Page 1279 – RTO Insider

August 25, 2017

FERC, RTOs to DOE: We Got This

By Rich Heidorn Jr. and Tom Kleckner

The U.S. Energy Department grid study released Wednesday added no new information to debates that have been going on for months at FERC technical conferences and RTO/ISO stakeholder meetings.

The report also acknowledged that the department has virtually no authority over generation or wholesale markets, leaving it to FERC and RTOs to act on its recommendations. (See Perry Grid Study Seeks to Aid Coal, Nuclear Generation.)

On Thursday, FERC and several RTOs responded. Their message: We’re already working on it.

Acting FERC Chairman Neil Chatterjee issued a statement saying the report “highlights many activities that the commission is carefully considering, including examining ways to enhance wholesale electric capacity markets and improve price formation in those markets, to increase electric and gas coordination, and to assure bulk power system reliability and resilience. The commission will remain focused on these and other issues that are critical to maintain the nation’s competitive wholesale electric markets and keep the lights on.”

PJM, ISO-NE, MISO, CAISO and SPP also issued statements assuring DOE that they are addressing the issues and that — despite the ominous warning Secretary Rick Perry used in his April 14 memo ordering the study — that there are no imminent risks to grid reliability.

Price Formation

Among the report’s recommendations were a call for FERC to “expedite its efforts with states, RTO/ISOs and other stakeholders to improve energy price formation in centrally organized wholesale electricity markets.”

FERC DOE department of energy grid study — | *PJM*

“After several years of fact finding and technical conferences, the record now supports energy price formation reform, such as the proposals laid out by PJM and others,” it said, citing PJM’s June report, “Energy Price Formation and Valuing Flexibility,” and MISO’s extended LMP initiative. (See PJM Making Moves to Preserve Market Integrity.)

The report says that although all RTOs/ISOs have some type of shortage pricing, the designs differ, a “variance [that] could present challenges to market participants who require a threshold level of certainty to make an investment decision.” Although it acknowledged that FERC Order 831 doubled energy offer caps in the organized markets to $2,000/MWh, it cited concerns expressed by Market Monitors Joe Bowring and David Patton over the volatility of shortage pricing revenue. (See Lawyers Take an Economics Class: Capacity Markets vs. Scarcity Pricing.)

It also called for mitigating negative prices “to the broadest extent possible,” quoting from the department’s January Quadrennial Energy Review report that “price suppression is occurring in RTO/ISO wholesale markets with noticeable amounts of wind and solar generation (and low-cost gas generation).”

Essential Reliability Services

The department also urged FERC to require valuation of “essential reliability services” through fuel- and technology-neutral markets or regulatory mechanisms. The report includes in that description ancillary services such as frequency and voltage support, and ramping capability.

A table in the report shows that only MISO and CAISO have any product in the “ramp reserve” category. SPP’s David Kelley said the RTO is evaluating the benefits of a ramping product for the Integrated Marketplace and is exploring designs deployed in other markets. It has no current timeline for implementation.

Resilience

The report also called for further study on mandatory capacity markets, which it noted have “been the subject of near-constant debate” and the development of metrics and tools for evaluating “resilience.”

The department said NERC “should consider adding resilience components to its mission statement and develop a program to work with its member utilities to broaden their use of emerging ways to better incorporate resilience.”

“RTOs and ISOs should further define criteria for resilience, identify how to include resilience in business practices and examine resilience-related impacts of their resource mix,” it continued.

The report acknowledged that while wholesale markets “do not explicitly recognize or compensate system resilience,” PJM and ISO-NE have changed their capacity market rules to incentivize generator performance during scarcity conditions. It notes that only some RTOs — naming PJM, ISO-NE and NYISO — value onsite fuel storage, a characteristic of coal and nuclear plants that natural gas plants without oil-fired back-up lack.

Quoting PJM, the report notes that “criteria for resilience are not explicitly defined or quantified today.”

“Each RTO/ISO should strive to explicitly define resilience on its system and conduct resource diversity assessments to more fully understand the resilience of different resource portfolios,” the department said. “Federal, state and local work to define and support systemwide resilience is also needed.”

NERC issued a statement saying that reliability and resiliency “are key priorities for NERC and we appreciate the recognition of our work on these matters.”

ISO-NE

ISO-NE spokeswoman Marcia Blomberg said the RTO is reviewing the study. “However, in the two decades since their creation, competitive wholesale electricity markets in New England have achieved what they were designed to accomplish, including power system reliability supported by an adequate resource base, competitive wholesale power prices that accurately reflect the cost of reliable power production and a shift in resource investment risk from ratepayers to investors.

“As the energy landscape evolves, ISO New England will continue working with industry stakeholders and state policymakers to ensure that the markets can adapt to changing industry dynamics, such as state environmental policies and fuel security challenges, while continuing to produce competitive prices that support the resources needed to reliably meet consumer demand for power.”

PJM

PJM called the report “thoughtful” and “comprehensive.”

“The report acknowledges that wholesale power markets are working and providing reliability at the lowest possible cost and that power supply resources are more diverse than they have ever been. It also highlights the importance of expediently addressing needed reforms in energy price formation followed by a focus on grid resilience. These issues are a top priority.”

The RTO noted that it has posted discussion papers on price formation and capacity market reform to accommodate state policies. “Earlier this year, we published a paper, ‘PJM’s Evolving Resource Mix and System Reliability,’ which demonstrated that the PJM region has remained reliable throughout the rapid changes in the resource mix. PJM’s analysis also indicated a need to focus on fuel assurance and resilience to take into account the changing operational risks that the industry faces.” (See PJM: Increased Gas Won’t Hurt Reliability, Too Much Solar Will.)

CAISO

CAISO said it has “experienced success in integrating large amounts of renewable resources without threatening grid reliability. There’s no doubt that energy markets are evolving as the fundamental resource mix changes. The ISO will continue to operate a reliable grid that can capture the benefits of this transformation.”

MISO

MISO said it “has been preparing for the challenges of the evolving resource mix, and we will continue to ensure that planning constructs, market designs and operational practices are in place to support the reliability of the electric grid across our footprint. We look forward to continuing our work with DOE, regulators, policymakers and stakeholders as that effort continues.”

SPP

SPP spokesman Derek Wingfield said the RTO “is pleased the report acknowledges the value of transmission investments in enabling ‘an array of benefits’ including reliability, congestion relief, market competition, diversity of fuel sources and more, and that our own Value of Transmission study had some influence on the Department of Energy’s analysis. The report’s recommendation to further study market structures and the impacts of renewable integration is also welcome, and we pledge to assist the DOE and FERC with such analyses should the opportunity arise.” (See SPP Begins Promotional Campaign to Tout Transmission Value.)

Last month, SPP stakeholders approved recommendations from a study on how much wind energy the RTO’s system can safely and reliably absorb. The RTO has routinely broken the 50% penetration level for wind energy, and has said it can go even higher. The recommendations include the installation of online transient-stability and voltage-stability analysis tools. (See “Wind Integration Study’s Recommendations Move On,” SPP Markets and Operations Policy Committee Briefs: July 11-12, 2017.)

ERCOT

ERCOT, which is not subject to FERC jurisdiction, held a discussion with the Texas Public Utility Commission on Aug. 11 on price-formation issues including scarcity pricing and marginal losses. (See ERCOT, Regulators Discuss Need for Pricing Rule Changes.)

ERCOT has also successfully integrated renewables at 50% penetration levels.

NYISO officials had no immediate comment, saying they were digesting the report.

August 24, 2017

MISO Revisits Eclipse Ops, Prepares for 2024

By Amanda Durish Cook

CARMEL, Ind. — ‎While MISO officials were unsurprised that the Aug. 21 solar eclipse did not impact Midwestern grid operations, they do say an increase in solar capacity will complicate matters by the next total eclipse in 2024.

MISO Communications Director Jay Hermacinski on Tuesday said the RTO will study eclipse impacts over the next few weeks and request data from CAISO, a grid operator that was “truly” impacted by the eclipse. (See Grid Operators Manage Solar Eclipse.)

miso caiso solar eclipse — MISO’s US footprint outlined in green | *GreatAmericanEclipse.com*

All of MISO’s footprint fell within the 80 to 100% eclipse band, and Hermacinski said the footprint’s solar generation reacted “as predicted.” Grid-scale solar output dropped 100 MW during the eclipse, plunging to a nearly zero output during the peak and picking back up to about 40 MW around 3 p.m.

Hermacinski said that MISO operators had no problem meeting demand with stifled solar output.

“Our portfolio looked like it always does. We did not have to do anything special or bring on additional generation,” he said during an Aug. 22 Informational Forum. “Quite frankly, our operators prepared for the solar eclipse as if it were any other day. … We did not expect the eclipse to have an impact on our grid operations, and it did not.”

However, storms in the Upper Midwest and cooler-than-expected systemwide temperatures that day cut load, and MISO load dropped by 2 GW during the eclipse window.

“What we didn’t expect was the number of pop-up storms in the MISO region that brought about a 5- to 8-degree drop in temperature,” Hermacinski said.

MISO will use CAISO’s data to complement its own to help prepare for the next solar eclipse in April 2024, which will cut a path of totality from southwest Mexico to the northeastern U.S., putting the RTO’s Carmel, Ind., headquarters in the direct path. By that time, MISO is expected to have an additional 13.5 GW of grid-connected solar generation participating in its market, an amount exceeding that participating in the CAISO market today. MISO currently has about 180 MW of utility-scale solar and 350 MW of distributed solar in its footprint.

“MISO will be in a much different position in 2024 in terms of solar capacity than it is today,” Hermacinski said. A partial solar eclipse occurring in October 2023 will serve as a practice run before the 2024 event, he added.

August 24, 2017

FERC Rejects Requests for Stay of Atlantic Bridge

By Michael Kuser

FERC on Monday denied requests by two Massachusetts municipalities for a stay of its January approval of the Atlantic Bridge Project, a $452 million expansion and upgrade of existing pipeline networks in New York and New England (CP16-9-001; CP16-9-004).

The two Boston-area communities — the town of Weymouth and city of Quincy — alleged that the prospect of construction was harming property values and making it “impossible for owners to sell their residences in the face of uncertainty.”

The commission quoted its own environmental assessment that found the project’s “pipeline segments primarily involve replacements of existing pipeline in the same location and would not require a new permanent pipeline easement. … Existing property values in these areas account for the presence of the existing pipeline and/or compressor station infrastructure.”

FERC Enbridge Spectra Energy Corp. Atlantic Bridge Project — | *Spectra Energy*

The Atlantic Bridge Project would expand Enbridge’s Algonquin Gas Transmission and Maritimes & Northeast Pipeline systems by 132,700 dekatherms/day to serve the New England and Canadian natural gas markets. The project would replace existing pipelines and expand existing compressor stations or build new ones in New York, Connecticut and Massachusetts, including a 7,700-horsepower compressor station to be built in Weymouth. (See Atlantic Bridge Project Approved by FERC.)

While the Weymouth compressor station would be a new facility, it will be built “on a previously disturbed industrial property … between an existing water treatment facility and electric power plant” and will not “result in other impacts that would significantly impact adjacent property values,” the commission said.

Quincy also contended that FERC’s order would cause harm by encouraging investors to back development of the separate Access Northeast pipeline project, which would run through the community. The commission found that contention “purely speculative” and said that the city did not allege what harm it would suffer from development of Access Northeast.

For Whom the Order Tolls

Weymouth additionally requested rehearing of a procedural tolling order issued by FERC Secretary Kimberly Bose in March.

The order stemmed from the commission’s lack of a quorum, which Weymouth argued left the town no recourse, either through the commission or the courts, to halt construction of the project. But FERC rebuked that contention, explaining that the order was only meant to give the commission “additional time for consideration of the matters” raised on rehearing. Weymouth was “free to seek stays from the commission or other relief,” it said.

Weymouth also called the tolling order unconstitutional, premising its argument upon a February 2017 D.C. Circuit Court of Appeals decision in PHH Corp v. Consumer Financial Protection Bureau, which held that “the consolidation of substantive decision-making authority into a single person eliminates ordinary constitutional checks and balances and is, therefore, unconstitutional.”

FERC found Weymouth’s argument inapplicable because the court “agreed to rehear the case en banc and vacated its earlier opinion. Moreover, the panel members differed on the appropriateness or necessity of the separation-of-powers ruling relied upon by Weymouth.”

August 24, 2017

FERC Must Consider GHG Impact of Pipelines, DC Circuit Rules

By Rich Heidorn Jr.

FERC must consider the impact of greenhouse gas emissions when licensing natural gas pipelines, a split D.C. Circuit Court of Appeals panel ruled Wednesday (16-1329).

The panel’s 2-1 ruling in favor of a petition by the Sierra Club parted with previous D.C. Circuit rulings that found FERC did not have to consider the climate-change effects of exporting natural gas in its licensing of LNG terminals.

The majority — Judges Thomas Griffith, a George W. Bush appointee, and Judith Rogers, a Bill Clinton appointee — remanded FERC’s environmental impact statement (EIS) on the Southeast Market Pipelines Project, ordering the agency to estimate the project’s impact on GHG emissions or explain more fully why it could not do so.

Judge Janice Rogers Brown, also appointed by Bush, dissented, saying the court should have ruled as it did in the LNG cases.

FERC GHG Natural Gas D.C. Circuit — FERC’s ruling affects the Southeast Market Pipelines Project, including the nearly 500-mile Sabal Trail pipeline between Alabama and Florida | *Sabal Trail Transmission*

The Southeast Market Pipelines Project involve three pipelines, including the nearly 500-mile Sabal Trail, which will connect the other two pipelines between Tallapoosa County, Ala., and Osceola County, Fla., south of Orlando. Scheduled for completion in 2021, the project has a capacity of more than 1 Bcfd.

Existing Pipelines near Capacity

With both of its two major natural gas pipelines near capacity, Florida is at risk of having demand outstrip supply, according to Florida Power & Light and Duke Energy Florida, which have committed to buying nearly all the gas the project can transport.

The project’s developers — Duke Energy, FP&L parent NextEra Energy, Spectra Energy Partners and the Williams Companies — said increased gas supplies will allow utilities to retire old coal-fired power plants, thus providing a net reduction in GHG emissions.

FERC has jurisdiction over licensing interstate gas pipelines under Section 7 of the Natural Gas Act, which requires a finding that the project will serve the public interest before issuance of a certificate of public convenience and necessity. The commission began the EIS on the project in fall 2013 and issued its final report in December 2015, before approving the project in February 2016 (CP14-554, et al.). It rejected rehearing requests on the order in September 2016.

Because some of the pipeline’s gas would be burned by new or existing electric generators, resulting in CO₂ emissions, “at a minimum, FERC should have estimated the amount of power-plant carbon emissions that the pipelines will make possible,” Griffith and Rogers ruled.

Prior Rulings

The pipeline developers contended FERC was not obliged to consider emissions, based on the Supreme Court’s 2004 ruling in Department of Transportation v. Public Citizen (541 U.S. 752), in which it said that because the Transportation Department could not exclude Mexican trucks from the U.S., it was not required to gather data about the environmental harms of admitting them.

The D.C. Circuit applied the Public Citizen rule in three challenges to FERC approvals of LNG terminals, siding with the commission in all of them because it is the Energy Department — not the commission — that ultimately decides whether the terminals can export gas (Sierra Club v. FERC, 827 F.3d 36 (D.C. Cir. 2016); Sierra Club v. FERC, 827 F.3d 59 (D.C. Cir. 2016); EarthReports, Inc. v. FERC, 828 F.3d 949 (D.C. Cir. 2016)). FERC’s jurisdiction over LNG, delegated by DOE, is limited to approving the construction of the terminals.

In reviewing pipelines, “FERC is not so limited,” the court said in this week’s order. “Congress broadly instructed the agency to consider ‘the public convenience and necessity’ when evaluating applications to construct and operate interstate pipelines.” Thus, FERC could deny a pipeline certificate by concluding that the environmental harm posed by the project outweighed its public benefits, making the commission a “legally relevant cause” of environmental effects of pipelines it approves, the judges said.

FERC: Impact Unknown

FERC contended that the impact of the pipelines on GHG emissions was unknowable, dependent on variables including the operating decisions of individual plants and regional power demand. But the court said the National Environmental Policy Act — which mandates an EIS for each “major federal action significantly affecting the quality of the human environment” — requires some “reasonable forecasting.”

“The EIS gave no reason why [the pipeline’s capacity] could not be used to estimate greenhouse gas emissions from the power plants, and even cited a Department of Energy report that gives emissions estimates per unit of energy generated for various types of plant,” the court said. It said FERC “should have either given a quantitative estimate of the downstream greenhouse emissions that will result from burning the natural gas that the pipelines will transport or explained more specifically why it could not have done so.”

Without comparing the emissions from this project to other projects or to total emissions from the state or the region, “it is difficult to see how FERC could engage in ‘informed decision making,’” the judges said.

The court said FERC also must explain in the revised EIS its position on whether it should use the Social Cost of Carbon in its evaluations. The commission has argued previously against using the measure, saying that some of its components are subject to dispute and that not every harm it accounts for is “significant” under NEPA.

Dissent, Reaction

In her dissent, Brown said the pipeline case presented “virtually identical circumstances” to the LNG cases that the court said did not require GHG impact analyses. Because the Florida power plant Siting Board has the sole power to approve or deny new power plants in the state, “this breaks the chain of causation,” Brown said.

FERC declined to comment on the ruling.

The American Petroleum Institute, which absorbed America’s Natural Gas Alliance in 2015, said it believes FERC acted properly and is evaluating the ruling. “Regulatory certainty is critical to ensuring that infrastructure is constructed efficiently. Further delays due to needless regulatory hurdles will slow consumer access to reliable, affordable natural gas and opportunities for job creation,” it said.

The Natural Gas Supply Association, which represents 14 large gas producers and marketers, said it was “disappointed” by the order but had no other immediate comment.

August 24, 2017

Participant-funded Projects Get 2nd Shot at MISO Cost Recovery

By Amanda Durish Cook

MISO will resume discussion on possible cost recovery for participant-funded transmission projects under 345 kV after two wind industry organizations called on a stakeholder committee to revisit the issue.

The MISO Advisory Committee will take up the subject at a Sept. 20 meeting during Board of Directors week in St. Paul, Minn., where stakeholder sectors can offer opinions on the matter.

MISO FERC cost recovery — EDF and Indianapolis Power and Light’s Hoosier Wind Farm | *Mortenson*

Wind developer EDF Renewable Energy and nonprofit Wind on the Wires approached the Advisory Committee during an Aug. 23 conference call to once again appeal for cost recovery on customer-funded transmission upgrades under a proposed “non-[MISO Transmission Expansion Plan] upgrades” category. The RTO’s Steering Committee last month declined to rehear the issue after determining it had been fully considered in the stakeholder process even if supporters of the change were disappointed with the outcome. Some stakeholders pointed out that customers accept the risks of funding their own upgrades performed outside the MTEP process, and an after-the-fact cost allocation would be too complex to introduce.

EDF and Wind on the Wires faced two options after the rejection: either approach the Advisory Committee or file a FERC complaint. (See MISO Rejects Cost Recovery for Customer-Funded Projects.)

“We don’t think the discussion was robust enough,” said Bruce Grabow, an attorney representing EDF.

Grabow said the discussion in the MISO Regional Expansion Criteria and Benefits Working Group (RECBWG) demonstrated a “fundamental misunderstanding of the need and request.” The group had failed to discuss the current “gap” in congestion management or why participant-funded upgrades should be excluded from cost allocation, he said. There had also been no discussion of the possible unreasonableness of the status quo and no “exploration of how the proposal could work or be adjusted to address stakeholder concerns.”

Grabow argued that there should be a “simple” one-time return of installed costs imposed on new interconnection requests. MISO’s status quo of leaving the cost of customer-funded upgrades solely to the customer is “proving to be an insufficient means,” as no such projects were brought forward in MTEPs 14, 15 or 16 despite the need for sub-345-kV projects that relieve congestion, he said.

“One of the biggest challenges facing wind generators today is congestion in various areas that cause curtailment,” Wind on the Wires Executive Director Beth Soholt told Advisory Committee members. She said that customer-funded transmission upgrades meant to relieve congestion often become heavily trafficked with non-firm use themselves, diminishing the benefit that the project financier envisioned.

Grabow rebutted the RECBWG’s opinion that allowing cost recovery on customer-funded upgrades would equate to buyer’s remorse.

“If new customers are coming in and couldn’t get transmission service but for the upgrade, it’s not buyer’s remorse. It was done for a particular reason: to relieve congestion,” he said.

Grabow also argued that financial transmission rights are not adequate to ensure a fair payout.

“If new customers are relying on that transmission, they should pay their fair share,” he said.

August 24, 2017

Nuclear, Hydro Help New York Offset Higher Gas Prices in Q2

By Michael Kuser

New York energy markets performed competitively during the second quarter, with changes in fuel prices, demand and supply availability driving variations in wholesale prices, according to the NYISO Market Monitoring Unit’s second-quarter State of the Market report, released Monday.

Gas prices rose 20 to 60% in eastern New York and 65% in the western part of the state. But much of the impact on locational-based marginal prices (LBMPs) was offset by higher output of approximately 950 MW from nuclear, internal hydro and imports from Quebec and Ontario.

NYISO market monitor nuclear hydropower — | *Potomac Economics*

All-in prices averaged from $21/MWh in the North Zone to $57/MWh in New York City. The range was primarily because of congestion on power flowing from the North Zone to central New York, Central East congestion, and capacity price differences. Zone-level LBMPs increased in most regions by 7 to 25%.

Capacity costs were impacted by changes in net cost of new entry from the recent demand curve adjustment process. (See “ICAP Manual Changes for Demand Curve Reset Updates,” NYISO Business Issues Committee Briefs: Aug. 9, 2017.)

Congestion Management

Congestion costs from priced and unpriced constraints rose from 2016, with day-ahead congestion revenue up 24% from the same period a year ago to $117 million. Congestion increased into the city, across the Central East interface and along paths from western and northern New York, where priced congestion declined.

Unpriced congestion in the western and northern parts of the state became more prevalent because of improved hydro conditions within the state and low prices in the adjacent Canadian markets, as well as from transmission upgrades completed last year, which reduced priced congestion on 230-kV facilities in the west but shifted more flows onto parallel 115-kV circuits.

The Monitor found that “actions used to manage 115-kV congestion in western and northern New York led to import limitations from Ontario and Quebec as well as congestion on the 200-kV system in other parts of the state … management [which] could be performed more efficiently through the [day-ahead] and [real-time] market systems.”

PAR Operations with PJM

Real-time congestion costs for the Valley Stream load pocket on Long Island fell from a year ago because of improved modeling of lines between New York City and Long Island. Congestion increased through Millwood and into the city, but the ABC and JK lines were operated more efficiently.

The market-to-market phase angle regulator (PAR) coordination process with PJM expanded to include the ABC and JK lines in May after the 1,000-MW Con Ed-PSEG wheel expired. New coordinated flowgates were added mostly in New York City and the West Zone. For all PARs, actual flows typically exceeded their M2M targets toward New York, resulting in a small amount of M2M payments from PJM to NYISO in the second quarter.

The Monitor did find instances of efficient M2M coordination as PARs were moved in the correct direction to reduce overall congestion costs in a relatively timely manner. However, it cited “many instances” when PAR adjustments may have been available and would have reduced congestion but no adjustments were made.

“We observe that these PARs were often not utilized to help manage congestion, being adjusted only two to five times per day on average,” the report said.

PAR adjustments were not taken in some cases because of difficulty in predicting the effects of PAR movements under uncertain conditions or when adjustment would have pushed actual or post-contingent flows close to a line limit — or because of the transient nature of congestion or mechanical failures, such as stuck PARs.

The Ramapo PARs have provided significant benefits to NYISO in managing congestion on coordinated flowgates. Balancing congestion surpluses have resulted from relief of transmission paths from central to east New York, indicating that they reduced production costs and congestion.

“Nonetheless, comparable benefits have not been observed from the operation of ABC and JK PARs in the second quarter of 2017,” the report said. “We observed potential opportunities for increased utilization of M2M PARs.”

The normal limit for each PAR-controlled line was more than 500 MW, but flows were generally well below that level. On average, each PAR was adjusted two to five times per day, well below the operational limits of 20 taps/day and 400 taps/month. This was also below the average five to six 30-minute blocks of time per day when the congestion differential between PJM and NYISO exceeded $10/MWh across these PAR-controlled lines.

Reserve Market Performance

Day-ahead 30-minute reserve prices have been substantially elevated since a market rule change in November 2015, driven primarily by the new limitation on scheduling reserves on Long Island (down 250 to 300 MW), an increased 30-minute reserve requirement (up 655 MW) and higher reserve offer prices from some units.

The Monitor found that many units that offer above the standard competitive benchmark — or the estimated marginal cost — in part because of the difficulty in accurately estimating the marginal cost of providing operating reserves.

According to the Monitor, day-ahead offer prices may fall as suppliers gain more experience, which was evident in the second quarter as a large amount of reserve capacity reduced its offer prices from previous years, helping reduce price averages.

The Monitor will consider potential rule changes, including whether to modify the existing $5/MWh “safe harbor” for reserve offers in the market power mitigation measures.

Uplift and Revenue Shortfalls

Guarantee payments were $11.2 million during the quarter, comparable to a year earlier. Those payments rose in New York City and fell in Western New York because of higher gas prices that increased the commitment costs of gas-fired units and supplemental commitment for reliability in the city, and decreased out-of-merit dispatch and commitment of the AES Cayuga coal-fired units in the west.

Congestion shortfalls were $21 million in the day-ahead market and $11 million in the real-time, higher and lower, respectively, than in the same period in 2016.

Transmission outages accounted for roughly 80% of day-ahead market shortfalls in the second quarter, and $17 million were allocated to the responsible transmission owner.

Nearly all the real-time market shortfalls were associated with the North Zone lines, the West Zone lines and the Capital to Hudson Valley lines, with North Zone shortfalls accruing almost entirely because of transmission outages on two days in early April, totaling $4.6 million.

Capacity Market

Second-quarter capacity spot prices ranged from $1.99/kW-month in Rest-of-State to $8.02/kW-month in New York City. The average price includes one month of winter pricing (April) and two months of summer pricing (May and June).

Compared to the previous year, average spot prices fell 21 to 45% in New York City and the New York Control Area (NYCA) and rose 9% to 17% in the G-J Locality and Long Island.

Price changes in all regions were driven largely by changes to the installed reserve margin and net CONE of the proxy unit from the demand curve reset process. Net CONE values rose substantially in both the G-J Locality and on Long Island, while falling in the city and NYCA.

Additionally, import levels averaged 430 MW higher in the second quarter compared to 2016, with noticeably higher imports from PJM more than offsetting reduced imports from ISO-NE.

August 24, 2017

Perry Grid Study Seeks to Aid Coal, Nuclear Generation

By Rich Heidorn Jr.

Energy Secretary Rick Perry’s much-awaited grid study calls on the federal government to rescue traditional “baseload” power — coal and nuclear — by addressing renewables’ negative pricing and ending EPA’s New Source Review rule on coal generators.

rick perry grid study baseload power negative pricing — | *Energy Information Administration (EIA) Electric Power Monthly, June 2017*

The 187-page study, which was released late Wednesday night, contains little if any new data or analysis. Virtually all the trends it cites and the issues it raises have been under discussion for months or years at FERC, in state legislatures and at RTO/ISO stakeholder meetings. What is new are some of the policy recommendations, which reflect the Trump administration’s support of the coal industry and its rejection of the Obama administration’s Clean Power Plan.

The report cites Executive Order 13783, saying that while the Energy Department is not specifically named in the order, the department “should continue to prioritize energy dominance” and that it and other federal agencies “should accelerate and reduce costs” for licensing “nuclear, hydro, coal, advanced generation technologies and transmission. DOE should review regulatory burdens for siting and permitting for generation and gas and electricity transmission infrastructure and should take actions to accelerate the process and reduce costs.”

‘Unnecessary Burden’

As one example, it suggests ending the New Source Review rule, administered by EPA under the Clean Air Act, saying coal-fired generators should be allowed “to improve efficiency and reliability without triggering new regulatory approvals and associated costs.”

“The uncertainty stemming from [New Source Review] creates an unnecessary burden that discourages rather than encourages installation of CO₂ emission control equipment and investments in efficiency because of the additional expenditures and delays associated with the permitting process,” it said.

It also says FERC should require valuation of “Essential Reliability Services,” in which it includes reliability-must-run generators and ancillary services (frequency and voltage support, and ramping capability).

Perry, who requested the study in an April 14 memo, said it was “long overdue.”

“The industry has experienced massive change in recent years, and government has failed to keep pace,” he said in his cover letter to the report. “This report examines the evolution of markets that has occurred over the last 15 years. Policymakers and regulators should be making decisions based on what the markets look like today, not what they looked like years ago.”

Perry’s memo, which set a 60-day deadline, called for the department to “explore critical issues central to protecting the long-term reliability of the electric grid,” and to analyze “market-distorting effects of federal subsidies that boost one form of energy at the expense of others.” The report arrived two months late.

Vehicle for Trump Policy?

The memo sparked concern among renewable energy advocates that the study would be a vehicle for Trump to deliver on his campaign promises to “save” the coal industry.

Their fears were heightened by the involvement in the study of Travis Fisher, a former FERC economist hired by DOE in January who had written a 2015 report for the conservative Institute for Energy Research that alleged the “single greatest threat to reliable electricity in the U.S. does not come from natural disturbances or human attacks” but federal and state government policies such as renewable subsidies and mandates.

But the politicization appeared to have been tempered by the involvement of career DOE staffers and contractor Alison Silverstein, once senior adviser to former FERC Chair Pat Wood, a Republican appointee of President George W. Bush. Silverstein is board secretary for the American Council for an Energy-Efficient Economy.

Another factor was the leak of a draft of the report in June, which contradicted Perry’s memo by concluding that low natural gas prices rather than renewable-friendly policies were the main cause of coal and nuclear plant retirements.

Changes from Leaked Draft

Joe Romm, a writer for the progressive website ThinkProgress, compared the final version with the draft and concluded that “while Trump officials clearly tried to rewrite the previously leaked staff draft to give the impression that renewable energy sources are a threat to baseload power and grid resilience, they mostly botched the job.”

The draft report found that environmental regulations and renewable energy subsidies “played minor roles compared to the long-standing drop in electricity demand relative to previous expectation and years of low electric prices driven by high natural gas availability.”

The draft also concluded that “the power system is more reliable today due to better planning, market discipline, and better operating rules and standards.”

Both of those conclusions were eliminated from the final report, Romm said.

Instead, the final report concedes that “the biggest contributor … has been the advantaged economics of natural gas-fired generation,” and that “another factor … is low growth in electricity demand.”

The report also substituted the finding that renewable subsidies had a minor impact on baseload plant retirements with the conclusion that “dispatch of VRE [variable renewable energy] has negatively impacted the economics of baseload plants” — a statement that is undermined elsewhere in the report citing data that “do not show a widespread relationship between VRE penetration and baseload retirements.”

While the final report notes that “recent severe weather events” have “demonstrated the need to improve system resilience,” it removes the words “climate change,” which many scientists believe is a contributor to the phenomenon.

“Perry and his staff took a perfectly solid report on the grid and added a (surprisingly light, to my eye) coating of political propaganda,” wrote columnist David Roberts on Vox. “The result is a muddy report, with findings in it to please (or enrage) every onlooker.”

Coal, Nuclear Groups Praise Report

In early reaction to the report, many groups seemed to be able to find something they liked — with the coal and nuclear lobbies most effusive. Environmentalists were dismissive, if relieved.

“We commend Secretary Perry and the Department of Energy for studying the challenges facing the electricity grid,” said Paul Bailey, CEO of the American Coalition for Clean Coal Electricity. “One of the biggest challenges is how to preserve the nation’s coal fleet so it can continue supporting a reliable and resilient electricity grid.”

“We commend Secretary Perry for his leadership in beginning this important but long overdue conversation about the future reliability and resilience of our electric power system,” said National Mining Association President Hal Quinn. “Among other findings, the report notes that ‘regulations and mandates,’ in addition to market forces, have accelerated the closure of a substantial number of baseload power plants. … As the report notes, many states and regions bear an increased risk from the destruction of traditional baseload power and the resulting diminution of grid resilience.”

Nuclear Energy Institute CEO Maria Korsnick said the study “reaffirms our view that nuclear energy is a key and necessary contributor to a clean, reliable and resilient electric grid.”

“In the 10 years since the last comprehensive grid study by our government, electricity markets have changed radically,” she continued. “Today electricity markets do not properly credit nuclear energy for the numerous benefits it delivers, forcing plants to close years before the end of their useful lives and compromising grid reliability and resiliency in the process.”

Kelly Speakes-Backman, CEO of the Energy Storage Association, said the group was “encouraged” by its initial review of the report.

“The report plainly states that advanced energy storage systems are critical to ensuring that electricity is reliable, affordable and secure,” she said. “We also agree with the key findings that better strategies are needed by markets and in resource planning to properly reward the values that energy storage systems provide to the grid, especially increased reliability and resiliency.”

Tom Kiernan, CEO of the American Wind Energy Association, said the group agrees with the department “that it makes sense to determine how a portfolio of domestic energy resources can ensure grid reliability and resilience.”

Kiernan — who noted that the U.S. wind industry is expected to “support” 147,000 jobs by 2020 — said the report “provides a number of valuable policy recommendations.”

“In particular, DOE’s recommendations to value essential reliability services, which wind provides; to minimize regulatory barriers to energy production; and to accelerate infrastructure and transmission development are prudent and will help continue America’s wind power success story,” he said.

Dissenting Voices

The Alliance to Save Energy said the discussion about the report overlooked the role of energy efficiency. “As we look at the portfolio of solutions we can’t just look at supply,” said President Kateri Callahan. “We have to remember that increasing efficiency and productivity is the fastest and cheapest way to reach our goals — and it’s also a tremendous economic opportunity. Already efficiency is the leading job creator in the clean energy sector with some 2.2 million jobs in construction, manufacturing and other fields.”

Graham Richard, CEO of Advanced Energy Economy, a group of clean-energy and technology companies, said he was pleased that the department “recognizes that changes in the grid are primarily the result of low-cost natural gas, not policies supporting renewable energy.”

But he said the report “seriously overstates the challenges associated with new energy resources. It also implies that certain power plants now losing out in the marketplace make an irreplaceable contribution to reliability and resilience, which is not the case.”

“Our nation’s grid operators themselves have said they are facing no difficulty in managing an increasingly diverse set of resources, and that they will have no difficulty maintaining reliability as uncompetitive power plants inevitably retire,” he added. “What is happening in our power grid is a natural process of technology progress and market competition. That process should be allowed to continue, not be distorted by this administration’s preference for ‘baseload’ resources over the flexible resources that are modernizing the electric power system.”

Also critical was environmental group Earthjustice, which said the report “shows that science is not safe from manipulation under this administration.”

“Sound findings in the earlier draft of the report have been mysteriously excised, replaced by trumped up claims about the costs of environmental regulations,” said Earthjustice attorney Kim Smaczniak. “And this report says nothing about climate change. By willfully burying its head in the sand on climate change, the administration will make the grid more vulnerable to the next Superstorm Sandy, which left millions without electricity.”

August 23, 2017

MISO Wins OK for Cleco Plant SSR

FERC on Tuesday approved MISO’s proposed system support resource (SSR) agreement for Cleco Power’s Teche 3 generating plant in Baldwin, La., effective April 1 (ER17-1227, ER17-1228).

MISO designated the 338-MW natural gas-fired plant as an SSR after Cleco notified the RTO it planned to retire the plant. The RTO said the plant will be needed to prevent severe thermal violations on its transmission system that are not addressed by available mitigation measures until the Terrebonne–Bayou Vista 230-kV line can be put into service in 2018.

FERC Cleco Energy SSR MISO — Cleco’s Teche Power Station in Baldwin, LA | *Google*

The RTO said no feasible alternatives to SSR designation were identified in stakeholder meetings.

The commission rejected a protest by Entergy, which said the SSR agreement — which includes hourly compensation for the plant’s production and operating reserve costs — should include a true-up mechanism for the recovery of fixed costs to prevent Cleco from being overpaid. The commission said that issue should be addressed in a separate docket opened by Cleco for obtaining additional compensation to ensure it recovers its full cost of service (ER17-1368).

Teche 3 was built in 1971. Unit 1, completed in 1954, retired last September. Unit 2, completed in 1956, retired in 2011, when Cleco completed Teche 4, a 35-MW gas-fired black start generating unit.

— Rich Heidorn Jr.

August 23, 2017

PJM Markets and Reliability Committee Preview: Aug. 24, 2017

Below is a summary of the issues scheduled to be brought to a vote at the Markets and Reliability Committee on Aug. 24. 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. There is no Members Committee meeting scheduled this month.

Markets and Reliability Committee

2. PJM Manuals (9:10-9:25)

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

A. Manual 11: Energy & Ancillary Services. Revisions developed as part of the implementation of Coordinated Transaction Scheduling, a new real-time energy scheduling product across the PJM-MISO interface. The presentation will include associated revisions with the Regional Transmission and Energy Scheduling Practices document.

3. Governing Document Revisions to the Limitation on Claims (9:25-9:40)

Members will be asked to endorse proposed Tariff and Operating Agreement revisions that clarify the two-year limit on requests for billing adjustments.

4. Seasonal Capacity Resources Sr. Task Force (SCRSTF) (9:40-10:10)

Members will be asked to endorse a problem/opportunity statement and issue charge regarding items related to market participation by seasonal resources. The matters were discussed in the task force but ultimately not addressed in the FERC-approved enhanced aggregation proposal. (See PJM Outlines Aggregation Rules for Upcoming Capacity Auction.)

5. Dynamic Schedule Pro Forma Agreement (10:10-10:25)

Members will be asked to endorse proposed joint operating agreement and Tariff revisions to develop a pro forma agreement for dynamic scheduling. (See “OC Discusses Pro Forma Agreements for Pseudo-Ties, Dynamic Schedules,” PJM OC Briefs: July 11, 2017.)

— Rory D. Sweeney

August 23, 2017

UPDATED: Trader Agrees to Pay $2.7M in Win for FERC

By Rich Heidorn Jr.

Fort Lauderdale-based trader K. Stephen Tsingas agreed to pay $2.7 million in penalties and restitution in a deal with FERC’s Office of Enforcement that will also bar him from trading in commission-jurisdictional markets for three years. The commission approved a consent agreement setting the terms on Aug. 22 (IN5-5).

Tsingas and his company, City Power Marketing, agreed to the settlement without admitting to the commission’s allegation that they violated the Federal Power Act and commission regulations by engaging in market manipulation and later lying to FERC investigators.

City Power also agreed to pay a $9 million civil penalty, but the company is defunct and FERC agreed not to pursue Tsingas for the additional amount. In a filing in 2015, Tsingas said that FERC’s investigation forced him to lay off all his employees and “destroyed” the company. (See UTC Trader: Firm was Ruined by ‘Unfair’ FERC Prosecution.)

Although the $11.7 million in penalties were reduced from the $16.3 million the commission had sought, the case represents a victory for FERC in its crackdown on traders who profited from what the commission called risk-free up-to-congestion (UTC) trades. FERC said the trades were intended to cash in on line-loss rebates in PJM — the same type of trading that gave rise to the commission’s high-profile battle with brothers Kevin and Rich Gates and their Powhatan Energy Fund.

Three Types of Trades

The commission said City Power collected the rebates — or marginal loss surplus allocations (MLSA) — through three types of UTC transactions: “round-trip” trades that canceled each other out; trades between import and export pricing points of the same PJM interface with equivalent prices (SOUTHIMP-SOUTHEXP); and trades between two PJM nodes that historically had a very small price spreads (NCMPAIMP-NCMPAEXP).

The commission concluded that City Power created the false impression that it was trading to arbitrage price differences “when, in fact, it was engaging in trades solely to collect MLSA payments to the detriment of other market participants.”

The commission also accused Tsingas of attempting to mislead investigators by denying the existence of incriminating instant messages between him and a trading colleague.

The commission sued Tsingas after he failed to respond to a July 2015 order demanding the $16.3 million. The two sides reached a settlement in March, after a U.S. district court last August rejected Tsingas’ motion to dismiss and in January denied FERC’s motion for summary judgment. Approval of the settlement was delayed by FERC’s loss of a quorum in February.

Under the consent agreement, Tsingas will pay $1.3 million in disgorged profits to PJM and a $1.42 million penalty to the U.S. Treasury Department. Tsingas must pay $825,000 to PJM within 60 days, paying the balance over 10 years.

Barred from Trading

Tsingas also agreed that neither he, nor any person acting on his behalf, “will engage or participate (whether through consulting, advising, directing or strategizing), directly or indirectly, in any trading transaction (whether physical or financial or virtual) within the commission’s jurisdiction for three years.”

However, the bar “does not apply to any business entity in which Tsingas has an ownership interest, or its employees, so long as Tsingas does not personally engage or participate in, directly or indirectly, or otherwise operate or consult about, any trading transaction within the commission’s jurisdiction.”

“FERC would not have been able to pursue this remedy had the court decided the case on the merits,” observed Matthew Connolly, a senior associate in the litigation department of Nutter McClennen & Fish.

Like Tsingas, the Gates brothers and Coaltrain Energy — a third set of defendants accused of profiting from riskless UTC trades — have sought de novo reviews of FERC’s allegations, in which a federal district court would decide all issues of fact and law. (See Traders Deny FERC Charges; Seek Independent Review.)

The Powhatan case has been stalled in the Eastern District of Virginia, awaiting a judge’s ruling on how the review should proceed. FERC has asked for a short, appellate-style review (3:15-cv-452).

Coaltrain is awaiting a ruling from a judge in the District Court for Southern Ohio on its motion to dismiss (2:16-cv-00732).

PJM Seeks Advice

In April 2015, PJM asked FERC for advice on who should receive the disgorged profits and how they should be calculated. It also sought direction on how refunds should be made to parties who are no longer PJM members and noted that there were six entities alleged to have engaged in sham trades who would also be considered victims of the City Power trades. (See PJM Asks FERC for Direction on Refunds from Illegal Trades.)

In an order in July 2015, the commission told PJM to establish a method to distribute the resettled MLSA payments to market participants that would have received higher rebates if not for the money collected by City Power. The RTO must seek approval of its methodology from the director of the Office of Enforcement within 45 days after receiving the disgorged funds.