FERC Finds PJM ARR/FTR Market Design Flawed; Rejects Proposed Fix

By Suzanne Herel and Rich Heidorn Jr.

PJM must develop a new method for allocating auction revenue rights that doesn’t consider extinct generators, FERC ruled last week.

The commission said PJM had correctly diagnosed that its existing rules for ARRs and financial transmission rights were no longer just and reasonable because modeling assumptions it adopted to address FTR revenue inadequacy had “resulted in unwarranted cost shifts between ARR holders and FTR holders” (EL16-6-001, ER16-121).

But it rejected PJM’s proposal to address the problem by reducing Stage 1A infeasible ARRs by increasing its zonal load forecast growth rate. FERC said the proposed escalation factor “would trigger unnecessary transmission enhancements” because it would rely on outdated historical source and sink points.

“Instead, to address infeasible Stage 1A ARRs, we require PJM to revise its Tariff to remove the use of historical generation resources for requested ARRs in Stage 1A of the allocation process if those resources are no longer in service and develop a just and reasonable method of allocating Stage 1A ARRs based on source points that reflect actual system usage.”

FERC also shot down PJM’s proposal to eliminate the netting of negatively valued FTRs against positively valued ones in holders’ portfolios, saying the RTO had not proven that the netting rules were unjust and unreasonable.

In addition, the commission agreed with PJM that underfunding can be reduced by excluding imbalance costs not related to day-ahead congestion from FTR settlements. It ordered that PJM allocate balancing congestion to real-time load instead.

PJM has 60 days to submit a compliance filing reflecting the Tariff changes directed by FERC.

Technical Conference

FERC’s ruling relied in part on comments at a technical conference held in February. (See No Consensus on PJM FTR/ARR Allocations.)

pjm, ferc, auction revenue rights — FERC convened a technical conference Feb. 4 to discuss PJM’s market design for ARRs and FTRs. At the table (L to R): Tim Horger, PJM; Joe Bowring, Monitoring Analytics; Steve Lieberman, ODEC; Susan Pope, FTC (© RTO Insider) © *RTO Insider*

The commission called for the information-gathering session after the Financial Marketers Coalition and others protested PJM’s proposal to eliminate the netting provision, which would have increased ARR results by 1.5% annually.

The coalition — representing DC Energy, Inertia Power, Saracen Energy East and Vitol — objected to the elimination of netting, saying PJM hadn’t proved that the rules were unjust and unreasonable, nor that the proposed changes would fix underfunding.

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.

‘Sidestep’

FERC noted that PJM described its proposed escalation factor “as a targeted reform intended to sidestep the underlying allocation dispute (and corresponding stakeholder impasse).”

Since March 2011, the RTO has held three separate stakeholder processes to address FTR revenue adequacy.

Stakeholders and PJM had been wrangling with the issue of FTR underfunding for more than a year when Steve Lieberman of Old Dominion Electric Cooperative offered a proposal combining recommendations from the RTO and the Independent Market Monitor.

Although the proposal fell short of reaching the consensus necessary to make a filing under Section 205 of the Federal Power Act, PJM offered it as a unilateral filing under Section 206. (See PJM to File FTR, ARR Rule Changes with FERC.)

FERC said that short-term changes implemented by PJM because of the lack of stakeholder consensus on a comprehensive fix had improved revenue adequacy “to better than historical levels” but unfairly shifted revenues from ARR holders to FTR holders.

“When it is required to issue a pro rata reduction in transmission congestion credits due to underfunding, its netting policy … results in a cost shift from participants with larger shares of positive target allocation FTRs to participants with larger shares of negative target allocation FTRs,” reducing the hedging value of prevailing-flow FTRs, the commission said.

Because PJM’s current Tariff requires it to use historical paths in its Stage 1A ARR allocation, the RTO has modeled “dummy generators” where the historic source points are no longer in service, creating a disconnect between the Stage 1A ARR allocation and actual system usage.

That can result in infeasible Stage1A ARRs, “as some pathways may appear to be infeasible even though, in actual system usage, these lines are not overloaded. As the PJM Tariff has no mechanism by which to update this requirement, future changes in the resource mix and retirements will only further exacerbate this issue,” FERC said.

The commission clarified that Order 681, its 2006 rulemaking on long-term firm transmission rights, “does not guarantee, or require PJM to use, historical paths” in its ARR allocation.

Doesn’t Address Root Cause

FERC said PJM’s proposal to increase zonal load growth “is an inappropriate solution that does not address the underlying root cause” of infeasible ARRs.

It said the proposal “could trigger transmission enhancements to paths that are not needed for reliability and are not able to be justified through the benefits of relieving congestion through PJM’s economic planning process.”

“Any transmission enhancement identified under escalated load projections distorts the planning process, such that transmission planning is not based on expected system conditions. Additionally, in some cases, these paths may reflect generators that no longer exist or generation that load no longer utilizes (due to sale of the generation unit or the termination of a bilateral contract). PJM’s existing [Regional Transmission Expansion Plan] process would not identify a need to build the transmission enhancements for projected reliability or market efficiency needs without using an adjustment unrelated to system needs. Moreover, developing transmission enhancements solely to address infeasible ARRs ignores the more fundamental issue of why PJM should continue to model requested ARRs based on historic generation paths that load no longer utilizes.”

Netting Proposal

PJM said its plan to eliminate netting was justified because participants with fewer negative target allocations subsidize those with more negative allocations.

But the commission said it was “not persuaded that counterflow FTRs actually contribute to FTR revenue inadequacy or that the elimination of netting would improve FTR funding.”

It agreed with arguments by the Financial Marketers Coalition that portfolio netting does not result in cross-subsidies among parties holding prevailing flow and counterflow FTRs because the current practice guarantees that both positive and negative target allocations are treated in the same manner.

“We further find that PJM’s proposal would only reallocate FTR revenue inadequacy among various market participants without actually addressing the fundamental issues associated with FTR revenue inadequacy.”

FERC disagreed with the Market Monitor’s assertion that a market participant can protect itself from FTR revenue inadequacy by holding counterflow FTRs to shrink its net positive target allocation.

“The Market Monitor’s argument is flawed because it ignores the fact that market participants take into account expectations of FTR revenue inadequacy when transacting in FTR auctions, a point that the Market Monitor even noted in its 2015 Quarterly State of the Market Report,” the commission said.

It also disagreed with Exelon’s contention that holders of counterflow FTRs are not exposed to underfunding under the current netting rules.

“PJM and commenters supporting the elimination of portfolio netting have not provided evidence sufficient to reverse established commission precedent that states that PJM’s existing netting provision is just and reasonable,” FERC said.

Balancing Congestion

The commission acknowledged that its ruling that PJM change its handling of congestion imbalance — caused when there is less transmission in the real-time energy market than was assumed in the day-ahead market — represented a shift from its 2013 FirstEnergy Solutions order, in which it ruled that challengers had failed to prove the methodology was unjust and unreasonable (EL13-47).

“Such a finding does not preclude the commission from re-examining the issue when circumstances have changed or additional evidence has been presented,” it said. “By the time of the PJM filing in this case under Section 206, circumstances had changed considerably.”

The commission said including balancing congestion in the settlement of FTRs “contributes to the identified unjust and unreasonable cost shift between ARR holders and FTR holders, is inconsistent with cost causation principles and reduces the efficacy of FTRs as a hedge.”

Back to the Stakeholder Process

Following the technical conference, the commission solicited comments on other issues, including updates to the seasonal feasibility tests and source and sink points and whether transmission owners were incented to schedule outages in alignment with FTR/ARR rules.

But the commission said it would not order additional changes on those points. “While additional improvements to PJM’s ARR/FTR construct may be warranted, including those proposed by commenters, we refer these proposals to the PJM stakeholder process for further consideration and development.”

September 16, 2016

Interior Dept. Approves First Phase of California Desert Renewable Plan

By Robert Mullin

U.S. Interior Secretary Sally Jewell on Wednesday approved the first phase of the Desert Renewable Energy Conservation Plan (DRECP), a framework for California’s development of renewable energy projects on 10.8 million acres managed by the Bureau of Land Management.

Jewell’s approval of the bureau’s land use plan amendment marks the conclusion of Phase 1 of the DRECP, which identifies priority areas for developing renewable resources on federal lands within California while setting aside acreage for conservation and recreational uses.

Phase 1 is the product of a collaboration among the California Energy Commission (CEC), the California Department of Fish and Wildlife, the U.S. Fish and Wildlife Service and BLM.

“This landscape-level plan will support streamlined renewable energy development in the right places while protecting sensitive ecosystems, preserving important cultural heritage and supporting outdoor recreation opportunities,” Jewell said.

The bureau’s land use plan “designates development focus areas with high-quality solar, wind and geothermal energy potential and access to transmission, sited in low-conflict areas,” the Interior Department said in a statement. Developers in those areas will benefit from “a streamlined permitting process, predictable survey requirements and simplified mitigation measures.”

california desert renewable plan — *Source: Tom Brewster Photography via U.S. Bureau of Land Management*

The DRECP’s first phase is part of a broader California effort to open up a total of 22 million acres of public and private desert lands for renewable energy projects, an effort that could yield an additional 27 GW of additional renewable capacity, according to the CEC.

Phase II of the plan focuses on aligning local, state and federal renewable energy development and conservation plans, and building on CEC grants already awarded to California counties to foster renewable development.

Use of desert lands is a vital component in California’s strategy to meet its greenhouse gas reduction goals and derive 50% of its electricity from renewable resources by 2030. Development in those areas will become especially important if the state’s load-serving entities cannot obtain sufficient output from out-of-state resources. (See California Policy Goals to Require Significant Transmission Upgrades.)

“Renewable energy is a key part of California’s approach to addressing climate change, and large-scale renewable energy projects in the California desert will play an essential role in California meeting climate and renewable energy goals,” CEC Commissioner Karen Douglas said. “The DRECP provides a clear pathway for projects on public lands while giving the state much greater certainty about where those projects could be located.”

The announcement was met with opposition from renewable energy groups, which say the DRECP fails to balance renewable growth with land preservation and “forecloses development” on millions of acres of federal lands in Southern California. The plan sets aside 388,000 acres for renewable development, much of which is not suitable for solar and wind projects, the groups say.

“No one is saying that utility-scale renewable energy should go everywhere, but done responsibly and with safeguards, it does have to go somewhere if we are to meet state, national and global carbon-reduction goals,” said Nancy Rader, executive director of CalWEA, which estimates the plan will create the potential for 1,000 MW of new wind resources.

“The Interior Department and BLM missed a golden opportunity to balance the preservation of parts of the California desert with clean, renewable energy development across some of America’s richest renewable resource areas,” said Tom Kimbis, acting president of the Solar Energy Industries Association.

Shannon Eddy, executive director of the Large-scale Solar Association, called the plan “a Model T in a Tesla world,” arguing that it fails to consider the “enormous” policy changes that will require renewable development on public land.

“Rather than fostering sustainable clean energy development as a part of a conservation plan, it severely restricts wind and solar,” Eddy said.

Environmentalists praised the plan, which sets aside nearly 2.9 million acres as new federal conservation land.

“This plan is a win for California,” said Doug Wheeler, former California secretary for natural resources. “Not only does it help the state meet renewable energy goals, it also protects some of California’s best places — lands that provide a recreational escape and protect important wildlife species.”

“The DRECP provides a responsible path for future development while permanently protecting the most important places as California desert conservation lands,” said Danielle Murray, senior director at the Conservation Lands Foundation. “We thank Secretary Sally Jewell and the Bureau of Land Management for this landmark plan and hope it serves as a model for public lands planning in the future.”

September 15, 2016

CFTC Chair Flips on Private Rights of Action in RTO Markets

By Tom Kleckner

U.S. Commodity Futures Trading Commission Chairman Timothy Massad said Tuesday he will recommend the commission abandon its proposal to allow private rights of action against energy market transactions in RTOs and ISOs, reversing his position on the issue (81 FR 30245).

massad, cftc, private rights of action — Massad

Massad said that after a “careful review of the issue” and public comments, he plans to recommend CFTC’s final order exempt RTOs and ISOs “from all private rights of action under Section 22 of the Commodity Exchange Act (CEA).”

“As regulators, I believe it is our goal to provide effective and efficient oversight of our markets,” Massad said. “While private rights of action will remain critical overall in our markets, I am persuaded that … their preservation could result in greater costs and uncertainties without necessarily enhancing of markets or consumer protection.”

Massad’s comments came in a letter sent to U.S. Sen. John Boozman (R-Ark.), chairman of the Senate Appropriations Committee’s Subcommittee on Financial Services and General Government. In April, Boozman included an amendment to CFTC’s reauthorization bill that would have granted SPP the same exemptions the commission granted other grid operators in a 2013 order. (See Congress May Order CFTC to Back Down on Private Rights.)

“I appreciate the chairman listening to my concerns and those of others,” Boozman said in a statement. “This is an important decision that will prevent unnecessary increases in electricity costs for consumers in Arkansas and around the country.”

Private rights of action are judicially inferred rights to relief. Their use could have left the RTOs and their market participants as potential targets for lawsuits outside the FERC process.

The issue arose with the 2010 passage of the Dodd–Frank Wall Street Reform and Consumer Protection Act. The legislation revised the CEA and provided CFTC with authority to exempt RTO markets from its rules.

Six of the seven RTOs filed for exemptions, which CFTC granted in 2013. SPP filed for a “me-too” exemption in 2013 when it became apparent its day-ahead market would be going live. In a 2-1 vote, the commission issued a draft order on the SPP request in May 2016, which included preamble language that said it never intended to exempt RTOs from private rights of action. (See CFTC to Add ‘Private Rights’ to RTO Exemption.)

Massad’s change of heart will swing CFTC’s final order in favor of the RTOs and ISOs. He joins Commissioner J. Christopher Giancarlo, who filed a dissent against the draft order and wrote an op-ed on the matter in August for The Record, the second-largest newspaper in New Jersey.

In a statement put out by his office, Giancarlo said he looks forward to “approving a final order soon that recognizes the clear intent of Congress that the CFTC and FERC work together to ensure effective and efficient oversight of America’s electricity markets.”

He said it was “welcome news” that the commission “has decided to cut consumers a break and not unleash a torrent of costly lawsuits against public utilities that would have certainly raised power bills for millions of Americans.”

Commissioner Sharon Y. Bowen was unavailable for comment, as she left Tuesday for a one-and-a-half-week trip to China.

It’s unclear when CFTC will make its final decision. The commission has held only four open meetings in less than two years, but it often makes it decisions via a seriatim process, in which commissioners vote in sequence and in private, rather than at an open meeting. Commissioners can still release public statements in connection with their seriatim votes, however.

SPP helped lead the effort against the draft order, inundating CFTC with 38 (out of a total 43) comments. Industry groups, the House of Representatives’ Committees on Energy and Commerce and Agriculture, and FERC, which has had several jurisdictional tiffs with CFTC in recent years, were among those supplying comments before the June 15 deadline. (See Electric Industry Lobbies, Waits on CFTC Private Rights Ruling.)

The ISO/RTO Council said it was pleased with Massad’s statement. “The ISOs/RTOs, which have maintained that current oversight of competitive markets provides adequate protections for consumers, appreciate the chairman’s thoughtful consideration and recommendation.”

SPP CEO Nick Brown expressed his gratitude to Boozman for helping resolve the proposed regulatory action and potential regulatory overlap.

“The wholesale electric markets are already regulated by” FERC, Brown said in a statement. “The proposed resolution to this issue will still provide CFTC with broad behavioral enforcement authority but will no longer expand their scope as they had considered doing.”

September 14, 2016

Blackstone, ArcLight to Purchase AEP Merchant Plants for $2.2B

By Ted Caddell

American Electric Power has agreed to shed more than 5,000 MW of merchant generation in Ohio and Indiana to private investment firms The Blackstone Group and ArcLight Capital Partners for about $2.17 billion, the company announced Wednesday.

The Wall Street Journal first reported the deal Tuesday, citing anonymous sources.

The plants are the 2,640-MW coal-fired General James M. Gavin Power Plant in Cheshire, Ohio; the 850-MW natural gas-fired Waterford Energy Center in southeastern Ohio; the 480-MW gas-fired Darby Electric Generating Station, 20 miles south of Columbus; and the 1,096-MW gas-fired Lawrenceburg Generating Station in Dearborn County, Ind., on the Ohio border.

AEP, Blackstone, Arclight — General James M. Gavin Power Plant *Source: AEP*

The company has said about 2,700 MW of merchant generation in Ohio not included in the reported deal are also being considered for sale. The remainder of AEP’s total of 31,000 MW of generation is owned by regulated utilities in 11 states.

Merchant generators have seen profit margins evaporate as the fracking boom has flooded the market with cheap natural gas, reducing wholesale market clearing prices.

“AEP’s long-term strategy has been to become a fully regulated, premium energy company focused on investment in infrastructure and the energy innovations that our customers want and need. This transaction advances that strategy and reduces some of the business risks associated with operating competitive generating assets,” AEP CEO Nick Akins said in a statement.

AEP hopes to close the sale, which is subject to approvals by FERC, state regulators and a federal antitrust review, in the first quarter of 2017.

The company said it would net approximately $1.2 billion in cash after taxes, debt repayment and transaction fees, as well as an expected after-tax gain of about $140 million.

The company confirmed in January 2015 that it had hired investment bank Goldman Sachs to shop almost 8,000 MW of merchant generation in Ohio and Indiana, which then-AEP Ohio President Pablo Vegas called “on the economic bubble” and struggling to remain profitable. (See AEP Considering Sale of 8,000 MW in Ohio, Indiana.)

AEP and FirstEnergy have sparked opposition from PJM and others with their bids to convince Ohio regulators to effectively move their merchant plants back into their regulated rate base. (See FirstEnergy Posts $1.1B Loss, Eyes Exit from Merchant Generation.)

AEP’s sale mirrors that of other utilities, including Duke Energy, which sold its retail business and its interest in 11 merchant plants in Ohio, Pennsylvania and Illinois to Dynegy for $2.8 billion in 2015.

PPL spun off its merchant generation — along with that of Riverstone Holdings — to create publicly traded Talen Energy in 2015. Riverstone announced in June it had agreed to purchase the company and take it private.

Exelon also has looked to shift its exposure away from market prices to regulated assets while also threatening to close struggling merchant nuclear plants.

So what’s private equity’s rationale for buying merchant plants that utilities no longer want?

“The private-equity firms’ multiyear investment horizon gives them an opportunity to bet on a rebound in the wholesale power market,” the Journal said.

Private equity giant Blackstone‘s recent investments have included transmission development (GridLiance), oil and gas (Permian basin shale properties) and LNG (Cheniere Energy Partners).

ArcLight, a smaller fund, focuses on “energy infrastructure assets with substantial growth potential, significant current income and meaningful downside protection.”

It says it has spent $16.8 billion in 99 transactions since its founding in 2001, with “62 exits across diverse market cycles.”

Blackstone and ArcLight have owned more than 38,000 MW of generation globally, AEP said, including operations in PJM, NYISO and ERCOT.

September 12, 2016

Md. Balks at Proposed Emission Cuts as RGGI States Ponder Future

By William Opalka and Rory Sweeney

The Regional Greenhouse Gas Initiative reported another lackluster carbon allowance auction last week, bolstering calls by Massachusetts and others for more aggressive cuts in the compact’s emission caps.

But as the program conducts its triennial review of how it should operate in 2020 and beyond, Maryland is raising the threat it could pull out, as New Jersey did in 2011.

RGGI reported it sold 14.9 million CO₂ allowances at $4.54 each Sept. 7, nearly identical to the prices of the second auction this year of $4.53 and more than 70 cents lower than six months ago.

From 2.5% to 5%?

In 2014, RGGI set an emissions cap of 91 million tons that declines by 2.5% annually to 78.2 million tons by 2020. Environmental advocates and Massachusetts officials have called for doubling the rate of decrease to 5% annually. But Maryland’s top environmental regulator says that is too strict for his state.

Most RGGI members are part of ISO-NE, so any financial burdens created by the pact’s restrictions affect all of their power generators — and subsequently the prices they offer to supply power — equally.

Power plants in Maryland and Delaware, however, sell into the PJM markets and compete against generators that aren’t impacted by the same restrictions in states such as Pennsylvania, Ohio, West Virginia and Kentucky. More aggressive emissions cuts could price power producers in Maryland, where 22% of its production comes from coal, out of the market, said Ben Grumbles, secretary of the Maryland Department of the Environment.

rggi emissions cuts — Maryland Environment Secretary Ben Grumbles, Gov. Larry Hogan and Natural Resources Secretary Mark Belton visit Assateague State Park on Earth Day in April. *Photo Source: Maryland Department of the Environment*

Grumbles was quoted by The Boston Globe last month saying “unacceptable” cuts may drive Maryland out of the agreement. New Jersey Republican Gov. Chris Christie did just that in 2011, saying it was expensive and ineffective.

In an interview last week with S&P Global Market Intelligence, Grumbles called for “a renewed RGGI … that provides a stringent emissions cap without creating unfair competition for Maryland or other RGGI states.”

“Economic competitiveness and the cost of energy to local ratepayers must be considered in our midpoint review of RGGI, in addition to the fundamental objective of reducing greenhouse gases and increasing resiliency,” Grumbles said.

Grumbles was appointed by Republican Gov. Larry Hogan, who angered environmentalists in the mostly Democratic state in May when he vetoed a bill that would have raised Maryland’s renewable portfolio standard to 25% by 2020. The current RPS goal is 20% by 2022.

“It’s not clear exactly what (or who) will drive the state’s position” on RGGI, The Baltimore Sun said in an editorial last week, adding that Hogan’s veto “has already cast doubt about the administration’s commitment to improving air quality and fighting climate change.”

The Sun acknowledged that tougher caps could leave Maryland ratepayers “paying more for cleaner power but still suffering downwind power plant pollution” from its PJM neighbors.

The solution? “Get more states to join RGGI and elect a president who supports the Clean Power Plan,” the Sun said.

Unanimous Vote

The New England Power Pool is in the midst of a stakeholder process intended to further align the region’s wholesale markets with states’ clean energy policy goals. The initiative could result in Tariff changes that ISO-NE would present to FERC. (See Q&A: NEPOOL Chair on Redesigning Market Rules for Low-Carbon Future.)

Changing RGGI’s caps would require a unanimous vote of the nine states, and Maryland and Delaware aren’t the only ones that could balk.

Maine Gov. Paul LePage is a climate change skeptic, and Carlisle McLean, a LePage appointee to the state Public Utilities Commission, told the Globe “the state is looking hard at this continued RGGI commitment.”

Thanks in large part to the falling price of natural gas, RGGI has exceeded its emissions goals, while electric rates have dropped. The allowance sales have raised almost $2.6 billion, which the states have invested in energy efficiency, renewable energy, bill assistance and greenhouse gas abatement.

“RGGI emissions through the first half of 2016 were the lowest they have been in the program’s history, and annual emissions have been below the RGGI cap level in each of the program’s seven years to date,” Acadia Center President Daniel Sosland said. “This shows that emissions are falling quickly and even more cost-effectively than expected and provides the foundation on which RGGI states can feel confident going forward to set more ambitious emission targets.”

Acadia said low trading volume and stable prices could be “an inflection point” as the market awaits the results of the program review now underway.

‘Oversupplied’ Market

“An oversupplied market and low RGGI prices limited the program’s impact in its early years,” said Jordan Stutt, a policy analyst with Acadia. “Failing to strengthen RGGI through the program review could result in similarly low prices, depriving the region of funding for clean energy programs and sending inadequate market signals to clean up the region’s power sector.”

RGGI’s caps aren’t the only driver of its auction prices, which also have been buffeted by speculation over the fate of EPA’s Clean Power Plan.

From the first auction following the release of the draft CPP in June 2014 to Auction 30 in December 2015, RGGI allowance prices increased 49%. In the first auction after the Supreme Court’s stay of the CPP in February, prices dropped 30%.

“These dramatic swings in prices occurred in the absence of material changes in RGGI policy or the region’s fundamental energy market trends,” Acadia noted.

Katie Dykes, deputy commissioner for energy at the Connecticut Department of Energy and Environmental Protection and chair of the RGGI board of directors, declined to discuss specific proposals from her state.

“RGGI’s flexibility and adaptability have enabled the program to be successful across a diverse region. The program review process is based on consensus, and Connecticut is committed to reaching an outcome that works for all nine RGGI states’ unique goals and priorities,” she said in a statement.

Patrick Woodcock, director of LePage’s Energy Office, also emphasized consensus building and said it’s too soon to discuss how the review might influence other states’ participation. “We’re exploring program review changes and doing economic modeling to determine how these will impact the market,” he said.

September 12, 2016

Western Utility Execs Bullish on EIM, Wary of Deeper Integration

By Robert Mullin

SACRAMENTO, Calif. — Western utility leaders at CAISO’s annual stakeholder event said they welcome the operational benefits and increased regional cooperation of the Energy Imbalance Market but remain wary of organizing the wider West under a CAISO-run RTO.

At a Sept. 7 panel discussion on market regionalization at the CAISO Stakeholder Symposium, executives at utilities planning to join the EIM cited its main advantage: the improved integration of intermittent renewable resources.

“We were blessed with 1,000 MW of PURPA [wind projects],” said Lisa Grow, senior vice president of operations at Idaho Power, which will become the sixth company to join the EIM when it makes the move in April 2018. “We’re unable to integrate that” by itself, she said.

The utility and the state’s regulators have complained that its service territory has been flooded with excess generation by large but “disaggregated” wind farms developed under the Public Utility Regulatory Policies Act, which was enacted in 1978 to encourage the growth of small-scale, independent generation projects. (See FERC Conference Debates PURPA Costs, Purchase Obligations.)

With a minimum system load of about 1,100 MW, Idaho Power serves most of the state’s electricity users. The utility currently derives about half of its energy from hydroelectric projects.

Grow said her company expects to realize only a modest financial benefit from membership. But the company’s hydro-rich portfolio translates into a high degree of ramping capability, which should be an asset for the utility as it seeks to offload its surpluses into an EIM. Flexible and carbon-free generation will become increasingly valuable as Western states increase their renewable portfolio standards and California looks to significantly cut greenhouse gas emissions.

‘Big Hurdle’

In neighboring Oregon, Portland General Electric, which is scheduled to join the EIM next year, sees the market as a cost-effective way to integrate renewables. A law passed earlier this year will require the utility to achieve a 50% RPS by 2040.

Pope © RTO Insider — Pope © *RTO Insider*

“That is a big hurdle,” said Maria Pope, PGE’s senior vice president of power supply and operations and resource strategy. “My sense is that, irrespective of the market benefit, the advancements in the technology and processes have value in themselves.”

Utah Associated Municipal Power Systems (UAMPS), which initially protested PacifiCorp’s decision to join the EIM, is likely to join itself after a recently completed benefits study, CEO Doug Hunter said.

A publicly run nonprofit that provides wholesale electricity to 45 community-owned utilities in seven states, UAMPS owns generation and transmission assets in Utah and sits “right in the gunsights” of the EIM, Hunter said.

“We’re the definition of regionalism. … We really see it as a marketplace that we can enter — and our customers can benefit from this,” Hunter said, adding that the outcome of the EIM’s implementation “wasn’t as dire as we thought it would be.”

California Public Utilities Commissioner Mike Florio, who moderated the panel, turned the discussion to the Northwest’s largest public entity — the Bonneville Power Administration.

“Is it ever in the cards for Bonneville to join, or would that take an act of Congress?” Florio asked.

“Serving our preference customers is our priority,” said Elliot Mainzer, Bonneville’s administrator and CEO. “But having a market for surpluses would be important.”

Bonneville’s decision to join the EIM “will depend on how the governance functions,” Mainzer said. “But at this point, no decision on that.”

The market’s five-member governing body, which represents various stakeholder sectors, was selected in June and met for the first time earlier this month. (See EIM Governing Body Convenes First Meeting, Selects Leadership.)

Mainzer emphasized the importance of his agency to staying “constructively engaged” with the EIM, especially because PacifiCorp’s participation requires the use of Bonneville’s transmission system.

“So far, it’s worked effectively,” Mainzer said. “Managing at those seams, staying communicative … really matters.”

No ‘Gateway Drug’

Florio called the prospect of full membership in CAISO a “hot potato” for many utilities. He sought panelists’ thoughts on the challenges to regionalization.

“Early on, when talking with [Arizona regulators] about [joining the EIM], there was a lot of pessimism,” Arizona Public Service COO Mark Schiavoni said. CAISO CEO Steve Berberich and “I had to assure that this wasn’t some kind of gateway drug to something broader.”

“I think the concept of exporting California policy to the intermountain West was one of the biggest issues — a big part of the reluctance on the part of politicians,” Hunter said.

For UAMPS, the concerns come down to economics — specifically, the allocation of costs under a Western RTO.

“We could quadruple our transmission access charge” under an RTO, Hunter said. “We just don’t see the benefit.” He added that UAMPS was encouraged by California’s decision to slow down the ISO’s expansion efforts to “get a handle” on some of the more controversial issues. (See Gov. Brown Reaffirms Commitment to Expanded CAISO.)

Schiavano © RTO Insider — Schiavoni © *RTO Insider*

Schiavoni said the focus of regionalization must expand to include the needs of other Western states. “Until there’s dialogue and conversation that goes beyond California, I just don’t see movement toward that broader market,” he said.

“If I were outside California, I’d want to see California give up some control,” said Pat Hogan, senior vice president of transmission and distribution at Pacific Gas and Electric.

Citing the dependencies of the physics, politics and economics of the grid, Mainzer said he was concerned about “spreading volatility over a broader footprint.”

“You have to be able to trust each other to share the optimization,” Mainzer said. “If you can’t get beyond the governance … you’re bound to get the market design wrong.”

“I think it’s important not to underappreciate where we are now,” Pope said. “There’s a lot of work to be done.” The EIM is “extremely well-constructed,” she said, adding that she liked the ability of participants to enter and exit the market at will. “I would hate to jump into something that would add complexity without having a benefit.”

Comparative Approach

Hunter told the panel there are benefits to having a competitor to a CAISO-run RTO.

“We’re lucky because right now we have a proposal to the east of us that will allow us to do a comparative approach,” said Hunter, referring to a competing effort by the Mountain West Transmission Group to create its own RTO in the inland West. (See Mountain West RTO Could Pose Competition for CAISO.)

Hunter noted that Mountain West had received proposals from multiple RTOs to operate the potential market — including CAISO and PJM.

“In my neck of the woods, PJM is like the Antichrist,” Hunter said.

“If PJM is the Antichrist, what is the California ISO?” Hogan asked.

“Well, it’s the potential Good Witch of the West,” Hunter replied.

September 12, 2016

State Briefs

Gov. Brown Signs Sweeping Energy Bill

Gov. Jerry Brown signed a bill setting a target to cut greenhouse gas emissions 40% below 1990 levels by 2030, which means that residents can expect to feel more of what Brown has called the “coercive power of government.” Businesses will likely face more restrictive rules, and taxpayer and ratepayer money will be needed to subsidize cleaner technologies.

“California is doing something that no other state has done,” Brown said.

Business will be encouraged to cut emissions, including adopting better fuel economy for trucking companies to meet new highway-related standards, and farmers will need to cut methane emissions. Another bill signed last week will expand the state’s cap-and-trade system, which Brown is counting on to provide more emissions reductions.

More: Los Angeles Times

MARYLAND

Worcester County Approves 2 Utility-Scale Solar Projects

The Worcester County Commissioners unanimously approved two utility-scale solar projects totaling 35 MW in Berlin and Snow Hill, west of Ocean City. Longview Solar, the company developing the solar farms, has already received approval from the Public Service Commission and needed the county’s approval to go forward.

Longview is developing the projects even though the commissioners earlier denied tax abatements for the facilities. The 20-MW Heron Project will have 85,670 solar panels. A 15-MW project, with 63,320 panels, will be built near Snow Hill.

Community members were generally supportive at a public hearing on the projects, though several area residents expressed concern about the effect the facilities will have on the value of their properties.

More: The Dispatch; Ocean City Today

MASSACHUSETTS

Offshore Developers to Use Terminal

Three offshore wind developers will use the state’s $113 million New Bedford Marine Commerce Terminal port as a staging area for wind farm construction.

Deepwater Wind, OffshoreMW and DONG Energy signed the agreement, which calls for a $5.7 million annual payment to the state’s Clean Energy Center. All three have secured leasing rights to federal waters off the state’s coast.

Negotiations have gone on for months. The announcement comes a month after Gov. Charlie Baker signed legislation that requires utilities to secure 1,600 MW of wind energy in about a decade.

More: The Boston Globe

MICHIGAN

New DEQ Director Addresses Concerns over Appointment

Gov. Rick Snyder’s appointment to director of the Department of Environmental Quality, former BP lobbyist Heidi Grether, told the Senate Natural Resources Committee last week that she should be defined by more than her previous employment.

During a confirmation hearing, Grether tried to allay concerns over her controversial credentials. She told a packed hearing that she was the “product of much more than my past two or three jobs.”

The committee declined to vote at the hearing. Under state law, Grether is considered the director unless the Senate votes to reject the appointment. They have 60 session days after her Aug. 1 appointment to decide.

More: MLive; Detroit Free Press

Upper Peninsula Rates 2nd Highest in US

Customers of Upper Peninsula Power Company (UPPCO) pay an average 23 cents to 25 cents per kilowatt-hour for electricity, a rate that’s 67% higher than the state average, and higher than any average rate in the country, outside Hawaii.

UPPCO is currently asking the Public Service Commission for a 6 to 12% rate increase.

Officials from the commission and UPPCO say the utility’s rates are high because of costs associated with serving 54,000 customers that are thinly distributed over 4,460 square miles. “The region is sparsely populated, much of it densely forested, with weather often adding to the challenge of providing energy to this region,” CEO Keith Moyle said.

More: Detroit Free Press

MISSOURI

PSC Approves Empire, Liberty Utilities Merger

The Public Service Commission last week unanimously approved the proposed $2.4 billion merger between Empire District Electric and Liberty Utilities, a subsidiary of Canada-based Algonquin Power & Utilities. Hearings over the merger were canceled after negotiations between the companies and intervening parties led to a settlement.

The merger still requires approval from regulators in Kansas and Arkansas. Oklahoma regulators and FERC have already given their go-ahead. The companies expect to close the deal in the first quarter of 2017.

More: The Joplin Globe

NEW JERSEY

NJ Natural Gas Agrees to Slash Rate Request

New Jersey Natural Gas has agreed to cut its rate-increase request from 24% to 7.4% after it received a storm of disapproval from residents and business owners.

Under a settlement reached with Board of Public Utilities staff and consumer advocates, a typical customer’s monthly bill will go up by about $7.11. The original rate filing would have boosted bills by $21.69/month. “We are confident the ultimate outcome will serve the best interests of our customers and company,” CEO Laurence M. Downes said.

The settlement requires formal approval by the BPU.

More: NJ.com

NORTH CAROLINA

Duke Coal Ash Issue Big in Governor’s Race

The controversy over whether Gov. Pat McCrory pressured a state toxicologist to retract drinking water warnings for residents living near Duke Energy coal ash storage sites has become a major issue in the governor’s re-election battle.

State Attorney General Roy Cooper, who is running against McCrory in November’s election, used the issue to frame a television ad harshly critical of McCrory and his administration. The ad included Dr. Megan Davies, who resigned as state epidemiologist in protest after the administration accused one of her subordinates of lying when he testified under oath that he was pressured to downplay the risks of drinking water near coal ash sites.

McCrory, however, struck back with his own ad, accusing Cooper of failing to oversee the entire coal ash issue while occupying the state’s highest law enforcement position and criticizing him for accepting more than $325,000 in campaign contributions from the energy industry.

More: The News & Observer

OHIO

OCC Asks Supreme Court to Deny FirstEnergy Rate Request

The Consumers’ Counsel is challenging FirstEnergy’s latest attempt to obtain subsidies to keep two of its older generating stations open. The consumer advocate told the state Supreme Court that the subsidies “violate the law and this court’s recent decisions that protected customers.”

The suit, filed last week by the OCC and the Northwest Ohio Aggregation Coalition, is the latest challenge to FirstEnergy’s attempts to get guaranteed rates for the W.H. Sammis coal-fired plant and the Davis-Besse nuclear generating station.

FERC quashed FirstEnergy’s first attempt at subsidies, which had been approved by the Public Utilities Commission. The company submitted a revised plan to PUCO, which the commission provisionally approved.

More: The Plain Dealer

September 12, 2016

MISO TOs Seek More Time for Order 1000 Challenge

By Amanda Durish Cook

A group of MISO transmission owners has petitioned Supreme Court Justice Elena Kagan for more time to draft a petition asking the court to reinstate incumbents’ right of first refusal (ROFR) on RTO grid projects.

The TOs, including Ameren, Indianapolis Power and Light, Northern Indiana Public Service Co. and Otter Tail Power, want until Oct. 14 to complete their petition for a writ of certiorari. The TOs are seeking to overturn a Court of Appeals decision that denied the companies’ request to void FERC Order 1000’s provisions that introduced competition into transmission development (ER13-187, et al.).

In April, the 7th U.S. Circuit Court of Appeals rejected the TOs’ challenge, which contended FERC failed to apply the Mobile-Sierra doctrine, which presumes rates negotiated by private parties are reasonable (14‐2153). The group also claims FERC didn’t uncover any evidence that the previous Tariff provisions “seriously harm[ed] the public interest.”

ferc order 1000 miso — FERC held a technical conference on Order 1000 in July.

Seventh Circuit Judge Richard Posner said the TOs failed to show that maintaining the ROFR was in the public interest. He also said it was expected for MISO members to take issue with the removal of the provision that opens them to third-party competition.

“No one likes to be competed against,” Posner wrote. “So naturally, members of MISO in areas in need of additional facilities oppose Order 1000. They want to retain their right of first refusal — they don’t want to have to bid down the prices at which they will build new facilities in order to remain competitive.”

In the same order, Posner also denied a request by transmission developer LS Power, which said ROFRs should be dropped for even baseline reliability projects (14‐2533, 15‐1316).

LS Power received an extension for its own certiorari petition on Aug. 19. The TOs say granting their request for more time will not hold up the proceedings, as LS Power’s extension is already in effect.

In June, FERC held a technical conference to consider suggested improvements to Order 1000. The comment period in the docket, originally slated to end Sept. 2, has been extended to Oct. 3 (AD16-18). (See FERC Calls for Post-Conference Comments on Order 1000.)

September 12, 2016

Distributed Resources to Reshape Industry, Symposium Panelists Say

By Robert Mullin

SACRAMENTO, Calif. — While regionalization occupied center stage during the first day of CAISO’s annual Stakeholder Symposium, the second day’s panels took on an issue poised to be equally transformative for California’s electricity sector: the increased adoption of distributed energy resources.

“To give you a sense of the scale, in addition to over 16,000 MW of utility-grade renewables attached to the system, we now have 4,500 MW of distributed solar,” said Ashutosh Bhagwat, a member of the CAISO Board of Governors.

Rooftop solar capacity within the ISO’s balancing authority area has increased by 43% over the past five years, Bhagwat noted. “That means we’re most certainly going to hit 10,000 MW quite soon.”

Bhagwat said the ISO considers the rise of distributed generation to be an opportunity for enhancing its system, rather than a physical liability. Distributed resources have the potential to contribute to grid management, he said, but the ISO must overcome barriers to getting there.

“We have to figure out how to dispatch [DER] in a way that works,” he said.

Ron Nichols, president of Southern California Edison, said his company “is very strongly embracing the growth of distributed energy resources on our system. We’re dealing with it in an extraordinarily large way. In scale, it’s phenomenal.”

22,000 Changes

Among the questions the company is addressing: “What’s the pace of [DER] growth going to be? What are going to be the compensation models associated with that [growth]? What kinds of transactions are we going to deal with and how are we going to allocate costs with respect to that?”

The utility has made 22,000 short- and long-term changes to its distribution system to maintain reliability while incorporating DER.

“You don’t make 22,000 changes to the ISO transmission system — or even across” the Western Electricity Coordinating Council, Nichols said.

Lorenzo Kristov, principal of market infrastructure and policy at CAISO, said he started working on DER about four years ago when he led an initiative to expand the ability of distributed resources to participate in the ISO market.

Kristov said CAISO asked to him to imagine having as many as 100,000 “tiny” resources participating in the ISO’s market optimization — the platform responsible for scheduling and dispatching resources.

“Is that really the way that it’s supposed to be?” Kristov said. “My answer at that point was ‘maybe, but maybe not.’”

Among Kristov’s conclusions: Expanded DER will require distribution utilities to reconsider how they operate — while also forcing CAISO to rethink how it interacts with those utilities, he said.

Kristov said he can envision the development of a distributed service operator (DSO) “that looks pretty much like today’s distribution company. But then you could go to the very opposite extreme, where the DSO really takes on” the functions of another balancing authority.

Pilot Program

“These consumer resources can in fact be a reliable resource that can provide reliable services into the market,” said former FERC Chairman Jon Wellinghoff, now chief policy officer at SolarCity. “I think the future is at the area of the distribution utility.”

SolarCity is participating in a pilot program with Pacific Gas and Electric in which 150 homes with rooftop solar are installing the equipment and software controls necessary for the utility to provide ancillary services to the ISO, Wellinghoff noted.

“That’s one thing we need to remember … customers are an important part of this,” said Lorraine Akiba, a member of Public Utilities Commission of Hawaii, which has mandated a 100% renewable portfolio standard by 2045. “Customers have choices. We have to enable and empower them to be part of the grid.”

Federal-State Jurisdiction

Another question is which agencies will have jurisdiction over those resources in the wholesale market. While activities at the distribution level typically fall under the control of state regulators, FERC has the final say on matters related to markets and rules affecting the transmission system.

“These technologies are not only transforming the grid, but they are starting to erode the traditional barriers — the regulatory barriers — that separate the distribution system from the transmission system, and therefore [federal and state regulators] touch on each other in ways we never have before,” said Michael Picker, president of the California Public Utilities Commission.

FERC Chairman Norman Bay said jurisdictional questions can be resolved under the Federal Power Act. “If the resources are aggregated and have submitted a [CAISO Distributed Energy Resource Provider] filing — so it’s more than half a megawatt and can follow dispatch instructions — [they] can participate in wholesale markets,” Bay said.

During one panel, CAISO CEO Steve Berberich posed to Bay a scenario in which a FERC-jurisdictional DER aggregator violated an RTO’s market rules using behind-the-meter resources subject to state regulatory oversight.

“How would you bridge that gap?” Berberich asked.

FERC’s approach to enabling demand response to participate in wholesale markets could provide “a template for the way we might think about other distributed resources,” Bay responded. He noted that there have been cases in which FERC has pursued enforcement actions against DR providers for improperly verifying load reductions.

“Under our anti-manipulation authority, we have to show the conduct has a nexus with the wholesale markets,” Bay said.

In response to a question about who should be responsible for monitoring the market activities of DER aggregators, Bay pointed out that marketing monitoring presently occurs at the federal, state and RTO/ISO levels.

“There are many sources of information, and it’s very important that we use all those sources of information to make sure the market has integrity,” he said.

Bay also offered a note of support to California’s efforts to provide DER with access to the ISO’s market.

“I actually think a lot of good work is happening in California and CAISO, and I want to commend both the CPUC and CAISO for the work that you’re doing to establish market rules that allow DER and energy storage to participate in wholesale markets,” Bay said. (See FERC OKs CAISO Energy Storage Rules.)

September 12, 2016

NRECA Continues its Fight for the Little Guy

By Tom Kleckner

LITTLE ROCK, Ark. — During the Great Depression, it was the newly formed electric cooperatives that electrified much of the rural U.S. Now, the co-ops want to replicate that accomplishment by bringing their customers broadband Internet access.

“There are parallels between broadband today and the lack of electricity 80 years ago,” Mel Coleman, CEO of North Arkansas Electric Cooperative and president of the National Rural Electric Cooperative Association’s board of directors, said during a speech at the Clinton School of Public Service on Sept. 6.

“Reliable, high-speed Internet access is critical for attracting new employers to small communities,” Coleman said. “What employer would want to set up in a community where you’re getting 3 or 5 or 10 megabits a second? [Rural communities] are in desperate need of an economic boost. Think what it could do for education, health care and, yes, for all the Amazon shoppers.”

Coleman said his and two other Arkansas co-ops are “hanging fiber as we speak,” as are other electric cooperatives across the country. He hopes to have his first connected members in January.

Meanwhile NRECA, the co-op’s trade association based in D.C., is seeking federal financing help to “ensure that all Americans have access to affordable broadband services,” Coleman said.

It’s another way co-ops are serving the little guy, as they have been since the 1930s, said Coleman, who also used his speech to tell the co-ops’ history and to make their case against EPA’s Clean Power Plan.

“The history of the co-op movement demonstrates good things can happen when the government partners with private enterprise to solve big problems,” he said. “The American spirit of electric co-ops is not just a relic of the Depression era. It lives and breathes across rural America today.”

NRECA represents more than 900 cooperatives in 47 states. These nonprofits serve 42 million customers and operate or maintain more than half the nation’s grid. The largest is in Texas (Pedernales Electric Cooperative, with 260,000 members), and the smallest is in Alaska (INN Electric Cooperative, with 285 members).

Earlier this summer, NRECA hired former seven-term U.S. Rep. Jim Matheson (D-Utah) as CEO to help represent its interests. In addition to lobbying for broadband funding and fighting the CPP, NRECA also is seeking relief from mandatory capacity markets. (See Little Love for PJM in Capacity Market Debate.)

‘Darkness’

As Coleman recounted the electric co-op’s beginnings, he said investor-owned utilities were reluctant to extend their lines into sparsely populated rural areas. As a result, he said, “A vast majority of rural America sat in darkness.”

“The 1920s were roaring for some people, but not for American farms. Less than 3% of farmers had electric power,” Coleman said. “You can imagine milking cows in a wooden barn, with straw floor, and a kerosene lamp waiting to be kicked over.”

At the height of the Great Depression in 1935, President Franklin Roosevelt secured $100 million for rural electrification as a part of a $5 billion public works bill. The next year, Congress passed the Rural Electrification Act (REA), which used cash incentives as a carrot to the IOUs, Coleman said.

“Their grand plan consisted of taking money and hooking up a few customers in easy-to-serve places … it was clear the power companies had no interest in serving rural areas.”

Coleman said it wasn’t until the first REA loans were extended to the handful of co-ops at the time that rural electrification became a reality. The first REA-financed poles were set in Ohio in November 1935, and the first REA-produced power line went into service the following year in Marfa, Texas. By 1936, 140 electric co-ops were in operation in 26 states and by 1940, they were serving more than a million customers.

NRECA was formed in 1942, and it quickly began taking on the big industry interests who scoffed at the little co-ops.

“One of the NRECA’s first tasks was to disprove the allegations made by the investor-owned utilities,” Coleman said. “We were able to show that electrifying farms actually played a viable role in the war effort, by those farms producing more food than farms could without electricity.”

When World War II ended, half of America’s farms had electricity.

“Think about what a remarkable feat it was just to electrify rural America,” Coleman said. “Millions of miles of line, stretched across 75% of the nation’s land mass, all of it done with incentives, not mandates — incentives that were paid back in full, on time, and with interest.”

Clean Power Plan = Job Losses?

Coleman said NRECA and the co-ops are taking the same approach in their opposition to the CPP. In February, the Supreme Court stayed the plan pending resolution of legal challenges by the association and multiple states. Oral arguments are scheduled before the D.C. Circuit Court of Appeals for Sept. 27.

An NRECA study says a 10% increase in electricity prices as a result of CPP compliance would cause annual job losses of 360,000 between 2020 and 2040 in areas served by co-ops. The study estimates a $1 trillion hit to GDP by 2040.

Other studies have suggested compliance costs could be minimal if natural gas prices remain low. (See PJM: Regional Plan Cuts Costs, but Gas Prices are Wild Card for CPP Compliance.) For its part, EPA contends the CPP will have health and climate benefits of $55 billion to $93 billion per year in 2030, “far outweighing the costs of $7.3 billion to $8.8 billion.”

“As a movement that had its origins in the Depression era, and one that was formed to serve some of the nation’s most economically disenfranchised citizens, electric co-ops are sensitive to regulations,” Coleman said. “We are very sensitive to mandates. We’re very sensitive to any regulation or mandate that could impact the affordability of the service we supply to our members.”

Coleman noted electric co-ops serve 327 of the nation’s 353 poorest counties, or “93% of the nation’s most economically vulnerable places.”

“Many of those folks can’t afford to see their power bill go up. They’re honest, hard-working folks living paycheck to paycheck. A $10-20 increase in the electric bill may not be a lot for those of us in this room, but I can tell you we have members for whom that’s a lot of money.”

Coleman told a story of a 90-year-old member of his North Arkansas Electric Cooperative, who told him she had figured out that by taking her medication every other day, she would be able to pay her electric bill.

“Our concern is the person on the other side of the meter,” he said. “One of the arguments used by supporters of the [CPP] is that the cost to shut down coal-fired power plants will be absorbed by the [plant owners] and their Wall Street investors. Well, that may be true for the investor-owned, but that’s not true for co-ops. The problem is, the owners of our company are not a bunch of faceless Wall Street investors. They’re farmers and ranchers and teachers and veterans and retirees.”

Coal Dependent

He pointed out co-ops are heavily dependent on coal-fired generation because of a “previous government mandate,” the Powerplant and Industrial Fuel Use Act of 1978. Prompted by the 1973 oil crisis and the natural gas curtailments of the mid-1970s, the legislation encouraged the use of coal, nuclear power and alternative fuels in new plants. Provisions restricting the use of natural gas by industrial users and electric utilities were repealed in 1987.

“Power plants are not short-term investments,” Coleman said. “With maintenance and upgrades for the latest technology, the useful life for a power plant extends many decades. Upgrades are typically financed by long-term debt. It could be years before those debts are paid off. To retire a plant while it still has a mortgage will effectively force those co-ops members to pay for that same power twice.”

That’s not to say co-ops aren’t embracing renewable energy, Coleman said.

He listed wind, solar and biomass as being critical elements in the association’s “all-of-the-above” approach to fuels, and briefly detailed several individual co-op initiatives related to solar technology, community energy storage and carbon capture.

“The common thread to all these projects is they’re responding to local challenges,” he said. “Co-ops face change, we face challenge. The good news is, the American spirit is in the heart of every co-op.

“Electric co-ops have long been innovators in the industry. Our smaller size makes us focus on new ideas and how they affect our members. We try new things all the time, and when one co-op discovers something that works, they share it with all of us.”

All for the little guy.