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November 5, 2024

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FERC Accepts MISO’s 2nd Try on Queue Reform

By Amanda Durish Cook

FERC approved MISO’s second attempt at new interconnection queue rules, conditioned on the RTO allowing refunds for “significant” changes in upgrade costs and providing more detail on late-stage restudy scenarios.

MISO’s new queue process is designed to last 460 days and meant to reduce multiple unscheduled restudies by including mandatory restudies in each stage of the new three-part definitive planning phase. FERC said the design should minimize the backlogs that dogged the old queue by studying project withdrawals “on a more structured basis.”

m2 milestone plan ferc miso

FERC’s Jan. 3 order said that while the new queue proposed a longer official timeline than the old process, “the proposal is an improvement compared with MISO’s current study process that can take nearly two years due to unscheduled, ad hoc restudies.” MISO said the old queue process averaged 589 days. The changes formally took effect Jan. 4 (ER17-156).

In its transition plan, MISO plans to grandfather some late-stage interconnection requests. FERC said MISO’s transition “avoids the creation of an unwieldy study group.”

Two ‘Off Ramps’

The new queue creates two designated off-ramps for interconnection customers to withdraw projects; smaller but more frequent milestone payments that can be applied to an initial payment for the interconnection agreement; and a restriction on restudies after a generator interconnection agreement is executed. If a project is unexpectedly withdrawn, MISO can use milestone payments to fund network upgrades that would have otherwise been needed, lessening the financial burden on other projects that rely on the upgrades. After an initial $4,000/MW initial payment, the two subsequent milestone payments are based on a percentage of upgrade costs. (See MISO: Stakeholders Behind 2nd Queue Reform Attempt.) The changes also preserve the ability for MISO to enter provisional GIAs with customers for limited operation “at any time in the interconnection process.”

FERC had rejected MISO’s first queue proposal in March, saying the higher milestone payments could create barriers to entry and that the RTO placed too much blame for the queue’s gridlock on “speculative projects.”

“We find that MISO’s proposed changes to the Tariff address the commission’s previous concerns by implementing more transparent timing and cost information to enhance accountability in preparing timely interconnection studies, providing for more involvement of the interconnection customer in the study process and providing for earlier coordination with affected systems,” the commission wrote.

FERC also agreed with MISO that it should weigh stakeholders’ feedback before considering a provision that allows projects to withdraw penalty-free if substantial queue delays occur in the future.

Refunds for ‘Significant’ Changes

The commission ordered MISO to create a provision allowing refunds of milestone payments if “significant change” affects cumulative network upgrade costs while the project is in the queue’s definitive planning phase. It told the RTO to define the degree of change needed to trigger the refund and address the risk of “cascading withdrawals” that penalty-free exits could cause when crafting the provision. MISO’s revised filing proposed refund of milestone payments only if the network upgrade cost estimates increase 25% or more between the queue’s system impact study and the facilities study of the definitive planning phase.

Additionally, MISO must provide FERC semi-annual informational reports for two years describing the number and types of customers that experience changes in cost estimates for network upgrades greater than 25%. FERC also told MISO to clarify that the RTO does not intend to separately bill withdrawing interconnection customers for another interconnection customer’s restudies.

More Detail Required

| © RTO Insider

The commission gave MISO 60 days to clarify what events could initiate a restudy for customers with GIAs. FERC said the RTO did not maintain the “existing language regarding restudies related to other types of upgrades or contingencies and has not explained why such existing language is no longer necessary.” The commission rejected the argument of MISO’s generation developers, who said restudies after an executed agreement should be banned altogether.

Per FERC’s order, MISO also has 60 days to add language to make scoping meetings mandatory for transmission owners. The RTO had only proposed mandatory scoping meetings for interconnection customers. FERC said transmission owner attendance is “essential to the purpose of that meeting, which is to discuss alternative interconnection options, to exchange information including any transmission data that would reasonably be expected to impact such interconnection options, to analyze such information and to determine the potential feasible points of interconnection.”

FERC OKs New Rule on Milestone Payments

In a related order also issued Jan. 3, FERC accepted MISO’s revised plan that applies the M2 milestone payment across all classes of interconnection customer, including external customers (ER16-1817-001).

“The Tariff changes will ensure comparable treatment for all customers, external or internal, existing or new,” FERC said.

After revising a service agreement last spring for the Louisiana Energy and Power Authority, MISO proposed that external customers should be exempted from interconnection milestone payments because the fees serve to deter speculative projects, and such generators are either in-service, under construction or have an executed interconnection agreement with the transmission provider to which they directly interconnect. MISO also pointed out that the fee is refunded once a generator begins commercial operations. FERC rejected MISO’s stance in October, saying it amounted to preferential treatment. (See FERC Orders MISO to Levy Interconnection Fees Equally.)

MISO said the new queue rules makes it “clear that the M2 milestone payment assessed to any customer is not zero.”

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California Tx Policy Must Foster Resource Diversity, Report Shows

By Robert Mullin

California will require improved transmission access to a diverse set of renewable resources throughout the state and the broader West to cost-effectively meet its renewable energy and greenhouse gas reduction targets, according to a report released by the state’s Energy Commission.

renewable resources california
Windy Flats, Klickitat County, WA | © RTO Insider

Increasing solar generation will lead to rising costs stemming from the need to curtail surpluses during periods of high output and shore up system, and flexible, capacity during other times of the day, the report found.

A technologically and geographically balanced portfolio of resources would help offset the technical risks of California’s growing reliance on in-state solar generation, while the upgraded transmission required to access those resources could enable the state to export surplus solar outside the state.

The study was conducted on behalf of the multiagency Renewable Energy Transmission Initiative (RETI), a collaboration that includes CAISO, the state’s major municipal and investor-owned utilities, the Western Area Power Administration and the California Natural Resources Agency.

The outcome of a yearlong effort, the RETI report provided a “high-level visioning process about what it might take” for California to meet its 2030 mandates for generating 50% of the state’s electricity from renewable resources and reducing GHG emissions to 40% below 1990 levels, RETI project director Brian Turner said during a Jan. 4 call to discuss the report.

Turner was careful to point out that the report did not represent “a projection or goal for any total quantity of renewable energy statewide or in any specific areas” or advocate for any specific transmission or generation projects.

And while the study focuses on the potential for utility-scale renewable development in California and the rest of the West, Turner noted that it is not intended to express a preference for utility-scale energy over other strategies to help the state meet its goals.

“The overall flavor — objective — here is really one big, ‘What if?’” Turner told RTO Insider.

The RETI project poses a set of interrelated questions: “To meet [the state mandates], what might it require in terms of renewables? And, if it requires [a certain] level of renewables, what transmission might be required? And if that transmission were required, what cost, environmental and land-use implications might it entail?”

The report is the most comprehensive effort to date to draw on available information to scope out the most cost-effective transmission solutions for meeting California’s goals. It relies on information about the most promising areas for renewable development, environmental and local land-use policies within California and the potential for collaboration with the wider West.

“One of the questions to ask is: ‘Did we get the synthesis right?’” Turner said during the Jan. 4 CEC call, soliciting feedback from industry participants.

The study assumes that for California to meet its 50% renewable portfolio standard, the state will need to tap an additional 25 to 53 TWh of renewable energy between 2020 and 2030. Based on a 30% capacity factor, that translates into a need for 9.4 to 20.3 GW of new renewable capacity. That figure spikes to 76 TWh (29 GW) under a scenario of accelerated vehicle electrification in the state.

While low-cost utility-scale solar is already cost-competitive throughout California, its continued growth will become costly without the integration of other types of renewable resources to balance out the generation profile for solar.

“Without integration solutions, continued growth in solar PV resources will lead to increased costs from a surplus of generation during high solar periods and a shortage of system and flexible capacity at other times,” the report said. CAISO late last year incorporated into its real-time market a mechanism for procuring upward and downward flexible ramping capability in order to respond to variability from renewable sources, the costs for which are borne by load-serving entities and ultimately ratepayers. (See FERC OKs Ramping Product for CAISO, EIM.)

To counter that effect, California will require access to low-cost renewable resources both inside and outside the state, “especially wind and geothermal resources with generation profiles complementary to California solar generation.” The state’s power producers will also need access to energy markets outside California to offload excess generation and reduce ratepayer costs, the study said.

While California has a “substantial amount” of non-firm capacity to interconnect new generators as “energy-only” resources subject to curtailment, the state falls short in the availability of full-capacity interconnections equipped to ensure that output is “fully deliverable” — capable of reaching its load sink without hitting potential constraints.

That distinction is important because under California Public Utilities Commission rules, only fully deliverable resources can be counted toward a utility’s resource adequacy requirements.

The distinction also underlies the RETI report’s assumptions about the hypothetical potential for development of wind, solar and geothermal development in eight transmission assessment focus areas (TAFAs) where large quantities of resources could be constructed to meet the state’s goals.

The Renewable Energy Transmission Initiative report examined the potential for developing renewables in eight California regions — as well as in areas around major import-export points. | Renewable Energy Transmission Initiative

In most of the TAFAs, full deliverability of new resources would require a significant investment in transmission upgrades in order to relieve constraints. (See Price Tag on Tx Needed to Meet California 50% RPS: $5B?) Development in other TAFAs could be constrained by environmental restrictions or land-use rules.

The Imperial Valley TAFA shows some of the strongest potential for development based on a “hypothetical study range” (HSR) of an additional 3,500 MW of solar and 1,000 MW of geothermal and the existence of favorable land-use planning. New transmission would be necessary to achieve full deliverability.

Development of 4,000 MW of new solar in the Riverside East TAFA would be feasible because of extensive planning on U.S. Bureau of Land Management land through the Desert Renewable Energy Conservation Plan. (See Interior Dept. Approves First Phase of California Desert Renewable Plan.) Constructing 500 to 1,000 MW of wind would be less likely because of environmental and land-use restrictions.

While existing transmission in both the Imperial Valley and Riverside East areas could accommodate the lower end of new renewable development estimates, build-out at the high end of the HSR could require up to $1 billion in transmission upgrades to relieve the so-called “Desert Area Constraint” east of the Miguel substation.

The sprawling San Joaquin Valley TAFA shows potential for 5,000 MW of new solar development, in part through the reuse of “degraded” — or disused industrial — land, but development could require “substantial” investment in upgrading the region’s low-voltage network.

Full development of Northern California’s renewable potential is considered less likely because of a lack of environmental and land-use planning, as well as limited transmission availability. Tapping an estimated 5,450 MW of wind, solar and geothermal resources could cost between $2 billion and $4 billion in new transmission.

The possibilities for development along import-export paths is a mixed bag, according to the report.

Importing an additional 2,000 MW via the California-Oregon Intertie (COI), a major import point from the Pacific Northwest, is not considered feasible without construction of a new 500-kV line from the Oregon border to Tracy, Calif. Still, new transmission built elsewhere in the West and the possibility of dynamic line ratings could result in increased capacity on the line.

Also, the largely underutilized northbound segment of the COI could transmit 3,000 MW worth of solar exports from California.

“Being in the Northwest, we’re very interested in what are the implications for us,” said Fred Heutte, senior policy associate with the Northwest Energy Coalition, an alliance including environmental organizations, utilities and businesses in Oregon, Washington, Idaho, Montana and British Columbia.

Path 46 out of Arizona has the capacity to accommodate an additional 3,000 MW of imports, although substantial resource development could eventually trigger the Desert Area Constraint, the report said.

“This is quite an impressive bit of work in quite a compressed timeline,” Carl Zichella, director of western transmission for the Natural Resources Defense Council, said of the RETI report. “This is very, very useful work.”

The CEC is seeking comments on the draft final report by Jan. 10. A final study is expected to be issued by the end of this month.

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PJM Monitor Asks FERC to Act on ‘Paper Capacity’

By Rory D. Sweeney

PJM’s Independent Market Monitor urged FERC to address longstanding concerns over demand response providers and others selling “paper capacity” to arbitrage price differences between the Base Residual and Incremental auctions.

The Monitor made its request in a Dec. 30 filing that was accompanied by a report analyzing the use of replacement capacity since 2007 (ER14-1461, EL14-48).

pjm independent market monitor demand response
PJM’s Independent Market Monitor says demand response providers disproportionately replace commitments from Base Residual Auctions compared with sellers of other resource types. External generation and internal generation not in service also had high rates of replacement in some years.

“The lack of a specific requirement that all capacity resources be demonstrably physical assets when offered into PJM capacity auctions continues to provide strong incentives to offer speculative paper capacity,” the report concludes. “The pattern of IA prices being substantially lower than BRA prices, exacerbated by PJM’s preannounced sales of capacity at low prices in IAs, continues. The pattern of consistently extraordinarily high levels of replacement by DR providers and very high levels of replacement by capacity imports and planned internal generation continues.”

PJM attempted to address the issue in 2014, but FERC rejected its proposed rule changes to curb speculation in the auction, saying it created undue barriers to entry. The commission said PJM’s proposed arbitrage fix — which the RTO proposed unilaterally after failing to obtain stakeholder consensus — “will simultaneously increase risk to suppliers and costs to load, without guaranteeing equally offsetting benefits to the PJM grid as a whole.” (See PJM Wins on DR, Loses on Arbitrage Fix in Late FERC Rulings.)

Instead, the commission said it would convene a technical conference to find a solution. But FERC has not scheduled the conference, the Monitor noted, because of PJM’s request to defer action pending implementation of Capacity Performance.

The Monitor’s Dec. 30 filing asked the commission to “proceed without further delay towards solutions to the issues.”

“Sellers of demand resources in [Reliability Pricing Model] auctions disproportionately replace those commitments on a consistent basis compared to sellers of other resource types,” the Monitor said in its report. “The risks to the markets associated with the sale of DR without any supporting information on the plausibility of the underlying assets [mean] … the system is less reliable than it might otherwise be because the full amount of DR that cleared the RPM auction is not actually available, the price to other capacity resources has been suppressed by the sale of the speculative DR, new entry of other capacity resources could have been forestalled by the sale of speculative DR and there may not be adequate replacement resources available with short notice prior to the delivery year.”

“There is no reason for further delay on this matter,” says the analysis, which updates reports from 2012 and 2013. “The evidence has been and continues to be quite clear.”

The filing comes just weeks after the Monitor teamed with PJM to reinstate capacity-replacement rules that had been stripped away in November through a stakeholder initiative to reduce the accounting reconciliation time for Incremental Auction capacity transactions. (See “PJM, IMM Win Approval for Reinstatement of Capacity-Replacement Rules,” PJM Markets and Reliability Committee Briefs.)

Both PJM and the Monitor had opposed the stakeholder proposal, and the Monitor filed a complaint with FERC that caused some stakeholders who had supported the proposal to reconsider their positions. The complaint was withdrawn after the PJM/IMM proposal was approved.

At issue was a rule implemented in May that could allow what the Monitor describes as “speculative” capacity offers to clear at BRAs and then be replaced without justification at lower prices with capacity in subsequent Incremental Auctions. The rule — meant to help participants avoid Capacity Performance penalties when legitimate bids into the BRA from participants like DR providers unexpectedly become unable to deliver — had been superseded by a pre-existing rule that required justification for replacement.

However, PJM stakeholders who provide financial services find it onerous because it requires them in certain situations to maintain collateral for positions they have sold out of, a situation Citigroup Energy’s Barry Trayers termed “double counting.”

Monitor Joe Bowring stated at the time that reinstating the rule wasn’t “optimal,” but it was better than allowing capacity replacements without justification.

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Can 2017 Top 2016 for Breaking Ground in New York?

By William Opalka

Upstate nuclear power plants will start earning additional revenue for their carbon-free attributes in April as New York becomes the first state in the nation to offer the industry a lifeline.

The zero-emission credit program, adopted Aug. 1, was but one of a dizzying blitz of policy initiatives from New York regulators in 2016.

distributed energy resources new york nuclear power
Nine Mile Point | Constellation Energy Nuclear Group

The nuclear supports were included in the Clean Energy Standard, which mandates 50% renewables by 2030. The Public Service Commission also admitted that the retail electric and gas markets have failed and needs to be revamped. And under the path-breaking Reforming the Energy Vision, the PSC began proceedings to develop a new utility revenue model and ways to value distributed energy resources. With NYISO, the PSC also moved forward on $1 billion in transmission projects.

Those are just a few of the initiatives that will continue into 2017 and beyond, many of them under the very large umbrella of REV.

ZECs

The PSC proposed the ZEC program in February to prevent the closure of nuclear plants whose revenues have suffered under low natural gas prices. The additional revenue was crucial to Exelon’s agreement to purchase Entergy’s James A. FitzPatrick plant, which the company had threatened to retire.

The PSC upheld the ZEC and CES programs on rehearing late last month, but the ZECs still face two court challenges. Opponents say the estimated $7.6 billion over 12 years of payments are merely props to save upstate jobs and that the program interferes with the wholesale market. Others contend the money would be better spent on a faster transition to renewable energy. (See NYPSC Rejects Challenge to Clean Energy Standard, Nuke Subsidy.)

Crackdown on ESCOs

The PSC in 2016 continued a crackdown on energy service companies, culminating in a December decision that the retail-choice market couldn’t be reformed on the margins, instead needing a top-to-bottom overhaul. (See NY Regulators Call for Overhaul or End to Mass-Market Retail Choice.)

The proceeding, which will begin with a procedural conference Jan. 26, is an apparent change in strategy for the PSC, which lost a court challenge to its February order requiring retailers to guarantee savings for most mass-market customers. (See New York ESCO Order Vacated by Court.)

The PSC also banned ESCOs in December from signing up low-income customers, upping the ante from a previous order that set a moratorium on sign-ups. The ECSOs have yet to respond to the latest salvo.

PSC staff also released a report that starts a two-phase process to change the way DER are valued. The move is intended to replace the crude instrument of net metering with more sophisticated, granular metrics for weighing the value rooftop solar and other distributed energy resources provide to the system and the costs they impose. (See NYPSC Vision for DER: From Net Metering to ‘Value Stack’.)

The PSC says DER can improve system efficiency if their value is properly reflected in retail and wholesale markets and if utilities are incented to consider them as alternatives to traditional capital investments. NYISO plans to release a “road map” on integrating these resources into the wholesale markets in early January.

And to more fully integrate renewable energy resources into the New York grid, proceedings are underway for two public policy transmission projects under FERC Order 1000.

One, the Western Energy Connection, will add 1,000 MW of transmission capacity for hydro, gas and renewable generation, including the dam at Niagara Falls. In June, NYISO identified 10 proposed upgrades as finalists, submitting their findings to the PSC. (See NYISO Identifies 10 Public Policy Tx Projects.) The commission in October ordered further review and project selection by NYISO.

A second project will expand transmission corridors in central New York and the Lower Hudson Valley to provide easier power flows from the wind energy areas to the load centers near New York City. The PSC just closed a comment period on whether that project should proceed. (See NY Transco Chief: Tx Buildout ‘A Marathon, not a Sprint’.)

NYISO Strategic Plan

NYISO’s Strategic Plan for 2017-2021, released Dec. 15, says the grid operator will integrate the public policy goals of New York state to switch to cleaner and more DER while adding technological innovations to grid operations.

In addition to maintaining reliability, an important focus will be responding to changes resulting from REV, the ISO said.

In addition to the DER “roadmap,” the ISO will pursue greater fuel assurance through gas and electric coordination; capacity market improvements, including reduced reliance on reliability-must-run agreements; the demand curve reset; and improvements to its real-time commitment/real-time dispatch forward horizon coordination.

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PJM Capacity Debates, Angst over State Subsidies to Continue in 2017

By Rory D. Sweeney

After its first full year under new CEO Andy Ott, and the last year of its transition to 100% Capacity Performance, PJM heads into 2017 amid continued ferment over the capacity market and angst over the impact of state subsidies to generators.

markets and reliability
Ott | © RTO Insider

When Mike Kormos — Ott’s main challenger to replace former CEO Terry Boston — left PJM in March, Ott quickly restructured his executive staff, eliminating Kormos’ chief operations officer position and elevating deputy Stu Bresler to control of both the Markets and Operations divisions. The move put Bresler in charge of Kormos’ former deputy, Mike Bryson. Ott also expanded the authority of General Counsel Vince Duane. (See Ott Restructures PJM Divisions, Leadership.)

Ott’s reorganized team faced a series of challenges to the competitive electric model that rules in most PJM states.  While the 20th anniversary of retail choice was celebrated in Pennsylvania, the competitive model came under attack elsewhere. (See Crafters of Pa.’s Deregulation Law Look Back After 20 Years.)

markets and reliability

Public Policy vs. Markets

PJM has long dealt with state mandates and federal tax credits for renewable generation. The newer challenge is subsidies ordered by state policymakers fearful of losing in-state coal and nuclear generation — and their thousands of jobs — that are imperiled by environmental costs and low natural gas prices.

Michigan legislators voted in December to continue its 10% cap on retail choice. (See AEP Ohio Rate Plan Excludes Merchant Generation.)

Illinois followed New York’s lead in approving zero-emission credits to support Exelon’s two ailing nuclear plants in the state. (See Illinois Lawmakers Clear Nuke Subsidy.)

“The future of PJM markets is at issue,” Independent Market Monitor Joe Bowring said. “The PJM capacity markets cannot work with significant new subsidies. Subsidies suppress both the capacity price and the energy price. Both capacity market and energy market revenues are essential to providing incentives for new entry and for maintaining existing resources.”

FirstEnergy Wants Out of Competitive Generation
Sammis Power Plant | Bechtel

PJM outlined its concerns and defended its performance with a 45-page report in May. (See PJM Study Defends Markets, Warns State Policies can Harm Competition.)

In an interview with RTO Insider last month, Ott said he didn’t see the state initiatives as existential threats to competition. “I don’t see a concern being raised within PJM [about whether] it delivered value,” he said. “There has been a lot of benefit to competition. [It] seems to be more the question: How do we manage the entry and exit to make sure it’s being done in a reliable manner?”

Ott pointed out that between 4,000 and 5,000 MW of new generation has entered each of the past four capacity auctions. It’s “not only a swap in fuel, but a swap in technology,” he said, that is driving down costs and forcing legacy assets to consider retirement.

The tension between state policymakers and federally regulated wholesale markets is but one of the issues of 2016 likely to continue making news in 2017.

Planned transmission upgrades to the Artificial Island nuclear complex were put on hold in August after rising costs and complaints over cost allocation, another frustrating delay in what was to be PJM’s first competitive project under FERC Order 1000. (See PJM Board Halts Artificial Island Project, Orders Staff Analysis.)

Following a technical conference in February, FERC ordered changes to PJM’s rules on financial transmission rights and auction revenue rights and rejected the RTO’s first attempt at a fix. (See FERC Finds PJM ARR/FTR Market Design Flawed; Rejects Proposed Fix.)

It all sets up for an eventful 2017. Here’s some of the issues likely to dominate PJM stakeholder meetings in the new year:

The Case for Capacity Performance

No issue is likely to consume more stakeholder attention than continued debate over PJM’s new CP rules. After acquiring 80% CP resources in the 2015 and 2016 Base Residual Auctions, PJM will be requiring 100% CP for the 2017 auction, eliminating base capacity.

Ott defends the need for the increased performance requirements and nonperformance penalties under CP, although he conceded that changes to the market — such as what the minimum offer price should be — need to be considered. “[We were] seeing a lot of new units coming in, but not every one of them was coming in with firm fuel,” he said, referring to the previous rules, under which forced outage rates peaked at 25% during the 2014 polar vortex — the event that led to the tougher rules.

A coalition of cooperatives and municipal utilities has been campaigning for several months for a holistic review of the capacity construct, questioning whether the current model is sufficiently flexible to respond to state initiatives. (See “Stakeholders Remain Skeptical of Campaign to Revisit CP,” PJM Markets and Reliability Committee Briefs.)

Others have called for more specific rule changes, including extending the life of base capacity, incorporating seasonal capacity products and relaxing some of the construct’s strict performance rules. (See FERC Wants More Detail on PJM’s Seasonal Capacity Plan.)

Bowring | © RTO Insider

Bowring has continued his call to eliminate demand response as a capacity resource, saying PJM should limit its role to the demand side of the capacity calculations.

Security in All its Forms

A major focus for PJM in the coming year will be analyzing its security. It has completed a multiyear effort to develop a security strategy focused on cyber and physical protections, Ott said. “We’re already one of the leaders in the space, but continuous [improvement] is important to provide value to our customers,” he said. (See “Preview of Security Committee Receives Tepid Response,” PJM Markets and Reliability and Members Committees Briefs.)

The transition in fuel sources for generating units is receiving consideration as well. The rapid expansion of gas-fired and retreat of coal-fired generation has made PJM “more diverse than we’ve ever been,” Ott said, but he added, “Is there a point where we become concerned about being over dependent” on gas? The RTO has undertaken a fuel-security study to find out, the results of which are scheduled to be released by the end of the first quarter, Ott said.

Fixing FTRs and ARRs

FERC’s order requiring changes in PJM’s FTR/ARR market design and rejecting the RTO’s proposed correction sent PJM back to devise a new strategy, which it submitted in a Nov. 14 compliance filing (EL16-6, ER16-121). The order called for shifting the costs of balancing congestion onto load and allocating ARRs in a way that doesn’t consider extinct generators.

PJM filed for the changes to be implemented by June 1 while the Monitor requested rehearing, saying the commission erred in requiring load to shoulder the congestion costs. (See Monitor Says FERC Erred in PJM FTR Ruling, Seeks Rehearing.)

Renewed Turf Battle

Last year also saw a renewal of tensions between the Monitor and PJM management as Bowring took exception to the RTO’s attempt to constrain his unit’s role in the review of cost-based offers. (See PJM Attempting to Usurp Market Mitigation Role, Monitor Says.)

The disagreement is part of a larger dispute over fuel-cost policies, which Bowring defends as a major part of the Monitor’s role. “Fuel-cost policies are core to defining and evaluating competitive offers, which equal short-run marginal costs,” he said.

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FERC OKs New CAISO Load-Serving Entity Definition

By Robert Mullin

FERC approved a CAISO Tariff revision expanding the definition of a “load-serving entity” to include organizations that purchase wholesale electricity to serve their own needs (ER17-218).

The ISO’s rules previously recognized as LSEs only those entities that sell electricity or serve load to end users, a description that covers utilities, federal power marketing agencies and community-choice aggregators.

ferc caiso load-serving entity
CAISO’s LSE definition refinement eliminates a subcategory that previously covered California’s State Water Project, which will now fall under the newly expanded definition. |  CDWR

The original definition also made a special provision for the State Water Project (SWP), a California agency that directly engages the wholesale market to cover its own energy requirements. The revision eliminates that subcategory, with SWP now covered under the newly expanded definition.

The ISO sought to broaden the definition to accommodate the San Francisco Bay Area Rapid Transit District (BART), which, like the SWP, serves its own load but did not meet the standard definition of an LSE. (See CAISO Issues Revised Proposal to Expand LSE Definition.)

BART’s transmission contract rights on Pacific Gas and Electric’s network, which predate the existence of the ISO, expire at the end of 2016. When those rights automatically convert to CAISO service, the agency will be exposed to congestion charges.

The definition change will permit BART to receive a free congestion revenue rights allocation in the ISO’s annual process in order to hedge the transmission costs of serving its load. The revised Tariff language also makes clear that BART — and any other entity choosing to serve its own load — will be subject to resource adequacy obligations.

caiso load-serving entity ferc
| BART

“We find that the revised definition is a reasonable approach to encompass entities, such as BART, that are currently excluded but that nonetheless should be considered a load-serving entity, and avoids the need for CAISO to add carve-outs to the definition, as it initially did for State Water Project,” the commission said in its Dec. 30 ruling.

The revision also alters a provision requiring that any LSE must be authorized to serve load under California state or local law — deleting the reference to California. The change was intended to acknowledge the current membership of Nevada-based Valley Electric Association and to prepare the ISO for additional out-of-state members through regional expansion.

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ERCOT Looks to Incorporate DG, Improve Ancillary Services in 2017

By Tom Kleckner

Fifteen years after it first opened, ERCOT’s competitive electric market is pretty much running on cruise control. It has ample low-cost electricity to meet Texas’ growing demand and continues to add renewable resources. And 2016 will go on record as having the lowest prices ever.

ERCOT ancillary services RMR 2017
ERCOT’s distributed generation portfolio (Shell Energy)

Sure, protocols always need tweaking, the ISO’s reliability-must-run practices still draw stakeholder complaints and there are congestion concerns in Houston, West Texas and the Rio Grande Valley. But otherwise, ERCOT enters 2017 with a grid those in power see as the envy of others.

“Nobody has a competitive market like ours,” Texas Public Utility Commission Chair Donna Nelson said during a July meeting. The PUC has regulatory oversight of ERCOT, and Nelson often trades quips during open meetings with her two fellow commissioners over the market’s success.

Load-weighted average wholesale prices for 2016 were less than $25/MWh, far below the 2008 high of $77.19/MWh. Average prices have stayed below $41/MWh in seven of the last eight years. Not surprisingly, customer complaints to the PUC fell to 4,835 complaints, down from 6,973 the previous year, according to the Texas Coalition for Affordable Power.

The ISO, which boasts more than 18,000 MW of installed wind capacity, set a new record for wind energy production Christmas morning with 16,022 MW.

With 7 million smart meters, the Texas Interconnection is also one of the more advanced grids around. “We’ve got a retail market that offers customers choice in a way that’s more mature and more fulfilled than any other retail market in the world,” ERCOT CEO Bill Magness said in November.

DER Focus

Much of the focus in 2017 will be on accommodating distributed energy resources and determining how those smaller power sources can be aggregated to predictably meet demand.

In preparation for the new year, ERCOT staff have been working to map the system’s smaller (greater than 1 MW that inject to the grid) registered distributed generation units and on a white paper addressing DER’s reliability. Both efforts are picking up on the work of the Distributed Resource Energy and Ancillaries Market (DREAM) Task Force, a two-year effort that ended last year with a report that made eight recommendations.

The ISO estimates it has 900 MW of DG in its competitive areas (which doesn’t include the cities of Austin or San Antonio). It expects DG to grow at 10% annually, which is why staff wants to account for the DER on the system in both competitive and noncompetitive areas.

“With an 80,000-MW system, that’s not a huge penetration at this point,” Magness said. “These resources don’t raise a long-term reliability issue — they’re not waving a red flag — but we expect to see a lot more, whether for environmental reasons or people wanting energy independence. If you don’t know you have a large cluster of DG, your load forecasts are not going to be right.”

Magness likes to joke about the Austin moving company that has the motto, “If we can get it loose, we can move it.”

“If we can see it, we can integrate it,” he says.

Ancillary Services

ERCOT is also looking to improve its visibility into ancillary services and inertia data. Its existing ancillary services framework was lifted from a market design developed in the 1990s, and staff and stakeholders have been working since 2013 to unbundle the services and improve the market’s ability to handle DG, fast-acting storage devices, smart-grid technologies and other new developments.

A staff proposal to separate responsive reserve service into fast-frequency response, primary frequency response and contingency reserve service categories did not receive sufficient stakeholder support to move forward. A Brattle Group report on these “future” ancillary services determined they would offer economic benefits “on the order of 10 times the [estimated $12 million to $15 million in] implementation costs.”

ERCOT currently spends about $500 million annually on these services.

The ISO could also face an RMR rulemaking (Project No. 46369) in 2017 from the PUC. The commission held a workshop on the practice in December, gathering feedback from market participants on how it might limit a practice that even Magness has acknowledged can be a “blunt instrument.”

Reliant Energy’s Bill Barnes, who failed to gain enough support this summer for a protocol change that would price RMR units at the end of the dispatch queue, said during the workshop that the process “indicates the market has failed to retain and attract sufficient resources to meet ERCOT’s reliability criteria. The best solution to RMR is to not have any.” (See “Board Rejects RMR Mitigated-Offer Appeal, Lets Stakeholder Process Move Forward,” ERCOT Board of Directors Briefs.)

Barnes, the PUC staff and other stakeholders discussed modifying the RMR-evaluation timeline, the ERCOT board’s approval of RMR agreements potential changes to the review methodology.

Currently, RMR units are subject to the same offer mitigation as other units.

The ISO this year should complete much of its technology “refresh,” a four-year, $48 million initiative updating its computer technology. The final three of the 11 refresh projects — remote access and two telecom efforts — are scheduled to begin in 2017. By the end of 2017, ERCOT will have updated its database servers and core network.

The project has already spent 40% of its budget, Magness said in December, and it is expected to come in under or at the $48 million target.

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MISO Changes to Queue, Auction, Cost Allocation to Dominate 2017

By Amanda Durish Cook

MISO’s 2017 will likely be filled with capacity auction changes, cost allocation debates, an updated interconnection queue and multiple transmission studies.

The RTO filed its proposed forward capacity auction for its retail-choice areas Nov. 1 and requested a March 1 effective date (ER17-284). (See MISO Files Forward Capacity Auction Plan with FERC.)

MISO spent much of 2016 reconciling the forward capacity market with the existing prompt capacity auction and utilities’ forward resource adequacy plans and bilateral contracts. “There was a rush to the finish line to file the Competitive Retail Solution,” Resource Adequacy Subcommittee Chair Gary Mathis said. “We’ll hopefully find out in early springtime” if the proposal passed FERC’s muster.

Assuming FERC approval, work to implement the forward auction alongside the prompt auction will continue through 2017 before the first bifurcated auction in April 2018 for the 2018/19 planning year.

Interconnection Queue Changes

Curran | © RTO Insider

MISO expects a FERC decision any day on its second attempt to reduce uncertainty and the amount of time it takes for projects to clear the interconnection queue. The late October filing proposes fewer restudies, optional “off-ramps” with fee refunds for withdrawing projects, a smaller initial milestone payment and subsequent milestone payments based on a percentage of upgrade costs. “It’s currently a two- to three-year process and is challenged by restudies,” said Jennifer Curran, MISO vice president of system planning and seams coordination.

If all goes as planned, queue changes will take effect in January. Although the new process has yet to be approved, MISO has begun to prepare for the transition, with all projects expected to follow the new rules after February 2017’s batch of interconnection applicants.

FERC rejected MISO’s first proposal in spring, telling the RTO it placed too much blame for the queue’s bottleneck on “speculative” projects and said its proposed milestone payments to move along the queue were prohibitively high (ER16-675).

Cost Allocation

MISO also will set aside some of 2017 to revise its cost allocation formulas for market efficiency projects and sub-345-kV economic projects. The RTO hopes to complete the revisions in 2017 and implement them by 2018, when Entergy’s integration transition period, which limits cost sharing in MISO South, expires. (See MISO Stakeholders Propose Changes to Market Efficiency Cost Allocation Process.)

“We all know cost allocation is a money issue where consensus is not likely to spring up like a flower,” outgoing MISO Director Judy Walsh said at the December Advisory Committee meeting.

“I think we’ve seen a lot of movement; no one is going to get what they want, but we are on a path,” Xcel Energy’s Carolyn Wetterlin replied.

North-South Bottleneck

MISO is also planning a study that will examine the benefits of building new transmission to supplement the constrained transmission interface linking the RTO’s North/Central and South regions. In January, FERC approved a seven-year settlement that stipulates MISO’s north-to-south flows using SPP’s transmission be restricted to 3,000 MW and 2,500 MW south to north. (See MISO Proposes Study to Measure Benefits of New North-South Tx.)

There’s “nothing so stark as the North-South constraint” to MISO system planners, Curran told the Markets Committee of the Board of Directors last spring.

The RTO will also embark on an ambitious long-term transmission overlay study looking at system needs under three future scenarios, with varying assumptions on carbon reduction targets, natural gas prices, coal generator retirements and renewables growth.

Beginning Jan. 31, the Economic Planning Users Group will review an initial set of transmission needs to design preliminary overlays, said Lynn Hecker, MISO manager of expansion planning. Long-term transmission needs are expected to be identified at the end of 2017. (See “Long-Term Overlay Study Scoped; MISO Asks for More Responses,” MISO Planning Advisory Committee Briefs.)

Competitive Transmission Development

Late last month, MISO selected LS Power subsidiary Republic Transmission over 10 other bids to build the Duff-Coleman 345-kV transmission project, the RTO’s first competitive project under FERC Order 1000. The work in Southern Indiana and Western Kentucky includes the construction of two substations and a 28.5-mile line connecting them. Republic will be delivering quarterly updates to MISO throughout 2017 on the $49.8 million project. (See LS Power Unit Wins MISO’s First Competitive Project.)

While that work progresses, the RTO’s stakeholders are expected to spend the first half of 2017 identifying improvements to the RTO’s competitive developer selection process.

IT Refresh Coming

| MISO

MISO, which estimates it will spend about $1.1 billion on information technology between 2015 and 2019, has hired consultants for another study to assess its aging system software. Results of the study will be reveal how well the RTO’s software can accommodate the effects of a changing resource mix, increased intermittent and behind-the-meter generation and increased combined cycle units.

The RTO also plans to begin work on six projects in 2017 to improve its market systems in its ongoing Market Roadmap process. (See MISO to Study Aging Software; Market Improvements Planned for 2017.)

MISO Looks Back at 15

MISO took time last month to reflect on its 15th anniversary of becoming an RTO. At the December board meeting, CEO John Bear noted that the RTO has grown from 21 employees in 2000 to about 900 in 2016.

“The beginning tested our tolerances. Without regular money coming in, it’s hard to see a path forward,” said Steve Kozey, senior vice president of compliance services and one of those hired in 2000. “In February 2002, when FERC approved our Tariff and MISO could start recovering costs on a regular basis, employees let out a sigh of relief because they knew from then on out, they could count on a paycheck each month.”

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SPP Coal Generation Continues Decline; Wind, Load Records Set

By Tom Kleckner

Coal-powered generation continues to decline in SPP’s market, accounting for only half the RTO’s total energy production this fall (September-November), according to the Market Monitoring Unit’s recently released State of the Market report.

Wind production and lower gas prices have combined to reduce the use of coal resources, which accounted for 60% of SPP’s energy production just two years ago. At the same time, wind energy has increased its share of production from 13% in fall 2014 to 20% in 2016.

Not surprisingly, coal resources only set real-time prices 37% of the time this fall, compared to 52% in 2015. Cheaper gas units (combined cycle and simple cycle) were marginal 53% of the time, with wind resources setting the price 9% of the time.

After record low prices in the spring, gas prices rose in the fall, with the average cost of $2.61/MMBtu at the Panhandle Hub, compared to $2.25/MMBtu in 2015. The real-time balancing market’s average LMP was $25.10/MWh, up from $19.98/MWh a year ago; the day-ahead market saw an increase from $20.73/MWh last year to $24.43/MWh this fall.

The report also noted virtual transactions have “steadily increased from year to year,” driven primarily by financial-only market participants. Financial players completed 2.1 million virtuals this fall, with resource and load owners accounting for just over 62,000.

SPP saw “marked” increases of 12.6% and 13.7% of load in October and November, respectively, bettering the previous high month of 10.8% last March. Virtual transactions as a percentage of load have increased from 7.1% two years ago to 11.7% in 2016.

The RTO filed the report with both FERC and the Arkansas Public Service Commission.

SPP Sets New Wind Generation, Winter Load Marks

SPP set a new record for wind generation Friday when the footprint cracked the 12,000-MW threshold for the first time, producing 12,141 MW. The latest record was its sixth in 2016 for wind generation, breaking the previous high of 11,305 MW on Nov. 17.

The RTO also set a new winter load peak of 40,323 MW on Dec. 19, marking the first time its winter load surpassed 40,000 MW.

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CAISO Expansion in Question as EIM Grows

By Robert Mullin

CAISO rang in 2016 with a strong push to expand its operation into PacifiCorp’s sprawling six-state service territory, but the project hit a stumbling block by mid-year as skeptics called on the ISO to slow its regionalization effort.

A 2015 state law requires the grid operator and state energy agencies to explore ISO expansion to help California meet its 50% renewable energy mandate.

The ISO last year kicked off a set of initiatives considered to be “central” policy elements of expanding into a region with dozens of balancing areas subject to multiple state and municipal rules.

Those efforts — still ongoing — dealt with the complex and often contentious issues of allocating transmission costs, maintaining adequate regional resources and accounting for greenhouse gas emissions. (See CAISO Kicks Off Effort to Track GHGs Under Regionalization.)

But the most challenging initiative was the effort to develop governing principles that would assuage concerns about California dominating the policies and management of a Western RTO.

Particularly contentious is California’s requirement that the state’s utilities track carbon emissions from generation serving their loads in order to ensure compliance with emissions caps. CAISO’s provision of generation data is key to that effort, which means that every generator in an expanded ISO would be subject greenhouse gas reporting requirements in order to track deliveries to California — regardless of whether the unit is located in a coal-heavy state disinclined to impose such a requirement.

When industry participants across the West expressed concerns that an initial governance proposal threatened to compromise the energy policies of “non-California,” CAISO returned in July with a revised document that emphasized the preservation of state authority. (See Revised Western RTO Governance Plan Highlights State Authority.)

By late July, critics within California — fearing the loss of CAISO as an instrument of the state’s renewable and emissions goals — were calling for a slowdown in regionalization, saying that the ISO was moving too quickly to get a governance plan to the State Legislature before the end of its summer session. (See Governor Delays CAISO Regionalization Effort.)

While the ISO plans to submit a governance plan to lawmakers this winter, President-elect Donald Trump’s vow to cancel the Clean Power Plan is another roadblock for CAISO-led regionalization. Under the CPP, interior West states such as Utah and Wyoming would confront the requirement of sharply reducing carbon emissions from coal-fired generation, an objective made less costly by access to low- and zero-emission electricity made available through a regional market. With the Trump administration likely to pull the rug from under the CPP, coal-heavy interior West states contemplating an RTO will be less motivated to give ground to California’s environmental mandates in order to gain the emissions benefits of membership.

That, in turn, could prevent California legislators from signing off on a governance plan that risks the state’s ability to meet its goals.

“California will want to protect its environmental objectives,” retiring California Public Utilities Commissioner Mike Florio, a strong supporter of regionalization, told RTO Insider.

Ann Rendahl, commissioner with the Washington Utilities and Transportation Commission, said the success of regionalization will depend on how California’s lawmakers deal with the governance issue.

“It’s really in the hands of California,” Rendahl said.

EIM Accelerates Growth

The future looks brighter for the Energy Imbalance Market, the West’s only real-time energy market. Unlike in the ISO, members are not required to turn over control of their transmission and generator day-to-day participation is voluntary.

caiso eim seattle city light

The market last year extended its north-south reach with the integration of Arizona Public Service and Puget Sound Energy, expanding membership to four balancing authority areas, in addition to CAISO. The two utilities began transacting in the market in October after what officials called a largely uneventful implementation. (See Smooth EIM Transition for Arizona Public Service, Puget Sound Energy.)

“I’ve been through three sets of transitions, and I would say that each one is getting smoother,” Mark Rothleder, the ISO’s vice president of market quality and renewable integration, said during an Oct. 5 meeting of the EIM’s governing body.

Another transition is scheduled for October 2017 when Portland General Electric will join the market, the last fall entry before the ISO moves to a spring implementation schedule to avoid overlap with annual market software updates.

The benefits of NV Energy’s December 2015 integration into the EIM became evident in early 2016, after CAISO officials observed that the increased transfer capacity between the ISO and PacifiCorp East unified what had previously been a fractured market; California had found a real-time export market for its surplus solar and avoided curtailing a significant amount of renewable generation. (See CAISO EIM Boosts Market for Renewables in Q1.)

Last year also saw announcements from four utilities that said they intend to join the EIM.

In April, Idaho Power signed an implementation agreement that would make it the sixth BAA to join the market in spring 2018. Inclusion of the utility will bring an additional 4,800 miles of transmission into the market while improving trading access to an area of Wyoming that renewable developers — including EIM pioneer PacifiCorp — seek to tap for wind projects intended to serve the West Coast. (See Idaho Power Inks Agreement to Join EIM.)

Seattle City Light is slated to become the first publicly owned utility to join the EIM after signing an implementation agreement in December. (See Seattle City Light Signs EIM Membership Agreement.) City Light’s membership is contingent on satisfying the concerns of the Seattle City Council, which asked the company to flesh out the findings of an EIM benefits study showing the hydropower-rich utility could earn an additional $4 million to $23 million annually as an exporter of the flexible ramping capability needed to smooth out intermittent renewables. (See Council OKs Seattle City Light Bid to Explore Joining the EIM.)

The Sacramento Municipal Utility District said in October that it would begin negotiations to join the EIM, with some of the six other members of the Balancing Authority of Northern California — all publicly owned — to follow, depending on the outcome of cost-benefit assessments. (See Sacramento Utility to Join EIM; Other BANC Members May Follow.)

CAISO and El Centro Nacional de Control de Energía (CENACE), Mexico’s grid operator, announced an agreement in October to explore having the Baja California Norte region join the market as the first non-U.S. participant. (See Mexico’s Grid Operator to Explore Participation in the EIM.) While the region has no transmission connections with the rest of Mexico’s grid, it does boast 800 MW of transfer capacity with California through two 230-kV links at the Imperial Valley and Otay Mesa substations, and also offers promising potential for wind energy development.

2016 also saw the EIM begin to chart a course more independent of the ISO with the appointment of the market’s governing body and a clearer outline of governance. (See CAISO Board Appoints Western Energy Imbalance Market Governing Body.) At the body’s first meeting, Chairwoman Kristine Schmidt noted that a decade ago, nobody in the industry would have believed that the West would produce an organized real-time market.

“We’re now seeing a regional market take shape in the West,” Schmidt said.

In December, EIM and CAISO leaders approved a guidance document that provides solutions to the overlapping authority between the ISO’s Board of Governors and the EIM governing body resulting from the EIM’s delegation of a portion of its authority over Federal Power Act Section 205 filings to CAISO. (See EIM Leaders OK Governance ‘Guidance’ Proposal.)

The document outlines how ISO staff should interact with the EIM, providing a schedule for notifying the governing body about ISO initiatives and laying out the processes by which body members and EIM participants will provide feedback on proposed policy changes.

“I think this is an important step forward,” CAISO board member David Olsen said. “It really helps to clarify the scope of responsibility of the EIM board.”