A Missouri PSC Commissioner, Jeff Davis, gives his opinion of FERC's all-you-can-eat cash buffet for transmission developers in industry rag Transmission & Distribution World (how's that for some fun reading?) He's got it exactly right and it lays bare the underlying motivation behind PATH and other unneeded transmission projects. It's all about the money, boys!
PATH is riding along on an abundant gravy train, courtesy of you! All their "prudently incurred construction and development costs" are recovered from you as they are incurred. This expense is in your electric bill every month, if you're one of the 51-million electric customers in PJM's 13-state region. They also make a hefty profit, which is where that 14.3% ROE comes in. The power companies have all their costs covered, they even make a profit on the recovered costs, and they get to sell more of their filthy coal-fired electricity to the east coast population centers. The costs are "socialized" (paid for by electric customers) while the profits are "privatized" (they go in the pockets of Allegheny Energy, AEP, their super-rich CEOs, investors and shareholders).
Davis puts it like this, "FERC's repudiation of the “beneficiaries pay” doctrine along with all the “candy” incentives they are offering have created a modern-day gold rush to the transmission sector. Unfortunately, all the gold in this mine winds up in the hands of the transmission owners who get paid handsomely to build assets they end up owning. Consumers won't even realize they have gotten “the shaft” until a few years from now when their electric bills start going up to pay for these projects. The more these projects get rolled into rates, the madder those consumers are going to get. And who can blame them? If FERC has its way, we'll all be spending the next 30 years depositing our gold into someone else's mine. All we get is the shaft."
Couple of points: this isn't happening "a few years from now" here in PJM territory, it's happening NOW, and many consumers are still blissfully unaware of why their electric bills keep going up quite mysteriously. It's courtesy of PATH, TrAIL, Susquehanna-Roseland and other gravy train "backbone" transmission projects. Also, I'm not sure where he got the figure of "30 years", but you're going to be paying for PATH forever. The land and land rights they are purchasing and stuffing in the ratebase NEVER depreciate, so you'll be paying a return (that 14.3% ROE) on them into eternity.
Think if PATH is halted we'll all get our money back? No, PATH has been awarded the ability to recover all their costs in the event that a project is abandoned due to circumstances beyond their control. It's not quite as simple as that though, and remains to be tested. I think PATH should pony-up and become the test case, don't you? There's a whole bunch of hoops they'll have to jump through at FERC, and with their accounting problems hanging off their ankles like lead weights, I don't think they'll be jumping too sprightly. What fun!
Another important quote: "More importantly, there's no accounting for what will happen to customers' bills when it comes time to calculate all of the incentives with interest, taxes, depreciation and amortization." Precisely! This is what puts lie to PATH's $2.1 billion cost estimate. Their "estimate" (which is probably as phony as a three dollar bill anyhow) doesn't take any of these costs into account. The real price tag for PATH is going to be astronomical if we don't put paid to this nonsense now.
And last, but certainly not least, there's this: "Transmission builders can get 100% of their costs capitalized, guaranteed cost recovery for pretty much all their expenses, little or no regulatory oversight on costs and cost-overruns, as well as a hypothetical capital structure to combine with a 13% to 14% return on equity for their projects." While he's right that there is little or no regulatory oversight on costs and cost-overruns (as long as the utility fills out the forms properly and submits them on time, nobody at FERC pays attention), there is also a necessary public oversight provision in the tariff used to recover these costs. Any "interested party" (meaning you customers) can utilize an existing discovery and challenge procedure to get inside the utility's accounting and protest this unbridled spending spree. In fact, it's already happened to PATH, and what we found when we started getting data was a stunning display of bad accounting practice and imprudent expenditures. PATH has a lot to answer for before FERC.
Familiarize yourself with the process now -- keeping these utilities honest with your money is nobody's job but your own. Sad but true.