The Big Green Shell Game

What a busy week in the energy world!  Not only was NIETCs on everyone's radar, but FERC dropped two huge new rules that have been in the works for years.

Let's take a look at one of them now, FERC's new Transmission Planning and Cost Allocation rule.  It's nearly 1,300 pages.  Ain't nobody got time for that this week!

The rule was passed on a 2-1 vote by the Commissioners.  Commissioner Christie dissented and he seemed pretty steamed up about it during the meeting.  Commissioner Christie has been the most consumer-focused Commissioner FERC has had in recent memory.  If he thinks the rule is awful, I'm pretty sure I will, too.  So, I went right for the dissent, all 77 pages of it.  It's full of wisdom and truth, and lots of references to movies and books, (The Wizard of Oz, The Godfather and George Orwell to name but a few) that makes an enjoyable and thought-provoking read.  So here's one more from me...

"In a time of universal deceit, telling the truth is a revolutionary act."  -- George Orwell

Commissioner Christie is a revolutionary because he didn't stray from his duty to protect consumers.  It's FERC's whole reason for existing.

​Let's start with this bold title, "​The Final Rule Is a Pretext for Enacting a Sweeping Policy Agenda Never Passed by Congress, Denies the States the Authority Promised by the NOPR, and Fails the Commission’s Consumer Protection Duty under the Federal Power Act."

Not mincing words there.

Here's my nutshell summary, but I urge you to read the whole thing for yourself.

FERC's new rule requires planning on a 20-year horizon.  Nobody knows what our energy needs are going to be 20 years from now.  FERC's rule enables a political agenda by driving transmission that will create a preferred energy mix.  It's not about need driving transmission, it's about transmission driving energy mix and corporate profits.

FERC's rule requires planners to throw all sorts of "needs" into a common bucket:  reliability, economic, generator interconnection, public policy and corporate energy demands are all stewed together to create regionally "needed" projects.  Wait... what?  Interconnection needs? Public policy and corporate energy demands?  Yes, that's right, those are the "needs" planners must now put into their plans.

Historically, a new generator (or merchant transmission project) pays its own costs to connect to the existing system.  It only makes sense because the generator is the one profiting from the connection it needs to sell power to consumers.  Requiring generators to pay for their own connection also requires them to plan generators in economic places, where connection costs are cheapest.  When consumers are paying, generators will site where it's most profitable for them, not cheapest to connect.  It's like requiring you to pay for a new road to access a WalMart in the middle of nowhere so that you can buy WalMart products you don't want or need. 

Once all these needs are mixed up in the bucket, the planner must assign certain "benefits" of these projects to all consumers.  "Benefits" you probably didn't need in the first place.  But once you are receiving "benefits", you have to pay for them.  Therefore, we are all going to be paying for new transmission to meet the public policies of states we don't live in, and the corporate energy goals of corporations who increase profits by virtue signaling about how piously "clean" they are (on our dime).  How about if I demanded energy created from burning tiddlywinks?  Will regional planners have to plan that system and make everyone else pay for it?  No, I don't matter because I'm just a consumer, not a corporation spreading my lobbying dollars in all the right places. 

Public policies regarding energy created by states, localities or other political subdivisions should only be paid for by the citizens who have the ability to vote for them.  I should not have to pay the costs of transmission so that Virginia or Maryland can meet their own policies to only generate clean electricity (but I'm already doing that with new transmission for data centers).  FERC has doubled down and decided that everyone in the region must pay for the energy policies of certain states. 

On top of that, FERC has created a new cost allocation scheme that cuts states out of the mix.  Even if states agree that certain states should pay for their own energy policies (like offshore wind), that agreement can be trashed in favor of making everyone pay.  What a joke!  FERC spent lots of time over the past couple years holding meetings with state regulators to find out what they wanted to see in this transmission rule... and then tossed it all out the window.  I'm going to guess states are as steamed up as Commissioner Christie, and that doesn't make them eager to permit all this new transmission that's supposed to come out of this rule.

During the rulemaking process, FERC published an "Advanced Notice of Proposed Rulemaking" that contained a lot of these awful new policies.  Later, it published a "Notice of Proposed Rulemaking" that reined them in to an extent and created something less awful.  But then the rule FERC actually created tossed that out the window and reverted to the first awful ANOPR.  What gives here?

​In the words of Commissioner Christie:

The final rule should be seen for what it is:  a pretext to enact, through administrative action, a sweeping legislative and policy agenda that Congress never passed.  The final rule claims statutory authority the Commission does not have to issue an absurdly complex bureaucratic blizzard of mandates and micromanagement to be imposed on every transmission provider in the United States for the transparent goal of spending trillions of consumers’ dollars on transmission not to serve consumers in accordance with the FPA, but instead to serve political, corporate, and other special-interest agendas that were never enacted into law.  The rates for transmission that will result from the final rule will not only be unjust, unreasonable, unduly discriminatory and preferential, but grossly unfair to tens of millions of American consumers already burdened with rapidly growing monthly power bills.   

That's right, this rule is a special gift to the Biden Administration and its pet special interests that will profit from it.  It's not for me and you.

...the final rule inflicts staggering costs on consumers by promoting the construction of trillions of dollars of transmission projects, not to serve consumers in accordance with the FPA, but to serve a major policy agenda never passed by Congress, to serve the profit-making interests of developers of politically preferred generation, primarily wind and solar, and to serve corporate “green energy” preferential purchasing policies.

It's the "Green New Deal", Transmission version, all tucked neatly into place by corporate lobbyists and special interests.  How has FERC sunk so low? It is supposed to be an independent regulator, protecting consumers from corporate greed, but now it's just another politically captured federal agency unhinged from democracy.

 In fact, the final rule is not even about planning transmission, but is about planning policy, and it is very preferential about the policies it wants to promote.  As with the Great Oz, pulling back the curtain exposes the final rule for what it really is:  An essential component in a comprehensive plan by the current presidential administration to push what the media describe as “green policies” designed to prefer and promote the wind and solar generation it favors while simultaneously forcing the shutdown of the fossil fuel generation it disfavors, both needed to meet its political commitment.  Let me emphasize:  Whether the policies being promoted in this final rule can be described as “green, purple, red or blue” is irrelevant.  The point is that FERC, as an independent agency, has no business promoting the policies of any one party or presidential administration, especially when, as here, the effort to do so goes far beyond FERC’s legal authority and fails to perform our consumer protection function under the FPA.

Commissioner Christie calls FERC's new rule a shell game 16 times in his dissent.  Here's the first.

Put most simply, the final rule is a shell game that plays this way: 
Step One:  For planning and cost allocation purposes, throw transmission projects that solve specific reliability problems or reduce congestion costs into the same bucket as projects designed to promote public policies or corporate “green energy” preferences and disguise the purpose of very different projects by re-labeling all projects in the new bucket with the innocuous-sounding name “Long-Term Regional Transmission Facilities.”
Step Two:  Mandate planning inputs that must be used in determining which projects get selected for regional plans, which starts the money flowing from consumers to developers before any state has even evaluated the need for, or cost of, the projects. 
Step Three:  Mandate benefits that will ultimately affect the allocation of costs to consumers across a multi-state region.  Combined with Steps One and Two, this makes consumers involuntary “beneficiaries” who will then be forced to pay for projects that promote another state’s public policy or corporate “green power” commitments. 
Step Four:  Order all transmission providers to develop and file a cost allocation formula that will automatically be the default applicable to the entire bucket of Long-Term Regional Transmission Facilities. 
Step Five:  Remove the NOPR’s requirement that states must consent to the details of Steps One through Four before their consumers can be burdened with costs.

Another great term to search in this dissent is "regulatory capture."  (“In simple words, regulatory capture exists when a regulatory agency, created to act in the public interest, ends up advancing interests of the industry it is charged with regulating.”)

Instead, what we have in today’s final rule is a patent instance of regulatory capture with the singular goal to build out preferential policy and corporate-driven projects, steamrolling the states and consumers alike.

Today’s final rule is much less the product of reasoned decision-making or the agency’s specialized expertise, as of political pressure and special interest lobbying.   In the chapter on “regulatory capture” in future economics textbooks, today’s final rule should be a featured case study.

Commissioner Christie sounds off on FERC pulling a bait and switch by removing the promise to end one of its "FERC Candy" incentives from the final rule.

​By doing nothing about the consumer-paid “FERC candy” incentives that this Commission regularly hands out to developers, and even removing the provisions dialing back the CWIP incentive—and with its overall aim to pile trillions of dollars of additional costs for big corporate and politically-driven transmission on consumers, which will largely flow to the increased profits of wind, solar and transmission developers—the final rule could be the inspiration for one of the great country and western songs “Lord Have Mercy on the Working Man.”  Warner Bros. Nashville 1992 (“Why’s the rich man busy dancing while the poor man pays the band?  Oh they’re billing me for killing me, Lord have mercy on the working man!”).

Ever wonder where that "FERC Candy" term came from?  Commissioner Christie tracks it down...

Mary O’Driscoll, FERC approves incentives for AEP, Allegheny grid projects, Greenwire, July 21, 2006 (“The approvals came as the commission finalized rules intended to promote transmission-grid additions that outline specific rate and other incentives that FERC will consider for future construction projects — the ‘FERC candy’ that critics contend gives the utilities incentives but not much in the way of corresponding requirements.”) (emphasis added), https://subscriber.politicopro.com/article/eenews/2006/07/21/ferc-approves-incentives-for-aep-allegheny-grid-projects-234508.

I really could be here all day pulling quotes that resonated, but this is already long enough.  READ THE DISSENT.

Commissioner Christie points out seven ways to Sunday why the Commission's rule is not going to pass legal muster, and he's spot on.  I'm going to predict that this rule ends up before SCOTUS before being chopped off at the knees.

Meanwhile, by trying to have it all, the special interests that were served by this rule have instead created a situation where nothing gets done at all.  I agree with Commissioner Christie that the way to get the transmission we need to keep our lights on is to seek out agreement, not disagreement, with the states.  And to be fair to the consumers who are paying the bills.  End of story.  A lighter touch may have spurred beneficial energy policy changes because we really are all rowing in the same boat.  Instead, FERC has created a giant waste of time and energy that will prevent the very energy utopia it envisions.