Page 1230 – RTO Insider

December 18, 2017April 11, 2024

Overheard at the Great Plains Institute SPP Workshop

AUSTIN, Texas — The Great Plains Institute last week convened state officials and other stakeholders from across the Midwest for a one-day workshop exploring trends in SPP’s footprint. The workshop, which was streamed on the Internet, featured multiple perspectives on ongoing challenges and included panels on wind development and SPP’s proposed expansion with the Mountain West Transmission Group.

The Great Plains Institute convened experts, state officials, and stakeholders for a one-day workshop that explored energy developments and trends in SPP’s footprint. | © RTO Insider

SPP Continues to Manage Growing Wind Resources

Lanny Nickell, SPP’s vice president of engineering, recalled a time less than 10 years ago when the RTO thought if it ever exceeded 25% wind penetration, “it’d be a miracle.”

It’s the miracle that keeps on giving. SPP, the first North American RTO to exceed wind penetration levels of greater than 50%, saw that level reach 56.25% on Dec. 4, when wind resources accounted for a record 14,150 MW of energy.

“We’ve exceeded [25%] by far, because of our large geographical footprint,” Nickell said. The RTO added the Integrated System in 2015 and is now working with Mountain West to add its entities to its membership rolls.

SPP has added almost 12.5 GW of wind capacity since 2010, giving it 17.75 GW of installed wind. With the addition of another 5.3 GW that have interconnection agreements but are not yet in service, the RTO’s wind capacity will exceed its minimum load of just more than 20 GW. Another 35 GW of wind capacity is under various stages of review in SPP’s generator interconnection queue.

SPP FERC SPP Variable Generation Integration Workshop Great Plains Energy

| SPP

The RTO has approved $7 billion in transmission infrastructure since 2005 to accommodate the growth in wind energy, with another $3 billion planned. Half of the build are 345-kV facilities; the rest are primarily 100- to 300-kV infrastructure.

| SPP

“We don’t add transmission because we like transmission. We do so because it’s beneficial and helps keep the lights on,” said Nickell, who hinted at the need for 765-kV infrastructure in the future. “In order to reliably deliver the amount of wind that’s been requested, we’re probably going to need something more than just 345-kV.”

Nickell compared one of SPP’s windiest states, Kansas, with Denmark as an example of the RTO’s operational capabilities. He said Denmark had 116% wind penetration in 2015 and noted, “You can’t do that unless you’re exporting wind.” But when Kansas hit a wind penetration level of 106% on April 24, it wasn’t exporting wind out of the RTO.

| SPP

“It’s because we have a regional transmission organization,” Nickell said. “We can facilitate [those wind levels] and still keep the lights on.”

As more wind energy comes online, Nickell said, wind developers must face the question of what to do when energy exceeds load. “Exporting it does make sense, unless wind developers want to have their wind curtailed,” he said.

Landowner Opposition Formidable Obstacle to Tx Projects

Several speakers discussed the opposition Clean Line Energy Partners has faced from landowners and regulators in its plans to connect renewable resources with urban centers via long HVDC transmission lines.

“You’re going right back to the not-in-my-backyard thing,” said Ted Thomas, chair of the Arkansas Public Service Commission. “That’s causing intense pushback. ‘My granddaddy had this land. This is our family property. I don’t want this big, honking thing coming through here. You don’t understand, this property is not for sale.’”

Stoll | © RTO Insider

“Siting is difficult,” agreed Missouri Public Service Commissioner Steve Stoll. “Anytime you’re dealing with private rights and eminent domain, it’s difficult. You can say you’re helping our area by giving us the ability to sell our homes and attract business, but [the landowners] don’t see much value in it.”

“But even if [interregional] projects are built, it doesn’t draw down that massive supply of wind in the Oklahoma Panhandle,” Thomas said.

Nickell said another impediment to selling wind outside SPP is the cost of the transmission facilities themselves.

“It boils down to the question of who pays,” Nickell said. “Should the customer who wants to buy that energy pay for the upgrades to deliver it, as well as the cost of renting the transmission facilities? Or should there be a recognition of benefits to others that helps fund these projects?”

“SPP will have to grapple with what’s a fair cost to move wind out of the SPP footprint, and how that should work,” Stoll said. “It’s the biggest challenge since national electrification.”

Wind’s Economic Benefits Cross Party Lines

Xcel Energy’s Steve Beuning, one of the leaders of the Mountain West’s proposed membership in SPP, thanked the RTO for working with the Rocky Mountain entities and helping them increase their access to renewable resources.

“There’s an operational benefit that comes from the pooling of resources,” said Beuning, Xcel’s director of market operations. “That expansion of balancing diversity into a broader footprint is different. It didn’t exist when other RTOs were formed.”

“Any RTO can put a market together. I don’t know that we do a market any better than PJM, or any better than MISO, or any better than CAISO,” Nickell said. “From what we’ve been told, it’s how we do what we do that was important to the Mountain West group. They appreciate our stakeholder-driven culture. They appreciate our collaborative nature, the relationship-based culture.”

Ackermann | © RTO Insider

At some point, the Colorado Public Utilities Commission will be asked to give its regulatory approved to the merger. PUC Chair Jeff Ackermann said he is viewing the expansion in three parts.

“There’s the part about reliability, the part about transmission and the market,” Ackermann said. “It comes through really clear … that the culture and how SPP chooses to operate spills into the governance subject. I’ve heard a lot of good stuff about that pursuit of consensus, but the world we live in doesn’t lead to consensus. As you add more parties to things, and they haven’t had experience with discord, how is that done? How do you deal with discord? How do you factor in whatever is the next iteration, and how does that fit into the market?”

Moore | © RTO Insider

“Bringing those distant resources to urban centers is why we value those regional organizations,” said the National Resources Defense Council’s John Moore, director of the Sustainable FERC Project. “With all of the discussion around this integration, you ask, ‘Is this good for the customer?’ We hope so. We don’t want to see the balkanization that you see in the east, with interregional barriers … the last thing we want to see in the west is three or more RTOs developed.”

Tutos | © RTO Insider

Speaking on a panel on wind power, Vanessa Tutos, director of government affairs for EDP Renewables, said the economic benefits of renewables are clear, “irrespective of your political persuasion.” She cited a two-thirds drop since 2009 in the cost of wind energy, $128 billion of private investment and more than 20,000 wind industry jobs.

“Job opportunities are coming back to these rural areas,” Tutos said. “When you have a wind farm, you maintain the agricultural capabilities. The wind turbines, though they alter the landscape, allow [farmers] to maintain that form of life.”

But while the wind industry provides economic benefits, it doesn’t do it alone, Tutos said.

Mike Gregerson of Great Plains Institute (left) and Gaw | © RTO Insider

“Transmission planning is very important. I love the idea of a 765-kV overlay. I know reliability organizations don’t work that fast … but what wind generation is trying to do is ensure [that] the maximum amount of wind can be integrated in a reliable and efficient way. SPP has a huge opportunity to help implement policies to help reach a 21st century economy.”

“If you don’t have adequate transmission, things will grind to a halt,” said the Wind Coalition’s Steve Gaw. “If building transmission results in a lower cost of power, you’re doing your consumers a disservice by not examining [those options]. We have not gotten close to what low-cost energy would do to the [SPP] footprint. It’s not just transmission capacity; it’s also the scheduling of power across interfaces, and how much you have to pay for energy in pancake rates.”

Alternatives to DOE NOPR

Several speakers suggested there are better alternatives to the Department of Energy’s Notice of Proposed Rulemaking to provide price supports to coal and nuclear generation. (See McIntyre Takes FERC Chair; Wins Delay on NOPR.)

Rob Gramlich, a consultant who served as an adviser to former FERC Chairman Pat Wood III, said he expects the discussion in D.C. to become focused on price formation and market-based approaches.

“Obviously, the proposed resiliency rule is a major focus,” he said. “But since 90% of [the rule’s] eligible generators are in PJM, and PJM is more committed to markets than anyone else, it’s hard to imagine PJM doing anything to upend those markets. I’m not sure what we get from resiliency that we didn’t get from other new rules.”

“If it was me running the whole thing and giving them advice, it would be 180 degrees from what [the Trump administration is] doing,” Thomas said. “They ought to be embracing the fact that markets serve consumers. Markets serve consumers, and the administration should not squander opportunities to make that point.

“We should let the NERC engineers tell us when we have problems. We always say we might have a crisis in 30 days. Well, we had a crisis. It was the polar vortex, and it got to the edge of reliability problems. The next year, we had a weather event that came close to the polar vortex, but it didn’t cause a problem. Why? Because we had engineers study the problem and come up with solutions. Let the markets serve consumers, and let engineers tell us what the problems are.”

Stoll suggested another potential solution to the reliability issue: small (50-MW) modular nuclear reactors (SMRs) that are brought onsite already assembled. Taking great pains to say he was not shilling for the technology, he offered up SMRs as a source of baseload power.

“I wouldn’t want to put all our eggs in the natural gas basket. We don’t know what’s going to happen with natural gas,” Stoll said. Referencing the Utah Associated Municipal Power Systems’ work with SMRs, he said, “They rely on coal, but they’re going to put the first [SMRs] in their footprint. If everything goes right, they plan to replace their coal plants with SMRs. It’s a very interesting technology, and a technology the rest of the world is working on.”

Thomas agreed, saying the SMR market will likely be ready by the mid-2020s.

“We don’t need to be focused on subsidizing nuclear energy. We probably have a window with gas that will take us to that,” he said.

— Tom Kleckner

December 15, 2017

New Builds to Cover Indian Point Closure, NYISO Finds

By Michael Kuser

New gas-fired and dual-fuel generation coming online in the next few years will be enough to maintain reliability after the 2,311-MW Indian Point nuclear plant shuts down completely in 2021, NYISO said Wednesday.

An ISO report assessing the reliability needs arising from the staggered closure of Indian Point Units 2 and 3 cited three major projects totaling 1,818 MW now under construction: the 120-MW Bayonne Energy Center II uprate in NYISO Zone J, and the 678-MW CPV Valley and 1,020-MW Cricket Valley plants in Zone G.

NYISO indian point reliability — Indian Point

NYISO had been reluctant to perform a reliability needs assessment prior to formal notice of deactivation from Indian Point owner Entergy, which it received in November. However, in March 2017 both the Public Service Commission and the ISO predicted that the plant’s closure would present no problems for the state’s bulk power system. (See NYISO, PSC: No Worries on Replacing Indian Point Capacity.)

The report also analyzed a scenario without the three new projects. The Lower Hudson Valley (Zones G-J) would need other solutions to maintain reliability, “including generation, transmission, energy efficiency and demand response measures.” Transmission constraints into the valley from upstate (Zones A-F) and Long Island (Zone K) would make additional resources in any other zone unable to effectively resolve a deficiency, the report said.

While a generic addition of at least 200 MW by 2023 anywhere within Zones G-J would resolve the deficiency over a five-year horizon, a deficiency through 2027 would require additional resources ranging from 400 to 600 MW, depending on type and location of the resources within the valley, the ISO found.

The ISO determined the new capacity needed to compensate for the loss of Indian Point under the scenario by adding generic “perfect capacity” resources to zones in 100-MW blocks. “Perfect capacity” represents a hypothetical resource not subject to derates and not tested for transmission security or interface impacts.

NYISO Indian Point Nuclear plant reliability — | *NYISO*

New York City and Westchester County depend on Indian Point for 25% of their electricity, and the village of Buchanan and surrounding area rely on it for jobs and taxes. Gov. Andrew Cuomo in February formed the Indian Point Closure Task Force to explore ways to mitigate local tax and workforce impacts. The group next meets on Dec. 19 in Cortland.

Entergy agreed to deactivate Units 2 and 3 by April 30, 2021, under a deal reached with Cuomo in January. The agreement would allow the plants to operate for two additional two-year increments — with final closure slated for 2025 — if an emergency affected reliability in the New York City area. Unit 1 at the plant was shut down in 1974.

Cuomo had long sought the total closure of the plant, saying it was inherently unsafe to risk having a nuclear accident occur just 40 miles north of midtown Manhattan. (See Entergy to Shut Down Indian Point by 2021.)

December 15, 2017

Analyst: FERC Likely to Modify DOE NOPR

By Tom Kleckner

With a permanent chairman and full complement of commissioners now in place, FERC will likely modify “and keep moving” the Department of Energy’s controversial proposal to offer price supports to coal and nuclear plants, according to one industry analyst.

Christine Tezak DOE NOPR FERC — Tezak | *ClearView Energy Partners*

Christine Tezak, managing director of research for ClearView Energy Partners, said Wednesday her firm expects the commission to acknowledge the administration’s concerns and to take some action on the department’s Notice of Proposed Rulemaking (RM18-1).

Chairman Kevin McIntyre, who was sworn in Dec. 7, requested a 30-day delay for FERC to address the NOPR, which was granted by Energy Secretary Rick Perry. The commission now has until Jan. 10 to take action. (See McIntyre Takes FERC Chair; Wins Delay on NOPR.)

“The NOPR DOE sent over articulates a pretty straightforward concern that closing [baseload] power plants is bad,” Tezak said during a Texas Renewable Energy Industries Alliance webinar on the proposal. “It couches that concern by saying there could come a day under extreme circumstances where we would be really sorry not to have those plants around.”

Given broad opposition to the NOPR, Tezak thinks Commissioners Cheryl LaFleur, Robert Powelson and Richard Glick would all like to set aside the directive. She said LaFleur and Powelson reportedly prefer to close the docket and issue a Notice of Inquiry to RTOs with a 90-day timeline. Glick is also thought to be amenable to that option, Tezak said.

“I’m not sure that’s going to control the day,” she said. “The chairman does set the agenda. We think a variety of unusual circumstances are likely driving the commission to keep moving on the proceeding and to be responsive to the DOE’s concerns.”

It’s “feasible” FERC could issue an Advanced Notice of Proposed Rulemaking or a revised NOPR and keep the docket open if McIntyre can persuade two commissioners that action is required, Tezak said. “A revised rulemaking is not a final rule.”

Base on comments filed, Tezak said FERC has several other options to consider besides adopting the NOPR as written — unlikely, she said, given its lack of support and criticism for being vague:

To “go even bigger” and offer 15-year cost-of-service contracts to all coal- and nuclear-fired generators;
Adopt cost-of-service payments now and devise a permanent fix later;
Revise or refine the NOPR, define “resiliency” and procure it starting in 2019;
Study first, and act later; and
Just say “no” and close the docket.

While serving as interim chairman before McIntyre’s arrival, Commissioner Neil Chatterjee proposed a “show cause” order requiring grid operators to compensate resources that may provide resilience benefits and are at risk of retirement as an interim measure while the commission conducts a longer-term rulemaking.

“With apologies to Lynyrd Skynyrd, we called the variant Neil Chatterjee seemed to endorse ‘Gimme Two Steps,’” Tezak said. “[The NOPR] is a very, very broad proceeding, notwithstanding the criticism. It’s not a popularity contest or an election. Expert opinions matter, and there is a lot of different evidence in the docket. Looking ahead, that’s important to consider even if [many parties] would like to see FERC shelve the whole mess and move on.”

Industry consultant Alison Silverstein, who — “through a bizarre chain of events” — helped organize and write the DOE’s “Staff Report on Grid Reliability and Markets,” referred to the NOPR’s “premature” retirements of baseload plants as “road kill.”

“The DOE staff said there was no such thing as premature retirements,” Silverstein said during the webinar. “If you believe in markets, then those things retired when they were no longer needed. Almost all of them retired because they were no longer economic.”

The root causes — low natural gas prices and the growth of renewables — were so obvious, the DOE report did not address them, Silverstein said.

She defined grid resiliency as the system’s ability to absorb, restore and quickly recover from major adverse events. Reliability has short-term (withstanding sudden disturbances) and long-term (resource adequacy) dimensions, Silverstein said.

“It’s important to articulate the problem we’re trying to solve here,” she said. “Resiliency and reliability is very different for a power plant than the grid as a whole. For my money, we can buy a lot of transmission and distribution improvements and provide economic support for coal miners for the billions of dollars it would cost to subsidize uneconomic coal and nuclear plants.”

December 15, 2017

MISO Seeks FERC Reapproval to Keep RA Rules Intact

By Amanda Durish Cook

CARMEL, Ind. — MISO will pre-emptively refile its current resource adequacy construct for FERC approval Friday in an effort to dispel concerns that a future ruling could undo parts of the plan the commission itself had previously suggested.

MISO’s concerns stem from a July D.C. Circuit Court of Appeals ruling that found FERC overstepped its authority under the Federal Power Act when it prescribed revisions to PJM’s capacity market buyer mitigation rules in 2012 (15-1452).

That D.C. Circuit decision partially vacated FERC’s approval of PJM’s changes to its minimum offer price rule (MOPR) and remanded the case back to the commission for further action. As a result, the commission last week rejected the previously approved MOPR changes and required PJM to reinstate its previous design. (See On Remand, FERC Rejects PJM MOPR Compromise.)

Fearing that parts of its resource adequacy construct could be similarly vacated, MISO said it would refile Module E-1 of its Tariff on Friday, putting language already approved by FERC before the commission once again.

FERC MISO resource adequacy — Krouse | © *RTO Insider*

“This filing will contain only our existing Tariff language and will not propose any changes,” MISO corporate counsel Jacob Krouse told stakeholders at a Dec. 13 Resource Adequacy Subcommittee meeting.

In 2011, FERC accepted MISO’s current resource adequacy proposal, which replaced a monthly capacity auction framework with an annual auction and use of coincident peak demand forecasts to establish planning reserve requirements (ER11-4081). In that order, FERC directed MISO to remove its proposed MOPR provisions and instead use a peak load contribution methodology as its default methodology for assigning capacity obligations among other directives.

“We are giving FERC the opportunity to find our original filing just and reasonable … regardless of any procedural defects in the original order,” Krouse said.

Manitoba Hydro’s Audrey Penner asked why MISO’s well-established resource adequacy construct must go before FERC again.

“What is outstanding that would require MISO to refile?” Penner asked.

Krouse called the reasons behind the filing “procedurally complex” and said MISO seeks to pre-empt the possibility that FERC will ask the RTO to refile a revised construct in the event that the commission also overstepped its authority when it approved the original filing six years ago.

“MISO is unsure how and when FERC will act,” Krouse said.

The RTO is asking FERC to decide on the matter by March 1. If FERC doesn’t act on the Section 205 filing before the requested effective date, the filing is automatically considered accepted, Krouse said, though he thinks it “unlikely” the commission won’t address the filing.

Responding to a question from Indiana Utility Regulatory Commission staffer Dave Johnston, Krouse said the RTO will provide three pieces of staff testimony supporting the efficacy of the current resource adequacy construct. FERC liaison Chris Miller also said he expected MISO to quote at length the commission’s 2011 acceptance of the construct.

Northern Indiana Public Service Co.’s Bill SeDoris asked how MISO would respond to a rejection by FERC.

“Where do we go from there?” SeDoris asked, pressing to know whether the RTO would begin operating under pre-2011 resource adequacy rules.

Krouse said his own recommendation would be that MISO continue with its existing construct until the commission acts on either MISO’s refiling or the court’s remand.

PJM has similarly said that restoring its old rules is “not a viable option” and continues to operate according to its filed rate while it awaits FERC action on the ruling.

Dynegy’s Mark Volpe asked how MISO would respond if the commission issues an order on remand before it acts on the filing. Krouse said the RTO would reassess and adapt should that happen.

This fall, Krouse warned that the D.C. Circuit’s ruling limiting FERC’s ability to issue guidance on proposals might sway the commission in the future to issue more rulings that either accept or reject filings in their entirety.

December 15, 2017January 17, 2024

Millstone Likely Profitable Through 2035, Connecticut Consultant Says

By Rich Heidorn Jr.

Dominion Energy’s bid to win state subsidies for its Millstone nuclear plant took a hit Thursday as consultants hired by Connecticut said the plant is likely to remain profitable through 2035 even under low natural gas prices.

The report by Levitan & Associates concludes “there is no ‘missing money’ required to ensure Millstone’s financial viability through the existing term of Millstone’s Unit 2 operating license” in 2035.

The report projects that in 2022 the plant will earn after-tax net cash flow of $100 million under a low gas price/high operating cost scenario to more than $200 million under the reference case that assumes “business-as-usual” conditions.

“Under the reference case, the present value of Millstone’s after-tax cash flows [through 2035] is about $2.4 billion. This number is reasonably representative of Millstone’s enterprise value. Under the low gas price case, with all costs increased by 10%, the present value is $1.3 billion,” the consultants wrote. “However improbable the array of market and operating assumptions underlying the low gas price case with all costs increased by 10% may be, the associated enterprise value of $1.3 billion represents a conceivable ‘worst case’ for testing Millstone’s financial viability.”

The consultants added a caveat to their analysis, saying that if Dominion were required to replace its existing system with cooling towers as part of its National Pollutant Discharge Elimination System permit renewal, “it is likely that cash flow from energy and capacity sales would be insufficient to rationalize the investment.”

“We are still reviewing the report and don’t have a comment at this time,” Dominion spokesman Ken Holt said Thursday evening.

Connecticut Gov. Dannel Malloy ordered state regulators in July to assess the economic viability of the plant and determine whether the state should provide it financial support. Malloy’s executive order also directed the state Department of Energy and Environmental Protection (DEEP) and the Public Utilities Regulatory Authority (PURA) to assess the role of large-scale hydropower, demand-reduction measures, energy storage and emissions-free renewable energy in helping Connecticut meet its ambitious targets to cut its carbon output. (See CT Gov Orders Financial Analysis of Millstone Plant.)

DEEP and PURA released the Levitan study yesterday along with a draft report summarizing its conclusions and a request for comments on it, which are due Jan. 8. There will be a public hearing on the report Dec. 19 at Waterford High School.

PURA Chair Katie Dykes and DEEP Commissioner Robert Klee said during a press conference Thursday that the agencies will file a final report with their recommendations by Malloy’s Feb. 1, 2018, deadline.

Dykes said the regulators’ draft report contains no conclusion. “This report is laying out the dots,” she said. “It’s not necessarily connecting the dots.”

The regulators’ draft report noted “significant inherent difficulties” in evaluating the financial viability of a nuclear plant such as Millstone in a restructured market. “Merchant generators’ financial goals may exceed the regulated rate of return earned by cost-of-service generators, given merchant generators’ exposure to the risks of low energy prices, unplanned outages, and other costs that a regulated generator can recover from electric ratepayers,” the regulators said.

“Such is the challenge in assessing the financial viability of Millstone, and the advisability of mechanisms that would shift some of the risk of energy price volatility to the ratepayers of Connecticut. Despite DEEP and PURA’s specific data requests, Dominion only very recently provided a limited, two-page, high-level document with forward-looking financial projections. The document lacked the standard documentation supporting the projections concerning its actual financial condition. Thus, [Levitan] was limited to modeling Millstone’s financial viability using the best publicly available information.”

Levitan’s conclusions were consistent with findings of a study funded by subsidy opponents, including Calpine and Dynegy, which Dominion rejected as “loaded with gross assumptions and preposterous claims, with no real data.” Dominion, which purchased the 2,111-MW facility in 2001 for $1.28 billion, has said Millstone is more expensive to operate than other two-unit nuclear plants because its two units are of different designs. (See Millstone No Dead Weight for Dominion, Says Opponents’ Study.)

Levitan said its report was based on simulations modeling the New England wholesale energy market under several scenarios covering natural gas prices, expanded clean energy deployment and generation entry and retirements.

The consultants said they constructed a worst-case scenario increasing their proxy operating costs by 10%.

Because Dominion indicated last March that the plant will compete in ISO-NE’s Forward Capacity Auction next year, the company expects it to continue operations into at least 2022. Thus, the financial analysis considered only the period between 2022 and 2035, when the license for Millstone Unit 2 expires.

Malloy issued the executive order after Connecticut legislators failed to pass a bill sought by Dominion to boost the plant’s revenues.

Some subsidy supporters have said the loss of the plant would jeopardize the state’s ability to comply with the Global Warming Solutions Act of 2008, which mandates cutting greenhouse gas emissions to 10% below 1990 levels by 2020, and to 80% below 2001 levels by 2050.

Millstone supplies the equivalent of half of Connecticut’s electricity, but Dykes said the state is “long generation.”

December 15, 2017

Sempra, Oncor Reach Deal with Texas Stakeholders

By Tom Kleckner

Sempra Energy’s $9.45 billion bid for bankrupt Energy Future Holdings and its 80% interest in Oncor cleared a second major hurdle within a week after the California-based company reached a settlement agreement Thursday with several key Texas stakeholder groups.

The agreement represents a “significant step forward” and demonstrates “positive momentum” for Sempra’s proposed acquisition of a majority stake in the Texas utility, both companies said. Under the settlement, the parties have agreed that the acquisition is in the public interest, meets Texas statutory standards and will bring substantial benefits.

FERC ERCOT Oncor Sempra Energy — Oncor Headquarters | © *RTO Insider*

On Monday, FERC filed a boilerplate order approving the acquisition. (See “FERC OKs Sempra Acquisition of Oncor,” Company Briefs.)

Parties to the settlement agreement include the Public Utility Commission of Texas staff, the Office of Public Utility Counsel, Steering Committee of Cities Served by Oncor and Texas Industrial Energy Consumers. They will ask the PUC to approve the acquisition, consistent with the governance, regulatory and operating commitments in the agreement, the companies said.

Sempra said the agreement includes regulatory commitments that preserve the existing Oncor ring-fence and the independence of the utility’s board of directors. To protect Oncor, its customers and employees, the commitments also include extinguishing all debt currently held by EFH and Energy Future Intermediate Holding Co., the company said.

One consumer representative called the settlement a “good deal for customers,” saying Sempra agreed to a more robust ring-fence than was in place earlier for EFH or Berkshire Hathaway Energy, which appeared to have a solid $9 million all-cash offer until Sempra stepped in. (See Sempra Outmuscles Berkshire for Oncor.)

Sempra CEO Debra Reed said she was pleased with the support from the groups. “We strongly believe that this transaction will benefit Oncor customers and the state of Texas, and we are working with the PUC to facilitate its comprehensive review of our proposal.”

The PUC now holds the key to approval. The commission said in October it would complete its review within 180 days — by early April 2018. It has scheduled a Feb. 21-23 hearing on the acquisition in Austin. (See Texas Regulators Seek More Details on Sempra Oncor Bid.)

The PUC has seen a changeover among its commissioners since the unsuccessful attempts by Hunt Consolidated and NextEra Energy to acquire Oncor. Chair DeAnn Walker and Arthur D’Andrea have replaced Donna Nelson and Ken Anderson, respectively, with Brandy Marty Marquez the only holdover.

“Our partnership with Sempra Energy will result in a strong, well-capitalized Oncor that will help Texas continue to grow and invest in a safer, smarter, more reliable electric grid in the years to come,” Oncor CEO Bob Shapard said. “This settlement agreement moves us one step closer to ending the EFH bankruptcy process.”

Sempra announced the deal in August. It was approved by the U.S. Bankruptcy Court in Delaware in September but is still subject to a confirmation hearing by the court after PUC approval.

December 15, 2017

NERC Report Urges Preserving Coal, Nuke ‘Attributes’

By Rich Heidorn Jr.

NERC released its annual Long-Term Reliability Assessment on Thursday, calling for more efforts to preserve “essential reliability services” provided by coal and nuclear plants but saying it is agnostic as to how FERC and regional grid operators do so.

“FERC should consider the reliability and resilience attributes provided by coal and nuclear generation to ensure that the generation resource mix continues evolving in a manner that maintains a reliable and resilient” bulk power system (BPS), the 2017 report said.

NERC’s concerns that the increase in natural gas and renewable generation could endanger grid resilience puts it squarely in the middle of the debates over state nuclear subsidies and Energy Secretary Rick Perry’s call for price supports for coal and nuclear plants in organized markets.

“The changing composition of the North American resource mix calls for more robust planning approaches to ensure adequate essential reliability services and fuel assurance,” the report said, calling for new metrics to supplement reserve margins and requirements that all new generation provide voltage support and frequency response.

But NERC said it would limit its advice on the contentious issue, which is now before FERC. (See McIntyre Takes FERC Chair; Wins Delay on NOPR.)

Long-Term Reliability Assessment NERC — Moura

“What would be a bad thing is if we bring on a lot more gas-fired generation but all that gas-fired generation … can be interrupted, especially during winter peak times,” John Moura, NERC’s director of reliability assessment and system analysis, said during a media briefing on the report. “We replaced coal and nuclear that has some resilience to extreme weather and they’re going to be there, with resources that don’t have that. That’s our responsibility to look at and call out but … we do not have the authority or really the view as to how the market should address that.”

Recommendations

The report said:

FERC should support new products and revised market rules to ensure “essential reliability services” including frequency response and ramping.
State, federal and provincial regulators must recognize the long lead times for generation, transmission and natural gas infrastructure and the difference between regulated areas with long-term integrated resource plans and organized markets that can lose a generator with as little as 60 days’ notice.
State and federal policymakers, including the Department of Energy and FERC, should consider the impact of natural gas disruptions on the BPS when evaluating infrastructure requirements. Transmission planners and operators should identify reliability concerns resulting when a large share of gas generators rely on interruptible fuel contracts.
System operators and planners should gather more data on the “aggregate technical specifications” of distributed energy resources on local distribution grids to ensure accurate planning models, coordination of system protection and real-time situational awareness. Moura said the aggregate amount of behind-the-meter resources “is generally well known,” but that bus locations and technical specifications such as protection settings and voltage operating ranges are not.

In addition, NERC said it would conduct a “comprehensive evaluation” of its reliability standards to ensure their compatibility with nonsynchronous and distributed resources. “A lot of our standards were written largely for conventional generation, and words like ‘tripping’ or ‘spinning’ that are … well known when we’re talking about conventional generation don’t completely translate when we’re talking about asynchronous machines and inverters,” Moura said. “And so, we really need to look at our standards to make sure we’re not missing anything when we have more nonsynchronous machines on the system.”

NERC also said it will monitor reserve margins, citing projected shortfalls in ERCOT and the SERC Reliability region. The reserve margin in SERC-E, which comprises utilities in the Carolinas that aren’t part of PJM, is expected to fall below the reference margin level beginning in 2020 because of the canceled expansion of the V.C. Summer nuclear power plant. The announcement of 4,600 MW of coal and gas retirements this fall means ERCOT reserve margins will fall below targets by summer 2018.

Higher Reserve Margins, Additional Metrics Needed

“As we see the resource mix change, we’re really making a call to action to industry and regulators to increase the robustness of the planning approaches,” Moura said.

In the past, he said, planners assumed fuel would be available and that there would be generators with sufficient inertia to control frequency response. Neither is a given, he said, as the mix changes to more gas and renewable generation.

The report said increasing variable generation may require more planning reserves to maintain the one-day-in-10-years loss-of-load-expectation, boosting target reference margin levels to 17% from 15%.

Since 2008, all but one of nine regions increased their reserve margins by about 2 percentage points. The exception was SPP, which has seen its reserve margin drop from 13% to about 12% over 10 years. ERCOT and Quebec are currently below 15%, although they have increased over the last decade.

Essential Reliability Services

Moura acknowledged that NERC has made the recommendation for preserving reliability services before. “But we wanted to reiterate it here: that all new resources, no matter the fuel, need to have the capability to support voltage and frequency response.”

He said FERC’s November 2016 rulemaking proposing changes to its pro forma generator interconnection agreements seeks to address the frequency response issue but said it’s up to states to implement the interconnection requirements. And even that, he said, is not sufficient. (See FERC Has More Questions on Frequency Response NOPR.)

Interconnection requirements don’t “guarantee any performance,” he said. “It requires them to have the capability and the [ability] to provide it, but in market areas, if they’re not bidding in and being incentivized to provide that frequency response, they don’t.

“We’re not in trouble right yet with frequency response,” he added. “But we see it on the horizon.”

Similarly, he said ERCOT’s establishment of a “critical inertia” level of 100 GW/s is “a really good approach to manage this. But a long-term mechanism will be needed as even more … wind will be coming on to their system.”

Gas Supply

The report notes that on-peak natural gas capacity has increased from 280 GW in 2009 to 442 GW today, with another 32 GW of gas capacity planned for the next 10 years. It projects the Florida Reliability Coordinating Council assessment area will rely on gas for 78% of its power by 2022.

“Areas can have and can rely on large amounts of natural gas as long as they have fuel assurance mechanisms, and Florida does that very well,” Moura said. “They have dual-fuel requirements as well as firm transportation … and the pipeline was really built for the natural gas generation in that area.”

Moura also said PJM’s Capacity Performance requirements and ISO-NE’s Pay-for-Performance program is “exactly what we’re looking for.”

“But the jury’s still out as to whether or not those penalties for nonperformance will compel generators to get dual fuel. … At least in New England, states have been very clear that new natural gas pipelines aren’t wanted.”

NERC Long-Term Reliability Assessment — | *NERC*

The report also pointed out that the 0.61% (summer) and 0.6% (winter) 10-year annual demand growth rate for North America is the lowest on record. Despite flat loads, it noted grid operators added more transmission during 2006-2015 compared to 1991-2005.

December 14, 2017

NYISO Business Issues Committee Briefs: Dec. 13, 2017

RENSSELAER, N.Y. — NYISO year-to-date monthly energy prices averaged $34.72/MWh in November, a 5% increase from a year earlier, Senior Vice President for Market Structures Rana Mukerji told the ISO’s Business Issues Committee (BIC) on Wednesday.

Locational-based marginal prices (LBMPs) averaged $30.60/MWh for the month, up 8% from October and up 16% from November 2016. The ISO’s average daily sendout was 403 GWh/d, compared with 398 in October and a year earlier.

NYISO monthly energy prices LBMPs — | *NYISO*

New York natural gas prices gained nearly 19% in November, averaging $2.92/MMBtu at the Transco Z6 hub. Prices were up 33.5% from a year ago.

Distillate prices gained 31% year on year, with Jet Kerosene Gulf Coast averaging $13.04/MMBtu, up from $12.30 in October. Ultra Low Sulfur No. 2 Diesel NY Harbor averaged $13.70/MMBtu, compared with $12.86 in October.

The ISO’s local reliability share was 20 cents/MWh, up 6 cents/MWh from the previous month, while the statewide share dropped 10 cents/MWh from the previous month to -50 cents/MWh. Total uplift costs were lower than in October.

NYISO PJM natural gas prices MISO operations business plan — | *NYISO*

RTC and RTD Efficiency

In reviewing NYISO’s Broader Regional Markets report, Mukerji highlighted the ISO’s effort to increase the consistency between real-time commitment (RTC) and real-time dispatch (RTD) modeling and identify improvements to look-ahead evaluations in order to improve scheduling and price convergence. The Market Issues Working Group reviewed staff analysis of the issue Dec. 5, and the ISO expects by the end of the year to release a whitepaper identifying efforts to further explore RTC-RTD convergence in 2018.

Mukerji also noted that PJM has asked NYISO to review the former’s proposed pro forma pseudo-tie agreement that would apply to New York Control Area generators that sell all or a portion of their capacity to the RTO. PJM would provide commitment and dispatch instructions to pseudo-tied generators, which would be committed and dispatched to meet the RTO’s — rather than NYISO’s — needs.

NYISO has expressed concerns about using PJM’s proposed pseudo-tie agreement but said it’s prepared to work with the RTO to evaluate potential alternate solutions acceptable to both grid operators. FERC last month issued an order (ER17-1138) accepting many of PJM’s proposed pseudo-tie rules. Rehearing requests on the order are due Dec. 15, and NYISO said it was still evaluating its options.

Mukerji said NYISO is also modifying the rules for documenting capacity imports across PJM AC ties. The ISO’s proposal would require load-serving entities to submit evidence that an external resource with a capacity award has firm transmission service across the ties on the same day installed capacity (ICAP) results are posted. The Installed Capacity Working Group last month reviewed sample document types that would satisfy the requirement, which is slated to become effective May 1, 2018.

NYISO is additionally negotiating with PJM on cost sharing for the Ramapo 3500 phase angle regulator that was replaced by Consolidated Edison in September and plans to hold a joint NYISO/PJM stakeholder meeting on the issue in early 2018, Mukerji said.

On/Off Ramp Rule Changes

The committee also reviewed a complete market design proposal for “on/off ramp” rules the ISO uses to decide whether to eliminate or create localities within its market. Randy Wyatt, senior market design specialist for the ISO, told the committee that the proposed methodology is based on reliability planning principles.

Wyatt said the project is designed to ensure that locality price signals allow developers to make informed and efficient investments that enhance grid reliability. The committee will take up the subject again in the first quarter of 2018.

Charter Update for Integrating Public Policy Task Force

NYISO Executive Vice President Rich Dewey presented a revised charter for the Integrating Public Policy Task Force (IPPTF), which he said incorporated “some, but not all” stakeholder comments received so far.

The charter states that the BIC will receive monthly progress reports from the task force and that “any potential changes to NYISO tariffs, agreements, manuals or any other guiding documents” will be subjected to the ISO’s governance process.

NYISO and the New York Public Service Commission jointly formed the task force in October to create a forum for stakeholders to discuss pricing carbon into the wholesale electricity market. The task force held its first technical conference on Monday. (See New York Hashes out Details of Carbon Policy.)

Dewey acknowledged that there had been some confusion about why a new group was needed and explained that planners realized that integrating the state’s policy on carbon into the power markets would require a high degree of coordination between the ISO and state agencies.

The IPPTF’s next public hearing is scheduled for Jan. 8 in Albany.

— Michael Kuser

December 14, 2017

CAISO Plan Extends Day-Ahead Market to EIM

By Jason Fordney

CAISO is floating a proposal that would extend many of the features of its day-ahead market into the footprint of the Western Energy Imbalance Market (EIM) while possibly averting some of the thorny governance issues related to regionalization of the ISO.

CAISO EIM day-ahead market — CAISO’s 2018 Policy Roadmap | *CAISO*

The proposal is part of a broader plan focused on improving CAISO’s day-ahead market to better deal with emerging trends in resource procurement and planning, the ISO said. CAISO is including the plan in its Draft 2018 Policy Roadmap, which will guide the ISO’s many ongoing initiatives over the next three years related to grid operations, markets, new resources and generator retirements.

But a proposed expansion of the ISO’s day-ahead market could face competition from other corners. Reliability coordinator Peak Reliability and PJM announced last week they will explore the development of markets and other services in the West. (See PJM Unit to Help Develop Western Markets.) Farther inland, Mountain West Transmission Group is advancing on plans to integrate its member utilities into SPP.

California’s efforts to regionalize CAISO’s operations have twice stalled in the State Legislature in the last two years over concerns the state would cede too much oversight of its grid to other Western states less friendly to its ambitious environmental policies. Those states, in turn, have been wary of submitting control of their transmission systems to an entity controlled by their much larger neighbor.

An industry source, who wished to remain anonymous because they were not authorized to speak publicly, told RTO Insider that several present and future EIM members were gathering in Phoenix this week to discuss changes to the ISO’s day-ahead market. But Idaho Power spokesperson Brad Bowlin could not confirm the meeting.

“Unfortunately, we are not able to respond to your questions about this,” Bowlin said. “Any information will have to come directly from CAISO.” Idaho Power is scheduled to join the EIM next spring.

ISO spokesman Steven Greenlee said he was not aware of the meeting.

The ISO’s proposal would create something like an “RTO-lite,” allowing for each EIM balancing authority (BA) to retain its reliability responsibilities and assuring that states could maintain control over integrated resource planning. Under the plan, resource procurement would remain under the authority of local regulators that — along with BAs — would continue to direct transmission planning and investment decisions.

CAISO said its effort would target better load management, more integration of distributed resources and enhancements to the EIM. Primary among the challenges the ISO faces is a shift toward more renewable and distributed energy resources, and conflicts between resource planning and reliability planning that are driving an increased need for out-of-market reliability-must run contracts for natural gas plants. (See Board Decisions Highlight CAISO Market Problems.)

“Recent grid operations challenges [point] to [the] need for day-ahead market enhancements to better manage [the] net load curve in real time,” the ISO said in a presentation prepared for a Dec. 14 call about the roadmap.

Extending the day-ahead market to the EIM would improve scheduling efficiency and integration of renewables, and allow EIM participants to take advantage of enhancements to the market, the ISO said. The ISO re-prioritized its initiatives to focus on the day-ahead market changes as well as deferring development of some other market products.

CAISO is proposing changes to the day-ahead market to “address net load curve and uncertainty previously left to [the] real-time market.” These include 15-minute scheduling granularity and a “flexible reserve” product that pays resources for must-offer obligations in the real-time market to address load uncertainty. Also being contemplated is combining the integrated forward market and the residual unit commitment process.

Extending the day-ahead market to the EIM would require market members to align transmission access charge models, according to the ISO. It would also involve expanding congestion revenue rights across the expanded footprint and analyzing day-ahead resources so balancing areas don’t “lean on” each other for capacity, flexibility or transmission.

The ISO is also planning collaborative programs with the California Public Utilities Commission to better align resource adequacy planning with reliability planning and the changing grid.

The policy initiatives catalog lists CAISO’s many ongoing updates to market rules, the EIM, distributed resources, generation retirements and changing conditions on the grid. Part of the roadmap process is the February updating of the catalog.

The final roadmap is due to be posted on Jan. 10, and more stakeholder calls will be held prior to review by the CAISO Board of Governors on Feb. 15. The ISO will accept comments on the draft roadmap until Jan. 4.

December 13, 2017

Tight Supplies, Solar Ramps Drive CAISO Summer Spikes

By Jason Fordney

CAISO day-ahead prices hit all-time highs for the second time this year during the third quarter, and the frequency of price spikes in the 15-minute and five-minute markets increased, the ISO’s Department of Market Monitoring said in its quarterly market performance report.

High temperatures in California drove up demand at the beginning and end of August and into September, according to the report. Load peaked at 50,116 MW on Sept. 1, just short of the 50,270-MW peak record set in July 2006. Trading that day also saw day-ahead system marginal prices soar over $200/MWh during a four-hour period and hit $770/MWh in one interval.

“These outcomes were primarily driven by tight supply conditions as a result of a number of factors in combination with high demand while a significant amount of solar production is ramping down during sunset hours,” the report said. Average 15-minute market prices increased during every month of the third quarter from about $34/MWh in June to more than $45/MWh in September because of higher temperatures and loads.

The Monitor also confirmed that software problems had caused day-ahead prices to hit record highs in the second quarter even after being mitigated. In its second-quarter report, the department had noted that prices should not rise after mitigation and said it was investigating the cause. (See Monitor: CAISO Q2 Prices Hit Record Despite Mitigation.) The third-quarter report said the error was fixed on July 22.

“The ISO has determined that a software error introduced in 2016 resulted in infeasible energy and ancillary service awards for resources in the market power mitigation run but not the binding market run in the day-ahead market,” the Monitor said in the third-quarter report. “The software error resulted in an erroneous increase in supply available in the market power mitigation run, causing prices in that run to be lower than they would have been had all awarded schedules been feasible.”

CAISO is “currently evaluating the impact of this error on the market power mitigation process on affected days,” the report said.

Day-ahead prices appeared to be competitive in most hours, the Monitor said, and total year-to-date wholesale energy costs are close to 2016 totals, after the prices are adjusted for natural gas and greenhouse gas prices. Higher gas prices resulted in larger overall energy costs for 2017.

Transmission congestion was low in the day-ahead market in the Pacific Gas and Electric and Southern California Edison service areas but caused prices to drop about 2% in San Diego Gas & Electric’s area. Congestion in the 15-minute market pushed up prices in PG&E and SCE and decreased SDG&E prices. Frequent congestion on the Doublet Tap-Friars 138-kV constraint created an export-constrained area, undercutting prices in San Diego.

The Monitor said its analysis of natural gas price volatility shows a limited need for increased bidding flexibility created by raising commitment cost and default energy bid caps. CAISO followed the department’s recommendation and reduced the Aliso Canyon real-time gas scalars to zero beginning Aug. 1, raising them again temporarily Aug. 4-7 because of hot conditions.

Congestion revenue rights auctions took in $9 million less than payments to entities purchasing those rights, increasing year-to-date ratepayer losses to $38 million and to more than $680 million since the market began in 2009. The Monitor for more than a year has been calling for CAISO to eliminate CRR auctions. (See CAISO Monitor Proposes End to Revenue Rights Auction.)

The Monitor will discuss the third-quarter report with market participants during a Dec. 20 conference call.