Page 1141 – RTO Insider

August 7, 2018

Plentiful Generation Helps ERCOT Meet Extreme Demand

By Tom Kleckner

ERCOT executives said Tuesday that system generation has overperformed during the summer, helping the grid operator meet demand during July’s record heat and loads.

“We saw a real test of the system,” CEO Bill Magness told the ISO’s Board of Directors. “The fleet performed well, and everyone in the market was very aware of what was coming and what we needed to do. It was a good testament to how the participants in the market can perform and how they worked in a stressed situation.”

ERCOT, which manages about 90% of the Texas grid, set a new systemwide peak of 73.3 GW on July 19, breaking the record set in August 2016 by more than 2 GW. Its new weekend demand record of 71.4 GW on July 22 also broke the old mark of 71.1 GW.

All told, demand exceeded the old record during 14 intervals over July 18-23. Demand exceeded 70 GW between July 16 and 24 as a dome of high pressure settled over the state and sent temperatures into triple digits and some heat indexes to about 110 degrees Fahrenheit.

Staff this spring projected a summer peak of 72.97 GW in August.

Having plenty of generation to call on was key, said ERCOT Senior Director of System Operations Dan Woodfin. He noted generation outages in July were “significantly lower” than what the grid operator has historically seen.

ERCOT began the summer with 78.2 GW of available capacity and added 612 MW of gas generation in July. Wind power averaged daily output of 6.6 GW in July, above pre-summer expectations of 4.1 GW.

“The peak day, the 19th, the outages were almost 2,000 MW less than on the peak day last year. We saw that pretty consistently over that period,” Woodfin said. “The cooler weather that we’ve had the last couple of weeks has allowed the units to regroup and fix some things.”

The availability of generation helped minimize tight conditions and keep prices stable. Forward contracts for August delivery reached $239/MWh in May, but they have since fallen back into double digits.

Kenan Ogelman, ERCOT’s vice president of commercial operations, said the operating reserve demand curve (ORDC) has worked as designed. The ORDC creates a real-time price adder reflecting the value of available reserves; it is meant to incentivize resources to produce more energy and reserves.

“The pricing outcomes we’ve seen in the market are associated with expectations,” Ogelman said. “The incentives are also there to put power online, at the times they’re needed.”

He said congestion in the West region, driven by high load growth and combined with the way ERCOT produces load distribution factors, did lead to more than $30 million in uplift costs in June alone. “Wow!” one board member near an open mike exclaimed.

Staff shared operational data from May and June but promised additional information during the board’s October meeting.

“We’re pleased with how it all went, but it’s only Aug. 7,” Magness reminded the board. “We have a lot more August and September to go.”

Below-normal temperatures and rain have helped cool things off over the last week.

“This week has sort of been a dud, and next week won’t be much different,” said the ISO’s senior meteorologist, Chris Coleman. He said “there’s always an opportunity” that extreme heat will return in the next three or four weeks.

August 5, 2018

FERC Rejects Bid to Boost QF Output

By Rich Heidorn Jr.

FERC on Friday rejected CMS Energy’s plan to boost a 60-MW qualifying facility to 263 MW, saying the change is too large to qualify for recertification under the Public Utility Regulatory Policies Act (EL18-123, QF87-481-002).

The company sought to recertify as an existing cogeneration QF its T.E.S. Filer City Station facility in Manistee County, Mich. The facility has two boilers that can burn coal, tire-derived fuel and waste wood and creates 60 MW of electricity that is sold to CMS subsidiary Consumers Energy. It also provides about 50,000 pounds per hour of process steam to the facility’s thermal host, a paper mill owned by Packaging Corporation of America.

FERC qualifying facility QF PURPA — T.E.S. Filer City Station cogeneration facility | *T.E.S. Filer*

CMS proposed replacing the solid fuel boilers with a natural gas-fired combustion turbine and heat recovery boiler to be used with the existing steam turbine that would produce approximately 263 MW of net electrical output while providing the same thermal output to the mill. The company said a smaller turbine and boiler would not provide enough waste heat to efficiently operate the existing steam turbine and serve the mill.

The 2005 Energy Policy Act modified PURPA, requiring that any new cogeneration facility demonstrate that its “thermal energy output … is used in a productive and beneficial manner,” and that its electrical output be used fundamentally for industrial or other permitted uses “and is not intended fundamentally for sale to an electric utility.”

To implement the changes, the commission in Order 671 created a “fundamental use test,” allowing the thermal output from a replacement cogenerator to be considered to be “used in a productive and beneficial manner” if at least 50% of the total energy output (the electric, thermal, chemical and mechanical output) is used for industrial or other permitted purposes.

Order 671 said that an existing QF does not become a new facility “merely because it files for recertification. However, we caution that changes to an existing cogeneration facility could be so great (such as an increase in capacity from 50 MW to 350 MW) that what an applicant is claiming to be an existing facility should, in fact, be considered a ‘new’ cogeneration facility at the same site.”

FERC said CMS’ proposed changes are too significant to qualify for recertification as an existing facility.

“The increase in net capacity from 54 MW to 263 MW constitutes so substantial an increase in capacity that … it cannot be considered the same facility that was previously certified,” the commission ruled. “Rather, the converted facility, as proposed, is a ‘new’ cogeneration facility.”

The commission said CMS had not provided information demonstrating that it meets the fundamental use test. “Accordingly, on the record before us, we cannot certify the facility, if converted as proposed, as a cogeneration QF. T.E.S. Filer is free to file such information with the commission by either submitting a self-certification or applying for a commission certification of QF status.”

Dissent by LaFleur

Commissioner Cheryl LaFleur dissented.

“I do not read [Order 671] as requiring any significant increase in megawatt output to be treated as a change so great as to consider a facility a ‘new cogeneration facility at the same site,’” she said. “The record here shows that the conversion was designed to meet the needs of the thermal host, and that the increased megawatt output is simply a byproduct of meeting that existing need with a modern, efficient gas turbine. I believe those facts are the pertinent ones for determining here whether the changes are ‘so great’ as to warrant denying recertification.”

LaFleur noted that PURPA requires the commission’s rules to encourage cogeneration facilities. “Unfortunately, interpreting Order No. 671 in a manner that requires rejection in this instance may in fact discourage other cogeneration resources from updating and optimizing their systems, for fear of no longer maintaining their QF status. I do not believe that outcome is justified on this record.”

Separately, FERC approved CMS’ request for a declaratory order confirming that its power purchase agreement with Consumers will remain exempt from Federal Power Act Sections 205 and 206 after the PPA is amended to reflect the upgrades to the facility (EL18-124, QF87-481-003). “Assuming for the sake of this discussion that T.E.S. Filer is a QF, sales made pursuant to the PPA, as amended … will continue to be exempt from commission oversight pursuant to FPA Sections 205 and 206.”

August 5, 2018

FERC Rejects MISO Plan for External Capacity Zones

By Amanda Durish Cook

FERC last week rejected MISO’s proposal to create external zones for its annual capacity auction but left the door open for the RTO to submit a revised version of the plan in the future.

Under the proposal, MISO would have altered its Planning Resource Auction to include external resource zones based on neighboring balancing authority areas. In cases of price separation, the RTO would also distribute historical supply arrangement credits from excess auction revenues as a refund to external resources with long-term and consistently used historical supply agreements.

The proposal also included two new external resource subcategories: border external resources and coordinating owner external resources, which would be modeled and priced according to the existing local resource zone with which the resource shared a direct electrical connection. MISO had said that both types of resources are comparable to its internal resources and can meet physical and operational criteria that allow them to continue to be treated as if they were inside a local resource zone. (See MISO Closing in on External Capacity Zones.)

miso ferc external capacity zones — | *MISO*

The RTO had hoped to implement the new external zones by the 2019/20 planning year.

But in its Aug. 2 ruling, the commission took issue with two provisions of the proposal, both introduced in response to a deficiency letter in May (ER18-1173). (See FERC: MISO External Capacity Zone Plan Deficient.)

The first provision would have allowed an external resource bordering more than one local resource zone to choose which zone to participate in during the auction. The second would have permitted holders of evergreen contracts — supply contracts that include extension or renewal options written prior to MISO’s capacity construct — to receive historical supply arrangement credits collected from excess auction revenues to cover price separation. FERC said both provisions were unreasonable.

No Zone Toggle

FERC’s order said it was problematic for MISO to allow resource owners to toggle between zones in search of the best capacity prices.

“MISO’s proposal provides resource owners with new optionality that could lead to uneconomic behavior. For instance, a market participant could decide to move a lower cost capacity resource from one local zone to another in order to increase the likelihood that an affiliated higher-cost capacity resource clears in the local zone from which the capacity resource was moved. The ability to effectively move capacity resources from one local zone to another is not contemplated by the Tariff’s market power and mitigation provisions.”

MISO also proposed allowing internal capacity resources that border more than one local resource zone the option to choose their zone of participation, providing the “same flexibility” as similarly situated border external resources. The RTO said it contains 20 eligible internal resources and only one border external resource, the Joppa Power Plant in southern Illinois, with ties to multiple local zones.

But FERC said that rather than allowing market participants to select local zones, MISO could divide the resource’s capacity credit between the zones it borders using historic or forecasted system flows. The RTO could also propose a new system that determines how capacity credit is assigned to a resource that borders multiple local zones, the commission said.

Evergreen Contracts

FERC also determined that MISO should not make evergreen contract extensions eligible for excess auction revenues, saying the option would “embed inefficiencies into MISO’s resource adequacy construct for an indefinite period of time.”

“LSEs with evergreen contracts could continue to extend those contracts indefinitely to avoid the locational price signal that MISO’s locational resource adequacy construct was designed to provide,” the commission said.

Rejection in Full

FERC said it rejected the filing in full because MISO had instructed it to evaluate the contract as a cohesive whole. In its filing, MISO had said the elements “were created as a complete and balanced package based on discussions and adjustments made during the stakeholder process” and “are intended to be an integrated set of elements to improve MISO’s existing resource adequacy construct and should not be viewed in isolation.”

The RTO plans to discuss the proposal during an Aug. 8 Resource Adequacy Subcommittee meeting.

August 5, 2018

DC Circuit Rejects PJM Tx Cost Allocation Rule

By Rory D. Sweeney

PJM and FERC must reconsider how they allocate the costs of high-voltage transmission projects developed to satisfy individual utilities’ planning criteria, the D.C. Circuit Court of Appeals ruled Friday (17-1040, 17-1041).

Old Dominion Electric Cooperative, Dominion Energy Services and Virginia Electric and Power Co. challenged FERC’s approval of a PJM Tariff revision that resulted in the RTO assigning all the costs for two transmission projects proposed by the companies to the Dominion zone.

Dominion had initiated both projects in July 2013 as part of its FERC Form 715 criteria, which allow utilities to set planning criteria for their zones that go beyond NERC or RTO requirements. At the time, PJM’s rules required that half of the cost of high-voltage projects be assessed on a pro rata basis to all 24 utilities in the RTO based on customer demand, with the remainder allocated to zones based on benefits, as determined by a distribution factor (DFAX) analysis.

Dayton Power & Light objected to using the 50% pro rata allocation for Dominion’s initial Elmont-Cunningham project.

FERC Form 715 cost allocation — | *Dominion*

PJM then proposed a Tariff amendment that would prohibit cost sharing for projects proposed to satisfy TOs’ own planning criteria. FERC initially rejected the proposal, saying it violated Order 1000 and was inconsistent with the commission’s earlier finding that high-voltage transmission lines provide “significant regional benefits that accrue to all members of the PJM transmission system.” (See FERC Rejects PJM Cost Allocation on Dominion Project.)

After a technical conference, however, the commission reversed its decision, ruling that projects such as Elmont-Cunningham belonged in a new category of projects included in the Regional Transmission Expansion Plan for coordination but not selected for cost allocation. The commission then used the amendment to reject regional cost sharing for the Elmont-Cunningham and a subsequent Cunningham-Dooms project. (See FERC Does 180 on Local Tx Cost Allocation in PJM.)

Commissioner Cheryl LaFleur dissented, saying that the commission should preserve regional cost allocation “for certain high-voltage projects, even if those projects are selected solely to address local planning criteria.”

‘Severe Misallocation’ of Costs

The court agreed, saying FERC’s approval of the Tariff change was “arbitrary” and would result in a “severe misallocation of the costs” of high-voltage projects. It noted that the Dominion zone would receive less than 50% of the benefits of each of the two projects.

“FERC’s reasoning would replace a cost-allocation formula about which FERC had expressed no concerns with another one that is less accurate overall, as well as grossly inaccurate with respect to high-voltage projects, in return for no countervailing regulatory benefit,” the court said.

Because FERC has already acknowledged the regional benefits of high-voltage infrastructure, it “could hardly say that trying to distinguish between high- and low-voltage facilities was not worth the trouble.” By holding to a principle of cost causation, “FERC must make some reasonable effort to match costs to benefits,” the court said. “The cost-causation principle focuses on project benefits, not on how particular planning criteria were developed.”

“We fail to see how a categorical refusal to permit any regional cost sharing for an important category of projects conceded to produce significant regional benefits can be reconciled with the background [cost-causation] principle,” the court added. “We are sensitive to the concern, pressed by Dayton and the other amici supporting FERC, that individual utilities should not have free rein to impose unjustified costs on an entire region by unilaterally adopting overly ambitious planning criteria. However, nothing we say here prevents PJM or its member utilities from amending the Tariff, the Operating Agreement or PJM’s own planning criteria to address any problem of prodigal spending, to establish appropriate end-of-life planning criteria or otherwise to limit regional cost sharing — as long as any amendment respects the cost-causation principle.”

The court remanded the three orders back to FERC for further review.

“The legal or economic merit of Dominion’s particular end-of-life planning criteria, and the appropriateness of the Elmont-Cunningham and Cunningham-Dooms projects under those criteria, remain open issues on remand,” the court said.

August 5, 2018

SPP Ramps up Western RC Effort

By Tom Kleckner

OMAHA, Neb. — SPP met last week with Western entities that have expressed interest in its reliability coordinator (RC) services, further evidence the RTO is intent on becoming a serious player in the Western Interconnection.

The grid operator hosted the first meeting of its new Western Interconnection Reliability Coordination Working Group (WIRCWG) Aug. 2 in Westminster, Colo. It said the WIRCWG (suggested pronunciation: work-wig) will eventually become a forum for Western customers and other stakeholders of the RTO’s RC services “to engage in matters of RC-related governance and strategy.”

COO Carl Monroe said SPP hopes WIRCWG’s initial meetings and a “transparent, open-door policy that welcomes questions and concerns from any interested party” will demonstrate “our dependability and customer-focused attitude in the West, where we understand our potential customers may still be feeling us out.”

“SPP has more than 75 years of experience as a regional grid operator, and we’ve built a reputation as a reliable, effective and relationship-based organization among our members, market participants and other contract customers,” he said in a press release.

SPP has already scheduled an Aug. 14-15 meeting at its corporate headquarters in Little Rock, Ark., restricted to entities who have signed a letter of intent (LOI) for RC services. The grid operator says it has received 28 LOIs from Western entities, representing 200 TWh of net energy for load. SPP announced in June that it intends to provide RC services in the Western Interconnection by late 2019. (See Westward Ho: SPP Plans to Become RC in West.)

CEO Nick Brown told stakeholders last week that SPP is intent on establishing agreements with the companies and is following the necessary certification steps “to serve in this capacity.”

“Certainly, we have a good track record of incorporating folks in our RC services,” Brown said, referring to the 2009 and 2014 additions of Nebraska utilities and the Integrated System, respectively. “Our primary goal is to use the expertise we have, and to reach out to other entities and reduce the overall operations costs to our members. We very much expect that to be the case here.”

SPP said that while service agreements are still being negotiated, WIRCWG meetings will help those interested to learn about SPP and have a say in its service offerings in the West. It said 53 attendees were present in Westminster, a number that included members of the RTO’s Operating Reliability Working Group, which met before the WIRCWG meeting. It declined to give a breakdown of the 53 attendees.

Once the group is formally created, future meetings will be posted in advance and it will function like all other SPP working groups, an RTO spokesperson said.

“We’re eager to meet with potential customers, work with them to develop systems and processes to address their distinct needs, and begin a new chapter in the evolution of the power grid in the West,” said Bruce Rew, SPP’s vice president of operations.

With Peak Reliability’s recent decision to end its operations as early as Dec. 31, 2019, SPP and CAISO are now competing to offer RC services across the West. (See Peak Reliability to Wind Down Operations.)

CAISO last month received its first public commitment from an RC customer, the Balancing Authority of Northern California, a joint powers authority that provides balancing services for six California publicly owned utilities, including the Sacramento Municipal Utilities District. (See Most of West Signs up for CAISO RC Services.)

The Western Electricity Coordinating Council, which is responsible for the region’s bulk electric system compliance monitoring and enforcement, has asked its BAs and transmission operators to confirm which RC they will be using by Sept. 4.

SPP is still interested in integrating the Mountain West Transmission Group into its market, work that has been overshadowed by the competition for RC services and Xcel Energy’s April announcement that it was leaving the Rocky Mountain group. The RTO’s executives told stakeholders last month they expect to hear from the remaining participants in September, once they redo their cost-benefit studies.

August 5, 2018

PSEG Earnings, Combined Cycle Fleet Grow in Q2

By Rich Heidorn Jr.

Public Service Enterprise Group announced second-quarter earnings of $269 million ($0.53/share), more than doubling the $109 million ($0.22/share) in profits a year earlier, which were weighed down by costs related to the early retirement of the company’s Hudson and Mercer generating stations.

Operating earnings for the quarter were $325 million ($0.64/share), up modestly from 2017’s $316 million ($0.62/ share).

Public Service Electric and Gas earnings rose 12% year over year thanks to continued investment in transmission and distribution. PSE&G has invested more than $3 billion in electric and gas infrastructure in the past year.

The company recently finished construction of the third and final phase of its $1.2 billion, 345-kV Bergen-Linden Corridor (BLC) project. It was “one of the larger and more complex projects we have built and was finished safely on time and on budget,” CEO Ralph Izzo said on an earnings call Thursday.

Izzo told analysts that the company is not jeopardized by the long-running dispute over cost allocation for the BLC. (See FERC Rethinking DFAX for Stability Tx Projects.)

“The issue is who pays, not whether we get paid,” he said. “So PSE&G will get fully compensated for its transmission investments.”

PSEG projects $14 billion to $18 billion in capital spending through 2022, 90% of which will be on “regulated growth initiatives” at PSE&G, said CFO Daniel Cregg. The spending should support a compound annual growth rate of 8 to 10% over the period, officials said.

The company sees investment opportunities in the legislation signed by New Jersey Gov. Phil Murphy in May that raises its renewable generation targets, boosts storage and offshore wind, and revamps its solar program. PSE&G plans to seek approval of $2.9 billion in investments in energy efficiency, electric vehicle infrastructure and battery storage over six years. It also expects its three New Jersey nuclear plants to receive about $200 million annually under the state’s zero-emission certificates beginning in April 2019. (See Gov. Signs NJ Nuke Subsidy, Renewables Bills.)

New Generation

PSEG Power began commercial operation of its two newest generators in the second quarter, the Keys Energy Center, a 755-MW plant east of Brandywine, Md., and Sewaren 7, a 540-MW generator in Woodbridge, N.J.

pseg combined cycle plants q2 2018 earnings — PSEG’s Keys Energy Center, shown under construction in May 2017. The 755-MW combined cycle plant east of Brandywine, Maryland went into service in early July. | *PSEG*

Sewaren 7 is replacing Units 1, 2, 3 and 4 of its existing Sewaren coal-fired plant, which are being retired after about 70 years of operation.

With the addition of Sewaren and Keys, PSEG will have more than 4,000 MW of combined cycle gas turbines, one-third of its total fleet.

Bridgeport Harbor 5, a 485-MW dual-fuel, combined cycle plant in Connecticut, is expected to go online in mid-2019.

The investments in the three plants “reflect our recognition of the value of opportunistic growth in the power business,” the company said in its quarterly securities filing. “These additions to our fleet both expand our geographic diversity and adjust our fuel mix and are expected to enhance the environmental profile and overall efficiency of Power’s generation fleet.”

Analyst call transcript courtesy of Seeking Alpha.

August 5, 2018

Dominion Earnings up on Power Demand, Tax Cuts

By Rich Heidorn Jr.

Dominion Energy reported earnings of $449 million ($0.69/share) in the second quarter, up from $390 million ($0.62/share) for the same period in 2017, boosted by increased power sales and higher-than-expected benefits from tax cuts.

Excluding one-time rate credits and charges related to plant retirements and other matters, operating earnings for the quarter were $560 million ($0.86/share), above the company’s guidance range of 70 to 80 cents and up 33% from $421 million ($0.67/share) a year earlier.

“Based on the very strong results for the second quarter, we expect to be in the upper half of our 2018 guidance range, and our 2017 to 2020 earnings growth rate remains 6 to 8%,” CFO Mark F. McGettrick said during an earnings call Thursday.

The Power Generation Group had $639 million in cash flow, aided by lower operating and maintenance expenses and favorable weather.

CEO Thomas Farrell said Virginia Power’s weather normalized sales for the first six months of the year were 2.25% above 2017, driven by increasing demand from data centers and residential customers. “Over the past year, we have added over 400 MW of demand capacity across 14 data centers and expect to see continued strong growth,” Farrell said.

Millstone Update

On Wednesday, the Connecticut Department of Energy and Environmental Protection issued its final solicitation for zero-carbon resources after changing terms to allow Dominion to offer its Millstone nuclear plant.

dominion energy earnings data centers — Dominion Energy lineman | *Dominion Energy*

The company submitted Millstone’s financials to the state in May, seeking qualification of the nuclear plant as an “at-risk” resource. “We expect Millstone to be granted at-risk status, which means the bids will be judged on price and non-price attributes, such as carbon, economic impact and fuel security,” Farrell said. Bids are due Sept. 14, with a selection of winners expected by the end of the year.

Farrell noted that the company’s nuclear fleet has been operating for 660 days without an unplanned reactor shutdown, besting the previous record of 339 days set in 2012.

New Resources

The company’s Cove Point LNG export facility entered commercial service early in the second quarter and has loaded more than 60 Bcf of LNG on 19 cargoes.

Dominion’s $1.3 billion 1,588-MW Greensville County (Va.) combined-cycle power station is on budget and 95% complete, with commercial operations expected late this year.

The company will soon seek Virginia regulators’ approval of its proposed Coastal Virginia Offshore Wind project, a 12-MW, two-turbine test project being developed with Orsted, of Denmark.

Analyst call transcript courtesy of Seeking Alpha.

August 5, 2018

CenterPoint Misses Expectations with $75M Loss

CenterPoint Energy on Friday reported a second-quarter loss of $75 million ($0.17/share), compared to a profit of $135 million ($0.31/share) a year earlier. The company’s adjusted earnings of 30 cents/share fell short of Zacks Investment Research expectations of 32 cents.

The quarter’s loss included a pre-tax write down of $242 million to reflect the Houston-based company’s investment in Time Warner. AT&T acquired Time Warner in June, with CenterPoint receiving $53.75 and 1.437 shares of AT&T common stock for each share of Time Warner common stock it held.

CenterPoint endured a morning roller coaster ride Friday on Wall Street before its stock plunged in after-hours trading. After opening at $28.10/share, the stock closed at $27.96 before losing 12 more cents after the closing bell.

CEO Scott Prochazka said during a conference call with financial analysis that the company’s electric, gas and Enable Midstream joint venture businesses performed well, accounting for a 25% increase in revenue to $2.8 billion from 2017’s second quarter.

Prochazka said the company’s $6 billion acquisition of Indiana electric and gas utility Vectren is progressing well. The company expects to close the deal in the first quarter of 2019. (See CenterPoint Energy to Acquire Vectren in $6B Deal.)

CenterPoint Energy — Port of Freeport | *Port of Freeport*

However, Prochazka also said the cost of CenterPoint’s Freeport Master Plan project has more than doubled, from $250 million to $650 million, as a result of “more defined analysis” of infrastructure and environmental-related routing issues. ERCOT approved the project last year to solve reliability issues near the Freeport area south of Houston. (See ERCOT Stakeholders OK $246.7M in Freeport Reliability Projects.)

CenterPoint plans to file a certificate of convenience and necessity with the Texas Public Utility Commission in September.

— Tom Kleckner

August 3, 2018

SPP Regional State Committee Briefs: July 30, 2018

RSC, OMS to Take Crack at Interregional Issues

spp miso seams rto gerrymandering — | *Aces*

OMAHA, Neb. — State regulators from the SPP and MISO footprints are banding together to take on seams issues created by what one industry expert calls “RTO gerrymandering.”

Commissioners sitting on SPP’s Regional State Committee and MISO’s Organization of MISO States (OMS) met Monday to begin developing a joint RSC-OMS working group to improve market coordination and tackle problems the grid operators and their stakeholders haven’t been able to resolve.

“It’s a conversation we’ve been having off and on since May,” said RSC Chair Shari Feist Albrecht, who also chairs the Kansas Corporation Commission. “We want to contribute a state regulator’s point of view to the discussion here, and to provide advice and guidance.”

OMS Chair Ted Thomas, who chairs the Arkansas Public Service Commission, and Minnesota Public Utilities Commissioner Matt Schuerger met with RSC regulators before the committee’s regular quarterly meeting. Albrecht said the commissioners discussed defining the problems and establishing goals going forward.

“It made sense to work together,” she said. “State commissions have regulatory and cost-allocation authorities. We should have a responsibility in this area.”

“We need to work together… and not bang heads,” Thomas said during an OMS Executive Committee conference call in June.

SPP and MISO have been unable to agree to any interregional projects since FERC issued Order 1000 in 2011. The grid operators have said the cost of building joint models and financial and voltage thresholds inhibit their ability to come together on projects across the seams.

The RTOs agreed last month to work on improving their interregional process. They will study potential joint projects within their own regional models and have also added new benefit metrics, such as the avoided cost of other projects. (See MISO, SPP Loosen Interregional Project Requirements.)

“If there are problems, what are they? You can’t solve problems if you don’t try,” said Albrecht, noting that MISO and PJM work well across their seam. “We don’t have a sense of history or the background behind [seams issues]. Whatever they are, they’re not unsolvable.”

Stakeholders on both sides of the seam have expressed their frustration over the RTOs’ inability to get interregional projects approved. The Wind Coalition’s Steve Gaw, one of the more outspoken critics of the process, said he is pleased by the RSC and OMS efforts.

“RTOs were formed in part because of the savings that result from reducing the costs of seams between utilities,” Gaw said. “Today we have a seam between MISO and SPP that stretches across multiple states. The states, through the regional committees, are well positioned to examine whether significant cost savings for consumers and reliability improvements could be made between RTOs.”

Ironically, it’s the shape of the SPP-MISO seam itself that has contributed to the problem. Economist Rob Gramlich, president of Grid Strategies, said without “rationally configured RTOs,” seams issues have become larger than they should be.

“FERC has allowed oddly shaped RTOs — and the states and utilities have played a part in that — but they won’t work without effective seams management,” Gramlich said, referring to the shapes as “RTO gerrymandering.”

“It’s helpful for state regulators in both regions to help resolve seams problems for their mutual benefit,” he said. “Clearly, SPP and MISO are talking to each other and trying to work things out. They’ve made a number of improvements, but somebody needs to be holding them accountable and moving the process forward.”

SPP General Counsel Paul Suskie, staff secretary for the RSC, said the grid operator is “encouraged” by the commissioners’ engagement and greater understanding of seams issues.

“It’s especially valuable when it comes to building seams projects, considering commissioners’ critical roles in cost allocation and siting authority,” he said.

Ag Study Safe Harbor Limit Stays Unchanged

The RSC unanimously accepted the Cost Allocation Working Group’s recommendation to not conduct a larger study on the aggregate study’s safe-harbor waiver criteria, following the CAWG’s first limited review. The committee also agreed that the CAWG should conduct a second limited annual review in 2019.

The committee agreed last year to conduct a limited study of the aggregate study, which assesses the projects necessary to satisfy transmission service requests to move energy around the SPP system, as well as who pays for those projects. Transmission upgrades under the safe harbor limit are base-plan funded through the RTO’s highway/byway approach. (See “RSC Leaves Safe Harbor Limit Unchanged,” SPP Regional State Committee Briefs: July 24, 2017.)

The safe harbor cost limit will remain unchanged at $180,000/MW.

— Tom Kleckner

August 3, 2018

Eversource Boosting CapEx by $600 Million

By Michael Kuser

Eversource Energy said Wednesday that it is increasing its capital spending over the next three years by $600 million, bringing the total to $7.1 billion through 2021.

“This incremental capital will be split between $300 million for electric transmission, $200 million for electric distribution and $100 million for natural gas distribution infrastructure investments,” Eversource CFO Phil Lembo said in an analyst call. “To be more specific, on the electric transmission system, we now plan to accelerate the upgrades of aging wooden transmission structures and expect to replace thousands of them with new steel poles over the next several years.

“The primary driver of this increased level of expenditure will be investments in resiliency and reliability,” Lembo said. He added that the figures do “not include any potential initiatives that may emerge from the grid [modernization] reviews in Connecticut or Massachusetts.”

Eversource, New England’s largest utility, offers retail electricity, natural gas service and water service to approximately 3.6 million customers in Connecticut, Massachusetts and New Hampshire.

Q2 Earnings Increase 5%

The company reported second-quarter earnings of $242.8 million ($0.76/share), up slightly more than 5% compared with $230.7 million ($0.72/share) in the same period a year ago.

Eversource’s transmission unit earned $112.7 million in the quarter, up nearly 17% from a year earlier, primarily because of higher investment in its electric transmission system.

The company’s electric distribution business earned $101.3 million in the second quarter, down more than 20% from last year primarily because of the sale of New Hampshire generation assets, higher property tax expenses and revenue decoupling for eastern Massachusetts customers. Distribution rate increases partially offset the decline.

Eversource earned $5 million from natural gas in the quarter, up 11% from the same period a year ago. Colder weather in 2018 increased natural gas sales in Connecticut, where sales are not currently decoupled. The company’s Aquarion Water unit, acquired in December 2017, earned $7.2 million in the second quarter.

Regulators’ Support

Harsh storms this spring underscored the need to accelerate resilience investments, spending supported by state regulators, the company said.

The Massachusetts Department of Public Utilities this spring approved $133 million of additional grid modernization investments for NSTAR Electric over the next three years, in addition to $100 million authorized in 2017 for two battery storage initiatives and initial electric vehicle infrastructure.

eversource capex earnings — Eversource’s NSTAR Electric expects to begin construction on the nine-mile 115-kV line from Sudbury to Hudson, Mass. in 2019, with an in service date of 2020. | *Eversource*

The DPU also instructed NSTAR to file a three-year rate plan for continued grid modernization efforts beginning in 2021, which the company expects to submit sometime in 2020.

Growing demand in the Boston and Cambridge area prompted the company to upgrade several key substations.

On May 1, subsidiary Connecticut Light & Power’s new three-year rate plan took effect with an initial distribution rate increase of about $64 million. Two smaller increases will follow in 2019 and 2020.

Connecticut regulators also approved a base amount of $270 million per year in investments “aimed at making the grid more resilient, such as smart switches, enhanced tree trimming, upgrades to our poles and their integrity, and substation security,” Lembo said.

Eversource expects to file a separate grid modernization plan in Connecticut before the end of this year, he said.

Maintaining Margins

Eversource and its partner Orsted formed Bay State Wind for offshore wind solicitations but lost out this spring as Vineyard Wind won the 800-MW award for Massachusetts and Deepwater Wind picked up orders in Rhode Island and Connecticut. (See Mass., R.I. Pick 1,200 MW in Offshore Wind Bids.)

Lee Olivier, Eversource executive vice president for business development, said the company did not want to dilute its earnings for the sake of winning.

“We put in a compelling bid with returns that were consistent with the current returns we have in transmission, and that was risk-adjusted,” Olivier said. “Now clearly others took a different view of that, perhaps took more risk and lower returns, but we’re not in this thing to win for the sake of winning.”

Eversource sees potential for up to 7,000 MW of additional offshore wind in the Northeast by the middle of the coming decade.

“We see the long-term offshore wind becoming a major component of the bulk power system in New England,” Olivier said. “In Massachusetts, you have an additional 800 MW of authorization; that will likely come in our opinion early next year. We will participate in that. You’ve got a bill in the Massachusetts legislature that would authorize another 1,600 MW of offshore wind.”

Connecticut on July 31 issued a request for proposals seeking 12 TW of clean energy, he said.

“It could be Class 1 energy [wind and solar] but also could be existing nuclear and hydro, so we see that as a potential opportunity for offshore,” Olivier said. “They have authorized essentially 2,400 MW of offshore wind that’s kind of a specific RFP to offshore wind and probably the first 800 MW will come up in late this year or early 2019.”