Page 1702 – RTO Insider

July 23, 2013

FERC Rejects PSEG Frequency Compensation Challenge

The Federal Energy Regulatory Commission last week accepted PJM’s revised plan for compensating frequency response providers, rejecting a rehearing request from PSEG Companies.

The commission’s order concerned PJM’s January 15 compliance filing in response to Order 755, which required regional transmission operators (RTOs) and independent system operators (ISOs) to institute a two-part payment method for compensating frequency regulation resources. The order required RTOs and ISOs to make a capacity payment for making the resource available when needed and a performance payment based on the amount of work performed in response to the system operator’s dispatch signal.

PJM’s January 15 submission — its third compliance filing in response to Order 755 — addressed FERC’s November 16 ruling that PJM’s methodology would allow resources to be paid differently even when their performance is comparable.

PSEG asked the commission to reconsider the November order, arguing that PJM’s use of a “benefits factor” in determining compensation was unjust and unreasonable. The commission rejected PSEG’s challenge on procedural grounds Thursday, saying it raised issues settled in a previous order.

The commission also said PSEG failed to support its argument that PJM’s methodology would lead to overpayments to regulation resources, saying the company “has neither demonstrated when overcompensation occurs nor how it ought to be measured.”

The commission decided in PSEG’s favor on one point, saying PJM had failed to fully comply with its November order. The commission ordered PJM to make an additional compliance filing within 90 days that revises a section of its Operating Agreement.

July 23, 2013

FERC Proposes Revised Communication, Business Rules

The Federal Energy Regulatory Commission (FERC) Thursday endorsed revised business practices and communication standards to comply with commission Orders 890 and 676.

The Notice of Proposed Rulemaking (RM05-5-022) would accept version 3 of the standards, which were drafted by the North American Energy Standards Board (NAESB).

In Order 890 and companion orders (order 890-A through 890-C), the commission added greater specificity and transparency to the pro forma Open Access Transmission Tariff (OATT) created in Order 888.

Order 676 adopted business practices and communication protocols as well as creating a process for reviewing and upgrading the Commission’s OASIS rules and other wholesale electric industry business practices.

Among the topics covered in version 3 are: Service across multiple transmission systems (SAMTS); network integration transmission service (NITS); rollover rights for redirects and available transfer capacity (ATC) credits; gas/electric coordination and smart grid standards (defining use cases, data requirements, and a common model to represent customer energy usage).

Comments on the proposals will be accepted for 60 days after publication in the Federal Register.

July 23, 2013

Talk among Yourselves: FERC Urges Gas-Electric Communication

Federal regulators moved Thursday to give gas pipeline operators explicit permission to exchange non-public operational information with PJM and other RTOs.

The Federal Energy Regulatory Commission approved a Notice of Proposed Rulemaking (RM13-17) that it said would improve planning and reliability by revising the commission’s Standards of Conduct.

The proposed rule is the first regulatory change by FERC since it began an inquiry on gas-electric interdependence in February 2012 (AD12-12-000) due to concerns over gas-fired generators obtaining reliable fuel supply during the winter heating season.

While the commission has urged increased communication between gas pipelines and electric grid operators, numerous parties filed written comments or told FERC at regional conferences that they feared sharing operational information would run afoul of commission rules.

The Interstate Natural Gas Association of America (INGAA), for example, told FERC that pipelines could be accused of violating the Natural Gas Act’s prohibitions against undue discrimination for providing a grid operator with non-public transmission information without simultaneously disclosing that information to all other shippers or potential shippers.

Communication Permitted

As a result, the commission said last week, it was proposing revisions to its Standards of Conduct rules to provide assurances. “This is just to clarify that this [communication] is permitted under our current regulations,” said Commissioner Cheryl LaFleur.

Natural gas generation provided nearly 19% of PJM’s electricity in 2012, a nearly 40% jump over its production in 2011. In ISO-NE, natural gas’ share has increased ten-fold in 20 years, from 5% in 1990 to 51% in 2011.

Commissioners said they expect to take additional actions to prevent a collision between the needs of gas heating customers and gas-fired electric generators.

“We’re going to get a cold winter one of these years and we have to make sure we have enough energy to go around,” said Commissioner Philip Moeller.

The new regulations, (proposed sections 38.3(a) and 284.12(b)(4) of the commission’s regulations) would allow electric grid operators and gas pipelines to share non-public information for reliability and operational planning. In a presentation, commission staff said information sharing should be the rule “not just during emergencies, but also for day-to-day operations, planned outages, and scheduled maintenance.”

No List

The NOPR does not propose a list of non-public, operational information that can be shared, but gives examples, including:

real-time and anticipated system conditions with potential to change gas flows;
actual and anticipated electric service interruptions to gas compressor locations;
actual and projected gas transportation restrictions to electric generators;
real-time flow and operational capacity data at receipt and delivery points;
nominated and scheduled quantities of shippers who are or who supply gas-fired generators; and,
scheduled dates and duration of generator, pipeline, and transmission maintenance and planned outages.

Assurances

Much of the NOPR explains why communications between the two industries does not violate applicable rules and laws.

It notes, for example, that the commission’s Standards of Conduct apply to communications only within the same organization and do not limit communications between unaffiliated pipelines and electric transmission providers.

It also notes that the Federal Power and Natural Gas acts only prohibit “undue” preferences, advantages and prejudices. “A difference in treatment is not unduly discriminatory when the difference is justified,” the commission said.

The undue discrimination provisions are intended to ensure equal treatment for “similarly situated” customers.

“Transmission operators are not similarly situated to other customers because they require access to non-public scheduling and other types of information from a variety of sources to help them ensure the reliability and integrity of the transportation and transmission systems. In addition, natural gas pipelines are generally not customers of electric transmission operators. Likewise, in the case of RTOs/ISOs, they are not shippers on pipelines,” the commission said.

The commission also noted that gas pipelines and electric transmission operators have long shared non-public information with their counterparts. “For example, pipeline operators routinely exchange nomination and scheduling information with other pipeline operators and with upstream and downstream entities (that may be shippers on the pipeline) to confirm transportation nomination requests and to coordinate flows between the parties. Transmitting electric utilities similarly coordinate the sharing of non-public interchange schedule information on a routine basis through mechanisms such as, for example, e-Tags.”

No-Conduit Rule

The NOPR includes a “No-Conduit Rule” to prohibit recipients of non-public information from relaying that information to marketing employees or others who could profit from it.

Comments will be accepted for 30 days after posting of the NOPR in the Federal Register.

FERC contacts:

Technical Information: Caroline Daly, Office of Energy Policy & Innovation, (202) 502-8931, caroline.daly@ferc.gov

Legal Information: Anna Fernandez, Office of the General Counsel, (202) 502-6682, anna.fernandez@ferc.gov

July 23, 2013

FERC Rebuffs PSEG on PJM Transmission Modeling

The Federal Energy Regulatory Commission Thursday rejected PSEG’s challenge to PJM’s procedure for selecting new transmission projects, saying the company had failed to prove that PJM’s methodology was “tantamount to black box decision-making.”

PSEG had asked the commission to reconsider its November 29 order accepting revisions to PJM’s Operating Agreement that clarified how the RTO will use sensitivity studies, modeling assumptions and scenario planning analyses in developing its Regional Transmission Expansion Plan (RTEP).

PSEG asked FERC to require PJM to provide more details on how it will decide what scenarios to utilize and how to weight them.

The commission said, however, that PJM’s revisions “strike an appropriate balance between the need for PJM to maintain some flexibility … and the need for sufficient detail in the tariff to allow stakeholders to participate in the planning process.

“The process is not a `black box’ but an open and transparent process into which PSEG and all PJM stakeholders have the opportunity to provide input,” the commission ruled.

FERC also rejected PSEG’s request for additional safeguards to maintain cost controls market efficiency transmission projects modified as a result of sensitivity and scenario analyses. The commission noted that the revised agreement did not eliminate the cost benefit test that such projects must pass before approval.

PSEG did “not provide any concrete examples of how a lack of `limits to the extent to which an existing reliability or market efficiency project may be modified as a result of sensitivity and scenario studies’ puts PJM’s cost control measures at risk,” the commission said.

PSEG also requested that PJM align its RTEP process with the design of its forward capacity market, saying PJM’s “generation-related assumptions” in the RTEP should “be the same as the assumptions underlying the various [capacity] auctions.”

The commission rejected that request as outside the scope of the proceeding. It said PSEG should raise such questions within PJM’s stakeholder process or through a separate section 206 complaint to the commission.

July 23, 2013

FERC OKs Reliability Standard, Proposes Two Others

The Federal Energy Regulatory Commission Thursday gave final approval to one reliability standard and opened for comment two others.

The commission issued a final rule on the North American Electric Reliability Corp.’s Modeling, Data, and Analysis standard (MOD-028-2; Docket No. RM12-19-000). The rule clarifies the timing and frequency of total transfer capability measurements, which are needed to calculate a transmission provider’s available transfer capability.

In addition, the commission issued Notices of Proposed Rulemaking for two proposed NERC standards: Frequency Response and Frequency Bias Setting (BAL-003-1; Docket No. RM13-11-000) and Protection System Maintenance Reliability Standard (PRC-005-2; Docket No. RM13-7-000), in compliance with directives from FERC Order 693.

Frequency Response

The BAL standard includes requirements for the measurement and provision of frequency response, filling a gap in current standards.

The rule will establish a minimum frequency response obligation for each Balancing Authority, provides a uniform calculation of frequency response, establishes frequency bias settings that establish values closer to actual Balancing Authority frequency response, and encourages coordinated automatic generation control (AGC) operation.

The commission said it will require NERC to submit an analysis of the availability of frequency response resources during the first year of the rule’s implementation. If Balancing Authorities are unable to meet their obligations, NERC will be required to recommend changes to improve compliance.

The commission also said it will require NERC to revise the standard to address concerns over the withdrawal of primary frequency response before activation of secondary frequency response. The premature withdrawal can lead to under-frequency load shedding and possible cascading outages.

Protection System Maintenance

The proposed PRC standard details required maintenance and maintenance schedules for protection systems and load shedding equipment.

It will supersede four existing standards, PRC-005-1.1b (Transmission and Generation Protection System Maintenance and Testing), PRC-008-0 (Underfrequency Load Shedding Equipment Maintenance), PRC-011-0 (Undervoltage Load Shedding Equipment Maintenance) and PRC-017-0 (Special Protection System Maintenance and Testing).

July 23, 2013

Offshore Wind: Lease Sale Set for VA; Setback for NJ Project

It was one step forward and one step back for PJM’s offshore wind hopes as federal officials announced the auction of 112,800 acres off Virginia while New Jersey regulators rejected a deal with developers of a proposed Atlantic City wind farm.

The Interior Department’s Bureau of Ocean Energy Management said yesterday it will conduct an auction Sept. 4 for an area 23.5 nautical miles off Virginia Beach with potential wind generation of more than 2,000 megawatts. The online auction will use an ‘‘ascending clock’’ format in which BOEM sets an asking price and increases it in steps until only one bidder remains.

Eight companies have been prequalified to bid: Apex Virginia Offshore Wind, LLC; Virginia Electric and Power Company (“Dominion Virginia Power”); Energy Management, Inc.; EDF Renewable Development, Inc.; Iberdrola Renewables, Inc.; Sea Breeze Energy, LLC; Orisol Energy U.S., Inc. and Fisherman’s Energy, LLC.

Interior Secretary Sally Jewell said the Virginia lease marks the “transition from planning to action when it comes to capturing” offshore wind’s potential.

But as RTO Insider pointed out in a June 25 Special Report, the high cost of offshore wind means PJM is unlikely to see any turbines in the water without significant changes in state and federal energy policy. Report (See The Siren Song of Offshore Wind: Cost, Political Obstacles Slow Progress Despite Huge Potential )

Exhibit A is Fishermen’s Energy’s proposed 25 MW pilot project off Atlantic City.

On Friday, the New Jersey Board of Public Utilities voted unanimously to reject a proposed deal between the developer and the Division of Rate Counsel to allow the project to proceed.

In 2010, New Jersey enacted a law committing the state to purchase 1,100 MW of offshore wind by 2020. Ratepayers would subsidize the cost of the above-market energy from the plant through Offshore Renewable Energy Certificates (OREC).

‘Net Benefits’ Test

BPU won’t award ORECs, however, unless it is convinced that a wind farm’s economic and environmental benefits exceed its costs.

The Rate Counsel, which represents ratepayers before the BPU, previously had opposed the Fishermen’s project for failing to meet the “net economic benefit” test. But Rate Counsel dropped its opposition after negotiating reductions in the projected rates from the project.

The board rejected the Rate Counsel’s deal with the developers Friday, saying that a proposed $19 million contingency fund — which would have made ratepayers liable if the project failed to receive $100 million in potential federal grants and tax incentives — violated state law.

“The only way ratepayers …can be at risk of paying for the cost of the project is through the ORECs,” BPU spokesman J. Gregory Reinert told RTO Insider.

Rate Counsel Director Stefanie Brand told RTO Insider she disagrees with BPU’s legal analysis. She said the stipulation reduced the projected ratepayer costs of the project by 40%. “It went from being one of the most expensive offshore wind projects [in the U.S.] to one of the cheapest,” she said.

The board’s action is not the final word on the project. If developers and Rate Counsel cannot reach agreement with the BPU, the case could go to an evidentiary hearing later this year.

July 23, 2013

FERC Rule Boosts Storage, Renewables

By Rich Heidorn Jr.

Renewable generators will have more sources of balancing services and electric storage providers will be more competitive in the regulation market under a final rule approved by the Federal Energy Regulatory Commission Thursday.

The commission said the new rule (Order 784, Docket Nos. RM11-24, AD10-13) will improve competition and transparency in ancillary services markets at a time when the growth of wind power and other intermittent sources is increasing the need for imbalance services. The commission said the new rule “enhances the overall opportunities for third-parties to compete to make sales of ancillary services while continuing to limit the exercise of market power.”

The rule requires PJM and other transmission providers to consider speed and accuracy in acquiring regulation resources, removes obstacles to selling such services at market-based rates and creates new accounting categories for tracking investments in electric storage.

The ruling, which takes effect 120 days after publication in the Federal Register, will make it easier for batteries, flywheels and other emerging technologies to compete against slower-responding gas- and coal-fired generators to provide regulation and other services.

In addition, “Because most generation-based ancillary services can be provided by many of the generators connected to the transmission system, some customers may be able to provide or procure such services more economically than the transmission provider can,” the commission said.

The Electricity Storage Association hailed the rule as a “major victory.”

“The effects of this rule are simple – there will be more deployment of technology, stronger investments in projects, and a broader demonstration of the benefits of energy storage to the grid,” Judith Judson, chair of the trade group’s Advocacy Council and director of emerging technologies at Customized Energy Solutions, said in a statement.

FERC Chairman Jon Wellinghoff told reporters in a press briefing the rule is designed to increase “efficiency and opportunity” and is “extremely important” to wind generators, which need imbalance services to compensate for their fluctuations in output.

“Our job isn’t to incent any particular technologies,” Wellinghoff said. “Our job is to ensure that markets are open and transparent and fair to all technologies.”

Impact on Frequency Regulation

FERC’s pro forma OATT requires transmission customers to purchase regulation and frequency response service at cost-based rates from the public utility transmission provider or to “make alternative comparable arrangements” to self-supply the service, either through their own resources or purchases from third-parties.

The new ruling builds on FERC’s 2011 Order 755, which increased the pay for fast responding frequency regulation sources such as batteries and flywheels in PJM and other regions with independent system operators.

The rule requires transmission providers, including those outside of ISO regions, to share with customers their reasoning and any related data used to determine whether the customer has made “alternative comparable arrangements.” To ensure “apples-to-apples” comparison of regulation resources, the rule also requires transmission providers to post on OASIS historical one-minute and ten-minute Area Control Error data for the most recent calendar year, and update this posting annually.

The commission said the changes were needed to prevent transmission providers from requiring customers to purchase more regulation reserves than necessary.

The changes are good news to companies such as Beacon Power, LLC, which says its storage flywheels can respond nearly instantaneously to operator control signals — up to 100 times faster than traditional generators. Beacon cited a recent study for the California Energy Commission which found that a 30-50 MW fast-response storage device could provide as much or more regulation capability than a 100 MW combustion turbine.

Beacon last month announced the beginning of construction on a 20-megawatt flywheel energy storage plant in Hazle Township, Pennsylvania that will compete in PJM’s regulation market. The company expects to put 4 MW into commercial operation in September, with the full 20 MW plant operational in the second quarter of 2014. The company’s 20 MW plant in in Stephentown, New York, competes in NYISO’s regulation market.

Avista Policy Revised

In addition to attempting to level the playing field in the regulation market, the order eliminates barriers to competition for several other ancillary services by revising the commission’s Avista policy.

The Avista policy allowed third-party ancillary service providers to sell regulation and frequency response, energy imbalance service and operating reserves at market-based rates without performing a market power study. The policy was based on preventing market power through the “backstop” of cost-based ancillary services from transmission providers; thus market-based sales to PJM and other regional transmission organizations and independent system operators which have no ability to self-supply were prohibited.

The commission said it now concludes that the Avista rule created unreasonable barriers to entry by potential suppliers. The new order allows resources with market-based rate authority for sales of energy and capacity to sell the following ancillary services at market-based rates:

Energy imbalance service: Can sell at market-based rates to transmission providers with intra-hour scheduling (Paragraph 31 of the order). Transmission providers are required by Order 764 to offer intra-hour scheduling by Nov. 12, 2013.

Operating Reserve – Spinning Reserve and Supplemental Reserve services: Can sell at market-based rates to transmission providers with intra-hour scheduling that supports delivery of operating reserves from one Balancing Authority to another. (P 54)

Reactive supply and voltage control: The commission said it could not allow such market-based sales of regulation and frequency response service and reactive supply and voltage control, however, because the resources capable of providing those services are more limited than those supplying energy and capacity, leaving those markets more at risk to market power. The commission said it will continue to study ways to further open these markets to competition in a new proceeding. (P 55)

Competitive solicitations

In the meantime, the commission said sales of such services can be made at or below the transmission provider’s OATT rate, or at market-based rates resulting from a competitive solicitation. (P 13)

Such solicitations must be transparent (“open and fair”) and competitive (“adequate seller interest”), with precise definitions of the products sought. (P 95) The solicitation will be subject to an independent third-party review if the buyer solicits offers from one or more of its affiliates. (P 100)

Accounting Rules for Energy Storage

The third major component of the new rule was FERC’s addition of new electric plant and operation and maintenance expense accounts for energy storage devices.

The commission said the new accounts will help state and federal regulators ensure that utilities don’t obtain excessive rate recovery by seeking reimbursements under both cost-based and market-based rates for a single energy storage asset.

July 16, 2013

Capacity Supply Curve Review Gets MIC OK

The Market Implementation Committee last week approved an issue charge to consider modifying the algorithm used for publishing supply curves from the annual capacity auction.

The vote followed MIC’s approval in June of a problem statement by Jason Barker of Exelon to seek improvements to the supply curve currently produced by the Market Monitor, which masks individual price-quantity offers. Barker said the current curves — a compromise intended to balance transparency against disclosure of commercially sensitive data — aren’t accurate enough for use in analysis. (MIC Seeks Better Way to Draw Capacity Supply Curve.)

Comparison of PJM Market Monitor's Current Capacity Supply Curve & Proposed Revision (Source: Marketing Analytics) — Comparison of PJM Market Monitor’s Current Capacity Supply Curve & Proposed Revision (Source: Marketing Analytics)

The current method is the result of a Federal Energy Regulatory Commission order in a dispute over PJM’s proposal to publish price-quantity pairs after the 2010 Base Residual Auction. Constellation Energy and the monitor said that the data could be used to reconstruct participants’ offers in the SWMAAC locational deliverability area because of the concentration of generation ownership.

“We’re not opposed to providing additional granularity in the supply curve,” Market Monitor Joseph Bowring told MIC last week. But he cautioned that the FERC order made clear the commissioners’ “preference to err on the side of not providing information that could result in market power and collusion.”

A presentation by the monitor concluded that the moving average alternative suggested by Exelon is “unlikely to pass through the point at which supply equals demand because supply is an increasing function.”

Instead, Bowring offered an alternative to divide the supply curve into segments of equal megawatts, plot the average price within each segment and force the adjusted line through the clearing point. The monitor said the proposal will more closely track the true offer curve as the magnitude of jumps in supply decreases.

July 16, 2013

FE Closing Two PA Coal Plants Due to Air Regs

FirstEnergy Corp. announced July 9 it will close two coal-fired generators with 2,080 MW of capacity by October 9 because it would be too expensive to retrofit them to meet federal environmental rules.

Hatfield's Ferry Power Plant (Source: FirstEnergy) — Hatfield’s Ferry Power Plant (Source: FirstEnergy)

FirstEnergy spokesman Jennifer Young said the decision to close Hatfield’s Ferry, in Masontown, Pa., and Mitchell, in Courtney, Pa., was based on the cost of complying with current and anticipated environmental regulations during a time of low wholesale power prices.

The closure was the first announced in PJM since the Obama administration’s June 25 announcement that it will draft greenhouse gas regulations for existing generating plants.

Timing Coincidental

Young said the timing of the two announcements was coincidental. The $275 million it would cost to bring the two plants into compliance with the Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS) was what triggered the closing, FirstEnergy officials said.

FirstEnergy’s announcement followed NRG Energy’s decision, announced May 15, to accelerate the closing of five coal-fired units in Pennsylvania. The shutdown of Portland units 1 and 2 (401 MW) will be moved from January 2015 to June 1, 2014, while Titus units 1, 2, and 3 (243 MWs) will close Sept. 1 – more than a year and a half earlier than originally planned. Both are in the MetEd transmission zone.

Mitchell Power Plant (Source: FirstEnergy)

The closing of Hatfield’s Ferry and Mitchell will eliminate 380 jobs and reduce FirstEnergy’s generating capacity by about 10%. FirstEnergy’s 18,000 MW generating fleet after the deactivations will still be dominated by coal (56%), with big contributions from nuclear (22%), followed by renewables (13%) and gas/oil (9%).

FirstEnergy announced the closing of nine coal plants last year. The company expects to invest approximately $650 million to bring five other coal-fired plants into compliance with MATS: the Bruce Mansfield Plant in Pennsylvania; Harrison, Pleasants and Fort Martin plants in West Virginia, and the Sammis plant in Ohio.

NRG Closures

NRG and GenOn Energy, which merged last year, are idling nine coal-fired plants through 2015.

NRG is closing the Portland plant as part of a settlement with the states of New Jersey and Connecticut over plant’s air emissions. The company cited environmental compliance costs in the closing of the Titus plant. The plants employ 140 workers.

NRG announced June 24 that it will convert two coal-fired plants, Avon Lake in Ohio (732 MW) and New Castle in Pennsylvania (330 MW) to natural gas. The plants had been scheduled for deactivation in April 2015. Although the repowered plants will have the same peak output, their capacity factors will likely drop as they are dispatched as peaking plants, NRG spokesman David Gaier said yesterday.

Gaier said that the company is evaluating whether to convert Portland to natural gas. Titus is too small and unprofitable to be a candidate for repowering, he said.

Non-Utility Generation Closures

PJM also learned recently of the unrelated closing of two small non-utility generators. The Piney Creek NUG (31 MW) in PenElec told PJM June 25 that it had closed April 12. The Koppers NUG (8 MW) in the PPL transmission territory, notified PJM July 1 that it plans to close Sept. 30.

In all, PJM expects the closure of about 13,000 MW of generation through October 2015.

July 16, 2013

Second Incremental Auction Opens

The 2014/2015 2nd PJM incremental auction opened yesterday and will run through 5 p.m. Friday.

Existing PJM generators with available capacity are required to participate in the auction.

Suppliers must confirm the modeling of their capacity resources before their sell offers are accepted for the auction.

Generation, demand response and energy efficiency resources must confirm zone assignment, locational deliverability area (LDA) and product type. Generators also must verify unit location by state, unit type and fuel type. Instructions for confirming resource modeling and entering offers bids are available in the eRPM User Guide. See also Frequently Asked Questions on incremental auctions.