Page 1348 – RTO Insider

February 13, 2017

CAISO Takes First Stab at Defining Frequency Response Market

By Robert Mullin

CAISO’s first pass at soliciting stakeholder input on its primary frequency response product initiative generated a wide-ranging discussion about an obscure but increasingly important aspect of the ISO’s operations.

“We know that [primary frequency response] is important to your fundamental role as a balancing authority, and currently there are no financial incentives to provide this critical service,” Alex Morris, director of policy and regulatory affairs at the California Energy Storage Association (CESA), said during a Feb. 9 presentation to a stakeholder working group convened to lay the foundation for a market proposal.

caiso frequency response — CAISO is seeking to develop a market mechanism to compensate resources for responding to frequency dips during the “primary” control horizon — just moments after the onset of the event.

“And I don’t mean to be trite, but what we’re seeing from the data is that it’s no longer workable to assume the primary frequency response service will be provided — quote — ‘for free,’” he added.

Inertial Response

By “free,” Morris was referring to the fact that grid operators have benefited from the “inertial” frequency response capability inherent in the operation of most conventional generators, which can automatically vary their turbines’ rotational speed and output based on the pull of load, functioning as a damper for frequency excursions on the grid.

Nonconventional technologies such as wind and solar resources have little or no inertial response to momentary changes on the grid. Late last year, FERC proposed revising pro forma generator interconnection agreements to require all newly interconnecting facilities, including renewable generators, to have primary frequency response capability (RM16-6). (See FERC: Renewables Must Provide Frequency Response.)

“It’s probably been great that for many decades [frequency response] came along as part of the generation fleet for free and that’s how it worked, but unfortunately we’re in a different era with a different grid and we need to wrestle with this problem,” Morris said.

NERC reliability standard BAL-003-1.1, which was phased in between November 2015 and last April, requires each balancing authority area (BAA) to carry sufficient capability to respond to a frequency event. Meeting that requirement will become increasingly difficult as California’s 50%-by-2030 renewable portfolio standard drives increased penetration of renewable resources.

The NERC rule requires BAAs to respond to a deviation within about 20 to 52 seconds of occurrence. That rapid reaction requires a resource to automatically detect under-frequency and autonomously ramp its output without receiving a market signal or manual instructions from the ISO.

Procurement Needed

An issue paper published by CAISO in December laid out the ISO’s deteriorating frequency response performance in recent years and raised the alarm of further declines. (See CAISO Seeks Primary Frequency Response Market.)

“Without explicit procurement of primary frequency response, the ISO cannot position our fleet in a way that will provide sufficient frequency response,” said Cathleen Colbert, senior market design and regulatory policy developer at CAISO. “We need to also mitigate the risk of noncompliance” with the NERC standard.

For the current compliance period, the ISO issued a competitive solicitation to external BAAs to essentially procure an adjustment on its frequency response reporting. (See FERC Accepts CAISO Contracts for Imported Frequency Response.)

“We’re concerned about continuing to rely solely on procuring this adjustment in the long term,” Colbert said. Instead, CAISO seeks to provide internal generators with the ability to compete against external BAAs to provide the service.

In his presentation to the working group, Morris sketched out a preliminary proposal in which the ISO would develop a product that would incentivize frequency response capability and performance while compensating resources for their opportunity costs — for example, forgone energy market revenues.

Under the plan, the CAISO day-ahead and real-time markets would solve for current constraints and products while also reserving capacity from resources capable of providing primary frequency response. The market would compensate those resources for the service, as well as the energy injected during a frequency deviation event, similar to the energy settlement for regulation service resources that follow a dispatch order.

Regulation Service

“I thought that regulation was simply a zero-energy service,” said Mark Smith, vice president of government and regulatory affairs at Calpine.

George Angelidis, a principal at CAISO, explained that the energy a regulation service provider gives and takes from the grid should, in theory, sum up to zero, which is why regulation is considered a control service rather than an energy service.

“But there’s a capacity behind it, and through the energy provision, you provide the control service, but the expectation is that over a long period of time it’s more or less a zero-energy service,” Angelidis said.

“The general high-level view is that this resource is sitting at the ready — [and] frequency drops,” Morris continued. “The resource autonomously bursts out energy to provide the primary frequency response. In so doing, it’s giving energy to the grid. It may be appropriate to compensate [the resource] for the energy it gave to the grid.”

Biddable or Not?

Morris acknowledged that he avoided taking a position on whether frequency response provision should be biddable in the market on a standalone basis.

“I think as long as it’s being solved for inside the market — it’s co-optimized among the many other constraints in the market — then the opportunity cost of providing this service is then reflected,” Morris said. “So there would be some element of payment for providing this service, whether that’s just an opportunity cost, if any, or not.”

Jan Strack of San Diego Gas & Electric questioned the effectiveness of a “non-biddable” solution.

“The issue is, if you don’t have a bid, I think the market has no ability to select,” Strack said. “Which [resource] would it select? There’s no way to know. So I think you inevitably end up with a capacity offer situation just like you do with regulation.”

“I hear you,” Morris responded. “But I also think just the information about the energy costs will inform the optimization, similar to how with the [CAISO] flexible ramping product you can bid your flexible ramping capability for zero dollars, but you also have an energy bid, so [the market] knows if you have an opportunity cost.”

Smith wondered whether a generator that did not receive an award would be allowed to disable its frequency response capability, as it would automatically respond to an event.

“Basically, we make sure that you provide the service all the time, but if while you provide the service you suffer a lost opportunity cost for it, then you will be compensated adequately for it,” Angelidis said, adding that disabling that capability could run “contrary” to a generator’s interconnection agreement.

In comments filed with CAISO, Seattle City Light — which currently provides the ISO with transferred frequency response under a yearlong contract — said it hoped the ISO would develop a market mechanism that would allow transferred capability to compete with internal resources.

Mike Benn, energy trade policy analyst at Powerex, backed up City Light’s position.

“We’re supportive of what CESA said to co-optimize the procurement of frequency response in real time, but we think there would be a gap there and we’d like a forward procurement mechanism as well, similar to the [resource adequacy] construct,” Benn said. “So you could go out and procure on a year-ahead basis, and then they could procure from internal [resources], or they could also go and procure from external BAs.”

The “gap,” according to Benn, stems from the fact that short-term procurement of frequency response won’t guarantee resources will be available on a given day and might be insufficient to spur development.

“The transferred response from external BAs is a yearly product,” Benn said. “So in that way, when you get to real time, you’ve guaranteed that the resources are available.”

Benn pointed out that the absence of a forward procurement option would exclude the participation of external resources because NERC’s frequency response reporting requirement is based on an annual obligation that cannot be transferred on a daily basis. FERC recognized this fact on Feb. 2, when it approved the terms of CAISO’s transferred frequency response contracts with City Light and the Bonneville Power Administration. (See FERC OKs CAISO Frequency Response Contract Terms.)

“I think the two processes — a market mechanism and a transferred frequency response mechanism — aren’t mutually exclusive, and it’s probably good to think about them in that sense,” said Andrew Ulmer, CAISO director of federal regulatory affairs. “From a relatively non-engineering, non-market design perspective, I think of both as insurance mechanisms.”

CAISO has asked stakeholders to submit comments on the primary frequency response initiative by Feb. 23. A second working group meeting on the issue will be held on a date yet to be determined.

February 13, 2017

Southwest Power Pool Briefs

SPP will juggle a number of studies and reviews with its seams neighbors this year, following a 2016 filled with “lots of good stakeholder engagement.”

Adam Bell, SPP’s interregional coordinator, told the Seams Steering Committee last week the major effort could come with MISO. Besides the usual joint studies and regional reviews, the two RTOs could engage in a targeted market efficiency project (TMEP) study, similar to that between MISO and PJM. (See MISO-PJM TMEP Projects Drop to Five.)

Bell said he was not certain whether it would be separate from the joint study already planned for 2017 or rolled into it.

“We’re still talking about it,” he said.

SPP and MISO are already working on a targeted coordinated system plan (CSP) that is considering seven potential projects. If the two RTOs agree to move forward on any of the projects, SPP would conduct a separate evaluation allowing stakeholders and the Board of Directors to verify benefits and costs for the RTO. If none of the seven projects moves forward, the RTOs’ staffs will use the CSP results as an input into the 2017 joint study. (See SPP-MISO IPSAC Turns Attention to 2017 Study.)

Bell said the joint study will begin in April and will be “a pretty lengthy process. … We both agreed to a broader, much more comprehensive look following the 2016 study.”

The two RTOs will discuss that during their next Interregional Planning Stakeholder Advisory Committee meeting March 9 in Metairie, La.

SPP and Associated Electric Cooperative Inc. wrapped their joint CSP in January, identifying two projects near Springfield, Mo.: a 50-MVAR reactor at Springfield’s 345-kV Brookline substation, and a new 345/161-kV transformer at an AECI substation and an uprate of a related 161-kV line.

The SPP Board of Directors and Markets and Operations Policy Committee both approved the project in January, but it must still go through a regional review.

SPP also meets twice a year with Southeastern Regional Transmission Planning process representatives. The organizations review their regional planning processes, determine whether a study is needed and, toward the end of the year, exchange data.

M2M Report

Staff’s monthly market-to-market report showed MISO piled up its third biggest month yet of M2M payments to SPP in December, with 444 hours of binding resulting in a $1.98 million payment to its neighbor. Temporary flowgates again accounted for most of the payments, with 128 binding hours costing $1.65 million.

MISO has made $14.2 million in M2M payments since the two RTOs began the process in March 2015.

New Representatives Welcomed

The Seams Steering Committee welcomed two new representatives: Nebraska Public Power District’s Dustin Betz and Empire District Electric’s Tina Gaines.

Engineering Dept. Modernizes 2017 ITP 10-Year Report

SPP is using a new medium to explain its Integrated Transmission Planning (ITP) process: a web-based application summarizing a 200-page technical report with appealing graphics and less industry jargon.

Director Antoine Lucas and his transmission planning group developed the 2017 ITP10 story map to simplify the 2017 10-year assessment, which was presented to the MOPC and the board in January. Titled “Strengthening the Grid,” it has been viewed almost 700 times since being published just before the Jan. 31 board meeting.

“We have a diverse audience of stakeholders, ratepayers and regulators,” said Lanny Nickell, vice president of engineering. “It’s crucial that we present the information on which they base their decisions in a way everyone can fully understand and appreciate, especially as our studies become increasingly more comprehensive and complex.”

A team of SPP geographic information systems experts and analysts used the Environmental Systems Research Institute’s Story Maps application to produce a contemporary web design with industry mapping tools already used to visualize Bulk Electric System components. Engineering and communications staff worked together to distill the 2017 ITP10’s assumptions, approach and conclusions.

SPP Sets New Winter Generation Mark

SPP set another record for wind generation Feb. 9 when the footprint produced 13,342 MW of energy, smashing the previous record by more than 1,000 MW. The mark came at 9:34 p.m.

It was SPP’s first wind record for 2017. It established six peaks last year, the last coming Dec. 30 at 12,336 MW.

— Tom Kleckner

February 13, 2017

Texas PUC Delays Assignment of LPL Study Costs

By Tom Kleckner

The Public Utility Commission of Texas last week granted Lubbock Power & Light’s request to delay a decision on who will pay for studies related to the municipality’s planned move to the ERCOT grid.

Texas PUC Chair Donna Nelson | © *RTO Insider*

In a letter to the commission, LP&L asked that the assignment of study costs be held until ERCOT and SPP can finish separate cost-benefit studies on the potential move (Project 45633). The municipality said the two grid operators have not agreed on a common assumption for gas prices, “a key variable,” and said that the studies will indicate “the extent to which the LP&L integration into ERCOT would benefit customers in both systems.”

“Deciding who should pay the cost of the studies now, in the absence of that information, would mean assigning the cost of the studies to LP&L before it is known whether consumers in SPP and ERCOT would benefit from the transition,” LP&L said.

“I’m OK with waiting,” said Chair Donna Nelson during the PUC’s Thursday open meeting, echoing the position of the other two commissioners.

LP&L announced in September 2015 it planned to disconnect 430 MW of its load from SPP and join ERCOT in June 2019. An ERCOT analysis completed last June indicated it will cost $364 million and take 141 miles of new 345-kV rights of way to incorporate LP&L into the Texas grid. Both ERCOT and SPP are currently conducting separate studies on their systems with and without LP&L’s load. (See Texas PUC OKs ERCOT, SPP Studies on Lubbock Move.)

The utility, which plans to conduct its own study, said it “continues to expect that, on a net basis, the system transition that LP&L seeks will present quantifiable benefits to consumers in both the SPP and ERCOT systems.”

In a separate letter to the PUC laying out their respective study scopes, ERCOT and SPP estimated the combined analyses would cost between $225,000 and $255,000. The grid operators said they have assigned internal project codes to track the hours incurred for the studies and promised a final accounting to the commission.

Commissioner Ken Anderson noted SPP planned to perform its production-cost analysis with and without forced generation outages, but ERCOT would do so without taking the outages into account. Asked what the likely variance would be, ERCOT Senior Director of System Planning Warren Lasher said he didn’t think it would be a “game-changer.”

“You will be able to look at the two results and be able to see the difference, but often, it’s not going to change your decision,” Lasher said. “ERCOT doesn’t do this because it is complicated to do. You need to have very accurate data regarding outage rates, which is something we’ve had significant difficulty getting from market participants.”

Lasher said the difference in outage-rate data may also be “a function of the different market designs we have in the SPP region and the ERCOT region.”

The grid operators’ studies are expected to be completed by midyear.

Hand-Held Devices Allowed to Enroll Retail Customers

The commissioners adopted a change to the PUC’s administrative rules that will allow retail electric providers (REPs) to use laptops, tablets, smart phones and other hand-held devices to enroll customers (Project 45625).

The rulemaking came with a warning, however. “I’m going to be watching,” Nelson said.

The PUC chair added language that requires the REPs to “accurately and truthfully answer any questions” when giving customers an opportunity to review the enrollment documents.

“To the extent we get complaints about this, it’s not going to be something we look on favorably,” she said. “We want to make sure the customers get what they need.”

SPS Details Winter Storm Restoration Effort

Southwestern Public Service briefed the PUC on its recovery efforts following January’s winter storm, which left 58,000 of its customers in the Texas Panhandle without service and damaged 7,500 poles and other structures.

ercot texas puc lpl study costs — Transmission lines after the January 2017 Ice Storm | *SPS*

Evan Evans, SPS’ regional vice president of rates and regulatory affairs, said the company was prepared for the storm and its forecast of one-tenth of an inch of ice. The storm began with rain Jan. 13, transitioning into freezing rain and bitter cold through Jan. 15 that resulted in up to 3 inches of ice in some areas.

“It was a major ice storm … the worst residents said they had seen in over 50 years,” Evans said.

SPS used almost 1,100 employees, contractors and mutual aid partners to restore service to all its customers by Jan. 23. Evans said cellphone communication problems and waiting on electricians to repair damage on the customers’ lines and meters slowed the restoration effort.

Evans said the company upgraded its infrastructure standards in 2014 and will look for ways to improve its communications and further harden its facilities. He pointed out some neighboring utility customers are still waiting for service that may still be a week or two away.

“Your team did a tremendous amount of work in very dangerous conditions,” Commissioner Brandy Marty Marquez said.

“I’m amazed that you have people that have been out [of power] for seven days asking us if we were OK,” Evans said. “They see us working around the clock.”

Fines Approved, Cybersecurity Program OK’d

The commission’s consent agenda included approval of fines against Luminant Energy and Oncor Electric Delivery, once sister companies under bankrupt Energy Future Holdings.

Luminant agreed to an administrative penalty of $170,000 for not updating its ancillary service schedules 11 times in 2015 after ERCOT issued instructions to do so (Docket 46724). Oncor agreed to a $288,500 penalty for falling short of benchmarks on the length and frequency of outages for 2015 (Docket 46733).

The PUC also gave Executive Director Brian Lloyd the authority to negotiate and implement a contract to develop “a comprehensive cybersecurity and physical security outreach program” for Texas utilities, cooperatives and municipalities (Docket 46773).

February 13, 2017

PJM Making Cost Consciousness a Focus for RTEP Redesign

By Rory D. Sweeney

VALLEY FORGE, Pa. — PJM has made several changes to its proposed planning process for competitive transmission projects in response to stakeholder feedback, staff said Friday.

At a special Planning Committee meeting on redesigning the Regional Transmission Expansion Plan and the Transmission Expansion Advisory Committee, PJM’s Fran Barrett said the RTEP “is not just about [FERC] Order 1000.”

“The RTEP has been in service for 18 years. It’s served us well, but the market is changing,” Barrett explained. “We have heard you. [The redesign] is not just going to be about technology. It’s going to be about timing; it’s going to be about interactions.” (See PJM Proposal Would Lengthen Reliability RTEP Cycle.)

The changes would be detailed in a proposed Manual 14F. Among the changes is considering cost containment in the project selection phase, the details of which have not been finalized. “At this point, we have not made an effort to [separately] define ‘cost cap’ and ‘cost-containment mechanism,’” PJM’s Mike Herman said.

Alex Stern of Public Service Electric and Gas cautioned against creating a “race to the bottom” by selecting projects for having the lowest cost cap.

GT Power Group’s Dave Pratzon asked how the evaluation standards will be applied to what he called “squishy” situations, where the costs and benefits of a proposal might not be straightforward.

“How incidental a failure in PJM’s initial study does someone have to have before” the project is rejected? he asked.

Herman agreed that more consideration could be applied to the issue but said the manual can’t anticipate all possible situations. “I think we could get into lots of detailed discussions about ‘odd’ situations,” he said.

Proposed changes to the workflow diagram include:

Removing supplemental projects as a criteria driver, a response to stakeholders who said such projects don’t fit with market efficiency projects and should have their own diagram;
Including a footnote that explains how public-policy decisions factor into the public-policy criteria driver;
Adding “evaluation of impacts on other projects” into PJM’s factors for consideration, with a focus on whether the proposal alleviates the need for a supplemental or previously approved baseline project; and
Moving “stakeholder review” from the TEAC recommendation phase to one of the factors for consideration, to emphasize the importance of ongoing stakeholder feedback.

Stern reiterated his suggestion that the manual be limited to market efficiency projects.

“I’m not intending that we stop the discussions on reliability. In my mind, that’s going to take longer,” said Stern, who offered his own edits to the proposed manual.

“We thought there were a lot of similarities [between reliability and market efficiency projects] both on the front end and on the back end,” Herman said. “They still fall within the same decisional thinking process. … We felt it made most sense to put it all together in one manual.”

PJM RTEP redesign Market Efficiency Projects — Decisional Process Map | *PJM*

“We think it’s prudent to put the language together so you can see the differences,” Barrett added.

Other stakeholders agreed they preferred a single document. “That kind of leans me back toward ‘Let’s do this all together,’” PJM Public Power Coalition’s Carl Johnson said.

“Can I just say ‘what Carl said,’ or do I have to repeat it?” Calpine’s David “Scarp” Scarpignato said.

FirstEnergy’s John Syner also leaned toward a single manual, but he said incumbents should be given “brownie points” such as basis points for their longevity and reliability.

“I don’t know how you can put a manual together and be able to give all of those ‘brownie points,’” he said, adding that it likely will need to occur during transmission owner prequalification and would require a Tariff change.

February 10, 2017

EEI Pledges to Fight Elimination of Tax Deductions

By Rich Heidorn Jr.

NEW YORK — Investor-owned utilities will fight any tax overhaul that doesn’t preserve deductions for interest and property taxes, the head of the Edison Electric Institute told Wall Street analysts Wednesday.

As the nation’s “most capital-intensive industry,” electric utilities hope to convince Congress and President Trump that they should be treated differently from others when it comes to eliminating deductions, EEI CEO Tom Kuhn said.

“We can make a case that we’re different,” Kuhn said. His argument: Current tax policies allow utilities to reduce their weighted average cost of capital, saving ratepayers money.

EEI said that while it supports simplifying the tax code, broadening the tax base and reducing rates, it will seek to preserve the federal income tax deduction for interest expenses and state and local taxes (primarily property taxes), as well as maintain parity between dividend and capital gains tax rates.

It also will fight to continue tax “normalization” rules, which require state regulators to treat tax benefits to customers in the same way that the recovery of the cost of the associated property is treated.

Normalization spreads the tax benefits associated with assets over the same time period that the costs of those assets are recovered from customers. “It is critically important to maintain tax normalization to the extent that accelerated depreciation or other investment incentives are retained in the tax code,” EEI said in a position paper.

About 100 analysts attended the annual briefing at the tony University Club off Fifth Avenue, about a block from Trump Tower.

Kuhn said a group of utility CEOs traveled to D.C. a few days after Trump’s inauguration to make their case to White House officials and congressional leaders. “We’re going to be in the front of the curve” in lobbying, he promised.

Although tax reform wasn’t a major issue in the fall elections, Kuhn said he sees the call by the president and Congress for change as reminiscent of the conditions in 1986, before President Ronald Reagan’s tax package was approved.

“Tax reform doesn’t happen very often — every couple of decades,” he cautioned, adding that a tax initiative will likely be a back burner issue until Trump and Congress act on replacing the Affordable Care Act. “I don’t think it’s going to be an easy lift.”

One wild card is the proposal by prominent conservatives, including former secretaries of state George Schultz and James Baker III, for a carbon tax. “It’s really early in the debate right now,” Kuhn said of the proposal, noting questions about how the proceeds for the tax would be spent.

Convincing Regulators on Capital Spending

EEI projects that its 44 investor-owned utilities made a record $120.8 billion in capital spending in 2016, up from $103.3 billion in 2015. Of that, 35% was spent on generation (up from 32% in 2015), while transmission dropped to 17% (from 18%), and distribution was unchanged with a 26% share. Much of that spending has been on smart grid improvements.

What are ratepayers getting for their money? Job growth, resiliency and economic benefits from shorter outages, said David Owens, EEI’s executive vice president for business operations and regulatory affairs.

EEI officials said the increase in smart grid technology — along with stronger wires and poles, use of robocalls and improved situational awareness — helped utilities in the Southeast restore power to all customers within two days after Hurricane Matthew in fall 2016.

About 70 million smart meters have been deployed to date — representing 60% of U.S. households — up from 32 million in 2012, when Superstorm Sandy knocked out power to millions along the East Coast for as long as two weeks.

“We’ve got to demonstrate [to regulators] that there’s a whole string of benefits that accrue” from smart grid investments, said Owens, a long-time EEI official who has announced he will retire June 30. “We’ve got to demonstrate to the regulator that there’s a fair way to allocate those costs. If you’re rolling in those costs, you’ve got to be able to demonstrate that all the customers benefit. If you’re not rolling them all in, you have to charge that individual customer.”

FERC’s Future

Former FERC Commissioner Philip Moeller, EEI’s senior vice president for energy delivery and chief “customer solutions” officer, commented on prospects for restoring the quorum lost Feb. 3 following the resignation of former Chairman Norman Bay.

FERC canceled its Feb. 16 meeting and said no monthly agenda meetings would be scheduled until a third commissioner is confirmed to join acting Chairman Cheryl LaFleur and Commissioner Colette Honorable. FERC’s annual joint meeting with the Nuclear Regulatory Commission will be held as scheduled on Feb. 23.

“Realistically, the most optimistic scenario I would say would be [to have] multiple slots filled in 60 days. But that’s very optimistic,” Moeller said, adding that a candidate who has already cleared the FBI background check could be installed more quickly. Among those rumored as a candidate for the commission is former Texas regulator Barry Smitherman.

He predicted the new commission will seek to ensure that wholesale markets recognize the reliability value nuclear generators provide as baseload resources, citing financial supports approved in Illinois and New York. (See related story, Connecticut Lawmakers to Draw Up Millstone Rescue Plan.)

Moeller also said the new commission may revisit Order 745, which required RTOs to pay demand response the same LMPs as generation, and Order 1000, which he said “has not provided the certainty for transmission planning that FERC intended.” (See FERC Won’t Revisit Demand Response Pricing.)

He also called for the commission to “update” its interpretation of the Public Utility Regulatory Policies Act. (See FERC Conference Debates PURPA Costs, Purchase Obligations.)

EEI will be urging the commission to change its discounted cash flow model for calculating returns on equity “to attract additional capital to the transmission system,” Moeller said.

In June 2014, Moeller voted with LaFleur and former Commissioner Tony Clark to apply to electric utilities a two-step DCF process that incorporates long-term growth rates. The new formula has resulted in numerous ROE reductions.

February 9, 2017

ISO-NE Capacity Prices Fall 25%, Lowest Since 2013

By William Opalka

Prices dropped by one-quarter to $5.30/kW-month in ISO-NE’s capacity auction Monday, the lowest clearing prices since the RTO eliminated its price floor after the 2013 auction.

Forward Capacity Auction 11 easily surpassed the 34,075 MW of resources needed for the 2020/21 capacity commitment period, with a total of 35, 835 MW. Unlike in recent auctions, the RTO said, no new large power plants qualified, nor did any large power plants announce their retirements beforehand. However, 640 MW of new energy efficiency and demand response resources cleared, the equivalent of a new generating plant.

Three new power plants cleared in FCA 10 last year, which had a clearing price of $7.03/kW-month. That followed two consecutive record-breaking years, topped by the record $9.55/kW-month in 2015. (See Prices Down 26% in ISO-NE Capacity Auction.)

Falling prices are “the result of competition to provide plenty of the capacity that we need in New England,” Robert Ethier, vice president of market operations at ISO-NE, said at a news briefing Thursday.

Although the auction did not have large, significant new resources, “we did have a lot of smaller, other resources clear in the auction,” Ethier added.

The clearing price will be paid to all resources in all three capacity zones in New England and 1,035 MW of imports from New York and Quebec. Imports from New Brunswick, totaling 200 MW, will receive $3.38/kW-month. That price is lower because of excess capacity available over a 200-MW tie line.

The total cost this year is about $2.4 billion, down from last year’s $3 billion and 2015’s $4 billion.

Ethier said the lower prices allowed ISO-NE to acquire more than the minimum target to give it flexibility and to enhance reliability. Almost 40,500 MW — 34,505 MW of existing capacity and 150 new resources totaling 5,958 MW — qualified. (See ISO-NE Capacity Requirement Shows Flat Demand, More Solar.)

Several oil-fired units dropped out of the auction, “well under 200 MW” in the aggregate, officials said, but they remain available in the energy market. “We have not yet received any retirement notices from them,” said Stephen Rourke, vice president of system planning.

The new efficiency and DR resources bring the total available to more than 3,200 MW, or about 9% of the total capacity market.

In addition, demand reductions from the RTO’s forecast of behind-the-meter solar PV growth reduced the capacity target by 720 MW.

Six megawatts of new wind and 5 MW of new solar resources cleared the auction, bringing their totals to 137 MW and 66 MW, respectively.

ISO-NE said it will file the results with FERC at the end of the month, hoping for acceptance that traditionally occurs in June. The commission is operating without a quorum and would not be able to approve FCA 11 results on time if they are contested.

“We’ve thought about it, but it’s not a big concern, yet,” Ethier said.

February 9, 2017

MISO Auction Redesign in Limbo After FERC Rejection

By Amanda Durish Cook

CARMEL, Ind. – MISO will likely fall back on its existing Planning Resource Auction design next year after its Competitive Retail Solution failed to win FERC approval, but the RTO says the door is still open on instituting a locational auction construct.

ferc miso capacity auction — Bladen | © *RTO Insider*

At the Resource Adequacy Subcommittee meeting Wednesday, MISO officials were tight-lipped on whether they would seek rehearing on FERC’s Feb. 2 order or what approach they might pivot to in stakeholder discussions this year. (See FERC Rejects MISO’s 3-Year Forward Auction Proposal.)

While MISO Executive Director of Market Design Jeff Bladen discussed the possibility of rehearing, he stopped short of saying that the RTO would file a request. He also said the reliability issue in MISO’s competitive retail areas remains.

“It’s important to remember that there is a 30-day period where any party to the filing can request rehearing. Effectively, the docket remains open until then,” Bladen said. “I certainly would not prognosticate on if anyone would request a rehearing and what FERC would do with that … but I don’t want to be too opaque. MISO still recognizes that some things need to be fundamentally changed.”

While he didn’t rule out changes for the 2018/19 planning year capacity auction, Bladen said a retooled auction design by next year is unlikely. Bladen also said a “one size fits all” auction approach isn’t likely given the differing state regulatory structures in MISO.

“It’s pretty clear the proposal we made with the forward auction is not implementable on the timeline we proposed. It’s impossible for me to answer the hypothetical on what’s possible between now and the 2018/19 auction, but it’s hard to see [auction changes] implemented before then,” he said.

Some stakeholders asked if the auction would remain status quo until FERC regains its quorum. (See FERC OKs Pipelines, Delegation Order Before Losing Quorum.)

In the interim, MISO attorney Jacob Krause said, commission staff can delegate letter orders only for “non-controversial” filings.

February 9, 2017

Exelon’s Crane Reports ‘Monumental Year’

By Ted Caddell

This time last year, Exelon had its hands full.

The company was deep in a problematic $6.8 billion acquisition of Pepco Holdings Inc. while bogged down in a two-front battle trying to get nuclear subsidies for plants in Illinois and New York.

Things look much brighter for the Chicago-based energy giant in early 2017.

First, the acquisition of PHI has closed, adding PEPCO, Delmarva Power and Atlantic City Electric to Exelon’s stable of electric distribution companies.

Second — and against most odds — the company was able to convince Illinois and New York legislators to pass laws providing subsidies for its troubled nuclear plants.

And somewhere along the line, Exelon picked up yet another nuclear generating station, the James A. FitzPatrick station, from Entergy. The FitzPatrick deal is expected to close this spring, the company said.

As Exelon CEO Chris Crane put it during an analyst earnings call on Wednesday, “2016 was a monumental year for Exelon.”

The company earned $410 million ($0.44/share) during the fourth quarter, compared to $347 million ($0.38/share) for the same period in 2015, missing analysts’ expectations by a penny. Annual earnings came in at $2.5 billion, up from $2.2 billion in 2015.

“We made great progress in the ongoing transformation of our company, with a focus on meeting our commitments to stakeholders via the PHI merger and the creation of the [zero-emission credit] programs in both New York and Illinois that compensate our nuclear plants for their carbon-free attributes,” Crane said.

The successful push for ZEC legislation reversed the company’s decision to retire the Clinton and Quad Cities nuclear plants, saving $120 million in projected early retirement costs, Crane said. He also noted that Exelon’s nuclear fleet had a 94.2% capacity factor for the year, up nearly 1 percentage point from the previous year.

exelon zec nuclear generation — Exelon says ZEC credits helped save Clinton Nuclear Plant | *NRC*

All of the company’s electricity distribution companies enjoyed fewer storms and therefore lower outage-related costs throughout the year, he said.

Looking ahead, company executives are eyeing legislative action in several other states — including Ohio, Connecticut, New Jersey and Pennsylvania — that could result in ZEC-style subsidies for nuclear plants there.

Joe Dominguez, Exelon executive vice president of governmental and regulatory affairs and public policy, described the company’s approach to winning those concessions.

The first stage is “establishing a recognition that nuclear is the lowest-cost and most reliable zero-carbon option” for electricity customers.

“That’s where we are in Pennsylvania,” Dominguez said.

The next step: identify different “solution sets,” such as the ZEC programs already adopted or including nuclear as a qualifying resource for renewable portfolio standards.

“And it’s way too early for me to handicap where that discussion is going to go,” Dominguez said.

February 9, 2017

Connecticut Lawmakers to Draw Up Millstone Rescue Plan

By William Opalka

HARTFORD, Conn. — Supporters of the Millstone nuclear power plant on Tuesday issued impassioned pleas for Connecticut legislators to save the plant but were short on details on how to provide enough revenue to keep it operating beyond 2021.

dominion millstone nuclear plant — Formica | © *RTO Insider*

Those supporters were speaking at a Joint Committee on Energy and Technology hearing to discuss a preliminary bill, which, for now, merely says its purpose is “to provide a mechanism for zero-carbon electric generating facilities to sell power to electric utilities.” Sen. Paul Formica (R), committee co-chair and lead sponsor of the bill, said the hearing was intended to gather input from different constituencies.

While plant owner Dominion Resources has not said that it will close the Waterford facility, the company has acknowledged that the plant is under financial stress because of record low power prices set by cheap natural gas.

“We need to gather all the facts because we need a baseload power source here in Connecticut,” Formica said. “But if this baseload goes away, what happens to rates?”

Millstone can produce 2,111 MW, or about half of the state’s energy needs.

Bill co-sponsor Melissa Ziobron, a Republican representative from the nearby 34th District, said her husband has worked at the plant for 20 years.

“The premise of Millstone closing is real,” Ziobron said. “It is present for our family and 1,200 others.” She and others said the plant’s closure would devastate the economy of southeastern Connecticut.

An aborted plan introduced at the end of last year’s legislative session is presumed to be the starting point in any current deliberations to help Millstone. In the waning hours of that session, the Senate unanimously passed a measure that would have allowed the plant to bid into the state procurement process now reserved for renewable energy, large-scale hydropower and trash-to-energy facilities.

The bill passed the Senate without any hearings, but time ran out for the House of Representatives to act.

Elin Swanson Katz, the state’s consumer counsel, took no position on the bill, but she said her office is pleased with the mechanisms the state has put in place for long-term energy procurement to protect ratepayers.

“These processes have been highly competitive and well managed,” Katz said.

John Erlingheuser, associate state director of advocacy at AARP, called the bill “a special deal that has the same impact as a subsidy” that effectively reclassifies 50% of the state’s generation as renewable energy.

Dominion contends that the policy is justified.

“If Connecticut wants the lowest-cost, longest-term resource that also meets its environmental and economic goals, the solicitation process has to be expanded,” Kevin Hennessey, the company’s director of state policy for New England, said in written testimony.

Connecticut State Joint Committee on Energy and Technology | © *RTO Insider*

Power producers say that reverses 20 years of progress in building competitive markets in the region.

“Proposals to selectively grant some resources preferential treatment without regard for the impact of doing so on the rest of the power supply system risk highly adverse and likely irreversible consequences,” the Electric Power Supply Association wrote.

Eric Brown, general counsel for the Connecticut Business and Industry Association, disputed those who said Dominion needs to open its books to justify the policy change.

“We don’t need to see their books,” Brown said. “The marketplace has sent a very clear message: Nuclear power is struggling throughout the country. We’re losing plants in New England. That’s the best kind of evidence.”

Dominion commissioned a recent study indicating that state carbon emissions would increase by 2.5 million tons if the plant retired and was replaced by natural gas-fired generation.

Roddy Diotalevi, senior director of sales and external relations for UIL Holdings, said that Millstone is important in helping the state reach its environmental goals but that the costs to keep the plant running are still unknown.

“UIL remains concerned about the impact that these above-market payments will have on ratepayers and the negative effects that a long-term obligation and financial liability would have on the utility,” Diotalevi said.

Millstone and NextEra Energy’s Seabrook plant in New Hampshire are soon to be the only remaining nuclear plants in New England. Vermont Yankee closed two year ago, while the Pilgrim station in Massachusetts will shut down in 2019. New York’s nuclear fleet has been saved by a state subsidy, but that program is currently being litigated.

February 8, 2017

PJM Tracks the Power of the Super Bowl

By Rory D. Sweeney

VALLEY FORGE, Pa. — If you thought the ending of Sunday’s Super Bowl matchup was electrifying, you’re not alone. The event had a noticeable impact on electricity demand.

Just after the game started at about 6:30 p.m. on the East Coast, PJM’s demand dipped below the RTO’s forecast by about 1,000 MW, or about 1%, when everyone dropped everything to watch.

It recovered and then jumped above the forecast around 8 p.m., roughly corresponding with halftime, when everyone took a break to do other things, like cooking wings or microwaving some more queso dip. The load then followed the forecast until the game ended around 10:30 p.m., when it again exceeded the forecast as everyone went back to their normal routine.

The “Super Bowl dip” is a phenomenon that many RTOs experience. In fact, ISO-NE examined it in a post it published on its website last week. Part of the reason PJM could predict the load with fairly good accuracy is because the RTO factored the phenomenon into its forecast.

But that isn’t always the case. A similar event happened on Jan. 15, when the real-time load dropped about 2,000 MW, or roughly 2%, below the forecast around 6:30 p.m. ET, then jumped back up to the forecast around 8:30 p.m.

“It seems to have coincided with the end of the Green Bay [Packers]-Dallas [Cowboys] football game,” PJM’s Phil D’Antonio told the Operating Committee on Tuesday. “Apparently, that [playoff] game had enough attention that people were sitting in front of the TV. Then after the game, they went back to their normal lives.”

D’Antonio, a manager of reliability engineering at PJM, explained that the “load deviation” caused alerts within PJM’s control system. Ken Seiler, PJM’s senior director of system operations, noted later that it caused an eight-minute spin response of almost 703 MW.