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FirstEnergy Self-Dealing Scheme Not In The Best Interest of Potomac Edison/Mon Power Customers

9/22/2016

...so sayeth "The P3 Group," aka PJM Power Providers Group, a non-profit group of competitive energy providers in the PJM region collectively owning over 84,000 megawatts of generation assets. P3 is joined by the Electric Power Supply Association (EPSA), a national power providers' trade association.

These two groups popped up with a comment this week in the West Virginia Public Service Commission case regarding the issuance of a Request for Proposals for additional power supply for FirstEnergy's Mon Power and Potomac Edison subsidiaries.

The power providers say that the PSC has the authority to require FirstEnergy to issue an RFP for additional supply, and that only an RFP will ensure that Potomac Edison and Mon Power customers get the best price for new generation.

The best and most appropriate manner for this Commission to fully examine potential supply options would be with the use of a broad, competitively neutral RFP in which multiple suppliers could actively compete to meet the needs of West Virginia consumers. This would ensure that all available supply-side and demand-side resources are transparently reviewed in accordance with the state’s applicable rules and laws.

It doesn't take a rocket scientist to figure out that soliciting competitive bids for power will produce the lowest cost. But if you're FirstEnergy, you don't care about costs for West Virginia electric customers, you only care about your holding company's balance sheet and stock price.

The power providers quoted a research paper prepared by the National Association of Regulatory Utility Commissioners and the Federal Energy Regulatory Commission as support for an RFP:

The first key issue for incremental resource procurements is the design of safeguards to prevent potential improper self-dealing by the utility. Because the utility may financially benefit from the selection of its own self-build offer or a proposal from an affiliate, safeguards are necessary to ensure that the process is not improperly tilted toward the selection of such offers.

The power providers join the West Virginia Consumer Advocate Division, the Staff of the Public Service Commission, WV Citizen Action Group, WV SUN, and West Virginia Energy Users Group in calling on the Public Service Commission to order FirstEnergy and its subsidiaries to issue and RFP that will definitively and transparently determine the cheapest resource for adding additional capacity.

What is it FirstEnergy is trying to hide with its opaque self-dealing insistence that the purchase of one of FirstEnergy's own resources is a "good deal" for West Virginians? Sunshine is the best disinfectant!

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FirstEnergy's Coal Plant Purchase Has Cost You $130 Since 2013

9/20/2016

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That's according to a recent report from the Institute for Energy Economics and Financial Analysis (IEEFA).

Back in 2013, FirstEnergy, parent company of West Virginia distribution electric utilities Mon Power and Potomac Edison, came up with a bright idea to sell the Harrison Power Station to itself in order to raise cash to shore up its sagging balance sheet. The plant was originally owned by FirstEnergy's competitive electricity supply company, Allegheny Energy Supply. When owned by Allegheny Energy Supply, the plant was required to cover its own operating costs and make any profits by selling electricity into regional markets at a cost higher than its costs to produce the power. However, market prices for electricity began falling due to the glut of cheaper gas-fired generators, making it harder and harder for Harrison to compete and turn a profit. FirstEnergy proposed that Allegheny Energy Supply "sell" the plant to its West Virginia distribution affiliates at a jacked up price. Once Mon Power and Potomac Edison owned the plant, their ratepayers would cover the cost of operating the plant, with electricity sold to the power market at going rates. Except the going rate for power not only didn't produce any profit for the company's ratepayers, it didn't even cover its own operating costs. Therefore, ratepayers of Mon Power and Potomac Edison have been subsidizing the cost of operating the plant at a loss since 2013. The IEEFA estimates that the bill for ratepayers has climbed to $164 million. That equals roughly $130 in extra electric bill charges for every customer of Mon Power and Potomac Edison, paid to cover the losses of operating the Harrison Power Station.

The IEEFA calculated the costs by using monthly reports of operating costs and market prices submitted to the Public Service Commission since 2013. The IEEFA report reveals that the plant has produced a net cost (not benefit) to ratepayers for 28 out of 33 months. And future prospects for the plant turning a profit remain dim.

FirstEnergy "still believes the plant is still a good deal for customers in West Virginia."

Todd Meyers, a spokesperson for MonPower, responded to questions about the study by saying the company believes the purchase benefits their customers and that it supports coal mining.

“It continues to provide reliable, low-cost power to our customers, and has preserved the opportunity to use more than 5 million tons of West Virginia produced coal annually, supporting hundreds of coal miners with solid, family-sustaining wages,” he said.

No word on whether Meyers still believes in Santa Claus, the Easter Bunny, and the Tooth Fairy as well, but I recently bumped into a leprechaun riding a unicorn and he told me that he does.

What are customers of Mon Power and Potomac Edison paying for? Are they paying for the electricity they use, or are they paying to subsidize the coal industry? Or are they instead simply subsidizing FirstEnergy's quarterly dividends paid to shareholders?

And guess what? FirstEnergy has recently proposed selling ANOTHER of its competitive coal plants to Mon Power and Potomac Edison, citing the "model" of Harrison as the basis for another "good deal for customers in West Virginia." We can't afford another one of FirstEnergy's "good deals!"

Heads up, West Virginians, we're going to need all hands on deck to stop this one!

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FirstEnergy Scheme to Pass Risk to West Virginians

8/6/2016

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It's a risk hot potato. While some states have deregulated electricity generation, others have not. This makes for two different economic schemes for power plants. In the deregulated scenario, plants compete with each other to sell power in electric markets. A deregulated plant's income is derived from what it earns. Earnings minus the cost of producing power equals profit. But a regulated plant comes with a guaranteed profit. Regulation takes the place of a competitive market to guarantee a generator a fair return (but no more). A regulated plant is guaranteed to collect its cost of producing power, plus a fair return, to generate a set amount of profit.

When power market prices are high, deregulated plants earn more, because there is no regulated cap on the amount they can earn. However, when power market prices are low, regulated plants earn more, because they are guaranteed to earn a certain amount over their cost of service.

A deregulated plant must cover its own operation costs, everything it earns above its cost to produce power is profit. The owner of the plant shoulders all the risk of operating a plant that doesn't produce adequate profit. If a plant cannot produce adequate profit, it fails economically and will likely close.

A regulated plant's operation costs are covered by ratepayers. If the plant fails to produce an adequate profit margin, it can continue to operate because it is guaranteed to collect its operating costs and a small profit from ratepayers. The ratepayers shoulder all risk of operating a plant that doesn't produce adequate profit. It cannot fail economically because the ratepayers are there to make up any shortfalls between the cost to produce power, and the market price of that power.

It's all about who shoulders the economic risk.

FirstEnergy used to love deregulated plants when power prices were high. FirstEnergy made huge profits. But then power prices started falling because generators that were cheaper to operate entered the market. FirstEnergy's plants use coal for fuel. New plants use cheaper natural gas for fuel. Suddenly, FirstEnergy's deregulated coal-fired plants weren't economic any longer and couldn't cover their operating costs and still generate a profit. In a pure market situation, these plants would close. However, FirstEnergy has been looking for ways to transfer their deregulated plants into a regulated system, so they can continue to operate at a loss, courtesy of electric ratepayers. FirstEnergy wants to transfer its risk from the company to ratepayers.

“We cannot put investors and our company at risk.”

So said FirstEnergy CEO Chatty Chuck Jones during a conference with the company's stockholders. The company is planning to transfer its unprofitable Pleasants coal-fired plant into West Virginia's regulated system so that the company no longer has any risk associated with owning it.

If it's too risky for FirstEnergy's shareholders, it's too risky for West Virginia consumers. We simply cannot afford to shoulder more risk for the Ohio power conglomerate. Several years ago, FirstEnergy was successful in transferring its failing Harrison Power Station into West Virginia's regulated system. West Virginians are now paying above-market prices to operate it, and sell excess power into the regional market. Electric bills increased to cover the cost of owning and operating the plant (and paying for a whole bunch of maintenance on the plant that FirstEnergy deferred because the plant was losing money), plus a guaranteed profit for FirstEnergy.

Late last year, FirstEnergy filed its Integrated Resource Plan with the WV Public Service Commission. The IRP is a long-range plan by the company detailing how it plans to acquire the generation resources necessary to meet the needs of West Virginia customers. In its plan, it contended that buying another coal-fired power plant from its parent company was the best option for the customers. Other parties intervened to argue against it, but the Commission ultimately approved the plan, noting that actually buying the coal-fired plant would necessitate another filing and review by the Commission and parties could argue against it at that time.

However, during the last coal-fired power plant purchase case for Harrison, the company contended that there wasn't time to issue a request for proposals to solicit power supply contracts from other generators that may compete with Harrison to produce the lowest cost for West Virginia ratepayers. Therefore, Harrison stood alone as the only "solution."

Since the PSC neglected to require the company to solicit competitive bids for supply as part of its IRP, when is an RFP supposed to happen? It can't happen during the IRP, because it's too early in the process. But yet it can't happen when supply is needed, because it's too late in the process.

The Staff of the PSC and the West Virginia Consumer Advocate say the time is now. They have jointly filed a request that the company be required to file RFPs for all future capacity and energy requirements above a certain threshold. If West Virginians deserve to pay the cheapest prices for the power they need, then the company should be required to solicit competitive bids.

But the company doesn't want to. FirstEnergy wants to sell its Pleasants power station to West Virginians without any competition. That's not fair, or in the best interests of West Virginia ratepayers. FirstEnergy is whining that it shouldn't have to bear the risk of its unprofitable Pleasants plant, because it still has "life left in it."

“Is it frustrating that we’re shutting down tens of thousands of megawatts of generation in our country that’s got life left in it because of the way this market is working?” Jones said. “That is very frustrating to me.”

While the plant may still have physical "life" in it, it doesn't have any economic "life" left.

West Virginia can't afford to bail FirstEnergy out of its bad economic decisions any longer. Subsidizing FirstEnergy is "frustrating" to West Virginians, too, who sometimes have to make a choice between paying their electric bill and buying food. Go peddle your lemon somewhere else, FirstEnergy.

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Importing Renewables to West Virginia? No, thanks!

7/12/2016

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Block Grain Belt Express - Missouri has a brand new petition to let their Public Service Commission know you oppose the building of a 700-mile electric transmission line to export renewables to "states farther east."

Check it out here and add your name as a signer!

I signed it this morning. Want to know why?

As a resident of a "state farther east" proposed to be the beneficiary of this senseless sacrifice of Missourians, I am not in favor of importing renewables from other states. For years, West Virginians made a sacrifice to export energy to states to the east. Now that the bottom has fallen out of that market, West Virginia is left with nothing to show for its years of sacrifice. We must rebuild our energy economy and that includes building our own renewable energy generators for local use. We cannot afford to ship our energy dollars out of state to import Midwest wind, but must put them to work in our own communities to promote local jobs and economic development. Grain Belt Express is not wanted in Eastern states.

What we need here in West Virginia are local generators, serving local customers, providing local jobs and economic development. We don't need to ship all our energy dollars to Midwestern states, but invest them at home in our own communities.

Do you want to put your energy dollars to work in your own community? Or pad the tax coffers of other states and the bank accounts of the foreign investors hoping to strike it rich building unneeded transmission to export renewables from the Midwest?

Those foreign investors and their greenwashing buddies are pretending to represent your interests at the Missouri PSC by purporting that you desperately need and want this energy. Nothing could be further from the truth, and you need to speak up for yourself now, or risk having foreign investors speak for you!

NOTE: This is a brand new Block GBE petition. Even if you signed their petition several years ago, you need to re-sign this new one! Sign and share it now!

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Potomac Edison Says No One Was Harmed by its Failure to Read Electric Meters in Maryland

6/24/2016

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Wahhhhhhhh.

I could end this blog post there, but I won't.

In May, a Maryland PSC administrative law judge proposed ordering Potomac Edison to change its meter reading frequency to monthly and fined the company a piddly $25K.

That followed an earlier proposed order issued in April, in which the same ALJ said no harm, no foul, and did nothing to punish the company for its transgressions. The Commission pulled that proposed order and said it was "inadvertently issued." I guess the judge didn't check with his boss before filing it. Therefore, the revised order was issued a month later.

Now Potomac Edison and the Maryland Office of People's Counsel are appealing that decision, and basing it on the illegality of the ALJ's sudden change of heart. The OPC doesn't think monthly meter reading is a solution to a problem that has since solved itself, and that ratepayers shouldn't have to shoulder the financial burden of this company's despicable actions (or lack of action, as the case may be).

You can find all the above filings here.

I guess OPC has a point, why should ratepayers pay to fix Potomac Edison's failure? That's what happened in West Virginia, where meters are now read every single month. Buh-bye incorrect estimated bills and huge "catch-up" bills. Hello wacky bill schedule! Since a reading must be done before a bill is issued, bills are never issued and due on the same day each month. This presents a problem for folks who are only paid monthly, such as social security recipients, where they may receive two bills due within the same pay period.

But the anger is nowhere near that displayed across three states in the wake of Allegheny Energy's merger with Ohio dimwits FirstEnergy. Perhaps if Maryland's Staff and OPC had paid attention to the West Virginia proceeding several years ago, they'd know that the meter reading failure was directly tied to the company's post-merger actions. FirstEnergy insisted that Allegheny Energy toss out its perfectly good bill estimation methods designed to mesh with its alternate month reading schedule. It had been working in WV for 30 years. Instead, FirstEnergy insisted Allegheny adopt its own estimation routine, which was designed for missed reads in a system based on monthly reads. That's right, while it may have worked fine for FirstEnergy subsidiaries that read meters monthly, it did NOT work for Allegheny's bi-monthly read system. Combine that with FirstEnergy's "reorganization" of Allegheny's meter reading department and switch to "contract" meter readers who are paid less and must use their own vehicles, instead of a company-maintained motor pool, and disaster ensued.

Whose fault was this? FirstEnergy's!!

Only because of the scrutiny received in West Virginia (and to a lesser extent in Maryland, since the MD PSC was quite effective in preventing the customers from being heard during the heat of the moment) did the company take action to fix their mess. Because Maryland waited so long to actually DO anything, the problems are long since over.

Now Potomac Edison says their actions didn't actually hurt anyone in Maryland because there's nothing in the record. And there's nothing in the record because the MD PSC cancelled the public hearing it initially scheduled on this matter. Then shoved the case off to mediation for years. Then held a hearing. Then issued two orders FIVE YEARS after the damage was done. Justice delayed is justice denied, in this instance.

Potomac Edison also whines about the measly $25K fine the ALJ imposed. $25K probably wouldn't even pay for two seats in the FirstEnergy CEO's special "luxury suite" at FirstEnergy stadium. And yet this company has the nerve to cry like a baby over $25K.

So, hot potato passes to the MD PSC Commissioners, who seem to be responsible for the amended proposed order, so we'll assume it's to their liking. Who knows, maybe Chatty Chuck will invite the Commissioners to watch a game in his luxury suite! Woo Hoo!

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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.

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.

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FirstEnergy and AEP Flame Out in Ohio; Seek to Strap Ratepayers in Other States

5/3/2016

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Well, that was completely unsurprising. FERC said the Power Purchase Agreements requiring captive Ohio distribution company customers to purchase generation from AEP and FE merchant generators don't pass the sniff test.

Even though the Public Utilities Commission of Ohio (PUCO) approved the deals, FERC rules about affiliate transactions cannot be bypassed (or politically influenced).

FERC rescinded previously granted waivers to allow AEP & FE to engage in affiliate transactions without review. The waivers were granted when the companies spun off their regulated generators into merchant companies because the generation companies no longer had captive customers. In that case, any deals between regulated distribution affiliates and unregulated generation affiliates would have been subject to market forces. If the deals were too expensive, then customers could bypass the charges and switch to another, cheaper, generator. But AEP & FE made the mistake of placing the cost burden of these PPAs on captive distribution customers, and not free choice generation customers. Because then the customers would choose a cheaper generator.

Contrary to some of the articles I've read, the FERC decision does not reverse the PUCO's decision to allow the cost of the PPAs to become the responsibility of captive distribution customers. It simply rescinds its prior waiver of review of the PPA itself. The companies are now free to submit the PPAs to FERC for review. If FERC approves them, then everything can proceed as planned. However, it is unlikely that FERC will approve the PPAs because they allow AEP & FE to charge their captive customers to subsidize their shareholders profits.

So, what's a greedy and poorly managed utility to do? FE initially wanted to pretend that its PPA will be found just and reasonable by FERC. How much money and political influence would THAT require? Remember, the cost of civic and political activities is the financial responsibility of shareholders, not ratepayers. The cost of buying FERC is likely to obviate any temporary profits that may come from an 8-year PPA. They're not a cheap date like state utility commissions. However the company has apparently crunched the numbers and come to its senses. FE is now attempting to bypass FERC review by doing away with the PPA, while still collecting the charge it would levy on Ohio consumers. AEP is being a little more realistic, if not downright arrogant. AEP's CEO soothed investor agitation by claiming it will make the Ohio legislature re-regulate generation so that it may collect the cost of service, plus a return, for its Ohio generators. This would effectively end retail generation choice in Ohio. Is legislation that will cost Ohio electric ratepayers more money really that easy for AEP that it simply needs to want it and wave its magic wand? Time will tell.

Meanwhile, FirstEnergy wants to make its regulated Mon Power and Potomac Edison affiliates in West Virginia purchase another non-competitive generator from its competitive generation affiliate. It's just like re-regulating generation in Ohio, but the legislative work is already done. And FirstEnergy has already successfully pulled off a similar affiliate transaction a couple years ago when its competitive generation affiliate "sold" the Harrison Power Station to regulated Mon Power and Potomac Edison. West Virginia electric consumers have already bailed out one of FirstEnergy's uncompetitive generators, what's one more? This time, FE wants to "sell" its Pleasants Power Station to Mon Power and Potomac Edison. But Mon Power already owned an 8% share of Pleasants, which it "sold" to FE Generation as part of the Harrison deal. Now FE Generation wants to sell the same power station back to Mon Power. Pleasants is like the FE hot potato, bought and sold among affiliates as necessary to generate cash. The only fly in the ointment this time is that FE put a price on Pleasants when it "sold" it last time. I'm sure the cost to Mon Power can't be more than what FE Generation paid them for the plant a couple years ago. It's not like the price of antique coal generation stations has shot up in the past few years. But, never fear, I'm sure FE can pay the right people to convince the WV PSC that the plant is as valuable as the amount of cash FE needs to raise from its sale.

And don't forget... all this stashing of competitive generators into regulated companies is only temporary. If power prices recover and these generators once again become competitive, AEP & FE will find a way to "sell" these plants back to their competitive generation companies. It's all about shareholder return and making as much money as possible.... and ratepayers are the source of investor owned utility profits. The idea that regulation protects consumers in the absence of competition is nothing more than a fig leaf. Utilities that operate in both a competitive and regulated environment will continue to shift assets around to generate the most profit for their shareholders.

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Utilities Always Win In Current Regulatory System

4/9/2016

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Odd little bit of filler in a NW Arkansas newspaper this week. Bloomberg's In East, power costs fall, bills rise, tells Arkansans about utility hijinks in another part of the country. But these hijinks aren't local only to the east, they're as old as the utility business itself.

When regulation or markets find savings for ratepayers, utilities raise rates elsewhere to make up for it. Utilities, for the most part, are afraid of change. They refuse to make themselves relevant in a brave, new consumer-driven world. Instead of offering products and services that consumers actually want, utilities continue to force consumers to accept the products and services the utility wants to provide. At some point, utilities are going to make themselves irrelevant, because a consumer-driven world is here and it's not going away.

Ohio's utility tedious twins, American Electric Power and FirstEnergy, epitomize utility hijinks to ward off this brave, new world. While being all for deregulation of generation in Ohio when it was profitable, FirstEnergy has changed its tune and wants its generation to be regulated again. In West Virginia, FirstEnergy "sold" generators owned by its competitive affiliate to its distribution affiliate. The problem?

Spot power traded in the market run by PJM Interconnection LLC has averaged about $31 a megawatt-hour this year. That's less than half the $84.55 average in 2008.

Suddenly, competitive plants that were making a profit for the utility were not longer profitable. PJM's "market" had worked so well that older plants that are more expensive to run (such as antique coal plants) were no longer profitable. In a market situation, these plants would close and be replaced by cheaper alternatives, such as natural gas plants. Instead of changing though, the tedious twins sought out ways to make consumers pick up the costs of their plants so they could remain open and "competitive" in PJM's "markets."

After stashing their West Virginia plants in the state's regulated system, the twins came up with an idea to thwart Ohio's supposedly "competitive" generation system by selling the plants' generation into the state's regulated distribution system. The companies concocted power purchase agreements, whereby all regulated distribution system customers would make up any market shortfalls by purchasing the "competitive" generation at the company's cost. In turn, the company would sell the generation into PJM's "market" and leave consumers with any balance the "market" didn't cover. That's the definition of anti-competitive. No other generators in Ohio have the option of having regulated distribution customers pick up the cost of anti-competitive plants. If other plants aren't profitable, they close. That's how the "market" works.

But these utility schemes aren't long term commitments, no matter what the utility promises to score regulatory approval. The minute these schemes aren't profitable, the utility will propose a new scheme to make sure the profits continue. Does anyone actually believe that AEP and FirstEnergy will honor these PPAs in later years if they actually do begin to pay consumer returns at the expense of the company? Hell no. If that ever happens, the utility will find a way to get out of them and return them to a "competitive" business model. The utility never loses in our current regulatory system. The consumers are the perpetual losers.

Another utility scheme is to make up for losses on the competitive generation side by increasing profits on the regulated business side. Regulated transmission pays great returns and can earn additional financial incentives through federally regulated rates. It's not like we "need" a whole bunch of new transmission, it's that utilities need a way to make money. All of a sudden the transmission system, long neglected, has become rickety and failing and must be replaced. Serendipity! If a utility can earn double-digit returns building or rebuilding its transmission, then that's what they do. Utilities with stated rates are paid a set amount for maintenance of their transmission assets. But what happens if they don't spend all that money? It's added to share holder dividends. So, if a utility is hurting and looking for ways to increase share holder returns, the first thing they may do is cut maintenance spending. A look at any utility's quarterly calls with investors demonstrates that cuts to maintenance happen all the time in order to boost share holder dividends. But what happens to the transmission assets that aren't maintained? They become rickety and begin to fail. Serendipity! At that time, the utility determines that the transmission line needs to be completely rebuilt and earns a double-digit return on its "investment."

The transmission investment smorgasbord is why rates have increased, despite falling generation prices:

As the price of electricity in the region fell by half over the past decade, utilities raised monthly bills for residential customers by 26 percent, according to government data. Consumer advocates say the power companies are using falling electricity costs as cover to raise other charges. Utilities counter that they are passing on billions of dollars' worth of government-mandated improvements to long-neglected infrastructure.

Consumer advocates say this scheme isn't "fair" to consumers. But no end to the transmission feeding frenzy is in sight. While utilities spend their cash on profitable transmission investments, less profitable investments in the distribution system suffer. When state-regulated distribution investments pay an equal or better return than federally-regulated transmission investments, perhaps we'd see some attention paid to our rickety and failing distribution system.

Here's the lesson: The utility always wins because regulators have been conditioned to care about the utility's well-being over that of the consumer. After all, the utility is a constant in the regulatory realm, while consumers rarely show up. Only when regulators force better solutions will consumers benefit. Perhaps that's when utilities will realize they need to make themselves relevant to consumers by offering products and services consumers want, instead of force-feeding them the products and services the utility wants to offer.

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FirstEnergy's Switch is Off in West Virginia

3/1/2016

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Have you heard or seen one of FirstEnergy's vomitrocious "The Switch is On" ads recently? I heard one on the radio the other night, although it could have been directed at other FirstEnergy distribution customers in surrounding states.

At any rate, FirstEnergy is launching its first major advertising campaign in 19 years! And you're the beneficiary (also the financier -- every time you see or hear an ad, someone adds money to your electric bill, and maybe kills a puppy, but I'm not sure about that last part).

What's this campaign about? It's about FirstEnergy's environmental stewardship. FirstEnergy wants you to know what it has done to protect the environment:

They invested $10B in environmental protection efforts. Of course, the cost of that, plus a healthy double digit return for FirstEnergy, gets added to your electric bill. Who invested $10B?
They have reduced the amount of water used to produce electricity in their power plants (because they were forced to do so by regulation, kicking and screaming all the way -- you also paid for that).
Eleven percent of their energy resources are renewable (again, regulated against FirstEnergy's wishes, and at your expense). Who cares how many hours of wind generation FirstEnergy supported. It still only totals 11% of their generation portfolio, right?

Here's what FirstEnergy promises to do in the future, now that their switch is on:

Have a "goal" to reduce CO2 emissions by 90% (of their 2005 levels) by 2045. But this only happens if the Public Utilities Commission of Ohio approves their plan to make Oho ratepayers subsidize their dirty generation plants for the next 8 years. What's 90% of an unspecified number? Is there an algebraic equation for that? X = 90% of Y. Anyone who can answer this homework question receives a gold star! Oh, and did I mention you'll pay for this further CO2 reduction, too? You will.

That's it! Now don't you feel much more educated about FirstEnergy's environmental stewardship than you did 10 minutes ago? No? Not much of a plan, is it? It is worth the millions of dollars this campaign is costing you? And why would you care about what's going on with FirstEnergy's Ohio rate case? My radio gets some funky stations from time-to-time, but none from Ohio. So I'll assume there are some other benefits West Virginians are getting for their advertising dollar.

Maybe this video of CEO Chatty Chuck Jones explaining his company's environmental stewardship will do it?

WAKE UP!!!

Did Chatty Chuck put you to sleep, too? Sorry about that. Engaging TV personality he's not.

Wait? Did Chatty Chuck say, "We've supported energy efficiency throughout our 5-state region?" What five states would those be... let's see... Ohio, New Jersey, Pennsylvania, Maryland and... not West Virginia? He can't mean to include West Virginia in that, can he?

Why, just this morning I read an article about how FirstEnergy is blocking an important energy efficiency bill at the West Virginia Legislature! SB 370 has been sent to "purgatory" in the Rules Committee because FirstEnergy has "come forward with a potential problem" with the bill. In other words, FirstEnergy does not support energy efficiency in West Virginia. The bill would "allow local governments to adopt energy efficiency partnerships with commercial building owners to help finance energy efficiency improvements on the property." Isn't that energy efficiency, Chuck? It doesn't sound like you're supporting it. In fact, your corporate motormouth, Toad Meyers, says:

“FirstEnergy already offers low-income customer and commercial lighting programs in West Virginia, and we are on track to achieve our 0.5 percent energy savings target by the end of 2016,” Todd Meyers, a First Energy spokesman, said in a statement. “We strongly believe that these and any future energy-efficiency programs are best managed by the utilities as overseen by the Public Service Commission of West Virginia, which balances the needs of both customers and the utilities.

“Local governments are better positioned to provide their residents with necessary core services such as police and fire protection, road maintenance, and the like,” he added.

FirstEnergy’s West Virginia utilities have gotten a reputation of offering fewer energy efficiency programs for Mountain State residents than the company offers for other states, such as neighboring Ohio and Maryland. But the utility argues it's a matter of cost in West Virginia.

"The reason is simple enough: surrounding states such as Pennsylvania and Maryland have state laws that mandate energy efficiency programs. At the same time, utilities operating in those states also recover all costs from their customers associated with operating these programs," Meyers said. "In Maryland, for instance, residential customers pay about $7 per month, each and every month, as part of their electric bill to support these programs, whether or not they ever participate or redeem a rebate.

"There is definitely a general misconception that these programs are free… they’re not," he added. "And there has been significant pushback over the years from businesses and residents in states with mandatory programs who don’t like paying the costs every month to subsidize other customers’ appliance purchases and other rebates."

Meyers also said Mon Power and Potomac Edison plan to file plans for Phase II Energy Efficiency Programs "to help customers achieve additional energy savings in the near future, with rollout occurring in mid-2017, contingent on PSC approval.”

What is up with that? What is up, Chuck? (My lunch, after watching your video, but I digress). You'd better grab Toad by his power cord and reprogram him, Chuck! He's turning you into a liar! Worse than that, Toad has managed to contradict himself in just a few short paragraphs. After stating that "FirstEnergy already offers low-income customer and commercial lighting programs in West Virginia," Toad also says, "there has been significant pushback over the years from businesses and residents in states with mandatory programs who don’t like paying the costs every month to subsidize other customers’ appliance purchases and other rebates." But isn't that exactly what the majority of West Virginia's ratepayers do? Residential ratepayers pay monthly energy efficiency fees to support programs that are only available to low-income and commercial lighting programs! Like, duh, Toad!

So, FirstEnergy is not supporting energy efficiency in West Virginia. They're also belittling West Virginia's local governments, presuming them too stupid to govern anything to do with energy. Because that's best handled by utilities (so they can make sure nothing a local government does harms their greedy bottom line). Ain't that right, Chuck?

And what's that you say about being most proud about your employees? I will agree that your front line employees are your ONLY redeeming asset. But why is it that you want to harm them with "Right to Work" legislation, cutting benefits, and union-busting? The way you treat your employees is shameful. Proud my ass. Just remember, without them, you are nothing. When's the last time you hiked your bulk up a utility pole, Chuck? I fear you're not contributing to keeping my lights on!

And how come there were no little video clips of your corporate employees, like Toad mouthing off to reporters and contradicting himself? Aren't you proud of him, too? I didn't see one corporate stuffed suit in that whole video, except for yours, Chuck.

Maybe it's because that snooze-fest was "Produced by the Communications and Marketing Department?" While I'm thrilled you didn't waste any of my money hiring a real advertising firm to create an engaging and entertaining campaign, tell your Communications and Marketing Department not to quit their day jobs. Even Charles Ryan could have done a better job than that. Like maybe they could have given you a banana phone for a prop, Chuck, or perhaps even a clown hat? Everybody loves a clown! And wouldn't it have been fun to subject a cute puppy to your filthy environmental practices, and then show him still alive (but a bit dirty and singed around the edges) after 30 days? Doesn't that just tug on the heart strings?

The switch is on.... but nobody's home!

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WV Legislature to "Fix" Public Service Commission with Investor Owned Utility Money

1/23/2016

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Well, bless their little hearts. Some WV legislators still believe elections aren't controlled by corporate money.
As if WV's current governor-appointed PSC Commissioners aren't bad enough (completely clueless political favors or biased industry plants), a handful of legislators have set their sights on guaranteeing that future Commissioners are on the utility payroll.

A couple of bills intended to "fix" our awful public service Commission could end up making matters worse.

First up, HB2238 attempts to fix the PSC by geographically spreading out the commissioners to have one from each congressional district. Whatever. This one is harmless.

But HB2483 wants to elect commissioners. And where do these legislators think PSC candidates will get their campaign money?

They will get it from the investor owned utilities they would "regulate" if elected. And how do you suppose these "elected" commissioners would vote on proposals by their campaign funders?

In other states that elect PSC commissioners, the vast majority of PSC campaign money comes from the utilities the PSC regulates.

Alabama PSC funded by coal.
Georgia PSC funded by utilities.
Louisiana PSC funded by utilities.
Accusations of utility influence fly in Montana PSC race.
76% of Nebraska PSC campaign donations from utilities.
South Dakota PSC candidates accept unlimited donations from utilities they regulate.

Other problems:

PSC Commissioners moonlighting as industry lobbyists.
PSC Candidates funded by utility contractors when law prohibits direct utility contributions.
Candidates for New Mexico's Public Regulation Commission receive public funding for campaigns since 2003.
Oklahoma regulator accepts congressional campaign contributions from utilities she regulates.

And because PSC Commissioners would be elected from three different districts, that would remove the current requirement that at least one of them be an attorney. It would also toss out the window the current requirement that only two of them can be from the same political party.

Considering a huge majority of the voters electing utility-financed PSC candidates have never heard of the PSC and have no idea what they do, is it a good idea to let these clowns elect commissioners based on TV ads or party affiliation?

As long as the governor appoints commissioners, we stand a chance of getting decent commissioners from a decent governor. Once utilities can influence PSC elections, there is absolutely no chance of getting a decent commissioner. None.

Kick this legislation to the curb. Uninspired and thoughtless "fixes" may just cause further damage.

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Forward>>

FirstEnergy Self-Dealing Scheme Not In The Best Interest of Potomac Edison/Mon Power Customers

FirstEnergy's Coal Plant Purchase Has Cost You $130 Since 2013

FirstEnergy Scheme to Pass Risk to West Virginians

Importing Renewables to West Virginia? No, thanks!

Potomac Edison Says No One Was Harmed by its Failure to Read Electric Meters in Maryland

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

FirstEnergy and AEP Flame Out in Ohio; Seek to Strap Ratepayers in Other States

Utilities Always Win In Current Regulatory System

FirstEnergy's Switch is Off in West Virginia

WV Legislature to "Fix" Public Service Commission with Investor Owned Utility Money

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