Do you often make a typo that turns "Clean Line" into "Clean Lie?" Me, too.
Clean Line has a new shtick that claims Iowa ratepayers will benefit if the IUB allows it to change the process to make it less costly for its investors. Clean Line's claim can be paraphrased like this:
If you don't make it easy for us to build the Rock Island Clean Line (RICL) using the merchant model that charges customers in other regions for the cost of the project, then the Midcontinent Independent Systems Operator (MISO) will order new transmission just like RICL and make Iowa ratepayers pay for it.
Clean Line must really think Iowans and their Utility Board are a bunch of rubes. This argument fails on so many levels, and the reality is that building RICL could actually increase electricity costs for Iowans.
First of all, this is an apples to oranges comparison. RICL is not at all like the transmission projects MISO may order to be built. RICL's stated purpose is to export electricity from the MISO region to the PJM Interconnection region. MISO generally serves midwestern states, while PJM generally serves eastern states. RICL proposes to move large quantities of electricity generated in MISO into PJM, where it may be used by "states farther east." RICL is not proposing to serve any customers in MISO, particularly in Iowa. Contrast that to the transmission projects MISO orders. MISO is concerned only with serving customers within its own region. Therefore, any transmission projects MISO orders will be for the purpose of moving electricity around the MISO region for use by MISO consumers. MISO would never propose a transmission project for the express purpose of exporting electricity to another region, and then turn around and expect MISO consumers to pay for it.
Independent System Operators and Regional Transmission Organizations (which are generally identical constructs) are quite parochial. They are utility member organizations that exist to serve their own regional interests. Interregional planning is extremely fragile, to the point of being non-existent. This is because an ISO/RTO will generally utilize its own resources first, from a cost and reliability standpoint, before importing resources from another region. RTO/ISO members would never agree to pay the cost of export to another region, and moreover, this rubs against the Federal Energy Regulatory Commission's Order No. 1000, that ensures that only beneficiaries pay the cost of transmission built to serve them.
Therefore, the building of RICL would have NO EFFECT on the transmission projects MISO orders to serve its consumers. MISO will still order the transmission it needs to serve consumers in its region, including Iowa. RICL is no substitute for MISO-ordered transmission because it would not serve any consumers in Iowa, or anywhere in the MISO region. At best, RICL is agnostic about costs to Iowa ratepayers. It certainly won't save them any money.
RICL may actually cost Iowans higher electricity prices. Think of electricity produced in Iowa as a reservoir. As long as supply is plentiful, prices remain cheap, and cheap energy is dispatched first to Iowans. However, RICL would turn on a gigantic tap that drains that reservoir and sends the water (or electricity) to other regions with higher prices. This creates an imbalance between supply and demand, where Iowa electricity buyers must now compete with other regions to buy the cheapest Iowa-produced electricity remaining in the reservoir. Transmission lines levelize prices between electricity's source and sink (consumers), lowering prices in other areas by making cheaper energy available to new users, while raising prices at its source by increasing competition for the newly-limited supply. Exporting a plentiful supply of anything raises local prices by lowering supply. It's the simple principle of supply and demand.
Clean Line has come dangerously close to violating its negotiated rate authority granted by the Federal Energy Regulatory Commission. FERC based its grant of authority, in part, on the following:
To approve negotiated rates for a transmission project, the Commission must find that the rates are just and reasonable. To do so, the Commission must determine that the merchant transmission owner has assumed the full market risk for the cost of constructing its proposed transmission project.
Rock Island meets the definition of a merchant transmission owner because it assumes all market risk associated with the Project and has no captive customers. Rock Island has agreed to bear all the risk that the Project will succeed or fail based on whether a market exists for its services.
What RICL proposed in Iowa is a shifting of risk to Iowans. RICL believes it should not be subject to the financial risk presented by Iowa's long-standing permitting process that requires it to negotiate voluntary easements or prepare time-consuming Exhibit E material before being granted a permit. Instead, RICL believes Iowans should be subject to a confusing, inconvenient, and more costly bifurcated permitting process in order to absolve RICL of any financial risk during the permitting process. This is a shifting of financial risk to Iowans.
In its application to FERC, RICL talked big about sharing the risk with its customers, the load-serving entities (LSEs) that would buy its capacity.
Rock Island also argues that wind generators, whose energy the Project will likely transmit, present numerous risks that transmission project developers and investors must overcome. For example, Rock Island states that wind energy projects are typically constructed with shorter lead times than other generators and are less willing to commit to large transmission projects well in advance of generator construction. Rock Island argues that pre-subscription of capacity with creditworthy anchor customers can reduce financing obstacles because lenders demand to see a secure source of revenue as a predicate to project financing.
Here, it appears that RICL is suggesting that it can sell its capacity to LSEs before the project is built. These entities with a guaranteed spot on RICL's wind highway would later buy electricity from wind farms connected to RICL. Not only would it lower RICL's financial risk by providing the company with capital before its project is online, it would also provide a future revenue stream that wind farms could use to secure their own financing. Perhaps RICL should be looking to share its financial risk in Iowa with its potential customers by pre-subscribing its capacity to LSE customers at this time? Let the LSEs pony up the funds necessary to negotiate voluntary easements or create Exhibit E materials. That would shift the financial risk from RICL to its customers, where it belongs, instead of to Iowans.
Except RICL doesn't have any customers. Potential customers have been unwilling to shoulder any of RICL's financial risk during the permitting process. Chicken/egg. This demonstrates why Clean Line's business model will never work unless states agree to shift Clean Line's risk onto their own citizens by permitting a project that has no customers. Iowa said no on Monday. Arkansas said no in 2011. Missouri said no last summer.
In order to hide its failure to share risk with its own customers, RICL whined that the Iowa process is flawed and must be changed to shift risk from RICL to Iowans.
I'm not buying it. How about you?
The Pittsburg Post-Gazette's "Power Source"
energy news believes the Clean Power Plan will require "a tangled mess of hulking, long-range transmission lines." Not true, and the report's "facts" are fallible.
The reporter seems to rely on energy platitudes, pasted together with quotes from people who should have been asked about the conclusions the reporter made.
Opponents used some of those arguments to successfully derail the Potomac-Appalachian Transmission Highline, a 290-mile line from Putnam County, W.Va., to Frederick County, Md., proposed by Allegheny Energy in 2008. The Greensburg company, acquired by FirstEnergy in 2011, suspended the project after it could not convince regulators the line was necessary.
This guy calls up Steve Herling, but doesn't bother to ask him why PJM terminated the PATH project. It's not that "opponents" proved there was no need in any state regulatory process. It's that PJM first suspended, and later terminated the PATH project because
PJM staff reviewed results of analyses showing reliability drivers no longer exist for the project throughout the 15-year planning cycle. The analyses incorporated the continued trends of decreasing customer load growth, increasing participation in demand response programs and the recent commitment of new generating capacity in eastern PJM.
This reporter also seems to be under the impression that all transmission opposition comes from "citizens groups" who oppose transmission due to environmental reasons.
While citizen groups have fought transmission projects — often successfully — by attacking the developer’s need to build them, the environmental regulations could usher in more projects and complicate opposition.
Changing drivers of transmission
In the past, environmental groups have glommed onto transmission battles and used citizen group opposition to fuel the push on environmental grounds. Those days are over. This reporter seems to be the last to find out, but environmental groups are the newest and biggest fans of transmission lines. Numerous environmental groups have intervened in favor of big, new transmission lines that the wrongly believe are "for wind." Transmission lines are open access and it's not possible to segregate "clean" electrons from "dirty" ones. The citizens are on their own here and that's just fine... nobody needs or wants a hypocritical environmental NGO championing eminent domain for "clean" transmission lines while simultaneously using the same issue as a reason not to build "dirty" pipelines. Nobody takes these fools seriously anymore. Without an army, the environmental groups are simply Don Quixote. Tilting at their beloved windmill fantasy, but getting nothing accomplished.
It's still about need though. And the transmission poster child the reporter chose to use is not part of any regional transmission plan and therefore has not been designated "needed."
Transmission companies see big potential for new projects, particularly from sparsely populated areas that generate wind energy to urban areas. “Just as trains carried cattle and other goods from the rural areas to urban centers, the Plains & Eastern Clean Line will carry renewable energy from the Plains of the Southwest,” states the website of one developer, Clean Line Energy of Houston, Texas.
Clean Line expects federal approval for its 700-mile Plains & Eastern Clean Line, designed to carry 4,000 megawatts of power from wind farms in the panhandle of Oklahoma. The line will terminate near Memphis, Tenn. Clean Line has four other projects in the pipeline.
“We anticipate a very busy 2016,” said company president Michael Skelly.
And that's why Clean Line is attempting to use an untested part of the 2005 Energy Policy Act to usurp the siting and permitting authority of states and ram its project through using the federal eminent domain authority of federal power marketers. Except that statute requires a need for the transmission in the first place. And there is none. Clean Line elected not to participate in the regional transmission planning processes that determine need for transmission projects. Clean Line is nothing but a gamble -- the investors are gambling that a need for the project will develop if they can build it... but Clean Line hasn't been successful in signing up any potential customers... because they can't get their project built... because there is no need for it. That's the real chicken/egg the reporter should be examining.
I do hope Mr. Skelly is very busy in 2016... polishing up his resume and looking for new investors for his next get rich quick scheme.
The reporter longs for
...some wind mills and solar farms in areas with constant breeze and abundant sunshine
But he's looking in the wrong place. Even though he had a conversation with Scott Hempling about non-transmission alternatives, none of that seemed to sink in.
There's an area with "a constant breeze" located much closer to Pittsburgh than the Great Plains. It's called the Atlantic Ocean, where wind potential is much greater. Best of all, very little "tangled mess of hulking, long-range transmission lines" would be "necessary to bring that renewable power from the point of generation to utilities for local distribution."
Why can't eastern states boost their own economies by harvesting renewables close to load? The days of centralized generation are over. Also, sunshine is abundant anywhere -- no transmission lines needed to slap some solar panels on your own roof.
This reporter needs some education.
1. Transmission opposition by "citizens groups" won't change because of the Clean Power Plan.
2. Speculative transmission projects for which there is no need shall not be granted state eminent domain authority to take property for rights of way.
3. Clean Line is a merchant transmission project, not part of any transmission plan and completely unlike most other transmission projects. Therefore, it should not be lumped in with them or used as an example of anything transmission-related. If the CPP requires transmission, it will be planned and ordered by regional transmission organizations so that there is some surety that it will actually be built. Clean Line is not needed, may never be built, and is driven by anticipated profits selling energy into more expensive markets, not by the Clean Power Plan.
And stop drinking the big wind koolaid. There are no facts in it.
Looks like Dominion has finally reached the bottom of the barrel in its desperate attempts to get approval for construction of a 500kV transmission line across the James River at Jamestown.
An article in the Virginia Gazette says that Dominion is now offering $85M in "mitigation" to groups opposing its project. The $85M includes:
The mitigation proposal includes more than $52 million in funding for Jamestown Island, Hog Island and the Captain John Smith Historic Trail District. The money would fund projects such as seawall rehabilitation and replacement at Historic Jamestowne to help combat the impacts of sea-level rise and erosion, according to the draft mitigation plan obtained by the Virginia Gazette.
The mitigation plan proposal includes $15.5 million in funding for water quality improvement including erosion and sediment control in the James River. Battlefield and landscape conservation projects would get $12 million, including government and private lands associated with the Battle of Yorktown, according to the proposal. More than $4 million would go to protecting emergent marsh at the Hog Island Wildlife Management Area.
But here's the thing... the $85M in blood money would be paid for by electric ratepayers in PJM Interconnection's 13-state region, not by Dominion. That's right, Dominion's "generous" offer would become part of the capital costs of its Skiffes Creek project, which will be reimbursed to the company through federal transmission rates over the 40-year life of the transmission line, plus interest. Paying off the capital cost of a new transmission line works much like a mortgage, where a small amount of principal is paid each year, in addition to interest on the remaining balance. Dominion's "interest rate," called return on equity, is currently set at 11.4%, annually.
What Dominion is offering is that YOU will pay to "mitigate" the destruction of YOUR historic resource. And Dominion will make a profit on the deal.
And, really, would $85M of unrelated improvements to the Jamestown historic area make the new transmission towers in the James River disappear? No. No matter how much of your money Dominion throws at it, the transmission line will still forever spoil historic Jamestown. At the end of the day there will still be a transmission line in the river. The $85M isn't "free" money coming out of Dominion's coffers, it's money that will be added to your electric bill for the next 40 years. Aren't there better ways to pay for improvements to Jamestown than through a backdoor fee on your electric bill that also includes a hefty profit for Dominion?
Dominion's price for the transmission line is $155M, before "mitigation." With mitigation of $85M, the new total for the project's capital costs is $240M, a substantial cost increase. Don't you think Dominion could put that $85M to work finding a better solution to its plan, such as undergrounding the transmission line?
And here's the best part... if Dominion is denied a permit to build its current project, then PJM must go back to the drawing board to find another solution to the supposed reliability issue. Any new solution must now be competitively bid, not just handed to Dominion to build, as the original project was many years ago. Competition is always a good thing, and will most likely result in a better, cheaper, "constructable" solution.
Just say no to Dominion's ratepayer-funded blood money and send this project back to PJM's drawing board.
A Virginia blogger visited PJM Interconnection to find out who they are and what they do, and then wrote about it
. That's great investigative journalism because only a handful of the 61 million electric consumers served by PJM even know it exists. However, I do wish the blogger had a bit more curiosity to scratch underneath the surface of some of PJM's propaganda.
Amid a factual account of how PJM operates, I found this thoughtless propaganda blurb:
Electricity on the PJM grid normally flows from west to east. The major centers for electricity demand are the big metropolises along the Eastern Seaboard, at the eastern edge of the PJM system. There aren’t any power plants located in the Atlantic Ocean, therefore power that isn’t generated locally has to come from the west. As it happens, PJM’s western states have abundant, low-cost wind power — at night-time, wind power is so plentiful compared to demand that the price essentially falls to zero. The main factor limiting East Coast access to that cheap wind is the limited capacity of the transmission grid to carry it.
There aren't any power plants located in the Atlantic Ocean, but it's not due to lack of a "low-cost" source of energy. Offshore wind is a better source of energy than land-based wind.
In the United States, 53% of the nation’s population lives in coastal areas, where energy costs and demands are high and land-based renewable energy resources are often limited. Abundant offshore wind resources have the potential to supply immense quantities of renewable energy to major U.S. coastal cities, such as New York City and Boston.
Offshore winds tend to blow harder and more uniformly than on land.
Why would PJM, a member organization of power producers and distributors, downplay the viability of offshore wind, if it is truly "agnostic about the desirability of renewable energy?" Is it because PJM has an interest in building more transmission to expand its empire, or simply an interest in protecting the interests of its members? Or did this propaganda form in the mind of the blogger?
In Virginia, Dominion Power controls offshore wind energy development. And some believe Dominion is dragging its feet. Why would they do that? Dominion says its because the cost of offshore wind development is too high
, but I think it's a simple matter of milking old technology for the most profits before embracing new ideas.
While Dominion whines that building two test turbines off the coast of Virginia Beach will be too costly at a price of up to $400M, another company is proposing to build new transmission to bring Midwest wind energy to coastal cities at a cost of $8.5B. Yup, that's billion.
Something doesn't make sense here. Let's crack this nut.
Energy flows from west to east in PJM based on history. Over the past 100 years, Ohio Valley coal producers have been only too eager to plunder Appalachian states for their natural resources for benefit of those eastern metropolises. The coal was mined and burned in the Ohio Valley, while the electricity produced was shipped east via gigantic transmission lines. It worked because powerful interests in the Ohio Valley were happy to destroy local environments in exchange for the economic benefits of serving as an "energy exporter." The eastern cities got the benefit of "cheap" Appalachian energy, without having any of the pollution or environmental destruction in their own backyard. And they liked it. And they got used to it. And they expect it. But, the times... they are a'changing.
Coal is no longer king. Eastern cities are clamoring for "renewable" energy. And while entrenched interests like Dominion cling to dirty energy sources in order to milk every last dime from them, other powerful interests have set their sights on the Midwest as a new source of energy exports. There's money to be made hyping America's breadbasket as "the Saudi Arabia of wind" and building billions of dollars worth of new infrastructure to continue the status quo of west to east power flows.
But, unlike the Appalachia of 100 years ago, Midwestern landowners are having none of the sacrifice that goes along with being energy exporters. While a handful may be content to voluntarily lease land for wind turbines and collect royalties, the vast majority will not gladly sacrifice their homes and businesses to host gigantic new "energy highways" to ship electricity thousands of miles to eastern states like Virginia. These businessmen and women realize there's nothing in it for them, as "market value" payments for easements through their food factories do not adequately compensate for loss of production. Adding insult to injury, while land leases for wind farms are voluntary (and subject to free market negotiation), easement purchases for transmission lines are proposed to be involuntarily accomplished through eminent domain. Landowners are faced with voluntarily jumping off a cliff before they are pushed over the edge. This isn't a choice, and "market value" has little meaning when there is no choice. There is no "market" for involuntary land sales.
You simply cannot continue the west to east energy flow status quo, Virginia! It won't end up being "cheap" plowing through thousands of miles of productive farm land with new infrastructure in order to bring you "cheap" wind energy. The days of rural America to your west gladly sacrificing for your needs are over. If you want clean energy, make it yourself. Stop telling yourself that Midwest wind energy is your next Appalachia. It's just as expensive and it requires sacrifice from people who receive no benefit.
Instead, why not encourage Dominion (and their transmission minion, PJM) to develop the wind energy resources in your own neighborhood? The extensive transmission system required to transmit offshore wind energy to eastern cities is already in place, saving billions of dollars worth of new infrastructure. As well, a plan for an offshore transmission backbone to collect offshore wind energy and transmit it to shore at several crucial points has been in the works for years.
Stop drinking the industry koolaid that convinces you that you're helpless, Virginia. Create your own vibrant energy future in your own backyard!
GBX is asking for a back-up plan for its field of dreams approach to recovering costs, by coming back to the Commission to comply with the financing condition proposed in the Final Order.
GBE does not have the capacity to manage and supervise construction of the project, nor the ability to finance it. Farm Bureau contends that issuance of the CPCN is premature. It also believes that the actions of the Missouri PSC make GBE moot.
As the Farm Bureau previously argued before this Commission, the denial of GBX’s Application by the MPSC, along with the recent Circuit Court of Caldwell County Order which held that GBX has no authority to construct the proposed line through Caldwell County, Missouri, there will be no construction in Illinois by GBX due to the denials in Missouri. This Commission should consider additional evidence on this issue which occurred after the close of the evidentiary hearings, as described in Exhibit A, the Affidavit of Paul A. Agathen, a Missouri attorney who represents the Missouri Landowners Alliance (“MLA”). The Final Order erred on this issue. Thus, the Commission should rehear this issue.
The Illinois Landowners Alliance
request parallels the Farm Bureau's, and adds that the Commission erred in its finding that GBE would promote the public convenience and necessity and promote the development of a competitive electricity market. It also contends that the permit will "create an immediate cloud and deprivation of property rights which the landowners along the 200-mile route would experience for an unknown period of time."
Grain Belt whines that the Commission made an error when it said, "The Commission finds that GBX has not demonstrated that the Project is needed to provide adequate, reliable, and efficient service to customers within the meaning of Section 8-406.1." Sounds good to me! What's not to like? GBE also gets its panties in a wad over the fact that the Order did not specifically mention the 345-kV facilities running from the converter station to the substation in Indiana.
But... I've saved the best for last. Read this one slowly and savor it like a tasty after dinner mint. The request for rehearing of Mary Ellen Zotos is a knowledgeable, entertaining look at the bald truth of GBE and points out all that is plainly ridiculous about GBE and the ICC's Order. This attorney is awesome! What separates a good attorney from a great attorney his command of written language, and this request contains enough zingers and snark to fuel a thousand anti-Clean Line Facebook posts. Here's just a few snippets:
The record in this docket is devoid of any evidence that the Project would promote the convenience or necessity of anyone other than GBX and certain West Kansas wind developers who said they would use the Project if it ever gets built.
Boiled down, GBX merely asserts that a beneficial project like the Project is needed. Why is it needed? Because it is so beneficial. GBX’s argument that a need for the project exists based on a set of alleged benefits amounts to question-begging on a grand scale. GBX assumes what the Commission should require it to prove. Rather than focus on whether there is any need for the project, GBX jumps right into a show-and-tell on how beneficial the Project will be. The Commission concludes from this that a project with this many benefits must be needed.
Stated another way, the Commission fails to distinguish a benefit from a need. It merely accepts GBX’s catalog of purported benefits as proof of need. Under the Commission’s look-only-at-the-benefits logic, it could just as easily conclude that residents of Point Barrow, Alaska need Frigidaires.
...the Illinois RPS may be satisfied by buying RECs generated in GBX’s targeted west Kansas resource area, and those west Kansas-generated RECs can be purchased without having to build a $2,750,000,000 transmission line across four states.
...the GBX Project is “[l]ike that old 1970s song about Oz and the Tin Man, [because GBX] will give nothing to PJM that it doesn’t already have.”
While the Commission makes soothing noises that it takes seriously the landowners’ concerns about GBX’s ability to use the power of eminent domain against them, it immediately and blatantly contradicts itself by dismissing their concerns as unwarranted because GBX has not specifically requested eminent domain authority in this docket. Less than a moment’s thought suffices to show the absurdity of the Commission’s position on this issue. If GBX is granted a CPCN it could ultimately use the power of eminent domain against landowners under Section 8-509.
Instead of coming to grips with the power of eminent domain as an integral component of public utility easement acquisitions, the Commission adopts the Pollyanna Principle and accepts at face value GBX’s well-oiled talking points about its voluntary “code of conduct” when dealing with landowners, its promises of respectful treatment, its commitment to negotiate reasonably, and so forth. For the Commission to completely discount the potential impact of eminent domain on landowners simply because GBX did not ask for it in this docket is arbitrary and capricious, and an utter abdication of the Commission’s duty to Illinois citizens.
The Commission’s attitude toward GBX is one of serene and nearly limitless benevolence: whatever GBX can’t do now, it can certainly do later. The Commission will grant GBX its CPCN here and now even though it can’t satisfy most of the requirements of Section 8-406.1 until some unknown point in the future.
But when the landowners raise the issue of GBX’s potential future use of the power of eminent domain against them, which the Commission knows full well inheres in every easement negotiation between GBX and a landowner, the Commission summarily dismisses their concerns as premature because GBX hasn’t asked for eminent domain power here and now, in this docket. In this the Commission subjects the landowners to an egregious double standard, and indulges itself in arbitrariness and caprice of the grossest sort.
GBX’s least cost argument thus rests entirely on its claim that it has no alternative but to be least cost because its entire corporate existence will be some kind of Darwinian
market struggle where only the fittest survive.
The unmistakable irony here is that GBX destroys its own claim to be least cost by asserting that it can exempt itself from those same inexorable free market forces if the going gets tough: GBX reserves to itself the right to seek cost allocation to ratepayers, and in so doing proves itself just another corporate dissembler trying to evade committing itself irrevocably to the ups and downs of the market. And if there are too many downs, the ratepayers can bail GBX out.
But in this docket GBX tells the Commission that it is a “merchant transmission owner” not because it has assumed the full market risk of the Project, but because it plans to earn revenues through discrete transmission services contracts with shippers. This definition of “merchant” transmission owner” appears nowhere in FERC’s orders. That’s because it is a definition concocted entirely by GBX itself, and it differs fundamentally from FERC’s.
Understanding the term “assumption of all market risk” does not require a degree in economics: an assumption of all market risk means exactly that, all market risk, come Hell or high water.
This Commission has no jurisdiction to determine whether or how much of an interstate transmission operator’s costs may be recovered from anyone. The rates, terms and conditions of service for interstate transmission are exclusively matters of federal jurisdiction.
...GBX has no power to confer on this Commission subject matter jurisdiction over the rates, terms and conditions of service on interstate transmission facilities.
If GBX were really a “merchant” transmission owner as defined by FERC, then there would be no questions concerning cost allocation,
and this entire discussion would be unnecessary. GBX simply wants to have it both ways, eating its free market cake while having its cost allocation too.
I hope you enjoyed that as much as I did! The attorney who wrote it, Paul Neilan, also writes a blog
. If you enjoyed that filing, you'll probably enjoy the blog as well.
The ICC now has 20 days to consider the requests and make a decision to either rehear the case or deny the requests. If the Commission denies the requests, the litigants can proceed to court appeals.
Things are definitely heating up in Illinois! More fun to come!
The Federal Energy Regulatory Commission has added reconsideration of PATH's request for rehearing of the Commission's denial of its RTO membership incentive adder
to the agenda of its monthly meeting scheduled for Thursday
It's been so long since the Commission granted rehearing on this limited matter, it's been nearly forgotten in the ensuing shuffle.
At issue is PATH's request to continue to collect a half a percent of extra incentive return on equity for its membership in PJM Interconnection. When the Commission granted PATH a whole bunch of incentives back in 2008, it also granted it an additional 50 basis points for joining PJM. PATH proposed that it be allowed to continue to collect this incentive after it abandoned the PATH project, by continuing its membership in PJM until it had finished collecting its abandoned plant.
The Joint Consumer Advocates answered PATH's request for rehearing, and pointed out that the stated purpose of section 219 is to provide incentive-based rate treatments that benefit consumers by ensuring reliability and reducing the cost of delivered power. The PATH project has not benefited consumers by ensuring reliability because it was never built. And it certainly never reduced the cost of delivered power. Quite to the contrary, PATH increased the cost of delivered power by leaving ratepayers on the hook for its $121M of development costs even though it never even put a shovel in the ground.
In other words, even though PATH will never be built, and the PATH companies will cease to exist as soon as their abandoned plant is collected from ratepayers, PATH wants to be financially rewarded for continuing its pointless membership in PJM. A membership in PJM allows the member to participate in the PJM transmission planning process. Since PATH won't be built, and since the PATH companies were single purpose entities that will never plan or build another transmission project, what's the point of their continued membership in PJM?
I think the point is to continue to collect an additional half a percentage point of return (or interest) on the slowly dwindling $121M abandoned plant balance that PJM ratepayers must pay for.
It will be interesting to see what the Commission does to dispose of this matter.
Have you been paying attention to FirstEnergy's backroom deal charlie foxtrot in Ohio?
The company has proposed to regulators that Ohioans be forced to buy all the power produced at its unregulated ("competitive") Davis-Besse nuclear and Sammis coal-fired power plants at a fixed price that guarantees FirstEnergy a profit, and then sell the power into the PJM electric market. The impetus here is that power prices in the PJM market have been low. Competition was working to save ratepayers money! However, competition wasn't making FirstEnergy enough money, so FirstEnergy has been busy stashing its competitive generators into state regulated environments where the company could be guaranteed a certain profit. Have no doubt that once power prices recover and FirstEnergy has a chance to make more money competing to serve customers, that it will find a way to once again deregulate these power plants and keep the profits.
In addition to the current Ohio fiasco, FirstEnergy's competitive arm successfully "sold" its Harrison power station to regulated West Virginia customers several years ago at a huge profit. The ratepayers will hold the losses from the cost of operating this plant until such time as it once again starts generating a profit. Then FirstEnergy will probably propose to sell it back to itself at another huge profit. Although the West Virginia plan was hotly contested, all the opponents (except for the West Virginia Citizens Action Group) folded at settlement, content to accept cheap gifts in exchange for their support of the sale.
Not so in Ohio. The opponents are sticking to their guns and have rejected a backroom settlement deal crafted between FirstEnergy and the staff of the Public Utilities Commission of Ohio. Not that FirstEnergy cares... it's content to reach a settlement with a few parties who appreciate their cheap parting gifts. Whatever it takes to secure FirstEnergy's profits in a noncompetitive environment.
When will this nonsense end? Along with a plethora of stories about the deal (here and here, for example) came another story about FirstEnergy's stock price going up... directly tied to the backroom settlement:
The purchase power agreement (PPA) [with Public Utilities Commission of Ohio] was the last missing piece: balance sheet shored up; equity overhang removed — we see no more surprises for investors.
So, it's more important to protect investors with continued stock dividends than it is to protect the customers who need a public service?
"FirstEnergy’s proposal will put safeguards in place to protect our customers from increased price volatility that’s expected to occur in the years ahead," said Doug Colafella, a company spokesman.
Oh, really? I suppose the stock price increase and urge to buy FirstEnergy is just unrelated serendipity? What a shyster!
FirstEnergy's plan is to remove any threat of competition to its generating plants, ensuring they can thrive in a lower-priced market by using captive ratepayers to provide market power through subsidies.
... other utilities will want profit guarantees in Ohio and in neighboring states. This, in turn, will undermine a competitive market in which many companies do not have the resources to secure government help the way that FirstEnergy does.
Independent power companies competing against FirstEnergy for customers in Ohio and throughout the 13-state region where high-voltage transmission lines are controlled by PJM Interconnection are not asking for special deals like FirstEnergy is, said Glen Thomas, president of PJM Power Providers Group.
"Our members are competing to provide the most efficient and economic power to consumers in Ohio as possible. We oppose this deal. We see it as destroying all the benefits Ohio has gained from competitive markets.
"By going down a road where you subsidize plants that are not able to compete economically with other plants, you crowd out these economic advantages as well as send a terrible signal to the market that the best way ... is not to operate at most efficient levels but to seek a bail out from the PUCO."
But, wait a sec... I thought PJM's power markets were "competitive." Market Monitor Finds PJM Wholesale Electricity Markets Competitive
. Is the Market Monitor paying any attention to what's going on with FirstEnergy's noncompetitive stashing of its competitive generators into regulated environments in order to gain advantage over competing generators? Or is it too busy trying to claw back payments its stupidly designed markets made to some trader foxes, while ignoring the noncompetitive behavior of certain chickens in its market hen house?
This whole debacle is a lesson in the stupidity of allowing for-profit companies to provide a necessary public service in a monopoly market. Because investor profit that powers big salaries and sweet perks for utility executives will ALWAYS outweigh any obligation to customers. And big utility profits fuel backroom deals like the one proposed in Ohio.
I hope the Ohio opponents, such as Sierra Club, continue to call foul on this deal and don't knuckle under and give in like they did in West Virginia. Integrity is a valuable commodity in the market of real life.
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.
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.
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.
What's been happening in transmission news this week? The Virginian Pilot
took a look at Dominion's Skiffes Creek 500kV transmission project... and it sort of looks like the project itself is up the creek. Dominion has lots of excuses for why it needs to build a ginormous transmission line across the James River, but none of them are exactly logical. Skiffes Creek is not really the only option to ensure reliability, it's just the one that regional grid planner PJM Interconnection approved a long time ago in an uncompetitive environment. If the transmission project is not approved by the U.S. Army Corps of Engineers, then PJM will have to go back to the drawing board and re-engineer another solution to what it views as a reliability problem.
Gotta wonder... if this problem was put out for bid in PJM's new competitive transmission process, would other companies have better solutions? Solutions that solve the problem without creating an eyesore and river hazard of an aerial crossing of the James River? Probably.
Dominion contends that the technology doesn't exist to run a reliable line of the caliber and kind needed under 4 miles of riverbed - at least not without a price tag in the billions.
Oh, baloney, Dominion! Take a look at the Artificial Island project
that is proposed to cross underneath the Delaware River just a couple states to the North. When transmission solutions are evaluated in a competitive environment, a submarine crossing suddenly becomes viable, not only from a cost standpoint, but also with an eye toward "constructability," a measure of the ease of getting a project approved and constructed with minimal opposition. In the case of the Artificial Island project, PJM ultimately selected a proposal by LS Power that uses a 3.5 mile submarine crossing of the river in which the company capped its construction costs
. Dominion needs to re-evaluate its submarine options.
The Skiffes Creek project is a cash cow for incumbent utility Dominion. Under PJM's old, pre FERC Order No. 1000 transmission project selection process, the incumbent was allowed to propose all solutions. The incumbent could propose only those solutions that would provide a healthy shot to its balance sheet. FERC recognized that this process didn't necessarily inspire the best and cheapest solutions and has revolutionized the way regional grid planners select new transmission projects.
Dominion tries to hide behind an aura of concern for ratepayer issues.
Curtis said the Skiffes over-the-river plan, at $60 million, is indeed on the lower cost end of the dozens of routes and options the company considered. Whatever the expense, though, customers will reimburse Dominion. Rate hikes are automatically allowed for utilities that build infrastructure to strengthen the grid.
"So these are rate-payer dollars, not Dominion dollars," Curtis said. "But the opposition is still committed to the conspiracy theory."
Curtis tells only part of the truth here. The part he leaves out is that Dominion will be earning a double-digit return on its $60M investment in the project over its useful life of approximately 40 years. The more the project costs, the more Dominion makes in pure profit. Dominion is hardly agnostic about ratepayer costs. Also, if Dominion had to compete to build this reliability solution, it would face giving up this potential profit entirely to another company with a cheaper, less intrusive proposal. There IS a conspiracy... because the investment is Dominion's dollars, not ratepayer dollars. And Dominion earns a healthy return on every dollar it invests in this project.
So, are there other solutions? Opponents accuse Dominion of not examining and considering all options.
"What's frustrating is that people think we're being disingenuous," Curtis said. "They don't believe we've looked at all the alternatives, or they think we're only concerned about making the most money for our shareholders."
The article reveals
Several lines already feed outside power to the Peninsula, but it won't be enough without the Yorktown plant, which Dominion says is too costly to upgrade in the face of new federal clean-air standards.
Did Dominion consider upgrading and rebuilding the existing lines to increase capacity before settling on an entirely new transmission line? C'mon, Dominion, you're no stranger to this plan... after all, your plan to rebuild the 500kV Mt. Storm-Doubs transmission line to increase its capacity is what killed the entirely new 300-mile PATH transmission line. Or are much cheaper rebuilds only considered when Dominion finds itself in a competitive environment?
How much time and money will Dominion's effort to keep itself from being propelled "up the creek" with Skiffes Creek cost ratepayers? Dominion's blind pursuit of this project in the face of better alternatives is what may cause "rolling blackouts" on the peninsula. The longer Dominion delays by backing a lame horse, the closer the peninsula gets to a genuine reliability issue. Get with it, Dominion, and switch to a solution that everyone can agree upon. Don't you have a legal obligation to keep the lights on? Or only one to increase shareholder dividends every quarter?