Well, here we go again, folks! Last week the Federal Energy Regulatory Commission issued an inquiry regarding its transmission incentives policy. It's been 13 years since FERC first crafted its incentives policy, and 8 years since its last review. It's time.
This review is different than the last one. Some of the ideas FERC gave birth to in this inquiry are pretty awful, and if implemented, could spell trouble ahead for consumers and landowners in the way of future get-rich-quick transmission schemes. Therefore, you should participate. It's a lot easier to prevent bad policy from happening in the first place than it is to change bad policy once it personally affects you. Increased transmission costs affect every last one of us, and you never know when a new transmission idea will take root (route) in your back yard. Heh, I made a funny there. Enjoy, it's probably the last giggle you're going to get out of this.
So, here it is, in all its glory.
But, but, but... it's a beast, you say. It's written in FERCenese, you say (FERCenese is the official technical acronym-laden gibberish spoken at the agency, incomprehensible to regular folks). I can't possibly understand this and form coherent comments, you say. Yes, you can! Don't let the industry's purposeful over complication keep you out of this process, that's exactly what they hope will happen. In addition to the brief overview provided below, I'm going to break it down into people-speak in a series of blog posts covering the different topics. So, find something that interests you, put on your thinking cap, and try answering a question or two. If you find that too daunting, join with others to hash it out and file joint comments as a group. And if you're already part of a group and want to join with other groups to file a joint comment comprising an even bigger group of groups, then hit me up.
Comments are due 90 days after publication in the Federal Register. Today is the publication date. Initial comments are due on June 25, 2019. Reply comments (your comments on the ideas submitted by others) are due on July 25. This gives you nearly 3 months to brainstorm and get it written down. Don't wait until the last minute, nothing is more satisfying than having a filing in the can well in advance of the deadline, while others scramble at the last minute. The only drawback there could be forgetting to file it on the due date, but I won't let you forget. I recommend against filing your comments early. Last time, the utilities filed a last minute request to extend the deadline... imagine that, three whole months to write a set of comments and they couldn't get it done. In addition, regulatory proceedings are like a game of poker, don't tip your hand before you have to. It only gives them an opportunity to shape their own comments to best refute yours. Filing comments is easy. All FERC filings are electronic -- simply set up an account and upload your comments onto the docket. No paper copies needed. No service rules on an inquiry. File and go! It's a good idea to set up your account now, if you're interested in this docket. Once you have an account, you can subscribe to this docket in order to get electronic notice of all filings and other information related to this proceeding (particularly last minute requests to extend the deadline).
Now that the procedural has been taken care of... let's look at what's in the inquiry.
Incentives come from Section 219 of the Federal Power Act created by Congress in 2005. It's pretty simple, go check it out. Pay particular attention to what Sec. 219 actually says and compare it to what FERC thinks it says. Somehow they've gotten off track, changed a few words in their interpretation, and added a whole bunch of things that are nowhere to be found in Sec. 219. This should be the foundational touchstone of your comments -- what does Sec. 219 say about this?
In addition, you might be interested in reading what happened last time the Commission reviewed incentives. I wrote quite a lot about it here on the blog. Or, you may want to wade through the old FERC docket to read everything posted (but I warn you, three months probably won't be enough time for that... maybe that's where utilities get lost?).
Let's break the inquiry down by sections, including a brief description of each.
Incentives based on risks and challenges -- this is what FERC has been doing, awarding incentives based on a project's risk. But now the Commission poses the question if it should be awarding incentives based on a project's benefits instead. Are those going to be the glowing, magic math, benefit possibilities floated by transmission owning utilities, economic development types, and regional transmission organizations that never actually happen? Or will they be realistic benefits with some sort of true-up after project completion, where any "benefit" claims that don't happen come out of transmission owner pockets? FERC says they may be "benefits related to reliability and reductions in the cost of delivered power by reducing transmission congestion." How might one measure "reliability" benefits? How might one measure "transmission congestion" benefits, considering the fact that relieving congestion in one area may just increase it elsewhere? Are we going to include both increases and decreases in rates to come up with this figure, or will only decreases count, such as PJM tried with its Transource project?
Or might the Commission award incentives based on project characteristics, such as "transmission projects located in regions with persistent needs, interregional transmissions projects, or transmission projects that unlock constrained resources"? Why are these projects so special? Either we need them or we don't. Why goldplate transmission for certain generation, or simple overbuilding, just because it's big? And who is going to determine what is a "persistent need?" I've got a persistent need for chocolate. Maybe FERC needs a chocolate supply incentive to make sure I'm supplied to my heart's desire?
And there's also the suggestion that FERC should award incentives "automatically." Or should they continue to look at each request individually? It's sort of like doing away with bankers and allowing transmission companies to make automatic withdrawals from consumer wallets whenever they wish. Is this a good idea?
Here's a stunningly bad suggestion:
This review is different than the last one. Some of the ideas FERC gave birth to in this inquiry are pretty awful, and if implemented, could spell trouble ahead for consumers and landowners in the way of future get-rich-quick transmission schemes. Therefore, you should participate. It's a lot easier to prevent bad policy from happening in the first place than it is to change bad policy once it personally affects you. Increased transmission costs affect every last one of us, and you never know when a new transmission idea will take root (route) in your back yard. Heh, I made a funny there. Enjoy, it's probably the last giggle you're going to get out of this.
So, here it is, in all its glory.
But, but, but... it's a beast, you say. It's written in FERCenese, you say (FERCenese is the official technical acronym-laden gibberish spoken at the agency, incomprehensible to regular folks). I can't possibly understand this and form coherent comments, you say. Yes, you can! Don't let the industry's purposeful over complication keep you out of this process, that's exactly what they hope will happen. In addition to the brief overview provided below, I'm going to break it down into people-speak in a series of blog posts covering the different topics. So, find something that interests you, put on your thinking cap, and try answering a question or two. If you find that too daunting, join with others to hash it out and file joint comments as a group. And if you're already part of a group and want to join with other groups to file a joint comment comprising an even bigger group of groups, then hit me up.
Comments are due 90 days after publication in the Federal Register. Today is the publication date. Initial comments are due on June 25, 2019. Reply comments (your comments on the ideas submitted by others) are due on July 25. This gives you nearly 3 months to brainstorm and get it written down. Don't wait until the last minute, nothing is more satisfying than having a filing in the can well in advance of the deadline, while others scramble at the last minute. The only drawback there could be forgetting to file it on the due date, but I won't let you forget. I recommend against filing your comments early. Last time, the utilities filed a last minute request to extend the deadline... imagine that, three whole months to write a set of comments and they couldn't get it done. In addition, regulatory proceedings are like a game of poker, don't tip your hand before you have to. It only gives them an opportunity to shape their own comments to best refute yours. Filing comments is easy. All FERC filings are electronic -- simply set up an account and upload your comments onto the docket. No paper copies needed. No service rules on an inquiry. File and go! It's a good idea to set up your account now, if you're interested in this docket. Once you have an account, you can subscribe to this docket in order to get electronic notice of all filings and other information related to this proceeding (particularly last minute requests to extend the deadline).
Now that the procedural has been taken care of... let's look at what's in the inquiry.
Incentives come from Section 219 of the Federal Power Act created by Congress in 2005. It's pretty simple, go check it out. Pay particular attention to what Sec. 219 actually says and compare it to what FERC thinks it says. Somehow they've gotten off track, changed a few words in their interpretation, and added a whole bunch of things that are nowhere to be found in Sec. 219. This should be the foundational touchstone of your comments -- what does Sec. 219 say about this?
In addition, you might be interested in reading what happened last time the Commission reviewed incentives. I wrote quite a lot about it here on the blog. Or, you may want to wade through the old FERC docket to read everything posted (but I warn you, three months probably won't be enough time for that... maybe that's where utilities get lost?).
Let's break the inquiry down by sections, including a brief description of each.
Incentives based on risks and challenges -- this is what FERC has been doing, awarding incentives based on a project's risk. But now the Commission poses the question if it should be awarding incentives based on a project's benefits instead. Are those going to be the glowing, magic math, benefit possibilities floated by transmission owning utilities, economic development types, and regional transmission organizations that never actually happen? Or will they be realistic benefits with some sort of true-up after project completion, where any "benefit" claims that don't happen come out of transmission owner pockets? FERC says they may be "benefits related to reliability and reductions in the cost of delivered power by reducing transmission congestion." How might one measure "reliability" benefits? How might one measure "transmission congestion" benefits, considering the fact that relieving congestion in one area may just increase it elsewhere? Are we going to include both increases and decreases in rates to come up with this figure, or will only decreases count, such as PJM tried with its Transource project?
Or might the Commission award incentives based on project characteristics, such as "transmission projects located in regions with persistent needs, interregional transmissions projects, or transmission projects that unlock constrained resources"? Why are these projects so special? Either we need them or we don't. Why goldplate transmission for certain generation, or simple overbuilding, just because it's big? And who is going to determine what is a "persistent need?" I've got a persistent need for chocolate. Maybe FERC needs a chocolate supply incentive to make sure I'm supplied to my heart's desire?
And there's also the suggestion that FERC should award incentives "automatically." Or should they continue to look at each request individually? It's sort of like doing away with bankers and allowing transmission companies to make automatic withdrawals from consumer wallets whenever they wish. Is this a good idea?
Here's a stunningly bad suggestion:
Transmission projects can promote economic efficiency by reducing congestion, which allows efficient dispatch of resources, facilitating the interconnection of additional generation, and facilitating the transmission of additional generation to load centers. The Commission could tailor incentives to promote transmission projects that accomplish either of these two outcomes.
Why do we need to facilitate additional generation? There's no generation shortage. Did FERC mean to say it wants to facilitate a particular kind of generation? I'm pretty sure Sec. 219 was generation source neutral. Transmission is not an avenue to reward your favorite kind of electric generator, and besides as a regulator, I'm pretty certain FERC cannot pick and choose between generation sources.
"Persistent geographic needs." This sounds suspiciously like Sec. 1221, which is broken. Is FERC trying to anoint itself with power already vested in the U.S. Department of Energy?
Flexible transmission system operation, cybersecurity and resilience. Meh. Do we really have to reward these critters for doing their jobs?
Improving existing transmission facilities. Now here's an exciting topic! Except it appears that FERC's only thought there was adding a bunch of bells and whistles to what we already have, instead of simply rebuilding it to increase capacity in lieu of building new projects on new rights-of-way.
Interregional transmission projects. *sigh* Who says we need these? The most efficient system is one where source is located close to load. The bigger the gap between the two, the more expensive and unreliable the system gets. Is this about playing kingmaker for certain kinds of generation again?
Oh, I guess so, because that is followed by Unlocking Locationally Constrained Resources. This category includes gems such as, "Should the Commission use incentives to encourage the development of transmission projects that will facilitate the interconnection of large amounts of resources?" And what kind of resources would those be? Are we going to be building a whole bunch of new coal plants? I don't think so.
This has to be the worst idea in the whole inquiry. Ownership by non-public utilities.
"Persistent geographic needs." This sounds suspiciously like Sec. 1221, which is broken. Is FERC trying to anoint itself with power already vested in the U.S. Department of Energy?
Flexible transmission system operation, cybersecurity and resilience. Meh. Do we really have to reward these critters for doing their jobs?
Improving existing transmission facilities. Now here's an exciting topic! Except it appears that FERC's only thought there was adding a bunch of bells and whistles to what we already have, instead of simply rebuilding it to increase capacity in lieu of building new projects on new rights-of-way.
Interregional transmission projects. *sigh* Who says we need these? The most efficient system is one where source is located close to load. The bigger the gap between the two, the more expensive and unreliable the system gets. Is this about playing kingmaker for certain kinds of generation again?
Oh, I guess so, because that is followed by Unlocking Locationally Constrained Resources. This category includes gems such as, "Should the Commission use incentives to encourage the development of transmission projects that will facilitate the interconnection of large amounts of resources?" And what kind of resources would those be? Are we going to be building a whole bunch of new coal plants? I don't think so.
This has to be the worst idea in the whole inquiry. Ownership by non-public utilities.
Are there barriers to non-public utilities’ ownership of transmission facilities? Should the Commission consider granting incentives to promote joint ownership arrangements with non-public utilities and, if so, how?
What's the difference between a public utility and a non-public utility? State eminent domain authority. Public utilities are routinely granted eminent domain authority because their operations are for public use. Non-public utilities are not vested with eminent domain authority because their operations equate to a private driveway for their own use. Now the Commission wants to reward public utilities (with your cash, btw) for lending their public utility status to entities who are not providing a public service? This is concerning.
FERC finishes up by requesting your ideas on some other existing incentives. It seems that FERC isn't very excited or interested in changing these, but you may be. ROE adders, Transco adders, RTO membership adders, advanced technology (FERC thinks maybe it should do away with this one altogether), CWIP and recovery of pre-commercial costs (the costs of a transmission project before it is granted incentives), hypothetical capital structure, abandoned plant recovery, and accelerated depreciation. If you don't know what these are, I'll explain later.
I hope I piqued your interest and that you follow that with comments and ideas. Without your participation, your interests will be represented by utilities (who feast on these incentives), state regulators (who may or may not be co-opted by incumbent utilities), and if you're lucky enough to have a good one, your state consumer advocate. However, none of these entities really understand what it's like to be threatened by new transmission of questionable need. FERC needs to hear your unique perspective. Even worse, your interests could be represented by self-proclaimed "public interest" or "consumer interest" groups who are grant funded by corporations and political dark money and claim to speak for the silent population. Don't be silent!
In future blog posts, I'll delve into some of the incentive topics in further detail. Meanwhile, feel free to ask questions.
FERC Incentives Part Deux. Seems more like an exercise in increasing incentives than reining in the ones that already cost us way too much money. Your participation is the only thing that can make a difference here.
FERC finishes up by requesting your ideas on some other existing incentives. It seems that FERC isn't very excited or interested in changing these, but you may be. ROE adders, Transco adders, RTO membership adders, advanced technology (FERC thinks maybe it should do away with this one altogether), CWIP and recovery of pre-commercial costs (the costs of a transmission project before it is granted incentives), hypothetical capital structure, abandoned plant recovery, and accelerated depreciation. If you don't know what these are, I'll explain later.
I hope I piqued your interest and that you follow that with comments and ideas. Without your participation, your interests will be represented by utilities (who feast on these incentives), state regulators (who may or may not be co-opted by incumbent utilities), and if you're lucky enough to have a good one, your state consumer advocate. However, none of these entities really understand what it's like to be threatened by new transmission of questionable need. FERC needs to hear your unique perspective. Even worse, your interests could be represented by self-proclaimed "public interest" or "consumer interest" groups who are grant funded by corporations and political dark money and claim to speak for the silent population. Don't be silent!
In future blog posts, I'll delve into some of the incentive topics in further detail. Meanwhile, feel free to ask questions.
FERC Incentives Part Deux. Seems more like an exercise in increasing incentives than reining in the ones that already cost us way too much money. Your participation is the only thing that can make a difference here.
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