Gov. Earl Ray Tomblin has no plan to appoint a third member to the West Virginia Public Service Commission, even though several people have expressed interest in the position or recommended others they believe would fit the post.

Emails and communications obtained through a Freedom of Information Act request show that numerous people have contacted the Governor’s Office since January, asking Tomblin to confirm them for the post or to consider their preferred candidates.

The list of people seeking the governor’s attention include a former state senator, a city mayor, a retired engineer, a member of the state’s rural water association, a managing member at one of Charleston’s largest law firms and a lobbyist for First Energy, the parent company of MonPower and Potomac Edison, two of the state’s largest electric utilities.

An undated note left for the governor shows that Sammy Gray, the state affairs director and a registered lobbyist for First Energy, called to recommend two people for the commission spot. According to the note, Gray called to let Tomblin know that he supported Mike Castle, the Department of Environmental Protection’s director under Gov. Cecil Underwood, and Sam Cann, a former Democratic state senator from Harrison County, for the seat.

When contacted about his recommendations, Gray sent the request for an interview on to communication officials at First Energy.

“We believe both individuals possess solid experience with policy and energy matters that would help them make rulings in complex regulatory cases,” Todd Meyers, MonPower and Potomac Edison’s external communications manager, wrote in an email response. “Of course, the ultimate decision on who is appointed rests solely with the governor.”

First Energy’s recommendation of candidates for a utility commission, which ultimately regulates the company, is not out of the ordinary, according to Meyers.

“In the past, we have recommended individuals whom we believe to be qualified candidates for similar positions, both in West Virginia and elsewhere in our service territory,” Meyers wrote. “Again, others ultimately make the decisions on who is selected.”

In an email from April, Michael Basile, a managing member at Spilman Thomas & Battle, a Charleston law firm that represents clients like the West Virginia Energy Users Group in front of the PSC, asked the governor to consider attorney Susan Basile, his wife.

In the 1990s, Michael Basile worked for Gov. Gaston Capterton, the Attorney General’s Office, the West Virginia Development Office and later assisted in the transitions of Gov. Bob Wise and Gov. Joe Manchin. Basile, who has served as chairman of the Charleston Area Alliance and the Charleston Regional Chamber of Commerce, also is a registered lobbyist at the state capitol, where he has represented companies like DuPont, Chevron, Chesapeake Energy, DIRECTV and Dish Network.

In his email, Basile credited his wife’s qualifications and said she was a “big fan/supporter of GERT,” apparently referencing an acronym for Governor Earl Ray Tomblin.

Amy Swann, director of the West Virginia Rural Water Association, suggested the governor should consider one of her longtime colleagues and former PSC employee, Dina Foster.

Swann said Foster — now the manager of the Pea Ridge Public Service District, in Cabell County — has first-hand experience in utility issues and has the personal characteristics needed to make a good commissioner. With so many important issues being decided by the PSC, Swann said, Foster would be a valuable addition to the commission.

When Bill Wooten, a former Democratic state senator from Raleigh County, contacted the Governor’s Office earlier this year, he was hopeful he would be appointed.

With his experience in utility regulation from a legal and legislative policy perspective, Wooten thought he was qualified for the position, and he believed in his ability to weigh the needs of utility companies and their customers.

John Manchester, the mayor of Lewisburg, also submitted his credentials for consideration.

Manchester, who previously worked for the Tennessee Valley Authority and has dealt with utility regulation as Lewisburg’s mayor, said his experience has prepared him for the position.

“I pride myself on being a mediator, a man who tries to find solutions to issues,” Manchester said.

Allan Tweddle, a resident of Kanawha City and a semi-retired engineer, put his name in after having several people ask him to apply.

In his communications with the Governor’s Office, Tweddle listed a long list of people who could testify to his “commitment” and “open-mindedness.” While Tweddle worked with Southern California Edison, an electric utility on the West Coast during his career, he said he has absolutely no connection to any regulated utility in the state.

“We urge you to appoint a new commissioner as quickly as possible so that this investigation can be resolved,” Cathy Kunkel, a member of the Advocates for a Safe Water System’s steering committee, wrote in a letter to the governor in April. “Furthermore, we hope that anyone you appoint to the Public Service Commission will have experience in utility regulation and be independent of West Virginia’s major utility interests.”

"While the utilities are experts at running their business, it doesn’t always mean that they are right,”  said Jacqueline Roberts, director of the consumer advocate division.

“It’s an annual true-up, and it is to cover the cost of fuel and purchased power,” PSC spokeswoman Susan Small said. “There’s not profit for the company. It’s not going to staff salaries. It’s not operations and maintenance fees. It doesn’t go to rent and pension plans or anything like that.”

FirstEnergy spokesman Todd Meyers said the $165 million increase proposed in the Aug. 14 filing is largely the result of lower-than-expected wholesale electric prices over the past year.
Meyers noted the current rates were set partly based on projections of what amount of revenue the utility would be able to pass on to customers as a result of selling the excess electricity generated at its power plants.
“When we set the rates ahead of time based on where we think power prices are going to be, and then power prices aren’t there, we’ve already built in what we project the net benefit of sales to come back to customers will be. That’s built into the rates as they stand,” Meyers said. “That’s why the lower sales then really have an effect in the next true-up.”

Meyers said the Harrison Power transaction was never meant to be evaluated on the basis of a single year, but over the entire projected life of the plant. Prices can change year to year, sometimes in unforeseen ways, he said.
“We’re never looking at things to be a benefit to customers at one particular snapshot in time. We’re looking at what the best-case scenario is over time,” Meyers said. “You just don’t know what’s going to come around the corner, and we thought that having our whole strategy dependent on market purchases, then you’re really at the mercy of the market.

While recent case filings may create the impression that FirstEnergy has continued to seek rate increases, Meyers noted that there have also been decreases, such as the 5 percent rate decrease resulting from the 2012 ENEC filing.

At that time — roughly a year before the Harrison Power transaction was approved — the companies cited lower fuel and wholesale electric costs as reasons for the decrease.
“The perception that we keep raising the rates lately — that perception may be true — but there’s also times that we lower the rates, and people forget about the downswings,” Meyers said. “I wouldn’t call it a pattern. Every year, it’s a different look based on different circumstances.”

Cathy Kunkel, a fellow with the Institute for Energy Economics and Financial Analysis who testified against the Harrison Power transaction, said the PSC’s 2013 decision has a direct correlation to the scope of the proposed ENEC increase.
Had the transaction never occurred, Mon Power and Potomac Edison would have purchased more electricity from the market than what they generated at the power plants under their control. This means ratepayers would have directly benefited from the low wholesale electric rates during the current ENEC review period, Kunkel said.
“One of the fundamental things we were saying at the time is the transaction was about risk, and it was about shifting risk from shareholders to ratepayers. And whether or not the risk actually materializes, it was still a shift of that risk,” Kunkel said. “And I think now we’re seeing the risk has materialized, and we’re seeing it in this rate increase.”
In recent years, wholesale electric rates have been driven down by low-cost natural gas, Kunkel said. But with a lack of fuel diversity in Mon Power and Potomac Edison’s generation fleet, West Virginia ratepayers haven’t seen as much benefit from this downward pressure on the wholesale electric market, she said.
The Harrison Power Station is one example of a larger strategy that FirstEnergy has adopted in recent years of moving more of its largely coal-fired generation fleet into regulated markets where the company is able to pass on more costs to ratepayers, according to Kunkel.
“I think the big picture is we’re just seeing coal less competitive in the marketplace than it used to be, and ratepayers are paying the difference, because Mon Power has invested so heavily in coal,” Kunkel said. “No one can say what the power prices are going to be, but it looks like a bad deal at least in the short run. It’s a high-risk investment for ratepayers. Let’s put it that way.”

“We are very concerned about the level of rate relief the company’s requesting,” Jackie Roberts, executive director of the PSC’s Consumer Advocate Division, said. “We are in the process of evaluating the filing to understand what drives their cost request.
“This is a very large rate increase following on the heels of other large rate increases, and we will be carefully scrutinizing this case.”

FirstEnergy is in the midst of a major  investment cycle in transmission infrastructure. In 2014, FirstEnergy commenced its EtF initiative, which is intended to identify the need for, and facilitate the investment in, improvements to the security, resiliency, efficiency, and operational   flexibility of its transmission systems. EtF projects include building and re-conductoring transmission lines; building and enhancing substations; modernizing transmission
communication infrastructure; and installing dynamic reactive resources to regulate system
voltage. In all, FirstEnergy plans to invest approximately $2.5 to $3 billion in the  FirstEnergy East Operating Companies’ service territories through this program over the next five to ten years.
FET formed MAIT in preparation for this significant planned investment. As Mr. Staub
explains in his testimony, utilities face significant challenges in their efforts to simultaneously meet the service requirements of retail customers while also making   sustained investments in their transmission assets. A utility’s investment in transmission infrastructure competes with other business lines of the utility for capital, and transmission investments “can be deferred in favor of more immediate or emergency investments in distribution” facilities. The singleminded
focus as a transmission-only entity will enable MAIT to commit to addressing the significant investment needs of the transmission system.
This stand-alone structure also will allow MAIT to attract capital on more commercially reasonable terms. Mr. Staub explains that lenders view stand-alone transmission companies favorably due to their transparent and easy-to-assess risk profile. The  Commission has also observed that stand-alone transmission companies typically enjoy an enhanced ability to respond to transmission needs and have a superior track record of investing in new infrastructure.
MAIT’s improved access to capital will increase the likelihood that the planned investments are carried out and completed in a timely fashion and at a lower cost.  Moreover, MAIT will incur debt in its own name, without a parent guarantee. Any debt MAIT incurs to finance new transmission projects, therefore, will not affect the financial condition and credit ratings of the FirstEnergy East Operating Companies. Hence, the migration to a stand-alone transmission model not only better supports the sustained level of   transmission investment needed at MAIT but also preserves and enhances the FirstEnergy East Operating Companies’ capacity to issue debt for their respective retail and distribution needs.

At a hearing last week in Beckley, one citizen clearly believed the PSC acts more as a rubber stamp for the utilities than an advocate for the people. His notion was not hindered by a PSC staffer who was perceived to be texting or playing with her phone throughout the meeting.

The meter that measures the amount of electricity used, any underground service entrance conductor, and the meter base (materials only) are not covered under this plan, but are covered by your local FirstEnergy Company.  Your local FirstEnergy Company will supply the materials to repair or replace the meter base...

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The story may have stopped there, except for a consumer advocacy group’s efforts for utility reform. Their allegations kept the San Bruno disaster front and center by claiming PG&E knowingly pumped up their balance sheets and pocketed funds that should have went to the maintenance and upkeep of the aging natural gas system and that it was a relationship with the California Public Utilities Commission, that the group described as “cozy”, that let PG&E to get away with it.

Both the regulator in question and a PG&E Vice President have lost their positions, but recently released e-mails between the two seemed to confirm the allegations, and the fact that both have since lost their jobs also is a strong indicator that the charges were well founded (click here for a great story on this subject).

Discussed in the e-mails are, among other things, talk of vacations, chats with invitations to private meetings at remote and luxurious locales, and a general feeling of collusion between close friends rather than a more professional and business-like exchange between the regulator and the regulated. There are even some chat about PG&E meeting then Governor Jerry Brown and strategies to diffuse the events of San Bruno.

However, the most disturbing aspect revealed in the e-mails is the how the utility targeted the The Utility Reform Network (TURN), which was the advocacy group highlighting and investigating the events of San Bruno.

In January 2011, Peevey sent an e-mail to Cherry urging him to share with a Brown aide, former PG&E executive Nancy McFadden, a financial analyst’s views that the San Bruno case was hurting PG&E’s stock. The report credited Peevey for his “even-handed” approach in controlling the situation.

‘‘As I suggested before, this info should go to the governor’s office, probably best to Nancy McF,” Peevey wrote to Cherry. “Jerry has to be made aware that actions have consequences and the economy is best off with a stable utility sector.”

The real news here is that when people stand together, no matter what derisive things business executives may say against them or how small they may view their fellow citizens, America is still America and people can still make a difference.

The story above is also a reminder that as Americans we have a responsibility to hold the people that serve the public interests in any capacity accountable, and by doing so, we can discourage such insular and covert “cozy” relationships from developing.

This paper evaluates changes in fuel procurement practices by coal and gas-fired power plants in the United States following state-level legislation that ended cost-of-service regulation of electricity generation. I find that deregulated plants substantially reduce the price paid for coal (but not gas) and tend to employ less capital-intensive sulfur abatement techniques relative to matched plants that were not subject to any regulatory change. Deregulation also led to a shift toward more productive coal mines. I show how these results lend support to theories of asymmetric information, capital bias, and regulatory capture as important sources of regulatory distortion.

He found that the deregulated plants combined save about $1 billion a year compared to those that remained regulated. This is because a lack of transparency, political influence and poorly designed reimbursement rates led the regulated plants to pursue inefficient strategies when purchasing coal.

AEP has proposals pending with Ohio regulators that would provide a profit guarantee for five plants, four of which are part of the unregulated fleet. The company has said the plans would allow it to continue operating the plants, as opposed to a potential sale or shutdown.

Projects include the new Waldo Run transmission substation and a short 138-kilovolt transmission line in Doddridge County near Sherwood. The $52 million project is expected to support industrial users and enhance electric service to more than 6,000 customers in Doddridge, Harrison and Ritchie counties. The substation will accommodate additional load growth at a new natural gas processing facility, which consumes large amounts of electricity separating natural gas into dry and liquid components.

FirstEnergy is also working on a 138-kilovolt transmission line that will support the natural gas industry, as well as enhance service reliability for nearly 13,000 customers in the Clarksburg and Salem areas. The 18-mile, $55 million Oak Mound-Waldo Run transmission project is expected to be placed into service by December 2015.

The company is also evaluating additional transmission upgrades as new service requests from shale gas developers continue throughout the Mon Power territory. FirstEnergy is currently evaluating new transmission facilities in Wetzel County to support a midstream gas processing plant that continues to expand.

Project Need
FirstEnergy has identified the reliability risk of low voltage conditions on the transmission system under certain conditions. The proposed project addresses the reliability issues. Its assessment is based on existing conditions and the need for system reliability to safely meet the electrical needs of the region now and into the future.

Regulatory Approval
TrAILCo will submit a letter to the staff of the Public Service Commission of West Virginia advising them of the project.

Easements
In most locations, a new 150-foot wide right-of-way will be needed for the proposed transmission line. In a few locations, the new right-of-way will be 200 feet wide.