Hannibal Board of Public Works General Manager Bob Stevenson says that he has "spent my career in coal-based energy plants and electric utility systems." So, you'd think Bob would know the basics of how the electric grid operates, right?
Except Bob recently told a reporter for the Hannibal Courier Post that MISO, the Midcontinent Independent System Operator, would own a Clean Line substation once it was completed.
Except Bob recently told a reporter for the Hannibal Courier Post that MISO, the Midcontinent Independent System Operator, would own a Clean Line substation once it was completed.
The BPW has explored the option of either solely buying power, or a share in the power substation that would be built in Ralls County. Stevenson said the guaranteed return on such an infrastructure investment would be 10 percent a year. He noted such an investment would not be “speculative” since the substation, once completed, would be a Midwest Independent Transmission System Operator asset.
MISO does not own any transmission assets, including substations. As an independent transmission system operator, MISO merely operates the transmission assets owned by utilities. It cannot own any assets and maintain its independence.
Here's a corporate overview of MISO. MISO membership includes "52 Transmission Owners with $31.4 billion in transmission assets under MISO’s functional control." That's right, the transmission assets MISO controls are owned by others.
Eastern grid manager PJM Interconnection is a little more blunt about who owns the transmission assets it controls:
Here's a corporate overview of MISO. MISO membership includes "52 Transmission Owners with $31.4 billion in transmission assets under MISO’s functional control." That's right, the transmission assets MISO controls are owned by others.
Eastern grid manager PJM Interconnection is a little more blunt about who owns the transmission assets it controls:
We’re sometimes called air traffic controllers of the power grid. PJM monitors and coordinates more than 1,304 electric generators and 72,075 miles of high-voltage transmission lines. Just like air traffic controllers, we don’t own the equipment we direct. Others own the power lines and power plants. Power generators, utilities and power marketers coordinate their operations through PJM. Doing so makes major electric outages less likely to occur and reduces power costs.
ISOs and RTOs are federally regulated regional grid managers. The coordinate electricity flow, markets, and undertake planning to order utilities to build new transmission assets when needed.
Clean Line is not part of any ISO/RTO grid plan. Instead of having its own plan vetted by the regional transmission organizations to determine if there was a need, Clean Line skipped that process. Because Clean Line is operating outside the ISO/RTO planning process, it must shoulder all financial burden for its project. There is no federal, or other, guarantee that the company may recover its costs from electric ratepayers. Instead, Clean Line is taking a risk that its project will be found beneficial and useful by market participants who voluntarily negotiate a rate to use it.
When transmission projects are found needed and ordered by RTOs/ISOs, the costs of building the project are allocated to electric ratepayers in the region. Because utilities are ordered to build these projects, they can be granted a special federal incentive that allows the company to collect its investment in the project from ratepayers, even if it is later abandoned and never built. This is where the "guarantee" comes in. Clean Line was not ordered by any RTO/ISO and therefore isn't even eligible to apply for this guarantee.
There is no guaranteed return on an investment in Clean Line. Instead, an investment in Clean Line at this time would be incredibly risky. Anyone who invests in a Clean Line-owned converter/substation would lose their entire investment if the project is not permitted and built and/or attracts no customers willing to pay to use it. At this point in time, the Missouri Public Service Commission has denied Clean Line a permit to build the project. It cannot proceed. In addition, Clean Line has no customers signed up to pay to use the project. Clean Line has nothing to back up any investment made by Hannibal or any other investor. Clean Line will simply spend Hannibal's investment on whatever it wants to attempt to get its project permitted, built and attracting customers. If that isn't successful, Hannibal loses its entire investment.
I'm not sure where Bob gets his idea that there is a guaranteed 10% return a year through MISO. Perhaps Bob thinks that the standard 10% ROE for transmission owning MISO members who collect their regional rates through federal formula rates applies to Clean Line? It doesn't. Clean Line doesn't have a federal formula rate. Instead, Clean Line has federal negotiated rate authority, whereby it may negotiate rates with potential customers in a non-discriminatory, just and reasonable fashion. In order to succeed, the rates Clean Line negotiates with its customers must be high enough to recover its cost of service and return. Because it is a market-based project, Clean Line will be able to collect any return the market supports. Clean Line's return is not set or guaranteed by regulators.
If Bob is telling the Hannibal City Council that an investment in Grain Belt Express is guaranteed a 10% return, perhaps the City Council should ask Bob the following questions:
1. Who is guaranteeing this return?
2. How is the return collected?
3. Who is the return collected from?
4. Where is this guaranteed return set out in a regulatory order?
It's not. Because Grain Belt Express has nothing to do with MISO regional rates and does not have a formula rate through which to collect its cost of service and return from regional ratepayers.
Whether Bob is getting his misinformation from Clean Line representatives (who should know better!) or making it up on his own, misinformation like this is not serving the people of Hannibal. Instead, this inexpert review of Clean Line's offer to Hannibal could result in a $12.5 million dollar loss. The City Council must have any Clean Line offer reviewed by independent experts, just like any other utility contract the city signs. Failure to do so could be costly.
Let's review:
1. Clean Line is responsible for all costs of its project.
2. Clean Line currently has no rate structure.
3. Clean Line has no customers from which to collect rates.
4. There is no guaranteed return for an investment in Clean Line.
Any investment in Clean Line would be based on speculation that the company could permit, finance, build and attract customers to pay for its project. If those things don't happen, Clean Line, and any investment in the project, disappears forever.
It's great that Hannibal wants to buy more wind energy for its citizens. But Clean Line is not the only option. It's the most risky option. Hannnibal could purchase wind energy risk-free through MISO's energy market, and have it delivered through MISO's existing or planned transmission system. It doesn't take a gigantic, new, privately-owned transmission line to deliver wind to Hannibal. There are better, much less risky, options for Hannibal to lower rates for its customers by buying renewable generation. Perhaps Hannibal should issue a request for proposals to supply wind power, and examine all its options, before jumping on the first one-trick pony to ride through town?
Clean Line is not part of any ISO/RTO grid plan. Instead of having its own plan vetted by the regional transmission organizations to determine if there was a need, Clean Line skipped that process. Because Clean Line is operating outside the ISO/RTO planning process, it must shoulder all financial burden for its project. There is no federal, or other, guarantee that the company may recover its costs from electric ratepayers. Instead, Clean Line is taking a risk that its project will be found beneficial and useful by market participants who voluntarily negotiate a rate to use it.
When transmission projects are found needed and ordered by RTOs/ISOs, the costs of building the project are allocated to electric ratepayers in the region. Because utilities are ordered to build these projects, they can be granted a special federal incentive that allows the company to collect its investment in the project from ratepayers, even if it is later abandoned and never built. This is where the "guarantee" comes in. Clean Line was not ordered by any RTO/ISO and therefore isn't even eligible to apply for this guarantee.
There is no guaranteed return on an investment in Clean Line. Instead, an investment in Clean Line at this time would be incredibly risky. Anyone who invests in a Clean Line-owned converter/substation would lose their entire investment if the project is not permitted and built and/or attracts no customers willing to pay to use it. At this point in time, the Missouri Public Service Commission has denied Clean Line a permit to build the project. It cannot proceed. In addition, Clean Line has no customers signed up to pay to use the project. Clean Line has nothing to back up any investment made by Hannibal or any other investor. Clean Line will simply spend Hannibal's investment on whatever it wants to attempt to get its project permitted, built and attracting customers. If that isn't successful, Hannibal loses its entire investment.
I'm not sure where Bob gets his idea that there is a guaranteed 10% return a year through MISO. Perhaps Bob thinks that the standard 10% ROE for transmission owning MISO members who collect their regional rates through federal formula rates applies to Clean Line? It doesn't. Clean Line doesn't have a federal formula rate. Instead, Clean Line has federal negotiated rate authority, whereby it may negotiate rates with potential customers in a non-discriminatory, just and reasonable fashion. In order to succeed, the rates Clean Line negotiates with its customers must be high enough to recover its cost of service and return. Because it is a market-based project, Clean Line will be able to collect any return the market supports. Clean Line's return is not set or guaranteed by regulators.
If Bob is telling the Hannibal City Council that an investment in Grain Belt Express is guaranteed a 10% return, perhaps the City Council should ask Bob the following questions:
1. Who is guaranteeing this return?
2. How is the return collected?
3. Who is the return collected from?
4. Where is this guaranteed return set out in a regulatory order?
It's not. Because Grain Belt Express has nothing to do with MISO regional rates and does not have a formula rate through which to collect its cost of service and return from regional ratepayers.
Whether Bob is getting his misinformation from Clean Line representatives (who should know better!) or making it up on his own, misinformation like this is not serving the people of Hannibal. Instead, this inexpert review of Clean Line's offer to Hannibal could result in a $12.5 million dollar loss. The City Council must have any Clean Line offer reviewed by independent experts, just like any other utility contract the city signs. Failure to do so could be costly.
Let's review:
1. Clean Line is responsible for all costs of its project.
2. Clean Line currently has no rate structure.
3. Clean Line has no customers from which to collect rates.
4. There is no guaranteed return for an investment in Clean Line.
Any investment in Clean Line would be based on speculation that the company could permit, finance, build and attract customers to pay for its project. If those things don't happen, Clean Line, and any investment in the project, disappears forever.
It's great that Hannibal wants to buy more wind energy for its citizens. But Clean Line is not the only option. It's the most risky option. Hannnibal could purchase wind energy risk-free through MISO's energy market, and have it delivered through MISO's existing or planned transmission system. It doesn't take a gigantic, new, privately-owned transmission line to deliver wind to Hannibal. There are better, much less risky, options for Hannibal to lower rates for its customers by buying renewable generation. Perhaps Hannibal should issue a request for proposals to supply wind power, and examine all its options, before jumping on the first one-trick pony to ride through town?
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