A bill that would allow CAISO’s transformation into an RTO passed another key California State Senate committee on Tuesday after supporters were grilled on how the legislation could compromise the state’s control over its energy sector.
The Senate Judiciary Committee voted 4-1 to advance AB 813 to the Appropriations Committee, typically the final step ahead of a full floor vote. Committee Chair Hannah-Beth Jackson (D) cast the sole vote in opposition.
Holden | California State Senate
Speaking to the committee, State Assemblyman Chris Holden (D), the bill’s sponsor, touted the potential benefits of regionalizing the ISO, a three-year effort pushed by Gov. Jerry Brown that has failed to gain traction in the legislature out of concerns about yielding control over the state’s grid and the loss of energy-related jobs.
“Expanding CAISO’s participating transmission owners will allow electricity to be treated more efficiently across the West through CAISO’s markets as more of [the West’s] 37 balancing authorities join, and without layering of multiple transmission charges,” Holden said. “This will facilitate transactions such as exporting unused renewable power, like solar, throughout the region and importing power in the evening to meet California’s steep ramp as the sun goes down.”
AB 813 passed the Assembly in June 2017 but failed to come up for a vote in the Senate and was carried over to the current session. The Senate’s Energy, Utilities and Communications Committee approved the bill June 19 on a 6-1 vote. (See Senate Committee Advances CAISO Regionalization Bill.)
Loss of Oversight?
Cavanagh | California State Senate
Testifying with Holden was Ralph Cavanagh, a senior attorney with the Natural Resource Defense Council’s Climate and Clean Energy Program, who told the senators that California is already part of an integrated grid with its Western neighbors. The NRDC has been a strong proponent of regionalization.
“We’re involved in multistate grid planning now; we’re just doing it very inefficiently and at an unnecessary cost,” Cavanagh said.
He explained that while the bill would be authorizing the transition of CAISO’s state-appointed Board of Governors to a fully independent board, it would not be establishing the terms under which regionalization would proceed.
That prompted Jackson to ask: “We would lose our oversight. Is that right?”
“You have the decision to make as whether to authorize a transition to a fully independent board, and then you can pull the utilities out, senator, if for some reason you’re dissatisfied with the way the system operates,” Cavanagh said.
Stern | California State Senate
“But there’s a dispute as to whether we could pull them out or not,” Jackson said, referring to lingering questions about the process for removing the state’s utilities from the new RTO after they’ve joined.
Sen. Henry Stern (D) asked whether FERC would have to approve a utility’s withdrawal from the RTO.
“It’s an administrative sign-off,” Holden said.
Anderson | California State Senate
Sen. Joel Anderson (R) expressed confusion about how the RTO’s board would be appointed and who would fill its seats.
“What the statute establishes is that a future board would be fully independent, would have no connection to any market participant,” Cavanagh said. “It would not be a board of political appointees. It would be a board of diverse experts, which is how the other boards of the independent system operators elsewhere in North America operate.”
“But where would they come from? So, they just walk in and say, ‘I’m on the board?’” Anderson asked.
Crowley | California State Senate
Stacey Crowley, CAISO vice president of regional and federal affairs, explained that the process for selecting the board would be determined through a “public stakeholder initiative.” She noted the ISO had held workshops in 2015 and 2016 with the California Energy Commission that resulted in a proposal to create a nominating committee consisting of stakeholder representatives.
“This is not finalized, and we would go through a public process to determine that,” Crowley said.
“So the answer’s, ‘We don’t know yet,’” Jackson said.
Exporting Power, Jobs
Stern sought more information about the potential loss of California jobs if CAISO’s expansion allowed out-of-state renewables to qualify as in-state — or Bucket 1 — resources under the state’s renewable portfolio standard.
Holden acknowledged that the International Brotherhood of Electrical Workers has expressed concern about the impact of regionalization on the RPS buckets.
“We put in language to address the buckets, and in doing so, we lost a good deal of support for this bill from out-of-state wind and from others,” Holden said. “To go as far as labor would like us to go would basically end the bill.”
Joseph | California State Senate
Representing the Coalition of California Utility Employees, Mark Joseph told the committee that the ISO’s own study shows regionalization would result in the loss of 10,500 California solar construction jobs each year from 2020 to 2030.
“What the ISO has told us is that it will assume all renewable generation outside of the current footprint will be assumed to be delivered into California and therefore qualify as Bucket 1, up to the physical constraints of the transmission system, which they have told us is 12,000 MW,” Joseph said. “So the next 12,000 MW of generation — you can kiss it goodbye.”
Moorlach | California State Senate
Sen. John Moorlach (R) asked whether load in other states was paying for California’s surplus solar energy, or whether the state’s generators were being charged to send it elsewhere.
“Senator, you’re identifying a problem with the current fragmentation, which is that sometimes we can’t use all the renewable energy that we’re producing in California and we can’t push it out to the rest of the West,” Cavanagh said. “It’s worse than paying — we have to turn off solar plants at the height of the sunshine, and one of the reasons to do [regionalization] is we’ll have access to a much bigger market. Having access to the market means more revenue for California.”
“Are you sure these states will cooperate?” Moorlach asked.
“Senator, basically they’re being offered a chance to reduce their costs,” Cavanagh said. “Almost everyone cooperates in order to do that.”
The bulk power system showed improved ability to rebound from severe storms last year while continuing to improve on most other reliability metrics, NERC said last week.
NERC cited two Category 5 events — the most severe — last year in hurricanes Harvey and Irma. “While wind and water damage were record setting, the restoration efforts and subsequent recovery times were improved from historical benchmarks,” NERC reported in its State of Reliability 2018 report.
Harvey damaged 85 substations and more than 850 transmission line structures in South Texas, resulting in 225 transmission line outages. But utilities’ use of amphibious vehicles, airboats and aerial drones allowed them to perform damage assessments even before roads were clear of flooding and storm debris, NERC noted.
Irma caused a record number of electric outages in Florida, with 4.45 million customers losing power in Florida Power & Light’s territory, up from 3.24 million from Hurricane Wilma in 2005. But system hardening between the two storms reduced restoration time to 10 days from 18, NERC said.
The report recommended NERC encourage increased use of mutual assistance programs and drones and increase information sharing by publishing event reports and conducting other outreach on the lessons learned from the storms.
The storm observations were among six findings in the NERC report. The organization also found that:
Inverter disconnects during transmission disturbances are becoming an emerging risk. It cited phase-to-phase faults on 220-kV and 500-kV lines during the Canyon 2 Fire east of Los Angeles last October, which resulted in the loss of more than 900 MW of solar PV in Southern California Edison’s territory. It also noted a 500-kV line fault during the 2016 Blue Cut Fire in San Luis Obispo County, Calif., that led to the loss of 1,000 MW of BPS-connected solar PV. “The majority of these inverter-based resources tripped offline due to sub-cycle transient overvoltages and instantaneous protective action at the inverters to disconnect them from the grid,” NERC said. (See Solar Inverter Problem Leads CAISO to Boost Reserves.)
Bulk power system transmission events resulting in loss of load. Load loss was lower in 2017 than in any year since 2002. (Note: Chart excludes Criteria 4, added in 2013.) | NERC
There was no loss of load because of cyber or physical security events, but “grid security, particularly cybersecurity, is an area where NERC and the industry must continually improve defenses as threats continue to rapidly evolve.” It said the industry should continue to push for security improvements through “technological hardening, growing a culture of security, and effective information exchange between entities, the E-ISAC [Electricity Information Sharing and Analysis Center] and trusted partner organizations.” It urged continuing to improve critical infrastructure protection standards and giving “particular attention” to supply chain risks. It called for expanding participation in the E-ISAC by lowering the cost of participation and seeking Department of Energy funding.
Transmission outages resulting from failed protection system equipment, AC substation equipment (e.g., breakers, transformers) and human error — historically among the largest causes of transmission outages — all decreased over the last five years. “However, these areas remain major contributors to transmission outage severity and will remain areas of focus,” NERC said.
Annual frequencies of automatic outages of 200-kV+ transformers for 2013–2017. Green arrows indicate overall improvement. | NERC
Frequency response performance remained acceptable but varied among the four interconnections. The Eastern, Texas and Quebec Interconnections “trended ‘improving’ during the arresting period,” while the Western and Texas Interconnections “experienced statistically significant improvement during the stabilizing period” for 2013-2017. No interconnection fell below its interconnection frequency response obligation (IFRO).
Protection systems misoperations rates declined for the fifth consecutive year but remain high priorities. The overall NERC misoperation rate fell to 7.1% in 2017 from 8.3% in 2016, while the three largest causes of misoperations remained the same year-over-year: incorrect settings/logic/design errors, relay failure/malfunctions and communication failures. “Protection system misoperations exacerbate the impact of transmission outages, thereby increasing their severity,” NERC said.
The report said the only metric “indicating cause for concern” is planning reserve margins, with all regions except for the Texas Regional Entity projecting sufficient reserves for the next five years.
It cited ERCOT’s preliminary summer seasonal assessment of resource adequacy (SARA), which reported that operational tools such as load management and distribution voltage reductions could be needed to maintain sufficient operating reserves.
WILMINGTON, Del. — Members at last week’s Markets and Reliability Committee meeting approved PJM’s proposed revisions to adjust the methodology for developing the capacity model for winter peak weeks, despite strong dissent from stakeholders concerned about how the modifications might affect capacity procurement.
PJM’s Patricio Rocha-Garrido said the theoretical approach used by the RTO’s PRISM modeling software to derive aggregate outage levels during the winter peak week is not representative of actual aggregate historical outage levels because it relies on historical outage data at the individual unit level rather than the aggregate level.
To “better account for the risk caused by the volume of concurrent [outages] observed historically during this week,” the changes to Manual 20 create a “cumulative capacity outage probability table” using the historical forced outage data aggregated across the RTO. Planned outages will be based on the average historical planned outages aggregated across the RTO. (See “Winter Modeling Changes,” PJM PC/TEAC Briefs: May 3, 2018.)
However, several stakeholders expressed concern that the changes would reduce the potential for using seasonal resources.
“Given the summer-dominated loss-of-load-expectation, it is my takeaway that this change isn’t really going to have a measurable impact on the installed reserve margin,” Old Dominion Electric Cooperative’s Mike Cocco said. “However, if FERC orders changes to PJM’s annual capacity construct in response to several FERC [Federal Power Act Section] 206 complaints, then these Manual 20 changes potentially would have an effect by limiting the ability of seasonal capacity market resources to contribute. I would say there’s been a fundamental design change in [Capacity Performance], and I wouldn’t personally put so much focus on historical data but be looking at developing projections based on the design changes.”
“The challenge is making assumptions for the future; the only anchor point we have is the past,” Rocha-Garrido said.
“I believe that the assumption that planned outages is not a PJM-controllable level is not correct. It implies that PJM does not have control of planned outages,” CPower’s Bruce Campbell said.
He explained that lowering the expectations of units’ availability in the winter increases the overall procurement of annual resources, which means there would be less opportunity for seasonal resources to fill in the difference between the baseline amount of always-available resources and seasonal peak demands.
Carl Johnson, who represents the PJM Public Power Coalition, said he would be requesting a review for next year’s analysis of the model’s sensitivities and incorporating a different set of assumptions about how CP resources should be operating.
Some generation owners defended the revisions as necessary.
“We do need to do this. We cannot ignore it,” said Calpine’s David “Scarp” Scarpignato, who said he’s seen windmills in Texas stop working when the weather gets too cold.
Despite the concerns, stakeholders overwhelmingly endorsed the changes with 4.56 in favor and 0.44 opposed in a sector-weighted vote. The threshold for endorsement was 3.33.
The vote came on the same day PJM released a study analyzing the first year of partial implementation of CP in delivery year 2016/17 compared to the previous 2015/16 delivery year, which found that generator performance has improved since implementing CP even though the model has not been extensively tested by the extreme weather it was designed to address.
Unrelated to the MRC, Robbie Orvis of the clean energy consulting firm Energy Innovation, tweeted his own takeaways from the analysis. He noted the report’s acknowledgement of poor performance from coal-fired units during the January cold snap known as the “bomb cyclone.”
“Coal and oil Capacity Performance resources did not perform as well as their non-Capacity Performance counterparts during the cold snap. Understanding the source of this issue requires some additional analysis,” the report said. “Both coal and oil Capacity Performance resources showed no improvement in forced outage rates from the polar vortex to the cold snap.”
PJM said in the report that owners of coal-fired resources are making “major equipment overhauls and upgrades to ensure the longevity of these resources,” winterizing equipment to prevent icing and freezing, and “performing routine testing and inspections to ensure the quality of their equipment.”
Trust in Short Supply
A routine agenda item about cleaning up PJM’s governing documents turned into an impromptu stakeholder referendum on the RTO’s trustworthiness when stakeholders refused staff’s request for authority to file similarly innocuous revisions for FERC approval without stakeholder endorsement.
Members endorsed revisions to the Tariff to clarify cross references with the Operating Agreement and Reliability Assurance Agreement, but they drew the line when staff asked for stakeholders’ consent to file such non-substantive revisions in the future without having to bring them for an endorsement vote. Members allowed that staff wouldn’t need to make a presentation on the revisions but demanded they be on the consent agenda so stakeholders can review the changes.
American Municipal Power’s Steve Lieberman repeated his concerns that PJM was not affording the members sufficient time to review proposed changes to the governing documents and was shocked that the RTO’s response to that criticism was to seek the approval to make future non-substantive changes without prior member approval. Lieberman called into question whether the changes would be deemed non-substantive from a stakeholder perspective even if considered as such by PJM.
“Accidents have been made in the past, and sometimes we catch them for you,” Johnson added.
The reaction prompted Vince Duane, PJM’s general counsel, to weigh in uncharacteristically, saying he was “disappointed” given that members often complain they are overwhelmed by the slow pace of the stakeholder process and the extreme time commitments necessary to meaningfully engage in it.
“If you can’t trust us to make clerical changes … we’ve got a long way to go, and I don’t like the future at all,” he said.
Variable Operations & Maintenance Packages
Voting on whether to allow units to add certain variable costs in their cost-based offers derailed after American Electric Power asked to make several friendly amendments to its own proposal.
The proposed changes were a combination of proposals made by AEP and PJM that would allow units to include variable maintenance costs in cost-based energy offers as part of variable operations and maintenance (VOM). The package was endorsed at the Market Implementation Committee earlier this month. (See “Accounting for Maintenance Costs in Cost-Based Offers,” PJM Market Implementation Committee Briefs: June 6, 2018.)
The revisions appeared to be an effort to ensure the proposal is the first option to be voted on related to the matter. With the revisions, the proposal much more closely resembled a proposal brought for consideration at the meeting by Rockland Electric Co., which had previously expressed interest in a largely unpopular proposal from the Independent Market Monitor that eliminated all maintenance costs from energy offers. While RECO’s proposal was not as strict, it eliminated some double counting that the PJM/AEP proposal overlooked.
Because the proposal had been endorsed by the lower committee, AEP was no longer allowed to revise it, so it had to offer “friendly amendments” that required endorsement from the membership to be included in the proposal. When some stakeholders balked at being asked to consider last-minute amendments, others suggested the vote be deferred to a later meeting to give everyone a chance to review the changes.
PJM pushed members to commit to voting on the changes at the July MRC, explaining that the outcome affects the quadrennial review of the variable resource requirement curve in capacity auctions, which must be finalized in August. NRG Energy’s Neal Fitch questioned that argument, saying the parameters are cemented in August but the actual calculations don’t happen until January.
“I remain unconvinced that they’re tied together,” he said.
AMP’s Ed Tatum echoed that, saying the MRC “does have the ability to make changes to VOM as it sees fit,” irrespective of any “urgency” PJM desires to put on the timeline.
Stakeholders eventually agreed to defer the vote to the August MRC meeting, maintaining the current voting sequence for the proposals and declining to remand it to the MIC.
Waiting to make the revisions until after the quadrennial review is finalized will mean that these variable costs continue to be included in the cost of new entry calculation that is part of the foundation of PJM’s capacity auction for the next four years. Any subsequent changes that would include them in the VOM component of energy offers would mean that generators could be paid for those costs in both the energy and capacity markets until the VRR can be revised again in four years.
Credit and Default
Staff announced two member issues that will impact market participant accounts.
On Thursday, PJM declared GreenHat Energy in payment default for failing to pay its weekly invoice from June 5 of $1.2 million. The RTO will liquidate the financial transmission rights portfolio GreenHat defaulted on by bidding the balance of the 2018/19 positions into the auction that opens on July 16. Any remaining positions that aren’t liquidated there will be offered into the Aug. 16 auction.
Positions for 2019/20 and 2020/21 will be offered into the long-term FTR auction on Sept. 4. Those that aren’t liquidated will be offered into the Dec. 3 long-term auction.
The net loss or gain on these liquidated positions will be added to the actual unpaid net charges or net credits that accumulate on these positions prior to being liquidated and will be included in the total default amount that will be allocated to PJM’s members. Staff said they can’t estimate the amount of the default allocation assessment but believe it is likely to be “in the tens of millions of dollars.”
PJM will calculate each member’s estimated default allocation assessment percentage that will be applicable to GreenHat’s default after the June 2018 month-end invoices are issued on July 9, which staff hope to post by July 13. Staff said they will pursue “reasonable avenues of collection of GreenHat’s default amounts” and that any money recovered would be allocated back to members that are charged a default allocation.
Staff stressed that they have made revisions to the credit policy that they estimated would have created a $60 million credit requirement for GreenHat to acquire its portfolio had they been in place at the time. Stakeholders are also considering additional revisions to the credit policy. (See “DC Energy FTR Credit Policy Complaint to FERC,” PJM Market Implementation Committee Briefs: June 6, 2018.)
Staff also outlined a plan for allocating funds disgorged by PSEG Energy Resources and Trade as part of a FERC enforcement settlement. The more than $31 million — $26,905,736 plus interest of $4,494,264 — will be allocated as a negative operating reserve charge to market participants that received operating reserve charges during the period covered by the settlement. (See PSEG to Pay $39.4M to Settle FERC Investigation.)
The allocations will be made using a formula “consistent with the methodology utilized to allocate the original PSEG operating reserve credits” and staff hope to have the allocations credited by either June or July.
Stakeholder Process Revisions
During the Members Committee meeting, Chairman Mike Borgatti of Gabel Associates detailed several different initiatives to consider revising the stakeholder process, which had been a source of confusion.
First, he outlined an “academic” exercise being performed by Christina Simeone at the University of Pennsylvania’s Kleinman Center for Energy Policy. Earlier last week, Simeone sent a letter to the committee explaining that her Aug. 2 workshop is outside the stakeholder process and had been planned prior to the announcement at May’s committee meeting of similar initiatives within the stakeholder process. Simeone said she invited approximately 20 undisclosed PJM stakeholders that formed a “representative sample” of the membership and that “increasing the number of invitees risks distorting the representative sample and inhibiting in-depth group dialogue.” The chosen few will discuss “data analysis pertaining to PJM governance trends,” receive a presentation on the topic from Pennsylvania State University researchers and consider “a mock FERC-proposed rule on governance.”
Borgatti offered no endorsement of the workshop.
“I don’t control what Christina does. PJM doesn’t. I didn’t tell her I think this is a good idea,” he said. “In my opinion, this is exactly what it states to be: It’s an academic exercise.”
He assured members that the workshop wouldn’t be used to redesign the stakeholder process without their involvement and input.
PJM CEO Andy Ott echoed that view.
“I don’t believe her scholarship has any direct impact on what we’re going to do here,” he said.
The initiative within PJM will begin with a half-day discussion in late July to consider “target-rich opportunities to improve our process,” Borgatti said. He said the goal won’t be to fix any problems identified, but rather to decide whether they’re worth pursuing. The goal of the July session is to develop a recommended path forward that could be voted on at a future MC meeting.
Ott said he is aware of concerns about the stakeholder process and a “resignation” that nothing can be done to improve it.
“I think that feeling may not be the best situation,” he said.
“On the thorny issues, I think we do have opportunities to do better,” Tatum said, adding that collaboration will require opponents to not “immediately dig in their heels” and instead move forward without “preconceived notions.”
Stakeholders Approve Manual, Operational Changes
Stakeholders endorsed by acclamation several manual revisions and other operational changes:
Manual 6: Changes to address replacing terminated nodes that are part of FTR paths. These are changes to the manual only, so they will go into effect without a vote at the MC. (See “Modeling Node Changes,” PJM Market Implementation Committee Briefs: May 2, 2018.)
Revisions to the confidentiality provisions of the OA to specify that PJM may share member confidential information with reliability entities in addition to NERC. (See “Stakeholders Approve Changes to Manuals, Operations,” PJM Markets and Reliability Committee Briefs: May 24, 2018.)
Changes to the long-term FTR auction construct to correct current processes that allow participants to obtain the rights to congestion on transmission paths before the owners of the underlying auction revenue rights. The Monitor reiterated its opinion that the revisions are positive but don’t go far enough. (See “Long-term FTRs Undercut Annual FTRs,” PJM Market Implementation Committee Briefs: June 6, 2018.)
WILMINGTON, Del. — A controversial proposal to bring cost-containment measures into PJM’s transmission planning cleared its final hurdle in the stakeholder process last week despite a late attempt to block it by CEO Andy Ott.
The proposed Operating Agreement changes have been among the most contentious in recent memory. Originally developed by LS Power, the proposal gained sponsorship from several consumer advocates and PJM’s Independent Market Monitor, withstanding strong opposition from transmission owners. (See Cost Containment Coming to PJM Transmission Bids.)
It was queued up for one final endorsement vote at last week’s Members Committee meeting when Ott took the unusual step of addressing the membership to seek a delay on the vote. “I think this might be the first time I’ve ever done this,” he said.
Ott used his platform to make one final plea to stakeholders that his staff can’t handle much more.
“I think it risks the [Regional Transmission Expansion Plan] getting so complex that it becomes even more burdensome than it is today,” he said. “If you all would just take a step back. My planning staff is not infinite. … We’ll deploy our resources and do the best we can. But I think it’s unreasonable to expect that the next day we should make the baseline process more transparent. … Certainly, we can do things over time, but if you’re saying do things quickly … we cannot do all of this in the same time frame.”
He argued there are other areas in which increased efficiency would provide greater savings than the transmission cost caps. He suggested the Liaison Committee consider the issue.
“I don’t think there has been constructive engagement from all stakeholders,” he said. “I think there’s room to have more constructive engagement.”
Several of the proposal’s supporters responded to Ott’s comments. American Municipal Power’s Ed Tatum said Ott made “good observations” about the need for transparency for end-of-life projects in the RTEP process — a discussion that has been ongoing in the Transmission Replacement Processes Senior Task Force since March 2016. But, he added, “we are not proposing that PJM do the impossible.” He asked that staff “facilitate those [task force] meetings.”
“We think we’re asking for things TOs have already done to justify these discretionary projects to their management; no more, no less,” he said.
“It’s precisely because PJM and CAISO are national leaders on Order 1000 that it’s extremely important to get this right,” said LS Power’s Sharon Segner, who has shepherded the proposal from the beginning.
Susan Bruce, representing the PJM Industrial Customer Coalition, said even a 1% improvement would be “tremendous” and that the comparisons of financial significance might change as more projects become competitively bid instead of awarded to incumbent TOs.
“This will not stop us from demanding improvement in all spheres,” she said. “If I went back to my members and said [the cost-containment proposal] was deferred, they would be very disappointed in that.”
If PJM needs more staff to complete the intent of the proposal, “that’s an investment they’re willing to pay,” she said of her members.
Dominion Energy and Exelon requested and received approval for a friendly amendment to forbid PJM from requiring bidders to include cost-containment measures in their bids. That was immediately followed by a point of order challenge from PPL’s Frank “Chip” Richardson, who noted a section in the OA that required input from the Board of Managers before the MC can vote. He noted that the board hasn’t responded to a letter TOs sent to it more than a month ago to block action on the proposal. Richardson’s motion initiated a parliamentary process requiring that MC Chair Mike Borgatti, of Gabel Associates, determine whether the vote could proceed.
Ott said the board has seen the letter but hasn’t deliberated on it. Because it was sent right after the board held one of its bimonthly meetings, Ott considered whether it was of enough consequence to reconvene the board to discuss it. He decided it was not, he said.
Left to right at the PJM Members Committee meeting June 21, 2018: Chris O’Hara, PJM; Dave Anders, PJM; Mike Borgatti, Gabel Assocs; Andy Ott, PJM
Chris O’Hara, PJM’s legal counsel for the MC, said the board has been briefed on the topic and provided comments to the RTO. Board members attending the MC meeting in addition to Ott were Mark Takahashi and Dean Oskvig. O’Hara said the OA provision noted by Richardson “should not provide a legal impediment to stop the vote today” given his interpretation of the OA language and PJM’s practice since its inception of holding MC votes without the board weighing in beforehand. However, he said the final call was up to Borgatti.
“Don’t worry; the bus tires don’t hurt at all,” Borgatti responded.
Greg Poulos, executive director of the Consumer Advocates of the PJM States, said he was “disappointed” that Richardson waited until the last second to unveil his challenge and suggested that TOs and PJM were playing a “game.”
“I don’t think the conversation is advanced by suggesting there was a surprise,” O’Hara said.
“What I can offer you is that [if you think] this was a backdoor dealing, it was not. This is a real-time issue,” Borgatti said. “I have been advised that Roberts Rules require me to render a decision before we continue the meeting.”
Bob O’Connell of Panda Power Funds announced he would challenge Borgatti’s ruling either way to force a membership vote on the issue and relieve Borgatti of the weight of the decision.
“I don’t believe I or any other MC chair should be asked to dictate when the MC can vote on an issue. This is a very uncomfortable position to be in,” Borgatti acknowledged, before siding with O’Hara’s opinion and allowing the vote to proceed.
O’Connell challenged the ruling as promised, and it went to a vote, requiring a simple majority. It was taken as a sector-weighted vote, which meant it had a 2.5 threshold out of 5. It passed easily with 4.5.
The subsequent vote on the proposal also received overwhelming support with 4.28 in favor. The total was later adjusted to 4.17 with votes that hadn’t been recorded at the time, but it was still well above the 3.33 threshold necessary for endorsement.
The RTO must now work with the Monitor to develop the comparative frameworks, the first of which on construction costs is expected to be introduced in September and endorsed at the Markets and Reliability Committee on Dec. 6. It would be effective for long-term transmission proposal submission window, which runs from November to March. The second framework comparing return on equity and capital structures is expected by May 1, 2019, to be effective for all submission windows going forward.
As you may have read, the nuclear industry is promoting a new “study” by the consultancy ICF, purporting to show that failure to bail out nuclear plants would cause widespread blackouts in the Mid-Atlantic region of PJM.[1]
There are glaring fatal flaws. Let me offer just 10 (please email me with stuff I missed):
The Nuclear Energy Institute — not ICF — came up with the study assumptions, thus giving us the classic GIGO — garbage in, garbage out — problem. The study admits this: “NEI specified the scenarios for the analysis and the key assumptions for those scenarios” (page 1). So when you read below about all the unrealistic scenarios and assumptions, please keep in mind that they are the self-serving creations of the nuclear industry.
The study assumes that all the nuclear units (13 GW) in the PJM Mid-Atlantic region will retire if not bailed out (see App. A). No analysis supports this assumption. It is directly contradicted by PJM’s Independent Market Monitor, which has demonstrated, using NEI’s own cost data, that all these nuclear units except one cover their going-forward costs.[2] In other words, instead of 13 GW retiring, 1 GW retires.
The study assumes that retiring nuclear capacity is not fully replaced by other capacity resources, such that PJM overall suffers a capacity reduction of 10 GW (page 36, going from 152 GW to 142 GW). No analysis supports this assumption. It is directly contradicted by experience with PJM’s capacity market, which is designed to, and does, replace retiring capacity with new, more reliable capacity. In the last capacity auction, 67 GW cleared in the PJM Mid-Atlantic region, and there were another 6 GW that offered but didn’t clear — meaning they are available at a higher price if, for example, more nuclear units were to retire (which they won’t, as discussed in #2 above).[3]
The study assumes two gas pipeline incidents happen to occur at the same time, happen to occur during the highest winter demands in history and happen to affect only gas-fired generation (no other pipeline customers), causing the sudden loss of 13 GW of generation, and the outage persists for 60 days. Please note how absurd this scenario is: (a) two incredibly rare incidents happen at the same time; (b) during the highest winter demands in history; (c) only gas-fired generation is curtailed (despite the study’s premise that this curtailment is causing power blackouts); and (d) nothing is restored for 60 days (again, despite the study’s premise that there are blackouts). There is no legitimate basis for these wild assumptions, or for cobbling them together.
The study assumes that all demand response resources fail to perform. No analysis supports this assumption. It is simply buried in a footnote (fn. 22) questioning whether DR would perform, despite enormous penalties for failure to do so.
The study assumes that no oil inventories at dual-fuel gas generators could be restocked over a 60-day period. There is a half-hearted effort to support this assumption with statements about how difficult it might be (page 33). Given enormous penalties for failure to perform, generators would move heaven and earth to resume gas delivery and to restock oil inventories. And, of course, if oil inventory levels are problematic, adding a few more oil tanks would be an infinitesimal cost relative to the subsidies demanded by the nuclear industry.
The study assumes no gas pipeline expansion projects are built, despite the many projects underway like Transco’s Atlantic Sunrise project (1.7 Bcfd) and the PennEast Pipeline (1.1 Bcfd).[4] The study makes an argument that increased pipeline capacity somehow doesn’t increase pipeline capacity (pages 34-35).
The study implicitly assumes zero capability to transmit electric generation from the western and southern regions of PJM into the Mid-Atlantic region. There are 4 GW of such capability in the summer, and more in the winter when circuit ratings are higher because of lower temperatures.
The study implicitly assumes PJM has no tools to mitigate a temporary generation shortfall other than customer outages. No analysis supports this assumption. In a potential emergency, PJM has tools like maximum emergency generation, load management, imports, voluntary conservation and voltage reduction.[5]
I saved the best for last. The nuclear industry is claiming that without a bailout there will be hundreds of hours of blackouts. You would think that if this claim had a shred of credibility that customers facing this prospect would be screaming for a nuclear bailout. Instead, customers are diametrically opposed.[6] Why? Maybe it’s #1 through 9, above.
Let me give you a realistic take on the PJM Mid-Atlantic region. Seventy-three gigawatts offered in the last capacity auction, and there is a conservative 4 GW of transfer capability from western and southern regions of PJM, for a total of 77 GW of resources. The PJM Monitor says 1 GW of nuclear is expected to retire, for 76 GW of resources. Now let’s take the totally unrealistic scenario (see #4 above) of suddenly losing 13 GW of gas-fired generation at the worst possible time. That would leave us with 63 GW, 13 GW more than ICF’s historic peak-hour demand of 50 GW depicted on Figure 6.4 of its study. And that’s before considering pipeline expansion projects, PJM’s emergency tools, etc.
Case specifications and findings for an ICF study commissioned by the Nuclear Energy Institute. The study warns that major gas pipeline outages could result in extended blackouts in PJM if the region continues to lose nuclear generation. Columnist Steve Huntoon says the study’s assumptions are unrealistic. | ICF, Nuclear Energy Institute
There are plenty of things in this world to worry about. Blackouts from not bailing out nuclear plants? No, those pigs aren’t flying.
Use-limited resources will be allowed to attach opportunity cost adders to their bids in CAISO’s energy market under a proposal approved by FERC on Thursday.
The change was the only significant part of a package of Tariff changes — proposed in March in phase 3 of CAISO’s Commitment Costs Enhancements initiative — that the commission approved (ER18-1169). FERC rejected the ISO’s proposals to alter the information generators are required to submit to its Master File (a database of all resources participating in its markets and their characteristics) and to remove all ramp rates as components of daily bids.
The initiative is separate from, but related to, CAISO’s Commitment Costs and Default Energy Bid Enhancements; both involve better reflecting resources’ costs in their offers, thus improving market efficiency.
Use-limited resources are those that have limits on the number of start-ups and runtime hours, or on energy output, over a certain period. Small hydro facilities, for example, are automatically classified as use-limited resources by CAISO, while other resources must submit a request that includes certain data to be classified.
The 3-MW New Hogan Dam in Calaveras County, Calif. Small hydro facilities such as Hogan are automatically classified by CAISO as use-limited resources. | U.S. Army Corps of Engineers
But because the ISO’s market optimization software makes unit commitment decisions only one day ahead, it cannot take into account that dispatching a use-limited resource may hinder its ability to run later. As a result, the resources’ opportunity costs are not reflected in their offers.
CAISO said the changes are necessary because of the increase of variable energy resources on its system, making supply more unpredictable and use-limited resources necessary at any given time.
The opportunity cost adder that FERC approved “will capture the value of a use-limited resource’s limited availability so that the use limitation is not reached until the end of the monthly or annual use limitation period and the resource may be dispatched when it is valued most,” it said.
As part of the changes, effective Nov. 1, CAISO will all but eliminate one of the two methodologies under which use-limited resources are able to bid — the registered cost method. Under that approach, resources can elect to submit fixed commitment costs on a 30-day basis. CAISO told the commission that most use-limited resources use this method because it better reflects their opportunity costs and limitations, but because the costs are fixed, it cannot reflect variables such as the daily fluctuations of natural gas prices.
Use-limited resources will be required to use the proxy cost method, in which resources submit bids based on their start-up, minimum load and transition costs at a 125% cap. Resources less than a year old may still employ registered costs because, CAISO said, it needs a sufficient price history to calculate the adder.
“We find that the proposal is an improvement over the existing commitment cost recovery mechanism because the market optimization tool will be able to dispatch use-limited resources when they are most needed,” FERC said.
However, FERC agreed with NRG Energy’s protest of CAISO’s method for calculating opportunity costs. The commission ordered CAISO to submit within 30 days more details on its calculations as part of its Tariff revisions; the ISO had proposed to include them in its business practice manual.
The Master File
FERC rejected CAISO’s proposal to replace resources’ listed physical characteristics in the Master File with “design capability values,” information that reflects their capabilities when operating at maximum sustainable performance over a minimum run time. The ISO also proposed to allow scheduling coordinators to register “market values,” such as maximum daily start-ups, maximum daily number of transitions, operational ramp rates, operating reserve ramp rates and regulation ramp rates. CAISO said this would allow the market to consider, for example, that “a resource may be designed to start up five times a day, but starting it up more than twice a day could dramatically increase wear and tear and increase the probability of catastrophic failure.”
“We are concerned that, outside of exceptional dispatch, CAISO’s proposal does not include a mechanism to ensure that market values cannot be used to undermine the market’s economic resource dispatch when transmission constraints or other supply limitations create opportunities for the exercise of market power,” FERC said.
Using the market values instead of the design capability values may reduce available capacity, the commission said. “Permitting market participants to make less capacity available to the market raises the potential for physical withholding, which can affect dispatch and increase energy and ancillary service prices that may benefit the market participants’ affiliated resources. At times of tight supply conditions, it is more likely that withholding capacity could be a profitable action.” FERC also noted that CAISO proposed no new market mitigation measures to address this concern, and that its existing measures would be insufficient to handle the change.
Because CAISO predicated its proposal to remove ramp rates from daily bids on the changes to the Master File, FERC summarily rejected this as well. “If we were to accept the ramp rate proposal and reject the Master File proposal, scheduling coordinators would lose the flexibility currently afforded to them by the existing daily bid-in ramp rate functionality,” it said.
PJM has again moved to dismiss Potomac Economics’ complaint against its pseudo-tie construct, citing a recent court ruling that describes a limited role of RTO/ISO market monitors in legal proceedings.
MISO’s Independent Market Monitor filed a Section 206 complaint in April 2017 asking FERC to eliminate PJM’s existing pseudo-tie definition, claiming that the increasing use of pseudo-ties degrades reliability, hampers efficient dispatch and raises costs. (See Pseudo-Tie Feud Rises as Patton, NYISO Protest PJM Proposal.)
PJM is pointing to a June 15 D.C. Circuit Court of Appeals ruling that confirms FERC’s 2017 decision that Old Dominion Electric Cooperative cannot recover its operating costs incurred in excess of its filed rate during 2014’s polar vortex. The commission said such a move would constitute retroactive ratemaking (16-1111).
In its June 19 filing in the pseudo-tie complaint (EL17-62), PJM said the ODEC decision importantly included a denial of its own Independent Market Monitor’s motion to intervene. PJM said the court’s opinion shows that “a market monitor does not have standing to intervene in a proceeding on judicial review of commission orders” and that the case is “instructive” in its motion to dismiss the MISO Monitor’s complaint. PJM asked FERC to consider the precedent in its upcoming decision.
The court said that the PJM Monitor “has no legally cognizable interest” in the ODEC case and denied its motion to intervene.
The Monitor’s role, the court said, “is much in the nature of an auditor — it is largely confined to observing the market’s operations and then offering recommendations to PJM. The Monitor has no authority to enforce or to interpret the PJM [Operating] Agreement or Tariff, to direct changes in the market’s operations, to alter market rules or to police individual members’ compliance.”
The court added that “other than making some regulatory filings,” the Monitor is confined to informing FERC, other government agencies and RTO participating members “if it disagrees with PJM’s implementation of the market rules or operation of the PJM market.”
“Beyond its contractually assigned tasks, the Monitor has no independent legal interest of its own in the PJM markets,” the court determined. It characterized the PJM Monitor as “an outside observer hired to study and report objectively on the market’s operations … not a creature of statute, and operates under no affirmative duty imposed by public law.”
PJM originally asked FERC to dismiss the complaint last May on the grounds that Potomac “lacks the capacity by statute, order, contract or tariff to bring such a complaint in its role as an independent market monitor against PJM.”
The California Public Utilities Commission on Thursday denied a request to build a new natural gas pipeline after questioning Southern California Gas about why other major pipelines have been sitting out of service.
The commission rejected an application by San Diego Gas & Electric and SoCalGas to build a $639 million pipeline that would have stretched from Rainbow Station to Miramar, replacing the current Line 1600 built in 1949.
“The CPUC determined that the utilities’ most recent natural gas supply forecast and the CPUC’s reliability standard for gas planning do not demonstrate that there is a need for the proposed pipeline,” the commission said as it approved its proposed decision.
The commission directed SDG&E and SoCalGas to pursue other supply options for smaller amounts and for shorter periods of time than would have been provided by the proposed pipeline near San Diego. It also directed the utilities to ensure the safe continuing operation of Line 1600.
The applicants had said the sole purpose of the line was not to meet any short-term supply deficits but for emergency situations such as unplanned outages on Line 3010 or at the Moreno substation. They had also proposed derating Line 1600 from transmission service to distribution service.
The commission last week asked SoCalGas why it had not restored to service two pipelines, Line 3000 and Line 235-2. Line 3000 went out of service on July 29, 2016, and Line 235-2 ruptured and exploded on Oct. 1, 2017.
“Though such outages are to be expected periodically, the significant volumes associated with these facilities and the fact they have been out for lengthy periods during peak demand periods — nearly two years for one and over eight months for another — are causes for concern,” CPUC Energy Division Director Edward Randolph told SoCalGas President Bret Lane in a June 18 letter. Randolph questioned whether rates should be reduced if the lines are not providing benefits to ratepayers.
The Energy Division also issued a new report that cited the pipeline outages as a main reason it is recommending an increase in the allowed storage level at the Aliso Canyon facility from 24.6 Bcf to 34 Bcf. Comments on the proposal were due Monday.
SPP staff told stakeholders last week that the RTO will not conduct a joint transmission planning study with Associated Electric Cooperative Inc. this year, saying they were unable to find any “reasonable projects on either side of line.”
“The next shot will be in 2020,” said SPP’s Clint Savoy during a June 21 conference call of the SPP-AECI Interregional Planning Stakeholder Advisory Committee. “We will have plenty of time to get our hands around what we want to look at in the next study.”
A needs assessment along the seams identified more than 200 violations, but most were eliminated through model corrections or system adjustments, or because they were invalid contingencies. Most AECI violations were voltage issues, SPP said.
The RTO is proposing that one identified project, a 161-kV transmission line, be included in its 2018 near-term assessment.
A final report will be published at the end of July.
SPP and AECI have been performing joint studies every other year since 2010, as outlined in their joint operating agreement. Their only success was in 2016, when their study identified two projects near Springfield, Mo.: a new 345/161-kV transformer at AECI’s Morgan Substation and uprate to an existing 161-kV Morgan-to-Brookline transmission line, and installation of a new 345-kV 50-MVAR reactor at City Utilities of Springfield’s existing Brookline substation.
New Madrid Power Plant transmission lines | AECI
SPP would have been responsible for $17.1 million of the projects’ estimated $18.75 million cost, but FERC last year rejected the proposed cost allocation for both projects. The Brookline reactor project is now being addressed through the RTO’s regional planning process as part of the 2018 near-term assessment, and the Morgan transformer project is being prepared for another filing at FERC.
| SWEC
AECI, based in Springfield, is owned by and provides wholesale power to six regional generation and transmission cooperatives.
RENSSELAER, N.Y. — NYISO power prices dropped in May but are up 37% year-to-date, Nicole Bouchez, ISO principal economist, told the Business Issues Committee on Wednesday.
Prices averaged $28.78/MWh in May, lower than $35/MWh in April and $31.74/MWh the same month a year ago.
Year-to-date monthly energy prices averaged $50.20/MWh through May, up from $36.54/MWh a year earlier. May’s average sendout was 397 GWh/day, compared with 390 GWh/day in April and 383 GWh/day a year earlier.
Transco Z6 hub natural gas prices averaged $2.55/MMBtu for the month, down 9.4% compared with last month and 8.8% year-over-year.
Distillate prices gained 6.4% compared to the previous month but were up 49.7% year-over-year. Jet Kerosene Gulf Coast and Ultra Low Sulfur No. 2 Diesel NY Harbor averaged $15.96/MMBtu and $15.92/MMBtu, respectively.
| NYISO
Total uplift costs and uplift per megawatt-hour rose from April with the ISO’s local reliability share 22 cents/MWh in May, up from 12 cents/MWh the previous month, while the statewide share climbed from -57 cents/MWh to -17 cents/MWh.
ISO Reviewing Rules on PJM Imports
Reviewing the Broader Regional Markets report, Bouchez described the ISO’s work on item 26, an effort to clarify the minimum deliverability requirements for capacity from PJM, the subject of three joint meetings of the Installed Capacity (ICAP) Working Group and Market Issues Working Group since February.
The ISO has prepared a detailed overview of the supplemental resource evaluation (SRE) process for external resources, the existing nonperformance penalties for external ICAP suppliers, and a draft proposal regarding SRE process improvements for external capacity resources.
Bouchez also reviewed item 28, a complaint filed with FERC in December by the New Jersey Board of Public Utilities challenging PJM’s and NYISO’s implementation of the mutual benefits provisions of their joint operating agreement and requesting amendments to the JOA.
FERC rejected the complaint on May 24 (EL18-54). The commission found that because the Bergen-Linden Corridor Project was planned by PJM, and without a voluntary commitment to share cost responsibility by NYISO, “it is just and reasonable for the costs of the project to be allocated solely within PJM.” (See PSE&G on the Hook for Bergen-Linden Costs.)
Proposal to Extend TCCs Advances
The BIC voted to recommend that the Management Committee approve Tariff revisions to provide extensions of historic fixed-price transmission congestion contracts (HFPTCCs), following a presentation by Gregory R. Williams, manager for TCC market operations.
FERC Order 681 requires that long-term firm transmission rights be made available to allow load-serving entities to support long-term power supply arrangements.
The HFPTCCs initiated by NYISO in 2008 allow LSEs to obtain such contracts for up to 10 years, with some service grandfathered for up to 12 years; 1,748 MW of HFPTCCs are currently active. Those offered in 2008 are now approaching the end of their 10-year term and will expire after Oct. 31.
As part of developing the HFPTCCs, the ISO had committed to explore an option to renew the contracts after the initial term.
Contract extensions would be made available to LSEs that convert existing transmission agreements to HFPTCCs and continued to purchase them throughout the entire 10- or 12-year term.
The ISO is required to make all transmission capacity not used to support existing TCCs available for sale in its centralized TCC auctions. The bidding and offering period for the first round of the fall 2018 centralized TCC auction is expected to begin in mid-August.
Assuming the current proposal is accepted by FERC, the ISO would need to seek a waiver for permission to reserve 256 MW of transmission capacity from the upcoming auction to support the potential award of HFPTCC extensions that would begin on Nov. 1, 2018, and ensure feasibility issues do not arise from offering such extensions to qualifying LSEs.
