The hearing before an administrative law judge resembles a trial in a court room. However, witnesses have already filed their testimony at the Commission, and the hearing process mainly consists of live cross-examination of witnesses to complete the evidentiary record upon which the Commission will base its decision.
As part of the march towards hearing, litigants create a list of issues to be considered by the Commission. Litigants then file their Statement of Position, which details their position on the issues at hand. Think of it as a list of things the litigant intends to prove to the Commission.
The Statement of Position of the Missouri Landowners Alliance is a must read! It's the best place to get a quick overview of the case as it stands after multiple rounds of testimony and discovery (the examination of documents referred to by other litigants).
On the issue of need for the project, MLA states:
Grain Belt has again failed to establish that its proposed project is needed in Missouri in the sense required by the first of the five Tartan criteria. In the 2014 Grain Belt case, No. EA-2014-0207, the Commission rejected Grain Belt’s application for a CCN in part at least because it failed to prove that the proposed line would provide any service to customers in Missouri. As it indicated: “The Commission concludes that GBE has failed to meet its burden of proof to demonstrate that the service it proposes in its application for a certificate of convenience and necessity is needed in Missouri.”
After the Order was issued in that case, Grain Belt made a concerted effort to correct that deficiency. It made sales presentations to a number of load-serving utilities in Missouri, including Ameren Missouri, Consolidated Electric Cooperative, and a number of individual municipal systems in this state. None of those efforts were successful, including Grain Belt’s initial overtures to MJMEUC.
Eventually, however, Grain Belt discounted the price of its transmission capacity to MJMEUC to the point where MJMEUC conditionally accepted their offer in a Transmission Service Agreement (TSA) dated June 2, 2016. Under what Grain Belt calls a “first mover” rate, MJMEUC was handed the unique opportunity to purchase an initial 100 MW of capacity from Grain Belt at only $1,167 per MW per month. A second 100 MWs was offered for just $1,667 per MW per month. In contrast, Grain Belt’s “normal” rate for that identical service from Kansas to Missouri is $5,670 per MW per month, or nearly 5 times the discounted rate offered to MJMEUC for its initial 100 MWs.
Grain Belt now touts the contract as the “most significant” milestone they have achieved since their rejection in the 2014 case. In reality, Grain Belt’s inability to attract any customers for its line left it no choice but to buy its way into Missouri.
But even this discounted contract with MJMEUC does not assure the Commission that power from the Grain Belt line will actually be used by customers in Missouri. A number of Grain Belt witnesses have testified that MJMEUC agreed to purchase up to 200 MW of service into Missouri – or comparable language implying that MJMEUC has actually committed to buy capacity on the proposed line. But the fact is that MJMEUC has not committed to buy any capacity on the Grain Belt line.
MJMEUC is not obligated to decide how much capacity it will actually buy until about 60 days before the line becomes energized. Assuming that Grain Belt is finally accurate in forecasting the in-service date of its project, that means that MJMEUC will have nearly 4 1/2 years to determine how much capacity, if any, it wishes to purchase. And while no witness for Grain Belt even mentions this fact, when that time finally comes, MJMEUC can decide it will buy absolutely no capacity at all from Grain Belt. In other words, contrary to what Grain Belt implies in its testimony, MJMEUC has definitely not agreed to purchase 200 MW or any other amount of capacity on the proposed line. It is just as accurate to say they have committed to buy nothing at all.
It is fair to assume that the provision which in effect allows MJMEUC to cancel its contract with Grain Belt was inserted for MJMEUC’s protection. For a number of reasons, that provision certainly is not in the best interests of Grain Belt. So if it was added at the insistence of MJMEUC, that can only mean that MJMEUC wished to retain its option to jettison the Grain Belt contract if it finds something more attractive over the next 4 1⁄2 years. This possibility is particularly relevant here because before signing the TSA with Grain Belt, MJMEUC made no meaningful analysis of what other options it might have. We do not now know the extent to which the relative prices of different supply sources will change over the next 4 1⁄2 years, but we do know that such changes are inevitable.
Accordingly, the Grain Belt/MJMEUC contract provides no assurance to the Commission that MJMEUC and its member utilities will actually buy any capacity on the Grain Belt line. And the problem is, we won’t know the fate of that contact until years after a decision is rendered in this case.
As to other potential purchasers of capacity in Missouri, it’s déjà vu all over again. Despite its best efforts, Grain Belt once again has no contracts or Memorandums of Understanding with any load serving entity in Missouri to buy capacity on the proposed line – other than its drastically discounted deal with MJMEUC. In fact, it has no such agreements even with any of the Kansas wind farms. So once again, the inherent economics of the project have attracted no takers in Missouri. Just as in the 2014 case, the Commission is again being asked by Grain Belt to simply assume, or rather speculate, that some of its capacity will be used by someone to provide service somewhere in Missouri.
And Grain Belt is not likely to find any takers for any additional capacity at what they refer to as the normal rate for the Kansas to Missouri service. Certainly, none of the investor-owned utilities in Missouri has shown any interest. Grain Belt submitted a bid to Consolidated Electric Cooperative, but did not even make its “short list” of bidders. And finally, direct retail sales in Missouri are not an option.
The problem is, at Grain Belt’s normal rate for capacity, neither MJMEUC nor any other utility in Missouri would logically buy any capacity on the proposed line for delivery into this state. Based on a recent bid to MJMEUC from a Missouri wind farm, the purchase of Missouri wind would be less expensive than buying wind from Kansas and transporting it at the normal rate over the Grain Belt line into Missouri.
And the cost advantage of Missouri wind does even take into account other factors favorable to the Missouri wind option: the 25% “bonus” afforded under Missouri’s RES for renewable energy generated in this state, and the minimal need for additional high-voltage transmission lines throughout Missouri.
As shown by MJMEUC’s initial rejection of Grain Belt for some two years, MJMEUC had no “need” for Grain Belt’s line until Grain Belt devised its discounted “first mover” rate – a rate clearly designed to gain a foothold in Missouri. And of course without that foothold, Grain Belt could not extend its line into the more lucrative markets in PJM and points east.
In other words, the only “need” for the line was created by Grain Belt where no such need had existed. And that need still does not exist if the “normal” charges reflective of the basic economics of the project are applied. The MLA respectfully submits that a contingent contract, based on an artificially low, below-cost rate, extended to a single buyer, does not satisfy either the “need” or the “public interest” prongs of the Tartan criteria.
Despite the above observations, if the Commission assumes that MJMEUC might eventually buy some capacity on the Grain Belt line, that should not logically end the decision-making process on this issue. At that point, the MLA submits that the Commission would then need to balance the modest benefits of a potential purchase by MJMEUC (the only likely user of the line in this state) against the definite detriments to Missourians of building a high-voltage transmission line, complete with hundreds of large steel support structures, over a 200 mile path through northern Missouri.
So, what are the real benefits to MJMEUC and its retail customers of its contract with Grain Belt? Clearly, the only logical way to measure those benefits is to compare the total cost that MJMEUC would pay for power under the contracts with Grain Belt and Infinity, to the total cost it would pay for the next best alternative. That comparison and only that comparison would show how much MJMEUC would truly save by signing on with Grain Belt and Infinity.
Comparing the Grain Belt contract to the Illinois contract it is replacing, for example, is a meaningless exercise. If the difference between the Grain Belt contract and the expiring Illinois contract was say $10 million per year, but MJMEUC could have signed a contract with a third party and saved say $3 million compared to the Grain Belt contract, then of course the $10 million “savings” is not a savings in any meaningful sense at all. The savings in that example would be only $3 million per year.
So the next logical question for the Commission is this: what was the annual cost to MJMEUC of the next best alternative to the Grain Belt contract? Surprisingly, as MJMEUC admits, they do not know the answer to that question. And they do not know because they did not bother to seek bids when looking to replace the Illinois contract.
They simply signed up with Grain Belt, not knowing what other options might be available.
To make up for this deficiency, in its presentation to the Commission MJMEUC has resorted to speculative and after-the-fact comparisons of other alternatives to the Grain Belt contract. As the evidence will show, however, none of those comparisons provide a reliable means to measure the amount (if any) which MJMEUC might save if the Commission allows Grain Belt to build its line through Missouri.
The only way GBE could find a customer in Missouri was using a tactic retailers call a "loss leader." A loss leader is defined as:
Good or service advertised and sold at below cost price. Its purpose is to bring in (lead) customers in the retail store (usually a supermarket) on the assumption that, once inside the store, the customers will be stimulated to buy full priced items as well.
MJMEUC's "need" must be balanced against GBE's detriment to the public interest of Missourians. MLA sums it all up with this:
It is also impossible to quantify the damages which Missourians will suffer if the line is built, but we know they will be real and they will be heart-wrenching. One cannot put a price tag on the inability to finally build a new home at a location which would now be draped by a 4,000 MW power line; or the negative impacts the line will inevitably have on farming a right-of-way punctuated with miles of steel towers; or the decrease in property values of nearby property, for which the owners will receive no compensation whatsoever; or the decision by some people, for whatever reason, to uproot their families and move to a different location if the proposed line is built. And of course there is the 200 mile eye-sore that Grain Belt dismisses as something the locals will simply learn to live with. So admittedly, it is impossible to quantify the damages which 200 miles of line and steel structures will cause to the people of Missouri.
But this much we do know. The only potential benefit which Missouri is likely to see is totally dependent on developments in the energy business over the next 4 1⁄2 years, the results of which will determine if MJMEUC opts out of its contract with Grain Belt. And even assuming it does not do so, the level of any benefits to MJMEUC and its customers are purely speculative at this point.