Page 1096 – RTO Insider

November 18, 2018

MTEP 18 Advancing with 2 Contentious Projects

By Amanda Durish Cook

MISO staff are seeking to advance the RTO’s full 2018 Transmission Expansion Plan despite stakeholder objections to two projects, board members heard last week.

Staff recommend moving ahead with all 442 projects currently spelled out in the $3.3 billion plan, but the Planning Advisory Committee endorsed only 439 of the proposals, Executive Director of System Planning Aubrey Johnson said during a Nov. 13 conference call of the Board of Directors’ System Planning Committee.

The MISO System Planning Committee of the Board of Directors in September | © *RTO Insider*

The two projects sparking concern at the PAC include the rebuild of the Wabaco-Rochester 161-kV line in southern Minnesota and American Transmission Co.’s Straits of Mackinac project to replace a 138-kV circuit connecting Michigan’s Upper and Lower peninsulas. Stakeholders have complained the costs for the Wabaco-Rochester project will shift from generator interconnection customers to local load customers and have said that an alternate solution would better suit the Mackinaw area.

The third proposal not receiving endorsement has stirred less controversy: ITC Midwest’s capacitor bank project at the Walters 161/69-kV substation in southern Minnesota, which was only held from endorsement to allow MISO to update the project’s details. (See MISO PAC Puts MTEP 18 to Vote, Removes 3 Projects.)

The 10 voting sectors of MISO’s Advisory Committee eventually voted 5.25 in favor of the nearly complete MTEP 18, with 2.75 opposed and two abstentions. MISO’s sectors can divide their single vote based on differing opinions between organizations and companies within the same sector.

MISO is openly defying the strong objections of at least some stakeholders by recommending that the Wabaco-Rochester line and Straits of Mackinac circuit rebuild move ahead as planned.

Johnson said MISO staff are recommending the $11 million Wabaco-Rochester project despite stakeholder concerns over cost allocation and Xcel Energy’s request to defer the project in favor of a larger solution later. The RTO said the project improves market efficiency and has benefits “well in excess of costs” at 6.8:1. Johnson said staff have studied alternatives to the project, including proposals submitted by Xcel.

“The area is experiencing congestion currently, and there are no generator interconnection customers identified as responsible for upgrading this circuit,” MISO said.

MISO also continues to recommend ATC’s $105 million plan to replace its underwater circuit linking Michigan’s Upper and Lower peninsulas, which was damaged last year when the cables were struck by a passing vessel.

While stakeholders agree that ATC’s damaged cables should be replaced, some are divided on whether the cables should be installed on the bottom of the lake or in an underwater tunnel. Stakeholders have raised the possibility of an interim solution if the more complex tunnel option is needed. Some have also proposed alternative or joint ownership of the replaced cables.

Johnson said MISO believes the best course of action is ATC “expeditiously” replacing the cables, which solves the immediate planning issue. He also pointed out that ATC has the right to replace its own equipment under the terms of MISO’s Transmission Owner Agreement.

Johnson added that MISO “does not address regulatory requirements governing the manner of placement of the cables within the straits, as that is a state siting issue.” The siting on the Mackinac project has not been finalized with the Michigan Public Service Commission.

The uncontroversial $11 million Walters substation project was originally proposed as a line and transformer project but has evolved into a capacitor bank installment to improve voltages in the area. The PAC withheld approval so the alternate project could be updated into the MTEP 18 list. MISO said it has since updated the project details and isn’t aware of any outstanding stakeholder issues with the project. Johnson said the issue was resolved prior to the close of the PAC meeting in October.

Stakeholder Pushback

During the call, Director Phyllis Currie asked for stakeholder reaction to MISO’s decision to move ahead with the Wabaco-Rochester project, but none offered opinions during the open comment period. It was later discovered that technical difficulties prevented stakeholders from getting a line opened on the operator-assisted call. MISO held a special comment period by phone on Nov. 15, and CEO John Bear that same day apologized to stakeholders for the mishap during an Informational Forum.

During the make-up call, stakeholders repeated criticisms of the two proposed projects.

Representatives of Wolverine Power Supply Cooperative said the company submitted an alternative proposal to the Mackinac project and said MISO staff may have been too quick to dismiss it.

But ATC’s Brian Drumm said MISO evaluated the project and alternatives properly. He also pointed to ATC’s contractual right to perform upgrades on its own equipment.

Dairyland Power Cooperative’s Terry Torgerson said MISO’s estimated savings on the Wabaco-Rochester line are overstated.

Xcel Energy’s Carolyn Wetterlin said Xcel and MISO also “ended on a disagreement” this year concerning the Rochester-Wabaco line. She said the proposed line only shifts congestion into another area. Wetterlin asked that MISO delay the solution until MTEP 19.

The board will vote on whether to approve MTEP 18 in its entirety at its meeting on Dec. 6.

November 18, 2018

FERC Waives VLR Tariff Requirement in MISO South

By Amanda Durish Cook

FERC last week granted MISO a one-time Tariff waiver allowing the RTO to designate certain Louisiana resources as commercially significant to voltage and local reliability (VLR) without first collecting and studying a year of data to back up the determination (ER18-2273).

MISO plans to allocate the majority of VLR commitment costs incurred in the Fancy Point load area on the Mississippi River to Entergy, which has the largest amount of load and stands to benefit most. Entergy said it did not oppose the waiver, which is effective for one year beginning Aug. 22, 2018.

The RTO’s Tariff requires it to conduct quarterly VLR issue studies using data from the previous 12 months before it can label VLR commitments “commercially significant.”

FERC said the waiver is “narrowly tailored” to allow MISO to make the designation while accumulating the 12 months of data necessary to conduct a study pursuant to its Tariff. It added that the move is “consistent with the principle of cost causation in that it is designed to allocate revenue sufficiency guarantee make-whole payments for VLR commitments to the load in the local balancing areas that benefit from the VLR commitments.”

MISO said that absent a waiver, it would be required to allocate VLR commitment costs to the local balancing area where the VLR-committed resource is located, instead of allocating costs on a load-share basis to the entities that benefit from commitments.

FERC found that MISO acted in good faith on the designation by working with affected parties to create an operating guide and convening a special meeting to discuss VLR issues.

November 18, 2018

NYPSC OKs CCA, Rejects Residential EV Charging Tariffs

By Michael Kuser

The New York Public Service Commission on Thursday unanimously approved renewing Westchester County’s community choice aggregation (CCA) program, which since 2016 has pooled municipalities to purchase electricity and natural gas in bulk.

The New York PSC held its regular monthly session in Albany on Nov. 15, 2018.

The county’s Sustainable Westchester is the only active CCA in the state so far (Case 14-M-0564), though the PSC has approved three others. CCAs also provide consumers increased access to distributed energy resources and efficiency programs and products.

Commissioner Diane Burman supported the order but asked Department of Public Service staff about low-income provisions in the programs.

Ted Kelly, DPS assistant counsel, said, “As with the other CCA programs, Sustainable Westchester can only serve low-income customers with the start of the new, renewed program if they offer and provide those customers with a guaranteed savings product, and they did discuss that in their master implementation plan and acknowledge that they were aware of and would comply with that requirement.”

Commissioner Gregg Sayre said that CCAs are consistent with “increased customer choice and a market-based encouragement of new options for clean energy and distributed energy resources.”

Home EV Charging Tariff Nixed; Revisions Ordered

The PSC rejected tariff filings for residential electric vehicle charging from all the major investor-owned utilities in the state (Case No. 18-E-0206) and ordered them to file revisions that implement time-of-use (TOU) rates equal to the traditional residential customer charge.

“The incremental customer charge associated with TOU rates can deter EV customers from adopting the TOU tariff and can impact a customer’s decision as to whether to purchase an EV,” the commission said. “Minimizing such costs will lower barriers for customers to adopt TOU rates.”

“We know electric vehicles are coming, and we know that it’s up to us to make sure that this coming call on the electric system is managed well,” PSC Chair John Rhodes said. “That in turn calls for good engineering, but also for good economics and, specifically, good rates.”

Mary Ann Sorrentino, acting DPS chief of electric rates and tariffs, testified that the relevant statute (PBS Section 66-o) was intended to provide incentives to buy EVs and encourage the adoption of grid-responsible charging times.

New York law requires utilities to file residential EV charging tariffs and to report periodically, but the commission’s Nov. 15 order defines the reporting as annual and directs Central Hudson Gas & Electric, New York State Electric & Gas, Rochester Gas and Electric, Consolidated Edison and Niagara Mohawk Power to file their annual report every Jan. 30, starting in 2019.

“The tariffs addressing 66-o are essentially similar in that each of the electric utilities proposed a one-year price guarantee for residential customers with qualifying EVs that go on the residential time-of-use rate for their entire load,” Sorrentino said.

Under TOU rates, charges are lower during off-peak hours. The commission has already approved price guarantees for EV owners in Con Ed and Orange and Rockland Utilities service territories to reduce customers’ fear of trying a new rate, she said.

“The PSC has a broader proceeding underway to develop its approach to EVs comprehensively [Case 18-E-0138], but in the meantime, this is a smart, pragmatic adaptation of existing approaches that fits with our principles and makes sense,” Rhodes said.

The commission’s order on residential charging rates “complements the broader proceeding” on EV infrastructure and also the proceeding on the value of distributed energy resources (Case 15-E-0751), Sorrentino said.

Thursday’s order also addresses utilities with residential TOU rates that contain incremental meter charges as opposed to increased customer charges, such as National Grid and RG&E, directing that “residential customers with qualifying registered EVs that take service under residential TOU rates shall not be subject to the incremental charge.”

The commission in September approved Con Ed expanding its EV charging program, SmartCharge NY, to offer incentives to customers who charge medium- and heavy-duty EVs during off-peak hours. The commission’s order (Case 16-E-0060) said “it is critical to begin testing the efficacy of off-peak charging programs for the full gamut of EVs at a time when EV penetration is comparatively low.”

New York’s zero-emissions vehicle plan calls for creating statewide EV infrastructure to support 30,000 to 40,000 EV sales by the end of 2018 and 10,000 charging stations by 2021. The commission in September reported 26,470 EVs registered in New York.

November 16, 2018

NARUC Briefs: New Chief Picked, Staffers Honored

By Tom Kleckner

Iowa’s Wagner Lays out his Vision as NARUC President

ORLANDO, Fla. — Nick Wagner, newly elected president of the National Association of Regulatory Utility Commissioners and member of the Iowa Utilities Board, told the group’s annual meeting Tuesday that his vision for the organization is more than idle words.

Regulators and staff gather for NARUC’s opening session. | © *RTO Insider*

“Utilities, customers and stakeholders are looking to us as commissioners for answers. They expect us to lead,” Wagner said, shortly after taking NARUC’s reins from John Betkoski, vice chair of the Connecticut Public Utilities Regulatory Authority.

“As we approach the future and move forward, we are going to work on leading the way and exploring opportunities,” Wagner said. “This is more than a one-year tagline. What NARUC needs to do is focus on a long-term vision and not a tagline. The issues that are out there? They’ll come up. They don’t care if I put them in a tagline or not.”

Outgoing NARUC President John Betkoski listens to North Dakota’s Julie Fedorchak nominate his successor, Nick Wagner. | © *RTO Insider*

Wagner said NARUC will partner with the National Association of State Energy Officials (NASEO) to create a task force on comprehensive electricity planning, providing a forum to develop state-led pathways “toward a more resilient, efficient and affordable grid.” NASEO is composed of governor-appointed energy officials from each state and U.S. territory.

The task force will include up to 15 commissioners and state energy officials. Colorado Public Utilities Commission Chair Jeffrey Ackermann and Laura Nelson, executive director of the Utah Office of Energy Development, will serve as the group’s co-chairs.

“I’ve challenged the task force to come up with a novel approach outside of a 200-page report that’s going to be thrown on a shelf somewhere and never get read, something that commissions can use in the future as they approach this issue,” Wagner said.

“Things are changing. Technology is changing. Customer needs and wants are evolving,” he continued. “We can look at these changes and focus on exploring opportunities. We can approach our work differently than we’ve done in a way for 20 years. We can embrace moving forward and look at innovative ways to make this a better experience for everyone involved.”

Wagner was elected as NARUC’s president during the Nov. 12 opening general session of the organization’s 130th annual meeting and education conference.

He was appointed to the IUB in May 2013, filling a term that expires next April. He also holds officer positions with the Mid-America Regulatory Conference and the National Council on Electric Policy.

Incoming President Nick Wagner outlines his plans for 2019 to his fellow members. | © *RTO Insider*

Wagner served in Iowa’s House of Representatives from 2008 to 2012. He holds a bachelor’s in biomedical engineering and a master’s in electrical engineering, both from the University of Iowa.

“I’m looking forward to the year. We’ve got a lot of good things we can work on as the world changes for utilities,” he told RTO Insider. “From the very beginning, I knew this was something I wanted to be involved with and engaged in. I knew it was a great organization. What we do is critical to so many lives.”

The membership selected North Carolina’s Edward Finley Jr. as first vice president and Idaho’s Paul Kjellander as second vice president.

Wagner and nine other NARUC members were reappointed to the group’s board of directors: Bob Anthony (Oklahoma), Betty Ann Kane (D.C.), G. O’Neal Hamilton (South Carolina), Carla Peterman (California), Asim Haque (Ohio), Mark Vannoy (Maine), Chris Nelson (South Dakota), Kara Fornstrom (Wyoming) and Angela O’Connor (Massachusetts).

NARUC Hands out Barnich, Innovation Awards

During the opening general ceremony, NARUC bestowed the 2018 Terry Barnich Award to two commission staffers from Arizona and D.C. for their efforts to provide aid and expertise to regulatory partners abroad.

Elijah Abinah, utilities division director for the Arizona Corporation Commission, provided critical knowledge and assistance to NARUC’s long-running partnership with the Nigerian Electricity Regulatory Commission. He has also worked in Uganda and Rwanda, with support from the U.S. Agency for International Development’s Power Africa initiative.

Udeozo Ogbue, compliance office chief for the D.C. Public Service Commission, helped lead a partnership exchange with Tanzania’s Energy and Water Utilities Regulatory Authority, stressing the fundamentals of pipeline safety and building the authority’s capacity to develop rules for gas transmission and distribution. He has helped shape utility regulatory development and direction in Tanzania, Nigeria, Pakistan, India, Japan, South Korea and Mexico.

The award is presented in the memory of Terry Barnich, former chairman of the Illinois Commerce Commission, who was killed in Iraq in 2009 while working as the deputy director of the State Department office overseeing U.S. reconstruction projects.

The organization also handed out its Innovation Awards for promoting the exchange of knowledge and information that will benefit innovation in regulatory issues, to four individuals and groups.

Haque, chairman of the Ohio Public Utilities Commission, was honored for regulatory and policy innovation for his Power Forward initiative.

Technical innovation awards went to:

Greenlots in the electricity sector for developing a grid-management solution that allows utilities and grid operators to intelligently control electric vehicle load;
The San Jose Water Co. in the water industry for revitalizing its largest surface water-treatment facility; and
The Gas Technology Institute in the gas industry for developing a breakaway disconnect fitting for meter set assemblies.

Travis Kavulla (left) and Nick Wagner listen to a panel. | © *RTO Insider*

Electricity Committee Approves Storage Resolution

NARUC’s Committee on Electricity during its business meeting approved a resolution recommending five principles to guide member states in modeling energy storage and other flexible resources (EL-4/ERE-1):

Utilities and utility commissions should be well educated about the different types of quantitative models that exist today.
Utilities should develop, if appropriate, new modeling tools and planning frameworks that allow for a more complete evaluation of energy storage and other flexible resources.
Planning frameworks and modeling tools should model the full spectrum of services that energy storage and flexible resources are capable of providing.
Utilities should analyze a range of flexible resource options and current cost assumptions to identify and pursue the most cost-effective opportunities that best meet system needs.
Regulatory commissions should apply the same basic prudence principles to energy storage investments as to other utility capital plant.

The resolution passed on a voice vote, with one opposing vote and one abstention. It had been tabled during NARUC’s summer meeting but incorporated additional input from the Edison Electric Institute and the Energy Storage Association.

A second resolution, championed by Illinois Commerce Commissioner John Rosales, was tabled by a 17-9 vote. The resolution (EL-3) encourages state and FERC action to preserve the rights of states to support environmental preferences in electricity generation.

“I’m very passionate about this,” Rosales said. “I tried to make it as general as possible but was told there was vagueness. I feel comfortable moving forward with it. It’s timely, and it’s needed.”

Two other resolutions were also tabled to allow continued discussion:

CI-1/EL-1/WC-2, which encourages collaboration between state and federal regulators to improve safeguards against cyberthreats to the utility distribution system.
EL-2, which urges state and federal commissions and grid operators to require that fuel security and resilience evaluations be included in decisions to build new generation.

November 16, 2018

Revised NERC GMD Standard Approved

By Rich Heidorn Jr.

FERC on Thursday approved NERC’s revised geomagnetic disturbance reliability standard, which broadens the definition of GMDs, requires grid operators to collect certain data and imposes deadlines for corrective actions (RM18-8, RM15-11-003).

NERC created Reliability Standard TPL-007-2 (Transmission System Planned Performance for Geomagnetic Disturbance Events) in response to FERC’s directives to improve how its initial GMD standard, approved in 2016, addressed the risks from “locally enhanced” events. (See FERC Pushes NERC Further on GMD Rules.)

GMD storm in Fairbanks, Alaska, April 2011 | *NASA*

Thursday’s order (Order 851) directed NERC to revise the standard further to require the implementation of corrective action plans for responding to vulnerabilities to “supplemental” GMD events and to authorize case-by-case extensions of deadlines on corrective action plans. The commission also accepted NERC’s revised GMD research work plan.

‘Supplemental’ GMD Events

GMDs occur when the sun ejects charged particles that cause changes in Earth’s magnetic fields, potentially causing geomagnetically induced currents (GIC) that can cause voltage instability or collapse, damaging connected equipment.

NERC’s original standard required applicable entities — planning coordinators, transmission planners, transmission owners and generation owners connected at 200 kV or higher — to assess the vulnerability of their transmission systems to a “benchmark GMD event.” The benchmark was defined as a one-in-100-year event that would cause an 8-V/km “reference peak geoelectric field amplitude” at 60 degrees north geomagnetic latitude using Quebec’s ground conductivity.

Entities that fail to meet certain performance requirements based on the results of the benchmark assessment must implement corrective action plans.

Potential impacts of geomagnetic disturbances on the transmission system | *PJM*

The new standard addresses FERC’s directive to revise the benchmark GMD event definition so that it is not based solely on the averaging of magnetometer readings over a geographic area. Going forward, entities will have to conduct vulnerability and thermal impact assessments on “supplemental” events.

NERC defined the supplemental GMD event using individual station measurements rather than spatially averaged measurements, acknowledging that geomagnetic fields during severe GMD events can be “spatially non‐uniform” with localized peaks that could affect reliability. The supplemental GMD event definition contains a higher, non-spatially averaged reference peak geoelectric field amplitude component than the benchmark event definition (12 V/km versus 8 V/km).

The new rule also requires the collection of GIC monitoring and magnetometer data and adds a one-year deadline for the completion of corrective action plans and two- and four-year deadlines for completing mitigation involving non-hardware and hardware, respectively.

Case-by-Case Review

NERC had proposed allowing entities to exceed deadlines for corrective actions when “situations beyond the control of the responsible entity [arise],” which FERC said was inconsistent with its prior directive that extensions be considered on a case-by-case basis.

“While we generally agree with the standard of review that NERC states it will use to assess the merits of extension requests, we conclude that such assessments should be made before any time extensions are permitted,” the commission said. “By requiring prior approval of extension requests, the modified reliability standard will limit the potential for unwarranted delays in implementing corrective action plans while also providing NERC with an advance and more holistic understanding of where, to whom and for how long extensions are granted.”

Additional Directives

FERC said NERC did not go far enough in the revised standard, which requires entities to assess supplemental GMD event vulnerabilities but not to implement corrective action plans to address them. NERC would have required entities only to make “an evaluation of possible actions to reduce the likelihood or mitigate the consequences and adverse impacts of the events if a supplemental GMD event is assessed to result in cascading.”

FERC disagreed with commenters who said requiring corrective action plans is premature. “We see no basis, technical or otherwise, for not requiring corrective action plans for assessed supplemental GMD event vulnerabilities,” the commission said.

The rule is effective 60 days after publication in the Federal Register.

November 16, 2018

OMS Opens Search for New Executive Director

By Amanda Durish Cook

The Organization of MISO States is now accepting applicants for a new executive director to replace Tanya Paslawski, who will depart the organization at the end of the year. (See OMS Executive Director to Exit.)

OMS said it is seeking a candidate with “extensive understanding of federal and state energy industry regulatory matters and experience leading teams with diverse perspectives.” The executive director takes direction from the board of directors to execute the group’s strategy on energy industry issues.

“We’re looking for someone who is driven, dynamic and skilled at achieving consensus outcomes. Experience with organization administration and boards of directors a plus,” Colleen Dougherty, OMS Office Manager, said in a press release.

Resumes will be accepted through Dec. 3 and should be emailed to Dougherty at colleen@misostates.org. OMS is headquartered in downtown Des Moines, Iowa.

OMS members recognized Paslawski’s four years of work at the group’s Nov. 13 meeting.

“You were the right person at the right time,” Michigan Public Service Commission Chair Sally Talberg told Paslawski, praising her “great skill and vision.” Talberg said Paslawski took over OMS when it was a startup in its teenage years and helped transform it into a serious organization. Paslawski thanked OMS members for the opportunity to serve them.

In 2019, OMS will continue its longstanding focus on policy around distributed energy resources. The organization is working with MISO to create stakeholder forums to discuss DER issues. Stakeholder workshops on DER should begin in early 2019, OMS Director of Member Services Marcus Hawkins said.

November 16, 2018

Democrats Urge McNamee’s Recusal from Resilience Docket

By Michael Brooks

WASHINGTON — Senate Democrats on Thursday pressed President Trump’s FERC nominee to recuse himself from the commission’s ongoing proceeding on resilience because of his role in crafting a controversial Energy Department proposal.

Sen. Ted Cruz (R-Texas) introduces his former aide Bernard McNamee, President Trump’s nominee to FERC, before the Senate Energy Natural Resources Committee. | © *RTO Insider*

Bernard McNamee, executive director of DOE’s Office of Policy, told the Senate Energy and Natural Resources Committee that he would “clearly” be unable to rule on the department’s already rebuffed Notice of Proposed Rulemaking for FERC to order RTOs and ISOs to compensate the full operating costs of generators with 90 days of on-site fuel. But he was less direct about whether he would rule on any other proceedings stemming from the NOPR.

McNamee worked on the NOPR as the department’s deputy general counsel for energy policy. After the commission unanimously rejected the NOPR in January and opened its own docket to explore how “resilience” is defined, McNamee left DOE to become the director of the Texas Public Policy Foundation’s Center for Tenth Amendment Action and Life: Powered initiatives, the latter described as a project to “reframe the national discussion” about fossil fuels. (See Trump Nominates DOE’s McNamee to FERC.) He returned to the department in his current role in June.

Sen. Catherine Cortez Masto (D-Nev.) asked McNamee whether he would recuse himself “from any issue related to the grid resiliency proposal.” McNamee responded, “I understand that the docket in which that proposal was offered has been closed, and I need to consult with ethics counsel about whether or not I could further participate in the issues. …

“The issue of resilience is constantly coming before FERC, and so I need to consult with ethics counsel to understand what I could or could not participate in,” he said.

Sen. Angus King, an independent from Maine who caucuses with the Democrats, picked up this line of questioning later in the hearing.

“I’m surprised you didn’t give a direct answer to Sen. Cortez Masto,” King said before quoting the section of the U.S. Code concerning recusals. “I don’t understand any argument where you would have to consult any counsel anywhere on Earth to understand that you have a conflict of interest when it comes to this issue of this so-called Grid Resiliency Pricing Rule, or any version thereof.” King asked again whether McNamee would recuse himself.

McNamee responded: “I believe that the statute that you read refers to a specific proceeding, and I would want to talk with counsel or ethics advisers…”

King interrupted him, noting the law says “‘expressed an opinion concerning the merits of the particular case in controversy.’ You have clearly expressed opinions on the merits of this issue repeatedly and in fact before this committee.”

McNamee said it would depend on what specific issue came before the commission and again said he would consult ethics advisers.

“I’m surprised and disappointed that you feel that you have to consult with counsel on something that’s so clear,” King replied.

After lambasting the NOPR, Sen. Ron Wyden (D-Ore.) said McNamee’s nomination wasn’t “like the fox guarding the chicken coop. This is like putting the fox inside the chicken coop.”

“I think that FERC has a tradition of making decisions, not based on whether they’re Republican or Democrat though they may be nominated as such, but making them based on working together and what’s the right thing to do, and my pledge to you is that I will work in that fashion,” McNamee responded.

“I believe you ought to recuse yourself, if you are [confirmed], on matters that deal with the specifics of what got such a resoundingly negative response earlier,” Wyden replied.

Most of the two-hour-plus hearing was not devoted to McNamee, as the committee also considered the nominations of Rita Baranwal and Raymond David Vela, Trump’s nominees to be DOE’s assistant secretary of nuclear energy and director of the National Park Service, respectively.

Committee Chair Lisa Murkowski (R-Alaska) said she plans to advance the nominees to the Senate floor shortly after Thanksgiving so they can be confirmed before the current Congress adjourns at the end of the year. If they are not voted on by then, Trump would need to resubmit them next year.

“I really don’t want to see all the good effort that this committee has put into advancing these nominees fall by the wayside,” she said, addressing committee members. “So I would ask that you all work with me to clear the nominations in [our] jurisdiction before the end of the year.”

The committee also considered Rita Baranwal (left) and Raymond David Vela (right), Trump’s nominees to be the Energy Department’s assistant secretary of nuclear energy and director of the National Park Service, respectively. | © *RTO Insider*

‘Impartial Arbiter’

McNamee told the committee that he understood the importance of FERC’s independent, apolitical status, and the difference between his work at DOE and the role of commissioner.

“If confirmed, I commit that I will be a fair, objective and impartial arbiter in the cases and issues that would confront me as a commissioner,” he said in his opening statement. “My decisions will be based on the law and the facts, not politics. And I don’t just say this because I’m trying to get your vote; it’s something I believe.”

King and Sen. Tina Smith (D-Minn.) quoted from an op-ed McNamee wrote for The Hill in April: “Some suggest that we can replace fossil fuels with renewable resources to meet our needs, but they never explain how.”

“As I am grappling with your ability to be a neutral arbiter of the facts and this very important role at FERC, can you just explain to me how you would do that given what appears to me to be a bias?” Smith asked.

McNamee pointed to his time as an energy lawyer with Virginia-based McGuireWoods, during which he said he helped get three utility-scale solar facilities built in the state. He also said he worked on Virginia’s and North Carolina’s renewable portfolio standards.

“So I understand the role that renewables can play in our electric mix,” he said. But “I think the primary thing for FERC is to make sure that they’re not picking and choosing what the resources should be but ensuring that the markets are able to function so that resources can compete and that the market decides what’s the right resource.”

But McNamee also dodged efforts by coal-state senators — Joe Manchin (D-W.Va.), John Barrasso (R-Wyo.) and John Hoeven (R-N.D.) — to get him to tout the importance of coal-fired plants to reliability.

He also distanced himself from Trump’s June 1 order to Energy Secretary Rick Perry to prevent further coal and nuclear plant closures under both Federal Power Act Section 202c and the Defense Production Act of 1950. (See Trump Orders Coal, Nuke Bailout, Citing National Security.) Asked by Sen. Martin Heinrich (D-N.M.) whether he believed that there was an urgent threat to the grid, McNamee said, “The secretary currently has not issued a 202c, and I have no reason to second-guess his determination about whether or not there is an emergency currently. And it does not appear at this point on a general, nationwide basis that there’s an emergency.”

“So that would be a ‘no’?” Heinrich asked.

“It’s only a ‘no’ in that I don’t have access to all the information the secretary does,” McNamee replied.

The status of Trump’s order with DOE is unknown; reports surfaced last month that the department has tabled it in the face of free-market conservative backlash. Its details are only known through a memo that was leaked in May. When asked about it by Heinrich, McNamee said he was not with the department when the memo was drafted. “My understanding is that it’s in the intergovernmental process. I’ve not been involved in that process for the past few months.”

Speaking to reporters after the hearing, Murkowski said she was satisfied with McNamee’s responses regarding the NOPR. “What I took away was that his role when he was at the Department of Energy was to take the secretary’s directive and to draft that policy. His role at the FERC would be different than that, and I would expect that he would respect those lanes.

“As far as the recusal issue goes, I think it is appropriate that he would consult with counsel. He stated clearly that that case he had worked on … has been closed down. So if it is a question as to that, then it seems to me you’ve got a recusal issue going on. But if it’s a question as to something else that spins off from it, is it something that would require a recusal? I think that’s where you get your lawyers in there, and you make clear one way or another. And he said he would follow that guidance, which is the appropriate course.”

November 16, 2018

FERC Extends New ROE Policy to MISO; Seeks Comments

By Rich Heidorn Jr.

FERC moved Thursday to apply its proposed new methodology for calculating transmission owners’ return on equity rates to dockets in MISO and the South.

The commission’s directives mirror its Oct. 16 order in a case involving the New England Transmission Owners (NETOs), in which it solicited briefs on its plan to consider other metrics in addition to the discounted cash flow (DCF) model it has relied on since the 1980s.

As in the Oct. 16 “briefing order,” the commission ordered parties in ROE litigation over MISO’s TOs to submit briefs in a paper hearing (EL14-12-003, EL15-45).

Separately, the commission also approved an order providing guidance on how the new methodology should be applied to seven pending ROE proceedings involving units of Entergy, American Electric Power, Southern Co. and others (EL17-41-001 et al.).

FERC has proposed giving equal weight to results from the DCF and three other techniques: the capital asset pricing model (CAPM), expected earnings model and risk premium model. (See FERC Changing ROE Rules; Higher Rates Likely.)

FERC said the discounted cash flow methodology produced lower ROEs than the three other models for the four test periods at issue in the New England Transmission Owners’ proceeding. | *FERC*

Remand

The commission announced its new policy last month in response to the D.C. Circuit Court of Appeals’ April 2017 ruling vacating its 2014 order on the NETOs’ rates. The court said FERC failed to meet its burden of proof in declaring the NETOs’ existing rate unjust and unreasonable. (See Court Rejects FERC ROE Order for New England.)

FERC said it would use three of the models — the DCF, CAPM and expected earnings — to establish a composite zone of reasonableness that will determine whether it accepts or dismisses ROE complaints. (The risk premium model results in a single number and cannot produce a range of rates.)

Zone of reasonableness quartiles | *FERC*

“Under this approach, we would dismiss an ROE complaint if the targeted utility’s existing ROE falls within the range of presumptively just and reasonable ROEs for a utility of its risk profile unless that presumption is sufficiently rebutted,” the commission said.

When a complaint is warranted, FERC would base any subsequent rate on the average of the results from each of the four models.

The first of two complaints over the MISO TOs’ rates was filed for the period Nov. 12, 2013, through Feb. 11, 2015. Under the new formula, averaging the result of the risk premium analysis (10.36%) with the midpoints of the DCF (9.29%), the CAPM analysis (10.06%) and the expected earnings analysis (11.41%) results in a preliminary base ROE of 10.28%, with the incentive-based total ROE capped at 13.06%.

Using DCF alone, FERC reduced the MISO TOs’ base ROE from 12.38% to 10.32% in a September 2016 order. (See FERC Cuts MISO Transmission Owners’ ROE to 10.32%.)

If the commission’s revised methodology calculation prevails, it said it will order refunds of amounts collected in excess of 10.28%.

The MISO TOs include units of Ameren, American Transmission Co., Entergy, Indianapolis Power & Light, MidAmerican Energy and ITC Holdings. A second challenge to their 12.38% rate was filed in February 2015, with complainants arguing the base ROE should be no higher than 8.67%.

FERC said parties in the case must submit briefs within 60 days on whether its proposed revisions should apply and, if so, how.

Guidance in Other Dockets

In addition, the commission told litigants in seven other ROE dockets they should address its proposed new methodology in their proceedings.

“We do not believe that allowing participants to address the briefing order’s proposed new methodology in their ongoing proceedings, and continuing those proceedings without abeyance on that basis, will result in wasted time and resources because we believe that continuing with settlement discussions or hearing procedures will move those proceedings closer to resolution,” the commission wrote.

“In addition, these ongoing proceedings involve issues of material fact that the commission determined would be more appropriately addressed in hearing and settlement judge procedures, and the briefing order’s proposed new base ROE methodology does not change that determination. While the issues of material fact to be addressed are expanded with the inclusion of the three additional financial models, the most effective procedures for addressing base ROE issues continue to be the ongoing hearing and settlement proceedings.”

FERC Chair Neil Chatterjee said he hoped the commission’s new policies will reduce delays and “pancaked” rate complaints. He noted that one of the pending complaints has been awaiting resolution for more than five years.

“This means that transmission owners still don’t know what they made in 2013, and consumers still face uncertainty about their bills,” he said.

November 16, 2018

FERC Proposes $10M Threshold on Merger Reviews

By Rich Heidorn Jr.

FERC would no longer review mergers valued at less than $10 million under a Notice of Proposed Rulemaking (NOPR) approved Thursday (RM19-4). The NOPR would implement congressional direction under an amendment to Section 203 of the Federal Power Act.

“The commission interprets the amendment … as establishing a $10 million threshold, but not removing the commission’s jurisdiction to review transactions with a higher value that involve a public utility’s acquisition of facilities from non-public utilities if those facilities will be subject to the commission’s jurisdiction after the transaction is consummated,” FERC said.

The NOPR also would require mergers or consolidations by public utilities valued above $1 million to notify the commission of the transactions.

“Although the [smaller] transactions … are unlikely to present concerns under the commission’s public interest analysis and public utilities entering into these transactions are not required to secure an order of the commission … the information the commission proposes to require in the notification filing will allow the commission to collect information about the transaction should a question arise related to the underlying facilities and the commission’s oversight under the Federal Power Act,” FERC said.

“This may seem like just a simple legislative change, but its impact in relieving administrative burdens on regulated entities is significant,” said Chairman Neil Chatterjee.

Comments on the NOPR will be due 30 days after its publication in the Federal Register.

November 16, 2018

FERC Acts on Tax Cuts

By Rich Heidorn Jr.

Transmission owners will be required to reduce their rates to reflect reduced corporate income taxes under a Notice of Proposed Rulemaking approved by FERC Thursday (RM19-5).

The NOPR is a response to the December 2017 Tax Cuts and Jobs Act, which cut maximum corporate income tax rates to 21% from 35%.

Senate Majority Leader Mitch McConnell, House Speaker Paul Ryan and Vice President Mike Pence celebrated the passage of the corporate tax cut with President Trump in November 2017. | *The White House*

It would require public utility transmission providers with rates under an Open Access Transmission Tariff, a transmission owner tariff or a rate schedule to modify the accumulated deferred income taxes (ADIT) incorporated in their rates. ADIT is used to account for timing differences between the computation of taxable income for reporting to the IRS and that used for regulatory accounting and ratemaking.

TOs with formula rates would be required to deduct excess ADIT from their rate bases and complete a new worksheet annually to track ADIT. Utilities with stated rates would be required to return any excess ADIT to customers.

In related actions, FERC also:

Issued a policy statement providing guidance on how other FERC-jurisdictional public utilities, natural gas pipelines and oil pipelines handle the accounting and ratemaking treatment of ADIT (PL19-2).
Approved Edison Electric Institute’s request for accounting guidance on recording a reclassification of any stranded tax effects from the law (AC18-59).
Acted on 46 of the Federal Power Act Section 206 show-cause investigations initiated in March, when the commission directed utilities whose transmission tariffs reference tax rates of 35% to reduce the rates to 21% or show why they did not need to do so.
Accepted three interstate natural gas pipeline rate reductions and one settlement in response to Order 849, which requires pipelines to provide a one-time report estimating their returns on equity before and after the new tax law and changes to the commission’s tax allowance policies. The rate reductions involved Millennium Pipeline Co. (RP19-65), North Baja Pipeline (RP19-71) and Vector Pipeline (RP19-60).

Commissioner Richard Glick said he was troubled by a clause in the settlement with Kern River Gas Transmission (RP19-55) that would undo its rate reduction if FERC initiates a rate proceeding in the future under Section 5 of the Natural Gas Act.

“In my opinion, Kern River in this settlement is essentially holding the commission hostage,” Glick said. “What I think this really highlights is the fact that the Natural Gas Act doesn’t have a refund provision like the Federal Power Act does. So, again, I want to call on Congress to add a refund provision to the Natural Gas Act which mirrors the refund provision in the Federal Power Act so that we can ensure that consumers are protected.”

Comments on the NOPR will be due 30 days after date of publication in the Federal Register.