Page 1248 – RTO Insider

November 19, 2017

NYISO Business Issues Committee Briefs: Nov. 15, 2017

RENSSELAER, N.Y. — NYISO year-to-date monthly energy prices averaged $34.89/MWh in October, a 4% increase from a year earlier, Senior Vice President for Market Structures Rana Mukerji told the ISO’s Business Issues Committee (BIC) on Wednesday.

Locational-based marginal prices (LBMPs) averaged $28.35/MWh for the month, down 4.1% from September and up 27% from October 2016. The ISO’s average daily sendout was 398 GWh/day, compared with 437 GWh/day in September and 391 GWh/day a year earlier.

New York natural gas prices rose nearly 4% in October, averaging $2.36/MMBtu at the Transco Z6 hub. Prices were double those of a year ago, although still “historically low,” Mukerji said.

Distillate prices rose 14.9% year on year, with Jet Kerosene Gulf Coast averaging $12.30/MMBtu, down from $13.40 in September. Ultra Low Sulfur No. 2 Diesel NY Harbor averaged $12.86/MMBtu, compared with $12.80 in September.

The ISO’s local reliability share was 14 cents/MWh, down 2 cents/MWh from the previous month, while the statewide share remained unchanged at -50 cents/MWh. Total uplift costs were lower than in September.

External Capacity and Imports

Reviewing the Broader Regional Markets report, Mukerji highlighted NYISO’s effort to clarify the minimum deliverability requirements for PJM resources seeking to export into the ISO’s installed capacity (ICAP) market. He noted that during an October ICAP Working Group meeting, the ISO provided an overview of the current approach to assessing the deliverability of external resources into the New York Control Area for purposes of qualifying eligible capacity within the market.

NYISO is also modifying the documentation requirements for capacity imports across the PJM AC ties, with a planned effective date of May 1, 2018. The process change will require submission of documentation on the day the ICAP Spot Market Auction results are posted to demonstrate that external resources with capacity awards relating to imports across the PJM AC ties have firm transmission service for the month.

The ISO also is considering whether an Atlantic Economics proposal, or an alternate formula-based model, may be viable for calculating locality exchange factors (LEFs). NYISO has engaged General Electric to investigate the viability of potential refinements to the current methodology for determining LEFs.

NRG’s Kelli Joseph Elected Vice Chair

The BIC last week elected Kelli Joseph, NRG Energy’s director of market and regulatory affairs, to serve as vice chair of the committee for the 2017/18 term.

Joseph advocates on behalf of NRG at NYISO and the New York Public Service Commission and worked at NYISO as a grid operations senior analyst prior to joining NRG in 2014. She attended Houghton College and earned a Ph.D. in political economy at the University of Virginia and an international MBA at the IE Business School in Spain.

BIC Approves Developing New LCR Methodology

The committee also voted for NYISO to continue developing a new methodology to determine locational capacity requirements (LCR), subject to updating the net cost of new entry curve to be used in the ISO’s baseline assumptions.

Zachary Stines, associate market design specialist for the ISO, told the BIC that the new optimization methodology results in increased stability as generation changes occur within the system. He said the ISO sought to develop capacity requirements that maintain reliability while minimizing the total cost of capacity at the level of excess condition, i.e., the applicable minimum installed capacity requirement, plus the capacity of the relevant peaking plant.

David Clarke of the Long Island Power Authority opposed the proposed methodology, saying it is based on an unrealistically low estimate of net CONE on Long Island.

Mark Younger of Hudson Energy Economics wanted the ISO to commit to refreshing the database with the current net CONE values so that the optimization uses the same CONE as that used in the energy market. Stines said the ISO would do so early in 2018.

Questions on Integrating Public Policy Task Force

NYISO Senior Manager for Market Design Michael DeSocio’s progress report from the Integrating Public Policy Task Force (IPPTF) elicited a half-hour of stakeholder dissension over the ISO’s definitions of “harmonizing” versus “accommodating” public policy.

NYISO and the New York PSC jointly formed the task force in October to create a forum for stakeholders to discuss pricing carbon into the wholesale electricity market along the lines described in a previous Brattle Report. (See New York Stakeholders Question Carbon Pricing Process.)

Representing New York City, attorney Kevin Lang of Couch White, expressed concerned about the lack of transmission planning in the task force process, given the amount of offshore wind being sought by the state. Younger agreed, saying that new transmission will be required for the grid to absorb increased amounts of new renewable energy and that nobody should assume the issue has been settled.

“Even if you price carbon, it’s unlikely to be high enough to incent renewables development,” said NRG’s Joseph. “We need to be talking about design changes; that’s why we proposed a two-tier market. Not instead of carbon pricing, but while we are at it, look at capacity markets.”

In response to a question about whether the task force had a coherent mission, DeSocio said it is focused on fulfilling the goals of New York’s Clean Energy Standard.

The IPPTF’s next public hearing is scheduled for Nov. 20 in Albany.

— Michael Kuser

November 19, 2017

PGE Disputes ALJ’s Diablo Canyon Recommendation

By Jason Fordney

Pacific Gas and Electric has signaled it will challenge a California administrative law judge’s recommendation that the utility be granted only about 10% of the $1.8 billion in recovery it requested for the retirement of the Diablo Canyon nuclear plant in San Luis Obispo County.

The California Public Utilities Commission has scheduled final oral arguments for Nov. 28 over a joint settlement agreement filed by PG&E and interest groups regarding the plant, which the utility has proposed to shut down when its federal operating licenses expire in 2024 and 2025. PUC Administrative Law Judge Peter Allen on Nov. 8 approved the retirement plan but proposed that PG&E be allowed to recover about $190 million of the nearly $1.8 billion in requested rate recovery detailed in the settlement. Allen’s decision has no weight until voted upon by the five-member commission.

pg&e diablo canyon — CPUC members (left to right): Martha Guzman-Aceves, Carla Peterman, President Michael Picker, Liane Randolph, Clifford Rechtschaffen and staff at their November 9 meeting in San Francisco | © *RTO Insider*

“While the proposed decision preserves several elements of the joint proposal, it differs in regards to certain key areas, including the employee, community and energy replacement programs,” PG&E said in a Nov. 8 statement, adding that it “strongly disagrees with these proposed adjustments.”

The utility said it thinks the proposed settlement is appropriate, and “we look forward to advocating for this in our comments back to the CPUC and during final arguments at the end of November.”

PG&E first filed the settlement it forged with environmental, labor and anti-nuclear groups in August 2016. It would replace output from the 2,240-MW facility with a portfolio of renewable resources, energy efficiency measures and energy storage. (See PG&E Files Diablo Canyon Shutdown Request.)

The utility requested approval to recover $1.3 billion for energy efficiency procurement, $363 million for employee retention and retraining, $85 million to mitigate impacts on the local community, $19 million for license renewal activities, and unspecified canceled capital project costs.

Allen’s proposed decision rejected the energy efficiency money and approved $172 million for employee retention and retraining, $19 million for license activities, and a portion of canceled project costs. He recommended that issues related to the procurement of replacement capacity be handled in an integrated resource planning proceeding.

The judge sided with the Office of Ratepayer Advocate (ORA) and Energy Producers and Users Coalition (EPUC), which noted that state policy already requires PG&E to first meet its resource needs through all available energy efficiency resources. PG&E has proposed to increase its approved energy efficiency goals by more than 53% for 2018-2024, which ORA and EPUC indicated would only be possible by lowering PUC’s cost-effectiveness threshold.

“ORA and EPUC make a good point — it is not clear that PG&E could actually procure over 50% more energy efficiency than a goal that is already supposed to include all cost-effective energy efficiency (unless PG&E procures energy efficiency that is not cost effective),” Allen said. “There is no reason to approve a $1.3 billion rate increase for a proposal that will most likely either fail to achieve its goal or will achieve a goal not worth reaching.”

Allen’s Nov. 8 proposed decision also took issue with a settlement provision that would replace the property tax paid to San Luis Obispo County with $85 million in ratepayer money, arguing that PG&E has no obligation to pay the taxes once the facility shuts down and that utility rates should be used for utility — and not government — services.

PG&E has proposed to replace Diablo Canyon with greenhouse gas-free resources in three tranches: 2,000 GWh of energy efficiency; 2,000 GWh of energy efficiency and renewables; and a voluntary 55% renewables commitment from PG&E. The utility said additional resource procurement could be required to replace Diablo Canyon, the two units of which began operating in 1985 and 1986. The plant is used as a system resource and not for local reliability, and its output is exported on the bulk transmission system.

The settlement is supported by the Natural Resources Defense Council, Friends of the Earth, Environment California, International Brotherhood of Electrical Workers Local 1245, Coalition of California Utility Employees and the Alliance for Nuclear Responsibility.

Protests against the settlement were filed by California Large Energy Consumers, Californians for Green Nuclear Power, EPUC, several cities, the Sierra Club, Shell Energy North America, SolarCity, public interest groups and others.

After a 25-day public comment period, the ALJ’s proposed decision will be forwarded to the PUC. PG&E has requested that the commission reach a decision on the settlement by the end of the year.

November 19, 2017

New England Strives for CASPR Consensus

By Michael Kuser

MARLBOUROUGH, Mass. — ISO-NE is “in the final throes” of a stakeholder process to reach agreement with the New England Power Pool on a two-settlement market construct to integrate state-sponsored renewable energy resources into its wholesale market, CEO Gordon van Welie said last week.

Speaking at the Northeast Energy and Commerce Association’s Power Markets Conference on Nov. 14, van Welie said, “We plan to bring this to a vote at the upcoming NEPOOL [Participants Committee] meeting in December and then are going to file it [with FERC] in the December time frame.” He referred to the conference as a “quasi NEPOOL meeting,” considering that most attendees also participate in the organization’s stakeholder meetings.

iso-ne caspr — Audience at last week’s NECA’s Power Conference in Marlborough, Mass. | © *RTO Insider*

As part of NEPOOL’s Integrating Markets and Public Policy (IMAPP) process begun in 2016, the RTO this year came up with a two-tier market concept called Competitive Auctions with Sponsored Policy Resources (CASPR). (See “CASPR May Exclude New Resources from Substitution Auction,” NEPOOL Markets Committee Briefs.)

Van Welie said CASPR “is creating the opportunity for existing resources that have capacity obligations and that wish to retire to trade out their obligation with incoming state-sponsored resources in a manner that doesn’t affect price formation in the primary auction.”

“As much as the states would like to see that their renewable contracts get automatic credit in the Forward Capacity Market, that would run counter to the other objective that we have (aside from reliability), which is to maintain price formation in the capacity market,” van Welie said. “CASPR will tend to accelerate the retirements of the marginal units, with significant payout opportunities for some of the older resources that wish to retire.”

Seeking Broad Consensus

Sebastian Lombardi, an attorney with Day Pitney who serves as counsel to NEPOOL, said, “We’re hoping for consensus because NEPOOL can’t have an affirmative institutional position without some broad agreement being reached. Broad agreement has not been reached yet.”

The NEPOOL Markets Committee considered a number of modifications to CASPR, he said.

“Although some of those proposals were close to getting broad support, at this stage none of them have reached the requisite support needed for NEPOOL approval, but sometimes three weeks is a lifetime in a stakeholder process,” Lombardi said. “Folks have been discussing this for a long time and we’re now getting to the endpoint and folks are going to have to make some hard decisions.”

Christopher Geissler, an economist at ISO-NE, said that while a number of stakeholder amendments did not pass at the Markets Committee, they could be voted on again by the Participants Committee. For context, he said, stakeholder support in this scenario means a 60% vote by the committee.

“We’ve made a number of changes to our design on the basis of stakeholder feedback and we continue to elicit and evaluate stakeholder ideas,” Geissler said. “However, while stakeholder support is important, we also feel that the design has to meet the objectives that we set out at the beginning of the process, so just because something receives stakeholder support doesn’t mean that it’s something the ISO will support. It also has to be good market design.”

Lombardi added that New England has a unique set of rules and governance arrangements whereby “if NEPOOL were to support something that was different from what the ISO wants to file, more than one proposal could be teed up to FERC on equal legal footing, which would provide FERC some optionality.”

Not So Fast

Brett Kruse, vice president of market design for Calpine, gave the NEPOOL talks a 30 to 40% chance of success and described some of the obstacles to reaching an agreement.

For example, the current renewable technology resource exemption is being challenged in federal court, with briefings due Jan. 12, 2018. Kruse said only a couple generators support the CASPR proposal as is, but more would support it if it was modified to protect price formation. He suggested that Calpine’s bid shading amendment might win ISO-NE support, particularly as it is already supported by the RTO’s internal and independent Market Monitors.

In addition, generators do not support an amendment proposed last week by the New England States Committee on Electricity for a 200-MW “backstop” allowing entry of sponsored resources around CASPR in perpetuity.

“I look at CASPR as an interim solution; I think that’s the way the ISO has talked about it,” Kruse said. “I’m not that positive on the long-term outlook for markets here in New England. Now will that be five years, 10 years? I can’t see it getting to 20 years. But even if we get something like this done, I think all that we’ll be able to do is slow down the convergence.”

Although Calpine is expanding its retail and commercial load-serving business in New England, the company is not looking to develop any new generation other than wind because of Massachusetts’ solicitation for thousands of megawatts of clean energy.

“The fundamental stuff shifted because we tend to take the state at their word,” Kruse said. “A goal is one thing, a mandate is another, a law is something else. A lot of people I talk to believe there’s no way they’re going to be able to build that much offshore wind — it’s crazy, it will cost way too much money. But when the legislature puts it in a law and the governor signs it, we believe. So we believe all that stuff’s going to come in that shifts all the underlying fundamentals.”

Regulatory Risk Perceptions

Todd Schatzki, vice president of Analysis Group, said the region’s desire to transition to a low-carbon future is driving the market. “But moving from desire to developing market designs and public policies that send effective price signals — we’re not there yet. Now we have the dilemma of legislators entering the markets through the back door,” he said.

Dan Dolan, president of the New England Power Generators Association, which represents 80% of the region’s generating capacity, said regulatory risk is what he hears about most from his members.

“It’s the uncertainty of what’s next: What is the next large-scale procurement coming from a state?” Dolan said. “It’s those issues that then make investing in the tens of billions of dollars in assets that we have here very challenging. … I challenge you to find another sector of the economy that does not have guaranteed rate recovery and a rate of return investing any multiple close to that in new infrastructure in New England. We are the last major manufacturers in New England.”

Darren Matsugu, senior manager for market design and integration at the Independent Electricity System Operator in Ontario, said his ISO has only 8% natural gas-fired generation, compared to nearly 50% in New England. The Canadian province’s Legislative Assembly voted in 2003 to phase out coal, and the last coal plant there closed in 2014.

“The majority of our system’s installed capacity comes from very low marginal cost resources, whether it’s from hydro resources, from nuclear, or from solar and wind,” Matsugu said. “Along with the impact of lower natural gas prices, we’ve seen a significant decrease in the level of our wholesale energy prices. Often at the shoulder periods we fluctuate in the $0 to $10/MWh range.”

Beth Garza, director of ERCOT’s Independent Market Monitor and vice president at Potomac Economics, provided some perspective for the New Englanders struggling to achieve or accommodate the public policy goals set forth by the region’s six states.

“Unlike other areas that have centralized clean energy goals, Texas has not had that, but the markets are responding as if we did,” Garza said. “Texas has become a leader in wind generation simply because the zero-cost resource offers investors a good chance to make a profit.”

November 19, 2017

FERC Approves FirstEnergy Sales to Affiliates

FERC NOPR merchant generation FirstEnergy — FirstEnergy’s Akron, Ohio headquarters

FERC last week approved two requests by FirstEnergy Solutions (FES) to sell power to Potomac Edison and West Penn Power. All three companies are subsidiaries of FirstEnergy (ER17-1267, ER17-1272, ER17-1559). The agreements are retroactive to June 1.

FES won the bids through competitive solicitations from the affiliates to serve customers who do not take service from competitive retail suppliers. Potomac serves customers in Maryland and West Virginia; West Penn’s customers are in western Pennsylvania.

FERC uses standards set out in its 1991 Edgar Electric Energy (ER91-243) and 2004 Allegheny Energy Supply rulings (ER04-730) to prevent utilities from self-dealing. The commission determined that the affiliate deals met the four criteria of transparency, definition, evaluation and oversight.

No protests were filed over the transactions.

— Rory D. Sweeney

November 19, 2017

MISO Eyes Small Queue Changes, Merchant DC Interconnections

By Amanda Durish Cook

CARMEL, Ind. — MISO will next month submit two filings with FERC to further refine its new generation interconnection process, while a third filing early next year will seek to facilitate connections for merchant HVDC lines, the RTO said last week.

MISO Manager of Resource Interconnection Neil Shah said the two near-term filings — one to limit the amount of time interconnection customers can change their megawatt values and the other to update the interconnection request form — serve as a “clean up” to implement details the RTO missed in its filing to redesign the queue.

The first revision would shorten the period for generation owners to change the capacity volume associated with network resource interconnection service (NRIS), moving the final selection to the second decision point in the queue rather than just before MISO begins an interconnection facilities study.

The second change would update the interconnection request form that prospective generation owners fill out upon entering the queue to include options for external NRIS and MISO’s fast-track request option for small generating facilities.

Shah said he did not expect the filings to elicit protests from stakeholders, who offered no public comment on the changes during a Nov. 15 Planning Advisory Committee meeting.

miso interconnection queue — | © *RTO Insider*

Wind on the Wires’ Natalie McIntire said she hoped the filings were as harmless as Shah characterized. “It’d be nice to finally have some queue changes that are uncontested,” she joked.

The apparently benign queue changes come as some stakeholders are already calling for a fundamental reconsideration of the interconnection queue not even a year after the RTO rolled out a redesign of the process.

Earlier this month, EDF Renewables asked MISO to consider a two-stage queue instead of the RTO’s selected three-stage design, while FERC denied a request to rehear its approval of the new design, which generation developers said should include a fast-tracked queue for vetted projects. (See EDF Asks MISO to Revisit Queue Overhaul.) EDF will return to the Steering Committee in January to make its case for a streamlined queue.

HVDC Interconnection

Another interconnection-related filing in January or February would revise MISO’s Tariff to allow merchant HVDC lines to inject energy into the RTO’s transmission system at certain points of connection. Under the proposed rules, merchant HVDC would advance through the queue much like other interconnection customers and earn injection rights. However, MISO would draw a distinction between “injection rights” and “interconnection rights.” A merchant HVDC owner could only secure injection rights, and its associated generator must also line up in the queue and reference the HVDC injection rights. MISO would then convert the injection rights into interconnection rights for the generator without further queue studies. Only then would the rights be usable to offer energy or capacity into the MISO markets.

In response to a question by Indiana Utility Regulatory Commission adviser Dave Johnston, Shah said there are currently HVDC projects on hold in the queue, most of which are requesting injection rights into MISO.

WOW consultant Rhonda Peters said it’s still unclear how MISO will treat a merchant HVDC line wishing to withdraw from the system and inject into another balancing authority.

“As of now, these procedures are not supported,” Peters said.

Shah said some existing Tariff provisions would allow for withdrawal. “There’s some work needed, but it’s mostly educational in my mind,” he said.

Peters countered that the “thousands of megawatts” that HVDC lines are able to move is “unprecedented” and MISO’s current $4,000/MW upfront fee for the definitive planning phase is prohibitively high and will hinder the connection of projects. She asked for MISO to consult with other RTOs about their merchant HVDC interconnect policies.

Shah said he would take those suggestions into consideration and asked stakeholders to provide other input by Dec. 1. More discussion on merchant HVDC interconnection procedures is planned for the December PAC meeting.

November 19, 2017

FERC Won’t Rehear Entergy Refund Order on Off-System Sales

By Amanda Durish Cook

FERC last week refused to reconsider how Entergy should calculate ratepayer refunds resulting from Entergy Arkansas’ off-system sales to non-Entergy entities from 2000 to 2009. FERC denied rehearing requests from the Arkansas Public Service Commission, the Louisiana Public Service Commission and Entergy (EL09-61-006).

The order stems from a 2012 ruling requiring the company to make refunds to ratepayers because it improperly allocated lower-cost system energy in off-system energy sales to third-party power marketers and other non-agreement members between 2000 and 2009. The allocation violated the circa-1982 Entergy system agreement, driving up the rates of captive customers of other operating companies by preventing their purchase of the low-cost energy.

Last year, in Opinion 548, FERC ordered a full rerun of Entergy’s intra-system bill that reflects how the purchases should have been priced to determine damages. Final damages have not yet been determined, and the issue is still in hearing procedures. (See FERC Affirms Entergy Refund Order on Off-System Sales.)

The commission also affirmed its 2012 Opinion No. 521, in which it decided that although the opportunity sales in question are not joint account sales — sales to others for the joint account of all of the company’s operating companies — they should be given the same treatment under the company’s responsibility ratio.

ferc entergy — Entergy Arkansas’ Mayflower Substation | *Entergy*

It dismissed the Louisiana PSC’s argument that FERC erred in requiring that the opportunity sales load be excluded from Entergy Arkansas’ responsibility ratio because the subsidiary is solely responsible for the sales.

“The Louisiana commission’s interpretation of Opinion No. 521 ignores the commission’s full findings,” FERC said. “Entergy Arkansas should not have to pay for the capacity used to service the opportunity sales if it did not also have the ability to draw upon the cheaper energy for sales to its own load.”

FERC rebuffed the company’s argument that its remedy was “arbitrary and capricious in deviating from the long line of orders” that held that the system agreement granted each operating company first call on the energy from their generation facilities. “The precedent Entergy cites does not interpret the system agreement with respect to the type of off-system sales at issue in this proceeding,” FERC explained.

FERC also found no merit in the company’s argument that the refund methodology is at odds with provisions of the system agreement that prohibit an operating company from simultaneously buying and selling energy. The commission said Entergy failed twice to point out such a provision in its system agreement.

The commission also declined to decide whether payment for damages should be distributed to ratepayers or shareholders, calling it outside of the scope of proceeding.

November 17, 2017

California Utilities Short on Local RA Capacity

By Jason Fordney

California’s utilities are about 2,000 MW short of local resource adequacy (RA) requirements for 2018 according to CAISO, which has asked state regulators to restructure the RA program.

In a Nov. 13 report, the ISO evaluated the 2018 resource adequacy plans of Pacific Gas and Electric (PG&E), Southern California Edison (SCE), and San Diego Gas and Electric (SDG&E). RA requirements are broken down by Transmission Access Charge (TAC) areas, which are based on the service areas of the state’s three investor-owned utilities.

“The ISO’s evaluation has identified individual [load-serving entity] and collective capacity deficiencies in several Local Capacity Areas in the PG&E, SCE and SDG&E TAC Areas,” the ISO said.

CAISO risk-of-retirement resource adequacy — San Diego Gas & Electric’s Encina plant

Because CAISO evaluates RA for local load pockets as well as the overall system, capacity procurements made through the California Public Utilities Commission RA program don’t always align with the reliability needs identified by the ISO. As a result, the ISO at times depends on out-of-market payment schemes to keep fossil-based resources online to support local reliability, a practice that has created tension among market participants and concern at the ISO’s Board of Governors. (See Board Decisions Highlight CAISO Market Problems.)

The CPUC’s RA program requires an LSE’s capacity to be available to CAISO when and where needed. There are three types of RA: system resources, local resource adequacy and flexible resources, a category added in 2015 to help manage the changing resource mix.

Deficiencies Abound

The CAISO Tariff allows LSEs and electricity suppliers to address individual capacity deficiencies before the ISO obtains “backstop” procurement. The LSEs are not required to purchase capacity from a specific resource to meet a local need, but can purchase from any resource located locally or with adequate transmission.

“However, to the extent that the aggregate LSE showings do not comprise the right mix of resources that meet the LCR [local capacity requirement] criteria and ISO effectiveness needs, a deficiency may exist that would cause the ISO to procure individual and/or collective backstop capacity,” the ISO said.

Such deficiencies did indeed show up in CAISO’s findings. The report found an local capacity resource (LCR) shortfall of 1,072 MW in the PG&E TAC, nearly all of which represents a “collective deficiency” to be addressed by all LSEs within the area. Individual LSE deficiencies represent just 72 MW of the total.

PG&E area shortfalls include a 574 MW need in the South Bay-Moss Landing sub-area in the San Francisco Bay Area, and a 422 MW need in the “South of Palermo” section of the Sierra Area.

The SCE area needs an additional 317 MW in the Moorpark portion of the Big Creek-Ventura area, the report shows.

CAISO’s 2018 assessment for SCE includes generators that are set to retire in 2020 because of once-through-cooling rules, including a combined 2,076 MW of capacity from NRG Energy’s Mandalay and Ormond units. The proposed replacement, NRG’s proposed Puente natural-gas fired plant, is strongly opposed by environmental groups and some in the local community.

NRG asked the California Energy Commission to suspend the permit application after two members of the agency recommended the full commission deny the permit for the plant. (See NRG Signals Pull-out on Proposed Puente Plant.)

In SDG&E’s TAC, the overall deficiency is 560 MW, with individual LSE deficiencies accounting for 475 MW of the total.

Reforms Needed

Separately from the Nov. 13 report, the ISO recently joined with IOUs in asking the CPUC to make fundamental changes to the RA program, which is meant to procure sufficient resources to meet reliability needs. CAISO filed comments Nov. 9 in the CPUC’s latest RA proceeding saying it agrees that the commission should “establish a separate track of this proceeding to address fundamental resource adequacy issues.”

The IOUs want the CPUC to simultaneously consider the interplay among the CAISO market structure, the RA construct and state policy goals.

CAISO and others cite the increasing number of reliability-must-run agreements that the ISO has been forced to sign with natural gas units, the most recent being Calpine’s Metcalf Energy Center. CAISO said “the rapid transformation and nature of the resource fleet and other factors are exposing fundamental inadequacies in the current resource adequacy framework.”

But the ISO also noted that RMR designations “are a result of these events, not the root cause, and they highlight the need to comprehensively re-examine the resource adequacy program.”

November 17, 2017

MISO to Seek Waiver After FERC Rejects Offer Cap Plan

CARMEL, Ind. — MISO will seek a series of waivers in order to implement wintertime energy offer caps after FERC rejected the grid operator’s proposed cap design, RTO officials said.

Staff signaled the move a week after the rejection of MISO’s Order 831 compliance filing, which the commission said wrongly prohibited resources from submitting cost-based offers above the $2,000/MWh hard cap. (See MISO’s Plans for Wintertime Offer Caps Stalled by FERC.)

MISO offer cap ferc — Benbow | © *RTO Insider*

For the past three winters, FERC has granted the RTO a waiver of its $1,000/MWh offer cap. During a Nov. 14 Informational Forum, MISO Senior Director of Systemwide Operations Rob Benbow confirmed the RTO will seek a similar course this winter. (See MISO Granted Winter Waiver on Offer Cap.)

The waiver would allow resources to recover verifiable incremental energy costs higher than MISO’s existing $1,000/MWh offer cap for the season. That practice was prompted by a 2014 extreme cold snap that sent fuel costs soaring and saw some MISO generators offering at the $1,000/MWh cap, indicating they may have incurred costs in excess of the cap.

Benbow did not disclose what MISO is contemplating to revise its initial Order 831 proposal or when the RTO will attempt another filing. In turning down the plan, FERC said MISO did not describe what factors would be considered when verifying cost-based offers or distributing uplift and was silent on its treatment of external supply offers in excess of the cap.

“Right now, we’re reviewing this order,” Benbow said. “In the meantime, we have a temporary waiver to put in place…That waiver is being worked on right now, and we’ll get that out shortly.”

— Amanda Durish Cook

November 17, 2017

Ukraine Attacks, ‘Fake News’ Color NERC GridEx IV Drill

By Rich Heidorn Jr.

Participants in NERC’s GridEx IV began the two-day drill Wednesday encouraged by their coordination in recent hurricanes but chastened by the 2015 cyberattack on the Ukraine and the spread of disinformation via social media.

About 6,500 participants from 450 organizations took part in GridEx IV, including electric utilities, RTO officials, regional and federal government officials, first responders and intelligence agencies.

“The large-scale cyber and physical attack scenario is designed to overwhelm even the most prepared organizations,” NERC Acting CEO Charles Berardesco said during a media briefing Thursday morning. “Participating organizations are encouraged to identify their own lesson learned and to share them with NERC.”

nerc gridex iv — NERC led a media briefing on GridEx IV Thursday. Clockwise from bottom: Kimberly Mielcarek, NERC; Charles Berardesco, NERC; Patricia Hoffman, DOE; Kevin Wailes, Lincoln Electric System; Tom Fanning, Southern Co.; Duane Highley, Arkansas Electric Cooperative Corp.; Marcus Sachs, NERC. | *NERC*

Most of the participants are involved in two days of “distributed play” across the U.S., Canada and Mexico. In addition, about 100 executives gathered at Booz Allen Hamilton in Washington Thursday for a “tabletop” exercise run in parallel.

“The usefulness of these exercises is [testing] the unknown and heretofore unseen. It is to break the system. It is to find out where the friction points are [and] trying to harmonize the activities [of] the federal government, private industry and state and local governments,” said Southern Co. CEO Tom Fanning, co-chair of the Electricity Subsector Coordinating Council (ESCC). “It’ll be a great day. We’ll learn a lot.”

Previous Lessons Learned

Fanning said previous GridEx drills improved industry coordination, as he said was demonstrated in the “unprecedented collaboration” among investor owned utilities, cooperatives and municipal utilities following hurricanes Harvey and Irma in August and September.

“The ESCC also has a responsibility for helping to coordinate storm response,” he said. “I think this model is working exceptionally well. In fact, we believe the metrics would show that our recovery times were roughly half of what they have been for similar storms in the past.” Hardening of infrastructure also contributed to the speed of the storm recovery. (See Power Restored for 97% of Customers in Irma’s Wake.)

“You get good at what you practice, and we want to be good at response recovery,” said ESCC Co-Chair Duane Highley, CEO of the Arkansas Electric Cooperative Corp., who noted that about 50 cooperatives were participating. “And we want to build our relationships before we need them.”

ESCC Co-Chair Kevin Wailes, CEO of Lincoln Electric System, said a key improvement resulting from the 2015 drill was the creation of a cyber mutual assistance group. “We realized that we really did not have a deep enough bench … to deal with some of these events on an individual basis,” he said. “So we now have 130 companies involved in cyber mutual assistance.”

The 6,500 participants represented an almost 50% increase from GridEx III. (See GridEx III Shows Vulnerability of Power Grid to Cyberattack.)

This year’s iteration of the biennial exercise is the first to involve the finance, telecommunication and natural gas sectors in the tabletop exercise.

‘Real World’ Scenarios

The “injects” — or scenarios — were informed by the cyberattack that knocked out power to 225,000 customers in Ukraine for several hours in December 2015. (See How a ‘Phantom Mouse’ and Weaponized Excel Files Brought Down Ukraine’s Grid.)

“We always take real-world events as the basis for the exercise because the engineers that are running the distributed play … know what the vulnerabilities are,” said Marcus Sachs, NERC senior vice president and chief security officer.

“We will name specific vendors and components, so it’s a very realistic type of exercise.”

“There’s been a lot of operational planning and coordination since Ukraine in 2015 between government and industry,” said Chris Krebs, the Department of Homeland Security’s acting undersecretary for national protection and programs. “So this is a fantastic opportunity for us to start stress testing some of those planning assumptions we’ve made.”

In recognition of revelations about a Russian campaign to spread “fake news” during last year’s presidential election, officials said they also were incorporating the threat of disinformation on social media platforms.

“The unity of message … is just about as important as the unity of effort. That is, we’ve got to make sure we understand … how we advance our communications,” said Fanning. “An important aspect of that … is how do we gain more influence and control on social media.”

Cauley Absent

GridEx IV was the first such drill run without longtime NERC CEO Gerry Cauley, who was removed from his post Nov. 11 following his arrest on domestic violence charges. (See Cauley Arrest Tied to Relationship with NERC Subordinate.)

NERC issued a statement Wednesday saying the board “has engaged counsel to assist in conducting a thorough investigation” of the allegations. NERC spokeswoman Kimberly Mielcarek cut off Berardesco before he could answer a question about how he kept the Cauley situation from being a distraction going into the exercise.

“We’re keeping staff informed as developments unfold,” she said. “It’s premature for us to comment on anything further at this time. However, we do provide updates as they are available, and we will continue to do so both publicly and to our staff.”

Hopes for 2017 Drill

Patricia Hoffman, principal deputy assistant secretary for the Department of Energy’s Office of Electricity Delivery and Energy Reliability, said she hoped this year’s drill would test the energy secretary’s emergency authority. Section 202(c) of the Federal Power Act allows the secretary to order power plants to operate for reliability reasons during emergencies. It has been used infrequently, notably during the Western Energy Crisis in 2000 and after Hurricane Katrina in 2005.

The drill “also helps with us as we look at how we’re planning for modernization and investment in the infrastructure moving forward,” she said.

A report on the drill will be released in about March 2018.

November 17, 2017

Chatterjee: ‘We’ve Moved Past’ DOE NOPR

By Michael Brooks

WASHINGTON — FERC Chairman Neil Chatterjee on Thursday defended his call for interim price supports for coal and nuclear plants as a response to Energy Secretary Rick Perry’s grid resiliency proposal.

In remarks to reporters after FERC’s open meeting, Chatterjee expressed frustration with the reaction his plan has received from industry stakeholders. He said his critics were still debating the department’s Notice of Proposed Rulemaking — which calls for RTOs and ISOs with energy and capacity markets to pay generators with 90-day supplies of onsite fuel their full operating costs — and not his idea to provide a “lifeboat” for baseload plants while FERC considers the NOPR.

FERC ISO-NE Cheryl LaFleur Neil Chatterjee DOE NOPR — Chatterjee | © *RTO Insider*

Chatterjee was asked about discussions regarding the NOPR at the National Association of Regulatory Utility Commissioners’ Annual Meeting in Baltimore this week. “This is part of the confusion and why people are having the outsized reactions that they’re having,” he responded. “That entire debate at NARUC was predicated on the NOPR that Perry has submitted. What I’m sitting here talking about is what we’ve been working on for an interim step coupled with our own long-term rulemaking.” (See DOE, Pugliese Press ‘Baseload’ Rescue at NARUC.)

He said he was “cognizant” of the criticisms the NOPR has received, but that “people are still debating the NOPR as it was submitted to us. And what I’m trying to say is we’ve moved past that and we’re moving towards a constructive solution that still answers the questions that Secretary Perry asked in the NOPR in a way that does not distort markets and is legally defensible.”

Chatterjee revealed he was working on an interim solution last week. (See Chatterjee to Push Interim ‘Lifeboat’ for Coal, Nukes.)

He said he is contemplating proposing a “show cause” order requiring grid operators to compensate resources that may provide resilience benefits and are at risk of retirement as an interim measure while the commission conducts a longer-term rulemaking.

Chatterjee called on his critics to “calm down,” attributing their “hyperbolic” reaction to a lack of understanding of his plan.

“This is a very careful, thought-out approach that I think that when people have the opportunity to calmly look at it, there’s nothing controversial or radical.”

Chatterjee said it was “befuddling” that anyone would find it controversial for the commission to “carefully and thoughtfully” examine the long-term implications of not having coal and nuclear as part of the country’s generation mix. He emphasized repeatedly that his “lifeboat” plan was a work in progress but that it would be ready to act on by the DOE-stipulated Dec. 11 due date.

“We’re still fleshing it out,” he said. “It’s incredibly complex; I want to get it right, and as soon as it’s right and it’s ready and I’ve had time to review with my colleagues, I’ll discuss it in far greater detail at that time.”

Chatterjee said that in working on his idea, he has been trying to ameliorate concerns raised by Commissioners Cheryl LaFleur and Robert Powelson about the DOE NOPR.

“I’m hoping that in fleshing this out, [Chatterjee and his staff] will answer the questions and concerns my colleagues had and have a product that we’ll be able to build a consensus around,” he said.

Chatterjee has previously stated that he has not discussed his idea with the other commissioners.

He also said that he has not reviewed the price-formation proposal PJM released Wednesday — a longer version of what the RTO filed at FERC in comments on the NOPR. (See Rule Changes Could Spur $1.4B Jump in PJM Market Costs.)

“It’s certainly in line with the conversation that we’re having,” Chatterjee said. “It seems like something that we could look to for a longer-term solution. … But I still remain committed to doing something in the short term, in the interim, while we work towards some of the long-term issues that PJM acknowledged we have.”

A Farewell Address, of Sorts

In his remarks opening Thursday’s meeting, Chatterjee highlighted what the commission has done since he became chairman in August, including changes in hydropower licensing, proposals for improved cybersecurity and approval of 8 Bcfd of new natural gas pipeline capacity. (See FERC Seeks Cyber Controls on Portable Devices; Sets GMD Plans.)
He said the DOE NOPR would be “the most significant issue we will face during my time on the commission.”

Thursday’s meeting was Chatterjee’s last as chair, with incoming Chair Kevin McIntyre set to join FERC “any day now.” McIntyre, along with Democratic Senate aide Richard Glick, were confirmed by the Senate two weeks ago and are awaiting their signed commissions from President Trump.

Heaping praise on FERC staff, Chatterjee also touted the 344 orders that the commission has voted on since the restoration of its quorum. He said there were only “a few odds and ends” left before the commission had eliminated the backlog of filings from its time without a quorum.

“I think it’s safe to say that FERC is working harder than ever for the American people,” Chatterjee said. “It’s been my distinct honor to be the one at the helm overseeing the accomplishments I’ve outlined today. I’m humbled by the experience and grateful to President Trump for entrusting me with this responsibility.”

He closed out the meeting by noting the “unorthodox” nature of his tenure: beginning as chair before going to regular commissioner.

“Doing it in reverse, I actually hope that the experience that I’ve had will help me be a more effective commissioner going forward,” he said, receiving applause after adjourning the meeting.