Opinion ID: 6321556
Heading Depth: 2
Heading Rank: 2

Heading: PATH’s Expenditures

Text: In 2007, the regional transmission organization PJM determined that a new electricity transmission line was needed to address a reliability shortfall on its electric grid. Two of PJM’s member utilities formed PATH to build the new line— which would traverse West Virginia, Virginia, and Maryland— and to secure the necessary Certificates of Public Convenience and Necessity for the line’s construction. Those Certificates could be provided only by the utility commissions of each of the three states that the transmission line would cross. From 2009 through 2011, PATH spent more than $6 million on various activities to support its applications for Certificates. Through hired public relations contractors, PATH organized “reliable power coalitions” that would recruit individuals—often prominent business and labor leaders—to testify before the state utility commissions in support of PATH’s certificate applications. PATH’s contractors also polled public opinion of the project, ran promotional advertisements, and sent lobbyists to persuade state officials that the Certificates should be granted. There is little question that PATH made these disputed expenditures to influence the decisions of public officials. The record is full of statements to that effect. The internal communications of PATH’s public relations contractors, for example, declared that “[w]e have but one singular goal—to help get PATH approved,” a goal that would be achieved by “generating the political cover that commissioners/legislators need to ‘do the right thing.’” J.A. 66; see also J.A. 142-44 5 (contractor agreement with public relations firm). And the advertisements PATH’s agents ran were persuasive rather than merely informational, focusing on arguments in support of approval and construction of PATH’s proposed transmission line. See, e.g., J.A. 115, 117-18, 121. In its 2010, 2011, and 2012 annual filings, PATH categorized most of those expenditures into Accounts 923 (“Outside Services Employed”) and 930.1 (“General Advertising Expenses”). Per PATH’s formula rate, the costs had been passed on to customers—including petitioners—in the form of higher rates during 2009, 2010, and 2011. But in 2012, based on updated analyses that there was no longer a projected reliability shortfall, PJM cancelled the PATH project. PATH therefore withdrew its applications for Certificates, ended public relations and advocacy expenditures for the project, and never constructed the transmission line. To incentivize investment in energy transmission infrastructure, FERC rules generally authorize public utilities to recover qualifying investments if an approved project must be abandoned for reasons beyond the utility’s control. See 18 C.F.R. § 35.35(d)(1)(vi). Pursuant to section 205 of the Federal Power Act, PATH accordingly made a filing with FERC to recover “abandonment costs”—including its eligible expenditures and a proposed return on equity—totaling over $121 million. The money at issue here is a subset of the abandonment-costs recovery PATH sought.