Parties had 30 days to file requests for rehearing on FERC's March 30 Order on Remand reaffirming that PJM's "Postage Stamp" rates for transmission lines 500kV or greater are just and reasonable. Several parties filed requests, and I've just now managed to plow through them all.
The Illinois Commerce Commission is the winner for style. In addition to pointing out the reasons why FERC's Order fails to meet the 7th Circuit's standard of showing benefit commensurate with costs, ICC adds so many zingers, it's like a treasure hunt. "The Commission’s statement in this regard calls to mind the story of the fellow with one arm in the freezer and one arm in the oven who, on average, was quite comfortable." or "In making that statement, the Commission shows mastery in the art of understatement."
ICC points out that the 500kV lines (TrAIL, PATH, MAPP and Susquehanna-Roseland -- the Project Mountaineer collection) were designed to alleviate reliability violations in eastern PJM (New Jersey, eastern Pennsylvania, eastern Maryland, Delaware, Northern Virginia) caused by this area's demand for imported electricity. In addition, these projects were touted to reduce economic congestion and cause a drop in electricity prices in eastern PJM. They also get pretty tweaked about those PJM "positive externalities" that the Commission used to attempt to show benefit to western PJM flowing from their membership in PJM. ICC pointed out that the PJM report cited was not properly brought into evidence and that the report is highly disputed. It's apparently just some PJM fluff they issue every year to justify their miserable existence. At any rate, the "benefits" of PJM membership flow from PJM itself, and not from the 500kV lines. In other words, western PJM would receive those "benefits" whether the lines were constructed or not. They also took issue with the Commission's redefinition of what is east and what is west by including West Virginia in western PJM in order to show that PATH and TrAIL were providing some benefit to western PJM. West Virginia was never the intended "beneficiary" of those transmission projects, just the victim.
"Clearly, the Commission’s re-definition of “western PJM” is nonsense and the purpose of that re-definition is to obscure and mislead regarding the extent that true Midwestern utilities benefit from the 500 kV and above transmission lines planned and built in eastern PJM. Notably, using the Commission’s creative new definition of western PJM, the Commission designates significant 500 KV projects such as TrAIL and PATH as being at least partially located in “western PJM”, particularly noting the State of West Virginia as being in western PJM. The Commission states that TrAIL and PATH, which are both major 500 kV and above projects, “were approved to be located in western PJM, and to address reliability violations in western PJM.” Once again, the Commission particularly cites the state of West Virginia as being in western PJM."
Also be sure to read Bill's post about the history behind postage stamp rates and his take on the ICC filing.
Dayton Power & Light's filing has to be the substance winner. Although it's 150 pages, their filing provides documentation of all points raised, ad nauseam! If you like references and statistics, this is a great read! DPL's filing starts out with this great quote that they attribute to Everett Dirksen, Senator from Illinois"
"A billion here and a billion there and pretty soon you are talking about real money."
In addition to fleshing out and backing up ICC's points, DPL spends ink pointing out the true beneficiaries of Project Mountaineer's transmission projects.
"Even the two transmission lines that start in western Pennsylvania or central West Virginia to points east were not proposed by PJM to resolve any reliability problems within West Virginia or western Pennsylvania."
They also provide granularity* on the congestion costs argument. When construction of transmission lines cause lower prices on the east coast, they also cause the equal and opposite reaction of causing higher prices in the west, where the transmission line originates. This is undisputed fact. Here are the benefits received by eastern PJM from Project Mountaineer: increased reliability, lower prices, and only a fraction of the costs of the transmission project. In addition, DPL turns one of FERC's arguments about "benefits" received by western PJM on its head. The supposed "benefits" to the western "generation" area all flow to the utilities owning generation and transmission, and not to the ratepayers!
DPL has great statistics, for instance:
"...the TrAIL line alone (already built and in-service) provides Pepco (D.C. and Maryland) and BG&E (Maryland) annual benefits in the form of lower energy costs in excess of $100 million. PSEG in New Jersey receives an estimated $99 million annually, and the big winner is Dominion Resources in Virginia with annual LMP savings of $835 million. The PATH line (currently delayed) provides the same pattern of benefits, again with Dominion Resources, Pepco and BG&E receiving more than $100 million annually in a reduced LMP benefit."
Here's a breakdown of an analysis of the cost of the Susquehanna-Roseland Project (and the exhibits do a similar job on all 4 Project Mountaineer projects):
"PJM analyses identified numerous overloads on critical 230 kV circuits across Eastern Pennsylvania and Northern New Jersey and the proposed fix to the problem was the $1.161 billion Susquehanna-Roseland new 500 kV transmission line to be built from eastern Pennsylvania into New Jersey. Significantly, application of the DFAX methodology would result in virtually all
the costs of the line being allocated to New Jersey utilities and eastern Pennsylvania utilities operating directly across the river from New Jersey. Eight variations of a DFAX analysis were presented in this proceeding for this project using different time periods or other different assumptions, including multiple scenarios submitted by a witness opposed to the DFAX method. Under each analysis, 92% to 99% of the load on the facility that was overloaded and created the reliability problem came from the same eastern utilities that then would be assigned between 92% and 99% of the costs of the solution.
Consider again the $1.161 billion Susquehanna-Roseland new transmission line. Socialization would result in the eastern Pennsylvania and northern New Jersey zones paying only 23% of the costs, while the rest of PJM would assume 77% of the costs."
And, just one of many comparisons in the data:
"Under socialization, PSEG‘s shareholders and/or customers pay only $12.6 million of the annual costs, but enjoy $31 million per year in energy savings..."
DPL also points out another eastern PJM benefit -- incentive rates of return (which FERC granted in part because of congestion cost reductions) that flow only to the utilities constructing these transmission projects.
The Captain Obvious award still sits on a shelf, however, because nobody pointed out how socialization of costs region-wide skews PJM's markets in favor of incumbent generators. When an eastern PJM state, say for instance New Jersey, has reliability issues that need to be solved, the violations can be solved any of three ways: increased transmission, increased generation near load, or load reduction. Load reduction is the cheapest option, but is never PJM's choice to solve violations. Increased generation will be paid for only by local load that benefits from it, making it the most expensive option. However, new transmission lines will be paid for by the entire region, making local New Jersey costs for transmission less than building new generation. This skewing of PJM markets in favor of transmission, as the "cheaper" solution, favors incumbent generators, and as we all now know, PIG rules!
DPL also uses a creative argument I know all you readers of this blog and TPL have heard a thousand times before. Referencing the recommendations in the official report on the 2003 blackout, DPL points out:
"Not one of those 46 recommendations was to build new high-voltage transmission lines. The Joint Task Force
Report did not conclude, for example, that more high voltage lines should be constructed in Ohio, Michigan, Ontario or New York or eastern PJM (or within any PJM zone) to prevent future cascades."
PJM's (and their "pigs") plan to build new transmission lines to transport 5,000 MW of coal-fired electric power to the east coast provides no benefits to the state of West Virginia and in fact causes higher electricity prices, additional destruction of the environment and a higher than warranted share of the cost of the transmission projects. Any "benefits" FERC proffered flow only to the utilities, such as increased generation, increased sale of power, transmission line return on equity incentives and ownership of the transmission lines. No benefits derived from the building of new transmission lines are enjoyed by West Virginia's electric consumers!
Now the ball is back in FERC's court. Will they man up and reconsider what was a bad decision, or would they rather be embarrassed before the 7th Circuit again? Keep watching this one!
*stupid business buzzword I despise
The Illinois Commerce Commission is the winner for style. In addition to pointing out the reasons why FERC's Order fails to meet the 7th Circuit's standard of showing benefit commensurate with costs, ICC adds so many zingers, it's like a treasure hunt. "The Commission’s statement in this regard calls to mind the story of the fellow with one arm in the freezer and one arm in the oven who, on average, was quite comfortable." or "In making that statement, the Commission shows mastery in the art of understatement."
ICC points out that the 500kV lines (TrAIL, PATH, MAPP and Susquehanna-Roseland -- the Project Mountaineer collection) were designed to alleviate reliability violations in eastern PJM (New Jersey, eastern Pennsylvania, eastern Maryland, Delaware, Northern Virginia) caused by this area's demand for imported electricity. In addition, these projects were touted to reduce economic congestion and cause a drop in electricity prices in eastern PJM. They also get pretty tweaked about those PJM "positive externalities" that the Commission used to attempt to show benefit to western PJM flowing from their membership in PJM. ICC pointed out that the PJM report cited was not properly brought into evidence and that the report is highly disputed. It's apparently just some PJM fluff they issue every year to justify their miserable existence. At any rate, the "benefits" of PJM membership flow from PJM itself, and not from the 500kV lines. In other words, western PJM would receive those "benefits" whether the lines were constructed or not. They also took issue with the Commission's redefinition of what is east and what is west by including West Virginia in western PJM in order to show that PATH and TrAIL were providing some benefit to western PJM. West Virginia was never the intended "beneficiary" of those transmission projects, just the victim.
"Clearly, the Commission’s re-definition of “western PJM” is nonsense and the purpose of that re-definition is to obscure and mislead regarding the extent that true Midwestern utilities benefit from the 500 kV and above transmission lines planned and built in eastern PJM. Notably, using the Commission’s creative new definition of western PJM, the Commission designates significant 500 KV projects such as TrAIL and PATH as being at least partially located in “western PJM”, particularly noting the State of West Virginia as being in western PJM. The Commission states that TrAIL and PATH, which are both major 500 kV and above projects, “were approved to be located in western PJM, and to address reliability violations in western PJM.” Once again, the Commission particularly cites the state of West Virginia as being in western PJM."
Also be sure to read Bill's post about the history behind postage stamp rates and his take on the ICC filing.
Dayton Power & Light's filing has to be the substance winner. Although it's 150 pages, their filing provides documentation of all points raised, ad nauseam! If you like references and statistics, this is a great read! DPL's filing starts out with this great quote that they attribute to Everett Dirksen, Senator from Illinois"
"A billion here and a billion there and pretty soon you are talking about real money."
In addition to fleshing out and backing up ICC's points, DPL spends ink pointing out the true beneficiaries of Project Mountaineer's transmission projects.
"Even the two transmission lines that start in western Pennsylvania or central West Virginia to points east were not proposed by PJM to resolve any reliability problems within West Virginia or western Pennsylvania."
They also provide granularity* on the congestion costs argument. When construction of transmission lines cause lower prices on the east coast, they also cause the equal and opposite reaction of causing higher prices in the west, where the transmission line originates. This is undisputed fact. Here are the benefits received by eastern PJM from Project Mountaineer: increased reliability, lower prices, and only a fraction of the costs of the transmission project. In addition, DPL turns one of FERC's arguments about "benefits" received by western PJM on its head. The supposed "benefits" to the western "generation" area all flow to the utilities owning generation and transmission, and not to the ratepayers!
DPL has great statistics, for instance:
"...the TrAIL line alone (already built and in-service) provides Pepco (D.C. and Maryland) and BG&E (Maryland) annual benefits in the form of lower energy costs in excess of $100 million. PSEG in New Jersey receives an estimated $99 million annually, and the big winner is Dominion Resources in Virginia with annual LMP savings of $835 million. The PATH line (currently delayed) provides the same pattern of benefits, again with Dominion Resources, Pepco and BG&E receiving more than $100 million annually in a reduced LMP benefit."
Here's a breakdown of an analysis of the cost of the Susquehanna-Roseland Project (and the exhibits do a similar job on all 4 Project Mountaineer projects):
"PJM analyses identified numerous overloads on critical 230 kV circuits across Eastern Pennsylvania and Northern New Jersey and the proposed fix to the problem was the $1.161 billion Susquehanna-Roseland new 500 kV transmission line to be built from eastern Pennsylvania into New Jersey. Significantly, application of the DFAX methodology would result in virtually all
the costs of the line being allocated to New Jersey utilities and eastern Pennsylvania utilities operating directly across the river from New Jersey. Eight variations of a DFAX analysis were presented in this proceeding for this project using different time periods or other different assumptions, including multiple scenarios submitted by a witness opposed to the DFAX method. Under each analysis, 92% to 99% of the load on the facility that was overloaded and created the reliability problem came from the same eastern utilities that then would be assigned between 92% and 99% of the costs of the solution.
Consider again the $1.161 billion Susquehanna-Roseland new transmission line. Socialization would result in the eastern Pennsylvania and northern New Jersey zones paying only 23% of the costs, while the rest of PJM would assume 77% of the costs."
And, just one of many comparisons in the data:
"Under socialization, PSEG‘s shareholders and/or customers pay only $12.6 million of the annual costs, but enjoy $31 million per year in energy savings..."
DPL also points out another eastern PJM benefit -- incentive rates of return (which FERC granted in part because of congestion cost reductions) that flow only to the utilities constructing these transmission projects.
The Captain Obvious award still sits on a shelf, however, because nobody pointed out how socialization of costs region-wide skews PJM's markets in favor of incumbent generators. When an eastern PJM state, say for instance New Jersey, has reliability issues that need to be solved, the violations can be solved any of three ways: increased transmission, increased generation near load, or load reduction. Load reduction is the cheapest option, but is never PJM's choice to solve violations. Increased generation will be paid for only by local load that benefits from it, making it the most expensive option. However, new transmission lines will be paid for by the entire region, making local New Jersey costs for transmission less than building new generation. This skewing of PJM markets in favor of transmission, as the "cheaper" solution, favors incumbent generators, and as we all now know, PIG rules!
DPL also uses a creative argument I know all you readers of this blog and TPL have heard a thousand times before. Referencing the recommendations in the official report on the 2003 blackout, DPL points out:
"Not one of those 46 recommendations was to build new high-voltage transmission lines. The Joint Task Force
Report did not conclude, for example, that more high voltage lines should be constructed in Ohio, Michigan, Ontario or New York or eastern PJM (or within any PJM zone) to prevent future cascades."
PJM's (and their "pigs") plan to build new transmission lines to transport 5,000 MW of coal-fired electric power to the east coast provides no benefits to the state of West Virginia and in fact causes higher electricity prices, additional destruction of the environment and a higher than warranted share of the cost of the transmission projects. Any "benefits" FERC proffered flow only to the utilities, such as increased generation, increased sale of power, transmission line return on equity incentives and ownership of the transmission lines. No benefits derived from the building of new transmission lines are enjoyed by West Virginia's electric consumers!
Now the ball is back in FERC's court. Will they man up and reconsider what was a bad decision, or would they rather be embarrassed before the 7th Circuit again? Keep watching this one!
*stupid business buzzword I despise
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