Page 1274 – RTO Insider

July 3, 2017

We Read 79 FERC Comments so You Don’t Have to

By Michael Kuser, Amanda Durish Cook and Rich Heidorn Jr.

Following FERC’s two-day technical conference on tensions between wholesale electric markets and state energy policy initiatives in early May, the commission invited comments on five potential paths forward (AD17-11).

The paths include a continuation of the status quo (Path 3), with the courts sorting out whether state initiatives — such as the zero-emission credits for Exelon nuclear plants in New York and Illinois — violate federal jurisdiction; changes to the minimum offer price rule (MOPR) (Paths 1 and 5); and market rule changes to accommodate state policies (Path 2) or incorporate them into RTO and ISO pricing (Path 4).

The commission also asked commenters to rate the urgency of the issue and solicited suggestions on how FERC should go forward procedurally.

More than 80 commenters responded, although many repeated their past positions and did not provide feedback on the paths the commission outlined. Based on RTO Insider’s review of the comments, below is a summary of the supporters and detractors of each path.

“As was evident after the conference,” observed Duke Energy, “there is no consensus on a path forward and what a particular path entails.” (See RTO Markets at Crossroads, Hobbled FERC Ponders Options.)

Paths 2 and 4 appeared to be the most popular, although there were supporters and detractors for all of the proposals.

The range of challenges to the capacity market constructs in PJM, ISO-NE and NYISO — the Eastern markets that were the focus of the technical conference — raises the prospect that FERC could relax the markets’ participation requirements. Public power advocates, who have been seeking relief for years, peppered their comments with repeated demands to let them acquire capacity via bilateral contracts, with capacity auctions playing a much smaller, “residual” role.

Path 1: Limited or No Minimum Offer Price Rule

FERC Description

“An approach that would either not apply the minimum offer price rule to state-supported resources, or limit application of the minimum offer price rule to only state-supported resources where federal law pre-empts the state action providing that support.”

Background

If FERC were to abandon the MOPR altogether, it would likely invite court challenges alleging it was allowing states to usurp its authority under the Federal Power Act. Thus any relaxation of MOPR is likely to be constrained by the Supreme Court’s 2016 rulings in Hughes v. Talen and Electric Power Supply Association v. FERC. (See Court’s Reticence Frustrates Energy Bar.)

Supporters

Load-serving entities are the biggest fans of this approach, which also is supported by the Nuclear Energy Institute (NEI) and some commenters in the renewables camp.

The National Rural Electric Cooperative Association (NRECA), American Municipal Power and Old Dominion Electric Cooperative support Path 1 or 2 or a combination of the two.

The American Public Power Association (APPA) called for “a greatly limited MOPR that provides full exemptions for self-supply and state-sponsored resources, or the ability to remove such resources from the capacity market clearing process altogether.”

The Transmission Access Policy Study Group (TAPS), which represents transmission-dependent utilities in 35 states, considers it “potentially viable.”

NEI, the Sierra Club and the Natural Resources Defense Council’s Sustainable FERC Project all expressed support, with NRDC calling it the solution “most likely to support proper price formation.”

Opposed

Groups representing consumers led the opposition, with the Electricity Consumers Resource Council (ELCON) rejecting it as “too extreme.”

A group of 60 large industrial, commercial and institutional energy consumers in New York who filed as “Multiple Intervenors” also opposed it, saying “it presumes that state public policies that unduly impact or interfere with competitive wholesale electricity markets must be accommodated in most circumstances, and that the preferred ‘solution’ in cases where federal law pre-empts state action is the application of a minimum offer price rule.”

“While MOPRs may be appropriate in certain circumstances, Multiple Intervenors disagrees that they represent the only — or even the best — response to all state public policies that trespass into the commission’s jurisdiction,” the group said.

John Shelk, President and CEO, EPSA | © *RTO Insider*

NRG Energy also opposed Path 1, saying it would exacerbate price suppression in wholesale markets by allowing subsidized resources to enter the markets at prices below actual cost. It has proposed a “Forward Clean Attribute Market” in the New England Power Pool’s Integrating Markets and Public Policy (IMAPP) initiative.

NRG, Dynegy, Eastern Generation and the Electric Power Supply Association (EPSA) filed a federal court suit in October claiming the New York ZECs intrude on FERC’s jurisdiction over interstate electricity transactions. The same companies filed suit in February challenging Illinois’ ZECs for Exelon’s Quad Cities and Clinton nuclear plants and have also asked FERC to reject the subsidies.

Path 2: Accommodation of State Actions

FERC Description

“An approach that would accommodate state policies that provide out-of-market support with the operation of the wholesale markets by allowing state-supported resources to participate in those markets and, when relevant, obtain capacity supply obligations, subject to adjustments necessary to maintain certain wholesale market prices consistent with the market results that would have been produced had those resources not been state-supported.”

Background

Proposals for two-tiered capacity auctions that would clear subsidized resources separately fall into this path.

Supporters

LSEs are the biggest supporters, with the NRECA, AMP, ODEC and Eastern Massachusetts Consumer-Owned Systems backing the concept. The American Forest and Paper Association also favored a Path 2 solution, saying “each of the other four pathways are likely to prove impractical and more expensive for consumers.”

APPA said it supports efforts to accommodate state actions, “assuming such accommodation also covers resources procured by public power and cooperative utilities. Such an accommodation should be designed broadly so that there is no determination by the RTO of what constitutes ‘legitimate’ state policies.”

The New England States Committee on Electricity (NESCOE) noted that NEPOOL’s IMAPP initiative “has focused on developing approaches that align with Paths 2 and 4.” At the conference, ISO-NE presented its proposal for a two-tiered auction that it said would incorporate state-mandated renewable generation while preventing oversupply and addressing objections to a regional carbon tax. (See ISO-NE Two-Tier Auction Proposal Gets FERC Airing.)

The Advanced Energy Management Alliance (AEMA) said FERC should direct ISO-NE, NYISO and PJM to file Path 2-type changes in capacity market rules to support “the rights of states to control their own energy policy and to procure carbon-free resources that wholesale markets can integrate cost-effectively” while ensuring they do not distort wholesale prices.

New York City said Paths 2 and 4 provide the “best opportunities to correct current market constraints” on renewable resources and new technologies procured under public policy goals.

“The appropriate future is clearly a combination of Paths 2, 4 and 5,” NRG said, adding that they are consistent with a “pro-markets approach [that] appears to have wide support from across the stakeholder community.”

Independent power producers Calpine and Dynegy also expressed support for Path 2, with Calpine calling it a “mid-term solution.” Dynegy says Path 2 “is the next step: a robust stakeholder process to fully develop and refine the proposed solutions that have recently been presented by the ISOs/RTOs (ISO-NE’s Competitive Auctions with Subsidized Policy Resources (‘CASPR’) proposal and PJM’s capacity market repricing proposal).”

Brookfield Renewable, the Conservation Law Foundation and NextEra Energy, which are promoting their Carbon-Linked Incentive for Policy Resources (CLIPR) proposal as a long-term Path 4 solution, say Path 2 may be needed in the interim.

“Feasible Path 4 solutions — like the CLIPR proposal — must be identified simultaneously with the formulation of any interim short-term proposal, as doing so will avoid the risk that the interim Path 2 solution outlives its useful life to the detriment of the market and more robust and comprehensive long-term solutions,” the “CLIPR Coalition” said.

Avangrid said a combination of Paths 2 and 3 is best for multi-state regions, “while Path 4 is better suited to single-state wholesale markets.”

Opposed

ELCON and New York’s Multiple Intervenors opposed, with ELCON rejecting it as a “kluge.”

PJM’s Independent Market Monitor, which opposed all but Paths 4 and 5, said “it would be a mistake for ISO/RTOs to explicitly accommodate state-level subsidies” in their capacity market design.

The American Wind Energy Association said any Path 2 solution should be “technology-neutral.” It questioned “the feasibility of any Path 2 solution that proposes to differentiate … ‘subsidized’ resources from ‘unsubsidized’ resources and calculate the competitive offer price of the ‘subsidized’ resources.”

The New York Public Service Commission, which is backing a plan to integrate carbon pricing into the NYISO market, said Path 2 “illustrates the limitations of the five paths.”

Path 3: Status Quo

FERC Description

“An approach that would rely on existing tariff provisions applying the minimum offer price rule to some state-supported resources, and continuing case-by-case litigation over the specific line to be drawn between categories of state actions that may, or may not, result in a state-supported resource being subject to the minimum offer price rule.”

Background

At the hearing, acting FERC Chair Cheryl LaFleur urged stakeholders to avoid “unplanned and piecemeal regulation,” saying “it would be a bad outcome for customers and market participants in terms of cost, reliability and regulatory certainty.”

Supporters

Few commenters embraced the status quo, although ELCON called it the only path that is “tenable.” Duke endorsed it, saying that stakeholder discussions occurring in the RTOs/ISOs “should run their course” and that it is not necessary for the commission to take “prescriptive” action. “Threshold legal issues are pending before the courts, and the resolution of these issues should be allowed to play out before any further action is taken at the federal level,” ELCON said.

The large New York customers group said that while it is “not optimal,” it “may be the most realistic among the choices identified” by FERC.

AWEA said it would support Path 3 only if FERC continues to exempt renewable resources from the MOPR.

Opposed

TAPS called it “unsustainable and unworkable,” and NRECA and APPA also opposed, with the latter saying, “No participants expressed support for this option at the technical conference.

“The lack of support for the status quo has persisted throughout the history of the capacity markets and must be recognized in determining future paths,” APPA said.

Dynegy’s Illinois Generation Assets | *Dynegy*

NRDC said Paths 3 and 5, “as well as some approaches to implementing Path 2,” would violate the Federal Power Act by improperly discriminating between resources. “The act of defining what is or is not a ‘subsidy’ will inevitably entail arbitrary and discriminatory line-drawing efforts, as has become increasingly clear through FERC’s decisions regarding the application of the MOPR to resources supported by state policies,” it said.

Dynegy said Path 3 is “unsustainable.”

“Dynegy has already been negatively impacted by the ZEC subsidy programs and will continue to be negatively impacted absent relief from the courts or commission action. In a ‘status quo’ scenario, Dynegy will be unable to proceed with capital improvements [and] hiring, and will need to evaluate shutdowns of generating plants that are more cost efficient than the subsidized nuclear units.”

Path 4: Pricing State Policy Choices

FERC Description

“An approach in which state policies, to the extent possible, would value the attributes (e.g., resilience) or externalities (e.g., carbon emissions) that states are targeting in a manner that can be readily integrated into the wholesale markets in a resource-neutral way. For those state policies that cannot be readily valued and integrated into the wholesale markets, Path 4 would also require consideration of what, if anything, the commission should do to address the market impacts of these state policies. For instance, other approaches for these state policies may include accommodation, application of the minimum offer price rule or an exemption from the minimum offer price rule.”

Background

A carbon price adder is one potential Path 4 solution, but it has been rejected by the New England states.

Supporters

The NYPSC said its work with NYISO to incorporate carbon into the wholesale electricity markets “might be viewed as an endorsement of Path 4.”

Path 4 also won support from Dominion Energy, Calpine, Dynegy, Exelon, NEI, Vitol and the Solar Energy Industries Association (SEIA).

EPSA gave Path 4 conditional support. “The challenge will be to define those resource attributes (e.g., flexibility) or externalities (e.g., carbon emissions) that should be integrated into the wholesale market, and then to develop a mechanism to value those qualities in a resource-neutral manner,” EPSA said, adding that it “is confident that, if these objectives can be identified, the ISOs/RTOs and market stakeholders can establish workable and efficient means to integrate these objectives into competitive market structures.”

APPA also gave a qualified endorsement, saying it could result in “an efficient means of achieving environmental or other policy goals if it were limited to a single price adjustment, such as a carbon tax or adder.” The group said it would only support this “achieve” approach “if it were done along with and not as a replacement to an accommodation of state policies or a move to a voluntary residual capacity market.”

AWEA said Path 4 is its first choice and would allow the markets to “better value the benefits and externalities of renewable energy that are not being currently captured.”

It also expressed concern that the five paths could tread on state sovereignty, asking FERC to consider carbon pricing. “Since there is currently no real conflict between state-supported renewable energy resources and wholesale markets, nor has there been one over the decades for which these policies have been in place, there is no basis for the commission to suddenly upset this balance by infringing upon state sovereignty and undoing the intent of state laws that seek to promote renewable energy.”

The Brookfield “CLPR Coalition” said Path 4 is preferable to Path 2. It asked FERC to issue a policy statement directing the RTOs to submit “achieve” solutions to the commission in the near term and requiring them to file quarterly reports on their progress.

Opposed

Opponents include the Natural Gas Supply Association, NRECA, TAPS and the large New York customers, the last of which said they were skeptical that it could be implemented effectively and benefit customers.

ELCON said the proposal would be the “most prone to abuse” of the alternatives. “It would fail in real-world conditions because some states would not respect market-based solutions. They would concoct attributes that are not realistically fungible or tradable for the purpose of selectively internalizing externalities or for socializing the costs of command-and-control mandates.”

AEMA said FERC should allow RTOs and stakeholders to develop solutions but not force them to file proposals. “Pricing state policy into energy and ancillary markets, through mechanisms such as carbon adders, raises several controversial issues. Capacity market solutions are not plagued with such controversial questions, and if the commission were to direct ISOs to pursue both capacity and energy market solutions simultaneously, it would slow the progress of the capacity market solution,” AEMA wrote.

Economist James F. Wilson said the commission should set a long-term goal “of seeing more revenues from the energy and ancillary services markets, and eventually phasing out the capacity constructs, or converting them to voluntary mechanisms, recognizing the changing nature of `resource adequacy.’

“The energy and ancillary services markets hold the potential to efficiently guide the changing resource mix over time, including incorporating public policy objectives such as decarbonization that presently are not reflected in the markets; the capacity constructs cannot do this,” Wilson continued. “Reducing the role of the capacity constructs will require resisting the frequent pressures to change them in ways that raise capacity prices and/or lead to clearing substantial excess capacity.”

Cliff Hamal, managing director of Navigant Economics, said “the most fundamental assumption” underlying capacity markets — setting capacity prices based on the cost of building new gas-fired generation — may no longer be valid. “What if policy options, such as those that promote low-carbon resources and demand reductions have eliminated the need for regular additions of gas-fired generation? A case could be made that we have already reached that point, or might do so in the near future. If so, the fundamental basis for setting capacity prices through the net-[cost of new entry]-based demand curve auction is no longer valid.”

Path 5: Expanded Minimum Offer Price Rule

FERC Description

“An approach that would minimize the impact of state-supported resources on wholesale market prices by expanding the existing scope of the minimum offer price rule to apply to both new and existing capacity resources that participate in the capacity market and receive state support.”

Background

The MOPR came up frequently at the technical conference with some witnesses calling for its expansion and others seeking its relaxation or abolition. (See Uncertain Future for MOPR.)

Supporters

EPSA and EPSA members Dynegy and Calpine would like to see this path pursued immediately, while the NGSA says it is fine as a short-term fix but not as a long-term solution. Calpine also sees it as a “near-term” fix.

Competitive Power Ventures called for expansion of the MOPR to reserve price signals, the implementation of a “universal” carbon price into the energy markets and RTO dispatch decisions and improvements to price formation.

Opposed

NRDC, which said it would not be just and reasonable, was joined in opposition by Hydro-Quebec, the New York Power Authority, NEI, Dominion, FirstEnergy, East Kentucky Power Authority, the New York Multiple Intervenors, the PJM Industrial Customer Coalition, ELCON, TAPS, NRECA and APPA.

APPA called it “the worst possible outcome,” which would result in “an overly administered noncompetitive market that would frustrate resource development pursuant to policy decisions.”

“This would greatly benefit the pure merchant facilities, leading to a significant decline in resource diversity, a higher cost of capital and a lack of any type of planning or optimization of resources. Because the states will likely continue to seek to procure or retain resources based on policy preferences, an expanded MOPR also increases the risk of overbuilding and double-payment for capacity.”

The Multiple Intervenors was also opposed, saying that MOPRs “have the effect of sheltering incumbent generation owners from competition and impeding market entry.”

AWEA said it could open “the door to widespread mitigation of legitimate state policies and, in turn, uncertainty for renewable energy investors.”

“If the commission approves a MOPR based on factors other than limiting the application of the MOPR to only state-supported resources where federal law pre-empts the state action, then it becomes difficult to draw a clear boundary limiting commission interventions,” AWEA said. “As this path has no discernable limit to what types of public policies would be exposed to a MOPR, it could lead to an environment where legitimate state renewable energy policies could be impeded by the risk of being mitigated.”

In a joint filing, AWEA, Advanced Energy Economy, Alliance for Clean Energy New York, American Council on Renewable Energy, Mid-Atlantic Renewable Energy Coalition, RENEW Northeast, and Wind on the Wires also opposed expanding MOPR.

“All energy resources benefit from subsidies and/or favorable policies and, therefore, a singular focus on incentives for certain resources such as renewables, would be discriminatory,” they said. “Contrary to the claims of some of the panelists at the technical conference, Northeast power systems are performing better as a result of the availability and integration of renewable energy into the resource mix. Negative pricing is rare and, more importantly, not responsible for negative economic impacts on other generation sources. Gas prices, not renewables, are the primary factor reducing revenues for nuclear, coal, and other supply sources.”

Economist James F. Wilson also opposed Path 5. “The markets are not nearly as fragile, and the impacts of public policy resources not nearly as substantial, as some stakeholders suggest,” he said.

Rob Gramlich of Grid Strategies said FERC should continue to treat public policies as “exogenous, as a factor that may affect market participants’ behavior and willingness to pay or accept money for a transaction, but not something for the commission to mitigate or undo. One can disagree with some of the laws state and federal legislatures pass, and FERC can offer its input into legislative processes, but it would be a major shift in the regulatory paradigm for the federal electricity market regulator to go beyond intervening to remedy market power and manipulation and enter the realm of mitigating public policy.”

“A wide range of state and federal policies have affected quantities and prices in power markets since the inception of U.S. electricity markets,” Gramlich continued. “For example, there might not be any nuclear generation in operation were it not for the Price-Anderson Act limiting liability for unit owners. We might not have as much natural gas generation if intangible drilling costs were not allowed to be deductible as a current business expense under federal tax law.”

Urgency

There was wide disparity on the urgency of the issues, with those most affected — merchant generators — calling for swift action. (See Power Markets at Risk from State Actions, Speakers Tell FERC.)

Yes

NEI and IPPs — though on opposite sides of the nuclear subsidy debate — agreed on the need for a speedy resolution. NEI said RTO markets are not just and reasonable if they don’t provide sufficient revenues to retain nuclear generation threatened by low-cost natural gas.

EPSA said immediate action is needed to “insulate” wholesale markets “from current distortive state actions while all stakeholders collaborate on identifying market structures that help address defined public policy goals.” Also calling for urgency were Calpine, Eastern Generation, the Independent Power Producers of New York, the New England Power Generators Association, LS Power and NRG, which said that competitive markets are “under siege.”

NRG said FERC should actively participate in suits challenging the ZECs and act on pending complaints before the commission on the subject of the MOPR.

The R Street Institute, a free-market think tank, said FERC should have “an extremely high sense of urgency.”

Dynegy also called for swift action, criticizing Exelon Senior Vice President of Competitive Market Policy Kathleen Barron, who told FERC on May 1 that “we have some time to talk about where we go.”

No

Exelon responded that FERC should implement energy market fixes to eliminate the need for ZECs before considering any of the paths identified.

The PJM ICC said there was “no need for rush to judgment” and ELCON said the “problem at hand is too important to be rushed.”

NRDC said there is no evidence of a “crisis,” pointing out that reserve margins in PJM, ISO-NE and NYISO are all currently higher than their targets.

The Union of Concerned Scientists said the “proposed solutions are premature due to lack of [a] coherent argument” for action. “The calls for urgent action by stakeholders have presumed that there is clarity regarding the nature and size of the alleged problem with the capacity markets,” it said. “As far as the renewable portfolio standards, there is neither urgency, nor a clear statement sorting the issue.”

Procedural Steps

NRECA and Exelon said FERC should convene technical conferences in each region and require the grid operators to file progress reports on their stakeholder processes.

ELCON said any action should be a common solution across all RTOs to avoid exacerbating seams issues. Xcel Energy — which doesn’t operate in the three Eastern RTOs — said FERC should reiterate that the docket is limited to RTO/ISO markets, urging it to “do no harm” to unbundled states.

EPSA said energy price formation should be a priority, calling for completion of Notices of Proposed Rulemaking on the pricing of fast-start resources (RM17-3) and addressing uplift allocation and transparency (RM17-2). (See FERC: Let Fast-Start Resources Set Prices; FERC Seeks More Transparency, Cost Causation on Uplift.)

The R Street Institute called for FERC to issue a new NOPR setting a “bright line” on state policies that would be subject to the MOPR or legal challenges. “This would offer a more proactive approach than retroactive litigation, deter egregious interventions and perhaps disarm state-federal tensions.”

Public Citizen said the paths outlined by FERC are too narrow to solve the problems and that competitive markets may not always be the best solution. It said the commission should start by conducting an evidentiary hearing on whether RTO markets are resulting in just and reasonable outcomes. It also called for governance changes to allow non-governmental organizations voting rights in the RTO/ISO stakeholder process.

July 3, 2017

Public Power Skeptical of ISO-NE Two-Tier Capacity Auction

By Michael Kuser and Rich Heidorn Jr.

New England’s public power utilities aren’t convinced that ISO-NE’s proposed two-tiered capacity auction is the best way to incorporate state clean energy procurements into the wholesale markets.

At FERC’s May 1-2 technical conference on state policies and wholesale markets, ISO-NE presented its Competitive Auctions with Subsidized Policy Resources (CASPR) proposal, which it said would incorporate state-mandated renewable generation while preventing oversupply and addressing objections to a regional carbon tax. (See ISO-NE Two-Tier Auction Proposal Gets FERC Airing.)

In post-conference comments filed with the commission, several major New England stakeholders indicated they were willing to consider the RTO’s plan.

The Massachusetts Department of Public Utilities said it “generally agrees” with the four objectives of the ISO-NE proposal: “(1) competitive capacity pricing; (2) accommodating the entry of state policy resources into the [Forward Capacity Market] over time; (3) avoiding cost shifts; and (4) a sustainable, market-based approach.”

The New England States Committee on Electricity (NESCOE) said it will provide analysis later this year “on a variety of mechanisms through which states could execute policy objectives,” including Path 4 long-term “achieve” proposals and near-term Path 2 “accommodate” proposals such as CASPR. “NESCOE will continue to work with ISO-NE, market participants and others to explore potential solutions that could improve upon the status quo,” NESCOE told FERC.

However, the RTO’s plan got a wary response from the Eastern New England Consumer-Owned Systems (ENECOS). “The history of New England’s Forward Capacity Market (FCM) has not been a happy one from the perspective of small, vertically integrated utilities,” the group wrote. “To suggest — as some have in the technical conference — that the answer to the ‘threat’ posed by the prospect of large-scale entry of variable-energy, renewable resources into the current centralized auction construct is to create yet another centralized auction construct [invites] extreme skepticism.”

The group said any solution “should be coupled with restoration of the right of self-supply for load-serving entities as a means of satisfying their share of regional capacity obligations.”

ENECOS said both Paths 1 and 3 are “preferable to the more structurally profound proposals — such as carbon ‘adders,’ or creation of yet another centralized capacity auction construct for ‘clean’ energy.”

The Northeast Public Power Association (NEPPA) also had doubts, saying “the capacity market construct is ill-equipped to achieve the policy outcomes FERC, states and consumers desire.”

“When ISO-New England announced the settlement creating the FCM, NEPPA members worked to ensure not-for-profit load-serving entities (LSEs) retained the right to use their own existing resources to meet their capacity obligations,” NEPPA said. “That negotiated benefit was lost when FERC approved the minimum offer price rule (MOPR), which suddenly made the FCM a mandatory construct. ISO-New England is now effectively the single buyer and single seller of wholesale electricity in the region.”

NEPPA also criticized the MOPR as a “flawed construct.” It attached to its comments a concurring opinion by former FERC Chair Norman Bay, a parting shot before his resignation in February in which he called MOPR “unsound in principle and unworkable in practice.” (See Bay Blasts MOPR on Way Out the Door.)

The MOPR would be applied only in the first of the auctions under CASPR. In the first stage, ISO-NE would clear the auction as it does today, applying the MOPR to new capacity offers to prevent price suppression. In the new second “substitution” auction, generators with retirement bids that cleared in the primary auction would transfer their obligations to subsidized new resources that did not clear because of the MOPR. Because the substitution auction will not use the MOPR, it will clear at lower prices than the primary auction, enabling existing resources to buy out their obligations at a lower cost in return for retiring, the RTO says.

CASPR arose out of the New England Power Pool’s Integrating Markets and Public Policy (IMAPP) initiative — a response to state officials’ concerns that consumers could face excessive costs if state renewable procurements were not incorporated into the capacity market and generators’ fears that out-of-market resources will suppress capacity prices. New England states are set to procure more than 3,600 MW of nameplate renewable generation.

Another proposal that arose from IMAPP is the Carbon-Linked Incentive for Policy Resources (CLIPR), proposed by Brookfield Renewable, the Conservation Law Foundation and NextEra Energy.

The “CLIPR Coalition” said long-term Path 4 proposals are preferable to interim Path 2 plans. It asked FERC to issue a policy statement directing the RTOs to submit “achieve” solutions to the commission in the near term and requiring them to file quarterly reports on their progress.

Under the CLIPR proposal, LSEs would pay state “policy” resources an energy price premium that would fluctuate based on the “marginal carbon intensity” of the dispatch, “a direct analog to the LMP but computed as lbs-CO₂/MWh instead of $/MWh.”

Urgency

The New England stakeholders also disagreed over how quickly the region must act and how involved FERC should be in the process.

State officials generally downplayed the urgency. NESCOE said “the overall level of state-sponsored clean energy procurements that have taken place or are expected in the near-term comprises a small percentage of installed resources on the system.” It also defended state sovereignty and urged the commission not to take “prescriptive action.”

The Massachusetts DPU noted that the states’ procurement of clean energy resources “will extend over many years.”

“There is no evidence to suggest the current market construct is causing any decrease in merchant investment,” said a joint filing by the Connecticut Department of Energy and Environmental Protection, Public Utilities Regulatory Authority and Office of Consumer Counsel. “On the contrary, New England has attracted a large amount of new investment over the last several years, including renewable generation.”

The New England Power Generators Association (NEPGA) sees it differently. “NEPGA believes that the wave of out-of-market resources beginning to crest in New England threatens the very viability of a competitive wholesale electricity market,” it said. “The need is urgent, with a necessary direct and swift response from FERC and the wholesale markets.”

July 3, 2017

NYISO Sees ‘Productive Dialogue’ on Carbon Adder

By Michael Kuser and Rich Heidorn Jr.

Efforts to incorporate New York’s aggressive climate change policies into NYISO markets are focused on the introduction of a carbon price adder.

The ISO told FERC it has “engaged in a productive dialogue” with state regulators since the May 1-2 technical conference on state policies and wholesale markets.

NYISO is working with The Brattle Group, stakeholders and regulators to determine the feasibility of “Path 4” market design changes in response to the state’s Clean Energy Standard (CES) and its zero-emission credits for Exelon’s Nine Mile Point, R.E. Ginna and James A. FitzPatrick nuclear plants. The CES mandates reducing greenhouse gas emissions by 40% by 2030, from a 1990 baseline, and by 80% by 2050. It also calls for renewables to meet 50% of the state’s energy needs by 2030. (See NYISO Sees Carbon Adder as Way to Link ZECs to Markets; Carbon Adder to Test FERC’s Independence, IPPNY Panelists Say.)

NYISO carbon adder — Nine Mile Point | *Constellation Energy*

About 80 parties filed post-conference comments. Among those who expressed support for a Path 4 approach, in addition to the ISO and the Public Service Commission, are New York City, the New York Power Authority and the Independent Power Producers of New York (IPPNY).

The city said Paths 2 and 4 provide the “best opportunities to correct current market constraints” on renewable resources and new technologies procured under public policy goals.

The single-state ISO can “craft a wholesale market structure that wholly integrates the state’s renewable energy objectives and provides renewable generation with better access to the marketplace,” the city said. “Market entry and exit should take into account whether the public good is being served, and whether principles related to resiliency and the improvement of air quality and public health are being advanced or hindered.”

NYPA expressed interest in exploring Paths 1, 2 and 4, and called for the elimination or a scaling back of the minimum offer price rule (MOPR). “The commission should accept state actions which do not interfere with FERC’s responsibilities,” it said.

But a group of about 60 large industrial, commercial and institutional energy consumers in New York who filed as “Multiple Intervenors” said it is not convinced of the wisdom of the Path 4 approach. The group said a status quo Path 3, while “not optimal … may be the most realistic among the choices identified” by FERC.

While the New York Public Service Commission said its work with NYISO to incorporate carbon into the wholesale markets “might be viewed as an endorsement of Path 4,” it said Path 2 “illustrates the limitations of the five paths.”

“While Path 2 may appear to represent a ‘compromise’ position, it hampers the ability of states to carry out legitimate public policies. Further, Path 2’s explicit goal to ‘maintain certain wholesale market prices,’ rather than the original, narrower purpose of mitigating for market power, shows how far afield MOPRs have strayed,” the commission said. “It asserts the right ‘to maintain certain wholesale market prices consistent with the market results that would have been produced had those resources not been state-supported.’ No true market operates in this manner.”

The ISO told FERC it has “engaged in a productive dialogue” with the state Department of Public Service, which includes the PSC, since the May conference and expects to release Brattle’s preliminary findings “in the near future.”

The report can’t come too soon for IPPNY, which said that FERC should require the ISO to file its carbon adder proposal and the Brattle analysis of it as soon as it regains its quorum.

“If the NYISO decides not to file such a proposal, the commission should require the NYISO to explain the basis for its decision,” IPPNY said. “In addition, if the commission decides that capacity markets should be modified to accommodate state public policies, it should direct the NYISO to adopt a forward capacity auction similar to the markets in PJM and ISO-NE.”

Noble Environmental Power, which claims to be the largest wind generator in New York, said its six projects totaling 612 MW will stop receiving state renewable incentives within the next two years. “As more new wind facilities enter the already bottled market in Upstate New York with discriminatory out-of-market incentives to meet state policy goals, energy prices will be substantially reduced — with a significant likelihood that the projects’ output will be curtailed under market dispatch rules.” It called for a Path 4 solution, saying FERC should order the ISO to integrate emissions-free electricity as an attribute in its markets to ensure “a level playing field” for renewables and nuclear generators.

Urgency

IPPNY, Eastern Generation, New York City and the Multiple Intervenors said the need for action is urgent. “Conflicts between state public policies and federally regulated wholesale electricity markets almost certainly will continue to get worse, thereby harming customers and other market participants irreparably,” the large customer group said.

The PSC agreed “the need to address these issues is urgent.”

But it added, “proper time must be given to explore possible solutions. … This is not the time to rush into a quick fix without thought of the impacts on the market and legitimate public policy goals.”

July 3, 2017

Doubts About Balancing Markets, State Policies in Diverse PJM

By Rich Heidorn Jr.

When PJM officials sought to prevent a repeat of the generation outages that nearly forced rolling blackouts in the winter of 2014, they quickly realized no solution was likely to clear a two-thirds sector-weighted vote — required to file proposals under Section 205 of the Federal Power Act.

As a result, the PJM Board of Managers filed its Capacity Performance rules unilaterally under FPA Section 206 after only a limited stakeholder review.

Winning approval of the RTO’s five sectors is difficult enough. Now, as PJM attempts to ensure the zero-emission credits approved for nuclear plants in Illinois — and similar measures under discussion in Ohio, New Jersey and Pennsylvania — don’t suppress prices, the needle may be even tougher to thread.

The RTO’s footprint includes D.C. and parts of 13 states — states with disparate energy and environmental policies, including both restructured and vertically integrated constructs. Maryland and Delaware are members of the Regional Greenhouse Gas Initiative (RGGI), a market-based program to reduce emissions.

In contrast, PJM members and coal producers West Virginia and Kentucky don’t even have renewable portfolio standards. (New Jersey appears likely to rejoin RGGI after Gov. Chris Christie, who pulled his state from the compact in 2011, leaves office in January. Both the Democrat and Republican candidates running to replace Christie have promised to rejoin.)

The differences in stakeholder views were displayed at FERC’s May 1-2 technical conference on state policies and wholesale markets, and they were also evident in post-conference comments filed at the end of June. (See PJM Stakeholders Offer Different Takes on Markets’ Viability.)

The commission asked commenters to weigh in on five potential “paths” of action (see table).

In their remarks, PJM officials told FERC they are pursuing three initiatives:

Allowing states to voluntarily join a system incorporating carbon pricing with existing market structures. This approach, which would require a “critical mass” of states to agree on a “common template,” is in the “beginning stage,” CEO Andy Ott told the commission.
A two-phase capacity auction that would allow subsidized resources to be counted as available reserves without influencing the clearing price.
Changes to energy market rules to improve price formation, which PJM says could reduce the need for out-of-market actions by states. It would expand on the issues identified in FERC’s Notice of Proposed Rulemaking on the pricing of fast-start resources (RM17-3). (See FERC: Let Fast-Start Resources Set Prices.)

The RTO had outlined the proposals in a series of white papers, the last of which were released earlier last month. (See PJM Making Moves to Preserve Market Integrity.)

Ott (left) and Joe Bowring, Monitoring Analytics | © *RTO Insider*

PJM said the Path 2 “accommodate” route “is most in need of the earliest feasible commission guidance and ensuing market rule adjustments,” citing concern that price suppression from ZECs and other state generation subsidies could be “exported” from those states to other regions.

Supporters of Path 2 include FirstEnergy and Eastern Kentucky Power Cooperative, which filed jointly, and Public Service Enterprise Group, which is seeking financial support for its Salem and Hope Creek nuclear plants in New Jersey.

PSEG said it will not keep its nuclear plants in service if they are not “economically viable.” Company executives told analysts on an earnings call in April that the units will be cash-flow positive at least through 2019 but that the plants’ finances could worsen by 2020. FirstEnergy, which has been trying for years to win subsidies from Ohio for its merchant fossil fleet, has recently sought aid for its Davis-Besse nuclear plant.

PJM’s Independent Market Monitor, which opposed the Illinois ZECs, said “it would be a mistake for ISO/RTOs to explicitly accommodate state-level subsidies” in their capacity market designs.

The Monitor criticized the focus on so-called “baseload” resources. “The concept of baseload resources is backward rather than forward looking. Baseload units are units that run for most hours of the year. But the term baseload is now frequently used to mean units that used to run a lot of hours based on old economics, that no longer run a lot of hours based on current economics, and that are seeking subsidies to make up the difference in revenues.”

It opposed Paths 1-3, calling for a combination of Paths 4 and 5.

Direct Energy also weighed in on the baseload issue.

“The commission must ensure that to the extent there is an alleged need to retain baseload units for fuel diversity — which … may inevitably lead back to integrated resource planning — there is demonstrable and verifiable proof that without this retention, the electric infrastructure is in jeopardy from a security perspective,” it said. “Consumers paid far more than they should have in the days when utilities and regulators chose winners and losers through [the] integrated resource planning period. The commission cannot allow the cost efficiency and choices afforded to consumers through competition to be eviscerated without good reason.”

Richard Mroz, NJ BPU (left) and Place | © *RTO Insider*

Andrew Place, vice chairman of the Pennsylvania Public Utility Commission, endorsed Path 4 as the “most prudent approach.” The PUC, however, declined to take a position, citing uncertainty over how legislators in Pennsylvania, Ohio and New Jersey will respond to potential nuclear closures.

The Maryland Public Service Commission also withheld judgment on PJM’s proposed two-stage capacity auction, saying “the scope and scale of the proposal are uncertain.”

In a joint filing, American Electric Power and Dayton Power and Light expressed doubts about the ability to value and integrate state policies into markets. “While a New York carbon policy might be reflected in a carbon adder integrated into the NYISO’s market design, where there is only one state policy to address, such integration would be much more challenging in PJM, where the geographic and political diversity of the covered states would make policy consensus difficult to achieve.”

The companies also said PJM’s proposed two-stage auction could introduce “perverse incentives,” encouraging deregulated units to offer into the first-round auction at zero in order to clear the auction and qualify for the likely higher prices in the second round.

Public power commenters pushed back hard on PJM’s plans.

Old Dominion Electric Cooperative said the PJM proposal is not just and reasonable and called on FERC to avoid the “volatility of reactionary rule changes.”

The American Public Power Association said “PJM’s approach would by its design over-procure capacity resources, further increasing costs to consumers.”

American Municipal Power said FERC should order a five-year transition from the current PJM capacity model to one in which only 20% of capacity is procured through the auction with the remaining 80% procured through bilateral contracts.

Duquesne Light took the opposite position, saying it opposes the expansion of bilateral contracting.

It also said the current 90-day notice for generation retirements should be increased to 210 days. “The current 90-day advance notice of retirement of a unit is inadequate to allow PJM, the market and market participants to study and implement contingency plans to account and properly plan for the loss of generation,” the company said. “Generation deactivations can create local reliability problems whereby the totality of impacts cannot be identified within the current 90-day time frame nor can potential solutions be constructed within that 90-day window.”

The PJM Industrial Customer Coalition said the RTO’s “Capacity Market Repricing Proposal” whitepaper is “worthy of” further discussion but said it is strongly opposed to state mechanisms to price environmental attributes.

AEP and Dayton said FERC should consider the impact of state policies on transmission planning, not just capacity and energy markets.

“State-subsidized renewable generation investments may only be feasible in specific locations that require additional transmission to assure delivery. Market efficiency transmission projects are based on price signals in the energy and capacity markets,” the companies said. “Artificially low price signals, for instance, may cause significant delays in the planning and construction of transmission projects that could provide more cost-effective solutions to addressing generation retirements.”

They also commented favorably on the idea of creating a separate capacity tranche for resources based on their “resilience,” such as on-site fuel supplies, ramping capabilities and ancillary reliability services.

Urgency

There was no consensus on how quickly PJM should act. The RTO asked FERC to set a Dec. 1 deadline on RTOs/ISOs to file rule changes. (See PJM Stakeholders Offer Different Takes on Markets’ Viability.)

The Monitor agreed: “It is urgent that the identified issues be addressed.

“But it is not so urgent as to prevent a rational, forward looking and collaborative approach to addressing the issues that are faced by all,” it said. It noted that three-quarters of nuclear plants covered 100% of their going-forward costs in 2016.

The PJM ICC said there was “no need for rush to judgment.”

The New Jersey Board of Public Utilities said wholesale markets are limiting the diversity of its energy portfolio because they “may not adequately value all attributes.”

New Jersey, which gets about 45% of its power from nuclear units, will likely see that fall in 2019 — when Exelon’s Oyster Creek plant is slated for retirement — even if PSEG keeps its plants running.

The Chicago-based Environmental Law and Policy Center said it has “yet to see evidence that near-term action is needed.” It called for extending the deadline on the RTO’s Capacity Construct/Public Policy Senior Task Force, which was created in January 2016. Its charter calls for it to complete its work by the end of the year.

“We are concerned about undue discrimination between resources, unreasonable costs imposed on consumers and interference with states’ environmental policies in order to address a ‘problem’ — low prices — that does not appear to actually be a problem,” the group said in a filing it made on behalf of the Natural Resources Defense Council’s Sustainable FERC Project. “These concerns are exacerbated by not allowing sufficient time and stakeholder process to carry out the work of the CCPPSTF or evaluate proposals addressing similar issues put forth outside of the CCPPSTF. There is no urgency to justify rushing the process, particularly where accelerating the process means key questions are going unanswered and result in poorly considered proposals.”

‘Hot Mic’ Reveals Montana Move Against Solar QFs

By Amanda Durish Cook

A Montana utility commissioner was caught on a hot microphone last week appearing to confirm what renewable energy advocates say they already suspected: that state regulators knowingly put rules in place that will suppress development of small solar projects by altering the contract terms available to generators under the Public Utility Regulatory Policies Act.

PURPA montana solar bob lake — Lake | *Montana PSC*

During a break in a June 22 meeting of the Montana Public Service Commission, a microphone — inadvertently left on — picked up Commissioner Bob Lake speaking privately about a recent decision to reduce the standard contract length and rate available to qualifying facilities up to 3 MW under PURPA.

Enacted by Congress in 1978 to encourage diversification of energy supplies, PURPA requires utilities to pay QFs the cost a utility would incur for supplying the power itself or by obtaining supplies from another source. The law leaves it to each state’s utility commission to formulate those rates and set contract terms, depending on project size.

QF Death by Attrition

Lake’s comments were captured in a video posted by the Billings Gazette, which shows him and PSC rate analyst Neil Templeton discussing the commission’s move to cut QF rates by about 40% and reduce contract terms from 25 years to five years with the option to negotiate rates for an additional five years. NorthWestern Energy last year complained that QF rates were 35% above its “avoided costs” and asked that they be reduced (Docket No. D2016.5.39).

“It’s essentially a five-year rate, so … it’s going to probably kill QF development entirely,” Templeton said in the footage.

“Well, actually, a 10-year [contract length] might do it if the price doesn’t,” Lake replied. “And honestly at this low price, I can’t imagine anyone going to get into it. So, it becomes a totally moot point because just dropping the rate that much probably took care of the whole thing.”

“We’re live,” Lake worries later in the video. An unidentified staffer in the room assures him that microphones are turned off.

The incident follows FERC’s January decision to decline enforcing PURPA against the PSC. Solar advocacy group Vote Solar had complained that the state regulators violated the law when it allowed NorthWestern to suspend its tariff for solar QFs pending a rate review (EL16-117). (See FERC Won’t Act on Montana Regulators in PURPA Dispute.)

No Surprise for Solar Supporters

Jenny Harbine, an attorney with Earthjustice representing Vote Solar, was unsurprised by the content of the recorded conversation but surprised that the comments were captured.

“It’s remarkable that the concession was caught on tape, but as a general proposition, it’s well understood by the rest of the world,” Harbine told RTO Insider. “You can’t finance an energy project with a five-year contract any more than I can finance my home with a five-year mortgage. Commissioner Lake and the commission staff confirmed on the open mic that they understand that solar development [under the new five-year contract] is not feasible.

“When state commissions set unreasonably short contract lengths, development of those projects fall off a cliff. There’s evidence of that,” Harbine added. “What the commissioner conceded is that he understood a shorter contract length would close the door on those projects.”

Another notable point about the commission’s decision, according to Harbine: While NorthWestern had asked the commission to reduce the amount paid to QFs under PURPA, the utility did not ask for a shorter contract length.

“The commission took that upon themselves,” Harbine said, adding that developers should be “hopping mad.”

PSC’s Defense

PSC Communication Director Chris Puyear said the decision to reduce the QF contract length and rate boils down to price fairness for ratepayers.

“It’s not the role of the commission to pick winners and losers in the energy landscape,” Puyear said in an email. “Federal law says ratepayers shouldn’t have to overpay for electricity produced by independent generators, but that’s exactly what was happening in Montana.”

Customers were “forced to pay nearly double the market price of electricity for power produced by independent solar facilities” under Montana’s previous QF rate, he added.

“The commission’s action brings rates for independent power in line with what customers would otherwise pay for power produced by the utility, while ensuring that long-term, fixed price contracts do not shift undue risk to the ratepayer,” Puyear said.

“In making its determination on avoided cost and contract length, the commission relied heavily on record evidence, especially the testimony of the state ratepayer advocate, the Montana Consumer Counsel.”

June 30, 2017

California High Court Upholds Cap-and-Trade

By Jason Fordney

The California Supreme Court on Wednesday declined to review a challenge of the state’s greenhouse gas cap-and-trade program, preserving the 2006 law that requires power plants and other polluters to reduce carbon emissions or purchase state-issued credits.

The court declined to review the California Chamber of Commerce’s appeal of an April 6 decision by the Third District Court of Appeal favoring of the program.

cap-and-trade greenhouse gas caiso — NRG’s Etiwanda natural gas plant, Ranch Cucamonga

While the business interests represented by the chamber did not oppose the California Global Warming Solutions Act of 2006, which set the emissions limits, they attacked the associated California Air Resources Board (CARB) regulations that created the cap-and-trade program allowing the sale of some greenhouse gas emissions allowances.

The legislation required covered entities such as power plants to reduce greenhouse gas emissions to 1990 levels by 2020 and designated CARB to monitor and regulate emissions sources.

Under the program, large emitters of greenhouse gases must purchase emissions credits at CARB’s quarterly auctions to cover emissions not accounted for with free credits. The plaintiffs said the auction sales exceeded the State Legislature’s delegation of authority to the board, and that the revenue generated amounts to a tax.

The appeals court in its earlier ruling said “the legislature gave broad discretion to the board to design a distribution system, and a system including the auction of some allowances did not exceed the scope of legislative delegation.” The court said the legislature later ratified the system by specifying how to use the proceeds.

The appeals court also said the revenue is not a tax because it is a voluntary decision driven by business judgments regarding whether it is better to buy credits than reduce emissions, which, unlike a tax, has value.

“Reducing air emissions reduces pollution, and no entity has a right to pollute,” the lower court said.

The chamber did not immediately respond to a request for comment on the high court’s decision.

The Environmental Defense Fund and Natural Resources Defense Council intervened in the proceeding on behalf of CARB.

“This is the final step in this case to affirm California’s innovative climate program, including its carbon auctions, which serves as a vital safeguard to ensure polluters are held accountable for their pollution,” EDF senior attorney Erica Morehouse said in a statement.

Even with the court challenge behind it, cap-and-trade still faces an uncertain future. Gov. Jerry Brown is trying to extend the life of the program, which expires in 2020, through a ballot measure.

caiso cap-and-trade greenhouse gas — The California Supreme Court (photographed above) upheld a lower court ruling

“With this Supreme Court victory, now it’s up to us to take action extending California’s cap-and-trade system on a more permanent basis,” Brown said in a statement.

CARB is expected to auction about half of the program’s total allowances by 2020. As of January 2015, about 500 million allowances had been given away and about 75 million were auctioned.

June 30, 2017

Trump Promises to Make US Energy Dominate

By Michael Brooks

President Trump announced six “initiatives” in a speech at Energy Department headquarters Thursday, saying they would create “American energy dominance” in the world.

The announcements were part of the White House’s Energy Week, an effort to highlight the administration’s energy policies.

Some of the announcements were merely approvals by the departments of Energy, Interior and State. Flanked by Vice President Mike Pence, Energy Secretary Rick Perry, Interior Secretary Ryan Zinke and EPA Administrator Scott Pruitt, Trump announced:

A review of U.S. policies on nuclear energy resources;
The Treasury Department would work to address barriers on financing foreign coal plants;
A Presidential Permit for a petroleum pipeline crossing Mexico;
Sempra Energy had agreed to negotiate a deal to export LNG to South Korea;
Approval of two long-term applications by the Energy Department to export LNG from the Lake Charles, La., facility; and
A new offshore oil and gas leasing program.

Trump did not go into specifics about the announcements. They made up a brief segment of a speech punctuated by praise for his administration’s elimination of “job-killing” regulations, celebration of the withdrawal from the Paris Agreement on climate change and jabs at CNN for recent resignations over a retracted story about alleged ties between a Trump ally and a Russian investment fund.

american energy dominance trump — Left to right: Pence, Trump and Perry

Like his speech announcing the withdrawal from Paris, Trump’s remarks had nationalistic overtones, arguing that the U.S. has been taken advantage of by other countries that “used energy as an economic weapon.” The president did briefly mention that America’s “clean, beautiful coal” was in high demand from countries such as Ukraine. And he said the pipeline to Mexico would go “right under” his proposed border wall.

Nuclear Energy Institute CEO Maria Korsnick, who attended the speech, thanked the president for the study on the challenges facing the nuclear energy industry.

“If the president wishes for our nation to achieve nuclear energy dominance both at home and abroad, he’ll do it by preserving the existing nuclear fleet, paving the way for the deployment of advanced nuclear designs and stimulating exports abroad,” she said in a statement.

Left to right: Zinke, Pence, Trump, Perry and Pruitt

Tom Kiernan, CEO of the American Wind Energy Association, issued a statement Thursday expressing support for Trump’s “strategic vision to seek American energy dominance.”

“The administration’s all-of-the-above energy strategy, including resources like wind, can work to make America safer and more self-reliant while growing the economy,” Kiernan said.

Sierra Club Executive Director Michael Brune said Trump’s “Energy Week” showed “just how weak he is on energy solutions. Trump’s rhetoric on energy falls short of the reality in which he’s canceling life-saving public health standards that protect clean air and water just to boost the profits of fossil fuel executives. Trump isn’t leading America, he’s trying to drive us backwards and he will not succeed.

“Trump’s head is stuck so far into the sand that it’s no wonder the only thing he can speak of is fossil fuels — he can’t see that solar and wind energy are creating more jobs and powering homes and businesses across the country. If he truly cared about energy dominance, Trump would be investing in growing the booming clean energy economy rather than trying to turn back the clock for dirty fuels.”

June 30, 2017

Access Northeast Put on Hold by Utilities

By Michael Kuser

Eversource Energy and National Grid notified FERC on Thursday that they are suspending the permitting process for the $3 billion Access Northeast natural gas pipeline expansion project in New England until they can find a way to finance it. The two utilities made the filing (PF16-1) together with pipeline operator Enbridge, according to a report in the Boston Globe.

The story quoted Brian McKerlie, a vice president at Enbridge, as saying that after the companies persuade state legislators to allow a special tariff for electric ratepayers to fund the project, “we’ll be able to re-engage the FERC filing process and be back on track.”

The companies’ action was not unexpected.

Last August, Eversource and National Grid withdrew requests to bill customers of their four electric distribution companies for natural gas capacity from the proposed pipeline expansion after the Massachusetts Supreme Judicial Court vacated an order by the state regulators approving pipeline capacity contracts. (See Eversource, National Grid Withdraw Requests to Bill for Pipeline.)

The increasing reliance on natural gas to generate electricity in New England has led to reliability concerns, while the source of much of the gas, fracking in Pennsylvania, has led to environmental protests over new pipelines or plans to expand existing ones.

On Tuesday, Massachusetts gubernatorial candidate Setti Warren (D) visited a gas compressor station in Weymouth that serves the Algonquin and would serve its expanded version. Warren, mayor of Newton, criticized the pipeline expansion as a “mistake for Massachusetts” and said Gov. Charlie Baker (R) should oppose it.

June 29, 2017

Storage Advocates Urge CAISO on DR Product

By Jason Fordney

Tesla and other energy storage companies have urged CAISO to accelerate development of a new demand response product that is based on excess generation, but the grid operator says it must first address many concerns before including the product in any proposal.

The electric automaker and other storage proponents last week submitted comments on a draft proposal of CAISO’s Energy Storage and Distributed Energy (ESDER) Phase 2 initiative, which is unlikely to include establishment of a new proxy demand resource (PDR) that would consume load based on an ISO dispatch instruction, including providing regulation service.

CAISO wants to omit the load consumption product from the ESDER Phase 2 package to be presented to its Board of Governors for approval during its July meeting. (See CAISO Proposes Rules for Distributed Resources, Storage; CAISO Finalizes Rules for DR, Distributed Generation.) The ISO plans to defer the product until a third phase in order to better understand the limits of non-generator resources and other issues identified in its separate “multiple-use applications” initiative related to storage.

Increasing instances of generation oversupply and solar curtailments is creating urgency for a market mechanism that facilitates consumption of surplus power, and stakeholders have generally agreed that CAISO should not let jurisdictional rate issues interfere with development of the bidirectional PDR product capable of both consuming and producing energy.

“CAISO staff has indicated that owing to the retail billing implications of customer participation in a hypothetical load consumption product, such a product is too fraught to consider developing and implementing until such implications are addressed,” Tesla said in its comments. The company “strongly disagrees with this perspective,” provided that customers understand that their retail bills will be impacted by a decision to charge a storage device based on the billing determinants they are subject to pursuant to their retail tariff.

Tesla said that customers of the program should be able to determine for themselves whether to provide load consumption based on the difference between retail rates and wholesale pricing. Customers would find value in offsetting their retail bills through negative wholesale prices while helping California mitigate oversupply, the company contended.

While storage advocates are urging CAISO to develop a bidirectional PDR product, “a broad cross-section of stakeholders” said it should “take more time to resolve issues, consider options and coordinate with” the California Public Utilities Commission, CAISO said.

Among these concerns are the effects on retail rates, customer interest, demand charges and technical implementation issues.

Pacific Gas and Electric’s “excess supply pilot has delved into these issues and has reported that participants are concerned about rate impacts and ratcheting demand charges,” CAISO said in its revised proposal.

“Contrary to comments from the storage community, the CAISO does not view these barriers as jurisdictional in nature, but as real impediments to customer interest and robust customer participation in a bidirectional PDR product,” the ISO said.

Energy storage companies said CAISO should also work on enabling behind-the-meter storage to participate in the wholesale market via the PDR product. There is unused potential in BTM energy storage because to do so currently requires participation as a non-generator resource, said Tesla, energy storage company Stem and EV charger manufacturer eMotorWerks.

Tesla Distributed Battery Storage Power Plant | *Tesla*

There has also been discussion within the Load Consumption Working Group, which Tesla said CAISO staff “appears to defer to stakeholders to revive and manage.” Storage companies want the ISO to take a leadership role in the working group.

The California Energy Storage Association (CESA), which represents more than 60 companies, said it “supports rapid action” on the group performing further work and having CAISO lead it, adding that the ISO should ensure ESDER promotes nondiscriminatory access to markets.

“CAISO should focus on how to ensure resources like PDRs can show up in CAISO markets to compete to provide services,” CESA said.

June 29, 2017

FERC: MISO Gas Data Sharing Plan Falls Short

By Amanda Durish Cook

A MISO plan to share generators’ hourly gas-burn estimates with select natural gas pipeline operators will require more explanation before getting federal approval, FERC staff said Tuesday.

Agency staff issued the RTO a deficiency letter in response to a proposal to share nonpublic, day-ahead gas-usage profiles with pipeline companies — which currently include Northern Natural Gas, ANR Pipeline and DTE Energy — before this winter as part of a pilot program meant to improve gas reliability (ER17-1556). (See “3 Pipeline Companies to Receive Gas Profiles Before Winter,” MISO Reliability Subcommittee Briefs.)

In filing the proposal, MISO stressed that it would share only aggregated data, while also contending that sharing nonpublic operational data was allowed under FERC Order 787. The RTO plans to execute nondisclosure agreements with relevant pipelines and utilities under the proposal.

But FERC staff were primarily concerned with a provision that would also allow MISO to share data with local distribution companies (LDCs) and intrastate pipelines in addition to interstate operators.

While the deficiency letter acknowledged that Order 787 recognized the “significant” role of LDCs and others in maintaining reliability of both interstate pipeline systems and electric transmission systems, it also noted the order “declined to provide blanket authorization for the disclosure of nonpublic, operational information” to LDCs, intrastate pipelines or gas gatherers, instead requiring a case-by-case approach. FERC staff determined that “MISO does not provide support for this aspect of its proposal” and gave the RTO 30 days to provide more supporting information to justify sharing nonpublic information with LDCs.

Agency staff also said that MISO’s proposal failed to expressly prohibit the use of nonpublic, operational information “to the detriment of any natural gas and/or electric market,” as an earlier, similar proposal from PJM promised. MISO’s proposed nondisclosure agreement merely prohibits the “receiving entity from illegal and non-legitimate use of the nonpublic, operational information,” FERC staff said, asking MISO to explain the omission.

Some MISO stakeholders earlier this year voiced opposition to the pilot program, saying it could affect reliability if participating gas operators make burn rate decisions relying solely on partial day-ahead data. (See MISO Stakeholders Question Electric-Gas Info Sharing.)