Whoopie de doo... the Maryland PSC couldn't wait any longer to get rid of the Transource issue, so it tossed Western Maryland under the bus and suspended disbelief long enough to approve the settlement Transource reached with state agencies and intervening landowner groups. The lone opponent of the settlement agreement, Maryland's Office of Peoples Counsel, got kicked under the bus, too. Think about that one... the only party to the case representing the interests of all Maryland's electric consumers got kicked under the bus in favor of the interests of state agencies and a small community of landowners.
Of course, the PSC was decidedly dismissive of the landowners as well. The PSC found that it could reject certain portions of the settlement agreement, while still approving the agreement. The agreement was written to be whole... removal of any portion of the agreement voids the agreement. However the PSC says it is only rejecting those provisions, not disapproving them. Sounds like a bunch of weasel words to me.
The portion of the settlement agreement that the PSC rejected, of course, was the agreement that Transource would reimburse citizen groups and individual citizen intervenors for a portion of their legal costs. The PSC is not taking a position on this, therefore the PSC is not going to enforce that portion of the settlement agreement. What if Transource weasels out of paying? If they don't pay, the citizen groups can spend even more money taking Transource to court. Transource, for its part, should think long and hard about trying to include these costs in rates. The PSC approved the project without those provisions, therefore it would be pretty hard to argue that they are a necessary cost of constructing the project that should be paid for by ratepayers.
Of course, the PSC was decidedly dismissive of the landowners as well. The PSC found that it could reject certain portions of the settlement agreement, while still approving the agreement. The agreement was written to be whole... removal of any portion of the agreement voids the agreement. However the PSC says it is only rejecting those provisions, not disapproving them. Sounds like a bunch of weasel words to me.
The portion of the settlement agreement that the PSC rejected, of course, was the agreement that Transource would reimburse citizen groups and individual citizen intervenors for a portion of their legal costs. The PSC is not taking a position on this, therefore the PSC is not going to enforce that portion of the settlement agreement. What if Transource weasels out of paying? If they don't pay, the citizen groups can spend even more money taking Transource to court. Transource, for its part, should think long and hard about trying to include these costs in rates. The PSC approved the project without those provisions, therefore it would be pretty hard to argue that they are a necessary cost of constructing the project that should be paid for by ratepayers.
Maybe AEP can just deduct these costs from Hector's salary? Don't worry, Hector, your financial pain will be minimal when Pennsylvania doesn't approve the Transource project.
So, let's turn to Pennsylvania. Maryland obviously got tired of waiting for Pennsylvania to make a decision and decided to go first. Could Maryland's approval of Transource and dismissal of concerns about the western segment influence what Pennsylvania will do? Doubt it. Many moons ago, on a different transmission project, West Virginia permitted it first, and everyone believed Pennsylvania would have to approve it, too, just to align with West Virginia. But it didn't. The PA PUC administrative law judges recommended a denial. And the transmission company had to get on its knees and beg for a settlement that involved abandoning the vast majority of the project in Pennsylvania. What was eventually approved was something like 2 miles of line.
The people and governments of western Pennsylvania are still very much in opposition to the project. The longer segment of the Pennsylvania project is on the western side. In Maryland, all the opposition was on the eastern segment. In Pennsylvania, opposition has been about equal between east and west. However, the western opponents did not sign a settlement agreement because there was nothing in it for them. Transource has refused to make similar improvements to the western segment.
In addition, the Transource project will create a whole bunch of new costs for Pennsylvania electric consumers. In Maryland, the PSC dismissed new costs in one electric zone in favor of purported cost reductions in other zones. The MD PSC tossed Delmarva customers under the bus in order to create "savings" for customers elsewhere. It would be much harder for Pennsylvania to toss ALL its electric customers under the bus in order to create "savings" for electric customers in other states. Sounds pretty dumb when it's all boiled down, doesn't it?
But, hey, guess what? Transource cannot construct its project in Maryland until the Pennsylvania portion is approved.
So, let's turn to Pennsylvania. Maryland obviously got tired of waiting for Pennsylvania to make a decision and decided to go first. Could Maryland's approval of Transource and dismissal of concerns about the western segment influence what Pennsylvania will do? Doubt it. Many moons ago, on a different transmission project, West Virginia permitted it first, and everyone believed Pennsylvania would have to approve it, too, just to align with West Virginia. But it didn't. The PA PUC administrative law judges recommended a denial. And the transmission company had to get on its knees and beg for a settlement that involved abandoning the vast majority of the project in Pennsylvania. What was eventually approved was something like 2 miles of line.
The people and governments of western Pennsylvania are still very much in opposition to the project. The longer segment of the Pennsylvania project is on the western side. In Maryland, all the opposition was on the eastern segment. In Pennsylvania, opposition has been about equal between east and west. However, the western opponents did not sign a settlement agreement because there was nothing in it for them. Transource has refused to make similar improvements to the western segment.
In addition, the Transource project will create a whole bunch of new costs for Pennsylvania electric consumers. In Maryland, the PSC dismissed new costs in one electric zone in favor of purported cost reductions in other zones. The MD PSC tossed Delmarva customers under the bus in order to create "savings" for customers elsewhere. It would be much harder for Pennsylvania to toss ALL its electric customers under the bus in order to create "savings" for electric customers in other states. Sounds pretty dumb when it's all boiled down, doesn't it?
But, hey, guess what? Transource cannot construct its project in Maryland until the Pennsylvania portion is approved.
OPC also submits that the Project could be detrimental to Maryland customers if Transource does not also receive approval from the Pennsylvania commission (or the Project is otherwise abandoned by PJM) because, if so, Transource and BGE may be entitled to the recovery of prudently incurred abandonment costs. The issue of abandonment costs is an appreciable risk. Regarding the mitigation of such costs, in Case No. 9470—a separate but related CPCN proceeding—Potomac Edison, the applicant transmission owner, committed to limiting its construction costs, to the extent possible, pending the ultimate approval of the combined IEC Project in Maryland and in Pennsylvania. The Commission finds that a similar limitation under the circumstances is warranted. At the February Settlement Hearing, Transource witness Weber testified that Transource has incurred approximately $35 million to date, non-inclusive of Transource’s additional firm price contracts. Witness Weber stated that Transource would wait for approvals from both Maryland and Pennsylvania before beginning construction. The Commission will hold Transource to this commitment.
Wait for approvals from Pennsylvania before beginning construction. Got it? Of course, the Maryland PSC showed its
tendencies in the corresponding ordering paragraph.
That as an additional condition of the Commission’s approvals in this matter, Transource and BGE are directed to minimize all construction activities and additional construction-related costs, as they relate to the Maryland portions of the IEC Project, pending the regulatory approvals of Alternative Project 9A by the Pennsylvania Public Utility Commission and final approval by the PJM Board.
What's the difference between "beginning construction" and "minimizing construction"? Oh, probably another $35M or so. No big deal... you're going to pay for it, not Transource or the Maryland PSC Commissioners. What do they care about wasting your money?
So, what is up in Pennsylvania? The PA PUC issued a new schedule for evidentiary hearings on July 9 and 10. However, that is premised on the hearings being conducted via Skype. Franklin County and Stop Transource Franklin County have filed motions asking that the hearings be delayed until they could be held in person. Not everyone has access to computers and Skype (remember there are a lot of German Baptist "plain people" in Franklin Co.) and the issue of taking people's property using eminent domain requires in-person proceedings that everyone can understand and participate in. If this motion is granted, it could delay the PA PUC decision even more. Right now, they'd be lucky to have a decision by the end of the year. Who knows how much time would be added by waiting until it's safe to gather in person?
Whenever this hearing happens, it's going to get really interesting really quick. Stop Transource has a new witness for these hearings. Joe Bowring, PJM's Market Monitor, will be testifying on their behalf. The Market Monitor has been a long-time critic of PJM's Market Efficiency process, and apparently not a fan of the Transource project, either. STFC quotes this passage from the Market Monitor's most recent State of the Market report:
Whenever this hearing happens, it's going to get really interesting really quick. Stop Transource has a new witness for these hearings. Joe Bowring, PJM's Market Monitor, will be testifying on their behalf. The Market Monitor has been a long-time critic of PJM's Market Efficiency process, and apparently not a fan of the Transource project, either. STFC quotes this passage from the Market Monitor's most recent State of the Market report:
The Transource Project (Project 9A) is an example of a PJM approved market efficiency project that passed PJM’s 1.25 benefit/cost threshold test despite having benefits, if accurately calculated, that were less than forecasted costs. This project also illustrates the risks of ignoring potential cost increases given that the costs included in the benefit/cost calculation are nonbinding estimates. The Transource Project was proposed in PJM’s 2014/2015 RTEP long term window. PJM’s 2014/2015 RTEP long term window was the first market efficiency cycle under Order 1000. The 2014/2015 long term window was open from November 1, 2014, through February 28, 2015. This window accepted proposals to address historical congestion on 12 identified flowgates. The AP South Interface was one of the 12 identified flow gates listed in the 2014/15 RTEP Long Term Proposal Window Problem Statement.
A total of 41 market efficiency projects were proposed to address congestion on the AP South Transmission Interface. Transource Energy LLC, together with Dominion High Voltage, submitted a proposal referenced by PJM as Project 9A (or IEC or the Transource project) to address AP South related congestion.
Project 9A was considered a subregional project based on its voltage level, meaning that changes in forecasted system costs were not considered for purposes of estimating the benefit/cost ratios. Instead, only reductions in zonal load costs were considered as a benefit of the project. Any increases in zonal load costs were ignored in the analysis.
The initial study had a benefit to cost ratio of 2.48, with a capital cost of $340.6 million. The sum of the positive (energy cost reductions) effects was $1,188.07 million. The sum of negative effects (energy cost increases) was $851.67 million. The net actual benefit of the project in the study was therefore $336.40 million, not the $1,188.07 used in the study. Using the total benefits (positive and negative) to compare to the net present value of costs, the benefit to cost ratio was 0.70, not 2.48. The project should have been rejected on those grounds.
Subsequent studies of the 9A project have reduced its benefit/cost ratio as a result of increased costs, decreased congestion on the AP South Interface since 2014 and a reduction in peak load forecasts since 2015.
You really should read his report. It also includes delicious nuggets like this:
Projecting speculative transmission related benefits for 15 years based on the existing generation fleet and existing patterns of congestion eliminates the potential for new generation to respond to market signals. The market efficiency process allows assets built under the cost of service regulatory paradigm to displace generation assets built under the competitive market paradigm. In addition, there are significant issues with PJM’s current benefit/cost analysis, which cause it to consistently overstate the potential benefits of market efficiency projects. The MMU recommends that the market efficiency process be eliminated.
The PA-PUC could probably make good money selling tickets to this show!
Remember, it's not over until it's over, and there's still lots more to come!
Remember, it's not over until it's over, and there's still lots more to come!
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