FERC on June 13 initiated show cause proceedings into the practice by four RTOs of allowing transmission owners to self-fund network upgrades needed to bring generation online, saying the practice may amount to favoring TOs over interconnection customers.
The commission directed MISO, PJM, SPP and ISO-NE to explain within 90 days how their tariff language on the initial funding is fair or, alternatively, to propose changes to make their policies impartial (EL24-80). All four grid operators currently allow TOs the first shot at funding and earning a return on the capital cost of network upgrades required for generators to connect to their systems.
FERC said that approach might be biased against interconnection customers, who could see their interconnection service costs rise when compared with having the ability to finance their own upgrades. It said TO self-funding might “increase the costs of interconnection service without corresponding improvements to that service, may unjustifiably increase costs such that it results in barriers to interconnection and may result in undue discrimination among interconnection customers.”
The commission added that the grid operators’ current practice may amount to barriers to interconnection. It also seeks to “consistently and comprehensively” address the RTOs/ISOs that maintain a TO self-fund option.
Started with MISO
The show cause order is the latest in a string of seesawing decisions between the commission and the D.C. Circuit Court of Appeals that originated with disputes in MISO.
MISO restored TOs’ rights to self-fund in 2019 at FERC’s direction. The commission originally issued an order in 2015 preventing TOs from providing initial funding for network upgrades, but that decision was remanded by the D.C. Circuit. At the time, the court said the commission didn’t consider complaints from Ameren and five other TOs who claimed the policy forced them to accept “risk-bearing additions to their network with zero return” and essentially act as “nonprofit managers” of network “appendages.”
However, the court ruled in late 2022 that FERC did not adequately explain why it reinstated TOs’ option to finance network upgrades before the interconnection customers owning generation projects were given the chance to do the same. (See FERC Must Clarify MISO Tx Funding Decision, DC Circuit Finds.)
Since 2019, MISO interconnection customers have taken to filing unexecuted network upgrade agreements to protest the RTO reinstating TOs’ rights to self-fund. (See FERC Accepts Unexecuted Agreements Filed in Protest.)
Other affected grid operators have made filings regarding TOs’ right to self-fund upgrades.
PJM in 2021 filed on behalf of its TOs to replace its existing method of generator upfront funding of upgrades with a TO self-funding provision. The RTO also specified that interconnection customers must provide security either to PJM or the transmission owner in question to protect against non-payment. FERC accepted the switch but placed PJM’s new rules in a paper hearing and subjected payments to possible refund.
SPP allows either TO initial funding or generator upfront funding. However, FERC last year rejected an SPP proposal regarding its initial funding option, saying SPP’s plan to allow TOs a non-binding decision to elect initial funding could create uncertainties for interconnection customers because a TO could reverse course at the end of interconnection studies, leaving customers with different network upgrade costs.
ISO-NE allows a transmission owner to unilaterally elect TO initial funding. However, FERC said the practice of initial funding by TOs is rare in ISO-NE, where no TO has ever pursued the option. SPP in 2021 saw its first FERC-approved network upgrade agreement in which the TO elected initial funding.
In 2021, New York transmission owners filed a complaint against NYISO, which does not have a TO initial funding option, contending it was unfair the ISO wouldn’t allow them to be compensated for “the risks and costs associated with owning, operating, and maintaining system upgrades.” FERC denied the complaint, reasoning the TOs didn’t demonstrate that NYISO’s current funding mechanism was inequitable.
‘Replacement Rate’
In its show cause order, FERC singled out testimony from RWE Renewables, NextEra Energy and EDF Renewables, who argued that their costs “double or increase exponentially” when TOs take the reins on funding network upgrades. EDF claimed MISO’s use of TO initial funding has stymied development of new generation development in MISO and SPP, with larger MISO TOs hiking the cost of network upgrades.
FERC said it was concerned that unilateral TO initial funding might force an interconnection customer to pay a higher financing rate than it otherwise could secure through a lender. The commission also said interconnection customers may incur additional costs through securities to the TOs over a 20-year payback schedule.
“It appears that these increased costs do not provide any additional benefits to the interconnection customer than it would otherwise receive through generator upfront funding. We also are concerned that in some cases, an unjustified increase in costs may be significant enough to result in a barrier to interconnection because the costs are so high that projects that would otherwise be commercially viable cannot proceed,” FERC wrote.
Beyond that, FERC said it was troubled by the risk of discrimination to interconnection customers. It said vertically integrated TOs or TOs with affiliates may strategically decide to elect initial funding only for non-affiliate interconnection customers in an attempt to raise costs for competitors.
FERC also said it worried that initial funding may provide TOs the opportunity to double-dip on risk premiums because risks associated with owning, operating and maintaining network upgrades essentially are “baked-in” to TOs’ transmission rates, but also noted it might identify that TOs are not being adequately compensated for those risks.
The commission concluded the order saying that if it finds that TO initial funding is prejudiced but also finds that TOs take on uncompensated risks building network upgrades, it could enact a “replacement rate” compensation mechanism.
The D.C. Circuit Court of Appeals has upheld FERC’s approval of a key NYISO capacity market price determinant that New York’s utility regulator says could raise costs by hundreds of millions of dollars per year.
At issue is the amortization period for a hypothetical new peaker plant in its installed capacity market.
NYISO in late 2020 had proposed reducing the amortization from 20 to 17 years due to New York’s decision to require a zero-emissions grid by 2040.
The period in question is the 2021/25 demand-curve reset, the middle of which was 2023, which was 17 years from 2040, when fossil-fired plants might have to shut down to meet the mandate.
FERC repeatedly rejected that proposal as “speculative,” prompting appeals by the Independent Power Producers of New York that ultimately led FERC to reverse itself and approve the 17-year time frame.
This prompted protests by consumer advocates and the New York State Public Service Commission over the costs likely to result, but FERC reaffirmed its decision in early October 2023.
The PSC in mid-October appealed to the D.C. Circuit, saying the policy likely would increase capacity costs by more than $225 million per year.
The court on June 14 rejected that argument.
In a prepared statement, the PSC said:
“We are disappointed in the court’s decision. The fact of the matter is that the effect of changing the amortization period for setting capacity prices is resulting in windfall profits to the existing fossil fuel power generators and does nothing to add the resources we need to meet the State’s climate and reliability objectives. We will continue to advocate for just and reasonable rates. PSC is reviewing its options to protect New York customers both at FERC and in the courts.”
In the 2-1 ruling, the court noted that the metric in question is a key part of the capacity market pricing. It said the relevant question in the PSC petition was whether FERC’s decision “fell within the zone of reasonableness.”
The ruling says: “To be sure, FERC’s change of heart a mere five months after its initial decision on remand is eyebrow-raising, and we usually view such ‘flip-flops’ in an agency’s position with some skepticism.”
But it added: “FERC appropriately concluded that the proposal fell within the zone of reasonableness.”
The ruling noted that New York’s 2019 Climate Leadership and Community Protection Act mandated a zero-emissions grid by 2040 but gave no indication how to reach that goal, or whether all fossil-fired plants in the state would have to shut down as a result.
So, it makes sense, the ruling said, that a reasonable investor could conclude a new fossil-fueled plant would not be viable after 2039, and it was reasonable for NYISO to design its rates accordingly.
The court previously highlighted the PSC’s failure to clarify the 2040 mandate, calling it “regulatory inaction.”
“It is ironic that the Public Service Commission objects so strenuously to the System Operator’s interpretation of the N.Y. Climate Act. That Act vests in the Commission alone the power to ‘establish a program’ to achieve the zero-emissions target [N.Y. Pub. Serv. Law § 66-p(2)], yet the Commission has not issued so much as a proposed rule implementing the Act.”
The court notes that the PSC was required to enact such a program by mid-2021 but only began the process in May 2023 and has only gathered comments since then.
Judge J. Michelle Childs dissented on the ruling, saying the majority’s attempt to justify FERC’s decision failed. She wrote:
“The distinction between what is required by the Act and what may be required by its future implementing regulations is crucial: No one disputes that the System Operator may justify its proposed amortization period based on what the Act requires, but an amortization period based on what future implementing regulations may require is difficult to square with FERC’s anti-speculation precedent.”
NYISO had reduced the amortization period from 30 years to 20 years in 2014 due to increasing risks to investing in the hypothetical new plant.
The Western Area Power Administration’s non-jurisdictional Open Access Transmission Tariff does not meet the standard of an “acceptable reciprocity tariff,” despite recent revisions the federal power agency incorporated into the tariff, FERC ruled June 12.
The commission’s ruling came in response to WAPA’s April 2023 request for a declaratory order affirming that tariff revisions the agency submitted to meet the requirements of FERC orders 676-I, 676-J and 881 conform with or are superior to FERC’s pro forma (OATT) and that the revised tariff satisfied the requirements for reciprocity status (EF23-5).
The 676 orders, issued in 2020 and 2021, require transmission providers to incorporate certain North American Energy Standards Board standards into their tariffs, while 2021’s Order 881 requires providers to begin using ambient-adjusted ratings for their lines by July 12, 2025.
While the commission determined WAPA’s tariff revisions complied with those three orders, it stopped short of granting reciprocity status because the agency said it would continue to defer implementing FERC Order 1000, the 2011 directive that intended to encourage development of interregional transmission projects by eliminating the right of first refusal for incumbent utilities.
WAPA said it would need to continue delaying Order 1000 compliance until: 1) It can ensure final changes to the WestConnect transmission planning group’s regional planning documents do not conflict with the federal statutes governing WAPA and 2) it determines whether its Desert Southwest, Rocky Mountain and Sierra Nevada regions can continue to participate in that group.
The power agency said it will consider altering its tariff to accommodate Order 1000 once FERC approves the changes to the WestConnect planning documents and after it completes a review of the needed tariff revisions and obtains input from its stakeholders.
In denying WAPA reciprocity status, FERC also pointed out that WAPA has not yet complied with last year’s Order 2023, which directs RTOs/ISOs and other transmission operators to streamline their generator interconnection processes.
“We find that WAPA’s proposed revisions to its tariff, including its ministerial changes, substantially conform with or are superior to the commission’s pro forma OATT,” FERC wrote. “However, for the commission to find that WAPA has an acceptable reciprocity tariff, WAPA must submit revisions to its tariff to incorporate changes the commission made to the pro forma OATT associated with Order Nos. 1000 and 2023.
“Because WAPA has determined to defer implementation of Order No. 1000 to a later date, and because WAPA has not submitted revisions associated with Order No. 2023, we cannot find that WAPA’s tariff, as revised here, is an acceptable reciprocity tariff.”
WASHINGTON ― The biggest roadblock to the clean energy transition now underway in the U.S. is not technology-related or even the anticipated spike in power demand from data centers, according to speakers at a conference on the energy transition June 12.
It is the engrained, slow and risk-averse culture of U.S. utilities and other private-sector players, they said.
The technologies are ready, said Jigar Shah, director of the Department of Energy’s Loan Programs Office, at the Clean Energy Transition Conference, held at the National Press Club by Tech for Climate Action, a UK-based event organizer.
“Now we need to get utilities to act like private-sector companies and actually take risk. You see that in the stock market. … The utilities’ stock prices have [gone up] in the anticipation that they’re going to turn from dividend companies into growth companies,” Shah said during an on-stage conversation with Mary de Wysocki, chief sustainability officer for Cisco. “So, figuring out how that cultural and norm thing occurs is really fascinating to watch.”
DOE is providing technical assistance “helping a lot of those folks through that change,” Shah said.
Marissa Hummon, chief technology officer of Utilidata, a company developing grid-edge artificial intelligence applications, agreed that a major obstacle for her company is “getting the distribution utilities to act very differently than they have in the past.”
The energy transition “is going to happen whether or not utilities decide to step up,” Hummon said during a panel on the role of AI in the energy industry. “There will be new energy demands on the system, but the distribution utilities could really be encouraged to take that proactive step to deploy a platform that allows them to actually respond to the changes.”
The Biden administration’s position has been that the energy transition will be private sector-led and government-enabled with the billions of federal tax credits, loans and other incentives from the Infrastructure Investment and Jobs Act and Inflation Reduction Act. But the message that emerged from the conference is that at least some parts of the private sector have “been caught flat-footed” when asked to lead, Shah said, especially in the face of rising electricity demand from data centers and AI.
While the private sector is supposed to be the most efficient allocator of risk, “that process has been messy,” he said. “But I do think it’s a little bit unreasonable to believe the entire ecosystem has figured this whole thing out [in] less than two years” since the IRA was passed.
Faced with rising demand from data centers, Shah said, the focus has been on the AI chips and servers, but “much of the rest of the data center actually uses the electricity, so figuring out how we make the system more efficient is the more difficult thing to do. …
“We can’t actually decarbonize our processes by thinking the same way we thought about things 10 years ago. This is not just [about] buying carbon credits, figuring out direct air capture and doing everything exactly the same. This is about us reimagining how we actually still live a modern lifestyle but doing things with materials that are more sustainable; doing things with a more thoughtful approach.”
The electric power system must be able to “flex” load with the “same level of dexterity that we currently only flex supply,” he said.
“When you think about what it’s going to take to really meet this moment, it was something we actually needed to do in 2000, but people weren’t forced,” he said. “When you’re a monopoly, obviously, you have a tendency not to deploy innovation as fast as a more vibrant capital system, and so we’re doing it now because the pressures are just so great from weather and load growth.”
A similar sense of urgency should be used to create new narratives about AI, said Charles Yang, policy adviser at DOE’s Office of Critical and Emerging Technologies.
The challenge of load growth from data centers can be converted, not into new natural gas plants, but “into building an order book for the next generation of clean, firm, advanced technologies,” Yang said, pointing to Microsoft, Google and Nucor’s recently announced plan for aggregating their demand and contracting for clean power.
“We need better stories about what AI can do,” he said. “How it can help us discover more abundant, affordable batteries; how it can help us coordinate our EV charging and lower costs for ratepayers. These are the stories that we haven’t really told; they’re not the future we’ve been told about.”
Moving AI to Grid Edge
Since ChatGPT was introduced in November 2022, AI has exploded in the public consciousness, but, Hummon said, “Utilidata has been running AI models to operate the grid for more than 12 years. … We’ve been using data-driven, real-time methods to create outcomes of a more efficient, powerful grid, very reliably.”
What’s changed is the emergence of “generative AI” and the creation of large language models (LLMs) that allow users to ask questions or “prompt” the software in plain language.
Utilidata is deploying these advanced technologies to move AI to the grid edge, improving system visibility and opportunities for more efficient operations for distribution system operators, Hummon said. Such systems could not only get “the right information back to a central system to make a better decision, but also … interface with the customer using natural language about their energy use, about their choices, about just what sort of resources they want to purchase,” she said.
AI can also support better use of unused capacity on the grid to increase the power that can be sent down distribution lines without having to build new substations or feeders, she said. Optimizing the operation of a substation with traditional, physics-based calculations can take 12 to 18 months, Hummon said.
“If you’re using data-driven, machine-learning methods, you can be up and running in two weeks,” she said.
Claus Daniel, associate laboratory director at DOE’s Argonne National Laboratory, said his researchers and scientists want to push the use of AI in the electric power system further “to figure out how we can use that technology to help us in research and development to find better ways of utilizing energy; better ways of generating energy. …
“Artificial intelligence is particularly well suited to figure out what are the tradeoffs … and what are the connections. It’s particularly well suited for handling complexity and recognizing patterns that we currently cannot fully resolve when we just use high-performance computing and physics-based models.”
DOE and the National Labs are currently working with their Frontier and Aurora supercomputers ― the largest computers in the world ― to create “reliable and safe large language models,” Daniel said, noting that most publicly available LLMs often answer questions with convincing but completely wrong information.
Eelco de Jong, head of AI-enabled utility service at McKinsey & Co., zeroed in on how AI can be used to “more precisely allocate our capital towards the investments that have the highest return for [grid] reliability.”
Instead of replacing equipment based on age or zip code, “we’re seeing companies using granular data to forecast, for example, which households are most likely to adopt electric vehicles or heat pumps or switch from gas to electric,” de Jong said. “And based on that forecast data, we know exactly which neighborhoods or even which feeders are going to first run out of capacity, and we can channel … our capital dollars to that.”
Similarly, AI can help with stressed supply chains by routing equipment “to the places where [it has] the biggest impact on customer reliability,” he said.
“This is something that will fundamentally change how we operate the grid” and help solve the problem of non-dispatchable wind and solar, Daniel said. “If I manage through building controls, through heating and cooling needs … [to understand] what’s happening on the edge, I can control my demand in a better way. I can live with a higher percentage of non-dispatchable generation.”
AI integrated into thousands of devices on the grid edge could also make the system more resistant to cyberattacks, Hummon said.
“If the edge is intelligent in and of itself, then every individual endpoint can make its own separate decision,” she said. “You’d have to hack all those separate decisions in order to create the same type of risk that with pure central decision-making.”
The Senate voted June 13 to confirm Judy Chang to a five-year term at FERC, meaning the commission will be back to a full complement of five members even after Commissioner Allison Clements leaves at the end of the month.
Chang was confirmed in a 66-33 vote, with all the “nays” coming from Republicans. Her confirmation came the day after the Senate approved fellow nominees David Rosner and Lindsay See. (See related story, Rosner, See Clear Senate to Fill Out FERC.) Her term will expire June 30, 2029.
Senate Majority Leader Chuck Schumer (D-N.Y.) said he was heartened to see the nominees confirmed with bipartisan support. FERC was in danger of losing a quorum when Clements left.
“This week, the Senate protected access to affordable, reliable and safe energy for all Americans,” Schumer said. The confirmations came “in the nick of time.”
The three sitting FERC commissioners welcomed all three confirmations in statements June 13.
“As I have said many times, the commission works best when it has five members, so I look forward to welcoming them to the commission so we can work collaboratively to ensure reliable, affordable and sustainable energy for all consumers,” said Chair Willie Phillips.
The other two commissioners also welcomed the new members yesterday, with Commissioner Mark Christie posting on X, and Clements offering congratulations during a talk at a meeting of the Energy Bar Association’s Northeast Chapter in D.C.
“I’m pretty excited that they’re all coming in together,” Clements said. “I think it’s a real opportunity for a reset and a new collaboration. Every new commission is that.”
The industry and other stakeholders also lauded the confirmations.
Edison Electric Institute President Dan Brouillette thanked the Senate and said all three new commissioners will bring extensive experience in the energy sector to FERC.
“We look forward to continuing to work with FERC on critical regulatory issues to ensure that electricity customers have the energy they need, when and where they need it, reliably and affordably,” Brouillette said.
Electric Power Supply Association CEO Todd Snitchler also said a full FERC is important to tackle the issues around growing demand, shifting generation mix and other major issues facing the energy sector.
“We were pleased to see all three of the incoming nominees make commitments to maintain FERC’s independence as an economic regulator focused on reliability during their confirmation hearings,” Snitchler said. “It will be essential that FERC works to address wholesale power market barriers and opportunities to ensure reliability and drive competitive investment. Support for the proven ability of markets to deliver reliable, cost-effective and innovative grid solutions will be essential.”
American Clean Power Association CEO Jason Grumet also commended the Senate for approving the three “talented” new commissioners.
“The strong bipartisan support they received reflects the quality and caliber of these nominees and broad appreciation of the critical role FERC must play in modernizing our nation’s energy infrastructure,” Grumet said.
The Natural Resources Defense Council’s Sustainable FERC Project Senior Attorney Christy Walsh said her group looked forward to working with the new commissioners.
“FERC is at the center of the clean energy transition, and with a full FERC commission, we now can focus on the hard work ahead,” Walsh said. “There are tough challenges that must be addressed, chiefly, providing badly needed system upgrades, addressing a scarcity of transmission capacity and implementing long overdue, common-sense guardrails to our natural gas system.”
“As they take their place on the commission bench, the commissioners must incorporate climate and environmental justice impacts into their decisions, not succumb to the pressure from fossil fuel interests,” Sierra Club Executive Director Ben Jealous said. “In doing so, FERC can do its job, working for consumers who simply want to keep the lights on while protecting the health of their families and the planet.”
Arizona regulators voted to allow UNS Electric to expand its gas-fired Black Mountain Generating Station without a certificate of environmental compatibility — a decision critics said sets a “troubling” precedent.
The Arizona Corporation Commission voted 4-1 on June 11 to grant a “disclaimer of jurisdiction” to the 200-MW expansion. UNS Electric successfully argued that the project’s four natural-gas powered units, each with a nameplate capacity of 50 MW, individually fall under the 100-MW threshold at which a certificate of environmental compatibility is required.
The commission’s vote overturned a decision from the Arizona Power Plant and Transmission Line Siting Committee, which viewed the expansion as a 200-MW project that needed an environmental certificate.
In another decision from the June 11 meeting that’s facing criticism, the commission voted 4-1 to remove the requirement for an independent, third-party review of utilities’ integrated resource plans. The decision came after ACC staff said they couldn’t find a consultant to do the work within budget after issuing two requests for proposals.
The decision applies to IRPs filed in November by Arizona Public Service, Tucson Electric Power and UNS Electric, as well as future integrated resource plans.
1st Time in 50 Years
UNS Electric’s application for the Black Mountain expansion is the first time any company has sought a disclaimer of jurisdiction for a power plant since the state legislature enacted line siting statutes in 1971, according to the Line Siting Committee.
The process for obtaining a certificate of environmental compatibility includes public outreach and hearings before the Line Siting Committee and the ACC.
Western Resource Advocates said the commission’s decision “creates a troubling new precedent for gas and electric utilities seeking to build new generation facilities.”
“This is a disappointing decision that overturns decades of commission practice to essentially exempt most gas plants from commonsense environmental review, depriving Arizonans of a voice in siting these large, polluting industrial facilities,” WRA attorney Emily Doerfler said in a statement.
In a statement after the vote, ACC Executive Director Doug Clark said that “the law as written left the commission no choice but to disclaim jurisdiction.” It’s up to lawmakers to change the wording, he said in a release.
The Black Mountain expansion still must obtain permits from state and local agencies, including the Arizona Department of Environmental Quality, Clark said. And UNS Electric will need a certificate of environmental compatibility for interconnection with related transmission lines.
UNS Electric said an expansion of the Black Mountain Generating Station is needed for reliability in its service territory. The power plant, near Kingman in Mohave County, now has two 61-MW units that started operating in 2007.
The expansion is expected to cost $218 million and to begin operations in 2027.
IRP Review
The requirement for third-party review of utilities’ integrated resource plans came from a commission decision in 2018 aimed at improving the IRP process.
The decision ordered an independent review of scenarios and resource portfolios in each IRP and projected costs and benefits. The review could include the development of alternative scenarios and portfolios that the third-party analyst thinks should be considered.
“Their specialized experience … allows them to provide an unbiased and critical assessment to validate or challenge the assumptions and conclusions presented by the utilities in their IRP filings,” Western Resource Advocates said in a letter to the commission.
Alex Routhier, WRA’s senior policy adviser in Arizona, said the third-party review is even more important because ACC is short-staffed and lacks the expertise to run complex modeling on its own. The third-party analysts are familiar with what’s happening industry-wide and best practices that are in use, he said.
Commissioner Anna Tovar said the requirement for third-party review is needed to counter inaccurate data and modeling the commission receives.
“You’re assuming that all that data and modeling is correct, and you don’t have the skill set to deviate and prove that it’s not,” said Tovar, who cast the lone vote against removing the requirement. “I would say that is my biggest issue in regard to that.”
Commissioners who voted in favor of removing the requirement for third-party analysis said staff still could hire a consultant to review IRPs, but the step no longer would be required.
Commissioner Nick Myers said some stakeholders had been given access to the modeling platform the utilities use and could run their own analysis or hire someone to do so.
And Chairman Jim O’Connor noted the commission only “acknowledges” IRPs rather than voting to approve them.
NERC and the regional entities are making “tremendous strides” on the congressionally mandated Interregional Transfer Capability Study and expect to have a draft of the final report ready for stakeholder comment by August, John Moura, the ERO’s director of reliability assessment and system analysis, said this week.
Addressing the quarterly meeting of NERC’s Reliability and Security Technical Committee in Seattle, Moura reminded attendees that the ITCS represents an “unprecedented” effort on the part of the ERO. NERC began work on the study last August, following an order from Congress in the Fiscal Responsibility Act to deliver to FERC a report on the total transfer capability between neighboring regions, additions to transfer capability that could strengthen grid reliability, and recommendations to meet and maintain total transfer capability. (See FERC Approves NERC Transfer Study Funding Request.) The law stipulates that NERC must submit the final report to FERC by December.
The study “is on schedule, and really … lays out important groundwork for our future assessments,” Moura said. Elaborating on this point, he explained that the tight deadline had provided an incentive for the ERO to quickly develop new ways of working together.
“One of the biggest challenges has been integrating diverse systems and ensuring that our assumptions are internally consistent across the planning regions. That’s the one unprecedented thing about this study, and it’s difficult to get that consistency across the different planning coordinators,” he said. “However, it’s also led to a lot of innovations in how we conduct such a large-scale study. … We’ve developed a common modeling approach and [been] working with our stakeholders in new ways.”
To give a sense of the overall size of the effort, Moura explained that for the first part of the study — the overall transfer capability — the team is examining 114 bidirectional transfer points across North America and assessing winter and summer peak cases for 2023 and 2032 applied to each point, equating to 456 individual studies with 30 contingency analysis results.
Moura observed that the requirement to suggest prudent additions to transfer capability also requires NERC to study transfer points that don’t exist yet. One example is a currently theoretical interface between Texas and WECC’s Southwest subregion. The team must determine what kind of transfer such a connection may be capable of, and then assess whether such capability would be “prudent” to add for grid reliability.
The draft report will be released in stages to “allow longer periods of comment and input,” Moura said. “This year’s publications will focus on the U.S., he said, with results relating to interprovincial transfers in Canada to be released in the first quarter of 2025.
“The ITCS [is] more than a study: It’s a road map for the future of our interconnected power system and how the ERO will conduct assessments in the future,” Moura said. “We appreciate the ongoing support and input from all stakeholders as we navigate the complex but crucial task.”
A FERC administrative law judge on June 11 found that Basin Electric Power Cooperative improperly included the costs of a for-profit gasification business in its wholesale electricity rates, admonishing the co-op for its business practices and for apparently not understanding “some fundamental facts about what it means to be subject to independent regulation” (ER20-2441-002, et al.).
In his 905-page initial decision, ALJ Scott Hempling opened with some of the basics of FERC’s regulations under the Federal Power Act. This, he wrote, was because Basin only came under FERC jurisdiction in 2019, after providing wholesale services since 1962.
“This half-century absence of independent regulatory constraint explains the breadth, depth and intensity of the disputes over Basin’s rates for 2020 and 2021,” Hempling wrote. “Perhaps recognizing how remote are Basin’s practices from normal, customer-focused regulatory principles, Basin’s able counsel and witnesses have repeatedly sought refuge in such phrases as ‘the cooperative way,’ ‘the customers are the owners’ and the ‘democratic process.’ …
“But the cooperative movement’s venerable principles, and its honorable history, provide no logical or legal justification for the managerial mistakes, financial errors and discriminatory practices revealed by the record in this proceeding. The cooperative way shouldn’t create divisions among the cooperative’s members. A democratic process doesn’t always produce prudent decisions. And in a democracy, the majority shouldn’t discriminate against a minority.”
‘Thousands of Unnecessary Hours’
Basin is the largest rural electric cooperative in the country, based in North Dakota, and serves 3 million customers and 140 member co-ops in nine states in both the Eastern and Western Interconnections. When it filed its wholesale rates with FERC in 2020, having readmitted the jurisdictional Tri-State Generation and Transmission Association, several of its members and the Sierra Club protested, and the commission initiated an investigation under FPA Section 206. (See FERC to Investigate Basin Electric Rates; Danly Dissents.)
Basin also owns for-profit subsidiary Dakota Gasification Co. (DGC), which produces natural gas from coal and urea that is used for fertilizer, among other products. The company bought the Great Plains Synfuel Plant from the Department of Energy in 1988, which is located next to Basin’s Antelope Valley Station coal generator in North Dakota.
The co-op has set its electricity revenue requirement since 2016 at a level it says is needed to provide the financial health of the entire consolidated corporate family, taking into account all of its businesses’ losses — including DGC’s.
“Because Basin’s consolidated corporate family includes nonutility businesses, most prominently DGC, the annual electricity revenue requirement reflects not only the costs of providing electricity, it also reflects DGC’s financial experience, positive or negative,” Hempling wrote. DGC’s losses added hundreds of millions of dollars to Basin’s electricity revenue requirement, he said.
One of Basin’s members, McKenzie Electric Cooperative, argued that other than the products that it needs to provide power, none of DGC’s costs should be reflected in rates, and it should update its revenue requirements to reflect that.
Hempling not only agreed; he castigated Basin for wasting his and intervenors’ time by ignoring FERC precedent.
“Basin made no change in its pre-jurisdictional practice — the practice of basing rates on its consolidated income statement. Basin thus ignored commission precedent that protects a utility’s jurisdictional customers from the costs and risks of non-jurisdictional affiliates,” he wrote. “Basin also ignored commission precedent prohibiting the collection of amounts for unspecified, merely possible future events.
“Insisting that ‘the cooperative way’ justifies its disregard for commission precedent, Basin has caused intervenors, and this tribunal, thousands of unnecessary hours — hours spent seeking, reading, interpreting and critiquing thousands of internal document — all to do what Basin should have done on its own: Take seriously the rule of law, as Congress enacted it in the Federal Power Act and as this commission has applied it in interpreting that act. Taking seriously the rule of law means presenting a revenue requirement that reflects the cost of electric service and only the cost of electric service.”
Hempling also addressed the prudence of Basin and DGC’s business decisions. Though he ruled that this ultimately did not matter as to Basin’s electricity rates, “McKenzie and Basin have litigated the question of prudence, [so] they and the commission deserve my conclusions on that question.”
The ALJ ruled that Basin failed to assess cheaper alternatives compared to investing in existing coal plants. He outlined numerous flaws in the companies’ decision-making process, from the overlapping structure of their boards to lacking a culture that encouraged internal debate.
“Basin’s board failed Basin’s members — the ultimate consumers — by making them involuntary risk-takers in DGC’s business prospects, he wrote. “Worse, the board did so without any knowledge of, or any concern for, their members’ risk appetites.”
Hempling also found that Basin treats some of its members who had contracts with it through 2050 differently from those who had contracts through 2075, charging the latter more favorable depreciation rates and providing them relief from pancaked transmission rates.
“This dissimilar treatment of similarly situated customers violates the statutory prohibition against undue preference or advantage,” he wrote.
Precedential?
“In the absence of competitive pressure or regulatory oversight, Basin has spent its members’ money on costly and polluting generation resources without ever assessing whether cleaner alternatives would better serve customers’ interests,” Sierra Club Managing Attorney Kristin Henry said in a statement. “Instead, Basin blindly spent tens of millions of dollars on aging coal plants that were already uncompetitive in the energy market. This initial decision makes significant strides forward in holding Basin accountable for its egregious disregard of customers’ interests.”
Initial decisions still have to be voted on by the entire commission before any of its findings actually go into effect. Sierra will continue to participate in the case as it is considered by the full commission, so any final order, or future rate case, provides relief from the imprudent spending, Henry said.
If FERC adopts the initial decision’s findings, it would be precedential in finding cooperatives are not exempt from accountability under the FPA, nor from the general regulatory principle that monopoly utilities must minimize costs, Sierra said.
“This decision sends a clear signal: Instead of doubling down on these expensive and outdated coal plants — without even considering alternatives — Basin should commit to replacing coal plants with readily available, low-cost renewable sources of energy,” said Sierra Club Chief Energy Officer Holly Bender.
The initial decision did not recommend disallowances, or ratepayer refunds, associated with the coal plant spending, but it could be liable for some monetary remedy if Sierra Club can present enough evidence on transmission infrastructure and other alleged deficiencies in future dockets, it said.
Basin said in a statement that it was still evaluating the initial decision.
“But there are a number of findings that are contrary to the positions we made in the case,” the co-op said. “Discussing an active proceeding in front of FERC is a delicate matter, but we will continue to aggressively defend our collective interests in the proceeding as this moves to the full FERC commission. This is one step in a long process, and Basin Electric Power Cooperative remains committed to the cooperative principles and serving our members.”
MINNEAPOLIS — The 2024 Mid-America Regulatory Conference (MARC) June 9-12 showcased a tug-of-war of positivity and cynicism over meeting growing demand with a fleet that should evolve faster to meet clean energy goals.
‘Kitchen Renovations’
“You know how it feels when you’re renovating your kitchen, and you have to live there at the same time? It’s uncomfortable. … And that’s how it’s going to feel in the clean energy transition,” Smart Electric Power Alliance’s Yok Potts said in opening a panel on virtual power plants.
Much like the reward of a new kitchen after the inconvenient remodeling, the grid will emerge modernized and smarter, Potts said.
Illinois Commerce Commissioner Conrad Reddick said it’s challenging to enter a new territory of unpredictable load growth after years of expected patterns.
“The years of, ‘the grid isn’t growing so we don’t need to replace things’ are gone,” he said.
Sen. Tina Smith (D-Minn.) also said the messaging around the clean energy transition has changed in recent years.
“The old story of the energy transition is we have to do this or we’re all going to die,” she said. Now, she said it’s “a story of opportunity” that can result in economic booms, good jobs, a cleaner environment and a more equitable supply of energy.
Smith said she will never forget during her time as Minnesota’s lieutenant governor when a teenage climate activist asked, “What are you going to do with your power?” She asked commissioners and regulatory staff to reflect on that question themselves.
The Data Center Question
Minnesota Commissioner Joe Sullivan said load growth from data centers could expedite the move to clean sources of energy. However, he said the rising growth carries risks of moving backward in the clean energy transition, or over-forecasting demand and then overbuilding generation that ratepayers get stuck with.
“Data centers are giving us a lot of bad news and good news,” Minnesota Public Utilities Commissioner Hwikwon Ham said.
Xcel Energy’s Ryan Long said the rise of data centers comes at an opportune time, with Xcel switching off its remaining coal plants. He said he sees an opportunity for data centers to facilitate the “last firm clean energy” sources needed to get utilities to 100% carbon-free electricity.
But Long said utilities should craft contracts carefully so data centers pay a fair rate for energy and so utilities can “spread fixed costs among more sold kilowatt hours.”
Long said in the past, developers behind data centers were more likely to ask for discounts while insisting on 100% clean energy, whereas now they’re more willing to “ride out the rest of our energy journey with us.” He emphasized that utilities should keep commitments to existing customers and environmental goals at the forefront. He said data centers shouldn’t be subsidized by the existing customer base.
Aaron Tinjum, of the Data Center Coalition, said data centers generally are “highly efficient facilities” and his member companies’ “North Star” is clean, reliable electricity that decarbonizes the existing grid.
MISO Executive Director of Resource Adequacy Scott Wright said spot load growth from data centers is new to MISO, whose load growth has been “lackluster” for years.
“We haven’t seen anything like this on the load side in a couple decades, before MISO’s formation,” Wright said.
However, Wright said MISO’s load-serving entities cannot account for some of the growth in their forecasts because the projects are speculative. Wright said MISO likely will introduce probabilistic load forecasting to capture a plausible level of growth.
Wright said MISO has so far accumulated about 10 GW of demand from data center announcements in the footprint, with a new announcement occurring every few weeks. But he said aside from the data centers, the Midwest is entering a manufacturing renaissance.
“This is really an economic development opportunity for the Midcontinent,” Wright said. “A year from now, let’s talk about how we innovated, instead of being at the same place, talking about this tsunami of economic development at MISO’s doorstep.”
Wright said if load growth takes hold like some believe, it makes MISO’s long-range transmission planning (LRTP) even more essential. But he warned that MISO is still waiting for 50 GW of approved and unbuilt generation to emerge. Developers within MISO remain encumbered by supply chain challenges, he warned.
Sullivan said MISO’s switch from a deterministic forecast to probabilistic load forecast gives him pause. He said utilities are naturally incentivized to overbuild and he’s concerned a probabilistic approach could put “a thumb on the scale” toward construction.
Wright said its resource adequacy survey with the Organization of MISO States, due out publicly next week, is returning an uptick in demand.
“We’ve got to know how big this thing could be. We’ve got to scope it out,” Wright said. “The risk of not being prepared is bad for reliability and perhaps a huge, missed opportunity for economic growth.”
Pilot Project Effectiveness
CenterPoint Energy’s Muss Akram said it’s incumbent on utilities and regulators to share the results of pilot projects so others in the industry get a heads-up on which technologies on the cusp are practicable.
“I see the industry moving more and more in that direction, and it’s exciting,” Akram said.
“Everybody wants to pilot, right?” Heimdall Power CEO Jørgen Festervoll said, adding that regulators don’t always need a demonstration via a pilot because some technology has been in use and proven in other parts of the country for years.
Festervoll jokingly said he’s learned not to bring up what Europe is doing on its grid during his presentations. But he said the U.S. grid, which took 120 years to build, is set to see a doubling in demand soon. He said regulators and utilities must develop a willingness to deploy technologies that haven’t been in widespread use on the grid.
“There’s no way we’re going to be able to build ourselves out of this problem,” he said while pitching his company’s sensors that are mounted on power lines and use real-time conditions to flow more power.
“We’re in a phase right now where we’re not synchronizing very well,” said Iowa Utilities Board Commissioner Josh Byrnes. He said utilities are powering down old baseload plants as developers simultaneously “break ground” on data centers that will introduce new load. All this while breakthrough technology seems years away, he said. Complicating matters, the industry is struggling to attract new talent and secure supplies, Byrnes said.
“It’s a problem right now,” he summed up. “The grid is so tight. It makes me nervous. We really need to be squeezing out every electron.”
VPPs
Sparkfund founder Pier LaFarge said though the virtual power plants of today are too unsophisticated and slow to respond to influence utility planning, they will become “core” to generation and system planning in time. Virtual power plants eventually will reach gigawatt-scale with utility management, he said, and urged regulators to make participation free and give underserved customers the first opportunity to join.
“There’s been decades of antagonism between [distributed energy resources] and the utility,” LaFarge said. But he added that tension will dissipate as utilities “take DERs for what they should be” and develop tools and programs.
Midcontinent Considerations for Energy Storage
Clean Grid Alliance Executive Director Beth Soholt said several gigawatts of storage are lined up in MISO’s interconnection queue at a time when the RTO needs to overhaul its studies. She said MISO currently rigidly assumes storage charges at shoulder times and discharges on peak and imposes limits on charging that are in place for the life of the storage asset. Soholt said a “cookie-cutter” approach to every project is obscuring some of the benefits that storage can provide and returning expensive network upgrades.
“It’s a bit of a square peg in a round hole. … We’re focused on getting the model right,” Soholt said. “I just feel we need more storage online so utilities figure out exactly how they want to use it. We need to kick the tires and show exactly what it can do.”
Illinois Commerce Commissioner Stacey Paradis predicted there will be “sticky issues” around RTOs’ interconnection of storage that will need to be figured out in the next few years. She said even though the industry is “crawling toward” storage penetration at present, it will become a game-changer.
Energy Dome’s Eric Watson said any storage company would be happy to turn over extensive data to show they are the “technology of choice” and secure a place in utilities’ integrated resource plans.
Watson said his company uses modular domes to house turbines and compressors to store energy in the form of liquid CO2 under pressure. He said the domes use “off-the-shelf” components that don’t need special design.
“We’re effectively making large fire extinguishers,” Waston explained of the technology’s closed-loop, zero-emissions process.
Watson said the first U.S.-based dome will be at Alliant Energy’s retiring Columbia Energy Center in Wisconsin and will use the plant’s existing interconnection rights with MISO to come online sometime in 2026. He said he hopes the facility can return “good data” to show that Energy Dome technology is viable elsewhere.
Order 1920, Interregional Tx Planning
MARC secured a FERC commissioner to speak on last month’s Order 1920.
Commissioner Allison Clements said the order “is in a lot of ways modeled after what MISO is already doing” and said regulators of MISO states should feel good about that.
FERC even contemplated “not messing up” the planning MISO already engages in when drafting the rule, she said.
Clements said the rule requires players in the planning realm to consider needs years down the road and consider both intensive and lower-cost solutions. She said there’s an opening now to reassess what’s no longer working on the grid and deploy “emerging technologies that are in fact as old as the Walkman.” She said it’s time to innovate in the electricity sector, which historically hasn’t been a hot spot for technological advancements.
“If we can get past that color of molecule or that source of electron, if we all want to be grownups sitting around the table, there’s a lot of progress to be made,” she said.
MISO’s Jennifer Curran said MISO already is largely conducting the long-term, scenario-based transmission planning that Order 1920 prescribes.
However, a panelist from ITC said the same can’t be said of the RTO’s interregional transmission planning.
“There’s interregional coordination going on. Not so much planning,” ITC’s Krista Tanner said. “The current process isn’t producing projects.”
Tanner said planning between the RTOs only seems to work when they step outside their existing processes, like MISO and SPP’s Joint Targeted Interconnection Queue (JTIQ) portfolio of transmission projects. Tanner said MISO and PJM’s recently announced transfer capability study seems promising also because it’s a departure from the RTOs’ usual coordinated system plan studies. (See MISO, PJM Agree to Perform New Type of Joint Transmission Study.)
“Thinking out of the box is key,” Curran said of her experience working on the JTIQ with SPP.
Curran said a study dedicated to MISO and PJM’s seams is timely, with NERC and FERC focusing on transfers between grid operators. PJM’s Sami Abdulsalam said the RTOs have begun scoping the study and are focusing on avoiding complex, greenfield development. Abdulsalam also said PJM “isn’t quite there yet” on undertaking a JTIQ-like study with MISO.
Curran said MISO’s job is easier when the RTOs’ state regulatory committees come forward and articulate which issues they want MISO and its neighbors to address. The Organization of MISO States and the Organization of PJM States wrote a letter to the RTOs at the beginning of the year to call for more extensive joint planning.
Tanner asked RTO planners, regulators and utilities to contrast the costs of backbone, interregional projects with the more destructive outcomes of extreme weather events without the transmission. She said four days like with Winter Storm Uri in early 2021 can inflict as much cost in damages and fuel as the whole of MISO’s first, $10 billion LRTP portfolio.
Cooperation in Permitting
Energy consultant Charles Sutton said landowner fatigue with permitting has grown recently and will continue to increase as MISO’s LRTP projects enter the construction phase.
He said developers can blunt the negativity by awarding construction to local companies to show they support the local economy. Sutton added that developers should anticipate totally different reactions in different communities and that developers should be flexible and not rely on a single playbook to convince communities.
Robert Larsen, president of the Lower Sioux Indian Community, urged regulators to open honest communication at the very beginning stages of development “before things are too late, before things get disturbed.” He said groups should consult with tribal nations during scoping steps, not when they’re ready to begin construction.
“We’ve always said that progress is great, but we cannot have progress that destroys,” Larsen said. He urged utilities, developers and regulators to “do their homework” and research who historically lived in the areas they’ve designated for projects.
Larsen said for instance, wind developers have sited projects near Buffalo Ridge in Southwestern Minnesota, a high point in the geography where the native community comes to pray and fast. The “blinking red lights” of the turbines are a distraction, he said.
But Larsen said he was taken aback and touched when the Minnesota Public Utilities Commission last year voluntarily asked to be included in a state law that requires consultation with tribal nations.
Larsen urged young people in the crowd to remember their relationship with the land. He applauded Minnesota’s 2040 clean energy deadline and called for a restoration of land after “we’ve stripped it, mined it, polluted it.”
“We want to keep everything clean and useful,” he said.
Sen. Smith said utilities and regulators must regard tribal nations as sovereign entities, not special interest groups, with authority that is “inherent instead of bequeathed.”
NextGen Highways’ Randy Satterfield, whose company attempts to bundle infrastructure rights of way along roadways, said initiatives such as “co-locating infrastructure where there’s already infrastructure” is common sense.
Satterfield said Wisconsin for 20 years has allowed stackable rights of way for transmission in highway corridors, but many states ban combination permitting along interstates. Last month, Minnesota Gov. Tim Walz (D) ended the Minnesota Department of Transportation’s ban on co-location of transmission along highways when he signed an omnibus transportation bill. Next Gen Highways led the push for the language in the legislation.
Unions Make Appearance
In a MARC first, the annual conference featured a panel devoted to union labor.
Illinois Commissioner Michael Carrigan, himself a member of the International Brotherhood of Electrical Workers Local 146, said it’s going to be an undertaking to recruit a workforce that can grow to meet demand.
Kurt Zimmerman, of the International Brotherhood of Electrical Workers Local 160, said utilities must stay competitive when negotiating contracts, enough to ensure laborers have good careers. He asked commissioners reviewing projects to make sure the labor is from an indentured program to ensure a “solid, safe, reliable” workforce.
“Who builds projects is not something in the last 20 years that people have necessarily cared about,” said Jason George, of the International Union of Operating Engineers Local 49. “As a commissioner or developer, you should really care who’s building your projects.”
George said high schoolers these days don’t select their career field from a table at a career fair and want to know their work will be meaningful. He said aspiring apprentices now can take high school courses introducing them to engineering and take hands-on trade tours. George also said he’s on the lookout to recruit kids for training who don’t have experience with machinery, as well as the kids who grew up on a farm.
“People come in and change the course of their whole generational history with one job and a union card. It’s life-changing,” George said.
Richard Kolodziejski, of the North Central States Regional Council of Carpenters, said it’s important to seek out union labor so untrained people aren’t building the energy infrastructure of the future.
Kolodziejski said the construction trades culture needs to change to be more welcoming to women and people of color. He also said there should be more attention on the mental health of construction tradespeople, who experience some of the highest rates of suicide by vocation.
At their second in-person meeting of the year, held at Amazon’s headquarters in Seattle, members of NERC’s Standards Committee voted this week to reject a proposal to clarify the cyber systems to be addressed in an ongoing standards development project, while approving a separate standard authorization request involving the same project.
Both the accepted and rejected SAR relate to Project 2021-03 (CIP-002), which is working on five separate SARs involving revisions to CIP-002-5.1a (Cybersecurity — BES cyber system categorization). Committee Chair Todd Bennett of Associated Electric Cooperative acknowledged there are “a lot of things going on with this project,” which NERC staff have designated as one of 11 high-priority standards projects that must be completed by December. (See NERC Expecting Packed 2024 for Standards Actions.)
Introducing the first SAR, NERC Manager of Standards Development Alison Oswald explained that the project team “wanted to [list] the cyber assets that are going to be addressed” through altering one of the SARs attached to the project, “instead of using the umbrella term of ‘cyber assets.’” The assets to be named are electronic access control or monitoring systems, physical access control systems and protected cyber assets.
However, committee members wondered if the proposed changes still were necessary in light of changes in the ERO since the project began. Charlie Cook of Duke Energy observed that “we [in] the industry already have to provide a list of assets” as part of new audit procedures introduced by the regional entities since 2021 and suggested it was redundant to put the same specifications in the standard.
In response to Cook’s question, NERC Manager of Standards Development Latrice Harkness explained the SAR was intended as “a scoping mechanism to define what we are addressing” and to give the drafting team flexibility to discuss the topic if needed.
Cook then asked, “What gap are we trying to close [with this SAR] — is it a reliability gap, or is it simply a gap [that] makes the auditors’ job a little more difficult?”
Harkness replied again that the request was intended to ensure the specific terms would be included in the project’s scope, to which Cook responded that “there really didn’t seem to be a lot of support for this” proposal based on industry comments on the draft SAR.
Cook moved that the committee reject the SAR “for good cause” as provided for in NERC’s Standard Processes Manual, which passed with the required simple majority. The SAR will be sent back to the SDT for Project 2021-03 with a written explanation, which Bennett said he would work on with NERC staff.
The second SAR related to Project 2021-03 passed with no objections from committee members. This proposal was intended to revise CIP-002-5.1a and CIP-014-3 (Physical security) to provide consistency with changes introduced by Project 2015-09, which NERC’s Board of Trustees passed in 2021. (See “Approval and Standards Actions,” NERC Board of Trustees/MRC Briefs: May 13, 2021.) Oswald explained the proposed revisions to the standards were intended only to “clarify the functional entities responsible for” determining and communicating system operating limits.
The last two action items passed by the committee were to solicit nominations for drafting team members. In the first case, NERC staff requested members to supplement the team for Project 2021-01 (Modifications to MOD-025 and PRC-019). NERC Manager of Standards Development Jamie Calderon explained that the team has “a lot of modeling” experts and the ERO would like to “get more protection engineers” on board to address the project’s changing scope.
The second nominations item concerned creating a drafting team to address the Energy Assessments with Energy-constrained Resources in the Planning Time Horizon SAR, which the committee originally approved in 2022. Harkness explained that while the committee named a 15-member team to draft the SAR, that team now feels it would be best to split the work, with a new group tackling the long-term planning aspects of the project and the original team focusing on the near term.
