PJM's Got Nothing

In this last blog in the Transource Pennsylvania Surrebuttal Testimony series, let's take a look at the testimony filed by the three witnesses for the state Office of the Consumer Advocate.

The testimony of Scott Rubin was pretty quick.  It sure looks like PJM's got nothing in the way of facts that challenges Mr. Rubin's testimony about the increase in costs to Pennsylvanians that would come with a Transource IEC project.  What PJM's witness does is try to confuse allocation of project costs with economic benefit.  It's all just smoke and mirrors and Rubin creates a great example demonstrating that alleviating "congestion" causes increased costs for customers on the unconstrained side of the congestion.

I agree with Mr. Herling that if a project can be devised to cost-effectively eliminate the transmission constraint, the entire cost of that project should be borne by customers in Town B. As a matter of cost allocation, that is the fairest way to allocate the cost.

Where PJM and Transource are incorrect, however, is in ignoring the increase in costs in unconstrained areas when determining the benefits of a project. By using only the decrease in costs on the constrained side of the congestion point to determine the benefits of a project, PJM and Transource greatly inflate the benefits of the project, making an uneconomical project look economical.

There are no "special people" who deserve to have their rates lowered by raising them elsewhere, but that seems to be what Mr. Herling believes.  By looking only at cost decreases in the Washington, DC-metro area, and ignoring cost increases to Pennsylvania and other zones, PJM picks winners and losers in the electric rates game.  Cost increases should balance out cost decreases when determining "benefit" to the whole region PJM serves.

And speaking of the whole region, Mr. Rubin confirms Barron Shaw's testimony that if the IEC were a regional project, it would not come anywhere near meeting PJM's cost-benefit threshold of 1.25:1.

Mr. Rubin also corrects Mr. Herling's $866.2M estimated savings number, which it appears Mr. Herling plucked from thin air.

The most recent information provided by Transource shows that using PJM’s incorrect assessment of benefits (that is, looking solely at zones that would have reduced power costs) results in reduced congestion costs with a net present value of $707.29 million over 15 years. Moreover, as I explained in my direct testimony and as that same schedule shows, the total benefit to PJM (the sum of zones with reduced power costs and those with increased power costs) is only $17.05 million over 15 years.

And Mr. Horger's number is even worse.

 In other words, a project with a 15-year cost of almost $500 million would produce just $260 million of system-wide production cost savings over that same time period. This is a further indication that the Project is not economical and should not be constructed.

Mr. Horger should have quit while he was ahead.

Under PJM’s methodology for higher-voltage market-efficiency projects, system level production cost savings would receive a 50% weighting in determining the project’s benefits. The other 50% would be made up of savings in the benefiting zones. If that methodology were used for this project, it would result in the Project’s 15-year discounted “benefits” being calculated to be: (50% x $260.13 million) + (50% x $707.29 million) = $483.71 million. This is less than the Project’s 15-year discounted cost of $498 million, meaning that the Project would fail to provide a benefit-cost ratio of 1.0, let alone PJM’s required ratio of 1.25 or higher. Thus, if system-level production cost savings were considered, as Mr. Horger posits, PJM’s own methodology would result in the project failing the benefit-cost test.

Are the judges supposed to be impressed by PJM's magic math?  Or will they instead be swayed by simple, logical explanations they can follow?

And then there's Mr. Cawley, who opines that Pennsylvanians are not "entitled" to benefit from transmission congestion and that their increased costs should be ignored.  He even goes so far as to call notice of increased costs "self-interested parochialism."   

As if the decreased costs for Washington, DC at the expense of Pennsylvania ratepayers isn't "self-interested parochialism" in its own right?

And this is testimony in the Pennsylvania PUC proceeding.  End of story.

OCA Witness Geoffrey Crandall seems to have the same problem as other witnesses where PJM "misunderstood" and misstated his testimony, and then attempted to respond to things Mr. Crandall never said.  Does this trick never get old with PJM (or maybe it's AEP, the source of all PJM's testimony)?  Fact:  PJM never considered non-transmission alternatives to the IEC, although they exist in plenitude right in the back yards of the ratepayers experiencing the congestion costs.

And then we get to OCA witness Peter Lanzalotta, who also seems to have been victim to PJM's "misunderstanding" game.

Mr. Weber appears to state that my testimony recommends that the Eastern portion of the Project should be replaced either i) by new lines in existing transmission ROWs or ii) by additional circuits on lines already owned by PPL. The first part of this contention is completely incorrect. My direct testimony addresses the use of additional circuits on lines already owned by PPL. It does not address the installation of new transmission lines on new towers along existing ROW. My direct testimony points out that PJM did not evaluate the use of additional circuit positions already available on transmission towers owned by PPL. I do not develop an alternative to the facilities in the eastern portion of Project 9A. I only present the recommendation that use of additional circuits on transmission towers already owned by PPL be evaluated as part of an alternative to the proposed facilities in the eastern portion of Project 9A.

And PJM tries to defend its broken competitive planning process by sharing that it doesn't keep an inventory of existing circuits with room to add new, and besides it can only select an option from those that were submitted in its project window.  Poor, poor PJM, trapped and prevented from doing logical, cost effective planning.  *sniff, sniffle, wahhh* 

PJM is so busted... PPL submitted testimony with multiple options for using existing lines.  Maybe it's time for PJM to pull its head out of the sand?

After reading all this testimony, I can only conclude that PJM has nothing with which to prop up the Independence Energy Connection in the face of the simple, logical testimony of its opponents.  Trying to muddy the waters and confuse the judges just isn't working.  I have every confidence in the PA OCA and the Stop Transource folks to continue their excellent work and prevail at the evidentiary hearings beginning next week.

The IEC has been nothing but a huge waste of time and money.  Let's stop the bleeding.