, new transmission lines that the wrongly believe are "for wind."  Transmission lines are open access and it's not possible to segregate "clean" electrons from "dirty" ones.  The citizens are on their own here and that's just fine... nobody needs or wants a hypocritical environmental NGO championing eminent domain for "clean" transmission lines while simultaneously using the same issue as a reason not to build "dirty" pipelines.  Nobody takes these fools seriously anymore.  Without an army, the environmental groups are simply Don Quixote.  Tilting at their beloved windmill fantasy, but getting nothing accomplished.

It's still about need though.  And the transmission poster child the reporter chose to use is not part of any regional transmission plan and therefore has not been designated "needed."
Transmission companies see big potential for new projects, particularly from sparsely populated areas that generate wind energy to urban areas. “Just as trains carried cattle and other goods from the rural areas to urban centers, the Plains & Eastern Clean Line will carry renewable energy from the Plains of the Southwest,” states the website of one developer, Clean Line Energy of Houston, Texas.

Clean Line expects federal approval for its 700-mile Plains & Eastern Clean Line, designed to carry 4,000 megawatts of power from wind farms in the panhandle of Oklahoma. The line will terminate near Memphis, Tenn. Clean Line has four other projects in the pipeline.

“We anticipate a very busy 2016,” said company president Michael Skelly. 
And that's why Clean Line is attempting to use an untested part of the 2005 Energy Policy Act to usurp the siting and permitting authority of states and ram its project through using the federal eminent domain authority of federal power marketers.  Except that statute requires a need for the transmission in the first place.  And there is none.  Clean Line elected not to participate in the regional transmission planning processes that determine need for transmission projects.  Clean Line is nothing but a gamble -- the investors are gambling that a need for the project will develop if they can build it... but Clean Line hasn't been successful in signing up any potential customers... because they can't get their project built... because there is no need for it.  That's the real chicken/egg the reporter should be examining.

I do hope Mr. Skelly is very busy in 2016... polishing up his resume and looking for new investors for his next get rich quick scheme.

The reporter longs for
...some wind mills and solar farms in areas with constant breeze and abundant sunshine
But he's looking in the wrong place.  Even though he had a conversation with Scott Hempling about non-transmission alternatives, none of that seemed to sink in.

There's an area with "a constant breeze" located much closer to Pittsburgh than the Great Plains.  It's called the Atlantic Ocean, where wind potential is much greater.  Best of all, very little "
tangled mess of hulking, long-range transmission lines" would be "necessary to bring that renewable power from the point of generation to utilities for local distribution."

Why can't eastern states boost their own economies by harvesting renewables close to load?  The days of centralized generation are over.  Also, sunshine is abundant anywhere -- no transmission lines needed to slap some solar panels on your own roof.

This reporter needs some education.

1.  Transmission opposition by "citizens groups" won't change because of the Clean Power Plan.

2.  Speculative transmission projects for which there is no need shall not be granted state eminent domain authority to take property for rights of way.

3.  Clean Line is a merchant transmission project, not part of any transmission plan and completely unlike most other transmission projects.  Therefore, it should not be lumped in with them or used as an example of anything transmission-related.  If the CPP requires transmission, it will be planned and ordered by regional transmission organizations so that there is some surety that it will actually be built.  Clean Line is not needed, may never be built, and is driven by anticipated profits selling energy into more expensive markets, not by the Clean Power Plan.

And stop drinking the big wind koolaid.  There are no facts in it.
3 Comments

No RTO Membership Incentive for You, PATH

12/18/2015

1 Comment

 
Yesterday, FERC issued an Order Denying Rehearing of its earlier decision to deny PATH an additional half a percent of return on equity for its membership in PJM.

The Commission explained again that because PATH never (and will never) turn any transmission lines over to PJM for operation that it is no longer eligible for the incentive bonus point adder.

End of that chapter.  More PATH saga to come....  stay tuned.
1 Comment

FERC to "Further Consider" PATH's ROE Rehearing Request

12/15/2015

1 Comment

 
The Federal Energy Regulatory Commission has added reconsideration of PATH's request for rehearing of the Commission's denial of its RTO membership incentive adder to the agenda of its monthly meeting scheduled for Thursday.

It's been so long since the Commission granted rehearing on this limited matter, it's been nearly forgotten in the ensuing shuffle.

At issue is PATH's request to continue to collect a half a percent of extra incentive return on equity for its membership in PJM Interconnection.  When the Commission granted PATH a whole bunch of incentives back in 2008, it also granted it an additional 50 basis points for joining PJM.  PATH proposed that it be allowed to continue to collect this incentive after it abandoned the PATH project, by continuing its membership in PJM until it had finished collecting its abandoned plant.

The Joint Consumer Advocates answered PATH's request for rehearing, and pointed out that the stated purpose of section 219 is to provide incentive-based rate treatments that benefit consumers by ensuring reliability and reducing the cost of delivered power.
  The PATH project has not benefited consumers by ensuring reliability because it was never built.  And it certainly never reduced the cost of delivered power.  Quite to the contrary, PATH increased the cost of delivered power by leaving ratepayers on the hook for its $121M of development costs even though it never even put a shovel in the ground.

In other words, even though PATH will never be built, and the PATH companies will cease to exist as soon as their abandoned plant is collected from ratepayers, PATH wants to be financially rewarded for continuing its pointless membership in PJM.  A membership in PJM allows the member to participate in the PJM transmission planning process.  Since PATH won't be built, and since the PATH companies were single purpose entities that will never plan or build another transmission project, what's the point of their continued membership in PJM?

I think the point is to continue to collect an additional half a percentage point of return (or interest) on the slowly dwindling $121M abandoned plant balance that PJM ratepayers must pay for.

It will be interesting to see what the Commission does to dispose of this matter.
1 Comment

FERC Upholds Consumer Standing to File Rate Complaints

11/13/2015

5 Comments

 
Once again, the Commission has reaffirmed that electric consumers have the right to challenge wholesale electric rates that flow through to their local electric bills.
...the Commission concludes that, as courts have recognized, retail customers may file complaints and protest transmission rates and wholesale sales rates before the Commission.  Moreover, allowing retail customers to challenge such rates does not violate principles of federalism or interfere with states’ rights.
The settlement judge in a formal challenge proceeding involving a subsidiary of investor owned utility AEP had submitted what are known as "Certified Questions" to the Commission on Oct. 13.  A certified question is intended to seek the Commission's consideration and disposition of "any question arising in the proceeding, including any question of law, policy, or procedure."  The Commission had 30 days to answer the questions posed, otherwise they would revert to the judge who posed them for decision.  The questions posed were:
(1)  Shouldn’t section 306 of the Federal Power Act (FPA) be interpreted
in pari materia with section 201 of the FPA?  FPA section 201 gives the Commission jurisdiction over wholesale interstate rates and interstate transmission; therefore, retail ratepayers would not have the right to file complaints against wholesale rates.

(2) Wouldn’t an expansive interpretation of section 306 of the FPA (allowing retail ratepayers or end users to file complaints against interstate wholesale rates) violate the delicate balance of federalism; in other words, by giving complaint authority to retail rate customers, is the Commission interfering with states’ rights by asserting jurisdiction over retail rates?
The judge had recommended that the Commission:
answer the questions as follows: 
(1) “retail ratepayers are not permitted to bring an FPA section 205 complaint against wholesale sellers of electricity[;]” and (2) a different interpretation (i.e., allowing such retail ratepayer complaints) “would interfere with state jurisdiction over retail rates.”
The Commission didn't see it that way, and yesterday they issued an Order that explained to the judge:
Complaints may be filed under sections 206 and/or 306 of the FPA, 16 U.S.C. §§ 824e, 825e (2012).  While section 205(e) of the FPA refers to “complaints,” 16 U.S.C. § 824d(e) (2012), the Commission commonly refers to these filings as protests.  See 18 C.F.R. § 385.211 (2015).   

The plain language of the FPA and the Commission’s implementing regulations allow broad participation in proceedings before the Commission.  Specifically,
section 306 of the FPA explicitly authorizes “[a]ny person” to file a complaint with
the Commission. The Commission’s regulations are to a similar effect.  For example, Rule 206(a) of the Commission’s Rules of Practice and Procedures provides that “[a]ny person may file a complaint seeking Commission action against any other person alleged to be in contravention or violation of any statute, rule, order, or other law administered by the Commission or for any other alleged wrong over which the Commission may have jurisdiction.

Ms. Peine, an intervenor in this proceeding, is contesting the SWEPCO/AEP transmission formula rate inputs, and thus rates for transmission of electric energy in interstate commerce, which is within the Commission’s exclusive jurisdiction under Part II of the FPA.  These transmission inputs, i.e., costs, flow through to Ms. Peine’s retail electric bill.  Stated another way, Ms. Peine is an “end-use customer that will pay  . . . some portion of that [transmission] rate when flowed through [her] retail bill.” Thus, by challenging the transmission formula rate inputs, Ms. Peine has alleged injury in fact that can only be addressed by the Commission.  Under these facts, Ms. Peine is permitted to file a protest or a complaint and to participate in this proceeding by intervening.

This outcome is consistent with federalism.  Section 201 of the FPA recognizes the authority of the states over retail sales and facilities used in “local distribution.”  Ms. Peine’s formal challenges, however, go to the transmission formula rate inputs identified in the SWEPCO/AEP 2013 and 2014 Annual Updates.  Ms. Peine’s claims, therefore, go to the transmission of electric energy in interstate commerce and not to local distribution

Moreover, this issue is not a matter of first impression, as both the courts and the Commission have concluded previously that protecting consumers is one of the Commission’s primary responsibilities.

...the relevant definition of “interested parties” under the SWEPCO/AEP Protocols is not the version that was filed in 2007, but rather the version that was in effect when Ms. Peine filed her formal challenges under the Protocols, and that version did not include the examples that the Settlement Judge construed as limiting the definition of interested parties to exclude Ms. Peine.  Moreover, we disagree with the Settlement Judge’s interpretation of the parenthetical phrase in the earlier version of the SWEPCO/AEP Protocols.  The parenthetical phrase “(e.g., Transmission customers and affected state and federal regulatory authorities)” provided examples of categories of interested parties, and should not be read as exhaustive.  This parenthetical language would not preclude an end-use customer, like Ms. Peine, who will pay a portion of the transmission rate in her retail bill, from challenging the inputs to the SWEPCO/AEP transmission formula rate.

Lastly, as to the administrative efficiency concerns raised by the Settlement Judge and AEP, we note that the Commission’s Rules of Practice and Procedure provide appropriate measures to streamline Commission proceedings.
So, the judge made a complete mess of a whole bunch of law in her rush to deny standing to a ratepayer.  She also doesn't know the difference between "e.g." and "i.e."  And AEP and the Judge need to kwitcherbitchin about how terribly hard and unfair it is to utilities to have their rates examined by those who pay them.  Did they expect that the Commission was going to do away with annual reviews of formula rate inputs altogether?  There's no way to limit participation.  It's all in or nothing.  And the Commission just can't legally go with shutting down rate transparency.
Perhaps there's also a lesson here for AEP, who did a whole bunch of whining about how burdensome and costly customer reviews of wholesale transmission could be as an excuse to escape rate review altogether.  AEP has been down this road before as one of the parent companies involved in the PATH decision the Commission cited over and over in yesterday's Order.  Shame on you, AEP!  If someone suggested that you could steal from your grandmother and get away with it, would you do it?  Even though you know full well stealing from Granny is wrong?  I thought AEP was supposed to "do the right thing?"  Here's a little advice from your own CEO to apply the next time you see an opportunity to do something that you know is wrong in order to take unfair advantage over someone who appears to be weaker than you:
I urge you to make the concepts described in this book a regular point of reference for the manner in which you carry out your work and the treatment of others.
Karma.
5 Comments
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    About the Author

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

    About
    StopPATH Blog

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

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


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