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.
On Friday, PJM employee No. 13 switched off the lights of a nearly 53-year career, leaving open a position for a mentor, office jokester and Santa Claus.
Kirb receives a farewell gift from Pati Esposito.
“It’s an odd feeling. It’s not something you can ever rehearse or plan for,” Jim Kirby — commonly called Kirb — said in an interview on the morning of his last day. “It’s been a great ride.”
The Philadelphia native started his career with PECO Energy on Sept. 4, 1962, at 10th and Chestnut streets. That was back when the company was Philadelphia Electric Co. and ran PJM cooperatively with seven other utilities. The following year, Kirb became a PJM clerk, working as a load scheduler in operations.
Over the next 10 years, Kirb went to school at night to earn a degree in electrical engineering from Drexel University. PJM moved to Valley Forge in 1970, and through the years Kirb rose through the ranks to senior lead knowledge management consultant.
He was there to witness the single biggest game-changing event for the electric industry: retail choice — commonly, if less accurately, referred to as deregulation, which began in PJM in 1997 with Pennsylvania’s Electricity Generation Choice and Competition Act.
“You no longer had your vertically integrated utilities. Everything was diversified and split up, and so the membership grew exponentially. Now you had individuals building power plants … Pre-deregulation, you wouldn’t see this.”
Looking to the future, he said, “I think in the industry there’s going to be a lot of innovation in new power technology. There’s going to be a lot of work done on conservation of energy at the grassroots level. I think there’s a lot of investigation going on now into microgrids and distributed generation. We’re keeping up — PJM is in the middle of the discussions.”
PJM stakeholders took the occasion of Kirb’s final PJM Annual Meeting last month in Atlantic City to fête his contributions to the RTO’s culture over the past half-century, presenting him with gifts, a proclamation from Pennsylvania lauding his years of service — and a standing ovation.
Ed Tatum of Old Dominion Electric Cooperative invoked Kirb’s Santa Claus-like beard and belly, joking that he had spied him leaving a set of Lincoln Logs under the Christmas tree when he was 3.
“He’s a wise, wise man,” Tatum said. “What you taught me is when you’re getting into a situation, you need to know your stuff. You need to be technically accurate.”
Tatum said Kirb also taught him about interpersonal issues: That the only thing you can control is yourself and to not take yourself too seriously. “The value of relationships, you taught that to me,” he told Kirb.
Bob O’Connell of J.P. Morgan Ventures Energy recalled meeting Kirb 32 years ago. The two shared an affinity for fun in the workplace. But O’Connell said his own hijinks paled in comparison with Kirb’s, who already had 20 years on the job.
“I was just a mere amateur about some of the things I did in the office compared with Jim,” he said, adding, “Come next Friday, employees will feel more secure in the workplace because Jim won’t be lurking around the corner for them.”
“That’s a bum rap,” Kirb said with a laugh on his last day of work. “I didn’t play tricks. There was no sleight of hand. I’m too big for that — I can’t hide.”
Looking back at his proudest moments, Kirb pointed to the collegiality among employees that he helped foster.
“It’s really quite a company to work for,” he said of PJM. “It’s a caring company, and it hasn’t really changed. My payroll number was 13. There’s over 600 employees now. The overall care for each other and care for what we’re doing has continued.
“You just have to keep in mind that the other person that you’re dealing with is just as impassioned about their beliefs as you are, and at the end of the day, find the time to be a friend as well,” he said. “That person over the table with whom you’re disagreeing — they’re the same as you. They want the lights to stay on.”
There’s no doubt Kirb has had an outsized impact on the corporate culture: none of the dozen employees who preceded him is still working.
As he enters his first week of retirement, the 70-year-old says he has no particular plans beyond spending more time with his wife, two sons, daughter and 12 grandchildren.
“I’m available if anybody wants,” he said. “I’m always willing to talk. I was once accused that I was vaccinated with a phonograph needle.”
The Environmental Protection Agency on Friday proposed less ambitious requirements for ethanol in gasoline. The EPA’s three-year proposed ethanol mandate, which is retroactive to 2014, increases the amount of biofuel it wants mixed into the gasoline supply but at levels below those set in a 2007 law.
Gasoline refiners said the proposal still moves more quickly than the market can support. The ethanol industry, which is dominated by corn-producing states, wanted more aggressive targets to get their product into the fuel supply.
Biofuel regulations were put in place in an effort to reduce dependence on imported petroleum. But a boom in domestic oil and natural gas has eased the country’s dependence on foreign oil, and motor fuel consumption has fallen as newer, more efficient vehicles have replaced older guzzlers. The agency said the relaxed ethanol requirements recognize that biofuel production is lower than expected and that the domestic gasoline market is unable to absorb larger amounts of ethanol.
FERC Approves Final Settlement from 2011 Blackout in California
The Federal Energy Regulatory Commission’s Office of Enforcement approved the final settlement related to the 2011 power outage in Southern California, which left customers in California, Arizona, Baja California and Mexico without power for nearly 12 hours.
The Western Electricity Coordination Council (WECC), which acted as reliability coordinator for the portion of the grid where the blackout originated, agreed to pay $16 million as part of the settlement. The settlement calls for WECC to spend $13 million on reliability enhancements and pay a $3 million penalty.
WECC said the loss of a single 500-kV line initiated the cascading event.
NRC Asked to Review Ruling on Uranium Recovery Operation
The Nuclear Regulatory Commission is being asked to review decisions by the Atomic Safety and Licensing Board on a proposed South Dakota uranium recovery operation. The developers of the project and members of the Oglala Sioux Tribe asked the NRC to intervene.
The developers are protesting the board’s finding that NRC failed to properly consult with the tribe and identify and safeguard cultural and historic sites.
The Oglala Sioux are protesting the proposed uranium recovery method, which involves injecting oxygen-enriched water into the ground to dissolve the uranium and bring it to the surface.
Los Alamos National Laboratory Still Evaluating New Windmill Design
Researchers at Los Alamos National Laboratory in New Mexico are running computer tests on a new type of wind turbine that operates closer to the ground and at lower speeds than tower-mounted turbines.
Johan Steinlechner of Palm Springs came up with the new design, which involves building the turbine just 30 to 40 feet off the ground rather than hundreds of feet in the air. The lower-profile turbines would be easier and cheaper to construct and maintain.
Federal researchers recently announced plans to build a 1-MW prototype in Melrose, N.M., this summer.
The Nuclear Regulatory Commission has delegated authority to its Office of Nuclear Reactor Regulation to issue an operating license for the Tennessee Valley Authority’s Watts Bar 2 reactor, which is under construction. The vote, taken last week, would allow the regulators to issue a license if all necessary requirements are met.
“The delegation of this authority signifies confidence that NRC inspections show Watts Bar Unit 2 is being built according to rigorous regulatory requirements and industry standards,” TVA’s Chief Nuclear Officer Joe Grimes said. TVA has said it believes the plant will be in commercial operation by June 2016.
DOE Kicking in $32 Million to Train Solar Workforce
The Department of Energy said it is providing $32 million to help drive down the cost of solar production and to train the workers needed to install solar systems.
The department said it will earmark up to $13 million for solar workforce training, which would include positions not just in the construction field, but for professionals in the insurance, real estate and utility businesses as well. About $15 million would fund design work on concentrating solar power collectors. About $5 million would be allocated to develop solar data sets and market studies.
NTSB Says Shell Performed ‘Inadequate Assessment’ of Risks
The National Transportation Safety Board said Shell had inadequately assessed the risk of towing the oil rig Kulluk off the coast of Alaska in 2012. The offshore rig ran aground during a storm. The rig, which contained thousands of gallons of fuel oil, averted an oil spill in pristine waters.
“The probable cause of the grounding of the mobile offshore drilling unit Kulluk was Shell’s inadequate assessment of the risk for its planned tow,” the NTSB report states.
Shell said it intends to return to the same area to conduct exploratory drilling, pending permit approvals. The government in May approved its proposal to conduct Arctic drilling.
Virginia Residents Protest Pipeline Route in Front of FERC Headquarters
A group of Central Virginia residents, opposed to a proposed 550-mile natural gas pipeline, protested in front of the headquarters of the Federal Energy Regulatory Commission last week. Friends of Nelson, from Nelson County, one of the rural counties through which the Atlantic Coast Pipeline would be built, denounced what they called FERC’s disregard for the public in routing the pipeline.
“We want FERC and its commissioners to know that we are here this week because their complicity to route the ACP through our home deeply violates so many of our personal and community values,” said Joanna Salidis, president of Friends of Nelson. “Nelson County property owners want FERC to uphold their claim that eminent domain is a method of last resort — not a gift from the government to maximize profit on the backs of unwilling private property owners and communities.”
Dominion Resources, one of the project’s partners, said that it will release an alternative route in the coming weeks. FERC has not yet given final approval to the project.
The Federal Energy Regulatory Commission on Friday ordered Richard and Kevin Gates and their associates to pay $34.5 million in penalties and disgorged profits in their high-profile market manipulation case. But the brothers say they will force FERC to collect in federal court, where a statute of limitations defense could reduce penalties.
“We’re going to fight, and we look forward to meeting them in court,” Kevin Gates said Saturday.
No Loophole
The commission’s order accepts the Office of Enforcement’s findings that the brothers’ Powhatan Energy Fund and trader Houlihan “Alan” Chen violated anti-manipulation rules by making riskless back-to-back up-to-congestion trades to profit on line-loss rebates (IN15-3). FERC Chairman Norman Bay, who oversaw the investigation in his previous role as Enforcement director, did not participate in the order.
“The fact that the PJM tariff does not explicitly prohibit round-trip UTC trades does not create a loophole or otherwise render respondents’ transactions lawful,” the commission wrote. “Respondents’ round-trip UTC transactions were deceptive and manipulative.”
The order seeks $29.8 million in civil penalties and $4.7 million in disgorgement of profits.
If the Gates brothers don’t pay up within 60 days, as they insist they won’t, FERC will have to file a complaint in U.S. District Court to force payment.
The brothers also could benefit from the U.S. Supreme Court’s 2013 ruling in Gabelli v. Securities and Exchange Commission, which held that a five-year statute of limitations for the SEC to bring a civil suit seeking penalties for securities fraud begins when the alleged fraudulent activity occurs, not when it is discovered.
The court found that the “discovery rule,” which starts the statute of limitations when a victim learns he has been defrauded, did not apply when the government brings an enforcement action for civil penalties.
“The discovery rule exists in part to preserve the claims of victims who do not know they are injured,” the court ruled. “The SEC … is not like an individual victim who relies on apparent injury to learn of a wrong. Rather, a central ‘mission’ of the commission is to ‘investigat[e] potential violations of the federal securities laws.’”
Under the 60-day clock, the earliest FERC could file would be about July 29. If the Gabelli ruling were applied in the Powhatan case, that could mean that FERC could seek penalties and disgorgement for only the last few days of the months of questionable trades.
That would be an embarrassment for FERC, which seemingly left the investigation in limbo for almost two years.
Evolving Strategy
Chen, who conducted the trades in question, began trading UTCs in 2007, after leaving Merrill Lynch, where FERC said he studied UTCs as a tool for physical and financial transactions.
Initially, his trades were based on market fundamentals and models he developed using a “careful, low risk approach of what he called `directional bets,’” FERC said. Most bids were under 100 MW, and his profitability depended on favorable price spreads.
In October 2009, after discovering he was receiving line-loss rebates, Chen switched to a strategy designed to capture increased volumes of rebates, FERC said.
His strategy changed again after suffering a $176,000 loss on May 30, 2010, when one leg of a trade saw an unexpected price spike.
Following the loss, Chen switched to a round-trip trading strategy between the same two points (A-to-B, B-to-A) that FERC said made the underlying trades effectively riskless.
FERC is seeking penalties only for what it calls the “Manipulation Period,” from June 1, 2010 through August 3, 2010, when Chen stopped the trading after receiving a warning from PJM Market Monitor Joe Bowring.
Four-Year Investigation
FERC began investigating Chen and his partners the same month. Over the next three years, Chen and the Gates brothers responded to FERC data requests and sat for depositions while their lawyers sparred with FERC’s attorneys and provided affidavits from an economist and an attorney supporting their defense. Kevin Gates said he rejected FERC’s offer to enter settlement discussions.
In October 2011, FERC said a charging decision was “imminent,” according to William M. McSwain, attorney for the Gates brothers.
The commission took no further action, however, until almost two years later, in August 2013, when FERC staff delivered a 28-page “preliminary findings” letter summarizing why they thought Chen’s trades were improper. Attorneys for Chen and Gates rejected the arguments and reiterated their demand that FERC end the investigation.
FERC refused.
Frustrated, Kevin Gates began planning a publicity campaign to make the case that he and his partners had been unfairly hounded by FERC. On Jan. 30, 2014, President Obama nominated Bay to fill the seat of former FERC Chairman Jon Wellinghoff.
A month later, Gates went public, launching a website that included much of the correspondence between FERC and the investors’ attorneys and statements from academics, consultants and former FERC officials backing their defense. (See PJM Trader Calls FERC on Manipulation Probe.)
It wasn’t until last August that FERC staff issued a Notice of Alleged Violations against Gates and his partners, the commission’s first public acknowledgement of the investigation. The notice was filed the day after Bay was sworn in as a commissioner.
Facing opposition in Arkansas, a transmission developer is using an unusual tactic in order to garner public support for a proposed project: online petitioning.
Clean Line Energy Partners is asking signers of its Change.org petition to send a pre-written letter to the Department of Energy, telling “Secretary [Ernest] Moniz to support the delivery of low-cost clean energy to consumers” and approve the Plains & Eastern Clean Line, a $2 billion 600-kV high voltage, direct current transmission line. Clean Line posted the petition three weeks ago and, as of press time, has collected more than 2,400 signatures.
Online petitioning is usually utilized by activists and grassroots organizations for populist causes. In fact, those in opposition to the Plains & Eastern project started their own Change.org petition in January. It has gathered more than 1,400 signatures since then.
The line would stretch 720 miles, beginning in the Oklahoma panhandle, through Arkansas and end in Tennessee, southeast of Memphis. Clean Line is touting the project as a way to deliver up to 3.5 GW generated from wind farms in Oklahoma to customers in the Southeast.
The Plains & Eastern is the first transmission project being developed with the U.S. Department of Energy under the Energy Policy Act of 2005’s Section 1222. The department issued a request for proposal under the section in 2010 and selected Clean Line for the project in 2012.
The section allows for the department’s Western Area Power Administration or Southwestern Power Administration to partner with private companies in developing new transmission facilities if the department determines that they are necessary to reduce congestion or meet demand. The facilities must be located in states in which the power administrations operate. SWPA owns transmission lines and facilities in Texas, Oklahoma, Missouri, Louisiana and Arkansas.
The Energy Department is currently evaluating public comments on its draft environmental impact statement for the project. Meanwhile, the department requested updates to Clean Line’s application in December 2014. The public comment period for this “Part 2” application ends June 12.
Battle for Public Support
The pre-written letter in the petition tells Moniz “I am writing to express support for the Plains & Eastern Clean Line and to urge the Department of Energy and Southwestern Power Administration to participate in the proposed project.”
Clean Line’s petition is just one of the tools it’s using to help supporters submit comments during the public comment period, said Sarah Bray, the company’s director of communications.
“We’ve been engaging with supporters in all kinds of ways,” Bray said. “We have a tremendous amount of support for this project. You wouldn’t think people would mobilize for a transmission line … it’s been really exciting to see.”
Many in Arkansas, however, oppose the project. According to the Times Record, multiple cities have passed resolutions opposing the project. Last week in Van Buren, multiple residents spoke in opposition to the line, even after the city’s mayor and council received a presentation from a Clean Line representative who highlighted the boon in jobs and tax revenue the area would see as a result of the project.
In February, Arkansas’ two senators, Republicans John Boozman and Tom Cotton, introduced the Assuring Private Property Rights Over Vast Access to Lands (APPROVAL) Act. The legislation would require the Energy Department to receive approval from the governor and public service commission of a state in which the department wanted to exercise eminent domain for Section 1222 projects.
While eminent domain is often unavoidable, “this difficult decision should not be in the hands of Washington bureaucrats,” Boozman said. “If a project is not good for Arkansas, our governor or public service commission should have the power to say ‘no.’”
In January 2011, the Arkansas Public Service Commission denied Clean Line status as a public utility. The commission said that while it supports building transmission infrastructure in the state and that Clean Line’s efforts were “laudable and its work to be commended,” the line would not deliver power to Arkansas customers, a key part of the definition of “public utility.”
The Oklahoma Corporation Commission and the Tennessee Regulatory Authority granted Clean Line public utility status in 2011 and January 2015, respectively.
MISO and PJM have again narrowed a list of “quick hit” flowgate projects with the potential to relieve market-to-market congestion.
Resagging of the NIPSCO section of the Michigan City-LaPorte 138-kV line is expected to cost $2.3 million. Had it been in place in 2013-14, it would have provided congestion relief of $2.7 million.
After reducing their list of potential projects from 39 in March to four in April, RTO officials told the MISO-PJM Joint and Common Market Initiative meeting on Wednesday that the list had now been reduced to two.
In March, MISO officials said they and their counterparts in PJM were considering projects to address 39 flowgates responsible for about $408 million in historical congestion.
In April, the PJM-MISO Interregional Planning Stakeholder Advisory Committee whittled the list of potential projects to four. The committee said most of the potential projects were unneeded because about $279 million of the congestion would be addressed by upgrades already planned or in service and that other flowgates in the initial selection had not experienced congestion recently.
At Wednesday’s MISO-PJM JCM meeting, RTO staff said two of those remained on the recommended list, after determining that the other two were already being addressed. An additional five will be monitored for recommendations in the future.
Had the two projects been in place for 2013 and 2014 — the period studied — they would have reduced congestion by $9.6 million.
One is a SCADA equipment upgrade for the 161-kV Beaver Channel-Sub 49 line, providing congestion relief of $6.9 million.
The other is the 138-kV Michigan City-LaPorte line, which is resagging in the Northern Indiana Public Service Co. section, with congestion relief of $2.7 million.
Costs for the proposed Beaver Channel project are “minimal,” while Michigan City-LaPorte is estimated at $2.3 million, according to RTO officials.
Talks are underway with transmission owners and entities that would benefit from the upgrades. The projects are to be evaluated for inclusion in MISO’s 2015 Transmission Expansion Plan (MTEP15) for recommended approval in December.
MISO identified about $99 million in remaining congestion that hasn’t been addressed for service upgrades. About $80 million of that congestion is along the Michigan interface that will be subject to further study in the second half of this year.
Deliverability Improvements
Meanwhile, MISO has introduced a proposal to remove hurdles preventing it from importing more capacity from PJM. MISO said that while the MISO-to-PJM direction is “almost fully subscribed,” the transmission capability in the PJM-to-MISO direction is “minimally utilized.” One idea contemplated is expanding an external network resource interconnection service that allows an external resource to serve network load as would an internal network resource. The external resource would require transmission service to the MISO border.
Another is a modified external network integration transmission service (NITS) concept. MISO would offer NITS to generators and allow the MISO network load to be identified in the Planning Resource Auction.
“Right now, if you’re an external generator without existing load, your only option is point-to-point service,” said Jesse Moser, manager of infrastructure studies at MISO. The RTO is seeking stakeholder feedback by June 26.
The ideas emerged as part of broader talks between the RTOs to comply with the Federal Energy Regulatory Commission’s Order 1000 compliance filing, which is due June 16.
Stakeholders at the JCM meeting were told the RTOs have agreed to most of FERC’s directives and non-substantive revisions to eliminate differences between the two RTOs’ filings. Cost allocation remains under discussion.
Freedom Energy Logistics wants to purchase power from the Fiske Hydro Project in Hinsdale to power its offices in Auburn, about 88 miles away.
