Court Throws Out Demand Response Rule

A Federal Energy Regulatory Commission rule requiring PJM and other RTOs to pay demand response resources market clearing prices violates state ratemaking authority, a federal appeals court ruled today.

The Court of Appeals for the D.C. Circuit ruled 2-1 to void FERC Order 745, backing a challenge by the Electric Power Supply Association and others.

The commission’s 2011 order (RM10-17) required DR participating in the day-ahead and real-time energy markets to be paid locational marginal prices identical to those for generation. The order applied when DR was capable of balancing supply and demand and lowered the market-clearing price.

FERC said it had authority for the order under sections 205 and 206 of the Federal Power Act because reducing retail consumption through DR can aid reliability and lower wholesale prices.

The commission made a distinction between “price-responsive” DR, which it acknowledged was a retail product subject to state regulation, and DR response to incentive payments, which it called “wholesale demand response.”

Not a Wholesale Sale

Judges Janice Rogers Brown and Laurence H. Silberman disagreed. “A buyer is a buyer, but a reduction in consumption cannot be a `wholesale sale,’” they wrote in a 16-page opinion authored by Brown (11-1486). “FERC’s metaphysical distinction between price-responsive demand and incentive-based demand cannot solve its jurisdictional quandary.”

The commission “went far beyond removing barriers to demand response resources,” as Congress had ordered in the Energy Policy Act of 2005, the judges ruled.

In addition, the judges said, FERC’s reasoning had “no limiting principle,” agreeing with petitioners who said it would allow the commission to regulate the steel, fuel and labor markets because they also impact wholesale prices.

Windfall

Even if Order 745 did not encroach on state authority, it would have failed anyway because paying DR the LMP is not just and reasonable, the judges said, siding with Commissioner Philip Moeller, who dissented in the order. Moeller argued Order 745 overcompensates DR because it requires that it be paid the full LMP plus “be allowed to retain the savings associated with [the provider’s] avoided retail generation cost.”

The judges said this “potential windfall to demand response resources seems troubling, and the Commissioner’s concerns are certainly valid.”

Dissent

In a 28-page dissent, Judge Harry T. Edwards disagreed with the majority both on the jurisdictional question and on the propriety of paying DR at LMP.

Edwards said FERC deserved deference in its interpretation because the FPA is “ambiguous regarding whether forgone consumption constitutes a `sale’” and whether “a rule requiring administrators of wholesale markets to pay a specified level of compensation for such forgone consumption constitutes `direct regulation’ of retail sales” that would encroach on state jurisdiction.

Edwards noted that the compensation requirement built on the commission’s 2008 Order 719, which required that ISOs and RTOs accept bids from DR “unless not permitted by the laws or regulations of the relevant electric retail regulatory authority.”

Moreover, Order 745 was not the type of “direct regulation” of retail sales that would violate state prerogatives, Edwards said.

“All Order 745 says is that if a State’s laws permit demand response to be bid into electricity markets, and if a demand response resource affirmatively decides to participate in an ISO’s or RTO’s wholesale electricity market, and if that demand response resource would in a particular circumstance allow the ISO or RTO to balance wholesale supply and demand, and if paying that demand resource would be a net benefit to the system, then the ISO or RTO must pay that resource the LMP,” Edwards said. “That is it.”

Edwards also disagreed that upholding the order would leave FERC with unfettered authority, noting the restrictions the court had imposed in the California ISO case (372 F.3d 395), in which it ruled that FERC exceeded its jurisdiction in replacing the ISO board members on the theory that the composition of the board affected wholesale rates.

The court held that FERC’s authority was limited to matters “that directly affect the rate or are closely related to the rate, not all those remote things beyond the rate structure that might in some sense indirectly or ultimately do so.”

Edwards said requiring DR be paid the full LMP was reasonable to overcome barriers to entry.

Impact of Ruling

Before Order 745, ISOs and RTOs differed in the level of compensation paid to DR, with some underpaying demand resources in some circumstances, the commission ruled.

FERC’s response to the court’s rejection will be affected by the change in the composition of the commission since it issued the order. Order 745 was approved on a 4-1 vote that included two commissioners no longer on the panel: former Chairman Jon Wellinghoff, a strong proponent of DR, and Mark Spitzer.

Commissioner Tony Clark, who often sides with Moeller, replaced Spitzer, noted attorney Carolyn Elefant in a recent blog post.

Elefant said that an adverse ruling could affect FERC’s enforcement action against Lincoln Paper Co. for allegedly manipulating the ISO New England’s DR program. The Maine-based company filed a motion to dismiss in February that challenged the enforcement action on jurisdictional grounds.

Wellinghoff, now strategic counsel for the Advanced Energy Management Alliance (AEMA), said if the decision survives an appeal it will “lead to increased electricity costs for consumers by putting more money in the pockets of power generators.”

The alliance, a trade group for DR providers, noted a report by PJM’s Market Monitor that estimated DR saved consumers $11.8 billion in 2013.

Environmental groups also lamented the ruling. “As the U.S. advances into the clean energy economy, demand response should play an increasingly larger role in how our electricity is produced, delivered and consumed,” the Environmental Defense Fund said in a news release. “This order stymies that growth.”

If the jurisdictional ruling stands, “it could severely limit FERC’s ability to create a level playing field in wholesale markets and even planning for energy efficiency, demand response and other technologies,” said John Moore, senior attorney for the Natural Resources Defense Council’s Sustainable FERC Project.

“At a time when the transmission grid and our electric resource portfolio are changing rapidly — think more solar and wind power, rooftop solar, electric cars and two-way grid communications — the court’s decision could seriously constrain FERC’s ability to reform grid rules to accommodate these new dynamics, effectively cementing the agency into a 20th century approach to addressing 21st century challenges,” Moore said.

PJM Response

PJM noted that the ruling will not take effect immediately. The court told its clerk of the court to withhold issuance of the mandate on the order until seven days after disposition of any petitions for rehearing.

“Therefore, PJM hereby advises that it will continue to abide by the terms of its Tariff and Operating Agreement as relates to demand response in its markets,” the RTO said in a statement. “In other words, PJM will continue to operate business as usual.”

“At this point, it’s business as usual,” Andy Ott, executive vice president for markets said in a press conference today on capacity market results. If the order stands, he said, “FERC will have to [provide] some clarification on our Tariff.”

May 21, 2014

Analysis: LaFleur Cruises, Bay Bruises in Confirmation Hearing

By Rich Heidorn Jr.

WASHINGTON — Federal Energy Regulatory Commissioner Cheryl LaFleur sailed through her Senate confirmation hearing Tuesday while Norman Bay was forced to defend his limited policy experience and his running of the commission’s enforcement division.

Cheryl LaFleur and Norman Bay being sworn in to the Senate hearing.

Bay also found himself having to negotiate a gender politics minefield resulting from President Obama’s decision to appoint him directly into the chairmanship — leapfrogging him over LaFleur, the acting chair and the only woman on the panel.

Based on the senators’ comments at the Energy and Natural Resources Committee hearing, Bay will likely need every Democrat — or will have to pick off a Republican or two — to win confirmation.

LaFleur’s reappointment to a second five-year term, by contrast, seems assured.

No one criticized LaFleur, and some of the Republicans, including ranking member Lisa Murkowski of Alaska, said they would like to see her retain the chairmanship.

Heavy-Handed Enforcement?

It was clear well before the hearing started that Bay would face strong headwinds.

Two days earlier, The Wall Street Journal published an op-ed by former FERC general counsel William Scherman, along with a piggybacking editorial by FERC antagonist Paul Gigot, accusing Bay of driving Wall Street banks out of energy trading with heavy-handed enforcement tactics.

It continued an attack that Scherman, now a well-compensated attorney representing FERC targets, had begun at the National Association of Regulatory Utility Commissioners conference in November. (See FERC Pick a Blank Slate.)

Norman Bay, with Richard Gates looking on, responding to questions on his handling of the Gates case.

When Bay stood up to be sworn in, Richard and Kevin Gates — the twin hedge fund managers whose case Scherman cited as exhibit A — were sitting in the row behind him. Richard was on camera, over Bay’s shoulder, during the entire two-hour hearing. (See PJM Trader Calls FERC on Manipulation Probe.)

Murkowski made it clear that Bay had failed his job interview when he met her in her office the previous week.

After praising his “impressive personal story and resume,” Murkowski said she judged his energy policy experience as “recent and limited.”

“I did feel that our discussions had raised questions about your qualifications not just to be a sitting commissioner but to serve as the next chairman of FERC,” she said.

Bay, a first-generation Chinese American who attended Dartmouth and Harvard before becoming a U.S. attorney for New Mexico, has served as director of FERC’s Office of Enforcement since 2009. But unlike most FERC commissioners in the last decade, Bay has never served as a state utility regulator. (See table.) In addition, the last five chairmen served a median of 30 months before becoming chair.

Other Republicans joined in the attack, citing the Wall Street Journal articles and Scherman’s accompanying May 13 article in the Energy Law Journal. The latter — a 49-page, 28,000-word article — alleged a “widespread view that the FERC enforcement has become lopsided and unfair” and called for reforms.

“I find this very troubling,” Sen. John Barrasso (R-Wyo.) told Bay. “I believe this raises serious questions about your fitness to be on the commission. I also believe that these tactics have contributed to driving investors out of the electric market and that means a less reliable grid and higher costs to consumers.”

Sen. Mike Lee (R-Utah) also pressed him on Scherman’s allegations, asking him, “Is this true? Do we need reforms?”

Bay noted that the commission had adopted the “Brady doctrine,” which requires prosecutors to provide targets exculpatory evidence in the government’s possession, at his suggestion. Scherman alleges that FERC officials have failed to abide by the doctrine.

Bay’s response to the criticism was curiously unemphatic. He did not say the allegations were false. He said he didn’t “believe” them to be accurate.

LaFleur provided Bay only limited cover, acknowledging she had dissented on several orders over application of penalty guidelines and investigative procedures. “This is a relatively new area of our work,” she said. “It’s to be expected that we would have debates about how the rules are to be applied … but I haven’t dissented on any of the settlements or the substance of the orders to show cause.”

Negative Pricing and Market Manipulation

Sen. Lamar Alexander (R-Tenn.) tried to corner Bay with a long series of cross examination-style questions in which he attempted to link FERC’s enforcement practices with wind farms, the production tax credit, negative energy prices and nuclear power’s financial woes.

Democrat Joe Manchin and Republican Rob Portman, of the coal-dependent states of West Virginia and Ohio, spent their time on the clock asking what FERC could do to stop the EPA’s pending greenhouse gas rules.

Manchin, who helped sink the bid of Obama’s previous nominee, Ron Binz, did not indicate whether or not he would support Bay. He has previously expressed doubts about Bay’s experience. (See Senators Weigh in on Bay Nomination, PTC, Nuclear Waste.)

Portman offered perhaps the best news Bay heard all day, saying, “I assume you are going to be confirmed.”

Republican Ally

Bay had one notable Republican ally, a frail former committee Chair Pete Domenici, a fellow New Mexican, who introduced him in a rambling defense.

“He’s done everything right to entitle him to try this, try this job on …” Domenici said. “I’m not a great fan of the president of the United States. People know that. But this is a great appointment.”

Current New Mexico Sen. Martin Heinrich, a Democrat, also sponsored Bay. He praised Bay as “fair, balanced [and] consensus-oriented” and said he had used the enforcement tools that Congress granted FERC in 2005 to provide “$300 million in relief to consumers.” Heinrich dismissed Scherman’s attack as “sour grapes,” noting the attorney had represented “the losing side in a number of cases.”

Sen. Maria Cantwell (D-Wash.) also gave a spirited defense. She noted that Congress gave FERC expanded penalty powers in response to the Western energy crisis, during which traders at Enron and other companies boosted profits by manipulating the electricity market.

“The energy markets cannot be a tool for those who want to invest just for their own manipulation of the market. We have to have policemen on the beat,” she said. “… I want to remind everyone that the policeman has been on the beat and has done a lot of great work.”

Gender politics

But for most of the session Bay and his supporters found themselves playing defense, not only over his experience and FERC record but for his gender and Obama’s decision to appoint him as chairman. In addition to having one of five votes on the bipartisan commission, the chairman serves as FERC’s chief executive, responsible for managing staff and setting policy initiatives.

Murkowski said she was troubled by “the fact that our lone female commissioner, who has certainly demonstrated her leadership, would be moved down from the position that she currently holds as chairman.”

Barrasso also said Bay’s qualifications paled in comparison to LaFleur’s, who came to FERC after more than two decades of experience in the electric and natural gas industries, including roles as chief operating officer, general counsel and acting CEO of National Grid USA and its predecessor.

“Given the wide gap in experience between you and chairwoman LaFleur, why should we demote chairwoman LaFleur to make room for you?” Barrasso asked. “And what specific qualifications do you have to be chairman of FERC?”

Bay responded by talking about his “great respect” for LaFleur and professing his confidence that they would work well together.

As to the president’s decision to pass over a seemingly more qualified woman?

“You would have to ask the White House that particular question,” Bay responded. “But I would like to think that the White House might have considered a number of factors. First that I’ve done work – and good work – to protect consumers and the integrity of the marketplace and to ensure that there’s a level playing field for all market participants.”

Bay also cited his “bipartisan record of commitment to public service and good government,” a reference to his work with the State and Justice departments during Republican administrations. Bay also said his experience in the energy industry began before he joined FERC, citing his work as counsel to Sandia National Laboratory and two summers in college during which he worked at a Department of Energy research facility.

Finally, Bay got to what may be the realpolitik answer for why the White House could have bungled the politics of the FERC chairmanship for a second time: “Geographical diversity,” Bay said.

Bay was backed for the post by former FERC chair Jon Wellinghoff, an ally of Senate President Harry Reid of Nevada.

“I do come from New Mexico,” Bay said. “It’s a Western state and it’s a producer state. And Westerners and Pacific Northwesterners have always cast a long shadow, not only on this committee but also on FERC as well.”

Maybe LaFleur, an unapologetic Boston sports fan, shouldn’t have worn her Red Sox jersey to the commission meeting last October.

May 20, 2014

Industry Happy, Environmentalists Outraged by EPA Rule

The EPA’s cooling water rule resulted from a settlement following years of litigation with environmental groups including Riverkeeper Inc., Natural Resources Defense Council and the Sierra Club. Based on environmentalists’ reaction yesterday, the legal battles may not be over.

Reed Super, legal director for the Waterkeeper Alliance, said the EPA abdicated its responsibility “to state agencies that are simply not equipped to make these decisions alone.

“Unfortunately, EPA’s rule will perpetuate the unacceptable status quo that has allowed antiquated plants to withdraw nearly 100 trillion gallons of fresh and sea water each year, and indiscriminately kill fish and wildlife instead of recycling their cooling water or use dry cooling technology, as modern plants have done for the past three decades,” Super said. “We are beyond disappointed with this new rule.”

The energy industry’s initial review was more positive. “The Environmental Protection Agency, to its credit, has taken into account many viewpoints and made improvements to this rule based on the scientific data and procedural analysis that has been brought to its attention,” the Nuclear Energy Institute said in a statement. “We’re hopeful those improvements are included in the final rule.”

NEI said enforcement must recognize the impacts on electric reliability and include cost-benefit analyses to balance increases in electricity costs against environmental benefits.

“Cooling towers consume twice as much water from the aquatic habitats we want to protect compared to once-through cooling systems,” NEI continued “This fact is very important given projections that much of our country will face a water-constrained future. Technology-based solutions at a power plant’s cooling water intake structure can be highly effective in protecting fish and can accommodate the ecological diversity of the various sites. As the EPA has pointed out previously, solutions like traveling screens, with a collection and return system, are comparable to cooling towers in protecting aquatic life in water bodies used for cooling power plants.”

Tom Kuhn, president of the Edison Electric Institute, said the association was “pleased that EPA had avoided imposing a categorical one-size-fits-all approach to compliance; has embraced significant elements of flexibility; and has acknowledged the importance of weighing costs with environmental protection.”

May 20, 2014

Cooling Water Rule: 7,000 MW Lost in PJM?

By David Jwanier and Rich Heidorn Jr.

WASHINGTON — PJM could lose as much as 7,000 MW of generation by 2018 under long-awaited cooling-water regulations approved late yesterday by the Environmental Protection Agency.

The rule will require steam generators in PJM to take steps to reduce the volume of fish and other aquatic life sucked into their cooling water intakes.

The final rule affects about 544 power plants, including nuclear-, coal-, gas- and oil-fired steam generators. More than 500 industrial sites, including pulp and paper mills; chemical, iron, steel and aluminum manufacturing plants; refineries; and food processors, are also covered by the rule.

The EPA said about 40% of affected units are already using the “best available technology” as required by the regulations, which were issued under section 316(b) of the Clean Water Act.

The EPA estimates that 2.1 billion fish, shrimp and crabs are killed annually by being pinned against cooling water intake structures (impingement) or being drawn into cooling water systems (entrainment).

Industry officials were relieved in 2011 when the EPA announced its proposed rules, which did not include a requirement that all generators install expensive closed-loop cooling systems employing cooling towers. The EPA is also delegating enforcement largely to state environmental officials. (See related stories, What’s Covered by EPA Cooling Water Rule?)

PJM spokesman Ray Dotter said the RTO has not done any studies to evaluate the potential impact of the regulations but will review the final rule. “We did look at the proposed EPA rule and believe it provided flexibility to the states to conduct unit-specific determinations, which would minimize the impact to generation,” Dotter said.

The North American Electric Reliability Corp. published an analysis of the proposed rule in November 2011, which projected at least 25,000 MW of retirements or deratings nationwide by 2018 under a “moderate” regulation, including about 7,000 MW in PJM (1,300 MW of deratings and 5,700 MW of retirements).

The moderate case is estimated to cost $170 to $440 per gallon per minute (GPM).

The moderate case assumed only “more aggressive” states would require closed-loop systems. NERC said those states — including Delaware and New Jersey in PJM — are home to three-quarters of affected generation.

NERC projected PJM generators installing cooling towers would lose an average of 1.6% of their energy output.

NERC’s analysis, and a 2011 analysis by ReliabilityFirst Corp., assumed no nuclear plants would retire as a result of the rule, although RFC said retrofits would cut nuclear capacity by 3.5%. That, however, was before nuclear operators began threatening to shutter units because of low capacity and energy revenues.

Oyster Creek Generating Station (Source: Exelon)

PJM is already losing Exelon’s Oyster Creek nuclear plant by the end of 2019 — 10 years before its license expires — under a settlement with the New Jersey Department of Environmental Protection.

NERC predicted PJM would need more generation or additional demand response by 2018 under the moderate case and by 2015 under the “strict” case. The strict case, which would have required closed-loop systems and boosted generators’ costs by 25%, could have caused 35,000 MW in retirements and deratings nationwide, NERC estimated.

In its 2013 10-K filing, Public Service Enterprise Group said it was “unable to predict the outcome of this proposed rulemaking, the final form that the proposed regulations may take and the effect, if any, that they may have on our future capital requirements, financial condition or results of operations, although such impacts could be material.”

Exelon’s 2013 10-K filing, issued in February, said that under a final rule that did not require cooling towers, and allowed states’ permitting agencies to apply cost-benefit tests and consider site-specific factors, “the impact of the rule would be minimized even though the costs of compliance could be material.”

Exelon said its generators without closed-cycle recirculating systems include the Clinton, Dresden, Peach Bottom, Quad Cities, Salem, Calvert Cliffs, Nine Mile Point Unit 1 and R.E. Ginna nuclear plants in addition to Oyster Creek. Also affected in PJM are the Eddystone, Gould Street, Riverside and Schuylkill fossil fuel plants as well as the Fairless Hills plant, which burns landfill gas.

May 20, 2014

What’s Covered by EPA Cooling Water Rule?

The North American Electric Reliability Corp.’s 2011 review of EPA’s cooling water regulations had assumed that the rule would affect 1,200 generators with once-through cooling systems. EPA’s announcement of the final rule yesterday said it would affect less than half as many plants, however.

Covered are:

Existing facilities that withdraw more than 2 million gallons per day (MGD) of water from waters of the U.S. and use at least 25% of their withdrawals exclusively for cooling. They are required to reduce fish impingement using one of seven options.
Facilities that withdraw at least 125 MGD, which must conduct studies to determine whether controls will be required to reduce entrainment.
New units at an existing facility that are built to increase its generating capacity of the facility. They will be required to reduce the intake flow to a level similar to that of a closed-cycle system.

May 20, 2014

Clark: FERC May Rethink Fuel-Agnostic Stance

CAMBRIDGE, Md. — The Federal Energy Regulatory Commission may need to rethink its fuel-agnostic policies to preserve coal and nuclear generation threatened by environmental rules and market forces, Commissioner Tony Clark told the PJM Annual Meeting last week.

Clark said the threats to baseload coal and nuclear resources and the increasing reliance on natural gas-fired generation – “which has traditionally been our nation’s most volatile fuel source” – are exposing “cracks in the foundation of the system.”

“The loss of that traditional backbone, especially nuclear … is something to which we should probably give more than just a passing shrug,” Clark said. “It’s something we need to come to grips with.

“We have to acknowledge this would be … a major shift in what FERC has traditionally defined as its role, and it leads us down some corridors we’ve been very reluctant to get into because it gets straight into the heart of this very grey area of the states’ prerogative over integrated resource planning and FERC’s oversight of wholesale markets and bulk power system reliability.”

Clark noted that governors in New England are formulating a proposal regarding lack of pipeline cap. “The answer that we seem to be hearing from the New England region is ‘We’d like to see if FERC can build those natural gas infrastructure costs into our electricity markets.’”

He also noted initiatives by Maryland and New Jersey to contract with new gas-fired generators — efforts that were rejected by federal courts.

“At this point I probably have more questions than answers,” he said. “These are discussions we [states and federal officials] have to have because we are in this together.”

Winter Repeat Could Undermine Markets

A repeat of the price volatility and operational problems that occurred in January could undermine competitive markets in PJM, Clark said.

“If reliability suffers or we have a continuing cycle of [high] electricity prices, especially in the Eastern markets because of lack of infrastructure or fuel-source security, then it becomes an existential threat to these markets themselves,” Clark said Wednesday. “If you have repeated problems … there will be a call, make no doubt about it, in a number of these states to significantly rethink how these markets are structured.”

The Market Monitor raised a similar concern in its State of the Market report for the first quarter, saying that “non-market solutions may appear attractive,” when markets are stressed.

“Top-down, integrated resource planning approaches are tempting because it is easy to think that experts know exactly the right mix and location of generation resources and the appropriate definition of resource diversity and therefore which technologies should be favored through exceptions to market rules,” the Monitor said.

Pennsylvania Reacts

In Pennsylvania, one of the first states to adopt electric competition, officials are considering regulatory and legislative changes as a result of winter price spikes.

Through March, more than 9,100 consumers had contacted the state Public Utility Commission over electric prices that quadrupled in some cases. More than 5,700 customers filed formal complaints, while at least 50,000 customers have dropped competitive suppliers and returned to their local utilities’ default service since March.

The PUC last month proposed regulations that would require contracts to be more transparent about the volatility of variable rates and provide customers better access to historical pricing data. The PUC also has proposed reducing the time it takes to change electricity suppliers.

A bill that would cap variable rate hikes at 30% made it out of a Pennsylvania House committee but didn’t make it to the floor before the House recessed earlier this month.

May 20, 2014

Federal Briefs

A Senate committee posed pointed questions about the safety of the increasing number of decommissioned nuclear plants and stockpiles of used fuel, drawing attention to the lack of a permanent storage site.

spent nuclear fuel pool (Source: Nuclear Energy Institute)

The hearing of the Senate Environment and Public Works Committee last week called in a panel of experts to examine the issue. Chair Barbara Boxer (D-Calif.) questioned whether enough has been done to secure stockpiles being stored in pools and dry casks. She noted that in recent months, utility officials have announced the planned retirement of five more reactors.

“The reactors may be shut down,” Boxer said, “but the risks of an accident or attack have not gone away.”

Nuclear Regulatory Commission officials and utility industry leaders have consistently said they are satisfied with current storage and security arrangements. Senate leaders introduced a bill to jump-start the search process for a new site, but the measure didn’t gather House support. Some legislators are calling for a resumption of development and eventual operation of the Yucca Mountain site in Nevada.

More: The New York Times

Norris: Negative Prices Not Nukes’ Big Problem

Federal Energy Regulatory Commissioner John Norris said he has concluded that negative pricing is having a very small impact on the viability of the nuclear fleet and that the issue should not be part of the debate over an extension of the production tax credit used by wind developers. (See Who’s To Blame For Negative Prices?)

“I have concluded that the argument regarding the impact of negative pricing on nuclear viability is a distraction and not productive to the larger conversation regarding how to ensure that the existing nuclear fleet is maintained,” he said in a statement at last week’s commission meeting. “Transmission development is the better, and more proactive, solution to negative pricing rather than forcing that issue into the debate on the merits of the production tax credit (PTC).

“I believe the larger issue is not negative pricing but rather the additional supply of new, low-cost energy in recent years from both wind and low-cost gas that has contributed to lower energy prices and reduced revenues for the nuclear units,” he added.

More: FERC

Dominion Gains Crucial FERC Finding for LNG Export Plant

Dominion Resources’ attempts to gain support for its proposed liquefied natural gas export facility at Cove Point, Md., got a big boost last week when the Federal Energy Regulatory Commission ruled that the controversial project represents no environmental or safety risks.

The FERC review gave the go-ahead for further project development provided some conditions are met. The company wants to build a $3.8 billion facility that would give the existing import terminal the ability to export up to 5.75 metric tons of LNG annually.

The terminal is on the shores of the Chesapeake Bay at Cove Point in Calvert County, Md. The plan is the target of opposition from environmentalists and local citizen groups.

More: The Baltimore Sun

May 20, 2014

Company Briefs

Duke Energy last week announced plans to spend more than $1.5 billion to build a 1,600-MW natural gas-fired plant at its Crystal River site in Florida and said it will build another 750-MW gas-fired plant in South Carolina.

The company said the new Crystal River plant, on the same site as the soon-to-be decommissioned nuclear generating station and two coal-fired plants slated for retirement, will be in operation by late 2018. The site is about 90 miles northwest of Orlando.

The South Carolina combined cycle plant will be built on the site of the soon-to-be-retired Lee Steam Generating Station in Anderson County, S.C. The company gained approval from the Public Service Commission of South Carolina in April. Construction should start in early 2015. The company didn’t put a price tag on the South Carolina plant.

More: The Orlando Sentinel, Greenville News

Pump Inspections Delay PSEG’s Salem 2 Outage

The discovery of a “bolting issue” with one of the four reactor coolant pumps at Public Service Enterprise Group’s Salem Unit 2 will prolong the 1,160-MW station’s refueling outage period indefinitely, the company said last week.

PSEG said the problem was discovered during inspections conducted during the outage, which started in April. After the finding, which the company said did not pose a danger, a decision was made to check all four reactor coolant pumps. The outage, which usually takes about a month, will now extend past mid-May, but the company did not say when the unit would come back on line.

More: Reuters

PPL, IBEW Agree On 3-Year Deal

One day before the old contract expired, PPL Corp. and the International Brotherhood of Electrical Workers Local 1600 last week reached a tentative agreement for a three-year contract.

The new contract provides 7.75% in wage increases spread over three years, a revised retirement savings program for new hires, work rule changes and new health care benefit rules.

The union represents about 3,000 workers at PPL Electric Utilities, various corporate support operations and power plants. Both sides agreed to work under current contract rules while the new contract is finalized and put up for ratification.

More:Lehigh Valley Business

Beaver Valley Unit Trip Caused By Static Electricity

FirstEnergy officials and the Nuclear Regulatory Commission agreed that static electricity caused a transformer to fail at the Beaver Valley Nuclear Power Station in Shippingport, near Pittsburgh, during the polar vortex in January. The transformer failure caused one of the station’s reactors to trip.

Company officials said transformer oil pump procedures “did not provide proper guidance” for pump operation during such low temperatures, leading to static buildup and, in turn, the transformer failure. The discovery came after the company conducted a root cause analysis and reported to the NRC.

More: Greenfield Daily Reporter

PSE&G, PPL Give $66M To Del. Water Gap Park

Delaware Water Gap (Source: National Park Service)

The National Park Service last week said PPL and PSE&G provided $66 million in donations and project funding as remediation for building a transmission line that crosses part of the Delaware Water Gap National Recreation Area.

The compensation is part of the $1.42 billion Susquehanna-Roseland 500-kV line project, which crosses part of the park, linking Pennsylvania and New Jersey. It includes $20.5 million to purchase 288 more acres for the park, as well as $12 million for wetland restoration projects and $10 million for the Appalachian National Scenic Trail.

Work on the transmission line is about 75% complete, and it should go into service by June 2015. PSE&G’s portion of the project is budgeted at $790 million, while PPL’s portion is about $630 million, company officials said.

More: The Express-Times

Panda Power Starts Building 829-MW Shale Gas Plant

Panda Power last week broke ground on an 829-MW combined-cycle plant designed to take advantage of cheap gas from the Marcellus Shale formation.

Liberty Power Plant Rendering (Source: Panda Power)

The Liberty Generating Station is in Bradford County, near the Pennsylvania-N.Y. border. Pennsylvania Gov. Tom Corbett, during a ground-breaking ceremony last week, said the plant will contribute nearly $6 billion to the area economy during construction and its first 10 years of operation. The plant will use an air-cooled, closed-loop cooling system to avoid the need to draw water from the Susquehanna River. It is scheduled to be on line in 2016.

Panda, a Dallas private equity firm, has five combined-cycle power plants currently under construction in Texas and Pennsylvania with a total capacity of nearly 4,000 MW. It also has announced a 750-MW combined-cycle power plant in Northern Virginia and an 859-MW power facility in Southern Maryland.

More: Herald Online

NRC: Indian Point Workers Mishandled Fuel Bundle

Workers at Entergy’s Indian Point nuclear power plant in New York twice tried to place a bundle of spent fuel in a spot in a storage pool that was already holding a bundle, the Nuclear Regulatory Commission said last week. The incident, which took place in March, did not result in a radiation release and did not damage any of the spent fuel bundles involved, according to the agency.

The commission report pointed to an outdated computer program that tracks fuel bundle placement. While the NRC classified it as of “very low safety significance,” it ordered Entergy to take corrective actions.

More: The Journal News

May 20, 2014

State Briefs

Seeking Lower Bills Could Come At Cost

Customer advocates are warning that Chicago-area electricity customers seeking respite from a looming ComEd rate hike may find themselves paying even more.

The Citizens Utility Board is reporting that some alternative electricity suppliers are talking customers into plans that include higher rates. CUB spokesperson Jim Chilsen said Illinois’ electricity market “has become more expensive, confusing and treacherous.” He said CUB is seeing a spike in complaints from customers who thought they were signing up for a plan with rates lower than ComEd’s coming rates, only to find themselves locked into plans charging as much as 15 to 35 cents per kilowatt hour, compared to ComEd’s 7.6 cents.

“Illinois’ electricity market has become a buyer-beware market, and we just want consumers to look for red flags of rip-offs and be on the alert,” Chilsen said.

More: CBS Chicago

FutureGen Pipeline Route Approved by ICC

The Illinois Commerce Commission has approved a 28-mile planned pipeline to carry carbon dioxide from the proposed FutureGen coal-fired plant in Meredosia to wells near Jacksonville. The innovative carbon-capture project will be a showcase for that method of controlling greenhouse gases.

Although the commission approved the pipeline route, the FutureGen project still depends on further federal approvals for the entire $1.68 billion project. The project would inject 1.1 million metric tons of carbon dioxide a year.

More: The Southern

INDIANA

Regulators Give OK ForNew Gas Plant, Refits

The Indiana Regulatory Commission approved Indianapolis Power & Light’s plans to build a 650-MW combined cycle plant and convert two coal-burning units to natural gas.

IPL will retire six coal-fired units at Eagle Valley Generating Station near Martinsville and invest $631 million to build the gas-fired plant there.

The company also received approval to spend $36 million to retrofit two coal-fired units at the Harding Street plant in Indianapolis to natural gas. IPL said the projects will create 660 construction jobs and 25 permanent jobs.

The plan drew criticism from environmentalists. “Instead of jumping from one expensive and unsustainable fuel to another,” said Sierra Club representative Jodi Perras, “IPL should be investing in more wind, solar and energy-efficiency solutions that will put our city on a cleaner and stronger path.”

More: Indianapolis Business Journal

MARYLAND

O’Malley Vetoes Wind Turbine Moratorium

Gov. Martin O’Malley vetoed a 13-month ban on the construction of wind turbines within 56 miles of U.S. Naval Air Station Patuxent River. The bill called for a delay of construction until studies could show what effects the turbine towers could have on the radar at the base.

But O’Malley said it sent a “chilling message” to developers of renewable energy. “There are already safeguards in place to ensure that no renewable energy projects conflict with military facilities — those safeguards render this bill unnecessary,” O’Malley said in a statement.

Bill supporter Del. John Bohanan said the bill showed the legislature’s support of service members and the base. “I am disappointed by a veto that protects [wind] investors over the job security concerns of Maryland families who work at Pax River Naval Air Station,” Bohanan wrote in a statement. The base is a large employer in the area.

Lawmakers would need a three-fifths vote in each chamber to override the veto and would have to come back in a special session to do so.

More: The Washington Post

NORTH CAROLINA

Gov. McCory’s Ash Bill Hits Senate, Draws Critics

A bill that would require Duke Energy to file cleanup plans for four of its ash ponds and shorten incident-reporting times is being criticized as being too lenient. The bill, proposed by Gov. Pat McCrory, calls for Duke to file cleanup plans within 60 to 90 days for four plants — Riverbend near Charlotte, Sutton in Wilmington, Asheville and the Dan River facility, scene of this year’s massive coal ash spill. But the bill doesn’t set specific timelines for any of Duke’s other ash ponds.

Some see McCrory’s bill as being too easy on Duke. “This bill is a rehashing of the discredited sweetheart deal Duke Energy struck with the state last year and only requires what Duke Energy has already conceded in public statements,” said D.J. Gerken, an attorney with the Southern Environmental Law Center.

The bill would also eliminate a law that let Duke protect secret records about its ash dams and emergency action plans.

More: The Charlotte Observer

PENNSYLVANIA

Two Permits Issued For Trash-to-Steam

The state Department of Environmental Protection last week issued two permits for a proposed waste-to-steam plant in Center City, Allentown.

The project, proposed by Delta Thermo Energy of Bucks County, received an air quality plan approval and waste management permit. Delta Thermo wants to build a 4-MW plant on Kline Island that will turn garbage and wastewater treatment sludge to steam. It will be built next to the city’s wastewater treatment plant on Little Lehigh Creek.

More: Pa. Department of Environmental Protection

May 20, 2014

PJM, FERC: Grid is Ready for Summer

After a record-breaking winter in which it narrowly avoided load shedding, PJM says it is confident it can keep air conditioners running this summer. But forward prices suggest costs may be higher than last year.

“Our experience with extreme seasonal weather and conditions over the past couple of years has helped us to better prepare for hot summers [such as] the one we expect this year,” Mike Kormos, executive vice president for operations said in a press release last week.

PJM’s summer peak is forecast at 157,279 MW, a 1.3% increase over 2013’s forecast and virtually identical to last summer’s actual peak.

With 183,220 MW of installed generation capacity and 11,160 MW of demand response and energy efficiency, PJM says its reserve margin will exceed 25%, well above the required 16.2%. The RTO’s all-time peak was 165,492 MW in July 2011.

Transmission Upgrades

PJM said reliability will be enhanced by transmission upgrades completed since last summer, including two bulk electric system transformers and about 500 MVAR of shunt capacitors.

In its own summer assessment last week, the Federal Energy Regulatory Commission said congestion in PJM should be reduced thanks to two 500-kV projects scheduled to enter service in June, the Mount Storm-Doubs rebuild and the Hopatcong-Roseland segment of the Susquehanna-Roseland project.

National Outlook

FERC said forecast reserve margins are adequate across the country despite a net reduction of 10 GW in capacity since last summer, including a 2.5 GW cut in PJM. The commission said it is expecting a hotter than normal summer although some forecasters are predicting an El Nino, which could moderate temperatures.

The hurricane forecast is slightly below average, with 10-12 named storms expected, four or five of which are likely to become hurricanes.

Summer Electric Futures (Source: FERC, May 2014) — (Source: FERC)

Electric futures for the summer have jumped since November, with increases of 19% to 30% for the Mid-C, NYISO Hudson Valley and ISO-NE hubs. PJM-West is up by about 25%. [See chart]

FERC said the increases reflect the boost in natural gas futures resulting from winter demand, which left storage inventories below normal. Henry Hub summer futures averaged $4.81/MMBtu in early May, 84 cents above 2013. Prices in the Mid-Atlantic are up almost 20%. Prices in New York City are about equal to last summer, 58 cents below Henry Hub.

With gas futures more than $1/MMBtu higher than coal futures, coal generation is likely to exceed gas, FERC said. Some coal-fired generators had difficulties obtaining fuel deliveries during the winter due to ice on barge routes and congestion and equipment problems on the rails. Rail network congestion will continue in some areas this summer because of competing demand from oil shipments in the Dakotas and the Upper Midwest.

The North American Electric Reliability Corp.’s summer Reliability Assessment said that pipeline maintenance and storage refills during the summer could limit natural gas availability for generators lacking firm service.

NERC also forecast adequate reserve margins but warned of potential challenges in ERCOT and MISO.

Below is a snapshot of FERC’s and NERC’s regional assessments:

CAISO: Gas-fired generation is likely to increase to offset lower hydropower output due to a prolonged drought. This could result in pipeline congestion and high gas prices although increased solar generation may provide some relief.

ERCOT: ERCOT forecasts a 15% reserve margin, just above its 13.75% target, thanks to four new combined-cycle plants totaling 2 GW. The generation is expected to enter commercial service by August, when Texas load typically peaks. “However, an early season heat wave could stress the system before these new facilities are available,” FERC warned.

MISO, SPP: MISO and SPP should benefit from lower production costs this summer: MISO as a result of the addition of the MISO South region and SPP from the launch of new markets in March. SPP added a day-ahead market with transmission congestion rights, a real-time balancing market and a price-based operating reserve market. It also combined multiple areas into a single balancing authority.

MISO’s reserve margin is slightly above NERC’s 14.8% requirement but lower than last year’s 18.1% due to generation retirements and suspensions, and limits on transfers between MISO’s traditional footprint and MISO South.

NYISO, ISO-NE: Transmission improvements will help the Northeast. The Greater Springfield Reliability Project should reduce congestion in western Massachusetts and northern Connecticut while full service of the Neptune line will increase imports to Long Island. FERC expects increased interchange between PJM and NYISO following changes in congestion management on the Ramapo line. Demand response will also be important on peak days.