And the PATH Abandonment Games Begin at FERC
Yesterday, I filed my petition to intervene in the PATH abandonment case at FERC. The case number is Docket No. ER12-2708-000, for those of you who are keeping score at home.
One of the great things about being an intervenor in the case is getting to see what other intervenors, who are actually getting paid to intervene, have to say. The deadline for petitions to intervene is tomorrow, Oct. 19, so I am just in time to get service from last minute intervenors. Boy, is this going to be fun.
The first one I got today was filed by the Illinois Commerce Commission, which serves as the PSC in Illinois. And it’s a humdinger. If you remember, the ICC was one of the parties that sued FERC and PJM in federal court for charging Illinois rate payers for PATH, a line from which those rate payers would receive no benefit. As Judge Posner of the Federal 7th Circuit pointed out in his opinion in the case, this “postage stamp” method of recovering costs is blatantly illegal and contrary to all prior US practice concerning recovery of costs for transmission projects. The 7th Circuit Court sent the case back to FERC and told them to come up with a plan for complying with the law. FERC and PJM milled around for a few months and resubmitted essentially the same “postage stamp” plan to the 7th Circuit Court. The ICC went right back to FERC and demanded that FERC hold a new hearing process to reconsider its new old plan. Because this motion for reconsideration is still pending at FERC, FERC has not resubmitted its plan to the 7th Circuit Court for approval.
And that is exactly what the ICC said in its petition to intervene today:
With PJM cancelling the PATH project and removing it from the PJM transmission expansion plan, the PATH project will never go into service. This cancellation makes it all the more clear that the ComEd zone will not receive benefits commensurate with the abandoned costs that would be allocated to it under the postage stamp cost allocation method because there will not be any project benefits for anyone – just costs. In the September 28 Filing, PATH, relying on Remand Order in Docket Number EL05-121-006 which may be subject to rehearing and appeal, provides no evidence to support allocation of the abandoned project costs using the postage stamp method.
If, despite these facts, the Commission chooses to accept PATH’s proposal to allocate its abandoned project costs using PJM’s postage stamp cost allocation method, the ICC notes that such decision is subject to modification depending on the outcome of the Commission’s pending Order on the requests for rehearing of its Remand Order in Docket Number EL05-121-006 and any Appellate Court action that may proceed from such Order of rehearing.
So with these paragraphs, the ICC is telling FERC clearly that if FERC allows PATH to recover abandonment costs using the postage stamp method, the ICC will quite likely end up battling them again in federal court.
As the ICC points out clearly in its petition,
In PJM’s April 13, 2010 “Response of PJM Interconnection, L.L.C. to Information Requests,” in Docket Number ER05-121-006, PJM demonstrated that, using the distribution factor (“DFAX”) method for identifying project beneficiaries and allocating costs, the ComEd zone would be allocated zero costs for the PATH project.27 PATH specifically acknowledges in its September 28 Filing that the purpose of the PATH project was to “deliver power from West Virginia to the constrained Baltimore/Washington area.”28 Therefore, the cost causation for the PATH project from its conception is clear, and the ComEd zone is not among the cost causers. The beneficiaries of the PATH project using the DFAX method are also clear in PJM’s April 13, 2010 Response, and the ComEd zone is not among them.
ComEd is Commonwealth Edison, the power company that serves the Chicago area, which is a member of PJM. As the ICC points out, the DFAX method of allocating costs to the actual rate payers who benefit from a project, is a tried and true method used by power companies for decades. The DFAX allocation method complies entirely with all established federal law. The postage stamp system, which spreads the costs to all rate payers in a regional transmission organization, whether they benefit or not, as Judge Posner clearly stated in his opinion, is illegal under all federal precedents for cost recovery.
The ICC attorneys make several other good points about how AEP/FE calculated, or failed to calculate, the costs they want to recover. The ICC makes the very valid point that there is no way to determine whether the costs of buying the land for the Welton Spring and “Kemptown” substations were prudently incurred until these properties are sold and we can see how much AEP/FE lost or gained on the deals. In their application to recover their costs, AEP/FE want some fictional cost for the properties now and they will fix things later as they sell the property. That’s just stupid, as the ICC points out.
In their original application to recover their costs, AEP/FE claimed that there were no problems with their claims about the $121 million in costs they want to drop on PJM rate payers, and FERC should just grant their request by early December. Well, it doesn’t look like that is going to happen, because there is already a long line of intervenors in the case who have pointed out myriad factual issues in question.
This case will be great to follow, and I will try to keep up with the highlights as they happen. As Marty Brenneman, the great Cincinnati Reds radio announcer says, “This is going to be a good ole good one.”