Bill Howley sent me the link below. The story is on his blog. This could mean lower electric rates for WV, and it means back to the drawing board for financing TrAIL.

JBK

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Bill Howley billhowley@hughes.net 8/15/2009 7:15 PM >>>

This just came in on the Sierra Club listserv. Here's my post on The Power Line http://calhounpowerline.wordpress.com/2009/08/15/blockbuster-federal-court-decision-could-doom-path-trail/.

This could be big news.

Bill

Blockbuster Federal Court Decision Could Doom PATH & TrAIL 2009 August 15

Here is the news from SNL, a financial news Web site:

In a decision that could significantly hamper efforts to build major new transmission facilities nationwide, a divided three-judge panel for the U.S. Court of Appeals for the 7th Circuit on Aug. 6 overturned a FERC order signing off on the PJM Interconnection LLC’s postage-stamp rate design for new transmission lines operating at voltages of 500-kV or more.

After reviewing the arguments, the majority said the stakes are high, noting, for example, that under FERC’s decision, Commonwealth Edison Co. [an Illinois utility] may be required to contribute hundreds of millions of dollars to help pay for the proposed “Project Mountaineer,” when under the old policy it wouldn’t have had to pay a dime.

The problem, according to Judge Richard Posner, who penned the court’s decision in which Judge John Tinder joined, is that FERC never looked at the consequences of switching to the new pricing policy. “No particulars are presented concerning the contribution that very high-voltage facilities are likely to make to the reliability of PJM’s network. Not even the roughest estimate of likely benefits to the objecting utilities is presented,” Posner recalled.

Posner suggested that the new policy is unfair to customers in the western portion of PJM, where power plants are located relatively close to their customers and relatively low-voltage, mainly 345-kV, transmission facilities are used. In contrast, generating plants that serve the eastern portions of PJM are generally located long distances from load, and therefore 500-kV and even higher-voltage transmission facilities are used to deliver the power.

Yet, FERC never took this disparity into consideration, Posner maintained. Instead, he said, the agency relied on the fact that the eastern utilities that created PJM many years ago agreed to share the costs of certain facilities through pro rata sharing agreements.

“The fact that these utilities thought it appropriate to share costs in 1967 says nothing about the advantages and disadvantages of such an arrangement in the larger, modern PJM network,” the judge wrote. “The fact that one group of utilities desires to be subsidized by another is no reason in itself for giving them their way.”

The case was in the Seventh Circuit Federal Court in Minnesota because public utilities commissions in Illinois and Ohio had sued PJM over their rate scheme for Project Mountaineer, which included both TrAIL and PATH lines.

As noted on Who Pays for PATH, more than 40% of the costs of TrAIL and PATH will be paid for by rate payers west of the Allegheny Mountains. The Seventh Circuit says that can’t happen. There are two alternatives. Either only east coast utilities pay for PATH and TrAIL because they are getting the power, or AEP and Allegheny Energy pay for PATH and TrAIL because they are getting the profit.