Page 1285 – RTO Insider

January 25, 2019

PG&E Cleared in Fire that Burned Santa Rosa

By Hudson Sangree

California fire investigators on Thursday said Pacific Gas and Electric was not responsible for the Tubbs Fire, a catastrophic blaze that leveled parts of the city of Santa Rosa in October 2017.

The blaze was a major source of the utility’s anticipated $30 billion in wildfire liability that led it to announce it would file for bankruptcy by Tuesday.

Cal Fire cleared PG&E of starting the 2017 Tubbs Fire, the second most destructive wildfire in California history. | *Cal Fire*

The news came as PG&E continued to fight proposed new probation requirements stemming from the San Bruno gas line explosion in 2010 and came under fire from shareholders who said it doesn’t need to seek Chapter 11 reorganization.

“The news from Cal Fire [the California Department of Forestry and Fire Protection] that PG&E did not cause the devastating 2017 Tubbs fire is yet another example of why the company shouldn’t be rushing to file for bankruptcy, which would be totally unnecessary and bad for all stakeholders,” BlueMountain Capital Management, a major PG&E shareholder, said in a news release Thursday afternoon.

BlueMountain has argued in open letters to PG&E that the company is not insolvent and should postpone its bankruptcy plans. Shareholders would likely lose out to creditors in a bankruptcy proceeding. The firm said Thursday it was planning to run a slate of candidates to replace PG&E’s current board members in May.

PG&E’s battered stock price shot up after Cal Fire’s announcement, going from around $7/share to $14/share in trading Thursday, but the utility remained wary about its prospects.

“Regardless of today’s announcement, PG&E still faces extensive litigation, significant potential liabilities and a deteriorating financial situation, which was further impaired by the recent credit agency downgrades to below investment grade,” the utility said Thursday. “Resolving the legal liabilities and financial challenges stemming from the 2017 and 2018 wildfires will be enormously complex and will require us to address multiple stakeholder interests, including thousands of wildfire victims and others who have already made claims and likely thousands of others we expect to make claims.”

California Gov. Gavin Newsom held a press conference in the state Capitol on Thursday to address the finding.

PG&E may not be liable for the Tubbs fire, Newsom said, but “it was found liable for 17 other fires in 2017.” (Cal Fire found PG&E equipment was a cause of 17 major Northern California fires in October 2017.)

“This obviously begs the question, ‘Now what?’” the governor said. “Do we anticipate that PG&E will move forward … as they previewed this next week to file bankruptcy? That is an open-ended question, and that’s a question for PG&E.”

No Violations

Cal Fire said a private landowner’s electrical equipment had sparked the Tubbs Fire, which killed 22 people, destroyed 5,636 structures and burned 36,807 acres. The fire was one of 21 major wildfires that tore through Northern California during days when high winds whipped the blazes into fast-moving infernos.

“After an extensive and thorough investigation, Cal Fire has determined the Tubbs Fire, which occurred during the October 2017 fire siege, was caused by a private electrical system adjacent to a residential structure,” the agency said. “Cal Fire investigators did not identify any violations of state law … related to the cause of this fire.”

That was not the case for the San Bruno gas explosion and fire, which killed eight residents and wrecked a neighborhood in suburban San Francisco. Jurors in 2016 convicted PG&E of six felony counts for violating safety regulations and obstructing an investigation. The company has been on probation, with a federal judge and a monitor overseeing it, since January 2017.

The judge in the case recently pressed PG&E and federal officials for information on whether the utility may have violated the terms of its probation by sparking other wine country fires. The utility is also suspected of causing the Camp Fire, the deadliest fire in state history, which killed 86 people and wiped out the town of Paradise in November.

On Jan. 9, Judge William Alsup, of the U.S. District Court in San Francisco, ordered PG&E and federal prosecutors to show cause why he should not impose sweeping new probation conditions on PG&E. (See Judge, Gov., CPUC and Protesters Weigh in on PG&E Mess.) The proposed conditions include requiring the utility to inspect its entire grid, to trim trees and branches encroaching on wires, and to fix problematic lines, poles and transformers — all before the start of the 2019 fire season this summer.

PG&E could only deliver electricity through parts of its system deemed safe under the judge’s plan, which Alsup said is intended to “reduce to zero” the number of wildfires sparked by PG&E equipment during the coming fire season.

Last week, Alsup asked PG&E and government prosecutors to comment on his tentative finding that the “single most recurring cause of the large 2017 and 2018 wildfires attributable to PG&E equipment has been the susceptibility of PG&E’s distribution lines to trees or limbs falling on them during high-wind events.”

That has often happened in rural areas where uninsulated power conductors are pushed together by falling trees or limbs, dropping electrical sparks on the vegetation below. During California’s dry wildfire season, “these electrical sparks pose an extreme danger of igniting a wildfire,” the judge wrote.

Alsup scheduled a hearing for Jan. 30 to weigh the matters and required the parties to file their briefs by Wednesday.

Overlapping Oversight

In its response filing with the court, PG&E argued it has more than 100,000 miles of overhead lines, making Alsup’s plan virtually impossible to comply with and extremely expensive, even if it could. Inspections, repairs and extensive tree clearing could cost between $75 billion and $150 billion, requiring PG&E to quintuple for one year the rates it charges its 16 million California customers, the utility contended.

The judge’s plan could also undermine the regulatory authority of FERC and the California Public Utilities Commission, PG&E argued.

“The proposed modifications involve a host of policy decisions about how to address safety, reliability and cost, and, in particular, how to do so against the backdrop of both drastic climate change and a complex state and federal regulatory framework that requires the delivery of electricity to everyone in California through an interconnected grid,” the utility’s lawyers wrote. “The court’s proposal would make these policy decisions in the context of a probation hearing, even though regulators are currently grappling with these very same issues.

“And the proposed modifications would do so by giving PG&E only two options: either remove an extraordinary number of trees across every segment of its electric grid within six months, or instead de-energize transmission and distribution lines, shutting off power across Northern California and potentially beyond.”

Government lawyers said they too were worried about the court impinging on federal and state authority and did not support the proposed probation changes.

“While the United States shares the court’s interest in imposing conditions of probation aimed at ensuring that the inhabitants of the Northern District are protected from the death and destruction caused by wildfires, on this record, the United States is not in a position to address the feasibility of implementing the conditions and the chance that they will effectuate that goal,” lawyers from the U.S. Attorney’s office wrote.

“As a threshold matter, the government does not believe the record supports imposition of the proposed conditions as they are currently drafted. Moreover, as drafted, the court’s proposed conditions may overlap with state and federal regulations (e.g., the Federal Power Act and the California Public Utilities Code) and touch on the province of state and federal regulators (e.g., California Public Utilities Commission and the Federal Energy Regulatory Commission).”

They recommended that the judge ask the federal monitor overseeing PG&E to review and evaluate the proposed conditions.

January 25, 2019January 30, 2024

Momentum Continues to Build for NE Offshore Wind

By Michael Kuser

BOSTON — The offshore wind industry is poised for a wave of growth in the Northeast with expanding solicitations, falling contract prices and increasingly competitive auctions for new project sites, Massachusetts officials and wind developers shared Wednesday.

“We’re seeing more action in the industry, and we’re seeing more projects being developed in the multiple lease areas that we have,” Massachusetts Energy and Environmental Affairs Secretary Matthew Beaton said at a meeting of the Environmental Business Council of New England.

Beaton said he was excited to see New York expand its offshore wind target to 9,000 MW and joked that his state would now have to go for 50,000 MW. (See New York Boosts Zero-carbon, Renewable Goals.)

The state does want to solicit an additional 1,600 MW of offshore wind energy, and “we will be doing our additional procurement [800 MW] at least by June, and could be sooner,” Beaton said. (See Mass. Looks to Double Down on OSW, Clean Goals.)

The partial federal government shutdown forced James Bennett, chief of renewable energy at the U.S. Bureau of Ocean Energy Management, to cancel his speech about federal oversight of offshore wind leasing and regulation, said meeting chair Michael Ernst, executive adviser at energy consultancy Power Advisory.

However, Ernst showed slides of lease areas off the East Coast held by different developers and highlighted the December auction by BOEM that brought in $405 million for three wind energy sites off the Massachusetts coast — about six times the revenue from all previous auctions combined. (See Mass. Offshore Lease Auction Nets Record $405 Million.)

“We’re reaching the crest of that giant Hawaiian wave and heading for shore,” Ernst said.

Jobs, Tx and Wildlife

The Massachusetts Clean Energy Center will next month announce its first workforce solicitati o n awards for several training programs, said Bruce Carlisle, the center’s senior director for offshore wind.

The state estimates that deploying 1,600 MW of offshore wind will create up to 317 jobs during construction and indirectly support up to 985 jobs over the next 10 years.

The CEC also worked to “get the lay of the land in terms of where potential interconnection transmission landfall might be in order to inform state siting processes and what the basic grid was looking like,” Carlisle said. The center is “looking at where there were 345-kV high-voltage substations available for tie-in … stepping up from increments of 500 MW and looking at upgrades and what estimates of cost might be.”

Asked about expanding the target, Carlisle said authorization for an additional 1,600 MW requires the state’s Department of Energy Resources to look at the benefits and tradeoffs. Eric Steltzer, deputy director of DOER’s renewables division, noted his agency was aware that the offshore wind report had a legislative deadline of July, and also that Gov. Charlie Baker had made a pledge during the recent election campaign for it to be published in May.

Rachel Pachter, vice president of permitting affairs for Vineyard Wind, announced the company’s agreement with the Conservation Law Foundation, National Wildlife Federation and Natural Resources Defense Council to protect the right whales off Nantucket and Martha’s Vineyard.

A partnership between Avangrid Renewables and Copenhagen Infrastructure Partners, Vineyard last May won the contract to supply Massachusetts with 800 MW of offshore wind energy. (See Mass., R.I. Pick 1,200 MW in Offshore Wind Bids.)

“I personally spend about 50% of my time on fisheries issues,” Pachter said.

The company will base its operations in the Port of New Bedford but is looking at other ports as well.

“We’ve been working very hard to do our operations and maintenance on Martha’s Vineyard, particularly in Vineyard Haven, as … year-round jobs are a big thing for folks on the Vineyard,” she said.

“Stakeholder engagement is very important,” said Matthew Morrissey, head of New England markets for Deepwater Wind, which was acquired by Ørsted US Offshore Wind last year. “As it relates to commercial fishing, I am a fifth-generation New Bedford resident, and I represented the commercial fishing industry for a long time … which has legitimate concerns.

Morrissey said some of this engagement, however, is becoming taxing for the fishermen: “They just can’t show up,” so several different organizations have emerged to represent them. He cited the Responsible Offshore Development Alliance having “emerged as a true representative of many constituencies.”

Vineyard in October signed an agreement with the town of Barnstable to bring its power onshore there, and in November it signed an agreement with MHI Vestas for 9.5-MW turbines, “which was the largest commercially available turbine last time I checked a week ago,” Pachter said.

Ruth Perry, marine science and regulatory policy specialist for Shell Exploration and Production, said subsidiary Mayflower Wind is looking to set up a joint venture office with EDP Renewables.

Competitive Pricing

The hot competition for offshore wind contracts has “led to strikingly low prices in the first rounds,” Morrissey said.

Vineyard’s 800-MW contract with Massachusetts runs 20 years and has two 400-MW tranches. The first tranche starts at $74/MWh and the second at $65/MWh, with the prices increasing by 2.5% per year. Partially redacted contract summaries from the state’s Department of Public Utilities show an average nominal price of $64.97/MWh in 2017 dollars.

“Those low prices will further embolden state leaders along the Atlantic seaboard to push forward on increasing levels of commitment and as a result it will be a cyclical dynamic,” Morrissey said.

The combination of Deepwater Wind and Ørsted has a substantial footprint in the wind energy lease areas, he said, pointing out the “extremely exciting” wind targets in the region.

“We anticipate Connecticut coming forward in this legislative session with 2,000 MW or thereabouts,” Morrissey said. The company also expects Virginia to raise its target to 3,200 MW, which follows New Jersey’s 3,500 MW and New York’s new commitment to 9,000 MW.

“We’re seeing now the confidence in the industry build as a result of these procurements,” he said. “The challenges of today are nothing compared to the challenges five years ago when there was no marketplace.”

January 25, 2019

Status Quo for MISO Committee Despite Diversity Push

By Amanda Durish Cook

CARMEL, Ind. — MISO’s Steering Committee will retain its current membership structure despite the lack of a sector diversity guarantee among representatives.

November Steering Committee meeting | © *RTO Insider*

During a Wednesday conference call, committee members took no action to change the membership structure in a way that would enforce more equitable representation across MISO’s 10 stakeholder sectors.

Chair Tia Elliott said the committee received comments from six member entities that all supported no change. After reviewing comments, the membership considered the item closed.

In advocating for broader representation late last year, Rhonda Peters with Clean Grid Alliance pointed out that the Steering Committee currently has voting members from just four MISO sectors, but it could feasibly have as little as two stakeholder sectors represented in committee votes.

Peters contended that MISO and the committee should work to ensure at least six sectors are represented in voting, calling it a “gatekeeper” of stakeholder issue assignment and subsequent discussion in other stakeholder groups.

Committee members bristled at the “gatekeeper” characterization, with some noting that members represent the stakeholder groups that they were elected to lead, not their individual sectors. Steering Committee membership comprises the chairs of MISO’s main committees and is charged with administrative stakeholder duties — not policy decisions — which include routing new policy discussions to the appropriate stakeholder group for discussion.

Peters called for a special nomination process when a majority of stakeholder sectors are not represented on the Steering Committee, where the full RTO membership would vote to add more voting members to the committee.

“There are now more players than the traditionally integrated utilities,” Peters said during a November committee meeting. “We’re seeing changes in stakeholders, and we’re seeing more changes in the grid. There are more voices now.”

However, multiple companies emphasized that Steering Committee membership merely reflects MISO committee chairs, who can come from any sector and are themselves elected by a vote open to all members.

“Each chair and vice chair position is freely elected by the stakeholders within each respective sector,” Duke Energy’s Jay Rasmussen said. “If a stakeholder does not like the representation within the sector, they should get involved more in the nomination process and campaigning process within their sector. The individual is also free to throw their name into the nominating process. The current process works well, and there is no need to change it.”

However, MISO’s load-serving entity coalition said it was “supportive of diversity in MISO stakeholder entity leadership” and suggested that the RTO make sure chair elections for stakeholder groups are held within the same month so members have the opportunity to factor sector diversity into their votes.

January 25, 2019

NYISO Issues 5-Year Strategic Plan

By Michael Kuser

NYISO on Tuesday released a Strategi c Plan outlining how it will incorporate market and regulatory trends into its planning processes for 2019 to 2023.

“Our updated Strategic Plan is a living document that embraces the challenges and opportunities of the grid’s ongoing transformation,” interim President and CEO Robert Fernandez said in a statement. “The plan reflects the NYISO’s essential role in harmonizing public policy with technological innovation in a manner that delivers economically efficient and reliable energy to consumers.”

The document identifies key strategic initiatives in addition to the ISO’s core responsibilities and ongoing project plans.

To address its changing resource mix, NYISO said it will review market products and operational and planning practices. Taking “a deeper dive into evolving focus areas” will require significant study work, it says.

New York’s Clean Energy Standard and other policy initiatives, such as Reforming the Energy Vision, are ramping up adoption of renewable and distributed energy resources, creating a need to balance intermittent generation with other resources such as storage.

“Incenting resource flexibility, which includes the ability to respond rapidly to dynamic system conditions, providing controllable ramp with fast response rates and providing frequent start-up/shutdown capability, will be key to future market enhancements,” the plan says.

The plan also highlighted steps to harmonize the wholesale market design with state public policy goals, particularly the task force created by the state’s Public Service Commission and NYISO that last month produced a proposal to price carbon into the wholesale energy market. The ISO and its stakeholders are now refining the proposal. (See Imports/Exports Top Talk at NYISO Carbon Pricing Kick-off.)

January 25, 2019

AEP Reports Positive Earnings for Q4, 2018

By Tom Kleckner

American Electric Power on Thursday reported strong fourth-quarter and year-end earnings in line with analysts’ expectations.

While results were dampened by the global trade wars and a stronger dollar, company executives said they expect the positive economic activity to continue in 2019.

AEP earned $363 million ($0.74/share) last quarter, compared to $401 million ($0.81/share) for the same period in 2017. Analysts had expected earnings of 72 cents/share, according to the Zacks Consensus Estimate.

Year-end earnings were $1.92 billion ($3.90/share), up from $1.91 billion ($3.89/share) the year before.

“Our strong earnings performance in 2018 was driven by a robust economy,” CEO Nick Akins said during a call with analysts. “2018 has clearly been a great year, but we’re even more pleased with our track record over the last eight.”

Akins said that over the past five years, the Columbus, Ohio-based company has provided a total shareholder return of more than 92%, greater than both the S&P 500 Index (50%) and the S&P 500 Electric Utilities Index (65%).

CFO Brian Tierney noted AEP’s performance would have been even better had it not been for its service territory’s higher exposure to tariffs. He said 38% of all U.S. exports originate in AEP’s 11 regulated states.

“The early-year performance carried us through the headwinds,” Tierney said, referring to the company’s benefits from tax reform.

The company expects positive economic activity to continue in 2019, fueled by oil and gas development in its western footprint.

AEP’s stock price opened at $77.10 on Thursday and closed at $77.74. It has gained 11.5% over the past year.

January 24, 2019

MISO, SPP Regulators Continue Seams Talks

By Amanda Durish Cook

CARMEL, Ind. — State regulators in MISO and SPP are making progress on the seams issues that continue to vex the RTOs, but much work remains, MISO stakeholders learned Tuesday.

The Organization of MISO States (OMS) and SPP’s Regional State Committee (RSC) have been meeting since mid-2018 to discuss interregional coordination, which has never produced a major project, frustrating some stakeholders and causing market inefficiencies. Regulators last year initiated meetings with RTO officials to ask for solutions. (See Regulators Examine MISO, SPP Seams Issues at NARUC.)

The RTO’s market-to-market process has resulted in more than $51 million in payments from MISO to SPP since March 2015, compensation paid to manage congestion at the seam. The grid operators also face possible renegotiation next year of the 2016 settlement agreement addressing compensation for energy transfers between MISO Midwest and South above the current 1,000 MW of contract path capacity on SPP transmission.

Speaking during a Jan. 22 update at MISO’s Informational Forum, Missouri Public Service Commissioner Daniel Hall said the RTOs experience “significant inefficiencies on the seams” that are both “philosophical and structural.”

“There’s a growing awareness that these seams issues are becoming more significant due to the diminishing reserve margins,” Hall said, adding that some “personality issues” between MISO and SPP staff may have contributed to past difficulties.

Hall said regulators from both regions have outlined goals of improving seams coordination through:

Better market-based transactions and operations across the MISO-SPP seam;
Equal consideration of “beneficial regional and interregional projects in transmission planning”;
“Timely interconnection of new resources that includes consideration of the dynamics of the interconnection queue in both RTOs”; and
Improved inter-RTO relations through state-led cooperation.

“There’s nothing earth-shattering here,” Hall said of the OMS-RSC coordination effort. “We want to reduce transmission constraints to benefit ratepayers.”

“No one is right or wrong where viewpoints don’t align. We strive to understand the drivers behind our differences. It’s not personal. … The best outcome for customers is the best outcome. Customers in all portions of an RTO footprint should benefit from RTO membership,” Hall said.

While Hall said the RTOs are already working on several coordination issues such as better emergency coordination and easing interregional project criteria, some seams issues — including regional through-and-out rates and pseudo-tied generation — are being left unaddressed.

OMS and RSC representatives will meet again in D.C. on Feb. 10 in conjunction with the National Association of Regulatory Utility Commissioners winter meeting. Hall said the two groups will discuss the need for additional questions for both RTOs and explore the possibility of requesting a FERC analysis or commissioning an independent analysis on the MISO-SPP seam.

MISO Plans Seams ‘Hot Topic’ Talk

RTO seams issues will feature as MISO’s first 2019 “hot topic” in-depth stakeholder discussion in March. Staff said the goal is to get policy-level input from stakeholders on how to best approach coordination with its neighbors.

Jeremiah Doner, MISO director of seams coordination, said the RTO’s physical central position in the Eastern Interconnection “introduces a number of different regulatory and structural models that we have to work with.” He cited the 11 separate RTOs, independent utilities, cooperatives and federal agencies that border their territory and have varying seams coordination agreements with the RTO.

Doner said MISO is looking for stakeholders to offer views on what they would consider optimal coordination and a more consistent model for seams coordination with both RTO and non-RTO neighbors. MISO would look to improve price formation, transmission planning and cost allocation along all its seams, he said.

Customized Energy Solutions’ David Sapper asked how MISO might improve its transmission sharing with SPP so that South capacity is not trapped because of the contractual limit on SPP transmission connecting that region with Midwest.

Doner said MISO is open to discussing changes to the contract governing the Midwest-South contract path, which can be altered beginning in 2021.

In a separate monthly market operations report delivered at the meeting, MISO said it is monitoring additional generation committed for capacity that became trapped behind the contractual constraint in December. MISO Executive Director of System Operations Renuka Chatterjee said the capacity wasn’t ultimately needed because load did not materialize.

MISO load averaged 75.5 GW in December and load peaked at 94.2 GW on Dec. 11. Chatterjee said it was a mild month for the RTO, except for a few cold days at the beginning. Rising coal and natural gas costs lifted real-time prices to an average $31/MWh, she said, up 21% from a year earlier.

January 24, 2019

Calpine Price Formation Plan Leads in PJM Vote

By Rich Heidorn Jr.

Calpine’s modification of PJM’s energy price formation proposal emerged Wednesday as the first choice members will consider at Thursday’s Markets and Reliability Committee meeting.

In a series of votes that capped the 23rd meeting of the Energy Price Formation Senior Task Force (EPFSTF) on Wednesday, Calpine’s proposal won 73% support, besting PJM’s own proposal, which was supported by 57%. Almost three-quarters of voters also said they preferred Calpine’s proposal to the status quo.

Almost three-quarters of voters supported Calpine’s modification of PJM’s price formation proposal over the status quo. | *PJM*

The rule changes would affect shortage pricing, reserve products, synchronized reserves, secondary reserves and the alignment of the day-ahead and real-time reserve markets.

PJM’s proposal would replace the current stepped operating reserve demand curve (ORDC) with a sloped curve; the first horizontal segment would represent the minimum reserve requirement, with the downward sloping curve based on the probability of reserves falling below the minimum reserve requirement (PBMRR) in real time based on uncertainties.

The RTO would increase the price for the initial horizontal segment of the curve to $2,000/MWh and replace the second step of the curve with a downward sloping segment valued at $2,000 times the PBMRR.

Calpine supports the PJM proposal except that it would eliminate the RTO’s proposed transitional mechanism for the energy and ancillary services (E&AS) revenue offset used in the capacity market. PJM proposed the transition to reflect expected changes in revenues under the changes; as E&AS revenue increases, the net cost of new entry goes down.

Before the vote, PJM’s Adam Keech explained the RTO’s transition plan. Assuming FERC approval is received in the first quarter of 2020, PJM would implement the revised curve on June 1, 2020, with an $850/MWh penalty factor and move to a $2,000/MWh penalty factor starting June 1, 2023, for the 2023/24 delivery year.

PJM proposed adjusting the energy and ancillary services (E&AS) revenue offset used in the capacity market based on simulations of energy and reserve market outcomes. | *PJM*

Keech said PJM would simulate energy and reserve market outcomes based on actual operating conditions and use the results to adjust the E&AS offset. The simulations would be used to “scale” the revenues used to determine the offset, Keech said.

More than 230 task force members cast votes on the proposals.

The D.C. Office of the People’s Counsel proposed a similar ORDC to PJM but would treat the impact of the regulation requirement differently. It received only 5% support.

The Independent Market Monitor won 19% support for a proposal that would leave the ORDC unchanged and reduce the current two-step penalty factor ($850 and $300) with a single penalty factor equaling the safety net energy offer cap of $1,000/MWh. If PJM approves a cost-based offer above that price, the penalty factor could increase in $250/MWh increments to a maximum of $2,000/MWh.

No Shoo-in

Despite its seeming strength in Wednesday’s task force vote — which allowed members with multiple affiliates to cast multiple votes — Calpine’s proposal is no shoo-in. At Thursday’s MRC meeting, the voting will be subject to sector weighting, with no affiliate voting and a two-thirds threshold required for approval.

If the Calpine proposal fails to win the required supermajority, PJM’s proposal will be considered next. The Monitor and OPC proposals also could be considered if the preceding proposals fail.

The Members Committee is also expected to vote on the issue Thursday.

The Calpine and PJM proposals are likely to face opposition from at least some load interests.

Susan Bruce, attorney for the PJM Industrial Customer Coalition, said “the costs [the rule changes would impose on] energy-intensive customers are extreme.”

Gregory Carmean, executive director of the Organization of PJM States Inc. (OPSI), complained that PJM had not provided enough information on the impact of the proposed changes on prices.

Keech said PJM ran two simulations and that the data has been available since September. “It would have been great if that desire [for additional data] was provided earlier,” he said.

“Since the very beginning, OPSI has been very clear that we wanted to see the cost impact of those proposals before we determine whether they are just and reasonable,” Carmean responded.

In a letter to the Board of Managers on Wednesday, OPSI asked PJM to delay action until stakeholders have time to evaluate additional data.

“PJM has detailed its concerns with current energy and operating reserve pricing mechanisms but has not justified the urgency of resolving these concerns, established the operational and cost effectiveness of its solutions, or adequately evaluated the risks and rewards of its proposed reforms,” wrote OPSI President Michael Richard, of the Maryland Public Service Commission. “It seeks to institute new market structures under an unnecessarily rushed timeline, allowing little opportunity for its staff to generate the analyses necessary for stakeholders to fully understand the potential impacts these proposals will have on market sellers and consumers, gauge the reasonableness of the proposals or develop alternatives.”

Ultimatum

The board told members last month that it will make a unilateral filing with FERC if they do not reach consensus on a package by Jan. 31.

Under current market rules, PJM says, inflexible generators such as coal, nuclear and large gas units are not permitted to set price. As a result, RTO officials say, LMPs do not accurately reflect the true cost to serve load when those units are running.

Inflexible units are those with declining average costs that are unable to economically produce power output within a certain range or have an economic minimum output that exceeds the amount of energy needed from the unit, PJM says.

The issue, which had been masked by upward pressure on prices from rising demand and the higher costs of marginal units, is now more urgent because low fuel prices and more efficient units have resulted in a generation mix that is less differentiated by cost and more by physical operational attributes, the RTO says.

It contends flexible units will benefit because the rule changes will eliminate a source of price suppression.

January 24, 2019April 30, 2025

Newsom Names New CAISO Governors

By Hudson Sangree and Robert Mullin

California Gov. Gavin Newsom named new members to the CAISO Board of Governors on Tuesday, along with a new member to the Public Utilities Commission and members of the state’s newly created commission on catastrophic wildfires.

To the CAISO board, Newsom appointed University of California Berkeley Professor Severin Borenstein and Los Angeles Business Council President Mary Leslie. He also reappointed current CAISO Chairman David Olsen to a second two-year term.

“This is an exciting time for the ISO as the industry develops approaches to reliably integrate renewable energy,” Borenstein told RTO Insider in an email. “The board will have an important role facilitating opportunities for beneficial trade with the rest of the western market and continuing to support California’s climate goals.”

The five-member CAISO board will have to grapple with major issues this year, including the ISO’s new reliability coordinator role for much of the West. Service on the CAISO board pays $40,000 per year.

Borenstein has been a professor at Berkeley’s Haas School of Business since 1996. He serves as the faculty director of the business school’s Energy Institute. Previously he was a professor at the University of California Davis.

Leslie has been president of the LABC since 2002. She was the deputy mayor of Los Angeles under Mayor Richard Riordan from 1994 to 1995 and a commissioner at the Los Angeles Department of Water and Power from 2001 to 2003.

Challenges also await the PUC as it tries to deal with the fallout from PG&E Corp.’s collapse because of massive wildfire liability.

Newsom named Genevieve Shiroma, an elected director of the Sacramento Municipal Utility District, to fill the seat on the PUC left vacant when Commissioner Carla Peterman’s term expired in December.

Shiroma was a longtime member of the state Agricultural Relations Board and its former chairwoman. She was chief of the Air Quality Branch at the California Air Resources Board from 1990 to 1999 and an air quality engineer from 1978 to 1990.

The PUC position pays $153,689. Newsom’s nominees to the PUC and CAISO require State Senate approval.

Newsom appointed Peterman to an unpaid seat on the state’s new Commission on Catastrophic Wildfire Cost and Recovery, established as part of last year’s Senate Bill 901 to examine wildfires caused by utility infrastructure and “to produce recommendations on changes to law that would ensure equitable distribution of costs among affected parties.”

The six-member panel is required to hold at least four public workshops and provide recommendations to the governor and State Legislature by July 1.

In her last meeting with the CPUC in December, Peterman emerged as a strong proponent of giving utilities leeway to de-energize transmission lines under dangerous weather conditions. De-energization “is an option we don’t want to exercise often, but we do want the option to exercise,” she said at the time. (See Calif. Regulators to Scrutinize De-energization.)

Joining Peterman on the panel is former State Assemblyman Dave Jones, the state’s insurance commissioner from 2011 until earlier this month. Jones previously served as counsel to U.S. Attorney General Janet Reno and worked from 1989 to 1995 representing low-income families and individuals for Legal Services of Northern California.

The commission will also include Crowell & Moring attorney Michael Kahn, who was CAISO chair from 2001 to 2005 and head of the California Electricity Oversight Board from 2000 to 2001. Kahn was also a member of the California State Insurance Commissioner Task Force on Environmental Liability Insurance from 1993 to 1994.

The legislature will fill the other three seats on the wildfire panel. Appointees do not require Senate approval.

January 23, 2019

Erin Brockovich Protests PG&E Bankruptcy Plan at State Capitol

By Hudson Sangree

SACRAMENTO, Calif. — Could PG&E’s announcement that it plans to file for bankruptcy Jan. 29 be a ploy? A lawyer representing thousands of wildfire victims said she thinks it’s quite possible.

On the steps of the California state Capitol Tuesday, former state Sen. Noreen Evans, now a plaintiffs’ attorney, said she believes PG&E won’t go through with filing for Chapter 11 reorganization at the end of the month, as it has said it would.

Former state Sen. Noreen Evans, now a lawyer representing fire victims, said PG&E’s planned bankruptcy filing is a ploy to get lawmakers to intervene. | © *RTO Insider*

The utility’s move likely is an attempt to get California’s new governor, Gavin Newsom, and lawmakers to intervene, Evans said.

“I think there’s a very huge possibility they won’t file as planned,” Evans said. “It would open a can of worms.”

If PG&E, the state’s largest utility, were to enter bankruptcy, it would call into question billions of dollars in energy contracts and payments to CAISO, among other obligations. (See PG&E Meltdown Could Cos t CAISO Members, Generators.)

Evans, whose former district includes areas of Santa Rosa, Calif., devastated by wildfires in 2017, is now part of a legal team representing 4,000 fire victims in the state’s catastrophic blazes during the past two years.

The ex-lawmaker joined famed PG&E foe Erin Brockovich at the Capitol to protest the utility’s alleged efforts to avoid financial liability for the Camp Fire, which killed 86 residents and destroyed the town of Paradise, Calif., in November 2018. The wildfire was by far the deadliest blaze in state history.

Brockovich urged California leaders to do more than have a seat at the table in deciding PG&E’s fate. “Be the head of the table and take control of this runaway monopoly,” she said.

Erin Brockovich addresses a crowd of fire victims and reporters on the steps of the California state Capitol. | © *RTO Insider*

Brockovich gained movie fame after she helped build a case against PG&E in the 1990s for polluting the desert town of Hinkley, Calif., with hexavalent chromium. She has remained one of the utility’s most prominent critics.

Brockovich, Evans and other victim advocates don’t want PG&E to enter bankruptcy because it would put plaintiffs and their lawyers in line for payment behind PG&E’s secured creditors. A bankruptcy judge would parcel out compensation, not jurors.

Investors, too, are arguing against PG&E’s bankruptcy plan. BlueMountain Capital, a major shareholder, sent the utility a second letter this week urging it to postpone filing for bankruptcy protection and arguing bankruptcy is unwarranted. PG&E shareholders would likely lose their investments in a Chapter 11 reorganization.

Evans and other PG&E critics, notably public interest group Consumer Watchdog, have said PG&E’s bankruptcy is a ruse to get state lawmakers to do what they wouldn’t do last year — get PG&E off the hook for billions of dollars in liability.

Reporters surround Erin Brockovich on the steps of the state Capitol in Sacramento after she decried PG&E’s planned bankruptcy filing. | © *RTO Insider*

After the wine country fires of 2017 devastated Napa and Sonoma counties, PG&E lobbied lawmakers to overturn California’s longstanding use of inverse condemnation to hold utilities strictly liable, regardless of negligence, for damage to private property caused by their equipment.

Gov. Jerry Brown sided with PG&E last year because he was worried the giant utility would renege on the billions of dollars it plans to invest in renewable energy. In passing Senate Bill 901 last year, lawmakers didn’t alter inverse condemnation, but they provided a process by which utilities could seek long-term bond financing for wildfire debts. (See California Wil d fire Bill Goes to Governor.)

Wildfire victims holding signs joined Erin Brockovich on the steps of the state Capitol in Sacramento to protest PG&E’s planned bankruptcy. | © *RTO Insider*

The process, however, didn’t apply to 2018 fires, including the Camp Fire. Lawmakers initially showed interest in amending SB 901 to include last year’s fires but have recently backed off because of public anger against the utility.

Though state officials have yet to determine the cause of the Camp Fire, PG&E has said its transmission line sparked flames near the start of the Camp Fire on the morning it began.

PG&E announced earlier this month it would file for bankruptcy because it faces at least $30 billion in financial exposure for the Camp Fire and wine country fires. Absent state intervention, it said, bankruptcy was its only viable option.

January 23, 2019

MMU Report: Wind Forecast Errors Drive SPP Price Spikes

By Tom Kleckner

SP P saw an increase in price spikes and overall prices during October and November thanks to above-normal scarcity pricing, according to the Market Monitoring Unit’s fall State of the Market re p ort.

The Monitor attributed the scarcity increases to higher volatility in wind output, pointing to an increase in mid- and long-term wind forecast errors as the primary culprit. It also said a 72% increase in natural gas spot prices at the Panhandle hub ($2.13/MMBtu to $3.67/MMBtu) and unplanned generator outages or derates contributed to the uptick.

Redispatch costs increase faster with more expensive gas until scarcity occurs, the MMU said, driving up the number of scarcity events.

“Since the scarcity caps are price-based, they are reached more frequently due to increased gas prices,” the report said.

The long-term wind forecast, used for the day-ahead reliability unit commitment’s wind output, had an average error rate of 7.8% in 2018, almost double the 2016 average of 4.3%. The mid-term load forecast, used four hours ahead of the intra-day RUC processes, had an average error rate of 4.5% last year, 28% higher than 2016’s average of 3.5%.

Wind output versus day-ahead RUC wind forecast, Sept. 3 | *SPP*

When large wind dips are not accurately forecasted, the market will often be short rampable capacity, the MMU said. This forces SPP operators to manually force more capacity online.

The real-time marginal energy price peaked at $1,575/MWh at 2:40 p.m. on Sept. 3. Operators responded to an unexpected sudden drop in wind output by adjusting the load offset and manually committing quick-start units. It took three intervals before prices dropped back below triple digits.

MMU Executive Director Keith Collins | © *RTO Insider*

The Monitor said there is no “current answer for better forecasting” fluctuations in wind energy but noted a ramp product would “help abate these price spikes” by reducing their frequency and effects.

“By reserving ramp for unexpected conditions, such as wind drops or unit trips, the market will be better positioned when these events occur,” the MMU said.

SPP’s Market Working Group is coordinating staff’s development of a ramping product. Staff is currently testing different alternatives.

The fall report covers September, October and November. The MMU will host a webi n ar on Friday at 1 p.m. CT to discuss the report.

The report also indicates the following:

Energy prices have climbed slightly, with fall prices averaging around $27/MWh.
The number of intervals with negative energy prices continues to decline.
Overall congestion across the SPP footprint has declined.