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November 6, 2024

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MISO Describes Bleak RA Future, Stakeholders Push Back

INDIANAPOLIS, Ind. — MISO executives issued sobering warnings about its future resource adequacy in front of its Board of Directors last week as some state regulators and stakeholders pushed back on the narrative.

“I’m going to make some folks uncomfortable, both stakeholders and MISO staff … but we need to get this on the table,” Wayne Schug, vice president of strategy and business development said Thursday before a board presentation that he said had not yet been vetted with stakeholders.

Schug said MISO has been in contact with state regulators and lawmakers since its April planning resource auction (PRA) resulted in a 1.2-GW capacity shortage across MISO Midwest. The RTO has said the deficit might force it to order temporary, controlled load shedding this summer, and it predicts insufficient firm resources to handle summer peak forecasts under typical demand. (See MISO’s 2022/23 Capacity Auction Lays Bare Shortfalls in Midwest.)

Though MISO has added more resources than it has retired in recent years, Schug said the grid operator has less accredited capacity because most of the additions are largely intermittent.

He said the footprint is in desperate need of controllable resources “to balance weather-dependent resources” based on a future assessment of its supply. The Midwest capacity shortfall means MISO has a one-day-in-5.6-years loss-of-load expectation, short of its target one-day-in-10-years LOLE, Schug said.

“We need to think about the consequences of that and the changes we need to make as a market operator,” he said. “We’re below our target reserve margins. It means MISO will have to declare emergencies more often. … It does not mean that grid reliability of the top tier standard is at risk.”

Schug said while MISO sees load shed as a far-off possibility, it doesn’t mean it may happen.  “It does not move the needle to probably or likely, but it does increase the risk,” he explained

He said while customers have “grace” when a downed power line cuts off power, they view outages caused by insufficient generation as unacceptable. MISO membership needs to ensure that some gas units remain online, Schug said, as the grid operator’s capacity needs are longer than the four hours that most battery storage can supply.

“We need the capacity when the renewables aren’t there. The gas still needs to be there; it will be utilized less often, but it needs to be there,” he said.

MISO said its preliminary 2022 regional resource assessment shows additions of largely renewable resources, coupled with retirement of controllable resources that will further chip away at its stores of accredited capacity. Schug said the planned additions are simply not making up for planned retirements.

“In the next five years, we’re retiring a lot more generation than we’re bringing online,” he said. The risk is mounting, Schug said, and MISO and its members need to discuss whether all scheduled generation retirements should proceed as planned.

“It doesn’t mean there’s not time to address this, but the time is growing shorter and shorter. It takes time to build new capacity,” he said. “Honestly, we’re behind in this discussion. Folks are making long-term decisions now. And we need to give them information to make appropriate decisions to sustain reliability.”

“Time is not on our side,” director Phyllis Currie said by way of agreement.

Director Nancy Lange said MISO doesn’t appear to be in good shape in the near-term or the next 20 years.

“We have an issue we need to deal with,” Schug said. “It’s going to take a village. It’s going to take everything we have.”

Schug said states will need to know their neighbors’ generation plans to ensure that no one is negatively impacting the other and everyone is “bringing appropriate resources to the table.”

Stakeholders Offer MISO Guidance

Indiana Commissioner Sarah Freeman, president of the Organization of MISO States (OMS), said MISO’s summer readiness projection that its firm resources are insufficient to cover peak demand run counter to the Independent Market Monitor’s assessment of expected demand, which relied on the same source material. She said the seasonal assessment process lacks transparency and said MISO’s “messaging and information sharing” on resource adequacy could use some work.

“The early messaging from MISO in this area was problematic and certainly needed more context to be digestible by most consumers of media,” Freeman said. “MISO’s summer assessment is a well-known and well-covered event that generates a lot of headlines, but it’s also a largely undefined process.

“I’m going to be sharing everything I reasonably, ethically and legally can with MISO. Collaboration is the only way to solve this,” Freeman said of the resource adequacy issues.

OMS Executive Director Marcus Hawkins said if the RTO continues to usher the usual 3 GW through the interconnection queue each year, it will avoid the worst — a 10 GW shortfall contemplated in this year’s OMS-MISO survey. (See OMS-MISO RA Survey Says Supply Deficits Could Top 10 GW by 2027.)

“And that’s before the improvements to the queue,” he added, referencing the grid operator’s goal to shorten the queue’s timeline from 505 days to a single year.

Michigan Public Power Agency’s Tom Weeks said MISO’s presentation didn’t devote enough time to how the RTO can get more generation interconnected faster.

“To me, that’s a very direct lever of control there,” Weeks said.

Travis Stewart, representing the Coalition of Midwest Power Producers, said staff are likely undercounting future renewable additions. He also said MISO didn’t seem to be considering that aging generators can catastrophically fail when  kept online beyond retirement dates.

Stewart said MISO must employ a sloped demand curve in next year’s capacity auction.

“We can do it immediately. We can stop resources from exiting the market based on the inefficient signals MISO’s market is sending them,” he said.

Enviros: Transmission Could Have Helped

Clean Grid Alliance Executive Director Beth Soholt also said she was “concerned” about MISO’s messaging in recent weeks.

“The capacity shortage we are facing at this point is not the fault of wind and solar generation. In fact, those resources have been delivering both energy and capacity as expected,” she told the board. “The shortage is a problem of planning. MISO has known about the generation shift and the timing just like the rest of us. There is a reason the environmental sector and Clean Grid Alliance have been saying for years the futures MISO uses to plan its system fall far short of what is needed.”  

Soholt said MISO needs a robust grid to deliver generation to load. She said while MISO is doing meaningfully planning now with its long-range transmission plan, it’s simply being developed too late to “support enough new resource additions to offset the retirements.” (See MISO Makes Business Case on Long-range Tx Plan.)

“MISO needs to own that it is responsible for this situation and that includes not delivering on the transmission grid of the future in time. … MISO needs to ensure that transmission planning and construction are complete in time to serve the needs of new resources,” she said.

Soholt said MISO had the opportunity to begin serious transmission planning five years ago with its regional transmission overlay study, but said it was “cratered by certain stakeholders.”

She blasted MISO’s use of a vertical demand curve in the PRA and said the auction design ensures it doesn’t send an efficient pricing signal “until the last minute.”

She also said MISO could use better market products.

“The developer community is listening to this presentation and wants to bring solutions, but the [MISO] tariff is not keeping up with getting new resources on the system,” Soholt said. “MISO’s markets and market products are not defined in such a way that all resources can provide the full range of products and services they are capable of providing.”

She urged MISO to adopt a more positive narrative, confidence and a “can do” attitude when it comes to the resource transition and to hire outside professionals to assist with its communications.

“Without the central leadership of the [RTO], states will fall back on making inefficient decisions in isolation. It is not an insurmountable challenge to reach much higher levels of clean and affordable resources, but it does require planning and coordination,” Soholt said.

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3 Keys to Fixing the Cash-flow Dilemma in CO2 Capture

There are three things that can fix the cash flow problem in the carbon capture and storage (CCS) industry, says Jeff Brown, managing director of the Energy Futures Financing Forum: Direct pay incentives, project developers with a clear vision and giving developers just one job to do.

Prices and demand are too low to generate the cash flows necessary for long-term financing of capturing CO2, either from the air or at a point source like a cement factory.

Current tax incentives to bridge those gaps are not helping the CCS industry, Brown said Thursday at the Global CCS Institute’s 10th Annual D.C. Forum.

“Tax credits don’t incentivize because basically no corporations pay taxes … and if they do, they have excess tax credits,” he said. “Nobody can use tax credits, except for a very limited volume on Wall Street.”

Furthermore, tax credits are not cash, so they cannot be used to pay off debt. To resolve those issues, Brown said, tax credits need a direct-pay function. Direct pay would allocate tax credits as tax overpayments that can be drawn as cash from the Treasury. The Build Back Better Act included a direct-pay measure, and CCS advocacy organizations are continuing to lobby for its inclusion in smaller legislative packages now under discussion.

In Brown’s view, federal and state governments also have a role to play in simplifying the work that developers must do to make a CCS project successful.

“You need government-owned … or government-supported … pipelines and sequestration, so the developer only has one job — to figure out how to capture the carbon,” Brown said. A government-owned infrastructure approach would minimize timing challenges associated with siting capture facilities, the pipeline for transportation to a sequestration location, and the sequestration location itself.

Developers also need a vision for how to deploy capture infrastructure at scale under current incentive structures, he said.

“People don’t do the first-of-a-kind project unless they can see a trajectory to building enough of them to get their cost-of-capture down,” he said. If there is no “policy-supported trajectory,” the price per ton of CO2 is not going to be high enough to support the project financials.

If the incentives that are in place do not support that level of growth, Brown said “something has to give.”

“Either you have to have policy support for hundreds of projects, or you need to raise the level of the policy incentive so that, within a reasonable number of new units, you can get to the right price,” he said.

Market Vision

Reaching a normal rate of return on a CCS project is the “hardest part” for developers in the nascent CCS market, Michael Brownlie, division director at Macquarie Bank, said during the forum session on finance. The point-source CCS “market” is currently just a set of deals in which a CO2 emitter, a capturer and a sequesterer are integrated through a contract. That could change, he said.

“There is a possibility that we can get a market disaggregation of these things, and you just put CO2 in a pipeline and the lowest bidder for that CO2 [one willing to charge the emitter the least] picks it up and away it goes,” he said. “That’s the dream, but we’re a long way from getting anywhere near that.”

In a perfect market scenario, CCS would have a “durable policy instrument” that creates a revenue source for CO2, said Jay Dessy, director of Breakthrough Energy Catalyst. That instrument could be a carbon tax or tax credits that are enhanced through deadline extensions, direct-pay guidelines or qualifying technologies.

“I think you’ll see CCS applications that get focused on certain sectors, where it makes most cost-effective sense, whether that’s cement or other carbon-intensive businesses,” Dessy said.

Khalid Abedin, managing investment officer at the U.S. Department of Energy’s Loan Programs Office, says he sees the future of CCS as “a commodity similar to natural gas markets.”

In that future, CO2 would be available at different regional hubs, each with their own price point, where buyers and sellers can transact.

“People who are buying the CO2 might be using it for industrial purposes … and the seller, through a pipeline that they’re going to build, is going to take the CO2 to the delivery point,” he said. With a clear trading price, he added, market participants could easily forecast what the cash flow would be for a CCS project.

“That’s what I want the future to look like in maybe five or 10 years,” he said.

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Biden Calls on Major Economies to End Methane Flaring by 2030

With inflation raging and gasoline prices at record highs, President Joe Biden on Friday called for new international initiatives to cut greenhouse gas emissions and dependence on Russian fossil fuels.

Despite mounting threats to energy and food security triggered by Russia’s war on Ukraine, Biden told members of the Major Economies Forum (MEF) on Energy and Climate in a virtual meeting, “We cannot afford to let the critical goal of limiting global warming to 1.5 degrees Celsius slip out of our reach. And the science tells us that the window for action is narrowing rapidly.

“We have to dedicate ourselves as we look forward to delivering on existing goals and undertaking additional efforts to boost our progress,” said Biden, who has sought to assert U.S. leadership on climate policy despite the economic and political challenges he faces with the upcoming midterm elections.

Speaking at the meeting, United Nations Secretary-General António Guterres was even more direct in linking the war in Ukraine to the need for urgent climate action.

“We seem trapped in a world where fossil fuel producers and financiers have humanity by the throat,” Guterres said. “The argument of putting climate action aside to deal with domestic problems also rings hollow. Had we invested earlier and massively in renewable energy, we would not find ourselves once again at the mercy of unstable fossil fuel markets,” he said.

New efforts to reduce emissions from methane flaring and leaks led the list of proposed actions, building on the Global Methane Pledge launched at the UN Climate Change Conference of the Parties (COP 26) in Glasgow in November. (See US, Canada, EU Pledge to Slash Methane Emissions.)

“Each year, our existing energy system leaks enough methane to meet the needs for the entire European power sector,” Biden said, announcing the Global Methane Pledge Energy Pathway. “We flare enough gas to offset nearly all of the [European Union’s] gas imports from Russia. And so, by stopping the leaking and flaring of this super-potent greenhouse gas and capturing this resource for countries that need it, we’re addressing two problems at once.”

Argentina, Canada, Egypt, Germany, Italy, Japan, Mexico, Nigeria and Norway have joined the initiative, committing to eliminate “routine flaring” no later than 2030 and pledging $59 million in “dedicated funding and in-kind assistance,” according to a meeting summary from the White House.

Egypt, which will host COP 27 in Sharm el-Sheikh in November, is also among the 120 countries that have signed the original pledge to cut methane emissions 30% from 2020 levels by 2030.

Biden called on other countries to adopt the U.S. goal for zero-emission vehicles — electric, plug-in hybrid and fuel cell cars — to make up 50% of all light-duty car sales by 2030.

With Canada, Chile, the European Commission, France, Germany, Italy, Mexico, Norway and the United Kingdom signing on, Biden said, “Over the long run, we can remove the pain of volatile gas prices and reduce transportation emissions.”

Nonspecific Pledges and Support

Former President Barack Obama founded the MEF in 2009, with 16 other countries. At Friday’s meeting, 22 countries, the European Commission and the United Nations were represented.

The meeting was also a precursor for the Global Clean Energy Action Forum, a pre-COP 27 event to be held in Pittsburgh in September.

But, as reported in the White House summary, results coming out of the MEF meeting consisted mostly of nonspecific pledges for future action and expressions of support.

Several countries stated their intention to increase their Nationally Determined Contributions (NDCs) to emissions reductions — to keep global warming to 1.5 degrees by 2050 — with announcements to be made at COP 27. But only Australia provided a solid number for its “enhanced NDC,” committing to cut emissions 43% below 2005 levels by 2030.

Similarly, other countries “supported,” but have yet to commit to act on, Biden’s other new initiatives.

Biden called for a $90 billion international commitment for clean energy demonstration projects such as green hydrogen production and carbon capture by the September forum in Pittsburgh. The U.S. and the European Commission are planning a total of $50 billion in funding for such projects, the White House said, including $21.5 billion from the Infrastructure Investment and Jobs Act.

Two additional initiatives target shipping and agricultural emissions. Launched by the U.S. and Norway, the Green Shipping Challenge calls on “governments, ports, maritime carriers, cargo owners, and others to come forward at COP 27 with concrete steps … that will help put the international shipping sector on a credible pathway this decade toward full decarbonization no later than 2050,” the White House said.

Biden’s Global Fertilizer Challenge “aims to raise $100 million by COP 27 to strengthen food security and reduce agricultural emissions by advancing fertilizer efficiency and alternatives,” according to the White House. The goal is to reduce agricultural emissions and food insecurity “by helping countries with high fertilizer usage and loss adopt efficient nutrient management and alternative fertilizers and cropping systems,” the White House said.

Russia leads the world in fertilizer exports.

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MISO, Membership Share Impacts of Great Resignation

INDIANAPOLIS, Ind. — MISO and its membership shared their common experience with the employee churn caused by the COVID-19 pandemic.

The MISO community discussed industry reverberations from The Great Resignation, as the ongoing economic trend is called. It was the subject of the quarterly Hot Topic chat before the Advisory Committee Wednesday during MISO Board Week.  

Todd Hillman 2022-06-16 (RTO Insider LLC) FI.jpgMISO’s Todd Hillman | © RTO Insider LLC

“Many call this a once-in-a-lifetime occurrence,” Todd Hillman, MISO’s senior vice president and chief customer officer, said in opening the discussion. “What we’re seeing is the wave of change is not so much about leaving work but trading up.”

Hillman said the tightening labor market is caused in part by Baby Boomers, especially men, leaving the workforce and fewer young people taking their place. He said that trend is exacerbated in the male-heavy energy industry.

Compensation packages and work flexibility have become increasingly important in holding onto employees, Hillman said.

Clean Grid Alliance’s (CGA) Natalie McIntire said she’s worried about the high number of “important, key” MISO staff members that have recently left.

“We really want to encourage MISO to act assertively to address any internal issues that’s keeping it from retaining employees,” McIntire said. She suggested the grid operator hire outside consultants to review its compensation and company culture.

Hillman said MISO is tapping outside expertise to gauge compensation “given how fast inflation is moving.”

CGA Executive Director Beth Soholt said the RTO’s employees are probably stressed from “stakeholders yelling at them,” daunting study work and pressures to deliver the grid of the future. MISO leadership has repeatedly mentioned the post-pandemic talent shortage as a challenge to completing market initiatives on time.

Cleco Cajun’s Tia Elliott said when jobs were at a premium before the pandemic, employees likely put up with more discontent to hang on to their paychecks.

Staff Turnover’s Budgetary Impacts

The grid operator’s year-to-date budget is becoming a study in how the tight labor market, red-hot inflation and constrained supply chains weigh on bottom lines. MISO’s base expenses are $2.4 million (2.6%) over budget, driven almost exclusively by higher salaries as it tries to retain and attract labor. The RTO’s project investment budget is about $500,000 (4.4%) below budget because of delays, deferrals and cancellations.

The grid operator expects to finish 2022 almost $6 million (2.1%) over its budget. That’s after it reduces some travel and employee training to offset the extra $8 million it must spend on salaries that it didn’t foresee at the beginning of the year.

“This has allowed us to keep our vacancy rate flat,” CEO John Bear said, explaining the extra salary spending before the board’s Audit and Finance Committee June 14. He said MISO began losing employees early during the Great Resignation and noted it’s more expensive to attract a new employee than to keep one.  

CFO Melissa Brown said that because salaries and benefits make up such a large portion of the MISO budget, those overruns are difficult to offset.

Director Barbara Krumsiek said employee attrition is “terribly expensive.” She said with inflation and salaries rising so quickly, you have to react and “have a finer pencil.”

John Orr 2022-06-16 (RTO Insider LLC) FI.jpgConstellation Energy’s John Orr | © RTO Insider LLC

Constellation Energy’s John Orr said he “wholeheartedly disagrees” that employees want good a company culture over strong compensation. He said most importantly, people want to be paid for the value they bring to an organization.

“If you think … pay for performance isn’t the single most motivating factor, you’re seriously misleading yourself,” he said. “People will put up with a lot of BS if they’re being paid well. It happens every day. … Does it sound kind of mean? Yes, but it’s human nature.”

But Krumsiek said she worried that a pay structure that handsomely rewards its most aggressive employees might stifle progress on diversity, equity and inclusion.

“People want to be rewarded for the work they do,” regardless of their backgrounds, Orr said. If managers “have only one type of person working for them, then there’s something wrong.”

McIntire said the environmental sector hasn’t experienced the same degree of turnover that other companies may have. She explained that it’s boom time for renewable energy organizations, and they’re retaining employees and hiring others to keep up with the changing energy landscape.

Soholt also said CGA is “biting the bullet” and hiring more junior staff and taking the time to train them.

“It’s a phenomenon and something we’re going to have to do because there are just not enough people to go around,” she said.

Soholt said her organization is discussing salary adjustments for existing employees. She advised other MISO member companies to publish salary ranges on job postings.

“That saves time for the applicant and the person who is looking to hire,” she said.

ITC Holdings’ Brian Drumm said his company is experiencing higher voluntary departures.

“It’s not really hard to hire a new person, [but] it takes longer, and new people are coming in with more demands,” Drumm said.

Multiple members said job seekers now expect some ability to work from home.

North Dakota Public Service Commissioner Julie Fedorchak said one silver lining is that a dramatic number of exits at the commission have brought in employees with new ideas.

“There’s so much work that needs to be done. It’s very pressing, important work. … People are leaving MISO, and new people are coming in,” director Nancy Lange said.

She said burnout can quickly become an issue with the energy industry’s intense workloads, but MISO is encouraging staff to take vacation time.

Solholt said it’s important for employees to not only take vacation time, but to take uninterrupted time where they aren’t “texting from their children’s events.”

“You really need to have a good time, go to the cabin and disconnect. I want us to go back to that,” she said.

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AGs Support SEC Push for Company Climate Risk Assessments

Attorneys general from 19 states and the District of Columbia last week endorsed a plan to require publicly traded companies to include climate change risk assessments in their reports to the Securities and Exchange Commission.

The 20 attorneys general sent a letter Friday to voice their support to SEC Secretary Vanessa Countryman.

“Extreme weather events caused or exacerbated by climate change, such as hurricanes, wildfires, extreme heat, and extreme drought, have caused a number of material and costly impacts on company operations. As those events increase in intensity and frequency, their effects on companies will only grow,” the joint letter said.

On March 21, SEC proposed new regulations that would require publicly traded companies to include in their “periodic” SEC reports any information about climate-related risks that could impact their businesses. That would include greenhouse gas emissions, which are a common metric to calculate a company’s exposure to climate change risks, according to a March SEC press release. The rule would cover direct emissions, plus emissions caused by suppliers, transporting materials and distributing products.

The information proposed to be added to SEC filings must look at short- and long-term effects of climate change, how climate change would affect business strategies, how corporate goals are affected, and how climate change would affect financial assumptions.

In the March 21 announcement, SEC Chairman Gary Gensler said: “Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions.” 

Only 20% of North American companies make any climate-related disclosures, while 52% of companies around the world disclose their climate-related risks, the letter from the attorneys general said. 

In 2019, about 53% of U.S. households had invested in stock with an average household value of $371,390. Fifty-six percent of U.S. workers have investments in their health savings accounts, and 37% of households have individual retirement accounts, while 75% of non-retired adults have some retirement savings, according to the letter.

The letter noted that many states have set carbon emissions reduction goals for themselves and the companies and facilities within their borders.

Friday’s letter argued that adding climate change and emissions information in SEC filings would be a weapon against “greenwashing,” the practice of a company portraying itself as a good environmental steward while not following appropriate practices.

The letter cited the Volkswagen emissions scandal that surfaced in 2015 when the U.S. Environmental Protection Agency found that the company activated emissions controls in the cars only during laboratory tests to meet U.S. obligations, while turning off those controls when the vehicles were sold to the public from 2009 to 2015.

“The Volkswagen case is an egregious example, but more insidious are instances of subtle greenwashing, in which registered companies tout their commitment to addressing climate change, while operating in ways that contradict those pronouncements. In one recent study of climate change-related language from BP, Shell, Exxon and Chevron, the authors observed an increase in such language among all four companies. The authors found, however, that ‘the analysis of financial behavior [by the four companies] generated a picture even more sharply misaligned with tendencies toward increased green discourse,’” the AGs said in their letter.

The letter continued: “The analysis ‘failed to show any major [oil company] comprehensively transitioning its core business model away from fossil fuels.’ Registered companies that overstate their commitment to transitioning to lower carbon emissions — or omit contradictory facts about their businesses — may mislead investors into believing they are better positioned to deal with transition risks like current and proposed climate change regulations or market transformation. This kind of greenwashing also confuses the market by undermining the value to investors of similar commitments by registered companies that actually follow through on those commitments.”

The 20 attorneys general who signed Friday’s letter represent California, Colorado, Connecticut, the District of Columbia, Illinois, Maryland, Michigan, Nevada, Delaware, Hawaii, Maine, Massachusetts, Minnesota, New Mexico, New York, Oregon, Rhode Island, Vermont, Washington and Wisconsin. 

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SPP Seams Advisory Group Briefs: June 15, 2022

SPP staff last week added some additional color to their joint proposal with MISO to replace their affected systems study process with interregional transmission analyses similar to their joint targeted interconnection queue (JTIQ) initiative.

The RTOs told stakeholders last month that they intend to create a “JTIQ-affected system zone” where they identify new transmission facilities near their seams that are likely to be affected by their neighbor’s interconnection requests. Staffs said the process will enable them to take advantage of cost-sharing opportunities between GI customers and load. (See SPP, MISO Propose Scrapping Affected System Studies.)

Neil Robertson, SPP’s coordinator of system planning, told the Seams Advisory Group June 15 that the process will incorporate narrower affected system analyses into the regional processes.

“What we’re basically proposing to do is along with this forward-looking study is to look for larger, more regional interregional solutions,” Robertson said. “There is going to be an additional affected systems study performed under a much narrower scope from what it is today. The key thing about this is that it’s an additional layer we’ve incorporated into the regional generation interconnection processes … so the regional studies will provide coverage for the adjacent system along the seam.”

MISO and SPP seams (MISO and SPP) Alt FI.jpgMISO and SPP seams | MISO and SPP

 

The grid operators say the JTIQ framework will identify and mitigate existing and future affected system constraints. The biennial process will assign a predetermined dollar/MW charge to applicable interconnection customers based on their zonal impact. Staff said that will eliminate individual developers depending on higher-queued interconnection customers’ upgrades to get their own projects online.

“You won’t find many fans of the current process. I wouldn’t think efficiency and timeliness describe the current process,” Robertson said. “We’re providing both cost certainty and shorter timelines than GI customers take to get through the current process.”

Under the JTIQ process, GI customers would know the affected system cost earlier in the process and eliminate unknown affected system network upgrades, Robertson said. He said the process builds on FERC’s proposal for interconnection zones in its proposed transmission-planning rulemaking (RM21-17).

Robertson said the RTO staffs are “working behind the scenes” to gain stakeholder support for the proposal, but initial reaction on the SPP side has been positive.

“At a high level, we think it’s a very creative process,” ITC Holdings’ Raju Brahmandhabheri said before thanking SPP for “coming up with this idea.”

American Clean Power Association’s Daniel Hall said his organization is very supportive of the concept.

“As everyone knows, the study process has been a major impediment to moving through the queue in both RTOs. This effort to try and replace that process with something like the JTIQ is potentially a game changer,” he said. “We appreciate the effort and the creativity.”

$12.4M in M2M Settlements for SPP

SPP began its eighth year of market-to-market (M2M) transactions with MISO by accruing $12.4 million in settlements from its seams neighbor in March, pushing the total amount in its favor to $291.3 million. The process began in March 2015.

It was the 13th straight month M2M transactions have settled in SPP’s favor, and the 28th time in the last 30 months. The two grid operators exchange settlements for redispatch based on the non-monitoring RTO’s market flow in relation to firm-flow entitlements.

Permanent and temporary flowgates were binding for 1,828 hours in March.

Staff Secretary Savoy Promoted

The meeting may have been the last for SAG’s staff secretary, Clint Savoy. He was promoted to manager of interregional strategy and engagement, a new position, effective June 16. In his new position, Savoy will be leading the interregional relations team in ensuring SPP completes its seams-related goals under the RTO’s strategic plan.

Savoy said SPP plans to backfill his position while it looks for a permanent replacement.

“So, you guys are still stuck with me for a little,” he told the group.

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ERCOT Asks for Ruling on Sovereign Immunity Claim

ERCOT has asked the Texas Supreme Court to find that it is entitled to immunity as a governmental agency and reject a five-year-old lawsuit by a power developer.

The grid operator filed a petition with the high court June 10, asking it to reverse a February ruling by a state appeals court that ERCOT is a private, independent membership-based nonprofit not created or chartered by the state. (See ERCOT’s Legal Issues Continue to Mount.)

ERCOT noted in its filing that the Supreme Court “has already held that this case merits review,” and that it had agreed to answer whether the grid operator is immune from suit and whether the Public Utility Commission has “exclusive jurisdiction” over Panda Power Funds’ claims against ERCOT.

“The court declared that it ‘will review the court of appeals’ decision on appeal from the trial court’s final judgment,’” ERCOT said. “This is that appeal.”

The issue has become critical for ERCOT. It has asked that the more than 100 lawsuits filed against it over the February 2021 winter storm be consolidated and reviewed by a multi-district litigation panel. Another petition before the court has raised the same issues.

ERCOT said the Fifth District Court of Appeals “bungled” the statutory text when it ruled 12-1 in February that the grid operator’s immunity claim has no basis in Texas law. As a result, ERCOT said it would be subject to a suit that “could wreak havoc” on the state’s ability to manage the electric grid and market.

The grid operator said it “performs public functions under the PUC’s ‘complete authority’” and asked the Supreme Court to hold that it can manage the market’s electric resources “subject to the direct accountability to the state, without fear that private litigants will divert its mission, and the state’s resources, to their own ends without regard for the public interest.”

The appeals court said that while the PUC maintains some authority over ERCOT, the grid operator is “a purely private entity that is not created or chartered by the government, maintains some autonomy, is operated and overseen by its CEO and board of directors, and does not receive any tax revenue.”

Panda Power filed suit in 2017, accusing ERCOT of publishing “flawed or rigged” projections regarding energy production demand. The company said it spent $2.2 billion to build three plants, relying, it said, on ERCOT’s “false representations of market data.” Those plants are now operating at a loss.

The Supreme Court last year declined to make a ruling on ERCOT’s status. It said it did not have jurisdiction over the matter because the appeals court in 2018 found the grid operator was entitled to sovereign immunity before the higher court was asked to review the case. (See Texas Supremes Sidestep Ruling on ERCOT Lawsuit Shield.)

In December, the fourth Court of Appeals dismissed a lawsuit filed by San Antonio municipal utility CPS Energy against ERCOT. The three-justice panel sided with ERCOT’s claims that the grid operator is a “governmental unit” and said the utility should have first taken its claims to the PUC.

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FERC to Take 2nd Look at 2015 MISO Capacity Auction

FERC last week said it will take another look into whether Dynegy violated federal laws by manipulating pricing in MISO’s 2015/16 capacity auction.

Following a remand from the D.C. Circuit Court of Appeals, the commission directed its Office of Enforcement to compile a report using evidence from FERC’s earlier, nonpublic investigation that was abruptly closed in 2019. The commission said it will issue a decision following the office’s assessment (EL15-70-003).

FERC directed Enforcement staff not to collect any new evidence. It said the remand report should determine “whether Dynegy’s conduct constituted an exercise of market power and/or market manipulation, and, if so, what effect Dynegy’s conduct had on the 2015/16 auction results.”

The D.C. Circuit ruled last summer that FERC hadn’t sufficiently supported its decision to let stand the Southern Illinois transmission zone’s capacity price produced in the capacity auction. The court said the commission’s repeated decisions to uphold the zone’s $150/MW-day clearing price were arbitrary and capricious because they lacked explanation. (See DC Circuit Sides with Public Citizen over 2015 MISO Capacity Auction.)

Public Citizen, Illinois’ attorney general and Southwestern Electric Cooperative all questioned Dynegy’s market behavior after the auction because the company controlled a significant portion of the zone’s available capacity.

FERC wrapped a three-year investigation into the 2015 auction, finding no market manipulation on Dynegy’s part. The commission concluded the zone’s clearing price was just and reasonable and declined to set up an evidentiary hearing to possibly recalibrate the auction results. FERC said a clearing price isn’t unjust simply because it’s higher than expected. (See FERC Clears MISO 2015/16 Auction Results.)

When the D.C. Circuit remanded the issue to MISO, stakeholders asked if the grid operator was preparing to recalibrate the auction; staff said there wasn’t anything for MISO to do until FERC reassessed its decision.

FERC said it will prevent some commission staff from making decisions when it takes a second look at the matter. The commission will block staff with previous involvement in the investigation and those involved in creating the remand report and subsequent pleadings from “communicating with any member of the commission or its decisional staff concerning deliberations in this proceeding except through pleadings.”

“Out of an abundance of caution, certain commission staff will be treated as non-decisional employees for this proceeding,” FERC said. It did not name the commission staff that the rule would apply to.

Commissioner James Danly recused himself from last week’s order. He previously served on the legal team defending Dynegy against the market manipulation accusations.

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Cybersecurity, ‘Extreme’ Events Lead List of WECC Risk Priorities

Cybersecurity and “extreme natural events” top the list of grid issues WECC plans to focus on over the next two years, along with resource adequacy and the impact of “emerging technologies” on the Western Interconnection.  

WECC’s Board of Directors on Wednesday voted unanimously to approve staff recommendations for the organization’s four near-term “reliability risk priorities” (RRPs), issues of special concern that warrant focused research and stakeholder efforts. 

“The identification of RRPs does not preclude work on other risks,” WECC wrote in a brief submitted to the board ahead of the vote. “The prioritization process is meant to aid WECC staff and technical committees in focusing their work.”

The priorities identified for 2022-23 come after an intensive stakeholder process that began in February when WECC convened a workshop to begin narrowing the potential list of risks. (See WECC Workshop Assesses Western Risks.) 

That proved to be a daunting task for a geographically diverse region confronting multiple threats: growing wildfire danger; deepening drought; and an accelerating reliance on variable renewable resources coupled with the large-scale retirement of conventional generators.

Addressing the board at its virtual quarterly meeting Wednesday, Maury Galbraith, executive director of the Western Interstate Energy Board (WIEB), said WIEB’s Western Interconnection Regional Advisory Body (WIRAB) of state energy officials was “very happy” with the “strategic focus” of the reliability risk priorities and the process used to select them. His one complaint, though, was that the list of potential priorities kept changing over the course of the process, making it difficult for WIRAB and other parties to focus on and “talk consistently” about some of the risks. 

“I think that the constant changing of the risk priorities is probably a function of the WECC staff trying to anticipate where the board wants to be on these priorities,” Galbraith said. “And what I would say is, I think it’s OK to have daylight between the WECC staff and the WECC board on these issues. I think it supports the independence of both of those entities.”

Board member Gary Leidich differed with Galbraith’s take.

“I think what happened here was the sausage making, if you want to call it that, was done very publicly. And so I think we all started with, ‘What do we really want?’ And we wound up, I think, with a great set of reliability risk priorities,” Leidich said. 

“I accept Maury’s critique of how this changed over the timeframe since February,” Kris Raper, WECC vice president of external affairs, said. “I would say that part of the reason that it changed was not just anticipating where the board wanted to go with this list, but also where the stakeholders were going with this list. And so each time we provided an opportunity for stakeholder involvement, that list modified and evolved as the process went forward.”

Speaking Wednesday at a virtual meeting of WECC’s Member Advisory Committee (MAC), Fred Heutte, senior policy associate with the Northwest Energy Coalition, said that while WECC could have accelerated the prioritization process with a “simple rank-choice exercise,” he found value in stakeholders having sufficient time to produce “a result we can all stand with.” 

“And that time is well worth taking, because it helps us get out of our specific areas of concern in a given moment and think about the bigger picture in a pretty structured way, not just a blue-sky way,” Heutte said.

‘Uniqueness’

While the MAC on Tuesday endorsed the four priorities without dissent, longtime committee member Duncan Brown expressed surprise that cybersecurity made it to the final list.

“But then again, we’re not party to a lot of the information that’s flowing around at a board level and within the organization about cyber-attacks and things going on because of the sensitive nature,” Brown said. “I’m not saying we should be, I’m just saying we’re not, so it will be interesting to hear from the board at some stage as to, in generic terms, what we’re seeing in the way of cyber activity against the grid right now and how important that makes this as being one of the topics.”

When WECC kicked off the process in February, cybersecurity would have seemed unlikely to earn the top spot, given the stated preference for prioritizing risks unique to the West and NERC’s existing focus on cyber risks across the ERO.

“I don’t think ‘uniqueness’ to the West is the right word; maybe something relevant to the West, where it’s an issue for the West,” board member Ric Campbell said, noting that other regions of the U.S. are also dealing with RA and emerging technologies.

“I think about what can take the system down, and cybersecurity to me is at the top of the list,” Dick Ferreira, principal at ZGlobal, said during the MAC meeting.

WECC is hoping its cybersecurity work will support the “continent-wide” efforts of NERC and the Electricity Information Sharing and Analysis Center (E-ISAC) while also addressing issues specific to the West.  

Delivering a quarterly update to the WECC board Wednesday, NERC CEO Jim Robb pointed to “a couple of events” in the past year in which one of the ERO’s regional entities picked up on a cyber threat that NERC itself had not identified, including a vulnerability in commonly used modeling software.

As it works to “recraft” its strategic plan this year, NERC “is going to be trying to be much more thoughtful about what is the model around cyber, outside of the compliance and monitoring and enforcement of the standards, where the regions can really help us advance the ball,” Robb said.

Playing Together

WECC’s second priority, extreme natural events, was a more obvious choice as the region persistently faces record-breaking temperatures, prolonged cold snaps, deepening drought and intensifying wildfires, in addition to the risk of earthquakes along the West Coast. In its brief to the board, WECC said it expects to examine the impacts of such events on system operations, including load impacts that can be integrated into future reliability assessments. 

WECC said it could also investigate how resilient the Western Interconnection is in the face of extreme events, “elevate the dialogue” related to aging infrastructure in high-risk areas and “open dialogue” about adopting a wildfire mitigation data system.

On Thursday, FERC issued a proposed rulemaking requiring transmission providers to detail their plans for assessing their vulnerability to extreme weather and mitigating the risks. (See FERC Approves Extreme Weather Assessment NOPRs.)   

Resource adequacy, which WECC deemed its top priority two years ago, was relegated to the third spot on the new list of priorities. The organization has since begun issuing annual assessments to help stakeholders understand the potential impact of declining resource capacity on the system. (See West Cannot Rely on Imports, WECC Says.)

“WECC will continue to improve its stakeholder engagement to gather input, shape analytical work, and share useful and timely information, particularly with its regulatory and policy partners,” WECC said in its brief.

“WECC’s resource adequacy work focuses largely on resource plans, but there is a noticeable absence of information on how or whether integrated resource plans are carried out. To complement its current studies, WECC will evaluate how past resource plans have been implemented and the potential implications to resource adequacy and reliability,” it said.

The fourth priority, examining the impact of changing resources and customer loads on the grid, will likely initially focus on the impact of inverter-based resources (IBRs) on system performance.

“In some cases, the West simply does not have adequate models and data to evaluate the impacts associated with the changing technology (e.g., models for IBRs need to be improved throughout the Western Interconnection). Accurate models and data need to keep pace with the changing resource mix and loads to ensure reliability,” WECC said.

“As we transition to 100% green resources, [there’s] a lot of discussion about challenges in integrating inverter-based resources,” Steve Ashbaker, WECC reliability initiatives director, told the MAC on Tuesday.

Ashbaker explained that most IBRs are “grid-following” resources, meaning they can only inject power into the grid when there is a system frequency and voltage, whereas “grid-forming” resources can create their own frequency and voltage.

“The other thing we need to look at is grid-following plus grid-forming inverters in parallel with traditional rotating inertia — how do they all play together?” he said. “We look at areas of system strength, voltage regulation, frequency regulation, fault current oscillation dampening as just being some of the challenges that we need to consider.”

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Changes to CIP-014 Receive FERC Approval

FERC on Thursday approved an update to NERC’s reliability standard on physical security, removing a requirement that is no longer needed (RD22-3).

The order puts into place a new standard, CIP-014-3, to replace the existing standard CIP-014-2. NERC’s Board of Trustees approved the new standard at its meeting in February. (See “Additional Approvals,” NERC Board of Trustees/MRC Briefs: Feb. 10, 2022.)

At issue is language in the “Compliance” section of CIP-014-2 that requires transmission owners and operators to retain “all evidence demonstrating compliance” with the standard at the relevant facilities. NERC told FERC in its filing that while this provision “presents challenges to effective and efficient compliance monitoring” because auditors must visit the sites in question to see the data, it was considered necessary in light of the sensitivity of this information.

That assessment has changed following the introduction of the Secure Evidence Locker (SEL), which went live alongside the Align Software Platform in March 2021 for the Texas Reliability Entity, the Midwest Reliability Organization and NERC, and for the rest of the ERO Enterprise in May of that year. (See ERO Align Tool Goes Live for NERC, MRO, Texas RE.)

NERC conceived of the SEL as a way to provide secure digital storage where confidential information collected as evidence can be kept separate from work papers managed through the Align tool. Regional entities are not required to use NERC’s SEL if they construct their own lockers, provided they meet certain reliability and security specifications provided by the ERO.

With the SEL available, NERC told FERC that entities no longer need to worry about CIP-014 evidence being mishandled because it can be stored in the same secure location as all other evidence in the compliance monitoring and enforcement program (CMEP). As a result, the ERO asked the commission to remove the requirement for on-site storage.

EEI Raises Security Concerns

The proposal did not go without criticism from industry; after NERC submitted the new standard to FERC in February, the Edison Electric Institute filed an objection with the commission. EEI reminded FERC that because of the “critical and highly sensitive nature” of the information documenting CIP-014 compliance, it is not widely available even within utilities and that stakeholders “go to great lengths to protect the identity of the assets and other sensitive information.”

The institute also said that, far from providing additional levels of security, the SEL added risk by aggregating sensitive information from across the industry in a single place that could be attacked by a malicious actor. It argued that the commission should allow registered entities “more flexibility … to select the most secure methods for providing CIP-014 compliance data.”

FERC rejected EEI’s argument, responding that the SEL is not a “novel and untested” idea; the commission cited NERC’s 2020 petition for funding the SEL, in which the ERO stated that at least two REs already used similar lockers to collect CIP-related evidence. FERC’s order noted that NERC already uses the SEL to store evidence for other CIP standards, indicating “that it is a well established and secure method of evidence review.” It also observed that all data stored in the SEL are encrypted, are not backed up and are destroyed as soon as the CMEP engagement is done.

The standard became effective immediately upon FERC’s approval.