Seeking its third base rate increase in four years, Potomac Electric Power Co. won approval from Maryland regulators Friday for a $28 million increase in distribution rates and a $24 million surcharge to accelerate the hardening of feeder lines.
Pepco had asked the Maryland Public Service Commission for almost $61 million in additional distribution rates and an increase in its return on equity (ROE) to 10.25%. The commission accepted a staff recommendation for an ROE of 9.36%, a slight boost from the current 9.31%. The changes will add $2.41 monthly to the average residential bill, effective July 12, 2013.
Pepco also requested a $192 million Grid Resiliency Charge, including $17 million for accelerated vegetation management; $151 million to move portions of six feeders underground and $24 million to accelerate the hardening of 24 feeders that are prone to outages during major storms.
The commission approved only the work on the 24 feeders, saying it needed more information on the undergrounding proposal. The commission said the company’s plan for accelerating vegetation management in 2014 “has no impact on the amount of tree trimming required for subsequent years and provides no cost savings in the future.”
PJM officials told the Operating Committee last week that they are considering increased penalties to eliminate the current economic incentives for generators and demand response providers that fail to perform when called on to provide spinning reserve.
Providers of Tier 2 synchronized reserve are paid per MWH of reserves offered but are only called on to provide reserves for about three spinning events per month, most of them less than 20 minutes long.
“The result is that it is possible to provide the service profitably with a very low level of compliance,” the Market Monitor said in the 2011 State of the Market Report. “This behavior does exist in this market.”
The monitor repeated its call for increased penalties in the 2012 report with some additional observations: “Sometimes units do not achieve the ramp rate they have bid, sometimes units fail to follow PJM dispatch, sometimes system conditions change rapidly during the hour between a market solution and the actual hour.” The monitor noted that non-compliance “has never caused a reliability problem at PJM.”
Tom Blair, of Monitoring Analytics, told the Operating Committee that the market monitor studied three spinning events of more than 10 minutes in 2013 and compliance by demand response resources was “not good.”
David Pratzon, who represents generators at GT Power Source, supported the call for increased penalties. “Tier 2 resources can clear for hundreds of hours before they are called even once. There is a risk that someone can take the money and run.” The weighted average market price for synchronized reserve was $8 per MW last year.
However, Pratzon and representatives of other generators said the rules shouldn’t be so strict that they penalize providers that are doing their best to comply. For example, Pratzon said gas generators can hit “dead bands” during duct firing, and coal plants may underperform if their fuel is damp or of lower quality.
Pratzon, AEP, Exelon and Exelon joined to propose an alternative set of penalties that would not apply unless providers fall below 90% of their promised reserves. Blair said the market monitor also supports the 90% threshold.
Brock Ondayko, of AEP, said although the PJM dispatch system has improved, it still does not accurately model the behavior of coal-fired units.
He added that PJM should ensure that changes to the synchronized reserve rules do not have unintended consequences. “Adjusting ramp rates also impacts the amount of energy we’re awarded during the day,” he said.
PJM staffer Kim Warshel asked participants to submit proposed alternate solutions by July 16, in time for consideration at the next special meeting of the Operating Committee to discuss the issue, set for July 18.
A proposed new scheduling option for transactions into the New York ISO faces an uncertain future after a first reading at the Market Implementation Committee meeting last week.
PJM said it plans to seek an MIC endorsement in August of the Coordinated Transaction Scheduling (CTS) proposal, which is designed to improve interchange scheduling efficiency between NYISO and PJM.
The proposal would create an additional scheduling product, intra-hour evaluations of CTS interface bids and offers. CTS Interface Bids would have as many as four bid curves and up to 11 $/MW pairs. The option would be in addition to current hourly evaluations of traditional wheel-through transactions and intra-hour evaluations of traditional LMP bids and offers.
PJM says the new product should increase forward price transparency and price convergence between PJM and NYISO.
A cost benefit analysis found that the change could reduce production costs by as much as $26 million, but PJM’s Rebecca Carroll said the RTO had not analyzed how much of those savings would be offset by make-whole payments to generators.
CTS Interface bids would be scheduled based on the projected price difference between PJM and NYISO at the interface. It would use PJM’s Intermediate Term Security Constrained Economic Dispatch (IT SCED) application, which has a two hour look-ahead capability. The application correctly predicted prices within $5 about 60% of the time. “We definitely see there’s room for improvement here,” said Carroll.
PJM initially proposed that the trades be exempt from Balancing Operating Reserve (BOR) charges because they provide economic benefits to both NYISO and PJM and will be cleared and scheduled based on near-term projected operating conditions.
But the RTO dropped that proposal after stakeholders said the transactions should be treated the same as real-time dispatchable transactions.
“Because this is a real-time product, it is going to have an impact on balancing congestion,” said one stakeholder, whose identity is being withheld at his request, per PJM’s code of conduct. He said Financial Transmission Rights (FTR) holders should not be penalized for such impacts.
PJM also proposed 15-minute settlements for all interchange transactions — the same interval for which they flow — rather than being integrated in the current hourly settlement processes. PJM said the change would require a longer transition process than using 15-minute settlements for CTS trades alone.
Credit requirements on the new scheduling option would be based on the higher of the 97th percentile historical (prior year) hourly price for the node or the 15-minute IT SCED price forecast for the node.
Stephanie Staska, of Twin Cities Power, LLC, said the credit requirement should apply to all export transactions if such a screen is initiated for CTS transactions.
Several MIC members said it was premature to schedule a vote next month given the level of detail PJM had provided them to date. “I don’t know if we understand this issue well enough to vote knowledgeably,” said Jung Suh,of Noble Americas Energy Solutions LLC.
Dave Pratzon, of GT Power Group, said stakeholders should explore the impact of the change on balancing congestion and the implications of using 15-minute settlements.
The issue has been under discussion with NYISO since November 2012. The new scheduling product would require approval of the Federal Energy Regulatory Commission.
PJM expects to open a proposal window for market efficiency transmission projects later this year, PJM officials told members last week.
Steve Herling, PJM vice president of planning, said the window would allow transmission developers to propose cost-saving solutions to congestion issues identified by PJM staff. PJM officials said the window would be opened after PJM staff completes its analysis of public policy transmission needs.
“We may not open a window for another month and a half,” Herling told the Transmission Expansion Advisory Committee. “That doesn’t mean you can’t start working now.”
In an earlier meeting with the Planning Committee, Herling said that the window “will be less focused than” that opened earlier this year to address stability problems at Artificial Island in New Jersey. (See related article.)
Location of High Voltage Problems Identified by PJM (Source: PJM Interconnection, LLC; p. 11, RTEP Reliability Analysis, TEAC 7-10-13)
In 2012, PJM identified $718.6 million in gross congestion, $347 million of which was unhedgeable, a reduction from the $998 million in market congestion for 2011. (See Table.)
Fifteen monitored facilities were responsible for at least $10 million each in gross congestion, led by APSOUTH with $126 million of gross congestion, almost one-fifth of the total.
Proposals must meet or exceed a 1.25 benefit-to-cost threshold to be considered by the Board of Managers for inclusion in the Regional Transmission Expansion Plan.
The Market Efficiency case files are available to those with a Ventyx database license and clearance to view Critical Energy Infrastructure Information (CEII).
In a related matter, Herling said PJM has completed its review of applications from most of the 12 companies that sought prequalification as transmission developers under FERC Order 1000, which reduced transmission owners’ historic Rights of First Refusal and opened transmission projects to competition. PJM will post the results of its reviews within two weeks, Herling said.
The Operating Committee last week approved changes to manuals 1 and 12, while the Planning Committee received a presentation on proposed changes to Manual 21 and the Market Implementation Committee heard a first reading on changes to Manual 28.
Manual 1: Control Center and Data Exchange Requirements
Reason for change: New rules for access to PJM Energy Management System (EMS).
Impacts:
Added new section 2.5.7 detailing rules for transmission owner read-only access to PJM’s EMS. No screen scraping is allowed.
Modified section 3.2.3 to clarify procedures for data communication outages.
Modified section 4.2.4 to clarify repeating of All Call messages.
Adds details to Information Access Matrix in Attachment A.
Next Step: Vote by Markets and Reliability Committee.
Manual 12: Balancing Operations
Reason for change: PJM is changing the regulation requirement to align it with operational needs and address volatility in light load periods.
Impacts:
Changes On-peak (05:00-23:59) requirement to 700 effective MW, a decrease in the requirement for 52% of days, an increase for 48% of days. Net daily decrease of about 60 MW (section 4.4.3).
Changes Off-peak (00:00-04:59) requirement to 525 effective MW, an increase for 66% of days and a decrease for 34% of days. Net daily increase of about 20 MW (section 4.4.3).
Changes regulation scoring methods:
Performance scoring for small regulation allocation: Historical performance scores will be used if the control signal has an average absolute value less than 1% of the regulation assignment (section 4.5.6)
Performance scores when data is not available: Historical performance scores will be used if data is not available and for intervals less than 15 contiguous minutes (adds section 4.5.9)
Regulation Assignments: Scoring will be suspended for 10 minutes after assignment to allow time to ramp into position (adds section 4.5.10).
Next Step: Vote by Markets and Reliability Committee.
PJM contact: Rus Ogborn
Manual 21: Rules and Procedures for Determination of Generating Capability
Reason for change: Clarifying ambiguous language, updating terms.
Impacts:
Clarifies that intermittent resources (wind, solar) are not required to perform seasonal verification tests because their capacity credit calculation is used in place of a ratings test.
Clarifies that all generators, except hydro, pumped storage and diesel units, are required to adjust rating test results for expected cooling water and ambient air conditions.
Hydro and pumped storage units must perform their annual ratings test during the summer verification window and are not required to perform a winter test.
Next Step: Vote at next Planning Committee meeting.
PJM contact: Tom Falin
Manual 28: Operating Agreement Accounting
Reason for change: Incorporating changes to lost opportunity cost compensation as approved by FERC.
Impacts:
Changes sections 5.2.6 and 5.2.8 (Operating Reserve & Reactive Services Lost Opportunity Cost Credits) to limit lost opportunity cost compensation to the lesser of a unit’s economic maximum or maximum facility output as approved in FERC Docket ER13-1200.
Section 7.2 (Shortage Pricing) amended to incorporate calculation details for non-synchronized reserve market lost opportunity costs.
Modifies section 5.3 (Operating Reserve) to correct errors and provide clarifications on exempting deviations during shortage conditions and revisions for associating interfaces to the East or West BOR regions.
Modifies sections: 5.2.3 to incorporate details of Lost Opportunity Cost Credit for Synchronous Condensing; 5.2.6 (Wind Lost Opportunity Cost) to align language with Tariff; 17.3 (Allocation of Annual and Monthly FTR Auction Revenues) to correct section reference.
PJM transmission planners have identified more than $800 million in reliability upgrades for inclusion in the Regional Transmission Expansion Plan (RTEP), officials told members last week. Costs are likely to exceed $1 billion once all projects are tallied.
The upgrades, outlined to the Transmission Expansion Advisory Committee Thursday, include 26 projects to address high voltage problems, 10 to fix load deliverability problems and four areas with short circuit problems.
Short Circuit Upgrades
The biggest single reliability project is likely to be one addressing the short circuit problem in the PSE&G transmission zone outside New York City.
The 2012 PJM RTEP identified several buses in the PSEG zone where the fault currents exceed 80 kA. Potential solutions include upgrading stations to 90 kA and installing current limiting reactors.
Another possible solution being reviewed by PJM is to isolate the Hudson 230 kV from the 138 kV at Marion and 345 kV at Farragut. The 138 kV buses and transmission facilities on the path from Linden to Bergen would be converted to double circuit 230 kV or 345 kV lines. The 345 kV proposal is estimated to cost $1.1 billion but eliminates the need for $588 million of approved RTEP projects, resulting in a net cost of $515 million.
Also under consideration is a proposal to build parallel 700 MW high voltage DC converter stations, estimated at $800 million to $1.1 billion.
One member said PJM should open a proposal window to solve the issue. But PJM officials said they were unlikely to do so — meaning PSEG would have the right to construct the solution — because of the urgency of the problem.
“We will be hard pressed to get any solution by 2015,” said Paul McGlynn, general manager of system planning. “It doesn’t really lend itself to a proposal window.”
“The board has been concerned that this [problem] has been hanging on for quite a while,” added Steve Herling, PJM vice president for planning.
PJM staff is refining its cost analyses and performing additional load flow analyses. Any solution will have to accommodate PJM’s contract with NYISO for the so-called Consolidated Edison “wheel.” The wheel funnels 1000 MW from NYISO through PSEG and into New York City.
In addition to the PSEG short circuit project planners also identified “overstressed” circuit breakers in the Duke Energy Ohio and Kentucky (cost to be determined), Duquesne Light (cost TBD) and Jersey Central Power and Light Co. transmission areas (estimated cost $360,000).
High Voltage
Location of High Voltage Problems Identified by PJM (Source: PJM Interconnection, LLC; p. 11, RTEP Reliability Analysis, TEAC 7-10-13)
PSEG also figures prominently in upgrades to fix high voltage problems, with 13 projects with a total cost of $122 million. AEP had five projects totaling $17 million while AEC had two projects totaling almost $30 million. PEPCO, PPL, Jersey Central Power and Light, Allegheny Power System and PECO had upgrades ranging from $16 million to $4 million.
PJM’s Board of Managers will be asked to approve the high voltage projects in October, PJM officials said.
Load Deliverability
Twenty-five of 27 Locational Deliverability Areas (LDAs) passed the load deliverability test with no thermal or voltage issues while voltage violations were identified in the Penelec transmission zone resulting from the Penelec and Western MAAC load deliverability tests.
Planners identified 10 projects to solve the problems. One in PPL is estimated at $84.5 million and another in Atlantic City Electric Co. at $11.2 million. Costs of the remaining projects, one in Delmarva Power and Light and seven in PEPCO, have not been estimated.
PJM spokeswoman Paula DuPont-Kidd said the RTO began posting the information in response to frequent requests from members. PJM decided to make the information publically available because releasing it to individual companies would provide them a competitive advantage. “It’s mostly for marketers who use it for the day ahead and real-time markets,” she said.
Temporary rating changes are made throughout the day, most of them resulting from system conditions and having operational impacts. The expanded information included details to indicate the provisional status of requests. A list of reasons for ratings changes also was posted.
Beginning July 31, the postings will be updated at 11 a.m. and 1 p.m. daily.
PJM contact: Michael Zhang, PJM Operations Support
PJM began its first RTO-wide solicitation for black start service July 1, with proposals accepted through Sept. 30.
Respondents to the request for proposals (RFP) must be capable of: starting without an outside electrical supply; closing their output circuit breakers to a de-energized bus within three hours or less; maintaining frequency and voltage under varying load, and maintaining rated output for a specified time, typically 16 hours.
Existing black start providers do not need to submit proposals.
The RFP is one of the recommendations of the System Restoration Strategy Task Force, which also increased the pool of potential resources through revisions to the definitions for black start units and critical load to be served by them.
PJM expects to lose some existing black start capacity by 2015 as a result of the planned retirements of coal-fired generators squeezed by EPA regulations and low natural gas prices.
PJM announced this morning that the Board of Managers has approved a new contract with Monitoring Analytics, PJM’s independent market monitor. The contract, which must be approved by the Federal Energy Regulatory Commission, runs through 2019.
The contract ends — for the time being, at least — the latest dust-up among PJM and its stakeholders over the independence of the market monitoring function.
In March, states, industrial consumers and cooperatives protested the board’s plan to issue a request for proposals for monitoring services. The stakeholders said the board’s proposed RFP contained language that would undermine the independence and quality of the monitoring function. They also expressed concern that PJM would suffer a loss of institutional knowledge if it replaced Monitoring Analytics, LLC, which has been operating as the Market Monitor under the terms of a 2008 FERC settlement (EL07-56).
The board responded in April by announcing it was negotiating a new contract with the company and dropping plans to put the contract out for bid.
On July 2, however, the Organization of PJM States, which represents state regulators, sent a letter to the board complaining that it had not been consulted in the drafting of the new contract.
“We are frankly baffled by an apparent reluctance on the part of the board to consult with OPSI on the new contract language prior to the execution of the contract,” wrote Maryland Public Service Commissioner Lawrence Brenner, chairman of OPSI’s market monitoring committee. “…As a procedural matter it is doubtful that FERC created the OPSI Advisory Committee if the only beneficiary of its advice was to be the commission itself.”
Brenner told RTO Insider today that OPSI received a copy of the 19-page contract after it was signed July 8. He said OPSI may work with PJM and the monitor to address its concerns in PJM’s filing seeking FERC approval of the contract.
“There are a couple areas where we’ve suggested that some clarification would be helpful,” he said. He declined to go into specifics, saying he was speaking for himself and not OPSI.
Asked what OPSI’s exclusion from the negotiations said about its relationship with PJM, Brenner said “I wouldn’t read too much into it. We have a pretty good relationship with the board.
PJM President and CEO Terry Boston said in a statement that “robust, independent monitoring services are essential to PJM’s ability to administer fair and efficient wholesale electricity markets.
“The competency, integrity and analytical capability of the Monitoring Analytics staff is well known and appreciated at PJM and we look forward to continuing to work productively with them for the benefit of the region we serve.”
Monitoring Analytics President Joseph Bowring also issued a statement, saying “We look forward to a productive relationship with the board, with PJM and with PJM members in the coming years.”
A Ph.D. economist, Bowring has served as PJM’s market monitor since 1999. At a FERC technical conference in 2007, Bowring accused then-PJM President Phil Harris and his allies of attempting to muzzle him by squelching his reports and cutting his budget. Following an investigation, Harris resigned and FERC approved a settlement in which Bowring formed Monitoring Analytics and was awarded a six-year contract. The contract was worth about $10 million per year.
Brenner said yesterday that OPSI will be looking closely at the new contract provisions that govern the balance between the monitor’s independence and the board’s right to provide oversight of its performance.
“Both the market monitor and PJM tell us that the negotiations were very respectful and not contentious,” Brenner said. “All those things are a change from some years ago.”
PJM’s first competitive transmission project under FERC Order 1000 attracted proposals from five utilities and three independent developers.
Salem and Hope Creek Nuclear Reactors on Artificial Island. Photo Taken By Peretz Partensky from San Francisco, USA [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons
The proposals – to correct stability issues at Artificial Island, home of the Salem and Hope Creek nuclear plants, in Hancocks Bridge N.J. – ranged from a new 230 kV line and station (estimated cost $116 million) to two new 500 kV lines (a projected $1.5 billion price tag).
The Federal Energy Regulatory Commission’s Order 1000 eliminated incumbent utilities’ Right of First Refusal on construction and operation of new transmission projects, opening the business to competition from independent transmission developers.
The diversity of technical solutions and cost estimates submitted for the Artificial Island project appears to validate FERC’s prediction that competition could reduce costs and increase innovation in transmission development.
In all, 26 proposals were submitted, led by PSE&G with 14 alternatives. Transource Energy, a partnership between American Electric Power and Great Plains Energy (owner of Kansas City Power & Light Co.), submitted four proposals, while Virginia Electric and Power Co. submitted three and LS Power offered two. FirstEnergy Corp., Atlantic Wind Connection and a partnership between Pepco Holdings Inc. and Exelon Corp. each made a single proposal.
PJM planners will evaluate the proposals through analyses including thermal and short circuit studies.
Here is a summary of the proposals which were outlined to the Transmission Expansion Advisory Committee on Wednesday:
Atlantic Wind: Install a HVDC converter station near Artificial Island; Install a SVC at the new Artificial Island HVDC station; Install a HVDC converter station near the existing Cardiff 230 kV; Install a 320 kV HVDC facility from the Artificial Island HVDC station and the HVDC station near Cardiff 230 kV. Cost: $1.012 billion.
FirstEnergy: Install a new, New Freedom – Smithburg 500 kV line with a loop into the Larrabee 500 kV; Install two new 500/230 transformers at Larrabee; Install a Hope Creek – Red Lion 500 kV line. Cost: $452.3 million (cost submitted does not cover entire project).
LS Power: Two proposals:
Least Expensive: Install a new Salem – Silver Run 230 kV line with a 500/230 kV transformer at Salem; Install a new 500/230 kV station that taps the existing Red Lion – Cedar Creek 230 kV and Red Lion – Cartanza 230 kV lines. Cost: $116 to $148 million.
Most Expensive: Install a new Salem – Red Lion 500 kV line. Cost $170 million.
PHI/Exelon: Install a new Peach Bottom – Keeney – Red Lion – Salem 500 kV line; Remove existing Keeney – Red Lion 230 kV circuit; Reconfigure the existing 230 kV line from Hay Road – Red Lion (23020) to terminate at Keeney instead of Red Lion; Re-conductor the Harmony – Chapel Street 138 kV line. Cost: $475 million.
PSE&G: 14 proposals.
Least expensive: Install a new New Freedom – Deans 500 kV line; Install a new Salem-Hope Creek 500 kV line. Cost: $692 million.
Most expensive: Install new New Freedom – Whitpain North 500 kV line; Install a new Salem-Hope Creek-Red Lion 500 kV line. Cost: $1.548 billion.
Transource: Four proposals.
Least expensive: Install a new Salem – Red Lion 500 kV line. Cost: $123 to $156 million.
Most expensive: Install a new New Freedom – Lumberton – North Smithburg 500 kV line with new 500/230 sub east of Lumberton. Cost: $788 to $994 million.
Virginia Electric and Power: Three proposals.
Least Expensive: Install a new 500 kV line from Salem 500 kV to a new station in Delaware; Install a new station in Delaware that taps the existing Red Lion – Cartanza 230 kV and Red Lion – Cedar Creek 230 kV lines. Cost: $126 million.
Most expensive: Install a new 500 kV line from Hope Creek 500 kV to a new station in Delaware; Install a new station in Delaware that taps the existing Red Lion – Cartanza 230 kV and Red Lion – Cedar Creek 230 kV lines; Install a new Salem – Hope Creek 500 kV line. Cost: $202 million.
![Salem and Hope Creek Nuclear Reactors on Artificial Island. Photo Taken By Peretz Partensky from San Francisco, USA [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons](/ext/resources/2013/09/Salem_and_Hope_Creek_Nuclear_Reactors_7238282472.jpg)