Helping Power Companies “Refocus”

The comments that AEP CEO Nick Akins made in his most recent investor conference call have a very important lesson for anyone fighting for renewable energy and distributed generation.

Investment is a zero sum game.  Every dollar spent on a power company’s really bad idea is a dollar that can’t be spent making our electrical system more reliable by moving generation closer to electrical load using clean renewable power.

So it is not enough to advocate for renewable power.  And it is not about advocating around the fringes of power company or regulatory policy.  We need to go right to the heart of the most important issues.

I quoted this section of CEO Akins’ investor call in a past post, but it bears repeating:

Unlike previous presentations where we were dealing with long-term-type projects, it was very difficult to project out the earnings potential of transmission. Everyone wondered, “Well, okay, when, it’s great to talk about the project, but when are the earnings going to happen?” And our transmission organization has been refocused on developing those short-term projects and real projects through the Transco development and specific joint ventures associated with smaller, less-lead-time, more — less-risky projects, going forward.

Let’s be clear.  AEP did not decide to “refocus” away from PATH so that it was no longer a “real project” for them.  We forced them to do it by fighting and killing PATH.  AEP is moving on to other projects, many of them just as bad as PATH, but the billions of dollars that would have flowed from rate payers to AEP and FirstEnergy for decades (although some still are) are now available for us to invest more usefully.

This is not a one time thing.  As we know, power company managers get paid big bucks, most coming directly from rate payers, to dream up really stupid projects that are obsolete before they are even approved.  So the “refocusing” must go on if we want things to change for the better.  That is one big reason why The Power Line has not gone away.

In all the happy talk that corporate Big Chiefs spout to on their investor conference calls, you will never hear them offer any honest assessments or self-criticism.  Mr. Akins never thanked us for helping him “refocus” AEP’s transmission policies.  There is no doubt in my mind that he should have.

5 thoughts on “Helping Power Companies “Refocus”

  1. Ah… remember all those PATH questions that used to pop up in earnings calls and how Mikey stuttered, stammered and lied? The only difference between PATH and AEP’s other current JV projects is…….. US! And it looks like LDB has a few more JVs up his sleeve. I’m thinking they don’t involve WV, because then they wouldn’t be “real” projects. We are “unreal” 😉

  2. If path is not dead, then why are these folks still talking about it at FERC.

    Summary of electric agenda items for February 16, 2012 FERC open meeting

    Winston & Strawn LLP
    Kathy Konieczny and Raymond B. Wuslich

    E-10 Docket No. ER08-386-001, ER08-386-002, Potomac-Appalachian Transmission Highline, LLC (“PATH”)

    The Commission will likely respond to a request for rehearing and a certified settlement concerning the PATH project’s return on equity (“ROE”). The request for rehearing questioned whether the Commission’s directive requiring the hearing judge to use the median to determine PATH’s base ROE was correct. The proposed settlement changes the stated ROE under the formula rate from the current 14.3 percent to 12.4 percent effective January 1, 2011. The 12.4 percent ROE is composed of a base ROE of 10.4 percent and the ROE incentive adders provided by the Commission.

    I’m confused.

    • Chris,

      You start your comment by saying “If path is not dead”. The rest of your comment does not follow from that statement. I will assume here that you are asking “If PATH

        is

      dead…”

      While PATH is really dead, in the sense that the power companies are no longer interested in it, and PJM’s plans no longer justify it, AEP/FE still want to stay on the FERC gravy train. As your comment indicates, they are still collecting all of their costs (and they are continuing to charge us costs, even though the power line itself will not be built) and their new, reduced 12.4% return on equity. They continue to pick our pockets because FERC is letting them. AEP/FE have only told FERC (and the National Park Service in their EIS process) that the PATH project is “in abeyance”, not cancelled.

      Note that the fundamental FERC requirement for awarding the rate recovery and incentive collection for any transmission project is that the project must either be approved by the regional transmission organization for the power line’s region (in PATH’s case, PJM Interconnection) OR the project must be approved by all state PSCs that the line passes through. PATH was approved by PJM when AEP/Allegheny applied for cost recovery at FERC in 2006, but PATH is no longer in PJM’s list of required transmission projects. AEP/FE also withdrew all of their applications for PATH in the relevant states.

      So PATH no longer meets the one basic requirement for cost and incentive recovery. My point is that because this is the case, FERC should withdraw all right to collect anything for PATH costs by AEP/FE. Period. The claims about “abeyance” are crap, and everyone knows it. But FERC allows the power companies to continue picking our pockets.

  3. And FERC appears to have tossed out all those letters folks wrote to them last year, as part of their approval of PATH’s ROE settlement. So although PATH no longer qualifies for the incentives they are receiving, FERC has turned a blind eye rather than sift through all the letters to look for anything interesting.

    The only thing(s) still outstanding on PATH’s FERC dockets are the two Formal Challenges amounting to $5.8M in 2009 and 2010, and the big ol’ mess o’ motions that have been filed since PATH began trying to keep Ali and I out of their formula rate annual update process beginning last July. All those motions are pretty much moot now because the Challenge got filed despite Randy’s best theatrics, and on a completely separate docket PATH started in their desperate attempt to slam the door in our happy, smiling faces, FERC decided that Ali and I have an interest in PATH’s rates.

    So, we’re pretty much down to just the Formal Challenges and related filings now.

    Oh… and those two audits going on… The TrAILCo audit and the FirstEnergy/Allegheny Energy Merger audit.

    The former Allegheny doesn’t have too many secrets left now…

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