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October 31, 2024

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FERC OKs One-Year Extension for CAISO’s Aliso Canyon Gas Rules

By Robert Mullin

FERC approved CAISO’s plan to extend the temporary Tariff provisions the ISO implemented last June in response to natural gas pipeline restrictions stemming from last year’s closure of the Aliso Canyon natural gas storage facility.

The measures — which are intended to reduce the potential for blackouts through improved gas-electric coordination — now remain effective until Nov. 30, 2017, a year after the original sunset date.

“We find that continuation of the interim measures for an additional year should improve scheduling coordinators’ ability to manage their gas procurement and enhance their ability to recover gas procurement costs, while also providing CAISO with flexible tools to maintain reliability and avoid adverse market outcomes related to the limited operability of Aliso Canyon,” the commission wrote in its Nov. 28 decision (ER17-110).

ferc enhancement measures aliso canyon
With no timetable set for the reopening of the Aliso Canyon natural gas storage facility, CAISO sought to extend for another year interim market measures designed to deal with gas supply restrictions this past summer. | California Governor’s Office of Emergency Services

In a separate ruling Nov. 21, the commission also approved the ISO’s request to make permanent three other related “bidding enhancement measures” approved by FERC on June 1 that also would have expired Nov. 30. (See below.)

No Timetable for Return

The ISO sought expedited approval to extend the Alison Canyon measures to head off concerns about potential natural gas shortages during the coming winter, a second peak season for Southern California gas consumption because of increased residential heating. (See CAISO Seeks to Extend Aliso Canyon Gas Rules Through Winter.)

While Aliso Canyon owner Southern California Gas has been testing the storage facility for leaks, the California Public Utilities Commission has not yet set a timetable for reopening the facility. State regulators have instead signaled that they expect utilities to implement winter-specific measures for electricity consumers that would mirror the state’s successful summer response to constrained gas supplies. (See Sandoval: Nuke Shutdown, Auto-DR Aided Aliso Canyon Response.)

For its part, CAISO is preparing for the facility to remain out of service for most of 2017.

The commission’s decision enables the ISO to extend provisions that provide scheduling coordinators with two-day ahead advisory schedules and allow gas-fired generating units to incorporate more timely fuel prices into their market offers. It also continues use of an after-the-fact cost recovery mechanism for generators that includes pipeline penalties and is based on same-day gas prices rather than day-ahead gas indices.

The ISO will also retain its authority to override its “dynamic competitive path” assessment when it determines that the transmission path is no longer competitive in the face of a gas constraint, as well as to suspend virtual bidding to prevent market manipulation.

The commission also approved CAISO’s request to refine a provision that allows the ISO to enforce a market constraint that limits the minimum and maximum amount of gas that can be burned by generators in the affected area during periods of restricted supply. The refinement will set a limit on the maximum burn only, given that generators this summer demonstrated they could regulate their minimum burns simply by lowering the price of their bids into the real-time electricity market.

‘Objective Standard’ Rejected

FERC rejected a request by the Western Power Trading Forum (WPTF) to require CAISO to establish standards for deeming when a constrained transmission path has become uncompetitive or suspending convergence bidding. Reprising a statement from its decision authorizing the original Aliso Canyon measures, the commission said “the impact of the natural gas constraint on the assessment of competitive paths can only be assessed based on actual system conditions once the constraint is in place.”

Requiring CAISO “to develop objective standards for when and how these measures may be implemented is not feasible,” the commission concluded.

However, the commission did agree to a WPTF request that the ISO be required to publish a market notice for any revisions made to generator gas adders — rather than just during instances when the adder is increased.

The commission also said it agreed with market participants who filed comments contending that the interim measures should not become substitutes for permanent market reforms that could become necessary in the future.

“We find that the Tariff revisions proposed here are appropriate for mitigating the risks resulting from the limited operability of Aliso Canyon but expect CAISO to honor its commitment to consider other types of longer-term market enhancements,” the commission said. It encouraged the ISO to begin a stakeholder process to address the potential need for additional measures dealing with exceptional — or out-of-market — dispatches related to the facility’s closure.

Nov. 21 Ruling

In a separate ruling Nov. 21, the commission approved the ISO’s request to make permanent three “bidding enhancement measures” approved by FERC on June 1 to address summer gas supply concerns (ER16-2445). (See FERC Approves CAISO’s Aliso Canyon Response Plan Ahead of Summer.)

The Tariff revisions allow scheduling coordinators to rebid commitment costs in the real-time market if they were not committed in the day-ahead market or residual unit commitment process; ensure that the ISO’s short-term unit commitment process does not commit resources that did not submit bids into the real-time market unless they were scheduled or committed in the day-ahead market or had a real-time must-offer obligation; and allow scheduling coordinators to seek after-the-fact recovery of unrecovered commitment costs that exceed the commitment cost bid cap as a result of actual fuel procurement costs.

CAISO told FERC that the Tariff provisions were developed independently of the concern over Aliso Canyon as part of a stakeholder effort approved by the ISO’s Board of Governors in March 2016.

Although the changes were not intended to be temporary, the ISO said it included them in the package of interim revisions accepted in the June 1 order because it believed they would help it manage the transmission system and market operations during the summer.

The commission said the Tariff revisions “should provide more accurate prices in the real-time market and help avoid the inefficient dispatch of resources in the real-time market based upon bids that may not reflect current fuel prices.”

Monitor Seeks Sunset

The ISO’s internal Department of Market Monitoring told FERC the language permitting the real-time rebidding of commitment costs should only be extended until the end of summer 2017 pending a review of how limitations on rebidding commitment costs could be directly enforced through the ISO’s market software. The Monitor said it opposed continued reliance on non-automated, after-the-fact monitoring and enforcement to protect against the potential for excessive bid cost recovery payments.

The commission rejected the Monitor’s request to sunset the real-time rebidding rules but ordered CAISO to submit an informational report by Oct. 1, 2017, “detailing its assessment of the effectiveness of the rebidding process and its efforts to automate the monitoring and enforcement process.”

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FERC OKs Duke, Constellation Settlements

FERC approved a settlement over Constellation Power Source Generation’s reactive service payments that was initially opposed by PJM’s Independent Market Monitor (ER16-746, EL16-57).

The Nov. 21 order requires Constellation to file a revised reactive service revenue requirement no later than Jan. 16, 2017, and to make refunds if the resulting requirement for Constellation’s units in the Baltimore Gas and Electric zone is less than $1.24 million per year.

constellation settlements duke energy ferc
Constellation’s Gould Street generator is one of the resources providing reactive power in PJM’s BGE zone. | Creative Commons – DeanLaw

The Monitor initially asked FERC to add a list of conditions to the settlement, including updated power factor tests and eliminating the recovery of heating losses. The Monitor said the commission should end the practice of allowing cost of service rates for reactive capability and said if the practice is not discontinued the costs eligible for recovery should include only fixed costs incurred solely for providing reactive service.

On Oct. 4, the Monitor withdrew its opposition to the settlement, “because the settlement ‘establishes no principles and no precedent with respect to any issue in this proceeding’” and because Constellation must make a new filing.

The settlement resulted from a review ordered by FERC in May, when the commission reduced Constellation’s reactive payments by almost $225,000 to reflect the retirements of three generators. (See “Constellation’s Reactive Payments Cut Due to Retirements,” FERC Rulings in Brief.)

Duke Energy ROE Reduced

FERC on Nov. 21 approved an uncontested settlement reducing Duke Energy’s return on equity for transmission to 10%, down from 10.2% (Duke Energy Carolinas) and 10.8% (Duke Energy Progress) (EL16-29, EL16-30).

The settlement also terminates the amortization of Duke Energy Carolinas’ expenses on the aborted GridSouth RTO effective Dec. 31, 2015, caps common equity ratios and a sets a moratorium on changes in the ROE and equity cap through Dec. 31, 2019.

– Rich Heidorn Jr.

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Connecticut Advances Small-Scale Renewables Contracts

By William Opalka

Connecticut has selected 25 small clean energy and energy efficiency projects totaling 402 MW to negotiate power purchase agreements with the state’s two electric distribution companies.

The Class I projects, all less than 20 MW each, responded to a request for proposals earlier this year. They will negotiate PPAs with Eversource Energy and United Illuminating as part of Connecticut’s legislative mandate to decarbonize its electric generation resources.

Wind Turbine | CTEWD - Get Into Energy CT
Wind Turbine | CTEWD – Get Into Energy CT

“The response to the RFP for small-scale clean energy projects was robust and competitive — giving us the welcome challenge of carefully considering more than 100 projects and evaluating them against our established criteria,” Department of Energy and Environmental Protection Commissioner Robert Klee said in a statement Nov. 28.

Included among the 25 projects are 11 totaling 170 MW within the state: nine solar, one wind and 34 MW of energy efficiency offered by Eversource, making it both a resource supplier and the EDC negotiating procurement.

“DEEP and the state Attorney General’s office will play a role in development of the efficiency contract,” DEEP spokesman Dennis Schain told RTO Insider. “Also, all contracts have to be reviewed and approved by our utility regulatory body, so there are protections for ratepayers in this project from Eversource having been selected.”

Besides the 11 Connecticut projects, seven have been selected in Vermont, two each in Maine, Massachusetts and New York, and one in New Hampshire. The projects range in size from 3.5 MW of wind in Connecticut to two solar projects of 19.99 MW in New York.

Final contracts will be submitted to the Public Utilities Regulatory Authority for approval, which is expected in early 2017.

Connecticut also is part of a separate procurement with Massachusetts and Rhode Island for large-scale projects of 20 MW or greater. The states selected seven projects totaling 460 MW for contract negotiations. However, those negotiations have been stayed by the Second Circuit Court of Appeals following a challenge by Allco Renewable Finance, a developer of small-scale renewable projects. Oral arguments in that case are scheduled for Dec. 9 (Allco Finance Limited v. Klee, 16-2946). (See Court Halts New England Clean Energy Contracts.)

FERC Declines PURPA Case

In a related matter, FERC ruled Nov. 22 against initiating an enforcement action against Connecticut regulators over Allco Finance’s claims that the state was not abiding by the mandatory purchase requirements of the Public Utility Regulatory Policies Act (EL16-115, QF16-362, et al.).

The commission’s action means Allco and its unit Windham Solar may file their own enforcement action against the PURA “in the appropriate court,” FERC said.

Allco contends the state regulators improperly concluded that Windham is not entitled to a legally enforceable obligation at a forecasted avoided cost rate and that Eversource has no need for capacity.

It is at least the third time this year that declined to act on Allco’s PURPA claims. (See FERC Rejects Enforcement Action in Connecticut PURPA Dispute.)

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Clean Energy Innovation Requires Collaboration, Researcher Says

By Rory D. Sweeney

PHILADELPHIA — The next wave of clean-energy innovation will require collaboration as well as competition, says a researcher for the Near Zero energy policy advocacy group.

Speaking at a lecture series sponsored by the University of Pennsylvania’s Kleinman Center for Energy Policy last week, Dan Sanchez, a postdoctoral scholar at the Carnegie Institution for Science, said sharing intellectual property and allowing open access to research data are catalysts necessary for growth in the clean energy industry.

clean energy innovation
Researcher Dan Sanchez discussing his conclusions for developing effective clean-energy policy. | © RTO Insider

“There’s actually some really strong empirical work that shows that connectivity between the private sector and the public sector really does improve innovation outcomes and really does improve the chances that publicly funded research results in commercially successful products,” he said.

Sanchez focused his argument on two initiatives, one an institutional effort and the other creating a roadmap for successful implementation of technology. The technological initiative focused on developments in bio-energy with carbon capture and storage (BECCS).

The institutional effort focused on Mission Innovation, a 23-country commitment established in 2015 to double their annual combined public funding of clean-energy research and development from $15 billion per year to $30 billion per year by 2021.

Consistency is Key

He identified three “waves” of clean-energy investment in the past 70 years that failed to take hold permanently: nuclear energy following World War II; nuclear, renewables and energy efficiency in response to the oil crisis of the 1970s; and renewables, carbon sequestration, efficiency and grid upgrades in the 2000s.

Following each spurt of investment, there was a “dramatic retrenchment” in private funding as projects failed to deliver on their promises, he said.

“I think the lesson of the past two waves of energy innovation is that capricious funding — funding that ramps up and then ramps down very quickly — can really stall the pace of innovation,” he said. “Following World War II, the U.S. and the European Union in particular really focused on research and development of nuclear energy technologies. … We really kind of settled on standardized technology pretty quickly, and then dramatically reduced our R&D funds.”

Sanchez sees Mission Innovation having the potential to spur a fourth investment wave and says a clear, consistent path will be necessary to sustain it. That will include a centralized, independent headquarters, along with public visibility of R&D expenditures and better coordination among countries. For example, the U.S. and China have been collaborating for the past eight years on clean energy research centers, but in the past five years, no joint patents have been filed nor have any projects truly been jointly funded, Sanchez said.

“Essentially, the U.S. funded their technologies; China funded their technologies. They shared a little bit of information, but it really wasn’t joint, collaborative R&D in the way we’d really like to see,” Sanchez said.

BECCS

Sanchez focused on BECCS as a likely candidate for the next investment wave. He pointed out that just one facility in the world — an Archer Daniels Midland corn-to-ethanol plant in Decatur, Ill. — is employing the technology to sequester about 1 million tons of carbon dioxide a year, accounting for about 1/10,000th of the worldwide reductions that are estimated to be necessary.

“It’s fair to say there’s a very large gap between where we want to be and where we are right now,” he said.

Critics have said experimenting with sequestration could delay deployment of emissions technologies and even provide tacit acceptance of additional emissions. But Sanchez said that perspective misses the “market opportunity” that could be created by planning the development and deployment of the technology — essentially creating a roadmap for its successful implementation.

Next Steps

Sanchez said whether researching technologies or getting them deployed deserves more focus is the wrong question. “I think a lot of people frame this as an either/or question, but I think it’s silly … because it’s pretty obvious we really need both,” he said. “There’s not really enough time in the day to really fight those fights.”

He pointed to gasification of coal and biomass as technologies with high commercial potential because of their ability to balance carbon-reduction product costs and scale facilities. However, the necessary research will require collaboration among public and private organizations. He offered as a successful model the National Nanotechnology Initiative, which coordinates the work of 13 federal agencies and industry groups in addition to performing regulatory and public outreach.

Combining lessons learned from the BECCS and Mission Innovation initiatives, Sanchez said, could “fill the gap between our ambitions and where our technologies lie right now.”

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Davis Quits Arkansas Commission for MISO South Post

By Amanda Durish Cook

Arkansas Public Service Commissioner Lamar Davis has resigned to take a newly created position as executive director of government and regulatory affairs for MISO’s South Region.

Beginning Dec. 1, Davis will serve as MISO’s main liaison with state regulators, lawmakers and governors within MISO South, the RTO said Nov. 28. Davis resigned from the PSC effective Nov. 25.

Davis is the third former state regulator to join MISO’s staff since last year, following Vice President of Government and Regulatory Affairs David Boyd, who joined the RTO in 2015 after eight years on the Minnesota Public Utilities Commission, and former Public Utilities Commission of Ohio Chairman Andre Porter, who resigned to become vice president and general counsel in May. (See Former PUCO Chairman Andre Porter Joins MISO.)

“MISO is truly honored and excited to have Lamar join our team,” said Todd Hillman, vice president of MISO’s South Region. “We look forward to Lamar representing MISO South and the work we are doing to facilitate collaboration among state regulators, policymakers and stakeholders.”

Prior to his appointment to the PSC in January 2015, Davis served eight years as deputy chief of staff under former Arkansas Gov. Mike Beebe. Davis was also an assistant attorney general in Arkansas’ Consumer Protection Division, taught consumer law at the William H. Bowen School of Law in Little Rock, Ark., and served as a law clerk for the Arkansas Court of Appeals.

“These roles have afforded me the opportunity to work with countless public servants to serve the people of Arkansas, which has been very rewarding,” Davis said in a PSC statement. “I now have been offered a position in the private sector that will afford me the opportunity to champion policies to help advance the goals of our beloved state and region.”

Davis received his law degree from Bowen and a bachelor’s in political science from Dillard University in New Orleans.

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Loss on Water Permit a Setback for Indian Point Extension

By William Opalka

New York’s highest court ruled Monday that the Indian Point nuclear plant is subject to state coastal waters rules — a potential hurdle in Entergy’s bid to extend the plant’s operating licenses.

The unanimous Court of Appeals ruling said that Entergy must obtain a Department of State permit under the state’s Coastal Zone Management program. Indian Point Units 2 and 3 are on the banks of the Hudson River, 30 miles north of New York City.

“In sum, the Department of State’s interpretation of the exemptions in the Coastal Management Program, and its conclusion that Entergy’s application to relicense the nuclear reactors at Indian Point is subject to consistency review, are rational and must be sustained,” the court said.

New York’s CMP, adopted in 1982, includes protections for fish and wildlife while also “meeting public energy needs in an environmentally safe manner,” according to the opinion.

License Extensions

The plants were licensed by the U.S. Nuclear Regulatory Commission in the early 1970s and are operating under extensions while the commission reviews their applications for 20-year license renewals.

Entergy applied for the license renewals in 2007 and initially conceded that its application was subject to the state review under the CMP. In 2012, however, Entergy changed its position, arguing that the plants were grandfathered.

The court disagreed, saying that relicensing applications require new permits. Nuclear power plants’ use of state waterways is listed as a regulated use.

indian point, new york, clean energy standard
Indian Point Nuclear Power Plant

“Entergy is reviewing the court’s decision to determine its next steps, which could include refiling its Coastal Zone Management application that Entergy previously withdrew pending issuance of the NRC’s final supplemental environmental impact statement,” the company said in a statement. “Notwithstanding this court decision, we continue to believe we will ultimately be successful in obtaining a CZM permit and relicensing Indian Point. The facility continues to safely operate in a manner that is fully protective of the Hudson River and in compliance with state and federal law.”

The 16-page decision overturned a previous ruling from an Appellate Division court, which sided with Entergy.

The state’s objections to Indian Point will now be considered as part of the record for federal relicensing. However, if the state eventually denies a coastal certification, the plant owner could appeal to the U.S. Department of Commerce, which could override the state’s action, according to the decision.

Entergy also has a concurrent challenge pending in the U.S. District Court for the Northern District of New York. It sued New York in January, claiming the state’s attempts to require a CMP review intrudes on federal jurisdiction.

According to Entergy’s 2016 Form 10-K, New York is citing “nuclear safety concerns.”

That is a persistent complaint after a series of mishaps occurred in recent years at the plant.

“Indian Point is antiquated and does not belong on the Hudson River in close proximity to New York City, where it poses a threat not only to the coastal resources and uses of the river, but to millions of New Yorkers living and working in the surrounding community,” Gov. Andrew Cuomo said in a statement.

Cuomo, along with several of the state’s environmental organizations, has long advocated the plant’s closure. (See Environmental Groups Press for Indian Point Shutdown.)

Cooling Towers

Entergy also has been challenging New York’s contention that closed-cycle cooling would be the “best technology available” for addressing concerns over the impact of the nuclear plants’ cooling water intakes on aquatic life.

The company has estimated that retrofitting Indian Point with cooling towers would cost more than $1.2 billion. The company proposed as an alternative the use of cylindrical wedgewire screens at an estimated cost of $250 million to $300 million.

Because of the uncertainty over whether it will succeed in relicensing, Entergy said it may enter into fewer unit-contingent forward sales contracts for output from the plants.

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No OMS Consensus on MISO Cost Allocation Changes

By Amanda Durish Cook

The Organization of MISO States was unable to achieve consensus on a response to a five-question survey asking how MISO should revise its cost allocation procedures, Wisconsin Public Service Commission staffer Randel Pilo said Tuesday.

organization of miso states miso cost allocation
OMS Executive Director Tanya Paslawski at the 2016 OMS Annual Meeting in October | © RTO Insider

During the Nov. 22 OMS Board of Directors conference call, Pilo said that although state regulators were not able to reach unanimity on possible revisions to MISO’s cost allocation methodology, the discussion was a “helpful exercise.”

In multiple recent stakeholder meetings, MISO expressed a desire to work on cost allocation revisions through 2017 and implement the change 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.)

The RTO circulated a five-question survey on market efficiency project cost allocation in October, which asks:

  • Should MISO allocate all costs to benefiting local resource zones for economically beneficial projects lower than 345 kV?
  • Should MISO investigate additional quantifiable benefit metrics in addition to adjusted production costs for market efficiency projects?
  • Should MISO allocate all costs to benefiting local resource zones for economically beneficial projects lower than 345 kV?
  • Should MISO allocate all costs to benefiting transmission pricing zones for economically beneficial projects lower than 345 kV?
  • Should MISO allocate all costs to a blend of benefiting local resource zones and transmission pricing zones for economically beneficial projects lower than 345 kV?

Pilo said states are “nervous” about a blend of allocation to local resource zones and transmission pricing zones.

MISO will share and go over individual state responses at the Dec. 13 Regional Expansion Criteria and Benefits Working Group meeting and use input to make a conceptual proposal.

Pilo also noted that the questions were close-ended, and some states used an all-no answer strategy in the hopes of getting MISO to pay attention to their written responses.

“Moving forward, MISO has built in a year’s worth of time … and is planning on filing a process with FERC in December 2017,” said David Carr of the Mississippi Public Service Commission.

OMS Executive Director Tanya Paslawski also said work continues on the organization’s 2017 strategic initiative document, which identifies long-term goals similar to the 2016 document. Paslawski said the new document is set to be approved before the new year.

Paslawski also said OMS will adopt a banking resolution Dec. 1 to allow incoming OMS president and Indiana Utility Regulatory Commissioner Angela Weber to sign off on banking transactions. OMS voted to approve Weber as president at its annual meeting in October. She will replace current president and Michigan Public Service Commission Chair Sally Talberg in January.

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Trump: ‘Open Mind’ on Climate Change

By Rich Heidorn Jr.

President-elect Donald Trump said Tuesday he has an “open mind” on humans’ role in global warming, appearing to soften his campaign pledge to withdraw the U.S. from the Paris Agreement.

Trump made his comments in an interview with editors and reporters of The New York Times.

Asked by columnist Thomas Friedman if he would “take America out of the world’s lead of confronting climate change,” Trump responded that he is “looking at it very closely,” adding “I have an open mind to it.”

“I absolutely have an open mind. I will tell you this: Clean air is vitally important. Clean water, crystal clean water is vitally important. Safety is vitally important,” Trump said.

Editorial page editor James Bennet asked, “When you say an open mind, you mean you’re just not sure whether human activity causes climate change? Do you think human activity is or isn’t connected?”

Trump responded: “I think right now … well, I think there is some connectivity. There is some, something. It depends on how much. It also depends on how much it’s going to cost our companies. You have to understand, our companies are noncompetitive right now.”

donald trump climate change
Methane flaring | Bureau of Land Management

White House correspondent Michael Shear followed up with a question about the potential of foreign leaders to impose tariffs on American goods to offset the carbon that the U.S. had pledged to reduce.

“I think that countries will not do that to us,” Trump responded. “I don’t think if they’re run by a person that understands leadership and negotiation, they’re in no position to do that to us, no matter what I do. They’re in no position to do that to us, and that won’t happen, but I’m going to take a look at it. A very serious look. I want to also see how much this is costing, you know, what’s the cost to it, and I’ll be talking to you folks in the not too distant future about it, having to do with what just took place.”

Trump did not specifically mention EPA’s Clean Power Plan, which he has vowed to block. Still, his moderate tone was a marked contrast to his previous bombast on global warming.

In a 2012 tweet, he called climate change a hoax created “by the Chinese in order to make U.S. manufacturing noncompetitive.” During the campaign, he said he would “cancel” the U.S.’s involvement in the Paris Agreement, which aims to limit global warming to 1.5 degrees Celsius above preindustrial levels. (See CPP, FERC’s Bay, Honorable Among Losers in Trump Win.)

But in a video released Monday, Trump also made clear that he will steer a different course than President Obama on energy policy, renewing his promise to “cancel job-killing restrictions on the production of American energy, including shale energy and clean coal.”

Trump and the Republican Congress could use the Congressional Review Act to cancel some of the Obama administration’s most recent regulations, including a Nov. 15 Interior Department rule requiring oil and gas producers to use “currently available technologies and processes” to cut methane flaring in half at oil and gas wells on federal and Native American lands.

The act allows an incoming Congress to reject regulations finalized within 60 days of the end of either the House’s or Senate’s sessions.

The Congressional Research Service has concluded the act would apply to regulations finalized after May 30, if Congress holds no more sessions this year, The Washington Post reported Wednesday.

In contrast, an EPA regulation intended to reduce methane gas leaks was finalized on May 12, making it likely exempt from being reversed under the act, the Post reported. EPA said the rule, designed to reduce methane emissions from new or modified oil and gas wells, will prevent 11 million metric tons of carbon dioxide equivalent emissions by 2025.

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Public Advocacy Group Files FERC Complaint over PJM Rate Increase

By Rory D. Sweeney

A consumer advocacy group filed a complaint with FERC on Monday saying PJM’s recent rate-increase request is “unprecedented” and failed to consider mitigating costs by limiting employees’ pay increases (ER17-249).

Public Citizen’s Energy Program, based in D.C., filed the complaint in response to a member fee increase that PJM stakeholders approved in October. (See “Members Committee Endorses Revised Fee Hike,” PJM Markets and Reliability and Members Committees Briefs.)

It asks FERC to deny the rate filing “until PJM offers options on controlling certain expenses.”

The complaint argues that the largest factor necessitating the increase is accommodating PJM’s projected 4.8% average annual growth rate in the financial compensation paid to PJM employees over the next eight years.

“PJM already commands premium salaries paid to its employees, particularly to its top executives,” the complaint contends. “For many of Public Citizen’s members, it remains a tough economy. There aren’t many industries or companies within PJM’s service territory that are projecting a 4.8% annual growth rate for employee financial compensation over the next eight years.”

public citizen ferc complaint pjm rate increase
| PJM

“The impact on consumers of PJM’s proposed administrative rate revisions is 7 cents a month, phased in over eight years,” PJM spokesperson Paula DuPont said in an emailed statement. “Consumer advocates representing the PJM region support our proposal and were involved throughout its development. The proposal was unanimously approved by members.”

Public Citizen argues that neither PJM nor its stakeholders — which include state consumer advocates — “ever formally considered dampening growth in employee compensation as a measure to mitigate the rate hike.”

West Virginia Consumer Advocate Jacqueline Lake Roberts defended PJM’s request in a response to the complaint, also filed Monday. Consumer advocates are “active participants” in PJM’s stakeholder process and aren’t treated differently than other members, Roberts wrote in the response.

“As the steward of consumer interests, [Roberts ] takes rates and proposed increases very seriously,” the response reads. “[Roberts] believes that the stated rate as filed will ensure that consumers continue to benefit from these services. For these reasons, [Roberts] submits that the allegations of Public Citizen are erroneous.”

A representative of the Pennsylvania Office of Consumer Advocate was on PJM’s Finance Committee, Roberts noted, and the committee considered several proposals before unanimously endorsing the one filed with FERC — however, all of them assumed cost increases that necessitated rate increases.

While Public Citizen’s complaint said PJM employees “deserve praise and respect for administrating duties on behalf of FERC under the Federal Power Act,” it also noted that PJM’s audited financial reports indicate employee financial compensation grew from more than $98 million in 2011 to more than $124 million in 2015, for an average annual growth rate of 6.1%. Over this five-year period, employee compensation grew from 35.6% of total PJM expenses in 2011 to 37.4% in 2015.

PJM’s request doesn’t detail other “concerning” expenses, the complaint says, such as payments to outside political lobbying organizations and “expensive social events available to select PJM members.”

Public Citizen says it has tried to become a voting PJM stakeholder, but it can’t afford the RTO’s $2,500 annual membership fee.

“It’s certainly easier to balance budgets if you can tap into a pile of someone else’s money to close the gap,” Tyson Slocum, Public Citizen’s Energy Program director, said in an emailed statement.

“The right thing to do would be for PJM to shrink its out-of-control growth in executive pay,” he said. “FERC should not allow PJM to pay for excessive executive compensation through an unprecedented hike in electric rates paid by household consumers. PJM must learn fiscal discipline and recognize that its salary structure is bloated.”

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New FERC Rule Will Double RTO Offer Caps

By Robert Mullin

With winter looming, FERC last week adopted a rule that would double the “hard” offer cap for day-ahead and real-time markets to $2,000/MWh in every RTO and ISO.

Order 831 was a response to the 2013-2014 polar vortex, which caused natural gas price spikes that left some generators in the Northeast complaining they were unable to recover their costs (RM16-5).

The commission also noted that the $1,000/MWh offer caps effective in most RTOs could suppress LMPs below the marginal cost of production “given that recent history demonstrates that resource short-run marginal costs can exceed” that cap.

“We find that the currently effective offer caps may prevent a resource from recovering its short-run marginal costs, which could result in that resource operating at a loss,” the commission said in its decision to adopt the rule.

ferc rto offer caps
| © mg154 / 123RF Stock Photo

FERC last year approved a PJM measure to increase its offer cap to $2,000/MWh after RTO stakeholders voted overwhelmingly to approve the move. (See PJM Members OK 2,000/MWh Energy Market Offer Cap.)

The commission’s revised offer cap rule sets out three requirements:

  • Incremental energy offers must be capped at the higher of $1,000/MWh or a resource’s cost-based energy offer, with $2,000/MWh being the maximum bid.
  • An RTO must verify the costs underlying a resource’s bid above $1,000/MWh before that offer can be used to calculate the market-clearing LMP.
  • All resources — regardless of type — will be eligible to submit cost-based incremental energy offers in excess of $1,000/MWh.

The final rule modifies FERC staff’s original proposal, which would have converted the current $1,000/MWh cap into a “soft” cap — without implementing a new hard cap. (See FERC Proposes Uniform Offer Caps Across RTOs.)

The commission said the absence of a hard cap could be problematic for RTOs and their market monitors, who might have only “imperfect information” ahead of the market clearing process to verify the short-run marginal costs for resources bidding above $1,000/MWh.

“While a hard cap may diminish the ability to fully address the shortcomings of current offer caps identified above in all circumstances, we find that, on balance, a hard cap is necessary to reasonably limit the adverse impact that any imperfect information during the verification process could have on LMPs,” the commission said.

Opposing the rule was CAISO, which said that the current $1,000/MWh ceiling far exceeds the highest cost-justified offer from any ISO resource. CAISO further contended that any natural gas-driven price spikes would be too infrequent and short-lived to warrant a change. ISO-NE said it saw no need to increase the cap, but it didn’t contest the rule change.

Market monitors for ISO-NE and SPP also protested, arguing that new sources of gas supply have provided sufficient stability in fuel prices in recent years.

The commission dismissed those contentions, pointing out that three RTOs — PJM, MISO and NYISO — had made previous filings to temporarily waive or change the level of their offer caps.

“The waiver requests and high natural gas costs experienced during the polar vortex, which could have caused some resources to experience costs above $1,000/MWh, demonstrate that the deficiencies of current offer caps, in particular the $1,000/MWh offer cap, are concrete rather than hypothetical.”

In its Nov. 17 presentation to the commission explaining the rule, FERC staff made the case for applying the change to all organized markets.

“Adopting the same offer cap structure in each RTO and ISO would avoid seams issues that could arise if offer caps differ materially across markets,” staff said.

The new rule will be effective 75 days after publication in the Federal Register.