Dave Muhly Lets AEP Have Both Barrels at the Bland Hearing

Good evening, Your Honor.My name is David Muhly. I live in the Dismal Creek section of Giles County at Route 2, Box 149, Bland, VA. My wife and I have lived on Dismal Creek in Giles since 1973, for twenty-six years. We are surrounded by the Jefferson National Forest, front yard, back yard, and sideways. We are, in the parlance, "inholders". Our home is utility company independent, electrically powered by photovoltaic panels. We have all of the electrical conveniences of any modern home, but we are, of necessity, energy and watt-conscious. Twenty years ago, before our decision to power our home only with the sun, we approached APCo about running power the four miles from the nearest line to our house. The resident engineer indicated that they would do it,at a cost of ten thousand dollars to us before we flipped a switch, and that the line would have to be buried because it would cross the national forest.

My comments before this body are my own, based not on a scientific or technical background, but rather on my own observation and experience. It is my opinion that the issues are clear. American Electric Power Company wants to make more money for its shareholders and officers. The best way to do this, giventhe general climate of utility deregulation throughout the nationand in Virginia, is to reinforce its high-voltage transmission network. On its surface, this is a perfectly acceptable corporate strategy. The trouble arises in that AEP, itself an immense entity with international holdings and mainly monopolistic in its service area, has couched this 765kV project in terms describing it as necessary to meet some need in this area. The SCC, responsible to all the citizens of the Commonwealth, finds itself in the unenviable position of sorting fact from corporate fancy in deciding which citizens will bear the burden for others. And to be sure, this is a burden. So we, the citizens of Southwest Virginia, have become aware as we have become fearful. We have become angry as we have become lucid. We have come to know and understand, perhaps as we had not so fully before, the stakes on the table as the specter of a corporate behemoth plays loose and fancy with our lives. For all of us, these are not lines on a map, they circumscribe our homes. These corridors are not an exercise in environmental planning for a paid cadre of graduate students and tenured professors to enhance an academic portfolio, they divide our communities. This project is not a collection of studies, and charts, and statistics, it is a frontal assault upon our habitat, our environment, our lives. So we are here.I intend to leave to others to describe to Your Honor the devastating effects the construction and operation of this transmission line will have on the quality of their lives and those of their children and grandchildren. Their fears are real concerning the threat to rural water supplies through disruption of delicate karst aquifers or their contamination through herbicide application.

The impacts on the scenic beauty of the area and the negative effects on a developing local economy based on the tourism and recreation industries cannot be overemphasized. With such a large proportion of these counties' land area occupied by federal forest lands, the avoidance of impacts to the federal lands can only damage the tourism industry developing in the private sector which is, in a large part, dependent upon these very forests. The disruption which would incur to family farms and agricultural land which, by unbelievable effort and sacrifice over generations have been maintained as such, cannot be denied. The loss of property values and the questionable use of eminent domain authority which would be employed to acquire the rights of way are a matter of concern to all and may, in fact, prove to be illegal. You will hear testimony about the perceived health effects of living under such lines or in the proximity of the substations, the negative impacts on the New River, a federally designated American Heritage River, effects on county comprehensive plans, and the like. I would like to address the issues of need and process. As the federal Comprehensive Electricity Competition Plan states:"Since many transmission owners will also be in the power generation and marketing business, there may also be an incentiveto exercise control over strategic parts of the transmission system for economic purposes, perhaps using reliability concerns as a pretext." This Wyoming-Jackson's Ferry East alternative was originally developed by AEP as a response to the June 5, 1998 informal data request of the SCC Staff as a "phased" alternative, and was presented on August 20, 1998 as such. Phase 1 would be the Jackson's Ferry East 765kV line and a necessary 765/138kV transformer at Axton and an additional 138kV line between Axton and Rigis Stations in order to make a Jackson's Ferry East 765kV line fully functional. Phase 2 would be the construction of a Axton-Joshua Falls 765kV line, to be completed five years later. Indeed, the Company states in it's August 20 report: "The entire Phased 765kV Alternative (Phase 1 And Phase 2) provides essentially the same level of reliability as the proposed Wyoming-Cloverdale 765kV Project. However, the Wyoming-Cloverdale 765kV Project is less expensive, involves similar environmental challenges, and provides slightly better transfer capability improvement and line loss savings than provided by the Phased 765kV Alternative." The report identified three possible transmission line corridors for Phase 2 of the Project, averaging 71 miles in length, roughly eighty percent again the length of the average for the Jackson's Ferry corridor, and in fact stated: "The overall cost of the Phased 765kV Alternative is substantially more than the cost of the proposed Wyoming-Cloverdale 765kV Project...ranging more than $77 million to $114 million more than the $263 million cost for the Wyoming-Cloverdale Project."

The report further identifies three scenarios that could possibly delay the necessity of the construction of Phase 2 (from 2007 to 2012). These would be a)lower-than-expected load growth; b) generation additions in the Roanoke area; and/or c) increased east-to-west power transfer activities. What is significant here is that the current May 7, 1999 Application for the Jackson's Ferry 765kV line there is no mention of a) the necessary 765/138kV transformer upgrades or 138kV line construction at Axton or their associated costs($35 million, Exhibit V-7, August 20 Report); b)Phase 2 whatsoever, ($139 million, Exhibit V-8)although this Phase was originally proposed as necessary to address the needs identified in Wyoming-Cloverdale; and c) analysis as to what had changed if Phase 2 was now unnecessary as Ken Schrad of the SCC asserted in press releases following the filing of this Application. Either this is an apples to apples comparison between the two Applications or it is not, and if it is not, what are the "trade-offs" involved? If Phase 2 is now considered unnecessary, what has changed in terms of the above-referenced scenario in the last ten months? These points are nowhere included in the Jackson's Ferry analysis.Although the SCC has repeatedly made note in rulings by the Hearing Examiner that all routes proposed by the Company, including alternative corridors, are still on the table and subject to review, it is clear to me that the only routes which will be given serious consideration by the SCC Staff in it's evaluation are the routes which connect to Tazewell County, this as a result of the West Virginia Public Service Commission's prior certification of a route from Wyoming Station due south into Virginia through Wyoming and McDowell Counties. This routing serves the West Virginia PSC well, as it avoids any major environmental impacts in the state, crossing largely through coal company land, much of which has already been surface-mined. Indeed, the certification process in West Virginia included consultation with the coal companies to address impacts on their lands. This is not necessarily, however, likewise in Virginia's best interests. West Virginia reaps the benefits of jobs and revenue from the coal-burning at AEP's plants, while suffering little environmental impact, and dumps the bulk of impact and mileage in Virginia with only the flight of energy capital out of the Commonwealth to show for it. The Virginia SCC can hardly objectively identify the least environmentally-damaging routing for any project if it's hands are tied from the beginning by an entry wound defined by other entities with other agendas than providing for the well-being of the citizens of the Commonwealth.As part of the Jefferson National Forest's Environmental Impact Statement process, the USFS realized: "The proposed project has the potential to affect "cultural attachment" by intruding on the cultural landscape in applicable, culturally sensitive areas. The proposed transmission line could create an adverse, long-term change in the relationship between people and land in areas where cultural attachment is strong. In these areas, an intrusion is a potential threat to the living culture. Significant intrusions may weaken and potentially destroy the relationship between people and land, physical place, and kinship patterns by disrupting the cultural "membrane" that protects these relationships. There is a rich history to the study area, and there are areas where close family relationships and mutual support that have characterized mountain living for the last 200 years are still common." (DEIS, Executive Summary) I am concerned that, among other shortcomings, the Universities Study Team siting analysis included absolutely no reference to this issue and therefore passed along to the SCC Staff for evaluation a siting report fatally flawed from the outset and severely limited in it's scope. If the federal agencies, in analyzing impacts on federal land, saw fit to recognize the affect of their decisions on the citizens which lay immediately outside the boundaries of their jurisdiction and so included such an analysis, how much more necessary must it be for the consultants paid by the company to do a thorough siting study to include such considerations in their evaluation of a "least-environmentally damaging" route?

Add to this the errors in mapping, the failure to provide timely or complete public notification, and the distortion of the geological analysis, and I fear the SCC Staff has been presented by the UST with a marginal evaluation, at best, if not a completely bogus exercise in corporate whitewashing.The bulk of the remainder of my time I will devote to some comments developed in perusing the Supplemental Direct Testimony of Bernard M. Pasternack, Director, Transmission System Analysis and Planning and the associated Report on Generation Alternatives submitted by the Company two weeks ago. This document is a prime example of what to expect when the Company is selected to perform analysis on alternatives to it's proposed project. It is only unfortunate Your Honor saw fit to deny Protestants Motion of May 28 to Extend Procedural Schedule in your ruling of July 7, as the simple lack of days necessary to prepare public testimony works to the disadvantage of these communities when information by the Company and Staff is still forthcoming. Nevertheless, I offer the following observations:Mr. Pasternack , in response to question concerning viable alternatives to either 765kV project states: "AEP also believes that no combination of the various inferior alternatives could effectively substitute for a 765kV transmission project. A key aspect of this judgement is the proportionately higher cost of the alternatives when compared to either of the 765kV transmission line projects. Since the cost per kW of transmission loading relief for such options as demand side management ("DSM"), lower voltage lines, or generation were all judged to be far greater than the cost per kW of increased transmission capability for either 765kV option, there is no combination of DSM, lower voltage lines or generation that would be competitive."

Several points need note. The Company's "belief" is hardly sufficient to make the leap of corporate faith that would prove that because a single alternative is costlier, a combination of alternatives would therefore also be costlier, especially when one of the alternatives - demand-side management - has the potential for reducing the need in the first place. The Company, employing this logic, has determined that it need not evaluate an integrated package of alternatives including demand-side management, upgrading and reconductoring existing lines, peak load generation, and the construction of lower voltage lines as an alternative to it's 765kV projects. This is particularly troubling in the case of DSM which can reduce load to the point where other options in combination become economically and environmentally much more appealing. In fact, the Wisconsin Public Service Commission calculated in 1997 the amount of energy conservation that could cost-effectively occur in a Statewide Technical and Economic Potential (STEP) Study. The PSC found that Wisconsin could reduce energy usage by 35% over 20 years through a variety of measures, such as process improvements in manufacturing, lighting efficiency measures in the commercial sector and fuel switching for residential needs. Unfortunately, as the SCC records indicate, Virginia faces challenges in this area. In the SCC Environmental Report on Deregulation, Staff notes: "In its 1993 IRP filing with the SCC, Appalachian Power stated: Conservation activities and expanded use of high-efficiency equipment need to be fostered within the marketplace. Pro-active programs are required. Customers, builders, dealers, and contractors must be educated as to the merits of conservation and high efficiency. To be effective, programs must be tailored to meet local and regional needs and customer characteristics. Two years later, APCO's tone had changed. In its 1995 IRP it made the following statement: While there has always been a great deal of uncertainty over projections of DSM impacts, within the past few months the future of DSM has become even more uncertain. The impending likelihood of electric utility competition for retail customers has created new pressures for cost minimization. The Company anticipates that, while energy efficiency assistance will continue to be provided to its customers for the foreseeable future, special programs aimed at entire classes of customers might no longer be appropriate. With these factors in mind, the Company is projecting no new recruitment of DSM conservation program participants beyond a 10-year planning horizon." In other words, even while the Company was projecting unsustainable load growth and doomsaying brown-outs and black-outs because of system unreliability, it was acknowledging a conscious and deliberate program of reduced load reduction programs. Further, Staff notes: "Other electric utilities expressed similar sentiments. Allegheny Power made the following statement regarding DSM activities: In a traditional regulated electric market, mandated DSM programs were valid because captive customers were required to pay for new sources of power generation to meet increased load demand in the captive service territory. However, this is not the case in a competitive electric market. As such, in a competitivemarket the customers will receive no benefit from mandated DSM programs within their service territory. In its 1993 IRP, Virginia Power projected that by 2005 its DSM programs would decrease its summer peak demand by 963 megawatts. In its 1996 IRP, the projected DSM reduction of summer peak demand for the year 2005 was 224 megawatts." Clearly then, this is not solely a vision problem for AEP; it is rampant in the industry, and it is based on the fact that there is no market incentive for DSM programs. If, as a consequence of DSM programs, Virginia Power could in 1993 project into 2005 a demand reduction of over three-quarters of the 1270 mW AEP claims it needs to control loading on the Kanawha-Matt Funk 345kV line for 2003-2004 Winter Peak Demand, there is something wrong with this analysis of alternatives as it is presented to us by the Company in the Cloverdale Application and referred to by inference in this latest Application.Another point of interest in Mr. Pasternack's testimony concerns his use of the words "not competitive" to describe what the Company "believes" are inferior alternatives. Competitive with what? Is it the SCC's mandate to insure that proposals provided by the Company are evaluated in terms of insuring the bottom line for AEP's shareholders? I think not. Mr. Pasternack seems to believe he is already operating in a deregulated Virginia, and if so, perhaps AEP is not even the entity which should be presenting this Application, but rather the Alliance Regional Transmission Organization AEP submitted application to FERC for approval last month. Finally, Mr. Pasternack repeats his concern with cost per kW.

What exactly will be the average cost to the ratepayer of any of these alternatives? Do we know?In the Report on Generation Alternatives, the two most severe double contingencies identified by the Company which would force unacceptable loading on the Kanawha-Matt Funk 345kV line (the most susceptible and critical) would be overlapping outages of 1)Baker-Broadford 765kV and Pruntytown-Mount Storm 500kV, and 2)Broadford-Jackson's Ferry 765kV and Pruntytown-Mount Storm 500kV. What and where is Pruntytown-Mount Storm 500kV? That line is the major EHV line across the Midwest-East Coast Interface in far northeast West Virginia on the Maryland line. It carries almost 2000 mW into Mount Storm peak Winter load projected and from there three 500 kV lines feed Virginia Power and Pennsylvania-Jersey-Maryland. This is not an AEP transmission line, but instead an Allegheny Power line with connections to the AEP 765kV substation at Belmont and the VA Power Mount Storm facility. Are there simulations and forecasts in place describing system reliability problems if a second Pruntytown-Mount Storm 500kV or a 765kV line from the 765kV Station at Belmont to Mount Storm were to be built? Why not? After all, the PJM interface is actually the area of largest load growth, and it could better be served by a much shorter northern route entirely in West Virginia. The SCC has said it is not it's place to recommend projects but only review what is placed before it, however it was SCC Staff that recommended the development of the Jackson's Ferry Alternative in response to the Company's Cloverdale Application. Additional support of the Belmont - Mount Storm interconnect across the Midwest - East Coast Interface could well provide the needed reinforcement into the Virginia Power area, as well as provide access for competitive access to that market at much less environmental damage to Virginia. The cancellation of existing sales to Duke Power (which drains fully one-quarter or 660mW of peak winter load from Broadford - Jackson's Ferry) combined with coal-gasification generation using Southwest Virginia coal and the reconductoring and upgrading of selected 138kV lines could well provide the reinforcement necessary for the APCo Central/ Eastern Service Areas. Are these options evaluated in the report on generation alternatives? Is it too much to expect that analysis of an issue as complex as this receive more than a cursory and superficial examination? I would suggest "no", not when the well-being and future of Virginia's citizens are at stake.The Report is replete with other outstanding examples of bias, misrepresentations, and distortions of logic and analysis which call into question the whole concept of having the Company develop or evaluate alternatives to it's own preferred project. For example, the analysis of gas-fired Combined Cycle generating units (CCs) is confined to one paragraph and dismissed off hand because of "significantly greater unit cost" combined with some assumed but never documented or analyzed siting difficulties regarding water availability. In one sentence, the Company suggests there "may" be problems with water availability, and in the very next sentence assumes that to be fact and asserts that "CCs could not be located in the most efficient location" "As a result, the Company concluded that no additional analysis of the combined cycle generation option was justified." This although combined cycle units are by far and away the most efficient option in terms of operating costs and performance, and would have significantly altered the Company's analysis of annual operating costs projected for combustion turbine installations. Rather quick analysis reveals that CC units are available at $300/kW (not the $494/kW the Company presents, but closer to it's figure of $338/kW for CT units, but at efficiencies of better than 60% and much lower NOX and CO2 emissions). Such lapses of logic and analysis are not the result of sloppy thought; they are intentional misrepresentations of the facts in a deliberate effort to skew results and evaluation.Finally as regards this report, it is notable that there is absolutely no evaluation of the environmental impacts of generation alternatives compared to the 765kV transmission line projects. Perhaps in requesting this report, Staff had in mind only the bottom line costs in dollars and cents associated with a generation alternative, but I believe a more thorough evaluation of the effects of these alternatives on the lives and futures of Virginia's citizens and their environment may have been in order as well.I wish I would have had more time to prepare for this hearing.

I recommend to Your Honor the alternatives suggested by Congressman Rick Boucher in his letter of November, 1997 to Mr. Moore, and suggest that Staff seek to develop an alternative to these 765kV projects using Mr. Boucher's suggestions and others as an integrated and collective approach. We are at a crossroads in history where simple answers to complex problems just will not suffice. Creative thinking, conservation of resources, and the protection of our communities and our environment must become paramount in any analysis. Cheaper is not necessarily better, easier is not necessarily responsible, and the solutions of the past will not necessarily lead us into a secure and promising future.Thank you for your time and attention.

David Muhly Rt. 2 Box 149 Bland, VA 24315