A lot of you have been wondering what FERC's Order last Thursday means, but your eyes glaze over around page 2 of the 36-page order. If that describes you, here's your "real world" explanation.
In 2010, a group of electric consumers who were paying PATH's transmission charges in their electric bill attended an "open meeting" in DC regarding the rate they were forced to pay. PATH welcomed these consumers (and the consumers were the only ones who actually showed up for the meeting!) to the process as "interested parties" as defined in the legal protocols that govern PATH's rate setting process, which is under FERC's federal jurisdiction.
Two of the consumers, Ali and Keryn, continued looking into the rates, through the processes set in the protocols, by submitting requests and receiving information from PATH.
At the end of the examination phase, Ali and Keryn filed a formal challenge of $3.3M of PATH's expenditures and recovery from ratepayers during 2009. The challenge process is specifically set out in PATH's protocols as the proper avenue to challenge rates.
In 2011, Ali and Keryn once again examined PATH's rates under the protocols. Disputes over discovery, and Ali and Keryn's standing as end-use consumers, soon erupted. PATH wasn't so eager to provide the same information Ali and Keryn had used in their first formal challenge as it related to PATH's 2010 expenditures. PATH began to claim that Ali and Keryn had no legal standing to file challenges or participate in the examination process. It was an unsuccessful attempt to avoid providing information that could be used in another challenge. A second formal challenge was filed at the end of the second examination period that totaled an additional $2.5M of expenditures improperly recovered from ratepayers in 2010.
In order to prevail in a valid challenge to PATH's rates before FERC, Ali and Keryn had to raise "serious doubt" about the accuracy of PATH's rate calculations and/or the prudence of the expenditures. Once a challenge is filed, the burden of proving the rate is accurate shifts to PATH. PATH provided little defense and absolutely no evidence in their answer to the challenges.
FERC granted the challenges, finding that Ali and Keryn carried their burden of raising "serious doubt." In the order, FERC takes the next step, which is to set the accuracy and prudence of the challenged expenditures for a public, trial-type, evidentiary hearing before a FERC administrative law judge. However, standard practice at FERC is to avoid hearings in favor of a settlement between the parties. The parties here are PATH and Ali & Keryn. Therefore, FERC has ordered settlement judge proceedings to explore whether this matter can be resolved without a hearing.
The expenditures FERC found questionable are: lobbying, advertising, PATH's "Reliable Power Coalitions" and "PEAT" program, PATH's membership expenditures, shared parent company costs charged in PATH's rates, and donations and civic, political and related activities. In addition, FERC also set some "double counting" of expenses for hearing. In that instance, PATH recorded invoices in more than one account, increasing recovery over and above the amount they paid for the service. FERC dismissed prudence challenges totaling $100K for PATH's three-year contract for right-of-way maintenance with the National Wild Turkey Federation, however FERC also believes PATH recorded that expenditure in the wrong account and set that issue for hearing. FERC also set discovery procedures for hearing.
In a separate but related matter, FERC also granted two complaints filed by Ali and Keryn. Remember how PATH asked FERC to dismiss the challenges because they contended that Ali and Keryn did not have legal standing to file the challenges, nor participate in the examination of PATH's rate? PATH kept ratcheting up their incorrect "determination" that end-use consumers do not have standing, culminating this summer in a refusal to allow consumers to attend PATH's "open meeting" conference calls or to provide any information requested by consumers under the protocols. In response, separate complaints were filed. FERC agreed with Ali and Keryn that end-use consumers who pay transmission rates as part of their electric bill do have legal standing under section 206 of the Federal Power Act. PATH had complained in one of their filings that if FERC found that consumers have standing, it would open the door for "all of the millions of retail customers in the PJM footprint that may be indirectly charged some portion of [PATH's] transmission rates" to participate in examination of these rates and create an administrative "quagmire." Indeed, that is what FERC found. Any one of the 61 million consumers in PJM who pay a portion of a transmission rate have standing to examine and challenge that rate. PATH imagines that it (and other transmission owners) will now be deluged with information requests from every one of the 61 million consumers in the PJM footprint who fund their transmission projects. However, it's never happened before, and is unlikely to happen in the future. Formula rates are complicated and examining them is tedious.
In summary, consumers have standing to participate in the examination and challenge of transmission rates they pay, and PATH's 2009/10 recovery of $5.8M in inaccurate or imprudent expenditures from 61 million PJM consumers will now head to settlement and hearing for possible refund.
In 2010, a group of electric consumers who were paying PATH's transmission charges in their electric bill attended an "open meeting" in DC regarding the rate they were forced to pay. PATH welcomed these consumers (and the consumers were the only ones who actually showed up for the meeting!) to the process as "interested parties" as defined in the legal protocols that govern PATH's rate setting process, which is under FERC's federal jurisdiction.
Two of the consumers, Ali and Keryn, continued looking into the rates, through the processes set in the protocols, by submitting requests and receiving information from PATH.
At the end of the examination phase, Ali and Keryn filed a formal challenge of $3.3M of PATH's expenditures and recovery from ratepayers during 2009. The challenge process is specifically set out in PATH's protocols as the proper avenue to challenge rates.
In 2011, Ali and Keryn once again examined PATH's rates under the protocols. Disputes over discovery, and Ali and Keryn's standing as end-use consumers, soon erupted. PATH wasn't so eager to provide the same information Ali and Keryn had used in their first formal challenge as it related to PATH's 2010 expenditures. PATH began to claim that Ali and Keryn had no legal standing to file challenges or participate in the examination process. It was an unsuccessful attempt to avoid providing information that could be used in another challenge. A second formal challenge was filed at the end of the second examination period that totaled an additional $2.5M of expenditures improperly recovered from ratepayers in 2010.
In order to prevail in a valid challenge to PATH's rates before FERC, Ali and Keryn had to raise "serious doubt" about the accuracy of PATH's rate calculations and/or the prudence of the expenditures. Once a challenge is filed, the burden of proving the rate is accurate shifts to PATH. PATH provided little defense and absolutely no evidence in their answer to the challenges.
FERC granted the challenges, finding that Ali and Keryn carried their burden of raising "serious doubt." In the order, FERC takes the next step, which is to set the accuracy and prudence of the challenged expenditures for a public, trial-type, evidentiary hearing before a FERC administrative law judge. However, standard practice at FERC is to avoid hearings in favor of a settlement between the parties. The parties here are PATH and Ali & Keryn. Therefore, FERC has ordered settlement judge proceedings to explore whether this matter can be resolved without a hearing.
The expenditures FERC found questionable are: lobbying, advertising, PATH's "Reliable Power Coalitions" and "PEAT" program, PATH's membership expenditures, shared parent company costs charged in PATH's rates, and donations and civic, political and related activities. In addition, FERC also set some "double counting" of expenses for hearing. In that instance, PATH recorded invoices in more than one account, increasing recovery over and above the amount they paid for the service. FERC dismissed prudence challenges totaling $100K for PATH's three-year contract for right-of-way maintenance with the National Wild Turkey Federation, however FERC also believes PATH recorded that expenditure in the wrong account and set that issue for hearing. FERC also set discovery procedures for hearing.
In a separate but related matter, FERC also granted two complaints filed by Ali and Keryn. Remember how PATH asked FERC to dismiss the challenges because they contended that Ali and Keryn did not have legal standing to file the challenges, nor participate in the examination of PATH's rate? PATH kept ratcheting up their incorrect "determination" that end-use consumers do not have standing, culminating this summer in a refusal to allow consumers to attend PATH's "open meeting" conference calls or to provide any information requested by consumers under the protocols. In response, separate complaints were filed. FERC agreed with Ali and Keryn that end-use consumers who pay transmission rates as part of their electric bill do have legal standing under section 206 of the Federal Power Act. PATH had complained in one of their filings that if FERC found that consumers have standing, it would open the door for "all of the millions of retail customers in the PJM footprint that may be indirectly charged some portion of [PATH's] transmission rates" to participate in examination of these rates and create an administrative "quagmire." Indeed, that is what FERC found. Any one of the 61 million consumers in PJM who pay a portion of a transmission rate have standing to examine and challenge that rate. PATH imagines that it (and other transmission owners) will now be deluged with information requests from every one of the 61 million consumers in the PJM footprint who fund their transmission projects. However, it's never happened before, and is unlikely to happen in the future. Formula rates are complicated and examining them is tedious.
In summary, consumers have standing to participate in the examination and challenge of transmission rates they pay, and PATH's 2009/10 recovery of $5.8M in inaccurate or imprudent expenditures from 61 million PJM consumers will now head to settlement and hearing for possible refund.
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