Page 1133 – RTO Insider

August 10, 2018

IMM: PJM 2018 Capacity Auction was ‘Not Competitive’

By Rich Heidorn Jr.

The results of PJM’s 2018 Base Residual Auction were “not competitive” and illustrate the need to change how the RTO sets its capacity offer cap, the Independent Market Monitor said Thursday in its second-quarter State of the Market report.

“The outcome of the [2021/22] Base Residual Auction was not competitive as a result of participant behavior which was not competitive, specifically offers which exceeded the competitive level,” the report said.

In a separate analysis released Thursday night, the IMM calculated that total revenues from the auction would have been only $6.57 billion had all identified noncompetitive offers been capped at their net avoidable cost rate (ACR). The analysis said offers exceeding net ACR, while permitted by current rules, amounted to “economic withholding” and boosted total auction revenue by 41.5% to $9.3 billion.

PJM base residual auction market monitor — The Market Monitor’s analysis found that clearing prices in the 2018 Base Residual Auction would have been lower everywhere but the PSE&G zone had prices been capped at net avoidable cost rate. Not identified is the DEOK zone, which cleared with the rest of the RTO at $140/MW-day, but would have priced at $128/MW-day. | *PJM, Monitoring Analytics*

Capping at net ACR would have reduced the RTO clearing price from $140.53/MW-day to $90.47/MW-day. “All binding constraints would have remained the same except that the ComEd import constraint would not have been binding and the DEOK import constraint would have been binding,” the analysis said.

It singled out nuclear units, saying more nuclear capacity was offered at higher sell offer prices and fewer nuclear megawatts cleared than in 2017.

Although the IMM has regularly cited structural market power in the capacity market, 2018 was the first time that mitigation efforts failed and market prices were inflated, said Joe Bowring, president of Monitoring Analytics, which serves as PJM’s independent Market Monitoring Unit (MMU).

“I think it’s significant,” Bowring said in an interview. “It’s the result of the fact that the offer cap in the rules is mis-specified and needs to be fixed. We’ve been making that point for a while. But that issue resulted in an impact on this auction.”

PJM issued a statement Friday disagreeing with the Monitor’s conclusions.

“While PJM respects the Market Monitor’s opinion, the facts regarding the 2021/2022 Base Residual Auction are clear. The auction was conducted in accordance with all Tariff-specified requirements and rules, including those rules related to the application of offer caps, and the offers were in concurrence with those rules. The Market Monitor expresses an opinion of what the offer cap should be; the proper forum for such concerns about competitiveness of offers is the Federal Energy Regulatory Commission.”

Grades

For the 2018 BRA, the Monitor gave “not competitive” grades to the aggregate and local market structures, as well as market performance and participant behavior. Market design was judged “mixed.” The Monitor gave the 2017 BRA the same grades for market design and structures but rated both participant behavior and market performance as competitive.

The IMM said this year’s auction failed the competitive test because of the way PJM sets the offer cap under Capacity Performance rules.

“Some participants’ offers were above the competitive level. The MMU recognizes that these market participants followed the capacity market rules by offering at less than the stated offer cap of net CONE [cost of new entry] times B [balancing ratio]. But net CONE times B is not a competitive offer when the expected number of performance assessment intervals is zero or a very small number and the nonperformance charge rate is defined as net CONE/30. Under these circumstances, a competitive offer, under the logic defined in PJM’s Capacity Performance filing, is net ACR. That is the way in which most market participants offered in this and prior Capacity Performance auctions.”

Because net CONE times B exceeds the competitive level in the absence of performance assessment hours (PAHs) — periods requiring urgent actions, such as the dispatch of emergency or pre-emergency demand response — it should be re-evaluated for each BRA, the report said.

Repeating a recommendation it first made in 2017, the Monitor said PJM should develop forward-looking estimates for both B and the expected number of PAHs used in calculating rates for nonperformance charges.

The Monitor said CP rules, which increased penalties for nonperformance, “have significantly improved the capacity market and addressed many of the issues” it previously identified.

But it also said the CP Tariff language is overly rigid. “If the Tariff had defined the offer cap consistent with PJM’s filing in the Capacity Performance matter, the offer cap would have been net ACR rather than net CONE times B,” the report said.

“The bottom line is net CONE times B is way too high, especially when the performance assessment hours are less than 30,” Bowring said.

Of the 1,132 generation resources that submitted CP offers for delivery year 2021/22, 953 (84%) used the net CONE times B offer cap, while 129 (11%) were price takers.

Only eight generation resources (0.7%) requested the Monitor calculate unit-specific ACR-based offer caps. “The fact that so few resources requested unit specific offer caps is further evidence that the net CONE times B offer cap exceeds competitive offers,” the Monitor said.

PJM Disputes

PJM noted that market sellers must declare whether they will use net ACR or the net CONE times B offer cap 120 days before the auction.

“During the weeks where actual offers are submitted and the auction is cleared, the IMM has full visibility into all data relevant to the auction, including resource offers. If the IMM believed that economic withholding was taking place based on submitted offers and preliminary auction clearing results, the IMM could have consulted with the asset owner during that time period,” PJM said.

“If the IMM believes that economic withholding took place, the proper course of action is for the IMM to refer the market seller responsible for such offers to FERC for further investigation. If the IMM believes that the current rules regarding the default offer cap allow for economic withholding, the IMM, like any other stakeholder, can bring forward a problem statement and issue charge to be discussed by the PJM stakeholder body.”

Bowring noted that the issue of the balancing ratio is before the Market Implementation Committee. (See “Balancing Ratio,” PJM Market Implementation Committee Briefs: Aug. 8, 2018.)

PJM also questioned the IMM’s simulation results for nuclear units offering at their ACR. “They are based upon hypothetical offers that could have been submitted on the basis of the IMM’s anticipation of potential performance assessment hours, as well as the IMM’s determination of the appropriate value of ACR to use for certain resources as opposed to their actual going-forward costs,” PJM said. “Given these errors in the assumptions, the simulations bear no direct relevance to any hypothetical auction outcome had different offer-capping rules been in place for this auction.”

PJM spokesman Jeff Shields said the RTO does not agree that there is a problem with the current offer cap. “PJM is supporting stakeholder consideration of proposals that could result in adjustments to the default offer cap, but it is unclear whether a proposal that results in such an adjustment will be approved,” he said.

Should the proper offer cap be net ACR? “No. This assertion is dependent upon an expectation of performance assessment hours,” Shields said. “Whether a given submitted offer was above the competitive level, even though it was within the rules, is a matter for FERC.”

Comparison with 2017

The Monitor’s quarterly report also repeated its concerns over generation subsidies, saying they “threaten the foundations of the PJM capacity market as well as the competitiveness of PJM markets overall.” The Monitor wants to extend the minimum offer price rule (MOPR) to include existing units as well as new resources.

Although the Monitor found the capacity market problematic, it said PJM’s energy markets produced competitive results in 2018. Compared with the first half of 2017, PJM saw the following in the first six months of 2018:

Energy prices and fuel prices were higher and more volatile, resulting in higher margins for generation types. Average energy market net revenues increased by 160% for a new combustion turbine; 63% for combined cycle plants; 525% for coal plants; 44% for nuclear units; 10% for wind; and 20% for solar.
Total energy uplift nearly tripled from $49.7 million to $146.4 million.
Payments for DR programs increased 13.7% to $271.7 million.
Congestion costs increased by 214% to $896.6 million. Auction revenue rights and financial transmission rights revenues offset only 50.7% of total congestion costs for the 2017/18 period, the first in which new rules required the allocation of balancing congestion to load instead of FTR holders. ARR and FTR revenues offset 98.1% of congestion costs for load during the 2016/17 planning period.

New Recommendation: FTR Liquidations

The report includes two new recommendations. The Monitor said PJM should set a high priority on reviewing how it liquidates FTR holdings, a recommendation prompted by GreenHat Energy’s default in June, when it failed to pay a weekly invoice of $1.2 million. PJM has asked FERC to approve a waiver of rules that require immediate liquidation of a defaulting member’s FTR portfolio (ER18-2068). (See “Default Details,” PJM MRC/MC Briefs: July 26, 2018.)

Bowring said he supports a change in the rules that allows PJM to liquidate the portfolio over a longer period. “These are long-term” positions, he noted.

New Recommendation: REC Transparency

The Monitor also said states with renewable portfolio standards should make the data on renewable energy credits (RECs) more transparent. D.C. and all but five of the 13 states in PJM have a mandatory RPS. Virginia and Indiana have voluntary standards, while Kentucky and Tennessee have no renewable targets. West Virginia repealed its voluntary standard in 2015.

Although FERC has determined that RECs are not regulated under the Federal Power Act unless they are sold in a bundled transaction that includes a wholesale sale of electric energy, RECs affect market prices and the mix of clearing resources, the report said. “Some resources are not economic except for the ability to purchase or sell RECs.”

But data on REC prices, clearing quantities and markets are not publicly available for all states. In addition, RECs do not need to be consumed during the year of production, resulting in multiple prices for a REC based on the year of origination, the Monitor said.

“RECs markets are, as an economic fact, integrated with PJM markets, including energy and capacity markets, but are not formally recognized as part of PJM markets. It would be preferable to have a single, transparent market for RECs operated by PJM that would meet the standards and requirements of all states in the PJM footprint including those with no RPS. This would provide better information for market participants about supply and demand and prices, and contribute to a more efficient and competitive market and to better price formation. This could also facilitate entry by qualifying renewable resources by reducing the risks associated with lack of transparent market data.”

The Monitor said the CO₂ price implied by REC prices ranges from $4.74/metric ton in D.C. to $35.41/ton in Pennsylvania, while solar RECs’ implied prices range from $18.07/ton in Pennsylvania to $861.52/ton in D.C.

Those contrast with the 2018 average clearing price of $4.31/ton in the Regional Greenhouse Gas Initiative and the social cost of carbon, which is estimated at about $40/ton. “The impact on the cost of generation from a new combined cycle unit of an $800/ton carbon price would be $283.56/MWh. The impact of a $40/ton carbon price would be $14.18/MWh,” the Monitor said. “This wide range of implied carbon prices is not consistent with an efficient, competitive, least-cost approach to the reduction of emissions.”

August 10, 2018

NY Energy Market Summit Tackles DERs

By Michael Kuser

NEW YORK — New York is charting its own course for integrating distributed energy resources into its grid, different from the path trod by states with already high rates of penetration, industry experts said this week.

new york distributed energy resources — Sturgill | © *RTO Insider*

“California and Hawaii had to be reactive to distributed generation, but New York is taking a more proactive approach in trying to incent greater penetration of clean energy resources,” ScottMadden’s Chris Sturgill said at the New York Energy Market Summit held Aug. 6-8.

Sturgill noted the New York Public Service Commission this spring approved new DER measures as part of the state’s Reforming the Energy Vision initiative, which has enabled market participation for non-wires alternatives and the expansion of energy efficiency, demand response programs and demonstration projects. (See NYPSC OKs Con Ed EV Charging Program, REV Initiatives.)

“It’s easier to bring DER onto the grid now, thanks in part to informed dialogue between the utilities and DER owners,” Sturgill said.

“New York is pursuing aggressive policies to promote renewable energy, preserve competitive markets and resolve regulatory uncertainty,” said Paul A. DeCotis, senior director of West Monroe Partners.

Data First

Conference panelists pointed out that the growth of DERs and electric vehicles is changing once predictable load patterns. Utilities need to ensure continued reliability, recognizing that regulators are not as close to the system as they are, they said.

“I would start with data,” said Stuart Nachmias, Consolidated Edison vice president for energy policy and regulatory affairs. “We continue to support implementation of smart meters, and also the communications infrastructure to make them usable … but price signals are important to get generation closer to load … which is how New England evolved their locational pricing.”

Con Ed subsidiary Orange and Rockland Utilities, which serves customers in southeastern New York and northern New Jersey, has “seen a lot of solar proposals, which is not where the demand is,” Nachmias said.

Melissa Kemp, Northeast policy director for Cypress Creek Renewables, said New York must have a larger conversation about how to compensate solar projects.

“Initial costs may avoid later costs, such as avoided transmission spending, and a project may have positive health benefits, and those positive attributes should be accounted for, if not compensated,” Kemp said.

She also pointed to the importance of maintaining the low-income customer perspective and protecting against unnecessary rate increases. She added that those customers would also bear any extraordinary costs in the future, which could be avoided by increased spending now.

New Business Model?

Ross Kiddie, director at West Monroe Partners, noted that New York utilities submitted their second Distributed System Implementation Plans (DSIP) to the PSC a week earlier (Case No. 14-M-0101) and asked what are the must-have technologies to deal with DERs.

If people had controllable toasters, the utility or aggregator could preset a million of them and stagger their times to avoid spikes, said James Pigeon, NYISO manager of distributed resources integration.

“As we move forward, and the aggregators have the ability to control these assets, things will change,” Pigeon said. “The NYISO is not looking to change the business model and apply unique programs to every node on the grid. … We want to apply one model and have those resources respond to NYISO direction, whether for demand management or price signal.”

Damian Sciano, Con Ed director of distribution planning, said the electric system is moving from dozens of large generators to thousands of small-scale residential units, which could go into the millions when every customer’s appliances are connected to the grid.

“NYISO looks at New York City as just Zone J, but to us it’s a bunch of distribution lines that have thermal limits and voltage concerns,” Sciano said. “So when an aggregator puts together a bid for say 10 MW, it may completely satisfy what the NYISO is looking for, but it may be 10 MW on a part of the grid where we can only tolerate 2 MW at any given point.”

It goes back to the DER management system, even if someone else is aggregating something for the utility, he said. “We want to know exactly what’s being generated, very much preferably real-time, and understand how it’s affecting our system,” Sciano said.

Emilie Nelson, NYISO vice president for market operations, said she is focused on administering capacity and pricing at the wholesale level.

“If you rewind 15 years, the expectation for natural gas prices was not what they are today, so expectations can shift; reality can shift. A functioning market allows for third parties to bring in new solutions,” Nelson said.

Storage Issues

Sturgill asked how the ISO will consider proposals for energy storage resources in the wholesale market, particularly for those that are dual participation or trying to collect multiple pieces of the value stack. (See NY Releases ‘Roadmap’ for 1,500-MW Storage Goal.)

New York City is dedicated to working with utilities and others to value new DER technologies properly, including storage, said Susanne DesRoches, Mayor Bill de Blasio’s deputy director for infrastructure and energy.

“We see storage being able to support transmission and support the local network … for the complex picture in New York City, which is a bunch of islands with a unique power supply,” DesRoches said. “Storage should be valued properly for the attributes it provides for the system, and also we need clear permitting.”

Storage needs to be treated fairly on the system, said Peter Mandelstam, executive director for GRID Alternatives Tri-State, the largest solar energy nonprofit in the U.S.

“Having been involved in a lot of regulatory battles over the decades, both at the state and federal level, the most important thing is to get the rules right,” Mandelstam said. “Storage is now here, is now integral to the complete decarbonization of our electric system … the digital age now allows for the metering.”

Illinois Commerce Commissioner John Rosales, also vice chair for electricity at the National Association of Regulatory Utility Commissioners, said smart metering “is the catalyst” to put together a microgrid or adopt new technologies such as energy storage.

As a regulator, “you’ll never make everyone happy; there will be winners and losers, and they’ll be so unhappy that they will sue you,” Rosales said. “However, it’s important to remember that not making a decision is a decision.”

August 10, 2018

MISO Promises External Capacity Zones After FERC Rejection

By Amanda Durish Cook

CARMEL, Ind. — MISO said Tuesday it plans to refile a plan to create external capacity resource zones with FERC by the end of the month.

And the RTO still promises to make zone determinations in time for the 2019/20 planning year capacity auction, officials say.

FERC rejected the proposal earlier this month, saying two aspects of the plan rendered it unreasonable. (See FERC Rejects MISO Plan for External Capacity Zones.) One of the rejected provisions would have allowed external resources bordering two local resource zones to choose in which zone they receive auction credits, while the other would have made holders of evergreen supply contracts eligible for excess auction revenues indefinitely.

miso ferc resource zones — Jacob Krouse | © *RTO Insider*

During an Aug. 8 Resource Adequacy Subcommittee meeting, MISO attorney Jacob Krouse noted the RTO asked FERC to view the proposal as an integrated package, making the rejection total.

“The commission, under the NRG paradigm, rejected the filing,” Krouse said, referring to the July 2017 D.C. Circuit Court of Appeals ruling that FERC overstepped its authority when it suggested changes to a PJM proposal. MISO stakeholders warned last year that a rejection of the proposal was possible in light of the ruling. (See MISO Members: Court Rebuff May Reduce External Zone Chances.)

But RTO leadership appears undaunted by the rejection, planning to refile the proposal with two revisions Aug. 31.

“MISO believes that with the clear guidance we received from FERC … we are going to be able to refile at the end of the month,” Krouse said. “FERC did not note any concern with the vast majority of MISO’s proposal — just those two parts.”

Under proposed revisions, border resources that have participated in past Planning Resource Auctions will be assigned to the local resource zone in which they previously participated. New external resources that border two or more local resource zones will be assigned to the zone where the unit maintains the greatest electrical connection. MISO said it will measure electrical connectivity through line ratings using a contingency basis.

“MISO is proposing to assign resources to a single [local resource zone] instead of multiple zones,” Krouse explained.

For evergreen supply contracts, MISO now proposes to allow units to collect excess auction revenues only until the end of the original term of the agreement or for two years, whichever is longer. Krouse said the RTO’s filing will also include an option that removes the two-year extension, ending hedge eligibility as soon as the original contract expires. He said MISO intends to let FERC choose the provision it prefers.

Krouse asked for stakeholders to provide reactions to the changes by Aug. 17 and said the RASC will schedule a special Aug. 22 conference call to discuss feedback.

MISO Director of Resource Adequacy Coordination Laura Rauch said the change for border resources will apply only to a small subset of MISO resources.

Some stakeholders said the proposed treatment of evergreen contracts might violate the Mobile-Sierra doctrine, which holds that rates negotiated in a contract should be presumed to be just and reasonable.

“MISO is not changing the terms of the arrangement, so Mobile-Sierra would not apply,” Krouse said, adding that the RTO is not encroaching on the terms of buying and selling power. Rather, such contracts would simply become ineligible for additional hedges from MISO after the original term of the agreement or the proposed two-year transitional period.

“We in no way intend to change or limit the terms of evergreen contracts,” Rauch said. “These contracts were signed without consideration of the capacity construct.”

Others commended the RTO for continuing to pursue external zone designation.

“I really appreciate MISO going in and being aggressive on this. … We’ve been talking about this for half of a decade,” said Coalition of Midwest Power Producers CEO Mark Volpe.

August 9, 2018

Salem Harbor Operator Seeks Dismissal of ‘False Offer’ Case

By Rich Heidorn Jr.

The owners of Salem Harbor Power Station have asked FERC to dismiss allegations that the plant misled ISO-NE with supply offers it could not meet because of insufficient fuel.

FERC’s Office of Enforcement filed an Order to Show Cause on June 18, saying that owners Footprint Power should forfeit more than $2 million in capacity payments Salem Harbor Unit 4 received for a period in June and July 2013 during which the plant’s fuel supply prevented it from operating at its offered capacity. Enforcement also sought $4.2 million in civil penalties. (See Salem Harbor Plant Facing FERC Action.)

Footprint power salem nuclear plant ISO-NE FERC — Salem Harbor Power Plant | *Tetra Tech*

In its Aug. 2 response, Footprint’s attorneys said Enforcement “overstates” what ISO-NE expected from the plant, claiming the RTO was aware that NO_x emissions limits prevented it from running at full capacity for an entire day. Enforcement also failed to consider the time it took the plant to reach full output from start-up, the attorneys wrote in a 383-page answer that includes audio recordings of conversations between plant and ISO-NE operators and a passage from Joseph Heller’s “Catch-22” (IN18-7).

“The day-ahead offers reflected [the plant’s fuel] limitations. And as the taped phone calls show, the operators repeatedly caveated their estimates about potential availability as uncertain,” they wrote.

Footprint said Enforcement overstated the maximum amount of fuel the plant could burn by more than 82%. Enforcement staff did not interview plant operators and there is no evidence investigators talked with the RTO’s operators about their expectations, Footprint said.

The company also said Enforcement’s calculations understated the amount of fuel the plant had available to burn.

“Enforcement thus offers a conundrum where every option is a violation. If Salem Harbor offers what it considers to be a good estimate of the projected output of Salem Harbor, that is deceptive because the projection is higher than anything empirically proven to be available in advance. If Footprint offers a lower level of output from Salem Harbor, but one that has been empirically proven to be available in advance, that is physical withholding. This is no idle, after-the-fact thought. The principals of Footprint were veterans of the business and regulatory landscape facing New England independent power producers. They understood the regulatory environment in ISO-NE as well as anyone. And they actually were concerned at the time that under-offering Salem Harbor 4 could expose them to withholding claims.”

The filing acknowledges Unit 4 ran low on fuel in July 2013 but noted that the plant was then less than a year from retirement. “Fuel oil had to be bought in large amounts — a barge of oil cost over $5 million in the summer of 2013. And given that the plant historically ran very infrequently, much of that money might end up wasted.” Unit 4 retired less than a year after the period in question, and it and its fuel tank have since been demolished.

Footprint said Enforcement is attempting to penalize it for running low on fuel because the plant was not hit with ISO-NE’s shortage-event penalties. “If the commission wants to create greater incentives to store fuel oil on site, it obviously can do that prospectively by changing the definition of shortage events in the ISO-NE Tariff so that they occur more frequently. The commission in fact approved just such a change in late 2013. But the commission cannot lawfully change the Tariff to make shortage events more frequent looking backwards. … Viewing things from a broader perspective, the Pay-for-Performance capacity model is not going to work as intended if Enforcement gets to pile on its own chosen sanctions, above and beyond shortage-event penalties, whenever it thinks alleged performance limitations somehow have not already been sufficiently punished.”

Footprint also said the case should be dismissed based on the five-year statute of limitations. It disagreed with Enforcement’s prior claims that the issuance of a show cause order within five years is sufficient.

It requested a meeting with the commissioners and senior staff to discuss its defense, “with or without Enforcement present.”

August 9, 2018

Wildfires Reshaping Regulator’s Role, CPUC Chief Says

By Hudson Sangree

California’s Public Utilities Commission has increasingly focused on wildfire prevention as electric utilities have been blamed for a series of devastating blazes in recent years, the commission’s president told state lawmakers Tuesday.

CPUC Michael Picker California Wildfires — Picker | © *RTO Insider*

CPUC President Michael Picker said the commission’s role had shifted significantly from economic regulation to fire safety during years of high temperatures and low humidity “that result in intense fires with 145-mph winds.”

He and others called such conditions the “new normal” in California.

Picker made his comments before a joint committee of state senators and assembly members tasked with ironing out differences in SB 901, which deals with climate change, wildfire prevention and the legal liability of the state’s three investor-owned utilities: Pacific Gas and Electric, Southern California Edison and San Diego Gas & Electric.

Passed by the State Senate in June, the bill would require a utility’s wildfire mitigation plan to describe what factors it will consider when determining whether to de-energize lines in the face of fire danger and include procedures for notifying affected customers. (See Calif. Senate OKs Utility Wildfire Cost Recovery.) The mitigation plans are subject to CPUC approval.

The hearing was one of several called to draft a workable bill before the legislature adjourns its two-year session Aug. 31, when the bill would otherwise die.

The conference committee’s first hearing was held July 25, when one of its co-chairmen, Sen. Bill Dodd (D), said he was primarily concerned with the safety of residents after hundreds in his Napa County district lost their homes, and some were killed, in the catastrophic wine country fires of 2017.

California Department of Forestry and Fire Protection (Cal Fire) probes have blamed 16 of last year’s Northern California fires on “electric power and distribution lines, conductors and the failure of power poles” owned by PG&E.

The nearly 52,000-acre Atlas Fire in Napa, for example, started when a tree limb and a falling tree came into contact with PG&E power lines, Cal Fire said in a June statement. That fire killed six residents and destroyed 783 structures.

PG&E last quarter took a $2.5 billion pre-tax charge for third-party claims related to 14 of the fires.

Opening the July 25 hearing, Dodd said the state needs greater regulation of line maintenance, including vegetation removal, inspection and power shutdowns during extreme weather conditions, “so power lines don’t start fires.”

He placed part of the blame on the CPUC, alleging lax oversight.

“That means better utility planning and greater accountability for those who operate the grid, including checking compliance before a fire,” Dodd said on the dais in July. “That’s an area where the CPUC has done quite poorly regulating utilities and ensuring public safety.”

Testifying at the same hearing, Picker said the loss of life and homes from wildfires had been keeping him up nights, though he hadn’t expected fire-prevention to be a major part of his job.

“I have to say that fires are not something I thought I would deal with when I came to the Public Utilities Commission. But it’s obvious they are becoming a bigger and more dramatic issue here in the state of California.”

The CPUC in December approved more stringent wildfire standards for utilities, creating a “high fire-threat” district where correction of fire hazards is to be prioritized through improved vegetation management and increased wire-to-wire clearances. (See CPUC Targets Wildfires, Multifamily Solar, RMRs.)

The next hearing on SB 901 is scheduled for Aug. 9, when the subject will be the liability of investor-owned utilities for the destruction of private property caused by wildfires.

August 9, 2018

Corporate Buyers Ink Record 3.5 GW in Renewables

By Rich Heidorn Jr.

Nonutility buyers have contracted for more than 3.5 GW of renewable energy thus far in 2018, breaking the annual record of 3.12 GW set in 2015, the Rocky Mountain Institute’s Business Renewables Center (BRC) reported.

The 46 deals so far this year also best the 31 deals totaling 2.89 GW in 2017.

In total, U.S. corporate purchases of renewables have totaled 13.52 GW since 2008, according to the BRC, which says its member companies have been responsible for most nonutility transactions for renewable energy in the country.

The center says almost 60 companies have participated to date, up from four companies in 2013.

Facebook, which was one of the original four, pushed 2018’s total to the record with its July 18 announcement that it will buy 437 MW of solar power from six projects for its Prineville, Ore., data centers.

Facebook is among 140 companies that pledged to transition to 100% renewables. Other large purchases this year came from AT&T, Walmart, Microsoft and Apple.

“We are bearing witness to unprecedented growth in this market, which is critical to achieving the goal of a clean, prosperous and secure low-carbon economy,” said Jon Creyts, managing director at RMI.

The BRC, which launched in 2015 with about two dozen members, now has 250.

It helps simplify renewable purchases, offering procurement templates, primers and a Market Analysis Platform to identify the most attractive regions for wind or solar projects. BRC’s Marketplace allows corporate buyers to search wind and solar power projects available for off-take and gives developers a way to market their projects and collect information from potential buyers.

BRC’s goal is to facilitate procurement of 60 GW of renewables by 2030.

In addition to providing a way to enhance their green credentials, corporations increasingly see renewables as cost-effective. For example, storage and information management company Iron Mountain signed a 15-year power purchase agreement for wind in 2016 that it says will save it up to $500,000 in power costs annually. (See Cost Trends Favor Renewables Despite Coming Policy Shifts.)

In 2015, corporations passed utilities as the top purchaser of wind power.

However, some corporate buyers have complained their efforts have been hamstrung by insufficient transmission to move Midwest wind. (See Is RTO Tx Planning Hampering Green Corporate Goals?)

August 9, 2018

MISO Energy Storage Group Seeks Expanded Role

By Amanda Durish Cook

MISO’s Energy Storage Task Force is making a bid to broaden its role by seeking the authority to evaluate storage issues in addition to identifying them.

The group moved to revise its charter during a Tuesday conference, but any proposed changes are subject to approval by the Steering Committee at its next meeting.

The task force is currently limited to only identifying storage issues requiring MISO’s attention. It then forwards its findings to the Steering Committee, which assigns the issues to larger stakeholder committees for decisions. (See MISO Storage Task Force Defines Role, Seeks Plan.)

But the group now wants the authority to evaluate “issues or topics that are unique to the integration or challenge the realization of benefits of energy storage,” according to the revised charter. It would “also provide ongoing subject matter expertise to MISO entities regarding storage-related issues.”

miso energy storage task force — A MISO Energy Storage Task Force meeting underway. | © *RTO Insider*

Task force Chair John Fernandes said the initial charter may have been too restrictive.

“That was a very unilateral, one-way mission statement,” Fernandes said. “What we’re saying here is that there’s an opportunity for extended dialogue.”

He said it can sometimes feel as if the group encounters “radio silence” after it identifies an issue taken up by a larger stakeholder committee.

Fernandes said the group will reconvene in September to discuss next steps if the Steering Committee refuses to approve the expanded charter.

Some stakeholders said the revised charter might open the door to two stakeholder groups having the same discussions about energy storage, violating the spirit of MISO’s stakeholder process redesign three years ago that sought to reduce duplicative discussions across different RTO forums. (See MISO Takes Stakeholders’ Temperature on Redesign.)

But Fernandes said there are broad storage subjects that warrant further task force discussions even if a specific issue may have been escalated to another MISO group. He cited hybrid storage facilities as an example, noting the interconnection of such plants is currently under discussion within the RTO, but the general business model requires more evaluation.

Fernandes also questioned the efficiency of stakeholder committees creating new task teams to discuss unique storage attributes when the task force could evaluate them.

He added that the task force plans to continue to stay out of developing commercial business models for storage, as recommended by the Steering Committee.

August 7, 2018

MISO Moving to Combat Shifting Resource Availability

By Amanda Durish Cook

MISO last week laid out how it will tackle changing resource availability and needs in its footprint ahead of the release of a white paper on the issue.

The RTO told stakeholders it will focus on four key areas: resource accreditation, the annual capacity auction, outage scheduling and its own expectations for resource availability.

MISO Executive Director of Market Development Jeff Bladen said the project will aim to determine how the RTO can more efficiently turn committed capacity into available energy in a climate of diminishing reserve margins and growing use of intermittent resources.

“[This] is about making sure we can meet operating needs every hour of every day,” Bladen said during an Aug. 3 Reliability Subcommittee meeting. “This is becoming more critical as we see a narrowing gap between load and resources, which have increased the occurrence of emergency operations throughout the year.”

The four areas entail:

Studying characteristics of different resources to learn how to best incentivize them to create more flexible availability systemwide.
Evaluating the current Planning Resource Auction design. MISO said it will examine how it can best procure adequate resources throughout the planning year and reexamine how it accredits resources.
Ensuring that MISO’s outage process matches expected resource output with resource commitments. Bladen said MISO will look into how it can get more information on outages and the risk of outages, and examine how it can better model the risk in its planning process. The RTO says “a significant number” of unit operators change the start dates of outages within a month of the originally scheduled outage.
Aligning resource expectations and obligations with availability. For this, Bladen said MISO will ask what availability should be expected of resources; whether current emergency operating procedures are adequate; and whether resources provide the RTO enough information on their availability times. Bladen said MISO will focus especially on load-modifying resources, whose performance has been lacking during emergency declarations. (See “LMR Performance in January,” MISO Mulls Additional Emergency Communication.)

MISO’s Steering Committee will assign the issues to various stakeholder groups after next month’s release of a white paper explaining the issues in more detail.

Bladen said he expects MISO and stakeholders will work on implementing recommendations as they develop the project through late 2020.

In response to a question from WPPI Energy economist Valy Goepfrich, Bladen said MISO might be open to altering its loss-of-load study to reflect a departure from planning for a summer peak, but that such a move would not solve the issue entirely because the study and resulting reserve margin is a “blunt instrument.”

Bladen also said he was deliberately not suggesting a rule similar to PJM’s Capacity Performance. While CP may come up as MISO and stakeholders discuss solutions, the RTO instead wants to emphasize incentives so that the “capacity we’re counting on — and has arguably already been paid for by ratepayers — is available to us.”

New Notification System

As it debates how to address changing resource availability, MISO will this month roll out a new notification type to give members more warning of forecasted capacity shortages.

The new capacity advisory, which MISO plans to use when all-in capacity is forecast to be less than 5% above operating needs, is meant to be an intermediary step before declaring a maximum generation alert.

miso resource availability — Schaack | © *RTO Insider*

Manager of Unit Commitment and Dispatch Phil Van Schaack said the new advisory is strictly an informational communication and does not carry any operational instructions. However, the new notice does request that unit operators update their data and availability in the MISO system.

Van Schaack said the additional notification would be especially useful for weekends and going into Mondays, when generation assets tend to be more sparsely staffed.

“This is for when we want people to get looking at things when they’re ordinarily not looking at things,” Van Schaack said.

After stakeholders asked for more real-time electronic communication of tight operating conditions, MISO declared a maximum generation alert on a Friday in mid-May for predicted Monday conditions that did not materialize. With hindsight, some stakeholders said declaring the alert may have been overly cautious. (See MISO Mulls Additional Emergency Communication.)

Under the new approach, MISO will send a capacity advisory communication to members when it foresees tight operating conditions in advance.

“Everyone wanted proactive information, but they oppose restrictions or impacts to operations,” Van Schaack said. “The capacity advisory addresses stakeholder requests for transparency of forecasted conditions without impact to operations.”

The Indiana Utility Regulatory Commission’s Dave Johnston asked how the new notification will differ from MISO’s current hot weather alerts.

“The intent is more to say that ‘this is a capacity issue’ and ‘please review some of the data that you’ve submitted.’ I would say there’s some overlap, but for the hot weather alerts, we need about 99 degrees in Little Rock or so,” Van Schaack said.

MISO staff said they would have sent out the capacity advisory a few times this summer had the process been in place.

August 7, 2018

Stakeholders Annoyed by NYISO Carbon Price Draft

By Rich Heidorn Jr.

NYISO’s release of draft carbon pricing recommendations — and its refusal to immediately discuss the report — sparked annoyance and frustration among some stakeholders Monday.

The nine-page draft, released Aug. 1, summarizes discussions to date in New York’s Integrating Public Policy Task Force (IPPTF).

But NYISO staff declined to discuss it at Monday’s IPPTF meeting, which was scheduled for a briefing on the ISO’s “Dynamic Change Case” — its analysis to refine estimates of how carbon prices will impact customer costs.

Before the briefing began, several stakeholders pressed ISO staff to answer questions about the draft recommendations. IPPTF Chair Nicole Bouchez, the ISO’s principal economist, promised to schedule time for the discussion but said it would likely not occur before Aug. 27.

Attorney Kevin Lang, representing New York City, questioned language in the document that suggested the ISO was making decisions on issues that should be subject to a stakeholder vote. “It’s not up to the NYISO to adopt things,” he said.

“The draft is just a draft,” Bouchez responded. “It was based on our best understanding of the discussions and a coherent proposal. We’re definitely looking forward to input on any and all components.”

Jay Brew, attorney for Nucor Steel Auburn, said he also had questions about the recommendations, citing as an example, “basic principles that were applied by NYISO staff” regarding the allocation of carbon residual payments.

“I think the NYISO should be aware of the effect it has on the market — even something with a ‘draft’ recommendation,” added Seth Kaplan of EDP Renewables. “Be aware that you guys are producing turbulence out in the market as you float these things.”

“Nicole, we asked you not to do this. We said that it’s premature to put out recommendations,” interjected Lang. “You rejected that and said, ‘No, we have to do it.’ For the NYISO to now put out a series of draft recommendations and then not schedule anything to discuss them and just have them sitting there is inappropriate.”

“Thank you for your feedback,” Bouchez responded evenly. “We’ll look for continued discussion and get something scheduled.”

The task force is not scheduled to meet Aug. 13, and the Aug. 20 meeting is tentatively earmarked for presentations by two stakeholders, Bouchez said, making Aug. 27 the first time the recommendations could be discussed.

Report Builds on Straw Proposal

NYISO said its report builds on the April 30 straw proposal on a potential design for incorporating the social cost of carbon (SCC) into the ISO’s wholesale markets and subsequent stakeholder discussion.

The ISO proposed implementing the SCC without a transition mechanism and said internal suppliers participating in the wholesale markets will self-report their carbon emissions or their estimated emissions to the ISO weekly, subject to true-ups.

It rejected a proposal by some stakeholders that the ISO estimate emissions and have suppliers report final emissions. “This approach was not adopted because suppliers are better positioned to accurately estimate their emissions than the NYISO,” the report said.

Still under review by the ISO is whether the carbon impact on each component of the locational-based marginal price (LBMP) needs to be determined and how to prevent what the ISO called “double payments” for the same carbon reductions. The ISO cited stakeholder concerns that some resources may receive both state renewable energy credits and the ISO’s carbon charge.

EDP’s Kaplan took issue with the ISO’s statement, saying it “sort of assumes the REC payments are a carbon payment, which a lot of us would say is not true. So simply embedding it as an assertion … before a discussion [with stakeholders] is troubling.”

The ISO also has not decided on how to handle external transactions, saying it “is considering whether the external proxy bus LBMPs should be posted without the carbon effects rather than establishing a settlement mechanism that applies a carbon charge to imports and a credit to exports.”

It also noted the “robust stakeholder discussion” over how carbon charges will be allocated to loads, outlining four proposals without expressing a preference for one.

Questions on Analysis

ISO officials also faced tough questions during the briefing on the Dynamic Change Case.

Lang questioned how the NYISO will adjust the results of the MAPS analysis regarding the assumed location of renewable resources.

“Wind is being sited in particular areas because of cheap land, wide open spaces and good wind,” said Lang. He asked what the NYISO’s basis is for assuming that developers would move projects into other areas, such as Rockland County or New York City, solely because of higher LBMPs.

Bouchez said the ISO is not projecting wind development in the city.

“It is reasonable to assume — and I’ve talked to a number of developers — as to whether or not higher LBMPs in different locations would affect their choice to develop a project or not. And the answer has always been yes, because they’re looking to all the inputs to the project.”

Lang said it appeared the ISO was using a “very ad hoc approach, without any kind of methodology” and asked that NYISO discuss its methodology before performing the analysis.

Bouchez promised to research the issue with the experts working on it and report back. But she could not promise an explanation would come before the analysis is conducted. Officials said the first results from the analysis should be available about Sept. 10.

Mike Mager, representing Multiple Intervenors, a coalition of large industrial, commercial and institutional energy customers, said his client is unlikely to support carbon pricing without more certainty about how the state Public Service Commission will allocate residual payments to customers and between residential and non-residential accounts.

“We’re trying to get comfortable with [the concept of ] carbon pricing,” Mager said. “Are you telling us we’re going to vote on something and have no idea whether the PSC is ever going to let [all of the carbon residuals even] flow back to end-use customers or flow [them] back in an equitable manner? We would automatically oppose that. I think you’re going to get a lot of concern from other parties too. …

“I view it similarly to the whole issue of how is the carbon price set? How is it updated? When is it updated? What’s the method for updating it? These are all huge gaps in the proposal that [are] going to need to be fleshed out before something’s ready to be voted on, in my opinion. Otherwise you’re going to get a lot of votes in opposition due to the extreme uncertainty.”

Bouchez said a vote is unlikely before the second quarter of 2019 and that the ISO will begin its normal stakeholder process once the task force concludes its work.

“So we’re going to, at that point, spend a lot of time talking about exactly what we mean and how do we do this and how do equations for different things work and what does the Tariff look like. So that at that point we’ll be really nailing down a lot of the details but also potentially talking about different options,” she said. “So, I think there’s lots of opportunities to have those detailed discussions.”

August 7, 2018

Refinancing, Completed Tx, Round out NiSource Q2

By Amanda Durish Cook

NiSource last week reported second-quarter earnings of $23.2 million ($0.07/share), compared to a net loss of $44.4 million ($0.14/share) for the same period a year ago because of a hefty refinancing fee. (See NiSource Blames Debt Refinance Fee for Q2 Loss.)

The Merrillville, Ind.-based parent of Northern Indiana Public Service Co. and Columbia Gas earned $299.3 million ($0.86/share) for the first half of 2018.

Speaking during an Aug. 1 earnings call, CEO Joe Hamrock said the company has taken steps to strengthen the company’s finances in response to federal tax cuts, including offering about 25 million shares ($600 million) of common stock in a private placement and refinancing $760 million in long-term debt through the issuance of $400 million of preferred stock and $350 million of five-year notes.

“Due to financial statement impacts and the timing of federal tax reform implementation, our year-over-year consolidated results can be difficult to compare,” CFO Donald Brown said. “However … we are making continued progress on managing our annual operating and maintenance expenses, and we now expect our annual O&M expenses to be down approximately 4% in 2018 versus 2017.”

NiSource also remains on track to invest up to $1.8 billion in regulated utility infrastructure in this year, Hamrock said.

Hamrock said NiSource subsidiary Northern Indiana Public Service Co. placed two major Indiana transmission projects into service during the quarter, including the 100-mile, 345-kV Reynolds-Topeka transmission line and the 70-mile, 765-kV Greentown-Reynolds line. The projects, which cost a combined $600 million, were both part of MISO’s 17-project multi-value portfolio approved in 2011. (See MISO Triennial Review Shows Multi-Value Project Benefits.) Hamrock said the lines will “enhance regionwide system reliability, provide environmental benefits by increasing access to wind and solar energy and improve access to lower-cost electricity for customers.”

NIPSCO has also solicited 90 proposals for replacement capacity through its integrated resource plan, targeted for submission to the Indiana Utility Regulatory Commission by the end of the year.

Hamrock said the company received a “robust response to our request for proposals that should provide diverse options to meet our customers’ electricity needs for years to come.” He added the proposals total more than 20 GW with “several diverse fuel options.”

“The next step is to fully evaluate all of these options to develop the right portfolio of generation to best serve our Indiana electric customers,” he added.

In its last IRP, NIPSCO announced it planned to retire 50% of its coal-fired fleet by 2023. The company retired its 480-MW Bailly Generating Station Units 7 and 8 in northern Indiana on Lake Michigan in May, according to schedule. Both units were more than 50 years old.