The RTO told the Planning Committee it will be required to perform a network vulnerability analysis, and owners of 200-kV and larger transformers must perform transformer heating analyses. As of Jan. 1, stakeholders will have six months to establish roles and responsibilities. Within 18 months, they’ll have to provide models to accomplish the analyses. FERC has allowed up to five years to complete the remainder of the implementation plan.
| PJM
“We’re not stuck with a blank sheet of paper here,” PJM’s Frank Koza said. “We did a lot of this work in 2014 with all of your cooperation, so we’re pretty far down the road in terms of understanding what needs to be done. We will need to do more in terms of gathering better data for doing the study again, but we’re on our way.”
Among the changes FERC required for the standard is public disclosure of all geomagnetically induced current detector and magnetometer data. Within the PJM region, 47 such devices are in use.
“The science here is not fully done on GMD, so what’s going to be done here is additional research,” Koza said.
Members OK Revised Relay Subcommittee Charter
Members approved an update to the Relay Subcommittee’s charter, which was last amended in 2012.
More Granularity Requested on Winter Reserve Targets
Stakeholders approved PJM’s installed reserve margin study results and recommendations, but they asked the RTO to be more specific with its weekly reserve targets for winter.
The 27% winter reserve target, which is identical to last year, was produced using an average for the entire winter. But the margin needed to meet the one-day-in-10-years loss-of-load expectation ranged as low as 22% in December and peaked at almost 39% for the first week in January.
Stakeholders asked if PJM would switch from a season-long average to monthly ones.
“That’s something that PJM would like to assess internally,” PJM’s Tom Falin said. “I think it’s going to depend on how confident PJM is that the winter peak will happen in January. It doesn’t always.”
PJM to Retire Manual 35
With staff focused on maintaining PJM’s online glossary, the definitions in Manual 35 haven’t been updated in years, explained Janell Fabiano, senior stakeholder process facilitator. That, combined with definitions available in several other outlets, have led PJM to decide to eliminate the manual.
Though the news didn’t generate substantial discussion, it did engender mild protests from some stakeholders. Ed Tatum of AMP and Jim Benchek of FirstEnergy joked about making “Save Manual 35” T-shirts.
Dominion Retiring Bath County Thermal SPS
A special protection scheme used to minimize N-1 overloads and allow for a higher pond level at a pumped storage facility is no longer needed thanks to a number of regional system upgrades.
Dominion Resources plans to retire the Bath County thermal SPS by Dec. 1, but it says the stability SPS there will remain in place.
CAISO last week released the third draft of a proposal outlining the governing framework for a Western RTO.
The latest draft fleshes out concepts introduced in earlier versions, including the composition and role of the Transitional Committee to guide regionalization, and sets out a timeline for transitioning to a board independent of California oversight.
The proposal also more thoroughly outlines the process by which a body of state representatives — the Western States Committee (WSC) — would determine whether a proposed RTO policy encroaches upon state regulatory authority. (See Revised Western RTO Governance Plan Highlights State Authority.)
The draft is the first revision since California Gov. Jerry Brown asked CAISO and other state agencies to postpone their joint effort to present lawmakers with a governance proposal in early August. Under state law, the legislature must authorize the ISO’s transition into a regional body. (See Governor Delays CAISO Regionalization Effort.)
“The governance structure of a regional ISO is clearly one of the key topics that must be addressed for regionalization to go forward,” CAISO said.
What is still unknown is whether the proposal will convert enough RTO skeptics inside and outside California to jump-start the process of regionalization and provide California legislators with a well-supported set of principles in January.
‘Collaborative Process’
Preservation of state authority remains a central focus of the revised proposal, which addresses stakeholder requests that the ISO delineate the process for determining whether a proposed policy initiative by a future RTO would “materially diminish” state or local authority. CAISO set out a series of measures modeled on the “collaborative process” currently used in the Energy Imbalance Market when a stakeholder challenges ISO staff assumptions about whether a policy matter falls under the primary authority of the ISO board or the EIM governing body.
The first step: a procedure for state and local authorities to raise concerns with RTO staff — and, if necessary, the board and WSC — during the stakeholder policy development process prior to a FERC filing.
The board would then consult and collaborate with the WSC to determine whether an initiative complies with the RTO’s provisions protecting state authority.
When either body — by majority vote — determines that a policy impairs state authority, the policy will be subject to a combined vote of both bodies. If a majority of the two bodies collectively vote against the policy, it will not be approved — unless members of the WSC unanimously approve it.
Transitional Committee Changes
The revised governance proposal also takes up stakeholder concerns about the Transitional Committee charged with transforming CAISO into an independent RTO and developing a final proposal on governance.
The latest draft narrows the range of issues to be considered by the committee, with the process of selecting a final, independent board delegated to separate Nominating and Approval committees.
“This change is made to ensure that the [Transitional] Committee has a well-defined and achievable scope of work that is focused specifically on the key outstanding issues that are not resolved in these principles,” CAISO said.
The proposal specifies that the committee will include one public official — as opposed to the more loosely defined “representative” — from each state in the RTO’s footprint.
As set out in the previous draft, the committee will also consist of one representative each selected from a cross-section of eight industry sectors. The proposal saw a few alterations to those sectors, including the folding of power generators and marketers into the independent power producer sector, the insertion of community choice aggregators into the publicly owned utilities sector, and the expansion of the consumer advocate sector to include “end-use” consumer groups as well as state-sanctioned ratepayer advocates.
Sectors will now directly choose their representatives, rather than forward two nominees to the current ISO board for final consideration. Still, the board will retain the option to appoint additional members in order to ensure geographical diversity on the committee.
CAISO’s draft also encourages the Transitional Committee to develop a governance proposal supported by all members, while providing for a resolution process if achieving consensus is not possible.
In response to stakeholder concerns about timelines, the revised proposal sets a deadline for the ISO’s transformation to a fully independent RTO. It would conclude with a new board selected through a new nomination and approval process, which must occur within 36 months of the adoption of the regional governance plan.
Supermajority Voting
To accommodate the interests of smaller Western states concerned about California’s outsized representation in an expanded CAISO, selection of the new RTO board will be subject to supermajority provisions that will apply to both the Nominating and Approval committees described in the latest proposal.
The final board will consist of nine members, a count the ISO says is consistent with other RTOs in the country — and which spreads responsibilities sufficiently enough without being too unwieldy to bring members together for monthly meetings.
The stakeholder-based Nominating Committee will be chosen by members of up to nine industry sectors, while the Approval Committee will consist of voting members of the WSC.
Board candidates will be forwarded to the Approval Committee only after winning 75% support in a load-weighted vote of the Nominating Committee. Finalists must meet the same vote threshold to be seated by the Approval Committee.
Decisions falling under the “primary authority” of the WSC will be subject to the same 75% load-weighted voting process. The committee — comprising one representative from each state in the RTO’s footprint — will be responsible for approving FERC filings related to “certain regional ISO policy initiatives on specific topics” dealing with transmission cost allocation and resource adequacy.
Exceptions to the WSC approval requirement can made when a reliability threat necessitates that the RTO file with FERC on a temporary basis or if a supermajority of the board determines that a WSC filing would undermine a reliability standard or FERC requirement.
The RTO would also be permitted to file at FERC without WSC approval after “a sustained period of inaction” by the committee, which the latest proposal defines as at least 90 days after a matter has been submitted for consideration.
Despite requests from a number of industry participants, the revised proposal makes no provision for the creation of a formal stakeholder committee — such as a market advisory committee.
“This is an important topic and one that deserves further discussion among all stakeholders, both in comments on this second revised proposal and ultimately in the transitional committee forum contemplated in this principle,” CAISO said.
Calpine is purchasing the U.S. energy business of commodity trader Noble Group, the companies announced Monday.
The companies said Calpine will pay $800 million plus working capital for Noble Americas Energy Solutions, which claims to be the nation’s largest independent supplier of power to commercial and industrial retail customers. Calpine said the working capital totals $100 million; Noble put it at $248 million.
“In addition to expanding our retail customer sales channels and product offerings, we will more than double the volume of retail load we are capable of serving across the country from our complementary wholesale power generation fleet,” Calpine CEO Thad Hill said in a statement. The sale will help Noble reduce debt.
Mission Solar Energy will now use solar cells from Asia to make its solar power modules.
The company announced plans to end its solar cell production line in San Antonio, Texas, because of competition from Chinese manufacturers.
The decision to buy solar cells instead of making them is part of a restructuring strategy that allows the company to focus on its main products, reduce prices and stay competitive, Laura Waldrum, a company spokeswoman said.
Maria Korsnick was elected president and CEO of the Nuclear Energy Institute, effective Jan. 1, 2017. She succeeds Marvin Fertel, who retires on Dec. 31.
Since May 2015, Korsnick has served as NEI’s chief operating officer as a loaned executive from Exelon Generation and Constellation Energy Nuclear Group.
“The NEI Executive Committee is confident that Maria will enable NEI to increase recognition of nuclear energy’s value, further empower the nuclear industry’s commitment to efficiency and reliability, and facilitate the development of next-generation reactors,” said Don Brandt, chairman of NEI’s board and CEO of Pinnacle West Capital.
Mississippi Power’s Lignite Plant Adds to Delay, Cost Overruns
Mississippi Power’s Kemper County plant has delayed running on lignite by one month, adding another $33 million in cost overruns to a project that is more than two years behind schedule.
The delay, from Oct. 31 to Nov. 30, raised the total estimated cost of the project to about $6.9 billion.
The new delay is necessary to prepare both of the plant’s gasifiers to use syngas and to integrate systems so that both of the plant’s combustion turbines will operate simultaneously, Mississippi Power spokesman Jeff Shepard said.
Apex Clean Energy has purchased the up-to 360-MW Novus IV wind project in Texas from Novus Windpower and plans to construct a wind park in the north Texas Panhandle.
Construction could begin as early as 2017, according to Apex.
GE, Southern California Edison Plan World’s First Hybrid System
General Electric and Southern California Edison announced last week a plan to install the world’s first battery storage and gas turbine hybrid in response to the energy crisis in California’s Aliso Canyon earlier this year.
By the end of 2016, SCE plans to install a battery energy storage system from Current, powered by GE, and then integrate the system with a gas turbine in 2017.
The hybrid system will be deployed at two SCE sites.
PSEG Power plans to close two of its New Jersey coal-burning power plants effective June 1, 2017, citing the cost of modernization as its reason.
The plants, located in Jersey City and near Trenton, would need to be upgraded to comply with new rules imposed by PJM to ensure reliability, PSEG President Bill Levis said.
“The sustained low prices of natural gas have put economic pressure on these plants for some time,” Levis said. “In that context, we could not justify the significant investment required to upgrade these plants.”
Duke Plans to Recycle Coal Ash from Salisbury, NC, Basins
Duke Energy last week announced plans to remove coal ash from three basins at the Buck Steam Station in Salisbury, N.C., and recycle the material for concrete.
North Carolina’s coal ash law requires Duke to install three recycling units across the state.
Duke said it is still evaluating locations for the second and third units.
Dynegy has promoted Martin Daley, who previously served as vice president in charge of the power company’s natural gas-fired fleet, to chief operating officer. It is the first time the company has appointed a COO in nearly four years.
The company also promoted Carolyn Burke to executive vice president of strategy. Burke previously was the executive in charge of business operations.
The entry of Arizona Public Service and Puget Sound Energy into the Western Energy Imbalance Market was largely “uneventful,” according to a CAISO official who helped lead the effort to integrate the two utilities into the region’s only real-time market.
“I’ve been through three sets of transitions, and I would say that each one is getting smoother,” Mark Rothleder, the ISO’s vice president of market quality and renewable integration, said during an Oct. 5 meeting of the EIM’s governing body.
Still, Rothleder noted that it took a “huge amount” of work on the part of CAISO to guide the Oct. 1 rollout, which required about 30 staff to be present at the ISO’s Folsom, Calif., headquarters while others joined APS and PSE at their operations sites.
“We found that the APS and PSE teams were very well prepared,” Rothleder said.
APS brought on 16 new hires, created four new operations and trading desks, and undertook 9,000 hours of training related to the EIM, said Justin Thompson, the utility’s director of resource operations and trading. Utility staff had been testing systems since late winter.
“My recommendation to our execs was that you need 20 months to execute this,” Thompson said. “We shoehorned it in 15 to 16 months, and I wouldn’t recommend that for anybody.”
Four days into the transition, Rothleder said that it was “not unexpected” that the ISO had observed price volatility. Staff are still reviewing the issue to determine whether it reflects actual system conditions or stems from a data anomaly or software problem in need of correction.
| CAISO
Delving into the operational underpinnings of the EIM, Rothleder explained that each balancing authority area (BAA) participating in the EIM needs to pass two tests heading into every hour.
The first: A BAA must be balanced between generation and load in order to match its forecast.
The second: It must demonstrate enough ramping capability or resource flexibility to meet expected variability within the hour.
“These two tests are an indication that they’re coming into the system sufficiently resourced without leaning on other parts of the system,” Rothleder said.
During the first four days of participation in the EIM, APS and PSE passed the balance test 95.8% and 100% of the time, respectively. Both utilities have so far rated 100% on the flexible ramp test.
“These are very good results — and don’t take 95.8% as an indication that anything’s wrong,” Rothleder said, adding that it can take time for a utility to adjust to the “new paradigm” of the EIM.
According to Rothleder, APS has so far shown good price convergence between the EIM’s 15-minute and five-minute markets, which have yielded averages of $16/MWh and $20.50/MWh, respectively.
The PSE system experienced more price volatility during the first day, but the market stabilized after that, Rothleder said.
PSE’s prices have been in the “normal range,” averaging in the upper teens to mid-$20s/MWh, “which is consistent with the [bilateral] market,” said Josh Jacobs, director of load-serving operations at PSE. “So that’s a good result.”
Arizona boasts ample transfer capacity with its three EIM neighbors – CAISO, NV Energy, and PacifiCorp. | APS
Day Four in the market also saw Arizona real-time price averages dip into negative territory, which CAISO attributes to maintenance-driven transmission constraints in Southern California trapping generation in an area currently experiencing low seasonal demand.
“This is the role of the Energy Imbalance Market — to absorb some of that energy which can then go somewhere else at those times,” Rothleder said. “If we didn’t have transfers to APS for that energy from the south, we would’ve probably been economically reducing — or potentially curtailing — renewable resources because there was too much energy at the time relative to the transmission constraints that were binding.”
Rothleder pointed out that the APS system boasts “quite a bit” of transfer capability.
“We can transfer a lot back and forth with PacifiCorp, NV Energy and the California ISO,” Thompson noted. “We’re kind of the freeway of the EIM system there.”
“Transfer capability is really the grease that makes the Energy Imbalance Market work well,” Rothleder said.
WASHINGTON — Seattle officials Monday deferred action on a proposal by the city-owned utility to join the Western Energy Imbalance Market. Seattle City Light could become the sixth utility to join the CAISO-run EIM, following recent additions Arizona Public Service and Puget Sound Energy, which began EIM operations Oct. 1, and Portland General Electric, which is scheduled to join in 2017. (See related story, Smooth EIM Transition for Arizona Public Service, Puget Sound Energy.)
An official of the Seattle utility joined several other Western energy leaders at the Energy Bar Association’s Mid-Year Energy Forum last week to discuss the growth of the EIM, “Caliphopia” and how the Western Interconnection is likely to change.
To Robert W. Cromwell Jr., director of regional affairs and contracts for Seattle City Light, the math of joining the EIM is a no-brainer. Cromwell said it will cost the city $8.8 million to join the EIM and $2.8 million a year in operating costs. The payoff? An estimated $4 million to $23 million in annual savings through arbitrage opportunities by “capturing low prices to serve load [and] high prices to sell surplus energy.”
Cromwell said the utility differs from other public power companies because its large hydropower facilities on the Skagit and Pend Oreille rivers “force us to sell into the market.”
He said the utility also is pressured by declining wholesale revenue — a trend likely to worsen as growing wind and solar power create more frequent periods of zero and negative pricing — and declining retail loads. “I’ve got about 60 tall cranes [constructing] very large buildings in my city and my load went down,” he said.
On Monday, the Seattle City Council delayed a vote on the EIM initiative for three weeks. The bill would allow City Light to enter an exploratory phase for joining the EIM, but some council members were concerned about the costs of doing even that.
Jonathan M. Weisgall, vice president of legislative and regulatory affairs for Berkshire Hathaway Energy, also sees the advantages of regionalization as undeniable. Pointing to a map showing the 38 balancing authorities in the Western Interconnection, he joked, “To call this Balkanized is to insult Macedonia.”
Bilateral trading with manual dispatch and little situational awareness of other BAs is like using Craigslist, he said. The EIM, he said, is like “Match.com for electrons,” with five-minute dispatch, which is more accommodating for renewable generation.
Berkshire Hathaway’s NV Energy and PacifiCorp have saved $60 million since joining the EIM — a 20-month information technology project, Weisgall said, that required no new physical infrastructure.
Not everyone is rushing to join CAISO’s expansion, of course. For some, any sentence containing the words “California” and “energy” sends shivers. It’s not just the state’s liberalism but also memories of the 2000 energy crisis and Enron, which purchased Portland General Electric before imploding following disclosures of accounting and power trading frauds.
“The Northwest didn’t forget. Memories are long up there,” said Jonathan D. Schneider, of Stinson Leonard Street, who moderated the discussion.
Weisgall acknowledged that what he called “Caliphobia” is a challenge to a West-wide RTO.
“You’re trying to marry three incredibly blue states — California, Oregon and Washington — where it’s almost a felony to produce coal — with three very red states — Wyoming, Idaho, Utah — states that do not care about getting to 50% renewables much less … about greenhouse gas emission programs,” he said. “That makes it very, very tough.”
“We should not underestimate the challenge of getting there,” agreed Kenneth G. Jaffe, a partner with Alston & Bird, who represents CAISO.
“There are a large number of public power brethren in the Northwest who simply will not join a centrally cleared market before they die,” agreed Cromwell.
He noted efforts by Xcel Energy and others to create a Day 2 market in the Front Range in central Colorado and southeastern Wyoming, which he predicted will be operated by SPP or MISO. “The Cal-ISO isn’t the only game in town. (See “Xcel Seeking Larger Dispatch Areas in the West,” Overheard at the Transmission Summit.)
In addition to the political challenges and governance questions, another obstacle to an RTO West has been the Pacific Northwest’s bounty of rivers. Cheap hydropower represents about half of the power generation in the Northwest.
That’s “one of the reasons why a standalone market in the Northwest hasn’t penciled out the way it would in a somewhat more diverse resource base as is so in the east,” Schneider said.
“If you’ve got a local public utility district and your embedded costs of delivering power is about 2 cents/kWh … [any change] is a cost adder,” agreed Cromwell.
Nevertheless, the Bonneville Power Administration has been seeking ways to collaborate with CAISO, said Sonya Baskerville, manager of BPA’s national relations office. The agency is concerned with serving BPA load located within BAs that have joined the EIM as well ensuring it has outlets for marketing surplus energy.
“We can’t just sit by and let things roll on without being a player in that. We are having active conversations with the Cal-ISO, with other utilities in our region to talk about our primary goal, which is to preserve the value of our system — both hydro and our federal transmission system,” she said.
Central to any agreement would be a governance structure that preserves BPA’s financial and operational interests, Baskerville said.
NYISO last week forwarded to New York regulators 12 proposals for transmission projects to help the state meet its public policy objectives (16-E-0558).
The proposed projects, coming at the start of the ISO’s 2016/17 transmission planning cycle, would provide the state with access to offshore wind resources off Long Island, Canadian hydropower and clean energy from PJM. There are also proposals to unbottle clean energy from upstate production areas that are distant from load centers.
| NYISO
The proposals follow the Public Service Commission’s adoption of a Clean Energy Standard that seeks to overhaul the state’s generation fleet by producing 50% of its energy needs from renewable resources by 2030. (See New York Adopts Clean Energy Standard, Nuclear Subsidy.)
New York has other public policy initiatives to decarbonize its generation, including its Reforming the Energy Vision initiative, the Clean Energy Fund and compliance with the federal Clean Power Plan.
‘Holistic’ Approach Sought
New York City said a holistic approach is preferable to evaluating individual projects in isolation. “Identifying a single transmission line, or a segment of a line, as a need driven by public policy requirements is insufficient to achieve the state’s public policy goals, and such a piecemeal approach could effectively prevent timely achievement of those goals,” it wrote.
HQUS, a subsidiary of Hydro-Quebec, said proposals to import hydropower could satisfy much of the state’s requirements under the CES. “For example, a new 1,000-MW DC transmission project can deliver up to 8.7 TWh of incremental renewable energy to New York, nearly one-third of incremental renewable energy needed to meet the 2030 target.”
A joint filing by the New York Power Authority, National Grid and Central Hudson Gas & Electric, said the key to satisfying the goals is unlocking bottlenecks in northern New York that limit access to Canadian imports and wind and hydropower along the Saint Lawrence River.
“The possible addition of over 1,000 MW of new wind projects in northern New York, as reflected in the NYISO interconnection queue, potential increased renewable imports from Canada, and possible additional load reductions could exacerbate transmission constraints in delivering clean, renewable energy and its environmental benefits to the state’s load centers,” the filing said.
Transparency Concern
Competitive transmission developer NextEra Energy Transmission New York expressed concern that incumbents could hold advantages in any solicitation for projects.
“Regardless of whether the renewable assumptions include new wind generation and solar development in western New York or northern New York, or increased imports from Canada, all assumptions should be made public so that all transmission developers can begin on a level playing field,” NextEra wrote.
| Anbaric Transmission
Developers from outside of New York praised the CES provision that gives equal footing to projects from outside of the state. “Adding new transmission capability from PJM will facilitate delivery of the associated hourly matching energy to downstate loads, thereby helping reduce in-state transmission bottlenecks. Access to transmission-enabled, least-cost renewables is critical for New York state to meet the CES while minimizing ratepayer impacts,” wrote Poseidon, the developer of the proposed 500-MW Poseidon Transmission project, a 78-mile underground and undersea HVDC cable from South Brunswick, N.J., to Long Island.
Offshore Wind
PSEG Long Island, which operates the island’s distribution grid, said it and the New York State Energy Research and Development Authority are evaluating scenarios for delivering up to 4,000 MW of offshore wind.
“In all such cases, the offshore wind resources are likely to be distributed to several points of interconnection within [New York City and Long Island], with additional transmission system upgrades being required for deliverability to the rest of the New York Control Area,” it said.
PSC staff will review the filings and make recommendations to the commission.
In the previous planning cycle, which began in 2014, the PSC declared public policy needs for an AC project to serve the New York City area and one for western New York.
In response, the ISO issued a request for proposals in February for two projects in the Mohawk and Hudson valleys to deliver energy to load centers in and around New York City. (See New York Transmission Developers Ask FERC to Order a Do-over.)
CARMEL, Ind. — MISO is canvassing feedback on two Independent Market Monitor recommendations that seek to improve the Planning Resource Auction.
Manager of Resource Adequacy John Harmon said MISO agrees with the Monitor’s 2015 State of the Market recommendation to apply its 50-MW physical withholding threshold to affiliated market participants collectively, rather than to each individually. To do that, MISO would have to revise Module D of its Tariff, Harmon said at the Oct. 5-6 Resource Adequacy Subcommittee meeting.
The existing physical withholding framework allows a hypothetical company to increase its threshold by creating multiple market affiliates, according to the Market Monitor. | MISO
The Monitor has said its proposal would prevent a supplier from dodging mitigation by creating multiple affiliates to increase its withholding threshold.
Consumers Energy’s Jeff Beattie said he thought the proposal might be discriminatory, as his company cannot talk to its generation affiliates anyway because of requirements set by the Michigan Public Service Commission.
“It’s like Dynegy over there. I can’t collude with them!” he hollered across the room at Mark Volpe to lightheartedly make his point.
The Monitor’s proposal would subject a market participant and all of its affiliates to the threshold collectively. | MISO
Michigan PSC staffer Bonnie Janssen confirmed that both Consumers and DTE Energy have to file paperwork with the commission promising not to communicate with affiliates.
Harmon said MISO wants all stakeholder feedback by Oct. 21.
MISO is also tackling the Monitor’s 2013 suggestion to remove “inefficient barriers” for generators to participate in the PRA. The change would involve allowing a generation owner with an Attachment Y retirement request to participate in the auction and have the ability to postpone or cancel the retirement if it clears, which is not allowed under current Tariff language.
MISO adviser Neil Shah said the RTO will set aside time for discussions on the issue in future RASC and Planning Advisory Committee meetings to see if a rule change is warranted.
Minnesota Public Utilities Commission staff member Hwikwon Ham said he hoped changes to the rule would not further delay projects in MISO’s interconnection queue.
MISO to Move Ahead with Brattle Demand Curve for Forward Auction
MISO’s forward capacity auction proposal for merchant supply is nearly ready to be filed with FERC, and the RTO is using the final weeks to make presentations to support its stance.
| The Brattle Group
Jeff Bladen, MISO’s executive director of market design, said there have been more than 200 questions, comments and suggested edits since the redesign of the capacity market was first proposed. He said he didn’t anticipate “dramatic changes” at this point.
“We are closing in on that Nov. 1 filing date,” Bladen said. “It is late in the day to be bringing up issues, and we don’t anticipate new issues because we’ve gotten such a robust response so far.”
Bladen said the only unfinished business is MISO working with the Monitor to make any necessary additions to Module D Tariff language pertaining to the Monitor’s role in both the new auction and the PRA.
“In spite of the comments we’ve received, we’re still recommending the same curve,” Brattle analyst Sam Newell said.
Per stakeholder request, Brattle ran sensitivity analyses with higher price caps. Brattle analyst David Oates said moving the cap to 1.7 times net CONE moves the foot of the curve to the right but still manages to maintain reliability, at 109% of MISO’s planning reserve margin requirement. Moving the cap to two times net CONE results in procuring 106% of the planning reserve margin requirement.
But Oates also said that with higher price caps, price volatility increases by 30 to 80% compared with Brattle’s proposed curve. The two higher caps attract 100 MW and 220 MW, respectively, more merchant supply than Brattle’s 1,800 MW.
Newell again backed MISO’s forward proposal over the Monitor’s prompt, two-stage hybrid auction. “What most impresses me about this approach and the prompt hybrid that’s been discussed is that this approach allows all different suppliers to compete,” Newell said. “The hybrid proposal actually discriminates; it pays a much lower price to [regulated] supply than merchant supply. … It’s economic waste to buy a $150/MW-day resource when a lower-cost one is available.” He added that while relying solely on a sloped demand curve to price the marginal value of megawatts is “elegant,” it’s not realistic.
Jim Dauphinais of Illinois Industrial Energy Consumers said “it would make sense” to have a discussion to urge MISO to delay the Nov. 1 filing. “I’ll be frank: The word on the street is MISO is anxious to file this before FERC. The question is can some of these issues be worked out before the filing? There are certainly unresolved issues at this point.”
Dauphinais said delaying the filing to the end of the year might clear up issues. He is concerned that MISO’s Tariff language might be unclear, leading to a messy back-and-forth process with FERC, he said.
“I’ve also been walking on the streets and heard some people saying that,” Madison Gas and Electric’s Gary Mathis said. He said some were concerned that while implementation was delayed by a planning year, the filing date was only delayed by four months.
“I don’t think there’s uncertainty around the details. There’s disagreement about the details,” Bladen said. “It’s our conclusion that another month would not bring stakeholder consensus.”
Bladen said that MISO was already uncomfortable with the original “compressed” timeline to implement in planning year 2017/18. “The time we have in front of us is actually less than people realize,” he said. “We expect FERC to take 120 days to get back with an order. We expect it might well include guidance, maybe a technical conference; it might not. We need time to build the conclusion FERC orders. We have to have our systems up and running in the fourth quarter in 2017 in order to register units.”
Other stakeholders urged MISO to get language in front of FERC by Nov. 1 as planned.
MISO is also still weighing accelerating the creation of external resource zones in time for the 2017/18 PRA, ahead of the redesign implementation. Harmon said MISO was going to come back at the November meeting with a suggested approach, even though five of nine responding stakeholders were in favor of holding off on external zones until the 2018/19 planning year.
Dynegy’s Volpe said MISO not making a decision by October would make a 2017/18 implementation out of the question, though Harmon disagreed. In response to another question from Volpe, Harmon said it was possible that Tariff language would be presented by the next RASC meetings.
CARMEL, Ind. — Facing a FERC complaint from transmission customers, MISO last week defended its calculation of sub-regional transfer limits for the 2016/17 Planning Resource Auction and recommended that it continue to use the same numbers for future auctions.
The RTO made its recommendation based on stakeholder feedback it received, which shows general support for maintaining the status quo, said Kevin Sherd, director of forward operations planning, during a presentation at the Oct. 5-6 Resource Adequacy Subcommittee meeting.
MISO calculates the transfer limits between its North and South regions by deducting firm reservations from 2,500 MW for flows South to North and 3,000 MW for North to South. The initial transfer limits were prescribed in the RTO’s settlement with SPP that became effective in February.
Last month, a coalition of transmission customers filed a challenge to the results of the PRA with FERC, arguing that the limits are too strict and trapped capacity in MISO South, driving up clearing prices. (See MISO, IPPs Ask FERC to Reject Bid to Redo Capacity Auction.)
Six of 11 stakeholder respondents to a MISO survey on the issue endorsed deducting all firm reservations, while three wanted only pseudo-ties subtracted, and one apiece wanted nothing subtracted and net reservations subtracted. Seven recommended maintaining the current initial limits, with the minority split between using 1,000 MW or another method altogether.
Sherd said MISO doesn’t have much of a choice in subtracting firm reservations. “It’s firm transmission service. Firm transmission reservations can be scheduled at any point. It can’t be reduced absent a transmission congestion event,” he said.
But some stakeholders at the meeting disagreed that all firm reservations are absolute and must be subtracted.
In this year’s State of the Market report, MISO’s Independent Market Monitor recommended subtracting “a derating factor that represents the probability that MISO neighbors will request a derating” of the current initial limits.
“MISO is saying there’s no room for redispatch when all of the firm transmissions are subtracted,” Monitor Michael Chiasson said. “We’re saying there has to be something in between. … What’s the chance of that really being the norm and what’s the more likely case?”
| MISO
Steve Leovy, a transmission engineer at WPPI Energy, agreed and said a “probabilistic” approach was needed.
But ITC Holdings’ Ray Kershaw said he had never heard of using transmission-use probability. “We can throw out terms like ‘probability,’ but I don’t know of a method for calculating the probability of transmission use. There are certain things that need to be assumptions; there’s the [loss-of-load] expectation, I understand that. Could someone put this method down on paper?”
Leovy said MISO should make a best effort to estimate expected system capability and not focus so much on making sure it does not exceed the limit under any circumstances.
Sherd said it would be an “administrative nightmare” to track individual firm reservations and monitor the likelihood of it being used. “It’s not on a planning year basis; it’s on a daily, weekly, monthly basis,” he said.
According to MISO, the Monitor’s suggestion is not allowed, as MISO and SPP’s settlement agreement forbids a “unilateral” lowering of the sub-regional limit.
Firm Flow Limits Study
Rather than the existing initial limits or 1,000 MW, one stakeholder suggested a study of firm flow limits to establish new initial limits.
Per that request, MISO reviewed market flows compared with firm flow limits on several days this summer, examining 19 Tennessee Valley Authority flowgates that experienced transmission loading relief anytime in 2016. The analysis, MISO said, showed that South-to-North market flows “would generally be firm at flows near or above 2,500 MW.” The RTO said only one of the analyzed flowgates averaged below 2,500 MW.
MISO said it plans to continue reviewing transmission loading relief annually. The RTO is seeking final feedback on reusing the limit approach in the PRA by Oct. 12. MISO staff plan to review a limit proposal at the Nov. 2-3 RASC.
Per SPP and MISO’s settlement, firm transmission reservation holders have until Dec. 1 to confirm or cancel service above 1,000 MW for planning year 2017/18. MISO will publish its sub-regional import constraint and sub-regional export constraint values for the 2017/18 PRA before March.
Dynegy’s Mark Volpe asked if MISO could even discuss its North-South contract limit plans given the complaint at FERC.
“I think given the complaint is public and MISO’s response is public, there should be very little issue in discussing it,” MISO’s Jacob Krause said.
Massachusetts regulators have rejected fees National Grid sought to impose on small commercial and industrial customers that own distributed energy resources (15-155).
In an order approved Sept. 30 that granted the utility a $101 million rate increase, the Department of Public Utilities rejected proposed monthly charges for new stand-alone DER, including solar and wind. The customers who are most likely to be affected by the proposal include local governments and community-aggregated solar projects, which are intended to benefit low-income ratepayers and those otherwise unable to install solar panels on their own homes.
Solar Cell Panels on Gillette Stadium Roof | Wikipedia
National Grid had sought to impose the fees to help cover the fixed costs of the distribution grid and avoid shifting them to other ratepayers.
Regulators agreed with opponents who said the company failed to justify the charge or demonstrate cost-shifting. “With the exception of interval meters, the company has not quantified the costs that it contends stand-alone DG facilities impose on its distribution system,” the DPU wrote.
It did approve a $1 increase from the $4 minimum monthly charge for residential customers and a one-time interconnection charge of $28 for distributed resources to cover the application process.
National Grid had proposed a fixed fee of up to $20 for residential customers based on usage and $30 for small commercial customers.
A law passed in the spring by the Massachusetts legislature opened the door for the company to collect a “monthly minimum reliability contribution” (MMRC) for customers who receive net metering credits. (See Massachusetts Raises Net Metering Cap, Cuts Payments.)
The law also allows for the consideration of an access fee once solar capacity reaches 1,600 MW statewide, a threshold expected next year. National Grid has met its share of that total.
The DPU agreed with opponents of the proposal that the fees did not qualify as MMRCs because the rate case was filed before the law’s enactment. It also said that once the 1,600-MW threshold is passed, a fee could be considered in a separate proceeding.
The company had proposed a monthly access fee of $7/kW, reduced by an assigned capacity factor (40% for solar and 30% for wind). National Grid said the fee was necessary to recover its costs for the operation and maintenance of the transmission and distribution grids and the increase in costs it says will result from further penetration of distributed resources.
Several intervenors contended that the proposal ran contrary to Massachusetts’ efforts to have its rate design more accurately reflect market conditions.
“Reforms to electricity rate design must strike a careful balance between economic efficiency, equity for all customers, protection of low-income ratepayers and access to community distributed generation,” Mark LeBel, staff attorney at Acadia Center, said in a statement.
AUSTIN, Texas — Industry insiders last week gathered here for the Gulf Coast Power Association’s 31st Annual Fall Conference, which featured presentations on ERCOT pricing and the effect of market forces, as well as discussions on distributed generation, Mexico’s reformed energy market, wholesale market design and efficiency improvements, new developments on ERCOT’s seams, current cyber threats and cross-border transmission issues with Mexico.
Taking a look at current market conditions, the opening panel discussed what the future will hold. Sam Newell, a principal with The Brattle Group, said should solar costs continue to drop, it could replicate what ERCOT saw in the early years of the 21st century.
“At the beginning of the market, we built out [gas-fired combined cycle plants] in spades, and that’s why prices were so low,” he said. “I think that could happen with solar. [If I] were thinking about investing in traditional power gen in this market, I’d be worried because of that prospect. If we get 25-MWh, all-in solar, that will just kill prices for everybody else.”
“I think [pricing] is as big an issue for the coal,” said Bob Helton, director of market design and policy for ENGIE. “If you look at capacity factors, a baseload coal plant runs at 88, 89%. They’re running today down in the 30s. I think you will potentially see some changes in operations. It’s like my car is not running, but I’m not about to put new tires on it. You’re going to see some of those issues in maintenance that are going to change for coal plants with large capital expenditures.”
“Many generators [in ERCOT] have another revenue stream from their integrated retail side,” pointed out Charles Griffey, president of Peregrine Consultants. “Retail margins are very, very high right now in certain sectors of the market.”
“It’s in the best interest of the ERCOT market for us to be constantly moving forward, whether it’s real-time co-optimization, which is brought up by the [Independent Market Monitor] from time to time, or something else,” said ERCOT COO Cheryl Mele during her panel’s discussion on balancing efficient markets with economics. “We need efficiency, we need reliability and we need people to get behind us and support us when we have reliability issues.”
“We all put ERCOT in a tough spot,” Market Monitor Beth Garza said. “We want the highest and best and most impartial decisions out of that organization, but they’re also responsible to their members. Sometimes those interests aren’t always advocated for. … We expect the highest and best, but that’s never good enough. There is a role for the [Public Utility Commission of Texas] in some of these decisions that is even higher and broader than ERCOT and its stakeholder organization. It seems like that’s at a level at which disparate interests can be effectively adjudicated.”
“If ERCOT is a democracy, then the PUC is a benevolent dictator,” responded Barbara Clemenhagen, vice president of market intelligence for Customized Energy Solutions. “If the recommendations are coming from ERCOT and IMM, they should be based on perfect information. It may not always be correct, but the stakeholders have the right and the opportunity to weigh in on those things.”
Randa Stephenson, vice president of wholesale markets for the Lower Colorado River Authority, also defended ERCOT’s stakeholder process. “Even though there are different advocates, the voting structure is very balanced within ERCOT. Our communications and structure ensures there’s equal weighting of all the market participants,” she said. “We have to find ways to work together to find the best solution. When you have the pull and tug, we’re going to come out with very different compromise solutions.”
Mexican market participants can buy and sell power, ancillary services, financial transmission rights and clean energy certificates (CELs). The first auction of energy and CELs last year saw an average price of $48/MWh, which decreased to $33/MWh in this year’s second auction. Regulo Salinas, vice president of Ternium Mexico, said he is optimistic about the third auction.
“That is where the private sector will come in,” he said, welcoming their expertise. “We need more specialized people that understand the markets. We have hardly any of them in Mexico … traders, meteorologists, pricing, financial and accounting specialists. … It’s an opportunity for intelligent communication types to come into Mexico.”
“I’m confident we are on the right path. There’s plenty to be done, but plenty has already been achieved,” said Eduardo Andrade, a member of the advisory board for Mexico’s Energy Regulatory Commission. “We have a framework based on competition. As a country, we’re moving away from having the government looking over your shoulder and determining who should generate the electricity and at what price.”
Panelists credited Jeff Pavlovic, managing director of electric industry coordination for Mexico’s Ministry of Energy, with much of the market’s success, though he politely declined to accept their praise. “Our guiding principle has been to make as many decisions as possible and not give any more control to the government than is absolutely necessary,” said Pavlovic, who left Xcel Energy eight years ago to work on the Mexican market.
“We know a lot of companies are interested in the market,” he said. “We’re asking them to make big investments, and that takes information. We’ve been doing this one step at a time, but until all rates are public, it will be hard to get that investment.”
Enrique Giménez Sainz de la Maza, managing director of The Blackstone Group affiliate Fisterra Energy, said the “next challenge” is developing a retail market. “Without a robust retail market, I have my doubts about the wholesale market.”
ERCOT Frontera Tie to Mexico | Fisterra Energy
Fisterra owns the 524-MW combined cycle Frontera plant in Mission, Texas, just 2 miles from the Mexican border. Frontera only recently withdrew from the ERCOT system and dispatches power into Mexico through a DC tie and a 400-kV line. “We now have something very interesting. We have a market on both sides … one is an energy market, the other is an energy capacity market. At the end of the day, we have managed to develop the reality of a market in Mexico thanks to this interconnection.”
Gerardo Serrato, InterGen Mexico’s commercial director, said future interconnections will only help the price convergence between the two markets. “Theoretically, those prices have to converge, but reliability issues might stop that convergence. Not all the Mexican systems are interconnected. If they can interconnect the whole system, we can see convergence between the Mexican and U.S. system.”
Genscape’s Rick Margolin said strengthening the energy infrastructure between Mexico and the U.S. will only feed further economic development. The senior natural gas analyst pointed to the NET Mexico Pipeline that connects the Agua Dulce Hub in South Texas with Monterrey in northern Mexico as an example.
“Gas prices aren’t what Mexican consumers can get by tapping into the U.S. market, so there’s a major push to gain access to the international markets, which means primarily the U.S.,” Margolin said. “Consumers are insanely frustrated by the level of service they get from [Mexico’s national gas supplier] Pemex. Global manufacturers are very interested in expanding operations into the Mexican market. Mexico has more trading partnerships than the U.S., but they’re hesitant … because of the lack of service or reliable service. We’re seeing a massive buildout of both gas and power infrastructure to the border.”
Dynegy CEO Shares Thoughts
Dynegy CEO Robert Flexon celebrated his company’s emergence from bankruptcy in 2012 and its entry into ERCOT earlier this year with the acquisition of almost 4,000 MW of ENGIE combined cycle gas turbines. Fifteen percent of Dynegy’s capacity is part of the Texas ISO.
“ERCOT’s view around generating assets tends to be fuel neutral. They’re not trying to create winners and losers; they’re trying to create a competitive market,” Flexon said. “We like our position, we like the assets we have. The market is going to continue to have need for flexible resources. The way wind affects price formation and with solar shaving peak pricing, it’s just going to be a really difficult environment for non-flexible resources to survive that.
“Is the price signal going to be there to change the resources?” he asked. “Will it force Texas into a situation where we’re doing out-of-market things? We hope Texas doesn’t do that.”
Anil Kumar, a senior research economist and adviser for the Federal Reserve Bank of Dallas, said the regional economy is expanding at a moderate pace, thanks to “robust” job growth in services and goods-producing sectors overcoming oil prices in the $40s. “Sharp drops in oil prices used to drop us into a recession, but that’s no longer the case,” he said, pointing to an unemployment rate of 4.7%, slightly below the national average. “We are probably looking at the worst of the energy bust being over.”
October being National Cyber Security Awareness Month, it was only appropriate one of the GCPA panels examine the growing cyber threats to electric utilities and how to fend them off. Renee Tarun, deputy director of the National Security Agency’s Cyber Task Force, warned attendees that external cyberattacks are growing increasingly sophisticated.
But she also said not to ignore the dangers from inside.
“We’re seeing these attacks surface as more and more technologies are connected to the Internet. We’ve seen ransomware becoming more prevalent. We’re seeing nation actors develop specific harmful code. These different types of malicious actions can range from hackers in their basement to sophisticated nation actors,” Tarun said.
“But there’s also the uniformed user, someone accidentally clicking on a phishing link that introduces malware to the network. It’s important we leverage our technologies to be more automated in our defenses, but also the user being educated in the system as well. Security needs to be built in at the beginning, not as an afterthought.”
“I would say 50% [of cyberattacks] are pure human negligence,” said Boris Segalis, a partner with Norton Rose Fulbright. “Vendors can lose track of hard drives that include critical customer data … small companies may not vet the vendor … not having your anti-virus up to date … you can’t really prevent hackers, but humans can take measures to mitigate the effects of these incidents.”
Asked by an audience member whether cybersecurity insurance is available, moderator Doug Henkin, a partner with Baker Botts, said insurance brokers do specialize in the product, but “it’s a growing market that essentially didn’t exist. It’s not a simple insurance to buy, it’s not a simple insurance to be underwriting. With respect to anti-virus software, you might be underwriting 15,000 different companies, but those companies are using five to 10 subsets of the software.”
Developers Look Beyond ERCOT’s Seams
Bill Bojorquez, vice president of planning for Hunt Transmission Services, suggested ERCOT’s DC ties with Mexico — which include a connection through Hunt subsidiary Sharyland Utilities — could provide an alternative to building more transmission in the Rio Grande Valley.
“We believe these ties … give ERCOT the ability to say, ‘Wait a minute, we have an extra tool’ and call their neighbor when there are unplanned outages,” said Bojorquez, who helped develop the ERCOT market while at the ISO in the early 2000s. “One of the things I’m most proud of is establishing relationships with Mexican utilities. They have the ability to respond in emergency situations, and they are highly motivated because it helps with trade.”
David Parquet, senior vice president of special projects for Pattern Energy, is looking eastward instead. His company’s HVDC Southern Cross Transmission Project, a project six years in development, is scheduled to connect ERCOT with the Southeast in 2021.
“If you think back 10, 15 years ago when the whole renewable business started, there was a lot of low-hanging fruit where you could find wind relatively close to load,” he said. “Those days are gone. Today’s big efficient renewable projects are a long way from load so therefore, you have to think about transmission. Sometimes, you can hook up to the local grid through a wheel, or you can put together your own project.”
But Parquet reminded his audience that transmission projects across the seam must “ensure no change in FERC jurisdiction over flows into ERCOT. [Maintaining ERCOT’s independence] is the Holy Grail. You will not change that. Period. Full stop.”
“In planning the future of the grid, we’re very much looking at distributed generation resources,” said Oncor’s Don Clevenger, senior vice president of strategic planning. “The numbers are still small, but they really don’t tell the whole story as far as looking ahead into the future. … Last year, only one-third of our feeds had any DG; today, it’s half. In four to five years, that [growth] is going to be astronomical.”
“If you look at overall capacity, 80% of the DG installed throughout the [ERCOT] system by the end of 2016 will be dispatchable. We’ll have close to a gigawatt by the end of the year,” said Greg Thurnher, general manager for regulatory policy with Shell Energy North America. “We’re very interested in that gigawatt as it becomes very intelligent as far as price. You will have a comparable playing field for wholesale resources when they act as true resources … and have the ability to influence the price.”
Austin’s Pecan Street Project, a collaboration between the University of Texas at Austin, Austin Energy, city officials and industry and environmental representatives, has been testing DG’s “intelligence.”
“We can manage every single circuit in the house,” said the project’s engineering director, Scott Hinson. “It’s a rather granular management … air conditioning controls, creating an electric vehicle charging control, looking at solar controls … things as simple as pointing the solar panels west, so their peaking output is available later in the day.”
Renewables Key to Texas’ CPP Compliance
Participating in a panel discussing the Clean Power Plan’s potent effects on the Texas market, the Environmental Defense Fund’s John Hall said the state is already “90% closer” to compliance, thanks primarily to its abundant renewable resources. “We currently produce more wind power than any other state. We have more potential for solar, energy efficiency and demand response than any other state,” he said.
“From our perspective, the market in Texas and our vast, clean-energy assets are putting us in a position where the market is driving us to the use of clean-energy resources,” Hall continued. “We have an opportunity to take the massive clean-energy resources we have and we can significantly rebuild this economy.”
“There may be permanent coal-plant reductions that occur as a part of the Clean Power Plan, but fuel diversity is going to suffer,” said a more cautious Susana Hildebrand, Energy Future Holdings’ director of environmental policy. “It affects our power prices, because there may be a day where for whatever reason, you need coal or baseload plants to be available. Betting on the future of natural gas prices doesn’t always work out.”
Greg Sopkin, a partner with Wilkinson Barker Knauer, warned about increased costs to rural customers. “Urban areas have a lot more customers to spread around the costs,” he said. “If you’re talking about forcing a change on rural areas in a very short period of time by shutting down baseload plants, you’re looking at real, very significant costs.”
The company announced plans to end its solar cell production line in San Antonio, Texas, because of competition from Chinese manufacturers.
