Page 1283 – RTO Insider

August 4, 2017

NYPSC Pushes Ahead with ESCO Investigation

By Michael Kuser

The New York Public Service Commission on Wednesday rebuffed an appeal by a trade group seeking to prevent evidentiary hearings in the commission’s investigation into overcharging by energy service companies (ESCOs).

The commission rejected separate requests by the Retail Energy Supply Association and Direct Energy Services to halt the evidentiary phase of the proceedings, currently slated to begin in October, although it did grant one appeal.

nypsc energy service companies esco — ALJ Julia Bielawski

“For the commission to entertain an interlocutory appeal — an appeal from a judge’s ruling — at this early stage in the evidentiary process of a proceeding is extraordinary, and it’s up to appellants to show extraordinary circumstances to warrant the commission’s intervention at this point,” Administrative Law Judge Julia Bielawski told the PSC. “Here, typically a discovery dispute would not rise to that level. Here, however, one of the arguments presented by the appellants meets that criteria, so the recommendation is for the commission to entertain this appeal.”

Bielawski was citing the appellants’ assertion that a commission requirement to release certain customer data violates uniform business practices, commission policy and existing contracts.

Commission Chair John B. Rhodes agreed to reverse that one part of the PSC’s May 2017 order while dismissing the other appeals. The commission voted with him.

“The record is clear that certain ESCO customers have paid much more for their energy than necessary,” Rhodes said. “We have cracked down on bad-acting ESCOs, and we have banned ESCOs from serving low-income consumers.

“I’ve been observing the ESCOs using every legal, procedural move that I can imagine — and I’m a regulatory attorney of some years standing — to slow down and limit this proceeding,” Commissioner Gregg C. Sayre said. “I look forward with very great interest to the record now — and may I say, finally — being developed in this case. Even more, I look forward to having an opportunity to make some decisions regarding what appears to be a troubled market.”

A state Supreme Court judge in June ruled that the commission has “the very broadest of powers” to regulate ESCOs and utility rates, especially when seeking to prevent the overcharging of low-income customers. (See Court Backs NYPSC on Regulating Retail Sales.) The court’s Appellate Division last month upheld its conclusion that the commission has authority to cap prices of ESCOs at utility rates.

PSC Affirms REV Order

The PSC also ruled against a petition to rehear or reconsider the order adopting a regulatory and policy framework and implementation plan in the Reforming the Energy Vision case, also commonly known as the Track 1 — or REV framework — order.

Assistant Counsel Ted Kelly said, “The Track 1 order applied the general presumption against utility ownership of generation to these distributed energy resources. I identified several limited exceptions to that rule; in particular, one exception provides for utility ownership of [DER] to enable lower- and moderate-income customers to benefit from those resources.”

Several nonprofit organizations had asked the commission to eliminate that exception.

“Utility ownership of DER was one of the most controversial issues in our Track 1 order,” Sayre said. “We made a compromise between always allowing utilities to own DERs and put them in the rate base, or never. I think we made a good compromise.”

ConEd plant on the East River at 15th Street in Manhattan, New York City

The commission also approved a 3-MW solar project by Consolidated Edison in New York City aimed at saving low-income customers money on their utility bills. Con Edison will place the solar panels on rooftops and property owned by the utility.

August 4, 2017

NRG CEO Hopeful About ZEC Suits, Company Future

By Peter Key

NRG Energy CEO Mauricio Gutierrez said Thursday that his company is optimistic that FERC and U.S. courts will find that the zero-emission credits (ZECs) being issued to nuclear generators by two states are harmful to the market and consumers.

Mauricio Gutierrez NRG zero-emission credits ZECs — NRG Energy CEO Mauricio Gutierrez | *NRG*

Speaking during NRG’s second-quarter earnings conference call, Gutierrez was also bullish on the company’s future as a power generator and retailer, in part because of the location of its generation assets.

Additionally, he said that although the asset sales included in a transformation plan launched last month may not be completed by the end of the year, he expects the company will be able to announce them all by then.

NRG earned $99 million ($0.36/share) from continuing operations during the quarter, after losing $163 million ($0.25/share) a year earlier. That beat the Zacks consensus analysts’ estimate of a 5-cent/share loss. Both sets of figures excluded the results of GenOn Energy, which filed for bankruptcy in June and will become the property of its senior noteholders.

NRG’s revenue was $2.7 billion in the most recent quarter, up from $2.25 billion a year ago, but short of the consensus estimate of $3.03 billion.

The company is a plaintiff in lawsuits against ZEC programs in Illinois and New York, both of which were dismissed last month. (See New York ZEC Suit Dismissed.) The subsidies also prompted requests for FERC to extend the minimum offer price rule (MOPR) to existing units.

Initial briefs are due Aug. 28 in the plaintiffs’ appeal of the ruling on the Illinois ZECs case, which is pending before the 7th U.S. Circuit Court of Appeals. The plaintiffs plan to ask the 2nd Circuit to review the New York ruling.

When asked why he was so confident that the cases will be ultimately decided in NRG’s favor, Gutierrez said, “We think that we have a strong case, and with new FERC commissioners coming in, I think there will be a fresh look, a fresh perspective on the validity of our case and the potential impact that these out-of-market subsidies can have in the competitive markets.”

Another analyst on the call pointed to continued renewable subsidies while, outside Texas, load growth in NRG’s markets is flat. He asked if those developments concerned Gutierrez, as NRG will be left with a generation portfolio without renewables once the company finishes its planned asset sales.

Gutierrez said NRG would have a chance to rebalance its portfolio once its transformation process is completed and that its “generation is within the load pocket of the Chicago area, New York City or southwest Connecticut, and that these assets benefit significantly from capacity prices that have been very robust and continue to be robust as far as 2020 [or] 2021.”

As for NRG’s retail business, Guiterrez said the company has looked at best practices in other retail industries for ideas and concluded that it should build up its information technology infrastructure and analytics.

“So the way I characterize this effort is, in the last three years, we grew our business roughly by $200 million,” he said. “What we’re saying is that in the next three years, we are going to grow it by $200 million.”

[Editor’s note: Quotes from conference call courtesy of Seeking Alpha.]

August 4, 2017

FERC Quorum Restored as Powelson, Chatterjee Confirmed

By Rich Heidorn Jr.

The Senate on Thursday night confirmed Pennsylvania regulator Robert Powelson and GOP aide Neil Chatterjee to FERC, effectively restoring the quorum the commission lost six months ago.

Swearing in at their Senate confirmation hearing left to right: Brouillette, Chatterjee and Powelson | © *RTO Insider*

Confirmation of the two Republican nominees was never in doubt in the GOP-controlled Senate, but their nominations languished for almost two months after the Senate Energy and Natural Resources Committee approved them on a 20-3 vote June 6, as Democrats reportedly held out for an assurance that the Senate would also move on Democratic nominee Richard Glick.

That hurdle was cleared when the committee announced it had scheduled a Sept. 7 confirmation hearing for Glick, general counsel for the Democrats on the panel, and Republican attorney Kevin McIntyre, whom President Trump nominated as chairman. That action came after the White House, which had announced Trump’s intent to nominate Glick in late June and McIntyre almost a month ago, formally submitted their nominations to the Senate on Wednesday.

Excitement, then a Nervous Wait

Powelson, a member of the Pennsylvania Public Utility Commission, and Chatterjee, senior energy policy adviser to Senate Majority Leader Mitch McConnell (R-Ky.), were included on the 1 p.m. Senate Executive Calendar Thursday. That set off a flurry of excitement in the offices of energy lawyers and interest groups with issues before the commission.

Dan Brouillette, who had his confirmation hearing alongside the FERC nominees in May, was confirmed by the Senate as deputy secretary of energy shortly after noon. But doubts that Powelson and Chatterjee would win a vote before the Senate began its August recess grew later in the day. The upper house will not return until Sept. 5.

Sen. Lisa Murkowski (R-Alaska), chairwoman of the Senate energy panel, took the Senate podium at about 6:30 p.m. to request a vote after a lengthy quorum call — when the Senate remained in session but no action was taking place on the floor. The nominees were confirmed by a unanimous voice vote.

Chatterjee, of Kentucky, will replace Tony Clark, whose term expired last Sept. 30. Powelson is replacing Philip Moeller, whose term expired in October 2015.

Murkowski called Chatterjee “an invaluable asset” to her and her committee staff. “Extremely committed and dedicated. And it’s just been a real pleasure to work with him,” Murkowski said on the floor after the vote. “I don’t know Mr. Powelson as well, but having had an opportunity to advance his name before the Energy committee for confirmation too, I know that the … credentials that he will bring to the commission are greatly appreciated.”

Murkowski said restoring FERC’s quorum was essential to building new energy infrastructure. “In order to proceed with much of this you have to have the FERC actually operating: Working to review the permits; working through the ratemaking cases. It is substantive work. It is challenging work. It is work that has now been stopped up for months and months. So, knowing that FERC will be able to commence its operations again with a quorum is really good news today.”

Backlog to Clear

Once the two are sworn in, the commission will be able to resume work on the hundreds of contested dockets that have languished since February, when Chairman Norman Bay resigned after Trump named Cheryl LaFleur acting chair. The commission typically does not meet in public in August. Its next open meeting is scheduled for Sept. 20.

With only LaFleur and Commissioner Colette Honorable, the commission lacked the three-member quorum required to issue most significant orders. LaFleur was left alone on the commission when Honorable left once her term expired June 30.

FERC staffers have been able to issue only delegated orders; contested dockets and rulemakings have been at a standstill. As a result, LaFleur said, the commission has issued only a fraction of the 100 commission-authorized orders it averages a month.

Glick would replace Honorable for a term expiring in June 2022. McIntyre would finish Bay’s term and be reappointed for a term expiring June 2023. (See Trump Names Energy Lawyer McIntyre as FERC Chair.)

Turnover

In an interview in May, LaFleur noted that the four new commissioners will represent the biggest turnover at the commission since at least 1993. LaFleur joined the panel in July 2010. (See LaFleur Braces for ‘FERC 2.0’ Under Trump.)

In addition to the backlog of routine but contested orders they must clear, the new commissioners also will have to deal with another series of federal-state jurisdictional issues — moves by policymakers in RTO states to subsidize in-state generation. (See RTO Markets at Crossroads, Hobbled FERC Ponders Options.)

The confirmations were greeted with relief by many — but not all — stakeholders.

“Happy day!” tweeted LaFleur. “Very excited to work with new Commissioners Chatterjee and Powelson!”

Edison Electric Institute President Tom Kuhn said Chatterjee and Powelson “bring a wealth of experience, and a strong commitment to public service.” Kuhn said EEI’s priorities for FERC are “improving the functioning and price formation in wholesale markets, updating the transmission planning process, streamlining the siting and permitting process, developing predictability for the return on equity (ROE) in order to attract investment, and ensuring reliability and energy grid security.”

“We appreciate the Senate’s action to confirm both Robert Powelson and Neil Chatterjee,” said Jim Matheson, CEO of the National Rural Electric Cooperative Association. “Restoring FERC’s quorum will allow the commission to move forward on critical co-op issues such as access to a diverse power supply and the certification of natural gas pipelines.”

Advanced Energy Economy said it hoped the new commissioners will be receptive to “an energy system that encourages innovation and allows all technologies to compete fairly in wholesale markets while also respecting the right of states to set policy goals of their own.”

“We believe that market rules should not lock in old technologies at the expense of newer ones that can do more for less,” the group continued in a statement. “With a quorum restored at FERC and two more nominations pending, we look forward to working with the commissioners to remove all barriers to advanced energy technologies competing in wholesale electricity markets.”

Pipeline protestors outside Senate Minority Leader Chuck Schumer’s (D-N.Y.) office in Washington. | *Beyond Extreme Energy*

Some environmental activists, however, would rather the commission remain unable to approve new interstate gas pipelines. (See Pipeline Foes Like Hobbled FERC Just the Way it is.) The activist coalition Beyond Extreme Energy said that two dozen protesters blockaded the front door at the D.C. office of Senate Minority Leader Chuck Schumer (D-N.Y.) Thursday, resulting in arrests. The protesters carried a banner asking Schumer to oppose the FERC nominees and the Energy and Natural Resources Act of 2017 (S 1460), which environmentalists have labeled the “Dirty Energy Bill.”

August 4, 2017January 3, 2024

Stakeholders Hash out Future of DER at OMS Workshop

By Amanda Durish Cook

MADISON, Wis. — MISO state regulators and industry officials gathered this week to discuss how the region’s electricity sector will accommodate the budding growth of distributed energy resources within the RTO’s footprint.

While the outlook of participants at the Organization of MISO States’ Aug. 1 DER workshop ranged from cautious to optimistic, nearly all agreed that the industry could be confronting a profound transformation as energy resources become increasingly decentralized.

“DER, this is really just a fad, right? We don’t need to concern ourselves with this,” joked Wisconsin Public Service Commissioner Mike Huebsch. “In all seriousness, that’s what some were saying a few years ago, but it’s clearly not a fad.”

Missouri Public Service Commission Chairman Daniel Hall said DER is fast becoming a national policy issue.

“We are witnessing technological advances to accommodate the growing demand for DER,” he told a crowd of utility executives, regulators, renewable energy advocates and RTO officials at the workshop, sponsored by the Wisconsin Public Utility Institute and the Wisconsin Energy Institute.

“I think of this as potentially the creation of a new industry,” said Suedeen Kelly, a partner at the law firm Jenner & Block. DERs and microgrids are introducing electricity to far-flung regions of developing countries, she said.

“Is it going to be as dramatic a change in the U.S.? I don’t know yet. Are we going to move to a country of microgrids? Personally, I doubt it — but maybe,” Kelly said. “I think most of the decisions that state regulators have to make can fall into three categories: Who’s going to be allowed to own them? Who’s going to be allowed to dispatch them? How are they going to be compensated?”

Kelly said each state would likely tackle these questions on its own.

“We have a lot of time to figure out the dispatch question — who and how and all that,” said Mike Bull, director of policy at the Center for Energy and Environment.

Bull said he expects DER owners, rather than regulators, to come forward with policy ideas, noting that regulators are often reactive rather than proactive.

DER: Enemy — or BFF?

“DERs are advancing at a pace that I’m not sure any of us grasp,” said Lauren Azar, a former Wisconsin PSC commissioner, and current energy consultant and attorney.

Azar said states must work together to take the lead on policy issues and set aside regional differences. “It’s not surprising that whenever a huge new region comes into MISO, that it’s going to take some time to build some trust,” she said, referring to the integration of MISO South.

MISO Vice President of System Operations Todd Ramey said DERs could reach 20 GW in the RTO by 2030. MISO underestimated the adoption of customer DERs in its past modeling, he noted, and the RTO’s main concern remains forecasting substation-level requirements as early as possible, anywhere from two or three days to five minutes ahead ― a schedule MISO intends to maintain even with the increased penetration of DERs.

When Azar asked if anyone in the audience was surprised at the rate of electric vehicle adoption, she was met with a scattered raising of hands.

“OK, well you guys are more prescient than I am,” she said to laughter.

Azar said the grid is remarkable in its dynamism and ever-changing flows. “This year’s enemies are next year’s BFFs,” she said. “As state regulators, you have the luxury of taking the economic long view. You should not be driven by what your utility’s dividends are right now.”

Azar expressed regret about her 2011 vote against allowing aggregated demand response in Wisconsin and said she now realizes DR strengthens the nation’s grid and economy. She advised states against becoming too wrapped up in their own needs to notice what is good for the nation as a whole.

She noted that last year’s Notice of Proposed Rulemaking requiring RTOs to remove market barriers for storage and DERs indicates that FERC is inclined to allow for state regulation of aggregated DERs and energy storage above 100 kW. The NOPR is reminiscent of FERC Order 719, she said.

She advised states to encourage a regulatory structure in which new technologies are allowed to “bubble up” in non-discriminatory fashion and are properly monetized.

The Elvis Paradox

Tim Noeldner, WPPI Energy vice president of rates and special projects, said his company expects “slow and steady growth” in DERs and will leave a small planning gap for the resources to fill. “We go into the future a little bit short,” he explained.

Entergy Director of Regulatory Research Andrew Owens said 4% of New Orleans households with rooftop solar are spread throughout all socioeconomic corners of the city, a result of falling costs and generous tax credits.

“Is that an opportunity or a threat? Right now, we have no grid visibility of it other than locations and zip codes. We can do desktop modeling of it, but it’s not real,” Owens said. He said a mix of policy, pilot projects and partnerships are needed for a steadier transition, and can help scale New Orleans Mayor Mitch Landrieu’s lofty climate action goal of 255 MW of solar capacity within the city in the next decade, up 215 MW from today.

Owens also cautioned against the simple extrapolation of present DER trends, referring to the “Elvis Presley Paradox,” which he said holds that the number of Elvis impersonators increased from about 30 at the singer’s death in 1977 to around 50,000 by the mid-1990s — a growth rate that would translate into every third person in the world being an Elvis impersonator by now.

At some point, Owens said, there won’t be usable space for solar, and a willing tide of customers will abate.

Former FERC Commissioner Tony Clark, now a senior adviser with law firm Wilkinson Barker Knauer, said DERs could affect the future in one of three ways.

“You can make a case that things will look not much different than today ― I don’t think that’s the case,” he said. On the other hand, one could assume the “Elon-Musk-on-steroids version of the world takes over,” and electric vehicles are in every garage and residential heaters are able to store energy, making houses self-contained units.

Future reality is likely to be found somewhere in the middle, according to Clark.

“I personally think the most likely scenario is, moving forward, you literally have more power at the edges of the grid and figuratively more power in the hands of the consumers. … It’s still a network grid, but a more nimble grid,” Clark said. “I’d think that’s the most likely scenario. … Distribution services will still play an extraordinarily important role.”

University of Wisconsin engineering professor Bob Lasseter, who studies the penetration of DERs, said that microgrids provide the most promising means of integrating substantial amounts of distributed sources. However, a decentralized grid works best autonomously — not micromanaged by grid operators — and spared from extensive communications and controls.

“I believe that this bottom-up model is really going to work,” Lasseter said. “Microgrids are getting killed because there’s too much managing of loads.”

Supersized Battery

Residential DERs can help grid planners avoid costly transmission projects by lowering demand, said Amy Heart, director of public policy at solar advocacy group SunRun. “Imagine having customers excited about rate cases because they’re helping to generate savings,” she said.

Kelly said that the electric industry has traditionally rewarded investment because expansion has long been necessary. “Now? Not so much,” she said, adding that the industry needs to find methods to reward avoiding costly investments.

Grid investment is still paramount, Michigan Public Service Chairman Sally Talberg said, and new technologies to accommodate DERs could be incorporated into the upgrade of Michigan’s aging infrastructure.

“We’ve got breakers that are 70 years old. … It’s like driving a car without a steering wheel ― and this is not an autonomous car,” Talberg said. She envisioned grid upgrades that accommodate two-way energy flows and the grid itself upgraded to become “a large storage battery.”

More Visibility, Please

RTO executives, meanwhile, are seeking historical and operating data to plan for DERs.

Resource visibility is the key to modeling grid planning, MISO’s Ramey said. “I need to know where it’s at, what size and dynamic impacts,” he said. “Today, MISO has no role in integration [of DERs], but we need that data to ensure reliability.”

CAISO Manager of Transmission Planning Jeff Billinton said DER information needs to be incorporated into transmission planning and NERC reliability models years in advance. ERCOT Chief Operating Officer Cheryl Mele said RTOs need to know whether it will be the resources or the distribution companies that will provide production data.

Utility executives are also calling for more DER visibility.

Joe McGovern, Alliant Energy’s director of electrical engineering, said DER use is no longer a simple issue of interconnection. “It went from an engineering problem to a broader market issue very quickly,” he said. Stakeholders, generation owners, customers and developers must be educated on the potential impacts. He said he’d like to see a distribution system that runs like a software platform and is easily accessible.

Commonwealth Edison Director of Energy Policy Chris Foley said his company is giving “a lot of thought to the utility of the future” but is not yet moving to a distribution system operator model in which the utility co-optimizes distributed resources.

Baked-in Distribution Costs?

Clark said he said he would attempt to make attendees “uncomfortable,” reminding them that FERC could intervene and issue regulations for DERs if their growth went unchecked and had an adverse impact on rates.

“Consider me the Scaramucci of the workshop,” he joked, referring to the foul-mouthed former White House communications director.

“I thought he was going to cuss like Scaramucci did,” Arkansas Public Service Commission Chair Ted Thomas teased.

“That was the Midwestern version,” Clark replied.

Noeldner said WPPI supports a retail rate in which distribution costs are built in.

EnerNOC Director of Regulatory Affairs Greg Geller added that DER-owning customers need to reap the financial benefit of the value they are helping to create and suggested attaching a value to “peak shaving,” when customers help reduce demand at peak times.

State regulators must recognize the “push and pull” of customers influencing policy, said Tyler Huebner, executive director of Renew Wisconsin. “What we see is, the worse the net metering policies are [in a state], the bigger rush there is to install storage,” Huebner said.

OMS Executive Director Tanya Paslawski said the DER workshop served as a “good starting point” for future discussions within her organization. RTO officials last month asked OMS for policy ideas on a common DER definition and market rules. (See “MISO Asks OMS for DER Ideas,” OMS Issues EE Market Participation Opinion.)

“We’re not in any emergency situation in MISO ― or any RTO for that matter ― but this is something that is picking up steam … and there are a lot of moving parts to consider,” Paslawski said.

MISO participants will resume their DER conversation again in September at a full board meeting in which stakeholders will debate DER treatment as a “hot topic” discussion item. The RTO also continues to develop a common definition and market rules for the participation of energy storage in its markets. (See MISO Rules Must Bend for Storage, Stakeholders Say.) MISO’s Steering Committee last month voted to approve the creation of an energy storage task force, which will report its findings and discussions back to the committee.

August 3, 2017

Solar Eclipse Prep Nearly Complete at CAISO

By Robert Mullin

CAISO is nailing down its final preparations for the Aug. 21 solar eclipse, which is expected to take about 5,600 MW of utility-scale and rooftop solar generation off the California grid during morning hours when those resources would typically be ramping up output.

Still, the grid operator expressed confidence in its ability to avoid service outages stemming from the event, despite having to support an upward ramp of about 70 MW/minute heading into the eclipse and a downward ramp of 90 to 100 MW/minute coming out.

“We will ramp up generation to compensate for lost solar production, and there is plenty of capacity to meet need,” the ISO said in a FAQ published on its website. “It is not unusual for the ISO grid operators to manage ramps this large on certain days.”

CAISO currently has about 10,000 MW of utility-scale solar interconnected into its system, and its typical morning ramps average about 29 MW/minute.

The extra capacity will mostly come from traditional generating resources. (See CAISO Solar Eclipse Prep Relies on Conventional Mix.) With California’s water levels still relatively high after a wet winter, CAISO expects to have access to about 6,000 MW of flexible hydroelectric capacity in mid-August. The ISO has also been working with gas pipeline companies, utilities and generators to procure additional reserve and regulation capacity, both of which will be needed to grapple with the potential for oversupply and frequency regulation issues after the eclipse, as solar rapidly ramps up its output.

Tasks Completed

Begun last year, CAISO’s preparations for the eclipse have been extensive.

The ISO said it has consulted with the forecasting team that helped grid operators in Europe prepare for a 2015 eclipse, which especially affected Germany’s 40 GW of installed solar capacity. The ISO has developed its own event-day forecast using Aug. 22, 2016 — also a Monday — as the basis for projecting expected demand the morning of the eclipse. The ISO’s model assumes full sun, no “extraordinary” conservation measures and higher obscuration rates (representing the proportion of the sun obscured by the moon) in Northern California, along with a corresponding loss with rooftop solar output there.

caiso eclipse rooftop solar — The eclipse will have its greatest impact on solar generation in Northern California, where “obscuration” rates will be above 75%. | *CAISO*

The ISO has also completed a market simulation for the day of the eclipse and conducted “tabletop exercises” and training for real-time grid operators. It has also refined its renewable forecasts — in part by comparing them with third-party forecasts — and coordinated with natural gas companies to plan for increased output from gas-fired power plants.

The grid operator is also working with Western Energy Imbalance Market (EIM) participants to “incorporate eclipse impacts in their power schedules, maintain full operational energy transfers, and collaborate on forecasting.” CAISO expects the eclipse to have some impact on 1,700 to 2,000 MW of solar generation in neighboring EIM areas.

Still to Come

A week ahead of the eclipse, CAISO plans to “refine” its resource and load forecasts and update market participants about any changes to its reserve needs. Two days before the event, it will hold a conference call with market participants “to facilitate coordination and transparency,” the FAQ said.

Finally, on the morning of the eclipse, the ISO will ensure that its real-time forecasts are transferred into the ISO system in order to prepare generation and optimize the transmission network.

And while the ISO is not expecting the need for conservation measures, it did encourage electricity consumers to keep those measures in mind on the day of the eclipse.

“The ISO predicts the typical consumer will not notice the grid management challenges and balancing strategies,” CAISO said. “However, energy efficiency is always helpful to curb spikes in need for power and to lower consumer electricity bills during times of high demand.”

August 3, 2017

Va. Data Centers, Residential Growth Boost Dominion Demand

By Rich Heidorn Jr.

Data centers and residential customer growth are driving increased electric demand for Dominion Energy in Virginia, with weather normalized sales up about 2% for the first half of the year.

New customer connections in the first six months jumped 7% over 2016, and the company connected five new data centers between April and June, company officials said in their second-quarter earnings call Wednesday.

CEO Thomas Farrell said an anticipated increase in federal defense spending under the Trump administration would “provide strong support for the Virginia economy, which is the largest recipient of defense dollars in the nation.”

“All of these factors support our expectation that annual electric sales growth of at least 1% will continue,” Farrell added.

The company reported second-quarter earnings of $390 million ($0.62/share), a drop from last year’s $452 million ($0.73/share). Operating earnings for the quarter were $421 million ($0.67/share) versus $441 million ($0.71/share) for 2016. The main difference between reported and operating earnings were costs related to Dominion’s acquisition of Questar.

Operating revenue was $2.81 billion, up 8% from almost $2.6 billion a year earlier. The company is predicting earnings growth of at least 10% in 2018.

Transmission spending will contribute to that growth. Dominion added $327 million in transmission assets in the first half of the year, and the company plans to invest $800 million in transmission annually for at least the next decade.

Extensions for Va. Nukes, Subsidy for Millstone Sought

dominion energy virginia — Cove Point Liquefaction Project | *Dominion Energy*

Farrell said company officials are “working very hard” to win financial support from Connecticut lawmakers for its Millstone nuclear plant. He did not respond to an analyst’s question on whether the company would share Millstone’s financials to rebut criticism that the plant is already profitable and doesn’t need assistance.

However, he said the company will participate in the study ordered by Gov. Dannel Malloy last month. The state’s Department of Energy and Environment and Public Utilities Regulatory Authority are to report to the legislature on the plant’s financials in January 2018. (See CT Gov Orders Financial Analysis of Millstone Plant.)

Paul D. Koonce, CEO of Dominion’s Power Generation Group, said that the timing of legislative action depends on the resolution of the Connecticut budget, which he hopes lawmakers will complete by Labor Day.

Meanwhile, the company has begun the process for winning license extensions for its North Anna and Surry nuclear plants in Virginia. Officials said state legislation will allow the company to recover through a rate rider the costs of extending the plants’ lives, which could be as much as $4 billion.

Company officials also provided updates on several projects:

Farrell reiterated the company’s plans to add as much as 2,000 MW of offshore wind if two test offshore wind turbines planned for 26 miles off Virginia Beach “demonstrate that they work well in these waters and produce the kind of capacity that we expect.” (See Dominion Plans 12-MW Offshore Wind Project, 2nd in US.)
The Cove Point Liquefaction Project is 95% complete, on target for the beginning of commercial service later this year.
Construction of the Atlantic Coast Pipeline project should begin in November, assuming FERC restores its quorum by the end of September. “There’s certainly some vocal opposition in some isolated localities, but overall, folks in Virginia support the pipeline as they do in West Virginia [and] North Carolina, and we expect to get all the necessary permits later this fall,” Farrell said. Dominion won’t discuss potential expansion of the pipeline until it has the FERC permit in hand, he said.
The 1,588-MW Greensville County combined cycle plant is almost half complete and is on time and on budget with commercial operations expected late 2018.
The company said it expects to select sites later this year for one or more pumped-storage facilities in Southwest Virginia. The General Assembly approved recovery of the facilities’ costs through a rider.

dominion energy data centers virginia — Greensville County combined cycle plant construction | *Dominion Energy*

Solar

The company said data centers, military installations and the state government are driving demand for renewables. Three facilities totaling 119 MW went into commercial operation in the second quarter. In total, the company expects to add 438 MW of solar this year and another 200 MW by the end of 2018, bringing its total to 1,800 MW. The company’s integrated resource plan calls for up to 5,000 MW of solar by 2032.

“Solar uses a lot of land, and that’s beginning to become obvious to people as maybe not quite as obvious to folks in the West, where vacant land is abundant,” Farrell said. “So we’re exploring all of our options to meet our customers’ demands for decades to come. That’s part of why we’re looking at the relicensing of North Anna and Surry as well, and pump storage in the Virginia mountains.”

On Thursday, the company announced it has acquired two 5-MW solar facilities and plans to purchase two other solar farms totaling 10 MW later in the third quarter from Strata Solar, of Chapel Hill, N.C.

[Editor’s note: Quotes from the earnings call are according to a transcript by Seeking Alpha.]

August 3, 2017

Entergy Q2 Earnings Beat Expectations

By Tom Kleckner

With its merchant nuclear power plants all but part of history, Entergy reported second-quarter earnings Wednesday that almost doubled investor expectations.

The New Orleans-based company said second-quarter profits were $409.9 million ($2.27/share), compared with $567.3 million ($3.11/share) a year ago. A Zacks Investment Research survey of Wall Street analysts had forecasted earnings of $1.20/share.

Entergy took a $152.3 million loss related to its plans to sell or close its five Entergy Wholesale Commodities nuclear plants. (See Entergy, Consumers Announce Closure of Palisades Nuke and Entergy to Shut Down Indian Point by 2021.)

At the same time, the company has received final regulatory approval to build a pair of nearly identical 990-MW combined cycle gas-fired plants in Louisiana and Texas. The Lake Charles Power Station in Westlake, La., is expected to go online in 2020, while the Montgomery County Power Station near Houston should begin operations in 2021.

entergy earnings q2 2017 — Entergy’s Vermont Yankee nuclear plant, closed in 2014.

“These projects will contribute to our portfolio transformation efforts to replace older, less efficient plants with new generation,” Entergy CEO Leo Denault told analysts during a Wednesday earnings call, pointing to state-of-the art emission controls that capture and use waste heat to boost generation. “They are an important part of our strategy to meet our voluntary commitment to develop an electric system that is well-positioned to operate in a carbon-constrained economy.”

Denault said the two plants are expected to provide Entergy’s Louisiana and Texas customers at least $3 billion in combined net benefits and lower production costs. The plants are also expected to provide thousands of jobs during construction and generate more than $2 billion in economic activity for their local communities, he said.

Entergy has also amended its application for the proposed New Orleans Power Station, which has encountered opposition from the City Council. Denault said the company has renewed its request for the original 226-MW combustion turbine but also proposed a 128-MW unit as an alternative.

August 3, 2017

Exelon Confident on ZECs; Will Seek PJM Changes

By Rich Heidorn Jr.

Exelon officials said Wednesday they will press PJM to enact rule changes boosting off-peak prices and are confident nuclear subsidies in New York and Illinois will survive court challenges.

The comments came as Exelon reported second-quarter earnings of $80 million ($0.09/share), a drop from $267 million ($0.29/share) a year earlier, as its generation division saw a $250 million loss.

Adjusted operating earnings for the quarter were $509 million ($0.54/share), down from $604 million ($0.65/share) in 2016, reflecting the end of the reliability support services agreement for its R.E. Ginna nuclear plant in New York, increased nuclear outage days and lower realized energy prices. Those negatives were partially offset by rate increases that boosted utility earnings and zero-emission credit revenue ($0.05/share) for the Ginna, Nine Mile Point and James A. FitzPatrick nuclear plants beginning April 1.

Joe Dominguez, executive vice president of governmental and regulatory affairs and public policy, said federal district court rulings rejecting challenges to the New York and Illinois ZEC cases suggested opponents will have a difficult time prevailing on appeal.

“The district court decided these cases at a very preliminary stage, whereas a legal matter the courts had to assume all the facts that the plaintiffs pled were accurate. Those facts were not accurate, but even under the plaintiffs’ versions of the case, the courts found that they had no legal claim whatsoever,” Dominguez said. “In both decisions, the district courts rejected the entire waterfront of the plaintiffs’ claims beyond the … procedural issues. That speaks to how high a hill they will need to climb on appeal to reverse those decisions.”

David Gaier, spokesman for plaintiff NRG Energy disagreed. “We don’t think we’re down for the count at all,” he said.

Initial briefs are due Aug. 28 in the plaintiffs’ appeal of the ruling on the Illinois ZECs, pending before the 7th U.S. Circuit Court of Appeals. The plaintiffs plan to ask the 2nd Circuit Court to review the New York ruling.

Lobbying Position Improved

Dominguez said the court rulings have helped Exelon’s lobbying posture in other states considering ZEC-type programs. He said opposing lobbyists have cited the legal questions as risks for policymakers, saying “‘Why would you take a tough vote on this only to have it overturned in the courts?’ These decisions resolve that issue.”

CEO Chris Crane said “we remain hopeful” that Pennsylvania officials will enact similar subsidies to prevent the closure of Three Mile Island. (See Seeking Subsidy, Exelon Threatens to Close Three Mile Island.)

Dominguez said, however, that pricing carbon emissions in the wholesale markets would be preferable to ZECs. “It’s more clear to us now than ever that federal wholesale markets need to evolve to fully incorporate attributes like resiliency, fuel diversity and the environmental qualities of the generation resources. If the markets don’t evolve, then the markets are going to have a diminished role in energy policy going forward. We are committed [to markets] but the markets should be well-functioning. Our commitment to markets only extends so far as it provides the best outcomes for our customers.”

Dominguez said the company was heartened by PJM’s plan for energy market changes that would allow baseload generators such as nuclear plants to set clearing prices in off-peak hours. The RTO has said it will file the changes with FERC by the first quarter of 2018, with implementation targeted by summer 2018. “We are going to push very hard to make sure that happens,” promised Dominguez, who said the changes should increase off-peak energy prices and reduce capacity prices. (See RTOs to Congress: Don’t Lose Faith in Markets.)

Not Considering GenCo Spin-off

Crane said that although Exelon believes it is undervalued by Wall Street, it is not considering spinning off its generating unit into a separate company. He cited the “synergies” between its generation fleet and its distribution utilities. Exelon noted that all its utilities scored in the top quartile of the Customer Average Interruption Duration Index and that Baltimore Gas and Electric and Commonwealth Edison achieved their best-ever System Average Interruption Frequency Index scores.

“We are differentiating ourselves from any other merchant generator in the business. [We have] strong balance sheets, a different class of assets, very well run and fairly matched to our load books. So, we like where we’re at and wouldn’t speculate on anything else,” he said. We “really can see the value creation and want the market to recognize it as we do execute on what we say.”

CFO Jack Thayer told analysts Exelon believes future power prices will be higher than suggested by forward curves, whose liquidity has declined over the past year. Trades for 2020 and beyond represent only 6% of the futures volume at the PJM West hub on the ICE and NASDAQ exchanges, he said.

“We would note that our fundamentals group has a more constructive view on power markets than these illiquid forward curves suggest, but we appreciate that there is perceived safety in using the forwards,” he told the stock analysts on the call. “However, when running your numbers, we would just encourage you all to appreciate what is underpinning those forward prices.”

August 2, 2017

CAISO Leads EIM Q2 Benefits, Exports

By Robert Mullin

CAISO hauled in the largest share of the $39.52 million in benefits produced by the Western Energy Imbalance Market (EIM) during the second quarter, the grid operator said in a report released Monday.

The ISO was also the market’s dominant exporter of energy over the period as California coped with combined surpluses of solar and hydroelectric output on its system after a wet winter.

CAISO took in $15.49 million in benefits, compared to $8.81 million for PacifiCorp, $8.13 million for Arizona Public Service and $2.47 million for Puget Sound Energy. NV Energy’s estimated $4.62 million in benefits did not include data for June, which is still pending verification.

EIM CAISO exports pacificorp puget sound — | *CAISO*

The EIM’s total benefits increased by $8.52 million — or 27% — over the first quarter. (See CAISO EIM Exports Rise With Spring, Report Shows.) That spread will increase with the addition of NVE’s June figures.

The gross benefits represent either cost savings for serving load or increased profits from merchant operations within the EIM’s participating balancing authority areas (BAAs). The market’s ability to reduce curtailments also enables participants to collect renewable energy credits that would not otherwise be issued.

The benefits calculation nets out inter-BAA transfers that were scheduled ahead of the EIM’s 15- and five-minute market runs to avoid attributing contracted flows to the market.

CAISO exported more than 1.11 million MWh of electricity in the EIM’s five-minute market during the quarter, the report shows. Most of that energy was transmitted into NVE’s territory to be wheeled into the PacifiCorp-East area, but APS also absorbed a significant portion. The inclusion of APS and PSE last October greatly increased the transfer capability within the EIM, improving California’s ability to move its solar surpluses into other areas of the West.

That export capability enabled CAISO to avoid curtailing 67,055 MWh of renewable output from April to June, displacing 28,700 metric tons of CO₂emissions , the report said. The ISO estimates that, since 2015, avoided curtailments from EIM operations have reduced carbon emissions by 204,941 metric tons, the equivalent of removing more than 43,000 passenger cars off the road for a year.

CAISO’s exports are likely to decline sharply this summer as California absorbs more of its own renewable output in the face of increased summer loads, a pattern seen last year. (See PacifiCorp Increases Share of EIM Benefit in Q3.)

The report also noted the EIM’s impact on the procurement of flexible ramping capacity, which represents resources capable of responding to the variable output of renewable generators.

Because variability can decrease in one BAA at the same time that it’s increasing in another, the EIM enables participants to share flexible resources — allowing each BAA to procure fewer resources than would have been necessary on a standalone basis. These “flexible ramping procurement savings” during the second quarter represented about 39% of what would have been the total requirement of the participating BAAs absent the EIM, the report showed.

The EIM has yielded $213.24 million in gross benefits since commencing operation in November 2014 with PacifiCorp as its first member.

August 2, 2017

Day-ahead Prices Going Negative in CAISO

By Jason Fordney

Negative day-ahead prices surged in CAISO during the first quarter as combined surpluses of solar and hydroelectric output frequently left the market upside-down.

Prices went negative during 51 hours in the day-ahead market over the three-month period, compared with just three hours in all of last year, the ISO’s Department of Market Monitoring said.

“This is something we first just started seeing in this quarter,” Senior Analyst Gabe Murtaugh said during a July 31 call to discuss the department’s first-quarter report.

Negative prices indicate that the cost to procure wholesale power was at or below $0/MWh, which happens when there is an oversupply of solar power and other renewables while demand is relatively low.

Negative prices occurred in the day-ahead market during about 10% of the hours in the 11 a.m. to 3 p.m. time frame during the first quarter. They also happened more frequently during weekends when electricity loads were lower.

day-ahead prices caiso day-ahead market — | *CAISO*

Real-time prices also dipped frequently into negative territory during the quarter, occurring at about 10% of intervals in the 15-minute market and 13% of intervals in the five-minute market.

The negative pricing has become central to the debate around renewables in California, with some arguing that it is the result of a rush to integrate renewables without completely accounting for or understanding their impact on reliability and markets.

CAISO average energy prices decreased sharply in the first quarter, from about $35/MWh in December 2016 to about $23/MWh in March. This coincided with increased renewable output and low loads, the Monitor said. Prices in the 15-minute market are consistently lower than day-ahead prices and moved in about the same direction and magnitude each month.

“On average, five-minute market prices in March were notably low at about $17/MWh. This was the lowest average monthly five-minute market price during the past several years,” the Monitor said in the report.

CAISO also curtailed more renewable generation in the quarter, rising to a high in March of nearly 6%, compared with peak curtailment less than 3% a year earlier. Renewable curtailment rose above 80,000 MWh in both February and March, compared with less than 60,000 MWh in March 2016, according to ISO data.

During nearly all first-quarter intervals when prices were negative, the market economically dispatched generation down and CAISO did not have to curtail self-scheduled generation.

day-ahead market day-ahead prices caiso — Rooftop solar and other renewables pushed up negative prices in CAISO in the first quarter

Prices at times surged above $750/MWh at certain times because of generator ramping limitations when solar resources rolled off the system at sunset.

“During these intervals, steep increases in net load exceeded flexible ramping capacity procured through the flexible ramping product and required the power balance constraint to be relaxed because of insufficient available incremental energy,” the Monitor said.

Congestion in the Western Energy Imbalance Market (EIM) continued to isolate PacifiCorp-West (PACW) from CAISO and PacifiCorp-East (PACE), the Monitor said. This drove down prices in PACW and Puget Sound Energy compared with the ISO and the rest of the EIM.

Arizona Public Service and PSE joined the EIM in October 2016, adding new transfer capacity. This reduced congestion between APS, CAISO and PACE, the Monitor said. EIM market prices in the APS area were close to those in NV Energy, PACE and CAISO.

The Monitor earlier this month said that bid limits placed on PacifiCorp, NVE and APS are no longer needed because of increased transfer capacity in the EIM. (See CAISO Monitor Says EIM Bid Limits No Longer Needed.)

The report reiterated the Monitor’s recommendation that the ISO’s congestion revenue rights auction be eliminated and replaced with a market or locational price swaps based on bids for CRRs. (See CAISO Monitor Proposes End to Revenue Rights Auction.) CAISO is in the midst of an initiative to investigate the efficiency of the auction.