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October 30, 2024

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FERC’s Christie: Transmission Can’t be Built Without State Support

The surest way to ensure that transmission is not expanded is to usurp states’ authority, FERC Commissioner Mark Christie said April 4 at WIRES’ Spring Member Meeting in Chicago. 

With the Infrastructure Investment and Jobs Act, Congress directed FERC and the Department of Energy to update their processes on designating National Interest Electric Transmission Corridors (NIETCs) after a federal court curtailed the commission’s backstop siting authority from the Energy Policy Act of 2005. A NIETC designation allows the commission to overrule states that reject lines proposed in the specified area. 

The commission will implement that law because it is a creature of statute, Christie said. But he predicted the changes would have little practical effect. (See DOE Lays out Plans for Designating Transmission Corridors.) 

“The backstop siting authority will last until the point when FERC actually imposes a backstop siting authority on a state that just had a proceeding and found that it was not needed,” Christie said. “That’s as long as it’s going to last because the political blowback is going to be off the charts.” 

While he was on Virginia’s State Corporation Commission, Christie voted to approve more than 100 certificates for transmission lines, from small “wreck and rebuild” lines to the Trans-Allegheny Interstate Line (TrAIL) project, which was the longest regional project built in PJM. That project went through three states, including high-value real estate in Virginia’s Horse Country, where owners did not want it to spoil views of their “10,000-acre” estates, Christie said. 

The opposition was well funded and vociferous, but the line was needed to maintain reliability, he said. 

“And because of the process that we followed and giving the public the opportunity to come in front of their own state body, I think that played a big part in why Virginia politicians didn’t come out in opposition to it,” Christie said. 

If FERC were to overrule a state’s rejection of such a project, all its senior politicians, including its congressional delegation, would oppose it.

“You cannot get stuff built without state buy-in,” Christie said. 

Christie extended the same basic argument to the commission’s Notice of Proposed Rulemaking on transmission planning, the final rule of which FERC could vote on in the coming months. 

“There’s a lot of people running around Congress, ghostwriting letters for congressmen to send to us saying, ‘Well, don’t let the state stand in the way,’” Christie said. “You know, don’t let the states be an obstacle. FERC should just do it. FERC should just impose the cost allocation.” 

He recalled that two of the early, important cases he sat on during his SCC tenure were Dominion Resources’ and American Electric Power’s requests to join PJM. 

“We approved them because we thought regional planning could give us, occasionally, a regional reliability project that would be more efficient than a local project if the facts were there,” Christie said. “And we were willing to let PJM plan those regional projects, but they’re reliability projects.”

The facts are easy to prove for reliability projects, he said; the same can be said for economic projects that make sense as long the benefits outweigh the costs. However, the NOPR (and Order 1000 before it) contemplates a third category: public policy. That is where Christie has some concerns. 

“A public policy project is planned by politicians; [it is] fundamentally different,” Christie said. 

They work in single-state markets, but in RTOs, with multiple states that often have divergent policies, they can lead to problems. 

“If politicians in one state want 100% green energy, that’s fine,” Christie said. “If they want to pay for it. If they’re willing to accept the reliability consequences. That’s fine. But don’t make consumers in another state pay for it, unless they agree.” 

It does not make sense to throw those three categories into a regulatory blender and allocate every type of line across an entire RTO footprint, he added. 

“Even a policy project has reliability benefits,” Christie said. “Well, tangentially it may. You can build a line almost anywhere and get some congestion relief. That doesn’t mean it’s the optimal solution.” 

The way to build transmission projects is to have states buy into them, even when they are incredibly controversial like TrAIL, which is on the same scale of transmission that the NOPR’s supporters most want to see get built. Getting FERC to impose cost allocation on the states if they cannot independently come to an agreement will not work, Christie said. 

“I think that’s a pipe dream,” he added. “I think that’s just totally unrealistic the way things work in America.” 

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PSEG Plans for 80-year Nuclear Generation in NJ

PSEG subsidiary PSEG Nuclear has told the Nuclear Regulatory Commission it plans to request operating license extensions for its three South Jersey nuclear plants, which would enable the oldest plant to continue running until 2056 and the newest until 2066. 

With NRC approval, the plants, which are central to New Jersey’s clean energy goals, would operate until they are 80 years old — almost double the 42 years that is the average age of U.S. nuclear plants. 

The utility told the NRC in a March 28 letter it expects to seek license renewal for the plants — Salem Generating Station Units 1 and 2 and Hope Creek Generating Station — in the second quarter of 2027. The application would trigger a two-year review and approval process for the plants, which generate 3,468 MW of energy, PSEG said in a statement.   

“This early notification is intended to provide the NRC with time to ensure resource availability when the formal applications are submitted in 2027,” the company said. 

The three plants generated 42% of the electricity produced in the state in 2022 and are key to Gov. Phil Murphy’s (D) goal of reaching 100% clean energy by 2035. Solar projects account for about 8% of New Jersey’s in-state production, and construction has yet to start on any offshore wind projects, so nuclear-generated electricity will be essential to the state’s ability to produce clean energy and cut emissions for years to come. 

The state’s Energy Master Plan says nuclear plants will need to be “retained past current licenses” and predicts that in 2050, nuclear plants will produce 16% of the state’s electricity, compared to 34% generated by solar and 23% produced by offshore wind. 

Charles (Chaz) McFeaters, president of PSEG Nuclear, said the company has “safely generated reliable, always-on carbon-free energy” for five decades. 

“Seeking to renew our licenses signifies our commitment to continuing to contribute to New Jersey’s clean energy future and serving as a vital economic engine for the local community,” he said. 

Aging Plant Inspections

There were 54 commercially operating nuclear power plants in the U.S. in 2023, with 93 reactors in 28 states, according to the U.S. Energy Information Administration.  

U.S. nuclear plants initially are licensed for 40 years and can submit an application to the NRC to renew the licenses 20 years at a time. The NRC has completed 61 applications to extend a license from 40 to 60 years, known as initial license renewals, but has completed just three applications to extend a license from 60 to 80 years, known as subsequent license renewal. 

PSEG’s plan follows the announcement in March that Michigan’s 800-MW Palisades nuclear power plant, which was opened in 1971 and decommissioned in 2022, could become the first nuclear plant in the U.S. to be restarted, helped by a $1.52 billion loan from the federal Department of Energy’s Loan Programs Office (LPO). (See LPO Announces $1.52B Loan to Restart Palisades Nuclear Plant.) 

Diane Screnci, a spokeswoman for the NRC, said the agency’s extensive research on nuclear plant aging concluded that “most nuclear plant aging issues are manageable and do not pose technical issues that would prevent them [from] … operating [for] additional years beyond their original 40-year license period.” 

Each reactor is licensed based on a specific set of requirements, called the plant’s “licensing basis,” she said. “The license renewal review process provides continued assurance that the current licensing basis will maintain an acceptable level of safety for the period of extended operation. The renewed license requires ‘aging management programs’ to monitor and manage the effects of continued operation on certain structures, systems and components.” 

The agency conducts an extensive inspection and oversight program at every plant throughout its life, she said.  

Chizi Odidika, media relations manager for the Nuclear Energy Institute, said planned life extensions for nuclear plants are not unusual. 

“Over 90% of our current nuclear fleet intends to pursue operation for at least 80 years,” she said, adding that “extending their lifespan involves significant considerations and investments, including the development of robust monitoring programs to track the aging of key structures and systems.”  

Federal Nuclear Subsidies

PSEG is the sole owner and operator of the Hope Creek plant and the operator and majority co-owner of Salem 1 and Salem 2 plants, with Constellation Energy the minority co-owner. 

The company’s oldest nuclear plant, Salem Unit 1, came online in 1976 and in 2011 was granted a license extension to continue operating beyond the initial expiration in 2016 to 2036. The utility now plans to ask for an extension to operate until 2056.  

Salem Unit 2, which came online in 1980, obtained an extension to operate beyond 2020 to 2040, and approval of the planned request would continue operations there until 2060. Hope Creek came online in 1986 and obtained an extension to operate until 2046. PSEG will seek a license to operate the plant until 2066. 

PSEG’s announcement comes as the Inflation Reduction Act (IRA) this year begins offering nuclear production tax credits (PTC) to nuclear plant operators. PTCs create a credit of $15/mWh for electricity produced by existing nuclear plants. 

PSEG in November told the New Jersey Board of Public Utilities (BPU) the utility would withdraw from the state zero emission certificate (ZEC) program to pursue the federal tax credits. The New Jersey program provides subsidies to nuclear power plants at risk of closure so they can remain open to generate carbon-free power. It paid $10/MWh. 

The BPU twice awarded ZECs totaling $300 million a year to PSEG, in 2019 and 2022, and the company had filed a notice of intent to seek incentives in the next period, which would run from 2026 to 2029. But the BPU shut down the program after PSEG’s withdrawal because there were no remaining applicants. (See NJ Closes Nuclear Subsidy Process as PSEG Looks to Feds.) 

The ZEC process became contentious in the last period, with the New Jersey Division of Rate Counsel, the state’s consumer advocate, and environmental activists arguing PSEG exploited its market dominance to extract an unnecessarily large payoff and didn’t need the maximum ZEC to keep the plants operating. 

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Nev. RTO Effort Turns Focus to NV Energy Day-ahead Studies

In studies predicting NV Energy would benefit more from joining CAISO’s Extended Day-Ahead Market than SPP’s Markets+, a key factor is the benefits the utility would lose by leaving the Western Energy Imbalance Market, a consultant said. 

If NV Energy joins Markets+, it would drop out of the WEIM, the real-time market run by CAISO, and join SPP’s Western Energy Imbalance Service (WEIS). 

Leaving the WEIM would create a loss of nearly $100 million for NV Energy, according to John Tsoukalis with the Brattle Group, which conducted the market analysis for NV Energy.  

“So even when you replace that with the gains you see from joining Markets+ and the gains you see by the Markets+ real-time market … it’s not as beneficial as the EDAM cases you see,” Tsoukalis said during a Public Utilities Commission of Nevada (PUCN) workshop April 3. 

Leaving the WEIM would reduce NV Energy’s access to excess renewables from CAISO in real time, and the utility’s prices for real-time sales would fall, according to the study. 

Other WEIM participants also might feel an impact if NV Energy leaves CAISO’s real-time market, Tsoukalis told RTO Insider, although he noted Brattle hadn’t done calculations for other utilities. 

“I would assume the breaking apart of the WEIM would have a negative impact on the other current WEIM [participants],” he said in an email. 

Market Choice Evaluation

The PUCN opened a docket last year to explore ways to evaluate a utility’s choice of a regional market or RTO. (See Nev. Regulators to Weigh Approaches to RTO Membership and RTO, Day-ahead Choice Closely Linked, Nev. Effort Shows.) 

The April 3 workshop focused on cost-benefit studies for market participation; a workshop to discuss different market designs is slated for April 10 at 10 a.m. 

The latest workshop featured presentations on an Energy+Environmental Economics (E3) cost-benefit analysis that was part of the wider Western Markets Exploratory Group (WMEG) study and Brattle’s study for NV Energy, which the utility released last month. (See NV Energy to Reap More from EDAM than Markets+, Report Shows.) 

The Brattle Group study found that joining EDAM would grant NV Energy $62 million to $149 million in annual benefits. Results of the company joining Markets+ would range from a $17 million loss to a $16 million benefit. The study looked at two scenarios in which it joins EDAM and three in which it joins Markets+, calculating benefits expected in 2032. 

In a scenario that Brattle calls the EDAM bookend case, NV Energy and almost all other Western Electricity Coordinating Council (WECC) utilities join EDAM. 

NV Energy’s trading volumes would nearly double in that case, as the utility would serve as a central hub for trading between California and the Southwest and facilitate transfer of low-cost generation from California and the Southwest into Idaho Power and PacifiCorp East. NV Energy’s annual benefit in the EDAM bookend is estimated at $62 million. 

But the utility’s annual benefit would be even higher — an estimated $149 million — in a scenario called Middle View 1. 

That scenario assumes NV Energy, Idaho Power and Seattle City Light join EDAM, along with entities that have announced an EDAM choice, which now includes Portland General Electric. (See CAISO’s EDAM Scores Key Wins in Contested Northwest.) 

In Middle View 1, the Bonneville Power Administration and most of the Northwest’s publicly owned utilities, Puget Sound Energy, and all Arizona BAAs would join Markets+. 

Middle View 1 gives NV Energy access to more resources that are “bottled up” in a smaller EDAM footprint, Tsoukalis said. 

“[During] midday hours in most of the year, you can actually buy power when you need it at almost no cost,” he said. “Whereas in the EDAM bookend case, you kind of have to share that with the Southwest and the Pacific Northwest.” 

Markets+ Scenarios

If NV Energy joined Markets+ rather than EDAM, NV Energy’s generation costs from EDAM participants would rise and trading with those entities would decrease. Instead, the utility would do more trading with Northwest and Southwest BAAs under a Markets+ bookend case. It would gain $16 million annually in that scenario.

If NV Energy joined Markets+ but Idaho Power went with EDAM — in a scenario Brattle called Middle View 2 — NV Energy would lose $17 million annually, as the scenario cuts off a major Northwest-Southwest artery for Markets+. 

“Being in the WEIM alone with almost the full WECC in that footprint is more beneficial for NV Energy specifically than this kind of bifurcated case,” Tsoukalis said. 

Brattle also calculated WECC-wide results for different NV Energy scenarios. 

The greatest WECC-wide benefit, $985 million, was seen in the EDAM bookend case. The least benefit was $682 million in the Middle View 2 case, in which NV Energy chooses Markets+ but Idaho Power goes with EDAM. 

“All of these cases do create for the West as a whole a benefit,” Tsoukalis said. “Even in the cases where things are bifurcated and you get multiple day-ahead markets, the presence of those day-ahead markets does create customer savings relative to the business-as-usual case.” 

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NEPOOL PC Supports Additional Delay of FCA 19

The NEPOOL Participants Committee voted April 4 to support an additional two-year delay of ISO-NE’s Forward Capacity Auction 19 to buy time for the RTO to develop and implement resource capacity accreditation (RCA) changes and shift the overall timeline of capacity auctions. 

FCA 19 will procure capacity for the 2028/2029 capacity commitment period (CCP), and initially was scheduled for February 2025. The auction previously was delayed by a year in a filing approved by FERC in early January. (See FERC Approves ISO-NE’s One-Year Delay of FCA 19.) The additional delay would push the auction to February 2028, with the related CCP set to begin in June of that year. 

This February, ISO-NE endorsed a major redesign of its forward capacity market. While auctions historically have been held more than three years prior to each yearlong CCP, ISO-NE hopes to adopt a “prompt/seasonal” capacity market, with auctions held just months prior to the CCP, which would be broken up into distinct seasonal periods. (See NEPOOL MC Backs Further Forward Capacity Auction Delay, ISO-NE Moving Forward with Prompt, Seasonal Capacity Market Design.)  

Meanwhile, the RTO is continuing work on its RCA updates, which are intended to better align the capacity values assigned to different resources with the actual reliability benefits the resources provide. (See NEPOOL Markets Committee Briefs: March 13, 2024, NEPOOL Markets Committee Briefs: Feb. 6, 2024.) 

The vote on the additional delay passed with broad support from the PC, though some stakeholders have expressed concern the delay could hurt the development of new resources that rely on capacity market revenues.  

To help mitigate these impacts, ISO-NE will allow new resources expected to be operational by June 2028 but that lack capacity supply obligations to qualify for reconfiguration auctions. 

Extended-term/Longer-term Transmission Planning Phase 2

The PC also voted to support a proposal from ISO-NE and the New England States Committee on Electricity (NESCOE) to create a new process for transmission investments to address long-term transmission needs.  

The process would allow ISO-NE to issue a request for proposals targeting long-term transmission needs at the direction of the states. ISO-NE then would select a preferred solution out of the proposals received, while giving the states the option to proceed with this preferred solution. (See NEPOOL TC Approves Process for States’ Transmission Needs.) 

The costs of selected projects would be regionalized among the states unless NESCOE proposes an alternative cost allocation methodology. For a project to be eligible for selection, expected quantified benefits must outweigh costs.  

The PC also passed a supplemental process that would allow the states to select a proposal even if no project passed the cost/benefit threshold. In this supplemental process, one or more states could agree to cover the costs that exceed the benefits, while the rest of the costs would be regionalized.   

Operations Updates

ISO-NE COO Vamsi Chadalavada said overall demand in March was lower than historical levels due to mild temperatures and increasing behind-the-meter solar production. The monthly peak load was 15,692 MW, which occurred on the evening of March 21. 

Chadalavada noted that ISO-NE expects the eclipse on April 8 to cut solar generation by about 3,600 MW but said the RTO “has simulated this event, and our operators are ready.”

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BPA Staff Recommends Markets+ over EDAM

The Bonneville Power Administration on April 4 released a much anticipated staff report that tentatively recommends the agency choose SPP’s Markets+ over CAISO’s Extended Day-Ahead Market (EDAM). 

“We stuck to our evaluation principles and are confident in the analysis and public process that led to the recommendation,” Russ Mantifel, BPA director of market initiatives, said in a statement. “Both markets we are considering honor those principles; however, ongoing concerns with governance and some superior features related to greenhouse gas accounting and resource adequacy, among others, led to staff’s preference for Markets+.” 

The staff recommendation, the product of a public process the federal power agency kicked off last July, should come as little surprise to electricity sector stakeholders who have closely followed the growing competition between Markets+ and EDAM to bring a more organized electricity market to the West. BPA was an important contributor to the development of EDAM, but it has been a central participant in the intensive — and expedited — stakeholder process to design Markets+, including the market’s governance structure. 

But the staff report, and an accompanying letter by BPA Administrator John Hairston, also made clear the recommendation is not etched in stone. 

“This is not a final decision, nor is it an endorsement of one market option over another. Rather, it is intended to provide greater insight into the analysis of Bonneville staff and their recommendations based on information gathered to date,” Hairston said in the letter. 

Along with the market recommendation, BPA also released a “preliminary legal assessment” describing the agency’s authority under federal law to join a day-ahead market. The assessment considered multiple factors, including the business case for participation, the agency’s obligations to preference customers, and its environmental responsibilities with respect to operation of its dams. 

The legal assessment notes that the Energy Policy Act of 2005 grants federal utilities the right to join transmission organizations, including RTOs. The assessment points out that Markets+ and EDAM would be “less restrictive” than an RTO because BPA “would retain substantial control over its transmission assets, and its balancing authority area responsibilities would be preserved.” 

“While the development of a day-ahead market is not an RTO, it is reasonable to conclude that Congress contemplated federal utilities would be authorized to participate in subcomponents of an RTO like a day-ahead market as part and parcel of that express authority,” the assessment found. 

‘Important Differences’

In developing the market recommendation, BPA staff considered eight evaluation principles, including: statutory, regulatory and contractual obligations; service reliability for BPA customers; resource adequacy frameworks to maintain system reliability; business rationale; consistency with BPA’s 2024-2028 strategic plan; governance; commercial and operational impact of day-ahead market participation on customers; and handling of greenhouse gas emissions. 

Governance has been a top concern for BPA as it contemplates joining a day-ahead market that could eventually evolve into an RTO. For the agency, CAISO’s governance, which is subject to oversight by California state officials, has been a significant hurdle for joining EDAM and a point that heavily favors Markets+. 

“Paramount to Bonneville’s participation in any day-ahead market is the requirement for independent market governance that is not obligated to any single state, entity or trade association,” the staff recommendation said. “Bonneville staff believes that independent governance will ensure that decisions affecting the market are made with consideration of the interests of all market participants.” 

Staff said it saw “important differences” between Markets+ and EDAM in this area, pointing to differing approaches to stakeholder processes as well as governance. 

“Bonneville staff believes that Markets+ has developed a structure and process that is more likely to result in equitable market outcomes and fair consideration of Bonneville’s interest,” the report said. “The structure of the Markets+ Participants Executive Committee (MPEC), work groups and task forces that developed the market design and initial tariff provided all participants an equal opportunity to weigh in on decisions.” 

The BPA report said the Markets+ governance and processes “supported collaboration and negotiation” to help achieve consensus on issues, allowing the agency “to propose and obtain consideration of its statutory and contractual obligations” during development of the tariff. 

BPA staff complimented the Markets+ work group processes for being “publicly accessible” and for considering views of utilities, states and independent organizations. 

They also noted that SPP’s staff have offered technical support and other facilitations “while respecting the decision-making roles of market participants.” 

“As Markets+ transitions from phase 1 to phase 2 and ultimately to an operational market, Bonneville staff expects the MPEC, work groups and task forces to maintain the same level of decision-making and collaboration that crafted the tariff,” the BPA report said. 

BPA staff contrasted SPP’s approach with what they called CAISO’s “staff-driven model.” 

“Bonneville staff acknowledge the CAISO’s efforts to develop a more participatory stakeholder engagement process. Bonneville appreciates and respects the professionalism and expertise that CAISO staff routinely display in their stakeholder process, but Bonneville staff believes the process is still lacking in stakeholder leadership and engagement in policy and implementation development, evaluation and decision processes,” the report said. 

On governance, BPA staff said CAISO’s model “has presented challenges in resolving contentious regional issues” and that the agency has observed “that EDAM governance presents real problems for Bonneville’s participation in a day-ahead market and could result in unbalanced outcomes, as it continues to operate under provision of California law. 

The report notes that CAISO’s Board of Governors is appointed by California’s governor “with obligations to California ratepayers embedded in California laws and policies.” The ISO’s “dual responsibilities” of serving California load and operating day-ahead and real-time markets “has resulted in Bonneville, and consequently its customers in the Pacific Northwest Region, being at a competitive and governance disadvantage,” the report contends. 

BPA staff acknowledged the efforts of the West-Wide Governance Pathways Initiative to create a more independent governance structure for a single Western market that would expressly include California and rest on the platform of EDAM and CAISO’s Western Energy Imbalance Market. 

“Bonneville’s view is that achieving the objective of Pathways likely requires modification of California legislation, which has not gained traction in the past,” the report said. “Bonneville is tracking the effort’s legal analysis for indicators regarding the viability and potential timeline for governance updates. Throughout its decision-making process, Bonneville will continue to consider the progress of Pathways.” 

“I don’t anticipate, at this point in time, that we’ll get more involved [in Pathways] than we are right now,” BPA’s Mantifel said during an April 4 press briefing. “We will be evaluating anything that comes out of the Pathways Initiative as part of our ultimate decision, so when we do make the decision later this year, we will take into account any governance changes that have either been realized or proposed as a result of the Pathways Initiative.” 

SPP Wins on RA, GHGs

Markets+ also won favor with BPA staff on the issue of resource adequacy based on the market’s requirement that eligible participants also join the Western Power Pool’s Western Resource Adequacy Program (WRAP), which is operated by SPP. 

“WRAP has become the dominant resource adequacy program outside of California,” the BPA report said. “The EDAM proposal does not propose a uniform adequacy metric or require EDAM entities to participate in a resource adequacy program. Bonneville staff supports and prefers the clear and consistent requirement that all Markets+ [load-responsible entities] must participate in WRAP, which better supports regional reliability.” 

While California utilities are subject to a state-mandated RA requirement, other EDAM participants outside California can participate in the WRAP but are not required to join an RA program, BPA staff noted. 

“The EDAM proposal’s lack of a common resource adequacy metric makes it difficult to assess whether the footprint as a whole will be resource adequate in the planning horizon. Further, failure to adequately plan in advance to meet demand by the day-ahead time frame could undermine the ability of the market to find adequate supply to serve load in the short day-ahead time frame,” the report said. 

BPA staff also favor the way Markets+ will handle the tracking and accounting of greenhouse gas emissions, an issue of specific concern for agency customers in Washington state, which last year adopted a cap-and-trade system to price carbon. While both Markets+ and EDAM are designed to attribute specific resources to states with GHG pricing, BPA staff said SPP’s design offers more assurance that energy from the federal hydro system will be attributed to BPA’s Washington customers who have contracted for that power. 

“In contrast, CAISO’s design would attribute the federal system to Washington only when it is the most economical solution for the entire market footprint,” BPA staff said. “This outcome of CAISO’s design would adversely impact Bonneville because, at times when the system is not attributed to Washington, Bonneville may not be able to recover the difference between the price it receives for system resources and the cost it pays for load in the GHG area.” 

BPA staff also preferred the Markets+ approach to transmission congestion rent, saying it “better models physical congestion in Bonneville’s transmission system, allocates congestion rents according to constraint-level congestion and allocates congestion rents directly to long-term transmission right holders, which provides consistency for transmission customers across the entire footprint.” 

BPA plans to issue a draft decision on its market choice in August, followed by a final decision late in the year, likely in November. In the meantime, it will hold additional workshops on the issue this summer. 

Reactions

Stakeholder reactions to the BPA recommendation were mixed, if predictable. 

“SPP is very pleased to hear of BPA’s staff recommendation to join Markets+,” RTO spokesperson Meghan Sever said in an email to RTO Insider. “BPA has been an active participant in Markets+ development, and we look forward to continued collaboration as we work to build a Western energy market that provides environmental and financial benefits and enhances electric reliability in the Western Interconnection.” 

“We respect BPA’s public process and appreciate our continuing collaborative relationship on the broad set of Western electricity issues, as well as BPA’s partnership and successful participation in the Western Energy Imbalance Market,” CAISO said. 

Opponents of BPA’s “leaning” in favor of Markets+ offered stronger words. 

The Northwest Energy Coalition (NWEC), which has strongly advocated for a single Western market, once again advised BPA to ease up on its timeline for selecting a market. 

“NW Energy Coalition and our allies urge BPA to keep an open mind and continue to do comprehensive analysis before making a decision,” NWEC said in a statement, noting that EDAM, which has already been approved by FERC, builds on the WEIM, a market in which BPA already participates. 

“The WEIM already covers more than 80% of the Western region and has provided more than $5 billion in customer benefits. It is no exaggeration to say the WEIM has provided a crucial contribution to keeping the lights on during extreme weather events, including the mid-January freeze in the Northwest,” NWEC said. 

“This decision makes clear that the Bonneville Power Administration cares more about political control than its customers, residents of the Northwest, or endangered salmon and steelhead,” Mitch Cutter, salmon and energy strategist at the Idaho Conservation League, said in a statement. “A single regional market could help save ratepayers money, decarbonize the grid and reduce the Northwest’s dependence on salmon-killing hydropower. Instead of heeding its mission and statutory obligations, BPA seems hellbent on joining Markets+ and fragmenting the West when unity is most needed.” 

Advanced Energy United Executive Director Leah Rubin Shen said it was “exciting” that BPA staff determined it would be legal and beneficial for the agency to join a day-ahead market, but she said joined “energy industry and policy leaders throughout the region — including the governors of Washington and Oregon — in finding the recommendation about which market to join premature.” 

“This is a very dynamic landscape that is rapidly changing. BPA’s own modeling shows their customers and partners will benefit most from being in the same market as California, and there is a robust effort underway — the West-Wide Governance Pathways Initiative — to resolve BPA’s primary objection regarding independent governance,” she said. 

‘Absolutely Critical’

BPA’s final decision will carry significant weight in the Northwest, where it operates 15,000 circuit miles of transmission — or 70% of the regional system — and is the largest power provider, controlling 17,500 MW of generating capacity. 

But a final decision in favor of Markets+ could leave the agency at risk of hemming itself into a relatively small market with limited links to other potential participants, depending on the choices of neighboring balancing authorities. 

On that front, EDAM has already won commitments from significant players in the Northwest, including PacifiCorp, whose six-state territory extends into the Intermountain region, and Portland General Electric, Oregon’s largest utility by customer base. Publicly owned Seattle City Light, which has been deeply involved in the Pathways Initiative and is listed among its top funders, is expected to follow suit. (See CAISO’s EDAM Scores Key Wins in Contested Northwest.) 

Sources have told RTO Insider that decisions by Idaho Power and NV Energy will be vital for determining how markets take shape in West but especially important for the functioning of Markets+, which has its strongest support in the Pacific Northwest and Arizona — areas separated by more than a thousand miles and a lack of transmission links. 

Signs point to both joining EDAM, although that’s still uncertain. 

Idaho Power offered the clearest signal last month in a letter to CAISO saying it is leaning toward joining EDAM after determining that the market offers the greatest value for its customers. The Boise-based utility has also recently partnered with the ISO to fund a Nevada transmission line designed to increase transfers of renewable energy between Idaho and points to the south, opening up the potential for more energy sales into the Southwest. 

And while NV Energy has been more guarded about its direction, a recent Brattle Group study found the utility would realize significantly greater financial benefit from participating in EDAM than Markets+. The Nevada utility’s choice will be pivotal for either market, given the central location of its transmission network and its role in facilitating transfers among WEIM participants. (See NV Energy to Reap More from EDAM than Markets+, Report Shows.) 

“Where it looks like we’re going to go right now — if Markets+ succeeds in moving forward with a lot of support across the West — is a Northwest zone and a Southwest zone with no direct connection from transmission,” Fred Heutte, senior policy associate at NWEC, said in an interview in February. “It’ll have to transfer power across the grid of other entities that are not in Markets+.” 

Asked during BPA’s press briefing about the weight of such geographical factors in its final decision, Mantifel called them a “major factor,” but he also noted that while the agency’s financial benefits would be “sensitive” to the market footprint, it has not identified any “bright line at this point in time that would automatically shift our decision.” 

Asked whether the governance issue would outweigh financial benefits, Mantifel said: “I would say governance occupies a pretty equal spot in our evaluation. Yeah, governance is an absolutely critical issue for Bonneville in making this decision.” 

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Robb, Cancel Review Reliability Landscape

In their annual media call April 4, NERC CEO Jim Robb and Electricity Information Sharing and Analysis Center (E-ISAC) CEO Manny Cancel said that while the reliability landscape continues to grow more complex, the ERO Enterprise is focused on grappling with any problems that might emerge. 

The call covered a wide range of topics, including the in-progress Interregional Transfer Capability Study (ITCS) and last year’s GridEx VII security exercise, the report for which NERC also released this week. (See NERC Flags Communication, Coordination in GridEx VII Report.) 

In his opening remarks, Robb said the ERO is “about halfway through” its three-year plan for 2023-2025 and that he feels “very good about where we are” and what it has accomplished so far. Nevertheless, he also acknowledged that NERC’s agenda has become full over the last year, with orders from FERC on inverter-based resources and cold weather standards and Congress’ mandate for the ITCS, which must be submitted to FERC by December. 

Because of the new assignments, particularly the ITCS, NERC has had to reconsider its work plan priorities, and some of the activities that were planned for 2023 and 2024 could not be completed in the original time frame, Robb said. In addition, some of the new hires who were intended to work on the ERO’s work plan priorities were shifted to the ITCS. 

“We did go back through our priorities and talked with the board and pushed a few of them off to this year and beyond,” Robb said. “One of the major ones we wanted to do was a comprehensive assessment of market rules and how they do — or in some cases, don’t necessarily — support reliability going forward. We decided that was something that was important to be done, but not as urgent as some other things.” 

Robb emphasized that NERC has focused on making sure its added responsibilities, like the ITCS, don’t result in unexpected financial burdens for the registered entities that ultimately fund the ERO through its assessments. The added expenses for 2023 and 2024 were largely met by using the organization’s financial reserves, and the CEO added that “a few things have broken our way” concerning the ERO’s investments that have allowed it to “absorb the work.” 

Robb also said that as the ERO works on next year’s budget, it has made a commitment not to “surprise [stakeholders] with anything next year” in terms of major financial deviations from the three-year plan. 

E-ISAC Monitoring Active Threats

Cancel noted that the E-ISAC — which celebrates its 25th anniversary this year — has seen “significant ramifications” from global geopolitical issues such as Russia’s invasion of Ukraine and Israel’s military actions in Gaza, along with the ongoing tensions between Taiwan and China. These have manifested in a “dramatic increase in malicious cyber activity.” 

The E-ISAC continues to view China as a “top cyber threat,” Cancel said, citing the Volt Typhoon hacking group that CISA said this year had been actively infiltrating U.S. infrastructure operators for at least five years. (See CISA Highlights China Threat in 2024 Priorities Report.) However, Russia, Iran and North Korea also “continue to demonstrate advanced capabilities” to undermine U.S. infrastructure through vulnerabilities on electronic networks. Cancel said these threats demonstrate the need for vigilance and effective internal network monitoring. 

Physical security threats remain a top concern for the E-ISAC as well, with Cancel noting the organization reviewed more than 2,800 physical security events in 2023. He added that this number did not represent a “substantial increase beyond the elevated threat that started [in] 2022.” Cancel also observed that about 3% of the physical security incidents in 2023 affected the grid, but none led to cascading outages. The most serious incidents involved ballistic damage, theft, intrusion, tampering and vandalism. 

Cyber and physical attacks were both part of the plan for GridEx VII, which Cancel noted involved 15,000 individual participants from 252 registered organizations in the two-day distributed play portion and 230 individuals in the executive tabletop. Cancel attributed the drop in participating organizations — with last year marking the smallest number of groups since GridEx II — to changes in “the way we count the participants,” but he said the number of individual attendees represented a significant achievement for the event. 

“Fifteen thousand people across the U.S. and Canada … spent two full days participating. That’s quite a compelling statistic,” Cancel said. “And on the executive tabletop, we’ve seen no decrease there. We continue to get the CEO participation across the electricity sector in the United States and Canada, and I’m also very pleased that we get the appropriate leadership from the federal governments there as well.”

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DOE’s Final Transformer Efficiency Rules Seek to Ensure Stable Supply Chain

The U.S. Department of Energy on April 4 finalized energy efficiency standards for distribution transformers to increase grid efficiency and save $824 million annually. 

The congressionally mandated final standards give the industry an extra five years to comply. DOE said it adjusted them based on significant feedback from the industry and others after issuing its proposal last year. The longer time frame will give the industry time to ramp up production of grain-oriented electrical steel (GOES). 

“The regulatory process can work, and this final rule shows just that by reflecting feedback from a broad spectrum of stakeholders,” Energy Secretary Jennifer Granholm said in a statement. “Ultimately, it will be a piece of the solution, rather than a barrier, to help resolve the ongoing distribution transformer shortage and keep America’s businesses and workers competitive.” 

The final standards can primarily be met with GOES, most of which will be manufactured in the U.S., according to the department. Another small subset of new transformers can be manufactured with amorphous alloy, also expected to be manufactured domestically. 

There are more than 60 million distribution transformers around the country, DOE said. 

Efficiency improvements for transformers will cut wasted energy, saving $14 billion and cutting 85 million metric tons of CO2 emissions over 30 years, DOE estimates. The 30-year energy savings total 4.6 quadrillion BTUs, a savings of 10% compared to current products. 

The initial proposal was going to shift the market to 95% of transformers being made from amorphous alloy, but the final standard can be met if 75% of transformers are made with GOES. The final rule also extends the compliance deadline from three to five years. 

The standards are expected to protect the domestic supply of core materials used to build the transformers, increasing supply-chain resilience and preserving manufacturing jobs in Pennsylvania and Ohio, according to the department. 

“I engaged directly with Secretary Granholm and the Biden administration to ensure Pennsylvanians’ concerns about the proposed rules were heard, and I want to thank them for making sure the final rule will allow for Butler Works to continue its existing line of steel production in Western Pennsylvania, while supporting upgrades that will help spur innovation, protect jobs and reduce carbon emissions from the plant,” Pennsylvania Gov. Josh Shapiro (D) said in a DOE statement. 

The standards will significantly cut energy use by transformers, but they miss the chance for much larger savings, said the American Council for an Energy Efficient Economy. The final standards will save only one-third as much energy as the proposed standards would have. 

“These standards significantly reduce energy waste, but they leave much bigger savings on the table,” Andrew deLaski, executive director of ACEEE’s Appliance Standards Awareness Project, said in a statement. “Passing up the savings that could have been achieved has a real cost for consumers, businesses and the climate.” 

The GridWise Alliance said it was still reviewing the final rule, but it said the new framework will ensure that utilities can continue to make investments essential to maintaining the security and reliability of the grid. 

The country is still experiencing a critical shortage of distribution transformers, with the lead time for procuring some types close to two years, GridWise said. The original standard could have exacerbated that shortage, but DOE recognized the industry’s concerns. 

“I want to thank DOE for considering the challenges facing the grid industry and for listening to stakeholders in adapting the final rule to provide more certainty to the market for distribution transformers,” GridWise CEO Karen Wayland said. “Our GridWise members look forward to working with DOE to address the transformer shortage in the short term and in continually improving the efficiency of the electric grid over the long term.” 

Louis Finkel, the National Rural Electric Cooperative Association’s senior vice president of government relations, agreed that the final rule is much improved over the proposal. 

“The final rule provides stability for most of the market while affording a more gradual shift toward tighter efficiency standards for transformers used to meet larger commercial and certain electrification loads,” Finkel said. “We will work closely with our members, manufacturers and suppliers to ensure implementation does not further disrupt an already strained supply chain.” 

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Court: Ameren Still Without Remedy for Years of Rush Island Air Pollution

After more than two years, Ameren Missouri has not delivered suitable redress for more than a decade’s worth of Clean Air Act violations via its Rush Island coal plant.  

Lawyers for Ameren and the U.S. Department of Justice met again in U.S. District Court for the Eastern District of Missouri last week, where Senior District Judge Rodney Sippel appeared exasperated with Ameren’s proposed legal remedy for its excess pollution, which involves purchasing 20 electric school buses and 40 charging stations for the St. Louis area (4:11 CV 77 RWS). 

Sippel said Ameren’s proposal remains inadequate for the scale of pollution and entreated the utility to offer concrete ideas for “what we can do, not just what we can’t do,” according to the St. Louis Post-Dispatch. Sippel also warned that “stopping violating the law is not a solution to the harm done,” referring to Rush Island’s closure later this year. 

Following the session, the court ordered Ameren, DOJ and the Sierra Club to submit simultaneous proposed mitigation orders no later than May 1.

Rush Island has been at the center of a yearslong legal battle over its emissions. In 2007 and again in 2010, Ameren upped output at the plant by replacing boiler components; however, it didn’t install pollution controls as required for overhauled units under the Clean Air Act. Those violations triggered a 2011 lawsuit from DOJ on behalf of EPA, and another lawsuit in 2014 from the Sierra Club that named two other Ameren Missouri coal plants in addition to Rush Island. The litigation culminated in a court order last year for Ameren to either spend hundreds of millions of dollars installing pollution controls at Rush Island or shut it down. (See Hearing May Settle Ameren, DOJ Clash over Coal Plant.)  

Ameren confirmed this week that Rush Island will close by mid-October 2024, per the court order. 

“Ameren intends to comply with the court’s order, which requires a filing regarding mitigation by May 1, 2024. Our prior legal filing sets forth our position regarding the scope of mitigation,” an Ameren spokesperson said in an emailed statement to RTO Insider. 

Ameren did not elaborate on whether Sippel’s view that it needs to do more will influence its final mitigation plan. 

The utility has blasted DOJ and the Sierra Club’s recommended mitigation plan that includes Ameren purchasing 150,000 indoor air filters for the metro St. Louis area and building a renewable energy facility including at least 300 MW of wind or solar generation paired with at least 200 MW of battery storage somewhere in Ameren’s Midwest service territory. The facility should be built within five years, the two said, to “reduce regional reliance on [sulfur dioxide]-emitting generation infrastructure.” 

In a recent court filing, Ameren argued it should not have to mount a “massive, multiyear construction project that would involve and require input and regulatory approvals from numerous stakeholders.” It also argued that a renewable energy and storage project is extraneous since it already “carefully” plans its resource mix under an integrated resource plan (IRP) process.  

Ameren added that DOJ and Sierra Club’s ask ignores that after the court’s rulings on its liability and remedy, it “has substantially redirected its resource planning into renewable energy generation with enormous investments in wind, solar and battery facilities already planned for the coming years.”  

“What plaintiffs seek — and what their proposal amounts to — is a penalty,” Ameren said. 

In its legal filings, Ameren has touted an anticipated $28 billion in social benefits for retiring the plant early, instead of in 2039 as estimated in previous IRPs. 

Rush Island operates sparingly under a MISO-designated system support resource (SSR) agreement, used to keep generation operating past planned retirement dates for the sake of system reliability. The SSR has been in place since 2022 and has been reupped annually, this time set to expire on Sept. 1. MISO has said its SSR cannot override a federal court order to cease operations, and the coal plant will go dark in October despite MISO previously saying it could require a Rush Island SSR into 2025.  

The Sierra Club declined to comment on how a suitable remedy for Ameren should look but emphasized its joint filing with DOJ last month asserting that an early retirement of Rush Island does not mitigate the harm caused or atone for belated compliance. 

“Ameren has … suggested Rush Island’s recent period of limited operations, coupled with its impending 2024 retirement, obviates the need for further relief. But Ameren’s emissions accounting is skewed, and the company’s description of its retirement decision touts Rush Island’s ‘early’ retirement while ignoring its belated compliance,” DOJ and Sierra Club wrote.  

The two cited Joel Schwartz, a scientist with Harvard’s School of Public Health and an expert witness for DOJ in the case, who has said the social cost of Rush Island’s excess sulfur dioxide pollution is around $23,500 per ton. At 17,000 tons of excess emissions per year, Schwartz estimated that a single year of delay in installing scrubbers or shuttering Rush Island causes $300 million in societal harm to downwind communities. 

Under Rush Island’s limited operating status as an SSR, DOJ and Sierra Club said that Ameren has “still has not begun to pay back the debt owed to the public health and welfare; it has merely slowed the rate at which it borrows from the health of downwind communities.”  

The two further argued that Rush Island Units 1 and 2, which began operating in 1976 and 1977, were designed for approximate 30-year life spans and should have been fitted with pollution controls or retired 15 years ago to comply with the Clean Air Act.  

“Ameren suggests this court should forgive its mitigation obligations entirely, and that it should get full credit for what amounts to a belated selection of an obvious compliance plan that the company should have begun years ago,” they wrote.  

Meanwhile, Ameren is proceeding with a bid before the Missouri Public Service Commission to recoup the costs of retiring Rush Island from its customers (EF-2024-0021). (See Ameren Files to Recoup Rush Island Closure Costs from Customers.)  

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EPA Awards $20B from Greenhouse Gas Reduction Fund

A heat-pump water heater for a low-income homeowner in DeSoto, Ga. A National Guard Armory renovated with high-efficiency, all-electric heating as a small-business and nonprofit incubator in Owosso, Mich. Solar panels, window and roof upgrades, and aging-in-place upgrades for an affordable senior housing project in Miami.

These projects and thousands more like them, funded through community lending institutions, received a $20 billion boost April 4, as EPA announced the eight organizations it has selected to receive grants from its Greenhouse Gas Reduction Fund (GGRF). Grant amounts range from $400 million to $6.97 billion.

Created by the Inflation Reduction Act, the GGRF aims to “create a national clean financing network for clean energy and climate solutions across sectors, ensuring communities have access to the capital they need to participate and benefit from a cleaner, more sustainable economy,” EPA said. The awards represent “the single largest non-tax investment within the [IRA] to build a clean economy while benefiting communities historically left behind.”

The awardees have committed to use the money for projects that collectively will reduce or avoid 40 million metric tons of greenhouse gas emissions per year, while drawing in nearly $7 in private investment for every $1 of federal funds they receive over the next seven years, according to the announcement. In addition, more than 70% of the GGRF funds will go to low-income and disadvantaged communities, including more than $4 billion for rural communities and nearly $1.5 billion for tribal communities.

The Climate United Fund, which was selected to receive the largest GGRF award, plans to use its $6.97 billion to help finance 1 billion square feet of net-zero building space across residential and commercial sectors, including 188,000 units of multifamily housing. Other targets include deploying 150,000 zero-emission vehicles and more than 11 GW of renewable energy.

The group is a partnership between impact investor Calvert Impact, the Community Preservation Corporation — which invests in affordable housing in low-income neighborhoods — and the Self-Help Credit Union, located in Durham, N.C. The fund plans to invest both in community lending institutions and in specific projects.

“We are not aiming to just deploy more clean energy and green buildings in underserved places; we’re building up local lenders and local businesses that can support enduring, thriving, and equitable clean energy markets and communities,” according to a Climate United fact sheet.

Speaking at a rollout event for the GGRF in Charlotte, N.C., on April 4, Vice President Kamala Harris said the grants will address a key issue in building out a clean energy economy: limited access to capital in low-income and disadvantaged communities.

“In every community in our nation, there are, of course, extraordinary people with talent, ingenuity and the ability to help us take on the climate crisis,” Harris said. “In too many places, too many people with all that talent have still had limited access to capital to do the work they want to do, to start and grow a clean energy business.”

The GGRF awards mark “the first time in history we are providing tens of billions of dollars directly to community lenders to finance local climate projects,” she said. “We have taken this approach because we know we have the capacity … to empower communities to decide what projects they want, that will have the greatest impact from their perspective in the place they call home; and then we can invest in those projects in a way that will actually have value for the people who live there.”

The funds also will be used to provide technical assistance and build capacity among community lenders, to “drive deployment of tens of thousands clean energy projects,” said EPA Administrator Michael Regan, who accompanied Harris to Charlotte. “And the good news is we’re not starting from scratch, because these [awardees] are not new to this work. These experts have already provided capital to families and small businesses across the country.”

EPA Administrator Michael Regan in North Carolina | The White House

Self-Help, for example, has spent several years working with a range of community groups to build 49 energy-efficient homes in Grier Heights, one of Charlotte’s historically black neighborhoods, said Donnetta Collier, financial capabilities manager.

“Our work guarantees that the homes’ heating and cooling bills will be under $48/month,” and all the homes were sold to residents with incomes below 80% of area median income, Collier said.

As part of Climate United, Self-Help hopes to scale its model to build more homes “by infusing billions into community lenders across the country,” she said.

The Awardees

The idea behind the GGRF dates back more than decade, when Sen. Ed Markey (D-Mass.) and then-Rep. Chris Van Hollen (D-Md.) first introduced legislation to create a national climate bank. Markey and Sen. Van Hollen continued to work on the legislation, which was finally incorporated into the IRA as the GGRF.

Quoted in the EPA announcement, Van Hollen hailed the awards as “a pivotal moment in America’s fight to confront the climate crisis while driving inclusive economic growth.”

The IRA provides $27 billion for the fund, divided between three programs, two of which will be funded by the $20 billion announced April 4.

The National Clean Investment Fund (NCIF) will award $14 million to three nonprofit groups, to establish “national clean financing institutions that will deliver accessible, affordable financing for clean technology projects nationwide,” with a particular focus on public-private investing and low-income and disadvantaged communities.

Climate United is one of the NCIF awardees, along with the Coalition for Green Capital ($5 billion) and Power Forward ($2 billion). All three have decades-long experience in funding community-level projects, according to EPA

The Clean Communities Investment Accelerator (CCIA) is investing $6 billion in five nonprofit community development financial institutions (CDFIs) to “establish hubs that provide funding and technical assistance to community lenders working in low-income and disadvantaged communities.”

The CCIA awardees are the Opportunity Finance Network ($2.29 billion), Inclusiv ($1.87 billion), Justice Climate Fund ($940 million), Appalachian Community Capital ($500 million) and Native CDFI Network ($400 million).

CDFIs are specialized lenders that focus on providing basic financial services to low-income and disadvantaged communities that may not have access to mainstream financial institutions, according to the U.S. Treasury Department, which certifies CDFIs.

The U.S. has more than 1,300 CDFIs, which together manage more than $222 billion in funds, according to the  Opportunity Finance Network.

The Native CDFI will use its $400 million grant to help 63 community lenders across tribal lands “to fund renewable energy, energy-efficient upgrades and sustainability projects that will enhance well-being and create employment opportunities for native people,” according to the organization’s website.

Republican Rollback Efforts

GGRF’s third program, the $7 billion Solar for All initiative, will “finance clean technology deployment … in low-income and disadvantaged communities,” according to EPA, which said it will be announcing more information on the program later in the spring.

The current awardees were selected through a review process that included “dozens of federal employees — all screened through ethics and conflict-of-interest checks, as well as trained on the program requirements and evaluation criteria,” EPA said.

Following the announcement, the agency will negotiate award agreements with each of the selected organizations, which will set out performance metrics for emission reductions and other goals, according to a senior administration official speaking on background.

Under the IRA, EPA must complete negotiations and finalize agreements to award the funding by Sept. 30, at which point the federal dollars will be officially “obligated” and available to the grantees, the official said.

The House of Representatives on March 22 passed a bill, the Cutting Green Corruption and Taxes Act (H.R. 1023), that would roll back the GGRF. Three days before the 209-204 vote, President Joe Biden issued a statement saying he would veto the bill if it is passed by the Senate.

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DC Budget Woes Threaten District’s Home Electrification Program

The D.C. Council has approved a bill aimed at electrifying 30,000 low-income homes across the district by 2040, but a fight is brewing over funding for the program, which Mayor Muriel Bowser is looking to redirect as part of her efforts to plug holes in her proposed 2025 budget. 

Introduced by Councilmember Charles Allen in February 2023, the Healthy Homes and Residential Electrification Act (B25-119) passed its first reading unanimously during the council’s April 2 meeting. A second reading and final passage could occur at the council’s next regular meeting May 7. 

The bill would establish a “Breathe Easy” program combining district and federal funding to cover all costs for home electrification retrofits for low-income homeowners and for apartment dwellers in buildings with a majority of low-income residents. Partial payments for retrofits also could be provided for moderate-income homeowners on an income-based sliding scale. 

The bill defines home electrification retrofits as “replacement of all appliances or other systems, such as oven, water heater or heating system, that combust fossil fuels on site with appliances and other systems that perform the same function and that are powered exclusively by electricity.” 

Funding for programs to train local contractors in installing and maintaining electric appliances and systems also is included in the bill.

Allen’s original bill set ambitious targets for the program, calling for 5,000 retrofits by the end of 2025, 10,000 by the end of 2030 and 20,000 by the end of 2035. 

However, at a March hearing, the council’s Committee on Transportation and the Environment amended the bill to allow a more gradual ramp-up of the program. The revised goals are to complete 2,500 retrofits by the end of 2027, 10,000 by 2032, 20,000 by 2037 and 30,000 by 2040. 

The committee also stripped the original bill’s provision adding a surcharge to permits for the installation of appliances and systems that burn fossil fuels in both new construction and renovations. 

The council previously authorized full funding for the program last year ― an estimated $25 million ― from the city’s Sustainable Energy Trust Fund (SETF), which is funded from fees residents pay on monthly electric and gas bills. 

But that funding could be slashed according to the proposed 2025 budget Bowser presented to the council April 3. The district is facing a $700 million deficit in 2025 because of a combination of rising costs, slow post-pandemic revenue growth and the expiration of one-time federal funds received from the American Rescue Plan, Bowser said. 

By 2028, the gap could grow to an estimated $1.2 billion, according to city estimates. 

The mayor’s presentation for the council did not mention the Healthy Homes Act or Breathe Easy, but called for $1 billion in program reductions, on top of $493 million in “efficiencies and reductions.” 

In a letter to the council, Bowser also said she would “resist starting new programs that would only add to our longer-term financial pressures.” 

Council staff and clean energy advocates still are combing through the budget’s details, but based on their initial analyses, the mayor intends to use $17.3 million from the SETF to pay utility bills for government facilities, rather than the low-income bill assistance, clean energy and energy efficiency programs it was created to fund. 

Questioned by Allen on April 3, Jenny Reed, director of the Office of Budget and Performance Management, said the need to shift the funds from the SETF was due to D.C.’s own renewable portfolio standard, which requires the district’s utilities to provide 100% clean power by 2032. The district also is working toward a 60% cut in greenhouse gas emissions by 2030 and net-zero by 2040. 

The problem, Reed said, is that the city’s energy demands are decreasing, while its energy bills are increasing as utilities buy renewable power and renewable energy credits to meet mandated levels of clean power. 

To balance the budget, “we looked at areas where programs had not yet started, and where there may be federal funding to offset some of those costs that we were now going to use for other purposes,” she said. 

Getting Creative

Breathe Easy fits that description all too well. 

The district’s Department of Energy and Environment (DOEE) is set to receive $59.4 million from the Inflation Reduction Act to be used for consumer rebates for “whole home” energy upgrades or for individual new electric appliances, such as heat pumps or electric stoves. 

The IRA provides $8.5 billion for home energy upgrades and rebates, with rebate programs being administered by state energy departments and the funding split just about evenly between rebates for whole-home and individual appliance upgrades. 

The rebates were supposed to be available as of Jan. 1, 2023, but the U.S. Department of Energy did not release guidelines for states to apply for the funds until July, and DOEE just now is completing its first applications. (See DOE Opens Applications for $8.5B in IRA Home Efficiency Funds.)

Getting the money is a two-step process, according to Nick Burger, deputy director of DOEE’s Energy Administration. 

“We submit an application to the Department of Energy. They do some initial review,” he said. “They tell us to proceed, and then we have to submit sort of a supplement called the implementation blueprint. That’s got a bit more detail on our program design, and once that piece is approved, then they release the money to us.” 

DOEE is “very close” to submitting its first application, and Burger is hopeful to get it through the Energy Department process by fall, with at least some IRA dollars “flowing to residents … sometime by the end of 2024.” 

But both Burger and Allen said the SETF funds for Breathe Easy are a critical catalyst to maximize the impact of the federal dollars. 

If Breathe Easy is defunded, “the federal infrastructure funding we’re pairing with this local funding will become next to useless,” Allen said at the April 2 council meeting. “There is a cap on how much you can spend on gas-to-electric home renovation under it, and it’s about half of what the actual renovations cost. 

“If [the mayor’s] budget were allowed to pass, it means that we’re not only going to harm lower-income households in our city, but we’re also just going to walk away from federal money on the table. It would be a wasted opportunity,” he said. 

Burger agreed, noting the IRA sets a $14,000 cap for the total rebates a household can receive for appliance upgrades and pays up to 80% of the costs for whole-home efficiency upgrades. “That’s where D.C. money can be used to unlock federal funding … to cover the full cost for income-qualified households,” he said. 

Allen has estimated a full-home electrification, including heat pumps and other appliances, can run up to $30,000 or more per home. 

D.C. already has ambitious clean energy programs, such as its Solar for All initiative, which has a mandate to install rooftop and community solar projects across the city, with the goal of halving utility bills for 100,000 of the district’s low-income residents by 2032. 

To prepare for the federal funds and Breathe Easy, the council last year appropriated $2 million for DOEE to run a pilot program using Solar for All and other existing energy-efficiency programs to install solar and electric appliances in low-income homes. Burger said 48 homes have been upgraded, primarily in two of the district’s African American neighborhoods, River Terrace and Deanwood. 

DOEE also is sponsoring a Healthy Homes Fair on April 6, to “help equip D.C. residents with the knowledge they need” to plan home efficiency and electrification upgrades, Burger said. “While we would be thrilled to be able to show up … with rebates in hand, we also know that residents are planning their electrification journey,” he said, and the fair is aimed at informing them about the available technologies and, eventually, the federal funding opportunities.

Still, without more local funding, the challenge for DOEE will be “how do we get these benefits, the federal rebates, most effectively, most easily into the hands of low-income households,” which may include both single-family homes and multiunit buildings, he said. The IRA provisions for multiunit buildings are more flexible and could be used to cover the full costs of unit upgrades; so, DOEE may prioritize channeling funding toward such buildings, he said.  

But Burger noted that the council and mayor will be negotiating the budget over the coming weeks, so DOEE will not know what its final budget will be until then. If the Breathe Easy funds are cut, DOEE will start exploring how it can stretch the federal funds, especially for the individual appliance rebates. 

“That’s where we’re going to have to kind of continue to look and get creative,” he said.