Clean Line Energy Partners is not a Public Utility

The best part about traveling is coming home and catching up on your reading.  Especially when it's a lot of reading of legal briefs on transmission line cases.  Reading a whole bunch of briefs on different Clean Line projects in different states, and in different stages of the legal process, made one thing abundantly clear.  Clean Line Energy Partners is not a public utility.  None of its projects are public utilities.  Nor can they ever be public utilities.

How else to explain finding the exact same arguments before both the Illinois Supreme Court, and the Missouri Public Service Commission?  Two different projects, two very different processes.

The Illinois Farm Bureau's brief at the Illinois Supreme Court cuts right to the chase:

"What Rock Island is asking the Commission to do is grant it a CPCN so it looks like a 'public utility' for purposes of condemning private property to build its line, while at the same time it plans to offer only a token percentage of that line's capacity for 'public use'. The transmission service that Rock Island plans to provide on its transmission line does not meet the public use standard under Section 3-105 of the PUA." (R.V27, C6629).
These are the words of the ICC Staff at the close of a five day evidentiary hearing at the
Commission on Rock Island's Verified Petition. Rock Island is not a public utility, and it does not commit to serve the public. Despite the express language of the PUA, Rock Island, as a non-utility startup company, sought a CPCN from the Commission for which it is not statutorily eligible. Rock Island's public policy arguments regarding an apparent desire for an expansion to the statutory definition of''public utility" should have been, and still can be, made to the legislature.

Clean Line is trying to shoehorn a square peg into a round hole.  It only wants to be a "public utility" so that it may be granted eminent domain authority.

The same basic argument shows up in the Initial Brief of Show Me Concerned Landowners before the Missouri Public Service Commission:

Grain Belt Express is a merchant transmission company. It is proposing to build a participant funded transmission line. As such, neither the applicant nor the proposed project embody the business characteristics the Legislature authorized this Commission to regulate.

The Court recognized that when a private business enters into special contracts upon its own terms and not at a regular rate, there is not only no need for the Commission to regulate, to do so would be a violation of the constitution. The purpose of regulation is to bring the power of government to bear on a common carrier service. Private initiatives not devoted to the public use of all do not justify the comprehensive regulations dictated by the Public Service Commission Law. Stated another way, when facilities are not devoted to a public use, there is no need for the Commission. That is the situation before the Commission in this Grain Belt Express case.

Two different cases.  Two different states.  Same basic precedent.

But wait... let's add a third state!  Because that's basically what Arkansas said when presented with Clean Line's Plains & Eastern project back in 2011.

The issues presented by this case are twofold: (1) whether Clean Line fits the statutory definition of an Arkansas “public utility” and is entitled to a CCN to provide public utility service in the state; and (2) if so, whether Clean Line is entitled to exemption from certain public utility statutes. For the reasons stated more fully below, the Commission finds that Clean Line does not meet the statutory definition of a public utility at this time.  The Commission’s ruling on the first issue moots the necessityof ruling on the second.
The Commission is a creature of the General Assembly, and it performs a legislative function in regulating all public utilities. Bryant u, Arkansas Pub. Sew. Comm‘n, 46 Ark. App. 88,877 S.W.2d 594 (1994); Sw. Bell Tel. Co. v. Ark. Pub. Serv. Comm’n, 267 Ark. 550, 593 S.W.2d 434 (1980).  The Commission’s statutory mandate extends to and includes “all matters pertaining to the regulation and operation of all ... electric lighting companies and other companies furnishing gas or electricity for light, heat, or power purposes.” Ark. Code Ann. 23-2-302.

The Commission’s decision in this case turns on the statutory definition of a “public utility” found in Ark. Code Ann,  23-1-101(9)(a) cited above. Although Clean Line’s presentation of its case was strong on policy considerations and certainly Clean Line worked hard to analogize its case to that of the SPP RTO, the Commission’s authority cannot exceed that which is delegated to it by the Arkansas General Assembly. The “public utility” definition requires “owning or operating in this state equipment or facilities for...transmitting...power to or for the public for compensation.” Ark. Code Ann. 23-1-101(9)(A).

The Parties’ legal filings and opening arguments at the December 7 hearing discussed to varying degrees what each of these key phrases means, but the Commission is not convinced the totality of the evidence satisfies this statutory threshold. Recognizing, as Clean Line pointed out, there is some circularity involved in the fact that Clean Line cannot own or operate regulated major utility facilities pursuant to Arkansas law in this state without first being declared a public utiliity, in isolation, this portion of the statute is not determinative of Clean Line’s utility status. However, read in tandem with the facts that the transmission of the power must also be “to or for the public for compensation’’ when Clean Line, to date, has no contracts for public utility service with any utility, including Arkansas utilities, and there also can be no transmission of power at this time, the Commission is not prepared to approve Clean Line’s CCN Application.

So Clean Line doesn't meet the definition of public utility in at least 3 states.  But nevertheless, Clean Line dolled itself up and presented as a public utility to numerous state regulatory agencies.  Even when a state is initially fooled by Clean Line's public utility costume, the courts have not been tricked.

I think we're on to something here...

If Clean Line Energy Partners is not a public utility, then the company can never use eminent domain to condemn land upon which to build its projects.  I think this is the simplicity we've all been searching for over the past five years to explain why CLEP is different from other transmission lines, and why it should never be granted eminent domain authority.

Sure, we've talked about the company being a private, for-profit enterprise, but so are other investor-owned utilities who build transmission.  We've talked about CLEP's failure to vet its plan at regional transmission organizations, but that in and of itself isn't necessary to build transmission.

There's absolutely nothing stopping CLEP from building its projects on voluntarily negotiated rights of way, or having voluntarily negotiated rights of way and committed customers in hand when applying for public utility status from any individual state regulatory authority.  Except CLEP can't do that.  CLEP won't do that.  CLEP has applied in various states to be granted public utility status with nothing but a business plan.  CLEP tells state regulatory commissions about its plans in the future tense.  Someday it will own utility property.  Someday it will have customers.  Someday it will negotiate rates with customers.  Someday it will get financing.  Someday it will hire employees with the expertise to build transmission lines.  Someday.  Someday.  Someday.  CLEP wants to be granted the rights of a public utility now without any of the responsibility that comes with it. 

CLEP needs the state regulatory process to grant it eminent domain authority to assemble rights of way.  But in order to be granted that authority, CLEP must be a public utility.  And it's not.

 CLEP is a merchant transmission company.  Its projects are extraneous transmission lines not needed for reliability, economic or public policy purposes.  The sole purpose of CLEP's projects are profit.  Merchant transmission projects aren't new.  There are several of them in existence.  However, those merchant transmission projects have customers.  They were proposed and built with certain customers in mind.  Clean Line is pure speculation... build it and they will come (well, maybe, but not so far).  Clean Line's business plan is unformed and unripe.  It doesn't work as proof of public utility status.

Clean Line's "merchant" business model does not comport with "public use" definitions under state law.  Negotiating rates for service with private parties does not make the service available to the public.  Neither does auctioning off small bits of service to the highest bidder at auction.  Merchant projects don't offer service to the public -- they offer service to private parties who can pay the most for service.

ComEd's brief before the Illinois Supreme Court describes how merchant projects like Clean Line fail the test of public use.

Rock Island’s plan offers the public the nondiscriminatory right to bid for transmission capacity. But it does not offer the public the nondiscriminatory right to use transmission capacity. Under well-settled authority dating back a century, Rock Island’s plan does not meet the “public use” requirement.

As a threshold matter, it is important to clarify what this means. As Rock Island’s witness makes clear in his testimony, the open season auction will be open to the public on non-discriminatory terms. In other words, any member of the public can bid. But there is a difference between being able to bid for a service through an auction and being able to actually use a service at a tariffed price. When Christie’s auctions a painting, any member of the public can bid on non-discriminatory terms; but only the winner takes the painting home.

The ICC points out that the open season will be “fair, transparent and non-discriminatory.” ICC Br. 25-26. ComEd agrees. But this simply means that the auction process will be fair, and that all bidders would have the same opportunity to bid. It does not mean that all members of the public can use the service on equal terms. Those who cannot pay the auction price are left with only the chance of receiving non-firm service and are expressly subordinated to anchor tenants and auction winners. Non-auction winners who do not, or who cannot use non-firm service, are left completely empty- handed.

A merchant transmission project with no customers does not meet the legal definition of public utility.

Show Me sums it all up in its brief:

Grain Belt Express is proposing a duplicate service to the existing, well-established transmission grid. It is seeking to provide discriminatory service to one particular customer to obtain this Commission’s approval. It is proposing as a merchant a service that is participant-funded. It wants to maintain that merchant status, free from the obligations imposed on an “electrical corporation” by the Missouri Public Service Commission Law. This unregulated utility will create many problems that the Missouri Public Service Commission Law was designed to thwart, such as destructive competition, damage to property from duplicative facilities, and the exercise of market power in a traditional monopoly service. Grain Belt is seeking the power of the state of Missouri granted by this CCN without any of the obligations imposed by the law. Show Me is concerned with one enterprise whose property is not devoted to the public service using the land (I think he meant to say "laws") of the state, particularly the eminent domain power of the state, for their own business interests. It is not just and it is not in the public interest of the state of Missouri.

Go away, Clean Line.  You're not a public utility.