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Archive for the ‘Public Utilities’ Category

Linemen

The online magazine Transmission & Distribution World today re-ran an earlier article on the dangers faced by electric utility workers. Though it describes a really brutal accident, it merits reading if only to be reminded about the danger that some workers face every day as part of their job — more dangerous than police and fire. You can read the full article here.

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Tax Reform

The GOP-passed tax reform law, a/k/a the Tax Cuts and Jobs Act of 2017, lowered the corporate federal income tax from a maximum of 35% to a flat rate of 21%.

Numerous transmission utilities file tariffs with the Federal Energy Regulatory Commission that are based on a cost of service revenue requirement. The expense of federal corporate income tax is one of those costs of service. When a corporation’s tax rate goes down from a maximum of 35% to a flat 21%, its income tax expense goes down, and thus its cost of service revenue requirement goes down. So, one would think that when transmission utilities’ tax rates go down, as they have, that benefit might flow through (or is that trickle down) to ratepayers.

Nope.

No transmission utility filed any amendments to its tariffs to reflect the new, lowered tax rate. Maybe they thought nobody would notice it, and they could pocket that 14% difference. (“Oh boy!!!).

So on March 15, 2018, FERC opened a series of new proceedings requiring that these transmission utilities either lower their rates to reflect the tax cut, or show cause why they should not be required to do so.

Your tax dollars at work.

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energy expense nat gas $$$

State laws and regulations generally specify the time periods for which public utilities must keep records, and those periods vary for different types of records. For example, a public utility may be required to maintain records of meter tests for six or more years, while customer billing records may be subject to retention periods of only a year or two.

Similarly, these regulations may limit the time period for which a public utility may recover from its customer if the utility learns that it has provided service to the customer for which it hasn’t billed. This permitted backbill period may be as short as one year in the  case of residential customers, and perhaps longer in the case of nonresidential customers.

These time periods vary from state to state and must be confirmed in any particular case. But all of these time periods can have important consequences for customers if they suspect, or discover, that they’ve been overcharged.

For example, assume Customer Industries opened its factory in 2010, and in 2018 it learns that it has been overcharged for a particular cost component of its bill since the account was opened. Naturally, it would like to recover the whole amount of the overcharge. But it may find itself stymied because it doesn’t keep copies of its own utility bills for more than a year or so.

Assume further that the utility is required to keep customer bills for only two years. If the utility recognizes that it has overcharged Customer Industries and is willing to issue a refund, it may limit its refund to the previous two years, even though the overcharge stretches back for eight years. The utility may claim that Customer Industries can’t prove overcharges for any period prior to that. Will they win on that? A definite “maybe.” At the very least, Customer Industries will have a steep evidentiary climb in order to make its case.

The customer would also have to check applicable regulations to see if there’s a distinction between errors that appear on the face of the bill (e.g., an error in addition or multiplication), and errors that are “latent” and can only be determined by analyzing the cost components on the bill.

In either case, Customer Industries would be in a much stronger position if it had simply kept its bills, or copies of them, because then it would have an actual record of what the overcharge was.

Recall that state regulations may limit the periods for which a utility can backbill a customer. But that does not necessarily limit the period for which the customer can claim a refund from the utility — provided that it has evidence. And that evidence consists of utility bills.

Given that you can buy a scanner at any office supply store for less than $200, there’s really no excuse for not keeping copies of utility bills. They could turn out to be worth a lot more than you think.

 

 

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Eminent Domain

Today, the United States Court of Appeals for the District of Columbia Circuit denied a request by environmental groups and landowners for a stay that would have delayed construction of the Mountain Valley Pipeline (MVP), a 303-mile long natural gas pipeline running from Wetzel County, West Virginia to Pittsylvania, Virginia. When built, the MVP will carry 2,000,000 dekatherms of natural gas per day to markets in the Northeast, Mid-Atlantic and Southeast regions of the U.S.

The problem, of course, was first identified by John Denver in 1971 when he described the area through which the proposed pipeline will pass as almost Heaven. Life is old on the MVP route, older than the trees that have to be cut down, but younger than the mountains that must be trenched to lay a 42-inch diameter underground pipe.

MVP is important for landowners because one of the chief reasons that line developers go to utility regulatory commissions, whether at the state or federal level, is to obtain the power of eminent domain. The developer may not be able to negotiate acquisition of all rights-of-way necessary for its project. It needs the power of the government behind it so that it can compel private landowners to grant easements over their properties, including structures. Developers also use the threat of an eminent domain proceeding as a lever in negotiating the price of easements.

Before the MVP case reached the DC Court of Appeals, it was litigated before the Federal Energy Regulatory Commission, 161 FERC P61043, which issued a certificate of public convenience and necessity for the pipeline in October 2017. Under the Natural Gas Act, once FERC issues a CPCN for a natural gas pipeline project, the holder obtains the power of eminent domain over properties necessary to complete the project. Many state public utility laws are to the same effect, though only within the particular state.

Landowners should be aware that in these cases, whether they’re for oil or gas pipelines or electricity transmission lines, the integrity of their property rights will be decided not by a court, but by an administrative agency, such as FERC or a state public utilities commission. These administrative agencies may or may not give proper weight to eminent domain issues. But the question of public necessity, which is the analog of public use in typical eminent domain cases, is considered by the administrative agency in the first instance. A court reviewing the agency’s order on appeal may view the public necessity issue as one predominantly of fact, and may be disinclined to upset the agency’s findings. Likewise, if a landowner challenges the developer’s easement in a new court case, that court may decide that it does not have jurisdiction to hear the landowner’s challenge because it would mean reviewing the issuance of the CPCN. Or it may simply deem such a request a collateral attack on the agency’s order.

Recall that in Kelo v. City of New London, 545 U.S. 469 (2005), the Supreme Court essentially removed all guard rails and speed limits from the eminent domain highway. The Court interpreted the concept of public use so broadly that essentially all a local government had to do was declare a neighborhood “blighted” and then turn it over to some politically-connected developer. Some states passed laws to limit eminent domain after Kelo.

But more threatening to landowners is that, within the context of an administrative CPCN proceeding, developers will seek to separate CPCN and eminent domain issues to the greatest extent possible. For example, the developer may seek to bifurcate the case so that the public convenience and necessity of a proposed project is analyzed without reference to its effect on private landowners because the bifurcation restricts eminent domain issues to a separate proceeding. Or the developer may simply urge that the regulator dismiss any concern about eminent domain because they are not seeking that power in the instant case.

Either way, for landowners that’s a recipe for disaster. Once the developer obtains its CPCN, the issue of “public necessity” or “public use” has already been determined, and they may well find themselves effectively precluded from defending their property rights.

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Exelon CEO Chris Crane

Exelon CEO Chris Crane

Chicago, IL February 14, 2017:  Chicago energy attorneys, Patrick N. Giordano and Paul G. Neilan, announced they filed a lawsuit in the U.S. District Court Northern District of Illinois today against Anthony Star in his Official Capacity as Director of the Illinois Power Agency.  Village of Old Mill Creek, et al. v. Anthony Star was filed on Tuesday, February 14, 2017 at the U.S. District Court Northern District of Illinois.

Attorneys Giordano and Neilan represent Plaintiffs that are governmental, residential, commercial, and industrial electricity consumers located throughout the State of Illinois. Plaintiffs claim that P.A. 99-0906, executed by Governor Rauner on December 7, 2016, violates the U.S. Constitution’s Supremacy Clause, Commerce Clause, and 14th Amendment Equal Protection Clause. The underlying basis for the constitutional claims is that the prices charged by electricity generating plants are subject to federal rather than state regulation. A similar case has already been filed in federal court in New York challenging that state’s subsidy of Exelon nuclear plants by the law firm Boies, Schiller & Flexner, LLP, which is headed by preeminent attorney David Boies.

Among other things, P.A. 99-0906 is designed to subsidize Exelon Corp.’s Quad Cities and Clinton nuclear plants. This subsidy will be charged to all Illinois electricity consumers beginning June 1, 2017 regardless of what company supplies the consumer’s electricity. The lawsuit specifically asks that the U.S. District Court grant a permanent injunction blocking the charges from going into effect as scheduled on June 1, 2017. According to Mr. Giordano: “These additional charges will reverse twenty years of deregulation in Illinois which have given us perhaps the one advantage we have over neighboring states: relatively low electricity charges due to an effectively functioning competitive market.” Mr. Giordano also said: “We’re challenging the nuclear bailout provision of the legislation because the prices charged by electricity generators have already been established by the competitive wholesale electricity market subject to federal jurisdiction and cannot be increased by the State of Illinois.”

The estimated impact to all Illinois consumers will be about $3.3 billion over the ten years of the nuclear bailout. Mr. Neilan points out that: “This nuclear bailout is one of four rate increases to Illinois consumers this year, including increased delivery charges, increased renewable energy subsidies, increased energy efficiency subsidies, and these nuclear energy subsidies.” When the nuclear subsidies go into effect on June 1, 2017, Illinois residents and businesses can expect to see an average 3% increase in their electricity bills due to the nuclear subsidies alone.”

Giordano & Associates, Ltd. is Chicago’s first law firm devoted to energy issues. We provide clients with experienced counsel on regulatory, litigation, transactional, and legislative matters in the areas of electricity and natural gas. Pat Giordano can be reached at pgiordano@dereglaw.com.

The Law Offices of Paul G. Neilan, P.C. represents commercial, industrial and governmental energy users in disputes against public utilities, as well as in litigation and transactional matters with non-utility competitive energy suppliers.

FACT SHEET

  1. Village of Old Mill Creek, et al. v. Anthony Star was filed in the United States District Court for the Northern District of Illinois on February 14, 2007.
  2. The Plaintiffs are: Village of Old Mill Creek, Ferrite International Company, Got it Maid, Inc., Nafisca Zotos, Robert Dillon,Richard Owens, and Robin Hawkins, both individually and d/b/a Robin’s Nest.
  3. The Defendant is Anthony Star in his official capacity as Director of the Illinois Power Agency.
  4. This case arises from unlawful Illinois legislation that invades the exclusive jurisdiction of the Federal Energy Regulatory Commission (“FERC”) over “the sale of electric energy at wholesale in interstate commerce” pursuant to the Federal Power Act. 16 U.S.C. 824(b)(1).
  5. The unlawful legislation is contained in subsection (d-5) Zero Emission Standard of Illinois Public Act 99-0906 (“P.A. 99-0906”), which was enacted on December 7, 2016 and is available at http://www.ilga.gov/legislation/99/HB/09900HB65761v.htm.
  6. Subsection (d-5) Zero Emission Standard of P.A. 99-0906 requires the Illinois Power Agency to procure contracts for Illinois utilities Commonwealth Edison Company, which serves northern Illinois, and Ameren Illinois Company, which services central and southern Illinois, for purchases of Zero Emission Credits (“ZECs”) from nuclear-fueled generating plants.
  7. The ZEC payments will be passed through by the utilities to all Illinois consumers through automatic adjustment tariffs.
  8. A. 99-0906 is designed to provide additional revenues to the Illinois-based Quad Cities and Clinton nuclear plants.
  9. Exelon Corp. owns both the utility ComEd and Exelon Generation, which owns the Quad Cities and Clinton nuclear plants that will sell the ZECs to the utilities.
  10. Although P.A. 99-0906 has many other provisions, this case concerns only subsection (d – 5) Zero emission standard.
  11. Plaintiffs are not challenging any other provisions of P.A. 99-0906. Section 97 of P.A. 99-0906 provides that the provisions of the Act are severable under Section 1.31 of the Illinois Statute on Statutes. 5 ILCS 70/1.31.
  12. In New York, ZEC payments to Exelon nuclear plants in that state are being challenged on the same grounds set forth by Plaintiffs in Illinois. Coalition for Competitive Electricity, et al. v. Audrey Zibelman, et al. was filed in the U.S. District Court Southern District of New York on October 19, 2016.
  13. A typical residential customer using 1 mWh (1,000 kWh) per month would pay an additional $2.64 per month beginning June 1, 2017 based on the initial ZEC price established in P.A. 99-0906.
  14. A manufacturing company using 10,000 mWh per month would pay an additional $26,400 per month beginning June 1, 2017 based on the initial ZEC price established in P.A. 99-0906.

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Coal-fired Power

Coal-fired Power

While the Hillary v. Donald Rumble on Monday night garnered all the media attention, the D.C. Circuit Court of Appeals heard a far more substantive discussion the following morning. An en banc panel of ten federal appellate judges heard oral argument on the Obama Administration’s Clean Power Plan.

It was a “hot bench,” with lots of questions from the judges. And while Hillary and The Donald put down their swords after 90 minutes, the oral argument on the CPP went on for more than seven hours.

West Virginia’s Solicitor General opened with an artillery barrage in the putative war on coal. The CPP sets target emission rates for fossil fuel generators such as coal, and prohibits them from operating if they exceed those limits unless they purchase carbon credits from generators whose emissions are below their assigned limits. He argued that the CPP thus forces coal plant owners into an impossible choice: they either subsidize their renewable energy competitors or shut down prematurely. In his view, that would affect not just West Virginia but the nation as a whole. W. Va. and other opponents argued that the Clean Air Act does not allow the EPA to require plant owners to invest in different generation resources.

The question of the scope of the EPA’s authority got a lot of attention. The EPA and other proponents of the plan countered that this type of regulation is already commonplace in the power industry. They argued that the emissions trading contemplated by the CPP would be the least expensive method of pollution control, especially when compared to setting emissions caps for each plant. EPA argued that the Clean Air Act mandates that it devise the best system of reductions for any particular pollution type, and that’s what the CPP does. They pointed to the Supreme Court’s 2007 ruling in Massachusetts v. EPA, which mandates that the agency act to regulate carbon. And, they continued, the high court’s 2011 ruling in AEP v. Connecticut affirmed the EPA’s regulation of carbon, declaring that because climate change damages were within the EPA’s jurisdiciton, individual states could not sue power companies for climate change harms.

Their opponents argued that other language in AEP casts doubt on the scope of that holding.

Other CPP opponents claimed that because CPP requires major changes to the power grid, that the EPA is infringing on states’ rights because each state is responsible for the reliability of its own electric power system. Numerous shut-downs of coal-fired plants that would follow implementation of the CPP would adversely affect grid reliability.

Once again, it comes down to the Third Branch Default Setting that we’ve seen before in litigation interpreting laws that are both complex and unclear. The almost endless adventures of the 8th Circuit Court of Appeals with the Telecommunications Act of 1996, now forgotten like some long-ago war over an equally forgotten issue, comes to mind. Yet the problem is essentially the same. Congress enacts a law, but because of its own inability to agree on what that law should really say, it gets passed with provisions that don’t add up, or are even contradictory. But those problems are down the road, and it’s more important for legislators to get some earned media at the signing ceremony and have some accomplishment to write home to constituents about. Thus it falls the judiciary, sooner or later, to sort things out. C’est la vie, c’est la guerre.

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Rick and Inspector Louis Renault, at the Cafe Americain, Casablanca, ca. 1942.

Rick and Inspector Louis Renault, at the Cafe Americain, Casablanca, ca. 1942.

Who can forget that scene in Casablanca when Inspector Louis Renault (Claude Rains) shuts down Rick’s (Humphrey Bogart) Café Americain because he’s shocked (shocked!) to find that gambling is going on in Rick’s establishment. Just then, a croupier hands a thick wad of bills to Inspector Renault: “Your winnings, sir.” Ever the gentleman, the Inspector thanks him very much.

Exelon has now assumed the role of Inspector Renault before the Ohio Public Utilities Commission, where it is shocked (shocked!) that First Energy, one of the nation’s largest merchant generators, may get a bailout in the form of revenue guarantees that will, supposedly, enable it to keep its generating stations open. (Ohio P.U.C. Docket No. 14-1297-EL-SSO, Second Supplemental Testimony of L. Campbell on behalf of Constellation and Exelon Generation).

Yes, that’s right, Exelon, the parent of Exelon Generation: the same Illinois-based nuclear generation giant that tally-ho’d down to Springfield last year to seek its own economic protectionism measure (Illinois General Assembly, H.B. 3293) in the form of a new “low carbon emission standard,” a standard so narrowly tailored that Exelon Generation was its only conceivable beneficiary. Exelon had, and still has, its hands full trying to polish its own Illinois bailout with high-gloss “market-based” varnish.

In Ohio, First Energy confronts the same issue that Exelon and others have been complaining about for several years now: market electricity prices are so low that First Energy, like Exelon, is threatening to shutter some of its generating stations unless the state bails it out.

As The Sparkspread previously explained, in the early 2000s Exelon, First Energy and many other large electric utilities, like so many itinerant free market monks, preached a pure, Ayn-Randian gospel to state legislatures and regulators: the salvation lower consumer electricity prices could be attained only through faith in unfettered (well, almost unfettered) retail competition.

Utility executives urging state legislators to adopt retail electric competition.

Utility executives urging state legislators to adopt retail electric competition, ca. 2004.

Illinois, Ohio and a number of other states joined this crusade and opened their electricity markets to competition. They spun off their generation assets to new genco subsidiaries, leaving just the delivery services (wires) under the traditional regime of cost-of-service rate regulation. They were betting on a future of increasing natural gas prices, which ordinarily set electricity prices at the margin. Visions of dollar signs danced in their CEOs’ heads.

Unfortunately, things didn’t quite work out. Caught between the expansion of natural gas supply obtained by fracking and a glacially-paced economic recovery, the real shock (shock!) to Exelon and First Energy is that the market went against them, as free markets have been known to do. That’s why they’re called “free” markets.

In Ohio, Exelon claims that the bailout of First Energy will hurt consumers to the tune of $2.0 billion. Besides, the holy canons of the free market prohibit bailouts of risk-taking, private, for profit enterprises like merchant generators. (Of course, those same holy market canons likewise forbid Exelon’s Illinois bailout, but they deserve a dispensation, right?)

Consistency is merely the hobgoblin of little electric consumers.
But in Ohio, the Public Utilities Commission might allow a bailout of First Energy’s merchant generation fleet, which is one of Exelon’s competitors in the PJM market. In a precise reversal of the tone Exelon adopted in the fight for its own Illinois bailout, in Ohio it finds horrifying the prospect of precisely the same type of bailout for First Energy.

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