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PJM's State of the Market Report

3/15/2012

1 Comment

 
Just when you had puzzed and puzzed until your puzzler was sore trying to interpret PJM's 5-book RTEP set, concisely edited by Leo Tolstoy, PJM has issued another voluminous report.  The 2011 State of the Market Report is like the world's biggest fortune cookie, with your hidden fortune cleverly translated into Ancient Sanskrit.  I wish PJM would get more efficient and issue Magic 8 Balls instead.  I mean, how easy it could be to give it a shake and say, "Oh, PJM Magic 8 Ball, will the PATH Project be coming back?"  The PJM Magic 8 Ball would give you an immediate answer like, "Don't count on it!"  Instead all we get are these encyclopedic mystery novels with "Reply hazy, try again!" stamped on the front cover.

Here's PJM's CliffsNotes version press release summarizing the report.  This is about as concise as it gets:

"The report noted that gas prices fell and coal prices rose in 2011. Gas prices decreased on average by 10 percent and coal prices increased on average by 19 percent in 2011. PJM LMPs were lower. The load-weighted average LMP was five percent lower in 2011. PJM capacity prices were lower. PJM average capacity prices were 18 percent lower in 2011. Operating reserve charges increased by 1.0 percent in 2011. Congestion costs decreased in PJM by 29.9 percent in 2011."

Inside the big report, there's a section entitled, "Generation and Transmission Planning" (Volume 2, Sec. 11!)  The report's mention of PATH seems to be missing one crucial fact -- that this project is supposedly "suspended."  The report prattles on like PATH hasn't skipped a beat, but throws you a tiny little bone at the end saying that PJM is "considering new information."  What is that supposed to mean, PJM Magic 8 Ball?  "Outlook not so good."  I hope Magic 8 Ball was speaking from PATH's perspective...

The Potomac - Appalachian Transmission Highline (PATH) project is required to resolve reliability criteria violations. The PATH project consists of a 765 kV transmission line extending approximately 275 miles from the Amos Substation, which is located in southwestern West Virginia, to the proposed Kemptown (765/500 kV) Substation, located in central Virginia. The project also includes a new Welton Spring (765/500 kV) Substation.
Currently, right-of-way issues are being discussed in West Virginia, Virginia and Maryland. The property for the Welton Spring and Kemptown substations has been acquired. The preliminary engineering design work, as well as the preliminary procurement activities, is in progress. Construction will be scheduled to begin following receipt of state commission approvals to construct. The required in-service date for the PATH line is June 1, 2015.
PJM is in the process of considering new information, including fuel cost estimates, emissions costs, future generation scenarios, load forecast updates and demand response projections.

Further down in the report, the MMU goes and gets all cranky about transmission projects dropping out of the RTEP messing up his little markets and makes this recommendation:

"The MMU recommends that PJM propose modifications to the transmission planning process that would limit significant changes in the status of major transmission projects after they have been approved, and thus limit the uncertainty imposed on markets by the use of evaluation criteria that are very sensitive to changes in forecasts of economic variables."

Way to send us all to the poor house, MMU!

This little transmission project went to market,
This little transmission project stayed in the RTEP,
This little transmission project is "in abeyance,"
And this little transmission project is not,
But this little transmission project cried, "Wah, Wah, Wah" all the way to abandonment.

Don't you just love the new "stakeholder friendly" PJM?

1 Comment

Incumbent Transmission Owners Usurp PJM's Authority

3/8/2012

4 Comments

 
It looks like Primary Power has had another revelation about the shifty state of affairs at PJM.  If you've been following the SVC issue, here's the latest.

Primary Power submitted a letter to PJM on February 29 to make a final plea to retain their prior selection to construct the projects.  FirstEnergy wants to swoop in at the last minute and take over the project and they have been whining like a milksop champ.

In the letter, Primary Power makes a couple of astute observations:

"Continuing to allow a re-opening of the original recommendations made by the OI is tantamount to allowing the incumbent transmission owners to take over PJM’s role as the Transmission Planner in its NERC reliability regions, and PJM’s management of the stakeholder process."

and

"There are real problems with FirstEnergy’s claimed estimate that make it not credible, and not a valid basis for comparison to Primary Power’s well-founded estimate. First, Primary Power’s estimate is based on five years of development work on the Meadowbrook SVC and a design-basis cost estimate provided by the EPC contractor for the Primary Power SVC projects. In comparison, FirstEnergy has done no development work on a Meadowbrook SVC and its estimate is just an unvetted assumption.

Second, FirstEnergy’s track record on cost estimates for this very type of facility demonstrates that FirstEnergy grossly underestimates the cost of the facility in its initial estimate.

In the case of FirstEnergy’s Black Oak SVC facility, which was designated to FirstEnergy in the 2005 PJM RTEP, FirstEnergy’s initial estimate was $35 million. Within a year after FirstEnergy was designated to build the facility, the original cost estimate had ballooned from $35 million to $50 million. FirstEnergy underestimated the cost by almost 50 percent, and PJM selected the project based on that estimate.

If FirstEnergy has similarly underestimated the costs here, which is likely given that FirstEnergy has done no development or design work on the Meadowbrook SVC, then FirstEnergy’s $60 million initial estimate could easily escalate to $90 million, well in excess of the cost for Primary Power’s Meadowbrook SVC project. The lesson learned from FirstEnergy’s prior cost estimating and its off-the-cuff estimate for a project that it has not developed, is that care should be taken when comparing cost estimates."

So, FirstEnergy severely undervalues their "off the cuff," unvetted cost estimates in order to have them selected by PJM.  And PJM continues to defer to the profit-driven bullying of its largest members.  Anything new and striking in that for you PATH opponents?  Nah, didn't think so.  PJM is a dangerous cartel and its continued biased favoritism of projects awarded to certain incumbent TOs keeps cropping up again and again.  Like water dripping on a stone...
4 Comments

When Sensationalism and Evasiveness Collide...

3/6/2012

2 Comments

 
...it causes news stories like this:

PATH power line could be back on track this summer

Don't blame the reporter, it looks like the title of the article that was not used by her editor was the more realistic, "Future of PATH power line could be decided this summer."

Does Herling actually say that PATH will be needed?  No.  In fact, most of what he says points to PATH not being needed.  New generation is planned for the east coast, coal prices are up, gas prices are down, prices have levelized, the bottom has fallen out of the Ohio Valley power generation market, east coast states are pursuing renewables and PATH's parent companies clearly aren't interested in the project any longer.  He drones on and on about PJM's new planning process, but none of what he says is news.  In the practice of what Bill has termed "PATH Kremlinology," we've been keeping you informed of the little puzzle pieces we dig up and fit together.  Stay tuned while we see this one through.

We first got wind of the supposed "summer" decision about PATH from the letter PATH sent to the NPS asking to have the EIS held in continued abeyance until 60 days after PJM's RPM auction in May.  None of that has changed.

Herling isn't exactly known as a "transparent" source of information, however.  When Dominion presented the rebuild of the Mt. Storm - Doubs 500kV line to PJM, our pal Herling tried like mad to sweep it under the rug or delay it unnecessarily.  He lost that battle.  MSD is proceeding with an in service date of 2015.

So, why would an impartial planner be in the pocket of the PATH companies?  Here's a little "transparency" for you, taken from one of Herling's many expert testimonies for the PATH Project:

"Prior to that, I worked for the American Electric Power Service Corporation for eight years in bulk transmission planning."

Okay, so that explains Herling.

It probably also explains this glaring departure from reality that I noticed in the 2011 RTEP last night.

In Book 3 of the 2011 RTEP, PJM makes the following statement about PATH's "abeyance" as it was announced in early 2011:

"Additional sensitivity analysis performed on a 2017 study year case examined the impacts on the need for PATH abeyance from Warren County Generation, a Global Insights load forecast, RPS initiatives, at risk generation and State DR/EE goals."

What's missing?  Dominion's MSD rebuild - the ultimate grim reaper for the PATH project.

Here's what PJM says about MSD:

"Baseline RTEP studies conducted in 2010 indicated that the Mt. Storm - Doubs line would continue to be a limiting system element even after major backbone additions like TrAIL and PATH were completed. Consequently, the PJM Board approved PJM’s recommendation to add the rebuild to the PJM RTEP as an operational performance upgrade."

But here's the testimony PATH presented to the VA-SCC on March 17, 2011 regarding PJM's additional analysis requested by the hearing examiner:

"When the upgrade is completed, the Mt. Storm-Doubs line, the first two lines on this slide, the carrying capacity of that line will be increased about 66 percent. And so, that will move out the thermal violations shown in the base case well into the decade of the 2020's."

Herling has always been in denial about MSD.  He also rules his little fiefdom like the lunatic patriarch of a dysfunctional family.

"As we work through 2012 … I think will fill in the blanks for what other factors we will consider and how we will weigh them when we are making decisions," he said.

Transparent?  Hardly.  But, will the PATH project become "needed" again this summer?  I suppose anything is possible when you're dealing with a cockamamie, clandestine cartel, but it's probably unlikely.  This doesn't mean you should forget about PATH and staying involved in continued opposition, though.  It's always possible that the zombie could rise from the grave until it is officially abandoned.




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PJM Publishes 2011 RTEP; PATH digs up stupid comments

3/5/2012

4 Comments

 
PJM finally made the 2011 Regional Transmission Expansion Plan available online today.  It's 5 "books" of silly stuff that's going to take a long while (and a lot of coffee) to get through.  PATH will continue to be "held in abeyance" in 2012.  No surprise there.  Just another $13M of profit for the PATH companies this year that will be paid for by you while the project continues to sit on a shelf.  Here's the PATH money quote:

PATH Abeyance
Analysis performed during the 2010 RTEP cycle required an in service date of June 1, 2015 for the PATH Line as shown on Map 1.3. The PJM Board issued a statement on February 28, 2011, suspending the PATH line.
PJM staff performed an updated analysis based on the 2011 RTEP assumptions that included Generation Deliverabilty; and Load Deliverability for the following LDA’s: MAAC, Southwest MAAC, Eastern MAAC, PEPCO and Dominion. Additional analysis performed on a 2017 study year case with 2011 RTEP assumptions examined the impacts on the PATH abeyance from Warren Generation, Global Insights load forecast, RPS, at risk generation and State DSR/EE goals. 2011 RTEP analysis suggests that the need for the PATH line has moved several years beyond 2015. Based on these analyses the PJM Board has decided to continue to hold the project in abeyance and requested that the transmission owners suspend development activities. Furthermore the PJM Board has directed staff to perform additional analysis using the 2012 RTEP assumptions and incorporating May RPM base residual auction results.

In honor of this momentous occasion, the li'l Coalfella has dug up some of his trademark stupid comments, just for you:
WV Metro News reports,
"Our energy delivery to customers still remains below 2008 levels,” Colafella told MetroNews. “You're really looking at a situation that's different today than when PATH was originally proposed."

PJM has continued to research the PATH project for the last year, getting updates to determine if things are changing. At this point, Colafella says the answer is "no."

"The landscape today is really no different than where we were a year ago,” he said. “Supply really continues to exceed demand on the electric grid."

Colafella says First Energy and Appalachian Power are following the lead of PJM.

"The companies are not moving forward with the project,” he said. “At this point there aren't any activities that are underway."

Except for that collection of $13M out of your wallet this year.  Li'l Coalfella forgot that "activity."

Looks like our li'l Coalfella isn't so hopeful about his little PATH Project anymore.  Compare the above with the stupid comments he made last year:

"'The investment we’ve already made won’t be lost though, because the project is not lost — just suspended,' Colafella said."

The project is lost.  Get on with the abandonment before your $140M investment is "lost" too.  We're not going away until you do.
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Onshore Wind vs. Offshore Wind

3/3/2012

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Dominion has made a filing with the Bureau of Ocean Energy Management asking them to suspend Atlantic Wind Connection's $5B offshore wind backbone.  Dominion says AWC's right-of-way request should only be approved after PJM Interconnection first approves the project.  PJM says:

"A spokesman for the group, which has more than 750 members, many with ties to the commercial power industry, said the project doesn't meet PJM's goal of providing reliable and low-cost energy to its customers.

"'It's something that doesn't fit into our existing framework,' Ray Dotter said."

It doesn't fit into their existing framework.  Perhaps that's because PJM never completed studying it last year due to "resource limitations."  However, PJM did manage to find the "resources" to study importing 40% renewables into PJM from "wind profiles for resources further west of PJM."

It doesn't "fit into their existing framework" because they don't want it to "fit into their existing framework."  PJM is first and foremost a cliquish cartel ruled by Ohio Valley coal-dependent generators.  These PJM bullies don't want offshore wind to upset their status quo.  Onshore wind from the midwest will provide opportunities for these companies to own profitable portions of an "energy superhighway" envisioned to move these renewables to population centers on both coasts.  Once this "superhighway" is in place, it will also provide them with an opportunity to undercut intended renewables with new and expanded coal-fired generation in electricity markets.  Offshore wind will cut into their current market share of load on the east coast, and require only a minimal amount of new transmission at four proposed injection points along the coast.  It will not provide expanded opportunities to get coal-fired generation to market.

The fact that offshore wind does not require a new, nationwide grid of transmission lines is one of its best selling points.  Transmission lines are expensive to build (estimates are currently more than $300B for the "superhighway"), take land through eminent domain, and face fierce opposition which causes project delays, or even cancellation of the entire project.  A recent article in Public Utilities Fortnightly estimates that onshore renewable generation, backup generation to support it, and required new transmission could top $500B.  The article, entitled "The Not-So-Green-Superhighway" (sorry, no link, you need a subscription to view online content by this snooze-fest) was written by the same author of this presentation.  Although the presentation is not as recent or extensive as the article, the article sets forth the same basic idea that was presented at the National Coal Council's 2010 Spring Meeting.  After stating that "RES transmission could enable expansion of coal-fired generation by equivalent of 30 new plants by 2020," the presentation concludes that "When public understands this, there will be reaction."  Well, consider this your notice.  React!

Offshore wind is being presented as more expensive than onshore wind.  Those estimates do not take into account the cost of getting onshore wind to market via $300B of new transmission.  When the true cost of onshore wind is recognized, it's not such a bargain after all.  The PJM cartel needs to quit dragging its subservient feet and stonewalling offshore wind.




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CFTP Says Transmission Investment to Increase 43%

3/3/2012

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In this press release the Coalition for Fair Transmission Policy (CFTP) points out that investment in new transmission is expected to increase 43% between 2011 and 2014.

"According to the Edison Electric Institute, shareholder-owned electric utilities and stand-alone transmission companies for the first time in 2010 surpassed the $10 billion mark for a yearly investment in transmission infrastructure. Spending on transmission increased nine percent from 2009 to 2010, EEI reported. Utilities and others are expected to invest $54 billion on transmission between 2011 and 2014, a 43 percent increase over transmission investment during the previous four-year period, 2007-2010, EEI reported."

That's because transmission is a tidy profit center for investor-owned utilities.  In return for their investment, these companies earn an immediate, guaranteed double-digit return on equity courtesy of federal transmission incentives and formula rates, even if the projects they invest in never get built!

While the CFTP makes some good points about broad socialization of transmission costs, the wisdom and ultimate cost of a "national grid" build out to support on-shore wind, and federal control of transmission siting and permitting, it's pretty hard to take them seriously or to want to support their "coalition."

That's because their membership (bankrollers) is composed of some of the worst perpetrators of the same bad policies they denounce.  For instance, member PSE&G is currently gouging over 60 million ratepayers throughout the 13-state PJM region for their unneeded Susquehanna-Roseland Project, as well as multiple other transmission projects they are undertaking.  If Susquehanna-Roseland had to be paid for solely by the ratepayers that benefit from it, it would not be cost effective.  S-R will purportedly reduce electric costs in New Jersey and load centers located at its eastern terminus.  According to CFTP, that's who should pay for the entire line.  Instead, PJM's cost recovery policy socialized PSE&G's cost across their entire region.  If we believe that S-R will reduce prices in New Jersey, we also accept the fact that S-R will increases prices to the west of it's starting point.  This "levelizing" of prices within the region is what PJM's screwed up markets promote.  Why is it that ratepayers who bear the direct brunt of proximity to "cheaper" generation must not only pay the cost of new transmission to make electricity cheaper for other load centers without enough generation to support their needs, but also have the prices they pay for electricity raised by the ultimate "benefit" of these same transmission projects?  This is the bad logic that PJM has been getting away with for years with their destructive "markets."

CFTP is just another corporate-funded "coalition."  These "coalitions" always have ulterior motives because, let's face it, corporations aren't in the "warm & fuzzy" business of helping consumers.  They exist to turn a profit every quarter.  Every expenditure is geared toward increasing those profits.  So, while their "coalition" has some good arguments, they're also a bunch of hypocrites.
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PJM Files New RTEP Planning Process With FERC

3/2/2012

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As I'm sure you all remember quite fondly, last year around this time, the PATH Project was "held in abeyance" by PJM, who also said they would continue to evaluate the project for inclusion in a future RTEP.  What they also said at that time was that they were embarking on a process to retool the way they do their planning. 

Here's the result of PJM's work over the past year.

PJM uses PATH (and MAPP) as an example of how their planning process "ha[s] impeded PJM’s ability to plan for its system with any certainty."  PJM ended up with a whole bunch of egg on their face when they persisted with their Project Mountaineer plan to use their RTEP process as a vehicle to promote purely economic projects as reliability projects.  It was embarrassing and inconvenient for PJM and its profit-driven transmission owner "stakeholders" to have the projects they determined were "needed" drop out of the RTEP in future years because they weren't "needed."  PJM's planning process was too rigid and based on clearly defined criteria with no room for opaque, subjective camouflage of superfluous projects.  PJM set out to create a new process where a project, once included in the RTEP, could never be omitted.

It didn't turn out much different than I thought it would.

PJM has added what they call "sensitivity studies, modeling assumption variations and scenario analysis" to their process.  In the future, when need for a dead dog like PATH becomes shaky, PJM will have the ability to just add a few more mystery spices to the planning pot in order to create a new reason to continue to pursue a loser project.  It's not just about "reliability" anymore:

"PJM believes there is merit in allowing for flexible planning criteria and proposes to expand its analyses
beyond a strict application of the reliability criteria in order to identify the most effective transmission system upgrades to satisfy the needs of the system. This proposed balanced approach starts with defined criteria and then allows PJM to look further to identify and evaluate potential transmission system needs using sensitivity studies, modeling assumption variations and scenario analyses, including Public Policy Objectives."

And about those "public policy objectives"...  PJM isn't just going to consider "public policy requirements" of state (or federal) mandates that are actually enacted statutes and regulations, but also "public policy objectives" that are "public policy initiatives of state or federal entities that have not been codified into law or regulation but which nonetheless may have important impacts on long term planning considerations."  So, as if it's not bad enough that you may end up having your property taken for a transmission line made necessary by the laws of another state, you may now also lose your property to a transmission line made necessary by the idea for a "public policy" in another state.  I can't wait to see this tested in a court.  I'm sure the wait won't be long.

PJM has also made a couple other changes, in order to show FERC how impartial, open, transparent and loved their planning process turned out.  PJM has added a new committee to their stable of "stakeholders."  The "Organization of PJM States, Inc. (“OPSI”), by unanimous resolution officially endorsed forming an Independent State Agencies Committee (“ISAC”) comprised of interested state agencies within the PJM footprint."  This committee will be composed of state public service commissions, who are still your only official line of defense against unneeded, prohibitively expensive, greed-driven transmission projects.  Despite PJM's attempt to make it sound like the states are enthusiastically supporting their new planning process and their new role at PJM, it looks like the states are suspicious.  And they should be.  Their authority to permit and site transmission projects within their borders has been under constant attack by the industry, FERC and PJM, who are pushing for a single federal transmission siting and permitting process whereby the states and citizens have a very limited voice.

PJM also proposes that they will "expand and enhance its planning procedures with respect to the communications and interaction around all phases of the process":

"The Transmission Expansion Advisory Committee shall be open to participation by: (i) all Transmission Customers, as that term is defined in the PJM Tariff, and applicants for transmission service; (ii) any other entity proposing to provide Transmission Facilities to be integrated into the PJM Region; (iii) all Members; (iv) the electric utility regulatory agencies within the States in the PJM Regional and the State Consumer Advocates; and (v) any other interested entities or persons."

Yeah, they talk a big game, but they get madder than a wet cat when a mere ratepayer intrudes into their playground.

Because PJM's new plan is a Section 205 filing, anyone, including YOU can comment, protest or intervene within the next 21 days.  If you need more info. about these processes, let me know.
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PJM Still Thinks PATH Could be Needed

2/21/2012

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PJM is still refusing to give up on the PATH Project boondoggle.  With the 2011 RTEP just a week away, PJM continues to recommend that PATH and fellow Project Mountaineer boondoggle, MAPP, remain in the la-la land of "abeyance" until the May 2012 RPM auction.  Project Mountaineer boondoggle Susquehanna-Roseland is supposedly still "needed," according to these slides.

There is no longer any "reliability" or economic justification for these projects!  They simply hang around like a stale house guest and continue to cost electric consumers in thirteen states higher electric bills that they can ill afford.

The last RPM auction in May 2011 showed that prices between eastern and western PJM have nearly levelized:

"In PJM's MAAC area the price of capacity will be $136.50 MW-day, a decrease of about $100 from last year.  (The MAAC price applies to the transmission zones of Baltimore Gas and Electric Company, Metropolitan Edison Company, Pennsylvania Electric Company, and PPL Electric Utilities, Atlantic City Electric, Delmarva Power, Jersey Central Power and Light Company, PECO, Public Service Electric and Gas Company, and Rockland Electric Company.) The non-MAAC region, will pay the RTO price of $125.99, an increase of about $100. This region includes western Pennsylvania, western Maryland, Ohio, Indiana, Michigan, Kentucky and Virginia.

"The convergence of prices between the eastern and western regions of the market is primarily driven by the significant reduction in forecasted load growth through 2014/2015," Ott said."

Any justification for Project Mountaineer has long since evaporated.  "Congestion" has eased, coal-fired electricity has become more expensive, and gas-fired generation in the East Coast load pockets has become cheaper than coal-by-wire.  In addition, new gas-fired generation is being proposed near load.  Any supposed "reliability" or "congestion" crisis has eased.

As far as Susquehanna-Roseland, PJM really needs to take a fresh look at that project.  Their current plan is complete overkill.  The existing line may be near the end of its useful life, however a simple rebuild may be the answer, instead of a brand new double-circuited 500kV line.

It's always "one more auction" with these guys, and there is always another auction down the road for the project owners to pin their hopes on.  Project Mountaineer was an embarrassing blunder on the part of PJM.  Let's put it to rest, move on, and quit wasting the scarce resources of PJM electric consumers on useless boondoggles!
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How Much Has PJM's "Project Mountaineer" Cost Electric Consumers?

2/14/2012

6 Comments

 
Seven years ago, in the midst of contemplating policy to encourage investment in the nation's transmission grid, FERC held a series of technical conferences to hear new ideas and opinions.  One such conference, held in Charleston, WV on Friday, May 13, 2005, was entitled, "Promoting Regional Transmission Planning and Expansion to Facilitate Fuel Diversity Including Expanded Uses of Coal-Fired Resources."  One might question exactly what kind of "fuel diversity" was being facilitated by expanding the use of coal-fired resources in 2005, since over 56% of generation in PJM came from coal during the previous year.  However, Joe Manchin, Peabody Coal and American Electric Power were involved in the conference, so don't waste too much time thinking about it.

A transcript of this technical conference is available here.  It's long, but definitely not boring.  There are plenty of arrogant little nuggets spread throughout, documenting political, corporate and regulatory humor about how they were getting things "taken care of" without notice by the electric consumers who would pay for it all.  (Hint:  search the document for the word "laughter" to find the bulk of their little jokes at your expense.)

During this conference, PJM Western Region President Karl Pfirrmann unveiled his plan outlining "the potential for new transmission resources in the region to enhance opportunities for coal based generation to reach eastern markets."  He called this plan "Project Mountaineer."

Project Mountaineer envisioned two or more new transmission "backbone" projects to "enhance [coal-fired] power flows by up to 5,000 MW."

Project Mountaineer's "transmission enhancements included potentially 550 to 900 miles of new backbone 500 or 765 kv transmission at an approximate cost of $3.3 to $3.9 billion. Although a large number, if such costs are spread to all customers within the PJM footprint, the cost to a typical retail customer would amount to only one mill/kwh."

Pfirrman envisioned that PJM's Regional Transmission Expansion Plan could be utilized as a "vehicle" to create a smokescreen to advance these purely economic projects under the guise of reliability.  In the words of AEP's Mike Morris, "...it lends credibility to what you're trying to do." This resulted in power company propaganda telling electric consumers they would be subject to "brownouts and blackouts" unless Project Mountaineer was built.

In response to the profitable opportunities presented by Project Mountaineer, some of PJM's biggest investor owned utilities began proposing transmission projects that fit into the Project Mountaineer scheme, such as Allegheny Energy's "TrAIL" Project and AEP's I-765 Project.

Four projects that fit PJM's Project Mountaineer criteria were eventually selected as part of PJM's RTEP and "ordered" to be built.  They are:

1.  Allegheny Energy's modified TrAIL Project, a 500 kV line, 215 miles long, beginning in Southwestern Pennsylvania and ending in Northern Virginia.  Dominion Resources was "ordered" to build a second, smaller segment of this project in their territory in Virginia.  Estimated cost for this project was $960M.  The sponsors of this project claimed it would relieve some portion of "congestion," which was purportedly costing PJM electric consumers $1.6B yearly in 2006.  Allegheny Energy's portion of the project was awarded a return on equity of 12.7% by FERC.  This project originally included additional project miles in Pennsylvania that were abandoned after the Pennsylvania PUC denied their application.  TrAIL was ramrodded through approvals and built in 5 years, although purchasing approval in West Virginia resulted in millions of dollars worth of "concessions."

2.  Allegheny Energy and American Electric Power's PATH Project, a combination of parts of both original TrAIL and I-765 projects.  The companies formed a joint venture and were awarded an astounding 14.3% return on equity for their investment in the project by FERC.  The 765 kV project was 275 miles in length, stretching from southern West Virginia, across Northern Virginia and ending in Mt. Airy, Maryland, and was estimated to cost $2.1B.  PATH was supposed to save consumers $47M per year in "congestion" costs.  PATH was shelved last year and is currently "held in abeyance" by PJM.

3.  PSE&G and PPL's Susquehanna-Roseland Project.  This 145 mile long, 500kV project, stretches from Salem Township, PA to Roseland, NJ, and is estimated to cost $1.25B.  For its part of the project, PSE&G was granted a 12.93% return on equity by FERC.  PPL is earning 11.68% ROE through their FERC formula rate.  This project was originally proposed with additional segments in New Jersey that have since been tabled due to decreased demand for the project.  This project is supposed to save consumers $200M per year in "congestion" costs.  This project is still waiting for a permit from the National Park Service.

4.  Pepco Holdings Inc.'s Mid-Atlantic Power Pathway (MAPP) was originally proposed as a 230 mile 500 kV project, stretching from a substation in Northern Virginia, across Maryland's Eastern Shore, through Delaware and ending in southern New Jersey.  Small fragments of this project were also awarded to VEPCO, Baltimore Gas & Electric and PSE&G.  The New Jersey and Delaware segments have since been tabled, again because of decreasing demand.  The current project is 152 miles long and is estimated to cost $1.2B and has also been put "in abeyance" by PJM.  MAPP earns a 12.8% return on equity for its owners and supposedly will alleviate $320M in annual "congestion" costs if built.

An attempt to add up the "benefits" for electric consumers in "congestion" cost savings provided by Project Mountaineer cannot be accomplished.  All the different "congestion" savings claims made by these four projects is calculated differently, is at least 5 years out-of-date, and cannot be verified.  In addition, it's not just a simple matter of adding the claimed savings because each project by itself changes the amount of remaining "congestion" and reduces possible additional savings by the other projects.  The nature of "congestion" itself has also changed dramatically since these projections were made.  Due to decreased demand projections, increased efficiency and demand response, and the TrAIL project going into service, the price differential between Western and Eastern PJM that formed the basis for these "congestion cost" claims has nearly levelized in PJM's 2011 RPM auction. 

"In PJM's MAAC area the price of capacity will be $136.50 MW-day, a decrease of about $100 from last year.  (The MAAC price applies to the transmission zones of Baltimore Gas and Electric Company, Metropolitan Edison Company, Pennsylvania Electric Company, and PPL Electric Utilities, Atlantic City Electric, Delmarva Power, Jersey Central Power and Light Company, PECO, Public Service Electric and Gas Company, and Rockland Electric Company.) The non-MAAC region, will pay the RTO price of $125.99, an increase of about $100. This region includes western Pennsylvania, western Maryland, Ohio, Indiana, Michigan, Kentucky and Virginia.
"The convergence of prices between the eastern and western regions of the market is primarily driven by the significant reduction in forecasted load growth through 2014/2015," Ott said.

According to PJM, congestion is now occurring at PJM's borders:  "The trend of an increasing percentage of transmission congestion occurring on facilities at PJM‘s market borders is driven by 1) reduced west to east flows due to a relative increase in coal resource offer prices in the western part of the market and a relative reduction in gas-fired resource offer prices in the eastern part of the market, 2) increased wind resources impacting the western part of the market, and 3) the completion of the 500kV TrAIL Line."  That's because Western PJM's generators are now trying to unload their unneeded product into other RTOs and can't get rid of it fast enough.

In addition, new gas-fired generation is being planned and built near load on the East Coast, further obviating any economic justification for more expensive coal-by-wire from Western PJM.

The savings are an illusion, but the costs to electric consumers are real.  Let's add up the estimated project costs (although actual costs at completion will be much higher).  $5,510,000,000 - that's $5.51 Billion.

Even this staggering figure is an mirage, however.  It's going to cost electric consumers much, much more.  $5.51B is the estimated total of project assets at completion.  Electric consumers will pay these costs back to the power companies little by little over the projects' estimated 50 - 70 year lifespan.  In addition to the annual, incremental pay off of the principal, electric consumers will also pay annual interest on the remaining balance at rates varying from 11.68 to 12.93 percent.  Return is calculated and paid annually.  Electric consumers are also responsible for yearly expenses such as income and other taxes, and operations and maintenance costs.

Let's take a look at how much the power companies have already spent on project assets:

1. TrAIL's rate base (assets) is $921,926,774.67.  It currently earns them a return (interest) of $76,492,872 per year.  TrAIL's annual revenue requirement (the amount you will pay per year) is $129,108,109, which includes the return.  These figures do not include the cost of Dominion's segment of the TrAIL Project, so consider it a very conservative estimate.

2.  PATH's combined current rate base is $139,771,892 and earns an annual return of $13,347,885.  PATH's annual revenue requirement is $23,211,101, including return.

3.  Susquehanna-Roseland's combined current rate base is $131,284,693 and earns a yearly return in the neighborhood of $17.5M.  Revenue requirement is harder to calculate on this one because project totals are split between two different formula rates that also include other projects.

4.  MAPP's current rate base is $74.2M, with a return in the neighborhood of $7.3M.  Again, these are ballpark figures taken from a formula rate that also includes other projects.  The small segments awarded to other partners amounting to around $70M aren't worth looking up, so consider these cost estimates as conservative.

Here are the eye-opening, conservative totals:

Project Mountaineer has already put you in debt to the tune of $1,267,183,359 - that's $1.26 Billion that is earning the project owners a yearly profit of $114.6M.  In return for the substantial price paid by electric consumers in 13 states and the District of Columbia for Project Mountaineer, only one out of four projects is actually completed and delivering electricity, in order to save East Coast ratepayers some fanciful amount of "congestion" costs.

In addition, these four projects have affected, and continue to affect, thousands of directly impacted citizens in Virginia, West Virginia, Maryland, Delaware, Pennsylvania and New Jersey in other ways.

The TrAIL Project required new rights-of-way, which thousands of landowners were forced to sacrifice at "fair market value."  In addition, it devalued thousands of properties in its proximity, for which damages were never paid.  Allegheny Energy contractors destroyed the environment while building the project.  A complaint about the environmental damage is still pending before the West Virginia PSC.

The Susquehanna-Roseland project has been "filibustered" by the federal Environmental Impact Statement and its owners are now offering a $40M "mitigation" concession to the National Park Service in exchange for a permit.  The cost of any concessions will be added into the ultimate cost of the project that ratepayers must repay to the companies.

MAPP continues to contract for long-term supplies, such as the underwater cable needed to cross the Chesapeake Bay, that may never be needed!

In addition, Project Mountaineer has cost thousands of landowners and project opponents hundreds of thousands of dollars in legal costs to intervene in state permit cases in order to protect their interests.  National non-profit organizations, such as The Sierra Club and EarthJustice and Virginia's Piedmont Environmental Council, have also spent heavily on legal costs to participate in permit cases in 6 different states.  And then there's the day-to-day costs of grassroots citizens' opposition groups that have formed to oppose the four Project Mountaineer transmission lines.  Although the cost of grassroots public relations campaigns are an incredible bargain when compared to the ratepayer funded PR campaigns of project owners, they still rely on donations from affected and sympathetic citizens.

I'd be remiss if I didn't mention the indeterminable societal costs imposed on millions of people who are affected by the increased pollution and destruction of their environment caused by increased mining and burning of coal.

Project Mountaineer is an embarrassing faux pas on the part of both PJM and FERC that should now be retired to the annals of history, along with other politically gauche misconceptions spawned by corporate greed.  The sheer cost of it alone, at a time when electric consumers can least afford it, is not sufficiently offset by any illusory "benefits."  It's time to cancel the remaining three Project Mountaineer transmission lines and move forward with new, smart energy policy.


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FirstEnergy Accuses PJM of "Arbitrary and Capricious" RTEP Project Selection

2/10/2012

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Send in the clowns...  In a most delightfully droll display of the pot calling the kettle black, PATH parent company FirstEnergy accuses PJM of selecting and supporting RTEP projects that are unneeded and too expensive. 

What seemingly prompted FirstEnergy's whiny letter to PJM's Board of Managers are certain SVC grid upgrade projects awarded to an independent company.  FirstEnergy gets all territorial because there's money to be made, even though FirstEnergy has shown no prior interest in these projects.  Dominion also gets into the act to steal one of the projects, which were developed by Primary Power over the course of 5 years at a cost to them of $5M.

Ah, we're not too far from the elementary school playground, are we fellas?  Wassa matta... did someone have a better idea than you which could prove to be profitable?  Feeling a little inferior and powerless so you thought you'd steal another company's idea and make money off it?  Silly incumbent transmission owners!

FirstEnergy's accusations ring pretty hollow, after years of subjecting landowners and ratepayers to their unneeded, exorbitantly expensive PATH Project, which was selected by PJM through an arbitrary and capricious process.  PJM's need case kept falling apart, year after year, until they just couldn't continue the charade any longer.

Here are a few unlikely phrases from FirstEnergy's letter.  Substitute "PATH" for "SVC project" and it's clear that FirstEnergy agrees with us -- PJM's planning process is skewed to favor pet projects.  First it was PATH, now it's Primary Power's SVC projects.  That's called Karma, boys!

You can read Primary Power's version of events here.

PJM has rejected or ignored two equally effective and far less expensive alternatives...

...which is more cost-effective and faces fewer construction and permitting risks...

In short, the Rio SVC Project will result in PJM transmission customers bearing substantially excessive and unnecessary costs.

The RTEP produced through this process must "avoid unnecessary duplication of facilities" and "avoid the imposition of unreasonable costs on any Transmission Owner or any user of Transmission Facilities."

PJM is charged with the responsibility to identify and select the most appropriate solutions, whether or not they precisely match those proposed to PJM by project developers. In this instance, PJM failed to discharge and, indeed, abdicated its independent planning responsibility in a manner that appears to be arbitrary and capricious and may be unduly discriminatory...

As explained above, this decision constitutes an abdication of PJM's planning responsibility. Once PJM
determined that an SVC-based solution to the voltage criteria reliability concern was preferable, PJM had a duty
to evaluate and analyze the potential options for installing the required SVCs at locations that would provide an effective solution without producing excessive costs. The apparent failure to do so caused PJM to select an option that is unnecessarily costly, duplicates existing facilities, and may be more risky than alternatives (e.g.,
siting).

...it did not eliminate PJM's responsibility to evaluate alternative solutions to reliability concerns...

PJM's failure to evaluate construction of an SVC at Meadow Brook, and its failure to explain why Primary Power's SVC project is preferable, render inclusion of the Primary Power project in the RTEP indefensible.  FirstEnergy urges the Board of Managers to require PJM to correct this deficiency.
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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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