Friday marked the first time the public has been able to take a look at what's shaken out of PATH's consolidated FERC case (ER09-1256-002 & ER12-2708-003).

Docket No. ER09-1256 deals with the three Formal Challenges to PATH's formula rate filings for rate years 2009, 2010 and 2011 that were made by West Virginia ratepayers Keryn Newman and Alison Haverty.  The Challenges alleged that PATH recovered millions of dollars that it was not entitled to.

Docket No. ER12-2708 deals with PATH's recovery of $121M of stranded capital investment in the PATH project.  In 2008, FERC granted PATH the right to recover all prudently-incurred expenses for the project in the event it was abandoned for reasons beyond PATH's control.

These two very different PATH cases were consolidated by FERC in 2012, forever joined at the hip for settlement and hearing purposes.

Earlier this year, the settlement phase ended and a procedural schedule for hearing was set.  Under the procedural schedule, PATH filed its Initial Direct Testimony in May of this year, supplemented in July.  Intervenors filed their Direct and Answering Testimony on Friday.  The public, trial-type evidentiary hearing is scheduled to begin on March 24, 2015 in Washington, D.C.

Here's what was filed Friday:

Direct and Answering Testimony of Keryn Newman and Alison Haverty, along with testimony from their witness Doug Kaplan.  Files are labeled, and the narratives are files number 2 of 20, 16 of 20, and 17 or 20.  The other files are supporting exhibits as mentioned in the testimony.  This testimony deals exclusively with the Formal Challenges in Docket No. ER09-1256.

Testimony and Exhibits of FERC Trial Staff.  Witnesses Miller and Deters deal with the Formal Challenges, while witness Keyton testifies on PATH's return on equity percentage that is part of the abandonment docket.

State Agencies and Joint Consumer Advocates filed testimony.  The testimony of witness Lanzalotta is with regards to the amount PATH should recover in the abandonment docket, while witness Woolridge deals with PATH's return on equity in the same docket.  The third JCA witness questions the prudence of PATH's legal expenses.
 
 
Well, here's a chance for our government to work for us!

It was reported on Monday that DOE's Inspector General will be "undertaking a review" of FERC's Office of Enforcement" at the urging of several U.S. Senators.

The lawmakers have urged the IG to look into the way FERC investigates market manipulation.  Earlier this year, a very public battle between FERC's OE and energy trading firm Powhatan Energy Fund LLC made headlines and haunted former Director of FERC's Office of Enforcement Norman Bay's nomination to the Commission.
Sen. Robert Casey, D-Pa., was the first to ask the inspector general to look at the way FERC has been investigating alleged energy market manipulation. Stressing the need for investigations to be transparent, Casey in July urged Friedman to look at seven specific aspects of FERC's enforcement program, including whether the agency has pursued enforcement actions against entities "that were not acting in violation of then-current applicable laws and regulations," and is "properly allocating its limited resources to investigation of cases that have the most deleterious effects on energy markets."

Then, in September, Barrasso and Sen. Susan Collins, R-Maine, asked the inspector general to explore allegations questioning the fairness and transparency of FERC's enforcement program, including those made in an Energy Law Journal article co-authored by a former FERC general counsel asserting that the commission's enforcement process has become "lop-sided and unfair."

The two senators specifically asked if FERC is holding certain parties to different standards with regard to market manipulation. For instance, Barrasso and Collins questioned whether the public is being given "actionable notice" of the types of conduct FERC considers to be market manipulation. They also asked Friedman to explore the article's allegations that the targets of FERC investigations and their employees are not being afforded the due process "required by FERC's own regulations and precedents" and that provided by other federal enforcement agencies.
The IG will also be investigating any "quid pro quo" connections between enforcement actions and other unrelated FERC actions, and some craziness about career vs. non-career positions.

FERC has publicly offered a recent defense against the allegations.

Some have wondered whether FERC applies different standards to those it considers outsiders to its little energy fiefdom.  Does FERC go after its utility regulars with the same zeal it reserves for banks, traders, companies or individuals that don't regularly wander its halls and hearing rooms?  Is FERC's OE all about big headlines, or is it about justice?  Are utility transgressions dealt with by sweeping the matter under the rug or slapping the offender on the wrist?

It's going to be interesting.  Let's hope we don't next have an investigation of DOE IG's investigation to determine whether that investigation was carried out in a fair manner.  They could run out of inspectors to inspect each other at some point.
 
 
Just when we were ready to make Kevin Gates an official member of the Sodom on the Potomac Super Hero Club, he's folded his tent and disappeared.

Pretty disappointing, after the terrific fight Kevin and his brother Rich have been putting up, claiming to have been wrongly accused and harassed by FERC for years.

Kevin says:
Powhatan Energy Fund has decided to take down its website at www.ferclitigation.com.  And, while the site is down, Powhatan will be declining all new requests to speak with the media and requests to present at conferences.
RTO Insider has a nice summary of the mystery here.

Too bad, Kevin.. SotPSHC is a very exclusive club!

 
 
FERClitigation.com has published a new letter to the U.S. Department of Energy's Inspector General from Senators Collins and Barrasso.

The Senators are asking the same questions that have been stinking up the FERC's aura for months.

1.    Are parties who "do not otherwise appear frequently before FERC" held to different standards than the utilities who are part of the daily scenery at FERC?

2.    Are there clear rules about what constitutes market manipulation?  Are market participants given adequate notice about what constitutes a violation and treated fairly during an investigation?  Is FERC pursuing "market manipulation" that was perfectly legal when it occurred?

3.    Are deals made with utilities that could be construed as quid pro quo enforcement settlements in order to receive FERC approval for a different transaction?

Tough questions.  Where are the answers?

You don't have to be one of the "white shoe" FERC regulars to think that something's off here.  There's been enough written to make even common consumers question whether our recently politicized FERC plays favorites with its incumbent utility friends while saving its scary investigations and worst punishments for energy "outsiders" that dare to venture into its lair.

The Wall Street Journal gets right to the point:
Ad hoc settlements win political plaudits, but because companies usually neither admit nor deny wrongdoing, the settlements set no meaningful or coherent legal precedents.
Does FERC's mindless pursuit of settlements really serve consumers?  Or is it all about the occasional big headline to draw the passing attention of the common consumer and give him a false sense of security that regulation is working to protect his interests? 

Does FERC play footsie with gigantic utility holding companies?  Case in point:  FirstEnergy's 2012 scheme to drive up capacity prices in ATSI, which cost consumers hundreds of millions of dollars.  Regulators didn't bat an eye because what FirstEnergy did was legal when they did it.  But, not so for some of FERC's red-headed step children that aren't regulars at the Sunrise Cafe.  Their ignorance of FERC's mysterious enforcement methods has cost them dearly.

Will DOE's Inspector General shake some of the political rot and decay out of 888 First Street and restore the public's respect and trust in the important work of the Federal Energy Regulatory Commission?

I hope so.
 
 
The Pufferfish Foundation wants to let folks know that the U.S. Department of Energy's Inspector General would like people who have been harassed by FERC's Office of Enforcement to contact their office.
They can contact the IG hotline at:
ighotline@hq.doe.gov
D.C. Metro Area: (202) 586-4073
Toll free: (800) 541-1625
FAX: (202) 586-4902
This information comes from U.S. Senator Robert Casey's office, and may be a response to the Senator's inquiry into FERC's investigation of Powhatan Energy Fund.  The investigation has been made public on the website ferclitigation.com.

Powhatan sent this letter to the Inspector General in July.

So, if FERC's bullies come knocking on your door, who ya gonna call?
 
 
That big revolving door at FERC keeps spinning.

Today, Commissioner John Norris resigned, three years before his term was up.  One out.

Last week, returning Commissioner Chery
l LaFleur was sworn in to a new term, and will temporarily act as lame duck chairman of the Commission.  Her chairmanship only lasts until next April.  One in.

Controversial
new Commissioner Norman Bay was sworn in earlier this week for his new term, and will advance to the chairmanship when LaFleur gets demoted next April.  One in.

The day after Bay was sworn in, FERC finally did what it had been threatening to do for the past 4 years and issued a Notice of Alleged Violations to Powhatan Energy Fund and its trader Alan Chen, officially accusing them of market manipulation.


Powhatan has been very publicly and aggressively
fighting FERC's attempt to eke out a settlement before formally charging them, and had been critical of Office of Enforcement Director Norman Bay's nomination as commissioner.  Powhatan's website has lots more information about the case.

Powhatan's response: 

“Your preliminary findings make no sense.  Should you choose to proceed with a public notice against Powhatan and/or Huntrise, please be advised that they will respond publicly and forcefully.”
So, just when FERC manages to get all its commissioner seats filled, a major public relations battle and search for a politically suitable commissioner starts all over again.  Here's a better idea:  Since FERC is all political now, maybe we should just start electing FERC commissioners, since they're supposed to regulate in the public's best interests?
 
 
W T
PPL?
I think PPL needs to do a round of drug testing of its employees.  Whoever came up with this idiotic idea must be on something.

PPL announced today that it had "submitted an application to PJM" to build a 725-mile 500kV line, estimated to cost $6B, through four mid-Atlantic states.

Never going to happen.

Residents of affected states are still reeling from PJM's last big transmission building idea, Project Mountaineer, that cost them billions, including nearly half a billion dollars for planned projects that were never built.  Try it, PPL, and you will experience coordinated, strategic opposition like you've never seen before!

The Morning Call seems to be the first media outlet to... err... call PPL out on its outrageous money-making scheme.  PPL interstate transmission project both costly and lucrative:  Project would fill utility coffers while costing ratepayers billions of dollars.

Morning Call says:
The project also would be a significant source of revenue for PPL Corp., PPL Electric Utilities' Allentown-based parent. Under Federal Energy Regulatory Commission rules designed to encourage infrastructure investment, utilities may earn a profit of 11.68 percent on transmission projects.
That translates into a profit of up to $700 million. PPL would share the money with any other utilities that participate in the project.
PPL customers, meanwhile, would see the cost, including utility profits, reflected in their rates — though the burden of paying for the project would be shared by ratepayers in all four of the states involved.
But, Morning Call only sees the tip of this iceberg.  PPL can apply to the Federal Energy Regulatory Commission for transmission rate incentives that would up its profits significantly.  In addition to incentive ROE adders that can increase the 11.68 percent several percentage points, PPL can also ask for guaranteed cost recovery in event of abandonment, a return on construction work in progress that enables them to begin earning that juicy return immediately, even before the project is completed, and many other outrageous financial rewards.

In addition, Morning Call's math is wrong.  The $700 million profit the reporter calculated is only that earned in THE FIRST YEAR of operation.  Transmission project rates work sort of like a 40-year mortgage.  The return is calculated and paid on the depreciating balance of the project cost every year!  So, in the first year of operation, PPL would earn a return on $6B and collect a certain amount of depreciation on the project assets that would lower the balance owed by ratepayers.  The second year, PPL would earn a return on the depreciated balance, and additional depreciation.  And so on, over the 40 year (or more) life of the capital assets.  PPL's possible profit from this ridiculous project is a nearly endless goldmine!

And, one last thing Morning Call gets wrong -- this project will be paid for, in part, by ratepayers in all 13 states in the PJM region because of its size.  A 500kV project built in PJM is cost allocated at 50% to all ratepayers based on peak usage, with the other 50% being assigned to the cost causers/beneficiaries.

Moving right along into PPL's feeble assertions that its project will:
If approved, PPL predicts, the project will improve energy reliability and security and provide customer savings by eliminating transmission bottlenecks and encouraging development of lower-cost natural gas-fueled generation plants.
The new plants would help replace energy supplied today primarily by coal-fired plants that, under increasingly stringent federal air quality standards, are expected to be retired in coming years.
This doesn't even make sense.  The coal-fired plants that will be closing are located in the Ohio valley, not on the east coast.  Once those coal-burners are offline, it will free up significant transmission capacity for any new "mine mouth" Marcellus shale gas-fired plants built in the Ohio valley.  Why would we need to build a new west to east transmission line when there's already plenty of them sitting idle due to coal-plant closings?

PPL says they will have a robust public input process to find out where to site the line.  Seriously?  That strategy doesn't work anymore.  It's all about need for the line in the first place, not where to put it.  Get with the brave new world of transmission opposition, PPL!

And speaking of siting the line... where is that new Maryland substation supposed to be on that featureless map?  If you compare it to a real map of Maryland, it looks like it's in Howard or Carroll counties.  But, what if there was land available in neighboring Frederick County for a proposed substation?  Oh, deja vu!

This has got to be the most thoughtless transmission proposal I've ever seen. 

Never going to happen.
 
 
So, what's been happening in the aftermath of the recent confirmation of a new and a returning FERC commissioner?

Pennsylvania Senator Robert Casey sent a letter to Energy Department inspector general Gregory H. Friedman asking some hard questions about FERC's enforcement office and requesting an "examination."

The Philly Inquirer wants to inquire why Senator Casey voted for Norman Bay before sending his letter:
Except, shouldn't the investigation come before a guy's promoted?
Whoopsie!

The guys at FERC Litigation have posted a bunch of new news stories and documents.  It appears that their battle continues.

Our friends at RTO Insider published an in-depth look at the "lingering uncertainty" at this federal agency, with information about some interesting questions that were asked in private conversations before a recent FERC open meeting:
How assertive will Acting Chair Cheryl LaFleur be as a lame duck? And will she remain for her five-year term after she has to relinquish the gavel?

With Commissioner John Norris openly musing about his post-FERC future, who will replace him and how soon?

How will Bay resolve the investigation into Powhatan Energy Fund, whose principals have been running a public relations campaign accusing FERC of heavy-handed enforcement tactics?
And, this morning, an opinion piece by investigative reporter David Cay Johnston accuses that federal regulators let utilities gouge customers.

Although my understanding and consumer's perspective of FERC probably differs from Johnston's, it seems that his nose works just fine.  Something stinks here!

Regulator, regulated, regulator, regulated, regulator, regulated, regulator, regulated.... the door is spinning!  Johnston gets right to the root of the problem:
FERC commissioners, however, disregard the just and reasonable standard, routinely ignore evidence and act more as agents of utilities than fair-minded regulators.

Absent from the commission is anyone who represents the rights of consumers.
Johnston ends by painting Norman Bay as a "ray of hope" for consumers.

I think perhaps FERC needs some public relations polishing.  Maybe these guys would be willing to help?
 
 
Norman Bay barely squeaked by a Senate vote yesterday to officially become a FERC Commissioner.  The vote on Bay was close, 52 - 45, and RTO Insider reports that it was a "party-line vote."  Just what we need... more political manipulation inside a federal regulatory agency.

Incumbent Commissioner Cheryl LaFleur was easily confirmed for a second term.

And here's where the political manipulation happened... it has been reported that a political deal was struck to allow LaFleur to remain as Acting Chairman for 9 months, at which time newcomer Norman Bay will ascend the throne.  I'm not sure what that was supposed to accomplish... what's on the agenda for the next 9 months that's so crucial?  Maybe FERC is planning a long, hysterical pregnancy of some kind. 

The Senate doesn't have any say over who is appointed Chairman, it can only confirm or deny Commissioners in general.  Or at least that's the way it's supposed to happen according to the law...

As if consumers don't already have enough problems with regulatory capture and the revolving door whereby regulated and regulator switch places with amazingly incestuous ease, now Harry Reid wants to run FERC.

Why?  In order to turn his state into the "Saudi Arabia of renewable energy," says Trib-Live.  Because none of the other 49 states want to produce their own renewables and reap the economic benefits of a distributed generation energy renaissance within their own borders.  Or maybe the other state representatives just don't have the cojones to stand up to Reid and serve their own constituents?

At any rate, it looks like the beatings will continue until morale improves.  I wonder what's going to happen to the guys at Powhatan Energy Fund now, in the wake of their very public campaign against Bay's nomination?

FERC is turning into a real circus lately.  The environmentalists have finally located the headquarters in DC and tried to block the entrance the other day.

FERC has even been serenaded.

I think this situation calls for more lobbyists!  Or perhaps just some comedy...

Read the recent
Motion to formally Lodge this as the longest filing name in Commission history, where a former energy insider has gone rogue and spills... in a most delightfully humorous way.

I am just a private citizen with an unnatural interest in (a fetish, if you will) and some history in dealing with unreserved use.  I apologize to any and all for my cheekiness and informality, but I ain’t getting paid to do this and if I never see the information for which I am asking I will not miss any meals.  With that said, I’ve got nothing better to do except enjoy a glass of tequila and write this quickly, so here goes....
Whatever happened to regulation in the interest of protecting consumers?

Is that song stuck in your head now, too?
 
 
In a predictable move, the U.S. Court of Appeals for the 7th Circuit kicked the Illinois Commerce Commission v. FERC can back to Washington today.

This case has been dragging on for nearly 5 years.  When it first started, ratepayers in PJM's Illinois territory were looking at sharing a huge chunk of the cost of PJM's multi-billion dollar Project Mountaineer collection of unneeded transmission projects.  Although the bill has shrunk considerably with the cancellation of PATH and MAPP, the argument has only grown.

It centers on PJM's 2006 adoption of the "postage stamp" cost allocation methodology.  This method assigned costs of new transmission 500kV or greater to all ratepayers in the region based on their share of regional electricity sales.  The more power an area used, the greater its share.  PJM did this to spread out (socialize) the cost of its Project Mountaineer venture over more customers so it could get that transmission built before the hoi polloi noticed, "before it became common dinner table talk."

However, it's important to realize that PJM no longer uses the 100% "postage stamp" cost allocation method and hasn't since last year.  Today's 7th Circuit decision will have no effect on any proposed or future transmission projects in PJM, or any other RTO.  Today's decision will only affect those projects that were built (or not!) before last year's new allocation method went into effect.  PJM's new, FERC-approved cost allocation methodology relies on a 50-50 split of two different methods for transmission lines of at least double-circuited 345kV or greater.  The first 50% is allocated according to the old postage stamp method, and the remaining 50% is allocated either to the cost causers or the beneficiaries, depending on the reason for the project.  Costs for transmission projects based on "public policy" clean energy state laws will be allocated to the states that require them under PJM's "State Agreement Approach."  If a state doesn't agree to shoulder the cost burden for a project designed to meet its renewable portfolio standard, then it will not be built.

Today's decision echoed the first remand from the 7th Circuit, that found that FERC had not done enough to show that utilities in "western PJM" received benefit from Project Mountaineer that was commensurate with their cost responsibility under the old "postage stamp" allocation method.


FERC dealt with the first remand by rolling its eyes and making up more crap about how "western PJM" benefited from Project Mountaineer.
  It pulled an even bigger diva act on rehearing.  But FERC just can't out-diva Judge Posner of the 7th Circuit.

Posner hates coal, and transmission lines that carry it.  But, he loves postage stamp rates for transmission lines that are supposed to be "for wind."


This Sybil act must also be confusing to FERC, but hopefully they can get it right this time... because third time's a charm, right?

Go ahead, read today's decision.  It's quite chatty and reads like some guy's geeky blog post about electricity and cost-benefit analyses, until you get to the 9-page dissent by
Judge Cudahy, who seems to be writing from the other side of the political spectrum.  It's fairly entertaining.  However, I suspect FERC is not as amused as you are.