The Ohio Supreme Court on Wednesday overturned a 2016 decision by state regulators that netted FirstEnergy at least $168 million in extra annual revenue through a distribution modernization rider (DMR) — though ratepayers shouldn’t expect a refund anytime soon.
In a 4-3 ruling, the court said the Public Utilities Commission of Ohio erred when it allowed FirstEnergy to modify its existing electric security plan to charge more than 2 million customers for the rider, collecting approximately $442 million over the last three years.
The commission approved the charge because the revenue it generated would purportedly serve as an incentive for the companies to modernize their distribution systems. The Ohio Consumers Counsel and 18 other parties challenged PUCO’s decision, telling the court that the fee was a sham devised for “credit support” and did not fund any system upgrades.
“Although the DMR may make it possible for FirstEnergy to obtain capital for future infrastructure investment on more favorable credit terms, the evidence cited does not support the commission’s finding that the DMR qualifies as an incentive under [the Revised Code],” the court said in its ruling. “The PUCO staff’s wishful thinking cannot take the place of real requirements, restrictions or conditions imposed by the commission for the use of DMR funds.”
The Ohio Supreme Court overturned a 2016 decision that allowed FirstEnergy to collect about $442 million in fees.
Although FirstEnergy must immediately remove the charge from ratepayer bills, the court acknowledged current state law does not provide any refund mechanism for the nearly half-billion dollars in fees it says the company improperly collected.
It’s a common occurrence, said OCC spokesperson J.P. Blackwood, noting that since 2008, utility companies have collected more than $1 billion from consumers in unlawful fees without paying back a single dime.
“Without a refund, this decision is another victory for utilities who have thwarted consumer attempts at the PUCO, the legislature and the court to enable refunds of utility charges that the court finds to be improper,” he said. “The utilities have too much influence in this state and that needs to be reformed.”
Matt Schilling, spokesperson for PUCO Chairman Sam Randazzo, did not respond to a line of questioning about whether the organization would ever consider approving a refund mechanism for consumers in the future.
“The PUCO is currently reviewing the decision and will respond in accordance with the court’s directives,” he said.
FirstEnergy also said it is still reviewing the ruling and evaluating its options.
“We continue to believe that [the DMR] provides benefits to our customers by enhancing our ability to modernize our system and invest in advanced technologies,” company spokesperson Mark Durbin said. “A third party appointed by the PUCO just this week determined that we have appropriately used DMR funds in support of grid modernization.”
In its ruling, the court was specifically critical of PUCO’s previous third-party DMR expenditure reviews, performed periodically by Oxford Advisors, saying they “do not sufficiently protect ratepayers from possible misuse of DMR funds.”
The court noted that Oxford is required to submit quarterly updates to PUCO staff, as well as a midterm report in the event FirstEnergy seeks to extend the DMR beyond its initial three-year term and a final report within 90 days of the termination of the DMR.
But the court also pointed to a catch: While PUCO will allow any participant in the DMR proceeding to examine Oxford’s conclusions and recommendations, the reports do not become available until they are filed with the commission.
“This will not occur, however, until FirstEnergy seeks to either extend or terminate the DMR, and so it appears that the parties will not be able to challenge Oxford’s findings until well after the DMR funds have been recovered and spent,” the court wrote. “Thus, it is not clear what remedy would be available should the commission (or this court on appeal) find that FirstEnergy has misused DMR funds.”
“After nine amazing years, I will be leaving FERC at the end of August,” LaFleur said in her tweet, which came in the afternoon, after the commission’s monthly open meeting. “The July open meeting will be my last, and I have a lot of people to thank. I am looking forward to the future, but no announcements on that at this time.” FERC does not hold open meetings in August.
LaFleur’s current term — her second — ends June 30, but by law she is allowed to serve past that date until the Senate confirms a replacement or the end of the current session of Congress. She first announced her impending departure in late January. (See LaFleur Announces Departure from FERC.)
The commission will be down to three members once she leaves, restoring its Republican majority.
“FERC was designed as a five-member commission, and I urge the administration to move quickly to nominate individuals to fill the two open seats simultaneously in a bipartisan manner,” said Sen. Joe Manchin (D-W.Va.), ranking member of the Senate Energy and Natural Resources Committee. “I look forward to reviewing the nominees … so we can restore a fully functioning commission.”
“During her nine years of service, Commissioner LaFleur has been a source of wisdom and stability at FERC,” Chair Neil Chatterjee said in a statement. “I will never forget the kindness she offered me when I came to the commission. She and her staff did not hesitate to show me the lay of the land as I stepped into this new role.”
TRAVERSE CITY, Mich. — The group charged with re-examining MISO’s director-selection process has issued its first recommendation: that stakeholder representation be doubled on the Nominating Committee.
Board Qualification Task Team (BQTT) Chair Mark Volpe on Wednesday said MISO sectors favor increasing stakeholder seats on the Nominating Committee from two to four to give members a greater voice in deciding who serves on the RTO’s Board of Directors. A handful of sectors first signaled support for such a move during a BQTT call last month. (See MISO Sectors OK Expanding Nominating Committee.)
The Nominating Committee is currently composed of two stakeholders and three directors.
While the BQTT says it favors stakeholders outnumbering directors on the committee, it has yet to determine how representatives would rotate to ensure all sectors get a chance to serve.
Environmental and Other Stakeholder Groups sector representative Beth Soholt said she supported some sort of sector rotation. She recalled once serving on the Nominating Committee in the “early years of MISO” but couldn’t remember an Environmental sector representative serving since.
She said she would like to “try to get away from a popularity contest and towards forced diversity.”
Municipals, Cooperatives and Transmission Dependent Utilities sector representative Megan Wisersky, who sat on the committee last year, warned that serving is time-consuming. She said sector representatives should be volunteers rather than being “frogged-marched” into the job.
Cooling-off Period Next
The task team will next tackle whether the current one-year “cooling-off” period should continue to be a prerequisite for board service, though several sectors already lean toward retaining the policy.
Volpe said his Independent Power Producers and Exempt Wholesale Generators sector “feels strongly” that the one-year moratorium for those employed in the industry should be extended to cover more candidates, including state and federal regulators and their staffs.
That issue arose last year when members installed Minnesota Public Utilities Commission Chair Nancy Lange on the board, despite concerns about the appearance of a sitting commissioner in a MISO state also sitting on the board. (See MISO Elects Lange to Board; Keeps 2 Incumbents.)
Volpe pointed to FERC Order 888, which created RTOs/ISOs with an emphasis on independence.
“Independence in appearance is very important,” Volpe said.
State Regulatory Authorities sector representative, and Wisconsin Public Service Commissioner, Mike Huebsch said he personally continues to believe the one-year moratorium is an “antiquated policy.” However, the Organization of MISO States has declined to take a stance on the matter.
Huebsch said from his experience, recusals and non-compete clauses are more common. He said MISO’s legal counsel should be astute enough to recognize when a board member might be wading into a possible conflict of interest.
“I might have a darker view of human nature,” Wisersky said. “Although it might be ‘antiquated,’ I think there’s still a need for it. Optics are very important. … I’m not so concerned with what happens publicly. I think a public shaming can occur in public media, but my concern is what occurs non-publicly.”
The BQTT will produce a list of preliminary recommendations to improve the board selection process by September. Volpe said he would likely present a package of final recommendations to the Advisory Committee in November.
FERC on Thursday upheld NYISO’s decision to deny a New York energy service company’s application to join the ISO until its predecessor pays its outstanding debt (EL19-39).
Light Power & Gas of NY told FERC in January that NYISO had violated its Tariff and the Federal Power Act in treating it as the successor to North Energy Power, a bankrupt ESCO kicked out of the ISO in October after it filed for Chapter 11 bankruptcy and its unpaid obligations exceeded its collateral.
NYISO noted — and LPGNY did not dispute — that though the two companies are separate, both share Abe Leiber, Jack Klein and Hindy Gruber as principals, and that LPGNY “apparently seeks to serve the very same customers as North Energy.”
The ISO also noted that, though formed in 2014, LPGNY only became active a week after North Energy filed for bankruptcy, when one principal contacted the ISO about joining. LPGNY also filed its application to join exactly one week after North Energy’s membership was terminated, NYISO said.
A screenshot of (the now bankrupt) North Energy Power’s website | North Energy Power
LPGNY argued that NYISO’s Tariff has no “successor liability” policy and that, even if it and North Energy were the same company, the ISO failed to follow its bad debt and re-entry provisions for defaulting transmission customers.
FERC sided with NYISO. “We find that NYISO’s decision to treat LPGNY as the same entity as North Energy is reasonable in light of the record, particularly the close overlap in not only those entities’ relevant personnel, but also their business activities,” the commission said. “Namely, both entities have the same contacts and administrators, similar addresses, are engaged in the same business in the same territory and seek to serve the same customers.”
The commission has previously found that it “may disregard the corporate form in the interest of public convenience, fairness or equity.”
It also found that the Tariff “neither explicitly supports nor prohibits NYISO’s decision,” though it urged the ISO to file Tariff revisions spelling out the factors it will consider when deciding whether to treat two separate entities as the same. Moreover, it emphasized that its decision “does not rely on the application of ‘successor liability’ that LPGNY alleges is the basis of NYISO’s actions.”
Finally, FERC found that NYISO did not violate its bad debt procedures, saying the Tariff gives the ISO “wide latitude in pursuing cost-recovery measures that may minimize or avoid a bad debt loss.”
PJM and a group of New York transmission owners intervened in NYISO’s defense. PJM said the case “implicates broader and common policy issues regarding whether [RTO/ISO] tariff rules” allow for denying a new member’s application based on prior enforcement history.
The Maryland Public Service Commission also intervened, though without taking a position, saying it was interested in the case because of its potential impact on PJM. The RTO is dealing with the effects of being burned by financial transmission rights trader GreenHat Energy and its principals Andrew Kittell and John Bartholomew, who were identified as lieutenants in J.P. Morgan Ventures Energy Corp.’s scheme to manipulate the CAISO and MISO markets between 2010 and 2012.
In an unusual move, LPGNY asked FERC to dismiss the interventions, a request the commission dismissed.
TRAVERSE CITY, Mich. — MISO’s Advisory Committee is considering creating a new miscellaneous sector in order to give its Environmental Sector a more singular voice.
The committee is weighing whether to spin off the “Other” contingent from the Environmental and Other Stakeholder Groups sector in response to member requests that entities with miscellaneous interests be separated from those with an environmental focus.
MISO came into existence with nine stakeholder sectors and added the Competitive Transmission Developer sector in 2014 after multiple developers joined the Environmental/Other sector, marking the only time a new sector has been added in the RTO’s 19-year history. The Transmission Owners Agreement stipulates that all entities must join a sector, which are used for Advisory Committee voting.
“We drew the short straw [to be a catch-all] for several reasons, I’m sure. It’s a form-over-function action here,” John Moore, senior attorney for the Sustainable FERC Project, said during an Advisory Committee meeting Wednesday.
“It could threaten the integrity of our sector if a raft of other entities show up,” Moore said, questioning the requirement that every MISO entity must identify with a sector.
“I think we were the place of last resort,” Clean Grid Alliance’s Beth Soholt said.
She said MISO could test having a standalone Environmental sector first without creating a new “other” sector to see whether other entities come forward “that don’t have a home.” It could then spin off a separate “other” sector if the need arises, she said.
The Environmental/Other sector currently contains 11 entities, all with an environmental bent. To create a new sector, the Advisory Committee must make a recommendation to be adopted by the Board of Directors, then filed with FERC.
Soholt said that over the course of MISO’s history, she’s seen a handful of companies that sought to join the Environmental/Other sector but were a bad fit.
“And keep in mind that I was 13 when I began with MISO,” she joked.
“The Environmental sector should be a sovereign sector. I think everyone can agree to that,” said Mark Volpe, representative for the Independent Power Producers and Exempt Wholesale Generators sector.
Chair Audrey Penner said the committee should approach the issue with a bigger picture in mind, pointing out that FERC has indicated it might examine RTO governance and transparency. The House Energy and Commerce Committee’s Subcommittee on Energy this month urged the commission to holistically review RTO and ISO governance rules. (See FERC Probed on RTO Governance, Market Issues.)
“I’m thinking about the Googles and Amazons here. Where do they fit? The writing is on the wall for some of these entities. They’re going to want to be part of the discussion,” Penner said.
Volpe suggested MISO might create a new sector for industrial entities.
“I think it’s incumbent upon us to be inclusive,” he said.
Volpe also suggested MISO create a list of all the entities that have approached sectors for entry but didn’t quite fit in. Multiple stakeholders said they had experience with an entity that was difficult to categorize in any one sector.
MISO Senior Director of Stakeholder Affairs and Communications Shawna Lake opened the item to written stakeholder feedback. Penner urged stakeholders to think through their recommendations carefully to avoid unintended consequences.
Meanwhile, MISO rolled out live stakeholder polling during the meeting. Stakeholders put the new feature to the test using the Poll Everywhere app on their smartphones to vote on what description furnished by sector representatives applied to which sector. Poll respondents were kept anonymous.
Lake said MISO would eventually use the technology in other stakeholder forums to collect opinions in real time.
NERC is investigating Chinese ties to the vendor it selected for a high-profile software project, the Western Electricity Coordinating Council learned Tuesday.
NERC selected BWISE Information Security to develop its Align project in February 2018, when the company was owned by NASDAQ. NERC signed an ERO enterprise-wide, eight-year software licensing agreement with the company in June 2018.
Brian Evans-Mongeon, CEO of Utility Services Inc., told the WECC Members Advisory Committee Tuesday some registered entities raised concerns after NASDAQ sold BWISE to SAI Global, an Australia-based company whose investors include a Singapore-based private equity fund managed by Barings Private Equity Asia, which is based in Hong Kong. The deal closed in April 2019.
NERC CEO Jim Robb, who attended the WECC meeting in Salt Lake City, Utah, told the MAC NERC has commissioned an “independent review” into the matter and should have a report within about a week.
Robb said the review is “to really understand what the legal linkages are between mainland China and Hong Kong, particularly the applicability of the 2017 Chinese intelligence law, which is what we’re concerned about here.” The law says “foreign institutions, organizations and individuals” could be subjected to Chinese intelligence, and individual personal property could be accessed for investigative purposes, according to JonesDay.
Robb also said NERC will have a classified briefing with the Department of Energy in early July to see “if they have any insights into the relationship between SAI Global, Barings Private Equity Asia and mainland China.”
Align Release Schedule as of May 10, 2019 | NERC
Robb described BWISE as a “blue chip provider of GRC [governance, risk management and compliance] systems,” saying “many utilities in the country use them right now. We took comfort in the fact that NASDAQ owned them because NASDAQ would obviously take security very, very seriously.”
“We are on top of this and doing everything we think prudent to make sure the tool as developed and implemented will be highly secure,” Robb said.
Robb said NERC staff also is seeking ways to minimize the amount of sensitive information auditors collect and would be stored in Align. Formerly known as the CMEP [Compliance Monitoring and Enforcement Program] Technology Project, Align is intended to improve and standardize processes across the ERO Enterprise.
“So, our goal is to make the tool as uninteresting as possible,” Robb said.
Evans-Mongeon, a Class 3 (transmission dependent energy service providers) MAC member, praised NERC’s general counsel’s office and Chief Technology Officer Stan Hoptroff for their research into the issue.
“Based upon the research people have shared with me — while there are still some registered entities who have expressed some concerns — overall I believe NERC has satisfactorily [obtained] information from these companies that those concerns and vulnerabilities do not exist.”
“That being said, the one concern I still have is in the area of supply chain. If you take a look at CIP 13, there is a provision in the requirements that software as well as hardware be examined and vendors be recognized.I think it is potentially beneficial for WECC to take a look at maybe reaching out to the registered entities and suggesting they take a look at these relationships for … potential threats and vulnerabilities.”
NERC on Wednesday called for developing metrics on resilience and urged continued efforts to respond to increased cyber threats and the growth in asynchronous generation.
“By nearly every measure by which we measure reliability … 2018 was one of the most reliable years on record,” Director of Reliability Assessment John Moura said in a press briefing announcing the organization’s revamped State of Reliability report. “While extreme weather events continued to stress transmission, generation and distribution systems, bulk power system reliability was maintained.”
There were no category 3, 4 or 5 events — unintended loss of load or generation of 2,000 MW or more — other than those caused by severe weather: hurricanes Michael and Florence.
2018 category 1-5 events | NERC
“While ongoing performance measures show positive trends in generation, transmission, and protection and control performance, NERC’s 2019 State of Reliability encourages continued vigilance as the evolving resource mix and cyber and physical security threats continue to present critical challenges,” NERC said in announcing the report.
Among its recommendations, the report says “the ERO Enterprise and industry should develop comparative measurements and metrics to understand the different dimensions of resilience (e.g., withstanding the direct impact, managing through the event, recovering from events and preparing for the next event) during the most extreme events and how system performance changes over time.”
Cyber Threats
“Despite continually evolving threats,” no cyber or physical security incidents caused “unauthorized control actions or loss of load” in 2018 NERC said.
However, the lack of incidents “does not mean that the risk of a cybersecurity incident is low,” NERC warned. “The number of cybersecurity vulnerabilities are increasing. Both mandatory and voluntary reporting indicate that distribution-level events are more frequent than those affecting [bulk electric system] equipment.”
The report recommended the ERO continue working with industry to share information and develop responses to cyber and physical security threats, including “resilient system design, consequence-informed planning and operation and practicing response and recovery processes.”
Improved Frequency Response, Despite Inverter Growth
It also said the ERO should continue to develop measures for dealing with the growth of inverter-based resources, including frequency response under low-inertia conditions, contributions of inverter-based resources to essential reliability services and “increasing protection system and restoration complexities.”
Despite the continued growth in inverter-based resources, however, NERC said it saw improved frequency response in all four interconnections (Eastern, Western, Texas and Quebec). Moura said the improvements were the result of manufacturers’ efforts and NERC’s guidance on how to avoid having generator governor response be undermined by other system controls.
He also cited ERCOT’s practice of opening relays to allow load to help maintain frequency. “That can, at times, perform much better than generation,” he said.
NERC also reported that misoperations by protective relays — either tripping when they shouldn’t or failing to trip when they should — rose slightly in 2018 but that the difference was “in the noise” statistically. There has been a significant drop since 2014’s “unacceptable” misoperation rate of 10%, Moura said.
The report noted a continued reliability risk in Texas this summer due to a projected reserves deficit but noted that ERCOT avoided emergencies last year thanks to better than expected performance from its generation fleet.
New Format
The report has been reformatted with less text and more infographics and weighed in at a svelte 89 pages, down from 200 last year.
It is broken into five sections, starting with key statistics (i.e., peak demand, energy, generation capacity, fuel mix) and a chapter summarizing the analyses of 177 events in 2018, including root causes and lessons learned. The report found that design/engineering or management/organization issues were the root of 74% of events in 2018, slightly higher than their share for the five years of 2014-18 (70%).
2018 events by root cause | NERC
Reliability Indicators
Chapter 3 covers reliability indicators (energy emergency alerts; planning reserve margins; transmission and generation outages, etc.), and Chapter 4 details the “Severity Risk Index,” which Moura described as a kind of “Dow Jones Index” for comparing performance over years.
2018 did see a spike in Level 3 energy emergency alerts, from six in 2017 (all in the Western Interconnection) to 17 last year (13 in the Eastern Interconnection and four in the West.)
The Eastern Interconnection had the highest number of Level 3 energy emergency alerts — declared when a reliability coordinator or balancing authority expects a capacity or energy deficit and may need assistance from neighbors.
Moura said all but four of the Eastern alerts concerned SaskPower in Saskatchewan, Canada. “Because they’re a lightly coupled system, if they have a couple generator issues, they get into these emergencies more often,” he said. “We’re not incredibly concerned on this one.”
Weighted effective forced outage rates for conventional generation | NERC
One reliability indicator that NERC rated as red — a statistically significant negative trend — is the weighted effective forced outage rate for conventional (coal, gas, hydro and nuclear) generators.
“The most important metric here is the monthly NERC [rate] compared to the five-year average,” Moura said. “Over the past couple years, we’ve gone a little bit higher. … We do see slight increases in the coal feet forced outage rate, and we also noticed very peaky outages in the gas fleet” in winter.
Long-term Trends
The final chapter, which deals with trends and priority reliability issues, reflects the concerns of NERC’s Reliability Issues Steering Committee. Moura called the chapter a “bridge” to NERC’s Long-Term Reliability Assessments.
The report recommends prioritizing how to ensure resource adequacy in the face of “increasing energy constraints.” Moura said this was a reference to the increasing role of intermittent generation and fuel supply issues, such as winter natural gas shortages in New England.
Despite its acknowledgement of the impact of severe weather on the system, the report does not mention climate change, which many scientists say is causing bigger hurricanes, wildfires and floods.
Moura said it is difficult to attribute any individual weather event to climate change. “The potential for climate change and how that affects [system planning] … will more likely be in our forward-looking assessments like our Long-Term Reliability Assessment,” he said.
SPP has raised the stakes in what could shape up to be a long-term competition to win over the Western electricity market one service at a time.
The RTO announced Monday it will launch its Western Energy Imbalance Service (WEIS) market in December 2020, offering to provide real-time services to balancing authorities across the Western Interconnection.
The move will put SPP toe-to-toe with CAISO’s well-established and ever-expanding Energy Imbalance Market (EIM).
SPP’s Western Energy Imbalance Services logo | SPP
SPP said it will administer the WEIS on a contract basis, allowing non-SPP members to participate in much the same way non-CAISO members voluntarily trade in the EIM. Participation would be open to entities with load or generation within — or pseudo-tied into — a participating balancing authority.
SPP said it is building on its previous success with regional markets to offer a variety of services to Western entities. As if to punctuate the point, it has even developed a new logo for its Western energy services.
CEO Nick Brown said the RTO wants to do more than simply launch a wholesale electricity market in the west.
“We want to work with utilities to understand the challenges they face and develop smart solutions that benefit the whole region,” he said. “That’s how we operate as an RTO, and it’s how we plan to administer this and other contract services in the west.”
SPPs’ plans met with a cool reception at a Western EIM Regional Issues Forum carbon workshop Tuesday in Folsom, Calif. Carl Zichella, director of western transmission for the Natural Resources Defense Council, said SPP doesn’t have a lot to offer EIM participants and noted there are limited transmission links between SPP’s territory and EIM states.
“They’re looking at ways to get a toehold in the Western market,” Zichella told RTO Insider. “But when you have a market that’s already delivering more than half a billion dollars in benefits, it’s going to be tough to compete with.”
CAISO rolled out the EIM in 2014 with PacifiCorp as its first member. The market now has eight participants across eight Western states and one Canadian province, with eight other BAs slated to join over the next couple years.
CAISO spokesperson Anne Gonzales said the EIM has grown steadily and has delivered “substantial” cost savings and carbon emission reductions to its participants. She pointed out by May the market had yielded total benefits of more than $650 million, and the $83.5 million in first quarter benefits more than doubled those for the same period a year earlier. (See Cold Forces NW to Dip More Deeply into EIM as AvistaJoins.)
“We envision even more expansion of the market, especially since the benefits increase with each new participant,” Gonzales said.
Some EIM participants alluded to lingering unease between California and the Rocky Mountain region that SPP may be trying to capitalize on.
‘Tender Time’
At the carbon workshop, an event intended to explore the integration of carbon pricing into the EIM, Idaho Public Utilities Commissioner Kristine Raper cautioned about using the market as a vehicle to export carbon policies from states such as California and Oregon to states without such policies, such as Idaho.
“I think that adding policy into an economic universe when you’re bringing in more and more states with diverse policy interests, makes the system more fragile,” she said.
Utah Public Service Commissioner Jordan White said it would be unwise to jeopardize the EIM’s efficiency by layering it with complex components such as carbon policy, which could undermine its optimization tool.
“It’s a very tender time as far as the EIM,” White said. “We have really come a long way in gaining trust in the markets.”
He said incorporating policies into the economics of the EIM “could potentially suffocate or erode it.”
WECC balancing areas | WECC
White said while he didn’t know the details of SPP’s imbalance market, he approved of “competition among market platforms” and suggested entities should choose whichever market platform is the best fit for them.
SPP spokesman Derek Wingfield said the RTO’s recent launch of Western contract-based services “acknowledges there’s value to be had by both SPP and customers in providing these products on a standalone basis.”
“We’re glad for the chance to do so and prove our worth,” Wingfield said.
SPP is already set to begin managing reliability coordination (RC) services to more than a dozen Western utilities in December. SPP, CAISO and BC Hydro are among those taking advantage of the decision by Peak Reliability, the Western Electricity Coordinating Council’s incumbent RC provider, to go out of business by year’s end. (See SPP on Track for WECC RC Certification.)
SPP already administers the Western Interconnection Unscheduled Flow Mitigation plan, which uses controllable devices to manage congestion along transmission lines, for six western entities: CAISO, NorthWestern Energy, NV Energy, PacifiCorp, Tri-State Generation and Transmission Association and the Western Area Power Administration.
SPP also said it is in the early stages of developing planning coordination services to help utilities study and plan upgrades to the region’s transmission system.
“We’re a stakeholder-driven organization that believes in the power of partnership,” Brown said.
SPP said in April it was seeking interested utilities and customers to help build a real-time market “that will meet the electricity needs of the Western Interconnection.” (See SPP SolicitsInterest in Western Real-time Market.)
It plans to operate the WEIS under a Western Joint Dispatch Agreement that SPP said will guarantee “participants a say in the market’s ongoing evolution.” Its central feature will be an intra-hour, centralized dispatch of energy every five minutes from participating resources. The market will provide price transparency of wholesale energy and allow parties to make bilateral trades and hedge against transmission congestion.
SPP operated an EIS market in its own footprint from 2007 until 2015, when it added the day-ahead Integrated Marketplace. That market yielded about $150 million in annual benefits, with one single-year peak of more than $250 million.
“SPP knows markets,” said Bruce Rew, SPP’s vice president of operations. “We [have] designed, built and operated wholesale energy markets that far exceeded participants’ expectations.”
ISO-NE floated a portion of its long-term market proposal to address fuel supply constraints, and five stakeholders presented their own concepts at the June 10-12 meeting of New England Power Pool’s Markets Committee.
The RTO faces an October deadline to file a market design with FERC that permanently addresses the regional fuel supply issue — specifically winter scenarios when natural gas supplies are limited.
In March, the RTO filed an interim proposal with the commission to address winter energy security for the commitment periods covered by Forward Capacity Auctions 14 (2023/24) and 15 (2024/25). That plan would “provide incremental compensation to resources that maintain inventoried energy during cold periods when winter energy security is most stressed” (ER19-1428). (See ISO-NE Filing, Whitepaper Address Energy Security.)
The interim proposal consists of five core components, including a two-settlement structure, a forward rate, a spot rate, trigger conditions (such as extended cold snaps) and a maximum duration for compensation. But some stakeholders have found the plan to be unduly complex, with the Massachusetts attorney general contending it represents the most dramatic change to the energy and ancillary services markets since their inception.
Keeping it ‘In Market’
ISO-NE’s proposed long-term solution looks to be no less complex — and transformative — than its short-term one. Senior Market Designer Andrew Gillespie’s presentation last week focused on just a portion of the plan — a proposal to create day-ahead ancillary services products intended to ensure that in-market processes begin to cover more of the RTO’s next-day operating requirements.
“Meeting these requirements via ‘in-market’ awards improves resources’ incentives to arrange energy supplies facing uncertainty,” the presentation said.
ISO-NE’s proposal calls for the creation of an hourly energy call option: option sellers would offer resources in hope of clearing in the day-ahead option market. As the buyer of the option, the RTO would specify an option price for each hourly interval before submission of option offers, which would occur in concert with submission of hourly energy offers. A resource could submit offers for both options and energy for the same hours, subject to limitations based on its physical parameters.
A resource with a cleared day-ahead option would then have an option position open for a given interval, which would be “closed out” at the real-time LMP for that interval.
“If the real-time LMP is greater than the strike price, the unit will be debited an amount equal to the product of the option quantity and the difference between the real-time LMP and the strike price,” the presentation explained.
The resource would also be credited for real-time energy and reserves supplied at applicable real-time prices.
Day-ahead headroom is the difference between the sum of day-ahead schedule amounts and the sum of real-time economic maximum values for the winter on-peak hours. | ISO-NE
ISO-NE expects that the total volume of call options it procures will meet day-ahead ancillary services requirements.
“These amounts would be based, at a minimum, on the procedures currently applied by the ISO in developing a reliable next-day operating plan,” ISO-NE said.
From a supplier’s perspective, Gillespie’s presentation points out, the option is on real-time energy — not a specific real-time ancillary service; regardless of why the option was awarded, it will still be settled against the real-time LMP.
The RTO commissioned Analysis Group to provide some context on how the proposed changes might affect energy market outcomes. Company principal Todd Schatzki on Wednesday said its study concluded that the proposed improvements could change the way market participants make resource decisions and change economic offers in ways that improve energy security.
Gillespie also noted that the RTO is reviewing a stakeholder suggestion to develop its proposed Multi-Day Ahead Market (M-DAM) separately, after the rest of the energy security improvements are filed with FERC in October.
Massachusetts AG: Simpler, More Physical
In a proposal prepared by London Economics, the Massachusetts attorney general’s office recommended a simple auction format of sealed bids with a uniform clearing price.
Marie Fagan of London Economics described the Forward Stored Energy Reserve (FSER) proposal as a limited amount of insurance for a limited challenge; she said details on the timing of the auction and other matters would be discussed at the July 8-10 MC meeting.
The pros of a uniform clearing price? Each bidder that clears the auction is paid the same price as the highest-cost clearing bid. Bidders can also submit low bids at short-run marginal cost (SRMC) for low-cost (infra-marginal) plants, ensuring they will be chosen.
The Massachusetts attorney general’s office prefers a simple auction wherein bids vary depending on bidders’ independent evaluations of costs and other factors, as well as the strike price the bidder wants to offer. | London Economics
But the proposal acknowledged one potential negative outcome of a uniform clearing price — that a bidder could engage in portfolio bidding, raising the bid price over SRMC for plants it expects to be marginal.
London questioned whether ISO-NE’s proposal will be effective from a reliability or cost perspective. It said the FSER is a simple and smaller-scale alternative to the RTO’s complex scheme, helping preserve the market signal when supplies are tight.
NextEra: Reserve Products
NextEra Energy Resources proposed the creation of replacement energy reserve (RER) and generation contingency reserve (GCR) products to be purchased by ISO-NE in the day-ahead market.
NextEra’s Michelle Gardner emphasized that both RER and GCR would be physical products, not financial call options, and as such could increase real-time energy prices when fuel reserves are low.
“Resources that sell the call options would have incentives for next-day fuel arrangements,” NextEra said of ISO-NE’s proposal. “However, the extra incentives are weak at best. They depend on assumptions about lumpy offers and risk aversion. One simply cannot expect a strong response absent a fundamental change to real-time demand.”
If done incorrectly, a seasonal forward market is likely to depress energy market prices and provide the wrong incentives, NextEra said. A physical RER, coupled with the right forward incentives, is key, it said.
Calpine: More Precise; More Cautious
Calpine — which has long suggested that the RTO acted in haste in not allowing the market time to work through its energy security issues — presented an energy security concept dubbed Forward Enhanced Reserves Market, which would procure fuel-secure capacity for the winter months three years prior to the obligation year.
By qualifying resources based on their ability to contract for stored fuel or readily-used stored energy, Calpine proposes that suppliers bid at auction for a total minimum or maximum amount of megawatt-hours they will commit to offer off of stored fuel during an Operating Procedure 21, which is activated when the RTO declares an energy emergency event.
Rebecca Hunter, Calpine senior analyst for government and regulatory affairs, said the benefits of its market design include: fuel security through a diverse pool of resources; timely transition of the evolving resource mix; investment in the existing fuel infrastructure; and market design changes in critical winter months only.
Energy Market Advisors: Use Today or Save for Later?
Brian Forshaw presented a concept by Energy Market Advisors, which has concluded that ISO-NE’s market suffers from:
Misaligned incentives: Resources lack incentive to procure and maintain energy supplies that may be needed in the future.
Operational uncertainty: The system may not have sufficient energy available to withstand extended supply losses during winter.
Inefficient schedules: Energy supplies can be depleted prematurely even when stored energy may be more valuable in the future.
Forshaw’s presentation posed the hypothetical question of whether the RTO should “use stored energy today or save it for later when it may be more valuable?”
“How we answer this question has significant (and differing) impacts for resource owners, system operators and electric consumers,” the company said, concluding ISO-NE should primarily focus on addressing those problems as quickly and efficiently as possible. Forshaw cautioned the RTO against implementing M-DAM and seasonal forward procurement at the same time as day-ahead enhancements, contending that would significantly complicate stakeholders’ development, and FERC’s evaluation of such significant changes.
FirstLight: Filling Buckets
Tom Kaslow of FirstLight, owner of the largest pumped hydro facility in the region, presented his firm’s concept for defining energy security, which asks the RTO to “connect the dots” between fuel security and resource adequacy by ensuring that the latter is backed by sufficient fuel storage. Kaslow’s presentation posed the question in terms of generator fuel tanks, which he termed “buckets”: How many buckets need to be filled, he asked, against how many can be filled?
“If the aggregate gas-only generator winter capability exceeds the region’s capability to access gas to support simultaneous generation at such resources, their actual reliability support to meet winter peak load is less than their aggregate megawatts of capability,” the presentation said.
Based on FCA 13-related values, being resource adequate at the summer peak may not assure enough gas storage to be resource adequate at the winter peak. | FirstLight
FirstLight recommends ISO-NE “establish the highest level of aggregate winter gas-only capability that can be simultaneously fueled at winter peak demand” and give capacity credit to gas-only resources that have firm transportation rights or contracted priority to take LNG during winter.
“Limit qualified gas-only winter capacity on the rest of the gas-only fleet to the level of such generation that can simultaneously operate,” FirstLight urges.
By assuring that each procured megawatt can be fueled, FirstLight says, ISO-NE can avoid sending inaccurate market signals at times when winter capacity is actually not in surplus. At the same time, it will provide efficient longer-term signals for resources to install dual-fuel capability, contract for pipeline transportation or obtain priority access to LNG, it said.
California’s annual wildfire season kicked off last week with high winds, a heat wave and precautionary power shutoffs by Pacific Gas and Electric to thousands of customers.
A wind-driven blaze called the Sand Fire burned 2,500 acres of hilly terrain 60 miles west of Sacramento, and another fire scorched 1,800 acres of dry grasslands in rural Central California. Neither fire caused serious injuries or property damage, but they underscored the threat of wildfires as vegetation begins to dry out after an especially wet winter.
In response to the hot, windy conditions, PG&E turned off power for a day or two for about 1,700 customers in Napa, Solano and Yolo counties near the Sand Fire and for nearly 21,000 in the Sierra Nevada foothills of Yuba and Butte counties. Last year’s Camp Fire, the deadliest and most destructive in state history, ravaged a large part of Butte and leveled the town of Paradise.
Members of the California National Guard search debris after the deadly Camp Fire, which led PG&E to institute emergency power shutdowns days later. | California National Guard
PG&E first deployed its controversial Public Safety Power Shutoff program last October, nearly a month before the Camp Fire started Nov. 8 — though it did not use the measure in Butte just before that fire ignited.
Power shutoffs are now part of the utilities’ annual wildfire mitigation plans approved by the California Public Utilities Commission. (See California Regulators OK Utility Wildfire Plans.)
A Portland, Ore.-based utility announced Thursday it was adopting a similar measure, suggesting that intentional shutoffs may spread beyond California. The Pacific Northwest has seen its share of devastating wildfires in recent years.
“This measure would only be taken as a last resort to help ensure customer and community safety,” Pacific Power said in a statement. The utility, a subsidiary of PacifiCorp, serves about 764,000 customers in Oregon, Washington and an area of Northern California near the Oregon border.
The National Interagency Fire Center (NIFC) in Boise, Idaho, predicts an active wildfire season in California, the Great Basin and the Pacific Northwest this year because of a “robust grass crop” from winter rains.
“As we go forward into June, those grasses that we see across the landscape are going to dry and cure out … and we’ll see an increase in fire activity especially across California,” said Bryan Henry, assistant program manager of predictive services at the NIFC.
Temperatures soared above 100 degrees Fahrenheit in inland areas during last week’s heat wave. CAISO issued its first “flex alert” of 2019 by calling for residents to voluntarily conserve electricity during peak demand in the late afternoon and evening, when air conditioning use spikes and solar arrays power down.
“Because of widespread heat, the ISO anticipates energy demand reaching a peak of 42,800 MW this evening,” CAISO said in a June 11 news release. “Also, two units with a total generation of 1,260 MW are offline due to mechanical failures. The Flex Alert is being called in response to the high electricity demand and the reduced generation.”
California, which last year mandated greater dependence on renewable energy sources going forward, offset the spike in demand largely with natural gas peaker plants, according to CAISO.
