Increased use of renewable energy will depress energy prices, increase capacity prices and lead to early retirement of some baseload plants, according to a discussion paper by ISO-NE.
Conceptual illustration of potential transmission for 12,000 MW wind scenario. (Click to zoom)
The RTO said renewables’ low operating costs, combined with state and federal subsidies, reduce the energy market clearing prices, requiring competing traditional resources to make up that shortfall in the capacity market.
“State subsidies for renewable resources will put downward pressure on energy market prices, but this action is not without consequences: it will put upward pressure on prices in the capacity market. The capacity market will help balance the revenue needs for resources as the energy market provides fewer opportunities for resources to recover their fixed costs,” the paper says.
In 2014, the region’s 800 MW of wind power produced nearly 1% of its electricity. Solar penetration had reached 900 MW at that time, with projections of nearly 2,500 MW by 2024.
Developers have proposed 4,000 MW of additional wind power, with studies suggesting 12,000 MW of onshore and offshore wind could supply a quarter of the six states’ electricity needs.
Increased renewables are expected to impact technology choices, even as the region continues its inexorable march to natural gas, which accounts for about half of New England’s power generation. “That might mean a shift from gas-fired combined cycles toward gas-fired peaking resources,” the report said.
A decrease in energy revenues may cause combined-cycle generators — which expect to earn double the energy and ancillary market revenue of a combustion turbine — to become less competitive. At the same time, more gas peakers will be needed to provide additional reserves as the penetration of intermittent renewables grows.
Baseload Coal and Nuclear
The report said renewables will put the most pressure on baseload coal and nuclear units, noting that Entergy cited low energy market revenues in closing Vermont Yankee.
“With the expected increased penetration of renewable resources, more such retirements should be expected in the future. For example, at current energy and capacity prices, nuclear units might earn almost 10 times more revenue from the energy market than they earn from the capacity market. Modest changes in energy market revenues could have large impacts on the bottom line of a nuclear unit or baseload coal unit. This may be especially true for nuclear units, which have very high fixed operating costs and typically operate at very high capacity factors.”
No Changes Recommended
Nevertheless, ISO-NE said it does not believe its market rules need to be changed to accommodate these developments. It previously noted that higher capacity prices in recent auctions attracted new generation resources into the region. (See Prices up One-Third in ISO-NE Capacity Auction.)
“In the medium- to long-term, the capacity market will enable the region to achieve necessary levels of resource adequacy and resource performance while transitioning toward a system with greater levels of renewable resources,” the report concludes.
Former Federal Energy Regulatory Commission Chairman Jon Wellinghoff improperly shared in public a video excerpt of a deposition taken during a 2013 commission investigation, according to a report released Tuesday by Department of Energy Inspector General Gregory Friedman.
But Wellinghoff on Tuesday told RTO Insider the video snippet in question was not “nonpublic” information when he played it during an industry conference on March 9.
While disclosing information is forbidden during an investigation, certain portions of it become public after an investigation is completed, Wellinghoff said.
“I’m kind of bemused by [the report] in the sense that, No. 1, this information is not confidential at all. I don’t understand where they get this,” Wellinghoff said.
The Inspector General also faulted FERC for inadequate safeguards inside the agency to prevent such disclosures and has asked current Chairman Norman Bay to do more to prevent disclosure of nonpublic information and strengthen post-employment guidance.
Perhaps ominously for Wellinghoff, Friedman asked Bay to determine if the former FERC chairman violated a Confidentiality of Investigations requirement at the agency “and ascertain what, if any, sanctions are available to address the former chairman’s actions.”
‘How Not to Behave’
Wellinghoff, who served as chairman from 2009 to 2013, is currently a partner at the energy law firm of Stoel Rives. He’s been widely sought after as a speaker and panelist at various utility industry conferences.
Jon Wellinghoff (Source: FERC)
It was at such a conference on March 9 when, Friedman said, Wellinghoff shared a video excerpt of a nonpublic deposition taken during a “major” Office of Enforcement investigation resolved in a July 2013 agreement.
The video clip showed a trader being evasive while questioned by investigators. Wellinghoff presented the clip during the conference “as an example of how not to behave in front of regulators,” Friedman wrote.
Wellinghoff said the point of showing the video during the conference was instructional, in the context of “don’t do this” if you’re being questioned by regulators.
“But the snippet had no substantial information at all” concerning the underlying case, he insisted.
Records show that Wellinghoff was on the agenda to moderate a panel on “FERC and CFTC Enforcement” at the Western Systems Power Pool’s spring operating committee meeting, in Sonoma, Calif. After the panel discussion, a FERC employee, along with an attorney for the energy trading firm targeted in the 2013 investigation, “expressed concerns to the commission that the disclosure may have been unauthorized and in violation of federal law regulation,” according to the report.
FERC Integrity at Stake?
The Inspector General “confirmed the essence of the allegation, finding that Mr. Wellinghoff had, in fact, disclosed nonpublic OE information in a public setting. We concluded that the disclosure of such information could threaten the integrity of FERC’s regulatory and enforcement process.” Under FERC regulations, Friedman said, “virtually all of the information gathered during the course of an investigation is nonpublic.”
The report faults FERC management for failing “to take action to positively ascertain the scope of information still in possession of the former chairman.”
“In our view, the seriousness of this matter required more aggressive intervention and involvement by the commission,” the report said.
Friedman said FERC staff were focused on preventing future disclosures and failed to determine whether the former chairman possessed other nonpublic, sensitive commission material. FERC attorneys spoke with Wellinghoff on March 20, asking him to call the commission before releasing any other material in public so they could determine whether or not it was nonpublic, according to the report.
The report said Wellinghoff agreed, but he informed the attorneys that his computer had crashed in February and that all of his documents had been permanently lost. “However, we were told that Mr. Wellinghoff used a personal computing device to show the video clip during the March 9 presentation, despite having told commission attorneys that all of his documents were lost due to the computer crash,” the report said.
On April 29, the day before the Inspector General announced its investigation into the matter, FERC asked Wellinghoff to destroy any remaining commission material he possessed. Wellinghoff confirmed that he had on May 4.
The Inspector General said Wellinghoff has declined repeated requests to discuss the matter.
FERC Policies Faulted
Also faulted were FERC’s post-employment guidance and exit processes, such as how employees leaving FERC should treat information. The review did cite steps taken since the public release of the deposition came to light. For example, in an April email to current employees, FERC’s ethics official outlined potential criminal penalties for unlawful removal and distribution of federal records.
But Friedman said the risk of unauthorized disclosure by current and former FERC employees “remains unacceptably high.”
He recommended that Bay:
Determine if Wellinghoff violated the Confidentiality of Investigations requirement and whether sanctions are available;
Determine if the commission has necessary safeguards in place to prevent disclosure and propose statutory or regulatory changes; and
Expedite the effort to strengthen post-employment guidance and exit processes, including a better understanding of what constitutes nonpublic information.
Major Enforcement Case
Neither the conference nor the firm whose traders were targeted in the FERC investigation are identified in Friedman’s report.
According to FERC records, there were two major enforcement cases resolved in July 2013. One involved Barclays Bank, which FERC determined had violated the Anti-Manipulation Rule involving electricity trades in the western U.S. The commission assessed penalties of more than $435 million.
The public record of the case includes the names of traders found to have run askew of federal laws and includes summaries of depositions they’d made.
The other case resolved that month involved make-whole payments and related bidding strategies of JP Morgan Ventures Energy. Again finding a violation of the Anti-Manipulation Rule, FERC levied massive sanctions that included a $285 million civil penalty.
Wellinghoff declined to confirm to RTO Insider whether it was from one of these two July 2013 cases that he pulled the video deposition. The former FERC chairman said he did not identify the case at the March 9 conference.
Bay on Board
In a letter to Friedman, Bay said he agreed the video excerpt shared by Wellinghoff constituted nonpublic information.
“I have directed appropriate senior commission staff to explore whether further steps are available to address this situation and to share their findings on that issue with me by Sept. 1,” Bay wrote.
Wellinghoff has stepped on toes within FERC previously since leaving the post. In 2014, commissioners criticized their former colleague for publicizing information from a FERC analysis on grid security. Wellinghoff was attempting to demonstrate more could be done to safeguard the nation’s electrical infrastructure. (See FERC Criticism of Ex-Chair Mounts.)
MILWAUKEE — A top Environmental Protection Agency official on Monday gave the most detailed hints yet about how the agency will revise its proposed carbon emission regulations on existing power plants when the final rule is released this summer.
Janet McCabe
Janet McCabe, acting assistant administrator for EPA’s Office of Air and Radiation, indicated that the final rule will include relaxed interim goals and informal ways for states in the Midwest and elsewhere to combine their efforts to ease compliance.
McCabe made her comments at the opening session of the Mid-America Regulatory Conference, where Wisconsin officials promised that they will be among the states filing legal challenges to the Clean Power Plan.
McCabe has appeared frequently before gatherings of state regulators and also testified at the Federal Energy Regulatory Commission’s technical conferences on the reliability impacts of the proposed rule. In previous appearances, McCabe made vague promises that the agency was listening to the feedback it has received on EPA’s proposal. (See MISO, SPP Stakeholders Developing Trading Plan to Comply with EPA Carbon Rule.)
Rule Sent to White House
With the final rule nearing release — it was sent to the White House for review last week — McCabe was a bit more forthcoming.
She indicated support for the Midcontinent States Environmental and Energy Regulators (MSEER), which has been developing a mechanism that would allow utilities to trade emission allowances within and across state lines. McCabe said efforts by MSEER and others to create “trading ready” compliance plans that don’t require time-consuming memoranda of understanding among governors have been “very instrumental in our thinking.”
“What an excellent idea that is, and we’re certainly pursuing that,” McCabe said.
McCabe acknowledged the widespread opposition to EPA’s proposal that states meet most of their 2030 emission targets by 2020, which critics have said would impede regional compliance and result in stranded costs for generators shuttered before the end of their economic lives. “We certainly, certainly heard that. We heard that loud and clear,” she said.
She also acknowledged fears that the rule might subject state energy efficiency and renewable portfolio standards to federal oversight, saying, “I think you’ll see more thought on that.”
Wisconsin’s Welcome
McCabe spoke after Mid-Atlantic Conference of Regulatory Utilities Commissioners attendees received a welcome from Wisconsin Lt. Gov. Rebecca Kleefisch, who warned that the EPA rule will dramatically raise electric prices, damaging the state’s ability to use its lower rates to attract industry from Illinois and other states. Under the proposed rule, Wisconsin would be required to cut its carbon emissions by 32% from its 2012 levels.
Brad Schimel, Wisconsin Attorney General
Kleefisch introduced Attorney General Brad Schimel, who all but guaranteed that the state would be among those challenging the final rule. Schimel said EPA’s proposal had “serious legal flaws” and set unfairly harsh goals for the state, whose economy is dependent on energy-intensive industry.
McCabe acknowledged the Midwest’s heavy reliance on coal, and promised that “affordability is very much on our minds as well.” She said the agency has proven that environmental regulation is compatible with economic growth, saying air pollution has been reduced by 70% since 1970 while the economy grew “by orders of magnitude.”
She also responded to criticism that the proposed state targets — which require some states to cut emissions much more than others — are inequitable, saying “we’re looking hard at that.”
She rejected suggestions that the agency was overreaching, saying it was charged with enforcing laws enacted by Congress. She said the rule would withstand legal challenges, saying it was “very solidly based in the Clean Air Act.”
“EPA is not an energy agency. We’re not trying to be an energy agency,” she continued. “We are an agency that protects the public health, and in this case that means addressing air pollution that contributes to climate change.”
In a brief interview afterward, Schimel said he heard nothing from McCabe that made it less likely that Wisconsin will challenge the rule. “She conflates clean air with climate change. That’s not a good sign for where they’re going,” he said.
FERC Commissioner Plays Peacemaker
Commissioner Colette Honorable (Source: FERC)
Federal Energy Regulatory Commissioner Colette Honorable, who spoke after McCabe, urged state officials not to take absolutist stands.
She said states challenging the rule’s legality should also be prepared to respond if it is upheld in the courts. Some opponents have urged states not to file compliance plans; EPA has said it will impose a federal implementation plan for such states.
“I don’t want to do anything to harm jobs; I know you don’t either. I don’t want to do anything that harms reliability or ensuring just and reasonable costs; I know you don’t either. Having said that, we have a job to do,” Honorable said.
“There’s a saying that metal sharpens metal. If we continue to stay engaged we will be in the best possible position to be prepared for whatever happens with the Clean Power Plan. I’m … convinced that we will be able to strike the right balance because of what we continue to hear from you.”
Rule Survives First Legal Challenge
The Clean Power Plan survived its first legal challenge on Tuesday. In a unanimous decision, the three-judge D.C. Circuit Court of Appeals found that a challenge to the rule by 12 states was brought too early, as it is still being finalized.
“Petitioners are champing at the bit to challenge EPA’s anticipated rule restricting carbon dioxide emissions from existing power plants,” Judge Brett Kavanaugh said. “But EPA has not yet issued a final rule. It has issued only a proposed rule.
“They want us to do something that they candidly acknowledge we have never done before: review the legality of a proposed rule. But a proposed rule is just a proposal. … We do not have authority to review proposed agency rules.”
The court’s remarks in its ruling mirrored the skepticism it expressed when it heard oral arguments in April. (See Federal Briefs, “Judges Appear Skeptical of Challenge to EPA Air Rules.”)
WASHINGTON — The Federal Energy Regulatory Commission was the subject of intense criticism Wednesday and Thursday as members of a congressional subcommittee considered legislation to rein in the agency’s Office of Enforcement.
The House of Representatives Energy and Commerce Committee is considering a legislative package that would institute a wide variety of changes to energy policy. This week’s Energy and Policy subcommittee’s hearing focused on Title IV, which would make changes to FERC’s enforcement procedures, along with Department of Energy efficiency standards and the Public Utility Regulatory Policy Act (PURPA).
Under Section 4212 of the title, FERC would be required to disclose to investigation subjects “any exculpatory materials, potentially exculpatory materials, or materials helpful or potentially helpful to the defense” within a week of issuing preliminary findings.
Brady Doctrine
The provisions are in response to criticism by defense attorneys — embraced by some congressional Republicans — that Enforcement has denied subjects due process. The allegations were highlighted in the Powhatan Energy Fund case, in which brothers Richard and Kevin Gates claim that FERC withheld exculpatory evidence from them in violation of the Brady doctrine. (See Gates, Powhatan Say FERC Enforcers Didn’t Share Crucial Info.)
Larry Parkinson, FERC
Responding to a question on Wednesday from Rep. Jerry McNerney (D-Calif.) about the implications of the phrase “helpful or potentially helpful” in the section, FERC Enforcement Director Larry Parkinson called it “a pretty dramatic rewrite” of the Brady doctrine.
The doctrine, stemming from the 1963 case Brady v. Maryland, holds that the prosecution may not withhold evidence that could aid a defendant.
Under the proposed language, “essentially what it would end up being is an open-file discovery policy,” Parkinson said. “If you say you’re entitled to information in possession of FERC that is ‘helpful or potentially helpful’ to the defense, I don’t know what wouldn’t be, whether it’s inculpatory, exculpatory or anything even neutral.” He also noted that Brady doesn’t apply to civil cases, even though FERC voluntarily adopted the doctrine in 2009.
These comments incensed Rep. Morgan Griffith (R-Va.), who flung his hands in the air and stood up in exasperation. When it was his turn for questioning the witnesses, he blasted Parkinson’s remarks.
“I don’t know how y’all did it wherever you worked, but the really good prosecutors … they gave you the open file because it helped you reach a settlement,” said Griffith, who referred to himself as a “simple country lawyer.”
Rep. Morgan Griffith
“So I don’t understand the resistance. I’m having a real hard time sitting here listening to you talk about how this a problem.”
“This is not a hide-the-ball kind of process,” Parkinson responded. “We lay out in extraordinary detail for the subjects of our investigations everything we’ve concluded, both factually and legally.”
On Thursday, the subcommittee heard from William Scherman, a former FERC general counsel who has led the attack on the agency, making his case in a law review article, Wall Street Journal op-ed and National Association of Regulatory Utility Commissioners conference. Senate Republicans quoted from his critique during the confirmation hearings for former Enforcement Director Norman Bay last May. (See LaFleur Cruises, Bay Bruises in Confirmation Hearing.)
Scherman told the subcommittee that it was “shocking” that Parkinson would say the language was not necessary. He suggested replacing “helpful” with “favorable.”
“There is no possible way that [FERC] could object to that,” Scherman said.
Commissioners’ Role
The proposed legislation would also allow investigative subjects “to communicate with the commissioners regarding the substance of settlement considerations to the same extent as such communications occur between the commissioners and the investigatory staff of the commission.”
Parkinson said that such a change would “impede the ability of the enforcement staff to regularly communicate with the commission or with others in the agency. It is simply unworkable to restrict the enforcement staff from those communications unless we ignore the fact that the commission itself owns and manages its enforcement program.”
Bill Scherman, former FERC General Counsel
“I don’t know how a commission effectively oversees an enforcement program if the enforcement staff isn’t able to regularly communicate with them without having to put it in writing, or without having to give the investigative subject the opportunity to address the commission in the same way.”
Griffith, however, criticized what he saw as the dual role of FERC commissioners as prosecutors and judges. Griffith compared this to a building code investigator going to the judge and asking how he should investigate and lay out his case against a potential violator.
Scherman noted that because Enforcement staff has regular communication with commissioners, “human nature would suggest that cannot be a fair adjudication. It has nothing to do with the integrity of the commissioners personally. But if you’re told for five years that somebody is guilty of fraud, if you’re told for five years that somebody has manipulated the markets, if you’re told for five years that somebody has unjustly enriched themselves at the detriment of consumers, and at the very last part you then have to sit, where only one party has had access to you, where only one party knows what you’re thinking and only one party has had a free exchange, that is a problem.”
Griffith suggested allowing the commissioners to retain their power to settle cases but said adjudication should occur in federal court “where you can have a legitimate, due process-filled trial.”
Scherman thought it would be a good idea — if FERC recognized that de novo review meant a new trial. “The commission is taking the absurd position that the words ‘de novo review’ does not lead to a full trial, does not lead to discovery, does not lead to the right to confront witnesses,” he said. “They’re taking the position that de novo review is essentially no different than a court review, where the commission gets deference on the record that they built on a flawed process.”
‘Neutering’ Enforcement
McNerney, who noted that California is still dealing with the aftermath of the Enron scandal, expressed concern that the section went too far in “neutering FERC’s investigative authority.”
Sue Kelly, APPA
With no one from FERC on Thursday’s witness panel, Sue Kelly, CEO of the American Public Power Association, attempted to defend the agency.
“I would just note that what they’re trying to do is protect consumers in these electric markets,” she said. “And if you look at the orders that have come out, if you look at the entities that are being chastised, if you look at the behaviors that are being engaged in, I think a case could be made that it’s really important to have a strong enforcement at the FERC because consumers are otherwise going to be taken to the cleaners.”
Scherman countered that “It is easy to say ‘don’t do this’ when your members are not subject to the very regulations that are violating due process. Ms. Kelly’s members are not subject to these rules. They’re not subject to this enforcement process.”
Kelly interjected: “Not true.”
“Well it is true, Sue. Other than [the North American Electric Reliability Corp.], what are you subject to?” Scherman replied.
Kelly noted that there was an enforcement case against an APPA member in ISO-NE. But “generally speaking, we don’t engage in behavior that would require” the enforcement process, she said to laughter. Kelly, however, was not smiling.
A consumer group and the Illinois Attorney General have asked the Federal Energy Regulatory Commission to launch an investigation into whether Dynegy illegally manipulated MISO’s Planning Resource Auction last April, resulting in a nine-fold price increase in Zone 4.
Public Citizen Inc. also alleged that MISO brushed aside recommendations by its staff that Zones 4 and 5 be merged due to their concerns about Dynegy’s growing share of capacity in Zone 4 after the company acquired four generators in the zone from Ameren. MISO didn’t want to risk Dynegy leaving for neighboring PJM, Public Citizen alleges.
Its complaint (EL15-70), filed Thursday, is the most serious volley yet by consumer interests still simmering over April auction results that saw prices in Zone 4, comprising much of Illinois, clear at $150/MW-day, compared with just $16.75 a year earlier.
The result will raise annual electric bills of Ameren Illinois residential customers by more than $140, the complaint states.
Illinois Attorney General Lisa Madigan filed a similar complaint Thursday, arguing that the 800% jump in Zone 4 prices is unjust and unreasonable and that the Dynegy acquisition made it a “pivotal supplier” in the zone.
“If Dynegy-controlled generation capacity physically located within Zone 4 is not bid, there would be insufficient capacity in Zone 4 to clear its local clearing requirement,” Madigan said. “Thus, Dynegy is able to set the price for the marginal clearing capacity, regardless of its internal cost of providing that capacity. If there were no pivotal supplier, one would have expected the Zone 4 price to match the result in Zones 1 through 7.”
Madigan also noted that in approving the Dynegy acquisition, FERC declined to look at its effect on competition and prices in Zone 4 and instead only considered a competitive analysis of MISO as a whole.
Public Citizen’s complaint suggests Dynegy could have inflated prices by either not offering some capacity or by offering some of it at such a high price that it would not clear.
Dynegy issued a statement saying it “follows and respects all the rules, tariffs and obligations in the markets and areas where we operate.”
“Dynegy offered all of its megawatts into the MISO auction with no physical or economic withholding in accordance with MISO tariffs and as approved by the Independent Market Monitor,” Dynegy said. “MISO’s Independent Market Monitor has publicly stated that ‘the auction results are reliable and participants’ behavior was in line with all tariff rules and procedures.’”
Spokesman Micah Hirschfield declined to comment on the price of the company’s offers. “As noted in the statement, our bids were approved by the Independent Market Monitor and within the rules and tariffs of MISO,” he said.
MISO said Friday that it is reviewing the complaint and will respond in the FERC proceeding.
Investigation Sought
Public Citizen alleges the auction results “may be the result of illegal manipulation and gaming of the auction bidding process, specifically capacity withholding” contrary to Section 222 of the Federal Power Act.
The group also alleges that MISO failed to make a rate change filing with support for the increases for FERC and public review, as required under Section 205 of the FPA. The new capacity rates took effect June 1.
The Public Citizen complaint does not explicitly accuse Dynegy of withholding capacity, but says it was in a unique position to do so after its 2013 acquisition of four coal-fired plants totaling 3,150 MW in Zone 4. That gave Dynegy control of eight generating plants in Zone 4 with a capacity of 6,000 MW.
“Because MISO has no plans to make company-specific bids public, we cannot know for sure how much of the several thousand of megawatts Dynegy owns in Zone 4 it bid, how much couldn’t be bid due to contract obligations, or how much it withheld from bidding altogether,” the complaint says.
Public Citizen said that the Ameren acquisition raised red flags for MISO staffers. It cited minutes from a 2014 MISO Loss of Load Expectation Working Group in which Zheng Zhou, manager of economic studies, purportedly stated that staff “are concerned with Dynegy’s offer strategy in the next Planning Resource Auction as they [Dynegy] are now the dominant provider of capacity in the zone.”
Mark Volpe, Dynegy’s senior director of regulatory affairs, speaking at Infocast’s MISO Market Summit in Indianapolis Thursday
In early 2014, MISO staff proposed merging Zone 4 and Zone 5 to blunt Dynegy’s newfound dominance. The proposal to merge zones failed, “under stiff resistance from Dynegy,” the complaint states. Specifically, it points to a June 2014 meeting of MISO’s Supply Adequacy Working Group, on which Dynegy Senior Director of Regulatory Affairs Mark Volpe served as vice chair.
“His role and the role of other powerful utility and financial stakeholders in the auction’s design and coordination do not lend credibility to the auction process and cry out for FERC review of the auction results under Section 206 at least.”
Volpe declined to comment Friday.
The consumer group alleges Dynegy “had financial incentive to intentionally withhold capacity” by either refusing to offer some units for bid or offering them at high prices with a low likelihood of clearing so as to drive up auction prices.
A UBS analyst estimated that a withholding strategy would generate about $5 million in earnings before interest, taxes and amortization (EBITA) for every 100 MW cleared at auction. In April a Dynegy spokesman said the company expected to make about $30 million out of the auction.
MISO Beholden to Members?
The complaint claims Dynegy used strong-arm tactics to manipulate MISO, threatening that if MISO did not adopt capacity market rules that were similar to PJM’s, Dynegy would part ways with MISO and join PJM. (See Dynegy: Change MISO Capacity Rules or We’ll Join PJM.)
“This fundamental flaw exposes MISO’s political science problem: FERC has placed a private organization in charge of developing power markets, and that organization’s insecurity about member flight results in decisions about rate structures … driven primarily by the need to retain membership, thereby prioritizing power generator profits at the direct expense of consumers,” the group said.
Last month the Chicago-based Citizens Utility Board called for a federal investigation of the auction results, citing significant rate hikes for downstate Illinois Ameren customers.
FERC Split over Previous Auction Challenge
Public Citizen may find at least a couple of allies in its request to reopen the auction results.
In September, a shorthanded FERC split 2-2 over whether it should reject the results from the ISO-NE’s February 2014 auction due to unchecked market power.
Republican Tony Clark and Democrat Norman Bay called for FERC to reject the auction results, but then-Chairman Cheryl LaFleur and Republican Philip Moeller said the commission should seek only prospective changes in the auction rules. Because of the 2-2 deadlock, the 2017-18 auction results “became effective by operation of law.” (See Congressional Meeting Fails to Sway LaFleur on Capacity Results.)
The RTO’s eighth Forward Capacity Auction (FCA) resulted in a sharp price increase after nearly 3,000 MW of capacity submitted retirement requests. Fearing they would have less capacity offered than required, ISO-NE officials applied administrative price rules to the auction.
Since the September vote, Bay has ascended to chairman and former Arkansas regulator Collette Honorable has joined the commission. Moeller’s term expires in June.
Court Ruling
Public Citizen’s complaint cites an April 29, 2015, opinion by the Ninth Circuit Court of Appeals, California v. Harris, that it said found that electric market rates, such as the Planning Resource Auction results, must be reviewed after-the-fact as well as in advance to determine whether they actually produce just and reasonable rates.
A New Hampshire energy broker wants to dust off a so-far unused 1978 state law that allows small hydroelectric power producers to sell electricity directly to customers.
Freedom Energy Logistics wants to purchase power from the Fiske Hydro Project in Hinsdale to power its offices in Auburn, about 88 miles away.
The Limited Electrical Energy Producers Act, which was intended to diversify the state’s resources, is limited to plants that produce up to 5 MW and sell to up to three customers. Under the law, the distribution utility — in this case, Eversource Energy — would only be paid for wheeling power over its wires but would otherwise be cut out of the transaction.
Because no proposals were ever brought before state regulators, however, ground rules have yet to be written. Thus, while the FEL proposal involves only a small amount of energy — 5 kW — it has implications for future, larger transactions.
A prehearing conference May 6 laid out the rationale for the proposal, which is expected to be fleshed out in a proceeding before the Public Utilities Commission this summer (DE 15-068).
“What we would like to do is to say ‘Okay, this law has been on the books forever. And, we would like once and for all to try to apply it, because we finally think the time has come to do that,’” FEL attorney James Rodier said at the conference.
“If other small hydro producers can follow in our footsteps, it’s going to make a terrific difference to the economics of these small projects,” added Cameron MacLeod of Fiske.
Under the agreement between FEL and Fiske, Rodier said the electricity generated by the dam, including any excess, would be delivered to FEL by the distribution utility.
How the excess generation is compensated will have to be determined. Rodier’s proposal would base compensation on avoided costs, the method used by small generators on net metering. “Are we going to be able to spin the meter backwards? That’s a big issue,” Rodier said at the conference.
Rodier told the New Hampshire Union Leader that his company has clients “very interested” in striking similar deals. “But they know there will be a challenge from Eversource, so no one wants to be the ones to go in and make this happen,” he said.
Eversource, an intervener in the case, had little to say at this early stage of the process. Its attorney, Matthew Fossum, said at the conference that he needed to learn more about the proposal’s relationship with net metering.
“We also have some questions about how this would actually work from a billing perspective, and what it would mean for attempting to bill a transaction like this, or some variation of it,” he said.
Staff members of a Maryland power plant accidentally threw away records necessary for an audit, fruitlessly searching four dumpsters for them, NRG Energy told the Federal Energy Regulatory Commission last week (AC15-129).
NRG’s Vienna plant, a 167-MW oil-fired generator in southeastern Maryland, had experienced an outage from April 26 to May 23, 2014, Christopher Holt, assistant general counsel of litigation for NRG, told FERC. At the end of the outage, the operations and maintenance manager for the plant directed his staff to clean out a closet and dispose of records dated before 2000. The plant’s records policy requires that log books be kept for seven years before being destroyed, but the manager was being conservative in his directions, Holt said.
FERC’s Office of Enforcement had told NRG in December 2013 that it would be conducting an audit of its capacity resources to evaluate the company’s compliance with market tariffs (PA14-1). In responding to data requests related to the audit, NRG said it discovered in July 2014 that all of the log books for Vienna, except for the current one, had been thrown away in the May clean-out. Holt said that staff did not realize that they were log books, which typically record phone calls made or received by the control room, personnel shift changes and reasons for outages.
Vienna’s staff searched four on-site dumpsters for the log books to no avail. They then contacted the trash company to determine where its trash was taken, intending to search the landfill.
“The plant assembled a team to go search the landfill cell only to realize the landfill cell in which the log books were discarded had just been closed,” NRG said. “As a result, the plant was unable to retrieve the log books.”
Since then, Holt said, Vienna has changed its log book procedure: the completed books are given to the O&M manager and placed in a dedicated filing cabinet. NRG also hired a new records supervisor manager, Holt said. The company is still transitioning to an electronic logging system, he said.
Returning and repowered generation resources and newly announced transmission upgrades appear to have alleviated NYISO’s concerns about system reliability over the next 10 years.
The NYISO Management Committee on Wednesday accepted staff’s Comprehensive Reliability Plan, which is the penultimate step in the 2014 Reliability Needs Assessment. The plan now moves on to the NYISO Board of Directors, which is expected to take action in July.
It cites nearly 2,000 MW of generation capacity returning to service by 2016, including the mothballed 493-MW Danskammer Generating Station in Newburgh, which restarted in December after converting to natural gas, and the 435-MW Dunkirk plant near Buffalo, which is set to return in 2016 after a similar repowering.
“This 2014 CRP has determined that the New York bulk power system will meet all applicable reliability criteria over the 2015 through 2024 study period and confirms that the initially identified reliability needs in the 2014 RNA are resolved,” the report states. “The NYISO has concluded that there are sufficient resources such that the New York Control Area (NYCA) will be in compliance with the resource adequacy criterion for the 10-year study period.”
Previously identified transmission security violations will be resolved from 2018 through 2024 through reconductoring, a new substation near Rochester and returning generation. For example, the return of Dunkirk is expected to eliminate thermal violations in the Buffalo and Binghamton areas.
Transmission owners have agreed to use operating procedures — including the adjustment of phase angle regulators, use of special case resources and possible load shedding during summer peaks — to address violations until permanent solutions are complete.
The conclusions come with several caveats. The CRP is based on projected summer peak demand load growth averaging 0.83% annually through 2014 and assumes no new generation after 2017.
Risk factors include a lengthy loss of generation or higher load levels in upstate New York, including Rochester, Western and Central New York and the Capital Region, which the report says “could potentially lead to immediate and severe transmission security violations.”
“The projected NYCA capacity margins are narrow in the later years of the study; therefore, a small decrease in the existing resource capacity or an increase in loads by 2024 would result in [a loss-of-load expectation] violation in that year,” the report says.
PPL on Monday completed the spinoff of its competitive energy business, which was combined with the generation assets owned by Riverstone Holdings to form Talen Energy, a new independent power producer.
The merchant generation spinoff leaves PPL with only regulated utility assets in the U.S. and U.K. “Over the past five years, we’ve transformed PPL into one of the top 10 utility companies in the U.S. and reshaped it in ways that have preserved and grown value for our shareowners,” CEO William Spence said.
PPL’s former power plants in Pennsylvania and Montana are now part of Talen Energy. The Federal Energy Regulatory Commission is requiring the divestiture of power plants within 12 months of today’s announcement to mitigate Talen’s market power in PJM. (See PPL, Riverstone Accept FERC Mitigation Plan on Talen Spinoff.)
“Which plants will be determined by how the market values those assets,” Talen spokesman George Lewis said.
Spence said the new PPL, separated from the uncertainties and challenges in wholesale power markets, will maintain a strong balance sheet, investment-grade credit ratings, strong cash flow and a competitive dividend.
Duke Energy to Build 5-MW Solar Facility to Power Disney
Duke Energy is building a 5-MW solar facility on 20 acres near Walt Disney World’s Epcot. The company has a 15-year power purchase agreement with Disney for the output. The power plant’s 48,000 solar panels will be arranged in the shape of a Mickey Mouse head.
ITC Files with DOE, Canada to Build Tx Link between Ontario and PJM
ITC Holdings on Monday filed an application with the U.S. Department of Energy for an underwater transmission line that will link the Ontario Independent Electricity System Operator and PJM.
The ITC Lake Erie Connector will be a 1,000-MW, bi-directional, high voltage, direct current line that will allow exports of power into Ontario, while providing generators in Ontario access to PJM. ITC filed the application after filing with Canada’s National Energy Board on May 22. It will also have to file with the U.S. State Department. Ontario has seen a large increase in renewable generation over the past few years, especially hydro and wind generation.
Construction of the 73-mile, $1 billion project is expected to start next near and be completed by 2019.
Duke Energy to Install Battery Storage at Retired Ohio Coal Plant
Duke Energy is installing a 2-MW battery storage system at a retired coal-fired plant in Ohio. When it becomes operational, it will be the second battery system at the W.C. Beckjord plant in New Richmond. The lithium-ion battery, controls and a power inverter will allow Duke to use the facility to provide ancillary services for PJM’s frequency regulation market.
Duke, which like other utilities is retiring the bulk of its coal-fired generation, is investing heavily into battery storage. It has a 36-MW system at a Texas wind farm and is developing five smaller projects in North Carolina.
BHE Renewables, a subsidiary of Berkshire Hathaway Energy, is buying 600 MW of wind and solar projects from a Minnesota developer, Geronimo Energy.
The acquisition includes the 400-MW Grand Prairie wind project in Nebraska, the 140-MW Walnut Ridge wind project in Illinois and a collection of Minnesota solar projects that total about 60 MW. Terms of the transaction were not announced.
Farm Owners are Last Holdouts Against Enbridge’s Sandpiper Pipeline
The developers of the Sandpiper pipeline, which would deliver crude oil from North Dakota’s Bakken oil fields to an interconnection in Wisconsin, are suing the last holdout in North Dakota to acquire the right of way for the pipeline.
The North Dakota Pipeline Co., a joint venture between Enbridge Energy and Marathon Petroleum, sued Krista and James Botsford under the state eminent domain law and asked the court to give it an easement across their farm near Grand Forks. The developers approached a total of 799 North Dakota landowners.
Sandpiper is a 610-mile, $2.6 billion project whose supporters say it would provide a safer, cheaper and more efficient alternative for transporting Bakken crude than trains.
Cleanup Crews Still Working at Scene of 2013 Pipeline Spill
The cleanup of a 2013 Tesoro Corp. pipeline rupture that spilled 20,000 barrels of oil on a South Dakota farm may take another two years to complete, state regulators say.
Tesoro and federal pipeline safety inspectors believe a lightning strike may have caused the break in the 6-inch pipeline, which spilled 840,000 gallons of crude oil over 7.3 acres of Steve and Patty Jensen’s farm. It was one of the largest on-shore spills in U.S. history.
“It’s now just become part of our lives,” Patty Jensen said. “They are working 24 hours a day, seven days a week. But it’s so big and it’s not as easy to clean up as they thought it would be.”
IPL’s Harding Street Plant Edges Closer to Gas Switch
Indianapolis Power & Light’s said its $70 million plan to convert the 80-year-old Harding Street power plant from coal to natural gas is proceeding on schedule and should be completed next spring.
The fuel switch, which is being financed by ratepayers through a special conversion surcharge, pleased anti-coal activists who have long complained that the plant was a major source of urban pollution.
Iowa Utility Pitches Shares in Community Solar Project
Cedar Falls Utilities wants to sell 3,000 shares for $399 each in a community solar generation project, a novel way to raise capital for a new utility generation project.
According to a presentation given by the company’s business development director, share owners would receive a dividend in the form of a deduction of $1 to $2 off their monthly utility bills. The utility is touting the program as a more affordable way to invest in solar than spending $10,000 or more to install a home solar system.
The Tennessee Valley Authority has bought 155 acres and 24 houses for an undisclosed sum to expand its Bull Run dry ash landfill in Clinton, Tenn.
TVA has been talking about the expansion project for several years but is only now seeking public comment on its plan to expand the landfill. The existing landfill could reach capacity in about five years, according to the company.
TVA stopped using wet ash storage after the disastrous 2008 collapse of an ash storage containment that released 5.4 million cubic yards of coal sludge into the Emory River. Dry ash storage is considered safer.
Acciona Wind Energy USA is accusing MISO of blocking it from selling power into PJM by improperly interpreting a process designed to streamline energy exports.
Tatanka wind farm.
The U.S. arm of the Spanish energy conglomerate told the Federal Energy Regulatory Commission last week that MISO is excluding a portion of its 180-MW Tatanka wind farm’s capacity from participating in its pre-certified path study process (EL15-69). The FERC-approved process allows interconnection customers to avoid lengthier studies when MISO evaluates their transmission service requests (TSR).
LaCrosse-Madison 345 kV
As part of a generator interconnection agreement (GIA) with Montana-Dakota Utility, the South Dakota wind farm currently receives 36 MW of network resource interconnection service (NRIS) from MISO. It is scheduled to reach full NRIS deliverability at the beginning of 2019, when the 345-kV LaCrosse-Madison line in Wisconsin is scheduled to be completed.
MISO claims that a customer must have deliverable NRIS as of the date of the pre-certification study, which has a five-year planning horizon, for its TSR to be considered. That is not supported by any language in the RTO’s Tariff, Acciona said.
“MISO has read un-filed terms and conditions into the Tariff by excluding customers like Tatanka Wind from participation for a portion of their NRIS that will be obtained, pursuant to the GIA, within the five-year planning horizon,” the company said. “The result of reading in additional restrictions on the planning process is to delay by 18 months after the full 180 MW of NRIS is available to Tatanka Wind the benefit of the pre-certified path study process.”
Acciona also noted that PJM has determined that Tatanka already has a full 180 MW of deliverable transmission service in the form of network integration transmission service (NITS), 108 MW effective June 1 and an additional 72 MW effective in 2018.
Addressing Uncertainty
FERC approved the pre-screening process in 2011, saying it would address “uncertainty and delays resulting from its existing procedures for handling transmission service requests to the MISO border [that] may inhibit export transactions.”
Transmission customers eligible for the pre-certified path study process may be granted TSRs over the path without the need for a system impact study (SIS).
MISO, however, granted Tatanka only 36 MW of service to PJM beginning in 2016 and delivered an SIS “estimating several hundred million dollars in upgrades” that would be required to grant the full TSR, ignoring the expected opening of the LaCrosse-Madison line, Acciona said.
‘Worthless Study’
“Tatanka Wind understands that transmission service must be provided in a manner that maintains the reliability of both transmission systems. This may justify the 18-month delay in applying the process in order to ensure sufficient time to study availability of transmission along the pre-certified paths. This does not, however, justify an 18-month delay based on ignoring NRIS that will take effect within the five-year planning window,” the complaint said. “MISO ignored the planned increase in NRIS, resulting in a worthless study identifying redundant upgrades no one believes are necessary to support the request for service following already planned upgrades.”
The company said MISO’s interpretation discriminates against exporters, because customers serving load within MISO are not subject to the 18-month delay.
Acciona requested that FERC order MISO to grant the TSR under fast-track procedures.
MISO has not yet responded to the complaint. In an April 3 email included as an exhibit to Acciona’s complaint, MISO Director of Interconnection & Planning Tim Aliff told the company that if it disagreed with MISO’s interpretation of its rules, it should pursue a change through the stakeholder process.
