PHILADELPHIA — Energy Secretary Rick Perry hasn’t given up on his campaign for coal and nuclear generation, but he conceded Tuesday he hasn’t made much progress either.
Speaking at the Edison Electric Institute’s 2019 annual conference, Perry said he continues to support an “all of the above” generation mix, praising coal and nuclear as the “most reliable” generation resources and criticizing the “blatantly discriminatory rules and regulations” he said are hampering them.
Perry called out the Obama administration and Green New Deal Democrats who he said want to ban anything but wind and solar power. “They will ruin our ability to run our economy when the sun doesn’t shine and the wind doesn’t blow,” he said.
He also criticized New York officials for blocking new natural gas pipelines, saying they were to blame for the “bizarre spectacle” of New England having to import Russian LNG last winter.
In a press conference later, Perry conceded “we’re pretty much at the same point where we were” after the White House failed to act on the Department of Energy’s proposal for price supports for “fuel secure” generation last fall. (See FERC Rejects DOE Rule, Opens RTO ‘Resilience’ Inquiry.)
Perry said he has seen “no movement from FERC or the White House.”
But it’s not all bad, he said, citing “progress” on research into carbon capture and expanded coal exports.
After his speech, Perry sat for a brief interview with incoming EEI Chair and Exelon CEO Chris Crane.
Crane thanked Perry for the electric load provided by the Department of Energy’s Argonne National Laboratory in Commonwealth Edison territory in Lemont, Ill.
“Keep the prices down,” Perry responded.
“Keep the nuclear plants running,” Crane shot back, before fist pumping with the secretary.
PJM and its Independent Market Monitor must turn over a trove of documents stemming from allegations of market manipulation against now-defunct Coaltrain Energy over its profits on up-to-congestion (UTC) trades collected in 2010.
The U.S. District Court for Southern Ohio subpoenaed both agencies on June 4 for records supporting complaints to FERC that the trading group profited by $4.2 million using an “over-collected loss strategy” that diverted more than $8 million in marginal loss surplus allocation (MSLA) payments between June and September 2010.
FERC and Coaltrain’s former staff — including leaders Shawn Sheehan and Peter Jones and traders Jeff Miller, Jack Wells, and Robert Jones — have been locked in a lengthy and expensive court battle over the commission’s demand for $42 million in fines and disgorged profits as penalty for the bad behavior.
Coaltrain is one of at least three firms accused by FERC of market manipulation for profiting on line-loss rebates from what the commission called risk-free UTC trades in PJM. (See Traders Deny FERC Charges; Seek Independent Review.) The company maintains it didn’t manipulate the market, its trading strategy wasn’t deceptive and it didn’t engage in wash trades or try to affect market prices.
Chart illustrates the time period over which Coaltrain Energy engaged in its over-collected losses (OCL) strategy, illegally earning it payments from PJM’s marginal loss surplus allocation program. | FERC
FERC also alleged Coaltrain’s use of employee-monitoring software gave investigators evidence of the company’s trading strategy. FERC said Coaltrain employees at first claimed they had forgotten about the software — Spector 360 — when the Office of Enforcement initially asked and then repeatedly delayed giving up the data. Sheehan and Jones allegedly didn’t have the program installed on their computers, effectively concealing their actions. (See FERC: Spy Software Provide Evidence of UTC Scam.)
Now, the court wants the Monitor and PJM to hand over all communications regarding Coaltrain from Jan. 1, 2010, through Sept. 30, 2010 — including phone calls, emails, studies, simulations, calculations and even the 2009 State of the Market Report.
The Monitor said in a June 4 email to PJM stakeholders the court order forces it to reveal confidential member information. Those opposed to the release must alert the IMM no later than June 28, the Monitor said.
The federal judge overseeing Pacific Gas and Electric’s bankruptcy case ruled Friday that he retains sole oversight of billions of dollars in renewable energy contracts the utility has said it may seek to reject during Chapter 11 reorganization.
Judge Dennis Montali | Commercial Law League of America
In a two-page declaratory judgement, Judge Dennis Montali of the U.S. Bankruptcy Court in San Francisco said FERC has no authority over the $42 billion in power purchase agreements entered into by the utility or its parent company PG&E Corp. despite the commission’s assertion that it shares jurisdiction in the matter with the bankruptcy court.
“The Federal Energy Regulatory Commission does not have concurrent jurisdiction, or any jurisdiction, over the determination of whether any rejections of power purchase contracts by either debtor should be authorized,” Montali wrote. “Debtors do not need approval from [FERC] to reject any of their power purchase contracts.
“Any determinations of the Federal Energy Regulatory Commission contrary to [this decision] are void, of no force and effect, and not binding on this court or either debtor,” Montali wrote.
The ruling sets up an appellate court showdown between federal authorities and puts in limbo 387 PPAs between PG&E and 350 companies such as NextEra Energy and Exelon. The PPAs represent nearly 14 GW of contracted capacity.
The case began in January when PG&E filed for bankruptcy and NextEra and Exelon sought FERC’s help preserving their contracts. In response to their petitions, FERC declared it shares authority over PG&E’s wholesale PPAs with the bankruptcy court. (See FERC Claims Authority Over PG&E Contracts in Bankruptcy.)
PG&E asked the court to prohibit FERC or its PPA partners from interfering in its Chapter 11 case. It argued the only way for it to emerge from bankruptcy intact is for the court to allow the utility to abrogate overpriced renewable energy contracts — and that any input from FERC over those contracts would violate the court’s authority under bankruptcy law.
Wholesale PPAs are not “simple run-of-the-mill” contracts between private parties, FERC said. They “implicate the public’s interest in the orderly production of plentiful supplies of electricity at just and reasonable rates and, as filed rates, carry the force of law binding sellers and purchasers alike.”
“Whether a wholesale rate is just and reasonable — and whether the abrogation or modification of a wholesale power contract is necessary to protect the public interest — is a question that the commission is statutorily obligated and exclusively authorized to consider,” the commission said.
But FERC insisted it “neither presumes to sit in judgment of rejection motions nor seeks to abrogate the role of adjudicating bankruptcy proceedings.”
Montali called FERC’s statements extraordinary and said he wasn’t buying them.
The 550-MW Topaz Solar Farm in Central California, one of the world’s largest solar arrays, is contracted to PG&E. | U.S. Fish and Wildlife Service
In a memorandum accompanying his order, Montali made it clear he thought FERC had overstepped its bounds when it inserted itself into the bankruptcy proceedings.
FERC “has chosen to interfere with bankruptcy courts’ decisions. Without statutory or Supreme Court authority to support its position, it in fact ‘presumes to sit in judgment’ and second-guess — no, overrule — decisions of the bankruptcy court.”
“Despite FERC’s lip service to what it describes as ‘concurrent jurisdiction’ to carry out differing and perhaps competing policies, the effect of its decision guts and renders meaningless the bankruptcy court’s responsibilities in this area of the law. For this reason, FERC must be stopped, and the division and balance of power and authority of the two branches of government restored.”
Montali stopped short of issuing an injunction against FERC and PG&E’s power suppliers, as the utility had requested, but said he would do so if necessary.
PG&E said it was pleased with the court’s decision. NextEra and Exelon had no comment.
During hearings on the matter, Montali said he wanted to issue a ruling quickly so that the parties could appeal the case to a higher federal court. That’s now likely to happen.
MEXICO CITY — Mexico’s energy secretary opened the Gulf Coast Power Association’s fourth conference on the country’s electric power market on Thursday with what observers labeled a “stump speech” and an olive branch to the foreign investment community.
Making her first public appearance since Fitch Ratings downgraded Mexico’s sovereign debt rating to BBB — just above junk status — and Moody’s Investors Service lowered its outlook to negative, Rocío Nahle, secretary of the Ministry of Energy (SENER), told her audience of about 100 attendees that the country’s energy market is still very much open to private interests.
“The private sector is playing a very important role that requires our full attention,” Nahle said. “We are at your service. We are public servants. We are servicing everyone. We can help you out, as much as possible.
“Where there’s synergy, we will push forward. Where it’s not possible, we will say it’s not possible. We’re looking to increase investments … to find joint energies between the public and private sector,” she said.
Nahle’s message was a departure from the actions the administration of President Andrés Manuel López Obrador has taken to reverse much of Mexico’s electric market reforms since taking power in December. AMLO, as he is commonly referred to, has railed against the 2013 reforms, calling them a “neoliberal” economic policy that favors markets and investors over the Mexican people.
Most of the administration’s early measures have benefited the government-run Federal Electricity Commission (CFE) electric utility. Capacity auctions, which obligated CFE to buy power, have been canceled, and plans announced for new power plants. (See Changes Add Uncertainty to Mexico’s Power Market.)
The country’s electric regulatory agency, the Energy Regulatory Commission (CRE), has seen its independence threatened by four new commissioners, all appointed by López Obrador. CRE President Guillermo García Alcocer last week announced his resignation, effective June 15, saying the commission “has a new composition with a majority vision different to mine.”
The changes “have left us in a situation where companies that want to do business here and invest are sitting on the sidelines,” said Bravos Energia President Jeff Pavlovic, who had a large hand in writing the new market rules. (See American Market Architect Reflects on Mexico’s Reforms.)
Pavlovic said he’s been enloquecido, or driven crazy, by the recent market developments, his bleary eyes emphasizing that point. The market is still active, he said, “but the pieces canceled by the government and the government statements send confusing signals.”
Thus, Nahle assured investors that the government will “abide” by all contracts signed under the previous administration.
“Not only abiding, but helping you push forward” through red tape, Nahle said. “Everyone has been complaining about the paperwork,” she said, promising to shorten the time it takes to obtain permits and regulatory approvals.
Nahle said the changes to the market were necessary because of an uneven playing field for CFE, never mind the utility’s 90% market share. She pointed to what she said was poor performance in the power auctions, which CFE is required to buy from, contending only 9% of the contracts from the second auction were actually completed and none from the third.
“There has been an imbalance. There should be a balance, which is the main strength of the power sector in Mexico,” she said. “There’s so much power and capacity, there is a place for everyone. There is space for all of us. Everything should be under order, which is what the government is working for.”
Shrugging off negative media reports on the market (“Sometimes we read different media. Some opinions are not very right, or people have personal opinions with firm foundation.”), Nahle said the reforms will be maintained.
“We’re not going to implement any changes. We will continue to work with the regulators, as we are now,” she said. “We can make it so much stronger. We invite you to participate, so we are going in the same direction. We have to take full opportunity, because this country is demanding lots of power.”
When asked whether Nahle’s statements will reassure market participants and investors, ICIS Heren’s James Fowler, a senior energy analyst for the Americas, firmly said, “No,” pointing to the changes made to strengthen CFE’s role in the market.
Andrea Calo, director of Mexican market intelligence for Customized Energy Solutions, said she has to counsel clients and investors interested in the market to better understand the signals coming from the new administration.
“We knew the power market was going to suffer some modifications,” she said. “It’s evident that it’s evolving. It’s a dynamic market, and it should change. It faced a structural power reform in 2013 … originated in part to attract private investment, because there’s not enough public capital to meet that demand. We’re seeing a change in that principle. It doesn’t mean the changes announced will become a reality. We will see how it goes at the end.”
Hard Line on Corruption
López Obrador’s 2018 campaign included a pledge to eliminate government corruption, a message Nahle says the president repeats “every single day.”
“Corruption is very, very costly to Mexico. Power insecurity is because of corruption. Inequality in this sector is because of corruption,” she said. “We’re even changing some public servants, because we do not tolerate corruption. Not any longer. No corruption is being tolerated by this administration.”
While there have been no wholesale purges in the energy bureaucracy, some personnel have seen their salaries slashed because they were making more than the president. One attendee questioned the strategy, pointing out that those who lost income might be incentivized to find other ways to make up the difference.
“The private sector is asking if there is still room to endorse investing in Mexico,” Calo said. “There’s a need to have a permanent dialogue with the new government and the new administration. Ideally, they might take advantage of all the agencies and public servants that were a part of the previous administration, taking advantage of their expertise to provide the technical advice in determining the best way forward. This market will help them reach their stated goals, a reliable supply and more efficiency.”
Asked to make sense of the new administration and its effect on energy market reforms, the conference’s final panel suggested patience with the sudden change in direction.
Severo Lopez, a partner with Galo Energy Consulting, said power markets “tend to be politically complicated,” which could lead to a long learning curve for the “nuevos” (newcomers).
“We had been working on the reforms for the past 20 years, but the last administration was the first time we saw political support for changing the energy sector,” Lopez said, referring to the Enrique Peña Nieto presidency. “We’re back to reality. Reality is that these processes are complex; the changes being made here are by changes in regulation. We shouldn’t freak out. It’s the usual process.”
“There are companies that want to contribute. We know we provide value,” said Jonathan Pinzon, director of regulatory affairs for Invenergy’s Mexican business. He said he was surprised by the “limited numbers of U.S. companies participating in this market” but noted that “things will change.”
“That was the reality six years ago,” Pinzon said.
Acclaim Energy Advisors’ in-country manager, María José Treviño, said she was spending her third straight day at an industry event. “The message is the same. Investment is here,” she said.
“A lot of companies have their generation facilities developed. They’re willing to keep developing, but there is a bit of uncertainty,” Treviño said. “The reality is … demand is growing. We see contracts being signed; we’ve seen consumers making decisions quickly. They want certainty in their budgets. There’s movement, but we need more. We need more investment in infrastructure to move forward.”
Pavlovic told RTO Insider that it won’t be CFE building the needed new generation plants and transmission facilities, despite the utility’s regained prominence. He pointed to the recent news that CFE had lost almost 14 billion pesos (about $710 million) during the first quarter of 2019, news that was only made public when the company missed a filing deadline and the Mexican Stock Exchange halted trading of its shares.
“Most people are trying to identify how to adapt to the new rules, but a big piece is unclear: Can CFE build new generation?” he said. “They don’t have the balance sheet to finance that many projects.”
SENER Planning Document Yields few Insights
If market participants were hoping SENER’s annual planning document would add clarity to the electricity sector’s future, they were sorely mistaken.
The ministry released the Programa de Desarrollo del Sistema Eléctrico Nacional (PRODESEN) at the end of May. The document, which provides a 15-year look-ahead, calls for CFE to add 18.8 GW of new capacity by 2025, equivalent to about 27% of the country’s current generation. Despite Nahle’s claims that the administration would stick to Peña Nieto’s goal of 35% renewable generation by 2035, the PRODESEN calls for only 2.9 GW of additional renewable energy.
Galo’s Lopez said the document has a CFE flavor because of political concerns that the utility “is at some disadvantage.”
“This plan has a strong part where it says CFE has to invest in generation, transmission and distribution,” Lopez said. “They talk about private investment, but there’s no fine definition of where investing in the private sector starts and ends. Why? There are no financial numbers in the plan. If you don’t put numbers in plan, you can say anything you want.”
“[The PRODESEN] sends some high-level signals. In the end, the challenge is how to implement them,” said Antonio Noyola, chief development officer with Avant Energy and a CFE veteran. “We need to read it, digest it, understand it. I’ve read it twice, and every time I read it, there are many questions. What exactly do they want to say?
“Electricity is a basic need for all. Who is going to supply it?” Noyola asked. “Shouldn’t [national ISO] CENACE be a part of it, if we are to grow the power system in a balanced way? We would like to see there is open access, when in practice, there is no access. So, a few challenges, yes.”
“The answer has to be provided by the government. It’s not coming from us,” said Laurie Fitzmaurice, EDF Renewables vice president of business development for Mexico. “I believe the PRODESEN knows we do not have the [background information] to understand this PRODESEN. We’re just starting to digest it. Whether we have a level playing field is not up for discussion. What does equality for CFE mean? There are many opinions.”
A newly minted short-timer, CRE President García Alcocer refrained from taking shots at the administration during his luncheon address. Instead, he delivered straightforward comments on CRE and its role in regulating and monitoring markets and sanctioning those that don’t comply.
“Regulating bodies are struggling to show why regulation is necessary. Our primary objective is to provide certainty to the investment community,” García said. “The certainty that the legal framework won’t change is important to you.”
He quoted “Game of Thrones” character Tyrion Lannister in explaining the difficulty in balancing consumer interests with those of public and private energy companies: “No one’s very happy, which means it’s a good compromise.”
García Alcocer’s resignation will leave CRE with just one holdover commissioner from the previous administration and two of seven slots to be filled. López Obrador responded to the resignation during one of his daily morning press conferences by saying officials that don’t share the administration’s goals should seek work elsewhere in an “act of honesty.”
“A regulator has no one to stand for him,” García Alococer said. “To have certainty for investment, we provide the blame shifting. It’s important for a politician to have someone take that responsibility.”
Looking back on his tenure with CRE, he seemed to take pride in its transparency. He pointed out its meetings are open to the public but noted the most recent meeting was the first with four new commissioners, all from petrochemical backgrounds.
“They are extremely boring, until a few days ago,” he said, drawing hearty laughter.
Bilateral Contracts Show Hope for Future
A year ago, an industry insider addressed the lack of activity in the bilateral market by saying that whenever a contract is signed, “There’s a big fiesta.”
Times have changed, said Cesar Reyes, a partner with Zumma Energy Consulting.
“I’ve seen a lot more momentum the last six months,” he said. “There’s more appetite on both the part of the qualified supplier [aggregator] and the end user. That’s because the rates and tariffs are following the same steady upward paths.”
“We see more movement, much more suppliers seeking clients, and higher dynamism,” said Yosafat Coca Huerta, with Suministradora (Supplier) Fenix. “A supplier has to think how can [it] get power … on tendering process. … There’s a big interest on behalf of generators seeking suppliers who might help out [with backup power]. We saw this in the last quarter and again this year. There’s a lot of interest by big parties … to reach bilateral agreements. Maybe we will have at that time, based on private bilateral hedge contracts, we’ll have a better price.”
“The outlook will be cleared up eventually,” Pavlovic said, “and we can go back to the fast-growth cycle we were in.”
The Pennsylvania State Senate’s top Democrat wants other lawmakers to sign onto his plan to cap energy sector emissions in a state known for its abundance of fossil fuels — an uphill battle he says matches the ambitions of Gov. Tom Wolf and other zero-carbon crusaders in the Mid-Atlantic.
Senate Minority Leader Jay Costa | Jay Costa
Senate Minority Leader Jay Costa said Friday his “cap and invest” program instructs the Environmental Quality Board (EQB) to adopt a mechanism that will prioritize the deployment of zero-emission technologies in an effort to reduce carbon pollution from the state’s electric power sector by at least 90% over the next 20 years.
“The federal government has abdicated responsibility on climate change — states, local governments, private companies and citizens must take the lead in enacting equitable policies to mitigate the growing impacts of climate change,” he said in a press release Friday.
The board would also have the authority to develop a market-based carbon pollution limit that generates revenue for investments in renewable resources that promote energy efficiency and affordability. Rather than imposing a strict charge like a carbon tax, the plan uses an auction system, although both strategies “create a cost for carbon,” said Costa spokesperson Brittany Crampsie.
“Pennsylvania has already made important strides towards reducing greenhouse gases, and mayors from Pennsylvania’s two largest cities have already committed to reducing carbon emissions,” Costa said. “But more work is needed to achieve the emission reductions and to make sure Pennsylvania isn’t left behind in the burgeoning growth of clean energy technologies and jobs.”
The legislation comes just two months after the EQB sent a controversial petition from the Clean Air Council to the Department of Environmental Protection for review and possible rulemaking. The petition calls for a cap-and-trade program that requires power producers to cut emissions to below an established “cap” that will be reduced by 3% each year until reaching zero. Those unable to stay below the limit must buy credits from producers with room to spare.
The Pennsylvania Manufacturers’ Association called the proposal a “regulatory scheme” that unfairly side-steps the legislative process, where such a debate belongs. It’s unclear how similar Costa’s bill is to the petition, if at all, though PMA President David Taylor said Monday it’s likely “more of the same.”
Mark Szybist, a senior attorney with the Natural Resources Defense Council, pointed out that while the bill’s language has not been released, its co-sponsor memo indicates it will not levy a carbon tax, instead directing the EQB to adopt “cost-effective regulatory mechanisms.”
“The board could do that by creating a market-based cap-and-invest program that puts a price on carbon dioxide and could also develop other approaches as a complement or alternative to a cap-and-invest program,” Szybist said.
Uphill Battle
Since 2007, the natural gas industry has spent nearly $70 million on state lobbying efforts, including $11.2 million in campaign donations, according to data compiled in the Marcellus Money report. Likewise, natural gas drilling in the commonwealth exploded over the last decade, pushing its output second only to Texas and providing for 20% of the national demand — a figure expected to double by 2040.
The boom has lowered residential electricity bills by an average of $102/month, the Pennsylvania Independent Oil and Gas Association said. Federal data also show a 14% decline in carbon emissions from the proliferation of gas across the country and 30% in Pennsylvania alone.
Still, Costa’s plan would further entrench Pennsylvania in the growing pool of Mid-Atlantic states pursuing ambitious clean energy goals in response to the nation’s withdrawal from the Paris Agreement, a worldwide initiative to limit the increase in global temperature to below 2 degrees Celsius above pre-industrial levels.
In April, Pennsylvania joined the U.S. Climate Alliance, and Wolf released an update to the state’s own action plan to achieve a 26% reduction in statewide greenhouse gas emissions by 2025. (See Pennsylvania Joins the US Climate Alliance.) He’s also called for a severance tax on the natural gas industry to fund infrastructure improvements and joined with the governors of New Jersey, New York and Delaware in supporting a moratorium on natural gas drilling in the Delaware River Basin — making him a controversial figure within the sector and among the state Republicans the industry supports.
“Pennsylvania has already benefited immensely from the boom in natural gas extraction, and House Republicans are dedicated to building on those gains rather than endangering them,” House Speaker Mike Turzai (R) said in a press release Friday that criticized the governor’s severance tax proposal and other economic policies. Turzai received $128,000 from natural gas industry donors in the last campaign cycle — 40% more than Wolf and the most of any state candidate running for office.
“It is an age old and long-established maxim that, if you tax something, you will get less of it,” Turzai said. “And yet, perhaps that is precisely what our Democratic governor and his allies in the House Democratic Caucus intend with his proposed severance tax: to make natural gas more expensive to produce, to deter fracking and to chase it out of Pennsylvania, as New York has done.”
It’s the fifth time Wolf has proposed replacing the state’s impact fee — which gas companies pay for each well they drill — with a severance tax that would be based on the amount of gas each well produces. Democrats argue the impact fee leaves money on the table, while Republicans insist it returns investment right back to the communities where the drilling has the most impact, allowing for localized infrastructure and environmental improvements.
Although Costa’s plan doesn’t overtly tax natural gas generators, the intention is obvious, critics said.
Taylor, who had not yet seen the co-sponsorship memoranda, argued that further regulating industry in the U.S. does nothing to reduce worldwide pollution levels. He said countries like China, India and Brazil produce far more emissions than U.S.-based companies, where regulations make air quality in cities across the country cleaner than in Paris.
“This is profoundly wrongheaded that we are going to further turn the screws in the place where this is done the cleanest with the least impact on the environment,” he said. “This is a global issue, and so you have to take a global perspective.”
So far, five Democratic senators have co-signed Costa’s bill, and Crampsie said the feedback has been largely positive.
“Capping carbon emissions from Pennsylvania’s power sector is absolutely critical in order to reduce a major source of pollution driving climate change,” said Tom Schuster, senior campaign representative for the Pennsylvania Sierra Club. “This legislation is a concrete step toward achieving the goals Gov. Wolf has set forth in committing Pennsylvania to the U.S. Climate Alliance and to building a clean and healthy commonwealth now and for future generations.”
Jacquelyn Bonomo, CEO of environmental group PennFuture, encouraged support of the “comprehensive” climate change plan, calling it a “tremendous opportunity … to improve the health of our families and drive forward a clean and resilient energy economy that benefits all residents no matter where they may live.”
HANNA, Wyo. — PacifiCorp subsidiary Rocky Mountain Power broke ground Wednesday on 1,150 MW of new wind power on the high plains of southeastern Wyoming near its existing Seven Mile Hill wind farm.
The company’s Energy Vision 2020 project is the latest in a series of mega-sized wind farms slated for the gustiest parts of the nation in Wyoming and New Mexico. The 99-MW Seven Mile Hill and other wind farms occupy a part of Wyoming where mountain chains end, allowing 70-mph winds to rush through regularly.
“These are gargantuan projects,” RMP CEO Gary Hoogeveen said of his company’s latest endeavors.
Some of the projects in Wyoming and New Mexico are intended to provide as much wind power as nuclear plants. Questions remain, however, about whether the electricity is needed and how it will get to densely populated areas of the West, particularly California.
In its Energy Vision effort, PacifiCorp/RMP plans to build three new wind farms capable of producing 350 to 450 MW each, along with a 140-mile high-voltage line to link the new turbines to its transmission system. It’s also “repowering” existing turbines at Seven Mile Hill and nearby projects with longer blades and new generating units atop the nearly 300-foot towers.
At the Western Conference of Public Service Commissioners annual meeting in Cheyenne last week, Idaho Public Utilities Commission President Paul Kjellander asked why the Energy Vision 2020 project was moving forward when his state has enough electricity for years to come. Idaho is one of the project’s intended recipients.
California Public Utilities Commission President Michael Picker questioned the construction of so much wind power in Wyoming — including a planned 3,000-MW project — and said there isn’t a clear transmission path to California.
“I can see maybe 1,000 MW, but not 3,000,” Picker said in an interview at the conference.
Many see California, with its 40 million residents, as a prime market for wind power from less populated Western states after it passed a 100% clean-energy mandate last year in Senate Bill 100. (See Calif. Gov. Signs Clean Energy Act Before Climate Summit.) Wyoming has about 578,000 residents with wide-open ranges and powerful winds.
PacifiCorp, based in Portland, Ore., is part of CAISO’s Western Energy Imbalance Market, which allows real-time trading across state lines.
RMP Vice President Todd Jensen, who oversees transmission planning, said the electricity from the Energy Vision project is intended only for the company’s service territory, which contains about 1.1 million customers in Idaho, Utah and Wyoming.
The utility has determined that getting its wind power to California would require tying into substations in Utah and Nevada and building hundreds of miles of new transmission lines, Jensen said. “There’s not really the bandwidth or capacity to get it to California.”
Western Wind Rush
Some are aiming to change that.
The TransWest Express Transmission Project is intended to provide 20,000 GWh/year of clean energy generated in Wyoming to the Desert Southwest, including Southern California, according to the Western Area Power Administration. The federal power marketing administration is supporting the project through its Transmission Infrastructure Program.
The TransWest line would “run about 728 miles from south-central Wyoming, crossing Colorado and Utah, to the Marketplace Hub about 25 miles south of Las Vegas, Nev.,” WAPA said. “When completed, this project would have the capacity to transmit about 3,000 MW of electricity generated primarily from renewable resources at planned facilities in Wyoming.”
The project is still in the permitting phase.
TransWest Express is a subsidiary of The Anschutz Corp., whose owner, conservative billionaire Philip Anschutz, built his $11 billion (2019 net worth) fortune in oil, railroads, telecommunications, real estate and entertainment, Forbes says. Anschutz is planning to build the world’s biggest wind farm on 300,000 acres he owns in Wyoming, the business publication says.
Anschutz’s Chokecherry and Sierra Madre Wind Energy Project near Rawlins in south-central Wyoming would consist of 1,000 turbines generating up to 3,000 MW — with much of the energy intended to be sent to California over the TransWest Express.
The massive wind projects have been undergoing environmental review, permitting and right-of-way acquisition since 2006. Completion is slated for 2026, according to Power Company of Wyoming, another wholly owned Anschutz subsidiary.
In New Mexico, Pattern Development’s Corona Wind Project is moving forward. Pattern’s plans call for construction of up to 950 wind turbines with the potential to produce 2,200 MW of electricity. That’s about the same capacity as Pacific Gas and Electric’s Diablo Canyon nuclear power plant, the last in California, which is scheduled to retire by 2025.
In September 2018, the New Mexico Public Regulation Commission declined to let the SunZia Southwest Transmission Project go ahead, citing unresolved concerns, especially that the developers had “failed to sufficiently define the location of the transmission line route for which it seeks approval.”
The commission denied the project without prejudice so that SunZia’s developer, SouthWestern Power Group, could firm up its plan and resubmit it.
SunZia’s $2 billion transmission project would consist of two bidirectional 500-kV lines with a total rating of 3,000 MW. Its proposed 520-mile path from central New Mexico south across the Rio Grande and the Sonoran Desert in Arizona has met with resistance from federal agencies, the military, environmentalists, community groups and ranchers since it was first proposed in 2008.
Some of those concerns have been resolved, particularly with the U.S. Bureau of Land Management and Defense Department, whose land the lines would cross or abut, but problems with some private landowners persist.
SunZia’s fate is linked with the Corona project, which would be the line’s anchor tenant. The transmission line’s developer says it will try again.
“SouthWestern Power Group is planning to reapply for location approval with the PRC during 2019, providing the additional information cited in the PRC decision,” the company said in its most recent update.
CHEYENNE, Wyo. — Former Gov. Jerry Brown sent his energy aide Michael Picker from Sacramento to San Francisco five years ago, telling Picker he wanted him to serve on the California Public Utilities Commission to try to set things right at the beleaguered agency.
“‘I need you to go down there,’” Picker recalled Brown saying. “He voluntold me.”
In 2014, the commission was in disarray. Its then-president, Michael Peevey, was under fire for his allegedly cozy relationships with the investor-owned utilities it regulated. Accounting irregularities were being investigated. And the San Bruno gas pipeline explosion of 2010 had raised concerns about its ability to ensure public safety.
CPUC President Michael Picker and FERC Commissioner Cheryl LaFleur attended the annual meeting of the Western Conference of Public Service Commissioners in Wyoming last week. | Michael Picker
Picker, 67, became president in early 2015 after Peevey’s departure and led the commission through utility-sparked catastrophic wildfires, the huge gas leak at Aliso Canyon and other crises. He recently announced he would retire once Gov. Gavin Newsom appoints his successor, which he has yet to do.
Outspoken as usual, Picker talked about his accomplishments and the commission’s challenges during an interview Wednesday at the Little America Hotel and Resort, where he attended the annual meeting of the Western Conference of Public Service Commissioners.
“It’s a process of rebuilding an organization that’s stumbling over its own history,” Picker said of the commission while sitting outside on a sunny spring morning on the high plains.
The commission was established more than 100 years ago to make unhurried and often unpopular decisions, Picker said. It began in 1911 as the California Railroad Commission and was meant to stem the abuses of powerful railroads, especially the Southern Pacific Railroad, whose reach extended into the State Legislature, the governor’s mansion and even the state Supreme Court.
“Prior to the founding of the CPUC, the Southern Pacific Railroad dominated California politics,” according to a history of the CPUC posted on the commission’s website. The railroad “provided free train passes to politicians and their family members, donated generously to political campaigns and dominated state party conventions to ensure delegates were friendly to the company’s interests.”
“Gov. Leland Stanford, a Southern Pacific co-founder, went so far as to appoint Edwin Crocker to the California Supreme Court, where Crocker served while retaining his position as general counsel for Southern Pacific,” it says. “Public backlash to Southern Pacific gave rise to the Progressive movement, which succeeded in electing Gov. Hiram Johnson and eventually establishing the CPUC to rein in railroad power and influence.”
The commission was renamed and given oversight of electric and gas utilities, telecommunications and water companies. It’s had the somewhat thankless job of approving new utility infrastructure and getting ratepayers to cover costs.
Picker said the commission is still a product of its era and not set up to respond to fast-changing technologies and public-safety crises such as wildfires. But he said he’s done his best to change that within the limits prescribed by statute and the state constitution.
In particular, he said he’s instituted organizational and cultural changes among PUC staff and its five commissioners — and he’s put far more emphasis on public safety.
“When I got there, no one was talking about safety, even though San Bruno was just a few years before,” Picker said.
Shortly after taking office, Picker — whose expertise was in environmental issues and organizational reform, not utilities — decided to stand outside the PUC headquarters on Van Ness Avenue and hand out fliers to the commission’s hundreds of employees. The fliers invited workers to contact him on his cell phone with safety concerns they felt had been ignored.
“It was a way for me to have conversations with staff,” Picker said.
Some who read the message contacted Picker, saying it was the first time they’d spoken with a commissioner, he said. They said their safety concerns would travel up the staff chain of command but never be dealt with by commissioners, who were aloof and unresponsive.
“That taught me a lot about what needed be to be done at the PUC,” he said.
Creating Consensus
The situation was right up Picker’s alley. He’d spent years addressing vexing problems in unorthodox ways and bringing together people from different arenas. His work had included serving in Brown’s first administration in the early 1980s setting up toxic waste programs and as a state deputy treasurer in the late 1990s.
“I try to focus on developing solutions that don’t lead to the next round of failures,” Picker said.
As chief of staff to Sacramento Mayor Joe Serna Jr. in the 1990s, he set up neighborhood divisions within city government to give residents more say and to encourage officials to tackle local issues.
Gov. Arnold Schwarzenegger tapped him to help get renewable energy projects approved by FERC and other federal authorities. He set up a multiagency team consisting of representatives from the federal Bureau of Land Management, the U.S. Department of Agriculture and different state agencies to map out the process for 150 projects, each generating more than 100 MW. It was his first real work in the energy sector, he said.
Schwarzenegger, and later Brown, asked him to deal with the CPUC, which as a rate-setter is the “second largest taxing agency in the state,” he said. Some lawmakers distrusted the commission and, over time, created a system of checks and balances to slow down its decision-making and force it to operate transparently. For instance, it is only allowed to decide cases on the written record before it.
A slow, lengthy process is good if there’s a danger that utilities are trying to game the market, he said. But it’s not so good at responding to fast-moving changes that people care about, such as wildfires and cell phone service.
“The way we make decisions is very hard for people to understand and participate in,” Picker said.
Picker has defended the CPUC’s practices before the State Legislature as utility-sparked wildfires ravaged the state.
When he became CPUC president, Picker said he decided not to act like his predecessors. Instead of using his prerogative to name an executive director, he made it a group project “designed to create consensus … [so] commissioners felt like they were part of the organization,” he said.
In August 2015, the commission began an investigation into Pacific Gas and Electric’s safety culture in response to the San Bruno gas explosion, which killed eight residents of a suburban San Francisco neighborhood. That was before the massive Butte Fire of 2015, the disastrous wine country fires of 2017 and last year’s Camp Fire, which leveled the town of Paradise and killed 85 people. PG&E equipment started nearly all the fires, state investigators concluded.
Picker said he and his fellow commissioners reinvigorated the CPUC’s Safety and Enforcement Division, which had languished under prior presidents. Deputy Executive Director Elizaveta Malashenko was selected to head the division.
“I’m proudest we brought back the safety division,” Picker said of his achievements.
A bill signed by Brown in 2018, SB 901, gave the CPUC oversight of IOUs’ wildfire mitigation plans. The commission recently approved the first plans under the bill, along with provisions governing power shutdowns for fire prevention. (PG&E took advantage of those provisions on Saturday and Sunday, when windy conditions caused fires near Sacramento and threatened foothill areas. PG&E told nearly 30,000 customers they could lose power.)
‘A Matter of Time’
Picker said it will be up to future commissions to continue improving wildfire safety.
Utilities need to use drones and other technology to increase line inspections, he said. The CPUC cannot inspect all the state’s power lines, as some have suggested, he said. It would take at least 1,300 new employees and $125 million a year to make that happen, Malashenko recently told a legislative committee. (See California Utilities Prepare as Fire Season Looms.)
“It flies in the face of what we were designed to do,” Picker said. The CPUC performs limited inspections of railroad lines, mainly at-grade crossings, while the railroads use specially equipped engines to inspect their tracks, he said.
The legislature could make changes to how the commission operates, or the state constitution could be amended, he said, “but it’s clearly not the right time to do all of that,” with wildfires and other issues taking precedence.
Picker said one notable change during his tenure has been the perception of California by other Western states. CAISO’s efforts to start a Western RTO have been largely rebuffed both inside and outside the state, he said. But the Western Energy Imbalance Market has been embraced as a no-strings-attached way to trade energy across state lines. Animosity toward California has decreased, he said, and one day the West may be organized into a formal wholesale market.
“Everyone knows where this is going,” he said. “It’s just a matter of time.”
As for retirement, Picker said he felt that after 10 years dealing with energy, and a new governor wanting to name a new president, it was time. “It seemed like a natural break,” he said. Newsom did not ask him to leave, he said.
Picker said he’ll keep pursuing new challenges and may return to his roots as a river guide. He’s been invited on a monthlong trip down the Blue Nile in Ethiopia and Sudan, but he hasn’t made up his mind to go.
FERC last week temporarily suspended ruling on Consumers Energy’s complaint over a pending transmission project in southern Michigan until state regulators weigh in on the project’s classification.
The commission’s move on Friday freezes the April complaint against Michigan Electric Transmission Co. (METC) over the Morenci Interconnection Project until the Public Service Commission decides whether the line qualifies as transmission or distribution (EL19-59).
Michigan Public Service Commission | Google Maps
Consumers has claimed that the $21 million, 138-kV line near the Michigan-Ohio border has more in common with a distribution project than a transmission project and should be classified as such. The Morenci project was included in MISO’s 2018 Transmission Expansion Plan over objections by the utility, which argued the line should be recognized as distribution under FERC Order 888’s seven-factor test because it would be radial in nature.
The PSC interceded in the dispute last month to claim jurisdiction over the issue, prompting METC to file a motion for FERC to hold the complaint in abeyance until the state commission renders its own determination. (See Michigan Regulators Intercede in MTEP Complaint.)
“We find that a determination of the classification of the Morenci Interconnection Project is central to addressing Consumers’ concerns raised in the complaint,” FERC said.
FERC said granting the motion won’t “unreasonably delay” its decision in the complaint, as Consumers had argued. The federal commission pointed out that the PSC has promised to act “as expeditiously as possible” on the matter. The state commission already held a prehearing conference on June 4 (U-20497).
“While we agree with Consumers that [FERC] is not required to allow a state regulator to weigh in on every asset classification dispute, this proceeding will benefit from the Michigan commission’s expertise and familiarity with its seven-factor test framework as applied to the Michigan Joint Pricing Zone,” FERC said.
The federal commission also directed METC to file the PSC’s decision in the federal docket within 15 days of its release.
The SPP Market Monitoring Unit has released its quarterly State of the Market report for the winter, which includes a discussion of several weather events.
Electricity and gas prices | SPP
The MMU said the market performed well during the winter months, “sending appropriate price signals during times when delivering power reliably was more challenging.” It said higher prices during an event indicates “a greater need for energy at a particular location.”
The report covers December 2018 through February 2019.
The MMU will host a webinar on Wednesday to add further color to the report.
Generation by technology type | SPP
Highlights for the period include:
Day-ahead energy prices climbed slightly, while real-time energy prices fell from winter 2018 levels.
Average hourly load in December and January was in line with the prior years, with only February exceeding previous levels.
Wind generation capacity continued to climb, increasing to 21.4 GW, a 5.3-GW increase from a year ago.
Generation by coal resources continued to decline, dropping to 44% of the fuel mix.
Overall profits from virtual transactions at the resource level nearly doubled from the previous winter, while profits at interfaces shot up from $200,000 to $3 million, which the MMU attributed to day-ahead and real-time price differences stemming from a modeling issue.
Net market-to-market payments from MISO were about $6.3 million, compared with nearly $16 million the year before.
CARMEL, Ind. — MISO last week proposed a set of changes to buttress its financial transmission rights market and said it will convene a new task team to work out the details of the fledging proposal.
Two alterations involve stiffer collateral requirements, while the third will prohibit known “bad actors” from participating in the RTO’s FTR auctions. During a Market Subcommittee meeting Thursday, MISO and stakeholders created a task team to refine the three-prong proposal.
“MISO has had no losses in the FTR market. Having said that, that doesn’t mean that there aren’t opportunities to improve,” said Brian Brown, a credit analyst with the RTO.
Brown said the improvements are targeted for April 2020, before the next annual FTR auction. By Friday, MISO will create the task team that will draw up the two required Tariff filings this fall, Manager of Credit and Risk Management Matthew Mullin added.
According to Brown, MISO is considering introducing a 5-cent/MWh minimum collateral requirement, which would boost collateral by $35 million across the entire FTR market.
Credit requirements could also be adjusted based on a proposed mark-to-auction valuation that would estimate the market value changes of an FTR portfolio by calculating the difference between FTR purchase prices and the most recent auction prices. PJM recently introduced such a measure to spot reductions in portfolio value in order to increase credit requirements, saying declining market value can be an indicator of increasing risk in FTR markets.
MISO said it plans to require FTR traders to post collateral based on the highest figure derived from either the current FTR credit calculation, the new minimum amount or the mark-to-auction valuation.
Customized Energy Solutions’ Ted Kuhn asked if the changes might negatively impact participation rates in the FTR market.
“We expect the impact to be minimal, but it’s difficult to forecast that,” Brown said, adding that MISO market participants have always been willing to post collateral.
RTO staff also said they will discuss the changes with its Independent Market Monitor.
MISO is justifying the changes based on a 2003 FERC policy statement that said the commission expects that ISO/RTOs “should act on behalf of their membership to minimize likelihood of default.”
Preventing ‘Bad Actors’
In a separate Tariff filing, MISO will seek to bar what it deems “bad actors” — either those that have defaulted or settled market manipulation charges in FERC jurisdictional markets — from becoming market participants.
Mullin said MISO currently lacks the authority to keep those with ill intent out of its markets.
“In light of recent events, we believe MISO should have authority to prevent bad actors from participating. … Right now, we don’t have the explicit authority to do anything,” Mullin said. “We believe this is a logical next step.”
He was referring to GreenHat Energy’s record default in PJM’s FTR market. MISO recently completed a scheduled analysis of its FTR market and has repeatedly reassured members that similar failures are unlikely to occur. (See MISO Offers Reassurances on FTRs, Examines Changes.)
Mullin said MISO must still define what constitutes a “bad actor” and what steps it will take after identifying one. He said the new task team would work out those details.
“These improvements won’t eliminate the risk of a loss; however, it closes the gaps and the opportunity to exploit those gaps. More importantly, it will reduce the magnitude of a loss,” Brown said.
Brown stressed that MISO’s historical FTR performance shows that it has been “minimally exposed.” He added that its FTR market has never experienced a default.
