Citizens Against Kemptown Electric Substation (CAKES) filed their comments on FERC's NOI Promoting Transmission Investment Through Pricing Reform this morning.  They did a fantastic job of making insightful suggestions for reform.  I think my favorite, in light of recent events, is:

"9. FERC’s Conflict of Interest
It is not possible to serve public ratepayers’ interests when FERC is both promoter and regulator of the utility industry. It has been shown by several Federal agencies that being responsible for both promotion and regulation of an industry leads to ineffective performance of both responsibilities and is a violation of public trust. One historical example for resolving this problem in 1974 was the splitting of the U.S. Atomic Energy Commission (promoter and regulator) into the Nuclear Regulatory Commission (regulator) and the Energy Research and Development Agency (now Dept. of Energy) (promoter). It is time for the U.S. Congress to split FERC into two separate agencies in order that the two responsibilities can be carried out effectively.

One particular example of this FERC conflict of interest is FERC’s gathering of coalbased utilities, PJM, and FERC officials in Charleston West Virginia on 13 May 2005 at
the FERC-sponsored conference "Promoting Regional Transmission Planning and Expansion to Facilitate Fuel Diversity Including Expanded Uses of Coal-fired Resources". The conference record shows a blatant bias toward promoting both generation and transmission by coal-based utilities, which FERC also is supposed to be
regulating. This bias has been perpetuated by FERC since 2005 while loading up coalbased utilities with multiple layers of incentives for building long-distance coal-based energy transmission lines (e.g. PATH Project) cross-country to the East Coast instead of supporting the construction of local renewable wind-based energy generation and distribution lines locally on the East Coast near the load centers. In the interest of credibly serving U.S. Administration energy policy regarding incentives and alternatives, FERC should take the initiative to assess its own dual responsibilities and request the U.S. Congress to split FERC into two independent agencies.

Regulatory reform is needed for FERC. The U.S. Courts already have indicated this need by their recent decisions. The U.S. 9th Circuit Court of Appeals in 2011 curtailed FERC’s free-wheeling promotion of National Interest Electric Transmission Corridors and coal; and the U.S. 4th Circuit Court of Appeals curtailed FERC’s “backstop” siting authority over state public service commissions. Unlike other regulatory agencies, for
example the NRC, FERC has not maintained its  independence and does not keep utilities and RTO’s at arm length distance in FERC decision making. This is a
worthwhile topic for further investigation by the General Accounting Office (GAO).  Moreover, RTO’s like PJM are not agents of the U.S. Government and, therefore, are
not bound by the ethics laws for protecting the interests of the public and public trust that U.S. Government agencies, such as FERC, are bound to, in particular with regard to agency actions and public perceptions  concerning waste, fraud, and abuse. PJM is,
in effect, a trade association of selected share-holder owned electric companies and has a built-in bias toward representing influential electric company members of PJM."

In a time of universal deceit, telling the truth is a revolutionary act. --George Orwell

Read the CAKES comments in their entirety here.

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.

Sugarloaf Conservancy filed their comments on FERC's NOI Promoting Transmission Investment Through Pricing Reform yesterday.

Sugarloaf wants FERC to do more to promote the use of advanced technology in transmission projects and the rebuilding of existing lines in lieu of new projects.  They also pointed out to FERC that PATH should be abandoned.

Read Sugarloaf's comments here.

So, where are YOUR comments?

Apparently the utility industry has been sitting around twiddling their thumbs all summer and now they don't have time to file requests for rehearing on Order No. 1000 and comment on transmission incentives all in the same week!

Therefore, FERC has extended the deadline again until September 12.

But that also gives you extra time to get your comments in, so get busy!

The deadline for filing your comments on FERC's Notice of Inquiry - Promoting Transmission Investment Through Pricing Reform is fast approaching on August 25.

StopPATH WV, Inc. filed comments yesterday.  Now the only thing left for me to do is to encourage you to do the same.  We all know that incentives are what has driven the PATH project and are what motivates them to continue to hang on by their fingertips.  This is your opportunity to have your say!

If you need help writing or filing your comments, check out our FERC Transmission NOI category, or just ask.  If you don't have time or inclination to file extensive comments (yes, I realize I'm a nerdy bean-counter), you can always file shorter comments and/or simply document your support of other comments on the docket (however, this doesn't mean copying them and re-submitting them form letter-style).

Remember the SCC Public Hearing in Virginia back in February?  Nearly every person who got up and spoke during the sessions I attended remarked that PATH was motivated solely by that 14.3% ROE.  Now it's time to quit complaining and take action!

There's only two weeks left!

Here's your quick reference guide to the resources available at StopPATH WV to assist you in crafting your comments on FERC's Notice of Inquiry Promoting Transmission Investment Through Pricing Reform.  Hopefully this contains everything you need to know, but if you have additional questions, email me.  You can also leave comments in the individual blog entries, but there's no guarantee I will see them in a timely fashion.

Extended comment deadline - August 25, 2011
How to submit your comments
General Overview of NOI

Overarching Questions pp. 1-10
Sec. 219(a) Statutory Threshold (Rebuttable Presumption) pp. 10-12
Additional Goals in Sec. 219 pp. 12-14
The Nexus Test pp. 14-19
Interrelationship of Incentives pp. 19-20
The Role of Cost Estimates pp. 20-21
Incentive ROE Adders pp. 23-27
Abandonment pp. 27-30
CWIP in Rate Base pp. 30-33
Hypothetical Capital Structure pp. 33-34
Pre-Commercial Cost Recovery p. 34-36
Accelerated Depreciation and Advanced Technology pp. 36-40

We encourage both groups and individuals to submit comments.  For individuals, it might be easier to concentrate on just one aspect of the NOI.  Detailed comments on a particular incentive or aspect are better than generalized comments on the entire NOI.  We are encouraging groups to combine resources and file a comprehensive set of comments.

FERC's Transmission Incentives are the "root of all evil" and the impetus for all the unneeded transmission projects that we've been plagued with.  These projects have cost consumers and landowners hundreds of thousands of dollars in defensive legal costs, years of stress and aggravation, and in some unfortunate cases caused complete financial ruin.  If you want to put a stop to this nonsense once and for all, don't miss this fortuitous opportunity to have a voice.

In the NOI, Promoting Transmission Investment Through Pricing Reform, FERC is seeking comments about the effect of its incentives on promoting transmission.  If you're going to comment, you need to understand what the incentives are, and what they are intended to do.

Beginning on Page 9 of the NOI, the Commission poses some general, overarching questions regarding the effect their incentives have had on the goals set forth in Section 219.  Read the introduction and history on pages 1 - 9, and consider all the other aspects of the transmission incentives covered in the NOI, and let FERC know what you think the effect has been.

The incentives have caused a "gold rush" to new transmission projects, while our existing transmission grid withers and fails from neglect.  Because of the excessive profit to be made with new projects that FERC created with their incentives policies, the original intent of Sec. 219 has been completely perverted.  The ultimate outcome of this is that the consumers have been saddled with an incredible amount of debt while energy corporations rake in an incredible amount of profit.

If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material.  You don't have to comment on all aspects of the NOI if that's too burdensome.  In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.

In the NOI, Promoting Transmission Investment Through Pricing Reform, FERC is seeking comments about the effect of its incentives on promoting transmission.  If you're going to comment, you need to understand what the incentives are, and what they are intended to do.


FERC wants your thoughts regarding "additional goals in Section 219," specifically the imbalance that exists between what FERC believes are differing goals in 219(b)(1) and 219(b)(3).

219(b)(1) calls for the Commission to promote "reliable and economically efficient transmission and generation of electricity by promoting capital investment in the enlargement, improvement, maintenance, and operation of all facilities for the transmission of electric energy in interstate commerce..."  FERC believes "the enlargement" includes construction of new facilities.

219(b)(3) encourages "deployment of transmission technologies and other measures to increase the capacity and efficiency of existing transmission facilities and improve the operation of the facilities."

FERC wants to know why the vast majority of transmission projects applying for incentives have focused on new transmission lines (the enlargement) and few have focused on improvement of existing transmission lines.

It seems to me that BOTH sections of 219 are, in reality, pointing to the upgrade of existing transmission.  However, the power companies have figured out that promoting projects that call for the addition of new, totally separate transmission projects are more lucrative to their bottom line.  Modernizing existing transmission (average age 40 years) just doesn't cost as much and doesn't provide as much wiggle room for padding of expenses.  Because the power companies earn a very high return on the amount invested, the more they invest, the more they profit.

FERC has stated that the "reliability benefits of operation and maintenance capital spending are obvious, and we expect applicants incurring this type of capital spending will be able to demonstrate reliability benefits and thereby be eligible for incentive treatment."  However, the power companies are not interested in improving existing transmission.  They may become interested eventually, when they have over built all the new transmission they can get away with and have to content themselves with the leftover crumbs, but it will take a whole bunch of improvement projects to equal the profit to be had on one new project.

In the meantime, our landscape is littered with aging, inefficient transmission lines that are increasingly subject to failure, which decreases reliability.  The argument that aging transmission causes the need for supplementation by new transmission is a self-fufilling prophecy.  Instead, if the focus was pushed toward rebuilding of existing transmission, it could obviate the need for new transmission.  We witnessed this happening with the PATH project.  For reasons I'm not going to get into, Dominion proposed the rebuilding of two existing transmission lines as an alternative to the new PATH transmission project.  However, their proposal was given the run-around at PJM, who attempted to sweep it under the rug.  PJM's favoritism of the PATH project (and thereby the PATH parent companies' financial gain at the expense of PJM's ratepayers) aptly demonstrated their bias and agenda to produce profit for their members, instead of their supposed mission of ensuring a reliable transmission system.  I don't know what goes on in the other RTOs, but PJM demonstrated why improvement of existing transmission is not being proposed in PJM.

For these reasons, perhaps FERC should require an independent (and because of demonstrated bias, this would not include PJM) evaluation of new transmission projects to determine if upgrades to existing transmission would serve the same purpose quicker and cheaper before granting incentives.  This would also satisfy the requirement that incentive projects benefit consumers and the whole "just and reasonable rates" mission.

Transmission owners should be required to evaluate their existing lines with an eye toward replacement before proposing new transmission projects, just as the staff of the WV PSC has suggested in their recent petition.  I realize that some new transmission may still be needed to connect new generation, however new long-distance transmission like PATH, intended to increase existing power flows parallel to existing, but "congested"and inefficient, transmission lines won't be needed.

Now that you've contemplated new vs. existing transmission, go look at FERC's questions beginning on page 13 of the NOI and formulate your comments/suggestions for FERC.  I'm sure you creative consumer "stakeholders" can make suggestions that the industry won't even ponder.  The industry will be letting FERC know how they can and should sweeten the pot even further for them.  It's up to you to provide balance with a little real world sanity.

If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material.  You don't have to comment on all aspects of the NOI if that's too burdensome.  In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.

In the NOI, Promoting Transmission Investment Through Pricing Reform, FERC is seeking comments about the effect of its incentives on promoting transmission.  If you're going to comment, you need to understand what the incentives are, and what they are intended to do.

We all know about budgets.  People live within their own financial comfort zone, and even corporations and governments must operate within certain set budgets (no, we're not starting a political debate!)  Failure to stay within budget causes personal financial problems, and in the case of corporations and governments, failure to stay within budget can turn a project into financial disaster.  Imagine a product that costs more to make than can be recouped through sale.  You wouldn't stay in business long if you were unable to properly budget.

FERC believes that transmission projects that receive incentives should not be limited by a budget.  In FERC's world, the cost of a project will never outweigh its benefits to consumers.  This is unrealistic because there is always a tipping point when the cost becomes greater than the benefit.  Now FERC ponders if there is a role for cost estimates in their transmission incentives policy.  However, they worry that limiting incentives to original budgeted amounts could be punitive when escalating costs are beyond the control of the transmission owner. 

FERC is under the assumption that the regional planning process places some weight on cost estimates when evaluating projects.  During the PATH battle, we have heard that there is no price too high at which point building PATH would become uneconomical.  The cost of PATH played no role in PJM's selection and stubborn loyalty to this project, even when faced with less costly alternatives, such as the Liberty Line and Dominion's Alternative One.  In fact, PJM went so far as to evaluate the cost of the Liberty Line in a biased manner that created a conflict of interest, in order to make the cost of PATH appear "economical".  We know that PJM is incapable of rationally utilizing cost estimates in selection of projects.  FERC gives them way too much undeserved credit.

FERC should limit transmission incentives to budgeted amounts only.  Their current system encourages unbridled spending because the more the project costs, the greater the financial reward for the transmission owner.  A project should be re-evaluated if cost estimates change.  FERC needs to remember the consumer whose cost of delivered power is being reduced by the transmission project because there will come a point at which project costs actually increase, instead of reduce, the consumer's cost of delivered power.

Now that you've contemplated the role of cost estimates, go look at FERC's questions beginning on page 21 of the NOI and formulate your comments/suggestions for FERC.  I'm sure you creative consumer "stakeholders" can make suggestions that the industry won't even ponder.  The industry will be letting FERC know how they can and should sweeten the pot even further for them.  It's up to you to provide balance with a little real world sanity.

If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material.  You don't have to comment on all aspects of the NOI if that's too burdensome.  In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.

In the NOI, Promoting Transmission Investment Through Pricing Reform, FERC is seeking comments about the effect of its incentives on promoting transmission.  If you're going to comment, you need to understand what the incentives are, and what they are intended to do.

FERC says that the granting of an incentive to a transmission project does not preclude the same project from receiving other incentives.  Therefore, they often grant multiple incentives and create a total incentive package that involves absolutely no risk for the transmission owner and their shareholders, and the promise of big financial rewards if a project is completed.  For example, the abandonment incentive allows the transmission owner to recover 100% of prudently incurred costs if the project is abandoned through no fault of their own.  Right there, all risk is removed from the transmission owners and investors and put upon the ratepayers, who shoulder all the burden without any stake in the process.  Once all risk is removed by the granting of this incentive, are any others necessary? 

A project can also receive the CWIP in rate base incentive, which allows them to begin earning a return immediately, while the project is in the planning and construction stages.  And about that return, it's very lucrative, with incentive ROE adders in addition to an already generous base rate.  After that,  FERC can also add in a generous hypothetical capital structure and recovery of pre-commercial costs, and then let the transmission owner recover their rewards at a faster rate through accelerated depreciation.  The effect of all this creates a sickeningly sweet feast that no corporation can resist. 

Because they can't lose, transmission owners will propose all sorts of projects that aren't needed and then try to hold on to them long after they should have rightfully been abandoned.  The transmission owners feel justified to go to whatever devious lengths and stoop to whatever nefarious deeds are necessary to obtain right-of-way and get needed state project approvals because the promised rewards are huge and there is no financial risk involved in failure.

As you contemplate the interrelationship of multiple incentives, keep in mind that FERC is attempting to strike an acceptable balance between consumer and investor interests and reduce your cost of delivered power!  On the investor side of the scale you have zero risk and huge financial incentives and on the consumer side of the scale you have all the risk of badly planned and executed transmission projects and huge financial costs.  Where's the balance?

In the real world, we know that too much of a good thing often has catastrophic results.  You need to explain that to FERC, in as plain a manner as possible.  On page 19 of the NOI, FERC asks a few questions about the interrelationship of incentives.  I'm sure you creative consumer "stakeholders" can make suggestions that the industry won't even ponder.  The industry will be letting FERC know how they can and should sweeten the pot even further for them.  It's up to you to provide balance with a little real world sanity.

If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material.  You don't have to comment on all aspects of the NOI if that's too burdensome.  In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.