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

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

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

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

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

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

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

Lastly, as to the administrative efficiency concerns raised by the Settlement Judge and AEP, we note that the Commission’s Rules of Practice and Procedure provide appropriate measures to streamline Commission proceedings.
So, the judge made a complete mess of a whole bunch of law in her rush to deny standing to a ratepayer.  She also doesn't know the difference between "e.g." and "i.e."  And AEP and the Judge need to kwitcherbitchin about how terribly hard and unfair it is to utilities to have their rates examined by those who pay them.  Did they expect that the Commission was going to do away with annual reviews of formula rate inputs altogether?  There's no way to limit participation.  It's all in or nothing.  And the Commission just can't legally go with shutting down rate transparency.
Perhaps there's also a lesson here for AEP, who did a whole bunch of whining about how burdensome and costly customer reviews of wholesale transmission could be as an excuse to escape rate review altogether.  AEP has been down this road before as one of the parent companies involved in the PATH decision the Commission cited over and over in yesterday's Order.  Shame on you, AEP!  If someone suggested that you could steal from your grandmother and get away with it, would you do it?  Even though you know full well stealing from Granny is wrong?  I thought AEP was supposed to "do the right thing?"  Here's a little advice from your own CEO to apply the next time you see an opportunity to do something that you know is wrong in order to take unfair advantage over someone who appears to be weaker than you:
I urge you to make the concepts described in this book a regular point of reference for the manner in which you carry out your work and the treatment of others.
The U.S. District Court for the Eastern District of Virginia looks like the O.K. Corral in the aftermath of the recent paper showdown requesting dismissal of FERC's petition to request an Order Affirming the Commission's Order Assessing Civil Penalties of $34.5M against defendants Powhatan Energy Fund and Alan Chen.

On October 19, Powhatan and Heep Fund, et. al. (Chen defendents) filed Motions to Dismiss FERC's request prior to trial.

The Powhatan Motion to Dismiss relies on FERC's failure to provide fair notice that the trades at issue were illegal at the time they took place.  Powhatan says this raises serious due process issues.

The Heep Fund Motion to Dismiss relies on a contention that the statute of limitations had expired before FERC's filing in U.S. District Court for all but 4 days of the subject trading.  Heep Fund also says that the complaint does not state a claim for market manipulation.  They also claim the same due process issues raised in Powhatan's Motion.  And, finally, Heep contends that the FPA does not authorize manipulation claims against individuals like Dr. Chen.

FERC responded on October 30, claiming Fair Notice precedent supports their claim and that Powhatan mischaracterizes the Commission's actions and precedent, and that none of their claims have merit.  FERC's response to Heep Fund made similar claims that their Motion to Dismiss was all wet.

What I found interesting here was FERC's reading of its Black Oak precedent as recognizing that traders may make trades solely to capture MLSA payments, however FERC "fixed" that problem by requiring traders to also purchase transmission.

In March 2009, PJM followed the narrower approach, proposing to pay MLSA to all trades with paid transmission (physical or virtual). In response to that filing, no party suggested that UTC trading would be susceptible to the kind of perverse incentives that the Commission understood could apply to most virtual trades.

No party filed any comments rebutting this contention as to the narrow distribution method, and the Commission accepted it in September 2009. Black Oak Energy, LLC, et al. v. PJM Interconnection, L.L.C., 128 FERC ¶ 61,262 (2009).
So, the Commission believed it had closed any loophole that created an incentive to place trades with the intention of collecting MLSA payments by requiring traders to purchase transmission.  But it didn't.  And the trading happened.

FERC contends, nevertheless, that the trading was an illegal type of trading, and in an effort to build a villain it uses the word "Enron" 19 times.  Everybody knows that Enron was bad, right?  And because this whole issue is so technical and hard to think about, maybe people will just go with the bad aura created by glittering generalities?  Here's another:  FERC used the words "Death Star" 17 times.  No average Joe knows what "Death Star" trading is, but it conjures up images of our Star Wars heroes being in jeopardy.  And it sounds really, really bad!!

FERC also prattles on about the Powhatan & Chen defendant's trading depriving other market participants of MLSA payments they would have scored if the defendants didn't trade.  But in this alternate universe where the defendants didn't trade, might others have traded instead, which would throw off any entitlement to MLSA payments by the other market participants?  And FERC has still failed to convince me that the MLSA payments would have flowed through to the electric rates paid by customers of the other market participants, instead of into the corporate coffers that pay share dividends.  Since FERC can't explain this properly, it must not be true that the other participants failure to receive MLSA payments caused higher rates for electric consumers.  I'm still waiting here...

Yesterday, Powhatan and Heep filed Rebuttals to FERC's responses.

Powhatan pointed out that FERC has changed its position on what the Black Oak orders meant, and "misses the forest for the trees."  Powhatan also points out a gap in FERC's logic:  If the Black Oak orders prohibited the trading at issue, why did FERC find it necessary to change the tariff to prevent this kind of trading AFTER it discovered what the defendants had done.  By closing the barn door after the horse got out, the Commission can now only retroactively fine Powhatan for trading that wasn't illegal when it happened.  And, of course, that idea is preposterous.

The Heep Rebuttal also refuted FERC's contentions in its Response.

So, now we'll see if the rocket docket
blasts off towards the Death Star, or dismisses this case, once the smoke clears in the corral.
In addition to airing her jurisdictional and standing concerns, the judge said permitting retail ratepayers to file such complaints "is at odds with promoting efficiency" because FERC could be faced with handling "potentially millions of individual complainants."

The groups, however, insisted that Cintron's position is "contrary to the plain language of the FPA," which states that "any person" has standing to file a complaint with FERC, as well as long-standing commission precedent holding that retail ratepayers have standing to challenge wholesale rates.

Citing a proceeding involving the abandoned Potomac Appalachian Transmission Highline project in which FERC found that "[a] complaint regarding a transmission rate can … be filed by any person, including an end-use customer that will pay some portion of that rate when flowed through its retail bill," the groups called Cintron's attempts to distinguish that situation from AEP's "unavailing." The judge relied on differences in the two companies' formula rate protocols to make her case, but the groups argued that "standing is a statutory right under the FPA, and whatever is said in the AEP protocol cannot overturn the statute."

As for Cintron's concerns about the regulatory burden that would be placed on FERC if retail ratepayers are allowed to challenge wholesale rates, the groups insisted that "administrative convenience is not a basis to eviscerate a statutory right." They said that "[i]n any event, this is a chimera — in the nearly 20 years since the commission issued Order 888, there has been a stream but not a deluge of … rate challenges."

Finally, among other things, the groups said the "novel viewpoint" expressed by Cintron "would reopen the … regulatory gap between federal and state jurisdiction that the FPA was designed to close."

"For consumers impacted by commission-jurisdictional transmission rates, there is no other effective remedy," the groups said.
And there's more new filings on the Docket.  (ER07-1069-006).
It is long settled law that FERC has jurisdiction over interstate transmission rates.  State Commissions are required to respect that jurisdiction and cannot change transmission rates that flow through to the retail electric customers over which the states have jurisdiction.  A state must pass interstate transmission rates through unscathed.  A rate can only be changed in the jurisdiction in which it is set.  Therefore, any retail customer who pays an interstate transmission rate can only address it at FERC, where the rate was set.

Power Magazine published an interesting piece yesterday headlined, "Will FERC Bar Retail Customers From Electricity Cases?"
Should retail electricity customers be barred from bringing cases before the Federal Energy Regulatory Commission, a decades-long practice? A FERC administrative law judge, Carmen Citron, last month recommended to the commission that it abandon its long-standing practice and deny retail customers standing before the agency.

Cintron’s mid-October recommendation came in a case involving an Arkansas lawyer, school teacher and activist (ER07-1069-006), Martha Peine of Eureka Springs, Ark. She challenged expenses AEP subsidiary Southwestern Electric Power Co. charged to consumers in lobbying for a new interstate power line. She argued at FERC that SWEPCO had stuck customers with some $92,000 in expenses that were improper. Her filing was under Section 205 of the Federal Power Act (FPA).
The op-ed took a look at both Judge Cintron's "Certified Question" to the Commission, and the "swift and pointed response" to the question by numerous trade orgs. representing large industrial and commercial electricity users.  Power says the trade filing from ELCON
challenged Cintron’s reasoning as flipping “the fundamental purpose of the FPA on its head.”

Elcon asserted, “The purpose of the FPA is not to protect utilities from the burden of responding to consumers; rather, as the Supreme Court and other courts have recognized, it is ‘to protect power consumers against excessive prices.’”
ELCON's filing is powerful -- must read!

Power opined:
Whether retail customers can continue their historic right to access to FERC also has political implications for the commission. In recent months, anti-natural gas activists have staged demonstrations at commission meetings, including interrupting proceedings (resulting in guard-escorted exits from FERC’s D.C. headquarters). The protesters have argued, often at high volume, that FERC cares only for the interests of big energy companies, and not those of people affected by the agency’s actions.

The commission has repeatedly said, as it opens its monthly public meetings, that it will consider arguments and protests to its activities from anybody, through normal FERC proceedings, including filings. Should the commission adopt Cintron’s recommendations, those statements will ring administratively and politically hollow.
This sort of begs a question about who FERC serves, doesn't it?

The whole history of this legal quagmire can be found on FERC Docket No. ER07-1069, sub docket 006 (although FERC misdocketed one of the supporting memorandums on the main docket, instead of the sub.)  Interesting reading!

At any rate, the Commission has until Nov. 12 to decide the Certified Question, or else it will revert back to the judge for decision.

What do you think the Commission should do?

A couple of new parties have spoken this morning.  The  National Association of State Utility Consumer Advocates and the City of Coffeyville, Kansas, have filed support of ELCON's position and are asking the Commission to publicly notice this issue and accept public comment before making a decision.
The final salvo in PATH's Formal Challenges/Abandonment case was fired yesterday by the filing of Briefs Opposing Exceptions at FERC.

Newman/Haverty Brief Opposing Exceptions.

FERC Trial Staff Brief Opposing Exceptions.

Joint Consumer Advocates Brief Opposing Exceptions.

PATH Brief Opposing Exceptions.

EEI didn't file another brief.  Nothing was filed by any other parties suddenly seeking to be a part of the case.

The case now goes to the Commission for final decision.  It could be months.  It could be years.  The Commission will act when it's ready.

Hello, life.  I'm baaaaaaaaaaaack!

Investor owned utility PPL has taken what it calls the first step in segmented approvals for its "Project Compass" that was announced during its earning call in the summer of 2014.

The original 2014 plan was a 725-mile line connecting New York, Pennsylvania, New Jersey and Maryland that looked like this:

The project announced last week only includes 475-miles of line in Pennsylvania and New York, and looks like this:
What happened to the New Jersey, southern Pennsylvania, and Maryland sections of the project?  In the Fall of 2014, PPL had this to say about its ginormous plan:
On a last quarterly call, we had just announced Project Compass, a proposed 725 mile transmission line through the shale gas regions of Pennsylvania and into New York and New Jersey and Maryland.

We’ve been meeting with officials at the state PUCs and governor's offices in the states where customers will benefit, Pennsylvania, New Jersey, New York and Maryland. Those meetings have gone well overall and we plan to have continuing dialogues on the project benefits. We're also meeting with other key agencies and other transmission operators in the region. We will continue to update you as we reach project milestones.
I guess those meetings didn't go as well as PPL thought they went, because those segments sort of well... disappeared, at least for the time being.

So, last week PPL said the "full project" consisted of 475-miles of transmission (down from 725) from western Pennsylvania into southern New York.  They claim to have applied for interconnection to the NYISO transmission region.  PPL claims that Project Compass will:
“This transmission line provides a significant opportunity to improve reliability and grid security and also provides benefits to customers,” Paul Wirth, spokesman for PPL Electric, said this morning. “When you add another path for power to flow, then that increases reliability because you are not relying as much on a single substation or power line.”

Another goal is to provide an estimated savings of at least $200 million per year for New York consumers by reducing transmission congestion.
But that's only the fox's opinion of the state of affairs in the chicken house.  This isn't how we plan for needed transmission!

A need for new transmission is recognized by regional transmission organizations (such as NYISO or PJM) for either reliability, economic, or public policy purposes.  Under FERC's Order No. 1000, the RTO next puts the transmission problem out for bid to transmission developers, who develop proposed solutions that are considered by the RTO in a competitive process.  This ensures that we only build needed transmission and that the transmission we build is the most cost-effective.

Instead, PPL has dreamed up a solution that needs a problem to fix.  Project Compass has not been deemed "needed" in any regional transmission organization's coordinated plan.  And only a project that is included in a RTO plan and deemed the most competitive solution can recover its costs through regionally allocated transmission rates.

The exception to this process is what's known as a merchant line.  In that instance, the transmission developer shoulders all risk and burden of building its project and then collects its costs from users through negotiated rates.   Is this what PPL is building?  You wouldn't know it from the way the company describes it to investors and the public:
Who will pay for the first segment of Project Compass?

According to the FERC guidelines for cost allocation, those who benefit from a new power line should pay its costs. The first segment would be paid for by electric customers in New York who will get the benefit of lower power prices. The costs would be paid over a period of many years on customers’ electric bills.
Wait a minute -- cart before horse!  According to FERC guidelines for cost allocation, only a project included in a regional plan is eligible for cost allocation.  According to FERC guidelines for negotiated rate authority, however, only those customers who agree to use the line pay a negotiated rate to do so.  There is no guaranteed cost allocation recovery for a merchant project.  And because there is no guarantee that costs will be recovered from consumers, the project's investors can lose their entire investment if the project does not go forward or attract customers.  Doesn't sound like a very solid investment, when there are plenty of transmission projects included in regional plans with guaranteed recovery where the investor could plunk down their money instead.

Furthermore, PPL believes it can avoid all that messy competition in the regional planning process by segmenting its project:
Shah Pourreza - Guggenheim Securities LLC
I appreciate the new disclosures around the Compass Project. So how should we think about the remaining miles? Are you looking to potentially segment the rest? And then, is there an opportunity to potentially JV with some of the neighboring utilities to smooth out the process?

William H. Spence - Chairman, President & Chief Executive Officer
Sure. I think in both cases the answer would be yes. So there's an ability to continue to segment the line as well as partnering with adjacent or utilities that the project goes through their service territory. So I think in both cases we would look to do that.

Daniel Eggers - Credit Suisse Securities (USA) LLC (Broker)
Okay. Very good. I got that. And then just on Compass real quick. I know it's ways off, but does this get caught up in this Order 1000 workout because it's an economic line instead of a reliability line? Do you get more competition, and people prospectively bid away the cost of capital? Or how do you think you're going to be able to reserve some sort of competitive advantage in this line?

William H. Spence - Chairman, President & Chief Executive Officer
I'll let Greg take that question.

Gregory N. Dudkin - President, PPL Electric Utilities, PPL Corp.
Yes. So the way this is set up currently under New York law, this would not be considered a FERC 1000 Project, so we are going and making interconnection requests and will be filing our Article VII now. So if the approval path goes down that path there may be an opportunity for competition, but the probability is little bit lower. If the PSC opens up economic window next year then there could be competition, so we'll see how it plays out.

William H. Spence - Chairman, President & Chief Executive Officer
I think relative to the competitive nature of this, obviously just having completed a very major line essentially in the same region, I think our capability to be very competitive should we get to that point should be strong.
Don't you think, PPL, that segmenting your project in order to avoid competition under Order No. 1000 is going to draw any number of valid complaints at FERC?  Someone doesn't have their thinking cap on!  And I really, really hope you're not planning to run this line anywhere on federal property that would require an Environmental Impact Statement under NEPA.  Segmenting a project to avoid NEPA is sort of... well... illegal, isn't it?

It's nice to see that PPL has finally recognized that running its badly planned project through urbanized parts of Pennsylvania, New Jersey and Maryland isn't going to happen.  But it's still off-base to think that restricting it to rural parts of Pennsylvania and New York is gonna fly.  It's not.  My Spidey Senses tell me that lots of people in Pennsylvania and New York caught last week's announcement and are investigating.  Opposition begins!

PPL's idea for a transmission project is leveraged on Pennsylvania's current Marcellus shale gas glut.  PPL believes that, instead of building underground gas transmission lines to transport gas from where it is collected to gas-burning generation plants located near eastern load, that gas-burning plants will develop near where the gas is collected that will depend on long-distance overhead electric transmission lines to transport electricity to load. 

However, what I would say is the compass project, which is not included in our CapEx program, would be a program or a project if you will that would take advantage of some of the opportunities in the Marcellus shale to basically instead of bringing the gas pipelines across, we'd be bringing electric lines across to the potentially new power stations that could be built. So that would be our opportunity, if you will, that's shale gas-related.
This is a really stupid idea left over from the last century, where "mine mouth" electric generation plants burned coal where it was mined and transported the electricity hundreds of miles to load because the load didn't want any of those dirty coal plants located in their neighborhood.  This solution simply doesn't work any more.  It's a lot easier to build a gas transmission line (and the fracking and exploitation of Pennsylvania to collect this gas is going to happen either way) than it is to build an electric transmission line.  What a truly stupid idea.

PPL's audacious Project Compass still has so many hurdles to jump, they might as well just quit now:
What approvals will be required for the first segment?

The first segment will require approval from various regulatory and regional planning entities including the public utility commissions of Pennsylvania and New York, New York Independent System Operator, PJM Interconnection, and FERC. Siting and construction of the line will require permits from appropriate environmental and resource agencies.
FERC, you say?  But FERC doesn't have authority to permit transmission lines.  It only has authority over transmission rates.  So, either PPL is planning to ask FERC for negotiated rate authority for a merchant line, or it's planning to ask FERC for some rate incentives for its cost allocated project.  Which is it?

And what kind of approval are they looking for from NYISO and PJM?  Is it an interconnection for a merchant project, or is it inclusion in a regional, competitive transmission plan?  Does PPL even have a clue what it's trying to accomplish?  This has to be the dumbest transmission plan I've ever seen, and it's based on both the public and investors being equally dumb.  I don't think the RTOs and state commissions are supposed to be dumb, because they're not.

Since PPL answered the last question this blog posed about where it came up with the name "Project Compass"
Where does the name “Compass” come from?

This project charts a new course in the way we think about and plan the electrical grid of the future.
we will expect them to answer the current questions about just what in the heck they're trying to accomplish with approvals as well.

The only course Project Compass is charting now is one of confusion that they hope will lead to corporate profits.  I think the needle is still pointing toward failure.
You're probably anxious to know what I think about PATH's Brief on Exceptions.

And you're probably eager to find out what I think about Trial Staff's Brief on Exceptions.

And I think you're also interested in what I think about the Joint Consumer Advocates Brief on Exceptions.

And you're probably just beside yourself with fervent, giddy curiosity to know what I think about Edison Electric Institute's Motion to Intervene Out-of-Time or, in the Alternative, Participate as Amicus Curiae, and Brief on Exceptions.

Alas, that's privileged information.  Attorney-client privilege between me, myself and I, you know.

All in due time, grasshopper.  All shall be revealed in due time.

No mystery what I think about the Brief on Exceptions of Keryn Newman and Alison Haverty.  Read it.

Now get back to work.  Nobody's paying you to read this blog.
Here ya go, DOE, you're going to need this:
The U.S. Department of Energy's Inspector General has completed his investigation of FERC's Office of Enforcement.  He found that FERC is following the rules it makes (but didn't stop to ponder whether those who make these rules, or the decisions that spring from them, are correct).  The investigation completely glossed over any detail that would have actually looked at the issues.  Sort of like that fictional guy from long, long ago who couldn't find his ass with both hands and a flashlight.  This investigation was so bad, I think DOE must have been missing the flashlight.  Or maybe a hand or two.  Or maybe both.

As SNL puts it:

The U.S. Department of Energy's Office of Inspector General has given a big thumbs-up to the way FERC's Office of Enforcement is conducting its investigations.

"Based on our review, nothing came to our attention to indicate that [Office of Enforcement] had not performed enforcement activities in accordance with relevant policies and procedures," the inspector general said in a special report.

However, one of FERC's biggest critics in that regard assailed the inspector general for focusing on whether FERC complies with its own policies without discussing whether those policies are flawed or violate due process in the first place.

"That takes damning with faint praise to new heights," William Scherman, a former FERC general counsel and partner with the firm Gibson Dunn, said in an interview. The lawyer also said the inspector general appears to be inviting Congress to address the problem, "and hopefully they will" in the energy bills moving thru the Legislature.
The investigation reviewed:
7 closed investigations, 20 closed hotline cases, and 10 closed cases regarding potential violations, which had been self-reported by regulated entities.

Also, we specifically evaluated an allegation that the settlement of an enforcement action involving Constellation Energy Commodities Group, Inc., (Constellation) was inappropriately linked to a then-pending request for a merger between Constellation and the Exelon Corporation (Exelon). Specifically, the Senators expressed their concern that Constellation's agreement to settle the enforcement action was provided in exchange for FERC's approval of the merger (referred to as quid pro quo).
And if there's any question in your mind about whether the Inspector General actually looked closely at the closed investigations and hotline calls, take a look at their findings in the Constellation/Exelon debacle.
We found that that the Constellation-Exelon merger was specifically mentioned in the terms of the FERC/Constellation settlement agreement. Further, we determined that even before the merger was approved, Exelon executives were directly involved in the settlement negotiations. Finally, we note that the approval of the merger by FERC and the consummation of the enforcement settlement agreement took place on the same day. The lingering question was whether these actions represented an inappropriate quid pro quo. While these actions may have raised understandable concerns, the evidence did not support such a conclusion. In fact, we found that Exelon had specifically asked for language in the settlement agreement that linked the effective date of the settlement with the effective date of FERC's approval of its merger with Constellation.
Nothing to see here, move along.  It's all just one big, funny coincidence!  Maybe they should have used a flashlight on that one...

Here's another funny co-inky-dinky... Inspector General Gregory Friedman retired on the same day this report was released.  Apparently DOE has a history of retiring employees who don't want to answer questions.

But(t), all is not lost... the Inspector General thinks the basic fairness of FERC's enforcement authority needs to be reviewed by Congress.
In addition to the issues we specifically evaluated, there were several that we were unable to review. Those concerns related to what was essentially the basic fairness of FERC's enforcement authority/processes. We concluded that these matters were public policy questions which, as important as they may be, are best addressed by policy makers and as such, were outside the purview of the OIG.
Our government is outta control and needs a Congressional flashlight in order to see...
My challenge partner, Ali Haverty, reminded me this morning of a Facebook meme we shared months ago.  It's a photo of two owls on a branch, and says, "Sometimes I just want someone to hug me and say, 'I know it's hard.  You're going to be okay.  Here is chocolate and 6 million dollars.'"

And that's what we got.  Of course, the 6 million dollars belongs to the 61 million ratepayers in the PJM region.  Our personal share is probably about a nickel.

On Monday, FERC ALJ Philip Baten issued his ruling on the PATH case that was heard back in the spring.

Ali and I were seeking the refund of just over $6M in expenses for the purposes of influencing the decisions of public officials that PATH incurred and recovered from PJM ratepayers in 2009, 2010 and 2011.  Judge Baten ruled that all of the expenditures were not recoverable in PATH's rates and must be refunded.

This is my favorite part:
As a general proposition, the cases that are discussed above suggest that when utilities are seeking selection or CPCN approvals from governmental entities, the utilities should rely on the established governmental approval processes to persuade the officials and not indulge in collateral efforts such as public education, outreach, and advertising activities.  If a utility should rely on  these collateral activities while pursuing selection or CPCN processes, then it will risk the chance that these costs may not be recovered from ratepayers.  If the selection or CPCN application has merit, the governmental selection process provides a sufficient vehicle for the utilities to present their engineering, marketing and economic studies and thereby hope to merit the vote of approval from these officials.  In this regard the PATH Companies spent over $8 million on attorney fees to prosecute the CPCNs before the respective governmental bodies, which begs the need for these collateral expenses.
The judge's decision must now go before the Commission, who may affirm or deny, in whole or in part.  That decision is several months down the road, at least, and requires another round of briefs.

Meanwhile...  more chocolate.  And champagne.  And music.  Let there be music!

The Public Service Commissions of both Delaware and Maryland have filed a complaint at FERC over PJM's new transmission cost allocation process, specifically the cost allocation of PJM's Artificial Island transmission project.  Under PJM's cost allocation rules, ratepayers of Delmarva Power in Maryland and Delaware would pay nearly 90% of the cost of the project, which is intended to improve transmission from the Salem/Hope Creek nuke in New Jersey.  However, Delmarva customers will receive only 10% of the benefits flowing from the project.

Whoopsie, PJM!  Your formulas still don't work!  Didn't FERC's Order No. 1000 determine that costs would be commensurate with benefits?  And didn't the 7th Circuit remand your prior cost allocation method TWICE because PJM and FERC couldn't show a correlation between benefits and costs?

It seems that PJM and FERC still haven't gotten it right on cost allocation.  And the legal battle is just beginning.  This could muck up PJM's cost allocation process for the transmission it orders up for years!  As a result... transmission won't get built.  Nice going, knuckleheads!

We have yet to see a massive transmission build out intended to ship renewables thousands of miles in an attempt to subvert state planning for compliance with the Clean Power Plan.  Expect problems there, too!  After all, not every state is going to receive the same kind of benefits from long-distance transmission that passes through in an attempt to meet the CPP goals of a different state.

I guess that's what happens when "regional" and federal interests attempt to overrun state regulators.  This complaint is going to be interesting and eat up a lot of ink.  Woo Hoo!