Page 1417 – RTO Insider

August 8, 2016

Company Briefs

A segment of the long-awaited Tres Amigas transmission project in New Mexico is expected to begin transmitting power to CAISO in early 2017. A company executive confirmed that construction of a 35-mile portion of the line called the Western Interconnect began after FERC approved the project last December and is expected to be completed at the end of the year.

“It’s a huge win for New Mexico: that much wind developed here and going all the way to California [is] a great business development piece, and a great asset for the state,” Tres Amigas CFO Russell Stidolph said.

The Broadview and Grady wind farms will be allocated 497 MW of the line’s 1,100 MW of capacity.

More: Albuquerque Business First

NextEra to Sell $1.5B in Equity to Help Finance Oncor Purchase

NextEra Energy said it will sell $1.5 billion of equity units to Goldman Sachs, Credit Suisse and Mizuho Securities.

Each equity unit will be issued for $50 and will consist of a contract to purchase NextEra common stock in the future and 5% interest in a $1,000 NextEra Energy Capital Holdings debenture, a bond without collateral, due Sept. 1, 2021. The proceeds of the sale will go toward financing the company’s acquisition of Oncor, it said.

More: NextEra Energy

Alliant Eyeing Wind Development in Wisconsin

After announcing it would spend $1 billion on wind projects in Iowa, Alliant Energy’s CEO said the company will also consider investing in wind buildout in neighboring Wisconsin.

“We are also evaluating additional wind energy purchases and future investments for Wisconsin customers,” Alliant CEO Pat Kampling said during an earnings call. “This will add economic and stable energy to our fuel cost and allow us to offset market purchases of energy.”

Alliant reported net income of $86.4 million ($0.37/share) for the second quarter this year, compared to $67.6 million ($0.31/share) for the same period last year.

More: Milwaukee Journal Sentinel

Dynegy Posts Q2 Loss, New Company Logo

Dynegy reported a net loss of $800 million for the second quarter this year, compared to net income of $388 million for the same period last year.

The announcement comes as Dynegy completed a “rebranding,” with a new logo and redesigned website, in recognition of becoming one of the country’s largest independent power producers after purchasing 17 power plants from Paris-based ENGIE.

More: Dynegy; FuelFix

Solar Mosaic Raises $220M for Solar Installation Loans

Solar Mosaic, a six-year-old California company that acts as a middleman between residential customers and solar installation companies, raised $220 million to finance installations around the U.S. The company provides loans with fixed interest rates to residential customers, with an average loan of about $30,000.

The company has previously secured about $200 million in debt in April and said that it would support loans for about 5,000 customers. More than 250 solar companies use Solar Mosaic to arrange funding for their customers.

More: Reuters

Exelon, PHI Hire New Communications Execs

maggiefitzpatrick(johnsonandjohnson) — FitzPatrick

Exelon has named Maggie FitzPatrick, formerly of Johnson & Johnson, as its senior vice president of corporate affairs, philanthropy and customer engagement, effective Aug. 29. She takes the place of Jamie Firth, who is retiring at the end of this year.

FitzPatrick will oversee communications, brand strategy and the disbursement of charitable giving out of D.C., where Exelon’s headquarters moved following its acquisition of Pepco Holdings Inc. She also takes a seat on Exelon’s executive committee.

Exelon’s Pepco subsidiary hired Clarissa Beyah-Taylor as its vice president of communications to oversee public outreach for the three PHI utilities: Atlantic City Electric, Delmarva Power and PEPCO.

More: Exelon

El Paso Electric Touts Coal-Free Status

El Paso Electric officials said the company has become coal-free and no longer is using the fossil fuel, making it the only electric utility in Texas and New Mexico without any coal-fired generation.

EPE recently completed the sale of its part ownership in the Four Corners coal-fired power plant on the Navajo Indian Reservation near Farmington, N.M., the company’s sole source of coal power. The company received 5% of its power this year from the plant, which has been replaced with natural gas-fueled generators and solar power.

More: El Paso Times

ExxonMobil to Invest $15M in Renewable Energy Research

ExxonMobil announced it invested $15 million in the University of Texas at Austin Energy Institute to research integrating renewable energy sources into the nation’s current portfolio to reduce the impact on water, air and climate. The research will take advantage of the school’s renewable energy, battery technologies and power grid modeling.

More: Houston Business Journal

PECO Gives Customers a Glimpse into Neighbors’ Homes

PECO Energy has embarked on a behavioral experiment to reduce power consumption by sharing customers’ usage with their neighbors.

The utility plans to provide the reports every other month for two years. All customers, regardless of whether they were chosen to receive the mailed reports, can view the data online.

The plan is part of PECO’s effort to cut 2 million MWh and lower peak demand by 161 MW by 2021.

More: The Philadelphia Inquirer

Black Hills Energy in Midst of $20M Tree-Trimming Effort

South Dakota’s Black Hills Energy has invested more than $10 million during the past three years trimming trees and other vegetation along its electricity lines and intends to spend $10 million more in 2016-17, according to a report approved Aug. 2 by the state’s Public Utilities Commission.

The five-year project to trim vegetation along 69-kV rights of way stems from a 2012 agreement between the company and the commission to protect the utility’s distribution system. Outages caused by trees numbered 116 in 2011 but fell to 38 in 2014.

PUC Chairman Chris Nelson said the results looked good but expenses have been “surprisingly” more than expected. “The numbers are higher than we had been anticipating, and we have been given an explanation why that is.”

More: Rapid City Journal

Once Fastest-Growing Austin Firm, Solar Company Faces Bankruptcy

Austin-based Revolve Solar, formerly one of Texas Hill Country’s largest clean-tech companies, has filed for Chapter 11 bankruptcy protection.

The company’s CEO, Tim Padden, said the bankruptcy filing was the result of a billing dispute with a vendor and that he was optimistic the matter could be resolved. Revolve filed a voluntary petition for bankruptcy on July 31 in U.S. Bankruptcy Court for the Western District of Texas.

The bankruptcy comes less than a year after Revolve was honored as the second-fastest-growing Austin company, with revenue of more than $10 million from 2012 to 2014. During that time, the company said its revenue grew from $1.76 million in 2012, the year it was founded, to $15.9 million in 2014.

More: Dallas Business Journal

AEP Buys EnSync Hawaiian Projects

American Electric Power purchased a series of solar and energy storage projects in Hawaii from EnSync Energy Systems. Neither AEP nor the Wisconsin-based company put a price tag on the acquisition, but EnSync said the projects were the “major portion” of its investment of $13 million.

EnSync is switching to a business model according to which it will be more reliant on projects using power purchase agreements, rather than selling its energy storage equipment.

AEP’s subsidiary, AEP OnSite Partners, sees more opportunity in Hawaii. “Hawaii provides ideal conditions to create customer value with solar resources combined with energy storage,” said Joel Jansen, COO of AEP OnSite Partners. “These projects are the first integrated solar and storage projects in Hawaii.”

More: Milwaukee Journal Sentinel

EFH Creditors See Industry Vet as Luminant, TXU Energy CEO

Energy Future Holdings creditors filed court papers last week that said energy veteran Curtis Morgan would become CEO of power generator Luminant and retailer TXU Energy once their parent company emerges from bankruptcy.

Morgan has 35 years of experience with Reliant Energy, NRG Energy and EquiPower Resources, and he was an operating partner at Energy Capital Partners. He has served on a committee of private equity consultants advising Dallas-based EFH as it winds its way through one of the largest bankruptcies in U.S. history.

If the company’s bankrupty reorganization is approved later this year, Luminant and TXU Energy will break away from EFH as a tax-free spinoff. EFH’s other main business, distributor Oncor, is expected to be sold to NextEra Energy for $18.4 billion.

More: The Dallas Morning News

August 8, 2016

Federal Briefs

FERC Commissioner Tony Clark announced through Twitter that he would leave the commission after its next open meeting in September.

“After 4+ years on FERC, I’m announcing today that the September Commission meeting will be my last,” Clark posted. “Public service has been an honor, but these aren’t meant to be forever jobs. Looking forward to next chapter, whatever that may be.”

Clark announced in January that he would not seek reappointment after his term expired June 30. He had said that he may serve beyond his term until a replacement is found. President Obama, however, has yet to nominate anyone to fill the seat vacated by Philip Moeller, let alone Clark’s. His departure means that FERC will be left without a Republican commissioner.

More: Clark Won’t Seek New FERC Term

Report: More EE Standards Under Obama than Any Other President

Under the Obama administration, the Energy Department has finalized more energy efficiency standards than under any other administration, a recent report said.

Regularly updating and creating energy efficiency standards has been part of the department’s duties since President Ronald Reagan signed the National Appliance Energy Conservation Act in 1987. While the department has been publicly touting its progress, the report by two independent groups, the Appliance Standards Awareness Project and the American Council for an Energy-Efficient Economy, validates its claims. The department has adopted 45 standards under President Obama and will potentially adopt 10 more before his term ends next year.

The runner-up to Obama is President George W. Bush; under his presidency, 27 standards were adopted. Bill Clinton’s administration adopted the fewest with only six, the report said. Obama made energy efficiency a top priority for the department after it fell behind in its mandated update quota under Bush, according to the report.

More: The Washington Post

American Petroleum Institute Challenging EPA Gas Rule

The American Petroleum Institute has filed a lawsuit against EPA with the D.C. Circuit Court of Appeals, challenging the agency’s final rule on emissions for new and modified natural gas facilities. The suit says the agency didn’t follow Clean Air Act limitations when developing the regulations.

API joins a coalition of 14 states and a number of trade groups in challenging the rules.

More: API

Court Orders 99% Cut for PG&E San Bruno Penalty

A federal judge last week sharply reduced the potential fine against Pacific Gas and Electric in its criminal trial over gas pipeline violations related to the San Bruno explosion in 2010, which killed eight people and destroyed 38 homes.

U.S. District Court Judge Thelton Henderson slashed the penalty from $562 million to $6 million at the request of prosecutors in the case. Neither Henderson nor the prosecutors provided a reason for the move.

The original penalty would have represented one of the largest corporate criminal fines in history. San Bruno Mayor Jim Ruane said the fine was less important to him than seeing the utility punished.

More: NPR; The Guardian

FERC Alleges Trader Manipulated Gas Market

FERC issued a notice last week alleging that National Energy & Trade and one of its traders, David Silva, engaged in fraudulent trading in the natural gas market in January 2012 by selling a large position in the Texas Eastern M3 market at low prices and then benefiting from the resulting market uptick.

More: FERC

NRC Issues Final Safety Report for Duke Nuke

The Nuclear Regulatory Commission issued the final safety evaluation for Duke Energy’s proposed Williams States Lee nuclear plant to be built in Cherokee, S.C., bringing the company one step closer to beginning construction. The commission found no safety issues to prevent the plant from being built.

Duke applied for the licenses in 2007 and received the commission’s final environmental impact statement in 2013, but it still hasn’t made a final decision on whether to go ahead with construction. That decision would come after the commission has issued the two necessary operating licenses, according to the company.

More: WFAE

DOJ Opens Investigation into Westar-Great Plains Deal

Coming on the heels of a Missouri Public Utilities Commission staff recommendation that the commission should have jurisdiction over the pending $12.2 billion Westar Energy-Great Plains Energy merger, the federal Department of Justice is also looking into the deal.

Word of the Justice Department investigation came in a report Westar filed with the Securities and Exchange Commission. “We and Great Plains Energy intend to fully cooperate with the DOJ in its investigation,” Westar said in its filing, which did not give details about the reason for the inquiry.

The PUC staff filing said it is looking to see if it can claim jurisdiction, even though Westar operates only in Kansas. Great Plains operates in Missouri. “Staff maintains that all of the known evidence supports a determination that the proposed transaction is detrimental to the public interest and ought not be permitted to go forward,” the staff said.

More: Topeka Capital-Journal

EIA Predicts NA Carbon-Free Power to Grow to 45% by 2025

The Energy Information Administration projects that by 2025, energy generation from renewable and nuclear resources will grow from 38% to 45%. Part of the outlook is predicated on the recent agreement between the U.S., Canada and Mexico to attain a goal of 50% by then.

EIA also included energy efficiency in the figures, but it didn’t break out the three resources. It predicted a decline in coal-fired generation of about 13% by 2025 and an increase in natural gas generation by 4%. It noted that Canada has already attained a level of 80% clean energy generation, primarily because of its large hydroelectric capacity.

Mexico’s combined nuclear and renewables should grow to 29% by 2025, EIA said. The outlook assumes EPA’s Clean Power Plan is upheld.

More: EIA

White House Requiring All Agencies to Consider Climate

The White House Council on Environmental Quality last week issued guidance under the National Environmental Policy Act that requires all federal agencies to consider the environmental and climate implications of projects.

The directive requires agencies to quantify greenhouse gas emissions and note the potential climate change impacts of each project during the review process. “This increased predictability and certainty will allow decision-makers and the public to more fully understand the potential climate impacts of all proposed federal actions,” the council said in a statement.

The policy change was first proposed in 2010. Republicans complained that it would allow the Obama administration to institute regulations without congressional approval.

More: Morning Consult

NRC Upholds Entergy’s ‘No Booze’ Policy at Vermont Yankee Plant

The Nuclear Regulatory Commission upheld Entergy’s zero-tolerance rule for alcohol at its Vermont Yankee nuclear plant. The commission’s decision was prompted by Entergy’s 2014 suspension and firing of an employee after unopened bottles of alcohol were found in a private vehicle.

A company panel of managers later overturned the suspension, but a further company review reinstated it. A company spokesman said the zero-tolerance policy extended even to empty alcohol bottles that were headed for recycling. “You can’t even have the perception” of alcohol on site, the spokesman said.

At the time of the violation, the plant, which has since been retired, was in full operation with 636 employees.

More: Times Argus

NRC Reviewing NextEra’s Plan to Correct Seabrook Concrete Issue

The Nuclear Regulatory Commission is reviewing NextEra Energy’s plan to address concrete degradation issues at its Seabrook nuclear generating station.

The degradation is being caused by an alkali-silica reaction (ASR) in the concrete throughout the plant. It was first discovered in 2009 when Seabrook employees found portions of an underground electrical conduit tunnel degrading. It has since been found in numerous walls throughout the plant.

ASR is a chemical reaction that forms a gel in some concrete mixtures. The moisture-caused reaction forms the gel, which then expands and forms cracks. Approval of NextEra’s plan is critical to NRC issuing a license extension.

More: Gloucester Times

FERC Approves Apple’s Solar Marketing Plan

FERC last week approved Apple’s application to sell solar capacity at facilities it owns in Nevada, Arizona and California on the wholesale market. The ruling allows it to enter the wholesale market with 20 MW of generation capacity in Nevada, 50 MW in Arizona and 130 MW in California.

“Based on your representations, Apple Energy meets the criteria for a Category 1 seller in all regions and is so designated,” FERC wrote in a letter to Apple attorneys.

Google also has received FERC approval to sell solar capacity into wholesale markets.

More: The Mercury News; Fortune

August 8, 2016

Despite Lengthy Negotiations, PJM Cost Allocation Settlement Still Finds Detractors

By Rory D. Sweeney

Years in the making, a settlement between PJM and transmission owners over the RTO’s procedure for allocating the costs of major transmission projects is receiving criticism from stakeholders that say they weren’t invited to the table.

The case has dragged on for nearly a decade, with FERC’s orders on how to allocate costs for transmission projects at or above 500 kV twice being remanded by the 7th U.S. Circuit Court of Appeals back to the commission.

PJM’s “postage-stamp” cost allocation for the projects was challenged by the RTO’s Midwestern utilities. The method billed all PJM utilities in proportion to their load, regardless of where the projects were located.

The commission had originally approved the postage-stamp method in 2007 and attempted to justify it in its order on remand. The court, however, ruled that FERC had again failed to show how a western utility would benefit as much as an eastern utility from new transmission facilities in the east. (See FERC Orders Proceedings to Decide PJM’s Postage-Stamp Cost Allocation.)

In June, after more than a year of negotiations, a large majority of stakeholders submitted to FERC a settlement that created a cost allocation formula for projects approved prior to Feb. 1, 2013, when PJM abandoned the postage-stamp method (EL05-121).

“The overwhelming majority of the PJM transmission owners and all of the state regulatory authorities that have actively participated in this proceeding are either settling parties or have agreed not to oppose the settlement,” the filing reads.

The agreement would require collecting fees from customers on the eastern side of PJM’s territory and distributing them to customers on the western side. For projects that have been or will be completed, the settlement assigns 50% of costs on a load-ratio-share basis and the remaining 50% under the solution-based distribution factor (DFAX) methodology — the same method used for regional 500-kV projects approved since 2013.

Abandoned or canceled projects would be assigned using the violation-based DFAX method. The charges would be retroactive to Jan. 1, 2016.

Retroactive Issues

The settlement didn’t sit well with Direct Energy and the Retail Energy Supply Association, which argued they were neither invited to participate in the settlement talks through the PJM stakeholder process nor informed that they’d be expected to pay for the result.

On Monday, RESA appealed the denial of a previous motion to intervene in the case. In the appeal, the group stated that the settlement would require its members to pay their allocated share retroactively, “even if the customers who should be billed for the amounts have migrated to another supplier.”

Under deregulation, customers of the load-serving entities that make up RESA’s membership can switch companies quickly, so LSEs aren’t able to pass along retroactive charges to those who’ve left in the interim, the group said.

The denial, written by Acting Chief Administrative Law Judge Carmen A. Cintron, called RESA “a party that is uninformed of the delicate and complex negotiations that transpired in its absence.”

“When entities wait unreasonably long to seek intervention, [FERC] has stated that they ‘assumed the risk that the parties would settle the case in a manner not to their liking.’ Such is the situation that RESA’s delayed request has created for itself,” Cintron wrote.

RESA said it only became aware of the proceedings by reading the published settlement and that its suggested changes would “create minimal, if any, disruptions.”

“This is not a situation where an intervenor seeks to scuttle a settlement,” RESA said.

The group suggested two options to solve the issue: change the date for when charges should go into effect to sometime in the future, or put the burden of recovering the costs on electric distribution companies.

RESA is “hopeful” its new arguments will allow it to intervene, spokesman Bryan Lee said.

Marji Philips of Direct Energy said her company estimates the settlement will cost eastern ratepayers about $287 million.

“The LSEs are going to wind up having to pay for these costs that everybody agreed should be rate-based, and the calculation when it was originally done was done incorrectly,” she said.

Comments Pro and Con

Direct Energy and RESA are not alone in their opposition to the settlement. Linden VFT, which owns merchant transmission facilities, said it would not receive benefits in the settlement commensurate with the costs it would incur. In filed comments, Linden said the solutions-based DFAX method is “unduly prejudicial” to companies like itself.

But many stakeholders filed comments in support of the settlement.

“Pennsylvania’s ratepayers have been unfairly burdened, since 2007, with an excessive portion of those costs associated with the transmission projects encompassed by the settlement,” the state’s Public Utility Commission said. “The settlement agreement resolves those inequities and establishes a more reasonable and equitable cost allocation for both previously incurred costs as well as costs yet to be recovered.”

August 5, 2016

PJM Board Halts Artificial Island Project, Orders Staff Analysis

By Suzanne Herel

The PJM Board of Managers has suspended the controversial Artificial Island transmission project pending a “comprehensive” staff analysis to be completed by February, at which time it will decide a course of action, CEO Andy Ott said in a letter to stakeholders Friday.

“It has become evident to all involved that the projected costs to resolve the problems at Artificial Island have increased significantly. PJM has been examining alternatives in an attempt to offset some of the increases,” Ott wrote. “In addition, questions have arisen about whether the currently proposed solution would perform as intended without further expense. Because of these concerns, PJM has come to the conclusion that a pause in the project is necessary before any new financial obligations are incurred by the project developers.

“In light of the current uncertainties around the changing scope and configuration of the project, it is imperative that we understand the basis for any alternatives that may exist to manage the operational issues at Artificial Island.”

FERC, DFAX, cost allocation, PJM, Artificial Island — Salem and Hope Creek Nuclear Reactors on Artificial Island *Source: Wikipedia*

This is the second time the board has overturned the stability project — PJM’s first competitive solicitation under Order 1000.

Initially, PJM planners recommended awarding the work to Public Service Electric and Gas, but the board reopened bidding to finalists following protests from spurned bidders, state officials and others. (See PJM Board Puts the Brakes on Artificial Island Selection.)

PSE&G, one of three entities eventually designated to build a 230-kV transmission line from the New Jersey nuclear complex under the Delaware River to Delaware, said Friday it was “committed to working with PJM and will provide PJM with any information and support they request.”

LS Power’s Northeast Transmission Development, picked to construct the transmission line, said Friday it was “disappointed” by the board’s action.

“The modeling errors in question do not relate to Northeast Transmission’s designated portion of the Artificial Island project and Northeast Transmission was not involved [in] the associated modeling activities,” it said. “Northeast Transmission was surprised by the PJM board’s decision, as Northeast Transmission had received no indication prior to the announcement from PJM on Aug. 5 that PJM had any concerns with PJM’s or PSE&G’s modeling of the system protection and control upgrades.”

Pepco Holdings Inc., chosen to work with PSE&G on the project, did not immediately respond to requests for comment.

The board approved the stability fix for the complex that houses the Salem and Hope Creek nuclear generators last summer. But in April, PJM revealed that PSE&G’s portion of the project — which the RTO initially pegged at $137 million — had nearly doubled to $272 million once the transmission owner completed a detailed analysis. (See Artificial Island Cost Increase Could Lead to Rebid.)

“PJM conducted a preliminary estimate regarding the interconnection to Salem,” a PSE&G spokeswoman said Friday. “We then conducted a detailed, design-level analysis of the interconnection to Salem. We had not previously prepared a detailed estimate for Salem because our proposal would have terminated in Hope Creek.” (See PSE&G Defends Artificial Island Cost Increase.)

The sticker shock prompted PJM planners to consider other alternatives, including terminating the line at Hope Creek.

“However, in reviewing this alternative, an issue arose related to one of the other components of the project: that is, whether proposed system protection and control upgrades would perform as intended,” Steve Herling, PJM’s vice president for planning, said in a letter to stakeholders Friday. “Specifically, PSE&G identified an error related to the modeling of circuit breaker clearing times associated with those upgrades. The effect would be a reduction in the margin of stability provided by those upgrades, regardless of any alternatives to the transmission solution under review, requiring further steps and expense to correct.”

In an informational filing with FERC submitted Friday, PJM said, “By virtue of this suspension, all designated entities are placed on notice to cease incurring any new financial obligations on the Artificial Island project until PJM completes its analysis and the PJM board has made a subsequent determination based on that analysis.”

The cost allocation of the project, the lion’s share of which would be charged to customers on the Delmarva Peninsula, led the governors, legislators and consumer advocates of Delaware and Maryland to oppose it. (See Del. Lawmakers Try to Block Artificial Island Plan; Project Still on Track.)

In June, FERC agreed to rehear its order approving the use of the solution-based distribution factor (DFAX) cost allocation method for the project. (See FERC Taking a Second Look at Cost Allocation for 2 PJM Projects.)

Neither of the letters PJM sent out Friday mentioned the cost allocation controversy.

Delaware Gov. Jack Markell released a statement commending the PJM board for its action.

“This decision is one that the state of Delaware welcomes,” he said. “The project as it was proposed would have placed an unjust burden on the state, resulting in higher electric rates for our consumers and businesses. I hope that upon further review, a more equitable solution can be identified.”

Bob Howatt, executive director of the Delaware Public Service Commission, said the agency was still analyzing the board’s decision.

“It seems like the political and economic concerns may have succeeded in stopping what has been called the most efficient and cost-effective solution because PJM and FERC have failed to address the cost allocation issue,” he said, adding that the decision seemed “totally unfair” to LS Power.

Howatt said he worried what effect the suspension would have on the desire of independent transmission companies to participate in the Order 1000 process.

“If I were an independent transmission company, why would I waste a lot of time on a project that could get overturned?” he said. “I just see it chilling the competitive transmission market that FERC has been attempting to create.”

August 4, 2016

UPDATED: Entergy Sells FitzPatrick to Exelon

By Tom Kleckner and William Opalka

Exelon announced Tuesday it has purchased the James A. FitzPatrick nuclear plant for $110 million from Entergy.

Officials from both companies were joined by Gov. Andrew Cuomo at the plant’s gates to announce the deal, which is subject to regulatory approval.

“We are pleased to have reached an agreement for the continued operation of FitzPatrick,” Exelon CEO Chris Crane said in a statement. “We look forward to bringing FitzPatrick’s highly skilled team of professionals into the Exelon Generation nuclear program, and to continue delivering to New York the environmental, economic and grid reliability benefits of this important energy asset.”

Entergy executives had reiterated last week that the company did not intend to continue operating the troubled plant in upstate New York beyond January 2017.

“There are no plans to continue to run the plant under Entergy ownership,” Bill Mohl, president of Entergy Wholesale Commodities, told analysts during the corporation’s second-quarter earnings call Aug. 2.

entergy, fitzpatrick — Fitzpatrick Nuclear Plant *Source: Entergy*

The company had announced plans to shut down both FitzPatrick and the Pilgrim nuclear plant in Massachusetts, but it recently said it had opened negotiations with Exelon over FitzPatrick. (See Entergy in Talks to Sell FitzPatrick to Exelon.)

Mohl told analysts if Entergy and Exelon are able to gain regulatory approvals for the transaction, refueling activities would begin in January. Otherwise, the decommissioning process would begin instead.

“We’ve made a commitment to reduce the size of the EWC footprint,” Mohl said. “If we’re unable to reach commercial agreements with Exelon or we’re not able to achieve those regulatory approvals, we’ll begin the regular decommissioning process and stay on the same path that we have previously been on.”

New York’s Public Service Commission on Aug. 1 unanimously approved 12-year subsidies for the state’s nuclear power plants on Lake Ontario, which have been buffeted by market forces. (See New York Adopts Clean Energy Standard, Nuclear Subsidy.)

Entergy reported second-quarter net income of $572.6 million ($3.11/share). That beat analyst expectations of $1.05/share, as polled by Thomson Reuters.

Revenue dropped to $2.46 billion, from $2.71 billion in the second quarter of 2015. The company said its March purchase of a 1,980-MW natural gas plant in southern Arkansas helped support revenue during the quarter.

Company shares, up 18.9% this year before the earnings announcement, have dropped 94 cents since, closing at $80.33 on Aug. 3.

August 2, 2016

ERCOT Technical Advisory Committee Briefs

AUSTIN, Texas — ERCOT’s Technical Advisory Committee last week rejected a request to allow economic dispatch of reliability-must-run (RMR) units over the objections of the ISO’s Independent Market Monitor and several of its Houston-area market participants.

NRG Texas drafted nodal protocol revision request 784, which addresses how RMR units are priced and dispatched, about the same time as ERCOT made its recent decision to extend into 2018 an RMR contract for NRG’s Greens Bayou Unit 5 near Houston.

The contract requires ERCOT to pay $3,185/hour for the duration of the agreement and an incentive factor of as much as 10% to reserve the 371-MW gas-fired unit’s capacity during summer months through June 2018. (See “Board Expands Greens Bayou RMR Contract to 2018,” ERCOT Board of Directors Briefs.)

NRG’s request would allow security constrained economic dispatch of RMR units to relieve transmission congestion after all other capacity available for transmission congestion relief had been exhausted.

ERCOT-IMM-Director-Beth-Garza-(RTO-Insider)-web — Garza © *RTO Insider*

Market Monitor Beth Garza supported the proposal, which she said would increase the dispatch price of RMR units, allowing other market units to be dispatched to resolve the constraint first.

In ERCOT’s energy-only market, an RMR agreement results from either a poorly designed evaluation process — which mistakenly identifies a resource as needed — or a failure of the market to provide sufficient revenue to justify continued operation of a needed resource, she said.

“Should the failure be in the RMR designation process, the resource is unlikely to be deployed and its energy offer price will be immaterial,” Garza said. “However, if the failure is in the market signal to units in this constrained area, the unit is likely to be deployed and the energy offer price will matter.”

Bill-Barnes,-NRG-(RTO-Insider)-web — Barnes © *RTO Insider*

Bill Barnes, NRG Energy’s director of regulatory affairs, said the request underscores the importance of sending the right price signals in the ERCOT market.

“We’re spending $60 million on an RMR contract for the months of June, July, August and September,” he said. “When you look at the State of the Market report for 2015, the real-time congestion rent for three of the major north-of-Houston constraints is $5 million. We’re spending $60 million to solve a $5 million problem. There are legitimate situations where the market solves the problem in a cheaper way. The boogeyman that is high prices gets pummeled by the boogeyman that is RMR.”

As drafted, NPRR784 would only apply when generator offers are mitigated because there is inadequate competition. RMR units are currently subject to the same offer mitigation as other units in such a situation, with Greens Bayou Unit 5 likely being offered at around $50-60/MWh. When there is adequate competition, RMR units are offered at $9,000/MWh under either the status quo or the NPRR.

The revision request would instead require all RMR units to be offered at the highest possible price that would still allow SCED to dispatch the unit for congestion. In Greens Bayou’s case, the estimates are as high as $700/MWh.

The NPRR failed to gain the Protocol Revisions Subcommittee’s endorsement during a roll-call vote July 14, but NRG appealed to the TAC. The revision request eventually fell short of the necessary two-thirds approval, with 54% positive votes and four abstentions.

NRG on Friday filed another appeal with the Board of Directors, which will consider the proposal at its Aug. 9 meeting.

“How do you prevent future RMR? By sending the right price signals,” Barnes said. “The presence of the RMR is evidence the market signal has failed. 784 addresses the most important RMR issue: How do you send the right price signal? It’s not a perfect solution, but is it better than what we have today? We believe the answer is yes.”

Garza supported Barnes’ position, although she also said she is a “huge believer” in ERCOT’s stakeholder process and “what this room can do.”

“Our position has been the objective of the RMR should be the price should be reflective of the unit not being there, but we should have the energy available to resolve the constraint,” Garza said. “It is absolutely a shortage condition. If that situation did not exist, Greens Bayou would be on the way to the scrap heap right now.

“I’m sympathetic to the argument that, ‘Gosh darn it, we spent $60 million on this unit, why can’t we use it?’” Garza said. “However, believe it or not, those are sunk costs … that don’t change if you resolve this situation. When you’re talking about resources necessary to resolve a transmission constraint, there are two factors: the offer price or mitigated offer cap, and the shift factor of the unit on that constraint — the effectiveness of that unit to relieve the constraint.”

“We generally agree with the IMM … but we disagree that 784 as a one-off is the solution,” said Energy Future Holdings’ Amanda Frazier, chair of the PRS. “We’re concerned [NPRR784] is reactionary. It doesn’t address whether Houston prices are high enough to allow RMR. If we pass this, we’re paying for incorrect price signals.”

Texas-Industrial-Energy-Consumers'-Katie-Coleman-defends-NPRR-784-(RTO-Insider)-web — Coleman © *RTO Insider*

Katie Coleman, with the Texas Industrial Energy Consumers group, represented the PRS position, arguing NRG’s proposal is punitive to loads, encourages unit retirements by providing scarcity pricing in non-scarcity conditions and prevents the RMR unit from solving other constraints beyond a single transmission line.

“We have concerns about requiring loads to also pay $600-800/MWh to use that unit for the very purpose it was placed under an RMR contract,” she said. “We have concerns about the incentive this creates for a generating company with a fleet of units in a certain area to retire units and get high pricing for its other units. [NPRR784] would require Greens Bayou to be priced at the highest possible price to solve, which would preclude it from solving other constraints in area.”

Noting that the revision request has been classified as urgent, Coleman said that electric retailers are concerned its requested September implementation timeline does not provide enough lead time for Greens Bayou and other generators in the area.

Coleman also noted customers are paying for Greens Bayou only until the Houston Import Project goes into service as early as 2018, when it is expected to solve the region’s congestion issues.

“This NPRR is sending a price signal too late to matter,” Citigroup Energy’s Eric Goff said. “The fact the contract exists is interfering with what would happen had the unit been allowed to retire. It gets to the point of whether there’s a weird incentive here.”

“If you’re a load outside of Houston, I have no idea why you’re not outraged,” Barnes said. “If the load in Houston has a small load-ratio share, I can understand why you would want someone else to solve your problem. We’re an energy-only market. Price signal is everything.”

Shortly after the TAC meeting concluded Thursday, ERCOT posted answers to questions it received from its request for proposals for must-run alternatives to the Greens Bayou RMR contract. (See ERCOT Seeks Alternatives to Houston-Area RMR Unit.)

Committee Discusses July 7 System Outage

ERCOT staff shared its analysis of the July 7 outage of its Energy Management System. The outage lasted 102 minutes and resulted in corrupted data being passed to downstream systems, including settlements and reports. Market participants said they saw a perceived drop-off in load and generation, but their primary complaints were around a lack of information coming from the ISO.

“When these things are occurring, I know ERCOT is scrambling to recover and get the grid stable again,” Barnes said. “From a market perspective, it was pure chaos. Market notices should be crystal clear about what is happening.”

“We just knew something was wrong because of operation notices,” Goff said. “Knowing the extent of the outage would be beneficial to the market.”

“We want to share with you the information we definitively know as quickly as possible,” said Kenan Ögelman, ERCOT’s vice president of commercial operations. “The tension we’re trying to balance is how long to hold information back until we can be sure” it’s accurate information.

The problem began at 11:41 a.m., when an operator mistakenly loaded test data into the active system, which corrupted data in the emergency system’s network model. Between 11:59 a.m. and 12:16 p.m., the market’s qualified scheduling entities were instructed to assume constant frequency control. By 1:23 p.m., the data had been corrected and verified, and operations returned to normal.

Corrected prices were posted for the affected SCED intervals, and staff said that it is continuing to evaluate alternatives that may affect subsequent settlements.

Price-Correction NPRR Approved

TAC-Vice-Chair-Adrienne-Brandt,-CPS-Energy;-SPP-TITLE-Kenan-Ogelman,-ERCOT-staff-(RTO-Insider)-alt-image — TAC Vice-Chair Adrienne Brandt, CPS Energy; SPP TITLE Kenan Ogelman, ERCOT staff © *RTO Insider*

Barnes was successful with a second NPRR, dealing with ERCOT’s price-correction process following a SCED failure. NPRR696, which Barnes drafted on behalf of NRG subsidiary Reliant Energy Retail Services, passed with 72% of the vote.

“When the SCED system is not running, inputs grow stale. When it starts back up, things don’t make sense,” Barnes said. “It comes down to whether you believe the last best price, or whatever it spits out.”

NPRR696 establishes a price-correction policy that uses the last good price for settlement until ERCOT no longer requires manual action to stabilize the system. Barnes said that correcting prices for settlement intervals corresponding to the active watch period would give market participants transparency to known prices that reflect the last good SCED execution.

“This policy would extend that last good price for another 15 minutes,” Barnes said. “It could be the last high price or the last low price.”

The TAC unanimously endorsed six other NPRRs, a system-change request (SCR) and revisions to the Nodal Operating Guide (NOGRR), the Planning Guide (PGRR), the Retail Market Guide (RMGRR) and the Resource Registration Glossary (RRGRR).

NPRR738: Excludes from performance calculations intervals when an emergency response service generator is unable to meet its obligations because of transmission/distribution service provider (TDSP) outages.
NPRR747: Proposes new definitions related to voltage profiles, defines various entities’ responsibilities related to voltage support and clarifies that the interconnecting transmission service provider or its designated agent may modify a generation resource’s voltage set point.
NPRR767: Changes the eligibility check for the startup portion of the reliability unit commitment make-whole payment. Resources with lead times longer than six hours may submit a settlement dispute to have their resource-specific startup times considered when determining eligibility for startup costs included in the make-whole payment calculation.
NPRR770: Adds visibility and situational awareness to the market by posting the aggregate number of telemetered resources and their statuses to the ancillary service capacity monitor.
NPRR771: Clarifies that TDSPs must ensure an electric service identifier has been created in ERCOT systems before initiating electric service at a premises, avoiding related transactional, billing and out-of-sync issues.
NPRR774: Removes duplicate language regarding the calculation of seasonal transmission-loss factors.
NOGRR155: Clarifies voltage ride-through performance requirements for all generation resources immediately following a fault, stipulating that they must remain online and connected to the transmission system, and also maintain real power.
PGRR046: Aligns the planning guides with NERC’s TPL-007-1 reliability standard related to geomagnetic disturbances by specifying a process for developing geomagnetically induced system models.
RMGRR138: Removes the requirement for retail electric providers serving pre-pay customers to provide a weekly list of electric service identifiers to Oncor, replacing it with the requirement to provide the prepay list upon Oncor’s request.
RRGRR009: Adds three categories of data: voltage limits for resources’ substation transmission level equipment; geomagnetically induced currents and the presence of blocking devices to allow for the study of any vulnerability attributed to geomagnetic disturbances; and a most limiting single element (MLSE) allowing a resource entity to identify an MLSE on lines it doesn’t own.
SCR789: Updates the Network Model Management System topology processor to add a software tool commonly used by transmission-planning entities in ERCOT.

– Tom Kleckner

August 1, 2016

MISO, PJM Unveil JOA Process for ‘Targeted’ Market Efficiency Projects

By Amanda Durish Cook

MISO and PJM are seeking to hammer out new joint operating agreement language that would allow accelerated approval of short-term projects intended to relieve congestion at the RTOs’ seams before advancing further on a joint study that would identify potential projects.

MISO engineer Adam Solomon said that while the RTOs continue to work on the language detailing joint targeted market efficiency projects (TMEPs), the JOA needs to have a vetted process in place before project selection begins.

“We should really have the JOA language worked out before we push further into the study,” PJM engineer Alex Worcester agreed during a July 29 meeting of the MISO-PJM Interregional Planning Stakeholder Advisory Committee (IPSAC).

Targeted MEPs will differ from ordinary MEPs, which undergo a “longer and more rigorous” review that combines regional approval, modeling and analysis, and a review timeline. MEP rules may also be changing as a result of a FERC order requiring the RTOs to revise their interregional approval processes. (See MISO, PJM Working to Comply with NIPSCO Order.)

The two RTOs are currently evaluating 13 potential small projects in Illinois, Indiana, Michigan and Ohio.

“We’re really looking for the small, low-cost, short lead time projects that alleviate historical congestion at the seam,” Worcester said.

“We’re reviewing the upgrades and we’re working to ensure they’re effective and alleviate congestion,” Solomon said.

Officials from both RTOs said construction of the small projects could begin before the end of the year. That would require a special approval process developed within “a very tight timeline,” said Worcester, adding that the JOA should set out a simple method for TMEP approval.

The JOA stipulates that TMEPs must be in service within three years and cost less than $20 million. Projects exceeding the cap would move to the MEP classification. Because of the near-term nature of TMEPs, inflation rates will not be factored into the cost-benefit calculation.

MISO and PJM also propose to replace the current 1:1 cost-benefit ratio with a requirement that TMEPs produce enough benefits to cover their costs within four years.

“It’s a pretty high hurdle for these projects to pass,” Worcester said. “It’s consistent with our goal of having high-impact projects.”

To determine if a project meets the cost-benefit metric, the RTOs will rely on three years of historical congestion data to project a future case adjusted by market-to-market payments.

The new cost-benefit approach will “avoid complicated analysis,” said Worcester, who added that he could further illustrate the approach at the Aug. 26 IPSAC meeting.

The RTOs also want to be able to discount historical congestion at flowgates — used to determine TMEP project eligibility — by factoring in congestion hedges or auction revenue rights.

Worcester said that flowgates have an average of 30 to 40% of their flow hedged, but some flowgates have 100% hedging while others have zero. “What we’ve seen is a lot of variability from flowgate to flowgate,” he said.

Stakeholders are asked to provide feedback on the proposed TMEP language by Aug. 12. Final draft language will be presented at the Aug. 26 meeting.

“We’re making good progress toward getting this filed,” Worcester said.

August 1, 2016

Cybersecurity Rules Urged for Distribution Companies

By Rich Heidorn Jr.

NASHVILLE, Tenn. — Regulators from Connecticut and New Jersey last week urged their colleagues to join them in developing cybersecurity rules for electric distribution companies.

Hon.-Arthur-House,-Chair,-CT-PURA-web — House © *RTO Insider*

“Get in motion. Get started,” Arthur House, chairman of the Connecticut Public Utilities Regulatory Authority, told the National Association of Regulatory Utility Commissioners summer conference. “We have to attack it. It’s too important not to.”

In April, the state released a Cybersecurity Action Plan, which calls for a voluntary oversight program in which utilities would meet annually with state officials to report on their cyber defense programs, experiences over the prior year dealing with cyber threats and corrective measures they planned.

Hon. Richard Mroz, Prez, NJ BPU — Mroz © *RTO Insider*

PURA said it will consider adding reviews by “objective, third-party assessors.” The New Jersey Board of Public Utilities issued more prescriptive rules in March requiring senior officers of distribution companies to certify their cyber protection plans, BPU President Richard Mroz said. The rules apply to natural gas, water and wastewater utilities, in addition to electric distribution companies.

The BPU requires the companies to define responsibilities for cyber risk management activities and establish plans for identifying and mitigating risks to critical systems. It also requires companies to provide cybersecurity awareness training and to report cyber incidents and suspicious activity to the agency.

House said it’s understandable that state regulators are reluctant to take on the issue. “There’s just too much work in this job already. We already have too much work to do,” he said.

NERC’s mandatory reliability standards cover only the Bulk Electric System, generally defined as transmission lines operating at 100 kV and above. (See FERC Refines Bulk Electric System Definition.)

Nevertheless, some state regulators see cybersecurity as the exclusive job of the federal government, House said.

Air Gap?

Left to right: Crane and Travis © RTO Insider — Left to right: Exelon CEO Crane and NARUC President Kavulla © *RTO Insider*

House said he was dismayed to hear Exelon CEO Chris Crane say earlier in the NARUC conference that part of his company’s defense is an “air gap” between Internet-connected computers and the supervisory control and data acquisition (SCADA) system.

“I’ve never met a federal official who believes the air gap exists. We stopped hearing about it from private sector officials in utilities two years ago at least,” House said. “It certainly is an outdated reference to a rather discredited concept.”

On July 21, however, FERC issued a Notice of Inquiry seeking comment on the Critical Infrastructure Protection reliability standards for transmission control centers and whether the commission should require the separation of the Internet and industrial control systems (RM16-18). The notice also asked for input on application “whitelisting” practices to prevent unauthorized programs from running in control centers. (See FERC Orders NERC to Develop ‘Flexible’ Supply Chain Standard.)

House also disagreed with Crane’s description of the level of cooperation between government and industry. Crane, a member of the Electricity Subsector Coordinating Council, a liaison between the federal government and the power sector, said communication between the government and industry on cyber threats has improved greatly.

“It’s become much better in the last couple of years, having everybody around the table” — U.S. Cyber Command, the FBI and the departments of Defense, Energy and Homeland Security — “really working to communicate across the table much better. The silos are breaking down and the information is flowing.”

House disagreed.

“They’re not sitting at the same table. They’re not talking the same language,” he said. “We have goodwill [and] occasional cooperation. But we do not have an adequate defense system or adequate recovery” plans.

“There is a huge gap,” he continued. “I think we’ll have a partial compliance until we have an attack and then you’ll get mandatory standards” for EDCs.

Defense in Depth

NARUC-Cybersecurity-Panel-(incl-Cheryl-LaFleur)-web — Left to right: Commissioner Mroz, NJ BPU; Commissioner House, CT PURA; Commissioner LaFleur, FERC and Commissioner Jones, WA UTC © *RTO Insider*

FERC Commissioner Cheryl LaFleur said distribution companies and their regulators don’t need to wait for formal requirements. “There’s a lot that can be done at the distribution level without mandatory standards,” she said, noting that many distribution utilities are NERC registrants because of their transmission assets. “It’s not as if any of them are unaware of cyber challenges.”

LaFleur said the NERC standards approved by FERC rely on “defense in depth,” including perimeter security, virus screening and other measures. Every successful attack, she said, is the result of multiple failures.

Referring to the cyberattack on three EDCs in Ukraine, LaFleur said, “Many things could have stopped it.” (See How a ‘Phantom Mouse’ and Weaponized Excel Files Brought Down Ukraine’s Grid.)

On July 21, LaFleur dissented on a FERC order directing NERC to develop a reliability standard for supply chain management, saying the order failed to provide enough guidance and should have been delayed to allow more study (RM15-14-002).

Texas Public Utility Commissioner Ken Anderson said he worried the rule could create a “false sense of security.”

In 2011, he noted, Boeing and the Navy found that the ice detection system on a new P-8 Poseidon, a plane designed for long-range anti-submarine and anti-surface warfare and intelligence missions, was defective because it contained counterfeit components sold by a Chinese subcontractor.

“If the Pentagon — that actually has access to the intelligence — if they can’t catch the defective subcomponents going into a military weapons system … how the heck can a utility know what’s in that chain?” he asked.

August 1, 2016

Federal Briefs

FERC has granted the developers of the Constitution Pipeline an additional two years to complete the project.

The developers said they needed an extension while they appeal the denial by New York environmental officials of a required water quality permit under Section 401 of the federal Clean Water Act. (See Constitution Pipeline Appeals Rejection of Water Permit.)

FERC originally approved the project in 2014, with the condition that it be placed in service within 24 months. The extension gives developers a new deadline of Dec. 2, 2018. The pipeline would deliver Marcellus Shale natural gas from Pennsylvania to pipelines serving New York state and New England.

More: CP13-499

WCS Providing NRC More Info on Nuke Storage Site

Waste Control Specialists began supplying the Nuclear Regulatory Commission more information about the company’s plans to store high-level nuclear waste in Andrews County, Texas, after a letter from the commission fueled opponent groups’ criticisms.

The letter from Mark Lombard, director of NRC’s division of spent fuel storage and transportation, told WCS that its application for the project was deficient and requested more technical data. Opponents said the letter reflected unpreparedness on the part of the company.

WCS officials responded by clarifying the company only wants a license to store spent nuclear fuel rods using a dry-cask design and method already approved by the commission. The company plans to store 5,000 metric tons in the first decade but is seeking approval to store up to 40,000 metric tons.

More: Odessa American

Tribe Sues Corps of Engineers Over Dakota Access Permits

The Standing Rock Sioux Tribe of North Dakota and South Dakota is suing the U.S. Army Corps of Engineers for issuing permits for a crude oil pipeline it says threatens sacred sites and its drinking water supply.

The suit, filed in a federal court in D.C., alleges that the Corps’ approval of the Dakota Access Pipeline is illegal, as it ignored risks to the environment and tribal sites. The pipeline, which would deliver North Dakota crude oil to terminals in Illinois, is being built by Energy Transfer Partners.

The Corps’ approval allows the developer to bury the pipeline under the Missouri River a half-mile upstream of the tribe’s reservation.

More: The Gazette

PSEG Files Opposition to Access Northeast with FERC

Public Service Enterprise Group has submitted a filing to FERC saying that a proposed natural gas pipeline expansion in New England would suppress wholesale prices in the energy market.

The company said the Access Northeast project, proposed by Spectra Energy and being subsidized by four New England states, is not driven by reliability needs, and the utilities that would own the pipeline would rarely use the gas. PSEG also compared it to a New Jersey plan to subsidize power plant construction in the state through the PJM capacity market, which was ruled unconstitutional by the Supreme Court as it infringed on FERC’s jurisdiction.

Critics of the PennEast Pipeline in New Jersey, however, said PSEG’s complaints could also apply to that project, which counts the company among its investors.

More: NJ Spotlight

Nuclear Industry to NRC: Streamline Review Processes

A number of industry executives called on the Nuclear Regulatory Commission to improve the efficiency of its review processes, especially when it comes to approving advanced reactors.

“Anything you can do through the regulatory process to assure that the advanced reactors can come online as soon as reasonably possible, it’s going to be important not just for the United States, but for the world to meet this gap of increasing energy consumption,” former FERC Commissioner Philip Moeller, now senior vice president at the Edison Electric Institute, said during a public stakeholder meeting in Rockville, Md.

The meeting was the first of its kind since 1998. NRC was directed to hold it by Sen. James Inhofe (R-Okla.), chair of the Senate Environment and Public Works Committee, which has oversight over the commission.

More: Bloomberg BNA

August 1, 2016

DTE Expects Boost from Southwestern’s Rig Expansion

DTE Energy raised its 2016 earnings per share guidance from $4.80-$5.05 to $4.91-$5.19 and said the addition of two new drilling rigs in the Utica Shale could boost profits further still.

Houston-based oil and natural gas company Southwestern Energy recently announced it will add five rigs by the end of the third quarter, two of which will be in the DTE-serviced Utica Shale basin, which could boost DTE’s gas storage and pipeline business segment.

The expected increase in drilling activity was excluded from DTE’s revised earnings guidance, which reflected better-than-expected second quarter results. But DTE CFO Peter Oleksiak said during an earnings call last week that the rigs “may provide upside to 2016” earnings and also will aid 2017 results.

DTE reported second-quarter operating earnings of $177 million ($0.98/share), up from $137 million ($0.76/share) in 2015. DTE’s gas segment earned $35 million, up $10 million from a year earlier.

— Amanda Durish Cook