Second big Sunday story to blog about today, the St. Louis Post-Dispatch's examination of Clean Line as "a new kind of transmission developer."
This "new kind" of transmission developer is attempting to build transmission based on a "merchant" model. Under this construct, the transmission developer shoulders all project risk. In traditional transmission development, a project is ordered to be built by a regional planning entity to meet some reliability, economic or public policy need. Because the project is undertaken to supposedly benefit regional ratepayers, a developer charges its project costs to ratepayers. Ratepayers absorb the risk of successful development. Clean Line's merchant projects chose not to proceed through this traditional process, therefore there is no determined need for its projects. They are proposed completely as a speculative, profit-making venture, supposing that if they build it, a need will develop. If Clean Line fails, its investors lose their investment. There's no ratepayer-guaranteed regulated return. Clean Line accepts all risk for its market-driven projects.
However, Clean Line has told state regulators that it may "have to" apply to regional planning authorities for cost allocation of its projects in the future. In fact, Clean Line has been busy behind the scenes in the past, trying to drum up support for cost allocation of its projects. Clean Line's "build it and they will come" strategy may also extend to getting its projects permitted, customers signed up, and then dumping the entire thing into the regional planning process as a needed "can't fail" project. Beware, the enemy is at the gate!
So, Clean Line must shoulder all market risk of its voluntarily-undertaken projects. However, Clean Line also wants state public service commissions and the U.S. DOE to grant it the power of eminent domain to take private property for use in its projects. Eminent domain authority provides compensation to property owners for their property taken for use in public projects. It also ensures that holdouts cannot derail a project, and that property is acquired at a reasonable price so public projects aren't burdened by the expensive land acquisition costs that a developer would be faced with if land acquisition wasn't forced on property owners. There's a huge disconnect here! If the privately-funded Clean Line is shouldering all market risk of its projects, that includes the cost of voluntary land acquisition. Further examination of Clean Line's business model notes that the rates it may charge customers include all project costs, plus profit. Cheaper land acquisition allows lower rates and/or higher profits -- Clean Line's choice. Assuming all market risk for its project should also include the financial risk of voluntary land acquisition.
Clean Line's request for eminent domain authority is the driving force behind the huge rebellion of landowners, citizens, and local governments in seven target states. Clean energy advocates and environmental organizations have unwisely chosen to involve themselves in the debate. The Post-Dispatch talked to a representative of one such group, the National Resources Defense Council, who showcased his disconnect with the grassroots opposition groups:
This "new kind" of transmission developer is attempting to build transmission based on a "merchant" model. Under this construct, the transmission developer shoulders all project risk. In traditional transmission development, a project is ordered to be built by a regional planning entity to meet some reliability, economic or public policy need. Because the project is undertaken to supposedly benefit regional ratepayers, a developer charges its project costs to ratepayers. Ratepayers absorb the risk of successful development. Clean Line's merchant projects chose not to proceed through this traditional process, therefore there is no determined need for its projects. They are proposed completely as a speculative, profit-making venture, supposing that if they build it, a need will develop. If Clean Line fails, its investors lose their investment. There's no ratepayer-guaranteed regulated return. Clean Line accepts all risk for its market-driven projects.
However, Clean Line has told state regulators that it may "have to" apply to regional planning authorities for cost allocation of its projects in the future. In fact, Clean Line has been busy behind the scenes in the past, trying to drum up support for cost allocation of its projects. Clean Line's "build it and they will come" strategy may also extend to getting its projects permitted, customers signed up, and then dumping the entire thing into the regional planning process as a needed "can't fail" project. Beware, the enemy is at the gate!
So, Clean Line must shoulder all market risk of its voluntarily-undertaken projects. However, Clean Line also wants state public service commissions and the U.S. DOE to grant it the power of eminent domain to take private property for use in its projects. Eminent domain authority provides compensation to property owners for their property taken for use in public projects. It also ensures that holdouts cannot derail a project, and that property is acquired at a reasonable price so public projects aren't burdened by the expensive land acquisition costs that a developer would be faced with if land acquisition wasn't forced on property owners. There's a huge disconnect here! If the privately-funded Clean Line is shouldering all market risk of its projects, that includes the cost of voluntary land acquisition. Further examination of Clean Line's business model notes that the rates it may charge customers include all project costs, plus profit. Cheaper land acquisition allows lower rates and/or higher profits -- Clean Line's choice. Assuming all market risk for its project should also include the financial risk of voluntary land acquisition.
Clean Line's request for eminent domain authority is the driving force behind the huge rebellion of landowners, citizens, and local governments in seven target states. Clean energy advocates and environmental organizations have unwisely chosen to involve themselves in the debate. The Post-Dispatch talked to a representative of one such group, the National Resources Defense Council, who showcased his disconnect with the grassroots opposition groups:
“Clean Line’s not asking everyone within the region to pay for the line,” Moore said. “That’s the piece that sometimes causes state utility commissioners to pause, because the commissioners haven’t seen this kind of truly competitive business plan before.”
“The more favorable decisions from commerce commissions, the more opposition will recede,” Moore said.
Clean Line's business plan isn't "competitive," it relies on a government-granted right to condemn and take property. If Clean Line's compensation package was so great, landowners would be falling all over themselves to sign on. Instead, the company is looking at condemnation rates north of 80%. 80% of needed land condemned through eminent domain! Never going to happen.
Moore is also completely WRONG in his contention that opposition will recede if public service commissions (or the U.S. DOE) make decisions favorable to the project. Perhaps Moore doesn't want to acknowledge that Clean Line's "approval" in Illinois for its RICL project was conditioned on land acquisition being voluntary. That's right... no eminent domain authority for Clean Line in Illinois. Why? Because those resistant 80% of targeted landowners number in the thousands and the political price would be too great. Decisions favorable to Clean Line's land grab will actually drive increased opposition and public revolt. The opposition numbers in the thousands and extends across seven midwest states (double in Illinois because it is a target of both the RICL and GBE projects). And it's increasing every day. Moore knows nothing about the Clean Line opposition and doesn't care to. He's just pontificating in a most revolting way. Maybe he should get to know an opponent or two before telling the media how they're going to react to PSC decisions?
Clean Line has no customers and is facing increased public and political opposition. It's the poster child for a "new kind" of transmission development failure.
Moore is also completely WRONG in his contention that opposition will recede if public service commissions (or the U.S. DOE) make decisions favorable to the project. Perhaps Moore doesn't want to acknowledge that Clean Line's "approval" in Illinois for its RICL project was conditioned on land acquisition being voluntary. That's right... no eminent domain authority for Clean Line in Illinois. Why? Because those resistant 80% of targeted landowners number in the thousands and the political price would be too great. Decisions favorable to Clean Line's land grab will actually drive increased opposition and public revolt. The opposition numbers in the thousands and extends across seven midwest states (double in Illinois because it is a target of both the RICL and GBE projects). And it's increasing every day. Moore knows nothing about the Clean Line opposition and doesn't care to. He's just pontificating in a most revolting way. Maybe he should get to know an opponent or two before telling the media how they're going to react to PSC decisions?
Clean Line has no customers and is facing increased public and political opposition. It's the poster child for a "new kind" of transmission development failure.
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