AEP/Allegheny/PJM Don’t Like Free Markets

Here is some plain talk about the PATH project.

  1. AEP/Allegheny are losing customers in their former industrial consumer base in IN, WV, OH and western PA. Recent wholesale prices for AEP electricity in the western section of the PJM region were just over 1.6 cents per kilowatt hour.
  2. AEP/Allegheny are trying to gain access to new customers in “load pockets” in NJ, eastern MD and eastern PA where wholesale prices for purchased power ran as high as 22 cents per kilowatt hour in the most recent PJM auction.  Here is a link to the PJM press release on recent prices.
  3. AEP/Allegheny stockholders and highly paid executives do not want to pay for the construction of the power lines needed for them to reach these high profit markets, so they lobbied for, and got, the power of the federal government to force all electric rate payers in the PJM region to buy these power lines for them, plus extra high profit rates, also paid for by rate payers.
  4. Even with the rate payers paying the full cost of power line construction, AEP/Allegheny must still “persuade” landowners to give up land for the power lines. In a free market, AEP/Allegheny would have to offer to pay enough money to landowners to get them to voluntarily sell their land.
  5. AEP/Allegheny do not want to pay the free market price for land, so they lobbied Congress, and got, federal eminent domain powers, if state regulators do not cooperate. (Fortunately, the federal court in Richmond stopped this federal subsidy of the power companies for the time being.)  AEP/Allegheny also want a certificate of convenience and necessity from the WV PSC, because with that, the power companies will have state eminent domain power to force WV landowners to sell their land at below market prices.
  6. When the power companies need land, they run to federal and state governments for the power to force landowners to sell at low prices. When electricity consumers buy electricity, we do it in the “free” electricity markets, where the power companies make the rules.   So much for the free market in real estate.
  7. AEP/Allegheny want a free ride from rate payers, landowners and the government, because they want to stomp out the operation of the free market in the eastern “load zones.” The high price of electricity in the eastern PJM market is a “market signal” that people in those areas have to do something new.  They have to innovate.  They could import electricity from AEP/Allegheny, but if AEP/Allegheny had to build their own long distance power lines without government help and forcing landowners to give away their land, the price of this electricity would be astronomical.
  8. As an alternative to importing electricity from WV and OH, the people in the eastern “load zones” could innovate by reducing the demand for electricity at peak times through better managing demand and efficiency, or they could build new electrical generating plants to supply their power needs. This innovation is happening anyway, which is why PJM has reluctantly moved back the start up date for PATH three years to 2015.
  9. PJM’s rules actively discourage new investment in innovative power generation in east coast markets. PJM’s (very unfree) market rules and processes are rigged to favor power from AEP/Allegheny’s bulk power plants in the western end of the PJM region.
  10. All of the NERC violations and possibilities of “brownouts and blackouts” that AEP/Allegheny/PJM claim are the reasons for PATH, would disappear if free market forces in east coast markets were allowed to operate without interference from government regulators and power company lobbyists. There would be no need to transmit power from the Ohio River valley to the east coast and stresses on the power grid in eastern WV and western VA and MD would never happen.

The solution is simple.  Allow the market to work without government subsidies or interferance.  AEP/Allegheny should pay whatever it takes to get landowners along PATH to freely part with their land without confiscation through government eminent domain.  If that costs too much money, then the AEP/Allegheny stockholders can decide if PATH will be profitable or not.

At the same time, the true cost of importing electricity into the east coast will encourage innovation in power conservation and new power generating technologies.  If the market is allowed to operate without interferance, it will be clear that increasing efficiency, conservation and new generation on the east coast are much cheaper than importing power from WV.

We have already seen that the Federal Energy Regulatory Commission, PJM Interconnection, AEP and Allegheny Energy do not believe in the free operation of markets.  Will the WV Public Service Commission allow the free market to operate by denying a certificate of need to AEP/Allegheny?  Will the WV PSC allow the free market to operate by denying AEP/Allegheny the ability to use government to confiscate land using eminent domain?