Page 1129 – RTO Insider

October 29, 2018

Public Affairs Activism: Astroturf, Secret Donors and ‘Swampetition’

By Rich Heidorn Jr.

WASHINGTON — A public relations agency for the Consumer Energy Alliance emailed RTO Insider a couple weeks ago after we quoted the Energy and Policy Institute’s description of CEA as a “a fossil fuel-funded advocacy group.” (See Trump Nominates DOE’s McNamee to FERC.)

“CEA’s description in an [Associated Press] story from earlier this year was ‘Consumer Energy Alliance, a national advocate for energy consumers,’” the spokesperson said in an email. “We believe the AP is a more credible source.”

public affairs activism — The Campaign for Accountability, Energy and Policy Institute and Consumer Energy Alliance have attacked each other. | © *RTO Insider*

Well, yes, the AP is generally credible. But in this case, it was a bit too credulous.

Although CEA calls itself “the voice of the energy consumer,” a look at the group’s membership list shows 78 “Energy Providers & Suppliers,” two-thirds of them oil and gas producers and mining interests.

So, while I credit CEA for the transparency of its membership list, I was a little surprised that the group would invite scrutiny of its motives. Nevertheless, that would have been the end of the story, except for something else that CEA’s public relations person, Kristin Marcell, of SmartMark Communications, said in her email.

“Since your story referenced the Energy and Policy Institute in your description of CEA, I wanted to share more information about the institute’s background according to the Campaign for Accountability,” she said.

I felt I needed to know if I had quoted a disreputable source. So I clicked on the link. What followed was a trip down a rabbit hole into the murky world of public relations activism, “Astroturf” lobbying and “swampetition.”

It was a valuable reminder that one should not take such groups’ claimed missions at face value, particularly if they do not disclose their members and/or funders. Ultimately, these groups must be judged by what they do and the company they keep, not what they say.

As a window into this world, here’s what we learned about these three groups.

What is the Energy and Policy Institute?

CEA’s critic, the Energy and Policy Institute, describes itself as a “watchdog exposing the attacks on renewable energy and countering misinformation by fossil fuel interests.”

There’s little doubt about the group’s goals. It has taken on the Koch brothers, ExxonMobil, coal mining company Peabody Energy, and utilities American Electric Power, Dominion Energy and Duke Energy, among others. What it hasn’t done, however, is provide any information about who is funding its work.

“EPI is a dark money group: It does not appear to have nonprofit status, it is not registered with any relevant secretary of state, and no one admits to funding it,” the Campaign for Accountability said in a 2017 report that called it “just as secretive as the organizations it exposes.” CfA Executive Director Daniel Stevens summarized the findings in a July op-ed in the conservative Washington Examiner titled, “How the Energy and Policy Institute dupes the media into covering its work,” alleging that EPI “appears to be funded by interests or persons that profit financially from its work.”

Indeed, the institute provides no information on its members or financial backers, saying only that it “does not receive funding from corporations, trade associations or governments.”

Executive Director David Pomerantz, a former Greenpeace organizer, defended his group’s reticence.

“We’re clear about the kind of entities we accept money from,” he said in an interview. “We don’t take money from corporations, we don’t take money from solar companies, we don’t take money from wind companies or any other interest that could benefit from our work.”

Are you a nonprofit?

“We have a fiscal sponsor.”

Meaning you’re an affiliate of another organization?

“To be honest, we tend not to get into it because it inevitably leads to questions about who our specific funders are. And our work is pretty confrontational, with pretty powerful companies who have not been shy about attacking funders,” he said. “So we try to protect them from that. The way we describe ourselves is as a watchdog group whose funding comes from nonprofits.”

Pomerantz said EPI would not be required to disclose its donors even if it filed an IRS Form 990. In July, the IRS ended the requirement that nonprofit organizations registered under Section 501(c)(4) of the tax code as “social welfare” organizations report the names of donors who contributed more than $5,000 in a year. (Those names are redacted on the publicly viewable forms the groups file, leaving only the amounts visible.) The change did not affect nonprofit groups whose primary focus is influencing political campaigns, which remain required to report the names of large donors.

“Political spending — those donors have to be disclosed,” Pomerantz said. “That’s not the kind of work that we do.”

Pomerantz makes it clear that his group, unlike CEA, does not claim to believe in an all-of-the-above fuel strategy. “We’re passionate advocates for renewable energy and for [fighting] climate change. And the fact that we’re getting these kinds of attacks to me says that we’re being effective. I think we’ve developed a track record for our research that’s pretty rock solid, and nobody’s really attacked that. … Instead, they’re looking for these kinds of ad hominems. And I think we’ve got that no matter what, regardless of what level of disclosure we provide.”

CfA’s report on EPI was published in June 2017, about three months after EPI released reports accusing some investor-owned utilities and their trade group, the Edison Electric Institute, of conducting “a comprehensive campaign to weaken the solar energy market” by fighting net metering and using “disinformation.”

EEI spokesman Jeff Ostermayer defended the industry’s opposition to “outdated net metering policies” and said IOUs and other utilities provide “69% of all solar energy on the grid and virtually all the geothermal, hydro and wind energy.”

“A fair system of net metering means paying private solar customers the same, competitive price electric companies pay for other solar energy, instead of above-market rates that result in higher costs for all customers,” he said. “If private solar customers continue to use the energy grid — for backup power and to earn credits for selling energy back — then they should share in the costs of operating and enhancing the energy grid like all other customers.”

EPI also issued a report in May 2017 detailing how utilities pass through their EEI dues to ratepayers in their general operating expenses. “This widespread practice results in ratepayers subsidizing the political activities of EEI, with which they may not agree and from which they may not benefit,” the group said, citing utilities’ advocacy for increased fixed and demand charges.

Ostermayer said EPI has provided no evidence that EEI has failed to comply with state and federal laws addressing lobbying and expense reporting.

State regulatory commissions “conduct open and transparent regulatory rate review proceedings to determine what costs regulated energy companies can appropriately recover. … The lobbying portion of EEI’s dues, which is not recoverable, is calculated and reported each year using the Internal Revenue Code’s (IRC) definition of ‘lobbying and political activities’ as required to be reported on IRS Form 990,” Ostermayer said. “In filings required under the Lobbying Disclosure Act, EEI elects to use the same IRC definition, which broadly captures not only federal lobbying, but also state and grassroots lobbying and political activities. EEI activities in certain regulatory proceedings and communications efforts, for example, are not lobbying as defined by federal law. … EPI cannot change the definition of ‘lobbying,’ as set by law, to fit EPI’s own definition.”

EPI also reported in October 2016 that CEA has attacked policies supportive of solar energy, such as tax credits and net metering, while deliberately misleading the public with claims that it is “pro-solar.”

EEI, which is a CEA member, said it has never provided funding for the CfA and had no role in CfA’s report criticizing EPI.

What is the Campaign for Accountability?

Next, I felt I needed to learn more about the Campaign for Accountability. It was co-founded in 2015 by Anne Weismann, former legal counsel for the well-known liberal watchdog group Citizens for Responsibility and Ethics in Washington (CREW) and former CREW Chairman Louis Mayberg. Executive Director Stevens also is a former CREW staffer.

Much of CfA’s work has been similar to that of CREW in raising ethical questions about members of Congress and others. But the group also has taken on projects that suggest it may be driven in part by business interests rather than just a desire for good government.

In 2016, the organization launched “The Google Transparency Project,” which has produced reports on the revolving door between Google and the federal government, and allegations that Google-funded academics were influencing federal policymaking. In September, the group issued a report claiming to have purchased ads on Google while posing as the Russia propaganda agency that sought to influence the 2016 U.S. election.

CfA became its own 501(c)(3) in 2017, after beginning as a project of the New Venture Fund.

Unlike EPI, CfA does file a Form 990. Its filing for 2017 lists $995,000 in income from only four unidentified donors, the largest of which provided $850,000, 85% of the total. Although the filing does not list donors, Oracle — which has battled Google in an intellectual property lawsuit and other matters — confirmed in 2016 that it has contributed to CfA. CfA’s parent, the New Venture Fund, has received millions in funding from the Bill & Melinda Gates Foundation and the William and Flora Hewlett Foundation, according to reporting by Ethan Baron, of the San Jose Mercury News.

The Campaign for Accountability, Energy and Policy Institute and Consumer Energy Alliance differ in their transparency and in the consistency of their actions and stated missions. | © *RTO Insider*

Last month, a blogger for the Computer & Communications Industry Association (CCIA) included CfA’s receipt of contributions from Oracle as an example of what he called “swampetition,” defined as “manipulating regulators into attacking one’s competition.”

It “is a strategy with adherents in Washington, Brussels and beyond, although it is rarely front-page news,” wrote Matt Schruers, CCIA’s vice president for law and policy. “Hamstringing competitors in the political swamp instead of beating them in the market is often deployed by legacy industries against disruptive upstarts,” he wrote in a blog post Sept. 28. “It can also be used by small firms to cripple larger opponents. As a result, leading businesses are common targets of swamp warfare.”

[CCIA defines itself as a nonprofit that “promotes open markets, open systems, open networks and full, fair and open competition in the computer, telecommunications and Internet industries.” Its members include Google, Samsung, Sprint and Amazon — but not Oracle, Microsoft or Hewlett Packard.]

EPI’s Pomerantz said he was puzzled by CfA’s attack on his group and its work criticizing deceptive sales and marketing practices by rooftop solar providers. “It’s so dissonant from the rest of their work, which is progressive. It certainly seems to be funded by an anti-distributed solar interest,” he said, adding that he had no evidence to back his suspicion.

In an interview, CfA’s Stevens described his organization as a “progressive watchdog group.” He said CfA began investigating EPI after seeing the group’s research cited in defense of solar, including during a 2016 campaign over a Florida ballot measure. “Their name just kept popping up, so we started to [ask] who is this group?” Stevens said.

The Florida Amendment 1 campaign, which was backed by utilities, would have added language to the state constitution that could have increased fees for solar users and insulated utilities from competitors.

The measure, on which Florida Power & Light, Duke and other utilities spent more than $20 million, failed after disclosure of a recording in which a prominent supporter of the measure acknowledged that the amendment was an act of “political jiu-jitsu,” with utilities portraying it as pro-solar. Sal Nuzzo, policy director of the James Madison Institute, told conservative activists that the amendment was “an incredibly savvy maneuver” that “would completely negate anything [pro-solar interests] would try to do either legislatively or constitutionally down the road.”

Stevens denied his group functioned as paid attack dogs. “We have put all our cards on the table,” he said. “We’re following the law exactly as designed.”

But his answers left room for other interpretations.

Q. Do you ever take funding specifically in return for a given project?

“Oh no, definitely not. We have our work, and we conduct our work, and then people are free to support our work, but they don’t get any control over what we do or who we’re looking into.”

Q. So the suggestion that, because Oracle has been at odds with Google, Oracle was funding your Google Transparency Project, that’s not accurate?

“That’s not accurate.”

Q. Do you fundraise around individual projects?

“Not that I can think of.”

Q. So your fundraising is around your overall work? You’re not fundraising around individual projects?

“I think that’s right.”

Q. When you say you think that’s right, that sounds like you’re leaving a little wiggle room.

“That’s how you characterized it, so that’s fine. … You can quote me, or you can characterize it how you want, but I said what I said.”

What is the Consumer Energy Alliance?

Having interviewed principals at CfA and EPI, I circled back to the Consumer Energy Alliance, hoping for an interview with one of its leaders. Yet, after having invited the scrutiny, CEA suddenly became reticent, saying in emails in early October that it would be unable to provide anyone for an interview and suggesting we meet with one of their executives at the National Association of Regulatory Utility Commissioners conference in mid-November. Happily, President David Holt agreed to an interview when we asked again on Oct. 24.

In addition to its 78 energy providers, CEA also lists as members five “Academic Groups” and 146 “Consumers/Business/Agriculture/Industry/End-Users” — mostly trade organizations, chambers of commerce and labor unions. It also claims to have 500,000 other “members” — individuals who have signed up on its website to receive information.

CEA’s mission, as stated on its website — is a bit muddled. It claims to be both the “voice of the energy consumer,” and to “provide consumers with sound, unbiased information on U.S. and global energy issues.” (Emphasis added.)

So, is CEA the “voice” of the consumer or is it attempting to whisper into the consumer’s ear?

HBW Resources partner David Holt, president of Consumer Energy Alliance | *HBW Resources*

“I think it goes in both directions,” Holt said. “The foundation behind the Consumer Energy Alliance is [that] energy impacts every man, woman and child in the U.S., and there was not an organization that really talked to these other economic sectors around the country — the farming community, the manufacturing sector, and transportation and small businesses, and just basic families from a personal security standpoint — [about] how we can continue environmental improvement while we meet our basic energy needs.”

EPI and other critics say CEA is neither the “voice” of consumers nor a provider of “unbiased” information to them.

CEA’s policy positions are unabashedly pro-energy development. CEA has supported increased offshore and land-based oil and natural gas drilling and the Keystone XL pipeline to deliver oil from Canadian tar sands to U.S. refineries.

Holt said all policy campaigns are decided by CEA’s nine-member board of directors, which meets monthly via conference call and twice a year in person. In addition to Holt, the all-male board includes executives from the airline, manufacturing, insurance, retail and petrochemical sectors; none has a background in consumer advocacy.

HBW Resources partner Michael Whatley, executive vice president of Consumer Energy Alliance | *HBW Resources*

CEA’s 2016 Form 990 shows it received almost $2.6 million for the year and paid more than $1.1 million to HBW Resources, the public relations and lobbying firm Holt founded with Andrew Browning (CEA chief operating officer) and Michael Whatley (CEA executive vice president).

Houston-based Holt formerly worked for oil and gas trade publisher Hart Energy Services, the Texas Railroad Commission, the U.S. House Judiciary Committee and the U.S. State Department. He started a public affairs business in about 2004, which he said led to the formation of CEA in 2005. “And then as business continued to expand, [HBW was formed]. And now have a pretty vibrant organization with offices in … eight states around the country,” he said.

In 2011, Salon published a report detailing the role of Whatley and CEA in what it called a “stealthy public relations offensive … designed to manipulate the U.S. political system [and] deluge the media with messages favorable to the tar-sands industry.” It quoted a Natural Resources Defense Council analyst’s description of CEA as a “front group that represents the interests of the oil industry.”

According to his biography on the HBW website, D.C.-based Whatley served as a “senior advisor” to the Trump-Pence campaign and transition team and “represents companies in the energy and transportation sectors before the U.S. Congress, the federal government, agencies and state governments.” HBW reported $850,000 in lobbying revenue to the U.S. Senate in 2017, including CEA, oil and gas producer Noble Energy, and Sunnova Energy, a residential solar and battery storage technology service provider.

The Energy and Policy Institute said it discovered the address for the Consumer Energy Alliance’s Lexington, Ky., office is occupied by lobbying firm HBW Resources. | *Energy and Policy Institute*

On Holt’s biography page, HBW’s “core expertise” is defined as “implementing and managing expansive energy-specific advocacy campaigns to generate a full complement of stakeholder, media and grassroots support for thoughtful, Holt said CEA was “absolved” in the Wisconsin case but agreed with the PSC’s decision to exclude its petition from the record — which ended the commission’s investigation into the matter.positive energy development.”

Critics such as the Center for Media and Democracy’s Sourcewatch say HBW and CEA are actually practitioners of “Astroturf” lobbying — corporate-funded campaigns that appear to be grassroots efforts.

“Anybody with a keyboard and a blog, they can kind of say anything they want to say,” Holt responded. “There have been organizations that have said this about us in the past that frankly we’ve never even responded to because it’s in a way so outlandish. … That’s not how we do business.”

In 2014, however, the Wisconsin Public Service Commission rejected a petition submitted by CEA that listed the names of 2,500 state residents it claimed opposed net metering and supported the utilities’ requests for fixed-rate increases. The PSC excluded the petition from the record after some customers complained their names had been included without their consent.

Holt said CEA was “absolved” in the Wisconsin case but agreed with the PSC’s decision to exclude its petition from the record — which ended the commission’s investigation into the matter.

In 2016, more than a dozen people complained to FERC that CEA had sent letters to the commission in their names falsely claiming they supported the proposed 255-mile Nexus gas pipeline from eastern Ohio to Ontario (CP16-22).

CEA told the Cleveland Plain Dealer it had generated the letters based on a robocall survey, but some of those named insisted they had not been called. Nexus’ developer, Spectra Energy, is a CEA member.

Holt said CEA erred in attributing the survey responses to the name of the person registered at a given phone number even if another family member answered. “Say your daughter answered the phone and … agreed [to submit a letter], it was submitted on behalf of the phone of record, which clearly is not what we want to have happen. So we’ve discontinued that. Lessons learned, and we’re continuing to get better.”

Holt’s explanation didn’t fly with Mary England, whose husband was one of those in whose name letters supporting the pipeline were sent. “My husband has been dead since 1998,” England told the Plain Dealer.

Holt told the paper that Spectra had not commissioned the Nexus campaign. Asked by RTO Insider if CEA ever raised funds for individual campaigns, he acknowledged, “Yeah, we’ve done that a time or two in the past.”

Many environmental and watchdog groups have criticized CEA’s campaigns, which include helping to defeat a fracking ban in Pennsylvania, opposing federal low-carbon fuel standards and working with EEI to lobby the Interior Department to reduce barriers to siting energy infrastructure on federal land. Its current campaigns support natural gas pipelines and oil and gas drilling offshore and in Alaska and Colorado.

Is there anyplace CEA thinks oil and gas drilling should be banned?

“I wouldn’t say one way or the other,” Holt responded, before adding. “I’m sure there are.

“I’ve been very clear we are very strong supporters of the environment. I would think that environmental considerations need to be weighed along with energy solutions in making sure we have the proper balance.”

October 28, 2018

AEP to Focus on Smaller Renewable Projects

By Tom Kleckner

American Electric Power said last week it will focus on smaller projects after Texas regulators put the kibosh on the company’s proposed $4.5 billion Wind Catcher project.

“We’re looking at obviously smaller segments, smaller wind farms with smaller transmission, multiple areas,” CEO Nick Akins told financial analysts during the company’s third-quarter earnings call on Oct. 25. “That’s one of the lessons learned.”

AEP — PSO’s gas-fired Tulsa Power Station provides resource adequacy | *Public Service Co. of Oklahoma*

AEP canceled the massive project — which would have included a 2-GW wind farm in the Oklahoma Panhandle and a 360-mile, 765-kV transmission line — the day after the Texas Public Utility Commission rejected its application in July. (See AEP Cancels Wind Catcher Following Texas Rejection.)

Akins promised analysts they would see resource plans developed around renewables, storage and natural gas. The Columbus, Ohio-based company said in February that it wanted to reduce carbon dioxide emissions from 2000 levels by 80% by 2050.

“It will be smaller capacity segments focused on various jurisdictions, and we’ve already started that process,” Akins said.

AEP reported third-quarter earnings of $578 million ($1.17/share), compared to $545 million ($1.11/share) a year ago.

The company increased and narrowed its 2018 operating earnings guidance to $3.88 to $3.98/share, from $3.75 to $3.95/share. Akins said AEP’s projected growth rate of 5 to 7% annually was not “predicated on Wind Catcher” and it remains unchanged.

On a tumultuous week that saw the S&P 500 index lose the remainder of its 2018 gains, AEP shares finished at $72.74/share, a drop of $2.81 (3.7%) from its Oct. 24 close before reporting earnings.

Xcel Energy Just Missed Expectations

Minneapolis-based Xcel Energy announced on Oct. 25 third-quarter earnings of $491 million ($0.96/share) compared with $492 million ($0.97/share) for the same period in 2017.

AEP — Xcel Energy Wind Farm | *RTO Insider*

Xcel just missed analysts’ expectations, as recorded by Zacks Investment Research, of 98 cents/share. The company said higher operations and maintenance expenses partially offset favorable weather conditions and sales growth.

CEO Ben Fowke told analysts that Colorado regulators’ approval of its Colorado Energy Plan provides a “model for how the clean energy transition can occur in the United States.” Under the plan, Xcel’s Colorado subsidiary plans to retire 660 MW of coal generation, replacing it with 1,100 MW of wind power, 700 MW of solar and 275 MW of battery storage.

Share prices were down 3.5% ($1.75/share) in the two days following the earnings announcement, closing at $48.51 on Oct. 26.

NextEra Earnings Up from 2017

NextEra Energy reported third-quarter earnings on Oct. 23 of $1.01 billion or $2.10/share, up from $847 million and $1.79 during 2017’s third quarter.

NextEra CEO Jim Robo said in a statement that the company’s Energy Resources development team expanded its backlog of renewable projects by a record 1.41 GW. NextEra added 850 MW of wind, 447 MW of solar and 120 MW of battery storage projects and expects to have 10 to 16.5 GW of renewable power projects within the 2017-2020 time frame.

The Florida-based company’s stock lost 1.6% of its value following the earnings announcement, ending the week down $2.77/share at $169.89.

October 28, 2018

ERCOT SHs Debate Need for Changes Following Summer

By Tom Kleckner

AUSTIN, Texas — ERCOT market participants shared their thoughts with the Texas Public Utility Commission last week on how to address the energy-only market’s lack of scarcity pricing and slim reserve margins.

The consensus: There is no consensus.

ERCOT market participant representatives during the PUC’s review of the 2018 summer | © *RTO Insider*

Power companies and advocacy groups made their pitches during an Oct. 25 PUC technical workshop reviewing the market’s 2018 performance during a summer with an 11% reserve margin (Project 48551). Despite the tight margins and 14 system demand peaks bettering the 2016 record, the ERCOT market handled the summer heat without resorting to emergency actions.

Some participants suggested a shift in the loss-of-load probability (LOLP) used to calculate real-time reserves in ERCOT’s operating reserve demand curve (ORDC). Others suggested tweaking the ancillary services market. Still others said the market works just fine, thank you: No changes are necessary.

A common concern was that without higher prices and scarcity pricing this summer, the forward demand curve did not signal a need for additional generation.

Commissioner Arthur D’Andrea directs questions to a panel of market participant representatives. | © *RTO Insider*

“We view this discussion … as whether the current level of risk the signals in the energy-only market construct are delivering are considered acceptable,” said Michele Gregg, executive director of the Texas Competitive Power Advocates (TCPA), which represents generators, power marketers and retail providers. “The simple fact is that the lack of scarcity pricing only worsened the backward-dating forward curves, making future investment in dispatchable generation even more difficult.”

The TCPA recommends shifting the LOLP by up to one standard deviation, a position shared by Exelon.

“We believe the current scarcity pricing will not improve resource adequacy,” said Bill Berg, Exelon’s vice president of wholesale market development. “As we look ahead the next three or four years, it’s obvious to us the fleet is changing. A shift of one should shore up the existing fleet, support the renewable development we think is coming and leave enough new money in the market to incent new generation. We think 1.0 will keep you at a level where you can hold on for a few years.”

“We’re not afraid of high prices, when they are justified,” said Thompson & Knight attorney Katie Coleman, speaking for the Texas Industrial Energy Consumers trade association. “ERCOT is the only truly competitive market in the world, and we are proud of that. We think the market performed well this summer. We think you can expect that kind of performance to continue, because that is what the market is designed to do.”

“There’s no perfect answer here,” NRG Energy’s Bill Barnes said. “What we have is a competitive market. When there is scarcity, the prices should reflect a reliability risk. That did not match up this summer.”

Steve Reedy, the ERCOT Independent Market Monitor’s assistant director, noted several market participants had said similar generator outage rates shouldn’t be expected again in the future.

ERCOT’s David Maggio (center) briefs the PUC on the grid operator’s summer performance as the IMM’s Steve Reedy (left) and ERCOT’s Dan Woodfin listen. | © *RTO Insider*

“I’ll point out that with the lower outage rates, we had a more secure, less risky system this summer, and that fed into the lower prices,” Reedy said. “Should we have the same events repeat next summer, but with our normal outage rate, we will see high prices, and we probably wouldn’t be talking about the need to change the LOLP.”

The PUC is moving quickly to address the feedback, with staff pulling together information from the workshop and written comments for a discussion by the commissioners as early as November.

PUC Chair DeAnn Walker said she wants to get an earlier start planning for the 2019 summer with ERCOT staff, market participants and other governmental agencies than she did last year. She plans to once again coordinate generator and transmission outages and ensure maintenance work is completed by May.

Left to right: Commissioners Shelly Botkin, DeAnn Walker and Arthur D’Andrea listen to testimony. | © *RTO Insider*

Walker is also scheduling time with Christi Craddick, chair of the Texas Railroad Commission, which regulates gas pipelines, to ensure the lines are operating. The two also worked together before this summer to handle pipeline outages, “but we were working on one contract, one pipeline at a time,” Walker said.

“I agree … that 2019 is going to be hard. There’s no steel in the ground coming, and everyone wants to move to Texas, but that’s a great thing. We keep getting more and more load,” Walker said. “I also believe our system and the whole dynamics of the market are changing. It’s going to be difficult down the road, and we need to think on that.”

October 28, 2018

Avangrid Q3 Earnings Call Highlights Offshore Wind

By Michael Kuser

Avangrid earnings jumped more than 25% year-over-year in the third quarter, mainly driven by increased gross margins for renewables and new transmission rate plans.

The company posted net income of $125 million for the quarter ($0.40/share) versus $95 million ($0.32/share) a year earlier. For the first nine months of 2018, net income was $476 million ($1.54/share) against $458 million ($1.48/share) in the first three quarters of 2017.

During an analyst call Wednesday, the company also said it foresees solid future growth based on its role in developing the largest offshore wind project in the country. (See Mass., R.I. Pick 1,200 MW in Offshore Wind Bids.)

Avangrid’s 800-MW Vineyard Wind offshore project signed 20-year contracts with the Massachusetts Department of Public Utilities in August.

CEO James P. Torgerson said during the call that subsidiary Central Maine Power had obtained FERC approval for transmission service agreements for its New England Clean Energy Connect (NECEC) ahead of schedule. The project would bring up to 1,200 MW of Canadian hydropower to Massachusetts.

“Both Vineyard Wind and NECEC are on track, and we expect all permits and final approvals in 2019,” he said.

Torgerson said Maine regulators were close to granting NECEC a certificate of public convenience and necessity, but the state’s Public Utilities Commission on Friday said they would suspend hearings related to the project. (See related story, Maine PUC Move Poses Hurdle for NECEC.)

Significant Opportunities

The Vineyard project, a 50/50 partnership with Copenhagen Infrastructure Partners, calls for development in two phases. The first 400 MW will be operational at the end of 2021 for $74/MWh, with annual escalations of 2.5%, while the second phase, slated for a 2022 operations date, has a price of $65/MWh, again with 2.5% annual increases over 20 years.

Torgerson said both phases are eligible for investment tax credits and capacity payments. The company is looking at “significant additional opportunities for offshore wind” in Massachusetts, New York, Rhode Island and farther south, he said. Avangrid has a lease on 122,000 acres 24 miles offshore Kitty Hawk, N.C., enough for 2.4 GW of wind, and has secured a position in PJM’s queue to interconnect three planned 800-MW projects near Virginia Beach, Va. The development process “is moving a little quicker now” because of Virginia’s plans to solicit up to 2 GW of offshore wind by 2028, Torgerson said.

Avangrid also expects to bring 970 MW of onshore wind and solar into operation by the end of 2019 and estimates 2.7 GW of renewables development through 2022.

Regulatory Update

Offshore Wind Power — Transmission rate base ($M), currently capped at 11.74% | *Avangrid*

Torgerson also took note of FERC’s Oct. 16 ruling changing how it sets return on equity rates for transmission owners. (See FERC Changing ROE Rules; Higher Rates Likely.) The commission set a base ROE for Avangrid and other New England Transmission Owners of 10.41%. “The new ROE cap including incentives … would go up to 13.8%,” Torgerson said. “If this goes ahead as laid out by the commission, we would see a slight benefit to the higher ROE cap versus the lower ROE base. … So, 64% of CMP’s and [United Illuminating’s] transmission is currently capped at the 11.74%, and we get a benefit by going above that.”

The Maine PUC also recently found that CMP acted reasonably in preparing for and responding to the major storm that occurred in October 2017, and at the same time ordered the utility to file a rate case by Oct. 15.

“We asked for a $24 million rate increase; however, there won’t be any rate impact to customers as we use some of the tax reform liabilities and file that back to customers, so they won’t see a rate increase; yet we will get the ability to earn another $24 million in revenue at least,” Torgerson said.

Quotes courtesy of Seeking Alpha.

October 28, 2018

Overheard at TREIA GridNEXT 2018

By Tom Kleckner

Panel Discusses 50% Renewable Energy by 2030 Goal

GEORGETOWN, Texas — The Texas Renewable Energy Industries Alliance’s (TREIA) 2018 GridNEXT Conference attracted a devoted group of renewable energy developers and marketers to a three-day discussion of how renewable technologies in Texas are transforming the “grid of the future.” Attendees participated in panel discussions on building sustainability with renewables, planning for a resilient system and recoverability, and building community engagement.

TREIA board of directors member Ingmar Sterzing, a partner in renewable project developer Skaia Energy, moderated a leadoff panel that looked at the organization’s vision of reaching 50% renewable energy in Texas by 2030. He said the state, which already leads the nation with more than 18% of renewable-generated electricity, can produce enough power from additional wind (15.5 GW), solar (43.3 GW) and storage (550 MW) resources to reach that 50% figure.

ERCOT renewable energy supply 2008 to 2030 | *TREIA*

“I’m told current plans for batteries already exceed this capacity. These capacity values seem high, but they are in line with recent trends in new wind development,” he said.

Skaia Energy’s Ingmar Sterzing | © *RTO Insider*

Sterzing said regulators and traditional utilities could find themselves subject to “disintermediation” — in which the middleman in a transaction gets cut out of a process — if they don’t adjust quickly to new products and services.

“You figure it takes 10 years to build a coal plant. The old utility moves at that pace because of big, chunky additions that take advantage of centralization and economies of scale,” he said. “The retail consumers are not going to wait around when scarcity presents itself. There are substitute products on the market that are economic, and if we don’t get out in front of it, the consumers are going to do what they’re going to do, without concern for stranded costs or integrated operations. The regulators are going to have to pick it up, or the industry won’t be able to get out in front with integrated products and services that interface with batteries, distributed generation and electric vehicles.”

“It’s that process by where we set a vision, then come together to determine the technical problems that keep us from getting there, that has Texas in the lead,” said Tom “Smitty” Smith, a prominent Texas environmental activist and executive director of the Texas Electric Transportation Resources Alliance (TxETRA). “We’ve done well to tie ourselves with the vision of the future. We can move on to other things, because wind is now cool. We have to continue to capitalize on renewables.”

Dean Tuel, global vice president of sales for Younicos, an energy storage company, said economics will be the limiting factor in TREIA’s “50% by 2030” goal.

“It’s always economics. The cost of new technologies are always a challenge in the early phase,” said Tuel, whose company was acquired this month by Aggreko, a provider of mobile and modular power.

“We need to get to where we’re seeing 4- to 5-MW land-based turbines until we get the economics to where they should be,” ATG Energy founder Patrick Woodson said.

“The key is simply getting people to adopt new technologies and move away from their old way of thinking,” Tuel said. “How do you pull them in? Make the economic case.”

Younicos’ Dean Tuel (center) and ATG Energy’s Patrick Woodson listen as Skaia Energy’s Ingmar Sterzing explains TREIA’s 50% by 2030 plan. | © *RTO Insider*

AEP Texas cited cost effectiveness in attempting to install two battery storage facilities in West Texas and classify them as distribution assets, the panel noted. The Texas Public Utility Commission rejected the utility’s proposal in January, but it opened a rulemaking to address “non-traditional technologies in electric delivery service” (Project 48023). (See PUC Opens Rulemaking on Distributed Battery Storage.)

Smith said the three-person PUC may be the best commission since Pat Wood III and Judy Walsh were among the vanguard deregulating Texas’ electric industry in the late 1990s. However, Smith said, the commissioners, who have all been appointed since September 2017, “don’t want to issue policy statements” and would prefer to see what develops during the 86th Texas Legislature when it convenes in January.

New energy policy is unlikely, Smith said, with a new House speaker and new chairs on its energy policy-setting committees.

“We’re at a point where not much may happen this session,” he said.

Skaia Energy’s Ingmar Sterzing moderates a panel including (left to right) TxETRA’s Tom “Smitty” Smith, Younicos’ Dean Tuel and ATG Energy’s Patrick Woodson. | © *RTO Insider*

‘Imminent Grid’: Job Market of the Future?

Ken Donohoo, a director with the Electric Power Engineers consulting firm after 25 years with Oncor, said what he called the “imminent grid” presents a crossroads for the transmission and distribution sector. He said decisions on the grid made today will affect how power is supplied for decades to come.

“The traditional grid is a one-way system. We’re headed to a multi-way system,” said Donohoo, pointing to distributed energy resources, two-way power flows, block chain and other new technologies changing the market dynamics.

“It isn’t just the power systems anymore,” he said. “It’s the communications; it’s the control. It’s the Internet.”

Electric Power Engineers’ Ken Donohoo address TREIA attendees. | © *RTO Insider*

Donohoo described the imminent grid as being digitized, with remote control, self-regulation and a heavy emphasis on sensors collecting data.

“T&D planning must change and adapt. It’s full employment for planning engineers. If you have a son or a daughter, send them to [learn] planning and call me when they graduate,” he said.

“The decisions we make today will affect how power is supplied for decades. Whatever we are going to build today, we are going to have to live with it for the next 25 years. We have to understand what the future is bringing, and not blindly go with everyday reactions to what is cost-effective today.”

Cities Have Strategies to Meet Renewable Energy Goals

Representatives from host Georgetown and other Texas municipalities said their early investments in renewable energy have paid off — Georgetown officially reached 100% renewable power in July, while Austin is on track to meet its goal of 55% renewable energy by 2025.

Under a new “flexible path” strategy, San Antonio plans to generate about half of its power from renewable energy sources by 2040. Wind and solar energy currently account for about 22% of the city’s power.

“Our flexible path strategy is to make strategic decisions, but on a smaller scale,” said John Bonnin, vice president of energy supply and market operations for the city’s CPS Energy. “We want to plot a course that results in rates affordable for our community but avoid making multibillion-dollar mistakes.”

Bonnin said the strategy has already resulted in retiring 800 MW of coal-fired generation, with another 1.6 GW to come offline before 2026.

“Over the next several years, we have to develop and get consensus around a step-by-step approach to meeting customers’ needs 10 years from now, and meeting their needs in an acceptable way,” he said. “The flexible path is going to have to be just that, to satisfy all the affordability and sustainability criteria we have. We can shore up capacity with solar and wind. There will definitely be cheap power for sale over the next few years.”

City of Georgetown’s Jim Briggs makes a point as Austin Energy’s Khalil Shalabi takes it in. | © *RTO Insider*

“Georgetown has been a benefactor of the market, but when you start hearing about 800-MW, 600-MW drops in capacity, it begins to make you feel a little nervous,” said Jim Briggs, general manager of the city’s utility. “Will we be able to get new strategies into the market fast enough to make up the difference? In looking at batteries and distributed generation, the costs are moving targets.”

Khalil Shalabi, vice president of strategy, technology and markets for Austin Energy, said the city will be retiring the “lion’s share” of its thermal generation between 2020 and 2023. That means the utility will need DER, DG, storage and other “new tools” to pick up the slack.

“We can’t run [steam generation] forever,” Shalabi said. “It’s a problem, but it’s also exciting for us to deal with.”

Renewable Development Getting High Marks from Communities

Speaking on a panel discussing community-engagement strategies and lessons learned, Duke Energy’s Scott Macmurdo said the corporate renewable energy market is “going gangbusters,” pointing to a near doubling of last year’s 2.7 GW in deals because of consumer preferences.

“Companies are being held to account for what happens in their supply chains,” Macmurdo said. “Companies are taking ownership, and that’s one of the main drivers behind corporate renewable energy purchasing. The consumers care more and more about where they are sourcing these electrons. It matters with community engagement, because corporations are more sensitive about these issues.”

Susan Sloan, vice president of state affairs for the American Wind Energy Association, said consumer preference is one reason wind energy is still getting a favorable reaction in the state.

“We’re at a point now where we’re ready to start building again,” Sloan said, noting 5 GW of wind energy is currently under construction in Texas. “People are still interested in seeing more wind and using more wind. They’ve seen wind as a good neighbor and partner with oil and gas. It’s good for the economy; it’s good for the environment.”

Jeff Risley, chief strategy officer for Oklahoma-based consultancy Saxum, said whereas the industry generally receives strong community support, organized opposition has become more prevalent.

“There are organized players in this industry attempting to derail what’s happening with renewables. There’s lots of money behind them,” he said. “We deal with this all the time in Oklahoma. You have to combat those messages with the positives … about solar and wind development.

“We’re in the community, talking to people,” Risley said. “Then it’s figure out if they’re pro, con or in the middle. The middles are the ones we’re looking for.”

October 28, 2018

Western Grid’s Future Debated at CPREC-WIRAB Meeting

By Hudson Sangree

The formation of a Western energy market and who might control it were contentious topics of discussion at the fall joint meeting of the Committee on Regional Electric Power Cooperation (CREPC) and Western Interconnection Regional Advisory Body (WIRAB) near Phoenix last week.

Panelists also took on the topic of who will succeed Peak Reliability in the Western Interconnection as the company winds down its operations by the end of 2019. Both CAISO and SPP are vying for Peak’s reliability coordinator (RC) business, with CAISO poised to take on customers representing more than 70% of the region’s load. BC Hydro is also moving ahead with plans to set up an RC covering its own territory in British Columbia, Canada. (See CAISO RC Wins Most of the West.)

CAISO peak reliability pjm reliability coordinator — Marie Jordan | © *RTO Insider*

Peak CEO Marie Jordan said a major worry is that key employees will leave the organization before it hands off its responsibilities to its successors.

“As we’re going down this journey, and we’re closing the doors, slippage will be very hard to manage,” Jordan said.

In July, Peak made the stunning announcement that it would end its role as an RC and withdraw from an effort to develop a regional electricity market competing with CAISO. (See Peak Reliability to Wind Down Operations.) The Vancouver, Wash.-based company said it expected to shut its doors as early as Dec. 31, 2019, after transitioning its customers to other RCs. It was feedback from those customers commenting on Peak’s budget discussions that prompted the move to cease operations, Jordan has said.

In a panel Friday on RC services in the Western Interconnection, SPP and CAISO executives contended their organizations are best suited to provide RC in the West after Peak ends operations. Eric Schmitt, CAISO’s vice president of operations, said the ISO was already used to working with its western neighbors through its Energy Imbalance Market and other functions, while Bruce Rew, SPP vice president of operations, said the RTO had transitioned RC services before and could “make sure the lights stay on.”

The three-day meeting in Mesa, Ariz., addressed a dozen subjects including the reliance on natural gas for electricity generation in the West, cybersecurity for the grid, and customer-choice programs that are attracting large electricity loads away from investor-owned utilities.

On Thursday, wholesale market expansion in the West provoked a lively discussion among panelists, who debated the merits of CAISO leading a Western RTO — or whether an Eastern RTO such as PJM should tackle the job.

PJM has continued to express interest in developing an organized market in the Western Interconnection despite the downfall of Peak, its initial partner in the effort. (See Western Regionalization ‘No-brainer,’ PJM CEO Says.)

Petar Ristanovic, CAISO’s vice president of technology, said the ISO was most competent to form a Western RTO and questioned what “Eastern entities” could bring to the West at a time when California is trying to reach its goal of relying on 100% renewable and other zero-carbon energy sources by 2045. Eastern states, he said, are still trying to make the transition from coal to natural gas that California went through years ago.

Today, California is dealing with the “ongoing onslaught of intermittent renewables,” such as wind and solar, and looking to a future that includes the possibility of millions of electric vehicles charging at night. In addition to traditional morning and evening peak demand, “Who knows, we may get three peaks,” Ristanovic said.

Therese Hampton, Public Generating Pool | *LinkedIn*

Therese Hampton, executive director of the Pacific Northwest’s Public Generating Pool, an association of 10 consumer-owned electric utilities in Washington and Oregon, said CAISO had started as a single-state entity while other organized electric markets, including PJM, were formed as multistate organizations.

She said a Western RTO would need a governance structure that was independent of California’s political leaders, unlike CAISO, and large enough to include a diversity of interests and representatives from multiple states.

Western Interconnection Regional Advisory Body — Scott Miller, Western Power Trading Forum | *LinkedIn*

Her organization, she said, recently supported California’s AB 813. The bill, which failed to get a full floor vote in August, would have started the process of turning CAISO into a multistate entity by creating a governing board independent of the governor and legislature. (See Can Calif. Go All Green Without a Western RTO?)

Scott Miller, executive director of the Western Power Trading Forum, echoed her sentiments. Why, he asked, would Western states join a CAISO-led RTO if CAISO’s governance structure wasn’t altered, thus putting them “under the control of political elements in Sacramento”?

“You’d be foolish to do such a thing,” he said.

October 27, 2018

Maine PUC Move Poses Hurdle for NECEC

By Michael Kuser

Maine regulators on Friday suspended hearings on Central Maine Power’s proposal to bring Canadian hydropower to the New England grid via a 145-mile transmission line across the state.

The move by the Maine Public Utilities Commission poses a significant setback for the Avangrid subsidiary’s New England Clean Energy Connect (NECEC) project. During an analyst call Wednesday, Avangrid CEO James P. Torgerson had said NECEC was close to gaining a certificate of public convenience and necessity from Maine and “on track” to receive all permits and final approvals in 2019.

In granting the motion to suspend by NextEra Energy Resources (Docket No. 2017-00232), the PUC also scheduled an Oct. 31 conference to discuss the additional process and schedule to be adopted in the proceeding.

cmp central maine power necec hvdc transmission line — CMP’s $950 million New England Clean Energy Connect project now faces uncertain delays after the Maine PUC suspended hearings on Oct. 26. | *Avangrid*

In a joint letter to the PUC on Oct. 24, generator intervenors and others supporting the motion, including the Natural Resources Council of Maine (NRCM), said CMP “has only recently and very tardily produced certain highly relevant documents previously requested by NRCM and the generator intervenors. Furthermore, there remains a substantial risk that other highly relevant documents will not be produced by CMP and reviewed by the parties until after the currently scheduled hearing dates or even the current the briefing deadlines.”

Massachusetts awarded its 9.45-TWh clean energy solicitation to NECEC last winter after the original winner, Eversource Energy’s Northern Pass project, was rejected by siting officials in New Hampshire. (See Maine Lawmakers Signal Opposition to NECEC.)

NRCM attorney Sue Ely said in a statement that “the PUC’s decision to delay hearings on CMP’s proposed transmission line is a welcome acknowledgement that this process has been moving too fast for a thorough analysis of this massive, incredibly complex and flawed project. … At the 11th hour, the company finally submitted tens of thousands of pages of documents that are critical to understanding the climate and rate impacts of the proposed power line.”

Some of the submitted documents contradict statements in the record made by CMP, she said.

The NRCM and generators contend that Hydro-Quebec will divert hydropower from other markets, therefore providing no reduction and possibly even an increase in greenhouse gas emissions.

“CMP also asserts that NECEC will suppress generating capacity market prices to the benefit of Maine ratepayers, thus raising the question whether Hydro-Quebec has such capacity to sell and, if so, whether it would clear the ISO-NE” Forward Capacity Auctions, the intervenors said.

“Lastly, CMP claims that NECEC offers winter reliability by reducing the need for natural gas in New England during extreme weather conditions, ignoring the potential increase in natural gas consumption that would occur in New York and Ontario if Hydro-Quebec’s exports were simply diverted from those markets into New England,” they said.

October 26, 2018

CAISO’s CRR Market Yields Summer Surpluses

CAISO’s congestion revenue rights market showed unusual surpluses this summer because of higher congestion rents on Path 26, a major transmission line leading into Southern California.

In particular, there was a roughly $50 million surplus in August with sizable surpluses in July and September as well.

A CAISO forum addressed market performance and planning Wednesday. | *CAISO*

Deficits in the CRR market were far more typical than surpluses in 2017 and 2018. The atypical CRR revenue adequacy in August and September was one of the more notable revelations in CAISO’s Market Performance and Planning Forum on Wednesday.

“The main reason for the CRR surplus was congestion on Path 26,” said Rahul Kalaskar, the ISO’s manager of market validation analysis.

Kalaskar said there were high flows north to south this summer because of higher temperatures and gas prices. That led to higher energy prices and more expensive congestion pricing, boosting overall congestion revenues.

“The main reason for this high congestion is you had high gas prices, and there were some days where you had local outages,” Kalaskar said.

Western wildfires — and the threat of wildfires — created market uncertainty and contributed to higher prices, he said. Exceptional dispatches (out-of-market operations to ensure adequate generation) spiked in July and August in the ISO’s territory but diminished as the threat of fire and higher loads passed.

Other findings showed integrated forward market prices (which include day-ahead prices) in July and August spiking well above those in real time, but September saw a return of normal patterns. CAISO price correction events stayed high in August and September and Energy Imbalance Market-related price corrections surged in September too.

— Hudson Sangree

October 26, 2018

MISO, SPP Mulling Small Interregional Project Type

By Amanda Durish Cook

MISO and SPP could jointly create a smaller category of interregional transmission projects as early as next year to address costly congestion, the RTOs said Tuesday.

But the RTOs have not reached any decisions on the issue and will spend at least part of next year evaluating the effectiveness of a smaller project type to address historical market-to-market congestion, according to RTO staff speaking at an Oct. 23 MISO-SPP joint stakeholder meeting.

miso spp tmeps congestion — Davey Lopez | © *RTO Insider*

MISO Planning Adviser Davey Lopez said the projects could be any voltage and include tie-lines and interconnections or transmission projects wholly contained within the footprint of either RTO.

MISO said potential criteria could limit project costs to less than $20 million and require an in-service date of within four years of approval. The RTO is also suggesting that projects must pay for themselves within four years based on congestion savings. MISO is proposing to measure a project’s future congestion relief benefit against two years of historical congestion prior to the project study.

The criteria closely resemble those of MISO-PJM targeted market efficiency projects (TMEPs), created in 2017, which must cost less than $20 million, cover their costs within four years of service and be in service by the third summer peak from approval.

The RTOs cite high-priced congestion on market-to-market flowgates as the reason for creating a new smaller project type. Lopez said SPP’s Riverton-Neosho-Blackberry flowgate in Missouri may be ripe for such a project after costing MISO $18 million in congestion in 2017 and $9 million so far this year. Its congestion has been chronically expensive since the RTOs created it in 2017. (See “MISO M2M Payments to SPP Exceed $50M,” SPP Seams Steering Committee Briefs: May 2, 2018.)

“We’re getting close to $30 million on that particular flowgate in the last few years,” Lopez said.

He said new, smaller projects aimed at congestion relief are needed because the RTOs’ longer-term transmission planning process misses quicker transmission upgrade solutions.

But some stakeholders said congestion could be better solved by administrative means between the two RTOs rather than transmission buildout.

Lopez promised a “deeper dive” into the causes of congestion as part of the exploration into the project type. “As part of the process, it will cause MISO and SPP to look into the causes of congestion and if it will persist,” he said.

Early this year, Entergy argued that the MISO-SPP seam does not yet have a structured enough coordination process to develop smaller interregional projects. (See “Entergy Critical of MISO-SPP TMEP,” MISO, SPP Look to Ease Interregional Project Criteria.)

Other stakeholders called for more than two years of congestion data to justify creating a new project type, and staff from both RTOs said they will continue to collect flowgate data. Lopez said MISO plans to investigate individual flowgates and speak with transmission owners about the causes of congestion, much like it did in this year’s round of TMEPs.

MISO and PJM have so far recommended seven TMEPs, five of which received approval in 2017, with the other two up for approval this year. The projects are expected to cost under $25 million and reap about $132 million in benefits. (See MISO, PJM Endorsing 2 TMEPs for Year-end Approval.)

But some stakeholders contend that at least some of the market-to-market congestion issues can be traced to the RTOs’ separate interconnection procedures that don’t fully study how new generation projects will affect flowgates before granting grid access.

Stakeholders have called for increased coordination in generator interconnection procedures, but the RTOs say they already study for impacts on each other’s systems and facilities in their affected-system study process and that interconnection staff currently meet face-to-face twice a year and hold monthly conference calls.

October 26, 2018

Stakeholders Push Back Against SPP Retirement Changes

By Tom Kleckner

LITTLE ROCK, Ark. — SPP staff are dialing back an ambitious proposal to beef up the analysis behind generator retirements, promising to take “baby steps” in designing a “holistic process” in the face of stakeholder pushback.

SPP MMU generator retirements — SPP’s Casey Cathey | © *RTO Insider*

Casey Cathey, who will soon become SPP’s manager of reliability planning, recently promised the Strategic Planning Committee that staff would focus on the “technical aspects” of evaluating generator retirements, saying he wants the issue to be an official item before the Markets and Operations Policy Committee.

“We want to show some traction,” Cathey told the SPC on Oct. 18. “What we really want is an overall process, so people can rally around it and say, ‘This is what we really want to do.’”

Quite the opposite happened when Cathey shared his proposal with the MOPC and SPC earlier this month. Stakeholders reacted negatively to the potential use of reliability-must-run contracts and involving SPP’s Market Monitoring Unit in the evaluation process.

SPC Chair Mike Wise, who told RTO Insider he was surprised by the presentation, was emphatic as he complained about the potential use of RMRs and having to possibly pay other generators’ fixed costs.

“This is a real reach in strategy and dangerous from my point of view,” said Wise, Golden Spread Electric Cooperative’s senior vice president of regulatory and market strategy.

“This could blow this up into a massive issue,” American Electric Power’s Richard Ross said during the MOPC discussion. “I encourage you to walk before you run.”

Cathey took Ross’ advice, saying staff would rely on an in-house white paper to flesh out the RMR process by creating a business practice and revising the Tariff.

“We’re not going to address the RMR contracts or the settlement aspects of fixed costs,” Cathey said. “We’ll get down to the technical aspects of how we figure out this thing. We’ll back this up a little bit.”

The Board of Directors and Members Committee is not scheduled to resume the discussion during their Oct. 30 meeting.

Staff brought the issue before their governance groups, saying an aging fossil fleet has increased the possibility of retirements in SPP’s footprint. Noting that retirements are evaluated in multiple processes with limited coordination, staffers said they want to ensure the RTO has an opportunity to study retirements and any resulting mitigations before the actual retirement date.

SPP generation requirements statistics | *SPP*

More than 4.1 GW of generation has been retired in SPP’s footprint since 2010, but another 2.4 GW is scheduled through 2019, and staff said they are beginning to see ad hoc studies on other potential retirements. Cathey said 77 different resources have been manually committed for reliability purposes, with the longest commitment for 74 days.

“The only mechanism we have right now is to run the resource,” he said. “You guys would not be properly compensated. Any costs you would incur are not included in our Tariff.”

Best Practices

While staff are proposing planning and operations assessments for retiring units, it was the MMU’s evaluation that drew most of the stakeholder feedback. The Monitor wants to guard against market power issues, focusing its analysis on whether the retirement would result in a scarcity of generation capacity or amount to an uneconomic decision indicating physical withholding behavior.

Executive Director Keith Collins said the MMU will review both technical and economic justifications, looking at the unit’s age and possible state or federal environmental requirements that might force it to retire.

Collins also said the Monitor would intervene, if necessary, in retirement applications before regulatory bodies.

“I’m not comfortable with you testifying as an intervenor in our state cases,” Southwestern Public Service’s Bill Grant said. “I have a lot of concerns with what you’re proposing.”

“My expectations are it would be a dialogue. If there’s a difference of opinion, we would talk about concerns before reaching the point where we’re talking to the state or other regulatory bodies,” Collins responded. “What makes the Market Monitor unique is that we have a particular view no one else does, including the states. It gets to the concept of a structural market issue, where your resource could create market power.”

The MMU’s proposed analysis would rely on a going-forward cost that measures avoidable costs if a generator is retired or mothballed. Going-forward costs include mandatory capital expenditures due to any environmental, safety or reliability requirements, fixed operating and maintenance costs, and property taxes, if applicable.

The Monitor plans to use going-forward costs to help determine whether a generator’s net market revenues cover enough expenses to allow it to operate as long as it financially should.

“The two questions we would ask are, one, does [the retirement] create undue market power, and two, is the retirement economic?” Collins said. “If we have a serious enough issue that comes up as a part of this process, we’ll do what we have to do. We would be questioning the economics. The reality is, we’re reaching out to state commissions and talking about these issues already.”

Collins said the concept is nothing new for Monitors, noting NYISO has a similar process and uses expected net revenues to help determine whether to retire units or build new generation.

Cathey said the RTO would “hopefully” not identify any issues in the process and instead allow a resource to retire.

“We looked at every other ISO in the U.S. This has been crafted on best practices,” Cathey said. “If you’re coming to us to retire, you’ve largely done your own homework. We don’t want to be a barrier to that. If we find something because of the way we operate, we would execute an RMR.”

“My members, my board, [do not] want to pay for fixed costs of other generators in the market,” Wise said. “We don’t have a capacity market; we have a capacity requirement. I pay for my fixed costs; I pay for my fixed requirement. We don’t pay for each other’s fixed costs. This would be a real shift for SPP and problematic for many consumers.”

“Let’s be realistic,” Cathey said. “We’re not looking to circumvent any state authority. RMRs are really a last resort.”

Cathey said staff will continue discussions with several stakeholder groups and begin development of a revision request. SPP plans to return to the MOPC in January with draft revisions.