Citizens to STOP Transource

Media Briefing, Facts & Figures

In 2014, the regional electric grid operator, PJM noticed electrical congestion issues in the Washington DC suburbs.  To be clear, no one’s lights are going to go out if this project is denied, this is purely a profit-based, wholesale electricity project. In order to reduce the amount of congestion, PJM solicited bids.  They selected a project proposed by Transource (the “IEC”), a subsidiary of American Electric Power (AEP) that does new construction.

The IEC is proposed to move power from Pennsylvania to Maryland and the DC market. To move the power, Transource proposes two new high voltage lines running 45 miles south through York and Franklin counties in Pennsylvania, and Harford and Washington Counties in Maryland.  They would also construct two new substations in Pennsylvania and rebuild numerous lines to carry the power farther south into Maryland.

The project was immediately met by stiff resistance in Pennsylvania and Maryland as Transource initially proposed a spaghetti network of hundreds of miles of options.  They provided less than a week’s notice for their first open house in Norrisville, Maryland by means of a postcard sent to those residents located along their spaghetti network.  Nonetheless, a large crowd provided no doubt that the project was off to a poor start.  Transource had similar experiences at their other open houses, and settled on a path that affected primarily farms, and stayed away from lots with expensive homes and valuable construction rights.

The effect of this strategy was to place the line on preserved farmland.  For example, the largest tracts of land in northern Harford County are large tracts exactly because conservation organizations, the state, and the county have preserved the farms.  The owners of these preserved farms have entered into covenants with the state or county that restrict the land use to agriculture.  The owners entered these covenants under the assumption that the land would remain unspoiled forever.  They were deceived.

In order to build the lines, Transource needs approval from the Public Utilities Commission (PUC) in Pennsylvania, and the Public Service Commission (PSC) in Maryland.  The review process lasts over 18 months and is scheduled to conclude in the spring of 2019.

As the case has developed over the last year, battle lines have been drawn, and we have learned a great deal.  This is a summary of what has become public.

 

THE NEED FOR THE PROJECT

In 2014 the “AP South Interface” which is the region typically tasked with delivering peak power to the DC market, had a congestion cost of $486M, comprising 25% of congestion costs in all of PJM.  This is when PJM initiated their project request (RTEP) process to look for solutions.  But in 2015, congestion costs fell to just $56M, fell to $16M in 2016, and have leveled off at $21M in 2017.  This now represents 2% of PJM congestion.  In other words, the problem has largely disappeared.

The need for the project is not found in increasing loads either.  In fact, summer peak loads have been declining.  Every time PJM does a forecast for the electricity consumption, they decrease their estimates.  Current estimates are flat for the region over the next decade.

PJM also did not include proposed Maryland generation facilities in their analysis.  Nor did they include proposed generation retirements in Pennsylvania.  These are all market forces that would naturally tend to correct the “problem” that PJM is trying to fix.

 

THE ANALYSIS

The most important decision criteria for PJM in their continued support of the project is the Benefit/Cost ratio.  A high benefit and low cost would indicate a high need for the project, and vice versa.

The IEC benefit touted by PJM is currently a benefit of $707 million.  In the most striking discovery so far in the case, PJM released information that shows that this benefit was calculated by including all zones that would see lower costs because of the IEC, while simultaneously ignoring the costs in all zones that would see cost increases.  When we include zones that would see higher costs over the next 15 years because of the IEC, PJM projects a net savings across the grid of just $17M.  It appears PJM intentionally cooked the books to show the benefit to DC, while hiding the harm to others.

Neither PJM nor Transource made any attempt to include the costs to local businesses, agriculture, tourism, or any other extrinsic costs (like environmental impacts) of constructing new lines.  And of course, our legal costs were not considered either.

If the benefit analysis was deceptive, the cost side is just as bad.  Transource has consistently advertised the cost as being $320M.  But in September 2016, the capital cost had increased to $340M, and increased again to $366M in September 2018 as other utilities involved in the project provided new data.  But that isn’t really the cost either.  Because the project is financed, the true cost is reflected in the present value of revenue requirements (PVRR), which turns the $366M number into $498M.  And even that number isn’t right because Transource is still using 2015 data in their cost estimate.  Since 2015, there have been significant changes due to tariffs, interest rates, and labor.  Both the PA OCA and MD PSC asked for new cost estimates, but none were provided to PJM by Transource in time for the September 2018 analysis.

Instead, PJM went ahead with their analysis, and provided Transource with the “right” numbers.  In order for the project to continue, it must stay above a 1.25 B/C ratio.  If PJM believes the project provides $707M in benefit, Transource must keep the project below $565M in cost.  This tells Transource that they are now free to re-estimate their costs upward $67M, but not a penny more.  Transource has promised to provide new cost numbers soon.  There will be no surprise as to what they will show now.

Using only PJM’s questionable numbers, which don’t include true costs, the OCA’s expert witnesses estimate the true B/C ratio of the project to be 0.03.  That is, the project will lose 97 cents, for every dollar that is spent on it.

 

THE ALTERNATIVES

We know that the IEC fails the most basic scrutiny for cost and benefit.  But let us assume that the power is needed.

The OCA also has presented an expert witness who analyzed existing infrastructure in York and Harford Counties.  It turns out that the proposed new substation, Furnace Run, is within a few miles, within sight actually, of not one but two 230kV lines that have been newly reconstructed to follow the same specifications as the IEC.  (The grass hasn’t even grown back on the Maryland side of one of these lines).  Both of those lines run parallel into Maryland, and one goes exactly to the same substation as the IEC.  Both of those lines are supported on monopoles, just as the IEC would be, and both of those lines only carry wires on one side of the pole.  The other side is bare.

So here’s the easy math that the OCA analyst confirmed.  1/2 of an existing line, plus 1/2 of an existing line = 1 new line.  Yes, one of those lines goes to a different substation, but that substation is connected to the other destination by a newly upgraded circuit that has the capacity to carry the load.

So how could this happen?

Because PJM did not receive any proposals that included those lines.  Because PJM did not study that alternative.  Because Transource does not own those lines.  And because Transource would not make nearly as much money if they submitted to using those routes.  There is nothing in the process, until the PUC looks at it, that forces those lines to be considered.

 

A POLICY FLAW

But even if we ignored for a moment the fact that the IEC hurts Pennsylvania, and that other alternative routes are available, there is still a significant flaw.  PJM VP for planning, Steve Herling, stated PJM’s stance in an op-ed printed in the York papers, “after all, it would not be fair for customers in one area to pay consistently higher prices because the system’s design prevented some customers from accessing the lowest-cost electricity.

PJM is asserting that everyone is entitled to the cheapest electricity.  If you knew that Maryland imported about 50% of its electricity, and D.C. imports all of theirs, would you think they deserved the same rates as those of us who live with a half-dozen generators in our backyards?  Would you defend their right to import the cheapest electricity available if you knew that Maryland sued the EPA to crack down on Pennsylvania electricity plants?  How do you feel about hurting your neighbors to save pennies a month for a population that contains 8 of the top 15 wealthiest counties in the country?

Why shouldn’t we pay less for power here?  We’re the ones who have paid for it to be here, live with the pollution, and tolerate the existing web of lines.  In Steve Herling’s world, everyone is entitled to the cheapest electricity, and so when today’s transmission solution fails to supply the highest demand to the newly built lowest cost generator, new lines will be needed… whether they come from a wind farm in the mountains, or a breakthrough fusion plant built in some remote corner.  The line-building will never end.

 

PROJECT TIMING

The IEC is currently on schedule to have final evidentiary hearings this spring in both Pennsylvania and Maryland.  A decision may not occur until the summer of 2019.  Until then, the private landowners that make up the core of the Stop Transource organizations will continue to fight the project, and invest their own money in the effort.