Thanks for the earnings call fun today, FirstEnergy.  It gave Patience and I an excuse to dine on fancy sandwiches and cornichons, drink Raging Bitch, make certain hand gestures at the voices coming out of my laptop, and laugh at all the stupid things your NEOs said.  And a fun time was had by all... at least on this side of the internet connection!

"FirstEnergy's third quarter net income this year tumbled to about half of what it was a year ago," read the lead of The Plain Dealer's pre-call story.  I had to quickly whip up a side of schadenfreude to serve with lunch!

Tony the Trickster mentioned that, after recent closings, his "fleet" of generators is now about the same size as FirstEnergy's "fleet" was at the time it merged with and swallowed up the former Allegheny Energy.  This wouldn't be the first time I pondered if the merger's sole purpose was to carve up the Allegheny carcass, saving that which benefited FirstEnergy and tossing the rest on the rubbish heap.  When does the sale of troubled Allegheny distribution subs begin, now that FirstEnergy has accomplished its evil plan to raise cash by sucking the lifeblood out of Mon Power/Potomac Edison and leaving a dried up, debt-laden shell that no longer provides service to its customers?

It's all about Tony's "plan" to pull his ass out of the fire. It never was about serving customers, or any of that other dreck two of the WV PSC Commissioners wanted to believe.

Tony's next great plan is to plop his "spend" into regulated transmission investment accounts that earn risk-free, high returns.

This announcement turned the analysts on the call into curious monkeys who wanted to know all about tricky Tony's tantalizing transmission targets, but that wiley old geezer strung them along, talking about rebuilding lower voltage lines that don't require regulatory approval and said he would talk more about it at an upcoming EEI conference.  Tony also said that the company is primarily looking to "spend" inside its footprint and not looking for projects that have long lead times with respect to either approval processes or likely construction processes.  Because they learned their lesson with PATH? Someone's been paying attention in class!  But he forgot to tell them about FirstEnergy's proposal for a project to solve PJM's Artificial Island issues, and any lingering ratepayer-funded PATH assets that may still be kicking around.  Do you think the curious analysts were only pretending to be that clueless?

In response to a question about coal costs, Donny started talking about pulling his lever.  I'll spare you the hand gestures that instigated.  And before the laughter had died down, Tony started talking about the possibility of things being soft down the road...

I love my job.

Interested parties ask for information and clarification.

Time is quickly running out to send in your RSVP for PATH's upcoming "Open Meeting."  Follow the instructions here to send your RSVP for the meeting to PATH's lawyer on or before Oct. 28.

This isn't a real "meeting."  An overconfident and arrogant PATH wasted your money for several years holding actual in-person meetings, complete with coffee & donuts, at its fancy DC counsel's office.  However, the whimpering remains of PATH now holds this "meeting" over the phone via conference call.

During the call, you can ask PATH any questions about its plan to collect another $39.8M from you in 2014.  If you are a party to the abandonment case, you cannot ask about that case, but only about the information contained in the 2014 Projected Transmission Revenue Requirement filing linked above.  Silly, yes, but when has PATH ever been logical?

A lot of you have been asking me what's going on with the abandonment case and why PATH continues to collect money from you.  Until that case settles or is heard, PATH is permitted to continue to collect the reimbursement it requested when it filed for abandonment.  If, after the case is over, it is determined that PATH has collected more than it is allowed, PATH will have to refund the difference to you.

So, send in your RSVP for the November 1 @10:00 a.m. phone meeting and belly up to the farcical ratepayer question bar.  If you don't come, PATH will think you don't love them anymore.

...and they'rrrrrrrrrrrrrrrrre off!

Eager and hopeful transmission builders in PJM are now busy with their transmission line routing Etch-a-Sketches, drawing a new transmission line through your back yard, and hoping that their proposal will be anointed Miss Market Efficiency 2013 and take home the big prize.  In mid-August, PJM "began invit­ing com­pet­i­tive pro­pos­als for trans­mis­sion improve­ments to pro­vide relief at its 25 most con­gested locations."  According to RTO Insider, the deadline to submit new transmission proposals for consideration is September 26.

FERC's Order No. 1000 removed the historical "right of first refusal" to build new projects from incumbent transmission owners.  Under the prior scheme, when PJM determined that a new project was needed, it was first offered to the incumbent transmission owner in that zone.  If the incumbent declined to build it, then the project was opened to competitive bidding.  But I'm not sure that ever happened.  After all, what greedy transmission owner would ever turn down the chance to make more money with new transmission investments returning double digit interest?  Under the new scheme, when PJM identifies a new transmission building opportunity, a project proposal window is opened and all transmission owners who have been pre-qualified may submit new project proposals that solve the transmission issue.  PJM then descends into its secret underground lair with all the bids and makes a subjective selection of the contest winner.

PJM's "Market Efficiency" project "need" is based on identified "top 25 congestion events."  What is economic congestion?  It's when not enough transmission capacity exists to wheel the cheapest power available to all users.  It doesn't mean that someone's lights will go out if this power can't be transmitted from point A to point B.  It simply means that the user may have to pay slightly more for power produced locally, instead of relying on "cheaper" generators hundreds or thousands of miles away.  Economic congestion is a constantly shifting premise that can never be entirely eliminated.  At some point, the cost of building new transmission to ship power from point A is going to obviate any cost savings at point B.  Trying to build new transmission to solve an ever-changing economic and demand situation is like trying to herd cats.  And it's going to cost you... a lot!

So, where are these "top 25 congestion locations?"  RTO Insider has a handy-dandy chart here.  And it's a good thing they do, because if you want any more details than that, you have to know PJM's secret handshake to be allowed to delve into "Critical Energy Infrastructure Information" (CEII).  Transparent, right.

RTO Insider tells us that 8 of the 25 are flowgates between PJM and MISO, where power is traded between regions.  Within PJM, the most congested point is the AP-South inter­face with Bedington-Black Oak.  According to PJM, the Bedington – Black Oak Transfer Interface (Bed-Bla) includes the Bedington Black Oak 544 line, and the AP South Transfer Interface includes the Doubs - Mt. Storm 512 line and the Mt Storm – Meadow Brook 572 line.  Sound familiar, former PATH opponents?  Bedington is located in Berkeley County, WV, and was part of PATH's original configuration.  Black Oak is located near Rawlings, MD, in Allegheny County, just to the west of PATH's proposed Kemptown substation.

But, wait a tick... just last year, FirstEnergy told the WV PSC that everything was hunky-dory with its West Virginia transmission system.  Guess not, but then admitting your problems and fixing them before they get out of hand and cause the construction of new transmission projects doesn't bring home the bacon for Big Daddy Tony, now does it?

Earlier this summer, PJM's Steve Herling had much to say about PJM's new transmission proposal competition.

Steve Herling doesn't think much of you little people.  In fact, it appears that you are just so much doggie doo on his shiny, expensive shoes.  Herling sees you as someone who must be kept in the dark so that you don't interfere with PJM's "open and transparent" project selection process.

Such infor­ma­tion would include “a line from A to B, imped­ance mod­el­ing, so peo­ple can ana­lyze [the pro­pos­als],” Her­ling said. “We won’t put out right of way infor­ma­tion. You’d get the pub­lic all stirred up that ‘we’re look­ing at your property.’”

Right, Steve, but why shouldn't "the public" get stirred up about having their property taken by eminent domain to construct new transmission lines of dubious necessity?  We've already been stirred and shaken by PJM's last little foray into big, new transmission projects that brought us the wasteful, and since abandoned, PATH and MAPP projects.  We pretty much stay stirred here at StopPATH blog.  All.the.time.

And Herling also gives us a look at how PJM will evaluate project proposals in its secret underground lair:

“If you have half the right of way in hand, that cer­tainly will have an impact on cost and reg­u­la­tory risk and would prob­a­bly affect con­struc­tion time,” Her­ling said. “To give you credit, we would have to dis­close some infor­ma­tion. We don’t have to talk about indi­vid­ual pieces of prop­erty you have."

So, a transmission developer who has land held for future use in its collection of assets would have a leg up on building new projects?  That hardly seems fair, when that property was paid for by ratepayers, and the competition does not have the same ability to have the public pay to buy it valuable assets that can be used to win future transmission projects.  In fact, it's sort of like a new and even more lopsided ROFR, isn't it?  FERC said ROFRs are no longer legal in Order No. 1000.

In another thoughtless move, "the RTO plans to hire inde­pen­dent con­sul­tants to val­i­date devel­op­ers’ cost esti­mates and iden­tify poten­tial reg­u­la­tory risks, such as the like­li­hood of obtain­ing sit­ing for rights of way."

Gosh, I wonder where PJM is going to find an "independent" consultant who hasn't worked for any of the pre-qualified entities in the past and is not expecting to do so in the future?  Yeah, good luck with that, PJM.

Herling believes all this nonsense is transparent:

“If it becomes obvi­ous that we’re rely­ing heav­ily on one piece of infor­ma­tion we’re going to have to make it pub­lic — and you might still not get cho­sen,” he con­tin­ued. “… We’ll have to make sure it’s trans­par­ent and above board to defend our­selves against challenges.”

And now, thanks to the invaluable RTO Insider and this blog... it is a little more transparent than PJM envisioned it would be.  Now YOU know about it.  Stay tuned...

Transmission's biggest cheerleaders met last month in San Diego to talk about a subject near and dear to their wallets.  During his presentation to his fellow speculators, Ray Wood, head of U.S. power and renewables at Bank of America Merrill Lynch said:

Wood wasn't just bragging, however, but trying to convince everyone that transmission needs big, double-digit rates of return in order to attract capital.

According to Wood, funds for transmission are readily available, however transmission is so risky that no one wants to invest in it until a project has been awarded a "notice to proceed."

This is a lie.  There is no risk involved in building transmission.  Transmission incentives awarded by FERC routinely place all risk on consumers.  One incentive awarded by FERC to all who ask is guaranteed recovery of 100% of prudently-incurred project cost.  Another is the ability to collect a return on investment during  the construction period (CWIP in rate base).  The investor cannot lose if he is guaranteed to receive his entire investment back, plus a generous return, even before the project is constructed.

What Wood is whining about is that brief period of time between the day some transmission owner rolls out of bed with the idea to build a transmission goldmine, and the day incentives and a formula rate are approved by FERC.  This is the only time when investment isn't earning a great big return.  After that, it's all $$$$$!

Wood pretends that there's some further risk during other necessary approvals, such as a state CPCN or an environmental review.  The investor is still earning during this time -- where's the risk?  The only "risk" is that a project may be abandoned if it cannot buy necessary approvals, therefore the "sky's the limit" amount of investment that it was possible to make actually constructing the project is curtailed, and the investor is left with a smaller investment that is still earning around 12%.  Oh, boo hoo.

And what about projects sponsored by transco spinoffs of gigantic investor owned utilities?  These companies often self-finance the early cost of a project by borrowing at the parent company level at extremely low rates, and then earning a 14.3% return on that investment.  In the case of the PATH project, the company never borrowed any money, however they still collected a 14.3 or 12.4 percent return on money they probably borrowed at 3 or 4%.

So, how do we fix this to make both Wood and electric consumers happy?  How about setting limits on incentive rate of return periods to coincide with the "risky" periods of a transmission project?  Transmission is only competing with other investments at the beginning.  Once the investment is made and the project constructed, all risk disappears.  So, what if incentive ROEs were gradually lowered over the life of the asset?  As well, incentive ROEs should not kick in until an actual investment in the project has been made by an entity other than the company or its parent.  Transmission owners are scamming us big time!

Last week, PATH held its "Open Meeting" to discuss its 2012 transmission revenue requirement true up and answer questions from interested parties.  Well, at least that's what the meeting notice said...

However, PATH couldn't (or wouldn't) answer questions, instead PATH made crap up.  Randy's never going to learn, is he?

Emboldened by a question from one participant about the cost of legal counsel to defend the formal challenges, Randy answered a question about how PATH-Allegheny could have possibly had 5.1 full-time employees on an abandoned project in 2012 by telling everyone that "most" of that time was spent answering information requests about its formula rate filings.

Let's see, Randy, 5.1 full-time employees at 2080 hours each equals 10,608 hours spent answering 270 individual questions, "most" of which PATH refused to answer because they were alleged to be harassing, oppressive, annoying and burdensome.  That equals 39.28 hours per question, including those where a refusal to answer was merely copied and pasted into PATH's response.  That's nearly a work week.  It took PATH one full work week to answer each question?

Right.

Stop making crap up when you're talking to accountants, okay?

And when given the opportunity to answer questions informally over the phone during the Open Meeting and save all those work hours in 2013?  PATH refused and asked interested parties to submit written information requests.

The arrogant energy industry and their paid media pimps continually pretend they know what consumers want.  They believe that if they write and publish enough lies that consumers will start to believe them.

Not.

Forbes "contributor" Ken Silverstein tells us that "Utilities would have an easier time building transmission lines if it were not for a feisty public, which generally feels that those ugly lines ought to be built somewhere else."

Really?  This guys bills himself as "editor-in-chief for Energy Central's EnergyBiz Insider. With a background in economics and public policy, I've spent two decades writing about the issues that touch the energy and financial sectors. My EnergyBiz column has twice been named Best Online Column by two different media organizations."  However, his NIMBY name calling merely showcases his complete ignorance of the dynamics of current transmission policy debate.  Is he really this clueless, or is he merely posturing for the crowd to parrot power company propaganda?

Let's take a look at just a few of the facts Silverstein gets wrong:

1.    "...the transmission grid is aging and it needs to be updated and expanded so that it can fulfill the needs of consumers — many of whom don’t want those unsightly lines near them."

WRONG!  The transmission grid was not designed to wheel energy from coast to coast to fill the pockets of greedy traders.  The industry is not spending enough capital "upgrading" for any real need, but has been banging its head against a brick wall attempting to "expand."  Let's look at just one example:  While PATH was shooting blanks attempting to get its new build project approved, Dominion slipped in and quietly punked AEP/FirstEnergy with the rebuild of an existing line that completely obviated the PATH project.

Consumer issues center on NEED and COST.  It's not about NIMBY anymore.  How loud do you suppose Silverstein would squeal if someone routed a transmission line through his own backyard?  Silverstein loves new transmission... as long as there's no personal sacrifice on his part involved and it's not in his backyard, therefore, Silverstein is the real NIMBY.

2.    "Inevitably, disputes emerge that typically center on the potential ecological harm that a given line may take. In other instances, the arguments are that the development is occurring in states that will not get the benefit of the added electricity, or that it would increase the usage of coal.

Such was the case when American Electric Power and FirstEnergy Corp. tried to build the so-called Potomac Appalachian Transmission High-Line, which would have stretched 275 miles from West Virginia into Maryland. The PJM Interconnection, which coordinates the transmission planning for the MidAtlantic states, has now withdrawn the project. It has done the same for Pepco Holding’s Mid-Atlantic Power Pathway, although both concepts could get resurrected once the economy is in full swing."

WRONG!  PJM cancelled the PATH project because it was not needed, not because of cost allocation, environmental or coal-related issues.  The opposition to PATH was ALWAYS based on the fact that the project was not needed. 

PATH and MAPP are not going to be "resurrected," and neither is an energy-wasting economy that increases energy demand.  Consumers in the PJM region are already on the hook for the quarter billion dollars wasted developing the unneeded PATH project, a project that will never provide consumers with any benefits.  None.  Zero.  PATH and MAPP were part of an industry money-making scheme named Project Mountaineer and were never needed for reliability or market efficiency.

3.    "While the concerns and the subsequent legal battles are well intended, they oftentimes perpetuate uncertainty. That is, investors are skeptical because they can make more money in alternative investments while the delays impede reliability. And if brownouts or rolling blackouts occur, the financial toll can mount."

WRONG! Brownouts and blackouts?  I haven't heard that kind of fear-mongering since PATH got shelved.  Get a grip, Silverstein.  You and I both know that is NEVER GOING TO HAPPEN.  Silverstein goes on about new transmission needed for renewables and then tosses in the blackouts invective?  Sorry, but the lights will not go out if renewables can't be transported coast-to-coast. 

Investors are salivating at the prospect of plunking their dollars into transmission investments making double-digit returns, despite the industry's "the sky is falling" whining.  As well, transmission projects can and do request formula rates and incentives that provide them with a continual return during the development and construction period.  There's absolutely no risk to transmission investors.  None.  Zero. 

Maybe Silverstein should do some research before he approaches a keyboard in the future.  There's plenty of information to be had on this website.  Maybe Silverstein could learn a few things about his topic here?  And maybe, just maybe, he might want to consult a consumer before writing more folderol about what they want.

It's that time again, PJM ratepayers!  PATH's yearly shuckin' and jivin' about how they spent your money last year is coming up on August 1. 

On June 3, PATH filed their 2012 Annual Update to true up the amount it collected from you during the year to the amount it actually spent.  It looks like PATH made an inaccurate estimate and now your bill is much, much higher than you expected.  PATH says you owe them an extra $5M that they will collect from you in 2014.

If you have questions about PATH's filing, send in your RSVP to join the phone "meeting" to get answers.  Just follow the instructions in the meeting notice.

You must RSVP before July 26 so our friends at PATH can have enough imaginary food, drinks, and goodie bags on hand for all telephonic participants.

The Federal Energy Regulatory Commission granted Ali & Keryn's third Formal Challenge (2011 rate year) and consolidated it with the other two Challenges (2009 and 2010 rate years) for settlement and hearing.

The third Challenge added another $4.4M to the total amount in dispute.

You can read a copy of the Commission's Order here.

Here's your next piece of puzzling FERC art to ponder, little ratepayers.  This paper mache sculpture located in the lobby leading to the hearing rooms is entitled "Redtape."

1. Who do you think is represented by the fella in the gray suit?
2. Who do you think is represented by the little briefcase carrying blue suits?
3. Is there a big pile 'o ratepayer cash just out of the photo on the left?
4. Do you think different participants in any particular conference would interpret this sculpture differently?
5. Do the people who work at FERC ever contemplate the message they send to ordinary folks with stuff like this?

You gotta admit it's better than nondescript landscape paintings or boring galleries of old Commissioners dressed in the height of 1950s fashion.

More to come from future trips...

One last question:  Will FERC run out of whimsical art to feature before we conclude this settlement?