Page 1301 – RTO Insider

June 19, 2017

Questions to FERC Nominees Reflect Democrats’ Wish List

By Michael Brooks

President Trump’s nominees to FERC gave nearly identical, boilerplate answers to senators’ written questions on issues ranging from hydroelectric project licensing to natural gas infrastructure following their confirmation hearing last month.

The questions, mostly from Democratic and left-leaning independent senators, provide more insight into a party grappling with being in the minority under a presidential administration hostile to environmental issues rather than the nominees themselves.

ferc trump chatterjee powelson — Powelson | © *RTO Insider*

Robert Powelson, a Pennsylvania Public Utility Commissioner, and Neil Chatterjee, senior energy adviser to Senate Majority Leader Mitch McConnell (R-Ky.), toed the FERC line, declining to answer questions about specific cases pending before the commission. The two, who were each approved 20-3 by the Energy and Natural Resources (ENR) Committee on June 6, are awaiting a confirmation vote by the full Senate. (See FERC Nominees Easily Advance to Full Senate.) No vote has been scheduled as of last week.

They pointed to recent technical conferences when asked about state energy policies and barriers to participation in the wholesale markets to energy storage, saying they were “eager” or “looking forward” to reviewing comments the commission has received.

They also provided similar answers to questions about Order 1000, about which nearly every senator who submitted written questions asked.

Senators expressed concern that there were still problems with the interregional transmission process. Sen. Joe Manchin (D-W.Va.) in particular quoted PJM CEO Andy Ott and SPP CEO Nick Brown’s criticisms of Order 1000 at the RTO Insider/SAS ISO Summit in March. (See PJM, SPP Chiefs Share Frustration with Order 1000.)

Both nominees said they were supportive of the order and pledged to carefully consider stakeholder feedback on last year’s technical conference. “I am a strong advocate for interregional transmission planning and, in my view, the commission’s implementation Order No. 1000 is a work in progress,” Powelson said.

The nominees also asserted that changes to how the commission administers the Federal Power Act, the Natural Gas Act and the Public Utility Regulatory Policies Act should come from Congress, not FERC.

Sen. Maria Cantwell (D-Wash.), for example, noted that while the electric industry is subject to mandatory cybersecurity standards, gas pipelines are only subject to voluntary guidelines issued by the Transportation Security Administration. She asked the nominees whether they agreed that there should be mandatory standards for pipelines.

“I defer to Congress and the Transportation Security Administration (TSA) as to the adequacy of TSA’s natural gas pipeline cybersecurity program,” Chatterjee answered. “Congress has granted TSA authority to establish mandatory cybersecurity regulations for natural gas pipelines.”

“Congress and the TSA are in the best position to evaluate TSA’s current natural gas pipeline security authority to determine if natural gas pipelines should be subject to additional or mandatory cybersecurity standards,” was Powelson’s answer.

Senators also asked questions particular to their individual states. Sen. Al Franken (D-Minn.) asked about problems with coal transportation by railway in Minnesota — another TSA issue, the nominees said.

But Sen. Tammy Duckworth (D-Ill.) asked about states served by multiple RTOs — which include Illinois. “States that are split into two RTOs are encountering issues where generating resources have been separated from the loads that they were built or contracted to serve,” she said. “How should proximity to resources, actual power flows and pre-existing transmission rights be considered in RTO modeling?”

Both nominees said they could not answer, as it was a question pending before the commission.

Environment and Climate Change

Powelson and Chatterjee’s deferral to Congress extended to questions about environmental impacts, climate change and increasing the use of clean energy resources, subjects about which every Democratic and liberal senator asked.

Sen. Bernie Sanders (I-Vt.), one of the three ENR members to vote against the nominees earlier this month, asked the nominees 52 questions — far more than any other senator — many of them related to the environment. Four questions asked in different ways whether the nominees accepted prevailing climate science.

Powelson and Chatterjee repeated their answers from their confirmation hearing that they understood climate change was real — and not a “hoax,” as Trump has claimed. (See No Fireworks for FERC Nominees at Senate Hearing.)

But they said it was not FERC’s place to regulate it or attempt to decarbonize the nation’s energy mix.

“Any policy to mitigate carbon emissions should originate in Congress; it should not be designed at FERC,” Chatterjee said. “Addressing climate change will require policy changes that the public accepts, and maintaining and enhancing affordability and reliability is vital to gaining that public acceptance. Should I be fortunate enough to be confirmed, my role as a FERC commissioner would be to ensure that any such policy not have a deleterious impact on reliability and affordability of our energy supply.”

“My understanding is that FERC’s policies are resource- and fuel-neutral,” Powelson said. “The commission relies on competitive markets to provide just and reasonable rates and reliable service for consumers, and to send appropriate investment signals for developers. … If confirmed, I will refrain from picking ‘winners and losers’ in the energy marketplace, as that is not FERC’s role.”

Questions by Sanders and others indicated their desire for FERC to slow down its approvals of gas pipelines. They asked the nominees if they agreed with former Chairman Norman Bay’s call for a review of the cumulative environmental impacts from Marcellus and Utica shale drilling. (See Bay Calls for Review of Marcellus, Utica Shale Development.)

While Chatterjee’s answer was anodyne — committing to working with his colleagues in reviewing commission policies — Powelson was more forceful in his answer.

“I respectfully disagree with that recommendation,” he said. “As a Pennsylvania state regulator … I believe that this issue would be better addressed at the state level. State environmental regulators and state public utility commissions are closer to the issues of shale gas development and are better equipped than the federal government to undertake such an assessment.”

Public Participation

Senators also expressed concerns about potential barriers to public participation in FERC’s processes.

“FERC is incredibly complicated, and the barrier to entry for someone to simply understand FERC proceedings, much less to participate, is extremely high,” Sanders said. “Stakeholders with considerable financial resources can participate, but everyone else is effectively excluded.”

Both Sanders and Franken asked about legislation that would create an Office of Public Participation and Consumer Advocacy at the commission, an issue earlier raised by public interest group Public Citizen. (See Public Interest Groups Cry Foul over Technical Conference, RTO Transparency.)

Both nominees wrote that they would “work with my colleagues to identify further steps that FERC could take to make its proceedings and processes more accessible to the public.”

But Powelson also said, “I do not believe that the creation of such an office at FERC is necessary. In my view, the public comment process at FERC provides all interested parties with the ability to participate in the process and express their positions on issues.”

Duckworth also spoke up for public interest groups, saying they believe they have “an extremely limited voice in RTO stakeholder discussions, and RTO actions taken behind closed doors seem to be condoned by FERC.”

Last week, Virginia Democratic Sens. Tim Kaine and Mark Warner introduced legislation that among other provisions would mandate public comment meetings in every locality in the path of a proposed interstate gas pipeline. The bill is in response to complaints in the state about the limited opportunity for the public to provide feedback.

Republican Rep. Morgan Griffith, also from Virginia and a member of the House Energy and Commerce Committee, introduced a similar bill in the House.

June 19, 2017

ERCOT Monitor: Optimizing Energy, A/S Top Priority

By Tom Kleckner

AUSTIN, Texas — Potomac Economics’ David Patton told ERCOT’s Board of Directors last week that while the ISO’s market performed “competitively” in 2016, there’s still room for improvement.

Delivering an overview of his firm’s recent State of the Market report for the Texas grid operator, Patton said more efficiencies would be gained by improving the market’s price formation and, more important, real-time co-optimization of energy and ancillary services. Potomac Economics, ERCOT’s Independent Market Monitor, filed its most recent market report with the Public Utility Commission of Texas in May. (See “IMM Offers Additional Suggestions to Improve Markets,” ERCOT Briefs.)

“Co-optimization is our highest priority recommendation,” Patton said, noting that he has been making that same recommendation since ERCOT’s nodal market was developed last decade.

“Co-optimizing energy and ancillary services is one thing you can do to lower costs the most, and to ensure efficient pricing in real time,” he continued. “More importantly, co-optimization allows for efficient shortage pricing. With sustained shortages, there’s going to be a lot of revenue generated and lots of costs generated. Having a system where you are confident the use of resources has been maximized and the dispatch has been optimized, the shortages you’re pricing are real shortages, not an artifact of some dysfunction where you can’t get all the ramping capability of all your resources efficiently.”

Patton called real-time co-optimization a “more elegant process” than ERCOT’s current practice of “producing adders to try and mimic what a co-optimized system would do.” He said jointly optimizing the energy and reserve markets would allow shortage pricing under the operating reserve demand curve (ORDC) — which sets real-time energy prices reflecting the expected value of lost load — to be more accurate. The real-time market would determine every five minutes whether a shortage of either energy or reserves exists and set prices accordingly. Currently, capacity providing responsive or regulating reserves are not available to be converted into energy.

“Instead of producing an adder, you are allocating megawatts between products to manage constraints and satisfy load and reserve requirements,” he said. “When the system runs out of resources and can’t manage the reserve requirements, the marginal cost of the last megawatt of reserves you can’t satisfy will set the ancillary service price and be embedded in the energy price. If you’re in a transmission shortage and you’ve ramped what you can ramp, but you can’t get the flow beneath the limit, it will optimally establish congestion prices that reflect that transmission shortage.”

ERCOT ancillary services — *2016 ERCOT State of the Market Report*

A co-optimized market would benefit ERCOT’s smaller qualified scheduling entities (QSEs) when they are allocated ancillary services, Patton said. QSEs with large portfolios can move reserves between generating units at lower costs, he noted.

“Co-optimization, with that full information in an optimal fashion throughout all of ERCOT … would allow the ancillary services to be optimized, because shortages of ancillary services set our shortage pricing,” he said. “Having confidence that’s done efficiently is important.”

ERCOT’s Wholesale Market Subcommittee has already taken up the co-optimization issue, which has also drawn attention at the PUC. (See Texas PUC Wary of Using ERS to Avoid Local Blackouts.)

The PUC has created a project to “assess price-formation rules in ERCOT’s energy-only market” (Docket 47199) and is planning a workshop for further discussion. The ISO is working on a report to be filed with the commission by July 14.

“We will be engaged in that with everyone else,” promised ERCOT CEO Bill Magness.

June 16, 2017

CAISO Proposes Consolidated EIM Changes

By Jason Fordney

CAISO is kicking off an initiative that will consolidate proposed changes to the Western Energy Imbalance Market (EIM), including allowing third-party transmission providers to receive congestion revenue when they make capacity available between EIM balancing authority areas.

Stakeholders will discuss the proposals in a call later this month, and the changes will be submitted to the EIM Governing Body in October and the CAISO Board of Governors in November.

“The ISO is committed to providing ample opportunity for stakeholder input into our market design, policy development and implementation activities,” CAISO said in a June 13 issue paper that outlines the new proposals.

The initiative contains two other proposals in addition to the third-party transmission measure, including one that addresses monetary charges related to bilateral market schedule changes and another that provides for more equitable sharing of benefits when an EIM transfer wheels through an EIM balancing authority area.

CAISO said the proposal to allow third-party transmission owners to make available unused capacity for use in the imbalance markets would benefit market participants by increasing transfer capacity, while the transmission provider would receive congestion revenue. EIM entities can currently collect congestion revenue through an offset, but that functionality is not extended to third parties.

EIM balancing authority areas caiso — Transmission lines near Joshua Tree State Park in California. CAISO has proposed allowing third-party transmission to supply unused capacity into the EIM | *© RTO Insider*

The ISO is also investigating whether it can use its current wheeling function to manage bilateral schedule changes originating within or moving across the EIM footprint. Under current practice, schedule changes made after hourly base schedules are submitted are exposed to real-time imbalance settlement payments that are not known ahead of time.

“This will allow market participants with potential bilateral transactions to express a bid price at which the balanced source/sink pair would result in a schedule change,” CAISO said.

Additionally, CAISO said it wants to explore whether balancing authority areas through which power is wheeled should share in benefits when energy transfers occur. EIM energy transfers through balancing areas are exempt from wheeling charges, and the market rule changes would allow the source, wheel-through and sink balancing areas to share in revenue recovery.

“In this case, analysis would need to be completed to determine the magnitude of net wheeling across the [balancing authority] and the cost associated with the wheeling that is not covered by the existing congestion rent settlement,” CAISO said. “This will likely vary per each EIM entity.”

Stakeholders will discuss the proposals in a June 20 call, with comments due on June 30 and a straw proposal to be posted July 27. More meetings are scheduled for August and September, with the board due to review a proposal in early November.

CAISO EIM balancing authority areas — | *CAISO*

The CAISO-run EIM is designed to better balance supply and demand across the West by making more electricity resources available in real time. It began operating in November 2014 and now includes participants in Arizona, California, Idaho, Nevada, Oregon, Utah, Washington and Wyoming.

In the past month, Powerex and the Los Angeles Department of Water and Power became the latest entities to sign agreements to join the market. (See Powerex Slated to Become First Non-US EIM Member; Los Angeles Dept. of Water & Power Signs Pact to Join EIM.)

June 16, 2017

FERC: US Resource Adequacy Good for Hot Summer

By Michael Brooks

Planning reserve margins across most of the U.S. are expected to be adequate for a hotter-than-normal summer, with only ISO-NE barely missing its NERC target, FERC said in its annual summer reliability report released Thursday.

The report analyzed reference levels and margins for all U.S. RTOs and ISOs, as well as NERC’s SERC Reliability, Florida Reliability Coordinating Council and Western Electricity Coordinating Council regions.

ISO-NE is expected to come in just shy of its 15.1% target with a 14.88% reserve margin. FERC staff said tight supply conditions could develop as a result of about 700 MW of new resources not coming online as expected.

“ISO-NE may be required to rely on additional imports from neighboring regions as well as implementing operating procedures to maintain reliability during possible periods of supply deficiencies,” the report said.

While ERCOT’s reserve margin is also tight, the ISO expects to have sufficient capacity to meet peak summer demand, with only a few local areas in southern and western Texas at risk of reliability issues, partially because of strong load growth.

FERC planning reserve margins — | *NERC*

SPP is expected to exceed its target the most; the RTO recently reduced its reserve margin to 12% from 13.6%. (See Waiting on FERC, SPP Members Cut Reserve Margin.)

NERC data show total U.S. generating capacity has risen by about 1% since last summer, matching a comparable increase in load. This comes despite the retirement of about 10 GW of combined coal- and natural gas-fired capacity over the last year.

This summer will see an additional 20 GW of new capacity, mostly from wind and solar resources, FERC staff said. NERC anticipates that total wind capacity will be up 8% over last year to 82 GW. The only new nonrenewable resources: 2 GW of gas-fired capacity in the Eastern Interconnection.

“The growing importance of renewable resources has continued in recent years, as both wind and solar capacity continue to expand,” FERC staff said. “Grid operators are pursuing operational solutions to better integrate wind and solar resources as part of their operational and planning activities.”

Staff noted the near record-high levels of snowpack in the West, particularly California, which could boost reliance on hydropower to mitigate any possible natural gas constraints stemming from the restrictions on the Aliso Canyon storage facility.

“While the restrictions on Aliso Canyon did not pose any major issues during the 2016 summer, the limited availability of the Aliso Canyon natural gas storage facility in Southern California may pose a risk to gas and electric reliability this summer if hotter-than-normal weather conditions and unplanned gas pipeline outages materialize,” the report said.

The National Oceanic and Atmospheric Administration is forecasting above-normal summer temperatures for most of the continental U.S., with the entire East Coast most likely to see an increase over the average.

June 15, 2017

MISO to Release Competitive Tx Project Cost Guide

By Amanda Durish Cook

CARMEL, Ind. — MISO will publish a guide describing its cost estimation process for competitive transmission projects by August, according to RTO staff.

“We’re going to really document how we create our cost estimates,” Alex Monn, MISO senior substation design engineer, said during a June 13 Planning Subcommittee meeting.

The RTO has also changed some aspects of its original cost estimation proposal based on stakeholder input.

With the emergence of competition to build transmission under FERC Order 1000, MISO had to begin providing cost estimates for competitive projects in order to protect the confidentiality of developers’ bids. The RTO wants to put a more transparent process in place before the next competitive project is opened to bidding. (See “MISO Seeks to Improve Tx Cost Estimates,” MISO Planning Subcommittee Briefs.)

miso cost allocation — | © *RTO Insider*

MISO plans to release both a planning-level cost estimate process and a more final scoping-level one. Stakeholders will review the RTO’s procedures on an annual basis, with the first review scheduled for January 2018.

“We’re going to make this a yearly cycle,” Monn said.

Stakeholders generally agreed on MISO’s new 20% project cost contingency allotment, up from an earlier 15% allowance: “Twenty percent is where everyone landed, so that seems like a good estimate for us,” Monn said.

However, MISO will keep overhead project cost allocation at 10% of the total project cost despite some stakeholder discord.

“In talking to stakeholders, everyone had a different basket of overhead costs,” Monn said. He said MISO staff still believe 10% is the most reasonable figure.

MISO transmission design engineer Devang Joshi said the RTO has increased its planning-level cost estimate for transmission line length to the straight distance between substations plus an additional 30% of the length. Stakeholders asked for more leeway after the RTO originally proposed a straight-line length plus a 20% adder. For scoping-level cost estimates, MISO will create a “reasonable proxy route for the purposes of determining a line length.”

The RTO has also simplified terrain and grading project cost impacts into three categories apiece. Terrain types include flat lands with light vegetation, forested areas and wetlands, with each represented by cost per acre and mile instead of MISO’s originally proposed terrain multiplier. Grading types are identified as “typical” (with the land being less than 30% sloped), “rough” (30 to 50% slopes) or “mountainous” (greater than 50% slopes).

At stakeholder request, the RTO has also added a cost estimate for constructing access roads to substation construction sites, but it reduced transformer cost to a simple unit cost of the transformer instead of a “turnkey” cost that would have provided for other construction materials.

June 15, 2017

NYISO Management Committee Briefs

BOLTON LANDING, N.Y. — NYISO said Tuesday that it declared a major emergency on May 21 during the hour beginning 5 p.m. after the loss of 1,000 MW of generation in ISO-NE caused the Central East interface flow to exceed its voltage collapse limit.

It was the second major emergency declaration in a month after one in April, also stemming from interface flow problems. NYISO had last declared a major emergency in July 2016.

Wes Yeomans, NYISO vice president of operations, presented the ISO’s May 2017 operations report during a June 13 Management Committee. The report showed that last month’s peak load of 25,578 MW occurred May 18 and that the month saw more than nine hours of thunderstorm alerts.

The grid operator reported that Lower Hudson Valley installed capacity (ICAP) prices for June fell by 27 cents month over month to $10.01/kW-month, while New York City was down by 33 cents to $10.24. Both declines stemmed from increases in generator unforced capacity available and a decrease in unoffered megawatts. The New York Control Area ICAP price meanwhile increased by $2.17 to $3.89, primarily because of reduced imports and increased exports.

Natural Gas down a Penny from April, up 76% from 2016

In his CEO/COO report to the Management Committee, NYISO COO Rick Gonzales noted that the ISO’s May average year-to-date monthly energy cost of $36.54/MWh represented a 22% increase from May 2016. The average locational-based marginal price for May was $31.74/MWh, compared with $23.31/MWh a year earlier.

May natural gas prices on the Transco Z6 pipeline serving New York City were down a penny from the prior month to $2.80/MMBtu but up 76.5% year over year. The grid operator’s average daily sendout was 383 GWh/day in May, compared with 377 in April and 397 in May 2016.

May distillate prices were down compared to the previous month but up 7.4% year on year. Total uplift costs were higher than in April, while costs per megawatt-hour fell. The local reliability share for uplift was 24 cents/MWh, up from 20 cents/MWh in April, and the statewide share was -13 cents/MWh, down from -8 cents/MWh.

New Testing Requirement for Automatic Swap Dual-Fuel Units

The Management Committee approved revisions to NYISO’s Market Services Tariff as described in the “Zone J Dual Fuel Testing Tariff Revisions” and recommended that the Board of Directors authorize filing the revisions under Section 205 of the Federal Power Act.

The New York State Reliability Council Rule G2 R4 requires combined cycle units in Zone J (New York City) that can automatically swap fuel type to test that capability during each capability period. NYISO is updating its Services Tariff Section 4.1.9 and Ancillary Services Manual Section 8 to comply with the rule.

— Michael Kuser

June 15, 2017

ERCOT Board Approves West Texas Transmission Project

By Tom Kleckner

AUSTIN, Texas — ERCOT’s Board of Directors on Tuesday approved the Far West Texas transmission project, which will result in the construction of two 345-kV lines southwest of Odessa, Texas.

The project would have received unanimous approval but for the abstention of American Electric Power, which will build the project, along with Oncor and Lower Colorado River Authority Transmission. The ISO’s Technical Advisory Committee unanimously approved the project in May. (See “Far West Texas Project Gets TAC’s OK,” ERCOT Technical Advisory Committee Briefs.)

ERCOT board far west texas project — | *ERCOT*

The $336 million project is designed to address the region’s continued load growth, which has averaged 8% since 2010. Increased oil and natural gas exploration in the Permian Basin and a jump in generation projects — mostly solar — are behind the numbers. ERCOT said peak electricity demand in the area has jumped from 22 MW in 2010 to more than 200 MW in 2016 and is projected to exceed 500 MW by 2021.

“We continue to see a tremendous amount of load growth in West Texas,” said Jeff Billo, ERCOT’s senior manager of transmission planning.

One 85-mile line would run between the Riverton and Moss switching stations, with a second circuit added to the existing 16-mile 345-kV line between Moss and the Odessa line. A second 68-mile 345-kV line will connect the Solstice and Bakersfield substations.

The project is expected to be completed within five years, pending approval from the Public Utility Commission of Texas.

Oncor and AEP initially proposed the project to ERCOT’s Regional Planning Group in April 2016. Staff reviewed 40 different alternatives and lowered the cost to $336 million after settling on the most cost-effective of four options: two separate double-circuit 345-kV lines — each with one circuit in place, substation expansions and other transmission elements. ERCOT concluded the upgrades “meet the reliability criteria in the most cost-effective manner and have multiple expansion paths to accommodate future load growth.”

June 15, 2017

UPDATE: Capacity Survey Shows MISO in the Black

By Amanda Durish Cook

In a departure from previous years, the 2017 Organization of MISO States-MISO resource adequacy survey suggests the RTO will have sufficient capacity to meet near-term planning requirements.

The annual results show the RTO will have 2.7 to 4.8 GW of excess resources from 2018 to 2022, translating into a 16 to 22% reserve margin — “sufficiently” above the 15.8% planning reserve margin requirement, according to MISO.

“The MISO region will have ample electricity-generating resources to meet expected demand while also maintaining an adequate supply of reserves for the next five years,” the RTO said in a statement. “The results show an improved resource adequacy outlook compared to last year.”

MISO Executive Director of Strategy Shawn McFarlane said this year’s range represents a 2 GW increase over the range predicted by last year’s survey.

“For the first time in the survey, we show adequate capacity resources,” he said during a special June 16 conference call to discuss results.

More than 96% of MISO’s load responded to the survey, according to the RTO. “We’re glad to see another high participation rate,” said OMS president and Indiana Utility Regulatory Commissioner Angela Weber.

The rosier results can be attributed to lower demand forecasts and a lukewarm growth rate of 0.5%, down from 0.8% in 2016, the RTO said. Its forecasted 2018 summer peak of 125.1 GW is down 2.5 GW from predictions made earlier in the year, it said. (See MISO Slims Summer Reserve Prediction.)

Changes to the way the RTO counts megawatts available as capacity might have also boosted the results. Weighted averages in this year’s survey included a 35% share of projects in the definitive planning phase of the interconnection queue, a change made to address stakeholder concerns that the survey was producing overly conservative capacity forecasts. (See OMS-MISO Survey Moves Ahead with New Calculation.)

Weber said the process of the survey and results continue to improve.

“Capturing resource adequacy for a moment in time remains an important tool,” she added.

Last year’s survey forecasted that the RTO would exceed its then-projected 15.2% reserve requirement by 0.9 GW — or 0.7% above the 2017 requirement — and that it could face a capacity shortfall by 2018 under a worst-case scenario. (See OMS-MISO Survey: Generation Shortfall Possible.) The 2015 survey concluded that a shortfall could occur by 2020.

resource adequacy survey OMS MISO — | *2017 OMS MISO Survey Results*

This year’s results show that two zones still face capacity shortfalls in 2018, but MISO said that “load-serving entities in these areas should be able to reliably acquire capacity from outside their zones to meet these needs.” Zone 5 in Missouri is expected to have a 0.3-GW shortfall, while Zone 7 in Lower Michigan could come up short by 0.7 to 1 GW. Shortfalls in both areas are predicted to persist into 2022. All other local resource zones are expected to have surpluses ranging anywhere from 0.4 to 1.6 GW in 2018 and 0.2 to 1.5 GW by 2022, except Indiana and Kentucky’s Zone 6, which has the potential for either a 0.7 surplus or a 0.4 shortfall by 2022.

Zone 4 in Southern Illinois showed the greatest improvement: Its 1.6-GW forecasted deficit became a 0.7-GW surplus in this year’s survey after MISO reduced load, added 0.4 GW of new resources and factored in the increased availability of existing resources in the zone.

“Several units at 1.8 GW that were previously expected to retire were determined to serve MISO load at the committed level,” McFarlane said of Zone 4.

Minnesota, Wisconsin and the Dakotas’ Zone 1 was limited to 600 MW in exports in 2018 due to a capacity export limit. Exports from MISO South’s Zones 8, 9 and 10 were limited to 1.2 GW because of the continued MISO South-to-Midwest constraint from the use of SPP’s transmission.

Some stakeholders asked how MISO predicted capacity import and export limits, given that the RTO does not calculate limits more than a year in advance. Laura Rauch, MISO manager of resource adequacy coordination, responded that MISO does estimate out-year import and export limits, but added that export limits only have a “minimal” impact on survey results.

MISO predicts when new transmission will relieve constraints, and the Zone 1 transmission constraint that limits exports to 600 MW is expected to disappear by 2022, Rauch said.

Xcel Energy’s Randy Oye asked MISO to provide more detail about how it determines future export limits and transmission constraints, a subject McFarlane said would be discussed at a July 12 Resource Adequacy Subcommittee meeting addressing the zonal breakdown of survey results.

An unforeseen demand increase could affect survey results “unless balanced by policy or market forces.” He warned that results are “highly sensitive” to the same load forecasts largely responsible for the excesses shown in the survey.

“We appreciate continued collaboration with the Organization of MISO States to provide this outlook on supply and demand in the MISO region,” CEO John Bear said. “This forward-looking view informs and enables collective actions by states and MISO members to ensure continued resource adequacy.”

June 14, 2017

PJM Monitor Rejects Fuel-Cost Policies for 11% of Units

By Rory D. Sweeney

PJM’s Independent Market Monitor said last week that it has rejected fuel-cost policies for 11% of generating units for the review period ending May 15.

The Monitor said 22 of the 479 power supplier fuel-cost policies it evaluated — less than 5% of the policies, but representing 11% of units — failed to meet its standards for being algorithmic, verifiable and systematic.

Sellers must go through the process again starting June 15, when PJM’s annual review period begins. The annual review runs through Nov. 1.

The policies are important because sellers will be penalized if they choose to offer into PJM’s markets without them.

PJM Joe Bowring fuel-cost policies — Schmitt | © *RTO Insider*

“Before you put an offer into Market Gateway, you need to have an approved fuel-cost policy,” PJM’s Jeff Schmitt said.

‘Ask Bob’

The initial review was the culmination of a long and often contentious coordination between the RTO and Monitor to get every market seller who must source fuel to submit a policy explaining how it developed the fuel costs included in its cost-based offers. PJM approved all offers submitted.

“We don’t actually agree with PJM that all of the policies that PJM agreed to were consistent with the Tariff,” Bowring said. There were several of the issues that caused his team to fail policies, including submission of unsupported cost adders and reliance on internal estimates.

“That’s what we refer to as ‘Ask Bob.’ So you go down the hall and ask your trader,” Bowring said, noting that the “probably 80%” of gas-fired units that used that method two years ago was “reduced dramatically.”

Some of the explanations shocked stakeholders.

“Someone for real submitted a gas hub that was not in any way, shape or form physically related to the unit that they were submitting it for and didn’t give an explanation as to why?” EnerNOC’s Katie Guerry asked. “You’re saying that someone submitted it without any sort of attempt at explaining it to you, knowing who you are?”

“Precisely,” Bowring responded. “Believe me, we understand all the nuance and subtleties about how it could be.”

Fatigue Among Stakeholders

The ongoing fuel-cost policy requirements have created fatigue among some stakeholders. During last week’s Market Implementation Committee meeting, Gabel Associates’ Mike Borgatti reconstructed the timeline.

“By May 15, we had to get our fuel-cost policies approved to resubmit them by June 15 to maybe get them approved again by Nov. 1, right?” he asked.

Sellers are required by June 15 to submit updated policies to PJM or confirm that their current policies remain compliant. The Monitor will make its determination on policy reviews by Aug. 1, which is also the deadline for sellers to provide policies and sample emissions, variable operations and maintenance calculations to PJM. The Monitor plans to have a fuel-cost policy template incorporating hourly offers available this week, and PJM expects to have its templates ready June 30.

PJM will make its determination on polices by Nov. 1. Schmitt said that review will capture any changes to ensure the policies allow for intraday offers.

“It’s not that we’re trying to recreate work. We just want to make sure that we’re good to go going forward for the winter,” he explained.

With the implementation of FERC Order 825, sellers will be able to update offers hourly to adjust for changing market and supply conditions.

“We know this process is not easy,” said Joel Romero Luna, who is part of Bowring’s team at Monitoring Analytics. “I’ll be surprised if anyone submits by June 15 a policy that captures hourly offers, so it’s my expectation that we’ll work through it, and hopefully we’ll get something acceptable by Nov. 1.”

Online Systems

Going forward, PJM and the Monitor will be using online systems for the process. The Monitor will require all market participants to use a new section on its Member Information Reporting Application (MIRA) for reporting cost-based offer data as of June 30.

The new “Cost Offer Assumptions” module was brought online June 12 with the expectation of having all market sellers transitioned by the end of June. The Monitor uses the inputs to verify sellers’ cost-based offers. Participants will need to verify that the data is correct because “incorrect or incomplete data in MIRA may trigger an evaluation of cost-based offers for potential penalties under Schedule 2 of the Operating Agreement,” the Monitor said.

PJM will also be using “a tool” to track policies, which Schmitt said could be MIRA — although that isn’t assured.

Bowring said one of his frustrations is securing PJM’s commitment on the topic.

“My read of what PJM has been telling us is that they don’t intend to rely on MIRA, but I’m not quite sure why. It’s going to cost them at least millions of dollars in order to replace it on their side,” he said. “Until PJM tells us they’re going to rely on it, we’re not making changes to make it work more smoothly for PJM.”

June 14, 2017

CAISO Finalizes Rules for DR, Distributed Generation

By Jason Fordney

CAISO finalized a set of updates to its proposed policies on demand response and distributed generation, saying there is strong stakeholder support for the new rules to be presented to the Board of Governors in July.

The grid operator has been working on three related but distinct proposals regarding DR, non-generator resources and multiple-use applications. (See CAISO Proposes Rules for Distributed Resources, Storage.)

An incremental approach would be best as CAISO learns from the changes stemming from the policies and their influence on generation resources and grid operations, the ISO said in a draft final proposal on “Energy Storage and Distributed Energy Resources (ESDER) Phase 2.”

“The ISO will continue collaborating with stakeholders on the remaining ESDER 2 topics in a phased policy approach that is appropriate in a rapidly evolving market environment that currently does not have a clear end state,” CAISO said.

The board next month will review finalized proposals for alternative baselines, distinguishing between charging power and station power for energy storage resources, and changes to the threshold price for DR, among others.

For DR, a baseline analysis working group developed enhancements to the method whereby proxy DR resources are evaluated. The ISO has finalized the alternative baselines, which are designed to improve the accuracy of DR performance calculations. CAISO said there has been “overwhelming” support for the alternative baseline proposal.

CAISO demand response distributed generation — | *CAISO*

The ISO currently relies on a “10-in-10” baseline methodology that works well for many large commercial and industrial customers but not for all customer types, leading to the development of a new approach.

Using the 10-in-10 methodology, the ISO calculates a baseline by examining the 45 days prior to a trade date and finding 10 “like” days in which no DR was required. It then uses hourly average meter data to create a baseline representing a typical load profile, and the resource is paid for reducing usage below the baseline.

Under the new proposal, baselines for residential resources would be based on a four-day weather match that estimates what electricity use would have been in the absence of DR dispatch under similar weather and on similar days, using a control group of similar users.

Commercial baselines would be based on the 10-in-10 method with a 20% adjustment cap, an average of the previous five days and a control group. Baselines are adjusted using actual load data in the hours preceding a DR event to better reflect variables that might not appear in the historical data.

The stakeholder process showed that station power is a retail issue, CAISO said, and listing specific functions for wholesale and retail functions is not the best approach.

“The CAISO believes that it is prudent to simplify the definition of station power to energy for operating the electrical equipment of an energy resource subject to a retail tariff, as defined by the local regulatory authority,” CAISO said. This definition would be consistent across regulatory authorities and avoid conflicts if the California Public Utilities Commission changed its definition of station power.

The ISO is also proposing to expand the list of gas price indices available for use in the calculation of DR benefits. This allows the DR “net benefits test” to recognize Energy Imbalance Market (EIM) entities outside of the state that want to participate as DR in the CAISO market.

The policy issues discovered in the process will affect the EIM if DR or distributed energy resources are used. The EIM Governing Body will review the proposal on July 13 in its advisory role.