I just submitted my comments on DOE's "Transmission Facilitation Program." The government website doesn't promise that it will make all the comments available (and transparent). That is up to the agency. Since my comments might end up propping up a desk with a broken leg at DOE headquarters, who knows, I thought I'd also publish them here. Now they are available for everyone to read because I love transparency.
Have you submitted YOUR comments yet? It's quick and easy!
DOE’s Transmission Facilitation Program is a ship adrift without a compass. In its NOI/RFI, DOE makes several references to the “objectives” of the program with reference to the IIJA (Section 40106(j)(8)). This is a list of “considerations” for selecting projects, not a list of objectives for the TFP. Some of the “considerations”
are nothing more than meaningless word salad, such as: 1) will improve the resiliency and reliability of an electric power transmission system; 2) facilitate interregional transfer capacity that supports strong and equitable economic growth; and (3) contribute to national or subnational goals to lower electricity sector greenhouse gas emissions. There’s no way for DOE to accurately and objectively determine whether projects meet these considerations. What is “strong and equitable economic growth” and what expertise does DOE have evaluating the economy? It appears that the whole program is subjective, made-up, discombobulated meddling in the transmission planning and rates authority of the
Federal Energy Regulatory Commission.
If FERC is in charge of electric transmission planning through its jurisdictional planning authorities, what authority or expertise does DOE have to plan “economic”
transmission, and how might DOE’s actions interfere or conflict with FERC’s authority to control transmission planning? Likewise, how do DOE’s financial giveaways to merchant transmission companies interfere or conflict with FERC’s negotiated rate authority for merchant transmission, which depends on market forces to keep rates in check in exchange for little regulation? At its webinar, DOE personnel claimed they were consulting with FERC, however that consultation is not being done in a transparent manner. At the very least, DOE needs to explore how its actions affect planning and rates under FERC’s jurisdiction through a transparent, official rulemaking. We need to know who is in charge of what, and how the “whole of government” process will work.
It was chilling to hear over and over again during the webinar how closely DOE is already working with transmission developers to design the system whereby it will hand over taxpayer funds to these for-profit companies. DOE must pull itself out of the swamp to ensure that its actions under this program are transparent and aboveboard. Remember Solyndra? DOE’s current approach to this program does not serve electric consumers. The electric consumer taxpayers DOE is supposed to be serving have been completely ignored in favor of playing political footsie with elite, connected, commercial developers.
In Question 2, DOE asks what information it should seek from applicants to evaluate host community benefits, environmental justice, and also makes reference elsewhere in the RFI to community engagement and outreach. DOE states, “The description of community and stakeholder engagement should include concerns
raises (sic), issues resolved in writing, and issues outstanding.” However, DOE proposes getting all its information about community benefits, outreach, engagement, and issues from the developer in the application process. The developer is NOT an unbiased source of information and DOES NOT speak for affected communities. DOE must perform public “listening tours” and/or public hearings in host communities, where project information is presented and the public itself can inform DOE about its concerns. This is the only way DOE is going to get the truth about community engagement: by engaging with the community.
Anything less than true community engagement is self-serving fabrication. DOE must meaningfully consult with communities and landowners affected by its actions
before the project receives TFP benefits. Justice begins when every person has a voice.
Also in Question 2, DOE asks: “To what extent should DOE consider additionality of outcome on these dimensions?” This word salad makes no sense to real people outside the D.C. political bubble. “Additionality” is not a word in my dictionary. I hereby request that DOE revise and reissue the portions of its RFI that are written in millennial trendy-speak so that the rest of America can understand what it is asking.
DOE can do much better using plain language, but creating cryptic and subjective word puzzles is being used to avoid clear rules and definition. For instance, what does this statement mean? “Facilitate interregional transfer capacity that supports strong and equitable economic growth.” Where has it been determined that
expanded interregional transfer capacity grows the economy? While it may boost the economy of a location that exports energy, it harms the economy of a location
that imports energy, instead of producing its own. This is an unproven statement turned into an “objective”. It is building transmission for the sake of building transmission and then pretending that it provides some benefit.
Transmission planning is not a DOE responsibility. FERC’s regional planning entities are the only experts. Asking a transmission developer to provide “evidence demonstrating that the proposed project is consistent with regional transmission plans and priorities” without consulting the actual regional planning authorities is more self-serving wordsmithing. DOE must require a review and independent report of the jurisdictional planning authority to make this determination.
DOE also proposes that the developer provide it with an estimate of the project’s timeline when it files an application. DOE says that projects for its first solicitation
must “be in commercial operation by December 31, 2027.” Five years or less to complete a transmission project is extremely unrealistic and the developer’s time
line is nothing more than hopes and dreams. All above-ground, greenfield transmission projects will be vehemently opposed by affected landowners and host
communities and will therefore face regulatory and legal delays. DOE must cancel its agreements and payments to a transmission project that does not meet its
operational deadline, or there’s no point in having one in the first instance. Perhaps DOE should set more realistic deadlines. 2027 is not going to happen.
Question 8 is another application requirement that is likely to be completely concocted by the applicant. Determining that “the eligible project is unlikely to be
constructed in as timely a manner or with as much transmission capacity in the absence of facilitation” provided by the TFP is like asking what color tails unicorns would have if they were real. It is impossible to determine how, or even if, TFP participation would be effective in forcing construction of unneeded transmission projects, or if it would simply act as a burr under the saddle of state utility commissions to deny approval of a TFP project. It doesn’t seem like DOE has done anything to consult with the state regulators who decide whether transmission projects are beneficial for consumers.
DOE proposes that it will receive all information on which it bases its decision from the entity that will receive the benefit. This is an open invitation for the applicant to
mislead DOE, such as occurred with Solyndra. DOE absolutely must get more of its required information from impartial sources.
Question 12 asks: “What equity, energy and environmental justice concerns or priorities are most relevant for the TFP? How can these concerns or priorities be addressed in TFP implementation?” If the TFP is truly about facilitating the timely construction of needed transmission, the DOE’s biggest concern should be requiring program projects to eliminate burdensome impacts on host landowners and surrounding communities. Rebuilding existing lines to increase their capacity, and siting new lines on existing rail and road rights of way is an innovative and workable plan to effectively mitigate impacts and neutralize opposition. Buried transmission also eliminates impacts. A buried transmission line on existing rail rights of way would not inspire delaying opposition. All of this is now technologically and financially feasible and is being used by merchant transmission developers. Landowners and communities are not fooled by platitudes and fake
mitigation, much less bribes to local elected officials to look the other way. The only way to prevent costly, delaying opposition is to not cause any impacts at all. DOE should require TFP projects to be sited on existing rights of way and buried, eliminating a need for eminent domain. Otherwise, DOE is simply spinning its wheels and wasting taxpayer funds.
It appears that DOE has learned absolutely nothing from its failed Section 1222 Clean Line Energy Partners “participation”. After many years, and many millions,
spent trying to assist a merchant transmission developer to obtain private property using federal eminent domain, the project collapsed under its own weight when it
couldn’t find any customers. Even if DOE takes the additional step of becoming the missing “customer” this time around, it won’t solve the merchant transmission
problem. The only successful merchant transmission projects are the ones that have committed customers before being built. Speculative merchant transmission
without committed customers is a demonstrated failure. Load-serving entities do not want to import generation from other states or regions when they could use
local resources just as cheaply. As regulated entities, it is about cost. It’s also about buying the milk instead of owning the cow. Regulated public utilities would rather
build and own their own transmission and generation assets that earn a return than
pay to use the assets of other companies. There is simply no incentive here for new customers to sign merchant transmission capacity contracts.
During the May 26 webinar, DOE personnel claimed that capacity contracts were not just for merchant transmission. Except that’s not true at all. Only merchant
transmission uses capacity contracts. Traditional transmission is cost-allocated to captive ratepayers.
Although not in DOE’s area of expertise or jurisdiction, it is imperative that DOE educate itself on the concept of utility regulation if it is going to be successful administering this program. Regulation takes the place of competitive markets to ensure just and reasonable rates in a monopoly environment. Regulated public utilities building traditional, cost-allocated, regionally-planned, transmission projects are unlikely to participate in the TFP. It is clear to anyone in the industry that the TFP was designed to give unfair advantage to unregulated, unplanned, unneeded, unfunded merchant transmission projects.
What is merchant transmission? It is a market-based concept, where instead of cost-of-service rates set by regulators in a monopoly situation, the project competes
with others to attract voluntary customers who negotiate market-based rates with the project owner. There can be no captive customers for merchant transmission,
and competition between customers is the mechanism that keeps the rates just and reasonable. The merchant can only charge as much as the market for its product
allows.
Merchant transmission must receive negotiated rate authority from FERC in order to negotiate with voluntary customers to sell its capacity. In evaluating negotiated
rate applications, FERC employs a four-factor analysis to examine: (1) the justness and reasonableness of the rates; (2) the potential for undue discrimination; (3) the
potential for undue preference, including affiliate preference; and (4) regional reliability and operational efficiency requirements. In examining the justness and
reasonableness of the rates, FERC considers whether the merchant transmission developer has assumed the full market risk for the cost of constructing its proposed project and is not building within the footprint of the developer’s (or an affiliate’s) traditionally-regulated system. In such a case, there are no captive customers who would be required to pay the costs of the project. The Commission also considers whether the developer or an affiliate already owns transmission facilities in the
region where the project is to be located, what alternatives customers have, whether the developer is capable of erecting any barriers to entry among competitors, and whether the developer would have any incentive to withhold capacity. The IIJA requires DOE to purchase up to 50% of the capacity of a qualifying merchant project, even though DOE will not use the capacity to transmit energy. DOE is not a voluntary customer, but a customer of last resort, who is captive to assume the market risk of the project. Participating TFP transmission projects are neither traditional cost-of-service projects, nor market-based merchant projects, but something else entirely that must be regulated to ensure just and reasonable rates under the FPA. After the IIJA removed the market-based framework by requiring DOE to fund merchant projects, there is no longer a mechanism to keep rates in check. The merchant can charge whatever it wants, and if DOE is the only customer it must pay the rate demanded. DOE will certainly pay a higher rate than a voluntary customer competing with others for service. Therefore, the merchant projects funded by DOE do not qualify for negotiated rate authority from FERC, but must be regulated in some fashion. In response to RFI question 11, this requires a formal rulemaking at the Commission.
DOE must also consider market power when evaluating TFP applicants. This requires an independent analysis, or report, and should be verified by regional transmission organizations and/or market monitors. Also, DOE should prohibit private, generation tie line projects from participating in the TFP program. All eligible projects must offer their full capacity to all using negotiated rates.
In response to question 13, a “market analysis” prepared by a transmission developer seeking to receive funding so that it doesn’t have to compete in an actual market is inherently suspect. Instead, DOE must do its own research in actual markets to determine whether the expected customers actually need the generation and transmission service DOE would be “facilitating.” It’s not enough to recite political platitudes about interregional transmission and decreasing greenhouse gases, it’s about matching offered generation with customer need. If there are no customers, then the transmission is not needed. Just because generation is offered does not mean remote customers are forced to buy it. Load-serving entities are perfectly capable of doing their own analysis to decide which generation and transmission capacity would be economic and needed by their customers. Even the TFP cannot force customers to buy unwanted generation or transmission capacity.
If there was an actual, competitive market for the capacity of a TFP project, then it wouldn’t need funding in the first place. Only a merchant transmission project
without customers would find the program useful to build transmission for which there is no market, and no customers. The project would be a literal road to nowhere, used by no one, not delivering power anywhere, but funded by American taxpayers. It’s a mind-bogglingly bad idea!
The IIJA and DOE seem to believe that the TFP will “encourage” voluntary customers for merchant transmission. We’re not painting Tom Sawyer’s fence here. Just because DOE purchases transmission capacity that no one else wants does not mean that everyone will suddenly want it due to some weird, new form of government peer pressure. If customers want to purchase capacity on a merchant transmission project, they will purchase it directly from the developer after determining that the service is financially beneficial to their customers. The financial equation for the customer will not change because of DOE’s purchase, unless DOE plans to sell the service for less than it paid in order to subsidize customers who take unwanted, unused capacity off its hands. It does not appear that such a plan would meet the statutory obligations of the IIJA, which requires DOE to replenish the TFP fund on a rolling basis. Selling capacity at a loss will eventually deplete the fund in its entirety.
In response to question 19, there is no way to “encourage” someone to buy something they passed up the first time it was offered unless it is offered at a lower
price or given away for free, neither of which fits the statute in question.
In response to question 25, yes, DOE should require a TFP project to already have signed contracts equivalent to the percentage of capacity it is seeking to have the
DOE purchase. Under no circumstances should DOE be the only customer, or the customer purchasing the most capacity of a project. When a developer resorts to
having DOE fund its project with capacity contracts that indicates that there is no market interest in the project and DOE will be unlikely to unload its capacity on voluntary customers in the future.
When DOE signs a capacity contract for up to 40 years of non-service “service”, it must reserve the full contract price to be set aside from the TFP fund so that DOE
does not later renege on its contract if it signs multiple contracts it does not have the funds to support. Signing multiple contracts under the presumption that one or
more would sell to others and replenish the fund before future capacity payments are due on other projects is, at its most basic level, a pyramid scheme. DOE should not use taxpayer funds to run a pyramid scheme.
In response to question 26, the TFP project must pay back DOE first before enriching itself with other capacity contracts. Any contracts signed after DOE commits should sell DOE’s capacity first.
In response to question 27, DOE could include a timeline in its capacity contract that requires the TFP project to sell a certain percentage of DOE’s capacity per year in
order to continue the contract. If a project is unable to sell any additional capacity after contracting with DOE, this would provide an exit provision for DOE instead of
depleting the fund for 40 years paying for a road to nowhere.
In response to question 28, how would DOE even know if it was receiving a more favorable rate than other customers if it was the first (and only) mover? Without any other contracts negotiated to use as comparison, it is impossible to determine. In addition, requiring all other customers to pay a higher rate than DOE could doom the project to never finding additional customers if DOE likely contracted at a rate that was too high in the first place. There is no way for DOE to determine that the rate it negotiates is competitive, and this is why these merchant-variants must be regulated.
DOE is a contract patsy that will be used to prop up unneeded merchant transmission. DOE’s TFP is set up for failure by sticking the taxpayers with the bill for a 40-year contract because DOE is a poor, captive, politically-motivated negotiator. The fund will quickly be depreciated and never replenished.
Question 22 contemplates that DOE will be signing capacity contracts before a merchant transmission project begins commercial operation. In that instance,
payment should not commence until the project is in service. Nobody would pay for service it is not receiving. In addition, the contract should contain an escape clause
for DOE if the project fails to receive state or other permits in a timely fashion. DOE must not be obligated to making payments for 40 years on a transmission project that is never constructed.
Knowing that the TFP program is nothing more than a gift to merchant transmission developers who want to monetize gold plated (but unneeded) projects, DOE should be wary of funding the lifestyles of the rich and famous, well-connected elite who lobbied for this program, instead of facilitating used and useful transmission. In the interest of equity and justice, projects should be evaluated on the basis of financial need and funds awarded first to deserving minority-owned businesses. The TFP is not to provide funds for the elite to live high on the hog while “developing” unneeded merchant transmission. An investigation of the finances of the company and its investors should be carried out as part of DOE’s evaluation. DOE may have forgotten the largess of Solyndra, but the American taxpayers have not. We don’t need a repeat of robots that whistled Disney tunes, spa-like showers with liquidcrystal displays of the water temperature, and glass-walled conference rooms. How is the company spending taxpayer dollars, and more importantly, who is spending taxpayer dollars? Initial investigation shall be followed by yearly audits.
Speaking of Solyndra, DOE is headed to a new Solyndra of five fold proportions. The unverified, applicant supplied information DOE proposes it will use as the basis for its evaluation is ripe for false and misleading statements. In fact, DOE’s RFI actively encourages applicant companies to embellish and create a world of fantasy. DOE completely failed to use due diligence to verify information on Solyndra’s application and was politically influenced to look the other way while rubber
stamping the applications of connected individuals. When comparing the lessons of Solyndra to the way DOE has handled the TFP program so far, the parallels are stunning. DOE should absolutely re-study the lessons of Solyndra so that the same mistakes don’t get made a second time.
DOE’s Transmission Facilitation Program is a merchant transmission developer buffet of epic proportions that enables certain connected individuals to fill their pockets with taxpayer funds. I don’t believe any beneficial transmission will come of it. It’s just another gigantic waste of hardworking Americans’ tax dollars.
Quote from DOE’s Solyndra investigation:
“While not the focus of the investigation, we were mindful of the concerns that had been raised regarding possible political pressure applied in the Solyndra decisionmaking process. Employees acknowledged that they felt tremendous pressure, in general, to process loan guarantee applications. They suggested the pressure was based on the significant interest in the program from Department leadership, the Administration, Congress, and the applicants.”
https://www.energy.gov/sites/default/files/2015/08/f26/11-0078-I.pdf
DOE must design the TFP so that this does not happen again. So far, DOE has failed the American taxpayer completely.
Build it and they will come only works in Hollywood.
are nothing more than meaningless word salad, such as: 1) will improve the resiliency and reliability of an electric power transmission system; 2) facilitate interregional transfer capacity that supports strong and equitable economic growth; and (3) contribute to national or subnational goals to lower electricity sector greenhouse gas emissions. There’s no way for DOE to accurately and objectively determine whether projects meet these considerations. What is “strong and equitable economic growth” and what expertise does DOE have evaluating the economy? It appears that the whole program is subjective, made-up, discombobulated meddling in the transmission planning and rates authority of the
Federal Energy Regulatory Commission.
If FERC is in charge of electric transmission planning through its jurisdictional planning authorities, what authority or expertise does DOE have to plan “economic”
transmission, and how might DOE’s actions interfere or conflict with FERC’s authority to control transmission planning? Likewise, how do DOE’s financial giveaways to merchant transmission companies interfere or conflict with FERC’s negotiated rate authority for merchant transmission, which depends on market forces to keep rates in check in exchange for little regulation? At its webinar, DOE personnel claimed they were consulting with FERC, however that consultation is not being done in a transparent manner. At the very least, DOE needs to explore how its actions affect planning and rates under FERC’s jurisdiction through a transparent, official rulemaking. We need to know who is in charge of what, and how the “whole of government” process will work.
It was chilling to hear over and over again during the webinar how closely DOE is already working with transmission developers to design the system whereby it will hand over taxpayer funds to these for-profit companies. DOE must pull itself out of the swamp to ensure that its actions under this program are transparent and aboveboard. Remember Solyndra? DOE’s current approach to this program does not serve electric consumers. The electric consumer taxpayers DOE is supposed to be serving have been completely ignored in favor of playing political footsie with elite, connected, commercial developers.
In Question 2, DOE asks what information it should seek from applicants to evaluate host community benefits, environmental justice, and also makes reference elsewhere in the RFI to community engagement and outreach. DOE states, “The description of community and stakeholder engagement should include concerns
raises (sic), issues resolved in writing, and issues outstanding.” However, DOE proposes getting all its information about community benefits, outreach, engagement, and issues from the developer in the application process. The developer is NOT an unbiased source of information and DOES NOT speak for affected communities. DOE must perform public “listening tours” and/or public hearings in host communities, where project information is presented and the public itself can inform DOE about its concerns. This is the only way DOE is going to get the truth about community engagement: by engaging with the community.
Anything less than true community engagement is self-serving fabrication. DOE must meaningfully consult with communities and landowners affected by its actions
before the project receives TFP benefits. Justice begins when every person has a voice.
Also in Question 2, DOE asks: “To what extent should DOE consider additionality of outcome on these dimensions?” This word salad makes no sense to real people outside the D.C. political bubble. “Additionality” is not a word in my dictionary. I hereby request that DOE revise and reissue the portions of its RFI that are written in millennial trendy-speak so that the rest of America can understand what it is asking.
DOE can do much better using plain language, but creating cryptic and subjective word puzzles is being used to avoid clear rules and definition. For instance, what does this statement mean? “Facilitate interregional transfer capacity that supports strong and equitable economic growth.” Where has it been determined that
expanded interregional transfer capacity grows the economy? While it may boost the economy of a location that exports energy, it harms the economy of a location
that imports energy, instead of producing its own. This is an unproven statement turned into an “objective”. It is building transmission for the sake of building transmission and then pretending that it provides some benefit.
Transmission planning is not a DOE responsibility. FERC’s regional planning entities are the only experts. Asking a transmission developer to provide “evidence demonstrating that the proposed project is consistent with regional transmission plans and priorities” without consulting the actual regional planning authorities is more self-serving wordsmithing. DOE must require a review and independent report of the jurisdictional planning authority to make this determination.
DOE also proposes that the developer provide it with an estimate of the project’s timeline when it files an application. DOE says that projects for its first solicitation
must “be in commercial operation by December 31, 2027.” Five years or less to complete a transmission project is extremely unrealistic and the developer’s time
line is nothing more than hopes and dreams. All above-ground, greenfield transmission projects will be vehemently opposed by affected landowners and host
communities and will therefore face regulatory and legal delays. DOE must cancel its agreements and payments to a transmission project that does not meet its
operational deadline, or there’s no point in having one in the first instance. Perhaps DOE should set more realistic deadlines. 2027 is not going to happen.
Question 8 is another application requirement that is likely to be completely concocted by the applicant. Determining that “the eligible project is unlikely to be
constructed in as timely a manner or with as much transmission capacity in the absence of facilitation” provided by the TFP is like asking what color tails unicorns would have if they were real. It is impossible to determine how, or even if, TFP participation would be effective in forcing construction of unneeded transmission projects, or if it would simply act as a burr under the saddle of state utility commissions to deny approval of a TFP project. It doesn’t seem like DOE has done anything to consult with the state regulators who decide whether transmission projects are beneficial for consumers.
DOE proposes that it will receive all information on which it bases its decision from the entity that will receive the benefit. This is an open invitation for the applicant to
mislead DOE, such as occurred with Solyndra. DOE absolutely must get more of its required information from impartial sources.
Question 12 asks: “What equity, energy and environmental justice concerns or priorities are most relevant for the TFP? How can these concerns or priorities be addressed in TFP implementation?” If the TFP is truly about facilitating the timely construction of needed transmission, the DOE’s biggest concern should be requiring program projects to eliminate burdensome impacts on host landowners and surrounding communities. Rebuilding existing lines to increase their capacity, and siting new lines on existing rail and road rights of way is an innovative and workable plan to effectively mitigate impacts and neutralize opposition. Buried transmission also eliminates impacts. A buried transmission line on existing rail rights of way would not inspire delaying opposition. All of this is now technologically and financially feasible and is being used by merchant transmission developers. Landowners and communities are not fooled by platitudes and fake
mitigation, much less bribes to local elected officials to look the other way. The only way to prevent costly, delaying opposition is to not cause any impacts at all. DOE should require TFP projects to be sited on existing rights of way and buried, eliminating a need for eminent domain. Otherwise, DOE is simply spinning its wheels and wasting taxpayer funds.
It appears that DOE has learned absolutely nothing from its failed Section 1222 Clean Line Energy Partners “participation”. After many years, and many millions,
spent trying to assist a merchant transmission developer to obtain private property using federal eminent domain, the project collapsed under its own weight when it
couldn’t find any customers. Even if DOE takes the additional step of becoming the missing “customer” this time around, it won’t solve the merchant transmission
problem. The only successful merchant transmission projects are the ones that have committed customers before being built. Speculative merchant transmission
without committed customers is a demonstrated failure. Load-serving entities do not want to import generation from other states or regions when they could use
local resources just as cheaply. As regulated entities, it is about cost. It’s also about buying the milk instead of owning the cow. Regulated public utilities would rather
build and own their own transmission and generation assets that earn a return than
pay to use the assets of other companies. There is simply no incentive here for new customers to sign merchant transmission capacity contracts.
During the May 26 webinar, DOE personnel claimed that capacity contracts were not just for merchant transmission. Except that’s not true at all. Only merchant
transmission uses capacity contracts. Traditional transmission is cost-allocated to captive ratepayers.
Although not in DOE’s area of expertise or jurisdiction, it is imperative that DOE educate itself on the concept of utility regulation if it is going to be successful administering this program. Regulation takes the place of competitive markets to ensure just and reasonable rates in a monopoly environment. Regulated public utilities building traditional, cost-allocated, regionally-planned, transmission projects are unlikely to participate in the TFP. It is clear to anyone in the industry that the TFP was designed to give unfair advantage to unregulated, unplanned, unneeded, unfunded merchant transmission projects.
What is merchant transmission? It is a market-based concept, where instead of cost-of-service rates set by regulators in a monopoly situation, the project competes
with others to attract voluntary customers who negotiate market-based rates with the project owner. There can be no captive customers for merchant transmission,
and competition between customers is the mechanism that keeps the rates just and reasonable. The merchant can only charge as much as the market for its product
allows.
Merchant transmission must receive negotiated rate authority from FERC in order to negotiate with voluntary customers to sell its capacity. In evaluating negotiated
rate applications, FERC employs a four-factor analysis to examine: (1) the justness and reasonableness of the rates; (2) the potential for undue discrimination; (3) the
potential for undue preference, including affiliate preference; and (4) regional reliability and operational efficiency requirements. In examining the justness and
reasonableness of the rates, FERC considers whether the merchant transmission developer has assumed the full market risk for the cost of constructing its proposed project and is not building within the footprint of the developer’s (or an affiliate’s) traditionally-regulated system. In such a case, there are no captive customers who would be required to pay the costs of the project. The Commission also considers whether the developer or an affiliate already owns transmission facilities in the
region where the project is to be located, what alternatives customers have, whether the developer is capable of erecting any barriers to entry among competitors, and whether the developer would have any incentive to withhold capacity. The IIJA requires DOE to purchase up to 50% of the capacity of a qualifying merchant project, even though DOE will not use the capacity to transmit energy. DOE is not a voluntary customer, but a customer of last resort, who is captive to assume the market risk of the project. Participating TFP transmission projects are neither traditional cost-of-service projects, nor market-based merchant projects, but something else entirely that must be regulated to ensure just and reasonable rates under the FPA. After the IIJA removed the market-based framework by requiring DOE to fund merchant projects, there is no longer a mechanism to keep rates in check. The merchant can charge whatever it wants, and if DOE is the only customer it must pay the rate demanded. DOE will certainly pay a higher rate than a voluntary customer competing with others for service. Therefore, the merchant projects funded by DOE do not qualify for negotiated rate authority from FERC, but must be regulated in some fashion. In response to RFI question 11, this requires a formal rulemaking at the Commission.
DOE must also consider market power when evaluating TFP applicants. This requires an independent analysis, or report, and should be verified by regional transmission organizations and/or market monitors. Also, DOE should prohibit private, generation tie line projects from participating in the TFP program. All eligible projects must offer their full capacity to all using negotiated rates.
In response to question 13, a “market analysis” prepared by a transmission developer seeking to receive funding so that it doesn’t have to compete in an actual market is inherently suspect. Instead, DOE must do its own research in actual markets to determine whether the expected customers actually need the generation and transmission service DOE would be “facilitating.” It’s not enough to recite political platitudes about interregional transmission and decreasing greenhouse gases, it’s about matching offered generation with customer need. If there are no customers, then the transmission is not needed. Just because generation is offered does not mean remote customers are forced to buy it. Load-serving entities are perfectly capable of doing their own analysis to decide which generation and transmission capacity would be economic and needed by their customers. Even the TFP cannot force customers to buy unwanted generation or transmission capacity.
If there was an actual, competitive market for the capacity of a TFP project, then it wouldn’t need funding in the first place. Only a merchant transmission project
without customers would find the program useful to build transmission for which there is no market, and no customers. The project would be a literal road to nowhere, used by no one, not delivering power anywhere, but funded by American taxpayers. It’s a mind-bogglingly bad idea!
The IIJA and DOE seem to believe that the TFP will “encourage” voluntary customers for merchant transmission. We’re not painting Tom Sawyer’s fence here. Just because DOE purchases transmission capacity that no one else wants does not mean that everyone will suddenly want it due to some weird, new form of government peer pressure. If customers want to purchase capacity on a merchant transmission project, they will purchase it directly from the developer after determining that the service is financially beneficial to their customers. The financial equation for the customer will not change because of DOE’s purchase, unless DOE plans to sell the service for less than it paid in order to subsidize customers who take unwanted, unused capacity off its hands. It does not appear that such a plan would meet the statutory obligations of the IIJA, which requires DOE to replenish the TFP fund on a rolling basis. Selling capacity at a loss will eventually deplete the fund in its entirety.
In response to question 19, there is no way to “encourage” someone to buy something they passed up the first time it was offered unless it is offered at a lower
price or given away for free, neither of which fits the statute in question.
In response to question 25, yes, DOE should require a TFP project to already have signed contracts equivalent to the percentage of capacity it is seeking to have the
DOE purchase. Under no circumstances should DOE be the only customer, or the customer purchasing the most capacity of a project. When a developer resorts to
having DOE fund its project with capacity contracts that indicates that there is no market interest in the project and DOE will be unlikely to unload its capacity on voluntary customers in the future.
When DOE signs a capacity contract for up to 40 years of non-service “service”, it must reserve the full contract price to be set aside from the TFP fund so that DOE
does not later renege on its contract if it signs multiple contracts it does not have the funds to support. Signing multiple contracts under the presumption that one or
more would sell to others and replenish the fund before future capacity payments are due on other projects is, at its most basic level, a pyramid scheme. DOE should not use taxpayer funds to run a pyramid scheme.
In response to question 26, the TFP project must pay back DOE first before enriching itself with other capacity contracts. Any contracts signed after DOE commits should sell DOE’s capacity first.
In response to question 27, DOE could include a timeline in its capacity contract that requires the TFP project to sell a certain percentage of DOE’s capacity per year in
order to continue the contract. If a project is unable to sell any additional capacity after contracting with DOE, this would provide an exit provision for DOE instead of
depleting the fund for 40 years paying for a road to nowhere.
In response to question 28, how would DOE even know if it was receiving a more favorable rate than other customers if it was the first (and only) mover? Without any other contracts negotiated to use as comparison, it is impossible to determine. In addition, requiring all other customers to pay a higher rate than DOE could doom the project to never finding additional customers if DOE likely contracted at a rate that was too high in the first place. There is no way for DOE to determine that the rate it negotiates is competitive, and this is why these merchant-variants must be regulated.
DOE is a contract patsy that will be used to prop up unneeded merchant transmission. DOE’s TFP is set up for failure by sticking the taxpayers with the bill for a 40-year contract because DOE is a poor, captive, politically-motivated negotiator. The fund will quickly be depreciated and never replenished.
Question 22 contemplates that DOE will be signing capacity contracts before a merchant transmission project begins commercial operation. In that instance,
payment should not commence until the project is in service. Nobody would pay for service it is not receiving. In addition, the contract should contain an escape clause
for DOE if the project fails to receive state or other permits in a timely fashion. DOE must not be obligated to making payments for 40 years on a transmission project that is never constructed.
Knowing that the TFP program is nothing more than a gift to merchant transmission developers who want to monetize gold plated (but unneeded) projects, DOE should be wary of funding the lifestyles of the rich and famous, well-connected elite who lobbied for this program, instead of facilitating used and useful transmission. In the interest of equity and justice, projects should be evaluated on the basis of financial need and funds awarded first to deserving minority-owned businesses. The TFP is not to provide funds for the elite to live high on the hog while “developing” unneeded merchant transmission. An investigation of the finances of the company and its investors should be carried out as part of DOE’s evaluation. DOE may have forgotten the largess of Solyndra, but the American taxpayers have not. We don’t need a repeat of robots that whistled Disney tunes, spa-like showers with liquidcrystal displays of the water temperature, and glass-walled conference rooms. How is the company spending taxpayer dollars, and more importantly, who is spending taxpayer dollars? Initial investigation shall be followed by yearly audits.
Speaking of Solyndra, DOE is headed to a new Solyndra of five fold proportions. The unverified, applicant supplied information DOE proposes it will use as the basis for its evaluation is ripe for false and misleading statements. In fact, DOE’s RFI actively encourages applicant companies to embellish and create a world of fantasy. DOE completely failed to use due diligence to verify information on Solyndra’s application and was politically influenced to look the other way while rubber
stamping the applications of connected individuals. When comparing the lessons of Solyndra to the way DOE has handled the TFP program so far, the parallels are stunning. DOE should absolutely re-study the lessons of Solyndra so that the same mistakes don’t get made a second time.
DOE’s Transmission Facilitation Program is a merchant transmission developer buffet of epic proportions that enables certain connected individuals to fill their pockets with taxpayer funds. I don’t believe any beneficial transmission will come of it. It’s just another gigantic waste of hardworking Americans’ tax dollars.
Quote from DOE’s Solyndra investigation:
“While not the focus of the investigation, we were mindful of the concerns that had been raised regarding possible political pressure applied in the Solyndra decisionmaking process. Employees acknowledged that they felt tremendous pressure, in general, to process loan guarantee applications. They suggested the pressure was based on the significant interest in the program from Department leadership, the Administration, Congress, and the applicants.”
https://www.energy.gov/sites/default/files/2015/08/f26/11-0078-I.pdf
DOE must design the TFP so that this does not happen again. So far, DOE has failed the American taxpayer completely.
Build it and they will come only works in Hollywood.
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