The TrAIL Project originated in 2005 as part of PJM’s Project Mountaineer, whose objective was to enhance west-to-east transfer capability in the PJM transmission system.  PJM planned to use its RTEP process to identify a comprehensive plan for the project.  Following PJM’s announcement, Allegheny began reviewing transmission enhancement opportunities within the AP Zone of PJM that could expand west-to-east transfer capability and be incorporated in the RTEP.  On February 28, 2006, Allegheny formally proposed TrAIL to PJM as an effective solution to long-term reliability needs in the PJM region, and requested that PJM include this proposal in the RTEP as part of a major expansion of the PJM system.

Allegheny’s proposal described TrAIL as a 330-mile, 500-kV line stretching from the Wylie Ridge substation in the western panhandle of West Virginia to a new substation on the eastern side of the AP Zone in Frederick County, MD.  The project included installation of a static VAR compensator (SVC) of approximately 500-megavolt-ampere reactive power at Allegheny’s Meadow Brook Substation south of Winchester, VA.  The entire line would be in the AP Zone.  Allegheny proposed to begin initial engineering and planning in 2007, and to place the first phase in service in 2013.

On May 19, 2006, PJM released the 2006 RTEP Baseline report presenting its first 15-year regional transmission plan.  The report identified numerous facility overloads, voltage and thermal violations, and contingency overloads on Allegheny’s transmission system, and recommended enhancements to resolve them.  On June 22, 2006, the PJM Board approved the RTEP and directed construction of TrAIL with an in-service date of June 2011.
Allegheny filed its request for incentives for the TrAIL Project, in Docket No. EL06-54-000, concurrently with its proposal to PJM.

Reviewed materials on the Allegheny and FirstEnergy web sites and other key industry and news sources.

Analyzed the revised reconciliation that TrAILCo submitted December 19, 2011 to remove certain transaction costs related to the FirstEnergy-Allegheny merger improperly included in its 2011 formula rate.  Issued data requests to understand Allegheny’s procedures for tracking, accounting for, and allocating such merger-related costs to TrAILCo.  Examined how merger-related costs were improperly included in TrAILCo’s revenue requirement, how the error was detected, how TrAILCo worked with PJM to revise customer billings and refund the costs to customers.  Scheduled conference calls and interviewed TrAILCo staff during the site visit to clarify our understanding of these matters.

Audit staff found that TrAILCo included three categories of merger costs in its 2011 formula rate:  (1) $14,823 in postage, hotel rooms, security, and other outside services incorrectly charged to operating costs rather than to the special, non-recoverable accounts established for merger costs; (2) $347,654 in executive bonuses charged to recoverable accounts based on an incorrect determination by Allegheny’s accounting department that the bonuses were not merger-related; and (3) $43,718 in 2010 merger integration costs charged to recoverable accounts due to an incorrect interpretation that the Merger Order required only transaction-related costs to be excluded from rates.

Audit staff’s review showed that TrAILCo reported cumulative spending on TrAIL in its FERC-730 reports rather than actual spending in the latest calendar year, as the FERC-730 instructions on the Commission’s web site require.  For example, in its first FERC-730, TrAILCo reported spending $2.3 million on TrAIL during 2006.  For 2007 through 2011, TrAILCo reported spending $32.9 million, $105.9 million, $546.0 million, $930.6 million, and $1.009 billion, respectively.  These figures total $2.63 billion, 2.6 times the amount TrAILCo charged to Project work orders in 2006-2011.

Compliance Trends
During the past several years, DAA observed noncompliance in certain areas that warrant highlighting for jurisdictional entities and their corporate officials. Although there are other areas of noncompliance associated with the topics presented below, the areas discussed relate to areas where DAA has found consistent patterns of noncompliance. Greater attention is needed in these areas to prevent noncompliance and to avoid enforcement action.

Formula Rate Matters. DAA rigorously examines the accounting that populates formula rate recovery mechanisms that are used in determining billings to wholesale customers. In recent formula rate audits, DAA observed certain patterns of noncompliance in the following areas:
Merger Goodwill – including goodwill in the equity component of the capital
structure absent Commission approval;
Depreciation Rates – using state-approved, rather than Commission-approved,
depreciation rates;
Merger Costs – including merger consummation costs (e.g., internal labor and other general and administrative costs) without Commission approval;
Tax Prepayments – incorrectly recording tax overpayments which are not applied
to a future tax year’s obligation as a prepayment leading to excess recoveries
through working capital;
Asset Retirement Obligation (ARO) – including ARO amounts in formula rates,
without explicit Commission approval;
Below-the-Line Costs – attempting to move below-the-line costs into formula rates (e.g., lobbying, charitable contributions, fines and penalties, and compromise settlements arising from discriminatory employment practices); and
Improper Capitalization – seeking to include in rate base (and earn a return on) costs that should be expensed.

Never doubt that a small group of thoughtful,  committed citizens can change the world. Indeed, it is the only thing that ever has. --
Margaret Mead
US social anthropologist (1901 - 1978)

“This company’s going to experience a thousand points of pain,” UWUA Local 102 President Bob Whalen said.

Whalen said, however, that after a 20-minute preliminary meeting, representatives only spent five minutes around the negotiating table on Monday. He said after reading the first item on the union’s list of contract change requests, the extension of health care benefits for retirees, FirstEnergy ended the discussion.

“They said, ‘No, the meeting is over.’ They did not listen to the rest of our proposals,” Whalen said.

During the Merger integration process, FirstEnergy and Allegheny will review existing procedures and policies to determine “best practices” and how to implement them, ensuring that customer benefits appropriately outweigh the associated costs and considering any related effects on customer service and customer satisfaction levels.

But Joel Gordes, a West Hartford-based energy consultant, said the regional approach toward addressing energy issues has a downside as well.

“This is a compact region, but each state has its wants and needs that are in conflict at times,” Gordes said. “If this leads to building more transmission lines across New England instead of focusing on other areas that decentralize energy production, like microgrids and solar energy, than I see this as something that weakens our safety net in the aftermath of some of the large storms we’ve seen. Distributed energy projects, like microgrids, would make us more resilient.”

The goal of the agreement, which was announced jointly late Thursday by the governors, is to reduce energy costs in the region.

The agreement calls for the states to jointly determine how to spend billions of dollars in ratepayer money from all six states to develop additional transmission projects for both natural gas and electricity.

"...the commitment to an initiative that can support additional transmission lines to bring cleaner electricity into Connecticut is essential to reduce our carbon emissions and help mitigate the devastating impacts of climate change that we have felt so severely here in Connecticut.”

[New Hampshire] Governor Maggie Hassan says the agreement - which she calls a "mission statement" - commits to expanding infrastructure like transmission lines and natural gas pipelines, which would help lower energy costs in the whole region. “But we want to make sure we do that in a way that really honors each state’s needs, and doesn’t disproportionately or inappropriately burden the people of any one state,” said Hassan in a cell phone interview on Friday.

The announcement comes at a time when the governors of Southern New England, with their more aggressive renewable energy goals, are especially concerned with rising energy rates. But some in Northern New England are worried about becoming a thoroughfare for renewable electricity destined for Boston and Hartford.

“I just think it’s a really positive an encouraging development,” said Hassan.