Page 1141 – RTO Insider

July 20, 2018

FERC Orders Pipelines to Pass Through Tax Savings

By Rich Heidorn Jr.

With two commissioners calling for additional action to protect consumers, FERC this week issued a final rule requiring natural gas pipelines to reflect the federal corporate income tax cut in their rates (RM18-11).

The July 18 order largely follows the commission’s Notice of Proposed Rulemaking in March, prompted by the Tax Cuts and Jobs Act, which reduced the federal corporate income rate to a flat 21%. (See FERC Orders Rate Revisions to Reflect New Tax Law.)

The NOPR would have required interstate pipelines to file a one-time report (FERC Form 501-G) to estimate the company’s return on equity before and after the tax cut took effect Jan. 1.

FERC natural gas pipeline section 5 — FERC staff present the final rule at Thursday’s commission meeting. | *FERC*

The final rule makes changes to the proposed form, including eliminating accumulated deferred income tax (ADIT) from the cost of service for pipelines that do not pay taxes — consistent with a separate order on rehearing of its revised policy statement on income taxes, also issued Wednesday (PL17-1-001).

The rule gives a pipeline several options for addressing changes to its revenue requirements, including making a filing under Section 4 of the Natural Gas Act to reduce its rates. Companies that do so will be granted a three-year moratorium on NGA Section 5 rate investigations if the pipeline’s Form 501-G shows an ROE of 12% or less.

Pipelines also can file either a prepackaged uncontested rate settlement or a general NGA Section 4 rate case. The commission said it will not initiate Section 5 rate investigations for pipelines that choose this option by Dec. 31.

The rule will take effect 45 days after publication in the Federal Register.

Call for Congressional Action

Democratic Commissioners Cheryl LaFleur and Richard Glick issued a joint concurrence calling on Congress to amend NGA Section 5 to provide the commission with refund authority like that for electric rates under the Federal Power Act.

“We believe that current law provides a perverse incentive for protracted litigation and creates an asymmetry of leverage between pipelines seeking a rate increase under Section 4 of the NGA and complainants or the commission under Section 5,” they wrote.

“We believe that our lack of refund authority affected the balance the commission was able to strike in today’s order. It is a clear tenet of cost-of-service ratemaking that tax savings should flow through to ratepayers, and the commission is rightly pursuing that goal in the final rule. However, because our Section 5 ‘stick’ under the NGA cannot effectively deliver timely relief to customers, the final rule proffers a series of ‘carrots’ in the hope that pipelines will exercise their Section 4 filing rights to quickly flow those tax benefits back to their customers. While we think the balance struck in the final rule is reasonable in light of our limited refund authority, we believe that the commission would be better equipped to protect customers if the law were amended.”

Dissents on Certificates

On Thursday, LaFleur and Glick also continued their campaign to force the commission to assess pipeline projects’ impact on greenhouse gas emissions. (See Dem Dissents Show FERC Divide on Carbon.)

Glick dissented on four gas pipeline certificate orders (Columbia Gas Transmission, CP17-80; Texas Eastern Transmission, CP18-10; Northwest Pipeline, CP17-441; and Millennium Pipeline, CP16-486-001).

LaFleur also cited the lack of GHG considerations in concurring opinions on three of the orders and indicated she would issue a partial dissent later on Millennium Pipeline.

GHG emissions are also certain to be a point of contention as the commission reconsiders its 1999 policy statement on pipeline certificates (PL18-1). Comments on the Notice of Inquiry are due Wednesday. (See FERC Outlines Gas Pipeline Rule Review.)

July 20, 2018

FERC Affirms Denial to Extend NY Tidal Power Pilot

FERC on Thursday affirmed its denial to extend the 10-year pilot license for what could be the country’s first commercial project for producing tidal power (P-12611-011).

Verdant Power’s proposed 1,050-kW Roosevelt Island Tidal Energy Project on New York’s East River was previously issued a FERC pilot license for 2012-2021.

Roosevelt Island Tidal Energy Project Verdant Power — Site of Roosevelt Island Tidal Energy Project on the East River | *Verdant Power*

Last December, the company requested an extension until 2026 to “acquire operational monitoring data” on the hydrokinetic pilot project, contending the technology involved is not at “commercial readiness.” Commission staff denied the extension request in May, saying that “barring extraordinary circumstances, 10 years should be enough time to complete a testing program and to make a decision on whether to file an application for a build-out license.”

Verdant requested a rehearing on the grounds that there is no prescribed timespan for pilot licenses and no stakeholders made “credible” objections to the extension request. New York environmental nonprofit Riverkeeper expressed concerns about protecting the endangered Atlantic sturgeon and requested use of a fish-friendly turbine design.

But FERC stuck with staff, saying Verdant still has more than 16 months before the company must file a final license application “to continue testing its technology and [acquire] additional data.”

FERC said in a 2008 white paper that an ideal hydrokinetic pilot project would be “small, short-term and located in environmentally non-sensitive areas.” In its order, the commission pointed out that the Roosevelt Island project already has double the recommended five-year pilot license time suggested in that white paper.

“If we were to accept Verdant’s argument, there is no indication that even 15 years would be a sufficient amount of time to determine whether to file an application for relicensing,” FERC added.

— Amanda Durish Cook

July 20, 2018

FERC Says Farewell to Powelson

By Michael Brooks

WASHINGTON — FERC celebrated departing Commissioner Robert Powelson’s brief tenure Thursday, with colleagues extolling his candidness and defense of competitive energy markets.

After only a year on the commission, Powelson is leaving in mid-August to become CEO of the National Association of Water Companies. (See Powelson Leaving FERC to Head Water Lobby.)

Robert Powelson FERC Commissioner — McIntyre tweeted this photo praising Powelson as a “tireless defender of wholesale markets and competitive market principles.” | *FERC*

The former National Association of Regulatory Utility Commissioners chairman was his usual joking self as he thanked fellow commissioners and staff until he began talking about his wife and two sons, when he choked up.

“They have been very supportive of me, and they have persevered through commutes [and] travel,” Powelson said, fighting back tears.

Powelson has been unafraid to speak his mind while at FERC. He once tweeted a debate challenge to coal magnate Robert Murray and ribbed then EPA Administrator Scott Pruitt at a storage industry conference for his excessive travel expenses. He also elevated the sports trash talk at commission meetings as an outspoken Philadelphia fan, enjoying a rivalry with Commissioner Cheryl LaFleur, a Boston native.

“I also respect your fierce independence and your commitment to the independence of FERC,” LaFleur said. “And your unbridled wit — I think that’s a euphemism for ‘complete lack of filter’ — made commission meetings and Twitter more enjoyable while you were here.” As a parting gift, she gave him a mug that said, “I don’t care how they do it here. I’m from Pennsylvania.”

“It’s very rare in this town that you find someone who’s willing to speak unfiltered in a variety of different ways, but without the need to be in lockstep with one political party or another,” Commissioner Richard Glick said. “But Commissioner Powelson certainly has shown the freedom to be able to speak his mind. And everyone in this room knows that Commissioner Powelson has always told us what he thinks, every single time, no matter what the issue is.”

Commissioner Neil Chatterjee, former energy adviser to Senate Majority Leader Mitch McConnell (R-Ky.), said he had vetted Powelson for a seat on the commission in 2011. Powelson, however, had just become chair of the Pennsylvania Public Utility Commission and “felt he didn’t want to leave the commission too quickly, which, as I think about it and reflect on it today, is rather ironic.”

“That was a lifetime ago,” he continued amid laughter. “Cheryl used to vote for pipelines back then with no regard whatsoever for emissions.”

McIntyre Toughs it out

The hour-and-a-half meeting appeared taxing for Chairman McIntyre, who revealed in March that he had undergone surgery and treatment for a brain tumor. (See McIntyre Discloses Brain Tumor Surgery.)

On the commission’s podcast, “Open Access” Tuesday, McIntyre said he has been suffering severe back pain since before July 4, later determined to be the result of compression fractures in two of his vertebrae. He also stumbled and fell on July 4, injuring his left arm.

In a departure from normal procedure, the doors to the commission meeting room were locked until five minutes before Thursday’s meeting was scheduled to begin at 10 a.m. McIntyre was already seated when staff, visitors and reporters were allowed in.

He remained seated throughout, excusing himself for not standing during the Pledge of Allegiance. His arm in a sling, he read slowly and deliberately, stumbling over some words.

FERC spokeswoman Mary O’Driscoll declined to answer a reporter’s question as to why there was a delay in opening the doors.

Normally open to talk about subjects not discussed at open meetings, McIntyre took few questions from reporters after Thursday’s session and was not asked about his injuries.

After the press conference, McIntyre remained seated in the hearing room as reporters and staff left. O’Driscoll said the room needed to be cleared for another meeting.

In Tuesday’s podcast, McIntyre said he was hoping to take time off soon. “Some major R&R would be really great if I’m able to arrange that consistent with my FERC responsibilities.”

July 20, 2018

FERC Teaming up with PHMSA on LNG Applications

By Michael Brooks

WASHINGTON — FERC is collaborating with the Transportation Department’s Pipeline and Hazardous Materials Safety Administration to process the 15 applications for LNG terminals before the commission, Chairman Kevin McIntyre announced Thursday.

“The new collaborative procedures, which will be implemented imminently, will significantly reduce the time required to review LNG project applications by taking full advantage of the expertise of our federal partners at PHMSA, the safety experts, to study potential impacts to public safety of each and every LNG terminal proposal,” McIntyre said at the commission’s monthly open meeting.

Transportation Department PHMSA LNG FERC — U.S. Transportation Department headquarters

FERC and PHMSA staff are still working out the details and will issue a formal memorandum of understanding “as soon as possible,” he said.

McIntyre alluded to the announcement Tuesday on the commission’s podcast, “Open Access.”

“In just the last few days, we have made truly significant strides in reforming the permitting process with our federal partners,” he told commission spokeswoman Mary O’Driscoll.

McIntyre also denied that FERC had sent letters to several export terminal developers notifying them that their applications could be delayed by 12 to 18 months as it struggles to deal with its backlog, as reported by Bloomberg last week. Bloomberg had corrected the story to remove references to the letters, but it still says FERC “is preparing to notify” developers of the delays, citing anonymous sources. (RTO Insider noted Bloomberg’s report in an article about a Senate Energy and Natural Resources Committee hearing at which the subject of delayed natural gas pipeline and LNG project approvals was discussed. See Senate Talks Gas Infrastructure amid Increasing Delays.)

The commission has in the past six months revised the notice schedules for three projects, McIntyre said, but it has not issued any new schedules in that time frame.

“FERC staff is very cognizant of the financial market impacts of its LNG project schedules,” he said. “Moreover, since we have been working diligently to streamline our permitting process and are still making significant strides in that direction, the release of any schedules to date would have been premature.”

July 20, 2018

FERC Orders Expanded Cybersecurity Reporting

By Rich Heidorn Jr.

FERC on Thursday ordered expanded reporting of cybersecurity incidents, saying attempts not currently reported could lead to bigger, more successful attacks.

The commission gave NERC six months to revise its critical infrastructure protection (CIP) reliability standards to mandate reporting of incidents that compromise, or attempt to compromise, a responsible entity’s electronic security perimeter (ESP) or associated electronic access control or monitoring systems (EACMS) (RM18-2).

FERC said the new rules will improve threat awareness by covering the installation of malware and other “incidents that might facilitate subsequent efforts to harm the reliable operation of the [bulk electric system].”

Under the current CIP-008-5 (Cyber Security – Incident Reporting and Response Planning), incidents must be reported only if they “compromised or disrupted one or more reliability tasks.”

The final rule adopts the Notice of Proposed Rulemaking the commission issued in December, which concluded that “the current reporting threshold may understate the true scope of cyber-related threats facing the bulk power system, particularly given the lack of any reportable incidents in 2015 and 2016.” (See FERC Orders Tightened Cyber Reporting Rules.)

The commission’s order also calls for standardizing cybersecurity incident reports to improve the quality of reporting and allow easier comparisons and analyses. The reports will require information on the impact, or intended impact, of the intrusion; the attack “vector” used; and the level of intrusion achieved or attempted.

In addition to continuing to send the reports to the Department of Energy’s Electricity Information Sharing and Analysis Center (E-ISAC), the reports would also be distributed to the Department of Homeland Security’s Industrial Control Systems Cyber Emergency Response Team (ICS-CERT). NERC will be required to file an annual report with the commission with anonymized summaries of the reports.

Seeking Balance

In its 2017 State of Reliability Report, NERC recommended redefining reportable incidents “to be more granular and include zero-consequence incidents that might be precursors to something more serious.” Although NERC received no reports of cybersecurity incidents during 2016, it noted that DOE’s Electric Disturbance Reporting Form OE-417 included two suspected cyberattacks and two actual attacks for the same period and that ICS-CERT responded to 59 cybersecurity incidents in the energy sector in 2016.

“Our directive is intended to result in a measured broadening of the existing reporting requirement in reliability standard CIP-008-5, consistent with NERC’s recommendation, rather than a wholesale change in cyber incident reporting that supplants or otherwise chills voluntary reporting, as some commenters maintain,” the commission wrote. “Indeed, as NERC contends, we believe that the new ‘baseline understanding, coupled with the additional context from voluntary reports received by the E-ISAC, [will] allow NERC and the E-ISAC to share that information broadly through the electric industry to better prepare entities to protect their critical infrastructure.’”

The ESP is defined by NERC as the “logical border surrounding a network to which BES cyber systems are connected using a routable protocol.” EACMS include firewalls, authentication servers, security event monitoring systems, intrusion detection systems and alerting systems.

“Since responsible entities are already required to monitor and log system activity under reliability standard CIP-007-6, the incremental burden of reporting of the compromise or attempted compromise of an EACMS that performs the identified functions should be limited, especially when compared to the benefit of the enhanced situational awareness that such reporting will provide,” the commission said.

Report Preferable to Data Request

The commission concluded a reporting requirement is preferable to a “perpetual” data request to collect the same information, saying it is “more aligned with the seriousness and magnitude of the current threat environment, and more likely to improve awareness of existing and future cybersecurity threats and potential vulnerabilities.”

It noted that “the commission will have the ability to review and ultimately approve the standard, as opposed to the opportunity for informal review that the commission would have of a data request.”

Timelines

The commission told NERC that it should consider the threat posed by attacks in developing its reporting thresholds and timelines.

“Higher risk incidents, such as detecting malware within the ESP and associated EACMS or an incident that disrupted one or more reliability tasks, could trigger the report to be submitted to the E-ISAC and ICS-CERT within a more urgent time frame, such as within one hour, similar to the current reporting deadline in reliability standard CIP-008-5. For lower risk incidents, such as the detection of attempts at unauthorized access to the responsible entity’s ESP or associated EACMS, an initial reporting time frame between eight and 24 hours would provide an early indication of potential cyberattacks. For situations where a responsible entity identifies other suspicious activity associated with an ESP or associated EACMS, a monthly report could, as NERC states, assist in the analysis of trends in activity over time.”

Top Challenge

Commissioner Neil Chatterjee said protecting the grid from cybersecurity threats is one of FERC’s top challenges. “Both the Department of Homeland Security and Federal Bureau of Investigation have issued multiple public reports describing intrusion campaigns by Russian government cyber actors against our critical infrastructure, including the electric grid,” he said in a statement. “While thankfully none of these intrusions have resulted in an actual power outage, they do represent an unsettling uptick in attempts to undermine America’s critical infrastructure systems.”

“Cyber threats to the bulk power system are ever changing, and they are a matter that commands constant vigilance,” added Chairman Kevin McIntyre.

Split Ruling on NERC Rules of Procedure

In a separate order, FERC also approved in part and denied in part NERC’s proposed revisions to its Rules of Procedure (RR17-6).

The commission approved NERC’s proposed revisions to Section 900 to clarify the scope and governance structure of its training and continuing education programs.

But it ordered NERC to restore sections of its personnel certification rules the safety organization had proposed for deletion from Section 300. The commission said it disagreed with NERC’s contention that the sections, pertaining to procedures for suspending an operator’s certification, dispute resolution and disciplinary action were “programmatic detail” that can be transferred to NERC manuals.

“If these provisions were removed from the NERC Rules of Procedure and remain only in a NERC manual, they would be subject to further change with minimal, if any, stakeholder input and without commission review,” FERC said. “This is not appropriate because changes in the provisions for suspension, dispute resolution or disciplinary actions could have a significant impact on a stakeholder’s or individual’s rights and obligations.”

July 19, 2018

ERCOT Sets New All-time Demand Record; Prices Spike

By Tom Kleckner

ERCOT set new all-time systemwide peak demand records Wednesday afternoon, reaching 72.2 GW between 4 and 5 p.m.

That eclipsed the mark of 71.4 GW set between 3 and 4 p.m., which broke the prior record of 71.1 GW set in August 2016.

ercot peak demand records — | *Shutterstock*

Real-time hub average prices peaked at $2,172.70/MWh on Wednesday in the interval ending at 4:30 p.m. The West load zone saw prices reach $2,281.95/MWh during that same interval. According to Bloomberg data, it was the highest prices have been since August 2015, when they hit $2,233/MWh.

Texas has been bedeviled by a high-pressure system that has settled over it and is expected to result in triple-digit temperatures into next week. Wednesday’s highs in the Dallas/Fort Worth area reached 108 degrees Fahrenheit in places. The region is expecting temperatures to reach 106 through Saturday, while Houston is looking at 100-degree days into next week.

“Texans continue to deal with extreme heat across the state as ERCOT and electricity providers are working diligently to ensure they have the power they need to keep cool,” ERCOT said in a written statement.

The ISO system cracked 70 GW of demand Monday and Tuesday, bettering the previous monthly high of 69.7 GW set July 3. Demand reached 70.6 GW and 70.96 GW, respectively.

“We fully expect to keep hitting new demand records as summer 2018 continues,” ERCOT said.

The grid operator has forecasted demand will top 74 GW on Thursday and Friday, 72 GW over the weekend and 75 GW on July 23.

ERCOT spokesperson Theresa Gage said the ISO has yet to issue a conservation appeal, despite the oppressive heat.

“As ERCOT predicted in the spring, we will likely break usage records as temperatures climb,” Gage said. “So far, the system is performing as expected.”

Staff in the spring projected a record peak of 72.97 GW in August, assuming normal weather conditions. The ISO says it has 78.2 GW of capacity available, with a planning reserve margin of 11%. (See ERCOT Gains Additional Capacity to Meet Summer Demand.)

The grid operator has now recorded four new monthly highs this year.

July 19, 2018

Mo. Supreme Court: PSC Erred in Denying Grain Belt Express

By Amanda Durish Cook and Rich Heidorn Jr.

The Missouri Supreme Court ruled Tuesday that the state Public Service Commission can issue the Grain Belt Express transmission project a certificate of convenience and necessity (CCN) without obtaining consent from each impacted county (SC96993).

The unanimous decision cleared one obstacle hindering Clean Line Energy Partners’ embattled, $2.3 billion, 780-mile line, which would transmit Kansas wind generation through Missouri and Illinois to PJM at the western border of Indiana.

“We think this is obviously a huge step forward,” Clean Line President Michael Skelly said in an interview.

Missouri regulators rejected Grain Belt Express in 2017, citing precedent from a state Court of Appeals’ decision that certificates require consent from each county affected by the proposed construction.

Missouri PSC Chair Daniel Hall at this year’s Mid-America Regulatory Conference in June. | © *RTO Insider*

Although four of the five commissioners said they found the project worthy, they said their hands were tied by precedent, as the Caldwell County Commission refused to allow the transmission line to cross public roads. (See New Midwest Infrastructure Must Respect Trends, Experts Say.)

But the Supreme Court said the commission confused a line CCN — which does not require prior county assent — with an area CCN, which does. An area CCN would have been necessary if the Grain Belt Express was intended to supply retail service.

It concluded that the commission mistakenly analyzed the application under the wrong subsection of rules.

The court reversed the PSC’s decision and remanded the case back to the commission to issue a new order.

County Opposition Remains

The Supreme Court acknowledged that Clean Line will still need county assent to construct facilities impacting publicly owned roads under state law. “But such assent is not relevant to the commission’s decision in issuing a line CCN,” the court said.

The project would cross 206 miles through eight Missouri counties.

Landowner group Block Grain Belt Express Missouri said Tuesday that it will continue to lobby county commissioners to withhold approval. The group said the ruling was an “empty victory” and maintains that the line has little chance of success.

“We disagree with the decision of the Supreme Court and are disappointed by it. A ruling requiring county consent prior to approval by the PSC would have likely been the end of the road for Grain Belt Express. However, Grain Belt is still far from being approved and built. We will continue to fight for our farms and property rights and against unnecessary use of eminent domain,” the group’s Russ Pisciotta said in a statement.

Clean Line Optimistic

Clean Line’s Skelly told RTO Insider he didn’t expect problems winning counties’ approvals for road crossings. “We’ll work with the counties to figure that out,” he said. “You always have to have road-crossing agreements.”

Skelly said the company, which already has CCNs from Kansas and Indiana, is planning to refile its application in Illinois, where its certificate was rescinded by a state appellate court in March because it did not qualify as a public utility in the state. Illinois law requires that a public utility “owns, controls, operates or manages, within this state, directly or indirectly, for public use, any plant, equipment or property used or to be used for” public utility purposes.

“We believe that the Illinois commission recognized the need for new transmission, and we believe we will be able to craft a successful application in Illinois,” Skelly said.

“The courts have laid out a pretty clear path” for overcoming their objections, Skelly added. “It could be as simple as owning land. It could be teaming up with an Illinois-based utility. It could be owning a substation.”

Grain Belt’s DC-AC converter station is slated to be attached to American Electric Power’s Sullivan 765-kV substation in Illinois, near the Indiana border. “A lot of that power is going to end up in Illinois,” Skelly said.

July 19, 2018

FERC Orders Expanded Cybersecurity Reporting

By Rich Heidorn Jr.

FERC on Thursday ordered expanded reporting of cybersecurity incidents, saying attempts not currently reported could lead to bigger, more successful attacks.

Under the current CIP-008-5 (Cyber Security – Incident Reporting and Response Planning), incidents must be reported only if they “compromised or disrupted one or more reliability tasks.”

Seeking Balance

Report Preferable to Data Request

Timelines

The commission told NERC that it should consider the threat posed by attacks in developing its reporting thresholds and timelines.

Top Challenge

“Cyber threats to the bulk power system are ever changing, and they are a matter that commands constant vigilance,” added Chairman Kevin McIntyre.

Split Ruling on NERC Rules of Procedure

In a separate order, FERC also approved in part and denied in part NERC’s proposed revisions to its Rules of Procedure (RR17-6).

The commission approved NERC’s proposed revisions to Section 900 to clarify the scope and governance structure of its training and continuing education programs.

July 18, 2018

UPDATED: Peak Reliability to Wind Down Operations

By Robert Mullin

Peak Reliability shook the West on Wednesday, saying it will wind down its role as a reliability coordinator (RC) and withdraw from an effort to develop a regional electricity market competing with CAISO.

The Vancouver, Wash.-based company said it expects to shut its doors as early as Dec. 31, 2019, after transitioning its customers to other RCs. It was feedback from those customers commenting on Peak’s budget discussions that prompted the move to cease operations, according to CEO Marie Jordan.

PJM’s Stu Bresler (left) and Peak CEO Marie Jordan pitching their combined services at the Colorado PUC in March 2018 | © *RTO Insider*

“At this point, we’ve received overwhelming feedback from a supermajority of our funders that there’s more support for the wind-down budget scenario and the wind-down of Peak,” Jordan said during a call to announce the decision.

Jordan said it was in the best interest of reliability “that we respond sooner than later and begin planning now for that orderly transition from Peak as the RC.”

“I have therefore engaged executive leadership within the interconnection to begin discussions on what an orderly transition for Peak would look like in a wind-down scenario,” she said.

Jordan noted that funder support for an alternative budget scenario outlining a slimmed-down “transitional” RC was “almost non-existent at this time.” The transitional RC plan Peak floated in May would have cut executive jobs, reduced the size of the board of directors and eliminated some administrative processes in an effort to keep the organization afloat past 2019. (See CAISO Puts $18.5 million Price Tag on RC Services.)

By Wednesday, only two of Peak’s 52 funders had submitted letters of intent (LOIs) indicating their support for the transitional proposal. Still, Peak said it will continue to accept funder comments on the transitional RC draft funding amount until July 30 and post its proposed budget and “strategic direction” Aug. 6, as scheduled.

Picking up the Pieces

Peak’s decision marks a rapid turnabout for an organization that just months ago was pushing ahead with plans to develop a “marketplace built by and for the West” in partnership with PJM subsidiary PJM Connext. (See Peak, PJM Pitch “Marketplace for the West.)

Jordan said Peak would be ending its relationship with PJM “to prevent the wind-down of Peak from creating an unnecessary distraction to the PJM Connext initiative, which has over the past several months gained traction among the Western entities.”

While that effort may be hobbled by the absence of Peak, PJM said in a statement that it will “continue conversations” with potential participants to develop a “member-owned market for the West.”

“While some revision of the business plan will be required to describe how the business will be organized in the absence of Peak, the fundamental nature of the proposition and its value remain unchanged,” the RTO said.

Peak’s fall could spell opportunity for yet another RC service provider looking to expand into the West.

“Peak’s announcement comes at a time when SPP is devoting significant effort to developing plans to provide unparalleled reliability coordinator services in the West,” SPP COO Carl Monroe told RTO Insider. “We are appreciative for Peak’s commitment to ensure an orderly transition of RC services to other providers, and hope their customers and others see this as an opportunity to partner with SPP as we bring new levels of value and reliability to the Western Interconnection, just as we have done in the Eastern Interconnection since 1941.”

During Wednesday’s call, Jordan said she saw the potential for an RC competitor to CAISO.

“I think it would be foolish of me to assume that there’s just one option,” she said. “It’s my personal belief [that] there is room for more than one RC in the Western Interconnection.”

Failed Gamble?

In some ways, Peak may have been undone by its own ambitions. Within weeks of the company’s announcement that it planned to develop market services in conjunction with PJM — putting it in direct conflict with CAISO’s regionalization aspirations — CAISO declared that it was “reluctantly” leaving Peak to itself become an RC. It said it could provide RC services “at significantly reduced costs.”

In April, shortly after Peak and PJM entered the “commitment phase” of their proposed market effort and issued an abstract of their business plan, CAISO divulged that most of the Western Interconnection had signed nonbinding LOIs for its RC services after it proposed to charge rates dramatically undercutting Peak’s. By early May, Peak’s vulnerability had become more apparent when it issued the transitional RC plan, what looked like a last-ditch effort to stem the loss of most its funding base.

In June 2017, Jordan testified along with Monroe before the Colorado Public Utilities Commission to keep Mountain West Transmission Group from defecting to SPP for RC services. (See SPP, Peak Reliability Pitch RC Services for Mountain West.)

“A single RC has been a very important piece of the vision for reliability in the West,” Jordan told the PUC. “Based on feedback I get from our funding members, our model is becoming so much more reliable for them, from the time we started … to where we are today. It’s been tremendous growth.”

A year later Peak said it would close its doors.

For its part, CAISO was diplomatic about Wednesday’s development and said Peak’s decision has “little direct impact” on its plans to offer RC services.

“Our design of the RC function is scalable and has always incorporated the ability to serve a significant portion of the load in the Western Interconnection,” ISO spokesperson Anne Gonzales said in an email. “The ISO is committed to working with Peak and others in the West on a transition that focuses on reliability, as balancing authorities and transmission operators make their selection of an RC service provider.”

More than 170 staff in Peak’s Vancouver and Salt Lake City offices will lose their jobs as the company winds down its operations. Jordan said Peak will offer six months of severance to every employee to retain them, pointing out they will still be needed to run the organization into 2020 to perform close-out audits and wrap up other business.

“It’s been a challenging time for all of us and our employees, so I appreciate everyone’s interest in Peak and the support that you’ll give us going forward,” Jordan told stakeholders on the call.

Tom Kleckner contributed to this article.

July 17, 2018

NY Sets Carbon Pricing Timeline, Reviews Progress

By Michael Kuser

RENSSELAER, NY – NYISO sai d Monday it could implement carbon pricing in New York’s wholesale electricity markets no earlier than the second quarter of 2021.

That “date is intended to provide certainty to energy trading markets that are currently pricing power prior to Q2 2021,” Michael DeSocio, senior manager for market design, told a July 16 meeting of the state’s Integrating Public Policy Task Force (IPPTF), the group exploring how to incorporate the cost of CO₂ emissions into NYISO’s markets.

NYISO carbon pricing emissions data — Con Edison’s East River Generating Plant emitted 2,261,240.56 tons of CO2 in 2016 according to NYSDEC.

The ISO also proposed wholesale market suppliers with active renewable energy credit (REC) contracts dated prior to Jan. 1, 2020, not be eligible to receive the carbon pricing portion of the market’s locational based marginal prices (LBMP) as part of their payment for supplying energy.

The cutoff date would help reduce or eliminate the potential for double payments to resources eligible for REC payments, DeSocio said.

Emissions Reporting

Speaking at the meeting, Ethan Avallone, NYISO senior market design specialist, presented propo s als on emissions reporting, billing and bilateral transactions under a carbon pricing scheme.

The ISO is proposing to develop a process for generators to report how much carbon they are emitting and later true-up their data based on actual emissions. The ISO would issue applicable charges or credits to adjust payments based on reported actual emissions.

Representing New York City, Couch White attorney Kevin Lang asked, “If what they’re reporting is their actual emissions, what is the true-up?”

“In some cases, the initial reporting could be an estimate of emissions,” Avallone said.

“Our understanding also is that there’s a lot of validation that happens to some of this data, so it’s allowing for that validation process to happen,” added IPPTF Chair Nicole Bouchez, the ISO’s principal economist.

Talen’s Athens generating plant in Greene County emitted 1,308,259.69 tons of CO2 in 2016, according to NYSDEC. | *Talen Energy*

Some CO₂-emitting resources submit emissions data to EPA, while others provide data to the state’s Department of Environmental Conservation. Some resources submit no data at all. But the majority of emitting resources should already have processes in place enabling them to provide emissions data to the ISO, Avallone said.

Billing Overview

The proposal calls for emitting resources to provide the ISO with weekly emissions data estimates during the billing month, while also providing updated emissions data when available. Bills from the ISO become final roughly eight months after the initial monthly invoice.

NYISO envisions that adjustments to the carbon charge would be paid to or collected from emitting resources that provide emissions data updates before a specified deadline for emissions reporting, which could be consistent with the current billing challenge period of up to five months after the initial invoice.

Resources that report to the ISO that they are subject to the Regional Greenhous Gas Initiative would be charged the gross social cost of carbon (SCC) minus the most recently posted quarterly RGGI price. Suppliers not covered by RGGI would incur a carbon price equal to the gross SCC.

Lang suggested greater granularity in the RGGI price calculation could help the ISO minimize the risk of over- or underpaying generators.

He said previous RGGI prices have fluctuated and future price estimates vary significantly, adding that generators purchase RGGI allowances at different times and in multiple ways.

For those reasons, Lang said he was concerned about basing the carbon price adjustment solely on a quarterly auction price.

In response to a request to use the actual RGGI price paid by the resource instead of the quarterly price, Bouchez said such a move would shift the risk from asset owners to consumers.

“In our markets we push that risk onto the asset owners,” Bouchez said. “They’re the ones best suited to manage that, and the consumers shouldn’t have to pay for that risk.”

The ISO additionally proposed that CO₂-emitting resources injecting into the grid to fulfill a bilateral transaction would also be subject to the carbon charge.

Transmission customers purchasing energy through bilateral transactions would receive an allocation of the carbon residual. This treatment would be similar to how other billing residuals are allocated to transmission customers’ actual energy withdrawal, Avallone said.

Progress Check

Bouchez presented a review of draft recommendati o ns for expected changes to the carbon pricing straw propo s al presented in April. (See NYISO Floats Carbon Pri c ing Straw Proposal.)

The plan calls for the IPPTF to deliver draft recommendations by Aug. 1, including suggestions regarding additional meetings or work anticipated by the task force. The group will finalize recommendations by the end of October and issue the proposal by the end of December 2018.

“We would request that when NYISO issues its straw proposal August 1, [New York Department of Public Service (DPS)] staff at the same time give a status update on how the process is going and whether or not it’s still supported. It would be helpful to understand DPS’s plans with regard to timeline and decision points on issues that are within its control, as in the setting of the carbon price,” said Ben Carron, National Grid’s senior analyst for regulatory strategy and integrated analytics.

“We’re still as committed as we were day one to review pricing carbon and determine whether or not it’s cost effective,” DPS Manager Alan Michaels responded.

The IPPTF said it foresees no changes to the concept of carbon pricing, and the analysis will use the gross SCC as recommended by DPS staff in April, which was based on a value already adopted by the Public Service Commission using the figure from the Interagency Working Group (IWG) on Social Cost of Greenhouse Gases.

The PSC’s March 2017 Value of Distributed Energy Resources (VDER) Order (15-E-0 751) set the compensation value at the higher of the Tier 1 REC or SCC minus RGGI. Converted by DPS to dollars per ton, the latter figure would gradually increase over the coming decade from $40.74/ton in 2020 to $56.77/ton in 2030.

The carbon charge will be applied to internal suppliers, and the task force will add more details to the emissions reporting proposal and also consider that emitting resources might only report EPA-accepted data.

The task force’s remaining work includes adding details to the proposal to estimate the carbon component of the LBMP for transparency, and application of the carbon charge to external transactions, which will reflect the July 9 presentation on benefits and drawbacks of the two options considered. (See New York Looks at Carbon Price Imp a ct on LBMPs.)

Regarding allocation of the carbon charge residuals to loads, issue Track 5 of the carbon pricing initiative will report the allocations of all three possible methodologies, as well as changes to other ISO markets and planning processes, Bouchez said.

The task force next meets Aug. 6 at NYISO headquarters to review draft recommendations for issue Track 5 regarding customer impacts, especially the assumptions used in modeling a dynamic change case.