Page 1206 – RTO Insider

February 20, 2018

Expert Sees ‘Extreme Uptick’ in Cyber Attacks on Utilities

By Rich Heidorn Jr.

WASHINGTON — The cybersecurity expert whose firm discovered the malware that caused blackouts in Ukraine in 2016 told state regulators that hackers targeting the U.S. electric industry are growing more numerous and more skilled.

SCADA cybersecurity Dragos NARUC — Lee | © *RTO Insider*

“There are five dedicated teams targeting infrastructure sites in North America, including eight different campaigns targeting sites,” Robert M. Lee, CEO of cybersecurity firm Dragos, told the National Association of Regulatory Utility Commissioners’ Winter Policy Summit on Feb. 11. “This is an extreme uptick.”

In June, Lee’s company identified malware it named CrashOverride as the likely cause of a disruption in December 2016 that cut one-fifth of Kiev’s power consumption for an hour. (See Experts ID New Cyber Threat to SCADA Systems.)

The attack occurred about a year after the December 2015 attack on Ukraine — the first time hackers had taken down a portion of the power grid. The 2015 attack used the BlackEnergy program, which highjacked the supervisory control and data acquisition (SCADA) systems, taking control of operator workstations and locking the operators out.

CrashOverride — which can control circuit breakers without any manual involvement — takes advantage of the simplicity of SCADA. “CrashOverride was just knowledge of the 2015 attack getting codified in malware to make it scalable,” Lee said. “A lot of times we tell ourselves, ‘There’s computer vulnerabilities; if we patch the computer vulnerabilities, we’re OK.’ But that’s not the actual risk. … [The 2016 Ukraine attack] was just adversaries learning the industrial systems and using them against themselves — almost becoming malicious insiders even though they were remote.”

The 2016 outage lasted only an hour. But, Lee said, CrashOverride is still dangerous because it “can work without any modification across all of Europe, most of the Middle East and most of Asia.”

The malware is an illustration of the increasing sophistication of hackers, Lee said. As recently as 2014, he said, there were only two campaigns against infrastructure sites. 2015 saw not just the first attack on Ukraine but also a cyberattack that caused physical damage at a steel mill in Germany — only the second attack to produce such results, after the Stuxnet attack on Iran’s nuclear centrifuges.

Left to right: Roxey, Lee and Hempstead | © *RTO Insider*

Last year, the first known malware specifically targeting industrial safety systems was identified, Lee said. The malware, which targets Schneider Electric’s Triconex safety instrumented system, was deployed against at least one victim in the Middle East. “It was going after safety systems in oil and gas production facilities. The only purpose of a safety system is to protect human life. If you go after it willfully … you are either intending to kill people or you’re just OK with doing so.”

Lee said grid operators and other industries face two strategic challenges. “We don’t truly understand or appreciate our industrial threat landscape,” he said. “So, we get a lot of best practices or compliance standards written off of business network security, not industrial network security to address the real risk.

“The second challenge is there’s not a lot of people who are industrial cybersecurity experts. The Department of Homeland Security puts that at around 500 people in North America … so you’re not going to scale that across the industry.”

Lee said small electric cooperatives and water utilities may be particularly vulnerable because of their limited staffs. He said his company has done “charity” work for one small water utility where “the one IT guy actually mows the lawn on Fridays.”

Tim Roxey, NERC’s chief security officer, said there are fewer than 500 people who have the necessary cybersecurity expertise and understanding of both NERC’s Critical Infrastructure Protection standards and federal government rules.

“You don’t find a whole lot of beer conversations around the bar about the Administrative Procedures Act, and yet these things are fundamental … to how we actually … develop the standards, implement the standards [and] enforce the standards,” he said.

There is some good news on that front, however. In an earlier presentation at the NARUC meeting, Dennis P. Gilbert Jr., Exelon’s chief information security officer, reported on his company’s adoption of the National Initiative for Cybersecurity Education (NICE) Workforce Framework. Developed by the National Institute of Standards and Technology, the program provides organizations with a common lexicon for describing cybersecurity careers by category, specialty area and work role. It involves creating new job titles and performing a market salary assessment.

Gilbert said Exelon was happy to reward many of their cybersecurity team members with 10 to 35% pay raises, citing better morale and a lower attrition rate of 5% — reducing the costs of having to recruit and train new workers in the “high demand, low density” career field.

How Moody’s Measures Cyber Risks

Jim Hempstead, managing director of Moody’s Investors Service’s Global Infrastructure Finance Group, who shared the panel with Lee and Roxey, explained how cyber risks figure in credit rating agencies’ evaluation of companies’ ability to pay their debts.

“We do not explicitly incorporate cyber risks into the credit analysis for the utility industry or for any of the other” industries, Hempstead said. “The transparency and disclosure around cyber risks are unreliable. There’s just not enough disclosure as to what the events are. And there’s not enough disclosure as to what is actually happening behind it.”

Instead, Hempstead said, Moody’s conducts scenario analyses that treat cyberattacks like extreme weather — a low-probability, high-impact event.

“We have seen over and over again utility companies that are able to absorb the impact of a severe event that in many instances has significant financial consequences, but the company is still able to right itself and put itself back on track.

“Now that means the cyberattack [modeled] is not a permanent destruction of critical infrastructure,” Hempstead added, distinguishing it from the dire scenarios painted by Ted Koppel in his controversial 2015 book “Lights Out.” (See Critics: Koppel Doomsday Scenario Ignores Prep.)

“If Ted Koppel is correct and everything east of the Mississippi is affected by cyber for 18 months, that’s outside the bounds of what we’re incorporating in our analysis,” Hempstead said. “But because utilities are viewed by Moody’s as critical infrastructure assets, we believe there will be an extraordinary government intervention to assist the company in putting itself back on track.”

Hempstead said Moody’s is concerned that the cybersecurity regulations for the utility industry “could create a culture of compliance where the defenses are relaxed because the compliance check boxes are getting checked. That’s, we don’t think, the right mentality. Cyber risk is an enterprise risk issue and therefore it resides at the board of directors. And we are very encouraged at how many boards of directors in the utility sector are very focused on cyber.”

Lee said some of his customers have been reluctant to embrace innovation for fear of being found in violation of reliability standards. Others express concern over how Dragos’ subscription-based services will impact their bottom lines. “Right now, one of the biggest pushbacks I get from a lot of my customers across the utility industry is, ‘Hey is there any way we cap ex this?’” he said. “We have to figure out how to make sure that the [security effort] that is already moving in the right direction is not hampered by the way we want to do accounting.”

GridEx IV

In an earlier presentation, Bill Lawrence, director of NERC’s Electricity Information Sharing and Analysis Center (E-ISAC), shared lessons learned from GridEx IV exercise in November, which simulated physical and cyberattacks on the electric system. (See Ukraine Attacks, ‘Fake News’ Color NERC GridEx IV Drill.) E-ISAC works with the Department of Energy and the Electricity Subsector Coordinating Council (ESCC) to inform the industry about physical and cyber threats.

“The scary thing is … everything we come up with [as an attack scenario] has happened somewhere in the world — about 99% of our entire scenario [has happened],” Lawrence said. “So, things with drones, things with modular malware, things with drains on resources in both computer and physical security.”

A public report on GridEx IV is due at end of March. A meeting will be held in November to plan for GridEx V, to be held in 2019.

February 20, 2018

ISO-NE Defends CASPR Against Protests

By Michael Kuser

ISO-NE on Thursday defended its proposed two-stage capacity auction, responding to criticism by its External Market Monitor and others.

In its Feb. 13 response to protests, the RTO asked the commission to approve its Competitive Auctions with Sponsored Policy Resources (CASPR) program, saying the Monitor’s “proposed cure would be worse than the disease” (ER18-619). Monitor David Patton filed a protest Jan. 30 saying that he supports “the objective and approach” of CASPR but that the RTO’s proposal has a “critical design flaw” that will result in “inefficient investment and retirement decisions and over the long term … raise costs substantially to New England’s customers.”

Also filing protests in response to the Jan. 8 CASPR filing were Massachusetts Attorney General Maura Healey; municipal utilities (New England Consumer-Owned Systems); Connecticut; the Natural Gas Supply Association; a coalition of environmental groups (Clean Energy Advocates); the New England Power Generators Association; and several merchant generators. (See CASPR Filing Draws Stakeholder Support, Protests.)

The CASPR proposal grew out of the New England Power Pool’s Integrating Markets and Public Policy (IMAPP) initiative, launched in August 2016 to address state regulators’ concerns about ratepayer costs associated with policy-driven resources and generators’ fears that out-of-market procurements of renewable generation would suppress capacity prices.

Under ISO-NE’s proposal, it would clear the Forward Capacity Auction as it does today, applying the minimum offer price rule (MOPR) to new capacity offers to prevent price suppression. In the second Substitution Auction (SA), generators with retirement bids that cleared in the primary auction would transfer their obligations to subsidized new resources that did not clear because of the MOPR. The proposal would phase out the current Renewable Technology Resource (RTR) exemption, which has allowed ISO-NE to clear 200 MW of renewable generation in its capacity auction annually (to a maximum of 600 MW) without regard for the MOPR.

ISO-NE CASPR two-stage capacity market — ISO-NE’s External Market Monitor included this example in its protest, saying excluding new conventional resources from the substitution auction (left) would clear only 400 MW of sponsored resources, with three existing resources retiring and sponsored resources foregoing $31.2 million in capacity payments. Under the Monitor’s proposal (right) 500 MW of sponsored resources would clear and only one plant would retire. Sponsored resources’ foregone capacity payments would total only $2.7 million. | *Potomac Economics*

Bad Cure

ISO-NE said it prohibited new conventional resources from participating in the secondary auction “to protect the Forward Capacity Market’s ability to guide competitive and cost-effective entry and exit decisions to maintain resource adequacy.”

But Patton’s Jan. 30 filing said the exclusion of new conventional resources from the SA will cause “new resources to clear and enter when they are not economic or needed and existing resources to retire that are economic to continue operating and whose costs of remaining in operation (i.e., going forward costs) are much lower than the entry costs of new resources that are entering.”

Patton would allow new conventional resources to clear through the SA “so they may be efficiently displaced by the sponsored resources.”

“This was a component of the ISO’s original proposal, but it decided to alter its proposal by excluding the new conventional resources from the Substitution Auction,” Patton wrote. “By doing this, the supply and demand (and prices) that will determine when a new conventional resource enters will ignore supply from the sponsored resources.”

The RTO retorted that “the EMM’s proposed cure would be worse than the disease” by creating “more, and more significant, problems than the overbuild problem it seeks to fix.”

One such problem would be fictitious entry, in which developers with no intention of building generation enter the FCA just to secure the severance payment in the second auction. The EMM’s fix? New conventional resources that are displaced by a sponsored resource would receive no payment.

The RTO said that could scare off new competitive generation, resulting in high capacity clearing prices — the “price blowout problem.”

Patton said that fear is “misplaced.”

“The risk described by the ISO is a risk that is common to all investment decisions and is efficient for the investor to consider in making its investment decision. Any time new resources are entering the market, whether they are sponsored resources or competing conventional resources, this will reduce the expected profitability and increase the risk to subsequent investment,” he wrote.

The EMM would modify the MOPR applied to sponsored resources in the primary FCA so that they can clear at a moderate price, potentially replacing the market-based clearing price with an administratively determined one.

“In addition to its complexity, this multilayered solution is both unfair and ineffective,” the RTO said.

Impossible to Win?

“In this situation, the conventional new resource has responded to the market’s price signal and succeeded in securing a capacity supply obligation (CSO) because it was willing to sell its capacity in New England at the primary auction’s clearing price,” the RTO said. “To strip such a resource of its award without compensation would alter the meaning of the clearing price, as a high price no longer would serve its fundamental purpose as a market signal to encourage commercial investment.”

The EMM’s proposal makes it impossible to “win” an auction, and the outcome differs fundamentally from “the outcome of a normal competitive auction in which an investor fails to clear because its offer price exceeds the market’s clearing price,” the RTO said.

ISO-NE also objected to the EMM’s proposed “price-setting by administrative dictate,” which it found “problematic, both practically and philosophically.”

Practically, the EMM methodology would create reliance on a predetermined estimate that may or may not reflect the true net cost of new entry (CONE), and “to the extent that number is wrong, FCM’s clearing price may be inflated or deflated,” the RTO said.

Philosophically, the EMM’s proposal would result in an outcome largely dependent on administrative parameters. The outcome, like that of the RTR exemption that CASPR seeks to replace, “ameliorates system overbuild but undermines the competitiveness of capacity prices,” ISO-NE concluded.

Applying the Monitor’s proposal to FCA 12 would have resulted in total costs of $4.15 billion, an increase of $908 million, or 28%, the RTO said.

“There can be no perfect solution that completely meets the objectives to maintain competitive pricing and accommodate state-sponsored resources,” ISO-NE said. “When required to trade between these competing objectives, the ISO prioritizes competitive prices.”

RTR Exemption

The RTO also defended its proposal to phase out the RTR exemption, calling it a “blunt instrument.”

The conditions that made the RTR exemption just and reasonable upon its adoption will no longer exist going forward, the RTO said: “Instead, load growth has slowed, the region has excess capacity, and, most significantly, the states have announced plans to contract for substantial amounts of sponsored capacity.”

NextEra Energy and NRG Energy insisted that the commission eliminate the RTR exemption immediately, saying it suppresses prices. CASPR would phase out the exemption by allowing the exempt megawatts that have accrued in earlier auctions — currently 481 MW — to be used over the coming three years through FCA 15.

NextEra argued that the three-year phase-out made no sense because the conditions that supported the exemption no longer exist. The RTO answered that a measured transition was necessary to maintain investor confidence and lower costs over the long term. It noted that the commission has accepted similar transition mechanisms in other capacity market proceedings.

Attorney General Healey opposed CASPR as not allowing “for any regular or reliable integration of sponsored policy resources” into the FCM. She recommended a mechanism like the “backstop” proposed by the New England States Committee on Electricity, which would guarantee entry of up to 200 MW of sponsored policy resources annually regardless of whether they were matched by retirements.

She also suggested the commission could remand the proposal to the RTO with an order to reinstate the RTR exemption.

The RTO said that, given current market conditions, a 200-MW RTR exemption would depress FCA clearing prices by up to 87 cents/kW-month. Continuing the RTR exemption or adding a backstop would undermine CASPR “because no sponsored policy resource would elect to sell capacity at a low price in the Substitution Auction when it could instead receive the higher primary auction price through the exemption,” ISO-NE said.

February 20, 2018

CAISO Board Elects New Leadership

By Jason Fordney

The CAISO Board of Governors last week enacted new governance policies and named Governor David Olsen as chairman. It also reviewed the ISO’s policy roadmap for 2018.

In a teleconferenced meeting Thursday, the board enacted a new process whereby governors will hold yearly elections for chair. The five-member board voted to replace sitting Chair Richard Maullin with Olsen, who was originally appointed to the board in 2012 by Gov. Jerry Brown.

Governor Angelina Galiteva said that with CAISO involved in more regional matters and the Western Energy Imbalance Market (EIM), the board felt members should have the opportunity to participate as chairs and share some of the growing workload. The board went through an analysis to study best practices, she said.

CAISO board of governors — Galiteva (left) and Ferron | © *RTO Insider*

“This is something we thought over and talked about for quite a while,” Galiteva said. The board elected her to the newly created position of vice chair, nominated by Governor Mark Ferron and seconded by Governor Ashutosh Bhagwat.

“We are entering a period where there could be some rapid change we are part of or instrumental for,” Maullin said, as other board members thanked him for his service in his role. Maullin’s term on the board ended Dec. 31, and he said remaining on the board depends on the California State Senate, which confirmed him as chair in July 2015. He was reappointed by Brown in January 2015.

Cook Briefs Board on 2018 Roadmap

CAISO Director of Market and Infrastructure Policy Greg Cook briefed the board on the 2018 Policy Initiatives Roadmap and Annual Plan, saying the presentation to the board represents the final step in the implementation process.

In January, Cook briefed the EIM Governing Body on the plan, which includes a proposal to extend the ISO’s day-ahead market to the EIM. (See CAISO Plan Extends Day-Ahead Market to EIM.) Each balancing authority area would retain reliability responsibility, and states would retain control over integrated resource planning. Transmission planning and investment remains with each BAA and local regulatory authority.

Cook shared some of the tasks associated with the day-ahead market extension, including the alignment of transmission access charge paradigms to ensure EIM entities recover transmission costs consistent with the existing bilateral network, and consistent billing determinants across the day-ahead market footprint for market efficiency. There will also be distribution of congestion rents collected through the day-ahead market and a day-ahead resource sufficiency evaluation, among other requirements.

CAISO board of governors keith casey — Casey | © *RTO Insider*

Keith Casey, the ISO’s vice president of market and infrastructure development, told the board that implementing the day-ahead across the EIM will provide additional benefits, but it “certainly will fall short of the full benefits we would get with full participation under a regional construct.” These would include efficiency of a single balancing authority over a larger footprint, as well as transmission planning and resource adequacy benefits.

“We believe it has important benefits … but I do want to stress it will fall short of the full integration benefits,” Casey said.

PG&E Continues Criticism of RMRs

During a public comment period, Eric Eisenman, director of ISO relations and FERC policy for Pacific Gas and Electric, told the board that PG&E has no issue with anything in the roadmap but that addressing the increasing use of reliability-must-run designations (RMRs) and the capacity procurement mechanism (CPM) is the utility’s “highest priority.” He reminded the board of the “robust discussion” it had over RMRs at its November meeting when the designation of the gas-fired Metcalf Energy Center was approved. (See Board Decisions Highlight Market Problems.)

CAISO board of governors David Olsen — The CAISO Board of Governors and others at the November meeting in Folsom, California | © *RTO Insider*

“PG&E continues to be very concerned about a slew of RMRs for 2019 that would be designated later this year,” Eisenman said. “But at this point, we just don’t know what is going to happen.” He urged CAISO to implement more extensive “Phase 2” changes in its RMR/CPM initiative in time for 2019 designations. The ISO has indicated it only intends to address must-offer requirements for RMR and CPM units in that time frame.

Casey said the ISO is looking at transmission alternatives to prevent situations that might otherwise lead to RMRs, including working with PG&E to address “low-hanging, fast upgrades” in the subarea where the Metcalf plant sits. The improvements would alleviate about 600 MW of local capacity requirements and are included in a transmission plan due to be finalized in March, he said.

“There is much we can do — we have a great deal of flexibility with the transmission plans to do those types of studies,” but it would be challenging to complete the improvements by fall 2019, he said.

“We share PG&E’s urgency about getting after these RMR reforms,” Casey said.

CAISO is in the midst of developing a package of enhancements to the RMR/CPM process, which is proving to be a contentious proposal among market stakeholders. (See CAISO, Stakeholders Debate RMR Revisions.)

February 20, 2018

FERC Approves EIM Changes, Western Measures

By Jason Fordney

FERC on Thursday approved a package of modifications to improve market efficiency developed by CAISO for the Western Energy Imbalance Market (EIM). It also issued several other decisions related to Western states and energy markets.

The commission said the EIM measures would improve efficiency by automating manual processes, providing greater transparency into bilateral transactions and enabling increased participation in both the EIM and CAISO.

The approved changes include automated matching of import/export schedule changes between resources inside and outside the EIM, as well as the ability to automate changes to mirror system resources at intertie scheduling points between CAISO and an EIM entity (ER18-461).

“We find that the automated matching and the automatic mirroring functionalities will result in more efficient EIM market outcomes by automating manual processes that are prone to errors and better maintain balance between resources and load following intertie schedule changes,” FERC said.

The EIM Governing Body approved the package of market changes in November 2017 | © *RTO Insider*

The EIM Governing Body approved the package of changes in November, after CAISO had scaled down the initiative based on consultations with stakeholders. (See EIM Governing Body Approves ‘Consolidated’ Initiatives.) The changes also facilitate bilateral settlements and improve the market’s modeling accuracy by expanding the functions of non-generator resources.

CAISO had requested approval of the measures by Feb. 15 to allow for the participation of Powerex and Idaho Power in the EIM on April 4.

Deseret Earns MBR Authority

The commission last week also approved Deseret Generation & Transmission Co-operative’s updated market power analysis for the Northwest region, granting the utility market-based rate authority effective Sept. 12, 2016. Utah-based Deseret became a public utility in 1996 after paying off its debt related to rural utility service (ER16-2186).

Deseret owns the 458-MW Bonanza coal-fired plant and a 25% interest in the 430-MW Hunter 2 coal-fired unit, both in the PacifiCorp balancing authority area.

FERC Approves PG&E/Port of Oakland Agreement

The commission also approved an interconnection agreement between Pacific Gas and Electric and the Port of Oakland but suspended the agreement and subjected it to hearing and settlement judge procedures (ER17-2536).

FERC EIM Energy Imbalance Market Gridliance — The Port of Oakland is a major container shipping facility and a municipal electric supplier.

The port acts a municipal electricity supplier that serves customers located at the Oakland International Airport, which it owns and operates, using PG&E’s transmission and distribution facilities.

Last year, the port submitted an application to convert its Cuthbertson substation from retail service to wholesale interconnection service under PG&E’s transmission owner tariff, but PG&E identified an issue with the tariff based on the substation’s power factor, which it said has to be resolved before it can provide wholesale service.

The port contends that PG&E’s sales for resale to it are subject to FERC jurisdiction and that it is concerned about provisions in the interconnection agreement referring to matters under the jurisdiction of the California Public Utilities Commission. The port argues that PG&E is attempting to “improperly impose” CPUC-jurisdictional exit fees on it and protests language describing the change to wholesale service as a notice of departure from PG&E, subjecting the port to departing load fees.

The port also contests that certain aspects of the agreement are unreasonable and unduly discriminatory compared with other PG&E interconnection agreements.

FERC set a public hearing subject to settlement procedures to be held within 15 days.

GridLiance Rehearing Request Rejected

FERC rejected GridLiance West’s rehearing request contending the commission erred when it failed to approve the company’s proposed use of an actual capital structure related to incentive rates for facilities it sought to acquire from Valley Electric Transmission Association (ER17-706). GridLiance West said the proposed capital structure was comparable to similarly situated transmission companies.

In its order denying rehearing, the commission said it made no final determination regarding the proposed capital structure but “found that its preliminary analysis indicated that the proposed TO Tariff had not been shown to be just and reasonable and raised issues of material fact that could not be resolved on the record before the commission.”

Idaho Commission Complaint Headed to Court?

FERC also declined to act on a petition for enforcement filed by Franklin Energy Storage against the Idaho Public Utilities Commission (EL18-50, et al.). The company argued the state commission had improperly classified its energy storage facilities as solar qualifying facilities, preventing them from being eligible for the PUC’s stated electricity rate under the Public Utility Regulatory Policies Act. The rate is available to non-wind and non-solar QFs of an average capacity of 10 MW or less.

The decision will allow the company to bring an enforcement action against the Idaho commission in the appropriate court, FERC said.

February 20, 2018

FERC Grants Deadline Waiver for New Hampshire Generator

By Michael Kuser

FERC on Thursday granted a waiver request from Public Service Company of New Hampshire (PSNH), allowing ISO-NE to accept its restoration plan for the Lost Nation generating unit, which the company submitted one business day after the deadline under the RTO’s Tariff (ER18-465).

Eversource Energy, PSNH’s parent company, in January completed the sale of its fossil-fuel generation units in New Hampshire to Granite Shore Power.

On Oct. 20, ISO-NE flagged the oil-fired combustion turbine in Groveton, N.H., for having a significant decrease in capacity below its cleared capacity supply obligation (CSO) of 13.97 MW for the RTO’s 2018-2019 capacity commitment period.

FERC ISO-NE waiver request PSNH — Covered bridge over the Upper Ammonoosuc River next to the 18-MW Lost Nation plant in Groveton, NH.

Under the rules governing the RTO’s annual reconfiguration auctions, Lost Nation had 10 business days to either purchase additional capacity to replace the shortfall or submit a restoration plan showing how it would be able to meet its obligation.

PSNH said the decrease in capacity occurred because a summer seasonal claimed capability audit was not performed. An Eversource employee intended to file a restoration plan showing that Lost Nation was dispatched four days in September 2017 and thus should be capable of supplying output to meet its awarded CSO.

The utility said that two events caused the delay in submitting the restoration plan.

First, the mother of the employee charged with submitting the plan died on Oct. 29, 2017, while the plan was out for review. Then, after a strong storm tore through the state on Oct. 30, the employee was called to storm duty and performed three consecutive 13-hour shifts until being released on Nov. 2. He was then given leave to prepare for his mother’s Nov. 4 memorial service.

The combination of events distracted the employee from submitting the restoration plan by the close of the Friday, Nov. 3 submission window; he submitted the plan the morning of Monday, Nov. 6. The RTO said it could not unilaterally waive the Tariff-imposed deadline.

In its Feb. 15 decision, the commission found that “PSNH acted in good faith by submitting the restoration plan as soon as possible after it discovered the omission.” The commission also noted that PSNH’s waiver request was uncontested.

February 20, 2018

FERC: NYISO Not Done on Order 1000 Rules

By Michael Kuser

FERC ruled Thursday that NYISO must make additional changes to comply with Order 1000, while acknowledging in a separate docket that it erred in directing the ISO to change the indemnification language in its pro forma development agreement.

The commission said transmission developers must indemnify NYISO except for acts of “gross negligence or intentional misconduct.” In ordering NYISO to remove the word “gross” from the agreement, the commission said it failed to follow its precedent in a 2015 order involving MISO (ER15-2059-002; ER13-102-008).

NYISO FERC FERC Order 1000 compliance — | *NYSEG*

FERC also granted NYISO a request for clarification, saying it will allow the ISO to propose a new process for evaluating alternative regulated transmission solutions and regulated backstop solutions for interconnection. The ISO’s current process is outlined in Tariff Attachments X and S.

But the commission rejected rehearing requests by the New York Transmission Owners (NYTOs), who balked at the commission’s requirement that TOs responsible for providing “backstop” solutions to a reliability need — normally the incumbent TO — sign the development agreement, as is required of nonincumbent transmission developers.

“If responsible transmission owners developing regulated backstop solutions are not required to execute a development agreement, they will have an advantage over nonincumbent transmission developers both in seeking selection in the regional transmission plan for purposes of cost allocation and remaining selected,” the commission said, noting that the NYISO Transmission Owners Agreement and the agreement between NYISO and the NYTOs on the Comprehensive Planning Process for Reliability Needs are less stringent than those in the development agreement

The NYTOs consist of Central Hudson Gas & Electric; Consolidated Edison; New York Power Authority; New York State Electric and Gas; Niagara Mohawk Power; Long Island Power Authority; Rochester Gas & Electric; and Orange and Rockland Utilities.

Compliance Filings

FERC also provided its clarification on alternatives to Attachments X and S in a concurrently issued order in which it accepted in part Order 1000 compliance filings NYISO made in March and September 2016. The commission accepted most of the ISO’s Tariff revisions but rejected language it said was discriminatory or unjust (ER13-102, et al.).

It ordered the ISO to make changes in its proposed transmission interconnection procedures that it found unjust and unreasonable, including language on scheduling and definitions.

It also required the ISO to make changes in its proposed Operating Agreement regarding maintenance schedules, compliance with local reliability rules and investigations of equipment malfunctions.

The commission found “incorrect” the Tariff revision that said nothing in Attachment Y affects a TO’s right to recover the costs of upgrades to its facilities regardless of whether the upgrade has been selected in the regional transmission plan for purposes of cost allocation.

“Pursuant to Order No. 1000, once NYISO selects a transmission project in the regional transmission plan for purposes of cost allocation, the regional cost allocation method set forth in Attachment Y of the [Tariff] applies, unless the project developer ‘decline[s] to pursue regional cost allocation,’” the commission said.

February 18, 2018

PJM Markets and Reliability Committee Preview: Feb. 22, 2018

Below is a summary of the issues scheduled to be brought to a vote at the PJM Markets and Reliability Committee on Thursday. (The scheduled Members Committee meeting was canceled.) Each item is listed by agenda number, description and projected time of discussion, followed by a summary of the issue and links to prior coverage in RTO Insider.

RTO Insider will be in Wilmington, Del., covering the discussions and votes. See next Tuesday’s newsletter for a full report.

Markets and Reliability Committee

2. PJM Manuals (9:10-9:30)

Members will be asked to endorse the following proposed manual changes:

A. Manual 2: Transmission Service Request. Revisions developed to align manual with Tariff changes endorsed at the Dec. 21 meeting to revise the process for analyzing transmission service requests. The initial study is replaced by the firm transmission feasibility study.

B. Manual 11: Energy & Ancillary Services. Clarifies the energy-offer verification process for demand-side bids, including caps on price-sensitive demand bids; reverses prior change to pre-emergency and emergency demand response because they are outside the scope of FERC Order 831.

C. Manual 14D: Generator Operational Requirements. Clarifies information requirements and submission deadlines for generation transfers. (See “Owner Transfer Rules Revision,” PJM Operating Committee Briefs: Dec. 12, 2017.)

D. Manual 18: PJM Capacity Market. Revisions developed in response to a FERC order on rules for pseudo-tie requirements and a transition period for existing pseudo-ties (ER17-1138). (See FERC OKs Change to MISO, PJM Pseudo-Tie Rules.)

3. Tariff Revisions to Address Overlapping Congestion (9:30-9:45)

Members will be asked to endorse proposed Tariff and Operating Agreement changes to address overlapping congestion. PJM and MISO have been working to remove duplicative congestion charges and have developed a two-phase plan to eliminate them. These changes encompass the second phase. (See MISO, PJM Pursue Pseudo-Tie Double-Charge Relief.)

4. Summer-Only Demand Response Senior Task Force Charter (SODRSTF) (9:45-9:55)

Members will be asked to endorse a draft charter for the SODRSTF. The task force, which was developed to consider ways to take advantage of excess summer-only resources, has met several times. (See Stakeholders Seek Load Discussion in PJM DR Task Force.)

5. Sunsetting Senior Task Forces (9:55-10:15)

Members will be asked to sunset the Underperformance Risk Management Senior Task Force (URMSTF) and the Regulation Market Issues Senior Task Force (RMISTF). The URMSTF developed proposals on underperformance risk management, which failed to receive MRC stakeholder endorsement, and changes to external capacity performance requirements, which were endorsed. The RMISTF resulted in a new regulation signal being implemented, along with a package of regulation procedure and requirement changes. (See PJM Regulation Compensation Changes Cleared over Opposition.)

— Rory D. Sweeney

February 18, 2018

FERC OKs MISO Queue Changes, Orders Fewer Restudies

By Amanda Durish Cook

FERC last week accepted several small revisions to MISO’s new interconnection queue design but also told the RTO it must keep working to ensure it sticks to a commitment to reduce restudies.

The commission provided MISO a month to revise its Tariff to eliminate a practice of automatically conducting a restudy based on predetermined triggers, which include a project’s termination or the withdrawal of a project from the queue (ER17-156-002).

MISO FERC interconnection queue — | *MISO*

“In the October 2016 queue reform filing, MISO proposed that, instead of conducting a restudy automatically upon each occurrence of a restudy trigger, the RTO would re-evaluate the need for any common use or shared network upgrades associated with the project,” FERC said.

MISO FERC interconnection queue design — As of Nov. 2017 | *MISO*

FERC largely accepted MISO’s new, three-stage interconnection queue in January 2017, but it sought more detail on a few aspects of the plan, prompting a follow-up filing. (See FERC Accepts MISO’s 2nd Try on Queue Reform.) The commission at the time directed MISO to conduct restudies on an as-needed basis only, even when a triggering event occurs. It said the RTO “could decide in its discretion whether a restudy was needed or not.”

In revisions filed last March, MISO altered its Tariff to enable it to conduct restudies for reasons other than triggering events. In the most recent ruling, FERC reversed that move, saying the RTO cannot conduct a restudy absent a trigger.

FERC accepted several other smaller Tariff revisions that it had directed MISO to make, including:

Stipulating mandatory attendance of transmission owners in scoping-level meetings between MISO staff and interconnection customers;
Describing the types of events that trigger a queue restudy; and
Offering customers a provisional generator interconnection agreement option at any time in the interconnection process, regardless of whether MISO failed to meet a study deadline.

MISO was also required to scale back its site control requirement by the queue’s second decision point from 100% to 75% after FERC determined that complete site control is difficult to obtain so early in the process.

The RTO also had to clarify that an interconnection customer that withdraws early in the queue — at either the first or second decision points — will not be responsible for the costs of other customers’ interconnection studies, and that a customer withdrawing at the third decision point should only pay a study deposit fee to cover a potential restudy for another interconnection customer.

Finally, MISO added language to clarify that the batch of projects entering the definitive planning phase in August 2015 was grandfathered into the old queue design.

However, FERC’s recent ruling gave the RTO 30 days to clarify that the queue’s third and fourth $4,000/MW milestone payment collection is only an initial charge subject to change as costs become clearer in the study process.

“This language implies that the M3 and M4 milestone payments are set to $4,000/MW and are not subject to a true-up as more accurate estimates become available, which is not in line with MISO’s indication in its testimony,” FERC said.

In accepting MISO’s filing, FERC dismissed a bundle of complaints from EDF Renewable Energy as being outside the scope of the proceeding. EDF had asked FERC to force MISO to share more network modeling details and prescribe “remedies” should the RTO fail to complete studies on time. The company also sought a directive instructing MISO to develop a fast-track queue option for vetted projects, and complained that the RTO failed to coordinate its generator interconnection process with the transmission planning process.

Another EDF complaint against MISO’s new queue design is still outstanding. (See Renewables Developer Escalates MISO Queue Design Dispute.)

February 18, 2018

Mass. Picks Avangrid Project as Northern Pass Backup

By Michael Kuser

Avangrid announced Friday that Massachusetts has selected the transmission project of its subsidiary, Central Maine Power, as the alternative for the state’s 9.45-TWh clean energy solicitation if New Hampshire regulators do not approve the Northern Pass transmission line by March 27.

Massachusetts awarded the contract to Eversource Energy and Hydro-Quebec’s Northern Pass on Jan. 25, only to see the New Hampshire Site Evaluation Committee (SEC) unanimously reject the 1,090-MW transmission project a week later. Eversource appealed the decision, saying in a statement Feb. 16: “We have a strong legal argument for a reconsideration by the SEC.” (See New Hampshire Rejects Permit for Northern Pass.)

Avangrid Northern Pass Hydropower — | *Eversource, Central Maine Power*

CMP and Hydro-Quebec’s New England Clean Energy Connect (NECEC) transmission project would deliver up to 1,200 MW of Canadian hydropower to the New England grid via a 145-mile transmission line. The partners estimate the project to cost $950 million.

News of the selection drew a protesting tweet from Dan Dolan, president of the New England Power Generators Association: “Massachusetts is now all-in on Hydro-Quebec, going from the fatally flawed Northern Pass to a Maine project that still lacks virtually all its key permits. Hydro-Quebec is asking for Massachusetts consumers to guarantee them revenue through an above-market contract for electricity for the next two decades.”

Dolan said existing power plant operators in the region have invested more than $13 billion in their plants without any guarantee of cost recovery or profit.

Beginning Negotiations

CMP submitted applications for state and federal permits for NECEC in mid-2017 and said it expects to receive state approvals later this year and final federal permits in early 2019. The company said it will immediately begin negotiation of long-term contracts with the Massachusetts electric distribution companies to prepare for a submission to the state’s Department of Public Utilities in April 2018.

“Our applications for state and federal permits are moving forward with the strong support of communities and stakeholders in Maine,” CMP CEO Doug Herling said in a statement.

Eversource’s statement said that Friday’s decision “strikes a sensible balance by allowing negotiations with Northern Pass to continue, while establishing a back-up protocol that can be initiated if necessary.”

Avangrid Networks CEO Bob Kump said, “A new transmission link between Maine and Quebec would deliver a reliable, firm supply of clean energy to help dampen seasonal price instability when high demand puts pressure on natural gas supplies.”

Massachusetts issued its MA 83D solicitation for hydro and Class I renewables (wind, solar or energy storage) last July. The selection committee for the clean energy request for proposals issued in July 2017 includes representatives from the state’s Department of Energy Resources and from distribution utilities Eversource, National Grid and Avangrid subsidiary Unitil.

Any contract awarded under the request for proposals must be negotiated by March 27 and submitted to the DPU by April 25.

Other proposals for the RFP included Nova Scotia-based Emera’s Atlantic Link project, a 375-mile submarine HVDC transmission line from New Brunswick to Plymouth, Mass., to deliver 5.69 TWh of clean energy per year. National Grid partnered with Citizens Energy on two transmission projects; one of them, the Granite State Power Link, is a 59-mile HVDC line from northern Vermont to New Hampshire to deliver 1,200 MW of new wind power from Canada.

The state-owned Hydro-Quebec also partnered separately with Transmission Developers Inc. for the RFP and, as with Northern Pass, made two proposals, one pure hydro and one with a wind energy component.

February 18, 2018

Michigan Dam Ordered Shut over Safety Breaches

By Amanda Durish Cook

FERC last week ordered the shutdown of a Michigan hydroelectric project over longtime safety violations — the most significant of which relate to inadequate spillway capacity.

The commission will revoke the license for Boyce Hydro’s 4.8-MW Edenville Dam in northern Michigan on March 1 following its Feb. 15 cease generation order and denial of the company’s request for rehearing on the issue (10808-058).

FERC dismissed Boyce’s arguments that the commission didn’t consider corrective measures the dam had already taken; that it doesn’t have authority to order a dam to shut down; and that the cease generation order was arbitrary and capricious. FERC has been threatening to close Edenville since late last spring.

The commission last month gave Boyce until March 1 to correct violations, some of which that have persisted since 2004, including:

Failing to increase spillway capacity to address the increased likelihood of more frequent flooding;
Performing unauthorized dam repairs and excavation;
Neglecting to file a public safety plan or follow its own water monitoring plan; and
Failing to acquire all property rights and to construct required recreation facilities near the dam.

FERC has repeatedly told Boyce to construct two auxiliary spillways to reduce the risk of flooding, “a grave danger to the public,” the commission wrote.

“Boyce Hydro’s license includes terms and conditions concerning dam safety, property rights, water quality, public recreation and safety, and other areas of public concern,” the commission said. “Boyce Hydro has a long history of noncompliance with those terms and conditions … [and] failed to comply … except for the obligations to acquire and document certain property rights (although the lack of designs for the new and revised spillways makes it difficult to determine if it has acquired all necessary property rights).”

FERC hydropower Edenville Dam Boyce Hydro safety violations — Edenville Dam spillway

The commission in January granted Boyce a temporary stay of shutdown until the beginning of March so the company can use the dam’s powerhouse to pass flows to alleviate ice formation on spillway gates during winter. (See Michigan Dam Faces Shutdown over Longtime Safety Concerns.)

FERC said Edenville’s current spillway can only currently handle 50% of a probable maximum flood.

The commission ordered Boyce last year to file plans to construct spillways and provide public access and recreational facilities by late 2017, but the filings never materialized, it said. Although Boyce had hired an engineering firm to design a new spillway and promised to create an escrow account for 50% of its gross revenues to fund construction, FERC found those plans insufficient, saying that it would take the company two years to save enough money to fund spillway construction.

“Given that the public has already been at risk for more than 13 years due to the licensee’s refusal to remediate the project spillways, we cannot accept a proposal that will perpetuate the problem even longer,” FERC said.

The commission expressed disbelief that Boyce’s lengthy history of noncooperation would change now.

“After weighing the relevant factors, commission staff determined that the violations required prompt action and that the licensee’s persistent pattern of noncompliance provided strong evidence that it would not make serious efforts to come into compliance absent an order disrupting its operation,” the commission wrote.

FERC said it didn’t take the economic impacts of a shutdown lightly but said the move is “a situation of Boyce Hydro’s own making.”

Boyce can seek a rehearing of the order before a FERC administrative law judge within 30 days.