FirstEnergy has reached what CEO Charles Jones called a “big milestone” in its process of unwinding from FirstEnergy Solutions, the bankrupt merchant generator that was until recently a subsidiary.
FirstEnergy’s Akron, Ohio headquarters
The FES bankruptcy settlement is now “definitive, comprehensive” and includes FES, its subsidiaries, FirstEnergy Nuclear Operating Co. and a committee for unsecured creditors, Jones said Wednesday. It builds on agreements FirstEnergy announced in April while reporting its performance for the first quarter. (See FirstEnergy Announces Mixed Earnings, Plan for FES Bankruptcy.)
“This definitive, comprehensive settlement defines and quantifies all of FirstEnergy’s obligations with respect to FES and FENOC,” Jones said.
The Aug. 1 announcement came as part of FirstEnergy’s review of its second-quarter performance, which exceeded both revenue and earnings expectations. The company reported quarterly adjusted earnings of 62 cents/share, which beat expectations by 9 cents, and revenue of $2.7 billion, which was $130 million over projections. Revenue increased $100 million compared to the same quarter last year, while earnings were up 18 cents/share year over year.
The settlement credits FES for nine months of its shared services costs with FirstEnergy and entitles the former subsidiary to continue purchasing the services through June 2020. FirstEnergy also agreed to increase its cash payment and cover costs for some FES employee benefits, which represent $218.5 million in additional costs incurred by FirstEnergy. FES is expected to file the agreement by the end of August as part of its bankruptcy case and to receive approval in September.
While FirstEnergy no longer has any merchant generation assets, Jones maintained his strong advocacy for financial supports for nuclear and coal units, saying that “the market policies in our country have severe flaws” and that he will “continue to be a loud advocate” for changes. Shuttering large-scale plants “is not going to be a good thing for the 6 million customers that I look out for,” he said. Jones said he remains “hopeful” that the U.S. Department of Energy “will eventually step forward to do something to stabilize” those plants.
Entergy accelerated its march towards becoming a “pure play” utility Wednesday, announcing the sale of its Pilgrim and Palisades nuclear power facilities for their accelerated decommissioning.
Financial analysts congratulated Entergy executives on the news during the second-quarter earnings call, where the company announced adjusted earnings of $1.79/share, beating Zack’s consensus estimate of $1.26 by 42%.
Palisades Power Plant | Entergy
CEO Leo Denault said the plants’ sale “solidifies” Entergy’s plans to fully divest itself of three of the four nuclear plants in its Entergy Wholesale Commodities (EWC) business.
Entergy’s share price jumped Wednesday by almost $2 — from $81.03/share at the market’s open to a high of $82.99 — before falling back to close at $81.82.
“This gives us a lot of capital, both financially and operationally, to focus on the growth of the utility,” Denault said.
Earlier this year, Entergy reached an agreement with Vermont state officials to sell its Vermont Yankee plant to NorthStar Group Services, which will handle the decommissioning. The plant was shuttered in 2015. The company is waiting on regulatory approvals to sell the plant’s holding company.
The transaction includes the transfer of the plants’ operating licenses, spent fuel and nuclear decommissioning trusts, to Comprehensive Decommissioning International, a newly formed joint venture between Holtec International and SNC-Lavalin.
Entergy received a “nominal” cash consideration in the deal, which must clear the Nuclear Regulatory Commission and other regulators.
“You could afford it if you could demonstrate the ability to close a nuclear plant,” CFO Drew Marsh told analysts. “The main objective was to move the risk to a party capable of [decommissioning] and doing it much quicker than we can.”
Pilgrim Nuclear Power Station | Entergy
Pilgrim, located in Plymouth, Mass., is scheduled to end operations by June 2019, and Palisades, in Covert, Mich., is to close in early 2022. The two plants date back to the early 1970s. They generate almost 1.5 GW of power between them and employ 1,200 people.
Entergy’s Indian Point nuclear plant in New York will close by 2021, according to an agreement between the company and state officials. Denault said there was “nothing to read” into not including Indian Point in the deal.
The company reported earnings of $245 million ($1.34/share), excluding a one-time tax benefit of 31 cents/share for the settlement of a 2012-2013 IRS audit. That compared to $410 million and $2.27/share a year ago.
EWC reported a loss of $57 million in the quarter. Entergy affirmed its 2018 consolidated operational earnings guidance range of $6.25 to $6.85/share.
FERC on Tuesday rejected NorthWestern Energy’s attempt to limit its liability for service interruptions to an ExxonMobil oil refinery in Montana, saying the provision was discriminatory (ER18-1715).
The utility had attempted to include the limitation in an unexecuted network integration transmission service agreement for ExxonMobil’s Billings refinery, saying it was needed because of the facility’s size, its “sophisticated equipment” that is “particularly sensitive” to loss of power, and that its continuous 24/7 operation lacks a backup power source.
The liability provision stated that neither party would be liable for “consequential, special, indirect or incidental damages whether arising in tort or contract, including a breach or alleged breach” of the agreement.
In 2016, ExxonMobil sued NorthWestern in state court, seeking $92.4 million in damages and lost profits over two power outages at the refinery that the oil company said resulted from NorthWestern’s negligence. The case was settled in December 2017 but terms were not released.
Billings Refinery | ExxonMobil
NorthWestern said the service interruptions — a 96-minute outage in 2014 and a 53-minute outage in 2016 — were caused by faults on its 50-kV radial lines feeding the refinery. It said the outages were triggered by problems on the distribution system of the city of Billings’ sewer plant. ExxonMobil’s suit alleged the utility was negligent because protective relays on its 50-kV lines were not coordinated with the relay system at the sewer plant.
FERC agreed with ExxonMobil that the liability provision was unduly discriminatory because NorthWestern was not seeking to impose such limits on other transmission customers, including three other oil refineries it serves in Montana.
“A transmission provider seeking commission acceptance of a non-conforming agreement bears a high burden to justify and explain that the non-conforming aspects of the agreement are not merely ‘consistent with or superior to’ a pro forma agreement but are necessary,” FERC said.
The commission rejected NorthWestern’s argument that ExxonMobil expected perfect, uninterrupted service. “ExxonMobil’s lawsuit against NorthWestern was not based merely on service interruptions, but the allegation that NorthWestern had ‘negligently failed to exercise reasonable care in designing, constructing, installing, managing, maintaining, inspecting and operating its electrical facilities and equipment,’” the commission said.
The D.C. Circuit Court of Appeals on Tuesday denied a petition by NextEra Energy and other industry players to review FERC orders allowing ISO-NE to exempt a limited volume of state-sponsored renewable resources from its capacity market’s minimum offer price rule.
A three-judge panel concluded that the commission “engaged in reasoned decision-making to find that the renewable exemption to the minimum offer price rule results in a just and reasonable rate” and that “FERC did not abuse its discretion by denying the petitioners’ request for a hearing” (17-1110).
ISO-NE revised its Tariff in 2014 to allow up to 200 MW of qualifying new entrant renewable capacity to be exempt from the MOPR, beginning with the ninth Forward Capacity Auction covering the 2018/19 commitment period. The Tariff change included a carry-over rule allowing any unused portion of the 200 MW to carry forward for two additional auctions, up to a total of 600 MW.
Citing “changing market conditions,” ISO-NE phased out its MOPR exemption in March 2018 while the case was under review.
6 MW Solar Farm in Salisbury, MA | LandVest
Generators argued that the renewable exemption was unjust and unreasonable because it would undermine competitive entry and result in significant price suppression, an argument the commission rejected.
The court sided with FERC. “We defer to the commission’s determination that the renewable exemption effectuates the market’s primary purpose by sending the correct demand signals to new entrants and by protecting consumers from excessive rates.”
Petitioners also argued that the commission’s approval of the MOPR exemption conflicted with a previous decision to reject a categorical exemption to the rule, which was upheld by the D.C. Circuit.
But the court noted that in this case, the commission considered the price suppression associated with the uneconomic entry of a small quantity of renewable resources, rather than a categorical exemption, and in doing so “has performed an updated balancing of competing interests in the New England market.”
The court also found that the commission explained how ISO-NE’s sloped demand curve mitigates the price suppression and why its view on the renewables exemption had evolved.
The commission is not required to show that a previous rate was unjust and unreasonable in order to demonstrate that the revised rate is just and reasonable, the court said.
FERC has considered several MOPR exemptions in other markets, accepting some and rejecting others.
“This type of balancing requires an expert understanding of the market, which is well within the commission’s realm of expertise. We see no reason to disturb the commission’s balancing just because it came out in favor of the renewable exemption despite the potential for price suppression,” the court said.
The petitioners also argued that the commission did not rationally link the magnitude of the exemption to any particular prediction of load growth or retirement. However, FERC explained that the 200-MW exemption was based on the best estimate of expected retirements and load growth, which was “estimated at 189 MW annually, plus an adjustment for the reserve margin required to meet the installed capacity requirement.”
They further contended that FERC inappropriately raised its retirement rationale on remand, that uneconomic entry would continue after retirements are complete and that its experts found price suppression would occur even with retirements.
“But the commission is not required to protect against all price suppression … [and] acted reasonably in concluding that retirements would help mitigate any price suppression,” the court said.
“Accordingly, we defer to the commission’s conclusion that the renewable energy exemption had only a limited potential for price suppression because of the implementation of the sloped demand curve, the prediction of a flatter supply curve, and predicted load growth and retirements.”
By Michael Kuser, Rory D. Sweeney, Amanda Durish Cook and Rich Heidorn Jr.
WASHINGTON — FERC Commissioner Cheryl LaFleur, who has been attending the commission’s annual reliability technical conference since her appointment in 2014, always opens the meeting by citing something special about each year’s gathering.
At Tuesday’s conference, LaFleur noted it has been 50 years since NERC was formed following the 1965 Northeast blackout. “I was practicing piano when the lights went out in Boston,” she recalled.
Issues cited in past years — including cybersecurity and improving NERC’s efficiency — were joined in this year’s hearing by concerns over inverter-based resources, the wind-down of Peak Reliability and the impact of gas shortages on resilience. Commissioner Neil Chatterjee chaired the session for Chairman Kevin McIntyre, who was unable to attend. Chatterjee was joined by LaFleur and Commissioners Robert Powelson and Richard Glick (AD18-11).
It was the FERC debut for new NERC CEO Jim Robb, who joined the organization four months ago from the Western Electricity Coordinating Council. Robb said his initial focus has been implementing the risk-based philosophy that NERC and the Regional Entities (REs) established over the last several years “and really embedding that in all the activities we undertake.”
A second priority, he said, is “consistent implementation” of NERC’s programs across the regions. “It’s clearly a challenge. It’s clearly an issue that industry wants to see us get better at.” He vowed to focus on the big issues and “try not to be distracted by the trivial.”
Time for a Gas Standard?
Robb also described his organization’s work on fuel assurance, the subject of a NERC technical conference in early July. Robb said it is time to shift from recognizing the challenges caused by the increasing reliance on natural gas and identify actions that can “synch” the operating practices of the gas and electric industries to make them “compatible and harmonious.”
“We’re not close-minded to the possibility of a suite of standards, if indeed they’re required. I think at this point in time we haven’t made that leap that we think we need to go to the step of creating a fuel-specific standard — that we can address this through some of the existing processes that we have,” Robb said. “But it’s clear that industry wants more guidance around what they should be studying and what sort of corrective actions they should be contemplating.”
That was exactly the ask of Peter Brandien, ISO-NE’s vice president of system operations. “It would be helpful for us if there was some sort of guideline or something agreed upon by the industry on how to look at energy security and what are the attributes or the pass/fail criteria you should be looking at,” he said.
Glick asked witnesses whether there are sufficient cybersecurity rules for gas pipelines. In June, Glick and Chatterjee penned a joint op-ed calling for mandatory reliability standards for natural gas pipelines like those FERC and NERC enforce on the grid. They noted that Transportation Security Administration has only a half-dozen employees overseeing pipeline security and relies on voluntary cybersecurity standards.
Berkshire Hathaway Energy CEO William Fehrman, who testified for the Edison Electric Institute (EEI), said NERC’s Critical Infrastructure Protection (CIP) standards “were very effective in developing a culture of security” in the industry.
“I do think that similar approaches should be made on gas pipelines. Whether or not there needs to be a standard I think is debatable, but I certainly believe that a similar focus on security and a culture of defensive postures on gas pipelines is appropriate.”
He added, “When we look through our assessments of pipelines, I would say that the vast majority of operators are already well beyond what would be a similar CIP standard. But, nonetheless, there is a good opportunity for further discussion on that matter.”
“I don’t have nearly as much visibility into the mechanics of how the pipeline systems actually operate,” said Robb.
“I’m not in a position to say whether or not the TSA … approach is adequate or not.”
Testifying later, independent consultant Alison Silverstein pointed out that no one from the gas industry was invited to appear on any of the four panels.
Silverstein also challenged the focus on fuel security, saying fuel shortages account for only a tiny portion of outage events. “We have a grid that some of the pieces on it are 70, 100 years old,” Silverstein said. “Today we’re built for ‘Ozzie and Harriet’ weather, and we’re facing ‘Mad Max’ in terms of the magnitude of threats from extreme weather.”
She also urged a focus on reliability measures with proven benefits, “like tree-trimming, the gift that keeps on giving, every season.”
When to Press
LaFleur asked when FERC should press NERC and the industry on new standards, citing a “conservatism” built into NERC’s industry voting mechanism. “Part of our job is to be annoying and push when there’s something” that needs to be addressed, she said citing FERC’s directives on physical security and geomagnetic disturbances.
“That’s a great question,” Robb responded. “I wish I had a crisp answer to it, but I don’t. … I think there’s a little bit of ‘you’ll know it when you see it’ embedded in here.”
Tim Gallagher, CEO of RE ReliabilityFirst, said the answer depends on the pervasiveness and imminence of the threat. “Standards are not in my mind the ideal way to respond to emerging or potential threats. Sometimes the threat or the risk can be addressed quite well outside of the standards process,” he said.
Gallagher cited NERC’s response to the widespread generation failures during the 2014 polar vortex. Afterward, NERC made site visits to willing generators and suggested corrective measures.
“If we had gone down the standards path in that case,” he said, “we would not have been prepared for the next winter. Taking this more aggressive, non-standards approach, we were able to elevate performance — along with working with our RTOs and improvements they made — and the voluntary cooperation of the industry to have much better performance.”
Steven Naumann, Exelon’s vice president of transmission and NERC policy, said the time-consuming standards process is especially ill-suited for responding to cyber threats. “The threat is going to change. We’re dealing with intelligent adversaries … so if we close one door they’re going to look for another.”
RC Function in West
LaFleur asked what FERC should be concerned about regarding Peak Reliability’s plan to cede its role as the Western Interconnection’s reliability coordinator to CAISO and perhaps others.
“The thing to remember about the Western Interconnection is it really works as one integrated machine,” said Robb, noting that radially connected Alberta is an exception. “Having a unified reliability coordinator overseeing that system was very beneficial. One of the issues we deal with in the West is that a problem in the Northwest can manifest itself in New Mexico very, very quickly. So, I think the most important thing, as we shift to a multi-reliability coordinator system in the West, is that the seams agreements and operating protocols between them really recreate that wide area view for the entire interconnection. The most important thing that can happen right now is for the TOPs [transmission operators] and BAs [balancing authorities] in the West to declare where they are going to go so that we know where the seams are.”
Glick asked how CAISO was going to address concerns he’s heard from some entities in the West that CAISO’s role in operating the markets and being the RC could lead to conflicts of interest — an issue that dogged SPP in the past.
“RC services are driven by compliance standards. They’re operational and engineering in nature,” responded Eric Schmitt, CAISO’s vice president of operations. He said CAISO asked potential customers to help it create the framework for the new function.
“We think it honors independence and separation between our … BA reliability function and markets and RC services. Organizationally and process-wise, we’re creating the kind of separation that the customers would like to see. Yes, there’s more discussion to be had around that as we go forward, but we think that was a good start.”
Standardizing Inverter Configurations
Schmitt also called for standardization of the configuration of inverters on renewable generation, citing the ISO’s problem with utility-scale solar tripping offline. (See Solar Inverter Problem Leads CAISO to Boost Reserves.)
“Nobody ever told the inverter owners how to program them,” said Robb. “The good news is industry has been very responsive. I think we’ve solved the problems that we know of. We may find others.”
Robb said NERC expects to begin work in August on two Standard Authorization Requests (SARs) on inverters.
Don’t Attempt to Control the Future
Panelists in the conference’s third session looked to the future and urged the commission not to attempt to control what it looks like.
“I think the way we’ve been thinking about essential reliability services is right on point,” said John Moura, NERC’s director of reliability assessment and system analysis. He cited several examples of recent grid-level issues, such as frequency response, that have been addressed with interaction between NERC and FERC.
Quanta Technology President Damir Novosel, who appeared on behalf of the IEEE Power & Energy Society, said the key is “knowing what we want to accomplish through [performance] standards, then [having] the market that will value what [we] want to accomplish.”
Speaking for the Large Public Power Council, ElectriCities of North Carolina CEO Roy Jones urged the commission to ensure that any resource that can provide the necessary services has access to the market to do so. He called for driving the standardization of storage resources further upstream to manufacturers, where “it’s more efficient to work on it there once so that everything coming down the assembly line has that standard.”
Wabash Valley Power Association CEO Jay Bartlett, who appeared on behalf of the National Rural Electric Cooperative Association, said regulators should first determine the right information to know about new equipment on the system so “that we can effectively model it and ensure that we don’t spend good money after bad, trying to cover parameters that we can’t model with reserves.”
Nicholas Miller, a principal at HickoryLedge, called for standards and market signals that are “outcome-based, not enabling-based,” because “there’s a lot more knobs that can be turned with inverted-based resources than with synchronous machines.”
Peter Gregg, CEO of Ontario’s Independent Electricity System Operator, said managing data is essential for the future.
“If we think about how our systems are becoming more complex, they are only going to become more complex,” he said. “I think our challenge is, how do we better leverage the data that we’re creating … how to actually access, interpret, analyze and use that data.”
Information Sharing
On the final panel, which focused on cybersecurity, NERC Senior Director Bill Lawrence discussed NERC’s plan to expand its Cybersecurity Risk Information Sharing Program (CRISP) to improve information sharing.
“Right now, CRISP covers well over 75% of the meters in the United States. … We have a very good sample set of what’s going in and out of IT networks,” Lawrence said.
But information sharing methods are still limited, he said.
“Whenever we start talking about … automated information sharing, I like to throw ‘HV’ in front of that ― human verified. Right now, we don’t have the trust on any information shared to be able to apply directly to production systems without awareness of the consequences it might have. So, we don’t have machine-to-machine yet,” said Lawrence, adding that the Department of Energy National Laboratories and federal research and development programs are working on trust models “to separate the wheat from the chaff.”
DOE’s Carol Hawk said the National Laboratories are also looking into “containerizing” power system applications so that each is isolated with a decreased chance of being compromised.
Hawk said cybersecurity staff could use the operational nature of the industry itself to protect against attacks. “Here’s an example: Each component in [a] system is designed to perform a very specific, limited function. We have developed technology that will allow the system to deny by default any unexpected cyber activity. … If it’s not expected, don’t allow it,” she explained. Hawk said with the system effectively locked down by only allowing its intended function, it “shrinks the cyberattack surface.” She added that protective relays could use modeling to analyze within four milliseconds whether a command sent by an adversary would destabilize the grid.
“So I see a bright future … because we can use characteristics of that operational environment to protect itself, to automate a response that makes sense,” Hawk said.
Trinity Cyber President Marie O’Neill “Neill” Sciarrone said addressing cybersecurity issues has changed little from her time at the Department of Commerce’s Critical Infrastructure Assurance Office in the early 2000s.
“We were coming out of Y2K and addressing the Code Red [virus], and you realize we’re talking about the same thing today we were talking about in 2000, and that’s sad. And that’s basically where we are,” Sciarrone said. She urged the sharing of more “actionable information.”
“You can share … IP addresses for someone to block, but you’re not giving the context of why or how the threat is evolving or how the threats to their IT systems are making their way to their [operation technology] systems,” she said, adding that it’s “absurd” to prepare for an unnamed adversary.
“When it comes down to it, we all need to admit adversaries have more motivation, more funding, more resources than any of us, and we need to bind together and be very transparent and open about what we’re seeing, how we’re acting, how we’re solving problems, and be as willing as they are to adopt modern technology and to be flexible and to move if we’re going to combat that. Otherwise, we’re fighting with both arms behind our back,” Microsoft’s Matt Rathbun said.
NERC CIP Standards
LaFleur asked whether the NERC CIP standards are sufficient or excessive.
“We hear the standards were just a baseline ― any self-respecting company has gone well beyond that. In other parts, we hear that we are way too restrictive and should be cut back. … [Edison Electric Institute] said we should have a moratorium on standards; there are too many,” she said.
Lincoln Electric System’s Paul Crist said utilities must balance compliance with emerging security threats. He said situations can arise where software vendors become compromised, but removing their software would lead to noncompliance. Crist admitted CIP standards “are probably a struggle for all” and said his company tries to balance the risk of violating compliance with having sufficient incident response capabilities. He noted that some vendors deliberately refuse to offer CIP compliance.
Rathbun said CIP guidance is not clear enough to issue any guarantees an entity will pass an audit.
“I have 78 certifications. CIP is not one of them,” he said.
Dragos’ Ben Miller said the industry’s understanding of threats is limited: “We have anecdotes. We don’t have large data sets. So I think it’s hard from a standards process … to chase the threat.”
After Hawk suggested asset owners may not be able to afford to cover the costs of sophisticated cybersecurity programs, LaFleur said she’s never spoken to a transmission owner who doesn’t have the opportunity to recover cybersecurity costs in rates.
Hawk said the issue of cost may emerge with research and development programs for new technologies.
“If a company is wanting to do something on their system, buy a new package to make it more secure, and they are not able to fund that, we would like to know about that,” LaFleur said. “There are so many things we can’t control, that are not within FERC’s authority. Utility rates are one of the things we actually do.”
SCANA stockholders on Tuesday overwhelmingly approved the company’s sale to Dominion Energy, moving the deal one step closer to completion.
South Carolina Electric & Gas would become part of Dominion under a deal approved by SCANA shareholders Tuesday. | SCANA
In a vote taken at a special meeting, shareholders voted 72% in favor of the sale, more than the two-thirds required for approval.
The sale now has only three more major hurdles to clear: authorizations by South Carolina and North Carolina regulators as well as the Nuclear Regulatory Commission.
FERC and the Georgia Public Service Commission have already approved the deal, and the Federal Trade Commission has indicated it won’t try to block it on antitrust grounds.
SCANA shareholders also voted against paying severance packages to SCANA executives if they are let go after the sale is completed, but that vote is non-binding. SCANA has set aside $110 million in severance for its executives, attorneys for the South Carolina legislature said Monday.
If approved, the deal would be a stock-for-stock transaction with Dominion paying two-thirds of a share of its stock for each SCANA share it acquires. At Dominion’s Tuesday closing price of $71.71, the company would be paying $6.83 billion for SCANA.
SCANA became an acquisition target due to its failed attempt to expand the V.C. Summer Nuclear Station in Fairfield County. S.C. It and Santee Cooper, a utility owned by the state of South Carolina, gave up on the expansion last summer after spending $9 billion on it over a decade.
A failed attempt to expand the V.C. Summer Nuclear Station led SCANA into Dominion’s arms. | SCANA
If the deal were to go through, it would give Dominion 6.5 million regulated electric customer accounts, 31.4 GW of generation capacity and 93,600 miles of electric transmission and distribution lines.
The deal is controversial, in large part because customers of SCANA’s South Carolina Electric & Gas subsidiary have already been charged more than $2 billion for the failed expansion and continue to pay about $27 a month for it.
South Carolina passed a bill that would roll back most of the payment, but SCANA is challenging its constitutionality.
MISO’s proposal to put time limits on its alternative dispute resolution process with RTO members is still missing key details, FERC said Monday.
In a deficiency letter issued July 30, the commission asked MISO for multiple specifics on its plan to set limits on the amount of time MISO members have to initiate alternative dispute resolution measures with the RTO over market settlements (ER18-1648).
MISO’s alternative dispute resolution process is used in place of a lawsuit or FERC complaint when parties seek to negotiate contractual disputes over settlements. The RTO’s current Tariff doesn’t contain provisions that “categorically bar settlement disputes raised after a long time,” according to MISO.
MISO has proposed giving members a limit of 90 days to request either an informal or formal alternative dispute resolution and 120 days for MISO and members to resolve settlement disputes. MISO itself would have two years from the operating day in question to make resettlement corrections. Resettlement outside of the two-year cutoff would require MISO and the participant to seek a Tariff waiver with FERC.
MISO’s May Tariff filing provided for a two-year limit for adjustment of “any billing, invoice or settlement statement with respect to any transmission service under the Tariff” and “any settlement statement with respect to any market activity or other service under the Tariff” involving “a system or software error of the transmission provider.”
But FERC has asked MISO to define the terms “system error” and “software error.” It has also ordered MISO to define the meaning of “readily discoverable, one-time MISO errors” and asked if the RTO foresees any short-term errors that are not “readily discoverable.”
The commission is also requiring MISO to clear up when the 90-day timeframe begins and if an “extended delay in the resolution of a settlement dispute or [an alternative dispute resolution] dispute by MISO” could possibly limit the resettlement of incorrect billings under the two-year limit.
FERC also inquired about a hypothetical situation raised by MidAmerican Energy in its comments on the proposal , which said that MISO could violate its two-year correction deadline if a months-long error is discovered and the resettlement period needs to extend to before the operating day or invoice date in question. FERC asked if MISO planned to file an amendment to allow for resettlement for more than two years for such a scenario.
FERC also questioned language in the proposal saying MISO “may make an appropriate adjustment” in “cases involving a system or software error of the transmission provider.”
“The word ‘may’ suggests that MISO is under no obligation to make the ‘appropriate adjustment’ even if a system or software error results in a Tariff customer paying an incorrect amount. Please explain why it is appropriate for MISO to have this discretion,” FERC said.
Lastly, the commission ordered MISO to clarify whether the alternative dispute resolution will apply to both market settlement disputes and transmission service disputes. FERC said certain sections of the proposal indicated it would apply only to market settlement disputes.
MISO lengthened the cutoff periods from the original proposal after stakeholders earlier this year expressed concerns they would need longer than 30 days to research and raise settlement disputes and longer than one year to make settlement corrections. (See MISO Considering Time Limits on Dispute Resolution.) MISO did not propose to place a dollar limit on resettlements. The RTO was aiming to have the deadlines imposed in July.
NextEra Energy Resources last week announced that it will close the 615-MW Duane Arnold Energy Center, Iowa’s only nuclear power plant, five years earlier than expected as a result of a buyout agreement with Alliant Energy.
Florida-based NextEra said that Alliant, the plant’s largest customer, will pay $110 million to NextEra in September 2020 to cover the last five years of their power purchase agreement. Alliant will instead buy 340 MW of power from four wind farms that NextEra plans spend $250 million to repower, part of a $650 million package of investments in Iowa renewables.
The deal is contingent upon Alliant getting approval from the Iowa Utilities Board to recover the buyout payment from ratepayers. Alliant said the deal will save its customers nearly $300 million over 21 years beginning in 2021.
NextEra plans to close the Duane Arnold Energy Center in 2020. | NextEra
“Partially replacing energy from Duane Arnold with NextEra’s additional wind investments in Iowa will bring significant economic benefits to our customers,” Alliant CEO Patricia Kempling said in a statement.
NextEra said it expects to gradually reduce staff at the plant, which employs 500 now, over the next seven years as it decommissions it. It also said it is evaluating redevelopment opportunities for the plant site, including new solar energy, battery storage or natural gas facilities.
Duane Arnold is one of numerous nuclear power plants experiencing economic difficulties because of cheap natural gas and falling renewable generation costs. Bloomberg New Energy Finance Analyst Nicholas Steckler said in May that 24 of the 66 nuclear plants operating in the U.S. were either scheduled to close or wouldn’t make money through 2021.
FERC last week granted GridLiance West incentive rate treatments for upgrades to a Nevada transmission line that connects to the CAISO grid, but it also ordered that the project’s overall 10.6% return on equity be subject to settlement judge procedures (ER18-1693).
The commission approved full recovery of GridLiance’s “prudently incurred” costs for its investment in upgrading the 14-mile, 230-kV Bob-Mead line if the project is abandoned for reasons outside the company’s control, as well as a 100% full “construction work in progress” incentive. FERC also granted the company a 50-basis-point “transco” adder made available to independent transmission developers.
GridLiance last year acquired Valley Electric Association’s 230-kV network in a deal valued at about $200 million, providing the company with 164 miles of transmission between CAISO and the interior West. (See GridLiance Gets OK to Acquire Valley Electric Tx Assets.)
The Six Cities group of Southern California public utilities protested inclusion of the adder, contending GridLiance had requested it just four months after reaching a settlement allowing for an overall 10.1% overall ROE, which included a 50-basis-point RTO participation adder.
Six Cities argued there was “overlapping justification” for the company’s prior request for a regulatory asset incentive (coupled with the RTO adder) and its current request for the transco adder because the latter “is designed to recognize the business model-related benefits provided by independent transmission companies,” similar to the rationale for the regulatory asset incentive already granted to GridLiance, the commission noted in its order.
But the commission rebuffed that contention, saying the functions of the transco adder and the regulatory asset incentive differ, and that it was “not persuaded that they rely upon overlapping justifications.”
“As an independent transco, GridLiance West satisfies the requirements for the transco adder. In contrast, the commission granted GridLiance West the regulatory asset incentive based upon a determination that GridLiance West had demonstrated that its request for that incentive satisfied the nexus test established in Order No. 679,” the commission said.
FERC also rejected as beyond the scope of the proceeding Six Cities’ request that GridLiance be ordered to disclose all authorized incentive adders in future transmission development proposals to CAISO because the adders could have a “material impact” on transmission projects in the ISO.
But while the commission favored GridLiance’s request for the adders, it also said its preliminary analysis indicated the overall 10.6% ROE for the Bob-Mead project might be too generous.
“Based on the record in this proceeding, the commission does not have a basis for determining whether GridLiance West’s overall ROE, inclusive of the transco adder granted above, falls within the zone of reasonableness,” FERC said in ordering settlement procedures.
MISO issued two maximum generation alerts and conservative operations declarations because of severe weather in June and a heatwave in July.
Both months were hotter than normal, and MISO recommended suspending transmission and generation maintenance in the North and Central portions of its Midwest region on July 5, when temperatures and loads were both above forecasts. The RTO said its system was stable throughout the event.
MISO spokesperson Mark Brown said staff coordinated closely with members and neighboring system operators during the event to manage generation and transmission resources. “MISO and our members train regularly and intensively to manage the power system in all types of conditions,” Brown told RTO Insider, adding that the alerts are meant to provide “situational awareness” to members.
The RTO also declared a hot weather alert for MISO South July 20-23 when the average temperature was 99 degrees Fahrenheit.
MISO Senior Director of Systemwide Operations Rob Benbow also said the system performed well during June despite above-normal temperatures and severe weather in the South region.
“We did see some hot weather alerts in the Central and North regions … at the middle to the end of the month, and we also experienced a transmission system emergency due to a forced outage in the South region in the early part of June, and that was followed by conservative ops and a max gen alert on the following day until that facility was returned to service,” Benbow said during a July 24 Informational Forum.
The day after severe weather on June 3, MISO declared a transmission system emergency in South with a maximum generation alert and conservative operations instructions. Benbow said the event caused real-time price spikes.
MISO’s June load peaked at 121 GW on June 29, up about 10 GW from last June’s peak. Average load was just under 77 GW, up 7 GW from a year earlier. Average real-time energy prices were $31.74/MWh, up 13%, which MISO attributed to localized congestion and higher demand.
MISO Reviewing Hartburg-Sabine Proposals
MISO has received multiple proposals for its second competitively bid transmission project, but it will not reveal the number of companies behind the proposals for at least another month — if at all.
The second request for proposals for the Hartburg-Sabine 500-kV junction project closed July 20, part of MISO’s 2017 Transmission Expansion Plan. The project will be in service by 2023 and is meant to alleviate system congestion in eastern Texas. The RTO opened the submittal window in early February.
However, MISO only identifies the number of proposals and their submitters once they’ve been judged and accepted as complete during an initial review expected to wrap up in early September, CEO John Bear said. The RTO will then post a list of finalists advancing to the evaluation process. Incomplete proposals are not revealed.
“MISO is pleased with the robust number of responses to the request for proposals,” Aubrey Johnson, executive director of competitive transmission, said in a statement. “This shows broad interest from qualified transmission developers and underscores the confidence in our competitive selection process. We look forward to moving to the next phase of the selection process to identify the best proposal for this important project.”
MISO plans to announce its selected developer for the project by Dec. 31. Bear said the project is expected to cost $129 million and have a benefit-to-cost ratio of 1.35:1. He added that it is the RTO’s first competitive project to include a substation.
