The WV PSC issued an order today denying Staff's petition to require FirstEnergy and American Electric Power to provide an assessment of the condition of their high voltage transmission facilities in the state within 30 days.

The Staff's petition was filed in accordance with a WV legislative Resolution that urged that the West Virginia Public Service Commission act to review the condition of the Pruntytown to Mt. Storm 500kV transmission line owned by Monongahela Power, a subsidiary of FirstEnergy, and order the rebuilding and reconductoring of that transmission line as soon as is practical.  It was also expanded to include all AEP and FirstEnergy facilities in the state in order to seize the opportunity that currently exists to take some lines out of service for rebuilding and modernizing.  This opportunity currently exists due to decreased demand and the recent energizing of the TrAIL line, providing enough slack in the system to get the necessary work accomplished.  This opportunity isn't going to last forever.

Rebuilding of existing lines that are over 40 years old will not only provide a safer environment for the West Virginians who live in the vicinity of this decrepit infrastructure, it will also increase the capacity and improve the efficiency of these transmission lines and save energy that is currently wasted due to line loss on these antique facilities.  Improving transmission lines in West Virginia will also serve as a proactive step toward preventing future proposal of new transmission lines, such as PATH, in the state.

Both of the power companies agreed to evaluate their facilities and provide reports to the PSC, however they wanted more time -- 120 days instead of 30. 

The WV PSC denied the petition and in its place reaffirmed their 2008 decision in the TrAIL case directing TrAILCo and its corporate affiliates to submit a plan for reconductoring or otherwise upgrading their respective transmission facilities within one year of the in-service date of TrAIL.  TrAIL was energized on May 19, 2011, which would make FirstEnergy's report due on May 19, 2012.  Note that the TrAILCo order only applied to TrAILCo corporate affiliates (the FirstEnergy companies) and lets AEP completely off the hook for any responsibility to evaluate the condition of their own aging transmission facilities.

The WV PSC is utterly abandoning their statutory responsibility to ensure that utilities under their jurisdiction provide safe and reliable service to the citizens of West Virginia.  If our current Commissioners don't want to do their jobs, it is incumbent upon our Governor to appoint ones who will serve the citizens of this state.

The term of Commissioner Jon McKinney expired on June 30, 2011.  Obviously, he doesn't want to do the job anymore, so the only responsible thing to do is for Governor Tomblin to promptly name his replacement and relieve him of his duties.  West Virginia utility attorney Robert Rodecker was suggested to Governor Tomblin by The Coalition for Reliable Power and endorsed by members of the legislature back in June, before the expiration of McKinney's term.  Roedecker's nomination was also enthusiastically endorsed by numerous citizens who contacted the Governor's office expressing their support.  Despite this, Tomblin has failed to act, and the PSC is now shirking their statutory responsibilities.

It's time for YOU to act!  Please call or email (or, for good measure, do BOTH) Governor Tomblin and let him know that you support the appointment of Robert Rodecker to fill the expired term of Commissioner McKinney effective immediately.  The Governor's office may be reached at 1-888-438-2731 or by submitting an email at this link.  DO IT NOW!

The WV PSC and Governor Tomblin are clearly ignoring the will of the citizens that has been expressed through their elected representatives and changes need to be made.  Change begins with YOU!

FERC is attempting to enable the building of billions of dollars worth of new high voltage transmission lines to transport utility scale renewables from the Midwest to both coasts in order to fulfill individual state renewable portfolio standard goals.  They are doing this through a regulatory framework they simply don't have the authority to construct.  Two years ago, Congress said "no" to their ideas for federal transmission planning, cost allocation and permitting.  Now FERC is sneaking in the back door and creating new regulatory processes that they hope will enable their end goal.  FERC Order No. 1000 set up the planning and cost allocation, and now FERC wants to take over DOE's NIETC designation authority in order to make new use of the "backstop authority" FERC was granted in concert with DOE's designation of corridors.  FERC envisions its desired NIETC designation and backstop authority overruling state denial of a transmission line project and utilizing the Commerce Clause to overturn Piedmont Environmental Council vs. FERC.  While this power grab is a bad idea because it usurps state authority to site transmission lines, it's also a bad idea from an economic standpoint.

The idea of transporting renewable energy hundreds of miles is uneconomic.  It also makes decisions for individual states about where the renewable energy that meets their state goals is produced.  When states set their renewable portfolio goals, the idea was to foster their own economic growth with in-state renewable energy projects providing jobs and economic growth within their own borders.  Now FERC wants to decide for them how their RPS goals will be met with renewable resources from other states, and force them to pay for the privilege.  FERC wants to pick winners and losers in the renewable energy business and thereby decide where renewable energy economic development will occur.

But, what if states insist on sticking with their original plans to develop renewable resources within their own borders to meet their own goals?  That's what's happening in California, much to the chagrin of Nevada, who thought they were going to make a bundle exporting renewable energy to California to meet its RPS goals.  In fact, California is looking at a potential surplus themselves and wants to export excess renewables to other states.  This great Midwestern transmission building renaissance FERC is envisioning enabling has no market!

While FERC proceeds merrily along with their enabling of new transmission lines, they fail to objectively consider the costs of this new infrastructure, which is going to be enormous (hundreds of billions of dollars).  In Texas, a huge grid build out to transport renewable energy from wind has far exceeded its original estimated cost and maybe isn't so economical after all.  Electric consumers are going to be left holding the bag on hundreds of billions of dollars of debt for a transmission line build out from which they'll never derive any benefit.

The states need to give FERC a wake-up call before this disaster gets underway and the debt starts piling up.

"Socialized Cost, Privatized Gain," read one of StopPATH WV's PATH protest signs that took up real estate in my garage for several years until we burned them all in a symbolic bonfire during our PATH Funeral Victory Party this past May.

This phrase succinctly describes the business model of high voltage transmission line developers.  Electric consumers finance these projects through their electric bills, but receive none of the tremendous profits that transmission owners rake in with these projects.  Transmission lines are owned by corporations that intend to make a profit on their product, electric transmission, so let's compare the electric transmission industry's business model to the business model of other corporations who sell products for profit.

We'll use a hypothetical example of a fictional company to flesh out a typical business plan.  The Widget Company makes and sells widgets.  They sell their product for more than it costs them to make it, therefore, they make a profit.  The amount of profit is called their profit margin.  Some companies rely on a small margin on a large number of product sales, while others make a large margin on a smaller number of sales.  However, this particular aspect of profit margins will end up being irrelevant in this example.

The Widget Company needs to determine how much to charge customers for their new SuperWidget.  They must take into account the parts used to build it, the cost of obtaining the parts (shipping, purchasing, accounting functions, storage and handling of parts, the cost of the manufacturing facilities and equipment), the cost of labor necessary to produce the SuperWidget (including all costs related to employees, such as insurance and other benefits, and the labor of the human resources department to administrate it) and the cost of storing, selling, shipping and billing for their finished product.  But wait, that's not all.  The Widget Company still needs to pay a salary to its CEO, rent an office, and make sure there's plenty of fresh coffee for the employees when they arrive to make SuperWidgets every morning.  Every penny that The Widget Company spends on anything must be accounted for and an appropriate share of those costs assigned to the cost of producing the SuperWidget.  Every penny that a corporation spends has to be accounted for and applied to the cost of the products they sell so they can pay their expenses and develop a profit margin that will allow them to make an overall profit.

Now let's suppose the CEO of The Widget Company gives himself a million dollar raise, replaces the coffee with Dom Perignon, and sends all the employees on all-expense-paid vacations to the French Riviera every summer.  He's got to cover the costs of these purchases, so he will have to raise the price of the SuperWidget, and other products, or reduce the profit margin.  If the new price of the SuperWidget ends up being higher than the price of a competitor's MegaWidget because of excess corporate spending, he will not sell enough SuperWidgets to make a profit and the The Widget Company will collapse.  This is why a corporation pays attention to how much they spend, because it all ends up in the price of their product.

Guess what?  You now have a working knowledge of the sub-set of accounting known as Cost Accounting -- these are the guys who figure out prices and profit margins based on company expenses.  If I'd told you this post was about cost accounting, you wouldn't have read past the first sentence, would you?  But now that I've tricked you into reading this far, please keep reading to find out what's different about the electric transmission industry's business model.

The cost of building a high voltage transmission line is shifted to electric consumers through federal and state ratemaking processes.  It exists to provide you with a service, transportation of electricity to your home or business.  When a new transmission line is needed, the transmission owner raises enough capital to cover the cost of building the line (or uses their own capital, but often it's a combination of both).  This capital pays for the physical components of the new line, the purchase of necessary land and rights-of-way, the design and engineering, the cost of necessary capital, and the cost of the regulatory process to gain approval to build.  This capital will be tied up for at least 70 years because electric ratepayers will reimburse the transmission owner for their invested capital little by little, over the useful life of the transmission line.  Therefore, the Transmission Owner is guaranteed a certain profit margin to make it worth their while to tie up their capital in a transmission project.  The Transmission Owner is also reimbursed for other non-capital expenses as they are incurred, such as the cost of marketing, the cost of employees whose time is spent on the project, and other non-capital items and expenses necessary to complete the project.

Now that you're an official cost accountant for a day, you'll be appalled that the Transmission Owner isn't held to the same standards as The Widget Company when it comes to cost accounting.  It doesn't matter how much the Transmission Owner spends because it never affects their profit margin!  Since they aren't selling a product when they're building a new transmission line, it doesn't matter how much it costs to produce one.  They can give their CEO a million dollar raise, serve Dom Perignon in the lunchroom and send their employees on expensive vacations because the ratepayers are picking up the tab and none of those type of expenses are considered "capital" and therefore won't affect budget for the estimated cost of the project (in PATH's case $2.1B).  These expenses are a free-for-all!

The Transmission Owner will make their profit by selling transmission service.  Here's where they are finally subject to an actual profit margin like a normal corporation.  However, the cost of producing their product, the transmission line, is free.  It would compare to The Widget Company obtaining SuperWidgets free from The Sucker Corporation and then selling them for a profit.  Since The Widget Company paid zero for the SuperWidgets, whatever profit they make comes in at 100%, so they have plenty of latitude for Dom Perignon and gold-plated urinals in the Men's Room, and can still make a killer profit.  Of course, The Sucker Corporation has already gone completely bankrupt by then.

A real corporation utilizing the transmission industry's business model would not only go broke, they would find themselves in debt for years because maintaining a decent profit margin does not serve as an important safeguard to control outrageous corporate spending in this business model.  Corporate spending that ends up in the construction cost of a transmission project has no limit, it's a blank check signed by ratepayers.  And as we have found out, there's no one paying the least bit of attention to Transmission Owner spending.

Socialized Cost - Privatized Gain.  Now you know how the electric transmission industry's business model could drive a cost accountant crazy.  It's actually more outrageous than you ever imagined! 

Four former FERC Commissioners give their opinions about building new transmission to enable midwest renewables to reach population centers on the coasts in The Chairmen Weigh In - ASSESSING INVESTMENT AND TRANSMISSION LEADERSHIP.

Of course, you've got to consider the source.  All four of them are now involved in the energy industry whereby they will personally profit from a renewable energy transmission renaissance.

Joe Kelliher works as Executive Vice President for Federal Regulatory Affairs for NextEra Energy.

Curt Hebert is CEO of Lexicon Strategy Group, an outfit that helps the industry with their "regulatory strategies."  Before that he worked for Entergy.

Pat Wood has his finger in a bunch of industry pies through his Wood3 Resources energy infrastructure development company.  He also sits on the board of SunPower Corp., First Wind Holdings and Quanta Services and has close ties to the American Wind Energy Association.

James Hoecker works for industry law firm Husch Blackwell and also opened his own lobbying firm, Hoecker Energy Law, which is a registered lobbyist for WIRES - The Voice of the Electric Transmission Industry.

The value of some opinions doesn't add up to much.

The Coalition for Reliable Power filed their comments on FERC's Promoting Transmission Investment Through Pricing Reform Notice of Inquiry on Friday.

Click here to read the Coalition's comments.  These comments center on how FERC can utilize existing state transmission project approval processes to assist them in evaluating projects when granting incentives.  It's too bad FERC is considering usurping state authority and making transmission project siting a federal process because they could make great use of the state processes already in place, which are the result of many years of experience in evaluating and siting transmission projects.

Today was the due date for PATH to file it's 2012 Projected Transmission Revenue Requirement.  The revenue requirement is the amount ratepayers in the 13-state PJM region will collectively pay to finance the PATH project during 2012.  These amounts are collected from your electric provider and passed through to you in your monthly bill.  In Potomac Edison's WV territory, these are not a separate line item, so you never notice it.  It's a mystery brought to you through the federal and state ratemaking processes.

Although the PATH project is "suspended," we still pay to keep it on life support at the federal level as long as the "suspension" goes on.  We are responsible for paying PATH a yearly return on the amount of capital they have invested in the project.  In addition, we cover their taxes on income (including that return), their taxes on the real estate they continue to hold, their operating and maintenance costs for the project.  It looks like there isn't a lot of planned spending in 2012 that would indicate they intend to do anything other than linger in a zombie state in 2012.  This zombie state will earn them a $14,675,718 profit on their investment in 2012.

PJM and PATH told us that their project would be re-evaluated this fall and a determination made on the future need for it under the new planning scheme.  That's not going to happen.  PJM's new planning process has been delayed until sometime next year, according to the latest update I've heard.

Other items of interest in the PTRR -- CWIP balances will fall for both operating companies.  This indicates that the forfeiture of property purchase options will most likely continue on both sections of the line, northeast and southwest of the proposed Welton Springs substation.  PATH is dead, dead, dead along its entire formerly planned route.

As part of the publication of this proposed budget, PATH is required to hold an "Open Meeting" to explain it to "interested parties," and answer your questions.  You are an "interested party."  Don't think you have to be an accountant to participate -- the discussions can get pretty general.  We got a really good group participating in PATH's 2010 ATRR meeting in July, and we look forward to even more participation this time. 

Once again, PATH has chickened out on holding a live, in-person meeting in D.C.  It must be pretty hard to look into the eyes of real people who are personally affected by your company's greed.  The meeting, on October 19 at 10:00 a.m., will be held via conference call -- dial in and ask a question, or merely listen in as others grill PATH, and hear PATH's attorneys sputter, deny and make stuff up.  It's quite entertaining!  :-)

In order to attend, you must send in a R.S.V.P. to PATH's counsel either via email or telephone before October 13.  Instructions are here.

If you're in the tri-state and want to come to a live, in-person, PATH Open Meeting breakfast party on the patio that day, just let me know sometime before the meeting.  Last time we had a lot of fun -- before, during and after the "meeting," which we jointly participated in via speaker phone.

Great, objective write-up on Coal Tattoo today about the two faces of AEP CEO Michael Morris.  Reporter Ken Ward, Jr. has been following the saga both here and on the Coalition for Reliable Power blog as Mikey's spin campaign unravels.

My favorite part is where he compares Morris to a cartoon character with a devil on his right shoulder and an angel on his left.  Perfect!

Good news for everyone who pays an electric bill in the 13-state PJM region today!  Potomac-Appalachian Transmission Highline and Trans-Allegheny Interstate Line have recently filed required financial reporting forms with the Federal Energy Regulatory Commission (FERC) that show a rebate of over a million dollars coming to ratepayers via the companies' FERC Revenue Requirements.

As you regular readers may recall, during an "Open Meeting" to discuss PATH's revenue requirement filing in July, I mentioned to PATH's attorneys and accountants that I had found merger charges which were recovered from ratepayers reflected in PATH's 2010 Revenue Requirement.  These merger expenses, related to the FirstEnergy/Allegheny Energy merger in February of this year, were prohibited from being passed through to ratepayers by stipulations in the companies' settlements with the Public Service Commissions of both West Virginia and Maryland.

I'm glad to see that they did their due diligence after the phone conference and located and re-classified these amounts to other FERC accounts that are not collected from ratepayers.  By removing these expenses from the amounts we were charged in our electric rates in 2010, and adding them to another account that acts as an income deduction (write-off) and is not collected from ratepayers, means that they now owe PJM's ratepayers a rebate of an additional $1,086,487 in over-recovered billings, with interest.

PATH's FERC Form 3Q for the second quarter 2011 included this note:

Schedule Page: 114 Line No.: 4 Column: d
Reflects a reclass of merger costs of $99,318 from Outside Services (FERC 923) to Other
Deductions (FERC 426.5).

TrAIL's FERC Form 3Q for the second quarter 2011 included this note:

Schedule Page: 114 Line No.: 49 Column: d
Reflects a reclass of merger costs of $987,169 from Outside Services (FERC 923) to Other
Deductions (FERC 426.5).

I will try to get copies of the actual forms up a little later today, but right now I have an appointment with an "old friend" that I need to rush off to.  Perhaps I'll elaborate on that later, depending on outcome.  ;-)

Now that's some real "energy efficiency" from the folks at FirstEnergy!