FERC last week approved two requests by FirstEnergy Solutions (FES) to sell power to Potomac Edison and West Penn Power. All three companies are subsidiaries of FirstEnergy (ER17-1267, ER17-1272, ER17-1559). The agreements are retroactive to June 1.
FES won the bids through competitive solicitations from the affiliates to serve customers who do not take service from competitive retail suppliers. Potomac serves customers in Maryland and West Virginia; West Penn’s customers are in western Pennsylvania.
FERC uses standards set out in its 1991 Edgar Electric Energy (ER91-243) and 2004 Allegheny Energy Supply rulings (ER04-730) to prevent utilities from self-dealing. The commission determined that the affiliate deals met the four criteria of transparency, definition, evaluation and oversight.
CARMEL, Ind. — MISO will next month submit two filings with FERC to further refine its new generation interconnection process, while a third filing early next year will seek to facilitate connections for merchant HVDC lines, the RTO said last week.
MISO Manager of Resource Interconnection Neil Shah said the two near-term filings — one to limit the amount of time interconnection customers can change their megawatt values and the other to update the interconnection request form — serve as a “clean up” to implement details the RTO missed in its filing to redesign the queue.
The first revision would shorten the period for generation owners to change the capacity volume associated with network resource interconnection service (NRIS), moving the final selection to the second decision point in the queue rather than just before MISO begins an interconnection facilities study.
The second change would update the interconnection request form that prospective generation owners fill out upon entering the queue to include options for external NRIS and MISO’s fast-track request option for small generating facilities.
Shah said he did not expect the filings to elicit protests from stakeholders, who offered no public comment on the changes during a Nov. 15 Planning Advisory Committee meeting.
Wind on the Wires’ Natalie McIntire said she hoped the filings were as harmless as Shah characterized. “It’d be nice to finally have some queue changes that are uncontested,” she joked.
The apparently benign queue changes come as some stakeholders are already calling for a fundamental reconsideration of the interconnection queue not even a year after the RTO rolled out a redesign of the process.
Earlier this month, EDF Renewables asked MISO to consider a two-stage queue instead of the RTO’s selected three-stage design, while FERC denied a request to rehear its approval of the new design, which generation developers said should include a fast-tracked queue for vetted projects. (See EDF Asks MISO to Revisit Queue Overhaul.) EDF will return to the Steering Committee in January to make its case for a streamlined queue.
HVDC Interconnection
Another interconnection-related filing in January or February would revise MISO’s Tariff to allow merchant HVDC lines to inject energy into the RTO’s transmission system at certain points of connection. Under the proposed rules, merchant HVDC would advance through the queue much like other interconnection customers and earn injection rights. However, MISO would draw a distinction between “injection rights” and “interconnection rights.” A merchant HVDC owner could only secure injection rights, and its associated generator must also line up in the queue and reference the HVDC injection rights. MISO would then convert the injection rights into interconnection rights for the generator without further queue studies. Only then would the rights be usable to offer energy or capacity into the MISO markets.
In response to a question by Indiana Utility Regulatory Commission adviser Dave Johnston, Shah said there are currently HVDC projects on hold in the queue, most of which are requesting injection rights into MISO.
WOW consultant Rhonda Peters said it’s still unclear how MISO will treat a merchant HVDC line wishing to withdraw from the system and inject into another balancing authority.
“As of now, these procedures are not supported,” Peters said.
Shah said some existing Tariff provisions would allow for withdrawal. “There’s some work needed, but it’s mostly educational in my mind,” he said.
Peters countered that the “thousands of megawatts” that HVDC lines are able to move is “unprecedented” and MISO’s current $4,000/MW upfront fee for the definitive planning phase is prohibitively high and will hinder the connection of projects. She asked for MISO to consult with other RTOs about their merchant HVDC interconnect policies.
Shah said he would take those suggestions into consideration and asked stakeholders to provide other input by Dec. 1. More discussion on merchant HVDC interconnection procedures is planned for the December PAC meeting.
FERC last week refused to reconsider how Entergy should calculate ratepayer refunds resulting from Entergy Arkansas’ off-system sales to non-Entergy entities from 2000 to 2009. FERC denied rehearing requests from the Arkansas Public Service Commission, the Louisiana Public Service Commission and Entergy (EL09-61-006).
The order stems from a 2012 ruling requiring the company to make refunds to ratepayers because it improperly allocated lower-cost system energy in off-system energy sales to third-party power marketers and other non-agreement members between 2000 and 2009. The allocation violated the circa-1982 Entergy system agreement, driving up the rates of captive customers of other operating companies by preventing their purchase of the low-cost energy.
Last year, in Opinion 548, FERC ordered a full rerun of Entergy’s intra-system bill that reflects how the purchases should have been priced to determine damages. Final damages have not yet been determined, and the issue is still in hearing procedures. (See FERC Affirms Entergy Refund Order on Off-System Sales.)
The commission also affirmed its 2012 Opinion No. 521, in which it decided that although the opportunity sales in question are not joint account sales — sales to others for the joint account of all of the company’s operating companies — they should be given the same treatment under the company’s responsibility ratio.
Entergy Arkansas’ Mayflower Substation | Entergy
It dismissed the Louisiana PSC’s argument that FERC erred in requiring that the opportunity sales load be excluded from Entergy Arkansas’ responsibility ratio because the subsidiary is solely responsible for the sales.
“The Louisiana commission’s interpretation of Opinion No. 521 ignores the commission’s full findings,” FERC said. “Entergy Arkansas should not have to pay for the capacity used to service the opportunity sales if it did not also have the ability to draw upon the cheaper energy for sales to its own load.”
FERC rebuffed the company’s argument that its remedy was “arbitrary and capricious in deviating from the long line of orders” that held that the system agreement granted each operating company first call on the energy from their generation facilities. “The precedent Entergy cites does not interpret the system agreement with respect to the type of off-system sales at issue in this proceeding,” FERC explained.
FERC also found no merit in the company’s argument that the refund methodology is at odds with provisions of the system agreement that prohibit an operating company from simultaneously buying and selling energy. The commission said Entergy failed twice to point out such a provision in its system agreement.
The commission also declined to decide whether payment for damages should be distributed to ratepayers or shareholders, calling it outside of the scope of proceeding.
California’s utilities are about 2,000 MW short of local resource adequacy (RA) requirements for 2018 according to CAISO, which has asked state regulators to restructure the RA program.
In a Nov. 13 report, the ISO evaluated the 2018 resource adequacy plans of Pacific Gas and Electric (PG&E), Southern California Edison (SCE), and San Diego Gas and Electric (SDG&E). RA requirements are broken down by Transmission Access Charge (TAC) areas, which are based on the service areas of the state’s three investor-owned utilities.
“The ISO’s evaluation has identified individual [load-serving entity] and collective capacity deficiencies in several Local Capacity Areas in the PG&E, SCE and SDG&E TAC Areas,” the ISO said.
San Diego Gas & Electric’s Encina plant
Because CAISO evaluates RA for local load pockets as well as the overall system, capacity procurements made through the California Public Utilities Commission RA program don’t always align with the reliability needs identified by the ISO. As a result, the ISO at times depends on out-of-market payment schemes to keep fossil-based resources online to support local reliability, a practice that has created tension among market participants and concern at the ISO’s Board of Governors. (See Board Decisions Highlight CAISO Market Problems.)
The CPUC’s RA program requires an LSE’s capacity to be available to CAISO when and where needed. There are three types of RA: system resources, local resource adequacy and flexible resources, a category added in 2015 to help manage the changing resource mix.
Deficiencies Abound
The CAISO Tariff allows LSEs and electricity suppliers to address individual capacity deficiencies before the ISO obtains “backstop” procurement. The LSEs are not required to purchase capacity from a specific resource to meet a local need, but can purchase from any resource located locally or with adequate transmission.
“However, to the extent that the aggregate LSE showings do not comprise the right mix of resources that meet the LCR [local capacity requirement] criteria and ISO effectiveness needs, a deficiency may exist that would cause the ISO to procure individual and/or collective backstop capacity,” the ISO said.
Such deficiencies did indeed show up in CAISO’s findings. The report found an local capacity resource (LCR) shortfall of 1,072 MW in the PG&E TAC, nearly all of which represents a “collective deficiency” to be addressed by all LSEs within the area. Individual LSE deficiencies represent just 72 MW of the total.
PG&E area shortfalls include a 574 MW need in the South Bay-Moss Landing sub-area in the San Francisco Bay Area, and a 422 MW need in the “South of Palermo” section of the Sierra Area.
Pacific Gas & Electric’s Moss Landing Gas-Fired Power Plant
The SCE area needs an additional 317 MW in the Moorpark portion of the Big Creek-Ventura area, the report shows.
CAISO’s 2018 assessment for SCE includes generators that are set to retire in 2020 because of once-through-cooling rules, including a combined 2,076 MW of capacity from NRG Energy’s Mandalay and Ormond units. The proposed replacement, NRG’s proposed Puente natural-gas fired plant, is strongly opposed by environmental groups and some in the local community.
NRG asked the California Energy Commission to suspend the permit application after two members of the agency recommended the full commission deny the permit for the plant. (See NRG Signals Pull-out on Proposed Puente Plant.)
In SDG&E’s TAC, the overall deficiency is 560 MW, with individual LSE deficiencies accounting for 475 MW of the total.
Reforms Needed
Separately from the Nov. 13 report, the ISO recently joined with IOUs in asking the CPUC to make fundamental changes to the RA program, which is meant to procure sufficient resources to meet reliability needs. CAISO filed comments Nov. 9 in the CPUC’s latest RA proceeding saying it agrees that the commission should “establish a separate track of this proceeding to address fundamental resource adequacy issues.”
The IOUs want the CPUC to simultaneously consider the interplay among the CAISO market structure, the RA construct and state policy goals.
CAISO and others cite the increasing number of reliability-must-run agreements that the ISO has been forced to sign with natural gas units, the most recent being Calpine’s Metcalf Energy Center. CAISO said “the rapid transformation and nature of the resource fleet and other factors are exposing fundamental inadequacies in the current resource adequacy framework.”
But the ISO also noted that RMR designations “are a result of these events, not the root cause, and they highlight the need to comprehensively re-examine the resource adequacy program.”
CARMEL, Ind. — MISO will seek a series of waivers in order to implement wintertime energy offer caps after FERC rejected the grid operator’s proposed cap design, RTO officials said.
Staff signaled the move a week after the rejection of MISO’s Order 831 compliance filing, which the commission said wrongly prohibited resources from submitting cost-based offers above the $2,000/MWh hard cap. (See MISO’s Plans for Wintertime Offer Caps Stalled by FERC.)
For the past three winters, FERC has granted the RTO a waiver of its $1,000/MWh offer cap. During a Nov. 14 Informational Forum, MISO Senior Director of Systemwide Operations Rob Benbow confirmed the RTO will seek a similar course this winter. (See MISO Granted Winter Waiver on Offer Cap.)
The waiver would allow resources to recover verifiable incremental energy costs higher than MISO’s existing $1,000/MWh offer cap for the season. That practice was prompted by a 2014 extreme cold snap that sent fuel costs soaring and saw some MISO generators offering at the $1,000/MWh cap, indicating they may have incurred costs in excess of the cap.
Benbow did not disclose what MISO is contemplating to revise its initial Order 831 proposal or when the RTO will attempt another filing. In turning down the plan, FERC said MISO did not describe what factors would be considered when verifying cost-based offers or distributing uplift and was silent on its treatment of external supply offers in excess of the cap.
“Right now, we’re reviewing this order,” Benbow said. “In the meantime, we have a temporary waiver to put in place…That waiver is being worked on right now, and we’ll get that out shortly.”
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 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.
Officials at CAISO’s Joint Information Center respond to “injects” during GridEx IV Wednesday. | CAISO
“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.”
This year’s iteration of the biennial exercise is the first to involve the finance, telecommunication and natural gas sectors in the tabletop exercise.
“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.
NERC officials participate in GridEx IV Wednesday | NERC
“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.
About 100 utility officials and others participated in the executive tabletop portion of GridEx IV at Booz Allen Hamilton in Washington, D.C. | NERC
“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.
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.
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.”
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 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.
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.
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.)
“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.
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.
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.)
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.”
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.)
