Page 1325 – RTO Insider

April 17, 2017

MISO Resource Adequacy Subcommittee Briefs

MISO stakeholders will decide in an email vote whether it’s worth debating the cost allocation for holders of firm transmission service reservations of more than 1,000 MW between MISO Midwest and South.

The Load-Serving Entities sector presented a motion to the Resource Adequacy Subcommittee on Wednesday asking that MISO drop the issue, which is an outgrowth of the RTO’s settlement over the use of SPP’s transmission for North-South transfers. The LSEs said changing the cost allocation of payments to SPP would not provide significant benefits to MISO.

Kevin Murray, representing the Coalition of MISO Customers, asked that a vote on the motion be tabled until FERC acts on the uncontested settlement for cost allocation among MISO members filed in August (ER14-1736, et al.), but stakeholders overwhelmingly rejected tabling the motion, 36-2. In the settlement filing, MISO has proposed allocating a declining percentage of the costs to reimburse SPP through a load ratio calculation and an increasing amount through a flow-based benefits methodology.

Keith Berry of the Arkansas Public Service Commission pointed out FERC may not act for quite a while because the commission has been short of a quorum since former Chairman Norman Bay’s resignation in February. President Trump has not nominated any replacements to fill the commission’s three open seats.

After considerable debate, stakeholders agreed to decide the issue via email. Ballots are due April 19.

Some stakeholders said firm reservations undoubtedly diminished the 2016/17’s Planning Resource Auction’s transfer capability between the RTO’s Midwest and South regions from 1,000 MW to 876 MW, increasing clearing prices.

Last month, some stakeholders questioned whether continuing the debate over the cost allocation was worth the effort. The 1,000-MW-plus usage of the transfer path is only relevant in the 2018/19 planning year, when firm reservations were granted in excess of 1,000 MW. (See “MISO Examines Single Year of MISO-SPP Settlement Allocation,” MISO Resource Adequacy Subcommittee Briefs.)

Any change would affect no more than 304 MW, because the potential TSRs over the North-South path for the year total 1,304 MW, the LSEs said.

MISO is currently in the fourth year of its settlement agreement with SPP over flows of more than 1,000 MW using SPP transmission to ferry energy between MISO Midwest and MISO South.

MISO Manager of Resource Adequacy Coordination Laura Rauch said the RTO and stakeholders have to reach a decision by November, filing either a cost allocation change or a notice explaining it would not pursue the issue. RASC Chair Chris Plante said the Regional Expansion Criteria and Benefits Working Group could be charged with working out the details if stakeholders decide to pursue a cost allocation change.

Next April, MISO stakeholders will tackle a related issue, deciding if and how to allocate costs to benefiting entities if the RTO raises the amount of capacity that can be transferred between the South and Midwest sub-regions to more than 1,000 MW in capacity auctions after April 2018.

MISO Still Tweaking OMS-MISO Survey Format

MISO is still tinkering with the format of its annual resource adequacy survey with the Organization of MISO States.

The RTO is proposing a “floating” format in which committed retirements and additions with signed interconnection agreements are left out of the bar graphs and the survey instead focuses on the range of possibilities from planned additions and potential retirements.

miso resource adequacy subcommittee cost allocation — 2016 OMS-MISO Survey results with 35% DPP projects in floating format | *MISO*

“People tend to gravitate toward the low end of the range. We’re really not trying to point people to the low end of the range or the high end of the range,” RASC Chair Shawn McFarlane said.

Survey results are expected in June. MISO plans to add a 35% share of projects in the definitive planning phase of the interconnection queue into survey results, although stakeholders have said the completion estimate is too low. (See Differences Persist over OMS-MISO Survey Improvements.) Incorporating the 35% calculation would have shifted 2016 results from a possible 15.9 to 17.4% planning reserve margin range to 15.9 to 19.1%. MISO requires a 15.2% reserve margin.

Rauch said MISO will continue to work on the survey format even after results are released in late spring. “We have had it evolve over the years with incremental changes,” said Rauch, pointing out that the RTO now focuses on the first five years of survey, rather than the full 10 years. It also shares data for each local resource zone while reporting inter-zonal transfers.

Stakeholders asked if MISO considers other variables, including external resources and wind at full capacity. Rauch said the RTO does consider transfers from other balancing authorities when calculating survey results.

— Amanda Durish Cook

April 14, 2017

UPDATE: All Zones at $1.50/MW-day in 5th MISO Capacity Auction

By Amanda Durish Cook

All 135 GW worth of capacity procured across 10 local resource zones in MISO’s fifth annual Planning Resource Auction cleared at $1.50/MW-day, a vast departure from the regional disparities of the last two years, when prices rose as high as $150.

MISO said the results for planning year 2017/18, which begins June 1, are reflective of new supply and lower demand in the Midwest.

“The 2017-18 auction results reflect a net regional increase in supply compared to last year’s results,” said Richard Doying, MISO executive vice president of operations. “Even as the generation fleet continues to evolve, the level of available resources positions the region well for reliable operations in the coming year.”

Because there were no binding constraints between the zones, all zones’ prices were set by an offer submitted by a resource in Zone 1, which encompasses parts of Wisconsin, Minnesota and the Dakotas, Doying said.

The year’s “uneventful” results were a function of more supply and less demand, and the lack of constraints. “When you combine those two, you get lower prices and uniform prices. … It doesn’t take much to have a significant impact on the clearing results,” he said during an April 14 press conference.

Doying also said results weren’t surprising given that even a small uptick in supply or a small reduction in demand can drop prices.

Capacity Needs Drop by 730 MW

MISO experienced an overall 730-MW decrease in capacity requirements, resulting from a roughly 1,000-MW decrease in MISO Midwest’s requirement and an approximate 300-MW increase in MISO South, indicative of regional economies, Doying said.

At an April 14 stakeholder conference, energy attorney Valerie Green of Michael Best & Friedrich asked if MISO had an explanation for the decline in load. MISO Manager of Resource Adequacy John Harmon said economic slowdowns were consistent across zones that experienced load declines.

Doying said this year’s offers included more demand, energy efficiency, solar and wind resources than the 2016/17 planning year auction. Auction results were reviewed and certified by MISO’s Market Monitor; no mitigation was required.

The single clearing price is in stark contrast to the RTO’s last two PRAs. In the 2016/17 auction, MISO South cleared uniformly at $2.99/MW-day and almost all of MISO Midwest cleared at $72/MW-day, with Zone 1 the lone outlier at $19.72/MW-day. (See MISO’s 4th Capacity Auction Results in Disparity.) MISO said last year’s disparate results were a product of retirements and capacity exports. This year’s clearing price also represents a hundred-fold decrease from the $150/MW-day price in Illinois’ Zone 4 in the 2015/16 planning year auction.

MISO resource adequacy subcommittee capacity auction — | *MISO*

Illinois Clean Jobs Coalition spokesman Billy Weinberg said the 2017/18 auction results are evidence that market forces are favoring energy efficiency and more affordable renewables. “Now is the time to begin planning for new investments and jobs in Central and Southern Illinois in cleaner technologies like energy efficiency, wind and solar energy that grow cheaper by the day and improve public health,” he said.

MISO also said the prices were a result of the improved transfer capability between zones. MISO’s South-to-Midwest export constraint increased from 876 MW last year to 1,500 MW this year; the Midwest-to-South limit increased from 2,794 MW to 3,000 MW. (See MISO to Use Same Sub-Regional Limit Rules for 2017/18 PRA.)

This year, the RTO’s maximum offer using the cost of new entry ranged from $246/MW-day for Zone 10 in Mississippi to $265/MW-day for Zone 5 in eastern Missouri.

In March, MISO predicted that all local resource zones would have enough capacity to meet their individual clearing requirements, with 172 GW worth of total installed capacity easily meeting the RTO’s 135-GW planning reserve margin requirement. (See “Preliminary PRA Data Show Capacity Excess,” MISO Resource Adequacy Subcommittee Briefs.)

Harmon said auction results will be presented to stakeholders in a more detailed presentation at the May 10 Resource Adequacy Subcommittee meeting.

In a research note Friday, UBS Securities analysts Julien Dumoulin-Smith and Jerimiah Booream called the results “a material disappointment for MISO, sending prices back to their historic lows of 2012 and 2013. … This will prove difficult to shift out of given the impacts from [the Mercury and Air Toxics Standards] and other environmental regulations that drove the improvements in prior periods.”

UBS had predicted prices would clear no lower than $12/MW-day. The analysts said prices would have been closer to $10/MW-day based on the lower demand but that the offer curve was also “flatter” because of Illinois’ approval of zero-emission credits for Exelon’s Clinton nuclear plant, which left the company less concerned with maximizing its capacity revenue. “This was the decisive factor in holding prices lower,” they wrote.

Same Auction Process

The auction was unchanged from its usual format, despite MISO’s attempt at a redesign that would have bifurcated the capacity market by holding a forward auction for competitive load three years prior to the prompt PRA. In February, MISO abandoned the changes after a curt FERC rejection. (See MISO Won’t Seek Rehearing on Auction Redesign.)

Doying said MISO has “other priorities” than reviving the Competitive Retail Solution. He said the RTO will continue a discussion about resource adequacy in Michigan and Illinois.

Exelon’s decision to keep its Quad Cities nuclear plant operating — thanks to Illinois’ approval of zero-emission credits to provide the plant additional revenue — has eased some of MISO’s concern, Doying said.

External Zones, Seasonal Classification

That does not mean MISO is dropping plans to improve the PRA. While a possible two-season classification is on ice for the remainder of 2017, the RTO is currently navigating the stakeholder process on creating external capacity pricing zones.

“Industry forces continue to indicate significant shifts in the fleet,” Doying said. “MISO will continue to address seasonal and locational issues with our stakeholders while ensuring that market signals provide incentives for investment where and when they are needed.”

At an April 12 RASC meeting, MISO’s Laura Rauch asked stakeholders how different classes of external resources should be treated. She presented stakeholders with examples of pseudo-tied resources, border resources and coordinating owners such as Manitoba Hydro. She also asked about contracts signed before the formation of the MISO market in 1998 or FERC’s 2012 approval of the PRA construct.

“What is the best method to recognize the contracts of existing resources?” Rauch asked stakeholders.

MISO is also asking stakeholders what rules should dictate external zone pricing. The RTO has proposed that the external zone price be based on the sink of the external resource.

Last month, the Monitor suggested pricing be based on balancing authority boundaries, with resources connected to both sides of Midwest-North constraint receiving a blended price. (See “IMM Offers Own PRA External Zone Design,” MISO Resource Adequacy Subcommittee Briefs.) Rauch said MISO will use stakeholder input to draft Tariff language and address the Monitor’s proposal at the May RASC meeting. Rauch said MISO staff is still evaluating the proposal.

Illinois Municipal Electric Agency’s Rakesh Kothakapu said MISO needed to be careful with pricing, especially considering if external zones continue to be priced low while supply continues to tighten. “We don’t want to end up in a situation where we price them lower even when it has nothing to do with a constraint,” he said.

A seasonal auction classification is beginning to look less certain.

“There’s a general thought that stakeholders aren’t as interested in a seasonal construct as they once were. The informal feedback I’m receiving is along those lines,” RASC Chair Chris Plante said.

In January, some stakeholders said the seasonality proposal had fallen out of favor after MISO revealed design specifics last year. (See MISO Plans Additional Capacity Auction Revamps for 2017.)

April 14, 2017

EIM Panel Backs Schmidt for 2nd Governing Body Term

By Robert Mullin

A Western Energy Imbalance Market (EIM) nominating committee made up of regional stakeholders is recommending that Kristine Schmidt be reappointed to the market’s Governing Body.

western energy imbalance market governing body — Schmidt | © *RTO Insider*

Schmidt was selected by the inaugural Governing Body last June after an extensive vetting process that included deliberations among five industry sectors: EIM entities, ISO participating transmission owners, power suppliers and marketers, publicly owned utilities, and state regulators. (See CAISO Board Appoints Western Energy Imbalance Market Governing Body.)

“The committee deliberated, as well as conducted outreach to its respective sectors, and reached consensus that it wished to renominate member Schmidt,” the nominating committee said in a memo to the Governing Body.

While Governing Body members are typically appointed for three years, the EIM’s charter calls for their terms to be staggered. Last year, a random selection process left Schmidt with what was essentially the short straw: a one-year stint slated to end this July. Schmidt’s fellow body members elected her to be the group’s chair during the group’s first meeting last August. (See EIM Governing Body Convenes First Meeting, Selects Leadership.)

“While quite grateful for this first one-year term … I firmly believe that given the forecasted EIM market and policy changes and the expansion opportunities, I have much more to offer the Western EIM and Governing Body to realize the mission of promoting, protecting and expanding the EIM,” Schmidt wrote in a Jan. 26 letter to the nominating committee.

Schmidt’s brief time on the Governing Body has seen the group perform myriad functions, including reviewing the EIM’s governance structure, initiating outreach to Western utility commissions and EIM members, participating in the self-evaluation of the Regional Issues Forum, and dealing with two CAISO initiatives in the group’s “advisory” capacity to the ISO’s Board of Governors.

In her letter, Schmidt noted that the body expects to rule on nine decisional matters this year. Most of those decisions are slated to land on the agenda starting in the third quarter.

“With a substantial workload pending for the latter half of 2017, I believe the experience and knowledge gained thus far will prove vital when deliberating over these decisional and advisory policies, as well as future polices in 2018 and beyond,” Schmidt wrote. Her fellow Governing Body members will vote on her reappointment during the group’s April 19 meeting.

Schmidt is currently president of Dallas-based Swan Consulting and has more than 30 years’ experience in the energy sector. She was formerly vice president at ITC Holdings and director at Xcel Energy. She has also worked as an adviser to former FERC Commissioner Nora Brownell.

April 14, 2017

Texas Commission Denies NextEra’s Bid for Oncor

By Tom Kleckner

The Texas Public Utility Commission on Thursday formally rejected NextEra Energy’s proposed acquisition of Oncor, unanimously approving an order denying the $18.7 billion deal.

The PUC telegraphed the decision during its previous open meeting March 30. All three commissioners made it evident then that they believed the risks posed by NextEra’s ownership outweighed the benefits. (See Texas PUC Puts Brakes on NextEra’s Oncor Acquisition.)

Little changed Thursday.

“NextEra Energy ownership of Oncor would subject the company and its ratepayers to significant new risks,” the PUC said in the order. “The tangible benefits to Texas ratepayers that are specific to the proposed transactions are minimal and would do little to compensate ratepayers for any of the additional risks imposed.

“When the commission weighs the additional risks and the lack of tangible benefits … the commission finds that the proposed transactions are not in the public interest.”

The commission noted NextEra’s proposal “is premised on the ability to link Oncor’s credit profile with that of NextEra Energy,” and that the Florida company objected to removing two protections from Oncor’s existing ring fence: restrictions on NextEra’s ability to appoint and replace members of Oncor’s board of directors, and the board’s ability to limit dividends or other “upstream distributions” from Oncor.

The PUC said those two ring-fence provisions had insulated Oncor from parent Energy Future Holdings’ bankruptcy. It said “a truly independent” board with control over decisions on capital expenditures and operating expenses is a “critical part of the ring fence.”

NextEra and Oncor declined to comment on the order and future steps, as they have done throughout the process.

NextEra proposed last summer to purchase Oncor in three transactions:

The approximately 80% interest indirectly held by EFH;
The 19.75% interest indirectly held by Texas Transmission Holdings Corp.; and
The 0.22% interest held by Oncor Management Investment.

The PUC considered all three transactions as one. It said NextEra’s “expansive and diversified structure” would subject Oncor to “new and potentially substantial risks.” It said NextEra would be refinancing current debt with new debt, making Oncor responsible for supporting 15% of $45 billion in consolidated obligations.

The commission approved the order before gathering in public Thursday, but brought it up briefly during the open meeting to substitute the word “difficulties” for “calamity” in a reference to how “a robust ring fence” protected Oncor’s ratepayers from the impact of EFH’s bankruptcy.

It was the second failed attempt to acquire Texas’ largest transmission and distribution service provider in less than a year. Dallas-based Hunt Consolidated withdrew its application with the PUC last May over requirements it found too onerous. (See Texas PUC Denies Rehearing on Oncor Sale, Ends Hunt Bid.)

Oncor has been ring fenced since 2007, when EFH, a collaboration of several private-equity firms, acquired TXU Corp. in a leveraged buyout. EFH, saddled by nearly $50 billion in debt when it bet wrong on high gas prices, declared Chapter 11 bankruptcy in 2014. It has since spun off its generation and retail electric service providers as Vistra Energy.

NextEra’s proposed acquisition was part of EFH’s eighth amended plan of reorganization, which was confirmed by a bankruptcy court in Delaware in February. That court has scheduled another hearing on the case Monday, where it and EFH’s creditors could look for another suitor for Oncor or divvy up a potential independent public offering.

NextEra shares fell briefly to $130.22 after the commission’s meeting opened, before recovering to close at $130.79. The company’s stock has gained more than $11/share since the year began.

April 14, 2017

Gas, LMPs Rebound in NY, New England in March

By Michael Kuser

A spike in natural gas costs pushed LMPs up in both NYISO and ISO-NE in March, though analysts say the rise may be short-lived.

NYISO on Wednesday reported locational-based marginal prices for March averaged $34.97/MWh, up from $30.95/MWh in February 2017 and a 69% jump from the $20.66/MWh in March 2016. Year-to-date costs averaged $37.81/MWh through March, up 23% from $30.68/MWh a year earlier.

In his April 12 Market Operations Report to the Business Issues Committee, Rana Mukerji, NYISO senior vice president for market structures, said natural gas prices in March were up 169% year-on-year, with prices at Transco Z6 NY averaging $3.49/MMBtu for March, up from $2.83/MMBtu in February. Mukerji said five days of cold weather boosted prices for the month.

ISO-NE said its average LMPs more than doubled in March from a year earlier as average natural gas prices rose 142%.

The RTO said the energy market totaled $382 million in March, up 74% from March 2016, ISO-NE Chief Operating Officer Vamsi Chadalavada told the New England Power Pool Participants Committee on April 7. Cold weather and higher gas prices March 11-14 caused day-ahead LMPs to jump to nearly $100/MWh during the period, with real-time prices spiking as high as $150/MWh as a storm hit the region with near-blizzard conditions March 14.

Blip or Trend?

Are the higher natural gas prices just a blip, or do they portend higher generator costs going forward? Jordan Grimes, director of power and gas with Morningstar, said that “market sentiment is relatively bearish on Henry Hub gas prices, but there are reasons to be bullish on Northeast prices, with the region facing coal retirement and capacity issues.”

The Iroquois pipeline delivers natural gas to western Connecticut from the Canada-New York border southeast of Ottowa, while the Algonquin pipeline carries Marcellus shale gas from Pennsylvania into Connecticut and Massachusetts. “Right now the market is rallying on that, and bullish on Marcellus translates into bullish downstream of Marcellus,” Grimes said.

About 1.0 Bcfd of new FERC jurisdictional pipeline capacity went into service last year in the Northeast, including the Transco Rock Springs expansion (192 MMcfd), the First ECA Midstream project (152 MMcfd) and the Algonquin Incremental Market Project (342 MMcfd), which began operation in the fall.

FERC State of the Markets Report

The March price spikes came following a year that brought record-low natural gas prices and near-record-low power prices, FERC reported in its 2016 State of the Markets report, released Thursday.

“Although natural gas production fell for the first time since 2005, flat demand due to above average winter temperatures at the start of the year and high natural gas storage inventories contributed to the low prices,” FERC said. “The low natural gas prices further incentivized gas-fired generation in 2016, and for the first time in history, natural gas’ share of total electricity generation output overtook coal’s on an annual basis.”

Henry Hub prices averaged $2.48/MMBtu, the lowest level in 20 years, FERC reported.

“Above average temperatures in the 2015-2016 winter limited natural gas demand during the first three months of the year, leading to robust storage inventories at the start of the 2016 injection season in April, and reduced demand for storage injections through the summer. Prices fell to record lows in the first half of 2016, before climbing thorough the second half of the year driven by steady domestic demand, rising exports and a drop in production.”

Although the highest in the country, gas prices in Boston were down one-third from 2015. New York City prices showed the largest decrease from 2015, dropping 42%.

U.S. gas production fell 2.5% to 72.3 Bcfd, the first annual drop since the burst in shale production began in 2005.

April 14, 2017

Texas PUC Chair Nelson Stepping Down

By Tom Kleckner

Texas Public Utility Commission Chair Donna Nelson surprised staff and open-meeting attendees Thursday by announcing she would be stepping down in May.

puct chair donna nelson ercot — Texas PUC Chair Donna Nelson | © *RTO Insider*

Nelson was appointed to the PUC by Gov. Rick Perry in August 2008. She was named chairman in July 2011 and was appointed by Gov. Greg Abbott to another six-year term in September 2015 that was to expire in September 2021.

“I think you have left a distinguished and wonderful mark on this state with your service,” Commissioner Brandy Marty Marquez told Nelson after her announcement. “There’s a whole lot of gratitude owed to you, by everybody here.”

“I’m not dead yet,” Nelson responded, before getting down to business. “It’s been a great time and we’ve done a lot of important things, so let’s continue that work now.”

Nelson, who said her last day will be May 15, will leave the PUC having served more time than anyone else. However, Commissioner Ken Anderson could soon eclipse her tenure. He joined the PUC one month after Nelson did, and his current term expires in August.

Marquez was appointed to the commission in August 2013. Her six-year term expires in September 2019.

Nelson said she would elaborate on her future plans as her end date nears.

Texas PUC’s Ken Anderson, Donna Nelson, Brandy Marty Marquez | © *RTO Insider*

Abbott will appoint Nelson’s replacement as chairman, as well as fill the commission’s vacancy. The PUC oversees ERCOT and Texas electric, telecommunication, water and sewer utilities.

Nelson also represents the PUC on SPP’s Regional State Committee, which provides regulatory input to the RTO. She will be replaced on the RSC by one of her fellow commissioners.

Ironically, Nelson, who is not a fan of personal photos, also said she had “good news”: “I’m getting my portrait taken.”

Her official studio photo will finally join those of the other current and previous commissioners on the PUC’s hearing room’s walls.

Before joining the PUC, Nelson was a special assistant and adviser to Perry on energy and telecommunication issues. She also served as legal adviser to a previous PUC chairman and as a former assistant attorney general for Texas, where she specialized in antitrust law.

A South Dakota native, she received a bachelor’s degree from Black Hills State College and a law degree from Texas Tech University.

April 14, 2017

SPP Adds 95th Member in Wholesaler Southern Power

TULSA, Okla. — SPP has increased its membership roster to 95 with the addition of Southern Power, the wholesale arm of utility giant Southern Co.

COO Carl Monroe made the announcement Wednesday during SPP’s quarterly Markets and Operations Policy Committee meeting. Southern Power’s membership was effective Tuesday.

southern power SPP — Southern Power’s 299 MW Kay Wind Facility in Kay County, Oklahoma | *Siemens*

Southern Power “is excited to join the Southwest Power Pool as a member and looks forward to collaborating with our fellow stakeholders to help shape the future of energy,” Jim Howell, Southern Power’s transmission and regulatory policy manager, said in a statement.

“We thank you for your contributions to the administrative fee,” cracked MOPC Chair Paul Malone, with the Nebraska Public Power District, addressing a company representative at the meeting.

Southern Power owns four wind farms in SPP’s footprint, three in Oklahoma (totaling 597 MW of capacity) and the 276-MW Bethel Wind Facility in the Texas Panhandle.

The company’s portfolio includes 46 natural gas, wind, solar and biomass generating assets spanning all four time zones.

April 13, 2017

MISO May Bar Units on Extended Outage from Capacity Auctions

By Amanda Durish Cook

MISO is considering prohibiting resources on extended outages from participating in future Planning Resource Auctions or making changes to capture the risk of such outages in loss-of-load-expectation (LOLE) analyses.

MISO resource adequacy — Harmon | © *RTO Insider*

Manager of Resource Adequacy John Harmon said MISO wants stakeholder feedback on whether resources on extended outage should be disqualified from PRA participation or if costs of possible outages should be shared by revising modeling assumptions in the annual LOLE study that informs the RTO’s planning reserve margin. The changes would not affect PRA 5, the results of which are due to be released Friday.

Harmon told the April 12 Resource Adequacy Subcommittee meeting that MISO’s Tariff does not prohibit participation of generators on outage for “significant portions of the planning year.” Each year, up to 10 generators providing capacity go offline on outages lasting 90 days to a year, including the summer peak, although the outages are known before the PRA is conducted, Harmon said.

He also said the RTO currently offers an Attachment Y suspension notice for outages longer than 60 days, but use of the form is not mandatory.

MISO recommended stakeholders seek an immediate fix for the 2018/19 planning year and seek a long-term solution afterward.

Harmon asked stakeholders to respond by April 26 with the minimum outage length that should disqualify a resource from PRA participation. Harmon also asked if stakeholders thought generators should be penalized or made to procure replacement capacity if an outage occurs during the planning year. Currently, generators on outages forfeit only their capacity revenue for periods when they are unavailable.

Stakeholders at the meeting asked for evidence to back up the two options.

“I think MISO might be bringing this forward because there’s something they see that we don’t see,” said Consumers Energy’s Jeff Beattie. He asked the RTO to bring evidence back to illustrate the possible risk. Beattie said while he did not see a risk posed by extended outages in his Zone 7 for the next three years, “maybe there’s something else going on with seasonal outages in other parts of the footprint.” Beattie also said there is nothing wrong with dipping into operating reserves to make up for outages.

Ted Leffler of Indianapolis Power and Light asked how often MISO overestimated its seasonal peak in the past and said the RTO should examine both aspects when considering resource adequacy.

Harmon said the problem boils down to the fact that a resource that has completed its generation verification test and identified itself as available during the planning year and then experiences a catastrophic event can still participate in the capacity auction.

“And that’s the worst-case example. There’s a spectrum of events that could happen,” Harmon said.

April 13, 2017

Utilities Ask to be Kept in Loop on DER Installations

By Rory D. Sweeney

VALLEY FORGE, Pa. — PJM invited two distributed energy resource developers to explain their operations and presented a case study of its own at Monday’s special session of the Market Implementation Committee. The presentations elicited concern from electric distribution companies, who asked that rules be implemented that keep them informed when customers want to install such systems.

“We simply need to know what’s happening before it happens and not after the fact. That will give us the opportunity to determine what needs to be done,” FirstEnergy’s Bruce Remmel said.

Calpine’s David “Scarp” Scarpignato said stakeholders could benefit from EDCs providing information to PJM on such interconnections. “A lot of small [projects] can add up to big numbers,” he said. “It seems to me like the notification should go two ways.”

PJM discussed a recent visit by staff members to Hopewell Valley Central High School in Pennington, N.J., where Public Service Electric and Gas has installed a solar and battery system. The 580-kWh Hopewell battery is an “in front of the meter” system but doesn’t qualify as an “energy storage resource,” PJM staff said, because it is primarily a backup power system for the school during an outage and therefore doesn’t fit the definition of a storage resource. Instead, it’s accounted for under “station power” rules, even though it provides regulation, capacity and energy services to the RTO.

DER market implementation committee — Hopewell Valley Central High School Solar Storage Project | *PJM*

PJM’s Andrew Levitt, who led the presentation, explained that a resource can be designated either in front of the meter — meaning it’s able to provide capacity and energy services — or behind the meter, meaning it can be used to net against load for wholesale transmission, capacity and ancillary services charges. The same megawatts cannot be used for both simultaneously, he said.

Drew Adams of A.F. Mensah and Adesh Harripersad of Distributed Asset Solutions highlighted how their businesses have handled installations of both types of resources in PJM.

It was A.F. Mensah’s problem statement and issue charge that precipitated development of the special sessions, borne out of the challenges faced with PJM’s policies on how systems combining batteries and renewables must be interconnected. (See PJM Considering Injection Rights for Demand Response.)

The company has moved forward with projects using the existing rules while they’re being discussed in this stakeholder process.

Adams highlighted some of the challenges and experiences when complying with all existing rules. Adams said his company paid a $500 application fee for each of 20 installations and that the installations are aggregated in PJM’s models as a single 0.1-MW market resource. He presented diagrams showing how the projects require two separate electric service lines to an end customer site: one for the existing service line including behind-the-meter solar panels, and a new service line for the battery storage system so its capabilities can be sold directly into PJM. The battery system acts independent of the customer load and solar in normal operation and is then connected to the load and solar through redundant switch gear during a bulk grid outage.

He explained that the systems have five meters, each providing different information to different recipients. FirstEnergy’s Ed Stein said that creates concerns because partial information may make it impossible to fully understand what’s going on with a system.

“Ultimately, I think there will be a lot more information sharing between EDCs, transmission owners [and] PJM,” Stein said. “We’re going to have to come up with an information-sharing paradigm that works for everybody. We may find ourselves that not one single entity has all of the information or ownership of all information at its disposal to give. … We’ve got a lot to consider with information here: who’s going to have it, who’s going to provide it, who’s going to be able to see it and access it and understand it.”

Adams said his company is supportive of those discussions.

Harripersad discussed the coordination issues that make project development and construction difficult. He works with funding provided by True Green Capital Management to develop photovoltaic solar arrays throughout the country. Even with long lead times — with delays created by the need to secure everything from state environmental approvals to local construction permits — projects are often a rush at the end, he said.

“All these things add up to, literally, down to the wire; you have three months to build everything,” he said. “The big thing is getting our projects interconnected.”

He praised project coordination among stakeholders within PJM’s footprint. “This coordination is unheard of in any other [RTO or ISO] territory in the country,” he said. He referenced a 16.7-MW solar rooftop project with the Port of Los Angeles in which he said CAISO has “no involvement.”

Work began on collecting stakeholder interests and potential solutions but didn’t get far, only advancing to design component 1.2. PJM staff assured this would be a main focus for the group’s next meeting.

April 13, 2017

California to Reconsider Retail Choice

By Robert Mullin

More than two decades after initiating a deregulation drive that faltered in the wake of the Western Energy Crisis of 2000/01, California officials are taking another look at offering consumers the ability to choose their electric supplier.

This go-round should be different, according to the state agencies heading up a new exploration of “the changing state of retail choice” in California, because of changes already in motion.

“Unlike electricity restructuring efforts of the past, when policymakers made a set of conscious decisions to move to open market competition, this transition is being driven by a range of economic and technological trends,” the California Public Utilities Commission and California Energy Commission said in a joint statement April 11.

To kick off the effort, the two agencies will hold a May 19 joint en banc public hearing to identify the “challenges and opportunities” stemming from “fast-approaching” changes overtaking the industry. The goal is “to ensure that reliable and low-carbon electricity will be available to all California consumers,” the agencies said.

Key among the factors now influencing the sector: the rapidly falling costs for renewable and energy storage technologies, which the CPUC and CEC say are “upending the nature of electricity service.”

The agencies estimate that by the end of this year, up to 40% of the state’s investor-owned utility customers will be receiving “some type” of electricity service from an alternative source, such as rooftop solar, community choice aggregators (CCAs) and direct access providers.

California officials are reconsidering the idea of “consumer choice” for retail electricity customers who continue to pay some of the highest rates in the country. Efforts would focus on giving more residents affordable access to renewable resources that help the state meet its environmental mandates. | *U.S. Energy Information Administration, Form EIA-861, “Annual Electric Power Industry Report.”*

California today boasts nearly 5,200 MW of installed rooftop solar capacity, according to California Distributed Generation Statistics, a website sponsored by the CPUC and the state’s IOUs. The state also has six CCAs, with more slated to begin operation within the next few years, a development that is expected to increasingly siphon off the customer base from the traditional IOUs.

“The implications of this migration away from ‘bundled’ utility service were not fully contemplated when the current regulatory rules were developed,” the agencies said.

The changes provide “tremendous opportunities” for California to meet its carbon reduction goals, but they will also create “unforeseen risks,” the agencies said.

The May 19 hearing will offer a closer examination of those opportunities and risks. A preliminary agenda indicates the event will start with a presentation on a still-pending CPUC white paper on retail choice, followed by an overview of the current state of retail choice in California and panel discussions focused on the perspectives of both the IOUs and electricity customers.

The agencies will also invite national electricity market experts to share their perspectives on retail choice in other regions, the role of technology in transforming electricity service and how California can restructure its regulatory framework and markets to help achieve its public policy goals.

California last set a course for deregulation in 1996 with the enactment of Assembly Bill 1890. Under the law, regulators first set out to restructure the state’s wholesale market while leaving retail price controls intact. The ensuing crisis — which resulted in the 2001 bankruptcy of wholesale market operator California Power Exchange — precluded the implementation of any retail market measure. Wholesale operations now reside with CAISO, which in 2009 rolled out a nearly statewide energy market designed to prevent the kind of manipulation that crippled the exchange.