The item on the agenda of the December meeting of the Federal Energy Regulatory Commission looked innocuous, filled with the dry, abstract language of most of the commission’s action items. It was an uncontested “settlement agreement” among a bunch of parties on an electric transmission issue going back some 15 years. The action marked the official obituary of the Potomac-Appalachian Transmission Highline, aka PATH.
It may have looked banal but the settlement was a concrete illustration of how difficult and confounding siting new interstate high-voltage electric transmission has become, even in a powerful regional transmission organization and with heavy federal support.
Commissioner Mark Christie was the only member of the five-person commission to speak about item “E-4” on the formal agenda, noting that it would be easy to consider it a “nothingburger.” FERC’s summary of the action says the settlement agreement “provides a process for the cancellation of the PATH Companies’ formula transmission rate and will facilitate the final wind-down and termination of the PATH companies.”
But, Christie added, the item concealed a troubling case, far from insignificant. Instead, he quoted Linda Loman, Willie Loman’s wife in Aurthur Miller’s legendary play Death of a Salesman, “Attention must be paid.”
The case of the failed PATH, Christie noted, demonstrates the incredibly convoluted, mind boggling, utterly opaque, failure prone process that faces new U.S. high-voltage interstate electric transmission lines – the big overhead wires that bring electricity from power plants to the smaller lines that carry the juice to end consumers. In a written concurrence with the unanimous vote, Christie said that the failure of the PATH project is important “because of the major lessons – and warnings – it holds for long-term regional transmission planning driven by policy goals, the substantial costs that go with such projects, and how FERC’s policies inflate those costs to consumers.”
The $2 billion PATH began in 2007 with a proposal from the regional transmission organization PJM as part of its regional transmission expansion plan (RTEP). It was to be a 290 mile, 765-kV transmission line from the 1,300-MW Mountaineer coal-fired plant in West Virginia on the Ohio River some 290 miles across West Virginia, Virginia, and into Maryland at a substation in a residential neighborhood near Frederick in the center of the state. The line would be in the territory where the PJM Interconnection, a federally approved regional transmission organization, dispatches power to the grid.
The project would have been part of a PJM regional transmission plan. None of the three states part of the PJM regional plan ever approved the project and all three indicated they were likely to oppose it. PJM cancelled the project in 2012, prompting the two Ohio utility developers, American Electric Power and FirstEnergy, to withdraw their applications for state approvals. Christie was a member of Virginia’s State Corporation Commission, the Old Dominion’s utility regulatory regulator, when the PATH was pending.
Then the dickering and legal maneuvering began over how to divvy up the costs and outcomes of the project collapse, culminating in FERC’s December 2023 approval of a settlement among the contending parties.
In his commentary on the PATH settlement, FERC’s Christie wrote, “Even though not a single ounce of steel was ever put in the ground, PATH’s developers have been collecting money from retail customers in the PJM states ever since it was approved for PJM’s RTEP. Since 2008, the total amount that consumers have been forced to pay to PATH’s developers has been approximately $250 million – that’s right, let me repeat: consumers have paid roughly $250 million for a project that was never built nor found needed by a single state regulator.” Christie is a former Virginia state utility regulator.
Christie added that a panoply of FERC-approved transmission incentives caused and inflated the damage to consumers. These included:
- A 50 basis-point addition to the project’s returning on equity “for becoming a member of PJM;”
- Another 150 basis-point adder “for the risks and challenges related to the PATH project;”
- Full recovery of costs as they are incurred (“construction work in progress,” or CWIP) in the rate base;
- “Permission to file for recovery of development and construction costs if the project is abandoned for reasons beyond PATH’s control (Abandoned Plant Incentive);
- “Permission to use a hypothetical capital structure of 50 percent debt and 50 percent equity during the construction period (Hypothetical Capital Structure Incentive);
- “Authorization to include in rate base an unamortized regulatory asset, consisting of deferred pre-commercial expenses not included in CWIP, and to amortize the deferred amounts during the construction period;
- “Authorization to apply and accrue carrying charges on the regulatory asset using an Allowance for Funds Used During Construction rate until the deferred amounts are included in rate base.”
Christie wondered “whether there are any incentives the Commission did not give to the PATH developers.”
Among the lessons to be learned from the PATH fiasco, Christie said, are “the inherent dangers in approving for regional cost allocation long-distance projects based on a prediction (i.e., a guess) of what the generation mix will be in 20 years or more. PATH was originally part of the huge ‘Project Mountaineer’ scheme – announced with great fanfare right here at the Commission itself – to build three high-voltage lines across hundreds of miles from West Virginia to East Coast load centers. The vast majority of the power to be delivered along these lines was to be coal-generated.
“After running into a firestorm of opposition in both the states in the path (no pun intended), as well as the end-user load states, Project Mountaineer was abandoned except for the PATH project, which represented a segment of one of the proposed Project Mountaineer lines. That segment was never built either. Yet, consumers have been paying for it ever since.”
The bottom line for Christie: “For policy-driven long-distance, regional transmission projects affecting consumers in multiple states, it is absolutely essential that state regulators have the authority to approve – or disapprove – the construction of these lines and how they are selected for regional cost allocation and what that cost allocation formula is, if their consumers are going to be hit with the costs.”
–Kennedy Maize
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