Do you agree that the three market  participants he named were “bad eggs”?
Why or why not?

Throughout this proceeding RI has claimed that Illinois customers will not pay the
Project’s costs. Because this fact is critical not just to protect customers, but also underlies RI’s economic case, the Order includes a condition stating that RI must seek Commission approval “prior to recovering any Project costs from Illinois retail ratepayers through PJM or MISO regional cost  allocation[.]”  While ComEd agrees fully with the Commission’s intent, this condition cannot be relied upon to protect customers, for several reasons.

FERC has exclusive authority over  transmission rates under federal law. It is far
from clear that FERC or a federal court would find that Illinois can require an applicant to waive the ability to petition FERC to approve any specific type of transmission rate, or could enforce such a waiver against a FERC finding that it was “just and reasonable” to pass costs on to customers. 

Even if the Commission could void the CPCN if RI (or a successor) made such a request to FERC, it is not clear what effect that “remedy” would have on customers’ rates. By then, the costs would be incurred and the line would be transmitting power in interstate commerce.

The Order’s condition does not apply to other parties (e.g., generators, shippers) who
could ask FERC to modify the rate to shift costs to customers, even if RI never did.

Similarly, the Order does not limit the  authority of FERC itself, which could sua
sponte revise RI’s rates, either in a RI-specific or a more broadly based investigation
proceeding. FERC has the power to “determine the just and reasonable rate … to be
thereafter observed” (16 U.S.C § 824e (2012)) in response to such a complaint or
upon its own motion, not just a filing by RI.

At a minimum, given the critical importance of shielding Illinois customers from Project
costs, the viability of this condition as a means of protecting customers – and potential
alternatives including financial security – warrants deeper examination on rehearing.

As multiple intervenors have pointed out in this docket that Rock Island’s failure to produce a needs analysis from PJM and/or MISO hurts all of the stakeholders, it seems like this problem could have easily been avoided. The absence of this global analysis produces increased unpredictability and either slows or jeopardizes other legitimate transmission projects. This risk to the consumers could have easily been prevented.

Now, other potentially viable and successful transmission projects will have to wait on the sidelines to see if Rock Island can get its act together by, among other things, finding money, qualified employees, suppliers, and numerous regulatory approvals. None of this benefits Illinois consumers, the market, or the reliability of the electric system. Instead, it puts everything at greater risk.

Formula Rate Matters. DAA continues to examine accounting that populates formula rate recovery mechanisms used in determining billings to wholesale customers. In recent formula rate audits, DAA observed certain patterns of noncompliance in the following areas:
• Merger Goodwill – including goodwill in the equity component of the capital structure absent Commission approval;
• Depreciation Rates – using state-approved or a blended depreciation rate consisting of Commission and state-approved depreciation rates without Commission approval;
• Merger Costs – including any merger-related costs in rates (e.g., third-party advisory fees, internal labor, severance, and other general and administrative costs) without Commission approval;
• Tax Prepayments – incorrectly recording tax overpayments not applied to a future tax year’s obligation as a prepayment leading to excess recovery through working capital;
• Unused Inventory and Equipment – including the cost of materials, supplies, and equipment purchased for a construction project without removing the cost of items unused in whole or in part from the cost of a project;
• Allocated Labor – using labor cost allocators not based on a representative time study to determine the amount of indirect labor costs to distribute to construction projects;
• Asset Retirement Obligation (ARO) – including ARO amounts in formula rates, without explicit Commission approval;
• Below-the-Line Costs – including below-the-line costs in formula rates (e.g., lobbying, charitable contributions, fines and penalties, and compromise settlements arising from discriminatory employment practices) without Commission approval; and
• Improper Capitalization – seeking to include in rate base (and earn a return on) costs that should be expensed.

Sen. Robert Casey, D-Pa., was the first to ask the inspector general to look at the way FERC has been investigating alleged energy market manipulation. Stressing the need for investigations to be transparent, Casey in July urged Friedman to look at seven specific aspects of FERC's enforcement program, including whether the agency has pursued enforcement actions against entities "that were not acting in violation of then-current applicable laws and regulations," and is "properly allocating its limited resources to investigation of cases that have the most deleterious effects on energy markets."

Then, in September, Barrasso and Sen. Susan Collins, R-Maine, asked the inspector general to explore allegations questioning the fairness and transparency of FERC's enforcement program, including those made in an Energy Law Journal article co-authored by a former FERC general counsel asserting that the commission's enforcement process has become "lop-sided and unfair."

The two senators specifically asked if FERC is holding certain parties to different standards with regard to market manipulation. For instance, Barrasso and Collins questioned whether the public is being given "actionable notice" of the types of conduct FERC considers to be market manipulation. They also asked Friedman to explore the article's allegations that the targets of FERC investigations and their employees are not being afforded the due process "required by FERC's own regulations and precedents" and that provided by other federal enforcement agencies.

Powhatan Energy Fund has decided to take down its website at www.ferclitigation.com.  And, while the site is down, Powhatan will be declining all new requests to speak with the media and requests to present at conferences.