FERC last week denied Public Citizen’s request for rehearing on Entergy’s sale of the James A. FitzPatrick nuclear plant in New York to Exelon. The commission dismissed as “irrelevant” the group’s concerns about the impact of the state’s zero-emissions credits (ZECs) on either Exelon’s market power or the broader NYISO energy and capacity markets.
James A. FitzPatrick Nuclear Plant
The commission authorized the sale last December over Public Citizen’s protests, saying the issues raised concerned the effects of the ZEC program rather than the impact of the plant sale on competition, rates, regulation or cross-subsidization.
In its rehearing request, Public Citizen argued that the commission had “committed errors of fact by inaccurately reporting the nature” of its protest, which “plainly and repeatedly raised the connection between the proposed transaction and the ZEC” program.
The commission’s Oct. 24 order (EC16-169-001) said that “under commission precedent, issues unrelated to the commission’s analysis of a proposed transaction under [Federal Power Act] Section 203 should be addressed in other proceedings or forums. Further, Public Citizen offers no analysis regarding how the [sale] would affect wholesale markets, with or without the ZEC program.”
WILMINGTON, Del. — Consumer representatives and the Independent Market Monitor expressed concern Thursday over PJM’s plans for vetting energy offers exceeding $1,000/MWh, with the Monitor seeking manual changes and consumer groups fearing excessive demand response costs.
The issues arose during a discussion at the Markets and Reliability Committee meeting on changes to Manual 11: Energy & Ancillary Services.
The manual changes, part of PJM’s implementation of FERC Order 831 (RM16-5), passed with 13 objections and two abstentions after Catherine Tyler, senior economist for Monitoring Analytics, reiterated complaints the Monitor filed with the commission in response to the RTO’s May 8 compliance filing on the order.
The order doubled the “hard” offer cap for day-ahead and real-time markets from $2,000/MWh — a response to the 2014 polar vortex, which caused natural gas price spikes that left some generators in the Northeast complaining they were unable to recover their costs. Incremental energy offers must be capped at the higher of $1,000/MWh or a resource’s cost-based energy offer, with $2,000/MWh being the maximum offer eligible for setting LMPs; approved offers over $2,000 are eligible for uplift payments.
The Monitor said PJM’s plan does not follow the order’s requirement that RTOs build on existing mitigation processes in verifying that offers above $1,000 are based on actual or expected costs and does not mention the Monitor’s role in that process.
“We will review offers over $1,000,” said Tyler. “The manual should make that clear.”
The Monitor told FERC that PJM instead “proposes to create a new cost-based offer verification process,” does not provide a way for verifying cost-based offers that fail its automated screen and lacks a process for verifying DR offers over $1,000. It said the commission should require “a new proposal that builds on existing cost verification processes, including the Market Monitor’s cost verification process and fuel cost policies.”
Greg Poulos, executive director of the Consumer Advocates of PJM States, requested the vote on Manual 11 be conducted separately from three other manual changes, saying the Monitor should have joint approval with PJM of energy offers over $1,000.
It was the DR issue that concerned Susan Bruce, of the PJM Industrial Customers Coalition. She said although her group is “a big supporter of demand response … we’re concerned we don’t have the same rigor” in ensuring the cost inputs in DR offers as for generation.
The lack of rules creates “opportunities for strategic behavior,” Bruce said.
PJM’s Pete Langbein said that although the RTO has considerable experience in verifying generation offers, “we’re a little bit in uncharted territory” for DR. He said PJM wants to analyze “what costs we see from DR in the next six to 12 months” before creating rules.
Bruce agreed it would be difficult to guess what costs DR providers will file but said that during the interim, “customers will be vulnerable” to potentially inflated and improper costs.
Langbein said PJM will address the issue in the stakeholder process and deal with offers in the interim on a “case-by-case basis.”
Bruce Campbell of CPower said he supported the RTO’s approach. “It’s difficult for me to imagine a standard that would be workable at this point beyond what PJM has outlined.”
PJM’s Chantal Hendrzak added that the RTO wants to wait for FERC’s response to its compliance filing before implementing standards. The rules will not go into effect until the RTO receives the commission’s response, she said.
The New Jersey Board of Public Utilities filed comments supporting the Monitor, saying, “PJM’s filing appears to be yet another attempt by PJM to minimize the role of the IMM.” The Delaware Public Service Commission called on FERC to reject PJM’s filing, saying its formulaic screen is unsupported and would result in higher prices than verifying all offers above $1,000.
PJM responded to the Monitor’s comments in June, reassuring FERC that all cost-based offers must be in accordance with the market seller’s RTO-approved fuel-cost policy, “including the IMM’s review of such policies.” The RTO said the proposed screen is “an additional safeguard” to ensure only legitimate generation offers greater than $1,000 are eligible to set LMPs.
WILMINGTON, Del. — State and consumer representatives grilled PJM officials Thursday over proposed changes to price-responsive demand (PRD) bids, with the head of the Organization of PJM States Inc. accusing the RTO of flouting the 2005 Energy Policy Act.
PJM says PRD bids should be available year-round, the same as generation resources under Capacity Performance rules. But OPSI argues they should be allowed the option to make only seasonal contributions because PJM’s summer peak loads exceed winter peaks by more than 20,000 MW.
“What problem are you trying to solve?” asked OPSI Executive Director Gregory Carmean at Thursday’s Markets and Reliability Committee meeting. “The states obviously would like to see the effectiveness of their demand-side programs reflected in PJM’s load forecasts.”
PRD — a program that lets customers agree to reduce their loads in response to energy prices in exchange for reduced capacity requirements — was developed during 2010-12, before CP rules changed the requirements for demand response. It requires dynamic retail rate structures and advanced metering. PRD providers — electric distribution companies, load-serving entities or curtailment service providers — must be able to remotely curtail load when a PJM maximum emergency event has been declared and LMPs exceed trigger prices.
Because PJM approved its first PRD plans for the 2020/21 delivery year, it must now bring the rules in line with CP, the RTO says.
Thursday’s discussion came during a first reading of three proposals developed by the Demand Response Subcommittee.
The RTO’s proposal would extend DR’s annual requirements to PRD. A second proposal would limit the triggers for assessing CP penalties to just penalty assessment intervals. The third, from DR-participant Whisker Labs, would extend the existing PRD rules to the winter, create a summer-only product and allow it to be aggregated with a winter resource for an annual CP resource.
Carmean said PJM was acting in “direct contradiction of Congress’ intent” in the Energy Policy Act of 2005, which said that DR “shall be encouraged” and “unnecessary barriers to demand response participation in energy … markets shall be eliminated.”
“I have not gone back to read the law,” said PJM’s Pete Langbein, who presented the proposals, which the RTO plans to bring to an MRC vote next month. But he said PJM had made modifications to its monitoring and verification rules and expanded regions to ease requirements for DR. “We are continuing to work on this in the seasonal task force,” he said, referring to the group being created as a result of a problem statement and issue charge approved by the MRC in August.
Greg Poulos, executive director of the Consumer Advocates of PJM States, said he shared Carmean’s concerns. “Residential customers can no longer participate in this program,” he said. “Customers are kind of getting the short end [of the stick].”
“It seems to be a different product now,” added Morris Schreim, senior adviser to the Maryland Public Service Commission.
Carmean said the changes could mean “stranding hundreds of millions spent on [advanced metering infrastructure] meters. … OPSI believe the PRD program as it exists today should be allowed to continue.”
Earlier this month, OPSI drafted a resolution calling on PJM to postpone the imposition of annual resource requirements on PRD “until it has implemented an improved mechanism for summer seasonal resource participation in excess of winter seasonal resource participation, or until such time that winter reliability requirements equal or exceed summer reliability requirements.” (See “OPSI, PJM at Odds over PRD,” PJM Market Implementation Committee Briefs: Oct. 11, 2017.)
On Friday, PJM CEO Andy Ott responded with a letter to OPSI. “PJM agrees demand response resources are valuable, and we seek ways to have them receive compensation in accordance with their contribution to reliability,” Ott said. “For seasonal resources that do not participate as Capacity Performance resources, the new stakeholder group will explore measures to value their contribution to grid reliability.”
WILMINGTON, Del. — PJM members approved a Tariff revision setting 78.5% as the balancing ratio to be used in calculating the default market seller offer cap (MSOC) for the 2021/22 Base Residual Auction next May.
PJM said the change was a stopgap measure required for next year’s BRA because there have been no penalty assessment hours (PAHs) since 2015. PAHs are one factor used to calculate MSOC for Capacity Performance resources. (See “Give me a B…,” PJM MRC/MC Briefs.)
The Tariff change passed with no opposition but 10 abstentions.
The MSOC is the product of the net cost of new entry (CONE) and the average of the balancing ratios for the three years preceding the delivery year. PJM proposed using 78.5% because it was used for the 2020/21 BRA earlier this year.
“I’m not sure how you got here,” said Gary Greiner of PSEG Energy Resources & Trade. “I do know 78.5 is not the right number.”
Susan Bruce of the PJM Industrial Customers Coalition agreed that the stopgap number was not correct. “I think there’s something to be said for the fact that there have been no performance assessment hours. That should be telling us something, but that’s part of a larger conversation,” she said.
The Independent Market Monitor’s Catherine Tyler also criticized the number as incorrect. She said PJM should instead rely on its avoidable cost rates, which she said is “already well defined in the Tariff.”
With one abstention, members also approved a problem statement and issue charge to develop a long-term solution. The issue was assigned to the Market Implementation Committee with a target of developing a solution in time for the 2022/23 BRA.
Bruce asked that PJM make clear in its FERC filing that the 78.5% balancing ratio is “not to be precedential in any fashion.”
DER Subcommittee Charter Sent Back to MIC
The MRC postponed voting on a draft charter to transfer all work on distributed energy resources into a subcommittee because of a disagreement over a proposed amendment by FirstEnergy.
The charter would create the Distributed Energy Resources Subcommittee, reporting to the MRC. It arose from concerns that the current problem statement and issue charge on DER is overly narrow and inhibited discussions that should include markets, operations and planning implications. The talks had been taking place in special sessions of the MIC.
FirstEnergy sought to add an amendment saying “Market rules must respect the distribution system and state/local jurisdictional agency standards and protocols to ensure safety and reliability. Rules should adhere to all pertinent jurisdictions and respect the relevant electric retail regulatory authority (RERRA).” (See “Amendment on DER Charter Sparks Debate,” PJM MRC/MC Briefs.)
MRC Secretary Dave Anders said that some stakeholders thought the amendment had been considered in the draft that came out of the MIC-DER group and others did not. The MIC did not formally vote on the measure.
As a result, the charter will be returned to the MIC, which will vote on versions with and without the amendment, with the winner brought to an MRC vote next month.
MRC OKs Sharing Generator Data for Restoration Planning
Members approved Operating Agreement revisions governing PJM’s sharing of restoration planning generator data with transmission owners. (See “TOs to Receive Confidential Generation Data for System Restoration,” PJM Operating Committee Briefs: Sept. 12, 2017.)
The changes will allow PJM to provide confidential generator data for any unit:
that is or will be modeled in TO energy management system; and
that is or will be identified in a TO restoration plan.
The second reference to “or will be” was added as a correction between the first read and Thursday’s vote. The corrected version was endorsed with no objections or abstentions.
PJM Chief Financial Officer and MRC Chair Suzanne Daugherty informed members that the RTO’s consulting subsidiary, PJM Technologies, has signed a contract to help the Chinese province of Zhejiang develop a real-time energy market.
Daugherty declined to share financial details of the contract but said it will involve three to four full-time equivalent PJM staffers for 18 months. The province, south of Shanghai, has a load equal to almost half of PJM’s.
For security, the PJM employees will be working on dedicated computers separate from the RTO’s network, Daugherty said.
IRM, Manuals Endorsed
The Markets and Reliability Committee unanimously approved the 2017 installed reserve margin (IRM) study results. (See “IRM Reductions,” PJM PC/TEAC Briefs: Sept. 14, 2017.)
The IRM dropped nearly 1 percentage point, from 16.6% to 15.8%, for delivery year 2021/22, thanks largely to an anticipated fleet-wide EFORd (equivalent forced outage rate – demand) reduction from 6.59% to 5.89%. EFORd measures the probability a generator will fail completely or in part when needed.
The reduced EFORd is the result of 7,150 MW in planned retirements with a 14.56% weighted average EFORd, and the anticipated entry of 16,980 MW of new generation with a 4.42% EFORd.
The IRM will be 16.1% for 2018/19 and 15.9% for 2019/20.
The MRC also endorsed the following proposed manual changes with one abstention and no objections:
Manual 11: Energy & Ancillary Services. Revisions, which also include changes to the OA and Tariff, were developed to address capping of intraday offers. The current rule offer caps units that fail the three-pivotal-supplier test, but prohibits reapplying the cap during the unit’s day-ahead commitment or minimum run time. The changes would re-evaluate capped units when offers are updated. The changes would also apply to self-scheduled resources. (See “Debate Continues on Intraday Offers,” PJM Market Implementation Committee Briefs: Oct. 11, 2017.)
The Members Committee unanimously approved the IRM study results, the Tariff changes for the balancing ratio, and changes to Manuals 11, 14B and 19 approved earlier by the MRC. (See descriptions in MRC briefs above.)
The committee also approved Tariff and Operating Agreement revisions to clarify definitions, as recommended by the Governing Document Enhancement & Clarification Subcommittee.
WILMINGTON, Del. — PJM will hold a special meeting from 3 to 5 p.m. Nov. 7 to address stakeholder concerns over how the proposed integration of the Ohio Valley Electric Corp. into the RTO would affect existing members.
RTO officials agreed to schedule the meeting after being unable to quell stakeholder concerns during a presentation by OVEC’s Scott Cunningham at Thursday’s Markets and Reliability Committee meeting.
Stakeholders expressed apprehension over the future of OVEC’s generation and costs of potential upgrades to its double-circuit 345-kV transmission network, most of which dates to the 1950s.
OVEC, which is headquartered in Piketon, Ohio, owns 2,200 MW of generation capacity but will have no load after a U.S. Department of Energy contract ends sometime before 2023. The company was created in 1952 to service roughly 2,000 MW of load from a uranium enrichment plant near Piketon operated by the defunct Atomic Energy Commission.
Clifty Creek Power Plant Complex | Crowezr
The company’s two coal-fired generating plants — the 1.1-GW Kyger Creek in Cheshire, Ohio, and 1.3-GW Clifty Creek in Madison, Ind. — are already pseudo-tied into PJM, and its eight “sponsors” can sell their portions of the output into the RTO’s markets. The generation would become internal to PJM following membership, eliminating the pseudo-ties.
MRC Chair Suzanne Daugherty said PJM had conducted operational and planning studies to ensure the integration would not harm reliability. General Manager of System Planning Paul McGlynn said testing also ensured the generation is deliverable.
But Steve Lieberman of American Municipal Power said stakeholders have not seen any analysis on the financial implications of adding OVEC. “There’s just a lot of things we don’t understand,” he said.
Six of OVEC’s eight sponsors — American Electric Power, Buckeye Power, Duke Energy, FirstEnergy/Allegheny Power, Wolverine Power Cooperative and Dayton Power and Light — are PJM members. Another sponsor, Vectren, is a MISO member. The final sponsor, PPL’s LG&E and KU Energy, does not belong to an RTO.
Cunningham said there had been “very little incentive” for OVEC to join PJM in the past because of the sponsors’ “different philosophy” and split between RTOs.
“All that has changed over the years,” he said. “For a small entity like ours, we have struggled with meeting compliance obligations.”
Direct Energy’s Marji Philips said the addition of OVEC’s 2,200 MW of 1950s vintage coal-fired generation is “very significant,” coming at a time when FERC is considering Energy Secretary Rick Perry’s proposal to grant coal plants cost-of-service rates. (Philips said PJM officials later informed her that 90% of OVEC’s power already flows into PJM, with 10% flowing to LG&E/KU.)
PJM’s internal “kick-off” discussion on integration was held June 6, according to spokesman Ray Dotter — nearly four months before Perry announced the proposed rulemaking.
Philips noted that the generators have been the subject of proceedings before the Public Utilities Commission of Ohio seeking to put them into the rate base. In March, for example, Duke Ohio asked PUCO to bill ratepayers for the costs of its 200-MW share of the plants, warning that “premature closing of the OVEC generating plants would have an immediate adverse impact on the communities in which these plants are located” (17-0872-EL-RDR).
“We do not anticipate them retiring any time soon,” said Cunningham, who said they had received “considerable” investments in environmental upgrades. “Those [subsidy requests] were made by the sponsors. We have never acknowledged that they were not economic.”
Vice President of Planning Steve Herling was reluctant to offer a number, saying “it would really depend” on the nature of the upgrade.
“Is it safe to assume it would be substantial?” persisted Farber, attending his last meeting before retirement. (See related story, Delaware PSC’s Farber Retires — Again.)
“I’m not jumping into that one,” Herling demurred.
American Electric Power on Thursday said the mildest weather conditions since 1992 led its third-quarter sales to fall 12.8% from a year ago, down to $4.1 billion.
The Columbus, Ohio-based company reported a quarterly profit of $544.7 million, a vast improvement over last year’s loss of $765.8 million for the same period. A one-time $2.3 billion impairment charge in 2016 related to the value of competitive coal plants, wind farms and coal-related properties accounted for much of that loss. (See AEP Turns Away from Generation to Transmission, PPAs.)
But the company’s adjusted earnings per share of $1.10 missed the Zacks consensus estimate of $1.19. It was also down from $1.30/share — which excluded the impairment — a year ago. Its year-to-date earnings are $2.82/share, down from $3.25/share in 2016.
During an earnings call, CEO Nick Akins, a drummer in his spare time, drew inspiration from the progressive rock group Dream Theater’s song “Another Day” in reaffirming 2018’s guidance range of $3.75 to $3.95/share, built around a 5 to 7% growth rate. He recited the song’s lyrics to analysts: “Live another day, climb a little higher, find another reason to stay.”
“Because of our efforts to overcome the weather and other obstacles, we’ll finish out the year 2017, we’ll live for 2018, and continue on our path,” Akins said. “The fundamentals of our business plan remain secure, and we’re confident going into 2018.”
AEP narrowed its guidance range for 2017 to $3.55 to $3.68/share. Akins said the company will make up lost ground by “driving efficiency, eliminating expenses where practical and with negligible movement of expenses to 2018.” The company also expects to benefit from continued economic growth in its footprint.
Akins said AEP now has procedural schedules in the four state jurisdictions — Arkansas, Louisiana, Oklahoma and Texas — with regulatory oversight of the company’s proposed $4.5 billion Wind Catcher Energy Connection Project, a 2-GW wind farm in the Oklahoma Panhandle. Hearings will be held January in Oklahoma and Texas, February in Louisiana and March in Arkansas. The company has requested approvals by April 30.
| AEP
“At this point, I should figuratively drop the microphone,” Akins said, “but we’ll let the facts — $4.5 billion invested, $7.6 billion in customer savings, substantial infrastructure development and great use of wind resources — speak for themselves.”
AEP also has $603 million in pending rate cases before five state regulatory commissions.
SACRAMENTO, Calif. — California regulators voted Thursday to extend the life of a state demand response pilot project, saying they hope it could lead to a permanent program to help meet the state’s clean energy goals.
The California Public Utilities Commission heard from the public about several matters at the meeting, held across the street from the state capitol. The five commissioners were also predictably unified in their opposition to any possible FERC-proposed grid resiliency pricing rule as a result of the U.S. Department of Energy’s Notice of Proposed Rulemaking calling for financial support for nuclear and coal-fired power plants.
DRAM Extended
The PUC unanimously approved extending the Demand Response Auction Mechanism (DRAM) pilot program into 2018, against the recommendation of its administrative law judges.
“There were a lot of things that really led me to this decision to see the merit of continuing with this an additional year,” Commissioner Martha Guzman-Aceves said. The program has grown in terms of new participants, including low-income residents, “to levels that are really quite outstanding and different from the [investor-owned utility] programs.”
In the DRAM program, third-party sellers bid aggregated DR directly into the CAISO day-ahead energy market. Utilities acquire the capacity but do not receive revenues winning bidders might gain from the market. In the 2017 DRAM, third-party providers could bid in as both local and flexible resource adequacy, not just system resource adequacy.
Thursday’s decision requires Pacific Gas and Electric and Southern California Edison to procure $6 million of DR in their territories in a 2018 auction for 2019 delivery, while San Diego Gas & Electric must acquire $1.5 million. DR companies bid for the contracts on a pay-as-bid basis.
The program also created two new working groups: one to define new DR programs, and one to study barriers to DR.
Commissioner Liane Randolph said, “It is helpful for us to continue these pilot projects until the evaluation is complete, and we decide whether we are ready to adopt the DRAM as a permanent program.” By keeping the auctions going and modifying the guidelines, “we encourage market participants to continue to invest in this new type of DR,” she said.
Commissioner Carla Peterman said there are limited opportunities for DR.
“I do think it is important to continue our momentum in this area,” Peterman said. She noted the auction will use the same procurement guidelines as a permanent auction. “I think it will be a good opportunity to see how those guidelines work in practice,” she said.
Commission Encourages CCA, Direct Access DR
The commission’s decision also moves forward the process of enabling community choice aggregators (CCAs) and direct access (DA) providers to create DR programs to compete with those of IOUs.
California’s CCA program allows local governments to aggregate retail electric customers and secure electricity supply contracts to serve them, while the DA program allows some nonresidential customers — such as agricultural, commercial and industrial, and small business — to choose alternative electricity suppliers.
The decision allows CCAs and DA suppliers to file with the PUC to determine whether their DR programs are similar to those of utilities. The measure takes steps to implement the “Competitive Neutrality Cost Causation Principle,” which defines what constitutes a similar program and adopts a four-part process make a final determination. If a CCA or DA provider proves its case, competing utilities must cease cost recovery for DR from customers that sign up with the third-party programs.
Chairman Michael Picker said he supports the proposal, but he is concerned that by moving existing DR customers out of the rate base of regulated utilities into the rate base of the CCAs, “we are frustrating the second promise of the CCAs, which is that they will create competition. Here we are actually hindering competition.”
Picker added that it will be important to carefully analyze the applications for DR programs. “The practice has not always met the theory in CCA world; they have been uneven in actually expediting our drive for clean energy sources,” he said.
But he said he strongly support the continuation of the DRAM because it has created unique products, not just opportunities to arbitrage.
Strong Opposition to DOE NOPR
The commission also endorsed comments developed by staff in opposition to the DOE NOPR. Comments on the proposal were due to FERC on Oct. 23.
The approved comments state that “this rushed effort erodes trust in U.S. wholesale electric markets and undermines the role of the FERC as an independent body. If the energy crisis has taught us anything, it is that diversification of resources is critical for resiliency and reliability planning.”
Instead of narrowing the choice of resources that qualify as “resilient,” the PUC said there should be “a wide range” of tools to meet reliability needs, including energy storage, flexible demand and distributed energy technologies.
Picker said that while any such rule would have little immediate impact in California, it could in the long term, and it has aroused concern in neighboring states. He said it was a signal that the Trump administration does not “care to observe a series of long-held conventions on wholesale markets.” The parties creating the rule “don’t have their act together to actually come up with a reasonable argument” and “they have a prescription that is looking for a problem,” Picker said.
Commissioner Clifford Rechtschaffen said “this rule did what was otherwise unimaginable,” noting that it united petroleum, natural gas and renewable energy interests in opposition. “It is so beyond the pale,” he added, saying that PUC staff had devised a strong mix of legal and policy arguments against the rule.
Entergy last week reported a third-quarter profit of $398.2 million ($2.21/share), up from $388.2 million ($2.16/share) a year ago.
“We now expect to finish the year in the top half of our utility, parent and other adjusted earnings guidance range,” CEO Leo Denault said in a statement.
The New Orleans-based company affirmed its 2017 operational earnings guidance range of $6.80 to $7.40/share, and its utility, parent and other segment adjusted guidance range of $4.25 to $4.55/share. Operational earnings do not include non-routine expenses, such as the costs to close or sell the company’s merchant nuclear power plants.
Denault said Entergy will work with regulators to recover $85 million to $120 million in Hurricane Harvey restoration expenses, and that the company expects $3 million to $5 million in unbilled revenue for 2017.
Palisades plant | Entergy
The CEO also said Entergy’s recent decision to extend a power purchase agreement with Consumers Energy regarding the Palisades nuclear plant does not mean the company is staying in the merchant nuclear business. (See Entergy Abandons Palisades PPA Termination.)
“Our strategy to exit the merchant business and become a pure-play utility remains unchanged,” Denault told analysts in an earnings call last Tuesday. “This decision to continue to operate the plant will preserve value for our owners while extending our exit from the merchant nuclear business by only a year.”
ERCOT last week approved the shutdown of two plants, including Luminant’s coal-fired Monticello facility in East Texas, that will take nearly 2 GW of antiquated generation out of service.
Staff approved Monticello’s retirement, effective Jan. 4, saying the plant is not necessary for reliability operations. The plants’ three units, dating back to the 1970s, have a combined capacity of 1,880 MW but found themselves frequently out of the market. Luminant announced the units’ proposed retirement Oct. 6. (See First Shoe to Drop? Vistra to Retire 3 Texas Coal Units.)
Luminant’s Monticello Power Plant | Luminant
The ISO also approved the indefinite mothballing of two gas units at the city of Garland’s Spencer plant, totaling 118 MW of capacity. The city filed notice with ERCOT on Oct. 4. The units began service in 1966 and 1973.
TAC Approves LDF Library Changes in Email Vote
ERCOT’s Technical Advisory Committee last week unanimously approved staff revisions to the ISO’s load distribution factor (LDF) library. The measure gathered 23 out of a possible 30 votes by email.
The vote was conducted after an Oct. 23 web informational session, which became necessary following revisions to account for a nodal protocol revision request (NPRR831).
Staff made changes related to private-use networks (PUNs), which are connected to the ERCOT grid and contain load that is typically netted with internal generation and not directly metered by the ISO. The change updates market systems to calculate a net load value for each PUN that will be included in the load zone price for all markets, when the load is a net consumer from the grid.
LDFs are used in congestion revenue rights and day-ahead market clearing activities, and developed using historical state estimator or supervisory control and data acquisition (SCADA). ERCOT staff added language to generate LDFs for PUN loads, which behave differently from non-PUN loads.
TAC’s October meeting, scheduled last Thursday, was canceled because of a lack of voting items.
FirstEnergy supports the U.S. Department of Energy’s call to financially support nuclear and coal-fired units, but that won’t stop the company from selling off its merchant generation fleet and retreating to the predictable returns of regulated assets.
FirstEnergy’s Akron, Ohio headquarters
CEO Chuck Jones last week said he is also “pleased” with signs of state-level support, including a resolution from the Pennsylvania legislature supporting the department’s proposal and the introduction of the Ohio Clean Energy Jobs bill to support nuclear units with zero-emissions credits (ZECs). But “whether these state or federal activities result in meaningful and timely support remains to be seen,” he said.
“We have no interest in maintaining generating assets that have commodity exposure, and we’re moving forward with exiting the commodity-exposed generation business,” Jones said during a call to discuss third-quarter earnings.
FirstEnergy reported earnings of $396 million ($0.89/share) on $3.7 billion in revenue, missing guidance by $80 million. However, operating earnings of 97 cents/share beat guidance by 10 cents. The results exceeded performance from the same quarter a year ago, when the company reported earnings of $380 million ($0.89/share) on revenue of $3.9 billion and non-GAAP earnings of 90 cents.
Company executives credited the success to “stronger-than-expected results” in its competitive and corporate segments, along with solid regulated performance that included distribution deliveries that were better than forecasted and higher transmission revenues.
The company increased its GAAP forecast for 2017 to a range of $2.02 to $2.42/share and non-GAAP to $3 to $3.10/share, which had been targeted at $2.70 to $3/share.
Jones said Ohio’s House Bill 381 was introduced earlier this month with terms that were “reduced” from FirstEnergy’s previous requests for nuclear price supports. But they’re “likely” enough to make plants “economically viable” when combined with the planned restructuring of First Energy Solutions (FES), the company’s competitive generation arm. He expects a final vote on the measure around the middle of the first quarter next year.
“We believe this effort is imperative for Ohio’s energy security,” he said.
Despite the price support discussions, the company remains focused on shedding FES, Jones said.
“A preferred outcome” would include agreement from FES’ creditors, he said, but Chapter 11 bankruptcy remains an option that hinges on several variables, including DOE’s proposal, FERC’s actions and discussions with creditors’ advisers.
“We recognize the varied interests of our stakeholders, but we’re also aware that some have an interest in floating rumors about our company,” he said in warning that he would not discuss the progress of negotiations.
The company is moving quickly to disgorge the assets. LS Power has agreed to pay $825 million in cash for 1,615 MW of capacity that includes four Pennsylvania gas-fired plants and interests in the Bath County Hydro and Buchanan gas-fired facilities in Virginia, which are owned by FirstEnergy’s Allegheny Energy Supply subsidiary. The transaction involving the four Pennsylvania gas plants is expected to close this year, while the sale of the interest in the Virginia facilities is expected to close in the first quarter of 2018.
Jones said the full deal, which added some assets but was still reduced by $100 million since it was announced earlier this year, was priced on “the existing market conditions.”
The company’s regulated Monongahela Power subsidiary in West Virginia “continues to work through the regulatory process” to take ownership of the 1,300-MW Pleasants plant and expects approval from the West Virginia Public Service Commission and FERC by early 2018, Jones said. Allegheny expects to receive $350 million in net proceeds after paying off all its remaining long-term debt.
