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Pepco Magic - How to turn a $1.2B debt into "lower rates"

6/20/2011

7 Comments

 
And now for something completely different... it's time to pick on Pepco Holdings for their amazing capacity to feed propaganda to the public about their MAPP project!

This editorial from Delmarva Now says that "PJM and Pepco suggest that the cost of the new line will not cause an increase in rates consumers pay for electricity, because production costs will go down and the $1.2 billion price tag will be shared by all consumers in its thirteen-state region."

What a bunch of crap!

Remember how AEP told us that their transmission project would "levelize" the price differential between eastern and western PJM?  PJM's recent RPM Auction resulted in a price decrease in eastern PJM with a corresponding price increase in western PJM.

"In PJM's MAAC area the price of capacity will be $136.50 MW-day, a decrease of about $100 from last year.  (The MAAC price applies to the transmission zones of Baltimore Gas and Electric Company, Metropolitan Edison Company, Pennsylvania Electric Company, and PPL Electric Utilities, Atlantic City Electric, Delmarva Power, Jersey Central Power and Light Company, PECO, Public Service Electric and Gas Company, and Rockland Electric Company.) The non-MAAC region, will pay the RTO price of $125.99, an increase of about $100. This region includes western Pennsylvania, western Maryland, Ohio, Indiana, Michigan, Kentucky and Virginia."

Thanks, Pepco, you're a pal!  Not only do the citizens of western PJM get to bear the burden of having their mountains blasted, their miners subjected to dangerous working conditions, their air, water and land poisoned by coal-fired power plants producing electricity to be shipped out of state, now they also get to pay more for the privilege!  Pepco, you're heinous!

Apparently the opponents of MAPP have the ability to smell the odor of power company propaganda as well and are calling Pepco out on their lies.  Bravo!
7 Comments
Pam
6/20/2011 06:54:57 pm

They need to fix their problems locally. Just about every week on the news is something about PEPCO and it's not good stuff either. But that's right, they don't make money off fixing old stuff and making it better.

Reply
Keryn
6/20/2011 07:23:26 pm

You're exactly right, Pam! And the root of the problem is FERC's transmission incentives buffet. The really irritating aspect is that there is nothing in the incentives policy prohibiting the updating of old infrastructure with new technology and being eligible for incentives. In fact, that was the original intent of the rules -- to deploy advanced technology. However, upgrading existing lines doesn't cost as much and because they're earning a return based on a percentage of project cost, the more they spend, the more they earn. This is why commenting on the NOI with the goal of changing the incentives policy with an eye toward directing it back to its original intent is so important. Our friends at the power companies can turn anything good into something bad due to their continual greed and competition for investors that requires making money every quarter. They are pushed by their shareholders to increase earnings. The consumers are the ones who pay the ultimate price for this vicious cycle. Their bottom line is $$$, not keeping the lights on.

Reply
bh link
6/20/2011 07:31:14 pm

The reason RPM prices dropped in eastern PJM was not because of any new transmission lines. It was because of the rapid rise in demand management resources sold in the RPM markets. In other words, people (and utilities) on the east coast cut their rates themselves by figuring out how to use less electricity.

Power companies want us to think that their useless boondoggle transmission lines are the answer to electricity problems. The rapid growth of demand management and cutting peak load have proved them wrong.

Reply
Keryn
6/20/2011 07:38:05 pm

Of course they want us to believe whatever story they're spinning at the moment. The problem is that they have SO MANY different stories!

Let's see, prices (aka "congestion") have decreased in eastern PJM and MAPP is still on the drawing table. So, do we really need MAPP? Of course not. Never did, never will.

However, there is a nugget of truth in the "levelizing" argument. Remember that PJM file I dug up a while ago that talked about new transmission causing price increases "upstream" of congestion that is relieved by building new transmission? I should go find that, but don't have the time right now.

Reply
Keryn
6/21/2011 12:01:47 am

And here's what I'm talking about:

"For loads located upstream of congested transmission facilities, wholesale market
prices may actually increase as congestion is eliminated and wholesale power prices
converge to a system-wide price that is between the price in the constrained area and
the price upstream of congestion."

That's what was revealed in the RPM auction.

http://ftp.pjm.com/~/media/documents/reports/20100310-transmission-allocation-cost-web.ashx
(page 13, but the whole document is an interesting read if you're a big nerd!)

It's the reducing of congestion that's causing the levelizing, not the method of reducing congestion. DSM is much, much cheaper and better than new transmission lines at relieving congestion. DSM is further obviating the need for MAPP.

Reply
Keryn
6/21/2011 12:09:11 am

And this is what stood PATH's attempt at some screwball "congestion costs" argument in Maryland on it's head. While that silly cowboy was cheering for lobbyist-mischief "congestion cost" reductions for eastern Maryland, the western PJM area was getting a giant shaft up their posterior in the form of higher prices and none of them were aware, much less objecting. Good thing that train derailed on its own -- and the RPM auction kills their "congestion" argument now.

Reply
bh link
6/21/2011 03:03:36 am

As George Loehr and Hyde Merrill pointed out throughout the PATH case, this is exactly the way PJM's markets are supposed to work. The price of electricity is higher in congested areas. This makes the savings from every kilowatt hour of demand resources much higher in congested areas, making those resources very "valuable" on PJM RPM auctions. As demand is reduced and congestion declines, so does the price of electricity in those areas, which also reduces the need for demand resources and the price of those resources falls accordingly.

It works, and it's cheap and fast.

It completely puts the lie to PJM's claims a couple of years ago that only building PATH could provide relief quickly enough to fix congestion. That didn't work out so well for them.

Reply



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    About the Author

    Keryn Newman blogs here at StopPATH WV about energy issues, transmission policy, misguided regulation, our greedy energy companies and their corporate spin.
    In 2008, AEP & Allegheny Energy's PATH joint venture used their transmission line routing etch-a-sketch to draw a 765kV line across the street from her house. Oooops! And the rest is history.

    About
    StopPATH Blog

    StopPATH Blog began as a forum for information and opinion about the PATH transmission project.  The PATH project was abandoned in 2012, however, this blog was not.

    StopPATH Blog continues to bring you energy policy news and opinion from a consumer's point of view.  If it's sometimes snarky and oftentimes irreverent, just remember that the truth isn't pretty.  People come here because they want the truth, instead of the usual dreadful lies this industry continues to tell itself.  If you keep reading, I'll keep writing.


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