Sunday, August 17, 2014

FERC, Order 1000, and the Death of the Merchant Transmission Model

FERC Order 1000 passed another hurdle at the D.C. appellate court.  The court made a classic  late Friday afternoon release issuing a ruling on the Order 1000.   Am I the only one suspicious on Friday afternoon releases?  

Back in the summer of 2013 Keryn at STOPPATHWV blog gave a good account for the basis of the appeal.  Later this spring she made an account of the arguments at the appeal.  This weekend, RTO Insider gave a good report on the appeal decision.

For those who do not remember FERC’s Order 1000,  the Federal Energy Regulatory Commission is attempt to promote or give “incentives” to build powerlines for promote wind companies.  Yes, Order 1000 is federal bureaucrats picking winners and losers.  Yes, Order 1000 is the government promoting an industry and playing favoritism.  Order 1000’s intent is to promote wind generation corporations through a simpler process to promote building transmission lines to serve the wind industry.  

Order 1000 discourages local generation.  Order 1000 discourages offshore wind generation by subsidizing Midwest wind generation with transmission projects being built and paid for separately.  Order 1000 discourages energy generation in the backyards of east coast urban centers and rewards generation in the less populated areas of the country.  FERC’s Order 1000 also discourages distributed generation and rooftop solar by homeowners.  

Order 1000 is not a friend of Midwesterns who might be living in the path of a political agenda.  Order 1000 is not a friend of the state’s public utility commissions.  In the ruling, the court agrees with FERC that the federal government’s consent for a powerline can argueably still be overruled by state’s commissions.  FERC also argues Order 1000 is a friend of the states because it is intended to promote state’s public policy statements, like Renewable Portfolio Standards.

The Institute for Energy Research (whoever they are) had a good characterization of the appellate court’s ruling.

“Today’s decision continues an unfortunate trend of our court system rubber stamping policies that expand the size and authority of our federal government. FERC Order 1000 socializes the cost of expanding expensive green energy projects—forcing the American people to foot the bill. This blatant disregard for the interests of American families will lead to higher electricity costs and will impact those who can least afford it.

“The Obama administration, Harry Reid, and the national environmental lobby are the only winners here. As always, their victory comes at the expense of the American people.”

How does this affect Clean Line Energy and the Rock Island Clean Line?

Order 1000 is an enemy of my enemy.  While Order 1000 is not a friend of ratepayers as it forces consumers in unaffected states to pay for a project.  It is the socialization of paying for transmission costs.  Conceivably a project by a REAL UTILITY COMPANY could be approved by FERC to wheel wind energy from western Iowa to eastern states to promote wind energy.  Such a project would be paid for in communities everywhere from Iowa to New Jersey through their monthly bills.  

So, why would an eastern state want to buy wind energy shipped across RICL when they could buy wind energy that is shipped through a REAL UTILITY COMPANY and wheeled at “no cost additional costs” across a transmission line paid through cost allocation?  It’s a no brainer.  Wind energy from Iowa would look cheaper if it is shipped across a powerline that is being paid by ratepayers separately?

The Center for American Progress explain’s cost allocation under Order 1000 nicely.

The only plus to FERC’s Order 1000 is it discourages the Merchant Transmission Line Model.  Unfortunately, it socializes costs and forces people hundreds of miles away to pay for the project.  The merchant model is dead under Order 1000.  It’s not competitive as people who don’t care or do not need the transmission line pay for it.   The Wall Street Journal characterized the socialized cost allocation model used by Order 1000 as people in Minnesota paying and benefiting for fixing potholes in New York City. The RICL merchant model cannot compete with such absurdity.  

Could RICL argue that its line is in compliance with Order 1000 and ask for it to be converted to cost allocation from the merchant transmission line model?  They could try, but RICL has already made one failed attempt at cost allocation at PJM, the Regional Transmission Organization.  RICL has also gone far out of their way to argue they are not a part of PJM’s long term planning.  because Clean Line doesn’t not want to comply with the organization’s requirements about financial openness.   We all know Clean Line’s balance sheet probably has a lot of zeros without commas after them, but the company wants to keep bank account and funds available a secret.   

If the federal appeals to Order 1000 run dry before RICL is built, it is conceivable PJM orders a sister project made by ratepayers in Michigan to New Jersey.  RICL would get no customers and no lenders.  If Clean Line attempted an Order 1000 compliant project as proposed by PJM, Clean Line would have to throw out Docket 12-0560 at the Illinois Commerce Commission and start over at the ICC.  

That’s not going to happen.  While Order 1000 is not a friend of ratepayers as FERC attempts to be an arbiter between RTO’s and transmission companies, Order 1000 is also not a friend of RICL and Clean Line’s merchant model.  RICL has effectively boxed themselves out of taking advantage of Order 1000.  

In many respects, it’s a matter of which devil is worse FERC’s Order 1000 or RICL.  For the ratepayer, all we can do is go after one devil at a time, and the first one is RICL.  Appeals to Order 1000 could likely continue and even when appeals are over, the order is so contradictory, it might be impossible to work it out at the Regional Transmission Organizations.  

Regardless of the Appellate Court’s ruling, Keryn’s conclusion at StopPATHWV blog from last March is still true.

When are the needs of consumers going to be considered?  Consumers aren't buying the specious arguments that billions of dollars of new transmission provide benefit to them.  In fact, more and more consumers are taking steps to check out of the grid and invest in their own onsite generators.  Only then will these ridiculous and expensive arguments end.  Meanwhile, fight on fellas.

When is FERC going to be concerned with what is best for consumers?  Now that Big Wind’s  bureaucrat/advocate at FERC, John Norris, has quit, it would be nice change if President Obama nominated a  FERC commissioner who is not interested in promoting a political agenda or part of the energy industry, but consumers instead.  If you are going to dream, dream big.  This monster at FERC is not going to be cut down through the judicial branch and few Congressmen recognize FERC’s abuse of power.  Whoever replaces John Norris needs to be a representative of ratepayers and the public.

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