Page 1237 – RTO Insider

December 12, 2017

Report: Costly Coal Undermining SPP Market, Bilking Consumers

By Tom Kleckner

A Sierra Club report released last week that said captive customers of SPP utilities are paying for uneconomical coal plants has drawn considerable pushback from the RTO and some of its members.

But the head of SPP’s Market Monitoring Unit (MMU) says the environmental group has a point in its criticism of utilities that self-commit coal generators when the RTO’s market prices don’t cover their operating costs.

When a utility self-commits a unit, it operates the plant regardless of whether SPP’s market clearing prices are sufficient to cover the plant’s marginal costs. Although self-committed units are ineligible to receive make-whole payments from SPP, the Sierra Club says, some units are apparently recovering losses from captive customers through state ratemaking proceedings.

The Sierra Club report, “Backdoor Subsidies for Coal in the Southwest Power Pool,” alleges that utilities in the footprint operate coal plants outside the wholesale markets, generating $300 million in excess costs that consumers were forced to pick up in 2015 and 2016.

SPP and its members responded by saying the Sierra Club’s analysis relied heavily on wholesale rates, which aren’t the same as retail rates that are subject to public policy and regulations. Nor do wholesale rates consider the cost of long-term supply contracts or ensuring grid reliability, they said.

MMU Sees Problem

SPP Sierra Club State of the Market report — Collins | © *RTO Insider*

Keith Collins, executive director of the MMU, says that while the report took some of the MMU’s observations out of context, self-commitment is a problem in the RTO’s markets. MMU staff raised the issue in their 2016 State of the Market report, which Collins reviewed with SPP’s Board of Directors and Members Committee in July.

The Sierra Club said it conducted a “high-resolution analysis” of 14 coal plants in SPP’s footprint. It used hourly market data to develop each plant’s cash flow analysis.

“All 14 units operated for extended periods of time when, objectively, it would have been less expensive for the electric bills of utility customers for the plants to sit idle,” the group’s report said. “The utilities that own each of the 14 coal units we examined would have saved its customers money if the coal units had operated less often.”

The report said all but one of the 14 units studied were owned by state-regulated utilities, municipal utilities or an electric cooperative with captive customers.

Utilities should be purchasing electricity for its captive customers in the SPP Integrated Marketplace (IM), the report said. But it said some utilities “appear to be going back to state commissions and using rate cases and other dockets to obtain ratepayer-funded subsidies for costs incurred in operating otherwise uneconomic coal plants.”

“In the SPP market, where nearly half of the resources are self-committing, how much of an energy market can SPP really be claiming to operate?” the report asked. “The consequence of these facts is that the SPP Integrated Market is possibly a market in name only. The impact of utility self-commit and underbidding energy offers within the SPP IM might be the most anticompetitive and anti-consumer behavior in any integrated electricity market anywhere in North America.”

The report also says self-committed coal units are denying revenues to independent merchant generators. “RTOs are supposed to create nondiscriminatory rates, but allowing coal units to self-commit discriminates against those operators that don’t have captive customers to fund a ratepayer subsidy. Moreover, it is discriminatory and unreasonable for the market to ask one subset of customers to pay above-market costs while all other customers pay market costs.”

Collins told the board and members that self-commitment of resources has declined but is “still very big.”

“When resources are self-committing, it can put downward pressure on prices also,” he said at the time, referring to the effects of incorporating uneconomic resources in wholesale prices.

“The point of the [Sierra Club’s] report is consistent with what we noted in the 2016 annual report,” Collins told RTO Insider. “Self-commitment can distort the market. It’s a message we’ve been presenting as well.”

The MMU report noted generation offers in the day-ahead market averaged 48% as “market” commitments and 35% for “self-commit” in 2016. Those numbers were 46% and 39%, respectively, in 2015. Outages accounted for the remainder.

The Sierra Club report quoted the MMU report, which said plants self-commit because of contract terms, low gas prices “that reduce the opportunity for coal units to be economically cleared in the day-ahead market,” long start-up times, and “a risk-averse business practice approach.”

Collins took exception to the Sierra Club’s claim that “reliability isn’t one” of the reasons why a unit might self-commit.

Although the MMU’s report didn’t cite reliability, Collins said, “reliability could play a factor where some of these resources self-commit. Our report identified a set of reasons for self-committing, rather than a complete list.

“We have been discussing this essentially since I’ve been here,” said Collins, a former FERC staffer who joined SPP in June from CAISO. “What are the factors [behind self-commitment]? What can we do to promote more market commitment? Some of it is education and creating awareness. At least there’s a dialogue there that’s begun.”

SPP Disagrees

SPP General Counsel Paul Suskie said in a statement that the RTO disagreed with the report’s fundamental assertion that “utilities’ option to either self-commit resources or purchase from the market equates to a subsidy and undermines the effectiveness and cost-efficiency of SPP’s Integrated Marketplace.”

Suskie said that “assessing the market’s fairness and effectiveness based on wholesale cost of electricity to consumers does not take into consideration a number of factors that may lead utilities to self-commit.” He listed contractual obligations, capital investments, public policy and fossil fuels’ contribution to renewable resources’ deliverability as among those factors.

“Our day-ahead market has functioned successfully for four years and, in that time, has reduced the cost of energy in our region by more than $1.25 billion while continuing to ensure the reliability of the grid,” Suskie said.

Peter Main, a spokesman for SPP member Southwestern Electric Power Co., said the company bids its generation into the RTO’s markets under its market protocols and will continue “to seek opportunities” to produce net energy revenues benefiting its customers.

“The Sierra Club report does not provide an accurate portrayal of the incremental (variable) costs and revenues associated with offering generation into the SPP Integrated Marketplace,” Main said in a statement.

Plant Operators Dispute Findings

According to the report, SWEPCO’s Dolet Hills and Pirkey plants in the East Texas-Louisiana region burdened customers with $210 million in costs in 2015 and 2016. However, SPP said the plants serve load in “locations in northeast Texas without significant wind.”

Oklahoma Gas and Electric, which owns two of the plants identified in the study, has said the units stopped self-committing into the market more than two years ago. Two other generators — Entergy-owned or co-owned plants in Arkansas — serve load in MISO.

Al Armendariz, with the Sierra Club’s Lone Star chapter, said he was confident the group has a “good handle on the cost to run these coal plants in SPP.”

Armendariz, who worked in EPA under President Barack Obama, said the Sierra Club compared the SPP LMPs paid to power plants in the immediate vicinity of the coal plants studied. The organization obtained operating data from S&P Global Market Intelligence, the U.S. Energy Information Administration and SPP in running its analysis.

“Our report is really a comparison of the revenue for electricity, compared to what it costs to actually run the power plant,” Armendariz said.

Rule Changes Sought

The Sierra Club would like to see several things happen, Armendariz said. “We think SPP should clarify its rules to require power plants to bid in their real cost of fuel and other variable [operations and maintenance] … in the day-ahead market.”

Armendariz also said the Sierra Club would like to see state commissions in SPP’s footprint “investigate this problem of self-commitment and disallow the recovery of costs borne by consumers when uncompetitive coal plants are operating.”

“Vertically integrated utilities should not be forcing their customers to pay the variable costs,” he said. “State commissions should not allow the recovery of those costs through the rate base.”

Asked whether the group planned to file a complaint with FERC, Armendariz told RTO Insider that the Sierra Club “is evaluating all avenues of legal recourse that may be available to rectify the problems.”

Both Armendariz and Collins agreed the problem of self-commitment is not unique to SPP. Collins said he saw self-dispatch at CAISO and “knows” it occurs in other markets. Armendariz said although uncompetitive coal plants are running in “virtually every market … the problem seems most acute in SPP.”

The MMU believes that will change as market participants continue to familiarize themselves with SPP’s day-ahead and real-time markets, which have been in operation for less than four years.

“It appears that resource owners are becoming more confident in the market and allowing the market to commit the resource instead of self-committing their resource,” the State of the Market report said.

The Monitor also said the market systems’ optimization algorithm is restricted to a 48-hour window. “Hence, large baseload resources with long-lead time and substantial start-up costs may not appear economic to the day-ahead market commitment algorithm,” the report said.

Collins said SPP’s Market Working Group has discussed a potential multiday optimization approach. A Tariff change has yet to materialize, he said, “but that could help address some of the concerns.”

December 12, 2017

Overheard at GridCONNEXT Conference

WASHINGTON — Almost 190 investors, utility officials, technology company executives and others gathered for the GridWise Alliance’s two-day GridCONNEXT conference last week. Here’s some of what we heard.

FERC Enforcement, Tx Investment, Cybersecurity

Former FERC Commissioner Philip Moeller, a Republican, and Spencer Gray, a Democratic aide on the Senate Energy and Natural Resources Committee, talked about the newly reconstituted commission, transmission investment and the limited prospects for bipartisan action in Congress.

GridCONNEXT FERC cybersecurity — Moeller (left) and Gray | © *RTO Insider*

“We are at a low ebb in bipartisan relations,” Gray said.

But he said there was one exception. “I think there’s broad bipartisan consensus in the Senate to … focus more funds on cyber[security],” Gray said. “We’ve gotten [feedback] from a lot of groups in recent years that the federal government should have a more robust R&D program to develop new cyber tools and understanding of emerging cyber threats. That just seems like the lowest hanging fruit to me. It’s not a partisan issue at all.”

Moeller, who oversees the Edison Electric Institute’s business operations group and regulatory affairs, said the industry is “actually doing a very good job” on cybersecurity through the Electricity Subsector Coordinating Council. “But I’m not sure as an industry we necessarily tell our story well, partly because of the sensitivity” of the subject matter.

Moeller lamented the court rulings that rejected FERC’s “backstop” transmission siting authority in the 2005 Energy Policy Act. But he acknowledged the commission’s efforts to encourage transmission investment haven’t always been helpful.

“Our feeling is that the capital is out there but perhaps some of the [investment] signals need to be clarified. Whether it’s the [return on equity] mess at FERC, which I helped create unintentionally. But in trying to solve a problem, we’ve probably made it a little bit worse. I think there’s some uncertainty on the future of Order 1000. And it took a while I think for people to, like it or not, have the Clean Power Plan more in the rear-view mirror before they could focus on the expansion of the transmission grid.”

On Wednesday, EEI released a report suggesting changes to FERC’s ROE calculations that ClearView Energy Partners said could increase the model’s results by approximately 50 basis points.

Gray said Sen. Maria Cantwell (D-Wash.), ranking member of the ENR Committee, will be watching “what happens under the new leadership of FERC to the Enforcement office.” In response to the abuses that contributed to the 2000-2001 Western Energy Crisis, Cantwell helped draft language in the 2005 Energy Policy Act that gave the commission increased authority over market manipulation.

Utility Execs Share Hurricane Lessons

Scott Prochazka, CEO of CenterPoint Energy and chairman of the GridWise Alliance, said Hurricane Harvey — “our third 500-year storm in two and a half years” — proved the “incredible” value of mobile substations. The company also is likely to add airboats and trucks able to drive through high water, he said. (See Weeks Later, Utility Officials Still Awed by Scale of Hurricane Harvey.)

Robert Schimmenti, senior vice president of electric operations for Consolidated Edison, recalled how the utility was “humbled” by the 14-foot storm surge that drenched parts of Brooklyn and Lower Manhattan during Superstorm Sandy in 2012.

“All the weather predictions were around 12 feet. We did all the math and all the projections, and we thought we were good for about a 12-and-a-half-foot storm surge. It was only until a bunch of bright engineers linked the buoy data in the East River to a map of storm projections that they created — and this is well before high tide — and as they created these projections, we were like ‘Hey, wait a second. This doesn’t look good.’”

More than 1 million Con Ed customers in New York City and Westchester County lost power during the storm. The company has spent $847 million to make its system more resilient, including the addition of “smart switches” to isolate and clear trouble on lines, flood gates, pumps and 3 miles of flood walls around critical equipment.

Recovery in the Caribbean

Hurricane Maria took down “only” 220 230-kV towers in Puerto Rico, said Bruce Walker, assistant secretary for the Department of Energy’s Office of Electricity Delivery and Energy Reliability. But replacing each tower is a five- to seven-day project requiring ferrying of workers and equipment by helicopter, Walker said.

“One of the things that was striking to me regarding their system is their transmission lines; while very well built, [they’re] built right through the mountains. There are no rights of way; there are no roads. There is no tree clearing in those areas.”

Praveen Kathpal, vice president of AES Energy Storage, said his company recently outlined for the Puerto Rico Energy Commission “a vision of how 10 GW of solar plus 2.5 GW of storage, arranged in essentially sectionalized grids across the island, could provide both resilience and lower costs, because those [investments] break even with how much Puerto Rico would spend on burning oil for power generation over the next 10 years.”

Kathpal said AES’ 10-MW battery installations in the Dominican Republic “rode through all the grid disturbances of Hurricanes Irma and Maria” despite damage to transmission lines and generation outages. “A battery installation is physically resilient. It’s not as subject to the factors that during an intense storm would cause other resources to disconnect. So even as 40 to 60% of the generation in the Dominican Republic tripped off, the batteries continued to operate. And as you can imagine with those kinds of generation trips, the frequency was flopping all over the place. So they actually did more work to restabilize the system.”

— Rich Heidorn Jr.

December 11, 2017

FERC Won’t Fall to Partisanship, Chatterjee Promises ISO-NE

By Michael Kuser

BOSTON — FERC Commissioner Neil Chatterjee promised Thursday that the commission will not become part of what he called the “hyper-politicized” policymaking process in D.C.

FERC ISO-NE Neil Chatterjee William Scherman — ISO-NE Consumer Liaison Group (CLG) meeting | © *RTO Insider*

Chatterjee made his remarks at a meeting of ISO-NE’s Consumer Liaison Group on Dec. 7, which also included a panel on energy storage and a discussion of energy and capacity prices.

Chatterjee is among the four commissioners who have joined FERC since August. He spoke to ISO-NE hours after the swearing in of Kevin McIntyre, who replaced him as chairman. (See related story, McIntyre Takes FERC Chair; Wins Delay on NOPR.)

A former energy policy adviser to Senate Majority Leader Mitch McConnell (R-Ky.), Chatterjee said it’s increasingly difficult to get any policy change through the legislative process, particularly regarding energy.

“Increasingly, energy policy is being made by provisions in the tax code, measures in big, year-end spending bills, or more so, more and more policy decisions are being made at agencies throughout the federal government,” Chatterjee said. “As someone who now works in the executive branch and may be the short-term beneficiary of that increased authority in the executive branch, I don’t think it’s good for democracy or good for America.”

Energy policy needs to be made in Congress to have lasting impact and avoid regulatory uncertainty, he said.

“For instance, in the EPA, the mission of the EPA today under Administrator [Scott] Pruitt is the polar opposite of what Administrators [Gina] McCarthy and [Lisa] Jackson had under the prior administration,” Chatterjee said. “There’s been a wholesale shift in direction, and that really leads to regulatory instability for consumers, for folks in the business of power generation and distribution. It creates just so much lack of clarity and uncertainty.

“One of the things I’m proud of is FERC provides stability. Not only is the nature of the work at FERC inherently technical, not political, but also because you have the bipartisan board structure — where the president’s party never has more than three members — you’re never going to lurch dramatically in a new direction. So even though there’s new leadership at the commission today, and we may not go in the exact same direction as the prior leadership was going, we’re not going to go in a dramatically different direction than the prior leadership.”

Republicans now hold a 3-2 edge on the panel. Because of the commission’s turnover and “what is perceived to be a political exercise” with the Department of Energy’s call for price supports for coal and nuclear plants, Chatterjee said, he’s heard concern that the commission will become more political. (See FERC’s Independence to be Tested by DOE NOPR.)

“I have to tell you, that’s not going to happen,” he insisted. “If you look at the composition of the five of us who sit at the commission, you have Commissioner [Cheryl] LaFleur, who has seven years’ experience on the commission but also decades in the energy space. She’s a leader we all respect and look up to and she will provide that stability.

“Kevin McIntyre, who was sworn in as chairman today, is one of the top energy lawyers on the planet, let alone in the country. He’s a serious, thoughtful leader who’s got a great temperament who will provide that steady leadership.

“Both Commissioner [Richard] Glick and I come from the Senate, and the thing about the Senate … is you work for the whole country … and see things holistically. Commissioner [Robert] Powelson had been chair of a state commission and brings that very valuable state experience … and state commissioners are very attuned to the interests of consumers.”

Chatterjee said one reason he wanted a seat on the commission was to encourage new technologies such as energy storage, which he said could help improve grid resilience.

“We are currently working through a storage rule at the commission that will … remove barriers to competition and access for storage, and enable storage to be properly compensated for the value it provides,” Chatterjee said.

Working on Energy Storage

The Consumer Liaison Group meeting included a panel on energy storage moderated by Robert Espindola, energy systems program manager for Acushnet. On Thursday, his company won a $700,000 grant from Massachusetts for a storage project at the company’s Titleist golf ball factory in New Bedford. (See Massachusetts Awards $20M in Energy Storage Grants.)

Also on the panel were Christopher Parent, the RTO’s director of market development; Massachusetts Department of Energy Resources Commissioner Judith Judson; Lewis Milford, president of Clean Energy Group, a nonprofit in Montpelier, Vt.; and Ted Ko, director of policy at Stem, which pairs artificial intelligence with storage to automate cost savings.

Judson had appeared earlier that day at a ceremony marking the storage grants.

In July, DOER adopted a 2020 target of 200 MWh energy storage for the three electric distribution companies in the state. Judson said that the short-term target is line with the 2025 goal of 600 MW laid out in the state’s State of Charge report last year.

As of Dec. 1, the RTO had 400 MW of energy storage in the interconnection queue, or about 3% of all generation applying to interconnect, Parent said. (See ISO-NE Preparing for Energy Storage Growth.)

ISO-NE Prepares for FCA 12

ISO-NE Vice President for External Affairs and Corporate Communications Anne George, who presented an update on the RTO’s activities, said it projects an energy market value of $3.9 billion for 2017. The value has been declining for a decade and is down more than two-thirds from the $12.1 billion posted in 2008, she said.

“But we also see the capacity market is ticking upwards,” George said. “That’s really because back in 2013 we saw … a large chunk of the resources retired in the region, and when they did that, in the eighth Forward Capacity Auction we saw prices rise. That’s how markets behave.” Prices continued to rise in the succeeding FCA, then dropped in FCA 10 and FCA 11, she said.

“So, you’ll see some increase in the capacity market portion of wholesale market costs over the next couple of years, but then you’ll start to see it level off and come back down,” George said. “Right now, we are in a surplus situation.”

FCA 12 is scheduled to take place for February 2018, covering the June 1, 2021, to May 31, 2022, capacity commitment period. In November, the RTO submitted a pre-FCA informational filing with FERC for review, which included all FCA-related calculations and determinations.

December 11, 2017

MISO Upping Harassment Training for Managers

By Amanda Durish Cook

CARMEL, Ind. — MISO will require its managers to undergo training on handling harassment complaints amid heightened awareness over sexual misconduct in the workplace.

sexual harassment MISO — MISO Human Resource Committee | © *RTO Insider*

MISO Vice President of Human Resources Greg Powell announced the new training during a Dec. 5 Human Resources Committee of the Board of Directors meeting.

In response to a question from Director Mark Johnson, Powell also said HR and management will have additional discussions on sexual misconduct awareness in the first quarter of 2018. “What are we doing from an overall standpoint to make sure all employees feel safe?” Johnson asked.

The HR Committee also decided to reserve time during first-quarter meetings to take up the topic.

“News headlines in recent weeks remind all organizations of the importance of ensuring a respectful and professional workplace,” Powell said, referring to the spate of sexual harassment and assault accusations that have roiled the media, politics and other industries. “Even some in our energy industry have fallen to this very bad situation in the headlines.”

NERC CEO Gerry Cauley resigned last month after his arrest for assaulting his estranged wife after she allegedly discovered his relationship with a female subordinate. (See Cauley Resigns; NERC Launches Search for Replacement.)

Powell said MISO will initiate a longer, more intense training for managers that will cover “all workplace harassment issues” in addition to the existing annual springtime sexual harassment training required of all employees.

Director Barbara Krumsiek has also been tapped to advise leadership and the MISO board on preventing sexual harassment and addressing accusations. Krumsiek has served as senior industry fellow of Georgetown University’s Women’s Leadership Institute and has given a TED Talk on women making their way to C-suites in “toxic” cultures.

MISO urges employees to contact managers, HR and its legal department with complaints. The RTO also maintains an anonymous hotline.

Powell said MISO will continue to concentrate on training and increasing awareness among its HR ranks and management.

“In addition to a strong, comprehensive sexual harassment policy and regular training required annually for all employees, we are working to extend beyond the expected actions to involve employees at every level to support a strong, open and inclusive way of life,” Powell said. “This includes the recent launch of our Diversity and Inclusion Council and Women’s Resource Group, which were created to ensure we continue our steadfast focus on diverse viewpoints in the organization and our communities.”

The RTO currently has a 3.1 approval rating out of 5 on Glassdoor with a 36% CEO approval rating. Among more than 100 reviews by present and former employees are multiple references to MISO as an “old boys’ club” with “top-heavy” management.

“Creating a Women’s Resource Group and then promoting men who mistreat women (you know who I’m talking about) won’t fix MISO,” one anonymous reviewer identifying as a current MISO engineer said in a review posted in May.

MISO declined to say whether it has disciplined any employees for harassment or sexual misconduct, saying it considers all personnel-related information confidential.

December 11, 2017

WECC Finding New Direction in Old Mission

By Jason Fordney

SALT LAKE CITY — The Western Electricity Coordinating Council’s board of directors last week endorsed a new three-year operating plan for the organization, part of a larger reinvention intended to more precisely define the organization’s role in protecting electric grid reliability.

The Regional Entity is undergoing a transformation that began with its 2014 restructuring and bifurcation into WECC and Vancouver, Wash.-based Peak Reliability. WECC is the largest and most diverse of NERC’s REs responsible for monitoring and enforcing compliance with reliability standards.

WECC peak reliability — WECC Board of Directors (Left-Right): Joe McArthur, Richard Woodward, Shelley Longmuir, CEO Jim Robb, Chair Kris Hafner, Vice-Chair Ian McKay, Gary Leidich, Mike Core, Richard Campbell (not pictured) | *Kirha Quick for WECC*

Peak Reliability, which counts utilities, transmission owners and CAISO among its six classes of members, now serves as reliability coordinator for the Western Interconnection, except the Canadian province of Alberta. The organization last week said it is exploring developing a new market structure with a division of PJM. (See PJM Unit to Help Develop Western Markets.)

“Really, [WECC] got kind of refocused on its core reliability assurance mission,” WECC CEO Jim Robb told RTO Insider. The 2018-2020 operating plan endorsed by the board “is really just building a process that wasn’t in place before, recognizing that we have a new kind of board, new management and a new relationship with the members.”

WECC develops and implements reliability standards and regional criteria across 14 Western U.S. states, Alberta, the Canadian province British Columbia and a small, northern portion of Baja California, Mexico. It is a 501(c)(4) “Social Welfare organization” with a current annual budget of $27 million.

Last week Robb detailed the company’s many ongoing initiatives to the board at WECC headquarters, in a modernized former hardware store in downtown Salt Lake City. The discussion illustrated the many complexities in monitoring reliability on an electric grid that is rapidly changing in resource mix and market structure.

A year ago, the WECC board approved five areas of strategic focus for the next three to five years, including focusing on the reliability impacts of new and changing market structures, such as the Western Energy Imbalance Market (EIM) and Mountain West Transmission Group’s effort to join SPP.

Other areas of focus include the reliability impact of changing load and energy resources, identifying and mitigating key vulnerabilities, and analysis of future events that could affect grid reliability that encompassed “high impact, low frequency” events.

What’s in a Name?

WECC has recently revived a proposal to change its name to “Reliability West,” which officials contend would complete the bifurcation efforts begun in 2014 and position the organization as “mission-driven” and “create separation from its history as a Registered Entity,” according to a WECC white paper published last month to tackle issues around the name change, which has been under discussion for three years. The change has many implications regarding implementation costs, perceptions of what the organization does and possible confusion with other entities that share the WECC acronym, the document shows.

“Some folks think this is just a branding effort,” Robb said at the meeting, adding that the proposed name is more reflective of the company’s mission and easier for employees to engage with.

WECC is also drawing up a three-way memorandum of understanding with NERC and the British Columbia Utilities Commission to better define the roles and responsibilities of each organization, and developing a reliability agreement with the Mexico’s Energy Regulatory Commission (CRE). It is also taking comment through Feb. 5 on proposed changes to the operating rules for its Western Renewable Energy Generation Information System (WREGIS).

WECC is funded through allocations to end users in its footprint based on net energy for load, as described in its delegation agreement with NERC. It is not a resource planner, but assesses the reliability implications of resource decisions and identifies concerns to address.

The organization also produces reliability reports on the Western grid. Its June 2017 State of the Interconnection Report showed that, between 2015 and 2016, loss of generation or transmission in the U.S portion of the Western Interconnection increased by 50% to 24 events. (See WECC Generation, Transmission Loss Events Spike.)

In the area of assuring reliability, WECC said its second-quarter index score of reliability outcomes in the Western Interconnection was at or above the average of the past eight quarters, as was the score of indicators of entities building better compliance programs.

December 11, 2017

MISO Board Approves $2.6B Transmission Spending Package

By Amanda Durish Cook

CARMEL, Ind. — MISO’s Board of Directors on Thursday unanimously approved the RTO’s annual Transmission Expansion Plan, including 353 new transmission projects valued at $2.6 billion.

But a Texas project subject to shifting cost allocation was benched for at least two months before approval.

MTEP 17 contains $1.4 billion of projects driven by transmission owners’ local needs, including reliability, replacement of aging equipment and upgrades for environmental requirements. Almost $1 billion will be spent on baseline reliability projects, while nearly $240 million will go to generator interconnection projects. The proposed projects have expected in-service dates through 2024.

“The bulk of the dollars are being driven by local needs,” MISO Vice President of System Planning Jennifer Curran said.

Although nearly the same price as MTEP 16, this year’s plan has 29 fewer projects. An earlier version of MTEP 17 called for just 10 fewer projects. (See MTEP 17 Proposal: 343 New Transmission Projects at $2.6B.)

MISO South represents 41% of spending under the new plan, in keeping with a trend that increasingly allocates more spending to the southern portion of the RTO’s footprint, which is experiencing load growth — unlike the Midwest region.

Texas Project Delay

The board postponed approval of the $130 million Hartburg-Sabine 500-kV line market efficiency project (MEP) in eastern Texas for two months because of a late change to cost allocation for the projects. Last month, regulators from both Texas and Louisiana asked MISO to create separate zones for the two states to allow for a more specific cost allocation.

MISO MTEP 17 market efficiency projects — Hartburg to Sabine Junction project | *MISO*

MISO has since filed with FERC to rename Local Resource Zones as “Cost Allocation Zones” for the purposes of allocating MEP costs only, with Louisiana becoming Zone 9 and Texas becoming Zone 11 (ER18-364). The proposal does not eliminate LRZs, which are used to determine resource adequacy needs, nor does it change their boundaries.

“Out of an abundance of caution, MISO does believe that a short delay would be prudent,” Curran said. A board vote on the project has been put off until Feb. 5, allowing FERC time to respond to MISO’s filing.

“The change to the zonal requirement makes sense,” Curran said. “Most of our other cost allocation zones are based on state lines.”

MISO policy requires that 80% of the costs for MEPs be allocated to local resource zones based on their relative share of adjusted benefits.

Curran said the delay would not affect MISO’s timeline for issuing a request for proposals for the project.

The Hartburg-Sabine project will be MISO’s second-ever competitively bid transmission project and the first such project to include a substation, and the RTO plans to add two new staff members to oversee the competitive process behind the project. The line is intended to alleviate constraints in MISO South’s West of the Atchafalaya Basin load pocket area straddling Texas and Louisiana.

“There’s a significant amount of aging infrastructure in this area,” MISO interregional adviser Adam Solomon said.

The Texas project has already frustrated some stakeholders, who last month considered requesting a longer delay over concerns about the project’s cost estimates. (See MTEP 17 Advances with Disputed Texas Project.)

MTEP 17 also includes five targeted market efficiency projects, smaller interregional projects meant to relieve historical congestion on seams shared with PJM, whose Board of Managers also approved the TMEP portfolio on Monday. (See related story, New Wave of PJM Transmission Upgrades Rankles AMP.)

All five TMEP projects this year are upgrades to existing systems. The projects, which have individual $20 million cost caps, will coincidentally cost $20 million combined.

TMEP project costs will on average be allocated 69% to PJM and 31% to MISO, based on projected benefits, which are expected to reach $100 million within four years of going into service.

TMEPs are designed to address cost-effective and congestion-relieving seams projects that might otherwise be overlooked because of their low cost and small size. To qualify, projects must cost less than $20 million, be in service within three years of approval and provide historical congestion relief that is equal to or greater than construction costs within the first four years of operation.

December 11, 2017

MISO Board, Monitor Seek Response to PJM M2M Missteps

By Amanda Durish Cook

CARMEL, Ind. — The MISO Board of Directors last week learned about the recent discovery that PJM had been committing two market-to-market errors that have likely cost MISO millions of dollars over a period of years.

They also heard that MISO may have little recourse to recover those losses.

At issue was PJM’s longtime practice of overstating its own transmission loading relief (TLR) because of a calculation error and its failure to order mandated tests required to define M2M constraints between the two RTOs. (See MISO Monitor Blames PJM for Market-to-Market Errors.)

MISO board PJM market-to-market M2M — Patton | © *RTO Insider*

During a Dec. 5 meeting of the board’s Markets Committee, Independent Market Monitor David Patton said MISO has anted up millions in unnecessary congestion costs stemming from PJM’s mistakes.

The untested M2M constraints led to $84 million worth of congestion in 2016 and $187 million in 2017, Patton said, adding a disclaimer that his firm probably couldn’t perfectly duplicate the constraint test that the RTOs perform, and that they may show different congestion values. Delays in defining constraints resulted in $44 million worth of congestion last year and $25 million this year.

“If they don’t define the constraint, they basically get to a free pass to use the transmission system,” Patton told the board.

Patton said one flowgate that wasn’t tested or defined as M2M led to $43 million in congestion in September alone.

“A unit was running, overloading the constraint, and we did not tell PJM to back it down,” Patton said. “We need to be vigilant. … We don’t always ask our neighbors to test the constraints.”

Willful Neglect?

Patton said PJM’s failure to order these tests was deliberate: “In our mind, this is a pretty gross violation of the Tariff, particularly since they knew they weren’t doing the test.”

Director Baljit Dail asked how Patton could be sure PJM knowingly neglected the test.

Patton said at the beginning of the RTOs’ M2M process nearly a decade ago, PJM was aware it needed to devise a new constraint model that included an actual representation of MISO system outages with shift factors, but it failed to create such a model. “They never did it, and they knew they didn’t do it.” Patton said.

“I’ll hold the rest of my questions for closed session,” Dail replied, referring to a closed session on the matter following the board’s open meeting.

“What is it that we can do as a board?” Director Thomas Rainwater asked.

Patton said there weren’t many options available to the board. It could urge enforcement by FERC, “which to be honest, hasn’t been very active in enforcement on violations of RTOs.”

“I don’t think there’s a lot you can do other than telling PJM how serious you think this is,” Patton said. He also said MISO stakeholders could pursue resettlement of prices related to the TLR miscalculations, although no precedent exists for such resettlements. PJM has been overstating its TLR response since 2009, “inappropriately” raising the relief obligation of MISO and other balancing authorities, Patton said.

Patton said it’s up to stakeholders to decide whether to pursue TLR resettlement at FERC.

“We’ve certainly resettled for less,” Patton said.

“These are serious issues with big dollar amounts,” Director Barbara Krumsiek said.

MISO Executive Vice President of Operations Richard Doying said strategies for resettlement would “certainly be a closed discussion item.”

PJM Responds

PJM Chief Communications Officer Susan Buehler told RTO Insider that PJM acknowledges it had “an internal process issue regarding the flowgate tests as well as a calculation error with respect to relief obligations,” but it disagreed that the issues amounted to a Tariff violation. She also said the MISO Monitor is possibly overstating the monetary impacts.

“PJM has corrected both issues and is evaluating the potential impacts, but at this time we do not believe the impacts are what the MISO IMM has indicated,” Buehler said.

She also said the congestion impacts and monetary values the Monitor has disclosed are projections and not solely a consequence of PJM’s “internal process issues” and “potential M2M inefficiencies” with constraints. PJM cannot confirm Patton’s numbers, she said.

JOA with TVA

Patton also urged the board to consider entering a joint operating agreement with the Tennessee Valley Authority over the TLR issue. MISO discovered PJM’s incorrect TLR values while investigating a northeastern Tennessee constraint, and Patton said TVA often calls TLRs on its 500-kV Volunteer-Phipps Bend line, which leads to price increases in the Midwest and corresponding reductions in the South. The TLR constraint contributed to higher prices during a late September emergency event, Patton said.

He said MISO has incurred 100 dispatch violations of its own constraints in responding to the competing dispatch effects of the Volunteer-Phipps Bend constraint.

“We’ll violate our own constraints in order to provide TLR to TVA,” Patton said. He also said TVA’s generation is almost always more effective and economic for managing a TVA constraint than MISO’s.

Patton originally complained about the excessive amount of relief MISO is asked to provide the Volunteer-Phipps Bend more than two years ago. (See External Constraint Vexing MISO, Market Monitor Says.) Now he thinks the RTO could lower its transmission constraint demand curve for TLR requests to avoid incurring costs to provide “very small amounts of relief.” He said MISO should instead pay TVA for economic relief on constraints pursuant to a JOA.

Doying said MISO is not in 100% agreement with the Monitor’s suggestions. “We value the reliability of our neighbor’s systems as much as we value the reliability of our own,” Doying said.

However, Doying said MISO is currently drafting a narrow JOA with TVA that would govern certain flowgates. He said MISO has had similar agreement with TVA in the past.

Patton also noted that TVA at times orders TLRs on Volunteer-Phipps Bend as a proxy to obtain relief on a nearby 161-kV constraint, and he questioned the efficiency of TVA’s process.

Director Paul Bonavia asked MISO executives if it was appropriate under NERC rules to use the 500-kV line as a proxy for a 161-kV line. Doying said the practice doesn’t violate NERC policies.

MISO General Counsel Andre Porter then reminded the board that further discussion was best left for a closed session.

“We’re not going to solve all of this today, but we’ll grapple with it, get it on the table,” Bonavia said. “How do we approach the resettlement issue. … How do we help our neighbors without being overzealous?”

“I do think we have a lot of issues to untangle with PJM and TVA,” Doying said.

December 11, 2017

MISO Board Promotes Moeller, OKs 2018 Budget

By Amanda Durish Cook

CARMEL, Ind. —The MISO Board of Directors last week stepped in to order a plan of succession for the RTO’s executive leadership, while also approving its requested 2018 budget.

As part of the plan, the board immediately promoted Executive Vice President of Operations Clair Moeller to president, a permanent appointment. In the event of unforeseen circumstances related to CEO John Bear, Moeller would act as CEO, the board decided.

MISO Board of Directors REV budget PJM Insider — MISO CEO John Bear (left) and Board Chairman Michael Curran | © *RTO Insider*

The RTO’s board usually takes a “nose in, fingers out” approach except when it comes to matters of personnel succession and strategic planning, Chair Michael Curran explained during a Dec. 7 meeting. He said the appointment will ensure that MISO is spared uncertainty in the event that Bear leaves his post.

For example, Curran joked, “if John gets hit by a truck, wins the lottery [or] beamed up by a spaceship.”

The board also approved a $321.7 million total operating budget and $29.6 million in capital spending for 2018.

As part of the budget, MISO will spend $21.7 million to begin replacing its aging market platform with a more adaptable modular market platform, a project it expects to complete by 2024. (See Winter Launch for MISO Website, Market System Project.) The RTO’s existing market platform relies on technology from the late 1990s, while its day-ahead and real-time market systems were added around 2005. The age of the system is limiting the new market products MISO can pursue.

“It’s approaching its teen years — God help us all,” Dynegy’s Mark Volpe joked during a Dec. 6 Advisory Committee meeting.

Alliant Energy’s Mitch Myhre, chair of the MISO Finance Subcommittee, said his group will track spending on the project.

“This is a big deal. $130 million is half of MISO’s annual budget,” Volpe said.

To date, MISO is under its 2017 base operating budget by about $1.8 million and predicts it will end the year having spent $240.8 million instead of the budgeted $241.7 million.

Chief Financial Officer Melissa Brown said the savings will result from not implementing a previously planned forward capacity market for the RTO’s deregulated areas, as well as lower-then-expected spending on building maintenance and employee travel.

MISO is $500,000 overbudget on this year’s capital spending but is poised to shrink the overage to $200,000 by year-end. The increase was mainly driven by the RTO’s effort to replace its market settlements software.

Last week also marked Director Paul Bonavia’s final meeting on the board, with his term expiring Dec. 31. In parting remarks, Bonavia called MISO a “civics lesson” and said the RTO was proof that decorum and cooperation could exist in an industry with several competing interests. “It’s positively breathtaking, with how you come together representing different interests but still have goodwill and move billions of dollars in investment,” he said.

Former Delta Air Lines Chief Information Officer Theresa Wise will replace Bonavia beginning Jan. 1. (See New Director to Join MISO Board, 2 Keep Seats.)

December 11, 2017

Photos Show Murray’s Role in Perry Coal NOPR

Newly revealed photographs show Energy Secretary Rick Perry and Murray Energy CEO Robert Murray meeting in late March to discuss the coal mining company’s “action plan” — the apparent basis for Perry’s controversial call for price supports for coal generating plants.

The photos, obtained by magazine In These Times and The Washington Post, appear to contradict Murray’s statement to Greenwire in November that “I had nothing to do with” the DOE Notice of Proposed Rulemaking.

One photo shows the action plan’s cover letter, printed on Murray Energy letterhead. Another shows Perry embracing Murray.

Rick Perry NOPR Murray Energy — Cover letter of Murray Energy’s “action plan” | *Photograph obtained by In These Times*

In These Times reporter Kate Aronoff said a confidential source provided the magazine with the photos, as well as additional, unpublished photos showing pages in the document, which propose, among other things, cutting EPA’s staff by half and replacing members of FERC, the Tennessee Valley Authority’s Board of Directors and the National Labor Relations Board.

Aronoff said her magazine had only obtained photographs of the meeting and of the document, not the document itself.

The action plan contains language regarding the need for “immediate action” to support struggling coal plants like that in the DOE NOPR issued to FERC on Sept. 28 (RM18-1).

One section of the plan calls for “immediate action … to require organized power markets to value fuel security, fuel diversity and ancillary services that only baseload generating assets, especially coal plants, can provide,” according to In These Times.

The DOE NOPR says “immediate action is necessary to ensure fair compensation in order to stop the imminent loss of generators with on-site fuel supplies, and thereby preserve the benefits of generation diversity.”

Murray had referenced the document in an Oct. 11 episode of PBS’s “Frontline,” “War on the EPA.”

“I gave Mr. Trump what I called an ‘action plan’ very early,” said Murray, whose company’s political action committee donated $100,000 to President Trump’s campaign last year, according to the Federal Election Commission. “It’s about three-and-a-half pages … of what he needed to do in his administration. He’s wiped out page 1,” which apparently included repealing the Clean Power Plan.

Several other officials are portrayed in the photos: Perry’s chief of staff, former Edison Electric Institute Vice President for External Affairs Brian McCormack, is pictured shaking hands with Murray. Also seen is Andrew Wheeler, at the time a registered lobbyist for Murray Energy, now Trump’s nominee for EPA deputy administrator.

At his confirmation hearing in early November, Wheeler testified to the Senate Environment and Public Works Committee that he had only briefly seen the document. Sen. Sheldon Whitehouse (D-R.I.) has called for its release. Wheeler has cleared the committee, and his nomination is pending a vote by the full Senate.

DOE did not dispute the authenticity of the photos. “Industry stakeholders visit the Department of Energy on a daily basis,” a department spokeswoman told Politico.

The March 29 meeting at DOE headquarters occurred just weeks after Perry was sworn in as secretary, and weeks before he would order a study on the effect of federal policies on the reliability of the grid.

Later in July, according to a letter from Murray to Trump obtained by the Associated Press, Murray met with the president and Perry in Youngstown, Ohio, where he asked that the secretary declare an emergency on the grid under Section 202(c) of the Federal Power Act in order to protect coal-fired plants owned by FirstEnergy, Murray’s biggest customer.

FERC NOPR Rick Perry James A. FitzPatrick nuclear plant — Andrew Wheeler, President Trump’s nominee for EPA deputy administrator, is seen on the far right, as Murray speaks with Perry. | *Photograph obtained by In These Times*

Trump was receptive to the proposal and, according to Murray, told Perry three times that “I want this done.” On Aug. 3, Murray again met with the president, along with FirstEnergy CEO Charles Jones, in Huntington, W.Va., where Trump told personal aide John D. McEntee III to tell Gary Cohn, director of the White House’s National Economic Council, “to do whatever these two want him to do.”

Perry, however, rejected the emergency order, the AP reported on Aug. 22. The next day, the department released its grid study. And a month later, Perry issued his NOPR, ordering FERC to consider fully compensating plants with a 90-day supply of on-site fuel their operating costs. (See Perry Orders FERC Rescue of Nukes, Coal.)

On Friday, Perry reluctantly agreed to FERC Chairman Kevin McIntyre’s request to delay action on the NOPR for 30 days. (See McIntyre Takes FERC Chair; Wins Delay on NOPR.)

— Michael Brooks

December 11, 2017

New Wave of PJM Transmission Upgrades Rankles AMP

By Rory D. Sweeney

The PJM Board of Managers last week authorized $348 million in transmission projects. Coming two months after it greenlit $1 billion in projects, the approvals irked American Municipal Power, the RTO’s biggest critic when it comes to its Regional Transmission Expansion Plan.

PJM Transmission Upgrades PJM Board of Managers AMP — Tatum | © *RTO Insider*

“There was another $186 million of supplemental projects that will move forward in the PJM process. In other words, over a third of the transmission projects reviewed in this time frame were not approved by the PJM board,” American Municipal Power’s Ed Tatum said in an email. “These projects were not subjected to the same level of rigorous review afforded baseline projects, yet the cost of these facilities will ultimately be borne by the consumers in the constructing transmission owners’ zone.”

Tatum was referring to the separation within PJM’s RTEP between different types of projects: baseline projects requested to address reliability issues that receive significant RTO scrutiny; and “supplemental” projects proposed by TOs to address their own internal criteria that aren’t subject to the same level of analysis.

PJM must make recommendations and receive board authorization before assigning baseline projects, but TOs do not need RTO approval for supplementals.

“Another half-billion dollars of more supplemental projects are waiting in the wings. The sheer volume of projects moving forward absent adequate review for need and alternatives should be a grave concern to the PJM board,” Tatum said.

Last week’s decision by the board authorized 26 projects, most of which were reliability upgrades or replacements. There were three market efficiency proposals PJM staff recommended for authorization, though they accounted for less than $10 million. Twelve of them are in the Mid-Atlantic region of PJM’s footprint; 10 are in the Western area and four are in the Southern area.

The board also approved PJM’s installed reserve margin (IRM) of 15.8% for 2021/22. The IRM dropped from 16.6% thanks to an anticipated fleet-wide equivalent forced outage rate (EFORd) reduction from 6.59% to 5.89%. (See “IRM Results Approved,” PJM Planning/TEAC Briefs Oct. 12, 2017.) An IRM study earlier this year also created updated margins for other delivery years, which the board also approved: 16.1% for 2018/19 and 15.9% for 2019/20 and 2020/21.

The board also approved five targeted market efficiency projects (TMEPs) in conjunction with MISO that traverse the grid operators’ borders. The smaller, congestion-relieving interregional projects were also approved last week by MISO’s board. (See related story, MISO Board Approves $2.6B Transmission Spending Package.)

The portfolio of system upgrades has a combined cost of $20 million. On average, project costs will be allocated 69% to PJM and 31% to MISO, based on projected benefits, which are expected to reach $100 million.