Brace yourselves, Americans, Congress is tinkering with energy policy again! No good can come of this. And some idiot has introduced a whole new Sec. 216 (16 U.S.C. 824p)
aka Section 1221
of the Energy Policy Act of 2005 that's even worse than its first iteration.
The original, Section 1221, designated the Secretary of Energy to conduct an electric transmission "congestion study" and designate "National Interest Electric Transmission Corridors" (NIETCs) every three years. Transmission proposed in these designated corridors
was subject to "backstop" permitting by the Federal Energy Regulatory Commission (FERC) in the event a state withheld approval of an application for a permit for more than one year, or lacked the authority to permit the project.
Section 1221 was promptly deconstructed in two federal courts. When FERC proposed that "withholding approval" included a denial, and that meant it could override a state's denial of an application, the 4th Circuit determined that "withheld approval"
excludes a state's denial of an application, preserving state authority. In addition, the 9th Circuit determined
that DOE did not properly "consult with states" before designating NIETCs, and therefore it vacated the corridors DOE had set in 2009.
Last year, DOE made a half-hearted attempt to produce the 2012 "congestion study," but was resoundingly smacked down by a whole bunch of comments, and hasn't done a thing since.
In practice, Section 1221 has been an abject failure
However, the new Section 216, carried to Congress by Sen. Martin Heinrich (D-NM), attempts to fix all that by giving FERC authority to overrule a state denial of a transmission permit and use federal eminent domain authority to take private property. It also tosses NIETCs out the window as a means to identify worthy transmission projects and replaces them with an RTO/ISO finding that the project is "needed."
Good news: The new Sec. 216 does not apply to Clean Line in its current form.
Bad news: The new Sec. 216 will encourage a whole bunch of new transmission projects of questionable necessity, and landowners along existing corridors and/or those owning "open farmland" are always the first targets identified on the ol' transmission routing Etch-A-Sketch.
So, let's look at what the new Sec. 216 says:
(B) FEDERAL AUTHORITY.—The Commission may authorize, in accordance with subsection (d), construction of a high-priority regional transmission project that the Commission finds to be required by the present or future public convenience and necessity and in accordance with this section if--
“(i) a State--
“(I) fails to approve construction and authorize routing of a high-priority regional transmission project not later than 1 year after the date the applicant submits a completed application for authorization to the State;
“(II) rejects or denies the application for a high-priority regional transmission project;
“(III) authorizes the high-priority regional transmission project subject to conditions that unreasonably interfere with the development of a high-priority regional transmission project contrary to the purposes of this section; or
“(IV) does not have authority to approve the siting of the high-priority regional transmission project; or
“(ii) the developer seeking a certificate for construction under subsection (d) does not qualify to apply for State authorization to construct a high-priority regional transmission project because the developer does not serve end-users in the State.
So, FERC can "authorize" a transmission project if a state denies an application or conditions approval in a way the transmission developer doesn't like. That's not "backstop" or secondary authority, it's usurping state authority in its entirety. A state must approve, or else. So, why even bother with the fan dance of state applications at all? That's just a big waste of time and money.
Tell ya what... if FERC ends up with authority to overrule state transmission permitting decisions, there's going to be a lot more "turn-offs" for Commissioner Norman Bay, because the protestors will have moved "from pipelines to Order 1000." *Insert laughter here*
Second problem - how these "special" high-priority regional transmission projects are determined:
(1) HIGH-PRIORITY REGIONAL TRANSMISSION PROJECT.—The term ‘high-priority regional transmission project’ means an overhead, submarine, or underground transmission facility, including conductors or cables, towers, manhole duct systems, reactors, capacitors, circuit breakers, static VAR compensators, static synchronous compensators, power converters, transformers, synchronous condensers, braking resistors, and any ancillary facilities and equipment necessary for the proper operation of the facility, that is selected in a regional transmission plan for the purposes of cost allocation under Order Number 1000 of the Commission (or any successor order), including an interregional project selected under that plan.
That's it -- mere selection of and inclusion in a regional transmission plan makes a project "high-priority." Ummm... does Heinrich know that RTOs include hundreds of projects in their regional plans each year? "High-priority" over what? Transmission projects that aren't in a regional plan? Those are few and far between because they're nearly impossible to build (ain't that right, Clean Line?) So, every
project is going to be a "high-priority" project in this brave, new world?
It's quite obvious that S.1017 intends to "fix" everything that went wrong with the original Sec. 216, including the flawed NIETCs and the ability of a state to deny an application for a transmission project that did not serve its citizens. But, let's ask ourselves, does it really need fixing? State approvals aren't the problem with new transmission, it's federal approvals and studies that muck up and delay transmission plans. In addition, Congress has resolutely refused to make electric transmission siting and permitting a federal responsibility, and will most likely continue to do so.
There seemed to be little love for controversial legislation like S.1017 at Thursday's Senate Energy and Natural Resources Committee hearing. But, you know how Congress is... they get up to all sorts of hijinks if you don't keep your eye on them, so this bears a bit of babysitting.
One more thing before I wrap this up... where did this legislation come from?
The original Sec. 216 got its purpose from:
(4) In determining whether to designate a national interest electric transmission corridor under paragraph (2), the Secretary may consider whether--
(A) the economic vitality and development of the corridor, or the end markets served by the corridor, may be constrained by lack of adequate or reasonably priced electricity;
(i) economic growth in the corridor, or the end markets served by the corridor, may be jeopardized by reliance on limited sources of energy; and
(ii) a diversification of supply is warranted;
(C) the energy independence of the United States would be served by the designation;
(D) the designation would be in the interest of national energy policy; and
(E) the designation would enhance national defense and homeland security.
Nothing in there about renewable energy, right?
Now take a look at the purpose of the new Sec. 216:
(a) Policy.—It is the policy of the United States that the national interstate transmission system should be guided by the goal of maximizing the net benefits of the electricity system, taking into consideration--
“(1) support for the development of new, cleaner power generation capacity, including renewable energy generation located distant from load centers;
“(2) opportunities for reduced emissions from regional power production;
“(3) transmission needs driven by public policy requirements established by State or Federal laws (including regulations);
“(4) cost savings resulting from--
“(A) reduced transmission congestion;
“(B) enhanced opportunities for intraregional and interregional electricity trades;
“(C) reduced line losses;
“(D) generation resource-sharing; and
“(E) enhanced fuel diversity;
“(5) reliability benefits, including satisfying reliability standards and guidelines for resource adequacy and system security;
“(6) diversification of risk relating to events affecting fuel supply or generating resources in a particular region;
“(7) the enhancement of competition in electricity markets and mitigation of market power;
“(8) the ability to collocate facilities on existing rights-of-way;
“(9) competing land use priorities, including land protected under Federal or State law;
“(10) the requirements of section 217(b)(4); and
“(11) the contribution of demand side management (including energy efficiency and demand response), energy storage, distributed generation resources, and smart grid investments.
Hi! You've reached StopPATHWV Blog. Your visit is important to me. I'm sorry I can't come to the website right now... et cetera.
I'm off again, this time until it's over (a week? two weeks?) I predict another 6 days. Too bad there's not some sort of football pool going on. I might actually make some money that way.
If you're in possession of a call-in phone number to listen in to the festivities live, enjoy it. Or just show up... it's a public hearing.
If not, transcripts have begun to be posted on the docket. Go here. Enter Docket No. ER09-1256 and list sub docket 002 in the correct fields. Read.
Meanwhile, remember to play fair and be nice, everyone! Sleep the sleep of the righteous. A guilty conscience can be like a lead weight attached to your ankle. Ain't nobody got time for that...
Drama, drama, drama. I'm pretty sure the media over-dramatized the outages in DC yesterday. Maybe not a bad thing to raise awareness, but they've missed the real message.
OMG - like this outage affected IMPORTANT people doing IMPORTANT things! Like Pepco is sooooooo bad!
This article covers the basics, and with a few additional details from WaPo's more dramatic version, here's the story:
A hot 230-kV transmission line (conductor) just randomly fell off its tower in Southern Maryland. No storm. No damage. It just broke for no apparent reason. Live, uninsulated transmission line on the ground started a grass fire. Lucky it didn't fall on any people, vehicles, etc. that happened to be in the right-of-way at that time. The fault caused a bunch of other lines and generators to trip offline in self-defense against resulting voltage swings. And the lights went out many miles away in Washington, D.C.
So, no big deal, faults happen. But the grid is supposed to be designed so that other lines instantly spring to life and take the load of the one out of service and the fault ends up being nothing more than a barely-noticed blip. But that didn't happen, it started to cascade to other lines and generators. Comparison was made to the 2003 northeast blackout, when a fault on a transmission line in Ohio cascaded into a regional blackout. The concept is quite the same, but the effect not as far-reaching. Do you suppose we'll need a multi-million dollar government task force to examine the incident?
What's the real problem here?
Lack of maintenance and upgrades to existing transmission lines. The industry is so busy chasing the big profits that come from building NEW transmission that they aren't investing their money in maintaining the assets already in service. Perhaps our federal regulatory agencies need to start encouraging maintenance and rebuilds of aging lines with financial incentives?
And then there's the problem of parasites like DC that have no generation of their own and depend on transmission lines from distant generators. The more transmission lines we build, and the more centralized the system that supplies electricity, the bigger this problem becomes.
Stop it. Stupid.
Distributed generation and less transmission lines = reliability.
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.
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.
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.
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.
The solicitation for commitments, expected to last about seven weeks, will be a gauge in determining the interest in using the line.
GBE is soliciting customers in accordance with the plan it filed with FERC last year to negotiate rates in a fair and non-discriminatory manner that results in just and reasonable rates.
Despite GBE's media push that FERC has "approved" its project, FERC has no jurisdiction to approve the siting and permitting of the project. What FERC does have an interest in is ensuring that the rates GBE charges to its customers are just and reasonable. FERC simply approved GBE's plan to undertake this process fairly. Once GBE completes the negotiation process and assigns capacity, it must make a compliance filing with FERC demonstrating that it complied with the plan as approved. That may be be the tricky part!
Who wants to make a contractual commitment to purchase capacity on a transmission line that may or may not be permitted, and may or may not be built? It could be generators, that Clean Line admits have not yet been built. It could also be utilities, who commit to purchase the capacity. Or it could be no one at all.
In the case of generators, the generators would need to have customers (utilities) that want to purchase their generation delivered to Indiana (and incur additional transmission costs on other systems to get the power to load). Since these generators have yet to be built, and the transmission to Indiana has yet to be built, committing to a purchase price for delivered power could be risky. Utilities hate risk. A utility seeking to add renewable generation to its portfolio has many options, including existing generators and transmission. Utilities plan their resources many years in advance as part of their obligation to provide a public service. They are obligated to seek the cheapest price. They want to know the resources they commit to purchase will actually be there when needed, not possibly unavailable at some later date, which would leave the utility scrambling to fill some hole in its plan at whatever price they can find. Utilities hate risk. Risk is costly.
In the case of utilities purchasing capacity directly... more risk! Purchase of capacity on a transmission line that may or may not be there when needed, connected to unnamed generators that may or may not be there when needed, is risky. Utilities hate risk.
I read an article long ago regarding Clean Line's business plan. Some panned the plan, saying there is no market for this kind of risk. So, I thought about it. If Clean Line's plan is such a sure thing, why aren't there hundreds of transmission companies building merchant lines outside the regional planning process? Utilities have transmission affiliates, and they like to make money, too. Maybe it's because experienced transmission developers know that there truly is no market for Clean Line's business plan?
Last year, Clean Line opened a different FERC-jurisdictional solicitation process for another of its projects, the Plains and Eastern Clean Line. Regarding that process, Clean Line recently claimed:
It was encouraged by the strong response to a solicitation of customers for another power line it plans to build to deliver wind energy from Oklahoma to Southern states.
Encouraged? Strong response? If the response was strong and encouraging, Clean Line should have negotiated contracts with the respondents and made its compliance filing at FERC and announced to the world that it had committed customers for that project, right? What happened?
From May through July of 2014, Clean Line conducted an open solicitation for transmission capacity on the Plains & Eastern Clean Line. 15 potential customers submitted more than 17,000 MW of requests for transmission service.
Clean Line's negotiated rate authority for Plains & Eastern requires the company to:
... make a compliance filing disclosing the results of the capacity allocation process within 30 days after the close of the open solicitation process, as discussed in the body of this order.
It's been 6 months. No compliance filing. No contracts. No customers. What happened? Is Clean Line still negotiating? Doesn't sound very strong and encouraging to me. What if the bids Clean Line received were unacceptably conditioned to manage risk, or not satisfactory to economically support the project? Remember, the bidding window has closed. Would Clean Line have to award capacity to the top bidders, no matter the conditions? If so, then perhaps it is busy evaluating the economic reality of its project.
Or is Clean Line planning to reject the first round of bidders and open a second solicitation window, hoping for better bids? Would that be fair in FERC's eyes?
Don't forget to get your bids in. ;-)
Utilities hate risk.
FERC bad-boy Kevin Gates says he's going to create an animated monkey for his website that explains how to make money in PJM's badly-designed markets.
Gates therefore said he stands by his earlier statement that FERC created a market "where a monkey could have made money that summer" by randomly picking nodes, MWs, congestion caps and hours. "We now have the data and I intend to prove it empirically," Gates added. "Once I'm done with the analysis, I intend to create an animated monkey to put on my website to present the results of my work and help explain the market that FERC created."
But what kind of monkey? Will it be a nice monkey?
Or will it be a naughty monkey?
For instance, staff said Chen and Powhatan's investors, including Gates, should have known that it was improper for Chen to submit trades in PJM's up-to congestion, or UTC, market on the funds' behalf just to maximize the rebates PJM gives market participants that use its transmission lines when it collects excess line-loss payments.
Staff further alleged that Gates and Chen suspected as much, citing an email exchange between the two parties suggesting that they "contact a law firm, the FERC, or PJM to try to get more insight into this issue." They never did, however, but instead decided to have Chen ramp up the trading activity, staff asserted.
Gates told SNL Energy that the problem with most of the emails and other information cited by staff to support its case is that they were taken out of context.
For instance, when asked if he indeed suspected that the types of trades in which Chen was engaging might be improper and why he did not seek advice on the issue, Gates recalled that the email exchange regarding the potential need for guidance took place in March 2010 and Chen did not begin trading in an allegedly illegal manner until the following June.
“The timing and the content of the email shows we weren't talking about Alan's trading at all — it was about the rebates themselves. We were concerned that FERC would try to retroactively take them back — not just for us, but for everyone," Gates said. He insisted that he never thought Chen's trading would be considered illegal.
Gates further explained that he did not contact an energy attorney at that time because he thought the possibility that FERC might punish market participants retroactively for flaws in existing rules was "preposterous when those rules were clearly approved." He also thought that while an attorney could quantify the risk or the likelihood that FERC may do so, contacting one would do nothing to protect him from that risk.
According to Gates, his decision not to seek legal advice at that time was the right one. He noted that after FERC in July 2011 tried to retroactively "claw-back those rebates" by ordering virtual (financial) traders such as Powhatan to return the previously refunded amounts, a federal appeals court in August 2013 remanded that decision, finding that the agency failed to justify its mandate. Moreover, Gates stressed that FERC staff has not alleged that any of Chen's trading activities prior to June 2010 were improper.
To be fair, SNL Financial also did an article featuring FERC's perspective
, but that one is behind a pay wall, so I guess nobody cares...
Personally, I'm looking forward to the animated monkey! I hope it's an evil monkey! They're ever so much more fun!