Page 1222 – RTO Insider

November 17, 2017

Ukraine Attacks, ‘Fake News’ Color NERC GridEx IV Drill

By Rich Heidorn Jr.

Participants in NERC’s GridEx IV began the two-day drill Wednesday encouraged by their coordination in recent hurricanes but chastened by the 2015 cyberattack on the Ukraine and the spread of disinformation via social media.

About 6,500 participants from 450 organizations took part in GridEx IV, including electric utilities, RTO officials, regional and federal government officials, first responders and intelligence agencies.

“The large-scale cyber and physical attack scenario is designed to overwhelm even the most prepared organizations,” NERC Acting CEO Charles Berardesco said during a media briefing Thursday morning. “Participating organizations are encouraged to identify their own lesson learned and to share them with NERC.”

nerc gridex iv — NERC led a media briefing on GridEx IV Thursday. Clockwise from bottom: Kimberly Mielcarek, NERC; Charles Berardesco, NERC; Patricia Hoffman, DOE; Kevin Wailes, Lincoln Electric System; Tom Fanning, Southern Co.; Duane Highley, Arkansas Electric Cooperative Corp.; Marcus Sachs, NERC. | *NERC*

Most of the participants are involved in two days of “distributed play” across the U.S., Canada and Mexico. In addition, about 100 executives gathered at Booz Allen Hamilton in Washington Thursday for a “tabletop” exercise run in parallel.

“The usefulness of these exercises is [testing] the unknown and heretofore unseen. It is to break the system. It is to find out where the friction points are [and] trying to harmonize the activities [of] the federal government, private industry and state and local governments,” said Southern Co. CEO Tom Fanning, co-chair of the Electricity Subsector Coordinating Council (ESCC). “It’ll be a great day. We’ll learn a lot.”

Previous Lessons Learned

Fanning said previous GridEx drills improved industry coordination, as he said was demonstrated in the “unprecedented collaboration” among investor owned utilities, cooperatives and municipal utilities following hurricanes Harvey and Irma in August and September.

“The ESCC also has a responsibility for helping to coordinate storm response,” he said. “I think this model is working exceptionally well. In fact, we believe the metrics would show that our recovery times were roughly half of what they have been for similar storms in the past.” Hardening of infrastructure also contributed to the speed of the storm recovery. (See Power Restored for 97% of Customers in Irma’s Wake.)

“You get good at what you practice, and we want to be good at response recovery,” said ESCC Co-Chair Duane Highley, CEO of the Arkansas Electric Cooperative Corp., who noted that about 50 cooperatives were participating. “And we want to build our relationships before we need them.”

ESCC Co-Chair Kevin Wailes, CEO of Lincoln Electric System, said a key improvement resulting from the 2015 drill was the creation of a cyber mutual assistance group. “We realized that we really did not have a deep enough bench … to deal with some of these events on an individual basis,” he said. “So we now have 130 companies involved in cyber mutual assistance.”

The 6,500 participants represented an almost 50% increase from GridEx III. (See GridEx III Shows Vulnerability of Power Grid to Cyberattack.)

This year’s iteration of the biennial exercise is the first to involve the finance, telecommunication and natural gas sectors in the tabletop exercise.

‘Real World’ Scenarios

The “injects” — or scenarios — were informed by the cyberattack that knocked out power to 225,000 customers in Ukraine for several hours in December 2015. (See How a ‘Phantom Mouse’ and Weaponized Excel Files Brought Down Ukraine’s Grid.)

“We always take real-world events as the basis for the exercise because the engineers that are running the distributed play … know what the vulnerabilities are,” said Marcus Sachs, NERC senior vice president and chief security officer.

“We will name specific vendors and components, so it’s a very realistic type of exercise.”

“There’s been a lot of operational planning and coordination since Ukraine in 2015 between government and industry,” said Chris Krebs, the Department of Homeland Security’s acting undersecretary for national protection and programs. “So this is a fantastic opportunity for us to start stress testing some of those planning assumptions we’ve made.”

In recognition of revelations about a Russian campaign to spread “fake news” during last year’s presidential election, officials said they also were incorporating the threat of disinformation on social media platforms.

“The unity of message … is just about as important as the unity of effort. That is, we’ve got to make sure we understand … how we advance our communications,” said Fanning. “An important aspect of that … is how do we gain more influence and control on social media.”

Cauley Absent

GridEx IV was the first such drill run without longtime NERC CEO Gerry Cauley, who was removed from his post Nov. 11 following his arrest on domestic violence charges. (See Cauley Arrest Tied to Relationship with NERC Subordinate.)

NERC issued a statement Wednesday saying the board “has engaged counsel to assist in conducting a thorough investigation” of the allegations. NERC spokeswoman Kimberly Mielcarek cut off Berardesco before he could answer a question about how he kept the Cauley situation from being a distraction going into the exercise.

“We’re keeping staff informed as developments unfold,” she said. “It’s premature for us to comment on anything further at this time. However, we do provide updates as they are available, and we will continue to do so both publicly and to our staff.”

Hopes for 2017 Drill

Patricia Hoffman, principal deputy assistant secretary for the Department of Energy’s Office of Electricity Delivery and Energy Reliability, said she hoped this year’s drill would test the energy secretary’s emergency authority. Section 202(c) of the Federal Power Act allows the secretary to order power plants to operate for reliability reasons during emergencies. It has been used infrequently, notably during the Western Energy Crisis in 2000 and after Hurricane Katrina in 2005.

The drill “also helps with us as we look at how we’re planning for modernization and investment in the infrastructure moving forward,” she said.

A report on the drill will be released in about March 2018.

November 17, 2017

Chatterjee: ‘We’ve Moved Past’ DOE NOPR

By Michael Brooks

WASHINGTON — FERC Chairman Neil Chatterjee on Thursday defended his call for interim price supports for coal and nuclear plants as a response to Energy Secretary Rick Perry’s grid resiliency proposal.

In remarks to reporters after FERC’s open meeting, Chatterjee expressed frustration with the reaction his plan has received from industry stakeholders. He said his critics were still debating the department’s Notice of Proposed Rulemaking — which calls for RTOs and ISOs with energy and capacity markets to pay generators with 90-day supplies of onsite fuel their full operating costs — and not his idea to provide a “lifeboat” for baseload plants while FERC considers the NOPR.

FERC ISO-NE Cheryl LaFleur Neil Chatterjee DOE NOPR — Chatterjee | © *RTO Insider*

Chatterjee was asked about discussions regarding the NOPR at the National Association of Regulatory Utility Commissioners’ Annual Meeting in Baltimore this week. “This is part of the confusion and why people are having the outsized reactions that they’re having,” he responded. “That entire debate at NARUC was predicated on the NOPR that Perry has submitted. What I’m sitting here talking about is what we’ve been working on for an interim step coupled with our own long-term rulemaking.” (See DOE, Pugliese Press ‘Baseload’ Rescue at NARUC.)

He said he was “cognizant” of the criticisms the NOPR has received, but that “people are still debating the NOPR as it was submitted to us. And what I’m trying to say is we’ve moved past that and we’re moving towards a constructive solution that still answers the questions that Secretary Perry asked in the NOPR in a way that does not distort markets and is legally defensible.”

Chatterjee revealed he was working on an interim solution last week. (See Chatterjee to Push Interim ‘Lifeboat’ for Coal, Nukes.)

He said he is contemplating proposing a “show cause” order requiring grid operators to compensate resources that may provide resilience benefits and are at risk of retirement as an interim measure while the commission conducts a longer-term rulemaking.

Chatterjee called on his critics to “calm down,” attributing their “hyperbolic” reaction to a lack of understanding of his plan.

“This is a very careful, thought-out approach that I think that when people have the opportunity to calmly look at it, there’s nothing controversial or radical.”

Chatterjee said it was “befuddling” that anyone would find it controversial for the commission to “carefully and thoughtfully” examine the long-term implications of not having coal and nuclear as part of the country’s generation mix. He emphasized repeatedly that his “lifeboat” plan was a work in progress but that it would be ready to act on by the DOE-stipulated Dec. 11 due date.

“We’re still fleshing it out,” he said. “It’s incredibly complex; I want to get it right, and as soon as it’s right and it’s ready and I’ve had time to review with my colleagues, I’ll discuss it in far greater detail at that time.”

Chatterjee said that in working on his idea, he has been trying to ameliorate concerns raised by Commissioners Cheryl LaFleur and Robert Powelson about the DOE NOPR.

“I’m hoping that in fleshing this out, [Chatterjee and his staff] will answer the questions and concerns my colleagues had and have a product that we’ll be able to build a consensus around,” he said.

Chatterjee has previously stated that he has not discussed his idea with the other commissioners.

He also said that he has not reviewed the price-formation proposal PJM released Wednesday — a longer version of what the RTO filed at FERC in comments on the NOPR. (See Rule Changes Could Spur $1.4B Jump in PJM Market Costs.)

“It’s certainly in line with the conversation that we’re having,” Chatterjee said. “It seems like something that we could look to for a longer-term solution. … But I still remain committed to doing something in the short term, in the interim, while we work towards some of the long-term issues that PJM acknowledged we have.”

A Farewell Address, of Sorts

In his remarks opening Thursday’s meeting, Chatterjee highlighted what the commission has done since he became chairman in August, including changes in hydropower licensing, proposals for improved cybersecurity and approval of 8 Bcfd of new natural gas pipeline capacity. (See FERC Sets 40-Year Term for Hydro Licenses and FERC Seeks Cyber Controls on Portable Devices; Sets GMD Plans.)
He said the DOE NOPR would be “the most significant issue we will face during my time on the commission.”

Thursday’s meeting was Chatterjee’s last as chair, with incoming Chair Kevin McIntyre set to join FERC “any day now.” McIntyre, along with Democratic Senate aide Richard Glick, were confirmed by the Senate two weeks ago and are awaiting their signed commissions from President Trump.

Heaping praise on FERC staff, Chatterjee also touted the 344 orders that the commission has voted on since the restoration of its quorum. He said there were only “a few odds and ends” left before the commission had eliminated the backlog of filings from its time without a quorum.

“I think it’s safe to say that FERC is working harder than ever for the American people,” Chatterjee said. “It’s been my distinct honor to be the one at the helm overseeing the accomplishments I’ve outlined today. I’m humbled by the experience and grateful to President Trump for entrusting me with this responsibility.”

He closed out the meeting by noting the “unorthodox” nature of his tenure: beginning as chair before going to regular commissioner.

“Doing it in reverse, I actually hope that the experience that I’ve had will help me be a more effective commissioner going forward,” he said, receiving applause after adjourning the meeting.

November 16, 2017

New Director to Join MISO Board, 2 Keep Seats

By Amanda Durish Cook

CARMEL, Ind. — A former airline executive is slated to become the newest member of MISO’s Board of Directors, while two incumbents will retain their seats, the RTO’s voting members have decided.

MISO board of directors — Wise | *Delta*

Newcomer Theresa Wise, former chief information officer for Delta Air Lines, will join Baljit “Bal” Dail and Thomas Rainwater to begin three-year terms on the nine-member body beginning Jan. 1.

Wise has also served as an executive consultant at Amtrak and CIO for Northwest Airlines. She holds a bachelor’s in mathematics from St. Olaf College and a master’s and Ph.D. in operations research from Cornell University.

“We are pleased to have an executive with Theresa’s knowledge and experience join the board. … With Theresa’s election and Bal and Tom returning to the board, we are well positioned as a governing body to continue providing steady, strategic guidance as MISO leadership navigates future challenges and opportunities,” board Chairman Michael Curran said in a statement.

Dail stood for a fourth term after receiving a waiver of rules limiting directors to three terms. MISO’s Nominating Committee granted the exception in June, saying Dail was needed to preserve the board’s knowledge about information technology. The decision was not taken lightly, committee members said. (See “Committee Permits Consideration of Extra Term for Dail,” MISO BoD Briefs.)

Wise replaces current Director Paul Bonavia, who announced this fall that he would not seek re-election for personal reasons. (See MISO Board Announces Candidates, Hears Budget Review.)

“Paul’s got some things he needs to tend to at home, and that’s going to take him away from MISO for the time being,” CEO John Bear said during a Nov. 14 Informational Forum. Bear commended Bonavia’s contributions over the last three years.

“Director Bonavia served MISO with the utmost commitment to our vision and mission — and we are grateful for his service,” Curran said. “He can leave the board knowing that his leadership helped propel the organization in the right direction.”

Vote Net Solutions, vendor for MISO’s election process, confirmed that 83 online ballots were cast. MISO needed 25% of its 138 voting members to participate to meet its quorum. Electronic voting was open for over a month.

John “Jeb” Bachman, former partner at PricewaterhouseCoopers, and Wolfgang Richter, former CIO at the consulting firm, stood as alternates in the election in the event that any of the candidates failed to garner a majority vote, but neither alternate proved necessary. In MISO board elections, alternates only rotate into the election for a second round of voting if any of the candidates don’t receive a majority in the first round.

November 16, 2017

Rule Changes Could Spur $1.4B Jump in PJM Market Costs

By Rory D. Sweeney

PJM on Wednesday released a proposal for revising price formation rules in its energy markets, teeing up stakeholder deliberation on changes that staff estimate could increase market costs by as much as $1.4 billion.

The two-part plan focuses on reducing out-of-market payments and changing shortage pricing to “accurately reflect the value of energy and reserves during reserve shortages.” PJM expects to present the plan to members through a problem statement and issue charge proposed at a Dec. 7 Markets and Reliability Committee meeting. It hopes stakeholders will approve a motion to examine the proposal through the stakeholder process at a second MRC meeting two weeks later.

LMP PJM price formation — An example presented by PJM highlights how its current LMP-calculation method fails to represent true incremental cost. When a flexible unit is on the margin, the LMP is its offer price, but when it is an inflexible unit, the LMP drops to the next flexible unit’s offer. The inflexible unit receives uplift as an out-of-market payment to compensate for its costs. PJM’s proposal would set LMP at the inflexible unit’s offer and pay flexible units lower in the stack to follow the reduction in load. | *PJM*

“Getting prices right is of growing importance, anticipating a continued increase in the penetration of intermittent resources,” the report says.

LMP Changes

PJM plans to reduce out-of-market payments, such as uplift, by allowing inflexible units — which can’t change their output incrementally — to set LMPs and paying flexible units to better follow load changes.

Speaking during a media briefing Wednesday, PJM’s Stu Bresler said that when the RTO implemented LMP, it knowingly included several “simplifying assumptions” that the algorithm wouldn’t consider units’ fixed costs in the market optimization or allow inflexible units to set prices. The assumptions “served very well,” but some of the “downsides … were masked … often enough” by flexible resources on the margin and setting prices with higher costs than inflexible units, he said.

“In the past, higher-cost flexible units set price often enough to ensure that all needed resources could earn sufficient revenues in the energy market, when combined with capacity revenues, to drive efficient resource investments,” the report says. “Today, the continuing penetration of zero-marginal-cost resources, declining natural gas prices, greater generator efficiency and reduced generator margins resulting from low energy prices have resulted in a generation mix that is differentiated less by cost and more by physical operational attributes.”

Allowing inflexible units to set LMPs and incentivizing flexibility will reduce out-of-market uplift payments and increase the value of flexible units with higher LMPs and flexibility compensation, PJM argues. The extended LMP method, which PJM had told FERC it was “actively exploring,” would bifurcate its security-constrained economic dispatch into separate dispatch and pricing runs, as is already done in MISO, ISO-NE and NYISO.

Shortage Pricing

To address shortage pricing, PJM proposes to create a 30-minute operating-reserve product to supplement its current 10-minute reserves and to revise its operating reserve demand curve to more accurately value granular amounts of reserves.

“Improved shortage pricing would substantially enhance market performance,” the report said, through incenting demand response and distributed generation “when it is most needed,” reducing the “‘missing money’ problem” that creates generators’ reliance on capacity market revenues and providing better signals for transmission investment.

“PJM believes that it is critical that … the shortage-pricing mechanism be reviewed and enhanced,” the report said.

Costs

Bresler noted that other grid operators, including MISO and ISO-NE, have already implemented portions of these proposals. He said either element would be “beneficial,” but that “we think the maximum benefit would be achieved by implementing both.”

The changes would affect both the real-time and day-ahead markets and come at a cost. PJM estimated the energy market changes will likely reduce capacity market costs but still increase overall costs between 2 and 5%, or between $440 million and $1.4 billion, annually.

Bresler said it isn’t possible to determine how the proposals would interact with any decision FERC makes on the coal and nuclear price supports suggested by the U.S. Department of Energy or if they would create any instances of double compensation.

“It’s very difficult to answer that question in the hypothetical,” he said.

Timing

PJM included the proposal in its comments to FERC on the DOE request, arguing that the commission should ignore the department’s ideas and instead give the RTO a deadline to present for approval its own solution. PJM had previously floated its proposal at a FERC technical conference on price formation. Members have criticized the RTO’s actions as attempting to bypass its stakeholder process.

Bresler said PJM is “very much looking to engage our stakeholder process with the proposal” but declined to rule out filing the revisions unilaterally if they don’t receive stakeholder endorsement.

“It’s too soon to answer that question,” he said. “We did suggest to FERC that putting some time bounds around that discussion and … requiring something back from PJM by some date in 2018 would be beneficial, and I think we’ll probably suggest [to stakeholders] … that we get in front of FERC [for approval] sometime in the fall of 2018.”

PJM included in its proposal the same letter of endorsement from Harvard economist William Hogan that it submitted with its FERC filing, but the RTO referenced none of the criticism that accompanied the proposal. (See NOPR Reply Comments Bring More Criticism of PJM Proposal.)

November 15, 2017

Cauley Arrest Tied to Relationship with NERC Subordinate

By Peter Key

NERC CEO Gerry Cauley seems unlikely to return to his job if his estranged wife’s allegations are true.

NERC FERC Gerry Cauley — Cauley | © *RTO Insider*

A police report, obtained by RTO Insider from the Gwinnett County Police Department in suburban Atlanta, quotes Cauley’s wife as saying he attacked her after she discovered him having cybersex with a “young female employee of his.”

Cauley was arrested for battery, a misdemeanor, in the early morning of Friday, Nov. 10. NERC placed Cauley on a leave of absence after his arrest and named General Counsel Charles Berardesco as interim CEO. (See NERC CEO on Leave After Arrest for Domestic Violence.)

Reached at home Tuesday night, NERC Board Chairman Roy Thilly declined to say whether NERC would investigate Cauley’s alleged relationship with a subordinate. The employee was not identified in the police report.

“I cannot talk to you about this matter,” Thilly said. “It’s a personnel matter, and it has to be handled very carefully.”

NERC later issued a statement saying the board “has engaged counsel to assist in conducting a thorough investigation” of the allegations. “The board takes the allegations seriously and based on a deliberate and objective investigation will act in NERC’s best interests,” it said.

The statement quoted Thilly, who said he is “in constant communication with NERC’s senior management team as they remain fully focused on NERC’s mission to assure the reliability and security of the bulk power system.”

Gerry Cauley couldn’t be reached for comment.

A FERC spokesman declined to comment.

According to the report, Jean Cauley told a responding police officer that she and Gerry are getting divorced and that he was living in the basement of their home in the Sugarloaf Country Club gated community in Duluth, Ga.

Jean told the officer she had washed several of Gerry’s shirts and was bringing them to his room. When she entered the room, she found her husband in front of an iPad. Shocked, she took the iPad, which she said is hers, and also found what the report describes as “several personal pictures of Gerald.”

At that point, Jean said her husband pushed her into a wall and then into a bathtub. “She stated that while Gerald was pushing her around, he asked her what she wanted and stated that if she calls the police, he will lose his job and she will get nothing from him.”

Police reported observing scratches and bruises on Jean and “that the bathmat was dishevelled [sic] and several of the shower curtain rods were pulled off.”

The arresting officer said she “could smell a strong odor of alcoholic beverage from several feet away” when she spoke with Gerry, who denied causing his wife’s injuries “and refused to say any more.”

Gerry was handcuffed and transported to the county jail. Jean, who was transported to a local hospital, was experiencing a great deal of pain in her back — which had recently been operated on.

The NERC Board of Trustees posted a notice Saturday saying it “is aware of the personal incident involving” Cauley and saying he is on a leave of absence “until further notice.” The board added that it is “taking steps to ensure the work of NERC continues seamlessly.”

NERC’s loss of its CEO comes as the reliability agency has found itself sucked into the debate over Energy Secretary Rick Perry’s proposed rescue of coal and nuclear plants that he contends are vital to the reliability of the grid.

On Tuesday, NERC officials held a webinar to announce the release of a report on potential reliability problems from natural gas delivery disruptions. There was no mention of Cauley. (See NERC: Dependence on Natural Gas Alters Resilience Planning.)

Rich Heidorn Jr. contributed to this article.

November 15, 2017

California Utilities Exceeding Renewable Requirements

By Jason Fordney

California electricity suppliers have met the state’s 25% renewable generation requirement, in many cases exceeding it substantially, state regulators said.

The state’s three large investor-owned utilities have also signed contracts with renewable suppliers necessary to exceed the requirement that they meet 33% of customer energy demand with renewables by 2020, the California Public Utilities Commission said in its Renewables Portfolio Standard report for 2016, issued Nov. 13. The commission is required to submit quarterly and annual reports to the state legislature on the industry’s progress in meeting RPS goals.

Retail electric sellers were required to meet 25% of load with RPS-eligible resources by the end of 2016. Pacific Gas and Electric reached about 33% renewables, Southern California Edison about 28% and San Diego Gas & Electric nearly 43%.

An aggregated forecast projects the utilities will meet the 2030 requirement of 50% by 2020, according to the PUC, which administers the RPS with the California Energy Commission. The PUC’s role includes setting policies for implementation, reviewing RPS procurement plans, reviewing IOU contracts and enforcing compliance.

PUC Commissioner Clifford Rechtschaffen said: “Our utilities are exceeding the goals we put in place for them. Costs have continued to decline, and reliability has not been compromised in any way. California’s successful program offers lessons for other states interested in advancing clean energy policies.”

The program requires IOUs, community choice aggregators, electric service providers and publicly owned/municipal utilities to procure renewables to reduce greenhouse gas emissions, stabilize electricity rates, diversify energy resources and contribute to reliability.

The state’s five CCAs and various multijurisdictional utilities report they are compliant with RPS requirements and expect to meet or exceed the 33%-by-2020 requirement.

RPS CAISO rps renewable portfolio standard — RPS Compliance Period Requirements (2017-2030) | *California Public Utilities Commission*

California’s latest RPS requirement of 50% renewables by the end of 2030 was set in SB 350, signed by Gov. Jerry Brown in 2015. The State Legislature is getting heavy pressure from environmental groups to pass a 100% zero-carbon bill that would include nuclear and large hydro in the last 40% of the requirement. Lawmakers are due to take up the legislation in January. (See CAISO Regionalization, 100% Clean Energy Bills Fizzle.)

The state’s IOUs are currently over-procured for renewables and held no annual solicitations in 2016. But they were required to procure renewables through other programs to meet the future RPS and other state policy goals. These include the Renewable Auction Mechanism, Bioenergy Renewable Auction Mechanism, Renewable Market Adjusting Tariff and Bioenergy Market Adjusting Tariff.

IOUs are also required to comply with “least-cost, best-fit” methodology to ensure the most cost-effective resources are being procured. The PUC plans to reform the methodology.

It said contract prices for solar photovoltaic fell 77% between 2010 and 2016 to an average of $29.17/MWh, and IOU contracts for wind fell by 47% to $50.99/MWh. This is because of the rapid expansion of the market and decreasing technological cost.

The report also lists challenges in meeting RPS requirements, including uncertainty in IOU load forecasts, curtailment of solar due to oversupply at certain periods, stranded costs that could end up with remaining IOU customers as other customers migrate to CCAs, and significant terminations in the Renewable Market Tariff program — a feed-in tariff for small, distributed renewable energy technologies.

November 15, 2017

NERC: Natural Gas Dependence Alters Reliability Planning

By Tom Kleckner

Planners must give more weight to potential pipeline outages in electric reliability reviews, NERC said in a report Tuesday.

“In light of the power sector’s rising reliance on natural gas, the loss of gas facilities must be added to the list of potential extreme contingencies used to measure system reliability impacts,” John Moura, NERC’s director of reliability assessment and system analysis, said in a statement announcing the report.

The report shows the impact of natural gas delivery disruptions will vary depending on the location and density of infrastructure. But the reliability authority says mitigation strategies are available to reduce the potential harm to the electric sector.

NERC FERC Natural Gas dual-fuel — Natural gas has had an out-sized influence on electric generation. | *Matcor*

The report, “Special Assessment: Potential Bulk Power System Impacts Due to Severe Disruptions on the Natural Gas System,” listed several key mitigation strategies, including transmission upgrades, dual-fuel capability, power imports, adding incremental and diverse generating resources, firm fuel agreements and battery storage.

NERC said the power sector is seeing a drop in the number of dual-fuel units. Developers are foregoing the added expense of dual-fuel capability in many new projects, it said.

It also suggests dual fuel, backup pipeline capacity, and alternative sources of supply should be required in areas with significant risk.

“Dual-fuel capability increases generation reliability and resilience,” the report said, noting dual fuel is currently limited by environmental regulations restricting how long plants can run on oil. NERC called for temporary air permit waivers before any “sustained natural gas infrastructure disruption,” saying waivers should be incorporated into “resilience-planning initiatives when they are required.”

The assessment does not directly take on the Department of Energy’s directive that FERC strengthen the grid’s resiliency by propping up the finances of coal and nuclear plants, but it does point out the growing importance of natural gas as a fuel supply.

“Natural gas resources have become much more diversified,” Tom Coleman, NERC’s director of reliability assessments, said during a media conference call. “Twenty years ago, we were more reliant on Gulf [of Mexico] supplies. We have much more shale gas in some of the market areas that has really changed the dichotomy. Due to this diversity, we don’t have the same risks we had 20 [or] 25 years ago.”

The report offers recommendations to policymakers, the industry and NERC itself. It calls for regulators to consider fuel diversity when they evaluate system plans and establish energy policy objectives. It also recommends expedited licensing of new transmission and natural gas facilities to diversify risk.

NERC suggests registered entities consider the loss of key natural gas infrastructure in their planning studies, and that the gas and electric industries increase coordination and information sharing “to promote reliability and interdependent system integrity.”

“As our power supply becomes increasingly dependent on natural gas, industry must ensure this just-in-time fuel is as reliable and secure as the power plants that need the fuel to operate,” the assessment says.

The organization also recommends adding planning and operating requirements for analyzing disruptions to its reliability standards. To mitigate common causes of failure, it said its Generator Availability Data System (GADS) database should begin collecting additional information on the duration, frequency and causes of natural gas outages.

NERC conducted the assessment by reviewing existing studies, evaluating gas storage facilities and identifying generation clusters — areas with at least 2 GW of gas generation — to determine potential vulnerabilities.

Coleman said the organization studied 24 areas, 18 of which “demonstrated the need for additional follow-up and analysis, based on power flow and stability issues” of the “extreme cases” it ran.

“We wanted to develop a bookend, a worst-case scenario,” he said.

Coleman said natural gas demand has “altered the storage dynamics,” which have historically operated as an inventory hedge by injecting in the summer and withdrawing in the winter.

“With much more electric generation out there, we’re seeing more of an annual injection and withdrawal cycle, versus just a winter and summer dichotomy.”

The report was received coolly by the American Petroleum Institute, which called it “a missed opportunity to properly examine ways to improve the reliability and resilience of North America’s electric grid.”

It said NERC acknowledged “that natural gas supply disruptions are extremely rare events and … that industry is taking steps to prevent such disruptions.”

It cited its joint report with the Natural Gas Council on resilience, which was released in July.

November 14, 2017

DOE, Pugliese Press ‘Baseload’ Rescue at NARUC

By Rich Heidorn Jr.

BALTIMORE — Department of Energy officials and FERC Chief of Staff Anthony Pugliese traveled 40 miles from the capital Monday to make their case for coal and nuclear price supports at the National Association of Regulatory Utility Commissioners’ 129th Annual Meeting.

doe nuclear power coal NARUC Pugliese — McNamee | © *RTO Insider*

In the morning, Pugliese and Bernard McNamee, DOE deputy general counsel for energy policy, spoke at a breakfast meeting sponsored by the Consumer Energy Alliance. After lunch, Sean Cunningham, DOE’s executive director for energy policy — and a former lobbyist for FirstEnergy and American Electric Power — lectured the audience on how he said FERC had failed to protect the grid against disaster. The audience included Commissioner Cheryl LaFleur — who kept her head down, writing notes and betraying no reaction.

The department’s Notice of Proposed Rulemaking (RM18-1) was a big topic of conversation both at the microphones and in the hallways at the Hilton Baltimore beside Oriole Park at Camden Yards. But LaFleur and Commissioner Robert Powelson, who spoke to consumer advocates in the morning, had little to say on how they will vote next month on the controversial proposal.

FERC Chairman Neil Chatterjee said last week he will seek an interim “lifeboat” to ensure the survival of struggling coal and nuclear plants while the commission ponders long-term rule changes. Chatterjee has said the commission will take action by Dec. 11 on Energy Secretary Rick Perry’s call for “full recovery” of coal and nuclear plants’ costs in RTOs with energy and capacity markets, including PJM, ISO-NE and NYISO. More than 700 comments were filed in response to the proposal. (See NOPR Backers, Foes Seek Last Word at Comment Deadline.)

LaFleur, Powelson Respond

LaFleur declined to comment on Chatterjee’s plan.

“I’ve really tried to spend my time thinking through the issues and not debating in the press. So, for now, I’ll just stick there, I think,” she said, adding, “But it’s less than a month so you’ll be hearing from us.”

Powelson also declined to say if he would support the chairman’s proposal.

“We’ll listen and see what everybody’s saying,” he said in an interview after speaking to the National Association of State Utility Consumer Advocates (NASUCA), which is holding its annual meeting alongside NARUC. “I don’t want to prejudge any outcomes.

“I’m open to having a broader conversation around valuing resiliency; looking at reliability metrics beyond just the capacity construct. And making sure … that we stay above and out of the fuel war conversation. That’s not the FERC’s role.

“I don’t think the secretary’s asking us to revert on organized markets,” Powelson added. “I think what he’s saying is, look at some of the things that are working in these markets and some of the things that aren’t working.”

Coal, Nukes ‘Came to the Rescue’

But at the General Session after lunch, DOE’s Cunningham made it clear he already knows the answers.

“The bottom line is this: Coal and nuclear power remain crucial to the continued functioning of the electric grid,” he said.

He used a revisionist view of the 2014 polar vortex to make his point.

“Because a large portion of gas supply is diverted to home heating, the grid operators struggled to meet demand and gas generators became unavailable. It was then that coal and nuclear plants came to the rescue. Because these plants are true baseload generators with onsite fuel storage, they successfully met the emergency demand,” he said.

In its response to Perry’s proposal, PJM said the NOPR “mischaracterized and misconstrued” the polar vortex, noting “PJM’s system remained reliable despite nearly 14,000 MW of coal retirements” and saying the 22% forced outage rate had been “mitigated” by the Capacity Performance rules enacted afterward.

“Contrary to the DOE NOPR, neither the 2014 polar vortex nor the recent hurricanes justify upending existing competitive energy markets,” PJM said, noting that some coal plants were idled because of frozen fuel and conveyor belts. “While fuel delivery was an issue during the polar vortex, it was not the driving factor behind outages that occurred during the extreme weather event, nor was gas-fired generation the villain, nor coal and nuclear the savior, that the DOE NOPR suggests them to be,” PJM said.

DOE: FERC Slow to Respond

Cunningham painted a dire future without coal and nuclear generation.

“Unfortunately, due in part to years of pressure brought to bear by opponents of coal and nuclear power, many of those plants were and are scheduled to close, which makes any number of disasters — or just a hot day in October or a cold one in April — a significant potential threat to our grid today. What if they had closed? How would that closure have affected the functioning of our hospitals? How would it have affected our police and firefighting capabilities? How would it have impacted the operations of our military?”

Cunningham said FERC has been slow to respond to the threat.

“FERC has been studying these issues for years, but the problem remains,” he said. “Secretary Perry’s proposal was intended to jump start a long overdue conversation — and more importantly, to spur FERC to action.”

“Washington has been stacking the deck against coal and nuclear power for years despite their benefits to the grid,” Cunningham added. “President Trump’s clear direction is to unleash every energy resource to make America energy dominant. … The president has nominated the people for government service who share that vision and are willing to address the regulatory burdens and government overreach that have limited our growth potential. Secretary Perry is doing, and will continue, to do everything in his power to jeep our diverse energy mix in place.”

Chatterjee Aide Chimes In

During the earlier meeting, DOE’s McNamee also defended the NOPR, echoing Cunningham’s response to critics who fear it would disrupt wholesale markets. Electric markets are not free, they said, but are shaped by policies such as the tax credits for renewables. “The fundamental fact [is] that the markets are distorted,” McNamee said.

FERC DOE Nuclear Power Grain Belt Express — Pugliese | © *RTO Insider*

FERC’s Pugliese responded to complaints that the commission’s deliberations were being rushed because of Perry’s 60-day deadline.

“I don’t think it is” too little time, Pugliese said. “Within PJM, this has been an issue that has been discussed for three-plus years. But for a lot of places around the country it … wasn’t. And so, all the sudden now we get 60 days, and I will tell you first-hand, every group around the country is coming in, every chance they get, to come give us ideas.”

‘Lifeboat’

Chatterjee laid out his “lifeboat” plans in remarks at an industry conference and in an interview Thursday on Bloomberg television.

In a meeting with reporters last month, Chatterjee said FERC’s options include initiating its own rulemaking, convening a technical conference or issuing a final rule based on DOE’s NOPR.

Now, facing legal and political obstacles to winning approval of a final rule, Chatterjee said he is seeking a short-term plan to rescue as many plants as possible while the commission does additional fact-finding.

“What I don’t want to have is plants shut down while we’re doing this longer-term analysis, so we need an interim step to keep them afloat,” Chatterjee told the S&P Global Platts Energy Podium in D.C. “I don’t know that we can get everybody in the lifeboat,” he added.

“My approach is going to be one of no regrets,” he said in the Bloomberg interview. “The worst-case scenario would be we do the long-term analysis, we figure out we actually did need these plants, but they’re gone. They’re offline and we can’t get them back.”

He said his plan will not alter RTO dispatch practices or distort markets.

Chatterjee also disclosed he had met with FirstEnergy CEO Chuck Jones “to really kick the tires on what they proposed [in their comments on the DOE NOPR] and challenge them on some of what they had put forward.” FERC’s ex parte rules, which bar commissioners from private discussions with parties in “case-specific, contested proceedings,” do not apply to rulemakings, according to a 2010 presentation by FERC Associate General Counsel Lawrence R. Greenfield (18 CFR 385.2201(a), (b), (c)(1)(ii)).

FirstEnergy proposed that the commission require RTOs and ISOs adopt a pro forma Resiliency Support Resource (RSR) tariff agreeing to make monthly payments to “fuel-secure, resilient generators.” The payments would be “equal to its full costs of operation and service” and a “fair return on equity,” minus its revenues for capacity, energy and ancillary services.

Chatterjee, a native of coal state Kentucky and a former aide to Senate Majority Leader Mitch McConnell (R-Ky.), has made no secret of his desire to aid coal generators. Powelson, a Republican, and LaFleur, a Democrat, have reacted more warily to the Perry proposal, expressing concern it could damage wholesale markets.

Awaiting McIntyre and Glick

Republican Kevin McIntyre and Democrat Richard Glick, who were confirmed to FERC by the Senate on Nov. 2, are awaiting their swearing-in and have not commented publicly on the proposal. Chatterjee told Bloomberg that he had not discussed the NOPR or his interim proposal with McIntyre, who will replace him as chairman.

“Kevin is somebody with a lot of expertise. He’s a smart, thoughtful guy. … And I hope that he will ultimately be persuaded to follow the course that I’ve laid out,” Chatterjee said.

Perry’s Sept. 28 proposal requested that FERC issue a final rule within 60 days. But even if Chatterjee won the two additional votes he needs to approve a final rule in December, it could be vulnerable to court challenges on the grounds that it was rushed through without sufficient notice to the public and proper evaluation by the commission.

Powelson said he was looking forward to the arrival of McIntyre and Glick — who cannot join FERC until President Trump gives them their signed commissions.

“Having two other colleagues be part of this conversation is important,” he said. “I think we’ve got a lot of work ahead of us over the next 24 days.”

Michael Brooks contributed to this article.

November 14, 2017November 11, 2023

Canada, New England Talk Energy Infrastructure

By Michael Kuser

BOSTON — New England’s transition to a clean energy future may depend more on new transmission lines from Canada than on new or expanded natural gas pipeline capacity, panelists said at a regional energy conference last week.

New England-Canada Business Council gas pipelines natural gas

Infrastructure Panel (left to right): Donald Jessome, Transmission Developers Inc.; Martin Imbleau, Gaz Métro; David Pasieka, Liberty Utilities; Will Hazelip, National Grid; DOER Commissioner Judith Judson; and Attorney Kevin Conroy of Foley Hoag | © RTO Insider

Speaking at the New England-Canada Business Council’s 25th Annual Energy Trade & Technology Conference, Massachusetts Department of Energy Resources Commissioner Judith Judson said the region is heavily dependent on gas-fired generation, which puts stress on the system at times of peak demand in winter.

“A lot of those generators end up switching to oil and emissions become extremely high,” Judson said. “It also means that we see some very high prices, and one of the challenges is balancing a clean energy future with affordability.” However, a key way to reduce greenhouse gas emissions in the heating and transportation sectors is to electrify, she said.

Massachusetts regulators are at the heart of the current Canada-New England energy conversation. In January, the state will select bidders responding to its July request for proposals for 9.45 TWh/year in renewable energy generation. Hydro-Québec partnered separately with Eversource Energy, Avangrid and Transmission Developers Inc. on three different transmission projects for the Massachusetts RFP and has agreements with Boralex and Gaz Métro to add wind power into the energy mix on each project at the state’s request. (See Hydro-Québec Dominates Mass. Clean Energy Bids.)

TDI CEO Donald Jessome agreed that something special is happening between Canada and the U.S. His company is partnered with Hydro-Québec on the New England Clean Power Link, a 154-mile underwater and underground transmission line that would transmit 1,000 MW of Canadian hydropower under Lake Champlain to Vermont. The project bid into the Massachusetts RFP.

“This has been going on for over a decade, discussing how we will connect the two regions, [and] how do we bring clean energy in from Canada,” Jessome said. “How do we get that infrastructure in place? A decade ago, when New England governors and Canadian premiers started talking about this and making that a key issue, people started to take notice. In a lot of ways, it’s happening already today.”

William Hazelip, vice president of business development at National Grid, said, “Market-based solutions are very complicated in design and take time [and] a lot of buy-in from stakeholders. … Long-term contracts are really the key to moving forward with financing renewable energy projects.”

Weak Case for Gas?

Slow growth in retail natural gas consumption could weaken the case for increasing New England’s pipeline capacity, according to one panelist.

“The region needs more gas but not necessarily more infrastructure because we’re adding 2% of new clients every year, but the overall load, yearly based, is not really increasing just because of the economics of energy efficiency,” said Martin Imbleau, vice president of operations for Gaz Métro.

Liberty Utilities COO David Pasieka disagreed.

“When you look at the growth for this particular region, with 1 to 2% growth in customers, when you do the long-term projections, we’re out of gas,” Pasieka said. “There are in Massachusetts a couple of LDCs [local distribution companies] that went into moratorium mode, not being able to expand their customer base. As an LDC operator, I need more customers to be able to justify the spend that I’m currently doing.”

Canada used to get gas from the north, but “all those offshore pockets are drying up,” he said. “Between Marcellus and Utica, this is one of the largest producers of natural gas in the world and the price point reflects it. This will be good for customers if we can figure out how to move it from that part of the world to this part.”

Imbleau countered: “The shoulder months are decreasing, but the peak period is increasing, so maybe what we need is seeking a solution not necessarily in underground facilities with a load factor of 100%, but in facilities that are designed to meet the peak load. They may be more expensive, but [they] make more economic sense in the long run, also in a social sense, including LNG peaking spots differing in different regions.”

Technology to the Rescue

Meanwhile, energy storage is fast replicating some of the attributes of gas-fired generation, Hazelip said.

“National Grid just today announced a 6-MW, or 48-MWh, Tesla battery in Nantucket to help defer the need for a third subsea cable to connect the island to the mainland,” Hazelip said. “National Grid Ventures is also developing two 40-MW batteries on Long Island, which will replace gas feeders. That’s something we’ve seen really pick up speed out in California as well. It’s gotten to the point [that] in some parts of the country, constrained parts of the system, where it’s very difficult to site gas infrastructure, batteries are a great choice. They’re becoming cost-effective, and you can get them built in a much shorter amount of time, and they provide other great benefits that the gas peakers wouldn’t.”

National Grid partnered with Citizens Energy on the Granite State Power Link, an HVDC transmission line to deliver 1,200 MW of new wind power from Canada, and the Northeast Renewable Link, a 23-mile AC line from Rensselaer County, N.Y., to Hinsdale, Mass., to deliver 600 MW of new wind, solar and small hydro into the New England grid.

Imbleau highlighted what Gaz Métro subsidiary Green Mountain Power is doing in Vermont by installing rooftop solar panels and including them in the rate base, as it does with batteries.

“The concept is that it benefits the overall system,” Imbleau said. “It’s a classic example of where the regulatory regime followed technology. Honestly, it’s not happening generally because technology’s probably at 4.0 and regulatory regimes are at 1.0, if we’re generous, so just allowing a regulated entity to play a role, not in the R&D sector, not in the technology that’s available off the shelf, but in the middle spot where there’s a barrier of entry and the technology has a social, economic and environmental benefit.”

Already Happening

Attorney Kevin Conroy of Foley Hoag noted that all of the top 100 largest corporations in the U.S. have set individual renewable energy goals — and many are seeking 100% renewables.

“How are they going to get 100% in some of the communities that they’re operating in?” Conroy said. “Guess what’s happening? Small hydro and solar developers are out meeting with Amazon and Walmart and everyone’s putting solar panels on their roof or doing community solar initiatives. Those things are happening, and it’s happening quite rapidly in California, and I see it in Missouri and see it moving very quickly to this part of the world.”

November 14, 2017

PJM Operating Committee Briefs: Nov. 7, 2017

PJM FERC frequency response primary frequency response — Boyle | © *RTO Insider*

VALLEY FORGE, Pa. — PJM’s Glen Boyle presented the Operating Committee last week with a proposed solution to address FERC’s proposed primary frequency response rule.

The proposal, which came from meetings of the Primary Frequency Response Senior Task Force, would rely on individual resources to provide the capability with specific performance settings; PJM doesn’t plan on requiring units to maintain operating headroom.

“We didn’t see need for that right now,” Boyle said.

PJM is considering either a cost-of-service payment, where the resource owner files with FERC for cost recovery for performing during an event, or determining that the frequency response capital investment is already included in the cost-of-new-entry (CONE) calculation. The focus comes in response to a 2012 NERC report found that only 30% of units were providing primary frequency response and a Notice of Proposed Rulemaking last year from FERC that would require all new units, excluding nuclear, to provide the service. (See FERC Has More Questions on Frequency Response NOPR.)

“As far as looking at a pure, market-based mechanism, that’s something that PJM would be open to, but we’ve had some difficulties with identifying what the actual requirement is, as it changes on a literally minute-by-minute basis,” Boyle said.

He also highlighted concerns about measuring units’ responsiveness. “So there are some pretty significant challenges to a market-based compensation,” he said. Tom Hyzinski of GT Power Group agreed it would be difficult to develop a market to compensate a minute-by-minute response.

Several generator representatives, including Hyzinski and Calpine’s David “Scarp” Scarpignato, balked at exempting certain technology types and not compensating frequency response beyond capacity payments. Hyzinski suggested developing a product based on a resource’s ability to provide the service.

“You can’t have resources that don’t provide primary frequency response participating in the same capacity market and taking the same capacity payment,” he said, questioning whether the capacity market currently compensates for the capability to provide frequency response.

“I think you’ll want to look at a way that, if they can’t provide it, they somehow purchase … it,” Scarp said.

“That is another option that’s still out there on the table,” Boyle acknowledged.

Scarp said frequency response is an element of resiliency, and “PJM is saying in a lot of forums that it wants to value resiliency.” He asked that PJM staff working on the frequency response issue engage with those focused on resiliency.

Restoration Drills

PJM’s Ryan Lifer reviewed the results of the annual fall restoration drills held recently. There were 108 transmission owner participants, 17 from generators and 47 PJM staffers, Lifer said.

User feedback was positive for a centralized website where participants could upload all information in one location, he said. PJM plans to complete the site in time for the annual spring restoration drill, which will be held May 15-16. Communications checks will happen on May 14. Alternate dates are set for May 21 through 23.

PJM Expects Cold Winter Season

System operators are planning for a colder winter this year than in the past two, PJM’s Augustine Caven said. Analysts expect a weak La Nina effect to develop, causing colder conditions, along with above-average precipitation in the Great Lakes region and below average to the south.

“Southward shifts in the polar vortex caused unusually cold weather this past August, and the expectation is that if this trend continues, we’re anticipating greater risk of arctic cold,” Caven said. “In short, we expect a significant cold winter season, and we’re taking steps to be prepared.”

TOs Must Approve PJM Licensing of DIMA

PJM wants to offer its Dispatcher Interactive Map Application (DIMA) to all TOs, but there’s a catch. Because DIMA requires some confidential TO information to work optimally, all TOs will have to sign off on the plan, and those that want to use it will have to sign nondisclosure agreements and pay PJM a licensing fee.

PJM’s Ed Kovler and Jacqui Hugee outlined the advantages, including compiling data from multiple resources into one geospatial display, and the requirements, which include several Operating Agreement changes.

PJM Holds Ground on Expanding ‘Hot Weather Alert’ Definition

PJM’s Chris Pilong said that the RTO still plans to revise its “Hot Weather Alert” definition to include lower temperatures “during the spring and fall periods if there are significant amounts of generation and transmission outages that reduce available generating capacity.”

The revisions, part of a periodic review of Manual 13, have sparked concern among stakeholders who feel the alert should be very narrowly defined.

“It seems like we’re taking a Hot Weather Alert and turning it into a ‘hot weather and warm weather/stuff is out’ alert,” said Adrien Ford of Old Dominion Electric Cooperative. “My question for you to consider is … should we consider making them separate?”

American Electric Power’s Brock Ondayko said he’s “still opposed” to the procedure PJM is trying to develop. He had initially voiced his opposition when Pilong announced it at October’s OC meeting. (See “Grid Operator Communications Changes Spark Debate,” PJM Operating Committee Briefs: Oct. 10, 2017.)

“I think there needs to be discussion,” he said.

— Rory D. Sweeney