New Testimony Filed in PATH Cost Recovery Cases at FERC

AEP and FirstEnergy want $121 million (and more) from all rate payers in PJM Interconnection to cover their stranded capital costs (the abandonment case) and operating costs (the formal challenges case) on the failed PATH transmission project.  Remember that this boondoggle was created by the Energy Policy Act, inspired by the Cheney administration, and passed by the Republican Congress in 2005.  The 2005 Energy Policy Act allowed certain anointed transmission projects to charge all their costs to rate payers, even if they were never built – a good deal for power companies, not so good for rate payers.  You can’t find a better example of money for nothing.

While I am still technically an intervenor in the PATH abandonment case at FERC, I am no longer an active participant.  Last Friday was the deadline for testimony by the remaining active participants in the cases: Keryn Newman and Ali Haverty in the formal challenge case and a group of state public service commissions and consumer advocates (with the conspicuous exception of the WV PSC) as well as the staff of FERC itself.

Pro se intervenor Keryn Newman filed testimony on behalf of herself and my neighbor Alison Haverty in their formal challenge to expenses charged by PATH to rate payers from 2009 to 2011.  As they have all along, Keryn and Ali maintained in their testimony that PATH charges for lobbying and fake front groups should be borne by AEP/FE shareholders and not PJM rate payers.  Here is a link to their testimony.

FERC staff analysts also filed their testimony last Friday.  Staff witness Jean Miller appeared to agree with Keryn and Ali that PATH had illegally charged rate payers for their PR and lobbying costs.  Keryn’s  and Ali’s challenges only covered the years 2009-2011.  Ms. Miller testified that PATH’s 2008 costs should also be refunded to rate payers.  Here is a link to Ms. Miller’s testimony.  FERC expert Craig Deters also filed testimony that fills out the evidence Ms. Miller presented.  Here is a link to his testimony.

Staff witness Robert Keyton attacked testimony provided earlier by AEP/FE concerning the return on equity and debt costs that they were proposing the charge rate payers.  Most of this discussion is pretty abstruse and, as Mr. Keyton himself points out, largely hypothetical, because the front companies for PATH created by AEP/FE never produced anything and never borrowed any money, and are now defunct.  Here is a link to Mr. Keyton’s testimony.

The state agencies also filed some excellent testimony by transmission expert Peter Lanzalotta.  Mr. Lanzalotta basically testified that the AEP/FE should have pulled the plug on PATH after the East Virginia State Corporation Commission rejected the companies’ claim that PATH was needed to resolve reliability problems on the PJM system.

The summary in the introduction to Mr. Lanzalotta’s testimony tells the tale:

Mr. Lanzalotta concludes that PATH’s recommendation to Virginia that PATH be allowed to proceed while waiting for the 2010 RTEP to determine the need for the Project was not prudent.

If PATH had successfully recommended that it would be prudent to suspend the Project at the beginning of 2010, at least a year earlier than it actually was, then the abandonment costs would have been about $29 million lower than they actually were.

Beyond PATH’s 2010 recommendation that it be allowed to proceed, the escalation of PATH’s costs from its inception through its multiple delays were in excess of typical transmission cost escalation over the same period. Based on the Handy Whitman Cost Trends for Electric Utility Construction, the amount of excessive spending on the PATH Project is estimated to be $4.3 million.

The reference to prudence is important, because FERC rules require that rate payers can only be charged with costs that were prudently incurred by the power company.  Mr. Lanzalotta is saying here that more than $30 million for which AEP/FE want to charge rate payers violates FERC rules, and must be paid only by AEP/FE shareholders.

This point has been made repeatedly throughout the case by me and by other intervenors.  Mr. Lanzalotta sums it up nicely.  You can see his testimony at this link.

Those of you who fought the PATH line in the WV PSC will appreciate the testimony of Randall Woolridge, on behalf of the state agencies.  Mr. Woolridge provides an analysis of the exorbitant legal costs for which AEP/FE are trying to charge rate payers.  The power companies had the gall to redact important information from the records they provided to the state agencies in discovery.  Mr. Woolridge states that his analysis was incomplete, because he only received the unredacted copies of lawyers’ records two days before his testimony was due.

The final hearing in this case, dockets ER09-1256 and ER12-2708, isn’t until March 24, 2015.  A final decision by the Commission is due on July 31, 2015.

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