Last week, the Federal Energy Regulatory Commission approved financial incentives for the Valley Link "portfolio" and set its formula rate, return on equity, and hypothetical capital structure for settlement and hearing. That's exactly what I expected they would do, so no surprise there.
It was also no surprise that FERC Chairman Mark Christie wrote a scathing dissent to the approval of incentives. Financial incentives for transmission projects are so far out of whack that they border on usurious. No, scratch that, they're way past the border. FERC's generous award of financial incentives for the Valley Link projects will cost consumers hundreds of millions of dollars in increased transmission rates over Valley Link's expected 40 year life. Well, if it actually gets built that is. Even if it never puts a shovel in the ground, ratepayers are still on the hook for hundreds of millions of dollars, thanks to the abandoned plant incentive. I just hope I'm around long enough to say... I told you so!
Chairman Christie's dissent is worth a read. He's grown increasingly critical of FERC's incentives policy and desperately wants to change it. But, he was outvoted 2-1 by two other Commissioners who are fairly recent additions to the Commission. The fourth Commissioner was MIA on this Order, like she is on many others. I'm not sure I understand why a sitting Commissioner doesn't participate in a lot of the Orders that are issued, but I'm sure there's a reason. If only she had participated, I'm sure consumers would have gotten a better deal.
Commissioner Christie compared Valley Link to its predecessor, PATH, and rightly so, since it's the exact same project, in the exact same place, owned by the exact same companies. Attention must be paid! However the other two Commissioners that were not around during PATH failed to pay attention, and therefore consumers are doomed to repeat the PATH experience that cost them $250M.
It was also no surprise that FERC Chairman Mark Christie wrote a scathing dissent to the approval of incentives. Financial incentives for transmission projects are so far out of whack that they border on usurious. No, scratch that, they're way past the border. FERC's generous award of financial incentives for the Valley Link projects will cost consumers hundreds of millions of dollars in increased transmission rates over Valley Link's expected 40 year life. Well, if it actually gets built that is. Even if it never puts a shovel in the ground, ratepayers are still on the hook for hundreds of millions of dollars, thanks to the abandoned plant incentive. I just hope I'm around long enough to say... I told you so!
Chairman Christie's dissent is worth a read. He's grown increasingly critical of FERC's incentives policy and desperately wants to change it. But, he was outvoted 2-1 by two other Commissioners who are fairly recent additions to the Commission. The fourth Commissioner was MIA on this Order, like she is on many others. I'm not sure I understand why a sitting Commissioner doesn't participate in a lot of the Orders that are issued, but I'm sure there's a reason. If only she had participated, I'm sure consumers would have gotten a better deal.
Commissioner Christie compared Valley Link to its predecessor, PATH, and rightly so, since it's the exact same project, in the exact same place, owned by the exact same companies. Attention must be paid! However the other two Commissioners that were not around during PATH failed to pay attention, and therefore consumers are doomed to repeat the PATH experience that cost them $250M.
As Yogi Berra once said, “it’s like déjà vu all over again.” Once again, a transmission developer asks the Commission to put already hard-pressed consumers on the hook for a laundry list of “incentives.” And once again, the Commission approves almost all of the list. As I have said repeatedly over the past four years, it is long past time for this Commission to do its job of protecting consumers by cutting back on its unfair practice of handing out “FERC candy” without any serious consideration of the impact on consumers already struggling to pay monthly power bills. The statute simply does not mandate such lavish generosity to developer interests at the expense of consumers. As discussed in great detail below, this list of incentives is especially difficult to stomach for consumers in Virginia, Maryland, and West Virginia given the egregious history of the Potomac-Appalachian Transmission Highline (PATH) project, about which I have written many times.
No matter how much Chairman Christie tries to reform a regulatory agency gone amok, he just can't get any traction in today's politicized FERC. I'm fast running out of patience myself. Perhaps it's time for Congress to act, since FERC just can't manage to reform its 20 year old incentives policy to comport with the existing statute. Maybe FERC needs to be called in for a hearing so they can explain themselves to our elected representatives? Or perhaps we need to get rid of Sec. 219 of the Energy Policy Act in its entirety. Imagine if utilities could only earn cost plus return on new transmission projects, without any financial "candy" from the all-you-can-eat incentives buffet. I guarantee you that they would still eagerly line up to build new transmission. It's how they make money. Even without incentives, transmission rates are already incredibly generous. Are you earning 10.9% on your investments lately? Yeah, me neither. In fact, while I'm having this dream, how about if we simply eliminate investor owned utilities altogether and make all utilities public? No more fat cats, no more bonuses, no more investors, no more outrageous profits paid by Granny in her electric bill. Just a necessary service paid at cost by struggling consumers.
So, incentives granted. Water under the bridge. But, FERC also set the formula rate and its protocols, Valley Link's Return on Equity and its hypothetical capital structure for settlement and hearing. I will be participating in that so that's all I can say about it until it's over. See you on the other side.
So, incentives granted. Water under the bridge. But, FERC also set the formula rate and its protocols, Valley Link's Return on Equity and its hypothetical capital structure for settlement and hearing. I will be participating in that so that's all I can say about it until it's over. See you on the other side.
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