Below is a summary of the issues scheduled to be brought to a vote at the Markets and Reliability and Members committees Thursday. Each item is listed by agenda number, description and projected time of discussion, followed by a summary of the issue and links to prior coverage in RTO Insider.
RTO Insider will be in Wilmington, Del., covering the discussions and votes. See next Tuesday’s newsletter for a full report.
Markets and Reliability Committee
PJM Manuals (9:10-10:00)
Members will be asked to endorse the following manual changes:
Manual 7: Protection Standards. Clarifications were recommended by the Relay Subcommittee as part of its biennial review of the manual.
Manual 10: Pre-Scheduling Operations. Changes make clear that reporting rules for all outages apply to both capacity and energy resources.
Manual 14B: PJM Region Transmission Planning Process. Updates light load and winter peak reliability analyses to align with current practices, among other updates.
Manual 15: Cost Development Guidelines. Clarifications are the result of a periodic review. Adds Tariff-approved language regarding pumped storage hydro units.
Manual 18: PJM Capacity Market. Changes are the result of a periodic review; conforming changes relate to Capacity Performance and the “deploy all resources” action.
The committee will be asked to endorse changes to make the parameter-limited schedule exception process more flexible. (See “More Flexible Parameter Limited Exception Process Approved,” PJM Market Implementation Committee Briefs.)
Members will be asked to elect Gary Greiner of Public Service Enterprise Group as a Transmission Owner sector representative. He will take the place of PSEG’s Frank Czigler, who has left the company.
AUSTIN, Texas — To address the Defense Department’s frustrations over Texas’ lack of regulation for siting new generation, the governor’s office is working with ERCOT to require notifying the department of proposed projects that might impact military operations.
DeAnn Walker, a senior policy adviser in Gov. Greg Abbott’s administration, told a Gulf Coast Power Association luncheon audience that she’s been working on the issue for nine months. Military issues are a top priority for Abbott, she said.
The Pentagon’s main concerns have been wind turbines disrupting radar signals and solar panels causing glare for pilots. Used to working with states who have control over siting facilities, military officials have been frustrated with Texas’ system, which lacks any state-level oversight. “The military claimed there were times when the first time they knew about a wind turbine farm going up near their facility was when they started seeing the turbines built,” she said.
Walker said concerns have been raised over projects planned around naval air stations in Corpus Christi and Kingsville. She knew of only one generation project canceled because of a conflict with military operations.
Walker worked with ERCOT to develop PGRR 47, which was presented in May. The change to ERCOT’s Planning Guide would require developers seeking interconnection approval to report on the status of reviews by the Pentagon and the Federal Aviation Administration.
A luncheon attendee pointed out that the military already receives notification about projects from FAA, which can occur much sooner than the interconnection application.
In exchange for its cooperation, the state has asked the Defense Department to provide color-coded maps that show where developers might run afoul of military siting restrictions, Walker said. The maps would be of all military operating areas in the state and be marked green (where there are no restrictions), yellow (where they could work together toward a solution) and red (where the military would oppose any development). Another attendee said the maps already exist on FAA’s website.
Walker said Abbott is adamant about winning approval of the change and asked that anyone with concerns address them with her directly.
Although the lack of siting regulation has caused tensions in Texas, the Defense Department has worked cooperatively with the power industry, becoming early advocates of renewables and microgrids.
At a FERC technical conference on reliability earlier this month, Chris Murray of the Navy’s Renewable Energy Program Office invited transmission and generation projects onto naval facilities. “If there is land on our base that you think makes sense, let us know. And more often than not, that land is going to be behind a secure perimeter with guards, which also can be good for a critical asset,” he said.
DETROIT — MISO expects the use of technologies such as energy storage, synchrophasors and HVDC lines to increase, Executive Vice President of Transmission and Technology Clair Moeller told the Board of Directors at its System Planning Committee meeting last week.
“As we do modeling into the out years … we see a substantial shift in the footprint away from coal — and that’s expected. But how the rest of the mix [develops] plays an important role,” Moeller said. “It’s a pretty interesting time in terms of how the portfolio might shift.”
Synchrophasors, which provide real-time transmission data, can answer whether “you can safely take the system to its physical limits to completely squeeze all you can out of the grid.” Moeller said. “This is the electric system’s introduction into big data.”
“How much [capacity] is in [the transmission system]? Because you know it’s there,” board member Paul Bonavia said. “This is a lot of food for thought.”
Board member Michael Evans asked if MISO could commission a technology company “that’s already slogging through the big data” to analyze the RTO’s information.
HVDC
MISO has found that DC transmission, which is ideal for transporting large amounts of power over long distances, only becomes as cost effective as AC for lines longer than 600 miles.
Moeller said DC technology could connect MISO resources to ERCOT and the Western Interconnection.
“If there are technologies available to us to move power from Denver to Des Moines, direct current is the way to go,” he said.
Clean Line Energy is MISO’s largest DC merchant, with three interconnection projects in the queue: the Grain Belt Express (which could carry 4,000 MW of wind power from western Kansas to Missouri, Illinois and Indiana), the Rock Island line (3,500 MW of capacity from northwest Iowa to Illinois) and the Plains & Eastern line (4,000 MW of capacity from the Oklahoma Panhandle to Tennessee and Arkansas). The Plains & Eastern project faces opposition from Arkansas’ congressional delegation. (See House Panel OKs Bill Targeting Clean Line Project.) MISO has just three DC lines to date: one in Manitoba and two transferring power from North Dakota into Minnesota.
“They’re substantially faster and more flexible,” Moeller said.
Storage
MISO’s treatment of battery storage as generation will have to change, Moeller said. It cannot be “force fitted” into a generation market definition, he said.
Although energy storage is evolving rapidly, and utilities are beginning to experiment with it, it is not yet competitive in MISO, Moeller said. He said there is no an independent source that has identified when storage will become economically viable.
Moeller also said MISO believes storage’s competitiveness has been hurt by the low cost of gas. While storage technology becomes cheaper and MISO shifts from its dependence on coal, Moeller said the RTO has discussed strategies to more precisely model price volatility, including securing grants for Ph.D.s in university mathematics departments for a more complex algorithm for gas prices and renewables. MISO currently uses U.S. Department of Energy data and simple inflation to forecast gas prices.
MISO Vice President of System Planning and Seams Coordination Jennifer Curran said the RTO expects installed gas capacity to increase in the near future, with 2,700 MW of gas-fired generation projects in advanced stages of study in the generator interconnection queue.
By 2030, MISO expects gas penetration to reach 35%, almost equal to coal’s current 36% share.
MISO said the substantial shifts in generation mix is justification for the RTO to begin making its own independent load forecasts.
Two generation owners on Friday petitioned FERC to block New England states’ efforts to have electric ratepayers underwrite the cost of expanded natural gas pipelines (EL16-93).
NextEra Energy and Public Service Enterprise Group said the proposals by state regulators to release natural gas capacity to electric distribution companies “will render ISO-NE markets unjust, unreasonable and unduly discriminatory, and result in manipulation of the ISO-NE market.”
The generators asked FERC to rule by Aug. 23 and order ISO-NE to draft a “prophylactic tariff fix” within 90 days. They also seek a technical conference and “final” FERC order by the end of January 2017, before the next Forward Capacity Auction in February.
“State regulators in Massachusetts, New Hampshire, Connecticut and Rhode Island are on the verge of implementing a scheme expressly intended to artificially suppress prices in wholesale energy markets in New England,” the companies wrote.
“Having no use for the pipeline capacity, the EDCs would release the capacity at below-market rates — first to gas-fired generators … and then whatever is left will be released to the marketplace,” the complaint continued. “This transportation subsidy would artificially flood ISO-NE markets with gas, thereby unreasonably suppressing gas prices and wholesale power prices.”
The proposal by the EDCs, endorsed in varying stages in proceedings by state regulators, would allow the distributors to recover from their ratepayers the cost of access to expanded pipelines.
EDCs Eversource Energy and National Grid favored the capacity release proposal at a FERC technical conference held last month. (See Utilities Seek OK for Gas Releases to Generators at Technical Conference.) The two are partners in the proposed Access Northeast pipeline at the center of the dispute. It would bring shale gas from the Marcellus region of Pennsylvania into New York and New England.
The Massachusetts Department of Public Utilities, which is the furthest along among the regulators, has ruled such a contract is legal under state law. It is considering a proposal for a 20-year gas supply contract that could be approved as early as October. (See More Pipelines for New England: ‘Gold-plating’ or Necessity?)
Massachusetts Attorney General Maura Healey has supported a lawsuit filed by ENGIE and the Conservation Law Foundation that challenged the legality of such contracts. A ruling by the state’s Supreme Judicial Court is expected soon.
Another proposed pipeline that could have benefited from ratepayer subsidies, Kinder Morgan’s Northeast Energy Direct, was scuttled earlier this year, in part because of the lack of commitments for firm capacity customers. (See Kinder Morgan Board Suspends Work on Northeast Energy Direct Pipeline.)
PJM is opening its second competitive project proposal window of the year this week.
Its scope consists of a year 2021 analysis of N-1 and N-1-1 thermal and voltage contingencies; generation deliverability and common mode outages; and load deliverability thermal and voltage.
The window will be open 30 calendar days, PJM said. Those offering proposals during that time will be permitted 15 additional days to submit detailed greenfield reports.
This is the second window for which a new proposal fee will apply for upgrades and greenfield projects. There is no fee for proposed projects costing less than $20 million. A $5,000 fee will be assessed for projects of up to $100 million. Proposals with a projected cost of more than $100 million must be accompanied by a $30,000 fee.
Details on registering were presented at the January Planning Committee meeting.
SPP said last week it is seeking industry experts to serve on a second independent panel to review Order 1000 transmission proposals in 2017.
The panel will review and score proposals for competitive projects approved for construction by SPP’s Board of Directors. The RTO’s first independent expert panel earlier this year awarded a 22.6-mile transmission project to Mid-Kansas Electric. (See SPP Awards First Order 1000 Project — But it May Not be Needed.)
“We are proud of our initial [industry expert panel] process, having now seen it all the way through for the first time,” said Paul Suskie, SPP’s executive vice president of regulatory policy and general counsel. He said the process will be refined based on lessons learned and stakeholder feedback.
SPP said interested candidates must have expertise in at least one of five areas “as it relates to electric transmission”: engineering design, project management and construction, operations, rate design and analysis, and finance.
Applications will be accepted through Sept. 1. Panelists will be selected based on a recommendation by the RTO’s Oversight Committee and approved by the board later this year. Those serving on the panel will be considered contractors and will be compensated through a monthly retainer and hourly rate.
More information on the panel’s application process can be found here.
DETROIT — MISO and its Independent Market Monitor have reconciled their differences and reached a compromise on a redesign of the capacity auction, CEO John Bear told stakeholders at the RTO’s Annual Meeting last week.
Bear made his remarks at Wednesday’s Advisory Committee meeting, which was originally planned to feature a presentation on the new competitive retail solution (CRS), a proposal to create a separate, three-year forward auction for retail-choice areas in the RTO’s footprint.
The delay gives MISO officials and the Monitor, which have disagreed on core aspects of the CRS, more time to work on their “hybrid” proposal. (See MISO: Auction Design July Filing Doubtful.)
Bear refused to give any details on the compromise, saying he preferred discussion to take place at the next Resource Adequacy Subcommittee meeting June 29-30, when the proposal will be officially unveiled. He also said further discussion would take place at a meeting in mid-July.
“If we need more time, we’ll take it. We’re not going to release something that’s half-baked,” Bear said.
MISO stakeholders, however, predicted a tough road to implementation regardless of what is released. Resource Adequacy Subcommittee Chair Gary Mathis told the board that “there’s a very big rift between those that think we shouldn’t be doing this, if ever,” and those in favor of varied approaches to redesigning the auction.
“It makes it hard to work through those issues,” Mathis said. He said he anticipates a “big stress level from stakeholders” as they sift through the revised proposal.
Board member Baljit Dail asked if it would be stalled to the point where it would still be under development in a year.
“No, I think we’ll have a big discussion, and then FERC will have to sort it out just like MISO has had to sort it out,” replied Mathis, who predicted challenges to whatever the RTO files.
Despite the predicted challenges in FERC, MISO board members put pressure on stakeholders to come up with a solution as quickly as possible. Board member Judy Walsh said she hoped MISO would come up with a filing in “some sort of short timeline.”
“The search for absolute consensus is going to lead us to endless delay,” board member Paul Bonavia agreed.
However, Kevin Murray, of the End-Use Customers sector, said any attempt from MISO to implement a hybrid solution in time for the 2017/18 planning year would be too hurried and “circumvent stakeholder process.”
Board Troubled by Forecast Generation Shortfall
At the Board of Directors meeting Thursday, board members said they were troubled by the possible generation shortfall in 2018, as predicted in this year’s MISO-Organization of MISO States Survey. (See OMS-MISO Survey: Generation Shortfall Possible.)
MISO Executive Vice President of Transmission and Technology Clair Moeller told the board that a redesigned capacity auction that sends better price signals could curb the rate of retirements.
“That’s why we continue to push the competitive retail solution and be aggressive, to solve this decline [in generation] before it becomes a reliability problem,” Moeller said.
OMS President Sally Talberg urged implementation of the CRS in time for the 2017/18 planning year.
In the survey, MISO identified 2.5 GW worth of planned retirements and 1.8 GW worth of potential closures in 2017.
Board member Michael Evans asked Moeller if he could provide reassurance that adequate reliability exists in the near future.
“We don’t anticipate significant problems in the local area as long as there is sufficient transfer capability. I am cautiously optimistic that things will be OK,” Moeller said. “In the construction world, we’d say that we used up all our ‘float.’ So we need to get to work, but there’s enough time.”
Evans also asked how many coal and nuclear plants that recently threatened to retire have actually filed for retirement study requests.
MISO legal counsel Stephen Kozey answered that the RTO could provide the total capacity that has filed for retirement but couldn’t name the individual plants.
“It is true that not everything [mentioned] in the press has gone through a [retirement study] request,” Kozey said.
“We may end up with a retirement queue,” Moeller added.
“It might be worthwhile to start doing some intensive ‘what-if’ studies,” Evans said.
Dail asked if the 800-MW increase in forced outages predicted in the survey would be a continuing trend. Moeller said the higher outage rates are the result of using coal plants for short cycles, for which they weren’t designed.
“Not to be an alarmist, but this makes me a bit uneasy,” board member Thomas Rainwater said.
The board then asked if MISO could simply deny generator suspensions and retirements.
“We have the ability to call resources back to maintain local reliability but not to protect resource adequacy,” Moeller answered. He said a market mechanism needs to be created to keep generators online for the sake of resource adequacy.
“So if you need them a day later, you can keep them. If you need them three years from now, you can’t keep them?” Walsh asked.
Snowpack in the Sierra Nevada mountains, depleted after four years of drought, will likely remain in deficit until 2019, according to a University of California, Los Angeles study. The research debunks the notion that the recent El Niño, which increased snowpack levels to about 85% of normal, was a “drought buster.”
Sierra snowmelt accounts for more than 70% of the region’s streamflow, 60% of the state’s water supply and much of the energy output for the state’s extensive system of hydroelectric dams, which declined by two-thirds between 2011 and 2015.
Only one previous drought in 65 years required more than a year of recovery to the snowpack. “The fact that this deficit is so much larger is where this number comes from and why we would expect it to be a multiyear recovery,” said Steve Margulis, the study’s lead.
The Department of Natural Resources will allow the builders of the Dakota Access pipeline to use horizontal drilling methods to construct the Bakken crude pipeline under historic tribal burial grounds in the Big Sioux River Wildlife Area, removing a regulatory impediment to the $3.8 billion pipeline.
The pipeline’s developers, Energy Transfer Partners, suggested the pipeline could be bored 85 feet beneath the surface as a way to resolve the dispute over the recently discovered burial ground. The drilling method would avoid surface disturbances of an open trench. “It’s obviously going to have to go deep enough so it’s not going to disturb the tribal grounds,” DNR spokesman Alan Foster said.
Native Americans said they still opposed the 1,168-mile pipeline. “It is disheartening that they have a green light to move ahead, but I feel very confident that there are a number of landowners, tribes and well-informed citizens who will be standing up to make sure that this pipeline does not get built,” said Dallas Goldtooth, an organizer for the Indigenous Environmental Network.
Westar Energy customers could see an $18 million rate reduction as a result of FERC’s approval of a settlement between Westar Energy and the Corporation Commission over transmission-delivery charges.
FERC on March 30 approved a settlement between Westar and the KCC after determining the company had collected too much money from customers. The ruling came a day before the state commission approved a $25 million increase to Westar transmission delivery charges, adding about $4 to an average customer’s bills.
As a result of those two decisions, Westar updated its transmission costs June 21, dropping the amount charged to customers by $18 million.
Upper Peninsula utilities say their customers will unfairly bear the burden of $49.7 million in MISO reliability charges to keep three coal-fired power plants operating.
The RTO filed a new cost calculation for the plants’ system support resource agreements with FERC, and the bills’ first installments are due July 8. Utilities are blaming the state’s customer choice program, which allowed all large mining customers to switch energy suppliers but capped the rest of the state at 10%.
Cloverland Electric Cooperative owes the most, at nearly $11.3 million. Cloverland CEO Dan Dasho estimated that each customer would have to pay an additional $17 to $20 a month for the next 14 months to satisfy the bill.
Ann Arbor Eyes More Solar to Combat Climate Change
Ann Arbor has unveiled a plan to cut the city’s carbon emissions 25% by 2025, aiming to add the equivalent of 2.4 MW in solar installations every year over the next decade.
The City Council unanimously approved a resolution that supports solar-friendly measures, including instructing city departments to abide by the Clean Energy Coalition’s Solar Ready Community guidelines.
Consumers Energy Contests Taxable Value of Wind Farm
Consumers Energy is challenging the tax assessment of its 111-MW Cross Winds Energy Park in Tuscola County, where several other wind farms are also seeking reductions in their property tax payments.
The utility filed petitions with the Tax Tribunal, arguing that the assessed value of the $250 million wind farm was too high and asking for refunds for overpayment.
NextEra Energy Resources has filed a similar petition regarding their Tuscola I and Tuscola II windfarms. Tuscola County Controller Mike Hoagland said the assessed values of “most, if not all” the county’s wind turbines are being challenged.
Gov. Mark Dayton said his state will ask the full panel of the 8th U.S. Circuit Court of Appeals to hear its appeal of a lower court ruling that the state’s clean energy law illegally regulates out-of-state energy companies.
A three-judge panel of the 8th Circuit upheld a ruling that the state’s law, which restricted electricity imports from power plants that increase the state’s greenhouse gases, was unconstitutional.
Entergy Forced to Shut Down Indian Point Because of Leak
A week after it came back into service following a three-month outage, Entergy once again shut down Unit 2 at its Indian Point nuclear plant so workers could repair a leaking water intake pipe.
The leak in the cooling-water intake was unrelated to the problem that Entergy encountered with damaged baffle bolts, which required the recent protracted outage to repair. But Gov. Andrew Cuomo slammed the plant’s operators for the latest in a series of problems at the twin-reactor complex.
“This is yet another sign that the aging and wearing away of important components at the facility are having a direct and unacceptable impact on safety and is further proof that the plant is not a reliable generation resource,” Cuomo said.
The Senate passed a bill that will prohibit wind turbines from being erected in the central and eastern portions of the state, threating two proposed wind farms with a combined output of 400 MW.
Sen. Harry Brown (R-Onslow County), the bill’s sponsor, said the wind turbines present a danger to low-flying aircraft, especially military jets and helicopters operating out of the several large bases, including Fort Bragg and Cherry Point Marine Air Station. “Anything we can do to protect them is important,” he said.
A Department of Defense spokesman, however, said Brown’s legislative effort was done without any consultation from the military. “We have not officially been engaged or involved with North Carolina regarding the latest proposed revisions to state law,” Lt. Col. James B. Brindle said.
Duke Energy Progress has proposed to cut rates for its 1.35 million customers to reflect lower energy costs.
The proposal, made last week to the Utilities Commission, includes some rate increases and some decreases on various components of its service.
Overall, residential customers would see a 4.9% drop; industrial consumers, 5.7%; and commercial customers, 6.3%. The rates would go into effect on Dec. 1.
The Public Service Commission last week approved a proposed $153 million wind farm and associated electric transmission line in Oliver and Morton counties. The three-member panel unanimously approved the project’s siting application, clearing the way for construction to start.
A NextEra Energy subsidiary is developing the wind farm, which will include up to 48 turbines and produce up to 100 MW of power. The project also includes a 4.5-mile, $11.4 million transmission line to connect the wind farm to the grid.
The Public Service Commission may vote as early as next month on the 72-turbine Brady Wind Energy Center II project. The PSC has meetings scheduled for July 6 and July 20.
Commissioner Brian Kalk said the commission did not have many additional questions for representatives of Brady Wind, a subsidiary of NextEra Energy.
The PSC has already approved Brady Wind I, the first phase of the project, which consists of 87 turbines and a 19-mile transmission line.
Gov. John Kasich has nominated energy industry attorney Howard Petricoff to fill a vacant seat on the Public Utilities Commission, which spurred Senate President Keith Faber, a Republican, to call for hearings into the Democratic nominee’s record.
Petricoff recently retired as head of the energy section of a large Columbus law firm and had many competitive retail energy suppliers as clients. Faber said Petricoff’s legal work “raised questions about his ability to make neutral decisions given his past activism.”
If Petricoff is confirmed by the Senate, PUCO would have two Republicans, two independents and one Democrat. State law mandates that no party can have more than three of the five seats on the commission, but it does not require at least one member of each party.
An overflow audience of nearly 300 residents turned out to debate a zoning proposal by a subsidiary of Iberdrola Renewables to build 37 wind turbines on 266 acres in Penn Forest Township, Carbon County.
The crowd, mostly hostile to the proposal, jeered representatives of Iberdrola and the Sierra Club, which supports the wind project. The 525-foot-high turbines and blades would be built on land leased from the Bethlehem Authority, the financial arm of the town’s water business. It would be located less than a mile of several homes.
Bills aimed to block a natural gas power plant and to shift a wind project’s interconnection costs to ratepayers failed in the legislative session, but other proposals favored by clean energy advocates moved forward, including an extension of the state’s renewable portfolio standard from 14.5% by 2019 to 38.5% by 2035.
The legislature also extended the Renewable Energy Fund to 2022, which provides grants and loans to install renewable-energy systems.
The sponsors of a federally funded experiment to explore deep underground storage of nuclear waste will have to search for a new site.
Spink County turned away technology development company Battelle from conducting experiments that involve drilling as much as 3 miles deep into bedrock to test storing waste in boreholes. The experiment wouldn’t involve any radioactive waste, but wary residents expressed fear the tests would increase the chances their area would eventually be chosen for a waste well.
“It was a good spot to try and do our science experiment, so we’re disappointed we couldn’t work something out with them,” a Battelle spokesman said. “But we understand.”
Lubbock Power & Light’s Electric Utility Board has proposed a 2% increase in customer bills and $70.9 million in infrastructure improvements. The budget will be presented this summer to the Lubbock City Council for final approval.
The rate increase would pay for the projected $333 million worth of capital improvements LP&L plans in the next six years, largely in preparation for the switch to ERCOT in 2019, when the city’s wholesale contract with Xcel Energy expires.
The inner transmission loop will be upgraded to 69 kV and the outer loop to 115 kV as part of the infrastructure improvements.
Less than a week after obtaining its air permit from the Air Pollution Control Board, Dominion Virginia Power began construction on its 1,588-MW Greensville County Power Station. The company said it expects the $1.3 billion plant to go into service by 2019.
Dominion says the power station will be a major boost for the region’s economy, with up to $8 million in property taxes paid to Greensville County in its first year of operation. The company also said its customers will save about $2 billion over the plant’s expected 36-year life, as the company will not need to purchase power on the market.
“The air board has approved and the Virginia Department of Environmental Quality has issued a very strict permit, which will require that our station be one of the most efficient and environmentally protective natural-gas fueled power stations in the world,” Dominion’s Pamela F. Faggert said.
DETROIT — The MISO Advisory Committee’s five priorities in 2016 have been finalized, but now the committee’s leadership would like them extended into 2017.
Chair Audrey Penner said the priorities process and priorities themselves would be subject to revision during an October strategy session, but they could carry into 2017. (See “Committee Endorses 5 Final Priorities,” MISO Advisory Committee Briefs.)
Paul Kelley, representing the Transmission Owners sector, said he wanted an opportunity to revisit priorities in 2017.
CEO John Bear said the committee’s agreed-upon priorities closely aligned with MISO’s. “I feel like we’re closer than ever with what [MISO] and the parent entities want,” Bear said.
Stakeholder Redesign Completed
Committee Vice Chair Tia Elliott said the stakeholder redesign organization chart has been fully implemented since June 1.
She also said this update at would likely be her last.
Elliott said the redesign’s benefits and possible shortfalls would be the subject of December’s Hot Topic discussion.
“I think it’s phenomenal that a very large group of stakeholders could coalesce and get this done. Kudos to you,” board member Judy Walsh said.
Elliott quoted Henry Ford to sum up the redesign work: “Coming together is a beginning; keeping together is progress; working together is success.”
WILLIAMSBURG, Va. — Two former Ohio regulators debated FirstEnergy’s and American Electric Power’s controversial power purchase agreements in the opening session of the Mid-Atlantic Conference of Regulatory Utilities Commissioners Annual Education Conference last week.
Steven Lesser, who served on the Public Utilities Commission of Ohio from 2010 to 2015, defended the commission’s decision to award the eight-year PPAs for the companies’ merchant generation, saying it was consistent with state policy since 1999. “The first thing I want to do is dispel this myth that Ohio has been on this clear trajectory toward deregulation,” he said.
Lesser’s opponent in the debate was former PUCO Chairman Todd Snitchler (2011-2014), who conceded that the state has moved in “fits and starts” toward competition. But he said consumers have indicated their preference for choice, with more than 80% of industrial and commercial customers in most areas of the state choosing alternate suppliers, along with more than 50% of residential customers.
After FERC said April 27 that the PPAs would be subject to its affiliate abuse review, the companies asked to replace the agreements with different proposals crafted to avoid FERC jurisdiction (14-1297-EL-SSO, 14-1693-EL-RDR, 14-1694-EL-AAM). Opponents of the deals have kept up the pressure in filings with FERC. (See FirstEnergy Foes Ask FERC to Step in Again in Ohio Dispute.)
Avoiding Risk
Lesser said PUCO was correct to adopt the PPAs as price hedges given natural gas’ history of price volatility. The commission’s role is to be “risk averse,” he said.
“As regulators … we have to look to the future. Are we one large injection-well earthquake from some moratorium on gas [development]? Has gas ended its long history of being a boom-bust industry?”
He also cited the solar and wind development the utilities promised in return for the PPAs, and PUCO’s conclusion — based on an assumption that gas prices will rise — that the PPAs will produce net benefits of $500 million versus market prices.
Ohio “should not have to choose between being a totally vertically integrated state or a fully deregulated state,” he said. “States should be allowed to choose wherever in that paradigm they want to be.”
Snitchler, now a principal with Vorys Advisors, said state restrictions on utility ownership of generation mean that the promised renewables “may not actually come to fruition.”
“So they sounded terrific, but the deliverables are at some point in the future, to be paid for by a party yet to be determined at a cost that is unknown and unknowable,” he said. He cited testimony that the PPAs could cost customers $3.5 billion to $5.5 billion “for nothing that ratepayers aren’t already receiving.”
Snitchler also acknowledged that gas prices have been volatile in the past. “But no commodity has zero fluctuation,” he said. “And the last time we were concerned about the price of gas, the Marcellus and the Utica [shale plays] were not developed,” he said.
Plant Closures
Lesser said the PPAs allowed regulators to balance the benefits of restructuring with reliability concerns and the state’s “economic development needs,” a reference, in part, to job losses that would result from plant closures.
“Ohio is just looking for some narrow flexibility between the fully deregulated” and fully regulated models, he said. “Regulators have the responsibility to ensure reliability — not hope for it, not wish it, but ensure it. … They need to be very risk-averse. Sometimes that might cost a couple extra dollars. … But being risk-averse is what they have been named to these positions to do.”
Snitchler said the reliability concern is a “red herring,” noting that the “plants in question that were threatened to be closed were committed [as PJM capacity resources] through the end of May 2019.”
“The concerns about jobs are real, because jobs do matter. But all jobs matter,” he continued, citing the construction jobs created by five new natural gas facilities being built in the state.
No Takers
The quick-witted Snitchler has been a crowd favorite at MACRUC gatherings in the past. But it was Lesser who drew the biggest laugh of the session when he responded to former New Jersey regulator Fred Butler, who asked whether politics influenced PUCO’s approval of the PPAs.
“Todd and I both support our families by practicing before the commission,” said Lesser, now senior counsel in the government relations and legislation group at Calfee, Halter & Griswold. “You expect us to answer that question?”
The Debate Continues
PUCO Chairman Asim Haque and Commissioner Thomas Johnson, who voted to approve the PPAs, had to leave the conference room for the debate because of ex parte concerns. “We’re going to get a couple’s massage,” Haque joked.
But Haque was present for a later session at which PJM CEO Andy Ott, Maryland Public Service Commission Chairman Kevin Hughes, former U.S. Energy Secretary Spencer Abraham and former Pennsylvania regulator Glen Thomas discussed the benefits and limits of restructuring and PJM’s capacity market.
Haque asked Thomas, now head of the PJM Power Providers Group (P3), whether the markets “got lucky” because of the cheap gas brought by the shale revolution. “Markets could be working but prices could be high,” Haque said.
“Maybe,” Thomas conceded. “But the bigger point is, because the markets were in place, consumers were able to benefit more than they would have otherwise.
“If you look at last 20 years of electric prices in PJM, there have been some [price] upticks. The polar vortex happened two years ago. There was Hurricane Katrina in [2005]. But if you look at the … overall trend over the long term, whenever there are [price] increases, the market responds, supply comes on and prices go down. … The market always responds to whatever is thrown at it.”
In 2015, he noted, wholesale energy prices were about the same as they were in 1999.
Thomas said when Pennsylvania approved restructuring two decades ago, “the single biggest concern … was ‘Could a competitive market build new resources?’ Twenty years later … the answer is a resounding ‘yes.’ We’re going into this summer with a 28% reserve margin.”
At the same time, he said, NOX, SOx and CO2 emissions are “all dramatically down.”
Support from Maryland
Hughes said PJM’s capacity market has recently resulted in new gas-fired generation in Maryland.
That was not the case in 2012, when the PSC ordered the state’s utilities to enter into contracts-for-differences with Competitive Power Ventures to build a gas-fired plant in the state.
At the time, Hughes recalled, policymakers believed the state was overly dependent on imported power. No new baseload generation had been built in the state since the mid-1990s. As coal plants began to retire, the commission feared the lack of in-state replacement capacity could cause reliability problems, Hughes said.
But CPV found financing to build the plant anyway and now it is one of three gas-fired plants under construction in the state; the PSC recently granted a certificate of public convenience and necessity for a fourth. “So I do think … we are seeing some signs now that capacity markets are working and are incentivizing some new generation,” Hughes said.
He said the state will seek additional in-state generation to comply with its Greenhouse Gas Reduction Act, enacted in April, which mandates a 40% reduction in emissions from 2006 levels by 2030.
But he added, “I do not think we are going to need to look at incentivizing new baseload generation. I think we have some good news there.”
Ott acknowledged that the majority of new capacity in the RTO has been gas-fired, which he said raised the question, “How much gas is too much?”
But that, he said, is a long-term concern. For now, he noted, PJM’s capacity is growing more diverse. Gas was the real-time marginal fuel in 35% of hours in 2015, up from 26% in 2011, while coal has dropped to 52% in 2015 from 69% in 2011, according to the Independent Market Monitor. Meanwhile, demand response clearing the capacity market has increased from less than 2,000 MW for delivery year 2011/12 to more than 10,000 MW for 2019/20.
“The good news is some of these gas units coming on … sit right on wellheads. … Some have dual-fuel capabilities. So the point is they are not all created equal from an operational perspective,” Ott said.
“What are the operational implications of being 70% gas?” he continued. “Certainly there are areas of the country that are at that level today so it’s not unprecedented.”
Ott also addressed Exelon’s threat to retire its Clinton and Quad Cities nuclear plants in Illinois, saying he hoped an “in-market solution” would be reached. The goal, he said, should not be to save every nuclear unit. (See Exelon to Close Quad Cities, Clinton Nuclear Plants.)
“Not every nuclear plant is created equal,” he said, noting the higher operating costs faced by small, single-unit plants. “Not everyone is run the best. So there is some benefit to having a market-based solution.”
NextEra Energy and Public Service Enterprise Group said the proposals by state regulators to release natural gas capacity to electric distribution companies “will render ISO-NE markets unjust, unreasonable and unduly discriminatory, and result in manipulation of the ISO-NE market.”
Snowpack in the Sierra Nevada mountains, depleted after four years of drought, will likely remain in deficit until 2019, according to a University of California, Los Angeles 
The Department of Natural Resources will allow the builders of the Dakota Access pipeline to use horizontal drilling methods to construct the Bakken crude pipeline under historic tribal burial grounds in the Big Sioux River Wildlife Area, removing a regulatory impediment to the $3.8 billion pipeline.
Westar Energy customers could see an $18 million rate reduction as a result of FERC’s approval of a settlement between Westar Energy and the Corporation Commission over transmission-delivery charges.
Consumers Energy is challenging the tax assessment of its 111-MW Cross Winds Energy Park in Tuscola County, where several other wind farms are also seeking reductions in their property tax payments.
A week after it came back into service following a three-month outage, Entergy once again shut down Unit 2 at its Indian Point nuclear plant so workers could repair a leaking water intake pipe.
Duke Energy Progress has proposed to cut rates for its 1.35 million customers to reflect lower energy costs.
The Public Service Commission last week approved a proposed $153 million wind farm and associated electric transmission line in Oliver and Morton counties. The three-member panel unanimously approved the project’s siting application, clearing the way for construction to start.
Lubbock Power & Light’s Electric Utility Board has proposed a 2% increase in customer bills and $70.9 million in infrastructure improvements. The budget will be presented this summer to the Lubbock City Council for final approval.
Less than a week after obtaining its air permit from the Air Pollution Control Board, Dominion Virginia Power began construction on its 1,588-MW Greensville County Power Station. The company said it expects the $1.3 billion plant to go into service by 2019.
