Part of the mission of the Federal Energy Regulatory Commission (FERC) is to:  Ensure that rates, terms and conditions are just, reasonable and not unduly discriminatory or preferential. 

Interstate transmission rates, such as PATH's, are under FERC's jurisdiction.  FERC oversees PATH's formula rate administered under PJM's Open Access Transmission Tariff. 

A formula rate is the filed rate charged to customers, although it begins as a blank template into which the company inserts different numbers each year.  This allows the actual rate to change every year in accordance with the amount the company spends.  A formula rate enables a company to continuously collect its rate without filing periodic rate cases.  However, rate cases serve to provide for a review and challenge of the proposed rates by those who are forced to pay them.  Because a formula rate allows rates to be set without the big production of a rate case, a formula rate is governed by protocols that allow (but do not require) those affected by the rate to review and challenge it if they believe it is unjust and unreasonable or unduly discriminatory or preferential.

When PATH's expenses were challenged at the WV Public Service Commission, PATH complained (and the PSC agreed) that the state had no jurisdiction over PATH's rates and therefore the PSC's hands were tied and it could not interfere or order PATH not to charge certain expenses to WV's consumers.  The PSC has no jurisdiction because of the filed rate doctrine, which has been in place for decades.  To make the filed rate doctrine as simple to understand as possible:  a rate must be challenged in the venue in which it is set.  A person cannot ask a regulator without jurisdiction to set a rate initially to modify it later.  FERC has jurisdiction over interstate electric transmission rates, therefore, any challenge to the amount you are charged for transmission must come under FERC's exclusive jurisdiction.  Otherwise, individual states could refuse to allow a transmission customer to recover a rate it must pay that is set by FERC, and the transmission customer would be unable to pass the rate it is required to pay for transmission on to its customers and would be stuck with an expense it could not recover.

Therefore, if a consumer wants to examine or challenge a transmission rate, they must do it in the venue in which it is set, which would be at FERC.  This review and challenge of rates is what Keryn and Ali and some other consumers have been participating in for the last three years.

The first year, PATH welcomed the consumers to its review process and provided information requested by Ali and Keryn.  PATH did this, not because they're such nice people, but because it was required to do so by its formula rate protocols because consumers are "interested parties" as defined in the protocols.

This consumer participation was quite unusual.  Consumers had never reviewed rates or challenged them before.  States and utilities would seem to be better equipped to do the review on behalf of their consumers or customers, however these entities were not reviewing rates with any real effort because it is too complicated, time consuming and expensive.  Therefore, NOBODY was reviewing PATH's rates, which enabled PATH to charge whatever it alone determined was just and reasonable.  FERC does not routinely review formula rates.  FERC relies on the persons who pay these rates to raise the red flag if something is amiss with a rate.

Ali and Keryn filed a challenge to PATH's rate at FERC at the end of the first review process.  When the second year's review process began, PATH carried out a series of ridiculous shenanigans that were intended to intimidate Ali and Keryn and prevent them from obtaining information under the protocols.  After all, if they couldn't examine the rate, they couldn't challenge it, right?  Wrong.  A second challenge was filed at the end of the second review period.  On June 1, 2012, the third year review process opened.  PATH has refused to provide any information at all this year, and has even tried to ban consumers from an informational meeting about its rate.

One of the tactics PATH tried to utilize last year to make consumers go away was to change the definition of "interested party" in its protocols.  Although the Commission granted the change (to read "any entity with standing under Sec. 206 of the FPA), it also informed PATH that consumers have a direct interest in the rates they are charged that are under FERC's jurisdiction (because, remember, the state does not have jurisdiction here, FERC is the only available venue for consumers).

On July 18, Keryn filed a complaint at FERC alleging that PATH had violated its formula rate protocols by refusing to provide information requested by an interested party.

The deadline for interventions and comments was Aug. 7.

Here's what turned up at FERC:

PSE&G, a utility from New Jersey, filed a doc-less motion to intervene, which merely preserves its right to participate in the case.  PSE&G had no comments.

Patience Wait filed a motion to intervene and comments.

Alison Haverty filed a motion to intervene and comments.

PATH filed an answer to the complaint.

Keryn Newman filed a response to PATH's answer.

Will consumer rights be protected by FERC?  Or will PATH manage to disenfranchise the consumers who pay its rates, and leave the consumers with no recourse other than to pay?

If you ever need a handy, dandy road map of corporate scheming, look no further than quarterly earnings calls.  Tony the Trickster and his merry band of profiteering pirates tried to put a big smiley face on their poor performance for investors during FirstEnergy's Q2 2012 earnings call on Tuesday.

You can read the transcript of the call here.

Here's a couple of items to look for as you read:

1.    FirstEnergy's "derecho" storm costs will be at least $130M.  70% of that amount will be capital expense that they will recover within existing regulatory mechanisms.  The other 30% will be "deferred."  This simply means the company will create a debt that they will recover from ratepayers at a later date (with carrying costs!)  FE says they will file a request in West Virginia in the 3rd quarter to set up the deferral.  They already have the regulatory structure in place to do this in the other states.  FE says that WV took the worst damage hit, so I'll assume WV will also get the lion's share of the repair cost.

2.    FirstEnergy's finance guy is pretending that the company has no idea why residential demand is still dropping.  He thinks it's due to the economy and unemployment.  Mark Clark thinks people without jobs sit home in the dark and don't use electricity because they can't afford to pay the bill.  Can any of you tell me why residential demand may still be falling?  Any kindergarteners reading this blog that are smarter than overpaid electric company bigwigs?  Apparently a light bulb (it was most definitely a CFL) finally went on over the head of Donny the Gregarious, who pondered whether energy efficiency was having a "dampening effect" on residential consumption.  Ya think?


3.    Lower operating costs due to "merger synergies" (most overused corporate buzzword, ever) and lower storm repair costs (remember this was before the "derecho") were an earnings driver for the quarter.

4.      Picture this...  Tony the Trickster reassured the analysts by telling them that his staff presented him with a weekly win/lose customer switching report.  See?  Being a CEO who makes millions every year really is as simple as sitting around, smoking cigars, and looking at pictures!

5.    FirstEnergy mentioned that transmission drives their profit... over and over again, in many different ways.  Has FirstEnergy told you lately that transmission is where they're hanging their hat to meet next year's "guidance"?  Yes, it's true, FirstEnergy needs to "accelerate" that $1B in "transmission spend" and push it up to 2012 or 2013, instead of later years.  Here's why:  Transmission spending earns a bigger return, 12.7% for their TrAILCo affiliate's projects.  Once they've spent capital on transmission assets, it begins earning in the world's sweetest investment account with absolutely NO RISK involved!  The quicker they can "deposit" their "transmission spend" in their own little investment account, the sooner it can start earning big profits that will enable even bigger earnings.  There's just one little problem -- sometimes Tony can't "accelerate" his "transmission spend" fast enough and get his transmission projects ramrodded through with enough alacrity to satisfy his financial needs.  Whatever could it be that might get in Tony's way?

"The real issue I see in terms of being able to get many of those transmission facilities in place, will not necessarily be driven by the construction schedule, but will be more affected by our ability to acquire rights of way, abilities to get outside crews in to support it, and doing that and getting the permits necessary to complete that amount of work in the timeframe that we’ve laid out in front of us.

So, we have some work to do, there’s a lot involved in the process, we’re in the early stages now, we’re preparing environmental impact statements and all of the other parts, pieces and parts that will require regulatory approval, primarily from siting organizations, and as we move in that timeframe, we’ll be better able to predict when we will have the particular parts of those projects in place. Because this is not just one project, there are a number of things that are going to be done. Substations are going to be enhanced, additional ones are going to be built, new lines are going to be brought in to serve those."


Delay might not be Tony's friend, but it can be a transmission opponent's BFF!

First, we need to set the proper mood.  Click here before reading the rest of this post.

Today, PJM staff released the rest of their analyses of the PATH and MAPP projects.

PJM recommends that PATH (and MAPP) be cancelled due to there being NO NEED to construct the projects to ensure reliability.

"PJM staff will be recommending to the PJM Board at their Friday, August 24th, 2012 meeting to cancel the PATH Project."

PJM also issued a press release.

"The PJM transmission planning staff will recommend to the PJM Board that the Potomac Appalachian Transmission Highline (PATH) and the Mid Atlantic Power Pathway (MAPP) lines be removed from PJM’s regional transmission plans. The recommendations are contained in slides posted today that will be presented tomorrow, Aug. 9, at a meeting of PJM’s the Transmission Expansion Advisory Committee.

A media briefing for reporters will be held Thursday at 3:30 p.m. following the advisory committee meeting. Steve Herling, vice president – Planning, will offer comments and take questions. To register for the briefing, please call PJM News at 866-756-6397.

Grid conditions have changed since the lines were originally planned, and our updated analysis no longer shows a need for the lines to maintain grid stability.

–         A slow economy has reduced the projected growth in the use of electricity.

–         PJM’s most recent capacity auction added 4,900 megawatts (MW) of new generation and procured 14,833 MW of demand response.

–         Although PJM’s analysis last year showed a diminished need for the two transmission lines the most responsible course was to wait to make a  recommendation after analyzing the updated forecast of peak use of electricity (the load forecast), the results of the 2012 capacity auction and the effects on grid stability of the anticipated announcement of generation retirements (16,000 MW) due to environmental regulations.

PJM’s regional planning process looks 15 years into the future to determine necessary changes to the transmission system to keep power flows stable. Planners study long-term growth in electricity use, generating plant retirements, broader generation development patterns, such as integration of renewable energy resources, and demand response and energy efficiency resources.

Since PJM’s first regional transmission plan in 2000, the PJM Board has approved more than $24.3 billion in new transmission lines and improvements and upgrades to existing facilities.

Just this year, PJM staff recommended and the board approved $2.8 billion in electric transmission improvements including new lines needed to keep the grid stable as generating units are retired in response to environmental regulations.

The staff recommendation will be presented to the PJM Board’s Reliability Committee later this month."

The State Journal was right on top of the story.  Click here to read Pam Kasey's story, PATH, likely canceled, cost $225 million.

All of the reasons PJM is now citing as reasons for cancelling (abandoning) the PATH Project are the very same reasons that PATH (and TrAIL) opponents have cited since the inception of the project in 2007.  Perhaps PJM should also take a fresh look at the Susquehanna-Roseland project at this time, because we don't need that one either.

PJM's errors in determining "need" for the PATH Project have cost PJM's 60 million ratepayers $95M in expenses since 2008.  In 2008, FERC granted PATH an incentive enabling the company to make a filing to recover the cost of its project from consumers in the event of abandonment.  PATH needs to prove to FERC's satisfaction that the company had no fault in the abandonment and that all amounts proposed to be recovered were prudently incurred.  PATH's current investment in the project totals slightly more than $130M.  $95M of our money + $130M of PATH's investment that they will attempt to recover from us = $225M wasted on the PATH project.

Goodbye, PATH!

Read more to find out why PJM cancelled PATH and MAPP here!

You regular readers know how much I love numbers.  They're black and white and they never lie to you.  I needed a certain number today for insertion in something I was writing.  I needed the total amount PATH has collected from millions of ratepayers in PJM's multi-state region (all or parts of Pennsylvania, New Jersey, Maryland, Virginia, West Virginia, North Carolina, Tennessee, Kentucky, Delaware, Ohio, Indiana, Illinois, Michigan and the District of Columbia) through its annual transmission revenue requirements from the inception of its formula rate in 2008 through the end of this year, 2012.

I'm not sure why I didn't have this number already at hand, it's just never had a use before, I suppose.  Are you ready to know how much of your money has been wasted over the past 5 years on a transmission project that was never constructed, was never permitted, and will never provide the smallest benefit to the electric consumers who financed it?

Ninety-five million dollars.  That's right $95M!  PATH has poured $95M of your hard-earned money down a rathole attempting to promote, site and permit a project that was never needed in the first place.  What an incredible waste!  How many other uses for $95M can you think of that would have provided some benefit to society?  Instead, the only benefits have been the financial ones that ended up on corporate profit statements.

Separate and apart from that $95M of your money that PATH has already collected and spent, they have also invested over $130M of their money in the project's rate base.  You will continue to pay them 12.4% annual return on their $130M investment until the project is officially abandoned.  When abandonment finally happens, the $130M will be fought over and eventually an amount will be set for recovery from ratepayers over a set number of years.

If we add the $130M investment PATH is going to want back to the $95M they have already collected and spent, we've got a total of $225M, nearly a quarter of a billion dollars of our money, that has been wasted by American Electric Power and FirstEnergy on a get-rich quick scheme to build unneeded transmission infrastructure.

Thanks for nothing, fellas!

Appalachian Power and the West Virginia Public Service Commission are attempting to pull a fast one on the utility's customers in the state.

Last week's news headlines trumpeted, "PSC issues order to keep AEP electric rates from rising,"  and the PSC issued a press release titled, "PSC Maintains Current Level for Electric Rates."  Nothing could be further from the truth!  However, APCo and the PSC think you ratepayers are dumb and easily fooled by their semantics games.  A review of the PSC's order in the case reveals that the claims of "no rate increases" are nothing but smoke and mirrors, and here's why:

1.    The "current rates" that are being "maintained" are the product of a series of rate increases over the past four years that were supposed to pay down a huge unrecovered fuel cost balance from 2008 and 2009.  These higher rates were supposed to be temporary increases granted to pay off a debt to the company.  However, APCo has continued to overspend, and at the end of the temporary rate increase period no substantial amount of old debt has been retired, or paid, by these increased rates!  Therefore, the 2008 and 2009 balance owed to APCo by ratepayers remains, and now has $25M in carrying costs (interest) tacked on to it!  Here's how the PSC describes it in their order: 

"Over the past several years, the APCo/WPCo customer rates have increased significantly primarily because of the increased costs to acquire fuel (coal) for power
generation and expenditures to meet more stringent environmental regulations. The 2012 ENEC filing was intended to be the last year of a four-year phase-in rate plan approved in Appalachian Power Co. & Wheeling Power Co., Case No. 09-0177-E-GI (Order dated September 30,2009) (2009 ENEC).

In the 2009 ENEC proceeding, the Companies filed for the largest rate increase ever requested by a utility in the State. That filing related to the energy cost increases
experienced in 2008 and 2009. In the 2009 ENEC, the Commission authorized a four-year phase-in plan of a $366.7 million rate increase, with the first ENEC increase of approximately $106.6 million, or a 10.5 percent increase in overall rates, and an $18.1 million Construction and Post-construction surcharge increase."

2.    APCo didn't ask for, and the Commission didn't approve, an additional ENEC rate increase because the company, the PSC, and the legislature are trying to avoid your scrutiny and anger over another huge rate increase.  These entities passed legislation this year that allows them to simply hide the huge rate increase necessary to pull their feet out of the fire.  They are hiding the gigantic rate increase by mortgaging it in your name over a 10 year period and tossing words and ideas around that they are hoping will confuse you.  "Securitization," or the "selling of bonds," is nothing more than the company taking out a mortgage and sticking you with the payments and interest.  APCo is tired of carrying this huge unrecovered balance.  If they "sell bonds" it means they take the cash from the mortgage loan, and the obligation to repay belongs to ratepayers.  This is a rate increase you will be paying over the next ten years, with interest.  APCo has tossed all its debt, both historical and current, into the amount of the rate mortgage that they will be applying for soon.  There is no rate increase simply because the actual rate increase will be a separate "securitization" case that is expected to be filed in the next couple of weeks.  The PSC took no action to "keep rates from rising," they simply deferred the huge rate increase to another case.  Parent company AEP stated in a recent presentation to their investors that the amount of the West Virginia rate increase will be $400M.

3.    Let's talk about utility "deferrals."  When the utility spends money that they are unable to recover through current rates, they "defer" it by creating a regulatory asset in their accounting system.  This debt belongs to the ratepayers, and at some point, the utility will ask the PSC for permission to recover it from you through a future rate increase.  APCo plans to clean up all outstanding deferrals on its books through "securitization" and transfer all that debt to ratepayers.  APCo also plans to put you right back into debt by "deferring" $56M of recent storm restoration costs.  You will pay for this "deferral" later.  APCo "deferred" its gigantic fuel cost increase from 2008 & 2009, and the cost of certain deals for lower rates it made with certain industrial customers in prior rate cases (such as Century Aluminum).  When APCo negotiates a lower rate for certain big electric users, they are not absorbing the discount.  They simply book the difference between their cost and the lower rate that these customers pay as a "deferral."  Now APCo wants you to pay for the discount other customers received in their bills in prior years.

"Deferrals" and "securitization" and the "selling of bonds" are not actions that cost APCo money.  They are debts that are incurred in your name by the utility, and they will all come due.  It's time for APCo customers to pay the piper, while the PSC and your state legislators hide behind big words and accounting mumbo-jumbo and try to trick you into believing that there will be no rate increases.

As part of a series of decisions over transmission owner squabbles last week, FERC denied the complaint of Primary Power that we have been following.

You can read the Commission's Order here.

Read the statements of Commissioners Wellinghoff and Norris regarding these decisions.

FERC says that they had to follow the RTO agreements currently in effect.  In the Primary Power case, they relied on PJM's findings that the SVC projects would be cheaper if constructed by the incumbents.  Sounds great right?  After all, who doesn't want to save money?

However, PJM's evaluation of the projects was based on completely bogus cost estimates from the incumbents.  PJM's selection of incumbents to build the projects provides no guarantee that the incumbent projects will actually end up being cheaper.  In fact, the way things are set up now, there is no cost control or performance standard for the incumbents to meet.

" Primary Power challenges the Dominion and FirstEnergy claims of lower cost and avoiding duplication of facilities as lacking technical analysis and development work.  Primary Power claims that neither Dominion nor FirstEnergy proposed any SVC projects in the Meadow Brook or Mt. Storm areas prior to the November 2011 Advisory Committee meeting and notes that FirstEnergy initially objected to installing an SVC at Meadow Brook, favoring a static capacitor-based alternative.  Primary Power notes that it committed to the PJM Board that it had “plenty of time” to obtain a certificate of public convenience and necessity and complete construction before the June 1, 2014 in-service deadline. Primary Power challenges FirstEnergy’s cost estimate, noting that FirstEnergy exceeded its estimate when it built the Black Oak SVC.  Static capacitors, unlike SVCs, do not absorb VARs and do not provide a range in output, but may only be switched on or off."

The PJM cartel supposedly made its decision favoring the incumbents based on cost.  PJM is always thinking about you ratepayers, you know, and putting your needs first.  However, Primary Power claims that FirstEnergy and Dominion simply made up cost estimates based on rough calculations, with the goal being to arrive at a lower cost estimate than Primary Power's, which was already on the table.  How easy was it to simply make crap up when the incumbents know they won't be held to their estimates?

FirstEnergy will most likely request incentives and add this project to their TrAILCo shell company's formula rate.  Perhaps FERC can make these projects the first to be held to cost control and performance standards under a revamped system of awarding incentives.  After all, PJM's reasoning for awarding the projects to incumbents completely fails if the projects end up costing more than Primary Power's estimates when fantasy meets reality.  It would be just desserts for the incumbents to have to actually build these projects for the amounts they have estimated.  I'm quite sure they'll have an audience.

FERC noticed the complaint and set a deadline of August 7 for answers, interventions, protests or comments.

If you'd like to contribute you own two cents, follow the instructions on the notice.

This morning, PATH held their "Open Meeting" for interested parties and others PATH doesn't consider to be interested parties but who were nevertheless "invited" to "participate" in the meeting.

A picture is worth 1,000 words.

But sometimes pictures aren't enough.

See PJM's Transmission Expansion Advisory Committee Reliability Analysis Update for July 12, 2012.

PJM's PATH Project Analysis Update begins on page 9.  Page 12 says PATH is not needed for reliability reasons.

Under 15 year thermal test:
"No 500 kV potential thermal overloads identified."

Under MAAC Load Deliverability Voltage:
"CETL > CETO"

CETL stands for Capacity Emergency Transfer Limits and is the actual emergency import capability of the test area.

CETO stands for Capacity Emergency Transfer Objective and is the import capability required by an area to comply with a Transmission Risk of one event in 25 Years.

An area passes the deliverability test if its CETL is equal to or greater than its CETO.

So, how about it PJM, can we toss PATH onto the great scrap heap of failed transmission projects that have cost consumers millions without providing any benefit now?

Oh no, not yet!  PJM still has one more test to run, the N-1-1  power flow modeling test, which they say will be completed before the next TEAC meeting on August 9.

N-1-1 means they look at every combination of two separate – one after the other - transmission line outages throughout PJM to make sure PATH really isn't needed after all.  Not only are PJM's N-1-1 scenarios highly unlikely to ever occur, but they defy common sense.  If a grid-killing disaster happens (derecho, anyone?) that takes out two separate transmission lines, who's to say that said disaster won't also take out the PATH Project, or any other transmission line they propose as a backup?  As we've all found out over the past couple of weeks, a "robust" transmission system is only as good as the distribution system that brings the power to your home or business.  And as a group of Consumer Organizations pointed out to FERC last month, transmission incentives are pulling investment away from the distribution system.

The good news from today's TEAC meeting is that if the analysis continues to show that the PATH and MAPP lines are not needed, the TEAC will recommend to the PJM Board that the projects be dropped from the RTEP (and no longer held in abeyance).

Thank you, PJM Magic 8 ball!

Ut-oh, trouble in paradise already?  It seems that PJM's new state PSCs group is already falling apart and nothing is ever going to get built at this rate.

Maryland, Delaware and the District of Columbia submitted this letter to PJM recently, disagreeing with OPSI's earlier position that "public policy" transmission projects should be paid for entirely by the states with renewable portfolio standards that cause them to be built.

The eastern PJM states believe that everyone should pay for regional projects that are made necessary to meet their state laws because these other states may receive some "benefit" from the project.  They even quote from FERC's Order No. 1000:

"[T]he regional cost allocation method for such a transmission facility may take into account the transmission needs driven by a Public Policy Requirement, who is responsible for complying with that Public Policy Requirement, and who benefits from the transmission facility. If a regional transmission plan determines that a transmission facility serves several
functions, as many commenters point out it may, the regional cost allocation method must take the benefits of these functions of the transmission facility into account in allocating costs roughly commensurate with benefits."

This is how FERC intends to charge you for some illusory "benefits" in order to spread the cost of new transmission projects over a wider base of rate payers in order to get more new transmission built without you noticing and discussing it over dinner.

So, what does FERC consider "benefits?"  FERC tipped its hand with their Order on Remand, where they refused to find a more equitable cost allocation methodology for the PJM region, preferring instead to put forth some make-believe "system-wide benefits" of PJM membership.  These "benefits" are not commensurate with allocated costs.  Western PJM states end up paying for the bulk of new transmission that benefits eastern PJM states.  It will be no different when states like Maryland, Delaware and DC decide to sponsor long-distance transmission lines to ostensibly transport "wind" (although western coal-fired generation will still be cheaper and dispatched into these lines first) from the Midwest.

So, get ready to pay to meet other state's renewable energy laws in your monthly electric bill, in addition to hosting new transmission lines passing through your community that don't actually supply you with electricity.  The beauty of renewables is completely tarnished when these new sources of power come with the expense and burden of new long-distance transmission lines.  Developing in-state renewables not only obviates the unreliable centralized generation model, but provides economic benefit for the individual states.  Why would Maryland want other states to profit from their renewable energy policies when they have much better local resources at hand waiting to be developed?

P.S.  Your English teacher asked me to slap you with a ruler.  The word "incentive" is a noun.  It does not have a verb form.  Stop trying to invent one.  You only sound unintelligent and illiterate.  The word "incentive" has many synonyms that can very easily be correctly transformed into verbs.  I suggest you use one of them and stop making up words like "incent."  Pick one:  inducement, motivation, motive, reason, stimulus, stimulant, spur, drive, propel, inspiration, encouragement, impulse, incitement, goad, provocation, attraction, lure, bait.