Page 1280 – RTO Insider

August 31, 2017

Echoing DOE Report, Industry Study Touts Coal ‘Resiliency’

By Amanda Durish Cook

A new study prepared for the American Coalition for Clean Coal Electricity (ACCCE) spotlighting the “resiliency” of coal-fired generators echoes the findings of a U.S. Department of Energy report released earlier this month.

Although the study by PA Consulting Group concludes that “no single electricity resource has all of the attributes necessary for a reliable and resilient grid” and that “a mix of resources is the best strategy,” it lauds coal generation for its “many critical attributes,” including stable fuel prices and an on-site fuel supply that can act as a hedge against potentially volatile natural gas prices, interruptible fuel deliveries and intermittent renewable and demand response resources.

ACCCE DOE coal — Coal stockpile | *Worldcoal.org*

The study’s release may prove to be an early salvo in the possible “fuel wars” predicted by one former senior FERC official who said that new FERC commissioners could break with agency tradition by each acting as advocates for favored types of resources. (See Coal Seeks ‘Resiliency’ Premium; FERC ‘Fuel Wars’ Coming?)

The study ranked generation resources on 11 attributes, giving coal high marks in all but black start capability.

The report is effectively a response to a study done by The Brattle Group for the American Petroleum Institute (API), which concluded that gas-fired generation is “relatively advantaged” in all but one of the 12 attributes identified in that study. (See NG Lobby Goes on Offensive vs Coal, Nukes.)

The API/Brattle report ranked coal as only “neutral” on two categories for which ACCCE claimed a full score — frequency response and ramp rates (referred to as “ramp capability” by ACCCE).

API did not score three categories in which ACCCE said coal had an advantage over gas: on-site fuel supply, reduced exposure to a single point of disruption and price stability.

“This new report shows the coal fleet is essential to help maintain the reliability and resilience of the electricity grid,” said ACCCE CEO Paul Bailey. “For that reason, we are especially supportive of DOE’s recent recommendation that policymakers need to establish criteria to value attributes, such as on-site fuel, that help protect the grid against low probability events that have extreme consequences.”

Bailey said he looked forward to “working with policymakers to implement DOE’s recommendation as quickly as possible” that RTOs begin valuing on-site fuel storage as a measure of “resiliency.” (See Perry Grid Study Seeks to Aid Coal, Nuclear Generation.)

Natural Gas Criticisms

The report took particular aim at natural gas-fired generation, coal’s biggest competitor. According to the report, coal generators on average stockpiled 82 days of bituminous coal and 73 days of subbituminous coal on site over the last five years. It compared that to the position of “vulnerable” gas-fired plants, which last year on average had about 60 days of fuel in storage reserves and rely on interruptible deliveries via pipeline.

It also pointed out that low-probability, high-impact events like earthquakes can cause supply shocks in the gas distribution network. More than 50% of gas storage capacity is located in five states — Michigan, Texas, Louisiana, Pennsylvania and California — PA Consulting warned, and 18 states in the continental U.S. have “no material storage capability,” including New England and North Carolina, South Carolina, Georgia and Florida.

The study also said that because most U.S. coal is used for electricity, coal-fired generation “does not compete with higher-priority uses” and will not have to be forcibly curtailed. It also pointed out that “all but two lignite coal-fueled plants [in the U.S.] source their coal from mines within 30 miles of the plant.”

The popularity of gas-fired generators relies on the continuation of low-cost shale natural gas, the study contends.

“The current investment boom in natural gas-fired plants is driven in part by an expectation of continued low natural gas prices of approximately $3-4/MMBtu,” the study said. The 77 GW of gas-fired capacity built since 2009 might be a result of an “over-focus on short-term price signals,” the authors contend.

Over the last decade, monthly average natural gas prices have “repeatedly seesawed” from $3/MMBtu to more than $12/MMBtu, reaching $100/MMBtu in some markets during the so-called “polar vortex” of 2014, the study noted. It also pointed to dramatically fluctuating gas prices during 2015’s Aliso Canyon leak and an extreme cold front in Texas in 2011 that caused 193 generating plants to either fail outright or experience weak output.

“Retaining existing coal-fueled power plants can help insulate ratepayers against rising and possibly volatile natural gas prices,” the report said.

August 31, 2017

NYISO Management Committee Briefs – August 30, 2017

NYISO locational-based marginal prices (LBMPs) have averaged $36.35/MWh for the year through July, a 12% increase from a year earlier, COO Rick Gonzales told the Management Committee during its Aug. 30 meeting. Natural gas prices were up 13.1% over the same period.

LBMPs averaged $35.84/MWh during July, up 13% from June and down 10% from July 2016. Last month’s daily sendout averaged 498 GWh/day, compared with 532 GWh/day a year earlier.

July natural gas prices and distillate price averages gained from the previous month, with Transco Z6 NY gas up 4% to $2.44/MMBtu, jet kerosene Gulf Coast up 9% to $10.49/MMBtu and NY Harbor ultra-low sulfur No.2 diesel up 7% to $10.85/MMBtu. Distillate prices increased 11.1% from the same period a year ago.

NYISO locational-based marginal prices LBMPs — | *NYISO*

Average uplift costs — not including NYISO cost of operations — were down to -43 cents/MWh for the month, compared with -37 cents/MWh in June. The local reliability share fell 4 cents to 11 cents/MWh. The statewide share of -54 cents/MWh came in 2 cents below June. July’s total uplift costs were also lower than in June.

The monthly peak load of 29,699 MW occurred July 19, far short of the all-time summer peak of 33,956 MW recorded on July 19, 2013.

NYISO Evaluates Energy Market Offer Cap

The ISO is continuing to evaluate its energy market offer cap to prevent differences in regional offer caps from interfering with economic and reliability-driven interchange scheduling, according to a report presented by NYISO Senior Vice President for Market Structures Rana Mukerji.

Under FERC Order 831 issued last November, NYISO is required to cap each resource’s incremental energy offer at the higher of $1,000/MWh or that resource’s verified cost-based incremental energy offer, and cap verified cost-based incremental energy offers at $2,000/MWh when calculating LBMPs. The grid operator last December filed a request for clarification/rehearing on the issue with FERC and submitted a compliance filing in May.

Mukerji also noted that the ISO is working to improve forward horizon coordination of real-time constraints (RTC) and real-time dispatch (RTD). NYISO aims to improve modeling consistency between RTC and RTD and evaluate improvements in look-ahead evaluations to facilitate more efficient scheduling and price convergence.

Pending issues include possible proposals to allow market participants to buy and sell reserves and regulation service between NYISO and adjacent control areas and to develop a market mechanism to assign external parties with the costs associated with congestion rent shortfalls resulting from external transmission outages.

The ISO is also examining the reciprocal elimination of fees on export transactions in order to increase interregional transmission scheduling efficiency. Rate pancaking between NYISO and ISO-NE has already been eliminated.

Interconnection Queue Improvements Approved

The committee approved steps intended to improve the efficiency of the interconnection queue process while maintaining needed reliability evaluations.

The proposed changes clarify and update existing practices and procedures, except for the transmission interconnection procedures, which are still pending FERC acceptance. Transitional rules would allow projects currently in the interconnection process to benefit from the proposed changes. (See “Committee Advances Interconnection Queue Improvements,” NYISO Business Issues Committee Briefs: Aug. 9, 2017.)

NYISO expects to file associated Tariff changes with FERC in late September following board approval.

New York Easily Handles Solar Eclipse

NYISO easily met operational reliability criteria throughout the solar eclipse Aug. 21, despite a 1,010-MW reduction of net load that exceeded predictions by nearly 300 MW, according to a report from NYISO Vice President of Operations Wes Yeomans.

The ISO did not experience the slight projected load increase early in the eclipse, possibly because of lower loss of behind-the-meter solar than originally anticipated, as well as public reaction to the event. He attributed the higher-than-expected net load increase later in the eclipse to high humidity.

New York experienced a partial solar eclipse from 2:30 to 2:45 p.m., with peak obscuration ranging from 80% in Chautauqua County, to 75% in New York City and Long Island and 67% in Clinton County.

— Michael Kuser

August 30, 2017

California Agencies, Utilities Prep for Climate Change

By Jason Fordney

California utilities and state agencies are cooperating on developing plans to manage the effects of global climate change on the electricity grid, an issue that looms especially large for the state.

Rising sea levels, reduced snowpack, more wildfires and extreme weather events such as drought and severe rain are predicted for California, which experts say will be more affected by global warming than other states because of its warm climate and extensive coastline.

California utilities climate change — California Energy Commission Chairman Robert Weisenmiller | © *RTO Insider*

Partnership between state officials, local government and utilities was the theme at a Tuesday workshop hosted by the California Energy Commission. Participants discussed the physical impacts of climate change on the grid, geophysical changes, temperature trends and the challenges facing vulnerable populations.

State law requires the CEC to assess and forecast the state’s energy production, supply and demand, and develop policies that conserve resources. The agency is studying climate change impacts on the energy grid as part of its 2017 Integrated Energy Policy Report process, which is updated every year and adopted every two years.

Pacific Gas and Electric is a critical infrastructure company with 16 million customers and a “critical responsibility,” said Melissa Lavinson, vice president of federal affairs and policy. The company is getting more requests from local governments for information on its efforts to prepare for climate change, she said.

PG&E favors a regional approach to the issue that would help with coordination, rather than going community by community. The utility has proposed a “climate resilience clearing house” to aggregate information and a regional governing body to coordinate local governments.

“We are far from the end of this process. We are at the beginning of this journey,” she said.

San Diego Gas & Electric is in the midst of a “Climate Vulnerability and Adaptation Options” study consisting of both electric grid and natural gas tracks, Sempra Energy Meteorologist Brian D’Agostino said. The electric analysis looks only at the effect of the rising water level and flooding on the coast where many of the company’s power plants are located, while the natural gas program also looks at climate hazards inland. The report also highlights downstream impacts on customers, electricity demand and the economy.

Historic and Project State-Wide Temperature | *California Energy Commission*

PG&E is working with the University of California, Berkeley and the California Department of Water Resources on a program to deploy wireless remote sensors to study moisture, temperatures and snowpack and more effectively manage hydro assets, said Gary Freeman, the company’s principal hydrologist. The company closely studies weather and increasing “atmospheric rivers,” which are columns of moisture that occur in the atmosphere and can dump large amounts of rain.

Atmospheric rivers hundreds of miles wide occur in California because of the Pacific Ocean and mountains that cool the air as it travels inland. The formations provide up to 50% of the annual precipitation on the West Coast, and their increasing activity is another example of how climate change affects grid planning and reliability in a region with extensive hydroelectric capacity.

Gov. Jerry Brown in April 2015 signed an executive order that set 2030 greenhouse gas reduction targets that were recently codified into law. (See California Lawmakers Extend Cap-and-Trade.) The state has also developed online tools providing climate change data, including climateconsole.org and cal-adapt.org.

August 30, 2017

ATC Fined over Improper FERC Reporting

By Amanda Durish Cook

American Transmission Co. has agreed to pay a federal fine and undergo a year of monitoring after failing to properly report more than 60 agreements and transactions to FERC over the past 16 years.

Under an agreement reached with FERC’s Office of Enforcement, Milwaukee-based ATC will pay a civil penalty of $205,000 to the U.S. Treasury and submit semi-annual compliance monitoring reports for one year detailing any further violations (IN17-5).

FERC ATC American Transmission Co — ATC headquarters in Milwaukee | *Mortenson Construction*

The office found that ATC repeatedly failed to seek approval to merge or acquire FERC-jurisdictional facilities and to file “timely” contracts and agreements relating to rates and charges for jurisdictional service.

“Enforcement determined that, although ATC’s violations did not result in quantifiable market harm, they created a lack of transparency in the market by failing to have all of ATC’s jurisdictional agreements on file with the commission, and by consummating purchases of commission-jurisdictional assets without commission authorization,” the commission said.

In an internal review of its filing processes during 2014 and 2015, ATC discovered 63 instances in which it failed to either properly report or file information starting in 2001.

Those include several agreements that it failed to file pursuant to Federal Power Act obligations, relating to operations, transmission design on shared 345-kV projects, pole replacements, repairs on jointly owned substations, transmission line relocation and ownership, and cost-sharing for jurisdictional facilities. ATC in some cases also neglected to file notices to terminate existing agreements. The company has already paid $1.4 million to several affected parties in time-value refunds.

The company also identified 21 jurisdictional facilities it acquired without gaining FERC approval. The facilities range in value from $1,513 to $1.2 million. FERC retroactively approved each transaction after ATC sought permission between 2014 and 2015.

Section 203 of the FPA requires public utilities to file for FERC authorization to merge or acquire jurisdictional facilities, and Section 205 requires public utilities to file “all contracts which in any manner affect or relate to such [jurisdictional] rates, charges, classifications and services.”

FERC said that, since discovering the violations, ATC has taken steps to “strengthen its compliance policies and procedures and to prevent noncompliance in the future regarding jurisdictional agreements,” holding employee training seminars, updating training documents and developing an internal review process to make sure the company has proper authorization.

August 29, 2017

MISO Sets Target for Market Platform Upgrade Decision

By Amanda Durish Cook

CARMEL, Ind. — Now that it has completed a seven-month evaluation of its existing system, MISO says it will provide a detailed decision on how it would rebuild its computer-based market platform in 2019.

MISO market platform — Porter | © *RTO Insider*

The RTO’s near-term focus: to protect and extend the life of the existing market system while exploring and discussing upgrade options with vendors, according to MISO General Counsel Andre Porter.

MISO will present a business case for the making the upgrade at a Sept. 6 workshop on the status of the market platform. MISO’s Board of Directors in June urged RTO officials to provide stakeholders with upgrade details — and a plan — in order to solicit comments. (See MISO: $130M Needed for New Market Platform.)

“Stakeholder participation is critical for the market system enhancement program,” Porter said, urging stakeholders to bring questions to the workshop.

At an Aug. 24 meeting of the board’s Technology Committee, Director Baljit Dail praised the RTO’s stakeholder outreach, but stressed that it should make the upgrade information easier to understand.

MISO expects to select an upgrade option and confirm a vendor in 2019, with roll-out of the new platform targeted for no later than 2024. Officials plan to finalize a budget in October for the estimated $65 million needed to preserve the existing system for another five to seven years, while another $65 million would be allocated to build a new modular platform. The budget will also include a total contingency amount equating to up to 25% of the project cost.

Director Thomas Rainwater commended MISO for being able to finish the evaluation stage of the project on time. “We think that’s a bellwether of what’s to come,” he said.

“The progress you all have made is phenomenal, and you guys should be very proud of this. As a committee, we want this project to be successful. It has the potential for a huge payout,” Dail said, urging officials to provide frequent updates on the project.

As MISO completes the platform rebuild, officials will also explore the intellectual property rights of the software. A deeper discussion on possible copyrights was saved for a closed session of the Technology Committee.

The existing market system, designed by General Electric, was built from scratch in 2005 for $245 million. To incorporate the ancillary services market in 2009, MISO spent $75 million. It spent an additional $30 million to expand the platform upon integration of MISO South in 2013. In any given year, MISO invests about $6 million to $9 million in maintenance and improvement costs, Vice President of System Operations Todd Ramey said.

“The system we use today, and have used since the start of our markets in 2005, is really based on infrastructure used in the late 1990s. This system has started to show signs of its age,” Ramey said.

Several Market Roadmap design changes have been put on hold because of the aging infrastructure, Ramey said. MISO has growing concerns about security and, in some cases, market participants must use older versions of web browsers to view web pages.

ISO-NE and PJM also use GE-designed platforms. Both RTOs will undergo “common” upgrades using a staged approach in the next few years, said Jeff Bladen, MISO executive director of market design.

“In some respects, we’re catching up [with other RTOs], but we have a plan to go beyond what’s done today,” Bladen said during an Aug. 23 Advisory Committee meeting.

Ramey noted that MISO would eventually be forced to change to its platform because GE plans to phase out IT support for the aging software.

The computer overhaul will mostly affect MISO’s day-ahead market and Energy Management System programs. The RTO’s settlement software system is being rebuilt in a different project launched in 2014. The RTO is currently completing system testing and expects to launch the new settlements platform sometime in the fourth quarter, in time for the early spring 2018 roll-out of five-minute settlements.

August 29, 2017

MISO-PJM Markets Meeting Addresses Seams Issues

By Rory D. Sweeney

VALLEY FORGE, Pa. — PJM and MISO staff provided updates on their proposed pro forma pseudo-tie agreements, the “freeze date” on transmission rights and targeted transmission upgrades at their Joint and Common Market meeting Aug. 22.

Pseudo-Tie

MISO’s Kevin Vannoy told stakeholders that FERC accepted the RTO’s pro forma pseudo-tie agreement Aug. 9 with an effective date of March 15, though it was approved in a delegated order and could be subject to further review and refunds now that the commission has a quorum (ER17-1061). (See FERC Conditionally OKs MISO’s Pseudo-tie Pro Forma.)

PJM’s pro forma agreement, filed on Aug. 11, awaits FERC approval. The grid operators filed revisions to their joint operating agreement to address PJM’s pro forma on Aug. 1.

PJM has until Sept. 17 to respond to a deficiency notice on its Tariff revisions for pseudo-tie requirements, which were filed March 9 (ER17-1138). (See MISO, PJM to Try Again on FERC Pseudo-Tie Filings.)

The grid operators next plan to address the “congestion overlap” that is causing some congestion to be charged twice and has led to complaints at FERC. The issue, which occurs when an associated market-to-market constraint binds in both markets, will require a two-phase solution.

“It’s a complex solution” that can’t be done in a single implementation, PJM’s Tim Horger explained.

The first phase, which the grid operators hope to have implemented by Dec. 1, would include JOA changes to better model the impacts of firm-flow entitlements before the day-ahead dispatch is modeled. This will allow day-ahead LMPs for pseudo-tied resources to more accurately reflect expected real-time congestion. The balancing authority receiving the power will receive credit for the flow from the generation unit to the border, while the source balancing authority will model its impacts as loop flows.

“We think it’s a major step and will remove most of the overlap,” Horger said.

The second phase will allow for mitigating day-ahead charges either through refunds or virtual transactions to align transmission usage charges with available financial transmission rights hedges.

The RTOs plan to file JOA changes implementing market-to-market adjustments in September, with implementation of the phase one solution by the end of December. Dec. 1 is the target date for filing additional JOA and tariff changes. Phase two is scheduled for implementation by June 1, 2018.

Freeze Date Update

The grid operators have been using an April 1, 2004, “freeze date” to determine firm rights on flowgates, but issues with that date have “become prominent” over time, the RTOs said. They have developed a two-phase alternative that would be in place by June 1, 2019, MISO’s Ron Arness explained.

The changes would affect designated network resources that came on after the freeze date, which currently are dispatched on a pro rata basis. The new rules would eliminate the pro rata allocation and have them dispatched in the order of their service date.

They also affect “freeze date” transmission service requests, which currently are treated as net imports or exports based on the local balancing authority. The new rules would provide “gross accounting” for imports and exports — generation-to-load LBA calculations would not include generation sourcing TSRs or load served by TSRs — with adjustments that will make the TSR sensitivity factors align with market flow sensitivity factors.

The RTOs plan to complete a whitepaper on the issue by next spring with implementation of phase one in the summer.

Targeted Market Efficiency Projects

PJM’s Chuck Liebold said there has been no targeted market efficiency project (TMEP) study in 2017 because the RTOs are awaiting FERC approval of regional cost allocations for the new category. MISO filed for regional allocation Aug. 4 (ER17-2246), and PJM filed its allocation on April 11 (ER17-1406).

Commission staff tentatively approved the TMEP category in a delegated order in June but said the decision was subject to review by the commission once it regained the quorum it lost in February (ER17-721). (See FERC Tentatively OKs New MISO-PJM Project Type.)

The TMEP proposals are designed to be quick, inexpensive fixes to address historical congestion. Five projects have been identified so far. At an estimated cost of $17.5 million, they are expected to create $99.6 million in benefits.

The RTOs are waiting on FERC approval before submitting the project recommendations to their boards. The benefit allocation for three of the five projects leans heavily toward PJM, with 88% of the $7 million Burnham-Munster project, 89% of the $1 million Bayshore-Monroe project and 90% of the $4.6 million Michigan City-Bosserman project. MISO shoulders most of the allocation on the other two, with 59% of the $150,000 Reynolds-Magnetation project and 76% of the $4.5 million Roxana-Praxair line.

Two-Year System Plan Study

The RTOs have completed regional benefits analysis for the eight interregional projects that were proposed for the solicitation that ended Feb. 28. Only one project — Northern Indiana Public Service Co.’s proposed new line between its Thayer and Morrison 138-kV substations in northwestern Indiana — is expected to provide more benefits than costs. (See 1 of 8 MISO-PJM Proposals Pass Initial Test.)

Liebold said the cost-benefit was not the only factor in recommending projects, but “for a project to be promising, you would expect to see benefits above costs.”

The RTOs will make recommendations to their respective boards on the proposals around November or December.

August 29, 2017

CAISO Finalizes Constraint Tool Proposal

By Jason Fordney

CAISO is close to finalizing a long-running effort to reduce exceptional dispatch of generation to resolve transmission constraints and comply with reliability standards, but market participants have raised last-minute questions about the proposal.

During an Aug. 21 call on the Contingency Modeling Enhancements (CME) draft final proposal, some stakeholders said they wanted more detail about where CAISO would apply a proposed “preventative-corrective constraint” tool. But the ISO, which is preparing to present a final plan to the Board of Governors next month, said it has provided enough transparency.

CAISO FERC transmission constraints requests for proposals — The Proposal is Meant to Improve Economic Dispatch and Reduce Exceptional Dispatch | © *RTO Insider*

CAISO kicked off the CME initiative three years ago to address a Western Electricity Coordinating Council reliability provision requiring grid operators to return a critical transmission path to its system operating limit within 30 minutes of a destabilizing event, such as the loss of a generator or transmission line. The ISO’s present approach to managing those contingencies relies on out-of-market interventions coupled with day-ahead market measures that procure a “bucket” of responsive capacity resources based on a flat megawatt rating of the line.

WECC has since retired that standard, but CAISO still needs to comply with NERC standards requiring a return to normal operations in 30-minute and four-hour time frames.

Under the proposal, resources contributing to restoring normal operations would receive both an energy payment and a payment for reserve “corrective capacity” set aside by the ISO, the cheapest way to provide needed generation if needed because of a contingency, CAISO says.

“The goal here is to reflect the real reliability constraint in the market,” said Perry Servedio, CAISO senior market design policy developer. “We believe the proposal improves transparency related to these constraints by improving the pricing and dispatch.” The latest version has “a hodgepodge of final tweaks to the policy.”

Southern California Edison had previously raised concerns over the complexity of the proposal, while Calpine and NRG Energy were supportive but said that the mechanism should allow participants to bid for corrective capacity. The ISO said that the proposal “fully captures and compensates” for capacity needed to meet any restraints on the system.

During the call, some stakeholders questioned why CAISO had not specified on which transmission paths the constraint tool would be applied. SCE said there is not enough transparency around how the paths would be selected, making it difficult to analyze the benefits.

For SCE, “the benefits are very limited. We don’t see any incremental benefit because you do have all the tools you have today,” Senior Project Manager Wei Zhou said. He added it will increase complexity in the market.

CAISO Principal George Angelidis responded that “I think we are getting bogged down in implementation details and we are missing the big picture here.” The fundamentals of the proposal have not changed, and it is “still a tool that will provide the ability to reduce constraints that are imposed by operators based on their judgement of system conditions,” he said.

“I don’t know why we are making a big issue on this trivial application change” of where the tool will be used, Angelidis said, adding that it would be used wherever it would provide a benefit.

Servedio said that “the selection criteria is: whatever we need to do to operate within our facility ratings.”

The grid operator is taking comment on the final draft proposal until Aug. 31.

CAISO has a separate and overlapping effort underway to resolve certain generator and transmission contingencies currently handled by out-of-market operations. (See Stakeholders Wary of CAISO Contingency Modeling.)

August 29, 2017

Routine July for MISO

CARMEL, Ind. — A mid-July heat wave failed to drastically alter MISO’s monthly average load and energy price, stakeholders learned at an Aug. 22 Informational Forum.

MISO heat wave outages — Chatterjee | © *RTO Insider*

July’s temperatures averaged near normal overall, MISO Executive Director of System Operations Renuka Chatterjee said.

Load averaged 87 GW during the month, up from an average 80 GW in June and “consistent with the summer weather conditions,” Chatterjee said. Load peaked for the year at 120.6 GW on July 20, close to last July’s peak. Day-ahead and real-time energy prices averaged $30/MWh and $31/MWh, comparable to a year ago, owing to natural gas prices that held steady below $3/MMBtu.

“Overall, this July was a typical summer month,” she said.

MISO experienced fewer forced outages this year but more planned outages when compared to last year. Forced generation outages decreased by about 3 GW from a year ago to about 11 GW, while planned outages were up 1 GW to about 6 GW. Real-time congestion stemming from forced outages led to “unanticipated higher prices” in MISO South on July 28, Chatterjee said.

July boasted 2,277 GWh of total wind generation, a 7% decrease compared with last July. Meanwhile, MISO’s registered wind capacity increased from 15.9 GW to 16.8 GW year-to-year.

— Amanda Durish Cook

August 29, 2017

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

WILMINGTON, Del. — PJM and its Independent Market Monitor remain at odds over whether price-based offer updates should be connected to cost-based offers and specified in each unit’s fuel-cost policy.

PJM FERC Market Monitor EIM governing body — Morelli | © *RTO Insider*

At last week’s Markets and Reliability Committee meeting, PJM’s Lisa Morelli outlined the RTO’s planned Manual 11 revisions for implementing intraday offers. The presentation was the culmination of a long debate at August’s Market Implementation Committee meeting, where stakeholders pressed PJM and the Monitor to find as much common ground on the issue as possible. (See “Stakeholders Push PJM and IMM for Consensus on Intraday Offers Rules,” PJM Market Implementation Committee Briefs: Aug. 9, 2017.)

Morelli’s presentation outlined where PJM and the Monitor continue to differ on linking a unit’s price-based offer to its fuel-cost policy. The RTO believes there’s no need for them to be linked, but the Monitor says updating price-based offers should be limited to simultaneously updating cost-based offers, which must be specified in the unit’s fuel-cost policy.

“We think it’s the only way to ensure that the timing of price-based offers and cost-based offers don’t permit the exercise of market power,” Monitor Joe Bowring said. “What we’re concerned about is this will result in one-way optionality for the generators to raise prices during the day but not be required to reduce costs when gas costs go down.”

The two sides will continue to seek compromise until the September MRC meeting, but they will have to pursue separate Tariff revision proposals if they haven’t reached agreement by then, Morelli explained. It could come as a new problem statement for stakeholders to consider, she said.

On energy-offer verification, PJM and the Monitor also remain divided over whether self-certification by the curtailment service provider is sufficient validation for demand response. The Monitor says it is not.

“The main arbiter in this is really FERC,” PJM’s Rami Dirani said. “So FERC has to really decide whether this approach is actually the proper approach going forward.”

There is also some difference of opinion on the exception process for verifying offers that are not consistent with a unit’s fuel-cost policy, verifying offers over 1,000/MWh and verifying operating reserve credits for verified offers over $1,000/MWh, but PJM believes the two sides are moving toward a compromise.

Summer-only DR to be Studied

Stakeholders approved by acclamation a problem statement and issue charge regarding summer-only DR, but not before state and consumer representatives pushed for additional revisions.

The proposal came out of the Seasonal Capacity Resources Senior Task Force, which culminated in a seasonal resource aggregation filing and approval at FERC late last year, PJM’s Scott Baker explained. However, RTO staff pared the problem statement’s scope down to eliminate other seasonal resources, such as wind, hydro or energy efficiency.

John Farber with the Delaware Public Service Commission asked for a friendly amendment that specifically noted analyzing the load forecast would be in the scope of the group.

“One of the values of DR is to manage the peak. A managed peak costs less than one that’s not managed,” he said.

Greg Carmean, executive director of the Organization of PJM States Inc., noted the Energy Policy Act of 2005 stipulated that unnecessary barriers to DR participation in the markets be removed. “I haven’t seen where PJM has gone back and evaluated whether or not their annual product actually is a barrier to demand response,” he said.

Stu Bresler, PJM’s senior vice president of operations and markets, said that the RTO’s strategy paper on DR indicates how it intends to move forward on the issue. The problem statement identifies several items that are already considered out of scope, including loss-of-load expectation analysis; seasonal capacity procurement or developing a seasonal market; re-establishing non-Capacity Performance products such as base capacity; or limited DR.

The initiative is following through on the strategy paper’s list of goals. PJM’s Pete Langbein said the Demand Response Subcommittee will be working on those in sequential order.

“I think this problem statement is a continuation on working on valuing DR,” Baker said.

Greg Poulos, executive director of the Consumer Advocates of the PJM States, said recent PJM rule changes have “hit hardest” on residential DR viability, “so this is great to see PJM taking these efforts.”

“The current construct is a barrier for residents to participate,” he said. He asked that PJM reconsider DR’s potential as a capacity product, but Baker declined to include the amendment.

Eclipse Hot Takes

PJM’s Ken Seiler provided some initial observations on PJM’s response to the Aug. 21 solar eclipse, saying the analysis will be used to better prepare for the 2024 eclipse, whose path of totality is expected to cross over PJM’s western edge.

Operationally, he said the RTO performed without incident. “We had enough regulation; we had enough reserves.”

About 2,200 MW of solar generation was lost, he said, but that remains largely an estimate as about three-quarters of it is behind-the-meter generation. Only about 500 MW was grid-connected and directly observable.

“The real surprise” came when operators saw CAISO and MISO curtailing units in expectation of lower demand, he said.

“We thought the load would be pretty much flat,” but PJM also saw a load drop similar to other grid operators, Seiler said. PJM had a load of about 133,600 MW about 1:45 p.m., which dropped to 129,500 MW an hour later.

Weather likely accounted for some of the decline. Certain regions saw temperatures drop by up to 10 degrees Fahrenheit, which “does seem to correspond fairly significantly with the load drop,” he said. The weather forecast predicted temperatures in the 90s, but the average was around 85, he said. Additionally, unpredictable “pop-up” storms materialized in the footprint, which have a dampening effect on temperature.

“Certainly, wind and weather and cloud cover provided some level of impact,” he said.

However, human activity seemed to also play a major role. PJM found through discussions with the Nest home thermostat supplier that the company had advised customers that they could cut back on air conditioning during the eclipse to compensate for the reduction in solar output, resulting in a 750-MW drop in load.

Additionally, people departing from their normal business day to view the eclipse caused a reduction. PJM received reports that some manufacturing facilities delayed lunch and instead shut down during the eclipse.

Stakeholders Approve Misc. Actions

Stakeholders endorsed by acclamation several manual revisions and other operational changes:

Manual 11: Energy & Ancillary Services. Revisions, along with others associated with the Regional Transmission and Energy Scheduling Practices document, were developed as part of the implementation of Coordinated Transaction Scheduling, a new real-time energy scheduling product across the PJM-MISO interface.
Tariff and Operating Agreement revisions that clarify the two-year limit on requests for billing adjustments.
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 29, 2017

PJM Stakeholders Debate Weight of Transmission Cost Caps

By Rory D. Sweeney

VALLEY FORGE, Pa. — As PJM begins to define its overarching principles for assessing cost-containment guarantees in competitive bids for developing transmission projects, one is destined to remain contentious.

“A cost-cap commitment is only one factor considered by PJM in its overall review and evaluation of project proposals for selection in the [Regional Transmission Expansion Plan],” the RTO has said.

Some merchant transmission developers, such as LS Power, are pushing to have those commitments become a defining factor, while PJM transmission owners, such as ITC Holdings and Public Service Electric and Gas, have argued that other aspects should be given just as much weight. State and consumer representatives have also expressed support for giving increased weight to cost caps. (See Containment Policy: PJM Takes Up Cost Caps.)

PJM cost caps — Glazer | © *RTO Insider*

Beyond being one of many factors considered in a project proposal, cost-cap provisions would be voluntary and limited to project construction costs. PJM’s Craig Glazer outlined the RTO’s other proposed principles last week at a special session of the Planning Committee on the topic. They include:

Clearly articulating the cost-cap commitment in the proposal submission, along with what is covered and any exclusions;
Providing proposed contractual language on covered and excluded items;
Ensuring that all cost-cap terms and conditions will be made public, while any information and part of the proposal inappropriately labeled as confidential will not be considered;
Supporting the rationale for any exclusions, with PJM evaluating the risk and potential cost impact of excluded events;
Providing quarterly progress updates, with cost-cap enforcement through FERC’s ratemaking process; and
Reserving for PJM’s Board of Managers the right to reconsider projects that aren’t making required progress and reassign completion to another developer.

“If the cost cap gets exceeded, I don’t want [PJM] to be the only entity that sues to enforce the DEA [designated entity agreement],” Glazer said. “The cost cap portion of the DEA … is really an agreement with FERC, an agreement with the ratepayers: Here’s what the project is going to cost.”

He explained that the legal process would likely require action from the developer to address the overages.

“The shoe would be on the developer’s foot to try to recover those costs,” he said. “PJM would provide an opinion on that subject, but we’re not central to that case. You’re not suing PJM for having violated the DEA.”

LS Power’s Sharon Segner said PJM was missing as an overarching principle that meaningful cost caps are preferable to cost estimates. When RTO staff hesitated to agree to that, she argued that additional clarity is needed in how proposals are being evaluated.

“If you go back to the original language in Order 1000 … there was specific instruction to the regions to disclose how proposals will be evaluated,” Segner said. “I think it’s reasonable to the development community for PJM to give general guidance on how it uses cost estimates versus cost caps in the evaluation process, and I think that is consistent with the mandate of Order 1000.”

“To simply make a bland statement that we value cost caps — and we do — it has no value,” PJM’s Steve Herling said. “The problem is the cost cap has 100 different parts, and depending upon how you structure those parts, you have a cost cap that’s valuable or a cost cap that’s completely meaningless. So for us to make a general statement that we value cost caps, it’s motherhood and apple pie, but it doesn’t actually tell you anything.”

“All I’ve heard so far was ‘meaningful cost caps’ or ‘valuable.’ … Propose [legal] language because we’re kind of at a loss as to what would be good here,” Glazer said.

“We’re comfortable with the fact that you’re considering cost caps,” ITC’s Brenda Prokop said. “We’re not comfortable with it being always the most important factor. We don’t think that’s appropriate.”

PSE&G’s Alex Stern agreed with that.

John Farber of the Delaware Public Service Commission urged patience in making any definitive decisions on the issue.

“Cost caps are a recent phenomenon, and it’s way too early in my opinion for PJM to be forced to make definitive statement as to the role cost-cap proposals would have in its evaluation,” Farber said. “I tend to agree with Sharon that legally binding cost caps could be superior to just cost estimates or desktop worksheets — but that doesn’t mean that they would be. I think PJM needs to gain experience with cost-cap proposals to understand how different terms have different effects.”

Glazer explained that part of PJM’s hesitation is how a proposal with a cost cap should be considered if it is substantially higher than a credible proposal with just a cost estimate. He described the cost cap in that situation as a “fig leaf” designed to attract positive consideration.

But Greg Poulos, the executive director of the Consumer Advocates of the PJM States, argued that giving caps deference doesn’t mean they have to be determinative in every situation. “I think there’s a big difference between the two,” he said.

The group has its next meeting scheduled for Sept. 8.