By Rich Heidorn Jr.

The developers of the abandoned PATH transmission project would be denied recovery of more than $10 million of their $121.5 million claim under an initial decision by a FERC administrative law judge Monday.

Judge Philip C. Baten recommended that the commission deny the developers, American Electric Power and the former Allegheny Energy (now FirstEnergy), recovery of lobbying and advertising costs as well as part of their legal costs and losses on the sale of the property they acquired (ER09-1256-002, ER12-2708-003). The commission can accept the recommendations in whole or in part.

The proposed 765-kV “coal by wire” Potomac-Appalachian Transmission Highline project was approved by PJM in 2007 to run from AEP’s John Amos coal generator in St. Albans, W.Va., to New Market in Frederick County, Md.

By 2011, however, PJM said the need for the line had moved several years beyond 2015 due to reduced load growth following the recession. The PJM Board of Managers ordered transmission owners to suspend work on the line pending a more complete analysis in 2011 of all upgrades in its regional transmission plan and terminated it in 2012.

Victory for Pro Se Interveners

Although the developers would recover most of their request, the judge’s ruling was a victory for two PATH opponents from West Virginia, Keryn Newman and Allison Haverty, who filed a pro se intervention challenging the companies’ request for recovery of $6 million in spending on lobbying and advertising campaigns intended to win political support for the project. The judge denied recovery of any of the expenses.

Baten also said $3.6 million in losses that the companies incurred on past land sales are not recoverable and that recoveries from any future land transactions “must be accomplished by commercially reasonable procedures.”

The judge also denied recovery for part of $3.9 million in legal expenses, for which the companies’ failed to provide documentation, and cut the companies’ proposed 10.4 % return on equity for the abandonment costs to 6.27%.

But Baten approved recovery for the purchase of property for a planned substation in Maryland and rejected a request by state consumer advocates to reject $29 million in spending incurred in 2010-2012 as imprudent.

The advocates said that the PATH companies should have recommended to PJM that the project be terminated by the beginning of 2010 and that expenses between that point and the actual termination should be denied.

The judge ruled that the expenses were recoverable because the PATH companies had a contractual obligation to construct the transmission projects as assigned by PJM. “The PATH companies did behave as a prudent utility by proceeding with their assigned obligations until otherwise instructed by PJM,” he wrote.

First Impression

Baten said that the case “presents significant issues of first impression” on FERC Order 679, a 2006 initiative that sought to accelerate transmission investment through incentives.

“This case addresses some new issues and gives the commission a unique one-stop opportunity to review and set policies for the comprehensive litigation scheme arising from Order No. 679,” Baten wrote.

The PATH project was initiated with PJM’s 2007 Regional Transmission Expansion Plan, and in 2008 FERC accepted a formula rate that entitled the developers to recover all prudently incurred costs if the project were cancelled.

In 2012, the companies filed for recovery of $121.5 million in abandonment costs. After settlement attempts with opponents failed, hearings in the case were held in March and April.

Lobbying Campaign

The pro se interveners contested spending on public relations agencies, advertising and public coalitions intended to influence public officials during the zoning and certificate of public convenience and necessity (CPCN) proceedings in Maryland, Virginia and West Virginia.

“When utilities are seeking selection or CPCN approvals from governmental entities, the utilities should rely on the established governmental approval processes to persuade the officials and not indulge in collateral efforts such as public education, outreach and advertising activities,” the judge ruled. “… If the selection or CPCN application has merit, the governmental selection process provides a sufficient vehicle for the utilities to present their engineering, marketing and economic studies and thereby hope to merit the vote of approval from these officials. In this regard the PATH companies spent over $8 million on attorney fees to prosecute the CPCNs before the respective governmental bodies, which begs the need for these collateral expenses.”

Among the spending rejected was $332,000 on a public opinion poll, $2.7 million in advertising and $94,000 paid to the then head of the West Virginia Democratic Party, Larry Puccio.

The judge said that the “nature and origins of the PATH companies’ business relationship with Puccio are somewhat amorphous” and that the companies paid him $31,000 “before his assignments were even formulated.”

“The invoices of record provide little description of his services. When the PATH companies were asked in discovery to provide additional details, their response was that such records are not available. While the PATH companies make protestations that Puccio’s services were not to lobby and instead were to educate the public and public officials, without proper documentation the only factual inference that can be drawn is that his services were to influence public officials, and the PATH companies have failed in their burden of proof to show otherwise.”