PJM Deceives State Officials About PATH Alternatives — And Gets Caught

Here is a letter sent by the consumer advocates of WV, MD, VA, OH, IL, NJ, DE and DC to the Board of Managers of PJM Interconnection dated November 24, 2010.

I’ll let the consumer advocates, who are all part of the public service commissions in their various states, speak for themselves:

We are concerned both about the methods used by PJM to determine the costs of competing transmission projects and how those cost differences will be weighed by PJM in determining which project(s) should go forward. In addition, we believe that the decision by Dominion Virginia Power to rebuild the Mt. Storm-Doubs line has not been adequately considered in the analysis of whether to require construction of PATH or any of its alternatives.  Given the magnitude of PATH and the alternative proposals in terms of size and cost to consumers, we do not believe it is prudent for PJM to make this crucial decision without a fullvetting of all of the issues involved, including the ones we have previously identified in the TEAC [PJM’s Transmission Expansion Advisory Committee], both in meetings and formally in the attached letter.

First, the evaluation of the costs of PATH and the proposed alternatives were not conducted on a basis that allowed any meaningful comparison of costs. PATH is based upon 2007 costs that we understand have been revised by PATH three times and not independently evaluated. The cost projections for the Liberty alternative were independently evaluated by Burns & McDonnell. We appreciate that PJM management saw the value in the independent evaluation of project costs; however PJM management did not require a comparable analysis of the PATH costs using the same assumptions as those used in evaluating the Liberty costs (or any other PATH alternative). While no doubt this gave PJM  management a better understanding of the Liberty costs, it provided no information whatsoever of how the PATH and Liberty costs compare, or whether the PATH costs are themselves reasonably projected.

To ensure that these projects are evaluated in an “apples-to-apples” comparison, and to ensure that the process is transparent, we formally renewed our request to PJM management to independently evaluate the PATH costs. This was not done and even a cursory review of the Liberty cost evaluation reveals that there were different assumptions for contingencies (10% for PATH, 15% – 40% for Liberty), there was no environmental assessment or feasibility for PATH, and the real estate costs for Liberty appear excessive (four times the real estate costs for MAPP), to name a few.

And now for the real zinger that reveals the rot at the heart of the PJM PATH project:

Finally as it relates to the evaluation of the Liberty costs, we were surprised to learn that PJM engaged Burns & McDonnell for the independent evaluation. PJM management never disclosed to the TEAC Committee participants – or at least to the consumer advocates – that PATH had engaged Burns & McDonnell for significant work on the PATH project. The conflict of interest is undeniable and should have been immediately disclosed. For a project of the magnitude of PATH it is unrealistic that Burns & McDonnell should be expected to objectively evaluate a competing project regardless of what specific employees may or may not have been assigned to the project. [emphasis mine]

The consumer advocates then move on to PJM’s deceptive handling of Dominion’s alternative to PATH, part of which PJM has approved:

Second, PJM has indicated that Dominion will move forward with the Mt. Storm – Doubs rebuild. This rebuild, according to the TEAC meeting materials, could be completed by 2015. The filing in West Virginia for approval of the project represents the new line will be energized by 2015. Nevertheless, at the November 10, 2010 TEAC meeting, PJM declined to adopt this projection or include Mt. Storm – Daubs [sic] in the 2010 RTEP even though PJM management announced construction would commence in the spring of 2010. We believe this project should have been included in the RTEP analysis for this year or evaluated through retooling or a sensitivity study that included an in-service date of 2015. We made this request at the October 28, 2010 TEAC meeting and formally renewed this request in advance of the November 10, 2010 TEAC meeting in the attached letter.

The consumer advocates conclude with the following requests:

Given the concerns we have expressed, we again respectfully request that the Board of Managers direct the PJM Planning Department to immediately undertake (whether in-house or by an outside consultant) a study that will independently evaluate the costs of the PATH project (and other alternative projects) in the same manner and on the same basis as was performed on the Liberty project. Only through a comparison of the results of these two studies will the PJM Board of Managers have the requisite information upon which to base its review and subsequent approval of transmission projects.
We also request that:
(1) PJM runs a sensitivity analysis of Mt. Storm – Doubs on the RTEP base case for this year;
(2) PJM consider the impacts on the consumers of electricity who will bear these costs by placing weight on the cost factor of the projects under consideration; and that
(3) the Board of Managers refrains from evaluating PATH and the alternatives without this essential information.

So, PJM staffers hid the fact that they had used a contractor already working for AEP/Allegheny on PATH to evaluate the competing alternative Liberty project through southern PA, which would have completely avoided MD, WV and VA and would have replaced PATH.  Then PJM staffers approved the rebuilding of Dominion’s Mt. Storm to Doubs line without including the resulting impacts in their projections they were using to justify PATH.

We already know from the independent analysis provided by Hyde Merrill and George Loehr that PJM has rigged their basic planning for PATH from the outset.  Now, as better, much less expensive alternatives are developed, PJM rigs the game to keep the creaking PATH project alive.

This deception and corrupt process reveals clearly the PATH simply cannot compete on a level playing field.  PATH is not about PJM’s quest for reliability.  It is about realizing PJM’s dream of a Project Mountaineer in all its glory.  This is not the first time PJM has engaged in this kind of deception and suppression of uncomfortable facts.  In 2007, PJM’s CEO had to resign when it was discovered that PJM had been hiding unfavorable reports generated by its own Market Monitor.

The seven consumer advocates need to keep the pressure on PJM.  Three of them, from WV, MD and VA are in the thick of the PATH cases in their own states.  We need them to stand by the citizens of their states and put an end to the corrupt AEP/Allegheny waste of time and money that is PATH.

All credit for digging out the consumer advocates’ letter goes to the people over at StopPATHWV.  There is a great story about the letter, and an in depth analysis of PJM’s corrupt report on the Liberty project here.