Category:

Utilities Always Win In Current Regulatory System

4/9/2016

Odd little bit of filler in a NW Arkansas newspaper this week. Bloomberg's In East, power costs fall, bills rise, tells Arkansans about utility hijinks in another part of the country. But these hijinks aren't local only to the east, they're as old as the utility business itself.

When regulation or markets find savings for ratepayers, utilities raise rates elsewhere to make up for it. Utilities, for the most part, are afraid of change. They refuse to make themselves relevant in a brave, new consumer-driven world. Instead of offering products and services that consumers actually want, utilities continue to force consumers to accept the products and services the utility wants to provide. At some point, utilities are going to make themselves irrelevant, because a consumer-driven world is here and it's not going away.

Ohio's utility tedious twins, American Electric Power and FirstEnergy, epitomize utility hijinks to ward off this brave, new world. While being all for deregulation of generation in Ohio when it was profitable, FirstEnergy has changed its tune and wants its generation to be regulated again. In West Virginia, FirstEnergy "sold" generators owned by its competitive affiliate to its distribution affiliate. The problem?

Spot power traded in the market run by PJM Interconnection LLC has averaged about $31 a megawatt-hour this year. That's less than half the $84.55 average in 2008.

Suddenly, competitive plants that were making a profit for the utility were not longer profitable. PJM's "market" had worked so well that older plants that are more expensive to run (such as antique coal plants) were no longer profitable. In a market situation, these plants would close and be replaced by cheaper alternatives, such as natural gas plants. Instead of changing though, the tedious twins sought out ways to make consumers pick up the costs of their plants so they could remain open and "competitive" in PJM's "markets."

After stashing their West Virginia plants in the state's regulated system, the twins came up with an idea to thwart Ohio's supposedly "competitive" generation system by selling the plants' generation into the state's regulated distribution system. The companies concocted power purchase agreements, whereby all regulated distribution system customers would make up any market shortfalls by purchasing the "competitive" generation at the company's cost. In turn, the company would sell the generation into PJM's "market" and leave consumers with any balance the "market" didn't cover. That's the definition of anti-competitive. No other generators in Ohio have the option of having regulated distribution customers pick up the cost of anti-competitive plants. If other plants aren't profitable, they close. That's how the "market" works.

But these utility schemes aren't long term commitments, no matter what the utility promises to score regulatory approval. The minute these schemes aren't profitable, the utility will propose a new scheme to make sure the profits continue. Does anyone actually believe that AEP and FirstEnergy will honor these PPAs in later years if they actually do begin to pay consumer returns at the expense of the company? Hell no. If that ever happens, the utility will find a way to get out of them and return them to a "competitive" business model. The utility never loses in our current regulatory system. The consumers are the perpetual losers.

Another utility scheme is to make up for losses on the competitive generation side by increasing profits on the regulated business side. Regulated transmission pays great returns and can earn additional financial incentives through federally regulated rates. It's not like we "need" a whole bunch of new transmission, it's that utilities need a way to make money. All of a sudden the transmission system, long neglected, has become rickety and failing and must be replaced. Serendipity! If a utility can earn double-digit returns building or rebuilding its transmission, then that's what they do. Utilities with stated rates are paid a set amount for maintenance of their transmission assets. But what happens if they don't spend all that money? It's added to share holder dividends. So, if a utility is hurting and looking for ways to increase share holder returns, the first thing they may do is cut maintenance spending. A look at any utility's quarterly calls with investors demonstrates that cuts to maintenance happen all the time in order to boost share holder dividends. But what happens to the transmission assets that aren't maintained? They become rickety and begin to fail. Serendipity! At that time, the utility determines that the transmission line needs to be completely rebuilt and earns a double-digit return on its "investment."

The transmission investment smorgasbord is why rates have increased, despite falling generation prices:

As the price of electricity in the region fell by half over the past decade, utilities raised monthly bills for residential customers by 26 percent, according to government data. Consumer advocates say the power companies are using falling electricity costs as cover to raise other charges. Utilities counter that they are passing on billions of dollars' worth of government-mandated improvements to long-neglected infrastructure.

Consumer advocates say this scheme isn't "fair" to consumers. But no end to the transmission feeding frenzy is in sight. While utilities spend their cash on profitable transmission investments, less profitable investments in the distribution system suffer. When state-regulated distribution investments pay an equal or better return than federally-regulated transmission investments, perhaps we'd see some attention paid to our rickety and failing distribution system.

Here's the lesson: The utility always wins because regulators have been conditioned to care about the utility's well-being over that of the consumer. After all, the utility is a constant in the regulatory realm, while consumers rarely show up. Only when regulators force better solutions will consumers benefit. Perhaps that's when utilities will realize they need to make themselves relevant to consumers by offering products and services consumers want, instead of force-feeding them the products and services the utility wants to offer.

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WV Legislature to "Fix" Public Service Commission with Investor Owned Utility Money

1/23/2016

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Well, bless their little hearts. Some WV legislators still believe elections aren't controlled by corporate money.
As if WV's current governor-appointed PSC Commissioners aren't bad enough (completely clueless political favors or biased industry plants), a handful of legislators have set their sights on guaranteeing that future Commissioners are on the utility payroll.

A couple of bills intended to "fix" our awful public service Commission could end up making matters worse.

First up, HB2238 attempts to fix the PSC by geographically spreading out the commissioners to have one from each congressional district. Whatever. This one is harmless.

But HB2483 wants to elect commissioners. And where do these legislators think PSC candidates will get their campaign money?

They will get it from the investor owned utilities they would "regulate" if elected. And how do you suppose these "elected" commissioners would vote on proposals by their campaign funders?

In other states that elect PSC commissioners, the vast majority of PSC campaign money comes from the utilities the PSC regulates.

Alabama PSC funded by coal.
Georgia PSC funded by utilities.
Louisiana PSC funded by utilities.
Accusations of utility influence fly in Montana PSC race.
76% of Nebraska PSC campaign donations from utilities.
South Dakota PSC candidates accept unlimited donations from utilities they regulate.

Other problems:

PSC Commissioners moonlighting as industry lobbyists.
PSC Candidates funded by utility contractors when law prohibits direct utility contributions.
Candidates for New Mexico's Public Regulation Commission receive public funding for campaigns since 2003.
Oklahoma regulator accepts congressional campaign contributions from utilities she regulates.

And because PSC Commissioners would be elected from three different districts, that would remove the current requirement that at least one of them be an attorney. It would also toss out the window the current requirement that only two of them can be from the same political party.

Considering a huge majority of the voters electing utility-financed PSC candidates have never heard of the PSC and have no idea what they do, is it a good idea to let these clowns elect commissioners based on TV ads or party affiliation?

As long as the governor appoints commissioners, we stand a chance of getting decent commissioners from a decent governor. Once utilities can influence PSC elections, there is absolutely no chance of getting a decent commissioner. None.

Kick this legislation to the curb. Uninspired and thoughtless "fixes" may just cause further damage.

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Requests for Rehearing Filed in ICC Grain Belt Case

12/16/2015

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On Monday, the Illinois Commerce Commission was hit with an onslaught of Requests for Rehearing of its Order issuing a Certificate of Public Convenience and Necessity to Grain Belt Express. Even Clean Line filed one!

The majority of the requests focus on the Commission's error in allowing GBE to utilize the expedited permitting process reserved for public utilities. Grain Belt Express is not a public utility.

Rehearing requests came from:

Concerned Citizens & Property Owners. CCPO concentrates on the expedited process error.

Illinois Farm Bureau. Farm Bureau concentrates on the expedited process error and additionally contends that the project is not the least cost option.

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!

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FirstEnergy Wants Backroom Deal That Kills Competition in Ohio

12/7/2015

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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.

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Clean Line Desires To Keep Costs Low In Order To Increase Profits

12/2/2015

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Take a virtual trip to Ottawa, Illinois, by listening to a recording of yesterday's oral arguments before the Illinois Appellate Court regarding whether or not the Rock Island Clean Line is a public utility under state law.

The recording, just over an hour long, includes arguments from the ICC and RICL in (flimsy) support of the ICC's decision to issue a conditional permit to RICL, as well as from ComEd's lawyer on behalf of appellants. The appellants asked the court to reverse the ICC's order and send the matter back to the Commission.

The attorney for the appellants discussed why RICL is not a public utility using a demonstrative that listed six attributes of public utilities. In contrast to public utilities operating (or proposed) in Illinois, RICL has NONE of the attributes of a public utility.

The point was made that the ICC's issuance of a permit to RICL for a speculative, future project was premature. The statute requires the applicant to possess certain attributes at the time it grants the license. To go around this failure, the ICC conditioned its permit upon a future showing of RICL's ability to finance its project. Said showing is to be made by making a filing to the ICC Staff, who will decide whether the financing stipulation has been met. Since when does a Commission staff anywhere have decisional authority? If RICL had met the financial requirements to be granted a permit when it was granted the permit, the Commission would have evaluated RICL's financial evidence to make a determination whether it was adequate to meet the statute. Instead, the ICC punted its authority over to the Staff at a future date to make a decision in which the other parties cannot participate.

The arguments were constantly interrupted by questions from the three judge panel hearing the case. These judges have been doing their homework!

One judge asked early on whether RICL's future use of eminent domain demonstrated a desire to keep costs low in order to increase profits.

That's exactly what it demonstrates! The judge pointed out the difference between a public utility's ratepayer-financed transmission projects, and RICL's investor-financed merchant transmission project. In the case of the public utility project, eminent domain may be granted in order to keep land acquisition costs as low as possible for the ratepayers who must pay for the project. However, in RICL's merchant transmission case, RICL's possible use of eminent domain will keep land acquisition costs low for its private investors. And since RICL's rates are set through negotiation, or by auction to the highest bidder, the price paid for transmission service is not the product of cost of service rate regulation. It is set by market. Any savings from using eminent domain to acquire property go directly into RICL's pocket and increase the company's profit. This, in a nutshell, is what makes the use of eminent domain for merchant transmission projects wrong. Eminent domain is supposed to be used for the benefit of the public, not for the benefit of private investors.

The judge further pointed out that a public utility has a legal obligation to serve all of the public in a non-discriminatory manner, otherwise any company could hold itself out as a public utility while it only serves certain customers who can afford its services. If a company proposes to pipe Goldschalger to taps in a limited number of homes who can afford it, it is not legally a public utility. RICL is no different.

There was also a lot of discussion regarding the amount of progress a permit holder must demonstrate in order to have its 2-year permit extended.

When asked about RICL's progress in Iowa, RICL's attorney said it had made a filing at the Iowa Utilities Board that is "moving the project forward slowly" in Iowa. (We'll laugh about that in the next post!) He also whined about how unusual Iowa law is and that Iowa should change its laws to be more like Illinois and other states. Hear that, Iowa? RICL doesn't like your laws! Awwwww.....

The court will issue a decision on the appeal "soon."

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Tick, Tock -- ICC Issues Grain Belt Express a Conditional Permit

11/15/2015

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Clean Line's Grain Belt Express received a conditional CPCN (permit) from the Illinois Commerce Commission last week. Another random number covered on Clean Line's Bingo Board.

Clean Line's Skelly acted like it actually did something to speed up the project.

“The ICC approval brings the Grain Belt Express Clean Line one step closer to dramatically increasing the low-cost wind energy available to customers in Missouri and Illinois.”

I disagree. The ICC's CPCN expires two years from date of issue. Although GBE requested its permit be issued with a two and one-half year expiration date, the Order did not do so. So, it's two years. Tick Tock, Clean Line!

Clean Line's patchwork quilt of permits is an exercise in harvesting low-hanging fruit, with the most desired pieces still way out of reach. Despite its six years of effort to get any of its four (or it is five?) transmission projects totaling thousands of miles permitted, Clean Line still doesn't have all the permits it needs for even one of them. They've built a crazy quilt of random permits and their timing is way off. Permits are going to start expiring before new ones are issued, creating a game of permitting whack-a-mole.

Its Rock Island project has a two-year Illinois permit on which it only has one year left to begin construction. Meanwhile, Rock Island is completely stalled in Iowa. No way will it complete its Iowa permitting before the Illinois permit expires.

Its Plains and Eastern project lacks a permit in Arkansas and eminent domain authority in Oklahoma.

And its Grain Belt Express project has been flat out rejected by Missouri. Clean Line made some noises about figuring out its options in Missouri -- either reapplying with the state or attempting a federal override. Either way, Clean Line has no chance of clearing up its issue in Missouri within two years.

I think this is just poor strategy and management of Clean Line's permitting process. Clean Line seems more concerned about having a piece of paper to show its investors, rather than making logical progress toward building a single project. Maybe this handful of speculators have bitten off more than they can chew?

Anyhow... about Grain Belt's CPCN from the ICC... Its a conditional permit, again (the Rock Island permit also came with conditions and no eminent domain authority).

The first condition imposed by the ICC is that GBE have all its financing in place before beginning construction. The ICC figures this will stop GBE from building the transmission line to nowhere before running out of money and expecting the government or electric ratepayers to bail it out to finish the project. Does the ICC think this is a possibility without the condition? That's quite telling in itself, isn't it? A real public utility usually has more than an idea and a fantastical plan to get rich quick. At least the ICC seems to realize Grain Belt Express has nothing behind it.

The second condition imposed by the ICC is a whole bunch of make-believe. The ICC requires Clean Line to come back before it to receive "permission" to charge Illinois ratepayers for the project through FERC-jurisdictional regional cost allocation. Ha ha ha ha ha ha ha. Why am I laughing? Because the ICC has no authority to accept or reject cost allocation to Illinois ratepayers. It is a regional process under the jurisdiction of the Federal Energy Regulatory Commission. The most the ICC can do is file a complaint that goes like this, "But, FERC, GBE promised us that we would have jurisdiction over a cost allocation decision!" And who is GBE to change FERC's jurisdiction? Can't happen. So, the ICC's logic goes like this: If GBE tries to get cost allocation to Illinois ratepayers, then we can suspend its permit and then they can't build the project! But... what if... GBE constructs its project and THEN receives approval for regional cost allocation? What you gonna do then, ICC? Cry? Waste time and money fighting this at FERC like you did the PJM cost allocation for the Project Mountaineer projects? That took, what... 10 years? And cost how much? The really frustrating part about this is that ICC has had it explained to them six ways to Sunday that they have no jurisdiction to impose this "condition."

But here's the big oops... the vote to issue the CPCN in the first place was 3-2 in favor. Two Commissioners issued a dissent that I'm going to call "blistering" (because Clean Line likes to say that about the Missouri dissent). The issue here is particular to Illinois law. Section 8-406 allows for the application for and issuance of a CPCN. Section 8-503 allows the ICC to order or authorize a company to build a certain project. Section 8-503 is a prerequisite to eminent domain authority under Section 8-509. The ICC may issue a CPCN under 8-406 without Section 8-503's authority that is the basis for an eminent domain grant under 8-509. That's exactly what happened with the Rock Island project. The project was issued an 8-406 CPCN but the Commission did not order or authorize the project to be be built under 8-503. This gives Rock Island the ability to build its project if it can get 100% voluntary land acquisition, otherwise Rock Island has to go back before the Commission to request a determination under 8-503 before it can proceed to 8-509's eminent domain authority. However, in 2010 the Illinois legislature added Section 8-406.1 to create an expedited process for public utilities to apply for a CPCN. This speedy process automatically includes the 8-503 grant. Because Clean Line didn't want to end up with another useless CPCN without 8-503 authority, it decided to use the expedited 8-406.1 process. The fly in the ointment, however, is that only a public utility may apply under 8-406.1. Clean Line is not a public utility in Illinois. This issue was the subject of several motions to dismiss and an interlocutory appeal to the Illinois Supreme Court during the proceedings. I've heard that the ICC acted quite suspiciously in denying the motions, without public discussion of any kind at the meeting where they denied the motions to dismiss. And here it comes again, in the form of a dissent from two Commissioners. I'd say chances of GBE's permit being overturned on appeal are pretty good.

And what then, Clean Line, what then? Why were you in such a hurry to get your Illinois permit for GBE when it was obvious Missouri was going to deny your application? What strategy was that? Just covering another square on your transmission permitting bingo board? Yay, you!

So, the Clean Line saga grinds on. No generators, no customers, not enough permits. When are Clean Line's investors going to quit tossing money down this rat hole? One of the more interesting things to come out of Illinois recently was Clean Line's filing regarding its Rock Island project regarding a change of investors. Although Clean Line made much earlier this year of a "$50M investment" in its company by Bluescape Resources, it turns out that investment was tied up in a ball of string. Clean Line got $12M. Bluescape got two seats on Clean Line's Board of Directors. The Board of Directors can order Bluescape to kick in another $5M at any time, once Oklahoma approves Bluescape's investment. The other $33M is completely at Bluescape's option. Bluescape wasn't foolish enough to give these wind cowboys all $50M up front. Clean Line keeps adding investors to its stable as the ones already there don't seem to be interested in upping their investment. Remember, if Clean Line can't get their projects built, their investors lose everything. Every last dime.

And there Clean Line's management sits, with their permit bingo board missing crucial links and no idea whether the balls they need are even in the hopper.

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Lack of Meter Reading Causes Outrageous Bills

11/9/2015

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I bet you think I'm talking about FirstEnergy subsidiaries Potomac Edison (or Perpetual Estimate, as it is more commonly known) and Mon Power. But, I'm not. Apparently your electric company doesn't need a penny-pinching merger to bugger up its meter reading cycle when sheer stupidity and hard words like "algorithm" will do the job quite nicely.

Sherfox Holmes is on the case in Michigan, where Consumers Energy hasn't been reading electric meters with any regularity, which has resulted in the outrageous "catch up" bills that are all-too-familiar to West Virginians.

Sherfox, the Michigan Public Utility Commission and Consumers Energy have put their noggins together (well, at least Sherfox believes it has some role in this) to determine that Consumers is not reading electric meters at least once a year. In fact, one lady complained that she hadn't received a meter reading in over 3 years -- once when she moved in and once just recently, which gave her a balance of over $3,000.

In the meantime, there’s still some people out there getting hit with high bills that they can’t afford.

“When we received the bill, I was like 'What has happened? I don’t understand this,'” said Carol Armstrong.

Armstrong requested three years worth of her energy bills after she got hit with an over $3,000 bill. She found out they had estimated her bill for three years except for twice: the month she moved into her house, and the month they charged her over $3,000.

Initially, Consumers Energy told Armstrong she would have to pay an additional $438 to each bill until it was paid off.

“They say it like it’s nothing. I told them well you say that like it’s nothing, but let me ask you question. If you went to your house today and opened your mailbox, and you had a bill in there like that, how would you feel? She said 'I wouldn’t be able to pay it,'” said Armstrong.

That’s when Armstrong contacted the Michigan Public Service Commission who told her she actually had three years to pay it back, the same amount of time they estimated her electric usage.

The Michigan PSC says that meters are supposed to be read monthly... unless there's some excuse for the utility not to read meters. Then everything is okay as long as the customer has as long to pay as the utility shirked its duties to read the meter.

This is no solution! It gives consumers an inaccurate picture of their energy use and causes financial hardship. Interesting though that a consumer can be "late" paying an estimated bill with no repercussions. Maybe the customers should start refusing to pay their estimated bills to inspire the utility to get off its dead behind and read meters?

Although, the MI PSC found a better solution to the problem than the WV PSC ever did... smart meters! The MI PSC thinks the problem will go away when customers have smart meters and has encouraged the company to step up its smart meter installation. But, as long as there's controversy about smart meter fees, the company isn't inspired to do anything to fix the problem.

Here's the deal: Multiple estimates screw up any algorithm that estimates future bills. It doesn't take a detective to figure this out. Consumers Energy has screwed things up by shirking its duties, and the MI PSC has allowed this to happen by shirking its own duties. And consumers will pay. They always do.

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Get Information About Potomac Edison Rate Increase at Jefferson Forum

10/13/2015

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Are you perturbed about Potomac Edison's constant rate increases? Do you want to have your questions answered?

Come to the Jefferson Forum this Saturday, October 17, at 8:30 am at the Mountain View Diner in Charles Town!

The JEFFERSON FORUM will hold its monthly meeting on

17 October 2015    0830 AM to   1100 A M
Mountain View Diner
901 East Washington Street
Charles Town, WV 25414

Our primary topic will be to discuss the proposed rate increase as filed 14 August 2015 before the WEST VIRGINIA PUBLIC SERVICE COMMISSION by POTOMAC EDISON and MONONGAHELA POWER. The issues to discuss involve the impact of this rate increase since it follows closely upon the rate increase which took effect in April 2015. The primary reason given for this increase appears to be increased fuel costs.

Since the consuming public is given no voice before the WV Public Service Commission, save for an overworked, under funded, understaffed Consumer Advocate Office, it is not unreasonable to request that the Utility Companies offer reasonable explanations for such demands.

We require civility and courtesy at THE JEFFERSON FORUM, and every effort is made to assure that every person is allowed to be heard.

Danny Lutz
MODERATOR
THE JEFFERSON FORUM

And Mountain View Diner serves a mean breakfast. It might be almost as tasty as the rest of the event!

Potomac Edison and the WV PSC have been invited, but have declined the invitation, stating:

Thank you for the opportunity to speak to the Jefferson County Forum on Oct. 17. Unfortunately, since the issues you wish to discuss are pending before the WV Public Service Commission, I cordially decline your invitation.

Testimony regarding the recovery of our fuel costs will be accepted by the Commission on Nov. 19th & 20th at their office in Charleston. Please feel free to attend those hearings.

No date has been set for the hearing on the Vegetation Management filing.

Just an FYI -- the food in Charleston isn't nearly as good. Neither is the show.

I wouldn't miss this for the world! I'm betting Potomac Edison won't either. They'd best find some really inconspicuous spies.... anyone acting suspiciously will be hauled to the front of the room and made to address the crowd while speed eating a Gyro, Feta & Tomato Omelette and juggling a trio of Belgian Waffles.

See you there ;-)

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Why are Potomac Edison's West Virginia Electric Rates So Confusing?

10/6/2015

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Potomac Edison sends out confusing electric bills and rate information that nobody can understand. The West Virginia PSC allows it.

Did you get one of those hand-dandy Potomac Edison "Electric Rates for West Virginia Customers" pamphlets in your recent bill? Did you try to use the pamphlet to check Potomac Edison's math or to figure out what the different line items on your bill mean? Don't. Don't try to figure it out. You're going to drive yourself crazy!

If you're one of those folks who just go with the flow and pay whatever the company charges you without even looking at your bill, then don't read any further. However, if you're one of those folks who scrutinizes things and speaks up when they're not right, this is for you.

There are two, possibly three lines items on your bill. Your "base charge," your "environmental control charge," and if you live in a municipality that imposes taxes on your electric consumption, there will be a line item for "taxes."

What goes into your "base charge?" If you use your rate pamphlet that Potomac Edison just sent you, the W.Va. Rate Schedule R - Residential rate is detailed as a flat $5.00/month customer charge, plus an Energy Charge of $0.08747 per kWh used. So, if you multiply your kWh used by the Energy Charge rate and then add the $5 Customer Charge, it will add up to the base charge line item on your bill, right?

WRONG! It doesn't add up.

Try calling the company for an explanation. They give you some complicated explanation that there are additional charges for things you can't find on your rate pamphlet under the Schedule R section. If you push them to explain it to you so you actually understand, they get their panties in a bunch. Try calling the WV Public Service Commission to see if they can explain it to you. They'll send you a bunch of schedules and a list of charges that went into your bill, but again, you can't find these charges on your rate pamphlet.

Turn your rate pamphlet over to the back cover. Under the heading of "Lighting Fixture - Customer Owned Pole" you will find some additional charges entitled "Environmental Control Charge," "Environmental Control Charge Normalization," "EEC Program Cost Recovery Rate," and "Temporary Transaction Surcharge."

Hey, Environmental Control Charge -- that's a separate line item on your residential bill, isn't it! And if you multiply your kWh used by the Rate Schedule R rate, you will get the same number!

But what about those other three charges? They're not separate line items on your residential bill. But they're in there. They've been added to your "base charge," along with your Customer Charge and Energy Charge.

Go ahead, try it. Multiply your kWh by each of the three remaining charges (taking note that the Environmental Control Charge Normalization is a credit, or subtraction from your bill for residential customers). Then add that to your Energy Charge and Customer Charge and see if you don't get the same subtotal that Potomac Edison got on your bill. Add in your Environmental Control Charge and Tax line items and you get the amount of your current bill! Amazing! Doesn't that sound easy?

No? You're not alone. It shouldn't take an intelligent guy a week and countless phone calls and numerous emails to become utterly frustrated with this confusion. You know what the ratepayers think, Potomac Edison? They think you make your bills confusing on purpose so that you can find new and interesting ways to gouge them without them noticing. So, I explained the rate pamphlet, the actual rate, and the correspondence, tariff sheets and other "explanations" he was sent by the company and the PSC. Just one more service I provide. I won't say he's thrilled, but he understands now. Why did you waste his time (and yours) like this Potomac Edison and WV PSC?

Why can't you include the ENTIRE Residential rate scheme on the front of your rate pamphlet, Potomac Edison? Why did you put those mystery riders on the back page under the Lighting Fixture Schedule? You're a special kind of stupid, aren't you? There's no reason calculating and understanding your residential electric bill needs to be this hard. Maybe you should ask a customer now and again about how you can improve their understanding of their electric bill and the rates they pay. Because I'm not going to be here to clean up after you forever.

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The Hackers Have Been To Your Valley And Now They Want To Be Paid

9/1/2015

3 Comments

More uproar this morning as word spreads that yesterday FirstEnergy subsidiaries Potomac Edison and Mon Power filed for ANOTHER 3.6% (Residential) rate increase to cover the cost of its vegetation management program ordered by the PSC in 2013.

Just like the ENEC case filed mid-August, this rate increase is simply the result of more bad decision-making by the WV PSC. The vegetation management program (VMP) has already been ordered and the company has already spent this money. They will recover it. What remains to be seen is how much.

According to FirstEnergy's filing, the Commission decided to cover the cost of the VMP with an additional surcharge, instead of including it in base rates. However, the surcharge didn't go into effect until 2015, so now FirstEnergy wants to collect all the money it spent before the surcharge, the amount of the surcharge it undercollected to date, and the amount of the surcharge it is predicted to undercollect in 2016 and 2017 if the surcharge rate remains unchanged. Total for you: $75.8M.

So, what's in this filing, and what are you getting for your money?

FirstEnergy says its program has increased your reliability by demonstrating "a remarkable decline in the
customers affected per mile from tree-related outages."

And it demonstrates with a evidentiary slide show of some before and after photos of its tree hacking prowess. Here's just one example of the work FirstEnergy did on its unfortunately named circuit "Hacker Valley." Indeed!

Prior to the VMP surcharge, the company recovered its cost of maintaining rights-of-way through its base rates. Base rates are determined in periodic filings, where the company demonstrates its costs. A fixed rate is set allowing the company to recover the costs. The rate is not changed until the company files another base rate case at their own prerogative. In between base rate cases, nobody is minding that the company is actually spending its base rates on what it said it was spending them on. Therefore, a company can cut services, while still recovering the cost of them, and increase its profits.

So, you may be asking yourself... how did the rights-of-way get so overgrown that they were seriously affecting reliability? What in the hell was the company doing with all the tree-trimming money it was collecting in base rates? Obviously, not trimming trees.

Instead of asking this question, the PSC acted proactively to fix the problem by making ratepayers responsible for the cost of all this unperformed maintenance. FirstEnergy got off scott-free in terms of financially owning up to its years of neglect. However, the PSC, in removing VMP costs to a surcharge, are now going to be monitoring that your money is actually spent on tree-trimming. Hurray! So now you will notice how much it actually costs.

How much does it cost? Customers have reported, "...they cut HEALTHY trees for no reason on our driveway. Some sat in the truck hidden back on the power lines for hour at a time waiting for quitting time." Yup, plenty of job milking going on by the tree contractors. In addition, FirstEnergy says that their costs to begin this program were high because it needed to double its work force in order to actually do something, and it was in competition with rival power company Appalachian Power to find new workers for this new program. Because of that, FirstEnergy needed to import tree hackers from out-of-state and pay them travel costs and per diem. Also, the company had been paying its contractors on a time & materials basis, instead of a firm bid, job-based contract.

But don't you worry, little hack-ee, FirstEnergy has been looking out for your interests by finding ways to reduce the cost of the VMP. They have now switched to 70% firm bid contracts, have managed to train all the new employees (and supervisors, you know, those guys who sit in the truck and sleep) and are diligently looking for ways to cut costs.

And if you believe that, I've got a bridge to sell you. That's because the cost of the VMP is projected to be split almost evenly between captial costs and operations and maintenance costs. An O&M cost is reimbursed dollar for dollar as incurred. However, capital costs are depreciated over the life of the line trimmed, taking many years to pay off. And guess what? Capital costs will earn FirstEnergy 8.19 percent interest yearly! The more "capital" they spend, the more profit they make! Who's minding the capital and expense split? Nobody.

FirstEnergy also says they will cut costs by increasing the amount of herbicide spraying they do vs. manual clearing. Get ready for lots more dead, brown, right-of-way strips and overspray killing adjacent vegetation and polluting your water supply. But don't worry, your government would NEVER let a company use chemicals that could harm you.

FirstEnergy has also changed its tree hacking game plan, to include many new trees outside its right-of-way that could fall on the line... maybe... if the stars align... or something. So this means they're widening their rights-of-way without paying the property owners for this additional taking. Tsk, tsk!

As of June 15, the company has trimmed over 1.8 million trees, removing over 400,000 trees and
controlling/clearing over 19,000 acres of rights of way. To provide some perspective, the 19,308 acres of right of way cleared and sprayed during the 14 month Review Period is the equivalent of the size of 19,000 football fields, since a football field approximates one acre in size.

I think the trees are screaming! Can you hear them?

So, what should you do about all this? Participate in any upcoming opportunities for public comment!

You also need to support your underfunded Consumer Advocate, who is run ragged trying to protect consumer interests in all these smaller, frequent rate increases.

But that effort was criticized by the Consumer Advocates Division, which said the move set a bad precedent and weakened the traditional rate making policies of the PSC, where nearly all facets of a utility’s business were considered in a single rate case.

At that time, Jackie Roberts, the CAD director, said allowing electric companies to assess additional surcharges to customers’ bills for tree trimming programs was just the most recent step in a trend toward companies filing a number of smaller rate cases.

According First Energy’s testimony, the company is expected to receive an 8.19 percent return on the cash expenditures under the program before taxes.

In these cases, Roberts said the commission needs to weigh what is needed for the utility to provide safe and reliable service against the customers interest in having reasonable rates.

“On its face, it certainly appears this filing would fail that test,” she said.

And wait... we're not done yet! The Gazette article mentions another rate increase that has not yet received much public scrutiny... MonPower and Potomac Edison customers are being asked to pay an additional $85 million between 2017 and 2036 in order to save the financially-troubled Grant Town Power Plant in Marion County through a new power purchase agreement. Here we go again with the WV PSC saddling ratepayers with additional costs to prop up West Virginia's coal industry through over-priced power produced by old, inefficient, coal-burning power stations.

Just hand over your wallets, little ratepayer, and nobody gets hurt. Except when they can't pay their electric bill...

Will enough ever be enough for FirstEnergy?

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Utilities Always Win In Current Regulatory System

WV Legislature to "Fix" Public Service Commission with Investor Owned Utility Money

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FirstEnergy Wants Backroom Deal That Kills Competition in Ohio

Clean Line Desires To Keep Costs Low In Order To Increase Profits

Tick, Tock -- ICC Issues Grain Belt Express a Conditional Permit

Lack of Meter Reading Causes Outrageous Bills

Get Information About Potomac Edison Rate Increase at Jefferson Forum

Why are Potomac Edison's West Virginia Electric Rates So Confusing?

The Hackers Have Been To Your Valley And Now They Want To Be Paid

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