VALLEY FORGE, Pa. — PJM will have to determine whether it wants to move forward without stakeholder endorsement on its plan to enforce primary frequency response (PFR) requirements beyond the standards of FERC Order 842 after members roundly rejected three proposals to revise the requirement.
RTO staff announced the results of a recent poll on the proposals at the Dec. 5 meeting of the Primary Frequency Response Senior Task Force (PFRSTF). None received more than 0.34 support; 0.5 was required to be advanced for consideration at the Markets and Reliability Committee. A question on whether PJM should make any change showed 0.73 in support of maintaining the status quo.
PJM stakeholders roundly rejected proposals to revise the RTO’s primary frequency response requirements beyond FERC Order 842 in a recent poll. | PJM
New units that enter the interconnection queue after Oct. 1 and existing units that request an uprate — including facilities that add units — will have to provide PFR, but there would be no new requirements for existing units that don’t make any changes. Generators have opposed proposals to require existing units to provide PFR. (See Primary Frequency Proposals Set for Vote in PJM.)
Stakeholders’ comments at the meeting reiterated the view that the proposals were, as FirstEnergy’s Jim Benchek put it, “a solution looking for a problem.”
“The thing about this is … it’s really an Eastern Interconnection thing … because each balancing authority has the obligation. Things are working,” Benchek said. “I would suggest that PJM … continue to monitor the situation, and if primary frequency response continues to degrade and needs to be addressed, then we restart this task force.”
American Electric Power’s Brock Ondayko agreed that the RTO should give Order 842 time to see if it corrects a trend PJM has noticed of reduced fleetwide PFR performance.
“In the meantime, I think PJM should probably explore the impacts of their own dispatch on the capabilities of units to provide [PFR],” he said. “The capability is so dependent on how PJM loads the assets, whether or not they have them moving prior to the [PFR event].”
Old Dominion Electric Cooperative’s Adrien Ford echoed the remarks, saying the poll results are “clear guidance” that the status quo is preferable.
“At this point, I think our work here is done,” she said.
Wider Concern
“Based on the latest webinar NERC held, I think there is indication that frequency response is declining in general. Is there someone jumping up and down saying, ‘The sky is falling’? I don’t think so. However, I think all the trends show we’re heading in that direction,” PJM’s Vince Stefanowicz said, noting that further delay risks NERC promulgating additional standards.
PJM’s Danielle Croop said that the overall trend is reflected within the PJM footprint.
“We have seen trending down in our frequency response … year over year for the past few years,” she said. “I definitely don’t think it’s PJM in a bubble that’s concerned about frequency response.”
Benchek assured that FirstEnergy’s units will continue to provide PFR and saw the potential for NERC to revise its standards as beneficial rather than a risk.
“We’re not going to take the governor controls off our units or anything,” he said. “We want to comply. We want to have a reliable system. It’s just not clear what we should do, so it’s maybe prudent to wait for better guidance.”
Other stakeholders asked PJM to continue to provide reports on unit performance and overall fleet response.
DFW AIRPORT, Texas — SPP’s Board of Directors on Tuesday approved a more than 8% reduction in the RTO’s administrative fee for 2019, although the fee is projected to rise again in 2020.
The RTO’s Finance Committee based its recommendation for a 39.4 cents/MWh fee on a net revenue requirement (NRR) of $157.5 million next year, a $21.3 million reduction from prior estimates for 2019 and just $3.2 million more than 2018’s forecast. SPP is projecting a 4.4% increase next year in the billing determinants used to calculate the administrative fee and is also benefiting from a recent $10.7 million over-recovery.
The administrative fee, which is collected under Schedule 1A of SPP’s Tariff on transmission contracts between transmission providers and customers, was 42.9 cents/MWh for 2018.
“There’s no promise that the fee can stay [low],” said Director Bruce Scherr, the committee’s chair.
Scherr said future affordability will be addressed as SPP moves into its next budgeting cycle. Board Chair Larry Altenbaumer said several times he would like to see an affordability task force created during the RTO’s January meeting.
There was little discussion as the Finance Committee presented its recommendations for both the fee and SPP’s 2019 budget. The budget, also approved without opposition, includes $196.3 million in expenses, a 5.2% increase over 2018’s forecast but 2.9% below 2019’s prior estimates.
SPP allocates the NRR to transmission customers based on their purchase of point-to-point (PtP) transmission service and/or network integrated transmission service (NITS). NITS customers are billed based on the prior year’s average monthly peak demand and represent approximately 90% of total annual billing determinants. PtP service is billed based on reserved hourly transmission capacity and represents about 8% of annual billing determinants.
Monthly true-up assessments cover any unreported load not covered by NITS or PtP service.
The NRR is expected to climb into the $180 million range by 2021, when a major computer system upgrade is planned. That would require an administrative fee of 45.2 cents/MWh.
The board’s consent agenda reaffirmed chairs for nine stakeholder groups; approved an $8.9 million short-term reliability project; accepted the Oversight Committee’s recommended 2019 Industry Expert Pool (IEP) that will evaluate any competitive upgrade projects; and passed scope changes for various working groups, primarily removing references to the dissolved SPP Regional Entity and ensuring equal representation among transmission owners and transmission users.
SPP said the following chairs were nominated with the unanimous support of their respective groups and will begin their two-year terms on Jan. 1:
The reliability project includes a 5.6-mile, 161-kV line in the Kansas City, Mo., area that will address thermal overloads following several Kansas City Power & Light generation retirements.
The 2019 IEP pool will include 13 holdovers from last year and adds two new members: SPP retiree John Mills and consultant Tip Goodwin. Mills is the first former SPP employee to serve on the panel. The panel did not consider any competitive projects in 2018.
The consent agenda also included a board policy statement that will allow Markets and Operations Policy Committee-endorsed actions destined for FERC filings and not appealed by members to go through the regulatory process without further board approval.
VALLEY FORGE, Pa. — After a year under new fuel-cost policy (FCP) rules, PJM stakeholders want to make some tweaks.
Discussions on the revisions commenced Tuesday at a special session of the Market Implementation Committee. The special sessions are the result of a problem statement and issue charge approved by the MIC in September. (See “Review of Fuel Cost Policy Rules,” PJM Market Implementation Committee Briefs: Sept. 12, 2018.)
PJM staff and stakeholders alike agreed the process could use some revisions to reduce its administrative burden. The rules went into effect in May 2017 after months of debate. In June 2017, the Independent Market Monitor announced that it had rejected fewer than 5% of FCPs during its annual review, but that those rejections accounted for roughly 11% of the units requiring FCPs. (See PJM Monitor Rejects Fuel-Cost Policies for 11% of Units.)
John Rohrbach of ACES highlighted a specific concern that “innocuous” operator errors representing less than half a penny can create tens of thousands of dollars in penalties.
“It seems reasonable to ask whether that is a reasonable system to have” such potential for penalties, he said.
The Monitor’s Joel Romero Luna clarified that PJM’s online information-submission portal rounds to the penny and that no penalty would be assessed if the error does not make it to the portal.
Rohrbach, however, pointed out that the Tariff and Operating Agreement give staff no leeway in assessing penalties for such FCP violations.
PJM attorney Chenchao Lu agreed that the current OA language doesn’t provide the RTO any discretion in assigning penalties for violations, though it does have some discretion in determining whether the FCP was violated in the first place.
Calpine’s David “Scarp” Scarpignato said the lenience should be expanded to include additional types of errors, including those “not intentional.”
“It’s very difficult to be able to determine intent just by looking at the data,” PJM’s Glen Boyle said. “If I move a decimal place on a number, is it intentional? How do I prove that?”
Additional Changes
PJM staff provided education on how the current FCP procedures work for developing cost-based offers. Stakeholders then listed a dozen areas of interest for revising the rules, including removing the administrative burdens for both the RTO and unit owners and adjusting potential penalties to be proportional to violations.
PJM’s Bhavana Keshavamurthy, secretary of the MIC, said she would add the topic to the agenda for the MIC’s Dec. 12 meeting for further discussion.
WILMINGTON, Del. — PJM’s Board of Managers has signaled that it is done waiting for stakeholders to make progress on a nearly yearlong initiative to improve energy price formation.
In a letter dated Dec. 5, the board gave stakeholders until Jan. 31 to reach any consensus they can on six energy price formation issues. After that, the board threatened, it will direct PJM to seek FERC approval for the changes without member endorsement under Section 206 of the Federal Power Act.
The six areas for changes include:
Consolidation of Tier 1 and Tier 2 synchronized reserve products;
Improved utilization of existing capability for locational reserve needs;
Alignment of market-based reserve products in day-ahead and real-time energy markets;
Operating reserve demand curves (ORDCs) for all reserve products;
Increased penalty factors to ORDCs to ensure utilization of all supply prior to a reserve shortage; and
A transitional mechanism for the Reliability Pricing Model energy and ancillary services revenue offset to reflect expected changes in revenues in the determination of the net cost of new entry.
PJM Board of Managers Chair Ake Almgren
“The board has reviewed evidence that demonstrates that when the system is experiencing stressed conditions, energy and reserve prices do not accurately reflect PJM operator reliability actions and, as a result, out-of-market payments increase substantially during those periods,” the letter, signed by Board Chair Ake Almgren said. “Further, PJM’s current reserve market rules do not accurately align the procurement of reserves with their reliability value or incentivize consistent response when deployed. The lack of alignment in the reserve markets mutes price transparency, shifts costs unfairly to consumers who have prudently hedged and limits competition to secure reserves at the least cost to consumers.”
The board said stakeholder discussions have shown “widespread agreement that improvements to reserve markets are necessary” and that PJM has proposed to stakeholders elements from other regions that have “successfully implemented … more robust designs [that] more effectively value reserves and price operator actions.”
The Energy Price Formation Senior Task Force last month delayed a vote on competing proposals from PJM and its Independent Market Monitor for revising the RTO’s ORDC. Stakeholders had expressed reservations about both plans. (See PJM, Monitor Remain at Odds over Energy Market Proposals.)
MRC Response
PJM CEO Andy Ott opened Thursday’s meeting of the Markets and Reliability Committee by saying the changes are “critical to the ongoing evolution of our market” and that, “frankly, we think [the market rules] fall short today.” He noted price spikes during extreme weather, first highlighted by the polar vortex in 2016, and thought some of the proposals, such as locational reserves, were “low-hanging fruit” that stakeholders would endorse “in the time period that’s necessary.”
“We really believe a comprehensive solution to this is necessary. I wish that stakeholders would have come to consensus,” he said.
The forced deadline irritated some stakeholders and found support from others.
“We think that stakeholders have been working assiduously on this, and we’re disappointed that PJM and the board think differently,” said Carl Johnson, who represents the PJM Public Power Coalition. He noted that newly proposed ORDCs were introduced last week and said setting up an Enhanced Liaison Committee, used once before to implement the Capacity Performance construct, is the tool available to the board for expediting the stakeholder process, not making threats.
Susan Bruce, who represents the PJM Industrial Customer Coalition, said stakeholders have not addressed some of the topics the board has asked for agreement on, such as alignment between day-ahead and real-time markets and aligning penalty factors.
“Those are issues that we haven’t really tackled and we don’t really have any information about,” she said, asking PJM staff to provide information for stakeholders to analyze because “the calendar is creeping” up to the deadline.
“That will happen. Where’s [PJM Senior Vice President of Operations and Markets Stu] Bresler? Make that happen,” Ott said, assuring stakeholders that the board wants member input “so when we do present a package to FERC, it is as vetted as possible.”
NRG Energy’s Neal Fitch said many of the topics are “evergreen,” and “we could as stakeholders talk about this for a very long time.” He said the Enhanced Liaison Committee might not be the right plan.
“Perhaps calling the question in the very near future is the right thing to do,” he said. “We’ve been working on this for a very long time. … I think it’s time for us to move on.”
“From my perspective, the stakeholder group is actually moving in a negative direction,” Calpine’s David “Scarp” Scarpignato said. He questioned whether stakeholders should have Section 205 rights in the FPA over market rules in PJM’s Operating Agreement because of how the stakeholder process gets bogged down. He said he doesn’t agree with everything in PJM’s proposal, like the transition plan, “but eventually you have to make a decision.”
WILMINGTON, Del. — PJM members will have two new avenues for feedback on the RTO’s Independent Market Monitor starting in January, the Board of Managers announced in a Dec. 5 letter.
The board will circulate an annual questionnaire, starting in January, for members to voice opinions on the Monitor. The letter didn’t suggest what questions are likely to be included.
Additionally, the board has asked the RTO to retain Michael Bardee to serve as a year-round external liaison “to receive direct member feedback” that will be reported to the board’s Competitive Markets Committee. Bardee has served as FERC’s general counsel and the director of the commission’s Office of Electric Reliability. Members can contact him at Bardee.pjm@gmail.com or 1-833-705-8428.
“The board is confident that this two-tiered approach will provide a broad and unbiased perspective, a committed level of accountability, and a means to a more complete understanding of strengths and potential areas of improvement,” the board said.
The decision “to broaden and formalize the way [the board] collects and assesses information about market monitoring in PJM and to provide an opportunity for all stakeholders to give feedback” came as a recent suggestion through the RTO’s Liaison Committee, according to the letter.
“We welcome transparent feedback,” Monitor Joe Bowring said in an email response. “We are always interested in market participants’ opinions. We look forward to continuing dialogue with market participants about all aspects of markets and the market monitoring function. As part of that, we are having a regular meeting of the [Market Monitoring Unit Advisory Committee] this Friday and all PJM members and others are welcome to participate.”
Distrigas LNG Plant in Everett, Mass., at sunset | Distrigas
FERC on Monday approved ISO-NE’s interim proposal to use an out-of-market mechanism to address concerns about fuel security (ER18-2364).
ISO-NE filed the Tariff revisions after FERC on July 2 denied a Tariff waiver to allow the RTO to enter a cost-of-service agreement to keep Exelon’s 2,274-MW Mystic plant running after its capacity obligations expire in May 2022. The commission instead directed the RTO to revise its rules to allow such agreements in order to address fuel security.
FERC tentatively accepted the Mystic cost-of-service agreement on July 13 while ordering an expedited hearing on unresolved issues. (See FERC Advances Mystic Cost-of-Service Agreement.)
Commissioners Cheryl LaFleur and Richard Glick approved the Dec. 3 order, with Chairman Neil Chatterjee dissenting in part. Commissioner Kevin McIntyre did not participate in the decision.
“We find here that the proposed study process, including the model assumptions and proposed trigger criteria as modified by ISO-NE from the OFSA [Operational Fuel-Security Analysis] and Mystic retirements studies, is just and reasonable,” the commission said. “Nevertheless, we encourage ISO-NE to work with all interested parties, including [the New England Power Pool], to continue to address their areas of disagreement while developing the long-term market solution.”
The commission also directed the RTO to submit “an annual informational filing regarding the applicability of its study triggers, study assumptions and study scenarios compared to actual experiences, starting with the winter of 2022/23, for the duration of this interim mechanism.”
Cost Allocation
In accepting ISO-NE’s proposal to allocate to load the out-of-market costs for retaining fuel-secure resources, the commission agreed “that the goal of the proposed revisions is similar to that of [ISO-NE’s] Winter Reliability Program and therefore should have a similar cost allocation method.”
The commission agreed with the RTO that it is inappropriate to allocate fuel security costs to transmission customers because fuel security concerns are distinct from traditional transmission-related reliability needs.
“Specifically, the reliability need that triggers the proposed revisions is a depletion of 10-minute reserves to a particular level or load shedding, as opposed to the violation of local transmission reliability criteria,” the commission said. “Additionally, unlike reliability-must-run resources, the need for a fuel-secure resource is unlikely to be met by local or pool transmission upgrades.”
Under the revisions, ISO-NE will now enter fuel security resources into the Forward Capacity Market as price-takers, ensuring that their resource adequacy contributions are counted.
With respect to capacity market offers, “there is no meaningful distinction between resources retained for reliability and resources retained for fuel security,” the commission wrote.
In his partial dissent, Chatterjee argued that the RTO’s price-taker provision undermines the fundamental premise for implementing a process to support fuel security, and that lower capacity auction prices will encourage marginal units to retire.
“If these same units also are fuel-secure resources, then this price suppression could lead to a further decline in fuel security,” Chatterjee said. “The result could be a vicious cycle of additional out-of-market interventions for these retiring resources, further price suppression and even more retirements, which, in turn, will only further diminish the region’s fuel security.”
Input Assumptions
Gaz Metro delivers LNG from its Montreal plant to customers in Vermont. | Gaz Métro
The Tariff revisions include a formal fuel security reliability review process for resources submitting retirement delist bids for Forward Capacity Auctions 13, 14 and 15, which correspond to capacity commitment periods 2022/23, 2023/24 and 2024/25, respectively.
The RTO will now apply a uniform set of 18 modeling scenarios to establish whether a resource submitting a retirement de-list bid is needed to maintain regional fuel security.
To measure the operational impact of a specific generator retirement, the RTO will model its system under each scenario, absent the generator that has submitted a delist bid, and model generators in descending order of their bids.
Under the RTO’s proposal, a generator will be retained for fuel security purposes if one of two triggers occur after full utilization of Operating Procedure No. 4 (OP-4), actions taken during a capacity deficiency when available resources are insufficient to meet anticipated electricity demand plus required operating reserves:
Reduction of 10-minute reserves below 700 MW in any hour in the absence of a contingency in more than one LNG-gas supply scenario case; or
The use of load shedding in any hour under OP-7, when the RTO requests that generators and demand response resources not subject to a capacity supply obligation voluntarily provide energy for reliability purposes.
The RTO will use the same model developed for OFSA to assess the need to retain a resource for fuel security. To evaluate the operational impacts of generator retirement delist bids, predefined scenarios will test system performance under a range of scenarios and sensitivities, absent a retiring generator.
Static input assumptions will model a number of system parameters, including winter peak load, winter load profile and local distribution company natural gas demand.
In addition, the RTO will use three variable inputs in the model: LNG injections, electricity imports and the dual-fuel oil tank fill rate, which represents the number of oil refills at dual-fuel generating units per 90-day winter season.
The commission noted that many commenters argued for modifications to the two proposed triggering criteria.
“Some commenters argue that the triggering criteria are too conservative, meaning the criteria are easily violated and will result in unnecessary out-of-market interventions,” the commission said. “Still others argue that the triggering criteria are not conservative enough, meaning that the criteria are not easily violated and will result in an elevated risk to reliability in cold weather months.”
The 700-MW trigger is intended to account for improvements in system performance between the forecast year and the operating year, which are not fully accounted for in the modeling, the RTO said in its filing.
The allowance for reduction of 10-minute reserves in the analysis does not indicate allowance of any violation of NERC operations criteria, the RTO said, adding that it will continue to maintain needed generation reserves to meet mandatory reliability criteria during operation.
Connecticut regulators supported the revised modeling methodology because “it incorporates more recent data that would be updated annually and accounts for resources under state contracts, [and] balances conservative and optimistic approaches to avoid both over-procurement and reliability problems.”
Market Failure
In a concurring opinion, Glick advised that “ISO-NE’s apparent need to retain units for fuel security is the result of a market failure” and that the RTO’s “ultimate approach to fuel security will need to be more sophisticated than the interim approach we approve today.”
Glick added that the favorable ruling for ISO-NE “does not necessarily indicate that even the exact same proposal would be just and reasonable in other regions of the country,” Glick said.
Units needed for fuel security would be economic if compensated for the services they provide, which should be procured through the competitive markets, he said.
“Individual, ad hoc contracts with particular resources whose retirement might, under the most conservative assumptions, create a fuel security concern is no way to address a region’s long-term fuel security,” Glick said.
FERC on Monday agreed with a financial trader that PJM failed to provide “all available supporting documentation” for two real-time repricing events that cost the company more than $500,000, but the commission rejected the company’s effort to obtain refunds from the RTO.
The commission said it denied Monterey MA’s request for PJM to the return to the original incorrect pricing to avoid an “absurd” result (EL18-150).
Monterey complained that it lost money on day-ahead financial positions it took after PJM revised nodal prices following events from April 1 to April 30 and June 22 to July 10 in 2016. While Monterey’s complaint was specific to those events, the company argued that PJM “frequently” revises real-time prices after the fact and “while the occurrence of these adjustments decreased in 2017, following an all-time high in 2016, the frequency of adjustments is again trending upwards, with 2018 numbers already matching or surpassing 2017 numbers.”
A financial trader in PJM’s virtual markets claims a recalculation of a real-time price at a dead bus cost it nearly half a million dollars. | Pexels
Bagley Event
In the April event, three of the four transmission lines to the BC Bagley 230-kV substation near Baltimore were out of service, according to the complaint. PJM said the fourth line was also out, creating a “dead bus replacement” situation in which the RTO calculates the nodal LMP using active nodes nearby. That recalculation switched the marginal congestion cost at the bus from negative to positive, costing Monterey $480,000.
However, Monterey argues that MISO’s state estimator shows the fourth line was still in service and that PJM’s outage reports didn’t include the line during that time. PJM failed to provide sufficient information when announcing the price reposting to explain why its data didn’t match up with data elsewhere, Monterey said.
LaSalle-Plano Event
In the second event, the LaSalle-Plano 345-kV line in Illinois was out because of forced outages on two 765-kV lines. Monterey took financial positions based on five-minute pricing signals over the previous few days, but the real-time LMPs were subsequently recalculated, costing the company $31,000.
PJM told Monterey the prices were changed because the model didn’t match how RTO staff actually operated the system.
Monterey said it sought arbitration with PJM over the event, but the RTO denied the request.
XO Energy, another financial trader, told FERC that it also lost money during the LaSalle-Plano event and supported Monterey’s request for Tariff and Manual 11 changes. XO agreed that PJM needs to be timelier in its customer response.
“Reasonable guidelines and Tariff obligations must be incorporated into these provisions to increase transparency and reduce abuse,” XO said.
FERC agreed that PJM failed to provide the amount of information required by its Tariff in connection with the Bagley event, but it also agreed with the RTO’s response that it complied with its Tariff in recalculating the LMPs. The commission therefore denied Monterey’s requests for changes, as well as its complaint about the LaSalle-Plano event.
FERC on Tuesday approved PJM’s proposal to extend the deadline for day-ahead energy market bids and offers by 30 minutes, from 10:30 a.m. to 11 a.m. (ER19-305).
The approval is the final step in the RTO’s expedited implementation of changes to take advantage of enhanced computing power and puts it on track to complete the effort in mid-December. (See “Day-ahead Market Timeline Manual Changes,” PJM Market Implementation Committee Briefs: Nov. 7, 2018.)
The window for bids into PJM’s day-ahead auction is expanding. | PJM
The changes were also made possible, PJM said, by a recent reduction in the number of biddable points for virtual transactions, which was part the third and final phase of its plan for mitigating uplift. (See FERC OKs Slash in Virtual Bidding Nodes for PJM.)
PJM told FERC that the extension would provide natural gas-fired generators additional time to engage in fuel price discovery each day, thereby increasing certainty around costs.
“The additional time for price discovery will place gas-reliant generation units on more equal footing with market participants who are not dependent on fluctuating daily natural gas prices when formulating and submitting their bids and offers in the day-ahead energy market,” the RTO explained.
The expedited implementation timeline means the changes will be in place before the winter season, when gas prices have been historically volatile. Several additional related changes are expected to be approved at a Thursday meeting of PJM’s Markets and Reliability Committee.
ETI Requests
The Energy Trading Institute (ETI) supported the change, but it asked that PJM additionally work to further reduce the day-ahead solve time without damaging the efficiency of the market and provide additional information regarding the software and hardware upgrades for market efficiency and transparency purposes. It also asked the RTO to “evaluate the divergence in the market and the increase in uplift [since the reduction of available locations for virtual transactions] and provide additional analysis on the cost associated with the de minimis solve time gain of reducing virtual transactions.”
In its reply, PJM welcomed the discussion with ETI through the RTO’s stakeholder process but said the requests were out of scope for the filing. FERC agreed and dismissed ETI’s requests.
The U.S. Senate voted 50-49 on Thursday to confirm Bernard McNamee as a FERC commissioner, restoring the commission to full strength and Republicans’ 3-2 majority.
Every Democratic senator voted against McNamee, including Sen. Joe Manchin (D-W.Va.), who had joined Republicans on the Energy and Natural Resources Committee in its 13-10 vote Nov. 27 to advance the nominee to the floor. (See McNamee Advances to Senate Floor.)
Manchin, a coal-state Democrat who often votes with Republicans on energy and environmental issues, is in line to become ranking member of the ENR Committee if Sen. Maria Cantwell (D-Wash.) moves to the Commerce Committee. That has rankled environmental groups and members of the more progressive wing of the party, who protested to Minority Leader Chuck Schumer at his office in New York on Monday.
Manchin said Wednesday he changed his mind on McNamee after learning of statements suggesting the nominee denies humans’ role in climate change.
Senate Majority Leader Mitch McConnell (R-Ky.) filed cloture on McNamee’s nomination last Thursday, but the vote to limit debate was postponed until after the state funeral of former President George H.W. Bush on Wednesday.
The cloture vote Wednesday was identical to the confirmation vote. After Senate rule changes in 2013, the vote to prevent filibustering presidential nominations requires a simple majority rather than a supermajority. Sen. Thom Tillis (R-N.C.) did not participate in either vote.
President Trump nominated McNamee in early October, after Robert Powelson left FERC in August to become CEO of the National Association of Water Companies, having served on the commission for only a year. McNamee, executive director of the Energy Department’s Office of Policy, would serve the remainder of Powelson’s term, which ends June 30, 2020.
McNamee could extend his tenure through 2025: The 2020 end date for his term means Trump would be able to re-nominate him before the end of the president’s own term the following year.
Leaked Video
Democrats’ opposition to McNamee stems in part from his role in drafting DOE’s Notice of Proposed Rulemaking seeking subsidies for endangered coal and nuclear generators. Democrats on the ENR Committee urged McNamee to recuse himself from FERC’s resilience docket, which it opened in January after rejecting DOE’s proposal. (See Democrats Urge McNamee’s Recusal from Resilience Docket.)
In response, McNamee said he would consult ethics lawyers on the matter.
McNamee has served in the DOE Office of Policy since June. Prior to that, and after FERC’s rejection of the NOPR in January, he worked briefly as the director of the Texas Public Policy Foundation’s Center for Tenth Amendment Action, a group that files legal challenges over what it views as government overreach. It was in this role that McNamee promoted the center’s Life: Powered initiative — described as a project to “reframe the national discussion” about fossil fuels — in a February speech captured on video. In the speech, McNamee described the effort to change public opinion about fossil fuels, which he called “the key not only to our prosperity [and] quality of life, but also to a clean environment.” He also attacked environmental groups, describing their activism against fossil fuels as a “constant battle between liberty and tyranny” and criticized renewable resources.
“Renewables, when they come on and off, it screws up the whole the physics of the grid,” he said. “So, when people want to talk about science, they ought to talk about the physics of the grid and know what real science is, and that is how do you keep the lights on? And it is with fossil fuels and nuclear.”
The video — which was apparently taken down from the TPPF’s YouTube channel when McNamee was nominated — was uploaded to YouTube by the Energy and Policy Institute, a liberal advocacy group, on Nov. 20. The speech was a stark contrast to McNamee’s promise days earlier at his confirmation hearing to “be a fair, objective and impartial arbiter in the cases and issues that would confront me as a commissioner.”
“After viewing video footage, which I had not previously seen, where Bernard McNamee outright denies the impact that humans are having on our climate, I can no longer support his nomination to be a FERC commissioner,” Manchin said in a statement explaining his vote Wednesday. “I would hope that Mr. McNamee will be open to considering the impacts of climate change and incorporates these considerations into his decision-making at FERC.”
McNamee Responds
After the video became public, Cantwell issued several supplemental questions to McNamee about his statements, saying “these biases will make it difficult both for you to be the impartial arbiter that you have committed to be, and for the American public to have confidence that you will be an impartial arbiter who relies on the ‘law and facts’ as you have stated in your testimony.”
In his response last Monday, before the committee vote, McNamee repeated his support for “a level playing field for all types of technologies and resources” and pledged to be “an independent arbiter, making my decisions based on the law and facts.”
Asked by Cantwell to “point to a peer-reviewed scientific study” that supports his criticism of renewables, McNamee cited NERC’s May 2017 comments on DOE’s grid study: “With no mass, moving parts or inertia, increasing amounts of inverter-based resources (such as solar photovoltaic) present new risks to reliability, such as managing faster fault-clearing times, reduced oscillation dampening and unexpected inverter action.”
He also cited a February 2018 National Renewable Energy Laboratory study on the challenges posed by California’s “duck curve.”
“I recognize the value of all resources to operating the electric grid while also recognizing that resources may have different operating characteristics that may be necessary to support the electric grid during different situations,” McNamee said.
Cantwell also asked, “How can environmental groups possibly expect a fair shake from you as a FERC commissioner given that you equated these groups and their values with those of tyrants?”
McNamee responded: “I understand the difference between being an advocate and an independent arbiter.”
Echoes of Binz
McNamee’s nomination somewhat resembles that of a previous nominee: Ron Binz.
Chosen by President Barack Obama in 2013 to be FERC chair, Binz withdrew his nomination after Manchin joined Republicans, then in the minority, in opposing him over his statements favoring renewables.
Binz served as chairman of the Colorado Public Utilities Commission from 2007 to 2011. Part of the opposition to his nomination, led by the coal industry, stemmed from his participation in the drafting of Colorado’s Clean Air-Clean Jobs Act, which offered utilities incentives for replacing coal-fired power plants with natural gas. The law led to the closure of several coal plants in the state. (See Who is Ron Binz, And What Will He Do at FERC?)
But what ultimately ended up sinking his bid was the disclosure of documents showing he was communicating with public relations firm VennSquared Communications — which had been hired by Green Tech Action Fund, a nonprofit that provides grants for the development of clean energy technologies — in response to the coal lobby. The emails sparked a furor among right-wing media and led the previously noncommittal Lisa Murkowski (R-Alaska), then ranking member of the ENR Committee, to withhold her support.
On the Senate floor before the cloture vote Wednesday, Murkowski referenced the “bipartisan concerns on [Binz’s] efforts to recruit support for his nomination” as the key difference between Binz and McNamee.
Prior to McNamee’s committee vote last week, Cantwell recalled the Binz controversy.
“It was not that long ago that this committee refused — refused — to confirm the nomination of Ronald Binz to the commission because of his support for renewable energy,” she said.
After the committee vote, Murkowski was asked by reporters about Cantwell’s comments on Binz and Earthjustice’s Kim Smaczniak’s tweet asking “What happened to the Binz test?”
“I don’t know that there was ever a ‘Binz test,’” Murkowski said. “If there was, I wasn’t [giving] that. I have to look at every individual that comes before me, I have to ask the questions and make that determination.”
RENSSELAER, N.Y. — NYISO on Monday recommended its carbon pricing proposal no longer include a mechanism that would make emissions-free resources with existing renewable energy credit contracts pay the LBMP carbon component.
The ISO’s clawback proposal “creates a distortion in the market … that places the ISO in the position of picking winners and losers, which is not where we want to be,” Michael DeSocio, the ISO’s senior manager for market design, told the Integrating Public Policy Task Force (IPPTF) on Monday. (See NY Carbon Task Force Looks at REC, EAS Impacts.) The ISO initially proposed the idea to reduce the potential for REC resources to receive double payments for their lack of emissions.
DeSocio noted REC payments are not solely linked to carbon abatement or avoidance but are primarily intended to support renewable resources. Withholding the LBMPc from resources with existing RECs would increase the uncertainty in the value and potential cost of such contracts going forward and also create a disconnect between the wholesale market price and payment to the resource, he said.
Double Payment Issue
Multiple stakeholders expressed concern about the potential for double payments, with ratepayers paying for both REC contracts and an unforeseen bonus or windfall for holders of such contracts that pre-date the existence of a carbon charge.
“As much as there could be a concern with costs … we don’t view this as a problem with the design,” DeSocio said. He estimated the possibility for between $30 million and $60 million in such payments in an overall program representing a few billion dollars, whether through the state’s Clean Energy Standard alone or with carbon pricing.
The $60 million estimate is an upper bound of any double payment, said Sam Newell of the Brattle Group.
One of the motivations for RECs “was to develop a new way of getting energy… So did you pay a little extra to help pave the way for the much larger amounts of clean energy the state plans to procure? Maybe. That was part of the purpose,” Newell said.
Newell also pointed out carbon pricing was being contemplated at the time some of the existing REC contracts were signed. “To what extent did the REC prices get discounted accordingly? Were they willing to take a little bit lower price in a competitive process because they saw some upside from some future carbon prices?”
“It’s not very accurate to just blithely call it a double-payment issue,” said Warren Myers, director of market and regulatory economics at New York’s Department of Public Service. “We’ve heard from a lot of parties about what they have to go through to get financing and the hedges they sign, so to say that generators are going to get double paid is a misstatement … What the ISO proposed, while well-intentioned, was a remedy that was worse than the malady.” (See NY Task Force Talks LBMPc, Residuals, Hedge Effects.)
Brattle Updates
Newell presented the task force with updated analyses on carbon price effects, including the outcome if NYISO’s AC transmission project in western New York — the two components for which are now before the ISO’s board — does not get built by 2024 as the study projected.
Effects of a carbon charge on wholesale energy prices | Brattle Group
The study assumes the projects would be built by 2023 to provide 350 MW of increased transfer capability across the Central East interface, while they could actually provide as much 875 MW of increased transfer capability, he said.
“So what would happen if these projects weren’t there at all?” Newell asked. “Then you would just see a little more bottling in upstate and less LBMP upstate from a carbon charge, and the opposite downstate … If you get the full 875-MW increase in transfer capability, the state would be a little more uniform than we modeled with only a 350-MW increase on Central East.”
2022 Scenario
While the study motivation and scope remain unchanged, “we also did the updated [modeling and pricing software] runs to look at a 2022 scenario, as requested by stakeholders, and to look at what the market would look like if a carbon charge was implemented,” Newell said.
Brattle’s analysis continues to show minimal retail price impacts from a carbon charge, with the strongest impact in 2022 — the year of implementation, when consumer bills are projected to increase by 1.6%, mainly due to the retirement of Indian Point nuclear plant coupled with no AC transmission upgrades in service and a doubling of renewables upstate.
The biggest observation is relative to both the retail rate and the generation component of the rate, Newell said.
“If you look at the graph, it’s visually not far off the zero point, so that’s the main conclusion, with a little bit of a trend over time towards more benefit,” he said.
However, wholesale prices are expected to register their largest carbon cost impact — $17.60/MWh — in 2025, with an estimated carbon charge of $49/ton.
Summary of Modeled 2022 Scenario | Brattle Group
Nuclear Retention
Brattle also revised its projections of the retention of nuclear generation in 2030, increasing its assumption from 450 MW to about 850 MW of the 3,300 MW of upstate capacity.
The Public Service Commission approved the zero-emission credit program in 2015 to prevent the premature retirements of three New York nuclear power plants, Exelon’s FitzPatrick, Ginna and Nine Mile Point. (See Appeals Court Upholds NY Nuclear Subsidies.)
Newell said a carbon charge could boost the net revenues for upstate nukes and prompt owners of units in good physical condition to apply for license extensions.
The study assumes Nine Mile Unit 2 will remain under any case, while it considers the other three units to be at risk of retirement.
“You can see that there’s a fairly good case for some likelihood of retaining some of these plants,” he said.
Why Price Carbon?
Why even do carbon pricing, Newell asked.
“I really see two closely related reasons. One that we’ve talked about a lot is that you provide a price signal that directly signals to the market how to operate in such a way that cost-effectively reduces carbon and how to invest in such a way… where you avoid the most emissions, that’s where the biggest rewards go,” he explained.
Another major factor — harmonizing state policies and wholesale markets — has not been emphasized enough, Newell said.
“I’m talking about this from the perspective of somebody who works nationally and is seeing a lot of conflict on these issues,” Newell said. “And [I’m] seeing an opportunity for New York ISO and New York state to address this issue more successfully than the rest of the country and to be a leader in this regard.”
The IPPTF will next meet on Dec. 17 at NYISO headquarters to consider the final draft carbon proposal, which will be posted by Dec. 7.
