Page 1390 – RTO Insider

October 21, 2016

Sacramento Utility to Join EIM; Other BANC Members May Follow

By Robert Mullin

The Sacramento Municipal Utility District (SMUD) announced on Friday it will begin negotiations with CAISO to join the Western Energy Imbalance Market, and other members of the Balancing Authority of Northern California (BANC) may follow.

BANC said a cost-benefit analysis with the Western Area Power Administration’s Sierra-Nevada Region (WAPA-SNR) determined that some of its six members would benefit from joining the EIM.

“We also view the EIM as a tool to help us integrate increasing penetrations of variable renewable energy resources in the future,” Jim Shetler, BANC’s general manager, said in a statement.

caiso eim sacramento municipal utility district — Completed in 2012, the Sacramento Municipal Utility District’s Solano Wind Farm has 230 MW of capacity. | *Sacramento Municipal Utility District*

The joint powers agency said it will seek an arrangement allowing it to phase in members who want to join the EIM. Any agreement must recognize “the unique situation faced by the BANC members as public power entities and their existing arrangements,” the agency said.

SMUD would be the first BANC member to participate. The utility expects $2.8 million in yearly net benefits from transacting in the market — a figure that nets out the estimated $6.7 million in implementation fees and $2.6 million in annual operations costs.

In a presentation to its board of directors last week, SMUD management said EIM participation will improve the region’s renewable integration, potentially reduce reliance on gas-fired generation and provide “many of the benefits of regionalization while preserving [local] control over resources.”

“We view this is an extension of our existing market engagement with the CAISO,” said SMUD CEO Arlen Orchard. “SMUD also believes this further demonstrates our commitment to collaboratively work with California entities to help achieve the state’s energy and environmental goals.”

SMUD operates under an agreement that enables the utility to bid power into CAISO through a single hub in which one proxy price is selected to represent all connection points between the two areas. The ISO entered into a similar agreement with WAPA last year.

“We are extremely pleased to see a major regional public power utility like SMUD step forward to engage in the EIM,” CAISO CEO Steve Berberich said.

In addition to SMUD, BANC’s members are the Modesto Irrigation District, the cities of Redding, Roseville and Shasta Lake, and the Trinity Public Utility District.

The joint powers agency’s footprint extends from Modesto, Calif., to the Oregon border and includes a portion WAPA’s transmission grid and the U.S. Bureau of Reclamation’s hydroelectric resources in California. The agency’s members also control capacity on the California-Oregon Intertie, one of two high-voltage transmission lines linking California with the Pacific Northwest.

sacramento municipal utility district, eim — The footprint of the Balancing Authority of Northern California extends north to south from the Oregon border to Modesto, and east to west from Sacramento to the Sierra Nevada range. | *Balancing Authority of Northern California*

Founded 70 years ago, SMUD serves 1.4 million people, making it the sixth largest municipally owned utility in the country and the second largest in California, behind the Los Angeles Department of Water and Power.

BANC, which began operations in 2011, is the third largest balancing area in California and the 16th largest of the 38 balancing areas in the Western Electricity Coordination Council. Created as an alternative to CAISO, BANC is responsible for balancing load among its members, as well as coordinating system operations with neighboring balancing areas. BANC contracts with SMUD to perform day-to-day balancing functions.

BANC’s announcement came three days after Mexico’s grid operator said it will explore EIM participation for Baja California Norte, a region already interconnected with CAISO. (See Mexico Grid Operator to Explore Participation in EIM.)

The current EIM members are Arizona Public Service, NV Energy, PacifiCorp and Puget Sound Energy. (See Arizona Public Service, Puget Sound Energy Begin Trading in EIM.) Portland General Electric is slated to join the market in October 2017, followed by Idaho Power in April 2018.

October 20, 2016

More Work Needed on Western RTO Proposal, Stakeholders Say

By Robert Mullin

CAISO’s latest draft of governing principles for a Western RTO is an improvement, but more changes are needed to win approval from regulators in the states in which PacifiCorp operates, speakers at a California Energy Commission (CEC) governance workshop said Monday.

caiso western rto — Edmonds | *Linkedin*

“Our states are very sensitive to the perception that California can swing a veto,” PacifiCorp Transmission general counsel Sara Edmonds said.

Edmonds was referring to a provision that would institute load-weighted voting on the proposed Western States Committee (WSC) — the body comprising representatives from states considering participating in a future RTO. (See Latest Proposal Fills Out Western RTO Governance Plan.)

Veto Rights

As currently conceived, the voting rule — which requires any initiative be approved by 75% of voting members representing 75% of load — would not only prevent California from ramming through favored policies, but also permit that state to singlehandedly block any measures with which it disagrees.

“Ultimately, why we came to this [voting model] is that it gives some power to the weight of load, but gives all parties the ability to block a vote,” said Stacey Crowley, vice president of regional and federal affairs at CAISO. “It really does drive consensus.”

“I also understand that [weighted voting] is very important to California,” Edmonds said, noting that her company will seek to obtain feedback from state utility commissions on the issue.

“I can tell you that a weighted voting model that gives California veto power will be problematic,” said Jennifer Gardner, an attorney for Western Resource Advocates (WRA), a Colorado-based environmental group that supports the ISO’s bid to regionalize the Western grid. (See Q&A: Western Resource Advocates Sees Benefits from Western RTO.)

In an alternative voting proposal submitted to the CEC last month, WRA pointed out that California would represent 76% of the load in an expanded ISO in which PacifiCorp was the only service area outside the current footprint. Including Arizona Public Service and NV Energy would still leave California with a 61% share, which would fall to a slim majority of 52% with the addition of Portland General Electric, Puget Sound Energy and Idaho Power.

Tiered Voting

WRA’s proposal: a tiered voting process in which every state would hold one vote under most circumstances and the WSC would attempt to work toward consensus. For issues where consensus voting might be difficult, other rules would apply, such as majority voting for day-to-day decisions and two-thirds majority voting for amending bylaws.

Load-weighted voting could apply for decisions related to the WSC’s areas of “primary authority” — tariff revisions that currently fall under the remit of state regulators. The weighting would be simplified so that any state with more than a 50% of the RTO’s load would wield two votes, while all others would get one. Gardner noted that the New England States Committee on Electricity follows a similar practice.

“What’s really important with that group is that they achieve all of their decisions based on consensus,” Gardner said. “If not, they revert to voting based on load.”

The California Public Utilities Commission’s Mike Florio said he was “taken aback” by the WSC’s limited role in the initial development of the resource adequacy and transmission access charge rules for an RTO.

“I think the counting rules [for resource adequacy] should be uniform for all the states,” Florio said. “That’s why it’s something that should fall to the Western States Committee.”

The ISO has played its strongest role with local resource adequacy, but the process is still in play for flexible capacity, Florio said.

“There is a significant role for the states there that hasn’t been outlined to date,” he added. “I’d think the states would want to have some kind of backstop role.”

Clarity on Roles

“I think we need to get much more clear on the very specific roles between the ISO board and the WSC — and versus the WSC,” said Dede Hapner, vice president of FERC and ISO relations with Pacific Gas and Electric.

Hapner said the most recent governance proposal provided a larger role for the WSC than the previous version and that industry participants must think about areas where the committee could trump the board.

“How much will be acceptable to the FERC?” she asked.

Hapner also advocated for the creation of a “transitional” WSC to begin quickly addressing issues of concern to participating states.

Concurring with that view was Rachel Gold of the Large-Scale Solar Association.

“Seating the WSC earlier — even in informal fashion — will be important to getting to ‘yes’ here,” she said.

Other Western states would likely want to weigh in on rules around resource adequacy and greenhouse gas accounting, Gold noted.

Mark Gendron, vice president of power services at the Bonneville Power Administration, had a similar take. While his agency was pleased with the proposal’s attention to complex technical issues such as resource adequacy, it thinks it will take time to work through those matters.

“We’re concerned that some of the decisions on some of these technical issues could be made prior to the [seating of the] new board and Western States Committee,” Gendron said.

Potential Shortcoming

Robert Cromwell, director of power contracts and resource acquisition at Seattle City Light, pointed out a potential shortcoming in the ISO’s decision to make the WSC a body of general state representatives rather than regulators: Utility commissions might still have to weigh in on whether they could fulfill a WSC decision based on their own state laws.

The panelists found some positives in the latest proposal as well.

“We have repeatedly requested that consumer and environmental advocates be separated [in the Transitional Committee guiding development of the RTO],” Gardner said. “We appreciate CAISO taking our concerns.”

PacifiCorp’s Edmonds supported the proposal’s creation of a Nominating Committee and Approval Committee to select members of the final RTO board — the latter of which would comprise WSC members.

“The current revised proposal appears to shift more responsibilities to states, and I know our states are looking at this,” Edmonds said.

Edmonds also noted that the fleshed-out proposal deferred fewer governance design details to the Transitional Committee, calling that a “good thing.”

Florio and Gendron both complimented the proposal for emphasizing that the WSC should be a collaborative body.

“I think the emphasis on a collaborative, consensus-based process is appropriate,” Florio said.

Hapner supported the proposal’s shorter transition to seating a final board and agreed with the redistribution of sector representation on the Transitional Committee, which folded generators and marketers into the independent power producers sector and created an exclusive grouping for end-use consumer advocates.

“The consensus seems to be that we’re making progress, but there’s still a lot of work to be done,” concluded CEC Chair Robert Weisenmiller.

October 20, 2016

Federal Suit Challenges NY Nuclear Subsidies

By Ted Caddell and William Opalka

Despite its best efforts to avoid litigation, the New York Public Service Commission saw its Clean Energy Standard challenged in federal court Wednesday by a group of energy companies and trade groups calling the rule’s subsidies to several nuclear power plants unconstitutional.

The suit, filed in U.S. District Court for the Southern District of New York in Manhattan, claims the zero-emission credits (ZECs) intrude on FERC’s jurisdiction over interstate electricity transactions, asking the court to find them invalid and order the PSC to withdraw them from the CES.

The ZECs are “purely protectionist in nature, enacted for political reasons to save jobs at the subsidized generators and the property tax revenues there from,” said the plaintiffs, which include Dynegy, Eastern Generation, NRG Energy and the Electric Power Supply Association.

The CES, adopted by the PSC in August, mandated that New York obtain 50% of its power from renewable resources by 2030. The ZECs were seen as a way to keep the state’s nuclear plants operating while utility-scale renewables are built. The 12-year subsidies would help keep open Exelon’s R.E. Ginna and Nine Mile Point and Entergy’s James A. FitzPatrick plant, the sale of which to Exelon is pending regulatory approval.

new york nuclear power — Nine Mile Point | *Constellation Energy Nuclear Group*

When it issued its order, the PSC said it had revised it in a way that it believed would avoid legal issues that caused the U.S. Supreme Court to void a contract between Maryland and Competitive Power Ventures in Hughes v. Talen. (See NY Attempts to Thread Legal Needle with Clean Energy Standards, Nuke Incentives.) The court found the contract unconstitutional, as it was tied to prices in PJM’s capacity market, over which FERC has jurisdiction. The PSC instead tied the price of its ZECs to EPA’s social cost of carbon and the price of carbon allowances in the Regional Greenhouse Gas Initiative.

The plaintiffs, however, said the ZECs were still tethered to FERC-regulated wholesale energy prices and thus unconstitutional.

“Apparently recognizing that its original proposal was plainly unconstitutional under Hughes, the PSC staff hastily revised its recommendation in July 2016 and changed the formula for determining the amount of ZEC subsidies,” they said. “Although the new formula was ostensibly based upon a federal interagency working group’s ‘social cost of carbon,’ this was window dressing, changing the name but not the intent to replace the FERC-determined energy price with a state-determined energy price.”

The plaintiffs argued that the subsidies disadvantage out-of-state generators who participate in NYISO’s markets.

“The ZEC order is directly discriminatory, as only specified New York nuclear facilities are eligible to receive ZECs,” they said. “Although states have the right to regulate the retail sale of electricity within their own borders, the wholesale sale of electricity involves interstate commerce, which the state may not regulate. NYISO’s wholesale marketers are interstate and international in nature, as they involve the sale and transmission of energy and capacity from generators located in other states and in Canada, and the purchase of such commodities by customers in other states.”

They also claimed that the ZECs could inhibit competition because they “would cause more efficient interstate generators to leave the market and discourage the entry of new competitors.”

Proponents of the CES were quick to denounce the suit.

“This lawsuit, filed by gas, oil and coal generators, is blatantly putting specific business interests ahead of what is best for New York,” said Gary Toth, vice chair of the County of Oswego Industrial Development Agency.

“Today’s lawsuit … is wholly inconsistent with the values of the countless New Yorkers who want to achieve a clean energy future,” said Ted Skerpon, chairman of the IBEW Utility Labor Council of New York.

“The bottom line here is that eliminating the nuclear provision from the CES will cause electricity prices to spike and will put thousands of New Yorkers out of work,” said Gregory Lancette, president of the Central-Northern New York Building and Construction Trades Council.

“Ultimately, if upstate nuclear plants close, it is the generation facilities that burn coal, oil, and gas that will benefit from the electricity price spikes that would result,” said Dave Young, president of the Rochester Building & Construction Trades Council.

Downstate Legislators Blast ZECs Again

On Monday, a group of New York City-area legislators again blasted the ZECs in a second letter sent to the PSC.

The legislators, now numbering seven, also said the PSC’s response to their first letter mischaracterized their opposition. (See New York Legislators Question Nuclear Subsidy.) They said they support the standard’s renewables goal but contend that the $965 million ratepayers will spend on the subsidies over the first two years of the program will be disproportionately borne by downstate ratepayers. They again called for the cost review of the power plants’ operating costs to be made public.

“The commission has kept the cost review concealed from the public, presumably on the grounds that the costs of the nuclear plants are trade secrets, but the commission in its order acknowledged there was little competition involved,” the letter states. “Upon sale of the FitzPatrick plant, Exelon/Constellation will become nearly the exclusive owner. Accordingly, there is no justification for withholding this information on the basis that the costs are protected trade secrets.”

The PSC responded to the first letter by saying the benefits of low emissions are shared statewide. It also has said the move toward a low-carbon energy portfolio would suffer if the nuclear plants retired prematurely.

October 19, 2016

UPDATED: PJM to Seek FERC OK for Seasonal Capacity Proposal

By Rich Heidorn Jr. and Rory D. Sweeney

pjm ferc seasonal capacity — Adam Keech, PJM | © *RTO Insider*

COLUMBUS, Ohio – PJM officials said Wednesday they will seek FERC approval of the RTO’s seasonal capacity proposal despite a lack of stakeholder consensus.

The proposal, which would relax the current prohibition on seasonal resources aggregating across locational deliverability areas, received less than one-third support in a Seasonal Capacity Resources Senior Task Force poll last month. (See No Consensus Among PJM Stakeholders on Seasonal Resources.)

Adam Keech, executive director of PJM market operations, told the annual meeting of the Organization of PJM States Inc. that the PJM Board of Managers had approved making a FERC filing in November.

In addition to what Keech called PJM’s “facilitated aggregation” proposal — which is intended to improve the ability of intermittent resources and demand response to participate in the capacity auction — the RTO also will consider changes in load forecasting and incorporating summer DR’s curtailment capabilities after the auction, Keech said.

“We’re looking for other ways to value seasonal resources” in addition to changes in capacity rules, Keech said. “We recognize there’s more work to be done in this area.”

Keech said PJM’s proposal is a response to complaints that the aggregation options offered to seasonal resources under Capacity Performance rules are unworkable because of the difficulty summer and winter resources had in “finding one another” and reaching commercial agreements.

Under the proposal, PJM would match summer and winter resources, eliminating the need for commercial ties between them. Summer and winter resources would have separate six-month obligations and would not be liable for another resource’s nonperformance.

The RTO’s proposal also would allow resources to aggregate beyond LDA borders, with unmatched resources moving up to the next LDA level until a match is found. For example, an offer containing individual resources located in the EMAAC LDA and SWMAAC LDA would be modeled in the MAAC LDA. An offer with resources in COMED and EMAAC would be modeled in the “Rest of RTO.” Performance penalties would be distributed evenly between the resources, no matter which failed to perform.

Measurement Rules, Injection Rights, Load Forecasting

Keech said PJM also will propose a change in how it measures winter DR, returning to the former firm service level (FSL) calculation “that is more conducive for demand response capability for industrial resources.”

PJM also plans to propose that wind be able to obtain higher winter capacity injection rights, in recognition that wind farms, which are rated at a 13% capacity factor in the summer, can produce 40% of their nameplate capacity in the winter. Hydro resources “potentially” could receive higher winter injection rights as well, Keech said.

Another initiative will seek ways to better incorporate DR into load forecasts, which would reduce costs by reducing the amount of capacity procured. PJM’s current method requires load reductions to be repeated for 15 years before they are reflected in the load forecast, Keech said. “There’s probably some room to improve in that area,” he said.

In addition, PJM is considering registering summer load curtailment capabilities after the capacity auction, which he said will borrow from its former interruptible load for reliability (ILR) program and “operational attributes” concept.

“We realize the operational flexibility value to that,” Keech said, adding “the details remain to be ironed out.”

Mixed Reception

The announcement of PJM’s plans got a mixed reception from other speakers at the OPSI meeting.

John Farber, an analyst with the Delaware Public Service Commission, called PJM’s choice “disappointing.”

Susan Bruce, counsel for the PJM Industrial Customer Coalition, said the group supports PJM’s filing. “We think it will help with the next auction,” she said. “It’s not a silver bullet though.”

Katie Guerry, of DR aggregator EnerNOC, made a pitch for her company’s proposal, which combined PJM’s plan with a “balancing ratio” that changes how DR is valued. It won support from one-third of the task force. Keech said PJM is discussing whether to apply the balancing ratio — currently used only for generation — to other resources.

James Wilson, a consultant for state consumer advocates, said PJM’s proposal falls short of his winter performance equivalents plan, which would auction “WIPES” credits that allow capacity resources to not perform in the winter. Opposed by PJM, Wilson’s proposal was supported by less than a quarter of task force members.

Wilson said the 2014 polar vortex was “a real wake-up call on the value of winter capacity” and said the CP rules properly created much stronger incentives for performance.

But he said CP went in the “wrong direction” in not recognizing the seasonal nature of both capacity resources and PJM’s peak loads. PJM’s projected 2020 summer peak load is 20,000 MW greater than its winter peak in a 50/50 forecast — with the difference rising to 26,000 MW in a 90/10 forecast.

“PJM’s reliability studies have always suggested that all of the outage risk is really in the summer, not in the winter,” he said.

Wilson said his “simple simulation” found that a “full seasonal” approach would save ratepayers about $1 billion annually by procuring 20,000 MW less in winter and accommodating more participation by seasonal resources — solar, wind and DR.

He said separate summer and winter price signals “would be potentially very helpful” for both renewable developers and gas-fired generators weighing the cost of obtaining firm gas supplies in winter.

Wilson praised PJM’s efforts to revise its load forecasts to recognize increasing energy efficiency. The changes reduced the forecast peak for the 2019/20 Base Residual Auction by 5,660 MW (-3.5%). (See Changes to PJM Load Forecast Cuts Benchmark Peaks.)

“But it’s too soon to … conclude that we’ve solved the over-forecasting problem,” Wilson said.

No Consensus in Task Force

The task force polled members last month on five proposed rule changes, with the most popular proposal — retaining the base capacity product for an additional year, delivery year 2020/21 — claiming 43% support. Only 48% of members who voted favored any change, while 52% chose the status quo.

Bruce Campbell of energy management company CPower said “a handful of large entities” can skew the voting in lower committees not subject to sector-weighted voting because they have multiple business units represented with stakeholder votes. “It’s my opinion that that probably has happened in this case,” he said.

October 19, 2016

CFTC Exempts RTOs from Private Rights of Action

By Tom Kleckner

The U.S. Commodity Futures Trading Commission on Tuesday unanimously issued a final order granting SPP’s request to exempt certain energy transactions in the RTO from the Commodity Exchange Act (CEA) and commission regulations.

The order is similar to the commission’s March 2013 ruling that provided six other grid operators with the same exemption, according to CFTC. But it also exempts those transactions from private rights of action, judicially inferred rights to relief that could have left the RTOs and their market participants as potential targets for lawsuits outside the FERC process.

The commission simultaneously amended its 2013 order to expressly exempt the six other grid operators from private actions, it said. SPP was not a party to the original order because its day-ahead market was not in operation, but it filed a “me-too” exemption in 2013 when it became apparent the market would soon be live. In response, the commission said in May that it never intended to protect the RTOs from private actions.

The ruling was expected after CFTC Chairman Timothy Massad said in a September letter to Sen. John Boozman (R-Ark.) that he would recommend the commission provide the exemption, reversing his previous position after receiving substantial industry feedback. (See CFTC Chair Flips on Private Rights of Action in RTO Markets.)

cftc private rights of action — Boozman (L) and Massad

Commissioners J. Christopher Giancarlo and Sharon Y. Bowen joined Massad in a seriatim process, in which the commissioners vote in sequence and in private, rather than at an open meeting. Massad and Giancarlo have both issued statements supporting their votes.

Mike Ross, SPP’s senior vice president of government affairs and public relations and a former six-term Arkansas congressman, guided the effort that provided 38 comments against the proposed rule to allow private actions. There were only five comments in favor.

“We’re pleased with the commission’s decision to keep existing exemptions in place,” Ross said in response to the ruling.

October 18, 2016

Mexico’s Grid Operator to Explore Participation in EIM

By Robert Mullin

An isolated area of Mexico’s grid already interconnected with California could become the first non-U.S. participant in the Western Energy Imbalance Market.

El Centro Nacional de Control de Energía (CENACE) — Mexico’s grid operator — and CAISO today announced an agreement to explore the benefits of having the Baja California Norte region join the West’s only real-time energy market.

While the region has no transmission connections with Baja California Sur or Mexico’s mainland grid, it boasts two 230-kV links with California through the Imperial Valley and Otay Mesa substations. Those lines, known as Path 45, provide about 800 MW of transfer capacity.

caiso eim cenace — The isolated Baja California Norte region’s only transmission interconnections are to the north – with California. | *Mexico Ministry of Energy*

“CENACE’s Baja California Norte participation in the Western EIM will enable it to benefit from the savings that a large geographic region can offer,” CAISO CEO Steve Berberich said in a statement.

Baja already hosts natural gas-fired generation built in part to serve California’s market, including Sempra Energy’s 625-MW Termoelèctrica de Mexicali and Intergen’s 1,100-MW La Rosita. Deliveries into Imperial Valley can serve San Diego County via the 500-kV Sunrise Powerlink, which was energized in 2014.

The region also has promising potential for wind energy, which is increasingly valuable to California as the state seeks to balance its solar-heavy portfolio in pursuit of a 50% renewable standard. Sempra’s Energía Sierra Juárez, a 155-MW wind farm completed near the U.S. border last year, operates under a 20-year power purchase agreement with San Diego Gas and Electric.

“Mexico has had a long, productive relationship with the ISO as we coordinate the management of our interconnected electricity grids,” CENACE General Director Eduardo Meraz said. “It is only logical for CENACE to carefully consider Baja California Norte’s participation in the Western EIM, with its promises of lower-cost electricity and increased renewable integration.”

Mexico’s energy policy requires the country to generate 30% of its electricity from hydro and other renewable sources by 2021, a mandate that increases to 35% in 2024.

Legislation enacted in 2014 named CENACE the nationwide grid operator and partially deregulated Mexico’s power sector, allowing for expanded private sector participation. The agency, which manages the nation’s wholesale electricity market, operates more than 33,000 miles of high-voltage transmission.

The recently expanded EIM has four members operating in eight U.S. states: Arizona Public Service, NV Energy, PacifiCorp and Puget Sound Energy. (See Arizona Public Service, Puget Sound Energy Begin Trading in EIM.)

October 17, 2016

Monitor Says FERC Erred in PJM FTR Ruling, Seeks Rehearing

By Rory D. Sweeney

PJM’s Independent Market Monitor asked FERC on Friday to reconsider its “flawed” ruling on PJM’s financial transmission rights market, saying it “contradicts the fundamental purpose of returning congestion revenues to load” (EL16-6-001, ER16-121).

bwj5qlkorwocayk5c6nh_full_bowring-joseph-monitoring-analytics-rto-insider — Bowring, PJM’s IMM | © *RTO Insider*

“A consistent theme of the Sept. 15th order is the unsupported view that load must provide guaranteed and risk-free funding of FTRs as a hedge against day-ahead congestion, and that this is somehow in the interest of load,” the Monitor wrote in its rehearing request. “This approach, favored by the financial participants who own most FTRs, is not consistent with the reason that FTRs exist and has no basis in market logic.”

The commission’s order rejected PJM’s proposal to reduce Stage 1A infeasible auction revenue rights by increasing its zonal load forecast growth rate, saying the change would result in unnecessary transmission projects because it would rely on outdated source and sink points. The commission also rebuffed PJM on its plan to eliminate the netting of negative ARRs in a portfolio against positive ones.

FERC also ordered PJM to allocate balancing congestion to real-time load. It gave the RTO until Nov. 14 to submit a compliance filing. (See FERC Finds PJM ARR/FTR Market Design Flawed; Rejects Proposed Fix.)

An FTR entitles its holder to credits based on locational price differences in the day-ahead energy market when the transmission grid is congested. FTRs can be purchased or converted from ARRs, which are allocated to network and firm point-to-point customers.

market monitor ferc pjm financial transmission rights — | *PJM*

The Monitor’s request argues that FERC departed from precedent and contradicted earlier orders in striking balancing congestion from the FTR definition.

“Elimination of the total congestion revenues rule means that load-serving entities will be forced to pay to make up the difference when congestion revenues paid to FTR holders are in excess of the total congestion revenues collected,” the Monitor said. “This requires load to pay total congestion, including day-ahead and balancing, and then pay balancing again when it is negative. This is not consistent with the objective of the FTR/ARR design, which is to return congestion revenues to load.”

The Monitor described FERC’s ruling on portfolio netting as “unexplained” and said it “fails to address extensive arguments and examples that show the portfolio netting rule does result in cross subsidies.” The netting rule should be eliminated, the Monitor argued, because it “provides unjustified subsidies to participants holding FTRs with negative target allocations.”

It also challenged the commission’s determination that the Stage 1A allocation rule is necessary, saying it “avoids addressing the actual problem: the complete disconnect between the allocation of ARRs and actual system usage.” The Monitor said “the entire concept of generation to load paths is archaic, reflecting the contract path approach to physical transmission rights prior to the introduction of market.”

October 17, 2016

Report: Calif. ‘Duck Curve’ Growing Faster than Expected

By Robert Mullin

A new research report indicates that the belly of CAISO’s “duck curve” is deepening more quickly than originally expected, with its effects increasingly spread across the year — and not just on the typical spring day depicted by the graph.

The report from consulting firm ScottMadden also suggests that distributed energy resources such as rooftop solar are contributing only modestly to the decline in net load and ramping rates associated with the widespread adoption of solar energy in California.

california duck curve utility-scale solar — The ScottMadden report contends that growth in distributed energy resources is keeping a lid on total load growth, but has little impact on system load —and, therefore, the deepening of the duck curve. | *Scott Madden*

“The duck curve is driven by utility-scale solar in California, not distributed resources,” the report says.

The report’s authors contend that understanding the root causes and impact of the curve is necessary for responding appropriately to its effect on grid operations.

“If we are to effectively address renewable integration challenges, it is imperative that we understand and address the actual issues that exist,” the report says. “Solutions for a seasonal, weekend, utility-scale solar issue may well be different than solutions for an everyday, distributed resource issue.”

California’s duck curve first appeared in 2013, the product of CAISO’s effort to forecast the long-term impact of increased renewable penetration on its daily operations.

That forecast demonstrated how the adoption of solar and other renewable resources would steadily undercut the ISO’s “net load,” which represents the portion of load that must be served by dispatchable resources such as gas-fired generation and imports. The net load calculation looks at total load for a given interval and subtracts energy generated by variable renewable resources.

Load Declines not Limited to Spring

The duck-shaped curve illustrates how daytime solar output crowds out the need for dispatchable resources during much of the day. That, in turn, creates the need for the sharp ramping of dispatchable resources as the sun begins to set. Over the long term, that ramp is expected to grow steeper as more solar resources come online and further depress net load as the state seeks to meet a 50% renewable energy mandate.

While CAISO’s original duck curve forecast predicted that minimum net load would fall to about 15,000 MW in 2016, this past spring already saw that figure — represented by the curve’s trough — sink to a low of 13,894 MW, a 31% decline from 2011. (See Solar is the Generation of Choice in California.)

Since 2011, ScottMadden said, CAISO’s daytime minimum net loads have been declining throughout the year, not just during the spring periods characterized by low residential loads coupled with relatively high solar generation. Furthermore, steep ramps are becoming more frequent, with the late-day three-hour ramp exceeding 5,000 MW on 58% of days in 2015, compared with 6% in 2011. Last year’s steepest ramp was 10,091 MW, a 62% increase from four years earlier, the report shows.

And the most significant ramps are occurring in fall and winter, when California’s net loads are at their lowest. In 2015, the 20 steepest ramps occurred in December (10), November (eight) and January (two).

The firm’s analysts also determined that the sharpest ramps consistently occur on weekends, the low point for weekly loads. Weekend ramps average 10% higher than those occurring on weekdays.

Weekends More Prone to Impacts

“These results suggest that weekends are more prone to experience the impacts of the duck curve because of their lower system loads,” the report says. “Conversely, higher system loads on weekdays mitigate the midday decline in net load and the impact of the duck curve.”

Perhaps most important from a system planning perspective, the report attempts to dispel the notion that DER is contributing significantly to the shape of the duck curve.

The authors explain that, while behind-the-meter distributed resources and energy efficiency appear to be offsetting growth in California’s total load, together they have little impact on the shape of the daily curve of system load — or load that must be supplied by system resources.

The authors back this claim by comparing CAISO — where distributed resources are just 3% of utility-scale capacity and do not participate in the wholesale market — with Hawaii, where residential solar represents 9% of generation managed by the state’s largest utility. In California, daytime system load has changed little since 2011, while Hawaii has seen a sharp decline over the same period.

Based on those findings, grid solutions need not “be totally dependent on complex DER management,” the report contends.

“Instead, the operational challenges associated with utility-scale solar present the potential for more targeted utility-scale solutions,” the report says.

October 17, 2016January 17, 2024

FERC Chair, Panelists Make Forecasts at OMS Meeting

By Amanda Durish Cook

LEXINGTON, Ky. — FERC Chairman Norman Bay headlined the Organization of MISO States’ annual meeting Thursday, where panelists discussed the grid of the future, the growing role of natural gas and the continuing uncertainty over state and federal regulators’ jurisdictions.

The Grid of the Future

Lorenzo Kristov, principal of market and infrastructure policy at CAISO, said a “one-way power flow with passive customers on the end is on its way out.” In 15 years, he envisions a future in which utilities deliver just 50% of load and the rest is served by local resources.

He imagined buildings with smart technology and microgrids that can detach themselves from the grid when service is interrupted. “It can ‘island’ if it has to, but most of the time it doesn’t want to because it wants to interact with the market,” he said. “This is where bottom-up meets top-down.”

Kristov said a more decentralized system is also more secure against increasingly severe weather and cyberattacks.

Jim Gardner, former chair of the Kentucky Public Service Commission, highlighted income disparity and email hacking, two trends tied to the presidential election, that he said would play a future role in power consumption.

Income disparity in the U.S., Gardner said, will manifest itself in the power industry, with one class wanting “concierge electrical service” while the other class “will barely be able to afford their electricity bills.”

“You’re going to have great disparity in the customers,” he said.

Gardner also predicted more cybersecurity scares, which he said will result in more top-down control of RTOs from the federal government.

Bay, who presided over a question-and-answer session at the annual meeting, hesitated to describe what an RTO would look like 20 years out. “The times I’ve been asked to be a talking head, I’ve been totally wrong,” he joked. However, he said the need for RTOs would persist. “I think there’s always going to be the need for the efficiencies of a large-scale grid. There is always going to be a need for transmission, so the wholesale market will continue to exist,” he said.

Devin Hartman of the public policy research organization R Street Institute said new, high-voltage lines can unlock constrained resources. “It’s important to know that sometimes so-called breakthroughs take years to develop,” he said.

Bill Booth of the Mississippi Public Service Commission asked if it was wise to continue to construct new high-voltage lines if distributed resources continue to grow.

Kristov said a careful, “least regrets” planning process will have to be used when building new transmission. “I suspect we will need a lot less than we would under a central utility structure,” he said.

Hartman said there are “huge question marks” in designing rates for distributed resources such as rooftop solar.

Gardner said the uncertainty around creating a model for distributed resources will likely continue. “The states are going to go in fits and starts. There’s not going to be a uniform movement,” he said. “The West doesn’t even have RTOs.”

Kristov said a rate structure could charge distributed resources based on how much volatility they introduce in the market. Standalone rooftop solar could be charged a higher rate than that with battery storage.

David Carr, counsel for the Mississippi Public Service Commission, said the addition of distributed resources could leave low-income populations behind. Kristov said local governments could pick up the slack through community programs.

Joe Paladino, a senior advisor at the U.S. Department of Energy, said integrated, regional planning processes are needed to manage the convergence of natural gas infrastructure with the power industry.

“This industry is very fragmented. Jurisdictions are going to have to start considering each other,” he said.

The panelists agreed that price disparities across locations will continue with the growth of microgrids. “Unless we had one huge central nuclear reactor transmitting power from the same distance,” Paladino said.

“You do,” Kristov injected playfully. “It’s the sun.”

Growth of Natural Gas

MISO strategy advisor Scott Wright said natural gas’s share of MISO electric generation could climb to 40% by 2025, up from 23% in 2015.

“The short version is we have a lot of gas, it’s going to be around for a long time and even the [U.S. Energy Information Administration] agrees,” said panelist Amy Farrell of the American Petroleum Institute.

Richard Levitan of Levitan & Associates said there are 39 GW of gas-capable generation, 21 pipelines and more than 3 million horsepower of compression in MISO North alone. “This region is blessed with massive storage infrastructure,” he added. “These serve as bellows to operating supply.”

Wright added there are about 140 storage fields in the MISO footprint.

Levitan also said MISO North has comparatively very few hours of non-deliverability attributed to line breaks or other issues. “I think you can say there’s barely a scintilla of vulnerability,” he said.

However, DTE Energy’s Don Stanczak did not agree with the rosy talk about the windfall of supply. He said the existing natural gas system was designed for predictable retail heating loads, but the increase in gas-fired power generation will require hourly withdrawals and injections.

“We do have a lot of natural gas storage in Michigan, but I don’t think it’s properly configured,” he said. “In the polar vortex, we were days away from having to decide if our customers wouldn’t have electricity or they wouldn’t have heat. And you can’t have heat without electricity.”

Wright said future developments in rapid injection and withdrawal could allow gas scheduling for power to become more natural, “like breathing,” and eliminate the panic of “did I schedule?” He said, however, that getting natural gas from the wellhead is often fraught with obstacles. “There’s a lot of rate pancaking and nominations across several pipelines.”

“I think we need to remind ourselves of the environmental opposition to pipelines,” Levitan said. “Just expanding existing pipelines has become a daunting task. The Northeast is littered with failed projects.”

Farrell suggested that FERC could encourage pipelines to offer an expanded set of market products.

“The gas-electric process that took place over the last four years was painful, but we have to open up that dialogue again,” said attorney Kelly Daly of Stinson Leonard Street in D.C.

When Jurisdictions Collide

Ted Thomas, chair of the Arkansas Public Service Commission, who moderated a panel on the increasing entanglement of RTO, state and FERC jurisdiction, said “the bright line appears to be getting fuzzy.”

Ohio Public Utilities Commissioner Howard Petricoff said the Federal Power Act’s “just and reasonable” standard is vague when compared to the legislation such as the Clean Air Act.

“There’s virtually no change in the language in the last 70 years in either the Federal Power Act or the Federal Gas Act,” Petricoff said. “It’s a much different industry than in 1935. … Today, we have independent power producers; we have interstate lines; we have a fairly complex industry. … The transmission, the grid and the resale are much more active.”

Jeff Dennis, of Akin Gump Strauss Hauer & Feld, said behind-the-meter generation and merchant generators’ competition with vertically integrated utilities has complicated jurisdictional questions. “Power [used to] flow one way. Consumers consumed and generators generated.”

Petricoff said the Supreme Court’s Electric Power Supply Association ruling affirming FERC’s right to regulate demand response has not answered the question of whether “1 MWh saved is 1 MWh generated.” (See Court’s Reticence Frustrates Energy Bar.)

Dennis said the FPA lacks the “cooperative federalism” that can be found in other federal laws.

“I think unfortunately the courts are going to continue to have to pick sides. That means we’re going to muddle through on a case-by-case basis.

“I think it’s important for the Supreme Court to know what aim regulators have in mind. That aim is critically important,” Dennis added.

“‘Cooperative federalism’ has different dimensions,” Bay said. “If we share the same objective, we can get so much more done rather than if we’re suing each other.”

Bay suggested state regulators make use of pre-filing meetings with FERC to minimize the “chance of friction.”

“I think my priorities are similar to every other [state] regulator here,” Bay continued. “From my perspective, what we should be doing at FERC is adapting to the change while maintaining reliability and just and reasonable rates.”

American Electric Power’s John Crespo said RTOs are dependent on states and local governments, whose regulation of land use, granting of easements and implementation of environmental rules determine if transmission actually gets built.

Bay said states need jurisdictional wiggle room. “States deserve a lot of latitude in pursuing policies that they think are helpful for their citizens. … The states are great for experimentation. At the federal level, you can observe that state experimentation and make decisions.”

Crespo pointed to MISO’s plan to add a forward capacity auction to serve retail choice loads in Illinois and Michigan. “It’s an interesting potential for cooperation between the states and RTOs.”

Distributed resources and DR have created “prosumers,” consumers who can become producers, Crespo continued. “What you could see is a blending of the wholesale and retail markets, and what will that look like from the FERC standpoint? It could be where you have a deeper encroachment of federal regulation on states’ rights,” he said. “I’m not so sure if states knew what they were giving up when they joined RTOs.”

Bay said utilities are voluntarily joining RTOs in what he called the “march of markets.”

“Utilities are making the decisions for themselves; FERC isn’t forcing them to. Obviously there are benefits to joining an organized market,” he said.

“The RTOs have been very good at producing the lowest cost megawatt-hour, but there are other valid policy goals,” Dennis said. “My belief is that there should be a way for different models to coexist among states, the RTOs and FERC. There needs to be some cooperation with FERC, but that needs to be a two-way street.”

Bay added that states and FERC will have to work together on cybersecurity efforts, quipping, “Hackers don’t care that FERC has jurisdiction over the Bulk Electric System and states have jurisdiction over distribution.”

Petricoff said energy officials are going to get much more creative in the coming years as “even the fundamentals of power” will be altered. “We’re in a decade of change,” he said.

October 17, 2016

SPP MOPC Rejects Change to Transmission Billing Dispute Procedures

By Tom Kleckner

LITTLE ROCK, Ark. — Bowing to arguments from the Public Power sector, the SPP Markets and Operations Policy Committee on Wednesday rejected a rule change that would have allowed transmission owners to collect interest in billing disputes, even if they lose.

SPP’s current Tariff language allows a transmission customer to pay the amount it is disputing into an escrow account, where it is held until the dispute is settled. The interest earned on that account is then paid to the winning party.

The proposed change would have allowed SPP to pay the disputed amounts to TOs while the dispute is underway, and then collect the disputed funds back from the TOs if the customer won its case. However, the customer would not recover the interest.

Attorney Heather Starnes, representing the Missouri Joint Municipal Electric Utility Commission (MJMEUC), said the Tariff change (RR132) would be unfair to transmission customers and would not incent use of the dispute resolution process. She also challenged forwarding disputed funds to non-jurisdictional entities, questioning SPP’s ability to claw back the funds.

spp mopc — Left to right at the SPP MOPC Meeting: SPP EVP & COO Carl Monroe; MOPC Chair Noman Williams, GridLiance; Heather Starnes, MJMEUC, and Richard Dillon, SPP director of market design. | © RTO Insider

“This is a win-win for the TO,” Starnes said. “It gets the disputed funds, gets to use those funds and earn interest on them, and even if the TO loses the dispute, it has still gotten the use of and interest on those funds for the time period in which the dispute is unresolved.”

The measure was opposed by Flat Ridge 2 Wind Energy, MJMEUC and several other public utilities: the City of Independence, Kansas Electric Power Cooperative, Kansas Power Pool, Municipal Energy Agency of Nebraska and the Oklahoma Municipal Power Authority.

SPP supported the revision, saying the changes would align with the Integrated Marketplace’s transmission-settlement process and be easier for staff to administer.

“Administrative efficiency and/or matching up the marketplace and transmission-billing dispute processes are not sufficient justifications for destroying the independent and balanced dispute process currently in place,” Starnes said in her comments against RR132. “SPP having to manage the escrow accounts created incentive for it to work diligently to get disputes resolved.”

“This seems to me to be a solution in search of a problem,” Midwest Energy’s Bill Dowling said.

SPP is one of two RTOs still using FERC’s pro forma tariff language, meaning any revisions to that language must meet a different burden of proof than normal Tariff revisions, Starnes said.

“SPP would have to have proved that RR132 and its process revisions were equal to or better than the FERC pro forma tariff language,” she said.

It was a surprising turnaround. The proposal had cleared the Regional Tariff Working Group in April with only two abstentions.

Only Oklahoma Gas & Electric opposed the MOPC’s rejection of the revision request. There were three abstentions.

Staff assured members that transmission-revenue funds won’t be commingled with Attachment Z2 funds.