We welcome the new year with a great opportunity to provide a much clearer picture of how AEP/FE pick rate payer pockets for PATH. You have read for years here on The Power Line that the cost of the PATH zombie project is being passed on to WV rate payers. If you read WV newspapers, watch TV in WV or even read the press releases put out by the WV PSC, you will not learn how this process works.
Here is how the Charleston Gazette described the FE electric rate increase that goes into effect today for Mon Power and Potomac Edison rate payers in WV:
Nearly $20 million of the hikes aim to allow Monongahela Power and Potomac Edison to recoup spending on fuel, transmission and purchased power costs.
No mention of PATH costs here.
Here is the WV PSC press release on the same rate case:
In an ENEC case, customer rates are adjusted to true-up recovery of actual fuel costs, purchased power and net purchased transmission costs and revenue for the previous year and to reflect projected changes in Mon Power and PE’s cost of fuel and purchased power for the year ahead. The ENEC process does not involve the recovery of profit, rate of return on investment, or salaries and wages.
No mention of PATH here. But we do have the mention of “net purchased transmission costs” and the description of this rate case as an “ENEC case.” There are two kinds of rate cases at the WV PSC. One type of rate case is the “base rate case” in which power companies are allowed to charge rate payers for reasonable profit and their basic (hence the word “base”) expenses and overhead costs like salaries, costs of buildings and equipment, etc. “ENEC cases,” as the explanation above points out, are cases in which the PSC allows power companies to recover the costs of additional charges that can change year to year, such as fuel costs and purchased power.
As the statement above notes, ENEC cases also include “net purchased transmission costs.” These are costs, or credits (That’s why the phrase is “net” costs.), that are charged to retail electricity companies like Mon Power and Potomac Edison by PJM Interconnection. In recent years, mainly as a result of the federalization of the national transmission system by the Cheney-inspired 2005 Energy Policy Act, this category of charges has grown dramatically. More and more federalized costs have become hidden from rate payers in the complex new FERC processes.
The paragraph above from the WV PSC press release includes a totally false claim when it states that: “The ENEC process does not involve the recovery of profit, rate of return on investment, or salaries and wages.” All of these costs are included in the transmission costs generated by PATH and passed on to Mon Power and Potomac Edison, and which the power companies have included in their current ENEC case. None of those costs were excluded by the PSC in their final order in this case, so all of these PATH “profit, rate of return on investment, or salaries and wages” are included in the new Mon Power and Potomac Edison rate increase.
Don’t believe me? Go to the WV PSC final order in the FE rate case. Click here to go to that order. On page 2 of the Order, you will see the same false statement that was repeated in the press release:
An ENEC case is a type of rate case for electric utilities that deals with the fuel, purchased power, and purchased transmission costs incurred by an electric utility to provide service to customers. An ENEC proceeding does not address other costs such as employee salaries, maintenance of generation, distribution, transmission and other facilities, customer service and administrative costs, real estate expenses, etc., that are the subject of base-rate proceedings before the Commission, nor does an ENEC proceeding address or contain any allowance for profit or rate of return on the items included in the ENEC.
So we won’t find any accurate information about PATH charges to WV rate payers in the PSC order.
For that, we need to go to what is, in effect, the FirstEnergy application for their rate increase. To begin a new rate case, a power company files a letter supported by testimony by its employees detailing why they want to raise rates. In this case, FirstEnergy subsidiaries Monongahela Power and Potomac Edison filed this testimony on September 1, 2011. FirstEnergy Director of Rates and Regulatory Affairs for the two power companies, Kevin Wise, presented a number of spreadsheets detailing the past costs for which FirstEnergy wanted to recover adjustments, as well as projected costs for the calendar year 2012.
Here is a link to the FirstEnergy rate filing from September 1. Mr. Wise’s testimony begins on page 80 of the .pdf document (not the page number of the testimony document). In his testimony, Mr. Wise refers to several appendixes which detail the costs he wants rate payers to pay. These appendixes tell the tale.
Keep in mind that the WV PSC, in its final order in the TrAIL power line case, prevented FirstEnergy from recovering any of the costs charged by PJM for the TrAIL line for a period of seven years starting in 2008. Those costs are shown on the spreadsheets but are specifically excluded from the rate increase request.
However, in the expenses for the “review period” for which FirstEnergy wants adjustments to be counted toward the new rate increase, there is an expense called “Non-TrAIL Project Transmission Enhancement Expense.” If you can get over the “enhancement” propaganda claim, you will note that the total expense for the July 2009 to June 2010 review period in this category is $5,505,193 which FirstEnergy wants to include in the rate calculations for its Mon Power and Potomac Edison customers.
The same non-TrAIL expense line appears in FirstEnergy’s forecast for the full 2012 calendar year. The 2012 forecast expense in this category is $1,426,220. Unlike the other spreadsheets, this expense is listed with an account number 565467. The curious thing about the forecast spreadsheet, which you can see on page 293 of the .pdf document, is that for the first time an expense called “Transmission Enhancement Charges PATH,” account number 565465, appears on the spreadsheets. The projected amount for this item for 2012 is $442,830.
It is not clear, because FirstEnergy’s accounting system is not consistent, and Mr. Wise provides no explanation, whether or not PATH charges were included in the Non-TrAIL Project Transmission Enhancement Expense from July 2009 to June 2011. The power companies may have hidden the expenses that PJM charged them for PATH in this larger account before 2012, but the $442,830 PATH expense is clearly set out in the 2012 projection.
The PJM Interconnection charges for PATH include all costs recoverable under FERC protocols, including profit, return on investment, salaries and other overhead expenses for the PATH project. Because these costs are recovered as part of the recent ENEC case, it is simply false to claim that these kinds of costs are not passed on to rate payers in ENEC cases. That may have been true at some point in the past, but it is certainly not true any more.