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November 2, 2024

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PJM Hit With $140K Penalty for NERC Violations

PJM will pay $140,000 to ReliabilityFirst as part of a settlement for violations of NERC reliability standards at several facilities — including two nuclear plants, FERC ruled on Thursday (NP23-13).

NERC submitted the penalties Feb. 28 in its monthly Spreadsheet Notice of Penalty. The commission said it would not review the settlement further, leaving the penalty intact. It also approved a further notice of penalty for violations of NERC’s Critical Infrastructure Protection (CIP) standards, although details about this settlement including the entities involved and the location were not disclosed in accordance with NERC and FERC’s policy on CIP standard violations (NP23-12).

Nuclear Limits Neglected

PJM’s settlement stems from violations of two standards: NUC-001-3 (Nuclear plant interface coordination) and TOP-001-4 (Transmission operations). The RTO self-reported the first infringement in its capacity as transmission operator (TOP), balancing authority and reliability coordinator, and the second as a TOP alone.

Requirement R4 of NUC-001-3 mandates that TOPs incorporate nuclear plant interface requirements (NPIR) — a set of requirements based on nuclear licensing requirements that are mutually agreed on by the nuclear generator operator and applicable transmission entities — into their operating analyses of the electric grid. The same standard requires a TOP to operate the electric system to meet the NPIRs and inform a nuclear plant operator when it has lost the ability to assess the operation of the electric system.

PJM failed to incorporate the NPIRs into its operating analysis while building its fall 2019 energy management system (EMS) model, when a software flaw corrupted the NPIR voltage drop limit tables for the Dresden and Quad Cities nuclear plants in Illinois. No other nuclear stations in the region were affected.

The RTO implemented the fall model build into the EMS on Sept 24, 2019; the incorrect limits were discovered on Nov. 27, at which point PJM manually adjust the EMS to replace the limits. At this point RF assessed the violation as over.

RF noted that PJM’s post-contingency analysis was still solving for the duration of the noncompliance and the entity voltage drop limits were still valid, apart from the NPIR limits. PJM used historical data to rerun the post-contingency voltage drop analysis after the fact with valid NPIR limits, confirming that there were no limit exceedances throughout the noncompliance.

RF determined the root cause of the violation to be a lack of adequate process or internal control to ensure the NPIR voltage drop limits were correct. The regional entity said the violation posed a moderate risk to grid reliability, observing that a lack of awareness into whether NPIRs are being met can leave operators without adequate transparency into plant stability. On the other hand, RF acknowledged that even with the faulty NPIR information the operating analyses still solved, and providing “some visibility” was better than nothing.

To mitigate the violation, PJM added additional peer checking into the model build process along with “verifying valid NPIR voltage drop limits,” and updated the EMS code to identify corrupt data during the model build process.

FirstEnergy Violation Leads to PJM Infringement

PJM’s violation of TOP-001-4 stems from requirement R18, which requires TOPs to “operate to the most limiting parameter where there is a difference in SOLs [system operating limits].”

The infringement began on Nov. 1, 2019, when maintenance on the Keystone-South Bend line caused flow to be isolated to a single breaker. With only a single terminal breaker in service, the breaker rating “became more limiting than that of the associated line.”

While the transmission owner (TO), FirstEnergy Utilities, had modeled this scenario in its EMS, PJM had not because the TO had not communicated to the RTO that the maintenance had caused the breaker’s “abnormal configuration ratings”— a violation in its own right that RF addressed last year in a separate settlement. (See FirstEnergy to Pay $700K Penalty to ReliabilityFirst.)

While FirstEnergy did call PJM the same day to inform it of the ratings issues, the RTO did not immediately update the breaker rating in EMS. Instead, it spent three days attempting to “assess the discrepancy” with FirstEnergy before finally updating the rating on Nov. 4, ending the violation.

RF said the root cause of the infringement was a lack of adequate process or effective mechanism for changing ratings on breakers. PJM had no ability to manually change the breaker’s rating directly, and staff did not realize that they could address the situation by reducing the rating on the affected line. On the other hand, RF said the violation did not pose a serious or substantial risk to grid reliability because PJM had other means of addressing a potential overload.

PJM’s mitigation measures included verifying and validating all flow circuit breakers within FirstEnergy’s territory and reviewing its manual to ensure TO responsibilities for updating flow breakers are clearly outlined. It also conducted training with its own staff and those of associated TOs to ensure they understand the risks of noncompliance.

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Will Income-tiered Fixed Costs Help California Decarbonize?

SACRAMENTO, Calif. — Careful utility rate design could lessen the impact on ratepayers of California’s expensive efforts to reach 100% clean energy and harden the grid against wildfires, panelists said at last week’s RE+ Northern California conference, sponsored by the Solar Energy Industries Association (SEIA) and Smart Electric Power Alliance (SEPA).

The panel addressed the state’s steeply increasing utility bills, which are projected to keep rising in coming years. Much of the increases are to pay for the costs of new generation and distribution and transmission system upgrades, the California Public Utilities Commission said in its 2022 annual report to the governor and legislature on actions to limit rate increases.

“Increasingly, there’s a big chunk of the utility bill that involves costs that are unaffected by usage, unaffected by customer demand,” said Matthew Freedman, staff attorney at ratepayer watchdog The Utility Reform Network (TURN). “When utilities spend a lot of money on wildfire mitigation, whether you reduce your usage or increase your usage in a given area has no effect on the wildfire mitigation costs, on the wildfire liability insurance costs, on a lot of the grid hardening that’s being done — and of course [on] a lot of the public purpose programs and other policy initiatives where costs are included in rates.”

TURN backed last year’s Assembly Bill 205, which included a requirement that the CPUC establish income-graduated fixed charges “so that a low-income ratepayer … would realize a lower average monthly bill without making any changes in usage.” The CPUC has asked parties to file opening testimony in its proceedings to implement the measure by March 7.

“We think it makes sense to do a fixed charge as long as you can differentiate it [by income], and to think about how that fits with other rate design strategies that will allow us to promote electrification in a rational manner,” Freedman said.

Julia Pyper, vice president of public affairs for GoodLeap, a financing company for rooftop solar and other green home improvements, said her firm also supported AB 205’s income-tiered fixed charges but has concerns about how the CPUC will implement them. Lowering electric bills for some customers could dissuade them from investing in energy upgrades, she said.

“Are we talking about 80 bucks a month? Are we talking $10 a month?” Pyper asked. “We’re all kind of in agreement that this was a good direction to go in, but so much will come down … to where that charge lands. Because if you take away all incentives for the customer to take action, then we can’t engage them in decarbonization efforts.”

‘Critical Enabler’

Jeanne Armstrong, senior regulatory counsel with SEIA, said income-tiered fixed charges “could ease the pressure on low-income customers in the short term” but finding ways to reduce utility costs remains vital.

“In the long term, if you don’t actually bring down the costs, you’re going to reach a crisis point again,” Armstrong said.

“I’m going to give an example,” she said. “Back in the early 2000s, when California had an energy crisis and … electricity bills [went] through the roof,” the legislature passed emergency legislation that directed the CPUC to “not raise rates in the first two tiers of what then was a five-tier utility rate structure. So, all the revenue increases went into tiers three through five, and lo and behold, those skyrocketed.”

The CPUC and legislature eventually revamped the rate structure.

“They brought five tiers down to two … and things were good again for a while, and we went on our merry way,” she said. But “because costs weren’t reined in, we’re once again having an affordability crisis. So, I think in the short term, this income-tiered fixed charge can help, but if we don’t do something on the cost in the long term, it won’t.”

Michael Backstrom, vice president of regulatory affairs for Southern California Edison, responded, “I’ll respectfully disagree.”

“I think that it is both a short-term and a long-term benefit to have a fixed-charge structure in electricity bills because of where we want to go from a decarbonization standpoint,” Backstrom said. “Perpetuating the system we have today, where all costs just get loaded into a per-kilowatt-hour charge, does not reflect the idea that in the long run, to achieve our decarbonization goals, we are going to want the customer to be more interested,” in investing in transportation and building decarbonization. “So having a sustainable rate structure [that includes] a fixed charge is going to be a pretty critical enabler.”

Reducing bills by 10 to 20% for low-income customers will “give those same customers the opportunity to adopt electrification technologies that are going to be very helpful to them, and that are better for the local region and reducing air pollution,” he said. “Does it solve the affordability issue? No. But it will be a big, big, big benefit in getting us into the right area.”

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Calif. Governor Appoints New CAISO Board Member

Joseph Eto (Lawrence Berkeley National Laboratory) FI.jpgJoseph Eto | Lawrence Berkeley National Laboratory

California Gov. Gavin Newsom on Thursday appointed Joseph Eto, a staff scientist at the Lawrence Berkeley National Laboratory, to fill a vacant seat on the CAISO Board of Governors.

Eto is a senior adviser to the Electricity Markets and Policy Department at Lawrence Berkeley, where he has worked since 1982, according to his online biography.

“Joe has authored over 250 publications on electricity reliability, transmission planning and operations, demand response, distributed generation, utility integrated resource planning and demand-side management, and building energy-efficiency technologies,” his biography on the lab’s website says.

“Between 1999 and 2020 Joe led the program office for the Consortium for Electric Reliability Technology Solutions, which was a national laboratory-university-industry R&D consortium founded by Lawrence Berkeley National Laboratory, Oak Ridge National Laboratory, Pacific Northwest National Laboratory, Sandia National Laboratories, the National Science Foundation’s Power System Engineering Research Center, and the Electric Power Group that conducted research and analysis on electricity reliability and transmission technologies,” it says.

He holds a bachelor’s degree in the philosophy of science and a master’s degree in energy and resources from the University of California, Berkeley, and is a registered mechanical engineer.

Eto and CAISO did not respond to requests for comment in time for this story.

Eto fills a vacancy created when CAISO Governor Ashutosh Bhagwat opted not to seek another term after 12 years of service. Bhagwat chaired the Board of Governors last year; his most recent term ended Dec. 31.

“It has been a truly fantastic 12-year run, like nothing else I’ve had in my life,” Bhagwat said during the board’s last meeting of the year on Dec 15. “I’ve enjoyed it thoroughly.”

The state Senate must confirm Eto, who will earn $40,000 per year as a member of the Board of Governors in addition to per diem meeting preparation and attendance costs. His term will end Dec. 31, 2025, according to CAISO’s board roster.

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Grid-Enhancing Technologies Can Speed Up Queues, Experts Say

Grid-enhancing technologies (GETs) can help open space on the electric grid to interconnect additional renewables more quickly than building new transmission, industry experts said during a webinar Monday.

The American Council on Renewable Energy and the WATT Coalition hosted the webinar, which was moderated by RTO Insider Editor-in-Chief Rich Heidorn, Jr.

Dynamic line ratings, advanced power controls and topology optimization software can all help wring the maximum performance of transmission lines, reducing both congestion and renewable curtailments, said WATT Coalition Executive Director Julia Selker.

Transmission capacity is currently based on a line’s static rating, which assumes a hot day with low wind speed. But dynamic line ratings (DLRs) take into consideration actual conditions, which results in higher line capacity about 85% of the time. In winter, dynamic line ratings add from 9% to 33% more capacity, while summer capacities can increase by 26% to 36%.

DLRs can also inform operators when a line is overstressed and they should reduce power below its static rating, Selker said.

FERC Order 881, issued in 2021, requires grid operators to adopt use of ambient adjusted line ratings, which factor in temperatures and time of day.

“But, really, windspeed and other factors are a big deal,” Selker said. “And one study of DLR versus ambient adjusted ratings in Texas showed that DLR had twice the value for climate and cost savings.”

Advanced power flow technologies are added to substations and give operators the ability to send power over specific transmission lines, thus minimizing congestion and curtailments, she added.

Topology optimization is software that examines where generation and load are on the grid at each moment and develops the best solution to minimize congestion, said Selker.

Transmission congestion costs reached $13 billion in 2021, based on reports from the nation’s grid operators.

“We think grid-enhancing technologies can reduce that congestion impact significantly, maybe 30% or so,” Selker said.

High costs for required transmission upgrades often force generation developers to withdraw their proposal altogether as they become uneconomic, said Arash Ghodsian, Invenergy vice president of transmission and policy.

“The queue sizes are significantly growing and, you know, there’s the optics of having speculative projects in the queue,” he said. “While that may be true, we’ve also seen many areas in the queue processes across the country where overloads could have been addressed by implementing grid-enhancing technology applications to reduce congestion and improve reliability.”

Invenergy has seen instances when generation projects lead to a 3% overload of a transmission line, requiring developers to pay as much as $50 million to build out new lines, while DLRs or other GETs would have fixed the issue entirely at a fraction of the cost, said Ghodsian.

While centrally planned lines can take years to build, GETs can be added in the meantime so that renewable development does not need to come to a halt waiting for new transmission to be built, he said.

Cheap, Quick

GETs can help ensure development of the kind of strong grid needed to decarbonize the power industry affordably and reliably, Minnesota Public Utilities Commissioner Matt Schuerger said.

“Planning is underway for new transmission, but clearly development, permitting, and construction takes time,” Schuerger said.

Ratepayers have paid for transmission lines, which should be used to their fullest extent even though significant new transmission must be built, he added.

EDF Renewables Senior Director of Transmission Policy Temujin Roach said the main thing that GETs do is to cut congestion, and while no grid will ever be gold-plated enough to eliminate congestion, reducing it provides major benefits for customers.

MISO has experienced significant congestion, which is expected to continue to grow. High natural gas prices have contributed to the recent rise in congestion, but even if those costs drop, GETs would still benefit consumers, Roach said. But proposals to use the new technologies have met with skepticism from utility employees who want to operate their systems more conservatively.

“We get a lot of pushback from transmission owners that don’t understand it and see it as a deconstruction of the system and get uncomfortable and concerned about that,” Roach said.

While GETs represent promising technologies that have been discussed for years, they have only seen limited use in this country, which varies significantly by region.

“The WATT Coalition sees an incentive misalignment as one of the primary issues,” said Selker. “Transmission owners today — their business model is about return on equity. It’s about building big transmission projects and getting a return on those large expenditures, and GETS just don’t really fit in that model. They’re cheap, they’re quick, they don’t make a substantial difference on that balance sheet.”

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SPP Briefs: Week of March 26, 2023

FERC Approves Public Service Colorado’s WEIS Market Participation

FERC on Friday approved Public Service Company of Colorado’s (PSCo) request to participate in SPP’s Western Energy Imbalance Service (WEIS) market and revisions to its market-based rate tariff (ER23-949).

The commission accepted PSCo’s change in status to join the WEIS market and found that it meets its requirements for both horizontal and vertical market power. Last April, FERC accepted PSCo’s Western joint dispatch agreement with SPP that establishes the legal relationship between SPP and its market participants.

FERC’s March 31 order directed the utility to file in 15 months a market-based rate change in status filing that includes an ex post analysis with 12 months of price separation data to help determine whether the PSCo balancing authority area has become a submarket of the WEIS market.

It also directed the utility to include a price separation analysis between the WEIS market and the PSCo BA in its future Northwest region triennial filings.

“PSCo’s participation in the WEIS market raises concerns of whether the PSCo balancing authority area could become a submarket of the WEIS market,” the commission wrote.

FERC’s approval was effective April 1. PSCo, a subsidiary of Xcel Energy (NASDAQ:XEL), is the WEIS market’s 10th participant. The Western Area Power Administration participates in three of its five regions.

SPP began administering the market on a contract basis in 2021. WEIS centrally dispatches energy from participating resources throughout the region every five minutes.

SPP, MISO Staff Honored for Collaboration

The Energy Systems Integration Group (ESIG) has recognized SPP and MISO staffers as recipients of its 2023 Excellence Awards for their work on the RTOs’ Joint Targeted Interconnection Queue (JTIQ) study.

SPP Winners (SPP) Content.jpg

SPP’s Antoine Lucas, Clint Savoy, David Kelley and Kelsey Allen

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SPP

 

The grid operators’ staffs were honored for “identifying significant transmission limitations near the SPP-MISO seam” during the study. Their work resulted in five projects that could help reduce congestion and allow additional resources, primarily wind farms, to interconnect with their systems.

Antoine Lucas, SPP’s vice president of engineering, was recognized along with David Kelley, Kelsey Allen and Clint Savoy.

MISO’s honorees were Aubrey Johnson, vice president of system planning, and Andy Witmeier, Sumit Brar and Jeremy Nash.

SPP and MISO are collaborating with the Minnesota Department of Commerce and the Great Plains Institute to seek funding from a Department of Energy program to help cover up to half of the JTIQ portfolio’s $1.06 billion estimated cost. (See DOE Clears JTIQ Projects to Proceed with Funding App.)

The awards recognize global energy professionals for their contributions and accomplishments toward the planning and operation of energy systems in ways that are reliable, economic and sustainable. They were presented during the ESIG’s annual Spring Technical Workshop March 29 in Tucson, Arizona.

Other recipients included Grid United CEO Michael Skelly for his “pioneering efforts to build transmission infrastructure to unlock the nation’s wind energy resources.”

Tri-State Generation & Transmission Association’s Mary Ann Zehr and WAPA’s Lloyd Linke received awards for their service to the ESIG’s Board of Directors and its Advisory Council, respectively.

Little Rock HQ Undamaged in Storms

SPP’s headquarters in Little Rock, Arkansas, escaped damage during a tornado that touched down “just blocks away” Friday as a deadly outbreak of storms ravaged the South and Midwest.

More than 50 confirmed twisters touched down in the region, killing at least 32 people. Another round of storms is expected in the same region Tuesday.

“SPP is saddened by the devastation to our community caused by yesterday’s storms,” SPP tweeted Saturday. “We look forward to joining in restoration efforts and doing our part to serve.”

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Overheard at ISO-NE Consumer Liaison Group Meeting

PORTSMOUTH, N.H. — The first meeting of a new era for ISO-NE’s Consumer Liaison Group featured few fireworks but plenty of substantive discussion of the challenges facing New England’s energy transition.

The CLG, a forum for connecting the RTO with the public, met Thursday, its first gathering since a December vote in which six climate activists were elected to its coordinating committee. (See Climate Activists Take Over Small Piece of ISO-NE.)

“Like the Red Sox, the Consumer Liaison Group is experiencing a reset,” said Donald Kreis, a coordinating committee member and the state of New Hampshire’s Consumer Advocate. “Our record is no wins and no losses. It’s a new day at the CLG, and there’s reason to be optimistic about making consumers have a stronger and better liaison to our grid operator.”

Dan Dolan, president of the New England Power Generators Association, laid out what he sees as the stakes for decarbonization in the region.

“The responsibility we have in New England … is to create a demonstration to other parts of the country and the world that you can move forward on a decarbonized future in a way that promotes economic prosperity, [that it] can be done in a resilient, reliable fashion and maintains affordability for the consumers,” Dolan said.

A running theme of the meeting was identifying areas of agreement between ISO-NE, which has been criticized for moving too slowly on greening the region’s energy mix, and those outside who have been pushing it for years.

“The ISO recognizes that climate change is happening right now, and that we need to reduce carbon emissions to solve this problem,” said Susan Muller, a senior energy analyst at the Union of Concerned Scientists, who spoke on a panel during the meeting.

“It’s really important common ground, and I know there’s a struggle right now to find common ground,” she said.

But where Muller argued the grid operator has not caught up to public sentiment is on the time constraints of climate change, which she said call for rapid action.  

“We’re concerned that without the time constraints being factored in, we’ll perpetuate the situation, and we don’t have a lot of time,” she said.

Anne George, ISO-NE’s vice president of external affairs, represented the organization at the meeting, as she’s done many times before. She gave a rundown of key issues facing the RTO, including its recently completed Forward Capacity Auction and two capacity deficiency events from the past winter that have raised questions about New England’s grid in cold weather.

Bob Ethier, a vice president for system planning at ISO-NE, also presented during the event.

“The big thing that I want to convey today is what we are doing to facilitate the transition to clean energy,” he said.

Among those efforts: “a heck of a lot of studies,” as well as providing technical expertise, working on transmission development and supporting interconnection, Ethier said.

Several speakers pointed to siting as another major challenge for the clean energy transition.

New Hampshire State Rep. Michael Harrington, a Republican and self-described “climate realist,” said that New Englanders have shown they’ll fight tooth and nail to prevent projects from being built in their backyards, pointing to the slow progress of the Northern Pass transmission line as one example.

“What’s the message that New England’s sending to the rest of the business world out there? Don’t come here and build anything because we don’t want anything built,” he said.

New Hampshire itself is in a unique position in the region, as multiple panelists noted. Its progress on renewable energy has been slower than in surrounding states, even as the price of that energy has plummeted.

“While right now we might be sort of free riding off the policies of the states around us, pretty soon it means we’re going to be missing the boat,” said Sam Evans-Brown, executive director of Clean Energy New Hampshire.

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Stakeholder Soapbox: New FERC Stance Needed to Improve Winter Storm Readiness

Michael Gilberson.jpgMichael Giberson, R Street Institute | R Street Institute

By Michael Giberson

FERC must look beyond reliability standards to boost electric industry winter readiness.

Winter Storm Elliott smashed into the Southeastern U.S. last year at just the wrong time, right before Christmas, disrupting both long-planned travel and last-minute holiday shopping. It was a bad time for the affected region’s electric utilities too, as power generators struggled under freezing temperatures while customer demand rose to winter records.

Duke Energy in North Carolina and the Tennessee Valley Authority (TVA) had to cut power to some consumers to help keep the grid from failing. For both power companies, it was the first time they had to employ these extreme reliability measures.

A few days later, FERC, NERC and NERC regional entities announced they would investigate operations of the bulk-power system during the storm. A report will emerge in a few months with useful details on which components failed and which reliability standards were not well enforced. But one may wonder what we can learn from the fifth such joint investigation that was not obvious from the previous four winter storm investigations.

The fourth FERC-NERC winter storm report, examining February 2021’s Winter Storm Uri, summarized the main finding of the earlier three. What have we learned? Small equipment failures — the freezing up of a gauge or a sensing line — can sideline a generating unit; gas supply interruptions were an issue; generation owners sometimes failed to prepare adequately; operators lacked training for extreme winter weather conditions; and utilities need to improve emergency communication practices. All four reports observe these kinds of failures and make similar recommendations.

Coincidentally, in February FERC approved winter reliability standards that address about half of the recommendations from the fourth FERC-NERC winter storm report. The standards are a step forward, said FERC Commissioner Mark Christie, “but the much bigger issue to me is market design.” Does it still support reliability?

The interaction of reliability and markets has always been a concern within restructured regions. Revenue from energy, ancillary service and capacity markets is intended to incentivize enough investment that supply can reliably meet customer demand under a wide range of conditions. Emergency operations help maintain service in extreme cases. At least those are market design goals.

But as has been discovered over and over, emergency operations can undermine market incentives supporting resource adequacy. For example, an RTO might call on demand response resources to help maintain a safe level of operating reserves. If the RTO market interpreted reduction in load as falling consumer demand, then prices fall at a time when resources are exceptionally scarce. The price suppressing potential of demand response programs was uncovered in RTOs a decade ago, but similar problems continue to emerge.

This sort of fine-grained market design work is essential to refining RTO systems. However, the sheer scale of some winter storms suggests attention to the bigger picture is needed too. Texas, the biggest state of the lower 48, was smaller than the winter storms that struck it in February 2011 and February 2021. Even PJM and MISO, the two largest of the RTOs in terms of generating capacity, are too small to handle the biggest winter storms alone. Winter storm readiness requires more extensive and effective interregional ties between RTOs and their neighbors.

Interregional Interties

This feature of the winter challenge leads to the first of two recommendations for winter readiness that go beyond the scope of FERC-NERC investigations: FERC should make interregional transmission projects a high priority. In the just released draft National Transmission Needs Study, the U.S. Department of Energy (DOE) identified over 50 recent transmission needs studies conducted by a wide range of organizations. The draft report concludes that significant system resilience, reliability and economic benefits can be expected from expanded interregional transfer capacity.

Particularly significant, as indicated by the DOE’s report, are expanded interties between the Western and Eastern interconnection in the Plains states and interties between ERCOT to both the west and east. A study by Grid Strategies and the American Council on Renewable Energy concluded “modest investments in interregional transmission capacity would have yielded nearly $100 million in benefits during the five-day event, while most areas could have saved tens of millions of dollars.” A transmission line connecting ERCOT to utilities in the Southeast could have saved lives in Texas during Winter Storm Uri and saved consumers at least $1 billion in energy bills.

Winter Storm Elliott makes clear the need for better interregional coordination beyond RTOs, both for interregional transmission planning and for everyday operations. Utilities in the Southeast region launched a trading platform in 2022 — the Southeast Energy Exchange Market (SEEM) — to help them share excess supplies. When the storm came, however, buying opportunities on SEEM disappeared. PJM and MISO both sent power into the southeast during the storm that helped limit the use of rolling outages in the area.

The Western Energy Imbalance Market (WEIM), operated by CAISO, has not yet been hit by winter storms comparable to Elliott. However, during the August 2020 heat wave, resources participating in WEIM were able to sell into CAISO and helped limit involuntary load shedding in California. The contrasting performance of markets in non-RTO regions may be reason for FERC to take another look at SEEM’s market design. In all regions, RTO or non-RTO, reliability advantages of interregional transmission will remain untapped without a functional regulatory framework that lets private capital flow.

Load Responsiveness

A second general recommendation calls for a renewed emphasis on demand-side engagement in power markets. The new reliability rules approved by FERC in February will require utilities to separate out protected circuits — hospitals, police and fire stations, and circuits providing other reliability protections — from other customers. The move will help ensure the high cost of involuntary load shedding is spread more evenly. However, technology now allows widespread participation in voluntary economic and emergency demand response programs.

PJM deployed cuts of up to 7,000 MW through voluntary load management programs during Elliott. These programs were one reason PJM could avoid involuntary load shedding when demand came in above forecast and generating units were failing at unexpectedly high rates. In addition to RTO programs, companies like Tesla, Sunnova, OhmConnect and Octopus Energy are implementing voluntary consumer response programs that can aid RTOs during periods of grid stress. It is much better for a few thousand customers to reduce use by 1 or 2% than have a few customers unwillingly cut off 100%.

FERC policy endorses active load-side participation in RTO markets, but the limited reach of existing programs, the high cost of involuntary load shedding and promise suggested by new programs mean now is a good time for more focus on customer engagement. Load shedding for bulk system reliability can be reduced by innovative, voluntary retail customer programs. As such efforts span wholesale and retail sectors, state and FERC commissioners should establish a joint effort to reduce involuntary load shedding by better enabling voluntary customer response programs.

Conclusion

Commissioner Christie was on to something when he raised questions about institutional design in the context of winter weather failures, which is outside the scope of FERC-NERC reliability investigations. Reliability assessments are missing some of the biggest aspects of prudent reliability policy. Notably, robust interregional transmission, active demand-side participation and healthy regional market design play key roles in meeting customer needs during extreme winter weather.

Some of the necessary work is simply ensuring emergency operations do not inadvertently undermine incentives to invest in winter readiness. Better mobilizing voluntary consumer responses can substantially reduce the need for involuntary cutoffs. Another part is ensuring effective mobilization of resources on a scale large enough to match winter threats. For example, FERC or Congress could establish interregional planning requirements and remove regulatory barriers to merchant developers to kickstart a woefully underdeveloped system. Competitive, interconnected markets are a reliability imperative.

Michael Giberson is a senior fellow with R Street Institute’s Energy & Environmental Policy Team.

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ERCOT Looking to ORDC Changes, Ancillary Services as Bridge to PCM

ERCOT stakeholders on Friday coalesced around changes to the operating reserve demand curve (ORDC) as their preference to supplement staff’s proposed bridge mechanism to the new performance credit mechanism (PCM).

During a workshop with staff, the Technical Advisory Committee (TAC) agreed to pursue changes to the ORDC and procuring additional ancillary services as two concepts that could help retain existing assets and build new dispatchable generation until the PCM can be fully implemented — assuming the PCM passes muster with Texas lawmakers.

Committee members quickly eliminated options that included capacity contracts, a manually settled PCM, and a backstop reliability service suggested by Texas regulators that would set aside capacity for dispatch during scarcity conditions.

“These are largely alternative ideas or alternative information that we want to provide to the [ERCOT] board … we’re trying to get to a point where we’re providing incentives for people to come into the market to provide dispatchable generation,” TAC Chair Clif Lange said, referencing legislators’ requests for more thermal generation in the ERCOT market. “I’m looking at it in the context of [2021 legislation in] which the intent was to try to provide additional revenues to dispatchable generation to come into the market.”

ERCOT’s ORDC values the wholesale market’s operating reserves on their scarcity, reflecting that value in energy prices. The curve has been modified several times since it became part of the market in 2014. The value of lost load, which is set equal to the system-wide offer cap, was changed from $9,000/MWh down to the $2,000/MWh low-system-wide offer cap after the 2021 winter storm, then back up to $5,000/MWh in January 2022. The minimum contingency level was also increased in 2022 from 2,000 MW to 3,000 MW.

The ISO’s staff also has proposed changes to the demand curve by targeting increases in operating reserve ranges that are above emergency levels, while avoiding ORDC increases at times of substantial operating reserve surpluses.

As directed by the Public Utility Commission, staff’s goal is improving market signals so they help retain existing assets, add new dispatchable generation, and reduce reliability unit commitments (RUCs) for system capacity. That would fit within the PUC’s requirement that bridging options make minimal system changes and be implemented with a year, fit within the existing market framework, and continue to be hedged by market participants through their energy positions.

Kenan Ögelman, vice president of commercial operations, said staff studied adding multistep floors within the same range of operating reserves, as suggested by stakeholders. Analyzing 2020, a mild-pricing year, and 2022, a higher pricing year, they found that setting floors of 6,500 MW at $20/MWh and 7,000 MW at $10/MWh would have increased revenues by about $500 million. That would align with the additional average revenue the PCM would provide, Ögelman told TAC.

He said the back-cast analysis for 2022 confirms that the multistep floors would direct the revenues largely to dispatchable resources. Setting a floor that first kicks in at the 6,500-7,000 MW range provides a self-commitment incentive better aligned with ERCOT’s conservative operations posture, he said.

“The last ORDC change made no distinction between online and offline reserves,” Ögelman said. “This is focused on online [reserves] and at the kind of scarcity bandwidth where we tend to take RUC actions. The difference really is the focus on online resources only getting the reward. So, if it brings more resources online … that would reduce the need for us to RUC.”

Stakeholders are still considering the additional procurement of ancillary services as an option, though it has received less support than ORDC changes. Dave Maggio, ERCOT’s director of market design and analytics, said increasing ancillary services is not one of staff’s “preferred approaches.”

“It’s much less clear to us how that helps to bridge the gap and … meet some of the criteria that we’ve listed. I don’t think it has any of the same benefits that we’ve been talking about,” he said. “It’s also not as clear … that we would have this … same targeted change in revenues as we were seeing with [our recommendation]. It doesn’t seem to do any of those as well as the preferred solution.”

Staff and stakeholders will share their recommendations with the board’s Reliability and Markets Committee as part of the directors’ April 17-18 meeting. TAC will meet virtually April 10 to agree on its final pitch to the board and, as Reliant Energy’s Bill Barnes suggested, to prevent a TAC meeting from breaking out during the R&M meeting.

“There are a lot of good thoughts behind some of these other options and concerns that I think would be valuable for the R&M to hear,” he said.

The PUC in January recommended to the state legislature that ERCOT adopt the PCM as a reliability addition to its energy-only market to address resource adequacy and operational flexibility challenges. The PCM would issue incentive payments to dispatchable — and primarily thermal — generation that meets performance criteria during the tightest grid periods.

The legislature has pushed back on the PCM and filed a package of bills that includes building 10 GW of gas-fired generation to sit on the sidelines until load shed is imminent. (See Texas Senate Lays out Changes to ERCOT Market.)

Members Honor Walter Reid

Stakeholders and staff paused the workshop to share their memories of the Advanced Power Alliance’s Walter Reid, who died March 24.

Walter Reid (Advanced Power Alliance) Content.jpgWalter Reid | Advanced Power Alliance

A technical and regulatory consultant for APA after a career with the Lower Colorado River Authority, Reid and his booming voice helped set the tone for ERCOT’s stakeholder process.

“Walter has his handprints all over [the stakeholder process] and was an amazing leader in getting us where we are today,” Ögelman said. “He coached me, and he always listened to what I had to say, so I truly appreciate having him in my life and getting to work with him.”

Barnes noted stakeholders don’t have a textbook to guide their work. Instead, they rely on those who have come before to share their knowledge.

“That’s how we grow. That’s how we improve on this market design, and Walter was always generous with his knowledge,” Barnes said. “I think back to the 2008 days when there were a lot of technical issues regarding the integration of wind. He was the leader in getting those changes adopted and was hugely successful in the amount of wind production that has been developed in the state and allowing ERCOT to operate it reliably. We owe it to folks like Walter for the success that we have today.”

“Texas and ERCOT are better places and better markets thanks to his efforts. Renewable energy owes much of its success in this state to the work of Walter Reid,” the APA said on its website.

Credit Group Members Approved

The TAC also confirmed 11 members for its new Credit Finance Sub Group (CFSG), which has been tasked to help ensure that procedures are in place to mitigate credit risk fairly for all market participants.

With the group’s first members confirmed, it can now vote on its leadership. Austin Energy’s Brenden Sager and Reliant Energy’s Loretto Martin are running unopposed for the group’s chair and vice chair positions.

The CFSG, which is still accepting membership applications, is scheduled to hold its first meeting April 21.

The TAC approved the group’s charter during its March meeting. The CFSG replaces the Credit Working Group (CWG), which had reported to the ERCOT board’s Finance and Audit Committee since 2004. TAC agreed to take on credit oversight responsibilities and consolidated the CWG with its Wholesale Market Subcommittee’s Market Credit Working Group and disband the latter. (See “TAC Shares Changes with R&M,” ERCOT Board of Directors Briefs: Oct. 18, 2022.)

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Kentucky Officials Ask FERC to Deny AEP-Liberty Deal

Kentucky officials have asked FERC to again shut down American Electric Power’s proposed $2.6 billion sale of its Kentucky operations to Liberty Utilities.

The Kentucky Public Service Commission, Kentucky Office of the Attorney General and Kentucky Industrial Utility Customers said in a March 30 protest that AEP (NASDAQ:AEP) and Canada’s Algonquin Power & Utilities (NYSE:AQN) conglomerate, whose North American assets include Liberty, have yet to address or propose mitigations for the “adverse impacts of the transaction on zonal transmission rates” (EC23-56).

FERC temporarily halted the transaction in December, directing AEP and Liberty to write in more consumer protections before it would approve the deal. AEP and Liberty responded in February by including a five-year freeze on the current return on equity and 55% equity capital structure; a commitment from Liberty to maintain the same credit profile for five years; and a five-year cap on operations and maintenance and administrative costs at the 2022 rate. (See AEP, Liberty Utilities Try Again on Kentucky Territory Deal.)

However, the Kentucky intervenors said that AEP’s and Liberty’s pledge that Kentucky Power and Kentucky Transco would remain in PJM’s AEP East transmission pricing zone “for the foreseeable future” is not good enough to protect consumers from rate increases.

The Kentucky PSC said even if Kentucky Power remains in the AEP East zone, its rates under Liberty’s ownership will increase because the utility will have higher incremental fixed and variable costs caused by “building a new transmission organization from the ground up.” The PSC said the zonal revenue requirement’s extra costs will “far exceed” any savings AEP will experience from shedding its Kentucky operations.

The regulators said that if Kentucky Power is separated from AEP ownership but remains in the AEP East zone, the PSC would lose its ability to use its “retail ratemaking jurisdiction to influence AEP’s decisions” on transmission investment in the seven-state AEP East zone, regardless of the benefit to Kentucky consumers. The commission said AEP-affiliated companies would no longer be under pressure to avoid shifting costs to Kentucky consumers.

“Applicants cannot simply ask the FERC and other stakeholders to accept its ostrich-like approach to the impacts if a move is made, or if it is not,” the Kentucky parties said.

They also argued that AEP and Liberty’s “extensive reliance” on future retail rate benefits aren’t relevant to FERC’s decision because the PSC deemed them necessary to shield consumers from the transaction’s rate hikes.

AEP and Liberty are hoping to close their transaction by April 26. If they fail again to gain commission approval by then, termination rights kick in for the parties.

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Groundbreaking California Clean Truck Rules Win EPA Waiver

The EPA on Friday approved a waiver for California’s Advanced Clean Trucks regulation, clearing the way for the state to launch the zero-emission program for medium- and heavy-duty trucks starting with model year 2024.

The regulation will require truck manufacturers to sell an increasing percentage of zero-emission medium- and heavy-duty trucks in the state from 2024 through 2035.

The zero-emission vehicle sales requirements will also apply in states that have adopted California’s Advanced Clean Trucks (ACT) regulation, including Washington, Oregon, New York, New Jersey, Massachusetts and Vermont.

California Gov. Gavin Newsom on Friday called the EPA decision “a big deal for climate action.” Newsom said California will be the first government in the world requiring zero-emission trucks.

“We’re leading the charge to get dirty trucks and buses — the most polluting vehicles — off our streets, and other states and countries are lining up to follow our lead around the world,” Newsom said in a statement.

The EPA waiver was needed because air quality standards in the ACT differ from those of the federal government. California is allowed to adopt and enforce its own vehicle emissions requirements if they exceed federal standards and EPA grants a waiver.

“Under the Clean Air Act, California has long-standing authority to address pollution from cars and trucks,” EPA Administrator Michael Regan said in a statement on Friday. “Today’s announcement allows the state to take additional steps in reducing their transportation emissions through these new regulatory actions.”

Mixed Reactions

The American Trucking Associations (ATA) on Friday criticized the EPA decision, saying it allowed California to create a “regulatory patchwork.”

“This isn’t the United States of California,” ATA CEO Chris Spear said in a statement.

Spear said the regulation’s “technologically infeasible rules” and “unworkable and unrealistic timelines” were setting the stage for a supply-chain crisis.

But environmental groups welcomed the EPA decision.

Heavy-duty trucks account for only about 10% of vehicles on the nation’s roads but have an oversized impact on air pollution, according to the Environmental Defense Fund. The impacts are felt especially in low-income areas and in communities of color, EDF said.

“The Advanced Clean Trucks Rule will save lives, save money for truckers and fleets, save the state billions of dollars in health care costs, and help create thousands of new jobs,” EDF clean transportation attorney Andy Su said in a statement.

Three Waiver Requests

The California Air Resources Board adopted the Advanced Clean Trucks regulation in June 2020. CARB has said that its rule will drive technology development and investment in zero-emission trucks.

In deciding whether to grant a waiver for ACT, the EPA held a virtual public hearing in June 2022 and accepted written comments through Aug. 2.

EPA also granted a waiver on Friday for a CARB regulation that extends emissions warranty periods for heavy-duty diesel trucks in model years 2022 and later.

EPA has yet to decide on a third waiver request from CARB. The Heavy-Duty Low NOx Omnibus Regulation, which CARB approved in August 2020, aims to reduce emissions of nitrogen oxides from trucks. The rule sets new standards starting with the 2024 model year and tightens the standards further in 2027.

CARB has asked EPA for more time before EPA acts on the low NOx waiver request, the federal agency said.

Increasing Sales Requirement

In August, CARB adopted the Advanced Clean Cars II regulation, banning the sale of gas-powered cars in 2035. The rule allows some sales of plug-in hybrid vehicles at that time. (See Calif. Adopts Rule Banning Gas-powered Car Sales in 2035.) CARB must still receive a waiver from the EPA to enforce those regulations.

Advanced Clean Trucks isn’t a total ban on gas-powered truck sales. Zero-emission sales requirements vary by vehicle class. For Class 2b and 3 trucks, such as step vans and city delivery trucks, the rule requires 5% ZEV sales in 2024, increasing to 55% in 2035.

For class 4 to 8 trucks, such as large delivery trucks, school buses and beverage trucks, the 9% requirement for zero-emission new vehicle sales in 2024 grows to 75% in 2035. ZEV sales requirements for Class 7 and 8 tractors range from 5% in 2024 to 40% in 2035.

ACT also includes a credit system in which a truck manufacturer may sell ZEV credits they earn to other manufacturers. Manufacturers may receive early credits for zero-emission trucks sold starting with model year 2021, and certain hybrid electric trucks may earn partial credits.

Under ACT, zero-emission sales requirements for trucks don’t increase after 2035. But a 2020 executive order from Newsom set a goal for all medium- and heavy-duty vehicles in the state to be zero-emission by 2045 where feasible.

In addition to ACT, CARB is expected to vote during its April 27 meeting on adoption of another zero-emission truck regulation, Advanced Clean Fleets.

The regulation would require some or all new trucks added to certain types of fleets to be zero-emission starting in January 2024. The three types of fleets covered are drayage, state and local, and fleets deemed high priority.