Below is a summary of the issues scheduled to be brought to a vote at the Markets and Reliability and Members committees Thursday. Each item is listed by agenda number, description and projected time of discussion, followed by a summary of the issue and links to prior coverage in RTO Insider.
RTO Insider will be in Wilmington, Del., covering the discussions and votes. See next Tuesday’s newsletter for a full report.
Markets and Reliability Committee
2. PJM Manuals (9:10-9:30)
Members will be asked to endorse the following proposed manual changes:
A. Manual 1: Control Center and Data Exchange Requirements. Revisions developed to comply with NERC reporting requirements. Transmission operators will be required to maintain certain data during outages, including bus voltages for all 345-kV stations or higher, and megawatt flows for tie lines and all lines 345 kV or higher.
B. Manual 11: Energy & Ancillary Services and Manual 18: PJM Capacity Market. Clarifies language on what is needed to qualify for exempt or bonus megawatts during performance assessment hours in PJM’s Capacity Performance construct. PJM says it needs certain data to determine how close generators follow its schedule. The data include values for economic minimum and maximum and emergency maximum.
3. Pseudo-tie Pro Forma (9:30-10:00)
Members will be asked to endorse proposed pseudo-tie agreements and Tariff and Operating Agreement revisions. The documents were developed to standardize pseudo-ties and minimize operating confusion. (See “OC Discusses Pro Forma Agreements for Pseudo-Ties, Dynamic Schedules,” PJM OC Briefs: July 11, 2017.)
4. Governing Document Revisions to the Limitation on Claims (10:00-10:10)
Members will be asked to endorse Tariff and Operating Agreement revisions to clarify the two-year limit on requests for billing adjustments.
Members will be asked to endorse updates to Manual 14B: PJM Regional Transmission Process and the Operating Agreement reflecting the change from the annual, 12-month Regional Transmission Expansion Planning cycle to an overlapping 18-month cycle beginning each September. The window for short-term projects will expand from 30 to 60 days. (See “RTEP Cycle Revisions Approved,” PJM PC/TEAC Briefs: July 13, 2017.)
Members will be asked to endorse proposed Tariff and Operating Agreement revisions to regulation market rules on performance scores, clearing and settlements that were endorsed by the Regulation Market Issues Senior Task Force and the MRC. The revisions change the rate for substituting traditional RegA and fast-response RegD. (See PJM Regulation Compensation Changes Cleared over Opposition.)
2. Pseudo-tie Pro Forma (1:45-2:15)
Members will be asked to endorse proposed pseudo-tie agreements and Tariff and Operating Agreement revisions. The documents were developed to standardize pseudo-ties and minimize operating confusion. (See MRC item 3 above).
While PJM stakeholders were meeting last week to consider yet more changes to the Reliability Pricing Model, public power representatives took their case to Congress, telling the House Energy and Commerce Committee on Tuesday that they should be released from participating in the increasingly complicated capacity construct.
American Municipal Power and Old Dominion Electric Cooperative told the committee that FERC should allow public power utilities to fill their needs through bilateral contracts or self-supply instead forcing them to participate in mandatory capacity markets. AMP — which provides power supply and other services to 135 members in Delaware, Indiana, Kentucky, Maryland, Michigan, Ohio, Pennsylvania, Virginia and West Virginia — also complained that PJM’s Capacity Performance rules undervalue the company’s new hydropower facilities.
AMP Senior Vice President and General Counsel Lisa McAlister and ODEC CEO Jack Reasor testified along with representatives from independent power producers NextEra Energy and Calpine, utilities Public Service Enterprise Group and Duke Energy, and demand response provider EnerNOC.
The two-hour hearing, titled “Examining the State of the Electric Industry through Market Participant Perspectives,” covered many issues. Rep. John Shimkus (R-Ill.) and ranking member Frank Pallone (D-N.J.) said the testimony would help them decide whether the Federal Power Act is in need of revisions.
PSEG made a pitch for financial support for its New Jersey nuclear plants, which Calpine and NextEra strongly opposed. Duke asked for reforms to the Public Utility Regulatory Policies Act and a “shot clock” for regulatory approvals of pipelines and other infrastructure projects.
Former FERC Chairman Joseph Kelliher, now executive vice president for NextEra, also offered his company’s answers for the questions that Energy Secretary Rick Perry asked in commissioning a study of renewable resources’ effect on the reliability of the grid. It is market fundamentals — not public policies, he said — that are the primary drivers of “baseload” plant retirements, and there is “no evidence” that those retirements are threatening reliability.
No RTOs or ISOs were represented in the hearing. They will get their chance to speak before the committee in a second hearing on July 26. But PJM was invoked frequently, and generally not favorably.
PJM Capacity Market under Fire
McAlister’s 21-page written testimony — more than twice as long as any other witness’ — reiterated public power’s longstanding complaints with PJM’s capacity construct, calling it a “complex rules-driven administrative mechanism” that “relies on such distinctly non-market features as an artificial demand curve, price caps and minimum offer price requirements, and obstacles to competition from certain types of resources.
“RPM is a ‘market’ in name only,” she continued. “And, as time has gone on, fewer and fewer PJM market participants use that term to describe it.”
ODEC also criticized RPM, saying its experience “has been mixed at best.”
Reasor quoted from FERC’s April 2006 order approving RPM. “After [load-serving entities] have had the opportunity to procure capacity on their own, it is reasonable for PJM to procure capacity in an open auction at a time when further delay in procurement could jeopardize reliability,” FERC said, adding, “This, however, should be a last resort.”
Although the annual capacity procurement is still called the Base Residual Auction, “repeated and significant design changes have made RPM more complex and costly and have undermined the ability of load-serving entities to use their resources to meet their capacity obligations,” Reasor said.
The 2016 BRA was the first PJM capacity auction with no rule changes from the prior year, following 24 significant FERC filings to revise RPM between 2010 and 2016, Reasor said, quoting PJM. The last major change, the introduction of Capacity Performance, imposes “onerous performance requirements” on capacity resources, he said.
New Hydro Dissed by CP
McAlister also complained about CP, saying it undervalues the $3 billion AMP spent to install 300 MW of hydroelectric facilities on existing dams on the Ohio River because the projects cannot guarantee continuous, yearlong operation. “This is the case because AMP cannot control the river flows and cannot practically back up the hydroelectric plants with an alternative generation resource,” McAlister said. “In making PJM’s capacity construct less flexible, CP also has made it less capable of integrating the diversity of resources that may be an element of implementing important state policies.”
McAlister said PJM “needs a resource adequacy construct that is robust enough to withstand the effect of external events without the need to adopt another set of complex rule changes in response to each event.”
She and Reasor said LSEs should be permitted to fulfill most or all of their capacity needs through bilateral contracts, with the BRA relegated to a truly residual auction to fill any shortfalls. (See related story, PJM Stakeholders See Capacity Auction Flaws, Offer Solutions.)
As a “second-tier alternative,” McAlister said, public power’s ability to self-supply their own loads should be restored by reducing the role of the minimum offer price rule (MOPR).
Transmission Costs
AMP also complained about transmission costs, saying four of its members’ transmission zones have seen annual revenue requirements double or triple between 2009 and 2016.
AMP’s and ODEC’s complaints regarding the transmission owners’ handling of supplemental projects — those not required for compliance with PJM’s reliability, operational performance or economic criteria — prompted FERC last August to issue an order to show cause finding that the TOs’ procedures were not in compliance with FERC Order 890 (EL16-71).
FERC said the evidence indicated that some TOs are “identifying — and even taking steps toward developing — supplemental projects before providing any opportunity for stakeholders to participate in the development of those projects through the PJM [Regional Transmission Expansion Plan] process.”
The order resulted in a hiatus in a stakeholder initiative, the Transmission Replacement Processes Senior Task Force, pending the TOs’ response. Although the TOs insisted they are in compliance with Order 890, they proposed a Tariff amendment providing additional detail on supplemental projects. FERC didn’t rule on the TOs’ response before losing its quorum in February.
“AMP supports appropriate transmission infrastructure build-out to replace aging infrastructure,” McAlister told the House committee. “However, there needs to be more transparent transmission planning, equitable treatment, better oversight to ensure the most cost-effective and efficient grid expansion, and rates of return that reflect current economic conditions and risks.”
AMP asked Congress for “enhanced” oversight of FERC “to ensure that [the commission] is responsive to the real needs of consumers” by making low costs “a central part of the RTO mission, in addition to promoting electric system reliability.”
McAlister also said Congress should ensure that RTO governing boards “are truly representative and open [and] transparent” with open board meetings. While the boards of MISO, SPP, ERCOT and CAISO meet in open session, PJM’s board meets in private, as does ISO-NE’s and NYISO’s.
The hearing also considered proponents and opponents of subsidizing nuclear plants. Tamara Linde, PSEG’s executive vice president and general counsel, repeated the company’s threat to retire its 3,500-MW Salem and Hope Creek nuclear plants in southern New Jersey. The plants, which are licensed until at least 2046, produce about 45% of the state’s electricity.
Linde said FERC should order PJM and other RTOs to “immediately” change their market rules to “preserve the diversity and resiliency of the nation’s electric generation resource mix.”
“Markets weren’t designed to drive to fuel diversity as an outcome, because fuel diversity in the generation fleet was always presumed,” she said.
Linde also said the U.S. nuclear supply chain should be considered “critical infrastructure, just as we regard our national highway system, electric grid and drinking water.”
Opposing nuclear subsidies were NextEra’s Kelliher and Calpine’s Steve Schleimer, senior vice president for government and regulatory affairs. Schleimer said competitive markets are threatened by both the zero-emission credits for nuclear plants in New York and Illinois, and New England states’ long-term procurement of renewables.
“If not addressed, out-of-market subsidies will undermine competition, investment will dry up, and these states will be back in the business of mandating when, where and what type of new generation will be built through long-term ratepayer guarantees, which is exactly the structure we moved away from several decades ago,” he said.
“A ‘hybrid’ market, where a state relies in part on the competitive wholesale electricity market to meet its resource needs, but also retains the right to select and subsidize preferred generation resource types to meet certain public policy goals, does not work and destroys all new competitive investment,” Schleimer said.
CAISO’s Lesson
He said the risk is playing out in CAISO, where he said the state’s “long-term contracting practices have decimated the competitive market.”
“It has led to the paradox that while retail rates are amongst the highest in the country as a result of these contracting mandates, wholesale prices are so low that the economic viability of the remaining generation that is dependent on competitive wholesale markets (generally existing conventional generation resources acquired or built when the market was competitive) is increasingly threatened.”
Alex Glenn, Duke’s senior vice president for state and federal regulatory legal support, had five requests to Congress, including swift confirmation of FERC nominees; the retention of the federal income tax deduction for interest expenses; “a reasonable ‘shot clock’ for actions on permit applications” for critical infrastructure projects; and a rewrite of PURPA to eliminate above-market must-take purchase obligations.
Glenn also said Congress should amend the SAFETY Act “to expressly include cyberattacks, and improve the process to obtain a security clearance so that we can increase the information-sharing capabilities between public and private entities.” Including cyberattacks under the third-party liability protections in the act would allow utilities and first responders to help recovery from an attack without the threat of “of protracted lawsuits in multiple jurisdictions,” he said.
In contrast to Duke’s lengthy wish list, Kenneth D. Schisler, vice president of regulatory affairs for EnerNOC, had only one request. Schisler thanked federal policymakers for removing market barriers to DR and said “it is vital” that FERC find a way to maintain competitive markets while respecting state policies. “Our only ask here today is that you continue to recognize demand response and its importance to our national energy strategy,” he said.
VALLEY FORGE, Pa. — PJM’s Capacity Construct Public Policy Senior Task Force has been working at a torrid pace to develop potential rule changes in time for next year’s capacity auction.
After little more than four months of meetings, PJM and stakeholders have offered four proposals to fix what many see as flaws in the RTO’s capacity construct. The main issue is how to accommodate state actions — such as energy credits or tax incentives, which subsidize certain generation types — without allowing them to influence clearing prices.
The RTO envisions a two-stage auction in which the first stage includes subsidized units and creates a “suppressed capacity price” using PJM’s standard variable resource requirement (VRR) demand curve. The second stage replaces subsidized units with a “reference price offer reflecting what would be a competitive offer from a unit of that type and vintage.” This would create a higher “restated price” more in line with pure competition that all cleared units would receive, unless states instructed PJM to pay its subsidized units less. Units that didn’t clear under the “suppressed” price would not receive capacity payments, even if they clear under the “restated” price.
| NRG
LS Power and NRG Energy responded at the task force meeting July 17 with proposals to tweak the two-stage approach. Both were designed to address those units that slipped between the auctions, which NRG referred to as “in-between” units. LS took the route of adjusting price, while NRG focused on adjusting quantity.
LS calls its proposal the “clearing price impact election model.” It factors the output of subsidized units into the second stage, resulting in a lower subsidized clearing price. Generators would have to elect when they submit their bids whether they would accept a lower subsidized price, which PJM would estimate before the auction. Those who won’t accept the lower price don’t clear, and the final clearing price would be adjusted upward as their output is eliminated from the supply. This would discourage units from creating price suppression by bidding low, LS argues.
NRG’s approach would also determine prices with and without subsidized units. Subsidized units would receive the subsidized price, and unsubsidized units would receive the unsubsidized price. The “in-between” units that clear the auction in the unsubsidized price but not in the subsidized price would clear and receive the unsubsidized price. The quantity of all offers would be reduced proportionally to ensure the entire auction cost is no higher than the total for the auction using the unsubsidized price.
Other Perspectives
Two other stakeholders took drastically different approaches.
Exelon, which has been battling for more than a year to secure state subsidies for some of its nuclear fleet, argued why such subsidies shouldn’t be mitigated in PJM’s auctions. More than 10 GW of resources “receive longstanding state support to enter/remain the market,” Exelon says, with the largest category being small- to medium-sized coal plants in regulated states.
“Resource adequacy objectives have been met at a reasonable cost despite the material impact on the marginal clearing price,” according to Exelon’s report. “Mitigation is unnecessary.”
“This is a very complex topic and we tried to bring some data and performance results into the conversation, realizing that other stakeholders may have different perspectives,” said Exelon’s Sharon Midgley, who presented the proposal.
Last Tuesday, the second day of the two-day task force meeting, American Municipal Power called for a smaller role for the Reliability Pricing Model, with public power permitted to meet most of their capacity needs through long-term bilateral contracts. AMP’s Ed Tatum argued that RPM is an “administrative construct … not a market,” and that PJM and its stakeholders “have to stop focusing on price and let a market do its thing.” Since 2010, PJM has made at least 27 major filings changing RPM, he said.
| Exelon
AMP’s plan would hinge on annual determinations of capacity obligations for load-serving entities, with a capacity auction several months before the delivery date, rather than three years. It would also eliminate the single clearing price created by the VRR curve in favor of a mechanism to match individual buyers and sellers. (See related story, Public Power Takes its PJM Gripes to Congress.)
| NRG
Several RPM structures would be maintained, such as resource must-offer requirements, the RTO reliability requirement, demand response participation and the Capacity Performance system of bonuses and penalties. The group also proposed a penalty on LSEs that fail to secure necessary capacity.
Stakeholders from both supply and demand pushed back, largely concerned that the plan would impede price transparency.
“Those customers who are signing up specifically to hedge their capacity costs, if they don’t know what the price that they’re paying is, that’s very difficult for them to hedge,” EnerNOC’s Katie Guerry said.
Joe Bowring, PJM’s Independent Market Monitor, had a much simpler solution.
“You can’t be partly regulated and partly not. You have to choose, and states have a whole range of options,” he said. “If states want to take it back [and fully regulate the industry], that is absolutely within their authority. What they shouldn’t do is take actions that are not in their authority. … If you subsidize two or three particular units … you’re suppressing the price of energy compared to what it would have been and you’re putting other units that are now economic at risk. That’s why I continue to repeat that subsidies are contagious.”
He said there’s no sense in “trying to work out complicated ways to make subsidies work in markets when they really can’t.”
“To me, the problem that has been identified is that competition is working,” Bowring continued. “Competition is a nasty business. Competition puts people out of business on a regular basis. I think it would be very difficult for the PJM markets in their current form to adapt to any more fully regulated states. … It would mean a significant change because the current structure of fully competitive markets is not compatible with a mix of generators with revenues based on cost-of-service regulation and generators with revenues dependent on markets.”
After the meeting, Bowring submitted recommendations that provide a definition for subsidies and call for developing an extended minimum offer price rule for all subsidized units that would be reviewed annually.
The task force has another two-day session planned for Aug. 2-3, at which Bowring’s recommendations and an update to the proposal from LS will be discussed. Other meetings are scheduled for Aug. 23, Sept. 11 and Sept. 26. The task force’s issue charge calls for any results to be delivered by the end of the year.
MISO’s Independent Market Monitor last week gave board members an explanation of the most pressing of the nine new recommendations contained in this year’s State of the Market report, which RTO staff are reviewing for potential inclusion in its annual Market Roadmap of market improvements.
Jeff Bladen, MISO executive director of market design, said the RTO will present its response to the report in September. Under its Tariff, MISO has 120 days to reply after the delivery of the report. Some of the recommended changes had been discussed in front of board members before, though the report was released early this month. (See Monitor Recommends 9 New MISO Market Changes.)
Monitor David Patton said he and the RTO have generally been on the same page over the years when it comes to his market recommendations. “I don’t sense that we’ve disagreed a lot; there are some recommendations that aren’t feasible,” Patton said during a July 20 Markets Committee of the Board of Directors conference call.
However, Patton said he sometimes disagrees with MISO’s prioritization and ranking of market projects on the Market Roadmap: The RTO tends to prioritize market efficiency and cost above all, while he champions cost, benefits and reliability. The two will return to the committee to give their takes on prioritization when the list is finalized in winter, he said.
MISO South Emergency
Patton addressed MISO’s April 4 maximum generation emergency in MISO South, the first in more than a decade.
The Monitor said that new penalties on non-responsiveness, and improved communication protocols, drove load-modifying resource participation to more than 80% from just 50% during the last emergency in 2006. (See 4 LMRs Face Penalties after MISO Max Gen Emergency.)
Patton repeated his contention that the emergency might have been avoided altogether if MISO had expanded authority to coordinate transmission and generation outages. Under current rules, the RTO can only recommend a revised outage schedule when an analysis shows that reliability will be in jeopardy.
“Our recommendation is to expand that authority to address the economic inefficiencies of having poorly coordinated outages,” Patton said.
Local Reserve Product
Patton recommends that MISO develop a 30-minute local reserve product for voltage support, local reliability and subregional capacity. Some areas do not have resources that can start within 30 minutes to restore supply after a contingency, Patton said, resulting in high uplift costs. He also said that when the Midwest-to-South transmission constraint binds after a contingency, MISO also must incur uplift charges just to secure subregional capacity needs.
“If we had a product, we’d set shortage pricing and potentially reduce our revenue sufficiency guarantee by a large margin,” Patton said. He said that the pricing would require its own settlement. “You would only deploy it after a major contingency, which might only be a few times a year.”
“In most of the eastern RTOs, a 30-minute product is in use regionally and even in local areas,” Patton said, adding that that even if MISO built its own transmission to relieve the Midwest-to-South constraint, a reserve product would still be useful for local needs.
“I think you’re personally on the right track here,” Director Thomas Rainwater said.
M2M Coordination
MISO’s market-to-market coordination could also use improvement, said Patton, who recommends MISO, PJM and SPP devise a process to hand off flowgate control when another RTO’s flows are dominating a constraint.
More than $238 million worth of congestion could have been more efficiently managed in 2016 through better M2M procedures, he said.
“Increasingly, market-to-market coordination is becoming important because of pseudo-ties and the increased implementation of wind that fluctuates heavily and creates constraints. The ability to coordinate and move generation on our neighbors’ constraints … is increasingly beneficial and cost effective,” Patton said. He suggested that MISO develop a joint operating agreement with the Tennessee Valley Authority for coordinating congestion management.
PJM’s and SPP’s effects on MISO’s systems are large enough that MISO should have identified them as a M2M constraint. Because MISO has not done so, it receives no compensation when PJM or SPP dominate flows on its system.
Shortage Pricing
Patton also said MISO’s shortage pricing method needs improvement, recommending the cap on the value of lost load (VoLL) be increased to almost $12,000/MWh to create a more sloped contingency reserve demand curve.
| Potomac Economics
MISO’s proposed reserve demand curve — filed in May to comply by Dec. 1 with FERC Order 831 (ER17-1571) — is much flatter, hovering at $2,100/MWh for much of the curve unless MISO clears less than 8% or more than 96% of its requirement level. MISO’s flatter approach results in “overstated shortage prices for small shortages and understated shortage prices for larger shortages,” Patton said. MISO’s current curve looks similar to the proposed option but carries a $1,100/MWh value for most of the curve unless less than 89% or more than 8% of the requirement clears.
According to Patton, there is disagreement among industry studies on VoLL. “Our personal view is that you should choose a value at your highest load, and that’s why we ended up at $12,000,” he said.
Capacity Auction Rules
Patton expressed concern over MISO’s “essentially zero” $1.50/MW-day footprint-wide clearing price in the 2017 capacity auction.
“In the current context, I think what I would say is the decision not to move forward with a competitive retail solution … is something we’d like MISO to reconsider over time,” Patton said. In addition to finding a solution for the RTO’s competitive load areas, Patton still advocates the use of a sloped demand curve in the Planning Reserve Auction.
“When we have hot topic discussions, we have some sectors that pound the table in favor of a sloped demand curve, and other sectors less so,” Director Baljit Dail observed. He asked why MISO has yet to instate a sloped demand curve in the auction.
“To be honest, it’s been a journey. I always thought it’d be easier with MISO because most of the capacity in MISO is self-supply through vertically integrated utilities. In a sense, the capacity prices don’t matter,” Patton said.
Awaiting MISO Response
Board members said that they had questions but would hold off on asking them until they could review MISO’s response to the recommendations.
“There are some questions that sound like we’re waiting to ask MISO management, ‘This is a very good idea. Why hasn’t this been done?’ and I suspect we’ll get a very thoughtful response,” Director Paul Bonavia said.
Richard Doying, MISO executive vice president of operations, said the RTO should have a “fairly thorough” response by September, but more analysis may be needed.
“For some of these, we may have an indicative response and would wait until October for a full evaluation,” Doying said.
“Congratulations, you’ve worn us down,” Bonavia joked to Patton before ending the two-hour-plus conference.
California officials Thursday cleared the Aliso Canyon natural gas storage facility to resume injections, even as momentum builds among lawmakers, regulators and the public to permanently close the site of the massive methane escape near Los Angeles.
The methane leak caused by a broken pipe casing at the 86-Bcf storage facility owned by Southern California Gas was discovered in October 2015 and plugged in February 2016.
State engineering and safety officials said that after months of “rigorous inspection,” they “have concluded the facility is safe to operate and can reopen at a greatly reduced capacity in order to protect public safety and prevent an energy shortage in Southern California,” according to the California Public Utilities Commission. State legislation required the PUC and Division of Oil, Gas and Geothermal Resources to clear the facility for operation before gas injections could resume there.
PUC Executive Director Timothy Sullivan said: “After careful review of testing results, our safety teams have confirmed the integrity of the wells at this facility. Out of an abundance of caution and consideration for public safety, storage capacity will be restricted to approximately 28% of the facility’s maximum capacity — just enough to avoid energy disruptions in the Los Angeles area.”
Aliso Canyon Well Head | Earthworks
State Oil and Gas Supervisor Ken Harris issued an order laying out testing requirements at the facility after injections resume. About 60% of the wells at Aliso Canyon have now been taken out of operation and isolated from the facility, and remaining wells were cleared during testing, officials said. Active wells now have real-time pressure monitors and will be subject to aerial monitoring. The wells also have new steel tubing and seals.
The finding came the same day the head of the California Energy Commission wrote PUC Chairman Michael Picker, calling for the facility to be permanently closed. He said Gov. Jerry Brown asked him to make plans for the facility to be permanently shut down.
“My staff is prepared to work with the CPUC and other agencies on a plan to phase out the use of the Aliso Canyon natural gas storage facility within 10 years,” CEC Chairman Robert Weisenmiller said in the letter.
Weisenmiller said that closing the facility “is no small task and the recommendation to close the facility is not one that I take lightly or without thoughtful consideration.” But he said reliability worries could be addressed through investing in renewable energy, energy efficiency, electric storage and other tools.
SoCalGas welcomed the decision in a statement Thursday. The company had warned of reliability concerns stemming from the loss of the facility and in November 2016 requested permission to resume injections.
State Senator Henry Stern: “There is no rush to re-open Aliso Canyon”
“Aliso Canyon is an important part of Southern California’s energy system, supporting the reliability of natural gas and electricity services for millions of people. SoCalGas has met — and in many cases, exceeded — the rigorous requirements of the state’s comprehensive safety review,” the company said.
On Wednesday night, State Sen. Henry Stern (D) tweeted that the “proposal to re-open #AlisoCanyon before we know what caused the leak and before earthquake and fire risks studied is premature & unnecessary.”
DENVER — As it comes to grips with the migration of 430 MW of West Texas load to ERCOT, SPP is confronting the possibility that as much as 1,300 MW of additional load could leave its system.
SPP members are encouraging the RTO to explore the reasons for the departures — and how to prevent them.
East Texas member Rayburn Country Electric Cooperative last month opened a project with the Public Utility Commission of Texas to “identify issues pertaining” to transferring its load and portions of its facilities into ERCOT (Docket 47342).
Despite its membership in SPP, only 15 to 20% of Rayburn Country’s load (about 150 MW) sits in the Eastern Interconnection. ERCOT estimates it will cost $38 million — primarily for a new 345-kV substation, a 138-kV switching station and the expansion of several 138-kV lines — to connect the co-op’s SPP load with the Texas Interconnection.
Rayburn Country owns and operates 160 miles of transmission in SPP, of which it proposes to move 130 miles into the ERCOT footprint, adding to the 207 miles of lines it already owns there.
The co-op determined that consolidating its load into ERCOT will give it access to “a more liquid and competitive wholesale power market, improved reliability, and elimination of cross-grid issues such as multiple NERC reliability standard audits and differing regional practices.”
An SPP task force has identified several other potential Texas entities with a medium-to-high risk of transferring an additional 1,100 MW of load into ERCOT, not including Lubbock Power & Light and the aforementioned 430 MW.
At its recent annual retreat, SPP’s Strategic Planning Committee considered whether it should “develop incentives or other mechanisms” to prevent future member migrations, Vice President of Process Integrity Michael Desselle said last week during an SPC meeting.
Who Pays?
“The strategic issue of who pays for what is actually fairly important,” said Oklahoma Gas & Electric’s Jack Langthorn, who chaired a task force studying the implications of LP&L’s departure. “When you lose load, should the costs go with it? When entities come in or leave, who pays for what?”
“These strategic questions remain and won’t go away,” said SPC Chair Mike Wise, Golden Spread Electric Cooperative’s senior vice president of regulatory and market strategy. “The lack of [retention] incentives we have in SPP needs to be resolved.”
The costs would be significant for Golden Spread and Southwestern Public Service, which currently serves Lubbock’s load.
A recent joint study between SPP and ERCOT indicates that the transfer of LP&L would increase annual transmission revenue requirement (ATRR) payments for 17 of SPP’s 18 transmission zones by an average of 1.3%. Zonal rates in the SPS zone would decline about 9.3% because of an approximate 10% drop in load, but the zone’s remaining load would see a regional-allocation increase similar to other SPP zones on a cost-per-megawatt basis, or $217/MW.
“What we’re really talking about is $14 million being reallocated within the SPS zone,” said Bill Grant, SPS’s regional vice president of regulatory and strategic planning. “It’s not insignificant by any means.”
“I am a big load inside the SPS zone. If this load leaves the zone, it increases my [transmission] costs,” Wise said.
Dueling Studies
SPP and ERCOT performed production-cost analyses for the years 2020 and 2025 to evaluate the effects of moving part of the LP&L system. SPP would see fuel costs drop $64 million to $86 million in its footprint and $61 million to $89 million in Texas in 2020. Those ranges increase to $71 million to $105 million and $68 million to $113 million, respectively, in 2025.
ERCOT’s portion of the study found its production costs would increase as much as $77 million in 2020 and $74 million in 2025. The ISO says that increase will be offset by using the LP&L interconnection to unlock wind energy currently trapped in the Texas Panhandle. (See “LP&L Study: Production Costs Increase,” ERCOT Board Briefs.)
| ERCOT
The Texas grid operator last year conducted a separate study showing it will cost $364 million to integrate LP&L, mostly through construction of 141 miles of new 345-kV lines. SPP’s study found it would need to spend $5.1 million on additional transmission projects to compensate for the loss of LP&L’s load, but another $1 million of upgrades could be deferred or avoided.
ERCOT’s study found the new facilities would increase grid stability in the Panhandle, while SPP determined any reliability concerns could be mitigated. The joint study predicted “minimal impacts” on ancillary service procurement quantity and markets, and on congestion rights and their markets.
LP&L announced in 2015 that it planned to disconnect its load from SPP and join ERCOT in June 2019 (Docket 45633). The PUC last summer asked the grid operators to conduct coordinated studies focused on a cost-benefit analysis for ratepayers. (See Texas PUC OKs ERCOT, SPP Studies on Lubbock Move.)
Grant encouraged the SPC to compare the two studies and “really start digging into the issues of why an entity might want to leave. There’s no better way to put it than Tariff arbitrage. That’s what it is.
“I don’t know what you can do to stop that,” Grant said. “If there are any savings to an individual entity, it’s the way they’re treated under their individual tariffs. If [zonal placements don’t happen fairly], you don’t get the added value of having transmission requirements in your zone.”
LP&L said it will next month file a contested case with the PUC slated to begin in May 2018 and has asked the commission to discuss the matter during its July 28 open meeting. The municipality said this timeline would allow it to successfully integrate with ERCOT before a “bridge agreement” extending its SPS power contract expires in May 2021.
ISO-NE on Tuesday proposed a plan to refine the procedural and technical requirements for determining whether new or modified distribution-connected generation should be interconnected by the RTO or a local utility.
Cheryl Ruell, manager of transmission services for ISO-NE, delivered a presentation on guidance for distribution-connected generation to the NEPOOL Reliability/Transmission Committee, which met July 18-19 in Meredith, N.H.
The grid operator’s proposal would consider the location and status of the distribution circuit to which the resource connects — as well as the size of the proposed generator — to determine the nature of any application approval required under Section I.3.9 of the Tariff. The interconnecting transmission owner would submit an application on behalf of generators that don’t participate in the wholesale market. Distribution-connected generators less than 5 MW may file a special category notification form, while those under 1 MW are exempt under the Tariff.
Existing state interconnection processes would continue to apply to any Public Utility Regulatory Policies Act qualified facilities in cases when the generator is interconnecting to a FERC-jurisdictional facility, but only if those projects produce energy to be consumed only on the retail customer’s site or sell 100% of their output to the interconnecting utility, rather than selling to RTO markets. If the host utility wishes to register the qualifying facility in the wholesale market, the host utility must meet all ISO-NE registration, modeling and operating requirements.
Forward Capacity Market and Interconnection Standards
ISO-NE also presented the committee with the current procedures for integrating a new generator with the Forward Capacity Market and interconnecting an elective transmission upgrade (ETU), which is a merchant-funded transmission interconnection.
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Director of Resource Adequacy Carissa Sedlacek and Director of Transmission Strategy and Services Al McBride covered timelines for interconnection, resource deliverability and application of the overlapping impact test.
The grid operator analyzes generators and ETU projects in the order they entered the queue and allocates transmission upgrades accordingly. Overlapping interconnection impacts restrict qualification when the upgrades identified for a new generator cannot be completed by the start of the requested capacity commitment period.
Under FERC rules, it may not be just and reasonable “for a generator in one location to sell its capacity as a capacity resource to, and receive capacity payments from, a load in another location if the generator’s output is not deliverable to the load that buys the capacity.”
Queue reforms in 2008 improved the FCM and generator interconnection process by replacing the “first-come, first-served” approach with a combination of a “first-come, first-served” and “first-cleared, first-served” approach. The changes established two types of interconnection service: capacity network resource interconnection service (CNRIS) and network resource interconnection service (NRIS).
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Generators are not required to participate in the FCM in order to interconnect to the New England transmission system.
The grid operator uses overlapping impact analysis to identify qualifying transmission upgrades. The study resource — whether transmission or generation — is responsible for impacts where the addition of the capacity results in an overload on a transmission element that is greater than or equal to 2% of the applicable thermal rating or greater than 10 MVA of the applicable thermal rating.
Generation redispatch depends on the distribution factor (DFAX) of the generators on a transmission element in the subsystem, which is a measure of the change in electrical loading on an element such as transmission line or transformer because of a change in output from a given generator. Generation with a DFAX greater than or equal to 3% on a monitored element for a given contingency — “harmer” generation — is not to be redispatched to relieve the constraint for a given study dispatch.
The Organization of MISO States (OMS) on Monday voted to lodge a protest in an ongoing dispute over whether states can prohibit energy efficiency resources from entering RTO markets.
OMS Executive Director Tanya Paslawski said the protest asks FERC to apply the same treatment to EE resources as it did to demand response in Order 719. It also affirms the authority of states to have final say in the matter.
The protest filing was approved by the OMS Board of Directors at a July 17 meeting held during the National Association of Regulatory Utility Commissioners Summer Policy Summit in San Diego.
FERC Order 719 required RTOs to accept bids from DR resources for certain ancillary services “on a basis comparable to other resources” and allowed aggregators to bid DR on behalf of retail customers directly into the market under certain circumstances.
OMS’s request stems from a recent disagreement between PJM and the Kentucky Public Service Commission. Citing the need to prevent expensive and unnecessary capacity purchases, the commission issued an order restricting EE resources from participating in PJM wholesale markets except in special cases. PJM staff responded by producing a problem statement contesting state regulators’ authority to restrict EE participation its capacity market. (See “EE Problem Statement Narrowly Approved,” PJM Market Implementation Committee Briefs.) National trade group Advanced Energy Economy petitioned FERC in June for a declaratory order, asking the commission to assert jurisdiction over the terms of EE participation in RTO/ISO markets (EL17-75).
Paslawski said that while FERC expressly left EE resources out of the order, OMS supports their market participation.
OMS members at the San Diego meeting agreed with the filing’s tone to uphold state jurisdiction. Commissioner Ken Anderson said the filing’s “thrust” on the jurisdiction of states was fitting.
MISO Asks OMS for DER Ideas
MISO Executive Director of Market Design Jeff Bladen appeared at the OMS meeting to inform state regulators that the RTO is beginning to work on developing market rules for distributed energy resources — and that he’d like input from the organization.
“Like all emerging issues, this is very much a work in progress,” Bladen said.
MISO seeks to create a common definition for DERs, rather than defining resources by technology type, the first step to developing future policy and planning processes, Bladen said. The RTO is currently running simulations with increased concentrations of DERs in hypothetical conditions to determine how it can create a more coordinated grid in which DERs do not stress transmission operations and real-time reliability conditions.
“We’re trying to test scenarios to see if we’re on the right track,” Bladen said.
Michigan Public Service Commission Chair Sally Talberg asked if MISO could carry out such simulations without communicating with generation owners.
“We’re essentially ignoring the method of dispatch” at this point in our studies, Bladen said.
Stakeholders will again take up DERs as their “hot topic” discussion item at MISO’s next full board meeting in September. Bladen said MISO will ask for stakeholder ideas on how to best integrate the resources.
“We see ourselves as just another collaborator on this rather than giving the answers.”
Avangrid earned $120 million in the second quarter, up 17% because of new rate plans in New York and Connecticut, improved cost management and a 4% increase in renewable energy production, the company reported Wednesday.
Avangrid CEO James P. Torgerson | Avangrid
The company attributed last quarter’s spike in renewable output to the recently completed 208-MW Amazon Wind Farm in North Carolina but said production at its other wind facilities came in below average. Avangrid plans to sign power purchase agreements equating to 1,800 MW of new wind and solar through 2020.
“We’ve already secured 1,000 MW of that — or 55%,” CEO James P. Torgerson told investors and analysts during an earnings call.
Avangrid controlled more than 6,000 MW of renewable resources by the end of June, 349 MW of which was added this year. Another 600 MW is slated to come online during the second half of 2017, with wind representing 534 MW and solar making up the remainder.
Renewables Rising
The company manages two primary lines of business: Avangrid Networks comprises eight electric and natural gas utilities serving around 3.2 million customers in New York and New England, while Avangrid Renewables operates more than 6 GW of mostly wind power in 23 U.S. states.
Avangrid Renewables Pipeline | Avangrid
Avangrid is this year focusing on reducing its exposure to wholesale markets by decreasing its merchant capacity from 35% to 27%.
“Year-to-date, we’ve executed 589 MW of fixed-price contracts to reduce our merchant capacity, and we’re really committed to keeping on track and adding even more as we see opportunities,” Torgerson said. “The company targets to be at 75 to 85% PPA plus hedges that we have on merchant capacity, so by adding the long-term hedges, we will actually be over 80%.”
The Networks business continues to dominate the company, contributing 73% of overall adjusted net income year-to-date, up 9% over the same period last year. But the Renewables division is playing catch-up, seeing its adjusted net income rise 26% for the same period.
Offshore wind platform | Avangrid
The company sees clean energy and offshore wind initiatives in Massachusetts as “key opportunities” to increase income beyond its long-term plan, Torgerson said.
Avangrid plans to bid “multiple transmission and/or renewable solutions” into a collaborative effort by the Massachusetts Department of Energy Resources, Eversource Energy, National Grid and Unitil to solicit clean energy proposals for 9.45 TWh annually of renewable generation.
“They’re looking for incremental hydro on a firm basis, but also new Class I renewable portfolio standard [resources], which would be wind and solar,” Torgerson said. “A combination of both could include transmission projects under a FERC tariff.”
Massachusetts is also soliciting up to 1,600 MW of offshore wind proposals due in December, and Avangrid intends to bid into that in partnership with Copenhagen Infrastructure Partners, Torgerson said. The projects will be selected in April 2018.
NYPSC Quorum Commended
Torgerson lauded the recent appointment of a new chair and two additional commissioners to the New York Public Service Commission, which operated for several months with only two of five seats filled, causing a backlog.
As part of New York State’s Reforming the Energy Vision initiative, Avangrid subsidiaries New York State Electric and Gas and Rochester Gas & Electric have filed a combined proposal with the commission to launch an Energy Smart Community project. The two utilities have already installed 20,000 smart meters under the program.
Quorum Pending at FERC
Avangrid could stand to benefit — or not — from the restoration of FERC’s quorum. The D.C. Circuit Court of Appeals (15-1118) in April overturned FERC’s 2014 order setting the base return on equity for a group of New England transmission owners — including Avangrid’s Central Maine Power — at 10.57%. The court ruled that the commission failed to meet its burden of proof in finding the existing 11.14% rate to be unjust and unreasonable. (See Court Rejects FERC ROE Order for New England.) The TOs are seeking to begin billing at the prior ROE.
“That is the most recent rate that’s legally in effect at this point, and we requested to begin billing that again 60 days after FERC has a quorum, with retroactive billing to June 8 of this year,” Torgerson said. “If no FERC decision is reached, we’ll start doing that.”
FERC has lacked the necessary three-person quorum since the February departure of former Chair Norman Bay, and has been down to one commissioner — acting Chair Cheryl LaFleur — since Colette Honorable left last month.
LaFleur may be joined by four new members if Democrat Richard Glick and Republicans Kevin McIntyre, Robert Powelson and Neil Chatterjee win Senate confirmation. (See Trump Names Energy Lawyer McIntyre as FERC Chair.) Glick is a former vice president of government affairs for Avangrid.
Stakeholders got a first look at the preliminary projects resulting from MISO’s yearly market congestion planning study during the July 19 PAC meeting. The RTO has so far floated three potential projects in the West of the Atchafalaya Basin (WOTAB) area straddling Texas and Louisiana:
A new $137.6 million 500-kV line and substation expansion from Hartburg to Sabine in southeastern Texas that would qualify as a market efficiency project and is expected to be in service by 2023.
A $2.8 million replacement of 26 transmission structures along the Sam Rayburn-Fork Creek-Doucette 138-kV line in southeastern Texas, expected to be complete by 2020.
Equipment upgrades valued at $500,000 for the existing Carlyss substation in southwestern Louisiana by 2020.
Arash Ghodsian, MISO manager of economic studies, said the RTO’s market congestion planning footprint diversity studies will produce final project recommendations in August. Project candidates will be submitted for approval by the Board of Directors at the end of the year. (See “Studies Could Assist in Relieving North-South Constraint,” MISO Planning Advisory Committee Briefs.)
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MTEP Siting Up for Review
MISO is also planning on updating siting guidelines for projects included in its Transmission Expansion Plan.
This year’s siting model will be slightly altered to add likely wind and solar zones. MISO will also consider zonal resource adequacy requirements when determining siting and exclude thermal unit development from non-attainment areas subject the National Ambient Air Quality Standards.
The RTO plans to further improve its siting modeling process for the 2019 cycle through a series of stakeholder workshops that will begin in September. Matt Ellis, a MISO policy studies engineer, said the overhaul will focus on the placement of new technology, including 100 MW of queued energy storage resources, future utility-scale renewables, rooftop solar — predicted to reach 10 GW by 2027 — and the addition of more electric vehicles and their demands on load.
Ellis said projects in the interconnection queue generally exhaust themselves within a three- to five-year cycle, but MISO plans for its transmission system 15 years into the future.
He also asked for stakeholders to submit ideas by Aug. 11 on how MISO’s siting process can account for new technology.
MISO will also conduct a multi-value project triennial review this year, sizing up its existing portfolio and quantifying benefits. FERC requires a full review of the approved portfolio benefit every three years.
Project manager David Lucian said the review will have no effect on cost allocation for existing projects, but findings could be used to adjust project criteria in future projects. The review includes analyses of economic benefits, generator flexibility, renewable target standards, natural gas risks and job creation.
MISO last conducted an MVP triennial review in 2014, concluding that the portfolio held a benefit-to-cost ratio ranging from 2.6 to 3.9 and should create anywhere from $13.1 billion to $49.6 billion in net benefits over the next 20 to 40 years.
The triennial review report will be filed with FERC by the end of the year, PAC Chair Cynthia Crane said. Results will also be published in the MTEP 17 report due in December.
