FERC on Thursday accepted a settlement that replaces the New York Power Authority’s stated transmission rates with a cost-of-service formula including a base return on equity of 8.95%. NYPA will receive an additional 50 basis points for its participation in NYISO (ER16-835).
Lineman on transmission pole | New York Power Authority
The organization will receive a 50-basis-point “congestion relief adder” for the Marcy South Series Compensation project in Delaware County for the original $55.7 million cost of the project. Costs exceeding the cap will revert to the base ROE.
NYISO filed the request on NYPA’s behalf in January 2016, with the commission ordering a settlement proceeding in March. The settlement, which was not contested, was supported by FERC trial staff. The commission said the rate formula became effective April 1, 2016.
NYPA was ordered to file an amended Tariff within 30 days.
The organization last January said it needed to convert to a formula rate because it anticipates spending approximately $726 million in its transmission life extension and modernization program through 2025. Some assets are more than 70 years old, NYPA said.
FERC last week rejected PJM’s proposal for revising how it implements its financial transmission rights forfeiture rule, ordering the RTO to instead adopt a portfolio approach suggested by the Independent Market Monitor (EL14-37).
The commission, however, declined to order any refunds.
The ruling was the result of a Section 206 proceeding ordered in 2014 to determine whether the RTO was improperly treating up-to-congestion trades (UTCs) differently than increment offers (INCs) and decrement bids (DECs).
Up-to-congestion transactions, which fell sharply following a FERC order setting Sept. 8, 2014 as the effective date for potential uplift charges, rebounded after the 15-month refund period expired.
The order says the forfeiture rule should be applied to UTCs as well as INCs and DECs. The order did not address whether uplift — currently assessed on INCs and DECs — should also be applied to UTCs. Instead, it said that issue would be considered in broader Notice of Proposed Rulemaking on uplift cost allocation. (See related story, FERC Proposes More Transparency, Cost Causation on Uplift.)
The forfeiture rule was implemented in 2000 to prevent market participants from using virtual transactions to create congestion that benefits their FTR positions. The FTR holder forfeits the profit from its FTR when it submits an INC or a DEC at or near an FTR location that results in a higher LMP spread in the day-ahead market than in real time.
The commission ordered the 206 investigation after PJM proposed redefining UTCs as virtual transactions and making them subject to the forfeiture rule, which had previously been applied only to INCs and DECs. (See FERC Orders Review of UTC Rules.)
Worst-Case Scenario
The current rule evaluates virtual transactions individually against the “worst-case” bus — the location at which the transaction has the biggest impact on congestion. A forfeiture is triggered if at least 75% of the energy flowing between the transaction bus and the worst-case bus is reflected in the constraint.
PJM had proposed continuing to evaluate transactions individually but replacing the worst-case bus technique with a generation-weighted reference bus to evaluate DECs and a load-weighted reference bus to evaluate INCs.
Under the worst-case approach, one trader’s INC (an offer to sell energy at a specified source location in the day-ahead market) may be paired with a different market participant’s DEC (a bid to purchase energy at a specified sink location day ahead). PJM said that can result in forfeitures occurring when they should not.
False Positives, Negatives
But the commission ruled that the RTO’s proposed fix didn’t go far enough, saying the individual transaction approach does not capture the impact of a market participant’s overall portfolio of virtual transactions on a constraint.
“This may lead to forfeitures from some participants who have offsetting positions elsewhere and thus whose virtual transactions did not actually impact the constraint. Likewise, the rule may fail to invoke forfeiture on some participants who do not impact the constraint with a single transaction but have additive positions elsewhere that, on net, do impact the constraint significantly,” the commission said.
It ordered PJM to adopt the Monitor’s proposal to evaluate the net effect of a participant’s entire virtual portfolio — INCs, DECs and UTCs — on the constraint.
A UTC would be included in the portfolio as an INC at its source point and as a DEC at its sink. Because UTCs include both source and sink, there is no corresponding worst-case bus with which to compare it. (In a related order, the commission also accepted a PJM compliance filing establishing the criteria for determining the source-sink paths for UTCs (ER13-1654-001, ER13-1654-002)).
FERC also ruled that PJM must evaluate power flows using a load-weighted reference bus, which PJM already uses to calculate certain components of LMP, instead of the worst-case bus. As a result, the commission said, the 75% trigger should be replaced with one based on a percentage of the total binding megawatt limit of the constraint related to the FTR path.
“Specifically, to trigger a forfeiture, the net flow across a given constraint attributable to a participant’s portfolio of virtual transactions must meet two criteria: (1) The net flow must be in the direction to increase the value of an FTR; and (2) the net flow must exceed a certain percentage of the physical limit of a binding constraint,” the commission explained. “Although any volume can cause congestion, this second condition recognizes that increased volumes relative to the binding limit are more symptomatic of transactions that increase the value of an FTR.”
It noted that CAISO uses a such a method in its congestion revenue rights settlements. The ISO determines that congestion has been significantly impacted if a CRR holder’s entire portfolio exceeds 10% of the constraint’s flow limit.
The commission said eliminating the worst-case bus would increase the transparency of the forfeiture methodology, allowing market participants to monitor their own activity to determine if they are significantly impacting constraints related to their FTRs.
Compliance Filing
FERC ordered PJM to submit a compliance filing within 90 days to modify its Tariff to incorporate the new approach.
It rejected concerns that the portfolio approach would discourage transactions at liquid trading spots such as zones, hubs and interfaces, saying transactions at those locations should be included in the forfeiture evaluation.
It also ruled that counterflow FTRs and virtual transactions that relieve congestion should no longer be exempt from the forfeiture rule. “Holders of counterflow FTRs are able to manipulate congestion to benefit their FTR position,” the commission said.
The commission rejected calls from some trading firms to eliminate the forfeiture rule, saying that the requests were outside the scope of the proceeding and that the rule was necessary to deter cross-product manipulation.
Despite finding the current methodology not just and reasonable, FERC said refunds were “not appropriate.”
“As some parties have indicated, they have based market decisions on the current Tariff rules that cannot now be revisited, and the commission has not always ordered refunds when market decisions are affected. Moreover, while market participants were on notice that the FTR forfeiture rule might change, the nature of any change was uncertain. The bids, offers and decisions market participants made could have been different had they been aware of the nature of the revised FTR forfeiture rule.”
The RTO had requested the waiver in response to a federal court ruling vacating an EPA rule that would have allowed greater use of emergency generators. FERC granted the waiver in August, effective June 21, 2016.
Real-time emergency generators are distributed generation limited by air quality permits to operating when ISO-NE implements voltage reductions of 5%. They must be able to go into operation within 30 minutes of the RTO’s dispatch instructions.
The waiver was prompted by a May 2015 ruling by the D.C. Circuit Court of Appeals reversing an EPA exemption that allowed the generators to operate 100 hours a year for emergency demand response.
“Because the court vacated the EPA rules that allowed emergency generators to respond to a 5% voltage reduction, [real-time] emergency generation resources can no longer operate when ISO-NE implements voltage reductions and can only operate when their host facilities lose off-site power, unless they are retrofitted to comply with the EPA’s National Emissions Standards,” FERC wrote.
The waiver allowed such generators to change their resource type to real-time DR within a timeframe that otherwise would not be possible, permitting them to participate as DR in the February 2017 Forward Capacity Auction.
Enerwise Global Technologies’ CPower sought rehearing, contending the waiver did not fully address the problems caused by the D.C. Circuit ruling. It sought additional relief, arguing that emergency generator holders of capacity obligations would suffer financial penalties because they would not be able to convert all their assets to DR resources or shed their supply obligations in time for the 2017/18 capacity commitment period that starts in June.
FERC said that CPower’s proposed relief was “in effect, a separate request for waiver of an additional Tariff provision” and thus beyond the scope of ISO-NE’s request. Last week’s order clarifies that it was dismissing CPower’s proposal without prejudice, meaning the company could file a new request under a separate docket.
FERC on Thursday approved CAISO’s agreements to procure frequency response from the Bonneville Power Administration (ER17-408) and Seattle City Light (ER17-411).
The contracts are intended to help the ISO comply with NERC reliability standard BAL-003-1, which requires each balancing authority area to carry sufficient capability to respond to a frequency event. System operators must maintain the grid at a frequency of 60 Hz or risk instability that could lead to cascading blackouts.
CAISO signed the deals after conducting a competitive solicitation that examined each bidder’s previous frequency response performance as well as comparing the costs of procuring transferred capacity against those for obtaining regulation-up service within the ISO’s market. The commission agreed with the ISO’s finding that transfers represented the lowest-cost option.
Rich in fast-ramping hydroelectric resources, BPA and City Light are both well-positioned to provide frequency response capacity to third parties.
Under the agreements, BPA and City Light will provide CAISO with frequency response and document their performance with NERC for the compliance year beginning Dec. 1, 2016. In the event of nonperformance, either entity will be liable for covering any fines levied against the ISO.
FERC’s acceptance of the agreements is subject to the clarification of a September order in which the commission approved the ISO’s competitive solicitation process.
CAISO sought clarification on whether the commission would recognize contracts that allow a counterparty balancing area to provide transferred frequency response to it based on the ISO’s annual frequency response obligation under the NERC standard (ER16-1438).
Without that clarification, the ISO contended, counterparties could interpret the decision as requiring them to maintain a net actual interchange measure in response to every single frequency disturbance event.
“Such a requirement would make it virtually impossible for the CAISO to contract for transferred frequency response quantities because balancing authorities cannot assure such a measure in response to every disturbance event,” the ISO said in its request for clarification.
The Western Energy Imbalance Market (EIM) experienced a “dramatic uptick” in failed ramping sufficiency tests in November and December, CAISO’s internal Market Monitor reported Wednesday.
New EIM participant Arizona Public Service was especially prone to failures during the fourth quarter of last year, but other areas saw increases as well, Keith Collins, manager of market monitoring and reporting with the ISO’s Department of Market Monitoring, said during a Jan. 18 Market Performance and Planning Forum.
Some of the increase could likely be attributed to a flawed ISO calculation that underreported ramping capacity available in the market, Collins said.
But the Monitor is still trying to pinpoint the exact cause for such a significant increase in test failures over the period (see graph).
CAISO performs the sufficiency test ahead of the market run for each operating hour. The test relies on base schedules submitted by each balancing authority area (BAA) participating in the EIM.
The objective: to ensure that each BAA enters the hourly interval with enough upward and downward ramping capability to avoid leaning on the resources of other market participants, similar to the requirement that each EIM participant begin each hour fully balanced.
“When a balancing area doesn’t have sufficient ramping capacity, then there are limitations on the amount of EIM [energy] transfers that are allowed into that region,” Collins said. “For instance, if there’s an upward [ramping] limitation, [then the region’s] imports are limited.”
Similarly, the ISO will restrict exports if it finds a shortfall in a BAA’s hourly downward ramping capability.
Those restrictions are intended to discourage EIM participants from relying on the market as a way to avoid developing their own ramping capacity as growing adoption of renewable resources increases the need for such capability.
Collins noted that the flexible ramping sufficiency test “is playing an increased role in some of the market outcomes we’re seeing,” a finding that the Monitor will elaborate on in its upcoming quarterly report.
The sufficiency test is designed to determine whether each EIM participant has scheduled enough ramping capacity to meet both the expected change in “net load” within its system and the “flexible ramping constraint” at its seams.
“Net load” represents total electricity demand minus the output from variable renewable resources. The ramping constraint indicates the factor by which transmission congestion will restrict a participant’s ability to import or export during a specific interval.
Passing the Test
To pass the sufficiency test, an EIM participant must demonstrate sufficient ramping capacity from the start of an hour through each 15-minute interval of that hour. Failure for just one interval translates into failure for the entire hour. Participants can resubmit schedules up to 40 minutes before the start of the hour.
The test considers each participant’s contribution to uncertainty in EIM’s overall load forecast during an interval, as well as its net import/export capabilities. The participant receives “credit” for its ability to reduce exports or imports in order to increase upward or downward ramping capability during the period.
The EIM’s upward ramping capability exhibited the “dramatic uptick” in test failures late last year, but downward ramping capacity tests, which were just implemented in November, have also seen “a pretty consistent level of failures,” especially in the APS region, according to Collins.
Steve Keehn, associate director at Navigant Consulting, asked whether the test failures were predominantly occurring during certain hours.
“I wouldn’t point to any explicit pattern that came up,” Collins said. “We’ve seen it at the beginning of the day, the middle of the day, the end of the day.”
Justin Thompson, director of resource operations and trading at APS, sought to know why so many of the failures were occurring early in the month and diminishing by mid-month.
One possibility is that the increase coincided with the Nov. 1 implementation of CAISO’s flexible ramping product market, which operated with flawed calculations that shortchanged the amount of available ramping capacity through mid-December, according to Guillermo Bautista Alderete, the ISO’s director of market analysis and forecasting.
“That is only one part,” Bautista Alderete noted.
He said other elements of the issue would be discussed in a monthly report produced by the ISO and distributed to APS and other new EIM participant Puget Sound Energy, which would become publicly available as well.
CARMEL, Ind. — MISO is preparing stakeholders for the first reuse of Transmission Expansion Plan futures, but some stakeholders are asking for a pause to review the scenarios for the 2017 plan because of the uncertainty of carbon-emission policies under the Trump administration.
MISO policy studies engineer Matt Ellis said “barring any significant change in policy or economic drivers,” the RTO’s 2018 Transmission Expansion Plan (MTEP 18) futures will largely mirror MTEP 17 futures, due to be finalized next month. MISO is not planning a “wholesale redevelopment” of futures as in prior years, he said.
Future development in 2018 will be discussed at a yet-unannounced stakeholder workshop in early April. Ellis said MTEP 17 futures were intended for use in multiple cycles, but MISO will still “review definitions and discuss potential changes to ensure validity.” 2018 futures are to be finalized at the Planning Advisory Committee meeting in August and study results are expected in October.
“Futures haven’t changed much in the last 10 years,” Ellis explained at the Jan. 18 PAC meeting.
Ellis said year-to-year uncertainties such as the rate of fleet change and economic and temperature changes will be examined before reusing 15-year futures. He added that variables such as natural gas prices, topology, siting locations and demand could be adjusted annually. Ellis also said MISO would assess the variety of projects in the interconnection queue and public announcements from developers to inform the futures. Reuse of MTEP futures was recently added to Business Practices Manual 020, which covers long-term planning. (See “MISO to Update Long-Term Planning BPM,” MISO Planning Advisory Committee Briefs.)
Stakeholders have asked what fine-tuning might occur annually and which changes would be considered significant enough to spur futures redevelopment, Ellis said. “Ever since November, I’ve received many questions. Any time there’s a change in presidential leadership, there’s bound to be a change in policy. … All fair questions,” he said.
Ellis said MISO will reweight the scenarios annually because of uncertainty over future carbon regulations. MISO’s futures weighting assigns a probability-based likelihood to each MTEP planning scenario. In MTEP 17, existing trends were given 31% consideration, policy regulations were given 43% and accelerated alternative technologies received 26%. (See “MISO Posts Final MTEP 17 Weighting, Siting and Seeks Scope Feedback,” MISO Planning Advisory Committee Briefs.)
Multiple stakeholders, however, asked for re-evaluation of MTEP 17 weighting considering President-elect Donald Trump’s vow to cancel EPA’s Clean Power Plan. They said less emphasis on policy regulations might be in order.
Steve Leovy of WPPI Energy said he supported the potential revision of MTEP 17 weights. “Four, five, six months from now, we might have a better idea of what regulations might be in place,” he said.
Adam McKinnie, a Missouri Public Service Commission economist representing the state regulatory sector, said it would be useful if MISO staff could explain why changes cannot be made to MTEP 17 weighting.
Ellis said a presentation could be arranged for the February PAC meeting.
WASHINGTON — Former Texas Gov. Rick Perry said Thursday he regrets calling for an end to the Department of Energy and is now “excited and passionate” about leading the agency as secretary.
Perry | Energy and Natural Resource Committee
Perry — who famously forgot the department’s name when he called for its abolition during a presidential debate five years ago — addressed the issue in his opening remarks during his confirmation hearing before the Senate Energy and Natural Resources Committee.
Perry also joined President-elect Donald Trump’s nominees for the Interior Department and EPA in saying he believes climate change is real and that manmade activity is a contributor — but that the degree of man’s impact and the proper response remain under debate.
Perry’s solicitous, self-deprecating manner occasionally brought laughs from senators and the audience, a contrast to the tense hearing a day before for Oklahoma Attorney General Scott Pruitt, Trump’s nominee for EPA. But Democrats nevertheless pressed Perry on his contention that climate science remains unsettled. (See Dems Unmoved by EPA Pick’s Charm Offensive.)
Budget Cuts?
Perry also appeared caught off guard when Democrats on the panel asked him about a report by The Hill that the Trump transition team plans to eliminate the Energy Department’s offices of Electricity and Energy Efficiency and Renewable Energy (EERE), along with the Office of Fossil Energy, which has overseen research on reducing CO2 emissions. Funding for nuclear physics and advanced scientific computing research would be reduced to 2008 levels, according to the report.
Rick Perry hearing | Energy and Natural Resource Committee
In his opening statement, Perry said his view on the department’s value had evolved after being briefed on its “vital functions.”
Democrats said the proposed budget cuts would threaten the research programs Perry claimed to now support.
“It’s hard to see how we can pursue an ‘all of the above’ [energy] strategy if so much of the department’s all-of-the-above capabilities are limited,” said Sen. Mazie Hirono (D-Hawaii).
“They’re cutting the legs out from under you,” said Sen. Angus King (I-Maine).
Murkowski | Energy and Natural Resource Committee
“I can’t answer whether that’s true or not,” Perry said of the news report. “I will be in the room advocating for [DOE research]. I’m not going to tell you I’m going to be 1,000% successful.”
Later, Perry said he would evaluate the worth of department programs as a “fiscal conservative,” saying “you can’t change the stripes on this zebra.”
Committee Chair Lisa Murkowski (R-Alaska) said in her opening remarks that she was not concerned that Perry, unlike his two immediate predecessors, is not a scientist. “What we need is a good manager,” she said.
‘Climate is Changing’
Franken | Energy and Natural Resource Committee
The hearing returned several times to Perry’s new position on climate change. Democrats noted that Perry had previously been dismissive, claiming in 2011 that scientists were manipulating data for financial gain and contending as recently as 2014 that there was no “settled science” on the subject.
“I believe the climate is changing. I believe some of it is naturally occurring, but some of it is also caused by manmade activity,” Perry said in his opening statement. “The question is how do we address it in a thoughtful way that doesn’t compromise economic growth, the affordability of energy or American jobs. … I am committed to making decisions based on sound science and that also take into account the economic impact.”
Hirono asked if his economic analysis would include the costs of not addressing climate change.
“Absolutely,” Perry responded, citing the emission reductions and wind development that occurred in Texas during his 14 years as governor. Perry, however, rejected Hirono’s call for a national renewable portfolio standard, saying he would leave such targets to states.
Sen. Al Franken (D-Minn.) attempted unsuccessfully to pin Perry down on what share of global warming is manmade, noting data released by the National Oceanic and Atmospheric Administration Wednesday that 2016 was the hottest year on record, surpassing records set in 2015 and 2014.
Daines | Energy and Natural Resource Committee
“Ninety-seven percent of climate scientists say that this is real,” Franken said. “So it seems to me that the science on climate change is pretty definitive.”
Perry also received pleas for help from coal state Sens. Joe Manchin (D-W.Va.) and Steve Daines (R-Mont.). Daines decried plans to close two of the coal-fired Colstrip plant’s four units by 2022. He said EPA’s Clean Power Plan will eliminate 7,000 jobs in his state and turn it from an energy exporter to an importer.
Perry responded that he is confident that scientists will develop carbon capture technology ensuring the continued use of coal.
WAPA, LNG and Yucca Mountain
Sanders | Energy and Natural Resource Committee
Senators sought commitments from Perry on an assortment of other issues during the nearly four-hour hearing.
Sen. Jeff Flake (R-Ariz.) called for more transparency regarding spending by the department’s Western Area Power Administration. The House Committee on Oversight and Government Reform is looking at a $767 million surplus at the power marketing administration to see if it should have been used to reduce rates.
Maine’s King expressed fear that U.S. natural gas prices will increase if the government allows increasing exports of LNG.
Perry said he would commit to not “artificially affecting supply and demand” and suggested EPA and Interior Department regulations were constricting gas supplies. “It makes abundant good sense to me to sell it to the world,” he said.
Sen. Catherine Cortez Masto (D-Nev.) sought assurances that Perry would not back a resumption of plans to create a nuclear waste dump in Yucca Mountain near Las Vegas. Perry pledged to consider alternatives but added: “I will not say absolutely no way is Nevada going to be receiving high-level waste.”
WASHINGTON — Donald Trump’s nominee to head EPA attempted to assuage skeptical Democrats on Wednesday, insisting he will enforce environmental rules and seeks only to ensure predictable regulation that respects states’ jurisdiction.
“People of this country are hungry for change,” Oklahoma Attorney General Scott Pruitt told the Senate Environment and Public Works Committee during his six-hour confirmation hearing. He said he would seek to end a “false paradigm that if you’re pro-energy you’re against the environment.”
But the panel’s Democrats were critical of the nominee, accusing him of being too cozy with fossil fuel producers. Sen. Bernie Sanders (I-Vt.) said he would oppose Pruitt’s confirmation as EPA administrator and most of the others appeared likely to join him.
Pruitt needs a simple majority to clear the committee — which Republicans control 11-10 — and the full Senate, where the GOP holds a 52-48 edge (including two Independents who caucus with the Democrats).
The Democrats cited Pruitt’s campaign contributions from the oil and gas industry and his 14 lawsuits against EPA as attorney general, including challenges to the agency’s Clean Power Plan, Cross State Air Pollution rule (CSAPR), the Mercury and Air Toxics Standards, regional haze rule and emission regulations on new power plants.
Ranking member Sen. Tom Carper (D-Del.) quoted former Republican EPA chief Christine Todd Whitman, who has said Pruitt is “disdainful of the agency and the science behind what the agency does.”
Pruitt’s Republican supporters said he would address the agency’s “overreach.” Chairman John Barrasso (R-Wyo.) followed up each round of questions by Democrats by quoting Oklahoma environmental officials and news editorials endorsing Pruitt’s appointment.
Pruitt opponents lined up outside the hearing room, some wearing surgical masks with “Stop Pruitt” stickers. A few opponents got into the room and briefly interrupted the hearing on two occasions. Helmet-wearing coal miners also attended the hearing in support.
Climate Change not a ‘Hoax’
As Trump’s Interior Department nominee had done in his confirmation hearing Tuesday, Pruitt said he did not agree with the president-elect’s claim that climate change is a “hoax” by the Chinese. (See Zinke: Climate Change Real, but Coal, Gas Should Continue.)
Pruitt, who has led a legal fight by states against EPA’s Clean Power Plan, said climate change is real but that the impact of human activities and how to fix it are subject of “continued debate and dialog.”
“I do not believe climate change is a hoax,” he said under questioning by Sen. Ed Markey (D-Mass.).
Pruitt acknowledged the Supreme Court’s finding in Massachusetts v. EPA that carbon dioxide was a pollutant under the Clean Air Act. “I think the court has spoken very emphatically about this issue, and the EPA has a legal obligation to respond,” he said.
But he clearly did not share Democratic senators’ sense of urgency over climate change, repeatedly calling it “the CO2 issue” and declining to rank its priority against other areas under the agency’s oversight. “The EPA deals with very weighty issues … water and air quality. It’s a matter of prioritizing resources to achieve better outcomes in each.”
He said he challenged the CPP because the agency created emission limits that coal-fired generators can’t meet — thus requiring a switch to other generation sources and exceeding its authority to regulate “inside the fence line.”
Pruitt also defended his lawsuits against EPA as efforts to ensure the agency implements its policies in accordance with law. His challenge to the CSAPR rule, he said, was not to the agency’s authority but to its implementation of penalties in excess of states’ “allocated share” of emissions.
“They [EPA] need to follow the processes set up by Congress,” he said, arguing that the agency has created uncertainty among those to which its rules apply.
“There are many laws that people look at and say, ‘Well I don’t really like that,’ but so long as they know what’s expected of them, they can plan and allocate resources to comply.”
Republicans joined Pruitt in his critique. Sen. Roger Wicker (R-Miss.) said the CPP would “put us out of business” because his state has little alternative to coal-fired power.
Markey called on Pruitt to recuse himself as EPA administrator from any lawsuits he filed as attorney general, including against the Clean Power Plan. Otherwise, he said, Pruitt would be “plaintiff, defendant, judge and jury.”
Pruitt said he would consult with EPA’s ethics counsel on a case-by-case basis on recusals.
Sanders took on Pruitt’s contention that there remains doubt about the cause of climate change and the conclusion that fossil fuel use must be reduced to address it.
Sanders also asked Pruitt what actions he had taken as attorney general to address the spike in earthquakes in his state, which has been linked to underground injection of fracking wastewater. Pruitt said fracking is regulated by the state Corporation Commission and acknowledged he had not filed any enforcement cases over the practice. “If that’s the kind of EPA administrator you’re going to be, you’re not going to get my vote,” Sanders responded.
Later, in response to a question from Sen. Ben Cardin (D-Md.) about the issue, Pruitt defended his state’s response to the earthquakes. He noted the commission had declared certain areas of the state off-limits to fracking, calling its actions “aggressive” and that they’ve helped reduce the number of quakes.
Sen. Jeff Merkley (D-Ore.) pressed Pruitt on a 2014 article in The New York Times that reported Pruitt sent letters to EPA and other federal officials — on state government stationary and signed by him — that had been authored by oil and gas companies. One 2011 letter he sent to EPA that accused federal regulators of overestimating the air pollution caused by natural gas drillers in Oklahoma, for example, was almost entirely written by Devon Energy, one of his state’s biggest gas producers. “You used your office as a direct extension of an oil company,” Merkley said.
Pruitt insisted the letter was “representing the interests of the people of Oklahoma.” He noted that the oil and gas industry is responsible for one-quarter of the state’s budget.
Sen. Sheldon Whitehouse (D-R.I.) said Pruitt’s version of federalism — which the nominee described as “national standards, neighborhood solutions” — would leave his state powerless to combat ozone pollution from other states. “Because those smokestacks are out of state, we need EPA to help us,” he said.
Sen. Cory Booker (D-N.J.) pointedly asked Pruitt whether he knew how many Oklahoman children had asthma, which is linked to air pollution. Pruitt acknowledged he did not. Booker said the American Lung Association puts the total at 110,000 — more than 10% of the state’s children — which he said was one of the highest rates in the U.S.
WASHINGTON — President-elect Donald Trump’s nominee to head the Interior Department told a Senate panel Tuesday that climate change is real but that he would continue to allow fossil fuel production on public lands.
Zinke
“We need an economy and jobs, too,” Rep. Ryan Zinke (R-Mont.) told the Senate Energy and Natural Resources Committee during a nearly four-hour confirmation hearing. The former Navy Seal attempted to steer a path between climate deniers and fossil fuel opponents, citing President Theodore Roosevelt as a model and calling for continuation of an “all of the above” approach to energy production.
Sen. Bernie Sanders (I-Vt.) asked Zinke whether he agreed with Trump, who has called climate change a “hoax.”
“I don’t believe it’s a hoax,” Zinke responded.
“The climate is changing. That’s undisputable. [My district includes] Glacier National Park. I’ve seen glaciers over the period of my time recede,” Zinke said. “Man has had an influence. I think that’s undisputable as well … I think where there’s debate on it is what that influence is and what can we do about it.”
“There is a debate on this committee but not within the scientific community,” Sanders interrupted, before asking whether the U.S. should continue to allow fossil fuels to be produced on federal land.
Zinke said it is preferable to produce energy domestically, “under reasonable regulations,” rather than depend on foreign energy production without environmental rules.
‘War on Coal’
Sanders
In response to a question from Sen. John Barrasso (R-Wyo.), Zinke pledged to reverse the Obama administration’s moratorium on coal mining on federal lands.
“The war on coal I believe is real,” he said. “The moratorium, I think, was an example of one-size-fits-all [policy]. It was a view from Washington and not a view from the states.”
He called for investing in research and development on coal. “We know we have the asset. Let’s work together to make it cleaner, better. We should be leading the world in clean energy technology and I’m pretty confident that coal can be a part of that,” he said. “But it is about science. It is about investing in our future and not looking at our past.”
Zinke also promised to support Barrasso’s plan to use the Congressional Review Act to overturn the Bureau of Land Management’s Nov. 15 rule regulating venting and flaring rule of natural gas.
Zinke said he was troubled by the volumes of natural gas vented during production. “The amount of venting in North Dakota alone almost exceeds what we get out of the fields. A lot of the wasting can be [eliminated] by having the infrastructure [to capture it]. So let us build a system where we capture that energy that’s otherwise being wasted. That’s an enormous opportunity.”
Mining Restoration
Cantwell
Ranking member Sen. Maria Cantwell (D-Wash.) pressed Zinke on whether he would support an end to current policy allowing surface coal mine operators to “self-bond” for their obligations to reclaim lands. She cited a Government Accountability Office report released Tuesday that found all other energy and mineral producers on federal lands — mineral mines, onshore oil and gas drilling and wind and solar production — are required to purchase third-party bonds.
“I think bonding is important,” Zinke answered. “I think we need to have the courage today to look 100 years forward [so we can] look back and say we did it right.”
“Well, I hope that was a great endorsement of the stream protection rule,” Cantwell responded, smiling. The rule, issued by the Interior Department on Dec. 19, requires coal companies to restore their land to its condition before mining began, an effort to prevent mining debris from contaminating streams. It, too, is a target for Congressional repeal. (See Cost Trends Favor Renewables Despite Coming Policy Shifts.)
CAISO’s decision to consider reforms to its congestion revenue rights auctions as one of its top priorities for 2017 has provoked mixed reactions from stakeholders.
Opponents of the move say the ISO’s pursuit of the CRR issue lacks widespread stakeholder support and therefore doesn’t warrant a top spot within the policy roadmap for this year’s discretionary initiatives. They contend CAISO is elevating the concerns of its internal Market Monitor above those of most stakeholders, who want the ISO to focus on other priorities.
But the initiative has its backers, some of whom argue that the ISO should move as quickly as possible to determine why auction revenues are consistently outpaced by payments made to CRR holders, leaving ratepayers to make up the difference.
CAISO has included the issue in its draft final policy roadmap of “discretionary” stakeholder initiatives in response to concerns expressed by its internal Market Monitor. “Discretionary” initiatives represent policies the ISO can implement out of its own choosing rather than as a result of a regulatory mandate or market necessity.
The Department of Market Monitoring has pointed out that ratepayers lost $520 million from 2012 to 2015 through a market that pays $1 to CRR holders for every 45 cents in revenues received from auctions.
A 2016 report by the Monitor urged the ISO to altogether eliminate the auctions, contending that the program suffers from inherent design flaws that allow speculators to reap large financial gains at ratepayer expense. (See CAISO Monitor Proposes to End Revenue Rights Auction.)
“The consistent underpricing of CRRs calls into question a fundamental assumption of the CRR auction design that competition will drive auction prices to equal the CRR’s expected value,” the Monitor said in its report.
The Monitor’s report offered up a potential alternative to the current auction: a bilateral or exchange market for forward contracts-for-difference for pairs of ISO nodes — also known as locational basis price swaps.
Unlike in the current CRR market, the price swaps would be traded between willing counterparties, rather than leaving ratepayers as the unknowing, and technically outmatched, counterparty.
“We’re not jumping to DMM’s proposed solution,” Brad Cooper, CAISO manager of market design and regulatory policy, said during a Dec. 22 stakeholder meeting. CAISO is taking up the initiative “because DMM has pointed out a significant revenue gap that comes to big money,” he said.
In comments submitted to the ISO supporting the initiative’s inclusion in the roadmap, the “Six Cities” utilities of Anaheim, Azusa, Banning, Colton, Pasadena and Riverside attempted to put the size of that gap into perspective. Revenue deficiencies stemming from the auction equated to $130 million per year over a three-year period, compared with the estimated Energy Imbalance Market (EIM) benefits to ISO market participants in 2015 of $12.7 million, they pointed out.
The potential CRR auction reform initiative would seek to address the concern that auction revenues have historically fallen well short of payments made to CRR holders. | CAISO
“Thus, the average annual costs to ISO LSEs resulting from the design of the CRR auction process have been more than 10 times the estimated EIM benefits to ISO market participants in 2015,” the utilities said.
Noting that the ISO has signaled a need to perform additional analysis before formally committing to the initiative, the Six Cities encouraged staff to move with all deliberate speed.
“Any preliminary analysis considered necessary should commence as soon as possible (and well before the middle of 2017) so that an appropriate solution to the CRR auction revenue deficiencies can be implemented prior to the auction for annual CRRs for 2018,” the utilities said.
Northern California Power Agency (NCPA), a joint powers agency established to serve the region’s municipal utilities, added its support to a measure that would address auction shortfalls.
“Modification of the auction process such that bids from entities willing to sell clear against those willing to buy is a reasonable approach to mitigating the long-standing revenue insufficiency concerns that we believe bears careful consideration,” the agency said in its comments.
Still, NCPA faulted the Monitor for its failure to suggest modifications rather than advocate for “abolition” of the auction process.
“NCPA does not at all support doing away with the CRR auction, which is an integral part of the risk mitigation services we provide our members,” the agency wrote.
Pacific Gas and Electric, the state’s largest investor-owned utility, said it was “eager” for the ISO to address CRR revenue inadequacy and “encouraged” by inclusion of the issue on the roadmap.
“In line with the DMM’s recommendation to assess the value of the CRR auction platform, PG&E hopes this initiative will provide an opportunity to consider and evaluate alternative solutions to CRR revenue inadequacy,” the utility wrote in its comments.
Opponents of the initiative include DC Energy, a proprietary trading firm focused on investments “related to the locational and temporal value and volatility in transport markets for power and natural gas,” according to the company’s website.
The company criticized CAISO for giving too much weight to the Monitor’s concerns about the auction issue when ranking the CRR initiative against other potential discretionary initiatives.
“DC Energy appreciates the need for CAISO consideration of DMM’s input,” the company said in its comments. “However, on its face, it appears that one stakeholder’s views were considered for its ranking, despite the volume of diverse comments received.”
The company said the Monitor’s analysis of the CRR market failed to focus on the benefits of the current system and that the ISO would be “best served” in considering various stakeholder and market perspectives when examining the market’s performance.
The current auction design provides a “superior opportunity for both price discovery and hedge acquisition” compared with a bilateral market, DC Energy argued.
“An entity seeking a hedge in the bilateral market might find it challenging or impossible to connect with a willing seller for an exact path,” the company said. “However, within the current CRR auction structure, network capacity is available to any qualified stakeholder, enabling liquidity and multiparty reconfiguration of electrical-location-specific (e.g., ‘nodal’) hedges.”
Western Power Trading Forum (WPTF), an interest group representing regional power traders, took DC Energy’s criticism a step further, contending that the Monitor’s “influence in the initiative-priority process belies [its] supposed independence and is contrary to [its] core functions” as set out in the ISO Tariff.
“WPTF contends that instead of devoting CAISO resources to a pet project of DMM, the CAISO should treat them like any other stakeholder who complained about a small aspect of the market that was naturally improving on its own — and ignore them,” WPTF wrote in its comments.
In support of that last point, the group pointed out that auction revenues as a percentage of payments increased after the ISO implemented practices that improved transparency into how it represents transmission outages in its market models. The Monitor’s findings indicate that the ISO took in 63 cents of auction revenue for every dollar paid out to CRR holders during the first half of last year. (See CAISO Monitor Seeks Congestion Revenue Rights Auction Reforms.)
In their comments, the Six Cities utilities appeared to anticipate the arguments of opponents of the initiative.
“The ISO should reject the efforts by recipients of the wealth transfers documented by the DMM to dissuade the ISO from addressing this misappropriation of the benefits of transmission assets paid for by ratepayers,” the utilities said.
Ellis said MISO will reweight the scenarios annually because of uncertainty over future carbon regulations. MISO’s futures weighting assigns a probability-based likelihood to each MTEP planning scenario. In MTEP 17, existing trends were given 31% consideration, policy regulations were given 43% and accelerated alternative technologies received 26%. (See “MISO Posts Final MTEP 17 Weighting, Siting and Seeks Scope Feedback,” 
