Grain Belt Express Is No More A Public Utility Than Rock Island Clean Line was

Yesterday was briefing day at the Missouri Public Service Commission.  Some briefs were uninspired dreck that more closely resembled a junior high school book report (copy, paste, copy, paste, don't waste a whole lot of thought or effort).  But there was one of them that just blew me away.  I love a good brief, I'm sorta geeky that way, and I've read a lot of them over the years.  They come in all sorts of shapes and sizes, but it's rare that you find one so well-written, thoroughly researched, and cited.  When you find one, it's a beautiful thing!

Yesterday's beautiful thing came from the Missouri Landowners Alliance, and made several very important points.

1.  Grain Belt Express is not a public utility.

2.  Invenergy has not yet purchased GBE therefore it is the qualifications of Clean Line that must be judged here.

3.  Invenergy is unlikely to build GBE as currently described in Clean Line's application.

Any of these three by themselves should be enough to stop approval by Missouri, but combined there's absolutely no question.  Sure, the PSC can simply disagree with the sound logic and deep legal precedent in the brief, but it would do so at its own peril as any approval is almost certain to be overturned by a court.

You can read a copy of Missouri Landowners Alliance's brief here.

To start the "not a public utility" ball rolling, consider this:

First, the Grain Belt line will not be selling its services to retail customers in Missouri. Second, Grain Belt has been authorized by the FERC to sell 100% of its capacity at wholesale to buyers (such as wind farms or load-serving utilities) at rates which are to be negotiated between the buyer and seller. Third, as an expected outcome of establishing rates through bilateral negotiation, Grain Belt’s customers will be paying different rates for capacity on the line – even for service from the same beginning and end points. Based on these facts, case law in Missouri tells us that the Grain Belt project is not an “electrical utility” in the sense that term is used in the CCN statute, Section 393.170.

And then the precedents start rolling...

In perhaps the key finding by the Court [in Danciger], it ruled that although the statutory definition of an “electrical corporation” includes no specific reference to public use, or to the necessity that the sale of the electricity be to the public, “it is apparent that the words ‘for public use’ are to be understood and to be read therein.”The question, then, was what constitutes the supply of electricity for “public use”, thereby qualifying the entity as an “electrical corporation.” In answering that question, the Court began with an obvious but critical point: a company either is or is not a public utility. If it is, then it is subject to the entire purview and regulation of the Commission, including the authority of the Commission to compel the company to provide service to all residences and businesses in the area where it provided service.

...

...if Grain Belt is indeed an “electrical corporation”, its negotiation of different rates for similarly situated customers would certainly be in violation of this statute, and no doubt others as well.

Grain Belt Express wants to pick and choose its customers based on how much they will pay for service.  This is NOT a public utility!  A public utility must serve all customers equally.  Reminds me of this handout from Com Ed's attorney at the Illinois Appeals Court hearing on whether or not Rock Island was a public utility.

And speaking of that case....

Perhaps the closest judicial decision on point is from Illinois, in a case which involved the question of whether the Rock Island Clean Line (a sister line of Grain Belt) was or was not a “public utility” under Illinois law. (Illinois Landowners Alliance v. Illinois Comm. Comm’n, 60 N.E.3d 150 2016). In finding that the proposed line was not a “public utility”, the Court held that “A private company that provides public utility services according to its own terms and conditions does not meet the statutory definition of a public utility.”Furthermore, the court found that in order to qualify as a public utility, the entity must offer its assets for public use without discrimination. The Rock Island line “is not for public use without discrimination.”

Finally, in reaching its decision, the Court relied in part on an earlier case which had found that the Mississippi River Fuel company did not qualify as a public utility. That company sold natural gas through individual contracts with 23 private industrial retail customers, as well as to 2 public utilities which resold the gas to its retail customers. In relying on the Mississippi River Fuel case, the Court noted the following: the company’s contracts were not based on fixed rates, and instead varied as to terms and conditions; and that the company’s act of selling gas to a limited group of customers could not be characterized as “public use.”

Grain Belt Express can never be a public utility in Illinois.  There's no reason it should ever be declared one in Missouri either, unless Missouri wants to become known as the state that allows private interests to take land from its citizens via eminent domain?  I highly doubt the court would ever let that happen, much less the Governor or the legislature.

It is clear that because GBE is not a public utility that the Missouri PSC has no jurisdiction to grant it a permit for the transmission project.  But then GBE can build at will, we must stop it, you may be thinking.  Sure, sure, go ahead and build your project Clean Line and/or Invenergy.... but without public utility status you'll be trying to build it without eminent domain bulldozing landowners who choose not to participate.  GBE has long since trashed any goodwill it could have in the state, and it's not something Invenergy can rebuild, no matter how highly (and insanely) it thinks about its relationship with landowners.  Fact of the matter is GBE cannot be built without eminent domain, and this fact does not dispose of the fact that GBE is not a public utility.  Clean Line's entire business plan fails once it gets to a court.

On the matter of who should be judged here:

However, it is another matter altogether to decide this issue on the basis of the qualifications of Invenergy. That company is not the Applicant here. Nor does it have any ownership interest in the Grain Belt project at this point. And as discussed later under criterion (4), it would be speculative to assume that Invenergy will ever own the Grain Belt project – at least in the form it has been described to the Commission over the past 5 years or so.

What the PSC has been doing here is absolutely idiotic.  It has been judging a non-applicant who only has what is essentially an option to purchase GBE.  Legally, this is all wet.  The PSC needed to noodle this through a little more instead of declaring "same case, different owner" and going on like nothing had changed except those points that bolster GBE's case.  The PSC must also approve the transfer of ownership (if GBE is a public utility).  Why would the PSC do it backwards by first issuing a permit to a company who does not yet own the project, and then deciding later whether that company may, in fact, own the project?  The decision that must be made in this case can only look at the applicant, Clean Line Energy Partners.  If Clean Line fails, Invenergy may certainly re-apply in its own name after purchasing the project.  This is a much cleaner way to go about this case.

Now let's talk about what Invenergy may do with a transmission project with eminent domain authority across two states, instead of re-applying in Illinois, moving legal boulders with its bare hands, and spending "$50-100M" to continue developing GBE.  MLA notes "This figure should not be confused with the $2 million estimate for development costs up to the point when Invenergy/Grain Belt secure Kansas and Missouri approvals."

So, Invenergy can spend up to $100M trying to get permitted in Illinois, with little chance of success.  Or, it can spend $2M to get eminent domain authority across the states of Kansas and Missouri and find another way to connect to MISO, since it has no queue position right now anyhow.

Only two conditions must be met before Invenergy is obligated to purchase the Grain Belt project: approvals of the Kansas Commission and this Commission. Closing is not dependent upon approval by the Commission in Illinois. So Invenergy could well end up owning the Grain Belt project, yet never receive permission to build the section of the line providing access to the PJM market. What happens then? According to Mr. Zadlo, Invenergy would need to come back to this Commission with a new plan, which most likely would mean the line would terminate somewhere in Missouri. And of course without the ability to reach the PJM market, Grain Belt has provided no evidence to prove that the line is economically feasible.

So what I can infer here is that IF GBE gets eminent domain authority across two states, it may change the project entirely, perhaps into one that doesn't need state approvals at all.  But of course Invenergy has stated that it needs to undertake eminent domain before it comes back with its new plan.  So what happens to property it has taken if Invenergy at some later date forfeits its permit and utility status in Kansas and Missouri?  How do the landowners get their land back?

And on that note, let's find something not quite so sad.  In fact... perhaps you will get a chuckle out of it like I did.  During cross examination, Invenergy's Kris Zadlo suggested that GBE could "go north or go south" to get around Illinois on its way to PJM, on the off chance that it was denied a permit in Illinois.  That's ridiculous!  How ridiculous?

In order to go north of Illinois, the line would presumably be rerouted north in Missouri, then pass through Iowa, Wisconsin and even Lake Michigan, necessitating numerous additional consents and routing studies along the way.

Going south of Illinois presumably would mean rerouting the line south within the state of Missouri to a point somewhere near Cairo, Illinois, then going north through Kentucky and Indiana, until finally reaching a point near the converter station in Clark County, Illinois – a total distance of roughly 450 miles. And without a certificate from Illinois, presumably the converter station would need to be redesigned, and moved out of that state. And that in turn would seemingly require starting anew with the process of gaining permission for the interconnection with PJM.

Right, Mr. Zadlo.  You're going to build an ovehead merchant transmission line through Lake Michigan.  *snicker*  If you really think this is an option, perhaps you should start looking at the amazing new technology available for buried HVDC.  You'd soon quickly realize that what Clean Line intends to do is 10-years out of date.  It would be like buying a 2009 model and pretending it was a "new" car.

So what does Invenergy plan to do?  It's not telling the PSC the entire truth.  Invenergy is much too sophisticated to be spending up to $100M without a plan.

Given that fact, it seems fair to assume that Invenergy must have a more realistic “Plan B” in mind in the event it cannot obtain consent to build the line in Illinois. For example, it must have crossed their minds that if Invenergy cancels its contract with MJMEUC, it could try to sell that 200 MW at a rate which might exceed any damages it could owe to MJMEUC. Another possibility would be for Invenergy to develop its own wind farms in Kansas, and use the Grain Belt line to move its energy into the MISO market. There are certainly inviting possibilities for combining the generation and transmission functions on the Grain Belt line for Invenergy’s own benefit.
While the MLA does not claim that either scenario is being considered by Invenergy, it has unveiled no logical plan of its own if it is denied entry into Illinois. And Invenergy appears much too sophisticated an organization not to have already developed a realistic plan to deal with that possibility. If it has, we have been given no clue as to what to expect.

Why would Invenergy want to sell service to bit player MJMEUC, when it can use service on its own generation tie line to cheaply plow through SPP (and on past its seam with MISO for even more opportunity!) and bid on some of these opportunities?

AEP Bounces Back from Wind Catcher Cancellation With 1.2GB RFP

and

PSO Not Giving Up On Building More Wind Farms In Oklahoma

So... GBE is not and can never be a public utility, however I don't think Invenergy cares because perhaps it has another scheme cooking.

Missouri Landowners Alliance is on top of its game!