MAPP is a 150-mile 500 kV transmission line that will run from Northern Virginia, through the Delmarva Peninsula, and to Maryland’s Eastern Shore.  Originally, MAPP was part of PJM’s $1.4 Billion Transmission upgrade that was intended to relieve congestion all the way from Virginia to New Jersey (see October 23, 2009 edition of the WER).  However, the project has since terminated its Delaware to New Jersey segment. 

The original project studies also relied on a related Virginia project, the Potomac-Appalachian Transmission Highline (“PATH”), to have been completed and in service by 2014.  However, that project has also recently been delayed (see January 8, 2010 edition of the WER).  In May 2009, PJM determined that the PATH Project will not be needed in 2014 as initially anticipated.  Subsequently, Allegheny Energy Inc. and American Electric Co. Inc. withdrew their applications for the project with the Virginia Corporation Commission.  PJM has announced that they will be re-evaluating their 2010 Regional Transmission Expansion Plan according to the new PATH developments.

The original MAPP filing to the Maryland PSC is available on its website under Case No. 9179 and Maillog No. 120847 at:  http://webapp.psc.state.md.us/Intranet/Maillog/submit_new.cfm?MaillogPath=120847&DirPath=C:\Casenum\Admin%20Filings\110000-159999\120847&maillognum=120847.

Previously on December 21, 2009, Allegheny and AEP stated that they filed a new application in Maryland and withdrew their application in Virginia to realign regulatory review schedules in Maryland, Virginia, and West Virginia.  At that time, the Allegheny affiliate that withdrew the application, PATH Allegheny Virginia Transmission Corp., stated that it would file a new application for the 31-mile Virginia segment in early 2010.  Meanwhile, Allegheny affiliate Potomac Edison Co. d/b/a Allegheny Power filed a new application at the Maryland Public Service Commission (“PUC”) after the first application was rejected on procedural grounds.  As such, the Maryland PUC will continue to evaluate the 20-mile Maryland segment of the PATH project. 

While considering the application, the Virginia Corporation Commission’s (“VCC”) hearing examiner asked PJM Interconnection LLC (“PJM”) to analyze the need for the PATH Project.  PJM’s analysis demonstrated that the PATH Project would not be needed as early as initially anticipated, primarily because plants in the region will run longer than initially projected and customers in the region have adopted programs that encourage demand reduction.  With the VCC ready to render a decision shortly after the new analysis undercut any arguments on the need for the project by 2014, Allegheny and AEP withdrew their application.  Allegheny and AEP now state that they will not consider the Virginia application again until the third quarter of 2010. 

However, the applications for the 224-mile West Virginia segment and Maryland segment will continue with their respective authorities.  These regulatory processes have been behind the regulatory processes at the VCC.  As such, Allegheny and AEP will have the opportunity to update PJM’s analysis this summer when it completes a comprehensive annual transmission needs analysis.  
A copy of the December 29, 2009 announcement can be found at:
http://www.pathtransmission.com/PATH_VA_Press_Release_12-29-09.pdf.

 Chi-Jen Yang, the lead author and technology policy analyst, claims that REITs could serve as a vehicle for consolidating ownership while reducing regulatory hurdles to transmission growth.  Yang does not believe that the United States has a national grid system, per se; instead, he maintains that the system is comprised of three major networks that are composed of “many smaller networks with highly balkanized ownership.”  The report notes that there are more than 500 owners of a small portion of the grid, which is a key problem with any effort to expand the grid.  Furthermore, the report found that the fragmented regulatory authority between the Federal Energy Regulatory Commission (“FERC”) and local/state authorities further hinders transmission expansion.

 To overcome barriers to building transmission, Yang proposes enabling REITs to provide investment opportunities in transmission, similar to the way mutual funds work.  Once corporations put their assets into an REIT, income taxes from those real estate assets would be reduced or eliminated as long as 90 percent of the income is distributed to the shareholders.  In addition, when a vertically-integrated state utility converts to a REIT, jurisdiction for the transmission facility would transfer to FERC, allowing for consolidated jurisdiction over the transmission system.  Since the existing tax code is ambiguous with respect to REITs being used for electricity transmission assets, Congress would have to modify the Internal Revenue Code to officially enable electric transmission REITs.  States and local opposition to transferring authority over siting to FERC also presents an obstacle, but Yang recommends implementing interstate siting compacts to promote coordination and joint siting with the states. 

 Yang also recommends national funding for feasibility studies and environmental impact studies, allowing cost recovery for projects in progress, abandoned/cancelled plant protection, and true FERC siting authority to promote transmission investments.  Yang points out that FERC has yet to exercise backstop siting authority under the Energy Policy Act of 2005.  He argues that FERC is further limited because of court decisions which limited backstop siting authority only to situations where states fail to grant permits—FERC cannot overrule a state’s rejection of a permit.

The settlement filing last week also showed that one of Amaranth’s former gas traders accused of manipulating gas markets is not a party to the new settlement. As such, the trader has been severed from the settlement proceedings and will have to continue to represent himself on his own according to the proceeding schedule already set by the Commission.

In July 2007, the Commission issued a Show Cause Order against Amaranth for certain trading practices that took place over the course of three days in early 2006. During that time period, Amaranth was alleged to have made as much as $168 million in profits by engaging in massive selling in short intervals in ways that benefited Amaranth’s gas derivatives positions. The Show Cause Order directed Amaranth to explain why it should not be fined $291 million.

After the parties came to the Commission with a proposed settlement in November of 2008, the Commission found that the settlement was not in the public interest because the proposed fines were insufficient. The Commission went on to state that it estimated Amaranth’s profits from its market manipulation actions were far in excess of the proposed settlement. Amaranth meanwhile has consistently claimed its innocence and stated that its traders conducted valid speculative trades.

The newest settlement is not public and has been completely redacted. However, the settlement will be fully released if and when it is approved by the Commission. While such a settlement would normally go to an Administrative Law Judge for approval first, the Commission has granted a request to have the settlement go directly to the Commissioners.

In April 2006, FERC approved SPP as the Independent Coordinator of Transmission (“ICT”) for Entergy. The ICT arrangement was a culmination of various proposals by Entergy to address concerns about access to Entergy’s transmission system. The ICT’s role is to administer Entergy’s open access transmission tariff, respond to transmission service requests, analyze Entergy’s investment plans, and oversee a weekly procurement process. The ICT arrangement is set to expire in November of 2010. In a recent order addressing Entergy’s weekly procurement process, FERC required Entergy to file by November 2009 its plans following expiration of the ICT arrangement.

At the technical conference, Entergy noted that it has agreed to conduct a cost/benefit analysis of joining the SPP by the end of this year. In the July 20 filing, Entergy stated that as part of a comprehensive review, it will explore alternatives to the ICT arrangement, including possibly joining SPP. Entergy indicated it will also consider whether modifying the current ICT structure and giving the ICT the authority to require Entergy to construct facilities identified in SPP’s planning process is more appropriate.

Entergy also addressed specific concerns raised in the technical conference that it is not investing enough to upgrade its transmission system. The company noted that it has spent more than $1.25 billion between 2004 and 2008 on its system. Entergy also stated that its current planning practices comply with all existing laws and regulations, including FERC’s transmission planning rules. However, Entergy did recognize the need for its transmission plans to be more aligned with SPP’s, and promised to work with stakeholders to improve that process.