Keryn has a great post this morning over at StopPATH WV about AEP/Allegheny’s concerns about the cost of shakedowns by WV politicians.
To document her descriptions, Keryn posted a link to a Morgan Stanley investor slide show that give us a very good picture of the arms of the AEP Transco octopus. This includes a joint venture with Warren Buffet’s MidAmerican Energy Company. The slide show is a little out of date, because it still describes AEP’s PATH partner as Allegheny Energy, instead of FirstEnergy, but the other information is still operative.
Note that the MidAmerican joint ventures overtly involve wind power connections.
Our friends in the Frederick area should also note the squiggly dotted line that represents a mysterious future project that connects AEP’s 765 kv transmission network in the Ohio Valley to the also future “Kemptown substation” that has been blocked by local zoning ordinances. This AEP pipe dream probably will not happen, because Allegheny Energy has now been bought by FirstEnergy, a major competitor in PJM that now controls most of the transmission system in PA.
I used the term “octopus” in my title for a very good reason. Back in the early 20th century, muckraker Frank Norris wrote a great book called The Octopus about the grain trusts and the railroads that controlled the US market for wheat and corn. The octopus in the title was his metaphor for the tentacles of this middle man/transportation system that set prices and exploited both producers and end consumers of US grains. Transportation has always been the high profit/low risk choke point in US markets, mainly because distances are so great in North America.
Why does AEP want to go into the transmission business?
- AEP is stuck with huge long term bets on coal-fired generation. It is now costing the company millions of dollars in payoffs to politicians and right wing think tanks to keep these power plants in business. These obsolete power plants are killing thousands of Americans every year, and it is very expensive fighting off attempts to shut them down.
- AEP has made some new investments in wind generation in Texas (see transmission plans in Texas and Kansas), but new land based wind generation is constantly undercut by heavily subsidized coal plants and a Congress that is hostile to renewable energy.
- Selling electricity to consumers is a nice steady gig, but all consumer electric rates, even in “deregulated” states is subject to rate setting by state PSCs.
But with interstate transmission –
- Power lines are not subject to pollution restrictions, now or in the future. And maintenance costs are relatively low.
- Now that Cheney and FERC have “put in place” a federalized process for stripping states of their power to regulate transmission, you only have to buy off one set of regulators and politicians in Washington, the famous “one stop shopping” that corporations are always trying to set up.
- And you have those wonderful federalized guaranteed returns on equity. Look at the slide show chart.
- The operation of your transmission lines is mostly controlled by regional transmission organizations like PJM and MISO, which are cartels controlled by power companies with only incidental participation by state regulators.