As 2012 draws to a close, let's take a look at the decrepit corpse of the PATH project. Although it's true that PJM officially cancelled the project in August and PATH will never be built, our little zombie continues to shamble about feeding on consumer wallets.
Back in 2008, FERC awarded several financial incentives to the PATH project. One of the incentives was the ability to apply at FERC to recover 100% of prudently incurred expenses from consumers in the event the project was abandoned (cancelled). Although you've been paying a yearly revenue requirement for PATH's Operations & Maintenance expenses and return (profit) every year since 2008 (grand total through Dec. 31, 2012 = $95M), PATH has been spending its own money on project capital expenses such as land, engineering, permitting, etc. These expenses get tucked away in PATH's rate base as "Construction Work in Progress" where they have been earning a return of 12.4% yearly. The amount PATH has invested in their project totals $121M.
In January and December of 2011, two West Virginia consumers filed formal challenges to PATH's yearly revenue requirements for the years 2009 and 2010 (part of that $95M). In September of this year, FERC granted the two formal challenges and set them for hearing. Expenses challenged include PATH's advertising and dishonest public relations activities totaling around $6M.
A week after FERC set the Challenges for hearing, PATH made their abandonment filing with the Commission, seeking to recover their $121M investment without any examination of the actual costs incurred. Then PATH turned right around and asked the Commission to consolidate the abandonment with the formal challenges for settlement and hearing.
More than 30 parties intervened in PATH's abandonment filing, including a dozen consumers from West Virginia and Maryland. FERC found that PATH was entitled to collect prudently-incurred project investment, however it set the prudence of the actual expenses for settlement and hearing. FERC also denied PATH's request to retain part of the incentive return on equity they were granted in 2008.
In its filing, PATH voluntarily agreed to forfeit 1.5% of the incentive rate of return they were granted in 2008. However, PATH asked to retain the extra .5% return FERC granted them as an incentive for joining the PJM cartel. Several parties protested this rather bald money-grab by PATH. Because the PATH shell companies were created by parent companies AEP and FirstEnergy (Allegheny Energy) as single-purpose entities to construct and own ONLY the PATH project, and the PATH project has now been cancelled, there is no purpose to PATH's continued membership in PJM, except to collect an additional .5% interest from consumers every year. PATH will never build, own or turn over any transmission infrastructure to the PJM cartel. PATH is simply limping along trying to maximize its profit on its failed endeavor. PATH's proposal was found to be unjust and unreasonable by the Commission, and PATH was denied the extra .5% interest, which reduced its yearly return to 10.4%.
FERC also ordered PATH to provide the cost detail that was missing from its abandonment filing. PATH asserted that its expenses were prudently-incurred and that no detail of how it spent $121M was necessary. Ridiculous much? Other abandonment filings have all included cost detail. Turns out that PATH had not even sorted its costs before filing for abandonment and needed another 45 day extension to get their act together. But we were supposed to believe that everything was prudently-incurred ;-)
Today, PATH filed a request for rehearing on the abandonment, claiming that FERC had made legal errors in their Order denying that .5% PJM cartel membership incentive. *sniff* *sniffle* *whiiiiiiiiiiiiiiiine* Pretty revolting, I've seen better tantrums from 3-year olds.
Just remember, all this legal nonsense is being paid for by all 60-some-odd million consumers in PJM's 13-state "region." No big deal for PATH to continue to stomp its feet and demand more money, it won't cost them a dime. So, just how much money are we talking about here? Around $240K in 2013, with lesser amounts in each of the following 4 years PATH has proposed as the amount of time given to ratepayers to pay off project debt. Wanna bet PATH wastes more of our money on legal fees whining about that .5% interest than it stands to gain overall?
So, here's where PATH stands at the end of this year:
$121M in abandoned project costs + $6M in prior O&M expenses set for settlement and hearing at FERC. Currently, settlement conferences are scheduled to begin at the end of February, 2013 and will continue as long as negotiations are productive. If settlement ultimately fails, some or all issues may actually proceed to hearing, adding another couple years and mounting legal fees to consumer misery.
The PATH zombie -- the gift that keeps on giving!
Back in 2008, FERC awarded several financial incentives to the PATH project. One of the incentives was the ability to apply at FERC to recover 100% of prudently incurred expenses from consumers in the event the project was abandoned (cancelled). Although you've been paying a yearly revenue requirement for PATH's Operations & Maintenance expenses and return (profit) every year since 2008 (grand total through Dec. 31, 2012 = $95M), PATH has been spending its own money on project capital expenses such as land, engineering, permitting, etc. These expenses get tucked away in PATH's rate base as "Construction Work in Progress" where they have been earning a return of 12.4% yearly. The amount PATH has invested in their project totals $121M.
In January and December of 2011, two West Virginia consumers filed formal challenges to PATH's yearly revenue requirements for the years 2009 and 2010 (part of that $95M). In September of this year, FERC granted the two formal challenges and set them for hearing. Expenses challenged include PATH's advertising and dishonest public relations activities totaling around $6M.
A week after FERC set the Challenges for hearing, PATH made their abandonment filing with the Commission, seeking to recover their $121M investment without any examination of the actual costs incurred. Then PATH turned right around and asked the Commission to consolidate the abandonment with the formal challenges for settlement and hearing.
More than 30 parties intervened in PATH's abandonment filing, including a dozen consumers from West Virginia and Maryland. FERC found that PATH was entitled to collect prudently-incurred project investment, however it set the prudence of the actual expenses for settlement and hearing. FERC also denied PATH's request to retain part of the incentive return on equity they were granted in 2008.
In its filing, PATH voluntarily agreed to forfeit 1.5% of the incentive rate of return they were granted in 2008. However, PATH asked to retain the extra .5% return FERC granted them as an incentive for joining the PJM cartel. Several parties protested this rather bald money-grab by PATH. Because the PATH shell companies were created by parent companies AEP and FirstEnergy (Allegheny Energy) as single-purpose entities to construct and own ONLY the PATH project, and the PATH project has now been cancelled, there is no purpose to PATH's continued membership in PJM, except to collect an additional .5% interest from consumers every year. PATH will never build, own or turn over any transmission infrastructure to the PJM cartel. PATH is simply limping along trying to maximize its profit on its failed endeavor. PATH's proposal was found to be unjust and unreasonable by the Commission, and PATH was denied the extra .5% interest, which reduced its yearly return to 10.4%.
FERC also ordered PATH to provide the cost detail that was missing from its abandonment filing. PATH asserted that its expenses were prudently-incurred and that no detail of how it spent $121M was necessary. Ridiculous much? Other abandonment filings have all included cost detail. Turns out that PATH had not even sorted its costs before filing for abandonment and needed another 45 day extension to get their act together. But we were supposed to believe that everything was prudently-incurred ;-)
Today, PATH filed a request for rehearing on the abandonment, claiming that FERC had made legal errors in their Order denying that .5% PJM cartel membership incentive. *sniff* *sniffle* *whiiiiiiiiiiiiiiiine* Pretty revolting, I've seen better tantrums from 3-year olds.
Just remember, all this legal nonsense is being paid for by all 60-some-odd million consumers in PJM's 13-state "region." No big deal for PATH to continue to stomp its feet and demand more money, it won't cost them a dime. So, just how much money are we talking about here? Around $240K in 2013, with lesser amounts in each of the following 4 years PATH has proposed as the amount of time given to ratepayers to pay off project debt. Wanna bet PATH wastes more of our money on legal fees whining about that .5% interest than it stands to gain overall?
So, here's where PATH stands at the end of this year:
$121M in abandoned project costs + $6M in prior O&M expenses set for settlement and hearing at FERC. Currently, settlement conferences are scheduled to begin at the end of February, 2013 and will continue as long as negotiations are productive. If settlement ultimately fails, some or all issues may actually proceed to hearing, adding another couple years and mounting legal fees to consumer misery.
The PATH zombie -- the gift that keeps on giving!
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