Page 1340 – RTO Insider

December 20, 2016

SPP Briefs

SPP and MISO continue to study seven potential joint transmission projects across their seam, but much of their focus is now turning to developing the 2017 joint study by next April.

Staff from the two RTOs told their Interregional Planning Stakeholder Advisory Committee on Friday that they have already begun to put together a work plan that includes a study scope, timeline and Tariff and joint operating agreement changes needed to accommodate the study.

RTO staffers met in October at MISO’s Louisiana offices to lay out a high-level framework for the study, which would end in 2019. Staff hope to improve coordination of their regional processes and sharing of regional planning assumptions.

“As we develop our regional plans individually, we would start developing regional candidate projects,” said MISO’s Davey Lopez, advisor of planning coordination and strategy. “Both parties agreed we want to plan for the best value, which may not be the cheapest solution.”

Lopez and his counterpart, SPP Interregional Coordinator Adam Bell, said their boards would be able to evaluate the regional projects and interregional projects on the same timeline, eliminating one of the stakeholder complaints in recent years.

“One of major hurdles we have is the timing of the regional processes,” Bell said. “Both sets of stakeholders will be able to look at regional and interregional plans at the same time, and pick the best project. One is not winning out by virtue of finishing first.”

southwest power pool miso transmission — | *MISO-SPP IPSAC*

Lopez told the IPSAC that the 2017 study will begin as the 2016 coordinated study process ends, using the latter’s study results as an input. “We’d like to ramp it up in April 2017, hit the ground running and jump right into another study,” he said.

The 2016 analysis has resulted in seven potential projects, primarily in the Dakotas and along the Kansas-Missouri border. Lopez said the list may be reduced further but that it is “good information for the 2017 study.”

Three of the projects would solve market-to-market flowgates, which have resulted in payments from MISO to SPP totaling $2.75 million.

Nine entities have submitted 32 solution ideas to address the project needs posted in October. Several of the solutions were duplicates of, or similar to, others.

Final study results will be shared with the IPSAC during its next meeting, tentatively scheduled for February.

Competitive Tx Process Task Force Suggests Criteria Change

The Competitive Transmission Process Task Force completed its review of the documents to be used by transmission developers bidding on projects through SPP’s Order 1000 competitive process.

Stakeholders determined that the inflation rate (2.5%), discount rate (8%) and operations and maintenance escalation rates should be prescribed by SPP in its solicitation.

Duke Energy’s Bob Burner proposed the group use a “pass-fail” grading system rather than point-scoring for certain qualitative items evaluated by the industry expert panel (IEP).

Staff noted the Tariff language gives the IEP sole discretion in determining how it scores competitive proposals but agreed to recommend to the panel which items should fall into the pass-fail category. Staff will draft a revision request that would remove certain pass-fail items from the solicitation process. Points allotted to the scoring categories would not be impacted.

The task force will meet again Jan. 9, in preparation for the Markets and Operations Policy Committee meeting two weeks later.

Gas-Electric Coordination Report Filed with FERC

SPP on Friday filed with FERC its first informational report on the RTO’s efforts to coordinate gas and electric scheduling practices. Staff shared a draft of the report two weeks ago with the Gas-Electric Coordination Task Force. (See “SPP to Deliver Positive Report to FERC on Gas-Scheduling Practices,” SPP Briefs.)

The report was filed to comply with FERC Order 809, which required RTOs to improve the alignment of their market schedules with those of interstate gas pipelines (RM14-2). SPP’s changes took effect Sept. 30.

SPP Sets New Winter Peak Mark

SPP set a new winter demand peak earlier this month, hitting 37,780 MW at 7:21 a.m. Dec. 9. The mark broke the previous record of 37,412 MW set Jan. 18.

– Tom Kleckner

December 20, 2016

FERC Declares Montana QF Requirements Illegal

By Michael Brooks

FERC on Thursday declined to grant a solar developer’s petition to enforce the Public Utility Regulatory Policies Act in Montana, where state regulators in June suspended a utility’s tariff for qualifying solar facilities above 100 kW (EL17-5).

As a result, solar developer FLS Energy can sue the Montana PSC or NorthWestern Energy in federal court, if it chooses.

ferc qf requirements solar montana — FLS Solar’s Fairmont Solar Farm in Fairmont, NC | *FLS Solar*

But FERC did find that the Montana Public Service Commission violated PURPA by requiring that qualifying facilities have power purchase agreements and interconnection agreements with utilities to form a legally enforceable obligation.

The Montana PSC voted 3-2 to suspend NorthWestern’s tariff, finding that the avoided cost rate the utility was required to pay QFs was too high. The PSC grandfathered in facilities that had completed their agreements prior to the date of the order, June 16.

In its complaint filed in October, FLS said it had completed PPAs, but not interconnection agreements, for 14 QFs in the state. It accused NorthWestern of slow-walking the interconnection process while it lobbied the PSC for the tariff suspension.

As a result of the suspension, the North Carolina-based company said it stands to lose $750,000, as it would have to negotiate new PPAs with NorthWestern, likely at a lower rate.

Under PURPA, utilities are obligated to purchase electricity from QFs, but each state can determine when a legally enforceable obligation begins, as long it does not conflict with FERC’s regulations.

“We find that, just as requiring a QF to have a utility-executed contract, such as a PPA, in order to have a legally enforceable obligation is inconsistent with PURPA and our regulations, requiring a QF to tender an executed interconnection agreement is equally inconsistent with PURPA and our regulations,” FERC said. “Such a requirement allows the utility to control whether and when a legally enforceable obligation exists — e.g., by delaying the facilities study or by delaying the tendering by the utility to the QF of an executable interconnection agreement.”

FERC’s order did not comment on the merits of the PSC’s suspension itself, which FLS had also requested. The commission last month tossed out the same complaint by solar advocates, saying only QFs can seek PURPA enforcement. (See FERC Rejects Complaint on Montana Solar; 2nd Case Pending.)

In a footnote, however, FERC said, “When a state commission believes that a previously determined avoided cost rate is no longer an accurate measure of a utility’s avoided costs, the appropriate response is not to establish a standard for a legally enforceable obligation that is inconsistent with PURPA and the commission’s regulations under PURPA, but instead to determine a new avoided cost rate that better reflects the utility’s avoided costs.”

“This is a great win for our company and the QF community,” Steven Levitas, vice president of business affairs and general counsel for FLS, said in an interview. “We were confident that the Montana commission’s [legally enforceable obligation] was inconsistent with PURPA.”

Levitas said that the company hopes the PSC will change the standard to comply with PURPA. Otherwise, he said, the company is prepared to take it to court.

FERC did not address FLS’s accusation that NorthWestern violated interconnection procedures, saying that, as a Federal Power Act matter, it was beyond the scope of the complaint.

December 20, 2016November 28, 2023

MISO Planning Subcommittee Briefs

CARMEL, Ind. — MISO and PJM are not optimistic that they can use common assumptions in their interregional transmission planning.

MISO engineer Adam Solomon told the Planning Subcommittee Dec. 13 that while it is possible to make joint powerflow and economic models, they would not be based on a set of common assumptions. “We think we can make assumptions from both MISO and PJM using separate sensitivities,” Solomon said during a Dec. 13 Planning Subcommittee meeting.

In an April 21 order, FERC directed MISO and PJM to explore with stakeholders the possibility of a joint model that uses identical model assumptions and criteria for regional transmission planning processes (EL13-88).

MISO has maintained that a joint model would be difficult to accomplish, as it studies two, five and 10 years into the future, while PJM studies five, seven and eight years ahead. In addition, MISO uses local balancing areas for dispatch, while PJM uses a single balancing area. PJM also does not forecast generation retirements, while MISO includes forecasted generation retirements in its futures modeling.

The RTOs’ Oct. 25 informational filing to FERC detailed their reasoning as to why a single set of assumptions was infeasible. The RTOs told FERC that “most stakeholders agree with the RTOs’ position that requiring the RTOs to adopt the same assumptions and criteria when conducting regional transmission planning would create significant challenges, including substantial revisions to each RTO’s robust regional planning processes and cost allocation methodologies.”

But Northern Indiana Public Service Co., whose complaint prompted the FERC order, said in comments to MISO that the two RTOs need a joint model because their different study processes lead to projects being categorized inconsistently (e.g., reliability, public policy or economic). “However, tests of NERC reliability thermal or voltage violations have less disparity between RTOs. Reliability models typically have similar topology, base resource modeling and demand assumptions,” the utility said.

In a Nov. 15 filing with FERC, NIPSCO accused the RTOs’ of ignoring the commission’s directives. “The pattern of behavior shown by the RTOs … demonstrates that [they] are committed to interpreting the April 21 order as empowering the RTOs to eliminate the Coordinated System Plan Study for interregional planning, which is plainly contrary to the spirit, if not the letter, of the commission’s orders,” NIPSCO said.

At the Dec. 14 Planning Advisory Committee meeting, Adam McKinnie, chief utility economist for the Missouri Public Service Commission, asked MISO to create a common interregional model before it embarks on more studies, such as the MISO-SPP joint study running through the first quarter of 2017. (See MISO-SPP Study Scope Finalized; Stakeholders Doubtful Projects will Result.)

Ameren said MISO and PJM should use the same base models for system load conditions, such as light load, summer shoulder peak, winter peak and summer peak conditions. Other members, including Great River Energy, ITC Holdings, WPPI Energy and American Transmission Co. said they understood MISO’s reluctance to adopt identical assumptions.

Retirement Risk, Deliverability Measured for MTEP 17

MISO’s deliverability analysis for the 2017 Transmission Expansion Plan will identify transmission constraints and possible violations on a five- and 10-year horizon, MISO engineer Carlos Bandak said.

Bandak said the deliverability analysis will determine whether groups of generators in an area can operate at maximum capability without being “bottled-up.” The information is used in granting or denying network resource interconnection service (NRIS).

After stakeholders expressed concerns that MISO would use historical limits for the deliverability analysis, Bandak reassured stakeholders that the RTO each year produces fresh results and does not test values from previous years, although it will not test above already-granted NRIS levels for existing generators.

Stakeholders argued that MISO might test above the approved NRIS level to a generator’s potential capability.

“We’re not going to use the deliverability study to grant incremental capability. That would be too complicated,” said MISO Director of Planning Jeff Webb, adding that the generator interconnection queue is the arena where owners should go if they want to be granted more generating capability.

“All we’re doing here is making sure that generators continue to be deliverable through their interconnection service. There’s nothing really new or strange here,” Webb said.

MISO also will incorporate a retirement sensitivity analysis in MTEP 17’s annual reliability assessment.

MISO will perform 10-year-out sensitivity analyses for age-based retirements modeled in MTEP 17’s “existing fleet” future. By 2027, all coal units 65 years or older and all gas and oil units 55 years or older will be assumed to have been retired.

In 10 years, the MISO footprint will contain 6.4 GW of at-risk coal generation and 10.7 GW of susceptible natural gas and oil generation. The RTO places the current average age of its coal fleet at 38 years and its natural gas and oil fleet at 22 years.

MISO engineer Anton Salib said the RTO would build models until March and test them through May, with preliminary findings released in June. A full report is expected by September.

Ginger Hodge of Customized Energy Solutions asked if results would be included in the MTEP 17 Market Congestion Planning Study. Salib said the findings may inform the study, but information from a variety of analyses would also be used.

By the end of 2016, MISO expects $2 billion more of MTEP 15’s transmission projects to be in-service. Project candidates for MTEP 17 are to be submitted by Sept. 15, 2017. Solomon said the overall scope of MTEP 17 studies will be completed by the end of this month.

In response to stakeholder feedback on the MTEP 17 scope, MISO told the Dec. 14’s Planning Advisory Committee it would consider removing independent load forecasting from the MTEP process because it is not governed by the RTO’s business practices. Purdue University’s State Utility Forecasting Group currently estimates MISO’s power demand. The PAC could weigh in on the future of the forecasting after the new year.

— Amanda Durish Cook

December 20, 2016

CAISO Board OKs Metering, EIM Governance

By Robert Mullin

The Western Energy Imbalance Market featured prominently in two proposals approved by the CAISO Board of Governors during its Dec. 15 meeting.

energy imbalance market caiso board metering — | *Trimark Associates, Inc.*

One measure will enable more CAISO market participants to meter their own resource performance data and submit it to the ISO for billing. The measure was proposed largely to help reduce costs for participating in the ISO’s markets, according to a CAISO memo to the board.

“Metering is a significant cost for market participants both in our base market and the Western Energy Imbalance Market,” CAISO CEO Steve Berberich said. “Our goal is to reduce the barriers of entry to [the EIM], and metering is part of that.”

CAISO currently obtains settlement-quality meter data through two different processes, depending on the type of resource. In one process, the ISO directly polls a resource’s meter and performs the validation, estimation and editing procedures necessary to achieve settlement. In the other, a scheduling coordinator is authorized to perform those settlement functions itself and submit the results to the ISO.

The proposal approved by the board extends eligibility for scheduling coordinator metering to certain resources that are currently required to be metered by the ISO.

Eligibility will now be open to energy- or ancillary services-only generators, distributed energy resources operating under a participating generator agreement and “intraties” — links between two utility distribution company service areas that can function as a proxy resource for market purposes.

The change will allow market participants to avoid the costs associated with using a CAISO-approved meter, meter reprogramming, inspection by an authorized inspector and the telecommunications equipment needed for the ISO to poll the data.

Scheduling coordinators applying for self-metering will be required to submit a settlement-quality meter data plan for all resources they represent to ensure accuracy in settlements.

That provision will apply to all new resources entering the market, regardless of resource type. It will also cover any new ISO resources that were previously EIM resources not subject to the requirement.

But the data plan requirement will not apply to scheduling coordinator metered resources already operating in the market.

“Existing market participants will have no additional requirements imposed on them as a result of this proposal,” said Tom Flynn, CAISO manager of infrastructure policy and development.

The measure also creates some uniformity in reporting by requiring all new generators in the ISO or EIM to submit meter data in five- or 15-minute intervals. Under current practice, ISO resources can choose break down their data submission into five-, 15- or 60-minute intervals, while EIM participants are restricted to five-minute reporting.

“For EIM participating generators, this represents a potential cost savings by avoiding the need to reprogram existing meters already capable of submitting meter data in 15-minute intervals,” the ISO said.

Kristine Schmidt, chair of the EIM governing body, expressed appreciation for the ISO’s revised approach to metering.

“This is very important for our EIM entities who have a significant number of meters that would otherwise have to be changed out,” Schmidt said.

“This seems like a win-win all around,” ISO board member Angelina Galiteva said in voting for the proposal. “This one is easy.”

Guidance Document Approved

The board also voted to approve the EIM’s “guidance document,” a set of procedures outlining how ISO staff should interact with EIM representatives and participants. The document sets out the timeframes in which CAISO staff will notify the governing body about ISO initiatives and explains the processes by which governing body members and EIM participants can provide feedback on proposed policy changes that affect the market.

“What the guidance document does is take all those rules — and establishes a process for implementing them,” said Dan Shonkwiler, CAISO general counsel.

Most significantly, the document provides solutions to the overlapping authority between the ISO board and the EIM governing body resulting from the EIM’s delegation of a portion of its authority over Federal Power Act Section 205 filings to the ISO. (See EIM Leaders OK Governance ‘Guidance’ Proposal.)

While the EIM governing body voted earlier this month to approve the guidance document, CAISO’s Tariff requires the board to formally approve any proposals — including those solely affecting the EIM — that alter the Tariff.

“I think this is an important step forward,” board member David Olsen said. “It really helps to clarify the scope of responsibility of the EIM board.”

December 20, 2016

MISO Planning Advisory Committee Briefs

CARMEL, Ind. — MISO planners approved an expedited project request in northeast Arkansas and are evaluating three others in Michigan, officials told the Planning Advisory Committee last week.

The $3 million Hickman Central project, submitted by Arkansas Electric Cooperative Corp. in October, will include a new substation, a quarter-mile line to connect it to the Dell-Blytheville North 161-kV line and two 161/345-kV transformers, said Edin Habibovic, manager of expansion planning in MISO South.

The Little Rock-based cooperative said the improvements are needed by October 2017 to accommodate about 35 MW of new industrial load. It said getting approval under the 2017 Transmission Expansion Plan in December 2017 would be too late.

MISO recommended that AECC begin work on the project “as needed” to meet the in-service date in less than 10 months and said the project would be formally included in MTEP 17.

The RTO also received three expedited review requests from ITC Holdings’ Michigan Electric Transmission Co. on Nov. 30:

A new 120-kV substation and 2 miles of double circuit 120-kV lines to handle an added 6 to 10 MVA in northern Michigan;
A new 120-kV substation and 0.1 miles of underground cable to serve 5 MW of new DTE Energy load in Detroit; and
A new 138-kV substation to serve 35 MW of new Consumers Energy load near Grand Rapids, Mich.

MISO said it is performing an independent reliability analysis “to determine that the projects [do] not cause any harm to the system.” The RTO plans to schedule a Technical Studies Task Force meeting in January to discuss results, said ‎Senior Manager of Transmission Expansion Planning Thompson Adu.

After 7 Years, Game Over for MISO’s ‘PAC Man’

Bob McKee (left) and Jeff Web | © *RTO Insider*

After seven years in the PAC chair, American Transmission Co.’s Bob McKee has announced he will not seek re-election.

MISO PAC Liaison Jeff Webb called him the “PAC Man” and presented him with a Pac-Man themed blanket. “It is in fact, sadly, game over,” Webb joked.

During his tenure, McKee oversaw MTEPs from 2010 to 2016. In parting words, he encouraged stakeholders to “take stock” and be actively involved in MISO’s planning process.

ITC’s Cynthia Crane will take over next year as chair.

— Amanda Durish Cook

December 20, 2016

PJM Planning/TEAC Briefs

VALLEY FORGE, Pa. — PJM’s proposed timeline for reviewing tie-line requests will need another round of revisions before members are comfortable with endorsing it.

Two clarifications precluded members from bringing it to an endorsement vote at last week’s Planning Committee meeting. The first concern was an implication that the applicant must present their request at a meeting of the System Operations Subcommittee’s transmission owners group (SOS-T) following PJM’s legal and technical review. The second issue was the timeline’s awkward construction, in which it counts down to a FERC filing date and then counts down again to an in-service date.

“We thought it was valuable, but if it’s causing issues, we can remove it,” PJM’s Sue Glatz said. She went on to request an endorsement vote with the understanding that the clarifications will be made.

Stakeholders questioned PJM’s pressure to secure approval despite reservations.

“It’s essential that these documents be clear and concise. I’m not wishing this on anyone, but there is the possibility that some of us might not be around to interpret them,” American Municipal Power’s Ed Tatum said.

pjm planning and transmission expansion advisory committee — | *PJM*

PJM’s Paul McGlynn countered that the process has been going on for quite some time. “We’ve been at it for four months now,” he said.

Project-Selection Guidelines Criticized as Too Subjective

PJM unveiled guidelines for how it will select market efficiency projects, noting a “bright line” criterion that it must relieve at least one economic (capacity or energy) constraint. Projects also must clear a benefit/cost ratio of 1.25:1 and proposals with estimated costs of more than $50 million will be subject to an independent review.

John Farber of the Delaware Public Service Commission questioned what he called PJM’s “market efficiency at any cost” metrics and asked that it increase its focus on gathering “objective data to move this from a subjective to an objective process” going forward. He said PJM’s analysis is subjective and that cost containment caps are not a “panacea.”

PJM’s Asanga Perera said congestion created by any outages needed to complete a proposed project would be factored into decisions if it’s useful, but that it’s “tough” to include short-term factors and a “one-time thing” like an outage into a 15-year analysis.

“I think what we’re suggesting with some of these slides is that a project without outage congestion might be a better choice,” McGlynn said.

PJM will publish the guidelines, which will be effective for the 2016/17 transmission planning cycle, on the market efficiency web page.

New Forecast Sees Further Load-Growth Reductions

PJM is again reducing its load growth projections due to the economic outlook and increased efficiency.

In its preliminary 2017 forecast, expected summer load for 2020 dropped 2.1% compared to last year’s forecast, while that for 2022 was down 2.9%. The winter 2020/21 forecast dropped 2.6% and 2022/23 was down 3.5%. 2020 was chosen for comparison because it’s the next year for the Base Residual Auction; 2022 is the year used in the Regional Transmission Expansion Plan study.

Analysis Needed to Answer Winter Resource Adequacy PS

PJM’s Tom Falin said the first step to addressing a problem statement approved last month on winter resource adequacy and capacity requirements will be to ensure PJM’s winter model is accurate. (See PJM Stakeholders Reject CP Rule Changes, OK Additional Study.)

Work is being done to assess how well it processes all factors, including how to quantify the operational risks of activities such as transmission outages and generator maintenance.

“Our suggestion is going to be that PJM take the next two or three months to assess internally,” he said.

He expected to have more information for March’s Planning Committee meeting.

‘Immediate Need’ Designations Questioned

At the meeting of the Transmission Expansion Advisory Committee, stakeholders questioned PJM’s determination of “immediate need” for several transmission reliability projects and criticized the decision not to open them to competitive bidding.

In particular, an American Electric Power project in northeastern Indiana raised eyebrows. The company says an outage of its South Butler-Collingwood 345-kV line would result in the loss of more 300 MW of load.

One fix, estimated at $76.5 million, would involve a new 345-kV switching station and a new double-circuit 345-KV line of 17 miles. PJM said it favors an alternative proposal from AEP estimated at $107.7 million because it would also address aging-infrastructure concerns.

PJM’s recommendation rankled some members, who felt the project could have been identified earlier to allow for competitive bidding. Some also questioned including costs for local infrastructure that they said shouldn’t be allocated throughout the RTO.

Five transmission towers along the route are in immediate need of replacement, 79 will need to be addressed within three years and another 22 will need to be fixed soon thereafter, according to AEP’s assessment.

Sharon Segner of LS Power questioned PJM’s findings on two projects it plans to award to Dominion, the incumbent transmission owner, based on immediate need. According to Dominion’s proposal, the projects aren’t slated to be completed until 2021, which is beyond PJM’s definition for an “immediate need” project, Segner said. She suggested opening a 30-day window for competitive transmission developers like her company to propose alternatives.

“Right now, the incumbent transmission owner cannot meet it in three years. Therefore, it would seem to me the right thing to do would be to see if anyone can meet it in the proposal window,” she said.

PJM’s Steve Herling said that would create months of analysis and third-party verification for PJM that would only delay AEP from completing the project.

“We’ve already considered all of these factors, and what we have here is our decision. If you take exception to our decision, you can communicate it to the board,” he said.

PJM staff also pointed out that a recent FERC docket offered stakeholders the opportunity to raise these concerns. The commission’s July order in that case made clear that the definition is based on the date of need, not the in-service date (ER16-736, EL16-96). (See FERC Rejects PJM Cost Allocation on Dominion Project.)

PJM Review of Artificial Island Bid Elements Completed

Installing optical ground wire (OPGW) and new relays won’t resolve reliability issues at Artificial Island as originally expected, PJM’s analysis has found. (See PJM Board Halts Artificial Island Project, Orders Staff Analysis.)

“There may be benefits to installing the optical ground wire and new relay, but that scope of work would not directly address the operational performance issue,” McGlynn explained.

An OPGW serves as both a ground and a telecommunications link. PJM determined that although high-speed relaying using such wires would improve the clearing times for line faults, some bus-fault clearing times were more limiting. “Since the timing is not improved by the OPGW and line relay changes, they will not improve the stability margin,” PJM said.

One of the preliminary recommendations from PJM’s analysis is to remove the ground wire and relay upgrades from the project scope, McGlynn said.

Stakeholders asked whether, based on the scope changes, PJM plans to re-evaluate submitted proposals, but Herling said that was not possible.

“Realistically, we’re only looking at the finalists … in the context that things have changed. … We’re not going to go back to the most expensive projects that were eliminated,” he said. “We’re still working our way through the cost issues and the constructability issues. … Obviously, we still have a lot of work to do.”

– Rory D. Sweeney

December 19, 2016

FERC: Let Fast-Start Resources Set Prices

By Rich Heidorn Jr.

RTOs and ISOs would be required to incorporate fast-start resources into energy and ancillary services pricing under a Notice of Proposed Rulemaking approved by FERC on Thursday (RM17-3).

The commission said new rules are required to allow fast-start resources to set LMPs — changes regulators said should reduce uplift and provide more accurate price signals to encourage investments.

“Without some form of fast-start pricing, most fast-start resources are not eligible to set prices even when they are the marginal resource,” Daniel Kheloussi, a staffer in FERC’s Office of Energy Policy and Innovation, said during a presentation at the commission’s monthly meeting. “Further, even when fast-start resources can set prices, they may not be able to recover their commitment costs, such as start-up and no-load costs, through prices. As a result, prices may not reflect the marginal cost of serving load.”

The commission said fast-start resources are unique because they are often dispatched to inflexible minimum or maximum operating limits, making them ineligible to set LMPs. They also are usually committed in real-time.

“As a result, the cost to commit these resources is incurred at roughly the same time the incremental energy costs are incurred, which raises the question of whether the commitment costs should be included in the LMP,” the commission said. “Finally, fast-start resources can arguably respond quickly enough to be considered part of an RTO’s/ISO’s operating reserves even when they have not yet been committed.”

Seeking to build on the RTOs’ best practices, the NOPR would:

Standardize the definition of fast-start resources to include any resource committed by the RTO/ISO that is able to start up within 10 minutes or less, has a minimum run time of one hour or less and that submits economic energy offers to the market. The definition would be technology-agnostic.
Require that an RTO must incorporate the start-up and no-load costs (commitment costs) of a committed resource in energy and operating reserve prices for the resource’s minimum run time.
Require RTOs to relax the resource’s economic minimum operating limit (eco min) when calculating prices — treating it as if it is dispatchable from zero to the economic maximum operating limit (eco max).
Allow offline fast-start resources to set prices under certain system conditions when they are economic and feasible.
Require RTOs to incorporate fast-start pricing in both the day-ahead and real-time markets to support price convergence between the two.

The NOPR is the third issued by the commission since it initiated a proceeding on price formation in RTO/ISO markets in June 2014 (AD14-14). It follows a June order requiring RTOs to align their settlement and dispatch intervals and implement shortage pricing during any shortage period (RM15-24). (See FERC Issues 1st RTO Price Formation Reforms.) In November, the commission doubled the “hard” offer cap for day-ahead and real-time markets to $2,000/MWh. (See New FERC Rule Will Double RTO Offer Caps.)

Inflexible

Fast-start resources are often required to be dispatched at their eco min or are block-loaded — in which the eco min equals its eco max.

Because the system may not need all of the resource’s eco min to meet load, other resources must be dispatched down, making them the most economic option to serve the next increment of load. “Therefore, despite the fact that a fast-start resource is essentially marginal, this restriction prevents a fast-start resource dispatched at its economic minimum operating limit from setting the LMP,” the commission said.

Thus, some RTOs have relaxed the resources’ eco min limits, treating them as dispatchable in a pricing algorithm separate from the dispatch algorithm. But while these changes can improve price signals — especially during stressed conditions when the need for fast-start resources is the greatest — the disconnect between prices and dispatch instructions can cause over-generation. Only some RTOs conduct reconciliations between the pricing and dispatch runs to prevent excess generation, FERC said.

RTOs Have Differing Approaches

In comments filed following the commission’s technical workshops on price formation, many stakeholders said they would support changes allowing resources dispatched at their operating limits to set LMP and allowing start-up and no-load costs to affect prices. The Electric Power Supply Association and Western Power Trading Forum said such changes could help address CAISO’s “duck curve” by redistributing excess costs incurred during the middle of the day to the ramping periods.

Region	Fast-Start Resource Definition	No-load costs incorporated in LMPs?	Startup costs incorporated in LMPs?	Set DA prices?	Set RT prices?	Offline prices set LMP?
FERC NOPR	Start-up: within 10 minutes or less. Minimum run time: one hour or less. Other: Submits economic energy offers.	Yes	Yes	Yes	Yes	Yes
CAISO	Start-up: online within two hours or less. Other: can be committed in CAISO’s 15-minute market or short-term unit commitment process.	Yes	No	Yes	Yes	No
ISO-NE	Start-up: 30 minutes or less. Minimum run time: one hour or less. Minimum down time: one hour or less.	Yes (1)	Yes (1)	No	Yes	No
NYISO	Does not apply fast-start pricing to all fast-start resources.(2)(3)	N/A	Yes	Yes	Yes	Yes
PJM	Start-up: two hours or less (fast start CT). Block-loaded resource: eco min = eco max.	No	No	Yes (4)	Yes	No
MISO	Start-up: 10 minutes or less. Minimum run time: one hour or less.(6)	Yes	Yes	Yes	Yes	Yes (5)
SPP	Start-up: 10 minutes or less. Minimum run time: one hour or less. Other: total minimum down time one hour or less. (10)	No (7)	No (8)	Yes (9)	Yes	No

(1) New rules effective March 1, 2017 (ER15-2716).
(2) Uses “hybrid gas turbine pricing logic” and “offline gas turbine pricing logic” for all fast-start block loaded resources in its real-time energy market. Allows all fast-start block loaded resources to set price in its day ahead energy market.
(3) Worked with Market Monitoring Unit and stakeholders on revising its “hybrid gas turbine pricing logic.” In a Dec. 14 FERC filing (ER17-549), the ISO proposed broadening its eligibility criteria to allow all fast-start resources to be eligible to set prices in its real-time energy market.
(4) Yes. But generally limited to certain operational conditions like constraint control.
(5) Yes. Only under reserve or transmission scarcity conditions.
(6) Extended LMP took effect in 2015 (150 FERC ¶ 61,143). Planning to implement ELMP Phase II to apply fast-start pricing to more peaking resources.
(7) No. But does allow inclusion of no-load costs in mitigated energy offer curves for unit commitment.
(8) No. But does allow inclusion of start-up costs in mitigated energy offer curves for the unit commitment.
(9) Yes, if offered into day-ahead market.
(10) Implementing fast-start pricing to commit quick-start resources more efficiently in real-time in Q2 2017.

ERCOT (Not subject to FERC NOPR)

Start-up: 10 minutes or less. No minimum run time requirement (11) (17)

Yes (12)(13)

Yes (13)(14)

Yes (15)

Yes (13)(16)

Yes

(11) Resource is exempted from following instructions for the first five-minute dispatch. Regulation reserves are used to cover missing energy.
(12) Yes. Market participants may include no-load costs in energy offer curves.
(13) Uplift may occur in cases in which the assumptions built into the energy offer curves are not correct and costs are not fully recovered.
(14) Yes. Market participants may include startup costs in energy offer curves.
(15) Yes. Day-ahead market is voluntary. Market participants may include no-load and start-up costs in energy offer curves.
(16) Market participants may include no-load and start-up costs in energy offer curves.
(17) Analyzing the feasibility and benefits of implementing a multi-interval real-time market.

The commenters noted that start-up time requirements for quick-start resources range from 10 minutes in NYISO, MISO and SPP, to 30 minutes in ISO-NE and two hours in PJM and CAISO.

Several stakeholders praised MISO’s extended LMP. The program, implemented in March 2015, is designed to reduce uplift by incorporating all offer costs into market clearing prices. (See MISO Study Undercuts IMM Proposal on Expanding ELMP Pricing.) The RTO is planning to implement ELMP Phase II to apply fast-start pricing to more peaking resources.

NYISO and ISO-NE also received some praise, while Golden Spread Electric Cooperative criticized SPP, saying the RTO’s market design and operator practices fail to reflect fast-start resources’ costs and their value to the system.

NYISO worked with its Market Monitoring Unit and stakeholders on revising its “hybrid gas turbine pricing logic,” resulting in a Dec. 14 FERC filing in which the ISO proposed broadening its eligibility criteria to allow all fast-start resources to be eligible to set prices in its real-time energy market (ER17-549).

ISO-NE will be implementing new rules effective March 1, 2017, to incorporate no-load and start-up costs in LMPs (ER15-2716).

SPP said it will be implementing fast-start pricing to commit quick-start resources more efficiently in real time in the second quarter of 2017.

PJM was criticized by its Independent Market Monitor, which said that relaxing eco mins for price setting is subjective and overrides “fundamental pricing logic,” sometimes increasing total production costs.

The RTO also was criticized for limiting its fast-start definition to combustion turbines and excluding reciprocating engines.

“A natural gas-fired reciprocating engine that has a cold start-up time of only five minutes and has an economic minimum of 50% of its economic maximum is much, much more flexible, and provides significantly more value to the bulk electric power grid, on a per-megawatt-hour basis, than an inflexible block-loaded resource that takes two hours to start,” IMG Midstream and Tangibl said in comments to the commission.

ERCOT, which is not subject to the FERC NOPR, is analyzing the feasibility and benefits of implementing a multi-interval real-time market.

Comments Sought

The commission asked stakeholders to comment on its proposals, including whether they could result in the exercise of market power. “The concentrated ownership of fast-start resources could raise market power concerns that are not addressed in existing RTO/ISO market power mitigation procedures,” FERC said.

The commission also acknowledged that the changes could require complex and expensive software changes. “We seek comment on the required software changes, updates to optimization modeling and parameter inputs, estimated costs and time necessary to implement” the changes, FERC said.

Comments are due 60 days after publication in the Federal Register.

December 19, 2016

ERCOT Sees Increased Load Growth, Shrinking Margins

By Tom Kleckner

ERCOT’s electricity demand continues to grow more rapidly than expected, and while reserve margins are projected to shrink slightly, the Texas ISO says it still has sufficient capacity to support system reliability.

“Based on the information we have today and current planning criteria, we continue to see sufficient planning reserve margins through most of the 10-year planning horizon,” ERCOT’s senior director of system planning, Warren Lasher, said Thursday.

The Texas grid operator’s latest Capacity, Demand and Reserves (CDR) report, released last week, indicates next summer’s peak demand will reach nearly 73,000 MW, growing to more than 77,000 MW by summer 2021. ERCOT set a new system peak this summer when it reached 71,110 MW on Aug. 11.

load growth electricity demand ercot — | *ERCOT*

The ISO expects to have more than 82,000 MW of capacity available for next summer and more than 88,000 MW by summer 2021.

The increased load growth will cut the ISO’s reserve margin to 16.9%, down from the May 2016 forecast of 18.2%. The CDR sees the reserve margin climbing to 10.2% in 2018 but dropping to 19% in 2021 — still well above ERCOT’s 13.75% target.

ERCOT attributes the load growth to the state’s strong economy, fueled by a rebounding petroleum market and high-tech jobs in Central Texas.

“We’re seeing stronger growth than Moody’s projected a year ago,” said ERCOT Manager of Load Forecasting and Analysis Calvin Opheim. “Texas growth used to be tied to oil and gas and drilling. Those [industries] appear to be coming back alive, but when you come into Central Texas and San Antonio, a lot of people are moving here for well-paying jobs” in other industries.

Opheim said Moody’s forecast for Central Texas, which ERCOT incorporates in its planning models, projects employment growth rates of more than 3% in 2021.

The Federal Reserve Bank of Texas is also optimistic, saying a stabilized energy sector, recent improvements in the manufacturing sector and increased optimism by Texas businesses will likely lead to a “moderately” improved economy in 2017.

ERCOT’s demand in November 2016 was already up 11.2% compared to November 2015.

The new CDR shows almost 2,700 MW of new capacity since the May report, including 1,188 MW of wind and 262 MW of solar. ERCOT surpassed 500 MW of installed solar resources when a 160-MW project in West Texas was synched to the grid in November.

By next summer, the ISO expects to add nearly 3,000 MW of wind, more than 450 MW of solar and 2,660 MW of gas resources — more than 2,150 MW coming from two units near Houston and Fort Worth.

Planned resources reflect more than 10,000 MW of additional capacity by 2021.

The ISO’s long-term forecast, which is updated annually, includes the addition of a new LNG facility being developed on the Gulf Coast, but it doesn’t take into account Lubbock Power and Light’s proposed migration of 430 MW of load from SPP to ERCOT.

December 19, 2016

MISO Stakeholders Narrowly Support New Pseudo-Tie Rules

By Amanda Durish Cook

MISO’s Reliability Subcommittee last week narrowly approved a more stringent process for deciding on pseudo-tie requests.

The package, approved 5-4 with 13 abstentions at a Dec. 16 special meeting, includes a pro forma pseudo-tie agreement and Business Practices Manual language for generators that intend to sell their capacity or electricity outside the RTO’s footprint.

MISO plans to file the proposed rules with FERC in early January. But Senior Director of Regional Operations David Zwergel said the narrow vote and large number of abstentions could give the RTO pause and lead to more discussions to see if minor language changes could address opponents’ concerns.

The new rules say proposed pseudo-ties can be rejected and existing pseudo-ties can be revoked if a market-to-market flowgate is not within 2% of MISO and the neighboring market’s calculated generator-to-load distribution factor. (See MISO Readies Updated Pseudo-Tie Rules.)

Andy Witmeier, of MISO’s operations division, said attaining RTOs — those using generators outside their borders — need to accurately calculate the impact that their pseudo-tied generation has on M2M flowgates.

The 2% provision, however, was a source of stakeholder confusion. Brian Garnett of Duke Energy said MISO had contradicted itself in the BPM language because in one instance, the RTO said the rules would not be retroactively applied, yet existing pseudo-ties could be subjected to the 2% rule. Amanda Schiro, manager of model engineering, said an existing pseudo-tie would only be subject to the 2% rule if it is modified, which would trigger a restudy under the new criteria.

Zwergel said he did not expect MISO to rescind any existing pseudo-ties based on the 2% threshold, but he said it wants to reserve the right in case an attaining RTO drastically changes its model and large discrepancies between models occur. Currently, pseudo-tie modeling in MISO is conducted four times per year, and Witmeier said the RTO’s modeling occurs “within a few weeks of other RTOs.”

WPPI Energy’s Steve Leovy said he’d like to see a more stringent tolerance than MISO’s proposed 2%, but RTO staff said they were confident with that threshold.

Stakeholders asked if MISO would include some of the pseudo-tie language in the MISO-PJM joint operating agreement. Ron Arness, senior manager of seams administration, said MISO could consider memorializing the changes in the JOA, but he did not see a need yet.

“It’s something we could monitor if [MISO’s and PJM’s rules] don’t align,” Arness said. “Today we don’t see any incompatibilities.”

Entergy’s Jeff Knighten, who cast an opposing vote, said his company agreed with a lot of details but “wasn’t ready to sign off yet.” Entergy said the 2% shift factor might work well “under test conditions,” but RTOs might not be able to maintain the same accuracy “under transmission outage conditions which may result in a substantial change in system flows.”

The other companies to provide public comments, NRG Energy and Occidental Chemical, likewise said details around the threshold were lacking and asked for justification.

December 19, 2016

CAISO Board OKs 2017 Budget with Steady Revenue Requirement

By Robert Mullin

CAISO’s Board of Governors approved a 2017 budget that includes a $4.3 million increase in spending but no corresponding rise in the grid operator’s revenue requirement.

“I do think it’s worth pointing out that the board has been engaged in development and review” of the budget before the vote, CAISO CEO Steve Berberich said during the board’s Dec. 15 meeting. “So it’s really been an ongoing process. This is just the final step.”

Although the ISO’s total expenditures are set to increase by 2% to $214.5 million, the annual revenue requirement will remain unchanged at $195.3 million, 18% its 2003 peak and 3.5% under the current FERC-approved cap.

The reason: Next year’s $4.6 million rise in labor expenses will be offset by expected revenues from other sources, including money earned from administering the Western Energy Imbalance Market (EIM). The EIM is projected to bring in $4.8 million for the ISO in 2017, compared with $2.5 million this year.

The ISO’s revenue requirement consists of five components, including operations and maintenance, debt service, cash-funded capital, an operation cost adjustment from the previous year and other costs and revenues. Those additional revenues are collected through EIM administrative charges and fees assessed for intermittent resource forecasting and generator interconnections.

CAISO revenue requirement 2017 budget — Increased cash flow from other sources will allow CAISO to leave its 2017 revenue requirement unchanged from this year’s level. | *CAISO*

CAISO recovers its revenue requirement through grid management charges assessed to market participants based on their use of the transmission system to serve load or deliver exports. The charges are slated to increase slightly next year, with ISO transmission volumes projected to fall 2 TWh, to 240.7 TWh. The drop continues a decline in recent years that’s due in part to a persistent drought, which has reduced the volume of water being moved across the state using a massive network of electrical pumps.

Fixed fees related to market operations — such as inter-scheduling coordinator trade and congestion revenue rights fees — will remain unchanged.

Operations and maintenance constitutes about 80% of the ISO’s budget at $173.6 million, up 2.6% because of rising labor costs, including merit pay and benefit increases for existing staff and the addition of seven new employees.

CFO Ryan Seghesio earlier this year told stakeholders that CAISO has held a “tough line” on headcount but that “stress points” in several departments necessitated additional hiring. (See CAISO Sees Steady Revenue Requirement Despite Spending Rise.)

The increased labor expenses will be partially offset by decreased costs from vacating the ISO’s Alhambra leased site, as well as declining outlays for consulting and contract staff.

Debt service costs will hold steady at $16.9 million. Construction of the ISO’s headquarters accounts for most of the debt, according to April Gordon, the ISO’s manager for budgeting and planning. Debt costs remain well below the 2006 peak of more than $80 million.

CAISO estimates it will spend $20 million on capital projects next year, most of them related to technology upgrades to support existing and new market operations.

Any minor year-end adjustments to the O&M budget made after the board’s approval will not affect the final approved budget, the ISO said.