Page 1344 – RTO Insider

August 7, 2018

Plentiful Generation Helps ERCOT Meet Extreme Demand

By Tom Kleckner

ERCOT executives said Tuesday that system generation has overperformed during the summer, helping the grid operator meet demand during July’s record heat and loads.

“We saw a real test of the system,” CEO Bill Magness told the ISO’s Board of Directors. “The fleet performed well, and everyone in the market was very aware of what was coming and what we needed to do. It was a good testament to how the participants in the market can perform and how they worked in a stressed situation.”

ERCOT, which manages about 90% of the Texas grid, set a new systemwide peak of 73.3 GW on July 19, breaking the record set in August 2016 by more than 2 GW. Its new weekend demand record of 71.4 GW on July 22 also broke the old mark of 71.1 GW.

All told, demand exceeded the old record during 14 intervals over July 18-23. Demand exceeded 70 GW between July 16 and 24 as a dome of high pressure settled over the state and sent temperatures into triple digits and some heat indexes to about 110 degrees Fahrenheit.

Staff this spring projected a summer peak of 72.97 GW in August.

Having plenty of generation to call on was key, said ERCOT Senior Director of System Operations Dan Woodfin. He noted generation outages in July were “significantly lower” than what the grid operator has historically seen.

ERCOT began the summer with 78.2 GW of available capacity and added 612 MW of gas generation in July. Wind power averaged daily output of 6.6 GW in July, above pre-summer expectations of 4.1 GW.

“The peak day, the 19th, the outages were almost 2,000 MW less than on the peak day last year. We saw that pretty consistently over that period,” Woodfin said. “The cooler weather that we’ve had the last couple of weeks has allowed the units to regroup and fix some things.”

The availability of generation helped minimize tight conditions and keep prices stable. Forward contracts for August delivery reached $239/MWh in May, but they have since fallen back into double digits.

Kenan Ogelman, ERCOT’s vice president of commercial operations, said the operating reserve demand curve (ORDC) has worked as designed. The ORDC creates a real-time price adder reflecting the value of available reserves; it is meant to incentivize resources to produce more energy and reserves.

“The pricing outcomes we’ve seen in the market are associated with expectations,” Ogelman said. “The incentives are also there to put power online, at the times they’re needed.”

He said congestion in the West region, driven by high load growth and combined with the way ERCOT produces load distribution factors, did lead to more than $30 million in uplift costs in June alone. “Wow!” one board member near an open mike exclaimed.

Staff shared operational data from May and June but promised additional information during the board’s October meeting.

“We’re pleased with how it all went, but it’s only Aug. 7,” Magness reminded the board. “We have a lot more August and September to go.”

Below-normal temperatures and rain have helped cool things off over the last week.

“This week has sort of been a dud, and next week won’t be much different,” said the ISO’s senior meteorologist, Chris Coleman. He said “there’s always an opportunity” that extreme heat will return in the next three or four weeks.

August 5, 2018

FERC Rejects Bid to Boost QF Output

By Rich Heidorn Jr.

FERC on Friday rejected CMS Energy’s plan to boost a 60-MW qualifying facility to 263 MW, saying the change is too large to qualify for recertification under the Public Utility Regulatory Policies Act (EL18-123, QF87-481-002).

The company sought to recertify as an existing cogeneration QF its T.E.S. Filer City Station facility in Manistee County, Mich. The facility has two boilers that can burn coal, tire-derived fuel and waste wood and creates 60 MW of electricity that is sold to CMS subsidiary Consumers Energy. It also provides about 50,000 pounds per hour of process steam to the facility’s thermal host, a paper mill owned by Packaging Corporation of America.

FERC qualifying facility QF PURPA — T.E.S. Filer City Station cogeneration facility | *T.E.S. Filer*

CMS proposed replacing the solid fuel boilers with a natural gas-fired combustion turbine and heat recovery boiler to be used with the existing steam turbine that would produce approximately 263 MW of net electrical output while providing the same thermal output to the mill. The company said a smaller turbine and boiler would not provide enough waste heat to efficiently operate the existing steam turbine and serve the mill.

The 2005 Energy Policy Act modified PURPA, requiring that any new cogeneration facility demonstrate that its “thermal energy output … is used in a productive and beneficial manner,” and that its electrical output be used fundamentally for industrial or other permitted uses “and is not intended fundamentally for sale to an electric utility.”

To implement the changes, the commission in Order 671 created a “fundamental use test,” allowing the thermal output from a replacement cogenerator to be considered to be “used in a productive and beneficial manner” if at least 50% of the total energy output (the electric, thermal, chemical and mechanical output) is used for industrial or other permitted purposes.

Order 671 said that an existing QF does not become a new facility “merely because it files for recertification. However, we caution that changes to an existing cogeneration facility could be so great (such as an increase in capacity from 50 MW to 350 MW) that what an applicant is claiming to be an existing facility should, in fact, be considered a ‘new’ cogeneration facility at the same site.”

FERC said CMS’ proposed changes are too significant to qualify for recertification as an existing facility.

“The increase in net capacity from 54 MW to 263 MW constitutes so substantial an increase in capacity that … it cannot be considered the same facility that was previously certified,” the commission ruled. “Rather, the converted facility, as proposed, is a ‘new’ cogeneration facility.”

The commission said CMS had not provided information demonstrating that it meets the fundamental use test. “Accordingly, on the record before us, we cannot certify the facility, if converted as proposed, as a cogeneration QF. T.E.S. Filer is free to file such information with the commission by either submitting a self-certification or applying for a commission certification of QF status.”

Dissent by LaFleur

Commissioner Cheryl LaFleur dissented.

“I do not read [Order 671] as requiring any significant increase in megawatt output to be treated as a change so great as to consider a facility a ‘new cogeneration facility at the same site,’” she said. “The record here shows that the conversion was designed to meet the needs of the thermal host, and that the increased megawatt output is simply a byproduct of meeting that existing need with a modern, efficient gas turbine. I believe those facts are the pertinent ones for determining here whether the changes are ‘so great’ as to warrant denying recertification.”

LaFleur noted that PURPA requires the commission’s rules to encourage cogeneration facilities. “Unfortunately, interpreting Order No. 671 in a manner that requires rejection in this instance may in fact discourage other cogeneration resources from updating and optimizing their systems, for fear of no longer maintaining their QF status. I do not believe that outcome is justified on this record.”

Separately, FERC approved CMS’ request for a declaratory order confirming that its power purchase agreement with Consumers will remain exempt from Federal Power Act Sections 205 and 206 after the PPA is amended to reflect the upgrades to the facility (EL18-124, QF87-481-003). “Assuming for the sake of this discussion that T.E.S. Filer is a QF, sales made pursuant to the PPA, as amended … will continue to be exempt from commission oversight pursuant to FPA Sections 205 and 206.”

August 5, 2018

FERC Rejects MISO Plan for External Capacity Zones

By Amanda Durish Cook

FERC last week rejected MISO’s proposal to create external zones for its annual capacity auction but left the door open for the RTO to submit a revised version of the plan in the future.

Under the proposal, MISO would have altered its Planning Resource Auction to include external resource zones based on neighboring balancing authority areas. In cases of price separation, the RTO would also distribute historical supply arrangement credits from excess auction revenues as a refund to external resources with long-term and consistently used historical supply agreements.

The proposal also included two new external resource subcategories: border external resources and coordinating owner external resources, which would be modeled and priced according to the existing local resource zone with which the resource shared a direct electrical connection. MISO had said that both types of resources are comparable to its internal resources and can meet physical and operational criteria that allow them to continue to be treated as if they were inside a local resource zone. (See MISO Closing in on External Capacity Zones.)

miso ferc external capacity zones — | *MISO*

The RTO had hoped to implement the new external zones by the 2019/20 planning year.

But in its Aug. 2 ruling, the commission took issue with two provisions of the proposal, both introduced in response to a deficiency letter in May (ER18-1173). (See FERC: MISO External Capacity Zone Plan Deficient.)

The first provision would have allowed an external resource bordering more than one local resource zone to choose which zone to participate in during the auction. The second would have permitted holders of evergreen contracts — supply contracts that include extension or renewal options written prior to MISO’s capacity construct — to receive historical supply arrangement credits collected from excess auction revenues to cover price separation. FERC said both provisions were unreasonable.

No Zone Toggle

FERC’s order said it was problematic for MISO to allow resource owners to toggle between zones in search of the best capacity prices.

“MISO’s proposal provides resource owners with new optionality that could lead to uneconomic behavior. For instance, a market participant could decide to move a lower cost capacity resource from one local zone to another in order to increase the likelihood that an affiliated higher-cost capacity resource clears in the local zone from which the capacity resource was moved. The ability to effectively move capacity resources from one local zone to another is not contemplated by the Tariff’s market power and mitigation provisions.”

MISO also proposed allowing internal capacity resources that border more than one local resource zone the option to choose their zone of participation, providing the “same flexibility” as similarly situated border external resources. The RTO said it contains 20 eligible internal resources and only one border external resource, the Joppa Power Plant in southern Illinois, with ties to multiple local zones.

But FERC said that rather than allowing market participants to select local zones, MISO could divide the resource’s capacity credit between the zones it borders using historic or forecasted system flows. The RTO could also propose a new system that determines how capacity credit is assigned to a resource that borders multiple local zones, the commission said.

Evergreen Contracts

FERC also determined that MISO should not make evergreen contract extensions eligible for excess auction revenues, saying the option would “embed inefficiencies into MISO’s resource adequacy construct for an indefinite period of time.”

“LSEs with evergreen contracts could continue to extend those contracts indefinitely to avoid the locational price signal that MISO’s locational resource adequacy construct was designed to provide,” the commission said.

Rejection in Full

FERC said it rejected the filing in full because MISO had instructed it to evaluate the contract as a cohesive whole. In its filing, MISO had said the elements “were created as a complete and balanced package based on discussions and adjustments made during the stakeholder process” and “are intended to be an integrated set of elements to improve MISO’s existing resource adequacy construct and should not be viewed in isolation.”

The RTO plans to discuss the proposal during an Aug. 8 Resource Adequacy Subcommittee meeting.

August 5, 2018

DC Circuit Rejects PJM Tx Cost Allocation Rule

By Rory D. Sweeney

PJM and FERC must reconsider how they allocate the costs of high-voltage transmission projects developed to satisfy individual utilities’ planning criteria, the D.C. Circuit Court of Appeals ruled Friday (17-1040, 17-1041).

Old Dominion Electric Cooperative, Dominion Energy Services and Virginia Electric and Power Co. challenged FERC’s approval of a PJM Tariff revision that resulted in the RTO assigning all the costs for two transmission projects proposed by the companies to the Dominion zone.

Dominion had initiated both projects in July 2013 as part of its FERC Form 715 criteria, which allow utilities to set planning criteria for their zones that go beyond NERC or RTO requirements. At the time, PJM’s rules required that half of the cost of high-voltage projects be assessed on a pro rata basis to all 24 utilities in the RTO based on customer demand, with the remainder allocated to zones based on benefits, as determined by a distribution factor (DFAX) analysis.

Dayton Power & Light objected to using the 50% pro rata allocation for Dominion’s initial Elmont-Cunningham project.

FERC Form 715 cost allocation — | *Dominion*

PJM then proposed a Tariff amendment that would prohibit cost sharing for projects proposed to satisfy TOs’ own planning criteria. FERC initially rejected the proposal, saying it violated Order 1000 and was inconsistent with the commission’s earlier finding that high-voltage transmission lines provide “significant regional benefits that accrue to all members of the PJM transmission system.” (See FERC Rejects PJM Cost Allocation on Dominion Project.)

After a technical conference, however, the commission reversed its decision, ruling that projects such as Elmont-Cunningham belonged in a new category of projects included in the Regional Transmission Expansion Plan for coordination but not selected for cost allocation. The commission then used the amendment to reject regional cost sharing for the Elmont-Cunningham and a subsequent Cunningham-Dooms project. (See FERC Does 180 on Local Tx Cost Allocation in PJM.)

Commissioner Cheryl LaFleur dissented, saying that the commission should preserve regional cost allocation “for certain high-voltage projects, even if those projects are selected solely to address local planning criteria.”

‘Severe Misallocation’ of Costs

The court agreed, saying FERC’s approval of the Tariff change was “arbitrary” and would result in a “severe misallocation of the costs” of high-voltage projects. It noted that the Dominion zone would receive less than 50% of the benefits of each of the two projects.

“FERC’s reasoning would replace a cost-allocation formula about which FERC had expressed no concerns with another one that is less accurate overall, as well as grossly inaccurate with respect to high-voltage projects, in return for no countervailing regulatory benefit,” the court said.

Because FERC has already acknowledged the regional benefits of high-voltage infrastructure, it “could hardly say that trying to distinguish between high- and low-voltage facilities was not worth the trouble.” By holding to a principle of cost causation, “FERC must make some reasonable effort to match costs to benefits,” the court said. “The cost-causation principle focuses on project benefits, not on how particular planning criteria were developed.”

“We fail to see how a categorical refusal to permit any regional cost sharing for an important category of projects conceded to produce significant regional benefits can be reconciled with the background [cost-causation] principle,” the court added. “We are sensitive to the concern, pressed by Dayton and the other amici supporting FERC, that individual utilities should not have free rein to impose unjustified costs on an entire region by unilaterally adopting overly ambitious planning criteria. However, nothing we say here prevents PJM or its member utilities from amending the Tariff, the Operating Agreement or PJM’s own planning criteria to address any problem of prodigal spending, to establish appropriate end-of-life planning criteria or otherwise to limit regional cost sharing — as long as any amendment respects the cost-causation principle.”

The court remanded the three orders back to FERC for further review.

“The legal or economic merit of Dominion’s particular end-of-life planning criteria, and the appropriateness of the Elmont-Cunningham and Cunningham-Dooms projects under those criteria, remain open issues on remand,” the court said.

August 5, 2018

SPP Ramps up Western RC Effort

By Tom Kleckner

OMAHA, Neb. — SPP met last week with Western entities that have expressed interest in its reliability coordinator (RC) services, further evidence the RTO is intent on becoming a serious player in the Western Interconnection.

The grid operator hosted the first meeting of its new Western Interconnection Reliability Coordination Working Group (WIRCWG) Aug. 2 in Westminster, Colo. It said the WIRCWG (suggested pronunciation: work-wig) will eventually become a forum for Western customers and other stakeholders of the RTO’s RC services “to engage in matters of RC-related governance and strategy.”

COO Carl Monroe said SPP hopes WIRCWG’s initial meetings and a “transparent, open-door policy that welcomes questions and concerns from any interested party” will demonstrate “our dependability and customer-focused attitude in the West, where we understand our potential customers may still be feeling us out.”

“SPP has more than 75 years of experience as a regional grid operator, and we’ve built a reputation as a reliable, effective and relationship-based organization among our members, market participants and other contract customers,” he said in a press release.

SPP has already scheduled an Aug. 14-15 meeting at its corporate headquarters in Little Rock, Ark., restricted to entities who have signed a letter of intent (LOI) for RC services. The grid operator says it has received 28 LOIs from Western entities, representing 200 TWh of net energy for load. SPP announced in June that it intends to provide RC services in the Western Interconnection by late 2019. (See Westward Ho: SPP Plans to Become RC in West.)

CEO Nick Brown told stakeholders last week that SPP is intent on establishing agreements with the companies and is following the necessary certification steps “to serve in this capacity.”

“Certainly, we have a good track record of incorporating folks in our RC services,” Brown said, referring to the 2009 and 2014 additions of Nebraska utilities and the Integrated System, respectively. “Our primary goal is to use the expertise we have, and to reach out to other entities and reduce the overall operations costs to our members. We very much expect that to be the case here.”

SPP said that while service agreements are still being negotiated, WIRCWG meetings will help those interested to learn about SPP and have a say in its service offerings in the West. It said 53 attendees were present in Westminster, a number that included members of the RTO’s Operating Reliability Working Group, which met before the WIRCWG meeting. It declined to give a breakdown of the 53 attendees.

Once the group is formally created, future meetings will be posted in advance and it will function like all other SPP working groups, an RTO spokesperson said.

“We’re eager to meet with potential customers, work with them to develop systems and processes to address their distinct needs, and begin a new chapter in the evolution of the power grid in the West,” said Bruce Rew, SPP’s vice president of operations.

With Peak Reliability’s recent decision to end its operations as early as Dec. 31, 2019, SPP and CAISO are now competing to offer RC services across the West. (See Peak Reliability to Wind Down Operations.)

CAISO last month received its first public commitment from an RC customer, the Balancing Authority of Northern California, a joint powers authority that provides balancing services for six California publicly owned utilities, including the Sacramento Municipal Utilities District. (See Most of West Signs up for CAISO RC Services.)

The Western Electricity Coordinating Council, which is responsible for the region’s bulk electric system compliance monitoring and enforcement, has asked its BAs and transmission operators to confirm which RC they will be using by Sept. 4.

SPP is still interested in integrating the Mountain West Transmission Group into its market, work that has been overshadowed by the competition for RC services and Xcel Energy’s April announcement that it was leaving the Rocky Mountain group. The RTO’s executives told stakeholders last month they expect to hear from the remaining participants in September, once they redo their cost-benefit studies.

August 5, 2018

PSEG Earnings, Combined Cycle Fleet Grow in Q2

By Rich Heidorn Jr.

Public Service Enterprise Group announced second-quarter earnings of $269 million ($0.53/share), more than doubling the $109 million ($0.22/share) in profits a year earlier, which were weighed down by costs related to the early retirement of the company’s Hudson and Mercer generating stations.

Operating earnings for the quarter were $325 million ($0.64/share), up modestly from 2017’s $316 million ($0.62/ share).

Public Service Electric and Gas earnings rose 12% year over year thanks to continued investment in transmission and distribution. PSE&G has invested more than $3 billion in electric and gas infrastructure in the past year.

The company recently finished construction of the third and final phase of its $1.2 billion, 345-kV Bergen-Linden Corridor (BLC) project. It was “one of the larger and more complex projects we have built and was finished safely on time and on budget,” CEO Ralph Izzo said on an earnings call Thursday.

Izzo told analysts that the company is not jeopardized by the long-running dispute over cost allocation for the BLC. (See FERC Rethinking DFAX for Stability Tx Projects.)

“The issue is who pays, not whether we get paid,” he said. “So PSE&G will get fully compensated for its transmission investments.”

PSEG projects $14 billion to $18 billion in capital spending through 2022, 90% of which will be on “regulated growth initiatives” at PSE&G, said CFO Daniel Cregg. The spending should support a compound annual growth rate of 8 to 10% over the period, officials said.

The company sees investment opportunities in the legislation signed by New Jersey Gov. Phil Murphy in May that raises its renewable generation targets, boosts storage and offshore wind, and revamps its solar program. PSE&G plans to seek approval of $2.9 billion in investments in energy efficiency, electric vehicle infrastructure and battery storage over six years. It also expects its three New Jersey nuclear plants to receive about $200 million annually under the state’s zero-emission certificates beginning in April 2019. (See Gov. Signs NJ Nuke Subsidy, Renewables Bills.)

New Generation

PSEG Power began commercial operation of its two newest generators in the second quarter, the Keys Energy Center, a 755-MW plant east of Brandywine, Md., and Sewaren 7, a 540-MW generator in Woodbridge, N.J.

pseg combined cycle plants q2 2018 earnings — PSEG’s Keys Energy Center, shown under construction in May 2017. The 755-MW combined cycle plant east of Brandywine, Maryland went into service in early July. | *PSEG*

Sewaren 7 is replacing Units 1, 2, 3 and 4 of its existing Sewaren coal-fired plant, which are being retired after about 70 years of operation.

With the addition of Sewaren and Keys, PSEG will have more than 4,000 MW of combined cycle gas turbines, one-third of its total fleet.

Bridgeport Harbor 5, a 485-MW dual-fuel, combined cycle plant in Connecticut, is expected to go online in mid-2019.

The investments in the three plants “reflect our recognition of the value of opportunistic growth in the power business,” the company said in its quarterly securities filing. “These additions to our fleet both expand our geographic diversity and adjust our fuel mix and are expected to enhance the environmental profile and overall efficiency of Power’s generation fleet.”

Analyst call transcript courtesy of Seeking Alpha.

August 5, 2018

Dominion Earnings up on Power Demand, Tax Cuts

By Rich Heidorn Jr.

Dominion Energy reported earnings of $449 million ($0.69/share) in the second quarter, up from $390 million ($0.62/share) for the same period in 2017, boosted by increased power sales and higher-than-expected benefits from tax cuts.

Excluding one-time rate credits and charges related to plant retirements and other matters, operating earnings for the quarter were $560 million ($0.86/share), above the company’s guidance range of 70 to 80 cents and up 33% from $421 million ($0.67/share) a year earlier.

“Based on the very strong results for the second quarter, we expect to be in the upper half of our 2018 guidance range, and our 2017 to 2020 earnings growth rate remains 6 to 8%,” CFO Mark F. McGettrick said during an earnings call Thursday.

The Power Generation Group had $639 million in cash flow, aided by lower operating and maintenance expenses and favorable weather.

CEO Thomas Farrell said Virginia Power’s weather normalized sales for the first six months of the year were 2.25% above 2017, driven by increasing demand from data centers and residential customers. “Over the past year, we have added over 400 MW of demand capacity across 14 data centers and expect to see continued strong growth,” Farrell said.

Millstone Update

On Wednesday, the Connecticut Department of Energy and Environmental Protection issued its final solicitation for zero-carbon resources after changing terms to allow Dominion to offer its Millstone nuclear plant.

dominion energy earnings data centers — Dominion Energy lineman | *Dominion Energy*

The company submitted Millstone’s financials to the state in May, seeking qualification of the nuclear plant as an “at-risk” resource. “We expect Millstone to be granted at-risk status, which means the bids will be judged on price and non-price attributes, such as carbon, economic impact and fuel security,” Farrell said. Bids are due Sept. 14, with a selection of winners expected by the end of the year.

Farrell noted that the company’s nuclear fleet has been operating for 660 days without an unplanned reactor shutdown, besting the previous record of 339 days set in 2012.

New Resources

The company’s Cove Point LNG export facility entered commercial service early in the second quarter and has loaded more than 60 Bcf of LNG on 19 cargoes.

Dominion’s $1.3 billion 1,588-MW Greensville County (Va.) combined-cycle power station is on budget and 95% complete, with commercial operations expected late this year.

The company will soon seek Virginia regulators’ approval of its proposed Coastal Virginia Offshore Wind project, a 12-MW, two-turbine test project being developed with Orsted, of Denmark.

Analyst call transcript courtesy of Seeking Alpha.

August 5, 2018

CenterPoint Misses Expectations with $75M Loss

CenterPoint Energy on Friday reported a second-quarter loss of $75 million ($0.17/share), compared to a profit of $135 million ($0.31/share) a year earlier. The company’s adjusted earnings of 30 cents/share fell short of Zacks Investment Research expectations of 32 cents.

The quarter’s loss included a pre-tax write down of $242 million to reflect the Houston-based company’s investment in Time Warner. AT&T acquired Time Warner in June, with CenterPoint receiving $53.75 and 1.437 shares of AT&T common stock for each share of Time Warner common stock it held.

CenterPoint endured a morning roller coaster ride Friday on Wall Street before its stock plunged in after-hours trading. After opening at $28.10/share, the stock closed at $27.96 before losing 12 more cents after the closing bell.

CEO Scott Prochazka said during a conference call with financial analysis that the company’s electric, gas and Enable Midstream joint venture businesses performed well, accounting for a 25% increase in revenue to $2.8 billion from 2017’s second quarter.

Prochazka said the company’s $6 billion acquisition of Indiana electric and gas utility Vectren is progressing well. The company expects to close the deal in the first quarter of 2019. (See CenterPoint Energy to Acquire Vectren in $6B Deal.)

CenterPoint Energy — Port of Freeport | *Port of Freeport*

However, Prochazka also said the cost of CenterPoint’s Freeport Master Plan project has more than doubled, from $250 million to $650 million, as a result of “more defined analysis” of infrastructure and environmental-related routing issues. ERCOT approved the project last year to solve reliability issues near the Freeport area south of Houston. (See ERCOT Stakeholders OK $246.7M in Freeport Reliability Projects.)

CenterPoint plans to file a certificate of convenience and necessity with the Texas Public Utility Commission in September.

— Tom Kleckner

August 3, 2018

Forecast Error Prompts CAISO CPM Procurement

By Robert Mullin

A forecasting error is prompting CAISO to procure a large volume of out-of-market resources for September under a special measure not invoked since the emergency shutdown of the San Onofre Nuclear Generating Station in 2012.

CAISO will solicit up to 1,434 MW of resources under its Capacity Procurement Mechanism, stakeholders learned during a call Thursday.

The procurement was prompted by the California Energy Commission’s July 10 publication of a revised load forecast showing the ISO’s balancing area will next month need 1,247 MW more in systemwide resource adequacy (RA) resources than originally projected, plus a 15% planning reserve margin.

Under CAISO’s Tariff, the ISO can invoke CPM in response to a “significant event,” defined as any “substantial event” or “combination of events” that “causes, or threatens to cause, a failure to meet reliability criteria absent the recurring use of a non-resource adequacy resource on a prospective basis.” A load forecasting error qualifies as such an event, Delphine Hou, the ISO’s manager of state regulatory affairs, said during the Aug. 2 call.

The CEC attributed the RA forecast error to its reliance on 2016 — rather than 2017 — energy demand data in its original 2018 monthly forecast. The forecast is provided to both CAISO and the California Public Utilities Commission for RA planning, which is managed by the commission.

The error was discovered because of discrepancies between the CEC forecast and the monthly peak forecast CAISO produces for Western Electricity Coordinating Council planning, which the ISO used this year for its flexible capacity needs assessment. The revised CEC forecast aligns with CAISO’s projections, which had been benchmarked to 2017 load figures.

October a ‘Concern’

While this month’s CPM solicitation will focus only on procuring resources for September, Hou said the ISO will continue to evaluate the need to procure resources for October, which the revised forecast indicates has an even bigger RA need: 5,103 MW. Under CAISO rules, a CPM procurement has an initial term of 30 days, which can be extended by another 60 days if the “significant event” is likely to persist.

Pointing to the much larger October deficiency, NRG Energy Director of Market Affairs Brian Theaker asked, “Can you elaborate on what the ISO will be looking for and what conditions it will impose before making a decision as to whether to CPM for October?”

While October load will be lower, the ISO is “sensitive” to the possible continuation of Santa Ana winds during the month, fire concerns in Southern California and the impact of drought, she said. She also pointed out that some generators may begin entering maintenance outages during that month.

“So we want to at least see how September goes. … It is likely we will extend the significant event through October, but we wanted at minimum to get the word out for September,” Hou said.

“Why are we hearing about [the error] now? It seems like we would’ve had this information back in January,” said Nuo Tang, principal energy policy strategist at San Diego Gas & Electric.

Hou was diplomatic in her response.

“It took some time because we were having a lot of discussions with the CEC and the CPUC about how to think about the difference between the forecasts, and it was eventually recognized that because the original RA forecast seemed somewhat low for September. … Out of an abundance of caution, we really should sunshine this other forecast for CAISO to use under significant events,” she said.

“I think what you’re highlighting is that we don’t vet the system RA forecasts,” leaving CAISO stakeholders unable to compare the forecasts used for system RA and flexible capacity, Tang said. “Would that be a fair characterization?”

“Yes, that is fair, and in fact you pre-empted my very [next] line … which is [that] for future coordination, we’re definitely working very closely with the CEC and CPUC to review the RA forecast for next year,” Hou said.

Credit Where it is Due

Tang also asked why CAISO chose to invoke a CPM significant event instead of relying on exceptional dispatch, a shorter-term out-of-market procurement mechanism.

Hou said that CAISO officials were concerned that if they delayed procuring resources, generators without RA designations could end up selling to other buyers, including those outside the ISO, or go out on maintenance outages.

“What we landed on was that we would prefer to notify the market earlier to get more bids into the competitive solicitation process [in order] to have a deeper pool for the operators to be able to pull from, because this is a system issue. It’s not going to be as a restrictive as a local issue,” she said.

Eric Little, manager of wholesale and GHG market design at Southern California Edison, asked if the ISO would reduce the 1,434-MW procurement if any LSEs show above their minimum RA requirements for the month.

Hou said the ISO had not yet performed that analysis, but that it would credit the system for any LSE overages.

“And then once you do that, when you start to cost allocate, will there be any reduction in bills for those LSEs that showed over, so they’re only getting allocated for their portion of the additional CPM procurement performed by the ISO?” Little asked.

“It would credit against the total required amounts … but it would not be a credit against the cost allocation,” Hou said.

“So all other LSEs get the benefit that the one LSE showed long?” Little asked.

“Yes,” Hou replied.

Resources owners have until Aug. 25 to submit their offers to the ISO. Bidding is open to any RA eligible resources internal to the ISO balancing authority area. External, or “intertie,” resources are excluded from participation.

August 3, 2018

FERC OKs MISO-PJM Double Charge Fix for Pseudo-ties

By Amanda Durish Cook

FERC has allowed MISO and PJM to implement the first of a two-phase fix to remedy the RTOs’ double-charging of congestion fees on pseudo-tied generation.

The commission on Tuesday approved amendments to the RTOs’ joint operating agreement addressing market-to-market (M2M) settlement and day-ahead coordination of pseudo-tie transactions (ER18-136-003, ER18-137-003).

miso pjm targeted market efficiency project tmep — | © *RTO Insider*

Effective Aug. 1, the RTOs will calculate day-ahead LMPs “that reflect the real-time usage of the pseudo-tied resource,” FERC said. To model generator pseudo-tie impacts, the RTOs will calculate flowgate impacts based on amounts offered in the day-ahead market. The two will also modify settlement procedures to account for market flows and associated M2M congestion payments.

Until now, the RTOs have reflected the costs of relieving a binding flowgate in both their LMPs.

FERC agreed with the RTOs that the proposal “represent[s] an improvement over current practices” and will eliminate most of the overlapping congestion charges.

Separately, the commission also approved PJM’s Phase 2 revisions, which will modify its Tariff to provide for rebates for deviations from day-ahead commitments and remove the remaining overlapping congestion charges not addressed by Phase 1 (ER18-1730).

FERC required MISO to make periodic informational filings on the status of its Phase 2 efforts.

MISO and PJM worked throughout 2017 to remove the overlapping congestion charges soon after the first of several complaints about the issue were filed with FERC. (See MISO, PJM Pursue Pseudo-Tie Double-Charge Relief.)

MISO reports 754 MW pseudo-tying into the footprint and about 2,142 MW pseudo-tying out.

Possible Interregional Projects

Meanwhile, the RTOs are working on two studies that could identify both small-scale and large-scale interregional transmission projects.

MISO and PJM are conducting a two-year coordinated system plan study to identify more expensive seams projects called interregional market efficiency projects (IMEPs) and a shorter-term study to identify smaller targeted market efficiency projects (TMEPs). (See MISO, PJM Plan 2 Studies for Seams Projects.)

The windows for submitting interregional project ideas opens Nov. 1 for PJM and Jan. 1 for MISO. Analysis on the project proposals will take place next year. MISO and PJM have yet to approve an IMEP.

At an Aug. 1 Interregional Planning Stakeholder Advisory Committee conference call, MISO and PJM staff said they would be ready to share this year’s TMEP study results during the October IPSAC. PJM interregional engineer Alex Worcester said the two are investigating 19 facilities — down from an original 61 — that have each amassed more than $1 million in congestion charges in 2016 and 2017 combined.

“Very soon here, we’ll be reaching out to the equipment owners of the 19 facilities flagged for further study to identify the limiting equipment and what the potential solutions might be,” Worcester said.

In September, MISO and PJM will begin testing the potential upgrades to see if they solve congestion.