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November 1, 2024

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FERC Orders ISO-NE to Reconsider Market Power Mitigation Rules

FERC last week ordered ISO-NE to reconsider its market power mitigation rules to address an “unanticipated and highly atypical” situation that Dynegy Marketing and Trade said caused it to lose more than $900,000 during the December winter storm.

In partly granting Dynegy’s request for recovery of more than $903,000 in costs, the commission’s May 5 order also instituted a show-cause proceeding under Federal Power Act Section 206 requiring the RTO to revise or defend its current rules (ER23-1261, EL23-62).

Dynegy Marketing and Trade, which was acquired by Vistra (NYSE:VST) in 2018, operates the Bellingham, Blackstone, Lake Road, Milford, Casco Bay/Independence and Masspower natural gas-fired generation stations in New England.

On the morning of Dec. 24, ISO-NE’s Internal Market Monitor determined that the size of Dynegy’s fleet relative to the system supply margin made the company a “pivotal supplier” that could potentially exercise market power.

This “structural” test is one of three screens ISO-NE uses to identify potential market power. The RTO’s “conduct” test determines if the participant offered the resource at a price above its “reference level” — a unit-specific price based on its cost of operations — by a certain threshold. The RTO’s “impact” test determines if the resource changed LMPs by more than 200% or $100/MWh, whichever is lower.

Resources that fail all three tests are subject to mitigation, with the duration of the mitigation determined only by the structural test — meaning that even after a resource’s offers no longer exceed the reference level plus threshold, it remains mitigated until it is no longer a pivotal supplier.

Pivotal Supplier

ISO-NE found that Dynegy was a pivotal supplier during hour ending (HE) 1 through HE19 on Dec. 24, resulting in the RTO mitigating “several” of its resources in the real-time energy market, causing them to under-recover their actual real-time energy market costs as natural gas prices rose in intraday markets.

Dynegy said its under-recovery occurred during intervals in which its supply offers were mitigated to lower reference levels and its resources were uneconomically dispatched higher than they would have been without mitigation (“downward price mitigation”).

The company also had offered segments of its supply curves below reference levels, but the IMM mitigated them to the higher reference levels (“upward price mitigation”), pushing Dynegy’s units out of merit and resulting in lower dispatch levels than the company had expected based on prevailing LMPs. Dynegy also said it under-recovered costs in those hours because it was required to buy back its day‐ahead awards.

The company supported its request with an affidavit from consultant Bill Fowler, a longtime ISO-NE stakeholder, who said he had never before seen the use of upward mitigation, nor heard it discussed in stakeholder processes that developed the current rules.

“If a generator is watching its offers being mitigated [in real time] to higher price levels, with the result being unit output is driven to lower megawatt levels than it desires, the generator no longer has an economic incentive to follow the ISO’s dispatch instructions as required, as it would be more profitable to self-dispatch to the higher megawatt levels,” Fowler said.

The tariff calls for mitigation to continue until a complete hour passes during which the pivotal supplier test is no longer exceeded.

As a result, said Fowler, Dynegy’s “offers became meaningless: They would be mitigated to reference until the [pivotal supplier test] condition was over. Adding to the problem, the mitigation would extend to all offer segments, not just those that were above reference.”

Rules that increase offer prices defeat the purpose of market mitigation and undermine reliability, Fowler said. “It is in precisely these situations — with volatile gas prices in scarcity conditions — that we want generators to take extraordinary steps to find ways to secure additional fuel.”

Dynegy’s request for recovery was supported by the New England Power Generators Association but opposed by the Maine Public Advocate, the Massachusetts Attorney General and the Connecticut Office of Consumer Counsel.

Ruling

The commission granted Dynegy’s request to recover costs related to downward price mitigation and recovery of $62,600 in legal costs but denied its request to recover costs related to upward price mitigation, saying the latter recovery was not permitted by the tariff.

But the commission also said the tariff provision that allows ISO-NE to apply upward mitigation may be unjust and unreasonable and can result in “an illogical outcome.”

Raising a seller’s offer “may potentially lead to suboptimal dispatch, and may increase production costs, because when ISO-NE mitigated Dynegy’s offers to a higher level, the market clearing software dispatched Dynegy resources to lower output levels than would have occurred had Dynegy’s offers not been mitigated upward,” FERC said. “ISO-NE likely dispatched other, more expensive resources to higher output levels to replace the output from the Dynegy resources that were dispatched down.”

FERC gave the RTO 60 days to defend the rule or propose a remedy to its concerns.

It said the RTO should consider whether it is appropriate to mitigate a resource to the lower of its submitted offer prices or its reference level for a given offer segment, rather than automatically mitigating all of a resource’s submitted offer segments to reference levels.

ISO-NE also should consider whether its market power screens should continue testing for conduct and impact beyond the first hour that a portfolio of resources is determined to be pivotal and whether there are other scenarios in which participants would be precluded from recovering costs incurred in situations where their supply offers are mitigated upward, FERC said.

ISO-NE spokesman Matt Kakley said the RTO was reviewing the order and had no immediate comment on how it would respond.

Stakeholders will have 21 days to file comments following the RTO’s filing.

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PG&E Looks to Cut Costs of Undergrounding Lines

Pacific Gas and Electric is seeking ways to save time and money on its $25 billion plan to underground 10,000 miles of power lines in high fire-threat districts, CEO Patti Poppe said during a first-quarter earnings call Thursday.

Digging trenches that are 30 inches deep, six inches less than the utility’s longtime standard of 36 inches, will save $25 million this year as PG&E tries to underground 350 miles of line, Poppe said.

“We determined that 36 inches of cover is not required in most places, and there’s little evidence that incrementally deeper conduits are meaningfully safer or more reliable than slightly shallower conduits,” she said.

“While this may not seem like much, a 6-inch change in depth reduces the labor hours required to install our underground conduits and reduces the amount of spoils [excavated earth and rock] created during our trenching activities by approximately 17%,” she said.

Poppe said PG&E is exploring whether “it’s appropriate to put the conduits 24 inches deep, another 6 inches of potential savings, and we’re analyzing the entire undergrounding delivery process through a value stream mapping exercise to identify further opportunities for efficiency, better customer and co-worker engagement, and even more waste elimination.”

The undergrounding effort is part of PG&E’s wildfire mitigation plan (WMP) that it filed with the California Office of Energy Infrastructure Safety (OEIS) in March.

The utility announced its undergrounding plan in July 2021. That year it buried 73 miles of line, and in 2022 it undergrounded 180 miles. From 350 miles in 2023, PG&E plans to ramp up to 450 miles in 2024, 550 miles in 2025 and 750 miles in 2026.

“We will continue to build on this progress during the WMP cycle by undergrounding 2,100 miles of distribution lines in [high fire-threat districts] from 2023 to 2026, effectively eliminating the ignition risk for overhead lines in those areas,” the wildfire plan says. “Between 2023 and 2026, 87% of PG&E’s undergrounding work is planned for the top 20% of risk-ranked circuit segments, as identified by our risk models.”

PG&E intends to file a 10-year undergrounding plan this year with OEIS under the terms of Senate Bill 884, a bill approved last year that provides for expedited review of undergrounding plans submitted by large electrical corporations to OEIS and the California Public Utilities Commission.

Once filed, OEIS will have nine months to review the plan before passing it on to the CPUC, which will also have nine months to review it.

Reduced Miles and Costs

During a February earnings call, Poppe said PG&E had buried line last year for less than the $3.75 million per mile it had originally estimated and expects to bring down the cost of undergrounding to $2.5 million per mile by 2026 through efficiencies of scale and technical advances.

The utility also reduced the scope of its work, saying it would bury 2,300 miles of line by 2026, not the 3,600 miles it originally targeted.

In its 2023 general rate case, PG&E had asked the CPUC to approve nearly $10 billion for three years of undergrounding but revised that figure down to about $6 billion because of the decreased mileage.

Even with the reduced mileage and costs, critics have called the plan expensive and unrealistic.

The Utility Reform Network, a consumer watchdog group, said in a Jan. 23 brief to the CPUC that PG&E had lowered its mileage target because it knew it would not meet its initial undergrounding goals.

“PG&E itself has come to realize that those targets were unrealistic,” TURN said.

Nevertheless, the utility is “moving ahead with plans to underground 350 miles in 2023, at a forecast cost of approximately $1 billion,” TURN said. “PG&E appears committed to this path, even though it has not received any authorization from the commission for any rate recovery for its 2023 undergrounding proposal. Needless to say, PG&E’s undergrounding request is hugely controversial and subject to CPUC disapproval, in full or in part.”

TURN recommended that PG&E should focus its system hardening work on installing covered conductor, “a proven strategy” that would be less than a third of the cost of undergrounding.

PG&E, however, said in its WMP that undergrounding is key to its “stand that catastrophic wildfires shall stop.”

The utility’s overhead lines have been blamed for a series of wildfires starting in 2015 and extending through last year’s Dixie Fire, which burned close to 1 million acres. The fires included the 2018 Camp Fire, which leveled the town of Paradise, killed 84 people and drove PG&E to file for bankruptcy reorganization in January 2019.

PG&E equipment did not cause any large fires in 2022, which the utility partly credited to its use of enhanced fault-detection technology that quickly de-energizes lines when changes in current are detected, limiting ignitions. (See PG&E’s Distribution System Needs Replacing, Monitor Says.)

One result has been a gradual rise in PG&E’s stock price over the past year. Its shares had traded at around $9 to $12/share for more than two years after its emergence from bankruptcy in June 2020 but closed Friday at $17.27/share.

On Thursday, the company reported first-quarter GAAP earnings of $569 million, or 27 cents/share, compared with $475 million, or 22 cents/share, in the first quarter of 2022.

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NEPOOL PC Briefs: May 4, 2023

Historically Warm Last Winter

ISO-NE COO Vamsi Chadalavada on Thursday told the NEPOOL Participants Committee that New England’s overall energy demand was down during the past winter, coming in at approximately 29,300 GWh, compared to the 31,600 GWh average since 2010.

This is the lowest winter energy total reported by ISO-NE going back through 2010, punctuating a clear downward trend over this time period.

Chadalavada highlighted how the expansion of behind-the-meter solar energy, which has significantly outperformed ISO-NE projections in recent years, has helped to ease winter demand.

The low demand was also in part from abnormally high temperatures, which averaged 4.8 degrees Fahrenheit above “normal” — defined as the average temperature over the past 30 years — from December through February. This includes a 35-consecutive-day stretch of above-normal temperatures, nearly extending through the entire month of January.

These warm conditions could increasingly become the new normal in the region, as research has indicated that New England is warming faster than average global temperatures, with the greatest impacts being felt in the winter.

2023/24 Projection 

Looking forward to this coming winter, Chadalavada presented a variety of scenarios modeling the impacts of different severities on the grid. These generally found the region well positioned, with sufficient energy and capacity to meet demand in mild and moderate winter scenarios.

In the case of a harsher winter, with lower-than-normal overall temperatures and several extended cold stretches, the RTO projected that some capacity deficiency actions may need to be taken for a few days, but that emergency measures will likely not be necessary.

He also noted that the Inventoried Energy Program, which compensates generators for storing up to three days of fuel, will remain in place in the winters of 2023 and 2024.

Winter Without the Everett LNG terminal 

Chadalavada also presented the RTO’s modeling of the winter of 2024/25 with and without the LNG import terminal in Everett, Mass., owned by Constellation Energy. The reliability-must-run agreement for the Mystic generating plant, the terminal’s “anchor tenant,” will expire in June 2024. (See Narrow Set of Options for Retaining Everett LNG Terminal.)

The RTO, along with the gas distribution companies, have argued that the terminal is necessary for the reliability of the region’s gas and electric systems, while environmental groups have challenged this conclusion, saying that these needs could be covered by storage investments and demand response programs.

ISO-NE’s modeling, which looked at how the grid would perform under moderate and severe winter scenarios, found “limited exposure to energy shortfalls” without the terminal, compared to essentially no exposure to energy shortages with the terminal. The projected severity of the shortfall depends on the size of the fuel oil inventory and how much additional clean energy — offshore wind in particular — is added prior to the loss of the terminal.

Winter energy and peak load (ISO-NE) Content.jpgWinter energy and peak load in New England from 2010 to 2022 | ISO-NE

 

The RTO concluded that an increased fuel oil inventory could fully cover the energy shortfall in the case of a moderate winter, and mostly mitigate the shortfall in the case of more extreme winter conditions.

Despite these findings, Chadalavada cautioned against jumping to the conclusion that the terminal will no longer be necessary following the expiration of the existing contract, owing to potential impacts the loss would have on the gas system, as well as on the electric system in the winters following 2024/25.

“The ISO doesn’t have the expertise to assess the operational capability of the regional pipeline system without Everett and will rely on the expertise of pipelines and the [local distribution companies] to identify any operational concerns,” Chadalavada said.

The RTO has been collaborating with the Electric Power Research Institute to study the potential long-term effects that the loss of the Everett terminal would have on reliability in the region. The first phase of this study, projecting out to 2027, is set to be released this Friday.

Order 2222 Compliance

The committee endorsed tariff revisions to comply with FERC Order 2222 in response to a commission directive, with a filing expected Tuesday.

The PC voted along the same sector lines as the Markets Committee did when it endorsed the revisions last month, with almost exactly the same amount of support: about 78.6%. (See “Compliance Filing on DER Aggregation,” ISO-NE Stakeholders OK DER Aggregation Plans, Generator Relief.)

FERC in March rejected certain elements of ISO-NE’s original proposal to comply with Order 2222, which directed RTOs and ISOs to allow distributed energy resource aggregations to fully participate in their markets. The commission ordered further revisions by several different deadlines, depending on the element.

The new revisions are those due 60 days from FERC’s March 1 order. (ISO-NE was granted a week extension to file them.) They would clarify that the relevant electric retail regulatory authority authorizes customers of small utilities to participate in a DER aggregation and that the RTO will resolve disputes that are within its authority and subject to its tariff.

The filing will also include an explanation of why ISO-NE’s proposal to require measurement of behind-the-meter DERs at the retail delivery point, rather than allowing submetering, minimizes barriers to entry for resources. The RTO has requested a rehearing of FERC’s rejection of its proposal to designate the DER aggregator as the entity responsible for providing any required metering information.

LS Power CSO Proposal

Finally, the committee rejected endorsing proposed tariff revisions by LS Power to allow its gas-fired Ocean State Power plant to unwind a 64-MW capacity increase while maintaining its existing 270-MW capacity supply obligation.

The plant had cleared Forward Capacity Auction 15 at 334 MW, but the company has become concerned that it will not be able to complete the uprate by the June 1, 2026, deadline. Under the RTO’s tariff, that would mean the plant would also lose its CSO for the existing capacity.

LS Power’s proposed revisions were intended to allow market participants to “unwind” promised capacity increases, allowing the plant to continue participating in the capacity market. Despite the RTO and its Internal Market Monitor opposing the proposal, the MC last month overwhelmingly endorsed it, with 83.3% in support. (See “LS Power’s Dilemma” in linked article above.)

But the company failed to achieve even a majority of the PC’s support, with only 45.7% voting in favor; it needed 60% for endorsement. All of the Generation sector was in favor, and minor support came from the Supplier, Alternative Resources and End User sectors. The Publicly Owned Entity sector was unanimous in opposition. Every sector had numerous abstentions.

LS Power may file a complaint with FERC under Federal Power Act Section 206. Before the vote, NEPOOL clarified to committee members that if they endorsed the revisions, it would indicate its support for LS Power’s revisions in the docket but not weigh in on the just and reasonableness of the current tariff.

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PNM, Avangrid Optimistic About Merger Prospects

While PNM Resources (NYSE: PNM) awaits a state Supreme Court decision that could give the company another shot at a merger with Avangrid (NYSE:AGR), PNM officials said they’ll keep running the company like it’s a standalone business.

The comments came Friday during a conference call with analysts to discuss PNM’s first-quarter results. Much of the discussion focused on Avangrid’s proposed acquisition of PNM, a deal that was announced in October 2020 and valued at $8.3 billion.

The merger received approval from five federal agencies and the Public Utility Commission of Texas, leaving approval from the New Mexico Public Regulation Commission (PRC) as the final hurdle to closing the merger. But in December 2021, the PRC voted 5-0 to reject the merger. (See NM Regulators Reject Avangrid-PNM Merger.)

PNM and Avangrid appealed the decision to the New Mexico Supreme Court. But the companies revised their strategy this year, when the PRC changed from a five-member elected commission to a three-member panel with commissioners appointed by Gov. Michelle Lujan Grisham. (See New NM Commissioner Steps Down over Qualifications.)

In March, the reconfigured PRC joined with PNM and Avangrid to file a motion asking the Supreme Court to dismiss the appeal and remand the case back to the PRC for rehearing.

On Friday, analysts pressed PNM officials for a timeline of the proceedings.

PNM Resources CEO Pat Vincent-Collawn emphasized that the court has no deadline for making a decision. Calling the state’s high court “the Supremes,” Vincent-Collawn referenced a song by the Motown musical group of the same name.

“You can’t hurry love … or mergers,” Vincent-Collawn told analysts.

Vincent-Collawn said that if the Supreme Court agrees to dismiss the appeal, the companies would file a motion for reconsideration of the merger with the PRC. The commission would establish a procedural schedule and decide whether to assign the case to a hearing examiner or manage it at the commission level.

PNM and Avangrid agreed last month to extend their merger agreement until July 20. That follows a decision last year to extend the merger agreement through April 20, 2023.

“This additional time should provide clarity on the path forward and an expected timeframe for further regulatory proceedings,” Vincent-Collawn said.

And for now, it’s business as usual at PNM, according to Don Tarry, the company’s president and chief operating officer.

“We’re focused on continuing to manage the business like it’s a stand-alone business,” Tarry said. “And we’ll continue to operate it that way and continue to fund it that way, too.”

Under the proposed acquisition, Avangrid would pay $50.30 in cash for each share of PNM Resources common stock. PNM Resources includes PNM, New Mexico’s largest electric utility, and TNMP, an electric transmission and distribution utility in Texas.

In discussing the proposed acquisition in a February conference call with analysts, Avangrid CEO Pedro Azagra said he expected the PRC’s new composition to make a difference. (See Avangrid Pushes Forward on NECEC, Offshore Wind, PNM Merger.) Azagra described the new commissioners as “highly experienced individuals” with “deep knowledge” of the energy transition and its challenges.

And in a news release last month announcing an extension of the merger agreement, Azagra said Avangrid remains committed to the merger.

“Together, we will accelerate Texas and New Mexico’s clean energy futures and increase the focus on reliability and resiliency for customers,” Azagra said.

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Wisconsin Tx Project Clears State Litigation

A transmission project that MISO approved 12 years ago cleared another legal hurdle Monday when a Wisconsin county judge found that regulators adequately scrutinized the project nearly four years ago.

Dane County Circuit Court Judge Jacob Frost upheld the Wisconsin Public Service Commission’s 2019 decision to issue a certificate of public convenience and necessity for the Cardinal Hickory Creek project, a 102-mile, 345-kV transmission line (2019CV003418).

The ruling does not affect last year’s U.S. district court decision, finding that federal agencies violated federal law when they cleared the line to route through the Upper Mississippi River National Fish and Wildlife Refuge. The decision halted construction on one segment of the line and is currently on appeal in the Seventh Circuit U.S. Court of Appeals. (See Federal Judge: Tx Line Can’t Cross Wildlife Refuge.)

Cardinal-Hickory Creek is one of the 17 Multi-Value Projects MISO approved as a $5-billion portfolio in 2011. The line is projected to facilitate the connection of nearly 20 GW of renewable energy, but it has been mired in litigation for more than a decade.

Frost said the Driftless Area Land Conservancy and two Wisconsin counties’ challenge to the PSC’s approval “largely boil down to disagreements with the PSC’s conclusions and decisions regarding the disputes of fact.” He said state regulators didn’t err in their decision to grant the certificate; adequately weighed competing evidence and explained their decision; properly determined that an environmental impact statement satisfied the state’s Environmental Policy Act; and did not shift the burden of proof to opponents of the line.

Regulators, not the courts, determine energy policy, Frost said.

“Though they couch the arguments as the PSC decision lacked substantial evidence, when examined more closely, petitioners are actually saying the PSC should not have believed the evidence applicants submitted and should have given greater weight to the evidence petitioners or PSC staff provide,” he wrote. “However, the court cannot second-guess the PSC as to weight and credibility of evidence. Because the PSC’s decision relied on substantial evidence, I must affirm.”

Frost said though he understood the “massive impacts” the project holds for Wisconsin, the PSC “properly conducted itself.”

The Cardinal-Hickory Creek owners, American Transmission, ITC Midwest and Dairyland Power Cooperative, said they were “extremely pleased” with the ruling.

“The judge’s decision reinforces that Cardinal-Hickory Creek is a critical, backbone project for the regional power grid within the Upper Midwest,” the companies said in a joint statement.

Mixed Responses

Jennifer Filipiak, executive director of the Driftless Area Land Conservancy, said the group was disappointed with the decision to uphold the PSC’s approval of the line. She said state regulators “failed to fully and fairly consider less-damaging alternatives to the Cardinal-Hickory Creek transmission line.”

“We remain committed to protecting the unique landscape of the Driftless Area and working to enhance its health and diversity. We are considering next steps and actions,” Filipiak said in a statement.

Wisconsin Wildlife Federation Executive Director Mark LaBarbera said his organization was similarly dissatisfied with the ruling. He said the PSC failed to “look more seriously” at potential alternatives and said that the line’s costs are already more expensive than original estimates.

“The company reported it has spent more than $530 million on this unfinished project, already exceeding its original $492 million total estimate,” LaBarbera said. “The dramatic cost increase makes clear why it’s essential to thoroughly study and consider alternatives before starting to build large projects that will damage Wisconsin’s natural environment. We are considering next steps and actions.”

Environmental Law & Policy Center senior attorney Brad Klein, who represented both conservation groups, said he is considering filing an appeal. He noted that the state decision does not impact the 2022 federal decision.

Clean Grid Alliance, Fresh Energy, and the Minnesota Center for Environmental Advocacy applauded the decision in a joint press release. They said that with the ruling, they’re “one step closer” to completing construction the project’s final leg so it can move forward and enable 115 renewable generation projects.

“We have been needing — and waiting — for this line for 12 years. And in that time, our society’s demand for clean electricity has grown even greater,” Clean Grid Alliance Executive Director Beth Soholt said. “Several states have enacted clean energy goals since 2011. That means we need this line — and much more — to meet their carbon reduction goals and improve the reliability of the grid to boot. There is great demand on our electric grid these days, so seeing Cardinal-Hickory Creek get across the finish line is a huge win.”

Amelia Vohs, regulatory attorney for the Minnesota Center for Environmental Advocacy, said the line is “well-designed and well-vetted to minimize its environmental impact, and its construction will result in reduced greenhouse gas emissions and more clean, renewable energy in the Midwest.”

“Everyone says they want a clean energy economy, but to get there we need transmission. You can’t have one without the other, and there is no time to waste,” Soholt said.

She noted that MISO’s first tranche of four long-term transmission portfolios, a $10 billion package approved last year, shows the need for transmission is only intensifying.

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Vistra Bolstering its Zero-carbon Generation

Vistra (NYSE:VST) officials told the financial community Tuesday that they are excited about the company’s recent acquisition of Energy Harbor, which will more than double its zero-carbon generation currently online and that they expect to close by year-end.

“We’ve talked about closing this in the fourth quarter, and I think that is achievable. So far, so good,” CEO Jim Burke told financial analysts during the company’s first-quarter earnings call.

The Irving, Texas-based company announced in March it was purchasing Energy Harbor, a spinoff from FirstEnergy (NYSE:FE), for $3 billion and assuming $430 million in debt. The company plans to combine Energy Harbor’s nuclear plants and its retail business in the MISO and PJM footprints with its nuclear, retail, renewables and battery storage assets into a new subsidiary called Vistra Vision. (See Vistra Pays more than $3 Billion for Energy Harbor.)

Burke said the regulatory approval process is progressing well and that the key filings have been made. The deal must be approved by the U.S. Department of Justice, FERC and the Nuclear Regulatory Commission.

“We believe the NRC is working towards an early October approval,” he said. “To be on the six-month track for a license transfer, we think, is actually on the more efficient side of the scale.”

Should the transaction close, it will give Vistra about 7.8 GW of zero-carbon generation and make it the second largest operator of nuclear plants in the U.S., with six reactors producing more than 6.3 GW of power. The Energy Harbor platform would also increase the company’s retail customer count to about 5 million.

“I like our retail, and we like our integrated model,” Burke said.

Vistra will add another 350 MW of zero-carbon energy when it completes the third phase of its Moss Landing energy storage facility in California later this summer.

The company reported quarterly ongoing operations adjusted EBITDA of $771 million, compared to $1.19 billion for the same period last year. It uses adjusted EBITDA as a performance measure because, it says, outside analysis of its business is improved by visibility into both net income prepared in accordance with GAAP and adjusted EBITDA.

Vistra’s share price closed Tuesday at $24.60, a gain of $1.22 for the day.

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FERC Questions MISO Plan to Drop Renewables’ Ramp Eligibility

FERC last week told MISO to provide more details around its plan to exclude wind and solar generation from supplying ramping service.

The commission issued a May 5 deficiency letter asking the grid operator to explain by midyear its proposal to disqualify its dispatchable intermittent class of resources from providing ramping capability (ER23-1195).

MISO staff have said that its wind resources are ineffective at ramping because their output is often trapped behind transmission congestion. They said when that occurs, they are forced to curtail intermittent resources from supplying energy but clear them for ramp capability, even though they’re undeliverable. (See MISO Plans to Bar Intermittent Resources from Ramp Capability.)

FERC asked the RTO to describe any operational challenges it has encountered with ramping supply issues and explain why it intends to only block intermittent resources from providing ramp capability. The commission pointed out that energy storage and other resources “are similarly undeliverable” when MISO clears up their ramp capability behind the same transmission constraints.

The agency also said the grid operator should describe how its plan is not discriminatory, an indication it believes the proposal could discriminate among resource types.

FERC said MISO should calculate the percentage of non-deliverable ramping megawatts from its intermittent resource class and the proportion of intermittent and traditional generation that clears for ramping from behind transmission constraints. It asked whether the RTO would consider non-intermittent and intermittent generation “similarly situated” when they’re located behind an identical constraint.

FERC also responded to MISO’s narrative that solar resources experience about 90% less congestion because they tend to be closer to load and are less likely to be curtailed. The commission asked why the grid operator wants to uniformly prevent intermittent resources from ramp eligibility when solar resources face fewer transmission obstructions than wind resources. It asked for an explanation about why the blanket exclusion should be considered reasonable.

J.T. Smith, executive director of market operations, has told stakeholders that MISO understands the criticism of its filing. He said staff doesn’t plan to make a permanent change, but they want to put the issue on “hold for the near term.”

“Under the current market conditions, the complication versus the benefit doesn’t make sense,” he told stakeholders in March.  

Smith said MISO strives to make market participation available to all resources capable of providing services.

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Duke Energy Sees Earnings Fall on Warm Winter Weather

Warm weather in its service territories led to lower earnings for Duke Energy (NYSE:DUK) in the first quarter at $1.20/share, but CEO Lynn Good told investors Tuesday that the firm should make up for it this summer.

“These results reflect a 22-cent headwind from weather, with January and February ranking among the warmest winter months on record across our service territories,” Good said. “In fact, DEP [Duke Energy Progress] had its warmest January and February in the last 32 years.”

Duke is working to make up lost ground on ratings and reaffirmed its annual projections, given that its strongest quarter is coming up this summer.

The firm is working on a sale of its commercial renewable business, with separate sales for its utility-scale subsidiary and another for one that focuses on distributed generation.

“We are in the late stage of the process for both transactions, and we’ll look to update you in the near future,” Good said on a conference call Tuesday. “We continue to anticipate proceeds in the second half of the year.”

The firm took an impairment charge on the sale of its commercial business of $175 million in the first quarter, which follows a $1.3 billion impairment in the fourth quarter that was also related to the sale of its commercial renewables business. Asked about the second impairment, Good said that the firm is nearing the end of the process.

“I would say to you, though, that the estimated value that we see in this process remains within our planning assumptions,” she added. “So, there’s nothing here that I would point to as a surprise for us, as we’ve moved through the process.”

The firm is in discussion with “select bidders” and is nearing the end of the process, with Good saying her team is anxious to announce a deal and give the market more information once that is appropriate.

Duke is getting started on a major spending spree on transmission and distribution, investing $36 billion through mid-decade on its system.

“The grid is a critical part of our energy transition, and with more than 320,000 line-miles, we operate the largest transmission and distribution system in the nation,” Good said. “The foundation of our grid plan is focused on improving reliability and resiliency, preparing the grid for renewables and enabling electrification.”

The investments are aimed at addressing threats from storms and attacks on the grid, as well as improving Duke’s ability to restore power, she added. The company is allocating capital for self-optimizing grid technologies, targeted undergrounding, physical and cybersecurity upgrades, and upgrading lines and substations.

“Our investments are already making a difference as evidenced by our response to Hurricane Ian last fall, where we restored power in less than half the time of our Hurricane Irma restoration efforts in 2017,” Good said.

Duke has received approval for recovery mechanisms in place for that transmission investment in all its states, she added.

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NYISO Shares Details of Potential Long Island Tx Projects

Stakeholders at the NYISO Transmission Planning Advisory Subcommittee and Electric System Planning Working Group (TPAS/ESPWG) meeting Friday learned how the ISO assessed the seven transmission projects chosen from the Public Policy Transmission Need (PPTN) solicitation for Long Island.

The solicitation was issued in August 2020 after assessments showed that Long Island’s existing transmission system was not capable of exporting offshore wind power to the rest of New York at levels exceeding its native load. NYISO identified seven viable transmission projects out of 19 submissions that the ISO found could expand Long Island’s export capabilities by unclogging constraints across the island. (See “Long Island PPTN Report,” NYISO Previews Plan to Expedite Interconnection Queue.)

NYISO presented cost cap assessment results, projected performance and production costs, and potential economic benefits for the projects.

The ISO used three criteria to assess developers’ proposed project cost cap, which is the amount of money they can recover from customers for the construction and operation of their transmission project: developers’ profit motive, consumer risk exposure and uncertainty, and the expected project cost versus the developer’s cost cap.

Respectively, these criteria evaluate how well developers incentivize their projects to contain costs via their proposed cost cap; how effectively the cost cap protects consumers from cost overruns; and how divergent the developer’s cost cap is from one estimated by SECO, an independent market research consultancy.

Long Island OSW project cost estimates (NYISO) Content.jpgSummary of Long Island OSW project cost estimates and economic benefits | NYISO

 

For the first and second criteria, the results indicated that projects with hard caps — meaning little to no recovery of expenses incurred above the cap — were assessed better than those with soft caps, meaning incurred costs above the cap are shared between investors and customers. This means hard-capped projects tend to have lower risk profiles.

Conversely, results for the third criterion show projects with hard caps tended to have significantly different proposed costs than those estimated by SECO, while soft-cap projects were closer.

According to NYISO, the qualitative results should not be read as weighted scores indicating whether one transmission project scores higher or lower than another, as each criterion is not a “smoking gun,” but instead should be considered collectively to “give a global perspective that holistically” identifies how each project can best fit New York’s needs.

In its review of project impacts, NYISO also found potentially immense economic, environmental and grid reliability benefits over the next two decades. The projects could reduce future consumer costs, generate production savings across New York and enable up to $3 billion in avoided upstate solar capacity capital costs.

The ISO compared the potential production cost savings and avoided costs from building out either upstate solar or Long Island dispatchable emission-free resources (DEFRs) to the buildout costs projected by the developer and SECO.

As noted by stakeholders during the meeting, DEFRs do not exist at scale, but they represent a significant element of New York’s strategy for achieving its energy goals.

The results show that a project’s magnitude of savings and its benefits are closely correlated to the amount by which it increases Long Island’s import capability and reduces energy curtailment.

The ISO is targeting the TPAS/ESPWG meeting this Thursday to present and review the draft report. It will spend the rest of the month seeking stakeholder advisory votes on the report.

Queue Window Comments

Also at Friday’s TPAS/ESPWG meeting, NYISO shared stakeholder feedback and comments on its interconnection queue proposal, which emphasized stakeholders’ continued apprehension.

NYISO and stakeholders have been debating the proposed overhaul of the interconnection process, and the recent feedback highlighted both developers’ concerns about the lack of transparency on implementation and transmission owners’ calls for greater scrutiny on the requirements for projects seeking interconnection. (See NYISO Stakeholders Debate Proposed Interconnection Queue Overhaul.)

This debate was best captured during a discussion about the overlapping nature of projects in a queue window between Anne Reynolds, executive director of the Alliance for Clean Energy, and Doreen Saia, an attorney with Greenberg Traurig.

Class year interconnection study (NYISO) Content.jpgHistorical statistics on NYISO’s class year interconnection study | NYISO

 

Reynolds asked why some TOs appeared opposed to overlapping clusters of projects, saying, “This is somewhat fundamental to [NYISO’s] redesign proposal.”

Saia responded that they were not outright opposed to overlapping projects but thought it was important “to stay open with how we address concerns identified.”

“This whole effort feels like that old joke about, how do you eat an elephant? A bite at a time. And we have this enormous elephant in front of us, and we are trying to figure out how to digest it while also trying to turn it into a different kind of elephant,” she said.

Anthony Abate, lead energy market adviser with the New York Power Authority, concurred. “We’re eager to get into the details,” but “we are looking at the next number of months and saying, ‘Holy moly, there’s still a lot of details that need to be figured out.’”

NYISO will return to the TPAS later this quarter after refining its proposal based on solicited feedback and begin vetting tariff revisions.

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Illinois Regulators Hear from RTOs on Summer Readiness

The Illinois Commerce Commission questioned MISO and PJM officials on their respective RTOs’ preparations for summer Thursday, with commissioners concerned about the rapid retirement of traditional power plants and the lag in interconnecting new renewables.

Bob Kuzman(Illinois Commerce Commission) Content.jpgRobert Kuzman, MISO | Illinois Commerce Commission

Robert Kuzman, director of customer affairs for MISO’s Central Region, said the RTO’s meteorologists are not expecting this summer to be as hot overall as last year, but they are expecting June temperatures to be higher than normal, as happened last year.

Using data from previous summers, MISO is modeling wind speeds and the amount of wind generation available hour by hour during previous summer months because of the resource type’s growth in the region, said Kuzman. “Wind forecasting prepares us for changes in wind [power] output from hour to hour and day to day.”

The analysis showed that MISO has tended to have between 800 and 1,200 MW of error in day-ahead forecasting, he said. Solar generation, which is also growing in the region, poses another problem, as weather can also affect its electrical output.

Kuzman also noted that the RTO was forced to delay its first capacity auction under its new seasonal construct after FERC ordered it to rework a capacity value ratio. “So, us being really prepared for summer, until we get those results, that data is not quite there,” he said. (See MISO Unveils New Seasonal Auction Timeline, Ratio.)

ICC Chair Carrie Zalewski asked whether there have been any developments in the retirement of old power plants or availability of demand response.

Kuzman said aggregations of DR are beginning to occur in Zone 4, which includes Ameren Illinois’ service territory, and that the retirement “of some thermal resources” has been delayed.

Mike Bryson, senior vice president of operations for PJM, also noted that shutdowns of fossil plants are occurring at a faster rate than the buildout of wind and solar.

“The megawatts are in the queue. The projects are there. We got to get them out of the queue and get them built,” he said in a reference to the long lead time between applications and approvals of renewable power projects.

In response to a question from Commissioner Conrad Reddick about PJM shortening that lead time, Bryson said the “lag will improve yet continue.” He added that PJM is trying to slow down the closing of thermal plants while working “to get solar and wind projects out and built faster.”

Mike-Bryson-RTO-Insider-FI.jpgMike Bryson, PJM | © RTO Insider LLC

DR has worked when needed, Bryson added. “We going to look for opportunities to get more demand response as well.”

Dave Kolata, executive director of the Illinois Citizens Utility Board, also voiced concern that there are a lot of renewable projects stuck in planning queues.

“There are and there have been delays, and we absolutely need to work on that and make sure that all these projects that are ready to go actually get built,” he told the commission. “As fossil fuel resources … retire, we want to make sure that we have the resources there to replace them. I think there’s no doubt in our minds that that can be done. But clearly, we need to put the focus on that.”

He said the RTOs, particularly PJM, have not recognized that Illinois is committed to moving away from all fossil-fueled power plants to renewables.

“I think that the existing capacity construct is designed to build new combined cycle gas turbines,” he said. “And that’s not consistent with CEJA, and where the state is going,” he said in a reference to the state’s Climate and Equitable Jobs Act passed in 2021, committing the state to 100% clean power by 2045. (See Illinois Senate Passes Landmark Energy Transition Act.)