Monday, December 31, 2012

FERC's Fast-n-Furious Freak Show

I just started reading who FERC truly is and what goes on there.  Keryn Newman at StopPATHWV and her previous postings were a big big help.  She recently wrote another Blog about FERC’s Order No. 1000 and nailed it.  It’s refreshing to see someone isn’t afraid to call it like it is.   Take a minute and go there.  It is one of the best commentaries I have read in a while.  Besides FERC and Order No. 1000, Keryn has taught me not to take this industry too seriously.  She taught me to look at it in the context of a circus, comedy or the soap opera that it is and not so much as a battle.  (You too can learn to read FERC petitions like it is a script to some lame episode of the show DALLAS or maybe make comparisons to Madagascar 3’s AFRO-CRICUS!)  Yes, the industry has a distaste for recognizing the ratepayers, consumers, and land owners.  It is a bit offensive but this industry can be one big circus. 

The way the industry approaches Mother FERC is fascinating.  Trade organizations serve such a wide base from the traditional Exelon and Ameren to these Nick-the-New Guy wannabes in the transmission circus.  There are renewable, coal, natural gas, nuclear, and hydro energies.   OPSI, I forgot solar!  Can’t forget solar.   These trade organizations and their publications look to be so afraid to write anything negative or report what is actually going on because it will offend someone in this politically charged industry.  Take the Order No. 1000 as an example.  FERC is clearly playing favorites to the red-headed step child of the industry with it.  The only reason FERC finds Renewable Energy so attractive now is because renewables through Order No 1000 is a means for FERC to take control from the states.  I’m no expert on the industry, but it’s pretty darn obvious and absurd to watch.  Consequently you get a company that is very likely the next Enron being treated like it’s FERC’s golden child because the company is willing to be a tool for FERC and their turf ware with the states.

Most trade organizations don’t want to touch this sensitive issue like Order No. 1000 too much.  If they do, its soft and mild or very cryptic.  They don’t want to offend the renewable energy business and call it the way it is.  They sure don’t want to show the contrarian side of issues, but a favorable ruling by FERC hurts another in the industry.  It’s hard to find anything to even acknowledge the flaws in Order No. 1000 or that it will likely be tied up in courts for years.   Trade organizations and their publications are not going to bight the hand that feeds them either….or tick off Mother FERC.  Some of the stuff printed on the internet makes Order No 1000 out to be something written by the finger of God and handed down form Mt Sinai.  FERC is not the mystical being it’s being treated by some writers.

Then there are the conferences.  Is there another industry in America that loves their conferences more that the energy business?   Every two weeks there seems to be another conference somewhere in the United States.  (Self-Indulgence?)  It’s like one orgy fest after another for these guys with their love affair with the regulators.  I suspect they create shell trade organizations just for an excuse to hold another conference.  And what’s a conference without a FERC Commissioner in attendance?  It’s a featured draw to bring the industry and their money.  Perhaps this is another reason why groups are so afraid to offend Mother FERC or explain how a policy will adversely affect another part of the industry.  An orgy isn’t an orgy without someone from Mother FERC attending the junket.

Last November there was a conference in Nashville about renewable energy.  Clean Line Energy’s Jimmy Glotfelty  gave a presentation.  FERC Commissioner John Norris is also a featured guest.  The next day the FERC’r John Norris writes a statement on FERC's Policy Statement on Electric Transmission Rate Incentives with a very positive letter about renewables and the “need” for further transmission for the renewable energy industry.  Is this a coincidence or a product of a very “close” relationship between the industry and those who oversee them?  

Shortly after, we find a petition by Jimmy Glotfelty asking FERC to force PJM’s interpretations of Order No. 1000.  I’ve never seen an industry so cozy with the regulators that oversee them and so arrogantly blatant about their tight relationship.  There’s no need to come out of the closet.  They’ve long forgot what the closet used to be used for.  I can imagine the frustration for the traditional energy companies like Exelon, Ameren, or MidAmerican Energy.  It must be frustrating to try to do business with such a circus around you. 

What other industry would allow such self-interest regulation? 

What function does regulation serve if the regulators are from the industry? 

What value is there to the ratepayer if the energy companies, RTO’s, and FERC all seek what is best for their self-interests? 

Who works toward the interest of the ratepayers?   Looks to me the closest hero in this bazaar world is the state regulators, the Public Utility Boards and the Commerce Commissions.  Without the state regulators, I would be afraid where this industry is headed.

To borrow a Hunter Thompson quote, “Politics is a cruel and shallow money trench, a long hallway where thieves and pimps run free, and good men die like dogs.  There is also a negative side.”  So is the world of the energy industry.  I am learning this is truly a Freak Show to watch the energy company’s fight before the RTO’s.  The energy companies fight the RTO before Mother FERC.  The state’s fight with Mother FERC and the energy company is used for convenience by the regulators.   The interests of the ratepayer, public and consumer are ignored in this Freak Show.  We are just a pawn.  To borrow a quote from the Mel Brooks western, Blazing Saddles, “Mongo just a pawn in the game of life.”   In many ways, that is all the ratepayer is to this industry.

Mongo is no longer a pawn in the FERC Fast-n-Furious Freak Show.

It's time this FERC'd up industry gets cleaned up. 

Friday, December 28, 2012

Zilkha Confidential Agreements and the Windfall

Tell me the "clean" energy industry isn't dirty!

Zilkha Energy Wind Farm Neighbor Easement Agreement.

Found this at the Illinois Wind Watch This is an interesting contract.  It is not about an easement to give physical access to a windmill through a neighboring property.  This agreement says for $1,000 a year for the next 20 years, I will be "happy" living under the shadow (literally) of a windmill.

I can see why Zilhka wanted to keep these agreements confidential.  American Wind Energy Associations (AWEA) says everbody loves living under windmills.  There was even a psuedo-economist who actually wrote a report that said any objections to living under windmills only comes from people with a NIMBY attitude.  Even former Senator Todd Seiben says it is a privilege to have the RICL powerline running through your field.

Zilkha's payoff to windfarm neighbors reminds me of another movie. WINDFALL

The trailer for WINDFALL reminds me of another movie trailer I saw recently.   PROMISED LAND!

Was Promised Land really about frac drilling or wind?  "Green" and "clean" wind isn't as "evil" as fracing for natural gas.  

I guess people really do regret having windmills built near their houses. How many windmills does it take to fill a 4,000MW powerline?  How many acres does it take to fill this powerline?

How many  Neighbor Easement Agreements will have to be written in Iowa to feed RICL's 4,000MW monster?

How many Neighbor Easement Agreements will potentially by written and signed by Zilkha's new business, Clean Line Energy for this powerline??

Thank you Illinois Windwatch for posting the Zilkha Energy Wind Farm Neighbor Easement Agreement.

Monday, December 24, 2012

Clean Line asks FERC to have regions pay for its "Merchant" Line

Somebody in recent Northern Illinois Letter to Editor’s War with RICL once said “We can’t have it both ways”.  This is exactly what RICL needs to be told.  You can't have it both ways.  It looks like they have a bit of an identity crisis going on.  They don’t know what they are. 

Is RICL a Merchant Transmission Line or a Cost Allocation Powerline? 

RICL, pick one!

Back in last summer RICL won approval from the Federal Energy Regulatory Commission (FERC) to be a Merchant Transmission LINE (MTL).   RICL explicating understood and guaranteed they would be considered a Merchant Transmission Line.  RICL agreed as an MTL, they would be accepting the risk.  Costs would not be allocated to consumers across the entire region.  Let’s remind RICL what was in FERC’s approval.

1.      Commission precedent distinguishes merchant transmission projects from traditional public utilities in that the developers of merchant projects assume all of the market risk of a project and have no captive customers from which to recover the cost of the project.  

2.      To approve negotiated rates for a transmission project, the Commission must find that the rates are just and reasonable.15 To do so, the Commission must determine that the merchant transmission owner has assumed the full market risk for the cost of constructing its proposed transmission project.

3.      Rock Island affirms that it will assume the full market risk of the Project and that it will have no captive customers.

4.      Rock Island meets the definition of a merchant transmission owner because it assumes all market risk associated with the Project and has no captive customers. Rock Island has agreed to bear all the risk that the Project will succeed or fail based on whether a market exists for its services. Rock Island also has no ability to pass on any costs to captive ratepayers.

RICL was very specific with FERC and FERC put in RICL’s approval.  So why is RICL now having this identity crisis?  Does this Texas company need a Dr. Phil moment? 

RICL was approved to be a Merchant Transmission Line.  

RICL is not a Cost Allocation public utility.

Hans Detweiler has been proclaiming this powerline will bring cheap power to Illinois, but he has always refused to say how much this energy will be costing the consumers.  This gives the appearance Hans is walking the line being careful in what he says and how he says it so as not to be held liable for fraud.    The fact is Hans Detweiler and RICL has never said how much this electricity will cost us or how the company intends to pay for this powerline.  Residents, like me, were daring Hans to say something with Letter to Editors in papers across Northern Illinois, but Hans always skirted the issue.

Last summer just after RICL won approval from FERC, RICL had dialog with PJM, the regions energy cartel, asking permission to change from the current merchant model to a more traditional cost allocation model were consumers over the entire region are forced to pay for the powerline.  The ink wasn’t even dry on FERC’s approval and RICL was already trying to change to rules.  All this time RICL is attempting to deceive the Illinois public that it is a merchant line.

Apparently RICL didn’t like the answer PJM gave them.  On December 10, 2012 Clean Line Energy filed a petition with FERC to allow them to have the costs for the RICL powerline be allocated to the ratepayer across the entire region from Illinois to New Jersey.

This company hasn’t built one powerline, set one lattice tower, strung one mile of cable, or even gotten approval from the Illinois Commerce Commission, but Jimmy Glotfelty has the audacity to tell FERC great progress has been made.  Jimmy wrote FERC;

Clean Line has achieved several key milestones in the development of its projects, including signing a Memorandum of Understanding with the Tennessee Valley Authority and obtaining certification as a transmission-only utility in both Kansas and Oklahoma. Two of the Clean Line’s projects, the Rock Island Clean Line and the Plains & Eastern Clean Line, have obtained approval from the Commission to charge negotiated rates and enter into negotiated agreements with anchor-tenant customers.

RICL forgot to tell FERC it is receiving mounting opposition from Illinois residents.  RICL has forgotten what it agreed to this summer with FERC.  RICL has forgotten or never knew a lot of things about honesty and transparency. 
Hans Detweiler has told us the virtues of a Merchant Transmission Line and consumers won’t be held to pay for this powerline for the windmills, but now RICL is now arguing a powerline for the windmills is worthy of cost allocation.

The Commission also recognized that different regions of the country may have different practices in populating their regional transmission plans when considering projects that are cost allocated and those that are not.

When has Illinois residence been forced to pay for a powerline specifically for the “virtues” of wind energy?  Never.  What ever happened to the virtues of economically priced energy?  Hopefully FERC commissioners understand overpriced wind energy and the misguided beliefs of RPS Public Policy Requirements is not worthy to change RICL to cost allocation before RICL transmits 1 kilowatt of energy.  Jimmy Glotfelty goes on to claim;

Order No. 1000 requires that Compliance Plans “ensure fair consideration of transmission needs driven by Public Policy Requirements as well as by reliability needs and economic considerations.”

Again, this attempt to make renewable portfolio standards as “public policy” to justify consumers pay for a Merchant Transmission Line is a joke.  Any moron can justify a need for a powerline when costs are not an issue and overpriced or under demanded electricity is not a factor.  The fact remains, this energy is not needed.  Economically priced natural gas coupled with increased energy conservation makes energy priced below what RICL can provide.   If RICL wants to follow the Cost Allocation Model, then reapply to FERC.

"The Commission should also require the PJM TOs to modify their compliance filing specifically to allow merchant transmission projects to be eligible for cost allocation for the economic and public policy benefits. If a merchant project is submitted for inclusion in the RTEP as a Supplemental or other non-cost allocated project, the project sponsor should be allowed to propose that the project be studied as a solution to identified transmission needs. If these studies show regional benefits, some portion of the project cost should be eligible for cost-allocation through the process identified in the PJM TOs’ Compliance Filing."

We find ourselves with RICL wanting Illinois residents to pay $70 per Megawatt hour or even more for wind energy from Iowa when the current price is closer to $30 per Megawatt hour.  Then RICL refuses to ratepayer the cost of this energy, their potential profit margins, or even the projected payback years for this project.  Clean Line Energy now wants ratepayers to pay for their merchant powerline.

This is ridiculous!   There are some states who have no Renewable Portfolio Standards or the standards are merely goals.  These consumers will be required to pay for RICL’s project while their states do not recognize the benefit.  RICL now desires to retain the “merchant” model but have captive ratepayers (consumers) liable for the cost of their project. 

Shall the ratepayers of the entire PJM region subsidize the RICL project?  America is on the edge of eliminating the Production Tax Credit for windmills and RICL thinks we need to subsidize this venture capital company.  Should West Virginia ratepayers fill the pockets of Michael Zilhka and the Ziff Brothers and pay for this powerline?  Should Illinois residents only pay for the Clean Line Energy powerline?

No.  This is wrong.  RICL was approved to be a “Merchant Transmission Line”.   They agreed and accepted the risks.  Michael Skelly, Jimmy Glotfelty and Clean Line Energy need to live by this agreement.   RICL can look at the BLOCKRICL.COM reference page.  There is a great link under “THE SOICIALIZATION OF RENEWABLE TRANMISSION COSTS”.   Georgetown Law Journal had a great article called It’s Electric, but FERC’s Cost–Causation Boogie-Woogie Fails To Justify Socialized Costs for

Still, the question remains why Clean Line Energy has made this petition to FERC.  Has FERC given a hint to Clean Line they are about to make a mandate on Renewable Portfolio Standards, a wink or maybe a tip of the hat?  No transmission project has been paid for by the entire region based on the virtues of renewable energy.  Clean Line has made claims their funding is secure and will be there should state approvals are complete.   Perhaps this is a sign Clean Line’s financing is not as strong as the company claims.  While Clean Line is keeping all financial numbers confidential in their petition to the Illinois Commerce Commission (docket # 12-0560)  asking to become a public utility, it is evident in the ICC has some concerns about the financing of the RICL project in its further line of questions.  Perhaps with the potential of losing funding   from the Production Tax Credit, Clean Line is desperately looking for additional sources to subsidize their projects and are seeing the ratepayers across the region as  the next best source.

Another possibility is this statement from FERC Commissioner John Norris.  He has indicated as a FERC Commissioner he will support ratepayers across a region subsidizing “Projects that provide access to location-constrained resources, such as our nation’s wealth of renewable resources, that previously had no or limited access to markets”.  The fact is these pass through states are a problem.   Just as states generally do not grant projects eminent domain for pass through projects that might benefit another state, all states have different RPS requirements or no requirement at all and state’s ratepayers should not be forced to pay for projects to meet political objectives of another state’s RPS. 

If FERC pushes Oder 1000 applies to a diverse array of Renewable Portfolio Standards, this will surely be a long and argues court battle.  Does one RPS trump another?  Does a state’s lack of an RPS mean any RPS trumps it or is a lack of an RPS an opinion that RPS’s are stupid and other states RPS should not be recognized.  And what happens five or seven years from now when  there is a new state’s public policy.  Coal is good.  Coal is bad.  Nuclear is good.  Nuclear is bad.  Wind is good…today….what about tomorrow? 

Will wind be considered unsustainable, too costly, and lose favor in the eye of popular opinion? 

Will there be a new flavor of the month? 

Clean Line is indeed the frontline in America’s Energy Battle. 

Like FERC Commissioner John Norris’s letter states, renewables are being added to energy portfolios purely on the basis of economics. 

I found myself surprised to be sitting with a group of utilities and businesses in the Southeast who face virtually no Renewable Portfolio Standards (RPS) or other government clean energy mandates, but are still looking for ways to get access to clean energy. They are doing it purely on the basis of economics
Those in the southeast deserve to be applauded.  This is the way it should be.  Renewables can compete on a level playing field with other forms of energy.  Renewable transmission does not need subsidizing from an entire region.  Innovation never comes through subsidizing an industry.  Perhaps Clean Line is attempting to force ratepayers to pay a portion of RICL’s sister projects that FERC has yet to approve.  If this is the case, it won’t be long before Clean Line is asking for regional subsidies for its RICL project.

Michael Skelly and Jimmy Glotfelty have had one do-over with the Illinois Commerce Commission for state approval.  If Clean Line and its RICL project wants to follow the Cost Allocation Model, they need to have a do-over with FERC.  It’s absolutely ridiculous RICL wants to change in midcourse from the Merchant model to cost allocation.  It is doubtful FERC is seriously about to force a uniform Renewable Portfolio Standard on all states without Congressional approval.  If RICL wants to follow the cost allocation model then reapply to FERC.  While RICL is preforming do-overs, Michael Skelly , Jimmy Glotfelty, and Jayshree Dasei can come back to Mendota, Illinois and have a do-over with an informational meeting with the Illinois stakeholders of this project. 

Clean Line, FERC, in Plainer English

This is a summary of the next post in more plain English.  Clean Line Energy has petitioned FERC (Washington regulators) to allow them to distribute the cost of their powerline across an entire region, like PJM.  Some states have a "Renewable Portfolio Standard" that mandates a certain type of "clean" energy.  Some states have an RPS as guideline.  Some states legislatures and lobbyists have not written an RPS.  They really are silly.

So now Clean Line is asking FERC to recognize one state's RPS and mandate that the entire region or even both regions should pay for all or part of a powerline. 

Clean Line wants to have it both ways.  As a Merchant Transmission Line, they accepts all the risks and rewards, but Clean Line would also like their costs socialized and attributed to the ratepayers across the entire region. 

Illinois potentially could have a scenario where we are as consumers pay for a powerline across Iowa in the MISO region to send the electricity to New England states.  We could potentially be paying more than twice the market price for energy for electricity that we do not need and also pay for the construction of the powerline!

Why is Clean Line asking for assistance in building their 4 powerlines?

Good question.  Hans Detweiler has gone across Illinois assuring us the financing is in place. So why ask the feds to have an entire region's ratepayers subsidize the powerline's construction?  Is the funding really there?

Good question?   No one has told me what the ICC is thinking and RICL refuses to let the public see their financial model.  However, if one looks at the line of questions the ICC has asked RICL, it shows there is a concern about RICL's potential costs, debt, and profit.  First review of the ICC's questions, I thought "boy, these are softball questions".   I later realized the questions weren't soft.  The answers were softball answers.  The answers lacked details.

Clean Line petition to FERC is also a test of FERC's Order 1000 and the federal government's abliity to mandate a region respect a states Renewable Portfolio Standard.  This could also be a court challenge involving several groups resenting being forced to respect another state's policy.  The "virtues" of wind energy is todays challenge, but what will be tomorrow's challenge?  Will another state create a public policy based on the "virtues" of coal energy?
Soooo...why is Clean Line now asking FERC to make entire regions pay for their projects?

Could Iowa residents protest having to pay for this powerline?

Could West Virginia's resident protest believe Illinois RPS is based on lobbyist and dirty Chicago politics?  Clean Line and FERC could be making a real mess as they force us to go down this road.

And why didn't Clean Line go down this road when it originally applied to FERC?

How much is the energy going going to cost us? 

We will be paying  even more if we are going to have to also pay for their powerline.

Merry Christmas.