Lots of big, interesting Sunday news stories this week!

First, the front page Washington Post story about utilities' campaign against rooftop solar.  This issue has been swirling about since 2012.  In June of that year, several consumer groups got together to file comments on FERC's transmission incentives docket in reply to Edison Electric Institute's holier-than-thou bullying to get its own way to continue, and even increase, incentive (subsidies) for new transmission builds.
Because transmission is such a long-term asset, we must be extremely mindful of
how new projects relate to each other to achieve comprehensive energy policy goals. If we continue to approach transmission as a hodgepodge, knee-jerk reaction to serve short-term goals and provide sustainable revenue streams to investor-owned utilities, we risk setting ourselves up for a possible future where a huge investment in  transmission becomes the financial responsibility of a shrinking pool of ratepayers. Technological advances and affordability are making it possible for an increasing number of consumers to produce their own power and feed it into the local distribution grid by making their own smart, fuel-free, power producing investments. Energy efficiency and demand management gains continue to shatter future demand projections, further decreasing the need for billions of dollars of investment in new transmission infrastructure.
Nothing like a wake-up slap across the face, eh, EEI?

In September of 2012, EEI held a pow-wow to talk about how they were going to manage this strange, new world where their control of the electricity-consuming public was going to erode with alarming alacrity.  Instead of approaching the problem honestly, EEI preferred to use its power, money and influence to try to find ways to kill distributed generation, instead of getting on the wagon and finding a way to turn it into a profitable business model.

In early 2013, EEI produced a white paper addressing what it termed "disruptive challenges" heralding doom and gloom for their stable of investor owned utilities.


And the battle lines were drawn.

Solar advocates have created their own issues, with polarized insistence that their use of the distribution system to sell their excess back to the utilities should be free, and that they provide so many benefits to the system that they should actually be paid more for avoided costs.

Because utilities are so bloated and focused on building more infrastructure from which they derive their profits, a shrinking pool of ratepayers increases the costs to the ones who don't install solar.  Utilities crying about the burden placed on "the poor" is
ludicrous and hard to stomach.

There has been no middle ground, and messaging on both sides is pretty ridiculous.  Too much rhetoric causes increased polarization that stymies progress and the eventual realization of our energy future.  Can't we get it together here, and effect a reasonable compromise?

Otherwise, the utilities can continue their self-destructive initiative to have it all, while solar advocates can disconnect from the public utility grid and build their own system to share their excess.  Seems kinda silly, doesn't it?  Where's King Solomon when you need him?
 
 
Have you been getting random mailers from "Potomac Edison," "Mon Power," or another FirstEnergy distribution affiliate trying to sell you an "Exterior Electrical Line Protection Plan from HomeServe?"

Just say no.

Go outside and look at your electric meter.  You are responsible for some components of your electric service connection.  The utility is responsible for the meter components and any underground service lines.  You are responsible for maintaining the rest.  Is your service drop overhead, or underground?  Read the fine print:
The meter that measures the amount of electricity used, any underground service entrance conductor, and the meter base (materials only) are not covered under this plan, but are covered by your local FirstEnergy Company.  Your local FirstEnergy Company will supply the materials to repair or replace the meter base...
So, what is covered?  An overhead connection to your house (cost estimated at $200) and the labor to replace the company-supplied meter base (estimated to cost another $200), if they ever need to be replaced!  So, how much will FirstEnergy's insurance cost you?  $5.49/month.  Forever.  You'd be better off putting that $5.49 in a mason jar every month, on the off chance that you ever do need these unusual electrical repairs, so that you can hire a local electrician to fix them.  FirstEnergy's literature claims that your homeowner's insurance won't cover these repairs.  Know why?  Because the cost of repairs is usually lower than your deductible!

Why would you want to give a bunch of money to the utility for "insurance" against an unusual problem that only costs a couple hundred bucks to fix?  It doesn't say "stupid" on my forehead.  Oh, but wait!  If you sign up you will receive a "special" phone number to call to get your service.  If you remember what you did with that phone number and the rest of your paperwork when you have an outdoor electrical line issue, then you could avoid the hassles of looking for an electrician in the yellow pages and "waiting" for service (because service dispatched through Akron, Ohio, is much quicker than calling an electrician in your own town).

Sounds like a scam to me!

So, I've been a Potomac Edison (or Allegheny Power, when that name suited them) customer for nearly 30 years.  How come I'm just now being bombarded with these junk mailers?  Because the West Virginia PSC recently sold me out to the company, going against the advice of its own Staff, the Consumer Advocate Division, and the findings of one of its own Administrative Law Judges.

Say what?  Take a look at WV PSC Case No. 13-0021-E-PC (look up "Case Information" here).  Two years ago, FirstEnergy asked the PSC for permission for its two West Virginia distribution companies (Potomac Edison and Mon Power) to market these useless "services" and products to their customers and to add the cost of any purchases to the customer's electric bill.

The Staff of the PSC and the Consumer Advocate objected to FirstEnergy's plan, which, in addition to the "Exterior Electrical Line Protection Plan," will soon be offering you:

1.  O
ther Home Solutions maintenance and repair plans (i.e. insurance) for other appliances you own, your natural gas service lines and even your plumbing. 

2.  Surge suppression service (which they already separately offer as part of their regulated service activity in West Virginia).

3.  Customer Electrical Services Program that allows your electric company to "arrange" electrical service work to be performed in your home.  You still pay for all the work they do, your monthly fee just alleviates your "hassle" of finding your own electrician and negotiating a reasonable fee for service with him.

4.  Online store - where you can buy all sorts of useless crap and energy-wasting space heaters, and pay for it all on your monthly electric bill.

A hearing was held, and the PSC's Administrative Law Judge recommended that the Commission prohibit this kind of promotion.  However, FirstEnergy didn't like that decision, so they filed exceptions to the Judge's Order and the Commission disregarded it and made a new finding that FirstEnergy could continue to promote these useless "services."


Remember, none of these services are regulated, so if you have an issue with service or billing of these add-ons, the PSC can't help you.  You're on your own to solve the problem with the company (and it's not even the utility you'll be fighting with, but some third-party "insurance company") or through the court system.

So, how much money does FirstEnergy make off these products?  Is the company really that desperate that it needs to peddle space heaters and worthless "insurance" to its customers?  It's not about the few pennies in kickbacks FirstEnergy receives from these third-party companies for selling you a "service," it's about the half a million bucks FirstEnergy was paid by one of these third-party companies for "licensing rights and utility bill access fees" to access Potomac Edison's or Mon Power's customer records and to have your utility bill you for their services.  FirstEnergy is essentially selling an asset -- its customer base and monthly billing system -- to a private company that hopes to make money selling things to the customer base.  There is a commercial value to a customer base of 500,000 customers.  When the customer base is acquired through a regulated monopoly, should the utility be able to sell it for private profit?  Your WV Public Service Commission says they can.

Tell your legislators to ask the PSC why they have allowed Potomac Edison and Mon Power to sell you out like that.  And think twice about jacking up your monthly electric bills with "insurance" you'll probably never need and overpriced lightbulbs from FirstEnergy's online store.

And want to have some fun right now?  All those junk mailers they're sending you have postage paid return envelopes to "Plan Administrator."  The envelope instructs:  "Include only your form and nothing else."  If you don't sign up for the plan, you won't need a "form," so go ahead and stuff them with "nothing else" or whatever you want and return them.  See how much scrap paper you can fit into the envelope!  Or perhaps your child would like to draw a picture for "Plan Administrator?"  Go ahead, have some fun!

And then, get serious.  The fine print instructs:
If you would prefer not to receive these solicitation from HomeServe, please call 1-888-866-2127.
Tell them you don't want to receive any more offers for their services from Potomac Edison or Mon Power and see what happens.  Of course, this won't stop the other offers from the other vendors mentioned above, but it's a start.  I'd like to know who's really controlling the mailing list here -- is it FirstEnergy or is it HomeServe?  Let me know what you are told in the comments section of this blog post...
 
 
The insiders got together to talk about the outsiders last weekend.  I'm sure my invitation got lost in the mail, along with yours, dear reader.  Or maybe... gasp... we're outsiders?

At any rate, the insiders had a nice long discussion about energy markets and slipshod enforcement tactics.  I know Barney has been telling the kiddies that they're "special" for many years now, but he wasn't singing about energy markets.
Energy markets aren't special.

They're just another product of the PJM cartel's enabling  of its members profits.

Bowring said the process that RTOs use to create market rules is flawed because market players get to vote on those rules, and sometimes they block the passage of needed reforms because they are engaging in the behavior that a new rule would prohibit.
It's like attending goody-two-shoes-kindergarten if you want to participate in PJM's energy markets, and you're going to have to tattle on yourself if you make too much money:
Bowring said market participants also have a duty to inform market overseers of faulty rules and false arbitrage opportunities and to not engage in such behavior once they suspect it to be wrong. He said the "vast majority" of market players do just that, and that those who think "they're the smartest guys in the room" by figuring out how to exploit some rule loophole are usually not since others have also seen that opportunity but chose to do the right thing by not engaging in such behavior.
When is FERC going to "do the right thing" and get rid of its mysterious and dysfunctional energy markets?

They need to realize that they need outsiders to make their silly markets work.  If outsiders aren’t allowed to make money playing by the market rules without suffering the occasional random sacrifice from their ranks to serve as an example of a "bad egg" and a demonstration of FERC's power, then perhaps they should just outlaw their participation altogether.  Will the beatings continue until morale improves?

It’s like slopping a whole bunch of chum into the water and complaining when sharks show up instead of some pretty goldfish.
 
 
The embattled Clean Line Energy project that proposes to transport energy from rural America to the heavily populated Eastern Seaboard has had a series of major setbacks.

In Missouri, the PSC's own staff, which is made up of engineers, utility economists, and attorneys advised the Commissioners to deny the application. In their Conclusions of Law brief they stated, "Grain Belt Express has not shown electricity delivered over its high-voltage transmission line and converter stations will be lower cost than alternatives for meeting renewable portfolio standards and general demand for clean energy because it overlooks significant costs affecting the integration of wind energy in its production cost modeling and its modeling inputs are insufficient to predict electricity prices at specific locations." They also recommended  “The Commission finds that Grain Belt Express' HVDC transmission line project is not needed in Missouri."

On February 11th the commission took the unusual step of ordering Clean Line to submit a considerable amount of additional documentation after the final briefs were turned in. Among the many requirements: Grain Belt Express shall set forth the status of its efforts to obtain the assent of the county commissions required by Section 229.100, RSMo, in the eight counties crossed by the selected project route in Missouri and provide supporting documentation thereof, including any letters of assent from those eight county commissions.

Five of the eight impacted counties have rescinded support they had previously given Grain Belt. Given that the local sentiment against Grain Belt tends to be very high, and that nearly 2,000 people turned out at the eight public hearings opposed to the project, it seems unlikely that they would be able to secure the needed county assent.

Additionally, Clean Line is running into many roadblocks with its Plains and Eastern project in Oklahoma, Arkansas and Tennessee. Clean Line hopes to be the first company to utilize Section 1222 of the 2005 U.S. Energy Policy Act to obtain federal eminent domain after they were denied eminent domain authority by the state of Arkansas. This provision would authorize DoE to essentially act as a land agent for the private company and use the government's power of eminent domain to condemn the private property in its path.

Recently the Cherokee Nation and several county boards passed resolutions against Plains and Eastern Clean Line obtaining federal eminent domain authority. Earlier this week, the Arkansas House Joint Energy Committee unanimously passed a resolution to send a letter to the Department of Energy condemning Clean Line's use of Section 1222. Arkansas’ congressional delegation has also been seeking answers from the DOE in Washington, and were instrumental in extending the public comment deadline on the project’s federal environmental impact statement an additional 30 days.

Clean Line is also facing major problems for their Rock Island Project in Illinois and Iowa. The Illinois Commerce Commission voted unanimously to withhold eminent domain authority at this time. In Iowa, where Clean Line recently filed franchise applications, they have been met with fierce resistance and an organized opposition group who is taking their fight to the state capital building.

Jennifer Gatrel from Block Grain Belt Express Missouri states, "Overall the idea that a private company could seize privately-held agricultural land for its own private benefit is just wrong. Clean Line has brought together a vast group of very different individuals from around the country working united on the common goal of protecting landowner rights. This company has brought a major disruption to our community and much time and money has been lost. Clean Line’s proposals have also created an enormous, tightly-knit family formed in reaction to the crisis. We will not lose this fight!!"
 
 
Below is a press release from Powhatan Energy Fund.  Why mess with perfection?  Here goes:
------------

West Chester, PA -  Last week, PJM Interconnection stated that Powhatan Energy Fund's response to FERC’s order to show cause illustrates our “failure to appreciate the unique legal and regulatory framework governing organized wholesale electricity markets.” Yeah, perhaps we do not understand this “uniqueness” – we were under the impression that constitutional protections applied to all regulated markets in this country, including theirs. We’ve raised our voice against the bullying tactics that FERC has employed in this investigation as they have completely ignored these protections, including our rights to due process and fair notice. Powhatan is in the news and people feel compelled to respond to us because we’re not unique – a lot of people know there’s a fundamental problem here.
 
The industry struggles to understand the rules and the laws under which they can operate their businesses. PJM’s recent statements add to their confusion. PJM’s pronouncement that FERC’s regulatory mission “to protect consumers and other market participants” is held to a “higher standard” than the SEC’s mission to protect investors is simply wrong. We do not believe PJM could cite any authority to support this claim. The SEC’s mission to protect investors is every bit as stringent and important as FERC’s. FERC has even stated that its market manipulation rule is modeled after the SEC’s 10b-5 precedent.  
 
We wish PJM would stop pretending that this investigation has anything to do with “just and reasonable prices” for power, as they put it. There is no allegation that we increased power prices. As a matter of fact, Alan’s trading had no negative effect on prices or on the power markets at all. If PJM wants to argue, we suggest they find a different straw man.
 
PJM made the rules, and Alan traded under those rules. Our activities were perfectly legal. And the thing is – PJM knows it. Even after August 2, 2010, when Alan stopped trading, PJM continued to wire funds to us for the very trades that are the subject of the investigation. If they really thought there was anything illegal about the trades, we wonder why they repeatedly sent us money.
 
We suspect that every single UTC trader made money in the summer of 2010. Instead of vilifying us in the press, PJM should thank us for identifying the goose that was laying these golden eggs. If PJM feels compelled to run any more simulations, Powhatan suggests they quantify how much money the big utilities would have “lost” the last five years had PJM continued to pay UTC traders to take transmission service out of the system. It will show the big utilities are better today, in part, because of Alan’s trading.
 
Throughout this five-year investigation, we’ve been very cooperative. Over the last year, we’ve been very open. The analysis of our experts, the interactions we’ve had with the FERC, and even our legal correspondence are available to the leadership team at PJM, who can see it all at www.ferclitigation.com. We encourage a visit.
 
 
Powhatan Energy Fund (aka the infamous Gates brothers) filed their Response in Opposition to Order to Show Cause and Notice of Proposed Penalty on Monday.  Unlike FERC's accusations, this one doesn't require a secret FERCenese* decoder ring to understand, and actually has plain-English section headings that every DC energy lawyer probably wishes he could write, such as:
C. The Report Contains So Many Obviously Wrong Accusations That Some
Additional Comments On the Most Blatant Inaccuracies Are Warranted
1. Dr. Chen’s “Home Run” Trading Strategy Is Not A “Post Hoc Invention” Because, Among Other Things, 35 Is Less Than 50
2. The Staff’s Analysis Of The “Indicia of Manipulation” Misses The Mark Entirely
3. Dr. Chen’s Trades Were Not “Wash-like” Or “Wash-type” – Whatever The Heck That Means
4. The Staff’s Stubborn Reliance On The Unpublished, Non- Precedential Amanat Case Is Just Lame
5. Uttering the Phrase “Enron” Or “Death Star” Does Not Magically Transform The Staff’s Investigation
6. Who Cares What Bob Steele Thinks?
7. The Staff Has Not Identified Any Actionable “Harm”
Although weighing in at 49 pages, Powhatan's response  is a quick and easy read, heavy on the common sense, and light on the bafflement that DC lawyers like to rely on to confuse the decision-makers.  It's a modern-day, regulatory version of The Emperor's New Clothes down there, where the object seems to be to simply confuse the issues with lots of big words and complicated concepts until the decision-maker (who most likely doesn't have the technical background to appreciate all the little nuances) is left drooling in his chair, more confused than he was before he entered the room.  I believe they hope that the decision-maker, like the long-ago emperor, will simply be afraid to admit that he doesn't get it, for fear of looking stupid in front of his lawyer courtesans.  When that happens, the emperor may nod his head and agree with the sagest of experts before him.

And in that spirit, OE's self-designated little conscience has entered the room by filing a public protest on the debacle.
  Former compliance counsel and current Super Dad Eric Morris shares:
I would hope the four Commissioners voting on this docket would reflect on the unjustness of treating certain entities that have regular business before the Commission very deferentially and then outsiders who receive zero funding from ratepayers such as the subjects of this investigation very harshly. 
He also has some other interesting observations, such as:
If [Kevin Gates] had become rich and bought a utility or five, I would imagine you would treat that future version of Kevin Gates much more nicely.
But what would Kevin Gates want with a utility (or five)?  He'd have to abandon his morals in order to run them.

Even Eric can't seem to find the harm that FERC's OE claims was done by Powhatan:
And speaking of protecting the incumbents, all the “harm” is supposedly being done to them.  I’d love to see OE prove that that money would have lowered ratepayers’ bills; if so, PJM should be broken-up for ever allowing this.  I would guess it is much closer to the old story of private gains (to PJM Members) and public risk (ratepayers paying for this investigation), though.   Who knows, maybe the PJM cartel is smarter than the Wall Street banksters like Goldman and I am just not giving them enough credit?
I doubt it.
*FERCenese |ferk in knees| noun:  The incomprehensible, acronym-laden gibberish spoken at FERC that is hard for common folks to understand.  Origin:  Electric ratepayer Scott Thorsen, standing in a field in Illinois.
 
 
The West Virginia PSC has approved the settlement reached by the parties to FirstEnergy's request to increase rates, and your rates will go up 8% overall on February 25.  Yeah, rate increases suck, but I think the bigger question here is... Did you get a better deal in the settlement than you would have if this case had gone through the full evidentiary hearing and been decided by the Commissioners?

I'm thinking... yes.  And here's why:

Actual base rate increase requested:  $95.7M (9.3%).
Actual base rate increase granted:  $15M (1.45%).

Vegetation Management Surcharge requested:  $48.4M
Vegetation Management Surcharge granted:  $47.5M  HOWEVER, something good happened here that is not reflected in the number.  For the first time, FirstEnergy will have to account for every dollar spent on vegetation management and file semi-annual reports that true up its actual expenditures to actual rates collected.  The vegetation management expenses must be reviewed for prudence.  In the past, the company was simply handed a certain amount annually for "vegetation management."  The company never had to account for how (or if!) the amount was actually spent on vegetation management.  What happened is that the company wasn't doing adequate vegetation management, resulting in more severe and frequent outages, but was using the money to bulk up its balance sheet and share dividends.  Now all the money collected for vegetation management must be spent actually maintaining vegetation.  This is a very good thing!

Depreciation rate change increase requested:  $17M
Depreciation rate change granted:  None.

Requested increase in monthly customer charge:  $1 (up to $6 from the existing $5)
Monthly customer charge granted:  $5 (no change).


Deferred expense for 2012 storm restoration:  $45.8M.  The companies wanted to collect this with an annual return calculated on the balance.  Instead, they will collect this over 5 years ($9M/yr.) WITHOUT any return (interest) being paid
.

The company wanted to collect $60M in expense it incurred in closing its Albright, Willow Island and Rivesville generating plants.  Instead, it will collect zero.  However, the companies are permitted to defer this expense (hold it on their balance sheet) for the time being, and may request recovery of it at a later date.  At that later date, you bet the recovery request will include years of "interest" accrued during the deferral.   This bears watching!

The companies had requested a surcharge to pay for the cost of upgrading their generators to comply with EPA regulations.  They withdrew their request in the settlement, however, the settlement simply kicks that can down the road, allowing the companies to create a regulatory asset (deferral) for those costs and to collect them during its next base rate case.  In the meantime, the accumulating costs will earn 8.19% return (interest), which will be payable at the next rate increase.

But, it looks like the apportionment of rates between customer classes was adjusted to lower rates of the industrial users, while residential rates were increased.
  Remember, industrial users were a party to this settlement.

Do you think you might have gotten a better deal from the PSC Commissioners?  I doubt it.  They're used to giving FirstEnergy everything it wants.  The Commissioners aren't really fighting for you, but the staff of the PSC, and our Consumer Advocate WERE fighting for you here and I think they engineered the best deal possible.  There was never any chance that the PSC would simply deny the rate increase in its entirety.  It was all about "how much."  And you kept the pressure on by filing comments and speaking at the public hearings.  Get educated, stay engaged!

 
 
Wow, what a shocker, right?  What happens when a cartel has to make new rules whereby its members have to compete for projects? 

Complete and utter failure.

On Thursday, PSE&G filed a complaint against PJM at FERC.  The complaint is just a new wrinkle in PJM's failure to carry out a competitive transmission planning process ordered by FERC and set out in PJM's own rules.  PJM didn't seem to have any problem coming up with a competitive process in order to comply with Order No. 1000, but it completely failed at carrying out its own rules in its first attempt at a competitive transmission project window.

The complaint alleges that PJM altered all projects submitted in the Artificial Island competitive window, substituting its own project creations for the ones actually submitted, and then allowed a select set of project sponsors to continually alter their projects throughout the evaluation process.  PJM still has not selected a "winner," although the process has been dragging on for nearly two years.  PJM simply cannot resist using its heavy hand to unfairly influence selection of transmission projects that need to be built.

Funny that when PJM has to operate competitively, it cannot.  Everything falls apart.

Is it really about keeping the system reliable and cost effective, or is it about ensuring profits for its most favored members?  Where do consumers fit in?


So, why don't we just do away with PJM transmission planning altogether?  It's a miserable failure.
 
 
RTO Insider reports that FERC has issued a proposed policy statement regarding "hold harmless" commitments made during utility mergers.

The policy is intended to further define merger costs and how they are accounted for, as well as proposed accounting mechanisms to track them.

As if it's about some accounting "confusion," and not about utilities willfully violating the commitments they make as a condition of approval for their merger.  But, hey, FERC has to start somewhere, I suppose.   Maybe some proactive monitoring of utility financial filings could begin to put a damper on the merger cost recovery free-for-all.  But then will the utilities just find more creative ways to improperly recover their merger costs?  How about some penalties for utilities found to have improperly recovered merger costs?  I think maybe a $30M fine for each occurrence would be appropriate.
 
 
...hit the "record" button!

New information in the Powhatan Energy Fund case reveals that FERC may be withholding information.

In a motion filed yesterday, Powhatan says that it has become aware that FERC's Office of Enforcement possesses a recording of a telephone conversation between PJM's market monitor and traders at another company who were engaged in trades similar to the ones in this case, where FERC is seeking over $30M in fines for alleged "market manipulation." 
On that tape, Dr. Bowring says that the trades did not violate the rules, that he understands why the traders engaged in them, and that the rules need to be changed to remove the incentives that drove the trading. He also says that he would not refer the trading conduct to Enforcement if the traders stopped the trading in question.
Powhatan says that accused trader Alan Chen had a similar conversation with Bowring, but did not record it.

The problem here stems from OE's failure to turn over the recording when it was asked to produce exculpatory evidence, i.e. to disclose all evidence that is "favorable to an accused" or "would tend to exculpate him or reduce the penalty."

This seems to be a bit of a double standard, since FERC is relying on the statements of a different trader to make its case to the Commission.

Powhatan also points out that Bowring is obligated to refer trading that he thinks might be market manipulation to FERC's Office of Enforcement.  I wonder how many little phone calls he's made to traders over the years, instead of fixing all the flaws in his "markets?"

How is anyone supposed to know what's allowed and what's prohibited?  Or do those rules reside only in Bowring's head?
  So, keep that recorder handy, just in case... unless you've got $30M or so laying around and don't mind parting with it.