Page 1249 – RTO Insider

October 24, 2017

FERC Flooded with Comments on DOE NOPR

By Rich Heidorn Jr.

FERC received more than 300 comments on Energy Secretary Rick Perry’s proposed “resiliency” rulemaking by its Monday deadline, with coal and nuclear interests backing the idea and RTO officials and most other stakeholders roundly rejecting it (RM18-1).

The flood of comments was so heavy that it taxed FERC’s filing system, causing the commission to announce late in the afternoon it would accept comments into Tuesday.

DOE NOPR Rick Perry FERC coal — Perry | © *RTO Insider*

Perry’s Notice of Proposed Rulemaking would require FERC-jurisdictional RTOs and ISOs with capacity markets and day-ahead and real-time energy markets to ensure “full cost recovery” for any generation that can provide “essential energy and ancillary services” and has 90 days of fuel supply on site. Units subject to cost-of-service rate regulation would be excluded.

In its request for comments on the NOPR, FERC asked stakeholders to weigh in on more than 30 questions. Few commenters bothered. But they were effusive in their support — and withering in their criticism.

Those that depend on coal and nuclear generation, including labor unions, shippers and mining companies, heartily endorsed it.

The rule “will produce numerous benefits for all Americans by preserving the continuing viability of critical coal-fired power plants,” said the Kentucky Coal Association (KCA), which represents 120 companies in the No. 4 coal-producing state. “This will not only support a more reliable and resilient power grid but will also have a profound and positive impact in Kentucky and across America by preserving jobs and economic development.”

The Nuclear Energy Institute embraced the cost-of-service compensation as a temporary measure “at least until other market structures are put in place that appropriately value the resiliency attributes that nuclear generation units provide.”

The natural gas, solar and wind industries joined with the Electric Power Supply Association and other industry groups to blast the proposal as “a transparent attempt to prop up uneconomic generation … that is not otherwise needed for reliability.”

RTO officials and their Market Monitors uniformly rejected the idea, with the ISO/RTO Council saying “the negative consequences of the NOPR … are obvious.” PJM, ISO-NE and NYISO also filed their own comments in opposition. (See related story, RTOs Reject NOPR; Say Fuel Risks Exaggerated.)

A bipartisan group of eight former FERC commissioners also blasted the proposal as a repudiation of 25 years of progress toward competitive markets.

Amory Lovins, cofounder of the Rocky Mountain Institute, derided Perry’s proposal as employing “language urgent without evidence, alarmist without cause, and peremptory without authority.”

Given the widespread opposition from all but the coal and nuclear industry — and the myriad questions about how the proposal would be implemented — it appears highly unlikely the commission will act to approve it on the accelerated schedule Perry had demanded, or that it would survive the almost certain legal challenges if it did so.

Perry directed FERC to complete a final rule within 60 days after publication of the NOPR in the Federal Register. The commission, an independent agency, is not required to approve the plan or follow his timeline. (See FERC’s Independence to be Tested by DOE NOPR.)

Below, based on a review of more than 50 comments as of press time, is a summary of the feedback FERC received. Reply comments are due Nov. 7.

Is the Grid at Risk?

Perry said the rule was needed to ensure sufficient supplies of “essential reliability services,” which NERC has defined as including voltage support, frequency services, operating reserves and reactive power. Just and reasonable rates for such generators would cover “its fully allocated costs and a fair return on equity,” including operating and fuel expenses and the costs of capital and debt, the NOPR said.

KCA cited “the clear findings in the proposed rule that the nation’s grid is at risk and that rule-secure resources are indispensable.”

“The commission simply cannot carry out its mission without adopting rules that appropriately value fuel-secure generating facilities that are capable of producing electricity when fuel supplies are interrupted or unavailable,” it said.

The Utility Workers Union of America (UWUA) cited a PJM analysis that it said concluded that “even moderate retirements” of coal and nuclear plants “would reduce PJM’s fuel assurance capability by almost 30% if the units were replaced by natural gas.”

“The country is at a crossroads, and urgent commission action is required before the value provided by critical baseload generation capacity is lost forever,” the American Coalition for Clean Coal Electricity (ACCCE) and the National Mining Association said in a joint 64-page filing.

“We should not allow short-term prices to dictate significant changes in our generation fleet that will reduce the nation’s resource diversity and grid resiliency,” argued NEI, which said nuclear generation units have the highest capacity factors of all generating resource types. “Because of these attributes, nuclear power plants provide reliable baseload generation that stabilizes the grid and moderates price volatility.”

Snow piled on street in Boston| © *RTO Insider*

The EPSA filing countered by citing a Rhodium Group analysis that concluded “0.00007% of customer-hours lost to outages were caused by fuel supply emergencies between 2012-2016, a period when 32% of the country’s coal fired power units and 6% of its nuclear generating units were retired. The same period also featured two of the coldest winters during the past 30 years in the Eastern United States, including the 2014 polar vortex.

“The vast majority of electric service disruptions in the United States are related to distribution or transmission outages, not unscheduled generation outages,” they continued. “And virtually all of the customer-hours that were lost due to fuel supply disruption between 2012-2016 were related to a single incident involving one coal plant in Northern Minnesota.”

David Patton, whose company performs market monitoring in MISO, NYISO and ISO-NE, acknowledged “there may be fuel supply contingencies or other contingencies that have not been fully considered by RTO planners or [NERC].” But he said, “To turn immediately to an out-of-market compensation scheme without considering the alternatives for addressing these issues through the RTO planning and market framework is both inefficient and ultimately unreasonable.”

Will the Proposal Help Resiliency/Reliability?

Many commenters said the proposal would harm rather than help reliability.

“The NOPR proposal would provide compensation to particular units that may otherwise retire because they are older, less efficient and less reliable than newer units,” the IRC said. “Supplanting newer, efficient units with older, less reliable ones in the markets will threaten reliability and market efficiency. This problem will be exacerbated because the NOPR does not outline any minimum performance standards or criteria for determining whether eligible resources are situated in an optimal location to support future reliability needs (including, particularly local reliability and voltage needs).”

Due to rule changes implemented since the 2014 polar vortex, the council said, “ISO-NE, NYISO and PJM have ably maintained reliability in their respective regions.”

Is there a compensation problem?

Longview Power, operator of a five-year-old, 700-MW supercritical coal-fired plant near Morgantown, W.Va., which claims to be “North America’s most efficient coal fired generator,” said it has been undercompensated in the PJM market.

CEO Jeffery L. Keffer said the plant — which has a heat rate of 8,842 Btu/kWh, a 92% availability factor and emissions at least 70% lower than the U.S. coal fleet — is dispatched by PJM as a baseload unit whenever it is available and been awarded capacity payments through the 2020/21 delivery year. It also receives payments for reactive power and other ancillary services.

“However, the compensation paid to Longview for its reliability contributions and ancillary services is wholly inadequate. During 2016, when Longview’s equivalent availability factor was over 92%, it received an average energy payment of only $27.50/MWh. Similarly, the 2017 average energy price paid to Longview is expected to be $28.63/MWh.”

Patton said, however, that the proposal to guarantee full cost recovery of resources “that may be economic to retire will likely generate costs that vastly exceed any reasonable estimate of” the value of lost load. He questioned the notion that coal units were being forced into “early” retirement, noting that the average age of existing coal-fired plants in 2016 was 38 years, within the 35-50-year life span for those assets.

Impact on Wholesale Markets

Critics said Perry’s call for “full cost recovery” for coal and nuclear units would reverse 25 years of competitive wholesale markets.

The R Street Institute, which promote free markets and limited government, praised the NOPR’s call for market improvements such as improving pricing for reliability and resiliency services. “But the detailed problem statement, factual foundation and proposed policy remedies of the NOPR are inconsistent with empirical evidence and principles of wholesale electricity market design,” said Devin Hartman, electricity policy manager. “Motivations for market reforms should never aim to adjust compensation with a predetermined result — in this case preventing certain power plants from retiring. The rationale for markets is to let competitive forces determine resource allocations, which lowers costs and better manages risk than a pre-determined, centrally planned approach would.”

“Proper valuation of coal baseload generation does not require the commission to abandon or ‘blow up’ the competitive electric markets,” KCA insisted. “KCA and other supporters of a resilient grid and affordable baseload power are simply requesting that the commission ensure that competitive market based rules fairly compensate the benefits of baseload generation sources, which are the most cost-effective way to meet constant electrical demand so as to provide for just and reasonable rates to consumers and generators.”

“Valuing coal and nuclear [electric generating unit] resiliency benefits is consistent with market evolution,” wrote UWUA President D. Michael Langford. “Electricity market constructs can be modified — as they are so frequently to accommodate a variety of purposes — to efficiently operate while compensating for reliability services.”

A bipartisan group of eight former FERC commissioners — including former Chairs Elizabeth Anne (Betsy) Moler, James Hoecker, Pat Wood III, Joseph T. Kelliher and Jon Wellinghoff — filed joint comments saying that Perry’s proposal would be “a significant step backward from the commission’s long and bipartisan evolution to transparent, open, competitive wholesale markets.”

“The commission’s adoption of the published proposal would instead disrupt decades of substantial investment made in the modern electric power system, raise costs for customers and do so in a manner directly counter to the commission’s long experience,” they said.

The former commissioners noted their role in issuing Order 888, which established transmission open access, and Order 2000, which defined the responsibilities of RTOs, saying their “shared collaborative mission across party lines and presidential administrations has been a model of good government.” More than two-thirds of U.S. electric customers are now served by competitive wholesale markets.

“Widely diverse interests have invested tens of billions of dollars in both competitive and regulated infrastructure. Customers and the industry have benefited from lower costs and better, more reliable services. Technological innovation has swept the entire value chain.”

They acknowledged that the markets have been impacted by federal tax subsidies for wind and solar generation, as well as “less overt benefits for oil, gas and coal extraction.”

“The commission cannot ignore these interventions, and in fact, should actively inform legislators how such programs impact market operations. But one step the commission has never taken is to create or authorize on its own the kind of subsidy proposed here.”

The IRC said Perry’s proposed cost recovery “stands in stark contrast to other types of narrowly tailored cost recovery mechanisms like reliability-must-run (RMR) mechanisms.”

“The negative consequences of the NOPR proposal are obvious. By affording certain generators guaranteed, full fixed and variable cost recovery for providing some undefined ‘resiliency’ benefit based on an arbitrary ‘fuel-security’ standard, the NOPR will shield eligible generators from the competitive forces that discipline market bidding behavior and ensure that market dispatch and prices are based on least-cost, security-constrained optimization of the resource portfolio.”

Legal Questions

The Harvard Environmental Policy Initiative and Columbia University’s Sabin Center for Climate Change Law said the NOPR is flawed because it doesn’t prove the preliminary conclusion required by the Federal Power Act that current wholesale rates are not just and reasonable.

“This glaring omission dooms DOE’s proposal under Section 206 of the Federal Power Act and allows the commission to issue a swift rejection without weighing in on the merits,” Harvard’s Ari Peskoe wrote. “The NOPR’s observation that wholesale markets do not price ‘resiliency’ does not substitute for an explicit proposed finding that current rates are unjust and unreasonable. DOE does not define ‘resiliency,’ nor has the commission ever used that word in connection with wholesale rates. DOE’s bare assertion that rates do not account for undefined attributes does not provide adequate notice necessary for meaningful public comments.”

Justin Gundlach, staff attorney for the Sabin Center, agreed. “The commission should recognize [the proposal] as a politically motivated gambit to allocate resources to the support of coal- and nuclear-fired generating capacity,” he said.
The IRC said the proposed requirement that RTOs submit compliance 15 days after the effective date of the final rule — 45 days after the rule is published — “is unreasonable and contrary both to commission policy and past practices.”

The IRC said “the NOPR proposes a drastic redesign of existing competitive market structures but provides very little implementation details and no discussion about acceptable cost allocation for the proposal. Given the dearth of specificity in the NOPR, parties will be left guessing as to what might be an acceptable compliance proposal until such time as the final rule is issued. Giving only 45 days from that point will deny RTOs and ISOs adequate time to craft compliant policies and develop tariff revisions. Equally significantly, a 45-day window from issuance of the final rule to submission of compliance filings provides very little time for RTOs and ISOs to initiate stakeholder discussions, let alone time for the RTOs and ISOs to consider what are very likely to be highly disparate stakeholder views on the RTO/ISO’s compliance proposal.”

ACCCE and NMA asked FERC to find existing RTO tariffs unjust and unreasonable. “It is critical that the commission make such a finding, and direct RTOs and ISOs to modify their tariffs to ensure that existing coal-fired generators are able to fully recover their operating costs,” they said.

The EPSA group filing said the proposal would “provide discriminatory compensation” to coal and nuclear generators. “The justification for the proposed payments – resiliency – is not well defined, nor does the DOE NOPR demonstrate that resiliency is lacking in the aforementioned regions,” they said.

It was filed by 20 stakeholders, including the Advanced Energy Economy and trade groups representing competing fuels and alternate resources (American Biogas Council, American Council on Renewable Energy, American Forest & Paper Association, American Petroleum Institute, American Wind Energy Association, Energy Storage Association, Natural Gas Supply Association and the Solar Energy Industries Association).

“This is what a very bad proposal can do,” tweeted EPSA Senior Vice President Nancy Bagot. “Bring people together to save the electricity market!”

90-Day Fuel Supply

DOE would require a generator receiving “resilience” payments to have a 90-day fuel supply “enabling it to operate during an emergency, extreme weather conditions, or a natural or man-made disaster.”

But commenters said the requirement is arbitrary.

Longview said it keeps 10 to 30 days of coal on hand. “Whether dealing with an extreme weather event, such as a ‘polar vortex’ or a terrorist attack, we see the likelihood of the event extending for 90 days as highly unlikely and particularly unprecedented. An event of this length would likely involve serious damage to the transmission grid, which means electric deliverability, not fuel supply, would be the limiting factor in supplying electricity to end users.”

Monitor Patton said the 90-day supply requirement was indefensible, saying he is unaware of any credible contingency that would support the requirement. “Major pipeline repairs have generally been completed within a few weeks; extreme weather conditions typically last from three to 10 days. … On-site fuel supplies of oil or LNG can often be resupplied within a few weeks,” he said. “To the extent MISO has had long-duration fuel-security issues, the issues have been with coal supply limitations due to railway congestion. … Not one of [the large-scale outages since 1965] was impacted by lack of long-term fuel security.”

Patton also dismissed the NOPR’s effort to tie its concern to “the devastation from Superstorm Sandy and Hurricanes Harvey, Irma and Maria.”

“In general, hurricanes are more likely to damage distribution and transmission systems and cause flooding at power stations, impacting resource types in specific locations rather than certain fuel types,” he said. “In other words, these contingencies will generally affect all resources is certain areas, regardless of fuel type, even the resources that qualify as resilience resources under the NOPR.”

Industry Groups’ Response

The Natural Gas Supply Association said there is “no basis” for the NOPR and its proposed solutions. It said “no fuel source is failsafe,” and that natural gas is a “reliability asset for the power sector,” saying interstate pipelines delivered 99.79% of firm contractual commitments over the last 10 years.

WIRES, a transmission trade group, said it would oppose any FERC action that “retreats from the market-oriented and technology-neutral regulatory policies that the commission has fostered for a quarter century [or] fails to fully acknowledge the central role that development of robust electric transmission infrastructure must also play in any effort to make the grid more reliable and resilient.”

The Edison Electric Institute asked FERC to clarify whether the rule changes would include only the Eastern RTOs or also CAISO and SPP, which have no capacity markets.

It said the commission “should institute an appropriate process to investigate potential issues related to resilience”
and direct the Eastern RTOs “to evaluate what, if any, steps need to be taken within their markets to define the specific resource attributes and essential reliability services that may need to be valued in their market(s) and whether alternate compensation mechanisms are needed consistent with the market structure in the region.”

Independent power producers were uniformly opposed, with filings by the New England Power Generators Association (NEPGA), the Independent Power Producers Of New York (IPPNY), PJM Public Power Providers and the Independent Power Producers of Ohio, Pennsylvania and West Virginia.

“New England and New York have long histories of developing market mechanisms to meet reliability,” NEPGA and IPPNY said in joint comments.

“PJM has demonstrated that it will make modifications to the market design to address changing reliability needs of customers,” said the IPPs from Pennsylvania, Ohio and West Virginia, citing the Capacity Performance rules enacted after the 2014 polar vortex. “In a perverse irony, the NOPR will likely harm grid reliability by chasing away the very innovation and investment in new generation needed to maintain the long-term integrity of the grid.”

Customers’ Response

The Industrial Energy Consumers of America said the proposal would raise costs for electric-intensive manufacturers, estimating a 1-cent increase in industrial electricity rates would increase its members’ costs by $9 billion to $10 billion annually. “As a large stakeholder who consumes 26% of U.S. electricity and spends approximately $65 billion on electricity each year, the manufacturing sector is very concerned about this rule,” said IECA President Paul Cicio.

In a joint filing, the Industrial Energy Consumers of Pennsylvania and the Pennsylvania Manufacturers Association
said the rule “threatens to dramatically change the economic climate in Pennsylvania by increasing electric prices and undermining the numerous and relatively recent benefits being generated by the booming and prospering Pennsylvania shale gas industry.”

The group noted that Pennsylvania consumers paid more than $12 billion in stranded costs to utilities in its transition to competition. “For many years after the legislation, the wholesale market prices were higher than those that the utilities used to calculate their stranded cost claims. The generation owners kept those additional profits.”

The Kentucky Industrial Utility Customers took no position on whether the proposal should be adopted, but said if it is, FERC should consider a separate capacity market for grid reliability and resiliency resources. It also said the authorized return on equity “should be the minimum necessary to ensure that the fuel-secure generation does not retire prematurely. An ROE in the 2 to 4% range would accomplish that. Any positive return is better than losing money. If the ROE is set too high, then the affected merchant generators would have reduced incentive to seek a more permanent market-based solution.”

Rule Defenders’ Script

Coal state politicians, such as Republican Sen. Shelley Moore Capito and fellow members of the West Virginia congressional delegation, weighed in with support.

The proposal also found some unlikely defenders, such as the Cleveland branch of the NAACP, which said “the continued operation of the baseload coal and nuclear power plants translates into safer and more prosperous communities.”

Several of the coal industry interests — including Camelot Coal, FreightCar America, Campbell Transportation and IBEW Local 50 — included identical language in their comments: “The preservation of certain plants will avoid the need to replace lost generation with imports and the associated construction of infrastructure to facilitate such importation. … Premature plant closures will deplete the stable of highly skilled (and specifically trained and experienced) employees, many of whom have lived in the region for several years and who take great pride in their work. … The baseload generation facilities that may be retired prematurely offer stability and optionality.”

Many of them raised the threat of layoffs and lost tax revenue from plant closures.

The Utility Workers Union of America, which represents 50,000 electric, gas, water and nuclear industry workers nationwide, focused on the potential impact in Avon Lake, Ohio, where it said closure of a coal plant would result in reduced income and property taxes. A city councilman told Congress in 2012 that the plant’s closure would force a 50% cut in the city’s emergency medical service operating budget and a $4 million cut — 11% — for the local school district, forcing it to cut programs for special needs students.

Michael Kuser, Amanda Durish Cook, Tom Kleckner, Jason Fordney and Rory D. Sweeney contributed to this article.

October 24, 2017

RTOs Reject NOPR; Say Fuel Risks Exaggerated

By Michael Kuser, Tom Kleckner, Rory D. Sweeney, Amanda Durish Cook

RTO officials and their Market Monitors on Monday unilaterally rejected Energy Secretary Rick Perry’s proposal to provide price supports to coal and nuclear plants, calling it expensive, inefficient and counterproductive.

The ISO/RTO Council (IRC) led the opposition, with CAISO, PJM, MISO, ISO-NE and NYISO also filing comments in opposition. Also filing statements opposing the proposal were PJM Market Monitor Joe Bowring; David Patton, Market Monitor for MISO, NYISO and ISO-NE; and Keith Collins, head of SPP’s Market Monitoring Unit.

In a joint filing supporting the rule, the American Coalition for Clean Coal Electricity (ACCCE) and the National Mining Association criticized the RTOs for failing to address trends threatening coal and nuclear generators. (See related story, FERC Flooded with Comments on DOE NOPR.)

They said NERC’s and RTOs’ “confidence in the current state of electric reliability … are based, in large measure, on existing conditions and short-term forecasts, largely ignoring the trend toward premature retirements of baseload coal-fired generating capacity currently available to address reliability and resiliency needs.”

market monitor coal nuclear NOPR FERC ISO-NE — | © *ISO-NE*

The coal groups acknowledged that some RTOs “have tried to explore measures intended to maintain traditional baseload capacity in the market, and have even taken some halting and less-than-full steps in that direction, a tacit recognition that existing market rules and structures are not properly valuing the reliability, resiliency and long-term price stability benefits that traditional baseload capacity provides.”

But it said “the few revisions to existing RTO/ISO tariffs and related market structures and rules have so far been much too little and far too late. Without action by the commission to remedy these tariffs and market structures, the electric system will devolve to lose the value of fuel diversity and end up overwhelmingly dependent on intermittent renewable and natural gas generation.”

Rebuttal

Patton recommended FERC define the contingencies the Department of Energy seeks to address. “Without first identifying in detail the contingencies and associated reliability risks to the system, there is no way to quantify a resilience requirement,” he said.

He said MISO and ISO-NE have already conducted fuel-security studies.

“MISO’s evaluations of the adequacy of the gas pipeline infrastructure found the MISO North and Central regions to be ‘favorably located at the crossroads of pipeline corridors extending from many supply basins … with more than 20 interstate pipelines and significant gas storage resources.’ Hence, MISO’s potential exposure to natural gas supply contingencies is relatively low, and the need for the payments called for under the [Notice of Proposed Rulemaking] is similarly low.”

Patton acknowledged New York and New England are more vulnerable to natural gas system contingencies than MISO. But, he said, “it is highly unlikely that the proposal in the NOPR is a feasible or reasonable means to address these vulnerabilities,” saying dual-fuel capability “has been the most effective and cost-effective means” to address them.

“This illustrates the problems that arise when one starts with a very specific answer, rather than starting with a clearly defined issue or objective and allowing the markets to provide the most efficient answer,” he said.

ISO-NE

ISO-NE found fault with what it called the NOPR’s “one-size-fits-all” approach to the region’s risks and said its stakeholder processes were preferable to the NOPR to “develop market-based solutions, if any are needed.”

“The NOPR does not address these risks, and ISO-NE proposes to instead use the time the region has in 2018 and beyond to quantify its fuel-security risks,” the RTO said.

The grid operator said the NOPR would “significantly undermine the efficient and effective wholesale electricity markets,” and that moreover, “New England has no urgent need to rush to a solution, given that the three-year Forward Capacity Market has ensured resource adequacy until at least 2021, and the region has already taken steps to improve operating procedures and generator incentives to secure firm fuel supplies.”

Commenting on the proposed rule’s estimated burden of $291,042 per respondent RTO/ISO to develop and implement new market rules as proposed, including potential software upgrades, ISO-NE said such efforts would “be in the millions of dollars for each RTO.”

The NOPR would undermine New England’s wholesale electricity markets in two ways, the RTO said: “First, these resources may have no incentive to bid their appropriate fuel and operating costs in the energy market … [and] could profitably bid zero. While there are admittedly few coal resources remaining in the region, if these costly units bid zero, it will undermine price formation in the day-ahead and real-time energy market and increase emissions.”

Second, the RTO said, its FCM enables resources to offer to retire if the market does not clear at or above a specific price: “Normally, as units age and their costs rise, new resources will be more economic than retaining aging units that require a higher price. With full cost recovery guaranteed, however, these aging resources will remain, deterring the development of newer, more efficient and more cost-effective generating units.”

ISO-NE also said it has developed new operating procedures to improve information on generator availability during cold weather conditions, such as requiring generators to report their anticipated availability to the grid, including details on their ability to procure fuel.

The RTO said it also has increased market-side efficiency and improved gas-electric coordination to mitigate the supply problems arising from natural gas pipeline constraints.

“For example, the ISO has shifted the day-ahead energy market timeline to better align the electricity and natural gas markets to give generators more time to procure the gas they need to run,” it said.

NYISO

NYISO asked FERC not to adopt the proposal but said if it deemed action necessary, it should give the RTOs at least 180 days from the effective date of any final rule to submit compliance filings.

“[The] deadlines are simply not realistic and attempting to impose them would not be reasoned decision-making,” the ISO said. “The NOPR’s approach would distort, if not destroy, wholesale market signals needed to attract and retain resources required for reliability.”

The ISO called the proposed grid resiliency pricing rule “flawed” for being premised on inaccurate assumptions and statements as they relate to New York.

“The NOPR does not establish that its proposal is appropriate or that ‘grid resiliency’ issues should be addressed the same way in different regions,” said the filing, adding that the grid operator “is not aware of any imminent emergency likely to develop on the wholesale electric system that necessitates drastic and immediate action.”

All resource adequacy criteria have been satisfied in New York and are expected to continue to be satisfied for the foreseeable future, said the ISO. For example, on Jan. 7, 2014, New York set a new record winter peak load of 25,738 MW during the polar vortex, and “NYISO met all reliability criteria and reserves requirements without activating emergency procedures at any time during the winter operating period. It did so despite significant generator capacity derates on some of the coldest days, including generation resources that would appear to qualify under the NOPR as ‘eligible grid and reliability resources.’”

The ISO said it has made improvements to its energy and ancillary service markets and incorporated features into its capacity market rules “that reflect the importance of resiliency to withstand severe weather events,” including basing the downstate installed capacity demand curves on peaking plant designs that include dual-fuel capability.

PJM

PJM agrees there is an issue with maintaining reliability, but not the one suggested by the department.

“The DOE didn’t exactly get it right in the way it attempted to articulate the problem,” Stu Bresler, PJM senior vice president of operations and markets, said Thursday.

During a special conference call to preview the RTO’s plan for responding to FERC’s request for comments on the NOPR, Bresler said that the real issue is energy price formation. PJM has been working on that topic for more than a year to respond to concerns over public-policy initiatives impacting market prices.

CEO Andy Ott made similar observations during a media call on Monday, calling it “a tall order” to implement the proposal “and then expect the competitive market to continue to function effectively.”

“The DOE proposal, which essentially is the cost-of-service type of mechanism, we don’t believe is workable. We don’t believe that that is an appropriate response,” Ott said. “We believe [it] is contrary to law and will not really solve any problems. … A better and least-cost solution would be to do proper valuation of resource attributes through a market construct.”

Ott said the proposal is discriminatory because it is exclusive to certain technologies, rather than the service provided to the grid, and only in RTOs with capacity markets — such as PJM.

“PJM does have an abundance of coal and nuclear plants that are in the merchant category, so … it does look like this is certainly targeted at the PJM region,” he said. “We do say that in our comments that this proposal does seem to be focused on this region.”

Bresler said that the NOPR — which cited natural disasters and the 2014 polar vortex to argue that units with large on-site fuel stockpiles should be subsidized to save them from retirement — misses the mark. (See FERC’s Independence to be Tested by DOE NOPR.)

“The point is that just maintaining a whole lot of resources with a 90-day fuel supply on site would not have relieved the problems with a majority of the outages during the polar vortex,” Bresler said. “While the polar vortex did highlight the need for the markets to ensure that we are signaling the need for resources to be able to operate on peak days, just resources with long-term fuel supplies on site was not the majority of the issue.”

During natural disasters, Bresler said, the main challenge is downed power lines, not generating plants being unable to run.

“Events like that … primarily affect the delivery system from supply to demand, not the supply resources themselves,” he said, noting that some coal plants impacted by Hurricane Harvey this summer weren’t able to run at full capacity because their coal piles were soaked.

“In the interest of framing the right problem, we will point out these things that we feel sort of led DOE down the wrong path as far as what the actual problem is,” he said. “We will say, however, that there is an issue that we do need to address, specifically to the PJM region. And that is the fact that there are some instances in PJM where not all resources are valued appropriately for the fact that they are relied upon to reliably meet the demand. … We are concerned that resources right now may not be offering as much flexibility as they could provide because they don’t have incentive to do it.”

Using competitive markets to “transparently” price needs is “superior” to providing cost-of-service payments to certain unit types, he said.

“One concern we have with the DOE approach is it seems to imply that while we may need to keep some of these resources around to ensure reliability and resilience, so therefore let’s keep them all,” Bresler explained. “That again is, from our standpoint, inefficient from the standpoint of the cost to load. Whereas the markets, we believe, have done a very good job to provide the discipline for what really is necessary and what’s not necessary and thereby not just provide efficient signals for entry, but also provide efficient signals for exit.”

PJM’s comments to FERC included a version of a proposal staff presented at its August meeting of the Markets and Reliability Committee. Bresler said the proposal will be revised and presented again at the Dec. 7 MRC meeting.

Ott acknowledged that PJM’s comments don’t reflect the perspectives of all its members.

“There really was no full vetting of these comments with stakeholders,” he said. “One, there isn’t sufficient time, and second is … PJM’s comments are PJM’s and we do not vet those through stakeholders.”

In his comments to FERC, Monitor Bowring said approving the DOE proposal “would replace regulation through competition with an unworkable hybrid of competitive markets and cost of service regulation. The eventual result would be the demise of competitive markets in the PJM region.”

“If the reliability rules need enhancement,” he continued, “the reliability rules should be enhanced. The DOE proposal should be rejected. The PJM region needs more competition, not less.”

MISO

MISO’s comments urged FERC not to adopt the proposal, saying it fails to identify imminent reliability or resilience issues, and said its footprint currently doesn’t have any such issues that would warrant immediate action “beyond the application of ongoing processes and existing tools that address resource availability and retirement in the MISO region.” [Editor’s Note: An earlier version of this article incorrectly reported that MISO did not file its own response.]

“Instead of proceeding in haste with material changes that could have broad-ranging and potentially adverse impacts, MISO urges the commission to move at a deliberate pace, to work through its existing dockets and to leverage its established processes to initiate a full, thorough and public vetting of the issues raised by the proposal,” the RTO wrote.

The RTO told stakeholders earlier this month that they would insist FERC respect the RTO’s existing reliability process, and would study frequency control, ramping, voltage support, inertia and inertial response to identify the features of a “resilient” generator. (See MISO Ready to Define, Study ‘Resiliency’ for DOE.)

SPP

SPP told stakeholders Thursday it would will join the IRC filing, pointing to what staff called “some pretty strong comments.”

“The council does a really good job of laying out why this doesn’t work from an RTO perspective,” SPP General Counsel Paul Suskie told the Strategic Planning Committee.

“If you’re a plant under the rule, your costs are totally covered,” Suskie said. “Why would you do anything but bid zero into the market? It will drive costs down further and distort markets further.”

Some stakeholders expressed discomfort with signing onto the IRC comments without seeing the language.

“The basic issue here is the subsidy,” countered SPP Board Chair Jim Eckelberger, saying renewable energy tax credits had led to oversupply. “We don’t want to screw up the market even more. We should take a strong stand here.”

In its call for comments, FERC said the NOPR’s scope applies to commission-approved ISOs and RTOs with capacity markets and day-ahead and real-time energy markets. Noting SPP’s lack of a capacity market, Suskie said while it “appears this rule is not applicable to SPP,” staff will work under the assumption that a final FERC rule could apply to the RTO.

Suskie said the proposed timeline for action is “impractical.”

“Staff would recommend additional time to implement if the final rule applies to SPP,” Suskie said, noting staff would have to compile a list of eligible facilities. “Staff is very concerned. … If you read what the intent appears to be, basically any coal or nuclear plant not [rate-based] within an RTO would have to be fully compensated.”

Suskie asked who would determine a plant’s rate of return and cost of capital.

“Traditionally, those things are decided at the commissions, not RTOs,” he said. “How do you enforce a 90-day coal supply? How do you enforce whether a plant complies with environmental regulations?

“If this is applicable to SPP, it would be a big sea change,” Suskie said.

Keith Collins, executive director of SPP’s MMU, said his group agrees with much of what Suskie said, saying the NOPR is “proposing a solution to a problem that’s not well defined.”

The NOPR “doesn’t define the problem well in a way that’s actionable and measurable,” Collins said. “When you actually read the [recent DOE grid study], it says more work needs to be done to value and define resiliency before you come up with solutions. What’s included, what’s excluded … it’s hard to say.”

Like Suskie, Collins said the 90-day timeline does not allow sufficient time to properly consider the NOPR.

“If there’s a question to be raised, it can be answered over time, but we don’t support what’s going on,” he said. “Competitive forces have been part of policy in the energy and electricity markets over the last 25 years. It will provide new technologies, batteries and the like, that will improve the resiliency for the grid in ways we’re not aware of today.

“What the Energy Policy Act of 1992 did was promote competitive markets and open access,” Collins said. “If someone can provide power cheaper than someone else, they should be able to do that. If I built a plant a while ago that’s unprofitable, that’s a signal. Resources are indicating they are not being able to recover their costs. We see the consequences of a policy like this with our negative pricing.”

In his filing, Collins said “the SPP markets provide insight into the adverse consequences of policies designed to preserve capacity that would otherwise be uneconomic in typical ISO/RTO markets.

“The SPP market, which is dominated by vertically integrated utilities, provides an example of the potential difficulties that will be faced if the Proposed Rule is implemented,” he wrote. “The SPP market has a considerably high capacity margin, currently trending above 40% compared to the 12% minimum requirement in the SPP Tariff. The excess capacity distorts price formation in the competitive market by encouraging price insensitive offer/bid behavior and mutes price signals for others type of generating technologies.”

CAISO

CAISO said the rule would not apply to it because it does not have a capacity market or coal or nuclear resources that would be eligible for the proposed compensation. But it opposed the rule nonetheless, saying “there is no basis for a universal finding that having a 90-day, on-site fuel supply is essential for ISOs and RTOs to maintain grid reliability or resilience.”

Rich Heidorn Jr. contributed to this article.

October 23, 2017

ERCOT Board of Directors Meeting Briefs: Oct. 17, 2017

ERCOT plans to revise its bylaws after discovering that dozens of members could be construed as affiliates under current rules because of stakes owned by investment funds such as Vanguard Group and Fidelity Management and Research.

The ISO learned of the issue from Vistra Energy, which informed ERCOT in September that Vanguard owns more than 5% of its voting securities — the current threshold for presuming that a shareholder exercises “substantial influence or control.”

ERCOT Board of Directors Vistra Energy — Seely | *ERCOT*

ERCOT General Counsel Chad V. Seely told the board Tuesday that further investigation into Vistra’s letter identified 30 members who could be considered affiliates of each other based on common equity investors and that the number could go as high as one-third of the ISO’s 309 members.

Already, more than a dozen companies, including Calpine, Dynegy, Exelon and NRG Energy, have informed ERCOT they are in a situation like Vistra.

In addition to Vanguard and Fidelity, ERCOT said it has determined that at least five other investment firms may own more than 5% of two or more members: BlackRock, Capital Research Global Investors, Hotchkis & Wiley Capital Management, Oaktree Capital Management and State Street Global Advisors.

“In brief, ERCOT legal believes that this is just the beginning of identifying a longer list of potential members who may be affiliates through common equity ownership by a broader list of institutional investors,” Seely wrote board members in a memo.

Seely said companies deemed to be affiliates could be forced to change their industry segment or lose their voting rights.

His office issued membership applications on Oct. 2 for the year 2018. Corporate members must be registered by Nov. 10 to vote on board members at ERCOT’s Dec. 12 elections.

To address the issue, Seely recommended that the ISO revise the affiliate definition in the bylaws. In the interim, he said ERCOT should issue a “blanket” resolution saying that investment companies that own less than 20% of a member are assumed not to have control of the member.

The higher threshold would apply only to shareholders meeting one of the exclusions from the definition of “affiliate” under Texas’ Public Utility Regulatory Act (PURA) or has been determined to hold ownership interests in the member for investment purposes only. Not eligible for the 20% trigger would be members sharing a common parent or board member or under common influence or control of another entity.

Board Nominees

Corporate members will vote during the annual meeting Dec. 12 on a second term for unaffiliated board member Peter Cramton, a University of Maryland economics professor. They also will consider a newcomer, Terry J. Bulger, a banking executive specializing in risk management.

Unaffiliated directors, who serve staggered three-year terms, are also subject to approval by the Public Utility Commission of Texas. (Tuesday was the first ERCOT board meeting attended by new PUCT Chair DeAnn Walker.)

Consent Items

The board approved three nodal protocol revision requests (NPRRs) and one system change request (SCR) on the Technical Advisory Committee consent list.

NPRR768 — Revises the categories of ERCOT-initiated actions that trigger the real-time online reliability deployment price adder pricing run to ensure prices reflect current system conditions.
NPRR821 — Eliminates the congestion revenue right (CRR) deration process for resource node to hub or load zone CRRs, an effort to improve CRR funding.
NPRR840 — Synchronizes the implementation of NPRR782 (settlement of infeasible ancillary services due to transmission constraints) by removing the two-hour advance notice period inadvertently left in protocol language when NPRR782 was approved.
SCR791 — Populates unused megawatt and price values in security-constrained economic dispatch (SCED) generation resource data (GRD) energy offer curves with null values rather than zeroes, to improve the usability of the 60-day SCED GRD disclosure report.

Consent, Non-Consent Items OK’d

The board also approved three additional NPRRs on individual voice votes:

Director Carolyn Shellman, of the Municipal Market segment, voted against two NPRRs, citing budgetary concerns. NPRR817 created the Panhandle 345-kV trading hub that would be excluded from the ERCOT-wide hub average and bus average calculations at an estimated cost of $150,000 to $200,000. “This would reduce the cost of future hubs,” TAC Vice Chair Bob Helton said.
Shellman also opposed NPRR829, which will allow a qualified scheduling entity to provide data on its net generation to the ERCOT transmission grid from their non-modeled generators so that the output can be considered in the estimate of real-time liability (RTL). The change is expected to cost between $200,000 and $300,000. The members of the Municipal segment opposed the proposal, but ERCOT supported it, saying it will improve the calculation of collateral requirements and transparency into non-modeled generation.
The board unanimously approved NPRR836, which incorporates 11 binding document forms into the protocols as a new Section 23, and allows changes to the forms to be made using the administrative NPRR process. Morgan Stanley, a member of the Independent Power Marketer segment, opposed the proposal at the Protocol Revisions Subcommittee.

Line of Credit

After an executive session, the board briefly reopened the meeting to renew its revolving line of credit with JPMorgan Chase.

— Rich Heidorn Jr.

October 23, 2017

PJM: Energy Price Formation Addresses DOE NOPR

By Rory D. Sweeney

PJM agrees there is an issue with maintaining reliability, but not the one suggested by the Department of Energy’s recent call for price supports for coal and nuclear plants.

“The DOE didn’t exactly get it right in the way it attempted to articulate the problem,” Stu Bresler, PJM senior vice president of operations and markets, said Thursday.

PJM DOE price formation NOPR — Bresler | © *RTO Insider*

During a special conference call to preview the RTO’s plan for responding to FERC’s request for comments on the DOE Notice of Proposed Rulemaking, Bresler said that the real issue is energy price formation. PJM has been working on that topic for more than a year to res pond to concerns over public-policy initiatives impacting market prices.

Bresler said that the NOPR — which cited natural disasters and the 2014 cold snap known as the “polar vortex” to argue that units with large on-site fuel stockpiles should be subsidized to save them from retirement — misses the mark. (See FERC’s Independence to be Tested by DOE NOPR.)

During natural disasters, Bresler said, the main challenge is downed power lines, not generating plants being unable to run.

Using competitive markets to “transparently” price needs is “superior” to providing cost-of-service payments to certain unit types, he said.

The response will include a version of a proposal PJM staff presented at its August meeting of the Markets and Reliability Committee. Bresler said the proposal will be revised and presented again at the Dec. 7 MRC meeting.

October 23, 2017

Good Markets, Bad Markets: CEOs Sound off on State Policies

By Rich Heidorn Jr.

WASHINGTON — Panelists at the Energy Bar Association’s Mid-Year Energy Forum last week heard two very different views of the health of wholesale markets.

wholesale markets eba energy bar association — Flexon | © *RTO Insider*

Pacific Power CEO Stefan Bird was effusive in his praise of the Western Energy Imbalance Market (EIM), which saved parent company PacifiCorp almost $9 million in the second quarter of 2017. But Dynegy CEO Robert Flexon complained that CAISO and NYISO had become increasingly inhospitable to merchant generators because of state policies favoring renewables and nuclear generation, respectively.

“For us, the markets are [in an] incredibly fragile situation. California is a disaster. There isn’t any competitive power company out there who wants to put a nickel into California,” he said.

Flexon also bemoaned MISO Zone 4 in Southern Illinois, where he said competitive units face unfair competition from rate-based generation. The state also has approved zero-emission credits for nuclear plants, leading to fears in PJM — whose footprint includes Northern Illinois — that such subsidies will be contagious.

“PJM is doing everything they can to try to keep their market together. They’re very proactive,” Flexon said. “They’re trying to fix price formation and the like. [Having] half our megawatts in PJM, I feel good about that.” (See related story, PJM: Energy Price Formation Addresses DOE NOPR.)

Bird said his company’s experience with the EIM has been an unquestioned success.

Moderator Christopher R. Jones, a partner with Troutman Sanders, had set off the discussion by asking Bird if the markets are “healthy.”

“Are they enabling what our customers want? Are they enabling [a] low-cost, affordable, reliable future? I think the answer is resoundingly ‘yes,’” said Bird, whose company has 740,000 customers in Oregon, Washington and California.

“We’ve really had unprecedented opportunities to move that dial on a very accelerated pace and lower costs as well as reduce emissions.”

He said the EIM’s economic dispatch and its ability to move renewable power to load centers enabled PacifiCorp to announce in June a $3.5 billion investment in renewables and transmission in Wyoming, Utah and Idaho “at very little to no costs for our customers and savings over the long term.” (See PacifiCorp IRP Sees More Renewables, Less Coal.)

John DiStasio, president of the Large Public Power Council, said his members don’t have a single view of the market. His organization, which represents the 26 largest members of American Public Power Association, has members in NYISO, SPP and ERCOT.

“Those members that view that there’s economic benefits for them are participating in markets, and those who don’t see that don’t [participate],” DiStasio said.

He said RTOs have gone through “identity crises.”

“When we started up with CAISO, it was really a traditional RTO. And at some point, state policy started to drive how they looked at supporting environmental policy as well. There’s been hit and miss on how that’s been priced. There’s been hit and miss on how you get the right incentives for capacity in some of the markets.” DiStasio said California’s dominance of CAISO has been a barrier to greater market expansion in the West.

“Having said that … moving energy over wider regions I think is going to have a certain inevitability to it where we’ll have more and more people operating in markets — even if it’s just at the EIM level.

“From a Western perspective, I was appreciative that FERC didn’t try to push the Energy Imbalance Market. Actually, it would have fallen apart had that happened given the history of the [2000-2001] energy crisis, the [1980 Pacific Northwest Electric Power Planning and Conservation Act], given what happened in the Northwest during the energy crisis. I think FERC trying to assert more control at that time actually would have had a negative effect. Now, the market dynamics seem to have emerged organically enough that you have people that are voluntarily creating critical mass.

“I think this is really going to be a delicate balance going forward with how much does FERC push on state policy, and I think they may have to rethink the whole paradigm at some point. Because it is a clearly a hybrid and we’re kind of stuck … in no man’s land.”

When the discussion turned to Energy Secretary Rick Perry’s call for price supports for coal and nuclear plants, Flexon also called for FERC action.

“FERC has been missing while all the mischief has been happening,” he said, referring to the agency’s six months without a quorum. “They need to get back in the game and protect the markets they created.”

October 23, 2017

FERC Seeks Cyber Controls on Portable Devices; Sets GMD Plans

By Rich Heidorn Jr.

WASHINGTON — FERC on Thursday proposed rules to prevent malware from infecting “low impact” computer systems through transient electronic devices such as laptops and thumb drives.

FERC NOPR GMDs cybersecurity — | © *RTO Insider*

The Notice of Proposed Rulemaking would approve critical infrastructure protection reliability standard CIP-003-7, a response to an order issued by FERC in January 2016 (RM17-11). (See FERC Postpones Action on Supply Chain Protections.)

In addition to setting controls on devices frequently connected and disconnected from low-impact Bulk Electric System (BES) facilities, the NOPR also requires such facilities to have a policy for declaring and responding to “exceptional circumstances.”

High- and medium-impact BES cyber systems already have rules for responding to “exceptional circumstances,” which include situations that impact BES reliability or pose the risk of injury or death and cybersecurity incidents requiring emergency assistance.

The NOPR also directs NERC to revise the standard to provide objective criteria for electronic access controls for low-impact systems and add ways to mitigate the risk of malicious code introduced by third-party transient electronic devices, such as scanning devices prior to use.

GMD Order

In a separate order, FERC approved NERC’s preliminary geomagnetic disturbance (GMD) research work plan and ordered it to file a final plan within six months (RM15-11-002).

NERC’s GMD work plan, which it developed in collaboration with the Electric Power Research Institute and its GMD Task Force, identified nine research areas and sets an estimated time frame for their completion. It was developed in response to the commission’s September 2016 order requiring grid operators to assess and protect against the threat of GMDs. (See FERC Approves GMD Reliability Standard.)

Thursday’s order sets the priority in which NERC should conduct the GMD research, saying it should first seek to improve earth conductivity models for studies of geomagnetically induced currents. The commission cited the models’ importance in completing the GMD vulnerability assessments required by reliability standard TPL-007-1.

It said the second priority should be improving harmonics analysis “because the synergistic effects of harmonics during GMD events are not well understood.”

October 23, 2017

‘Momentum’ Seen for U.S. Offshore Wind

By Rich Heidorn Jr.

WASHINGTON — Even as the Trump administration has rejected the Paris Agreement and works to boost coal-fired generation, optimism has been building on the East Coast for the offshore wind industry.

The U.S. market has gained momentum in the last two years, the head of DONG Energy Wind Power U.S. told the Energy Bar Association’s Mid-Year Energy Forum during a panel discussion last week.

energy bar association eba offshore wind — Brostrøm | © *RTO Insider*

President Thomas Brostrøm credited state renewable portfolio standards and carbon reduction goals for creating demand. And he said the shallow waters off the East Coast provide attractive sites like those in Europe.

DONG, the No. 1 offshore wind generator in the world, clearly sees renewables as the future. On Oct. 30, it will ask shareholders to approve changing its name — originally an abbreviation for Danish Oil and Natural Gas — to reflect its commitment to renewable power. It completed the divestiture of its upstream oil and gas business in September. The new name, Ørsted, honors Danish scientist Hans Christian Ørsted, who is credited with discovering electromagnetism in 1820.

The company, which operates more than 1,000 offshore wind turbines in Europe, acquired the rights to develop more than 1,000 MW off New Jersey and is working on a pilot project with Dominion Energy off Virginia. (See Dominion Plans 12-MW Offshore Wind Project, 2nd in US.) It also has formed a joint venture with Eversource Energy to bid on Massachusetts’ solicitation for 1,600 MW of offshore wind.

energy bar association offshore wind eba — Kalpin | © *RTO Insider*

Brostrøm said the industry has matured over the last two decades as it has moved from “bespoke” projects to more standardization. At the same time, the technology has advanced from 3.6-MW turbines in 2009 to 8-MW turbines today, with next-generation models expected at 12 to 15 MW.

The panel discussion, moderated by Holland & Knight partner Mark C. Kalpin, also included Walter Cruickshank, acting director of the U.S. Bureau of Ocean Energy Management, and Curtis Fisher, executive director of the National Wildlife Federation’s Northeast Region.

Since 2009, BOEM has issued 13 offshore commercial wind energy leases, giving leaseholders the right to seek approval for development plans. The U.S. currently has only one operating offshore wind project, Deepwater Wind’s 30-MW Block Island Wind Farm in state waters off Rhode Island, which went into service last December.

“We have quite a bit to learn, still, about how things will operate — how developers will move forward with their projects,” Cruickshank said.

On Aug. 31, Interior Secretary Ryan Zinke, Cruickshank’s boss, signed an order setting a one-year target for completing environmental reviews under the National Energy Policy Act following the issuance of a Notice of Intent. “We haven’t entirely figured out how we’re going to do that yet, but we are working on trying to improve our processes,” Cruickshank said.

Fisher said his organization supports offshore wind when it is sited “in the right places” and construction minimizes impacts on aquatic life. The group is especially concerned that foundations are not drilled during the migration of endangered North Atlantic right whales because the noise can disturb the marine mammals. Fewer than 500 are believed alive.

“This is our big chance” to address climate change, Fisher said. “I fundamentally believe that this is the challenge of our generation — to actually build [renewable] projects on scale to solve problems that many people think are just too big to solve.”

October 23, 2017

ISO-NE Planning Advisory Commitee Briefs: Oct. 18, 2017

ISO-NE will revise the scope of its 2027 transmission needs assessments for Eastern Connecticut, Southwest Connecticut and New Hampshire after stakeholders raised questions about the study’s dispatch modeling, Director of Transmission Planning Brent Oberlin said Wednesday.

“It seems to be as you dial in more and more on the bus basis, the dispatches seem to be very severe in some of the cases,” Oberlin said.

During the September Planning Advisory Committee meeting, ISO-NE presented the assumptions and study methodology behind the 2027 Needs Assessment Scope of Work, a study produced biannually to provide insights into the system 10 years into the future. (See “2027 Needs Assessment Scope of Work,” ISO-NE Planning Advisory Committee Briefs: Sept. 28, 2017.)

“If you look at the difference between the 90/10 cases and the 50/50 load level cases, you can see things becoming even more severe beyond what was anticipated using this new method, so we are going back and kind of hit the pause button for a second here trying to understand exactly what’s happening, what’s causing it,” Oberlin said. “We plan to come back to the November PAC to go into more detail on the issues that we’re seeing.”

Regional System Plan Tx Projects Update

Cost estimates have changed significantly for two transmission projects since the last Regional System Plan update in June 2017: the Connecticut River Valley project in Vermont (down $9.8 million) and the Maine Power Reliability Program project (up $7 million).

Fabio Dallorto, an ISO-NE transmission planning engineer, spoke about the projects and asset conditions during an update to the PAC.

The Vermont project (No. 1614) entails rebuilding a 115-kV line from Coolidge to Ascutney to resolve thermal overload. The decreased costs reflect competitive bids throughout the project and a reduction in the amount of contingency — from 50% to 10% — included in the estimates now that the projects are better defined, Dallorto said.

The RTO reported no new projects but said 16 upgrades on the project list have been placed in service since June, including four in the greater Boston area.

Western Mass. Structure Replacement

John Case of Eversource Energy reported that 19 of 263 structures on the 1231/1242 lines in western Massachusetts need to be replaced to maintain reliability. Some of the structures are more than 90 years old, and one crossing the Deerfield River lacks shield wire, which was inexplicably not replaced following a helicopter crash that damaged the wire several years ago.

ISO-NE REV William Scherman Interregional Transmission Planning — Western Mass. transmission structure damage | *Eversource Energy*

The majority of structures on the circuits are double-circuit steel lattice towers. Replacing them reduces the potential for structural failures, Case said.

The project’s scope includes installation of 15 115-kV double-circuit and four single-circuit light-duty weathering steel structures to replace lattice towers.

Eversource estimated the project will cost $8.1 million.

Environmental Update Cites Uncertainty at Federal Level

Emphasizing the “uncertainty and the changes that are afoot at the federal policy level,” ISO-NE senior analyst Patricio Silva spent half an hour updating the PAC on all relevant environmental policy and regulatory matters affecting larger generation and linear transmission projects.

“We’re seeing significant changes with the Clean Air Act, Clean Water Act, Resource Conservation Recovery Act and the National Environmental Policy Act, [which] is actually having a dramatic impact in a variety of different regulatory forms,” Silva said during his presentation.

Silva pointed out that the Trump administration has advanced with its proposed withdrawal from EPA’s Clean Power Plan, which would affect carbon dioxide emissions from existing electric generating units. (See EPA to Announce Clean Power Plan Repeal.) The agency’s New Source Performance Standards for carbon emissions are also in limbo pending a review, and related litigation has been stayed. The agency’s pause, now reversed, in implementing new ozone standards also triggered litigation, he said.

“Lastly, more technical, but of particular interest to generators, there are changes afoot in the regulations under the Clean Air Act covering start-up, shutdown and malfunction events at generators,” Silva said. “That is a rule that’s under reconsideration and that’s also subject to litigation.”

Silva noted that his presentation only covered the Clean Air Act. “I hope you’re taking away from this that there’s a lot going on and we do not know what the outcome may be on some of these actions,” he said. “In fact, we do have in the oil and gas sector under the Clean Air Act an example of a misstep, where EPA paused and stopped to reconsider a rule only to have the litigation that was being used by the industry to stop the rule swept away.”

With the Trump administration rejecting EPA’s previous approach and the D.C. Circuit Court of Appeals essentially putting rules into effect mid-step, “there’s a risk of regulatory snap-back, where depending on where the EPA is procedurally with a reconsideration or a policy or implementation change, an affected industry sector may suddenly discover that they’re facing a fully implementable standard with a compliance deadline that has passed,” Silva said.

ISO-NE is closely watching upstream oil and gas policy because it could have a variety of implications under the Clean Air Act, especially for the operations of existing and new generators, he said.

— Michael Kuser

October 23, 2017

PJM MRC/MC Preview: Oct. 26, 2017

Below is a summary of the issues scheduled to be brought to a vote at the Markets and Reliability and Members committees Thursday. Each item is listed by agenda number, description and projected time of discussion, followed by a summary of the issue and links to prior coverage in RTO Insider.

RTO Insider will be in Wilmington, Del., covering the discussions and votes. See next Tuesday’s newsletter for a full report.

Markets and Reliability Committee

2. PJM Manuals (9:10-10:00)

Members will be asked to endorse the following proposed manual changes:

A. Manual 11: Energy & Ancillary Services. Revisions, which also include changes to the Operating Agreement (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.)

B. Manual 11: Energy & Ancillary Services. Revisions developed for the offer-verification process and offer-capping logic as part of implementation of FERC Order 831. The Independent Market Monitor, which disagrees on some parts of PJM’s proposal, will offer comments. (See “Debate Continues on Intraday Offers,” PJM Market Implementation Committee Briefs: Oct. 11, 2017.)

C. Manual 14B: Regional Transmission Planning Process. Revisions developed to add information related to contingency definitions.

D. Manual 19: Load Forecasting and Analysis. Clarifies when load drop estimates are produced and includes updates from a periodic review of the manual. (See “Cleared PRD Forces Manual Revisions,” PJM PC/TEAC Briefs: Sept. 14, 2017.)

3. Balancing Ratio (10:00-10:20)

Members will be asked to endorse Tariff revisions addressing the calculation of the balancing ratio used in determining the market seller offer cap (MSOC) for the 2018 Base Residual Auction, along with an associated problem statement and issue charge. PJM is concerned that there have been no penalty assessment intervals as needed to determine the balancing ratio. The problem statement and issue charge are meant to address the issue permanently. (See “Give me a B…,” PJM MRC/MC Briefs.)

4. Distributed Energy Resources Update (10:20-10:40)

Members will be asked to endorse a proposed Distributed Energy Resources (DER) Subcommittee charter. A proposed revision that was not considered friendly by other stakeholders is being offered as a separate version. (See “Amendment on DER Charter Sparks Debate,” PJM MRC/MC Briefs.)

5. 2017 Installed Reserve Margin Study Results (10:40-10:50)

Members will be asked to endorse the 2017 installed reserve margin (IRM) study results. (See “IRM Reductions,” PJM PC/TEAC Briefs: Sept. 14, 2017.)

6. Restoration Planning Generator Data (10:50-11:00)

Members will be asked to endorse OA revisions associated with PJM 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.)

Members Committee

Consent Agenda (2:20-2:25)

Members will be asked to endorse:

B. Tariff and OA revisions to clarify definitions, as recommended by the Governing Document Enhancement & Clarification Subcommittee.

1. RPM Market Seller Offer Cap (1:25-1:45)

Members will be asked to endorse proposed provisions for calculation of the balancing ratio used in determination of the MSOC for the 2018 BRA. (See MRC agenda item 3 above.)

2. Intraday Offer Capping (1:45-2:00)

Members will be asked to endorse OA and Tariff revisions associated with capping of intraday offers. (See MRC item 2A above.)

3. 2017 Installed Reserve Margin Study Results (2:00-2:15)

Members will be asked to endorse the 2017 IRM study results. (See MRC item 5 above.)

— Rory D. Sweeney

October 23, 2017

New York PSC Adopts DER Rules, Sanctions ESCOs

By Michael Kuser

The New York Public Service Commission on Thursday enacted consumer protection standards for distributed energy resource suppliers.

The PSC’s order also created a manual of uniform business practices, the first rule of which stipulates that “a DER supplier shall obtain a customer’s consent to a sales agreement prior to billing a customer or enrolling a customer” in any program.

NYPSC DER distributed energy resources ESCO ESCOs — Kelly | *NY DPS*

At the commission’s monthly meeting in Albany on Thursday, Ted Kelly, assistant counsel for the state’s Department of Public Safety, testified that “as DERs become an increasingly common and significant part of electric and gas service to customers, [the commission] has both the authority and the responsibility to ensure that customers participating in DER markets and programs understand the costs and benefits of their investments and are protected from confusion, fraud and abusive marketing.” (See Comprehensive DER Oversight Best, NYDPS Hears.)

DERs take a broad range of forms, Kelly said, “from rooftop solar panels to smart thermostats, to energy-efficient and demand-responsive industrial equipment, to bio-digesters making energy from farm waste, to community-scale distributed generation projects.”

The order requires residential customers be able to cancel a contract within three business days after its receipt without charge or penalty, and that the contract include essential information about pricing, cancellation rules, tax incentives, and details of the product or service provided.

PSC Chair John Rhodes said the order “provides a thoughtful and protective balance for New Yorkers and the timing is right. We are facing important and welcome growth in these resources, and we need to be in a position to provide protection for customers against untoward practices while pragmatically not burdening developers. I also find the initial focus on [community distributed generation] and mass market [distributed generation] makes all the sense in the world.”

Penalties for a violation of the rules can range from a warning up to a ban from participation in any programs or markets authorized by the commission.

Reining in ESCOs

The PSC also said Brooklyn-based energy service company (ESCO) MPower Energy could be barred from operating in New York following more than 100 customer allegations of deceptive sales and marketing practices.

After investigating complaints dating back to 2015, the commission said MPower must justify within 30 days why it should be allowed to continue operating in the state. The PSC also gave the firm seven days to show why it should be permitted to serve low-income customers, whom the commission said are frequently the victims of aggressive and misleading sales practices by ESCOs. (See NYPSC Limits ESCO Service, Sets New DER Compensation.)

The commission also determined that three ESCOs — Just Energy NY, National Fuel Resources and Zone One Energy — can continue serving low-income customers, while it denied waiver requests for four others: Agway Energy Services, Stream Energy, South Bay Energy and New Wave Energy.

The PSC in December 2016 banned most ESCOs from serving low-income customers but said it would consider waivers for any company that promised to offer bill savings or that could guarantee benefits to those customers. A state court earlier this year issued a temporary restraining order on the ESCO ban, which has been since lifted. (See Court Blocks NYPSC Order Barring ESCO Contracts.)

‘Yes’ to Community Choice Aggregation

The PSC approved the nonprofit Municipal Electric and Gas Alliance (MEGA) to implement a community choice aggregation (CCA) program for several Upstate New York municipalities.

Under the order, additional municipalities will be allowed to form such programs in the future, which “enable communities to take greater control of their energy choices through a transparent and competitive process driven by the consumers themselves,” Rhodes said.

Commissioner Diane Burman asked whether CCAs were subject to the just-issued rules for DER. Kelly said they would be if they included a DER component.

Utilities Prepped for Winter

The state’s major energy utilities expect to have adequate fuel supplies on hand for the coming winter, the commission heard.

“Each utility has a unique mix of assets to serve a unique mix of customers,” said Cynthia McCarran, PSC deputy director for natural gas and water. In her winter preparedness report, McCarran highlighted the efforts by some utilities, notably Consolidated Edison and New York State Electric and Gas, to focus on using demand response programs and so-called “non-pipes alternatives” to meet growing space and water heating needs.

“We anticipate energy consumers will benefit from adequate capacity and supply if we see a harsher-than-expected season,” Rhodes said.

The report said that natural gas bills in general are projected to be slightly higher this winter than historical averages and compared to last winter, which was warmer than normal. On the electric side, this winter’s commodity prices statewide are projected to be slightly higher than last winter, but significantly lower than the historical average.

Commission staff reported that major dual-fuel generation owners are continuing to follow the lessons learned from the harsh 2013-14 winter, including topping off fuel oil storage tanks ahead of the season, making firm arrangements for fuel oil replenishment, and ensuring that plant equipment has been prepared for winter operations.

“The electric utilities have continued to perform well in reducing the electric supply price volatility of their full service residential customers,” McCarran said. “The utilities have hedged approximately 70% of their estimated statewide full service residential energy needs to protect against unexpected electric market price swings that could occur this winter.”