Disregarding its staff’s recommendation, Maine’s Public Utilities Commission on Tuesday endorsed a plan in which electric ratepayers would help finance natural gas pipeline expansion (2014-00071).
PUC staff said last month that ratepayer subsidies were unnecessary because market conditions have changed dramatically since 2013, when the proposal was first made. (See Maine PUC Staff Advises Against Pipeline Contracts.)
The vote to ignore the staff recommendations was unanimous. The order includes a proviso that four other New England states considering similar financial support would have to follow suit for Maine’s participation. Only Massachusetts regulators have made that commitment so far and that decision is being challenged in court. (See More Pipelines for New England: ‘Gold-plating’ or Necessity?)
“There are so many more things that need to happen before a shovel gets turned or more gas begins to flow, and most of those things are outside of Maine’s control,” Tim Schneider, Maine public advocate, told the Bangor Daily News. He also opposed the staff recommendation.
The commission said they have determined the benefits of new pipeline capacity outweigh any costs.
Yet to be determined are those costs or when supply contracts might be signed. Under state law, any action would require written approval from Gov. Paul LePage.
“The fossil fuel industry hoodwinked the PUC into gambling $1 billion of Mainers’ hard-earned money on a massive new gas pipeline,” Conservation Law Foundation attorney Ben Tettlebaum said in a statement. “From Day One, this LePage-appointed commission has been desperate to find any way to justify overwhelming concessions for Big Gas, no matter the cost.”
The approval comes after the cancellation earlier this year of the Northeast Energy Direct expansion project. The largest remaining proposal is the Access Northeast project, which would increase natural gas capacity from New York to Maine. A related proposal before FERC to allow local distribution companies to sell natural gas to utilities for power generation is being opposed by some power plant owners. (See Generation Owners Seek to Block EDC-Pipeline Deals.)
FERC last week issued a Notice of Proposed Rulemaking to incorporate in its regulations the North American Energy Standards Board’s latest Standards for Business Practices and Communication Protocols for Public Utilities (Version 003.1) (RM05-5-025).
NAESB’s new standards were adopted by its Wholesale Electric Quadrant (WEQ) and filed with the commission last October.
The commission also said it would list NAESB’s updated Smart Grid Business Practice Standards (WEQ-019) in its General Policy and Interpretations for guidance.
Version 003.1 updates earlier versions of nine standards covering such things as definitions of terms and Open Access Same-Time Information System (OASIS) standards.
It also adds a new standard establishing the Electric Industry Registry to replace the NERC Transmission System Information Networks as the tool to be used by wholesale electric markets to conduct electronic transactions via e-Tags.
The commission declined to adopt a second set of new standards, Modeling Business Practice Standards (WEQ-23), which specifies requirements for calculating available transfer capability (ATC) and available flowgate capability (AFC).
The standards were designed to complement NERC’s proposed retirement of its “MOD A” reliability standards. NERC has proposed replacing its six MOD A standards with standard MOD-001-2, focused exclusively on the reliability aspects of ATC and AFC.
The commission declined to incorporate the standard because it is still considering NERC’s proposed retirement of its ATC-related reliability standards (RM14-7) and is considering changes to the calculation of ATC (AD15-5). The commission said it will consider the NAESB standards as part of the ATC dockets.
The commission also said it would not incorporate:
Standards of Conduct for Electric Transmission Providers (WEQ-009), because it is only a placeholder for future standards; and
Contracts Related Standards (WEQ-010), because it contains an optional NAESB contract regarding fund transfers that is not required by the commission.
HOUSTON — Texas, which ranks 10th in installed solar capacity among the states, boasts two assets that could see it rise in the rankings.
“We have a lot of sun and a lot of land,” Christine Wright, SolarCity’s deputy director of policy and electricity markets, told a Gulf Coast Power Association luncheon last week. “Those are two key things there that make Texas a great resource for solar.”
Installed solar capacity is growing at a rate of 50% annually, and every time the world’s solar power doubles, the cost of photovoltaic panels falls 26%. In the 15 years since 2000, the industry’s share of generation capacity has doubled seven times, and the average cost for a solar facility in the U.S. was cut more than two-thirds to roughly $3/W.
Although Texas ranks first among states in solar potential, it has only 534 MW installed, putting it behind California, Arizona, North Carolina, New Jersey, Nevada, Massachusetts, New York, Hawaii and Colorado. The state saw $372 million in solar investment in 2015, which was a 48% increase over 2014 spending. While top-ranked California has nearly 25 times more installed capacity than Texas, Wright said ERCOT expects solar capacity to grow by a factor of 50 by 2030.
Wright said the driving forces are cost stability and customers’ demand for independence from the grid. Since solar incurs very few costs after installation and no fuel expense, it can act as a hedge against increasing energy bills. Wright referenced a 2015 Gallup poll that found approximately 80% of respondents preferred more emphasis be put on developing solar infrastructure.
Tax incentives add to the appeal. Congress extended the solar investment tax credit through 2023, and the state’s property-assessed clean energy program allows local governments to help residential and commercial applicants to secure loans for solar projects in exchange for an increased property tax assessment.
The state has enacted favorable legislation, Wright said, such as SB1626, which reduces builder restrictions on solar development, and HB706, which simplifies property tax form filing. But “we have seen that policymakers in other states don’t always make decisions that are consistent with customer demand,” which is why she said the industry needs to maintain an active education campaign. In Nevada, for example, rooftop solar drove $833 million in investment in 2015 but ground to a near halt after the state Public Utilities Commission promulgated rates that increased the bills for solar customers by more than 50%, she said.
She acknowledged that issues will arise as the industry gains market share, but that they are known. Efforts are being made to collect necessary data and address “growing pains,” she said, citing ERCOT’s formation of the Distributed Resource Energy and Ancillaries Market Task Force.
Generators under 20 MW will be required to ride through abnormal frequency and voltage events under a revised pro forma small generator interconnection agreement approved by FERC last week (RM16-8).
The commission already requires generators interconnecting under the large GIA to meet such requirements.
“It would be unduly discriminatory not to also impose these requirements on small generating facilities,” the commission said, noting that technology now available to small generators, such as smart inverters, gives them the capability to comply.
The revisions require small generators to not disconnect automatically or instantaneously from the transmission system for under- or over-frequency conditions and under- or over-voltage events. “The specific ride-through settings must be consistent with good utility practice and any standards and guidelines applied by the transmission provider to other generating facilities on a comparable basis,” the commission said.
FERC said its action was warranted by the increase in grid-connected solar PV generation and generator interconnection requests driven by state renewable portfolio standards.
It cited NERC’s finding that “a lack of coordination between small generating facilities and reliability standards can lead to events where system load imbalance may increase during frequency excursions or voltage deviations due to the disconnection of distributed energy resources, which may exacerbate a disturbance on the bulk power system.”
WASHINGTON — Responding to a flood of criticism, FERC last week revised its proposed rules for collecting data from market-based rate traders to monitor against market manipulation, narrowing the definition of “connected entity” and streamlining the collection process (RM16-17).
The commission issued a new Notice of Proposed Rulemaking at its open meeting, abandoning a NOPR issued last September that would have required RTOs and ISOs to register market participants through common alpha-numeric identifiers, with lists of their connected entities and a description of their relationships (RM15-23).
The new proposal aligns the definition of a “connected entity” with existing MBR affiliate definitions, eliminating references to stock and ownership thresholds. The original NOPR had included as connected entities companies controlling more than 10% of another, as well as top executives and traders, a definition heavily criticized by stakeholders.
The revised definition would limit relationship reporting to only those entities engaged in FERC-jurisdictional markets and those that trade energy transaction derivatives. The new proposal also would not require reporting debt instruments or structured transactions and submitting organizational charts.
“Today’s NOPR attempts to avoid duplication, minimize compliance burdens, modernize data collections and make information collected through its programs more usable and accessible for the commission and its staff,” FERC said.
At FERC’s open meeting last week, commissioners admitted that they had had concerns about the original proposal and expressed appreciation for stakeholders’ feedback.
“I had written separately … on the connected entities proposal to express some questions and concerns, but I’m very pleased to support the revised proposal before us today,” Commissioner Cheryl LaFleur said.
“Sometimes when the commission puts out a Notice of Proposed Rulemaking, there is a huge body of evidence that we have,” Commissioner Tony Clark said. “Sometimes — and I think this is one of those cases — the commission is putting something out, and we’re always genuinely interested in your feedback, but we’re interested in hearing your feedback on something that probably just isn’t quite as well fleshed out.”
FERC also proposed a database using an extensible markup language (XML) schema to keep track of entities’ relationships. The NOPR contains a draft data dictionary that lays out how to submit the required information.
The commission said it plans a “substantial outreach” effort to get input on the NOPR. As a first step, it announced it would convene a technical conference Aug. 11 to discuss the data dictionary. Comments on the proposal are due 45 days from its publication in the Federal Register.
FERC last week ordered Section 206 proceedings in MISO and SPP, questioning the RTOs’ failure to require nonpublic transmission owners to provide refunds in the manner it requires of public utility owners.
The commission expressed “concern that the refund commitments provided by the nonpublic utility transmission owners thus far do not apply to the full range of situations in which they may receive revenues associated with service provided due to their status as transmission-owning RTO members based on RTO rates, terms or conditions that are found to be unjust and unreasonable,” it said in the MISO order, which resulted from a complaint brought against the RTO by a group of transmission owners (EL15-45, EL16-99).
The commission raised similar concerns in opening the 206 proceeding for SPP, saying the lack of full refund provisions for non-public utilities could result in cost shifts, meaning “SPP’s resulting jurisdictional rates may not be just and reasonable” (EL16-91).
Although the commission cannot directly order refunds from nonpublic utility transmission owners that have joined RTOs, FERC said SPP and MISO could compel such refunds indirectly. It suggested the RTOs revise their Tariffs to require non-jurisdictional TOs to promise to honor refunds ordered in FPA Section 205 and 206 proceedings. Such refunds would include those correcting errors in the application of their formula rates and costs later found to be unjust and unreasonable.
“If a nonpublic utility transmission owner chooses not to make such a refund commitment, then SPP would remove its transmission revenue requirement(s) from the SPP Tariff as of a prospective date to be determined by the commission,” FERC said.
In the MISO ruling, FERC also denied the MISO Transmission Owners’ request for rehearing regarding whether a public utility’s ROE may be found unjust and unreasonable even if it falls within the “zone of reasonableness.” FERC set that zone at 7.03 to 11.74% in a June 2014 ruling involving New England TOs.
The commission also granted in part and denied in part rehearing requests in a separate docket involving a dispute over base ROEs. (See MISO TOs Seek Base ROE of 11.39%.) The commission denied a request for rehearing from the MISO TOs and Xcel Energy regarding the effective refund date FERC had set. It did grant in part Xcel’s request for rehearing with respect to refunds for nonpublic utility transmission owners.
In EL14-12-001, FERC agreed to clarify its Oct. 16, 2014, order that set hearing and settlement judge procedures along with a refund effective date related to the base ROE for MISO transmission owners. (See ROE Talks Between MISO Industrials and TOs Collapse.)
WASHINGTON — FERC directed NERC on Thursday to develop a “forward-looking, objective-based” critical infrastructure protection (CIP) reliability standard for supply chain management, one that would place the onus on utilities to develop their own plans for protecting the production and distribution of industrial control system hardware and software (RM15-14-002).
Commissioner Cheryl LaFleur dissented in the 3-1 decision.
The commission’s order requires each affected entity’s plan to address four objectives: software integrity and authenticity; vendor remote access; information system planning; and vendor risk management and procurement controls.
FERC emphasized the flexibility it provided NERC in developing the standard. “There is no requirement for any specific controls, nor does FERC require any ‘one-size-fits-all’ requirements,” it said. “The new or modified reliability standard should instead require responsible entities to develop a plan to meet the four objectives while providing flexibility to responsible entities as to how to meet those objectives.”
“The draft final rule directs ‘what’ gap NERC should address,” the Office of the General Counsel’s Kevin Ryan told the commission at its open meeting, “not ‘how’ NERC addresses that gap.”
“I’m happy to support today’s order because I do think it reaches the appropriate balance of pairing together an appropriate sense of urgency on the issue with a prudent flexibility that’s going to be needed by NERC to develop the rule,” Commissioner Tony Clark said.
This is only the third time that FERC has directed NERC to develop a reliability standard; usually, NERC proposes new or revised standards, and FERC issues Notices of Proposed Rulemaking (NOPRs) to adopt them. The commission previously ordered NERC to develop standards on geomagnetic disturbances and physical security.
Clark drew a comparison to the physical security standard in his support for the order. “With the physical security standard, we weren’t telling NERC to tell fence builders how to build their fences, which would be beyond our authority, but rather to come up with a standard so that utilities can incorporate those best practices to ensure physical security of the grid.”
LaFleur Issues Lengthy Dissent
It was this flexibility that led Commissioner Cheryl LaFleur to vote against the order. “I recognize that today’s order on the face appears to afford a great deal of flexibility, but I believe that flexibility is in fact a lack of guidance on the issue we’re addressing,” she said at the open meeting.
LaFleur argued that the rule should have been issued as a NOPR instead to allow more input from stakeholders.
FERC first issued a NOPR addressing cybersecurity, including supply chain management, almost exactly a year ago. While the commission approved seven NERC-proposed standards in the NOPR in January, it held off on addressing the supply chain, holding a technical conference later that month. (See FERC Postpones Action on Supply Chain Protections.)
FERC on Thursday also denied a request for rehearing of its approval of the seven standards (RM15-14-001).
Commissioner Colette Honorable noted that FERC received comments from 34 parties on the NOPR and 24 additional post-technical conference comments. “I think our work in this particular effort demonstrates that we did heed the concerns raised by industry, government, vendors, folks in academia and others,” she said.
“It is worth noting,” LaFleur wrote in a four-page dissent, “that the four objectives that will define the scope and content of the standard were not identified in the supply chain NOPR. Therefore, even though the final rule reflects feedback received on the supply chain NOPR, and is not obviously inconsistent with the supply chain NOPR, no party has yet had an opportunity to comment on those objectives or consider how they could be translated into an effective and enforceable standard.”
And in a rare — albeit low-key and brief — debate at an open meeting, LaFleur rebutted Clark’s comparison of the new rule to the physical security standard. Clark said the latter standard had a quicker turnaround than FERC had required, while there has been “significantly more comment … and process leading up to this particular order.”
“Although the timeline was short, I thought that was actually an example of very focused outreach in advance,” LaFleur said. “We actually ordered the Office of Electric Reliability to work with NERC on the structure of the standard before we issued the directive and [to] agree in advance on a timeline. And as a result, I think we issued — even though we didn’t say ‘build a fence’ — a pretty focused standard, and they complied pretty quickly.
“But of course reasonable minds can differ.”
The rule will take effect 60 days after its publication in the Federal Register. NERC will then have a year to submit the standard.
Further Cybersecurity Measures
FERC also issued a Notice of Inquiry on Thursday seeking comment on potentially revising CIP standards to address separating the Internet and industrial control systems in transmission control centers (RM16-18).
The notice is in response to last year’s cyberattack in Ukraine, in which hackers, likely from the Russian government, infected three Ukrainian utilities with the BlackEnergy virus. Workers at the utilities downloaded seemingly innocent Microsoft Office files that had been emailed to them and enabled macros that allowed the hackers to gain control of the companies’ cyber systems, eventually knocking out power to 225,000 customers in the country. (See How a ‘Phantom Mouse’ and Weaponized Excel Files Brought Down Ukraine’s Grid.)
In its report on the incident, the Department of Homeland Security recommended, among other measures, isolating industrial control systems from the Internet and other unsecured networks at control centers. FERC seeks comment on any potential impacts on the grid from doing this.
CAISO has released a revised set of principles for governing a Western RTO in a bid to convince skeptics that an expanded ISO will be amenable to the entire region. The new document won initial praise, although doubts remain.
The ISO’s governance changes seek to address the concerns of industry participants in the broader West who contend that the original proposal favored California interests and didn’t sufficiently protect individual states’ authority over electricity-related matters. (See CAISO Governance Plan Fails to Dispel Western Concerns.)
“I will say that the revised proposal appears to be a step towards us rather than a step away,” said Bryce Freeman, administrator of the Wyoming Office of Consumer Advocate, noting that he hadn’t yet studied the proposal in depth.
“The question is, is it enough to keep the [PacifiCorp] states engaged?” said Freeman, who criticized the original proposal as being “California-centric.”
State Approvals Needed
That engagement will be essential for CAISO’s expansion into areas of the West now served by PacifiCorp. A widely accepted governance structure is key to the Portland-based utility gaining regulators’ approval to join the ISO in 2019. Regulators from five states outside California — Idaho, Oregon, Utah, Washington and Wyoming — must sign off on membership.
“We think the revised proposal marks a positive step in the right direction and that the changes appropriately reflect input from stakeholders, including on the key issue of striking the right balance between the existing authority of the ISO’s board and California and the other affected states,” PacifiCorp spokesman Bob Gravely said.
The updated proposal attempts to strike that balance in part by scrapping a controversial plan to appoint an “initial” RTO board of governors on which California-appointed members would have held a 5-4 majority. That board was slated to remain throughout a transition period and would have selected the “final” board based on a process developed by a transitional committee. Freeman previously referred to the initial board as the “mother of all California-centric concerns.”
Transitional Committee
CAISO is now proposing that the transitional committee develop a nominating and approval process to select a new nine-member board. The new board would be selected within 18 months of the effective date for the governance plan, which the transitional committee would develop and submit to the current board for approval.
New board members would fill seats created under the governance plan, as well as the open seats of sitting board members as their terms expire. Transitional committee members could extend the terms of sitting board members after determining that doing so would be beneficial to the new board based on “expertise and institutional knowledge.”
The revised proposal also fleshes out the composition of the transitional committee.
“The details are drawn from the Energy Imbalance Market transitional committee, which was successful in developing a governance structure that gave the entire region a voice in the market rules for the EIM,” CAISO said.
Each state in the expanded RTO footprint would be entitled to appoint a committee representative through its own process. In addition, stakeholders throughout the region would select representatives to the committee from nine sectors: investor-owned utilities; publicly owned utilities; independent power producers; large-scale renewable energy providers; distributed energy resource providers; generators and marketers; federal power marketing administrations (PMAs); public interest groups; and state-sanctioned ratepayer advocates.
In addition to developing the governance plan, the transitional committee would be responsible for dealing with other issues, such as whether to create a funding mechanism to facilitate participation in the RTO by consumer advocates.
CAISO’s modified proposal clarifies the role and powers of the Western States Committee (WSC), previously referred to as the body of state regulators. A representative from each RTO state would be appointed to the WSC, which also reserves one non-voting slot each for PMAs and publicly owned utilities. State committee members are not required to be regulators.
The WSC would “provide input on matters of collective state interest” and hold “primary authority” over certain RTO policy initiatives related to transmission cost allocation and resource adequacy.
“Primary authority means the committee will play the lead role for its defined areas of authority, and policy approval by the committee would be a prerequisite to any Section 205 filing with FERC in those areas,” CAISO said.
Still, the ISO would reserve the right to file with FERC without WSC approval “when reliability is imminently threatened.”
‘Genuine’ Effort
The proposed principles make an explicit concession to state sovereignty, promising that governing documents would include “binding provisions” to “protect and preserve state authority over matters regulated by the states themselves,” including procurement, resource planning, retail rates, and resource and transmission siting.
“The proposal appears to genuinely making an effort to preserve state sovereignty,” said Michele Beck, director of the Utah Office of Consumer Services. “But there’s a limit to what you can do in any proposal.”
Beck cited the U.S. Supreme Court’s April decision in Hughes v. Talen Energy — which struck down a Maryland program to incentivize in-state generation — as an example of how participation in an RTO can compromise a state’s authority. (See Supreme Court Rejects MD Subsidy for CPV Plant.)
“Ultimately, policymakers will have to weigh whether a certain amount of loss of sovereignty is worth the benefit,” Beck said.
While Beck was encouraged that CAISO set aside a position for consumer advocates on the transitional committee, she was also wary of a process modeled on the EIM, which she said left out the perspective of consumer groups.
Show Me the Benefits
She also thinks Western industry participants need to be looking beyond the governance issue.
“I want to remind people that governance is a big concern, but we still have to see benefits,” Beck said, pointing out that no studies have been performed to assess how consumers in individual states will be affected by PacifiCorp joining an RTO.
The utility says such a study is in the works.
“Having a final governance structure approved by the legislature that can be supported by other states, as well as completing a full cost analysis to determine net customer benefits, remain the two most important steps that will determine if we continue to move forward,” said PacifiCorp’s Gravely.
CAISO will take up discussion of the revised proposal during a public forum held in Sacramento on July 26. After taking a last round of comments, the ISO plans to send a final governance proposal to Gov. Jerry Brown, who is expected to present the plan to the state legislature in August. Lawmakers must approve any changes to the ISO’s governance structure.
SPP executives had “inappropriate” involvement in the oversight of its Market Monitoring Unit, FERC said in an audit report released Friday that called for changes (PA15-6).
The report said the internal MMU “should strengthen its independence and enhance its separation from” the RTO by barring non-MMU employees from its office and RTO management from its meetings with the Board of Directors’ Oversight Committee.
The audit report raised many of the concerns reported by RTO Insider in a series of articles earlier this year, citing SPP executives’ involvement in the MMU’s budget, performance reviews and salary decisions. The audit also said the MMU’s independence was hampered by the fact that until recently it shared legal counsel with the RTO.
Auditors criticized MMU Director Alan McQueen — though not by name — saying he took actions that “blurred the lines” between the MMU and RTO.
It also said the Oversight Committee should undertake a “closer review of the performance of the MMU” and its director. “In complying with Order No. 719, one of the important steps taken by the MMU to ensure independence was when it structured its accountability process so that it reports directly to the Oversight Committee,” the auditors noted.
But the report did not address SPP’s treatment of former monitors Catherine Mooney and John Hyatt, who say they were fired for raising independence concerns. Nor did it mention their allegations that McQueen pressured them to compromise their positions in order to minimize conflicts with SPP management and stakeholders and that Oversight Committee Chairman Joshua W. Martin III refused to meet with them when they attempted to raise concerns. (See SPP Squelching MMU Independence, Former Monitors Say.)
The auditors said most of their 16 recommendations were already being addressed by the Oversight Committee’s revised December 2015 position statement on the MMU’s independence, which made the committee responsible for all salary and bonus decisions for McQueen and other MMU employees and ensured that the MMU director could meet with the committee in executive sessions without RTO officials present.
The committee approved the statement, which had last been updated in 2012, nine days after Hyatt and Mooney were fired. Martin announced the statement at the Board of Directors meeting in January — also announcing that McQueen would retire by the end of the year.
The audit did not call for replacing the internal unit with an independent monitor, noting FERC Order 719 allowed RTOs to choose their structure.
Aside from CAISO, SPP is the only regional grid operator that does not have an independent market monitor, and SPP officials indicated Friday they intend to keep that arrangement.
“We’re pleased the auditors found no instances in which SPP exerted inappropriate influence on the MMU,” SPP General Counsel Paul Suskie said in a statement. “Neither did FERC conclude the MMU is not independent, nor recommend that SPP’s market-monitoring functions be performed by a third party. As a result, SPP can continue to operate with an internal MMU, and MMU staff will be employees of SPP and participate in our collaborative stakeholder process while remaining independent.”
In a letter appended to the report, McQueen and Suskie agreed with all of the audit’s 16 recommendations, but challenged auditors’ repeated use of the terms “inappropriate” and “improperly.”
“SPP understands that, where the report discussed items that were inappropriate or improper, FERC audit staff is referring to processes, procedures and structures that could potentially result in inappropriate or improper conduct or that could demonstrate an appearance of impropriety,” they wrote. “No such activity took place.”
Suskie and McQueen said the audit was “a valuable process for SPP to assess the continued working relationship between [the] RTO and MMU given the evolution of SPP and its markers and services.”
The audit report was among the topics of conversation at Monday’s Regional State Committee meeting, where SPP CEO Nick Brown defended the RTO’s firing of Hyatt and Mooney. “No one is terminated from SPP without multiple officers concurring,” he said. “The board was very much informed, specifically the Oversight Committee. We were quite cautious, but very firm in our decision. I will say we were unanimous in our decision.”
FERC’s recommendations, Brown added, “really decrease the potential for any inappropriate influence over the independence of the Market Monitoring Unit.”
17-Month Inquiry
During the 17-month inquiry, auditors conducted three site visits and reviewed 30,000 emails of MMU and RTO employees “to understand communications between both groups, with outside parties and internal to the MMU and SPP RTO.”
Although the audit also looked at SPP’s compliance with its transmission-provider obligations, FERC accounting regulations and FERC Form 1 financial reporting requirements, it issued findings on the MMU only.
The auditors said that the independence and separation of function concerns they have regarding the MMU are “similar, in some respects,” to those identified in the commission’s 2008 audit of SPP’s Regional Entity, which is charged with enforcing NERC reliability standards (PA08-2, AD09-3).
RTO Executives at Oversight Committee Meetings
To ensure its independence from SPP management, the MMU is supposed to be under the control of the Board of Directors’ Oversight Committee. But the commission noted that until recently, RTO executives attended the MMU’s meetings with the committee.
“The presence of an SPP RTO executive in these meetings … could result in SPP RTO potentially exercising undue influence during such meetings and inappropriately having access to information associated with MMU operations,” the auditors said.
“Audit staff did not identify evidence of any impropriety in practice (nor has any such impropriety been alleged), and notes that the Oversight Committee can, and during the audit period did, conduct MMU-related meetings in executive session without the presence of the SPP RTO executive, when it deemed it appropriate. However, the presence of the SPP RTO executive in MMU-related executive sessions does not reflect the necessary separation of functions.”
In their letter, McQueen and Suskie acknowledged that the presence of RTO management at OC meetings “could give rise to the perception that there is an insufficient degree of separation between the MMU and SPP RTO.”
Incentive Compensation
The commission also said SPP executives “were inappropriately involved in the performance evaluation of the MMU director, approval of the MMU budget and compensation adjustments for MMU staff.”
“Audit staff is concerned that such involvement by SPP RTO executives creates issues in terms of using incentive compensation to exercise influence over MMU staff not to oppose SPP RTO initiatives,” FERC said.
“Rather than involving SPP RTO executives in the operations of the MMU, the audit staff determined that the Oversight Committee should take a more active role in its oversight of the MMU including performance evaluation of the MMU director as well as the overall performance of the MMU. This would be similar to the manner in which the SPP RE board provides guidance and oversight to the RE.”
The auditors said they met with the full Oversight Committee at its quarterly meeting at the beginning of the audit and later conducted several phone interviews with Chairman Martin. Martin told RTO Insider in an interview May 2 that he met with the auditors once, at the committee meeting in March 2015. He said it “was not an in-depth session where we were looking at specifics.” (See FERC Ended Audit Without Talking to Key Witness.)
Legal Counsel
Until March 2015 — after FERC began the audit — the MMU relied on SPP for legal services because it lacked its own counsel. “The MMU’s reliance on the SPP RTO for legal services and support could be problematic, particularly when the MMU disagreed with an SPP RTO position and desired to make a filing to the commission in opposition to an SPP RTO filing,” the report said. “Difficulties may arise both in terms of allocation of available legal staff as well as possible concerns of conflict of interest.”
RTO Insider reported that, until the last 18 months, the MMU generally filed only testimony packaged with RTO filings. (See SPP MMU Struggles to Find its Voice.)
MMU Shared Staff
The auditors said the lack of “clear separation” between the RTO and MMU staff also resulted from MMU staff’s involvement in RTO activities unrelated to MMU operations, particularly in 2013 and early 2014 when the RTO was racing to launch its Integrated Marketplace.
“This effectively blurred the lines of separation by making resources appear fungible,” the auditors said. “Moreover, SPP RTO rewarded MMU staff in the form of incentive compensation for their efforts on behalf of SPP RTO. This economic incentive further clouded the separation between the MMU and SPP RTO.”
MMU Involvement with Tariff Formation
The audit cited “tension … between the role of the MMU as an independent organization and the role of the MMU as an internal function of SPP, and therefore an integral part of its collaborative process.”
“Central to this tension are the concepts that, as SPP RTO employees, MMU staff should conduct themselves in a manner that promotes the interests of SPP RTO, while as members of the MMU the staff might be engaged in activities and take positions that run counter to what may be the consensus of the SPP members,” FERC said. “However, this inherent tension was latent until a contentious issue arose between the MMU and SPP RTO.”
The issue was the RTO’s attempt to mollify generators who became upset after the Integrated Marketplace opened that the MMU was not including general operations and maintenance in its calculations of cost-based offers. (See SPP MMU Struggles to Find its Voice.)
“At times, the MMU staff acted in a manner to steer the outcome rather than permitting the stakeholder process to arrive at a position that reflected their independent collaboration, consensus development and team-based approach,” FERC said. “It is incumbent on the MMU to advise the RTO and other interested parties of its views regarding any needed rule and tariff changes and the merits of proposed changes, but not to obstruct the SPP RTO’s process.
“The MMU should not disrupt the SPP process when tariff revisions are not acceptable to the MMU; rather, it should intervene when the proposal comes before the SPP board and when it is filed with the commission.”
The auditors criticized McQueen’s decision to join the Mitigated Offer Strike Team, which was created to reach a compromise.
“The MMU director wanted to restore a good working relationship, consistent with the SPP principle of being ‘relationship-based,’” the auditors said. “While the intent to improve relationships might be justified in general principle, audit staff believes that the MMU director’s efforts were counterproductive in this instance.”
Operational Separation
Auditors also raised concerns that the MMU staff works in offices accessible to RTO employees, most in open cubicles. “Audit staff observed that conversations can be overheard and sensitive materials visible to parties outside the MMU. Conversations by MMU staff members may involve discussions of matters such as ongoing investigations and potential referrals to the commission.”
SPP Headquarters Source: WER Architects
The commission said the MMU should consider erecting physical barriers and key card access to ensure the physical separation of MMU staff from other RTO staff, as the commission required in the RE audit.
McQueen and Suskie said the MMU lacks the resources to erect security barriers but said they are “looking into practical solutions” to address the concern.
Compliance Filings
The commission required the RTO to submit a compliance filing within 30 days detailing how it plans to respond to the recommendations, along with quarterly status reports on its progress.
[Editor’s Note: SPP/ERCOT Correspondent Tom Kleckner worked as an SPP spokesman from 2011 to 2015; Editor-in-Chief Rich Heidorn Jr. participated in the 2008 audit of SPP as a member of FERC’s Office of Enforcement.]
MARLBOROUGH, Mass. — New England states are moving ahead with their own greenhouse gas reduction programs while EPA’s Clean Power Plan remains in legal limbo.
At the Northeast Energy and Commerce Association Annual Environmental Conference on Wednesday, panelists said that the nine-state Regional Greenhouse Gas Initiative remains on course despite the U.S. Supreme Court’s decision in February to stay the federal plan pending legal challenges.
“We don’t have much in the way of travel to reach the Clean Power Plan targets under the current design of the final rule,” said Patricio Silva, a senior system planning analyst at ISO-NE. (See Northeast on Way to Compliance with Clean Power Plan.)
RGGI, which EPA has cited as a model, is currently committed to a 2.5% annual reduction in carbon emissions. But it undergoes program reviews every three years — including one now in progress — that could adjust targets.
The CPP seeks to reduce carbon emissions from the power sector by 32% below 2005 levels by 2030, with interim reductions required in 2022-2029.
While simple cycle gas turbines are exempt from the CPP, RGGI also includes all fossil units above 25 MW. EPA did not include simple cycle — or peaker — plants, reasoning that they run too infrequently to have a major impact on emission reductions. “That is an important distinction,” Silva said, calling it a sign of the RGGI states’ more aggressive carbon reduction goals.
According to the Energy Information Administration, ISO-NE’s carbon intensity was 1,037 pounds of CO2/MWh in 2015, which is projected to drop to 986 lbs/MWh by 2030, well within the CPP targets (1,305 lbs/MWh for existing fossil fuel-fired electric steam generating units and 771 lbs/MWh for existing natural gas combined cycle units), Silva said.
While the Supreme Court is likely to determine the CPP’s ultimate fate, the legal challenge is currently before the D.C. Circuit Court of Appeals (West Virginia v. EPA, No. 15-1363). In May, the D.C. Circuit rescheduled oral arguments from June 2 to Sept. 27, 2016, skipping an initial review by a three-judge panel and moving directly to an en banc hearing with nine of the circuit’s 11 active judges.
Carrie Jenks, a senior analyst with M.J. Bradley and Associates, said that while the CPP legal challenge may affect some states’ planning, the RGGI states have continued to plan for compliance, leading to key questions.
“RGGI [has to] decide if it would trade with states outside of its region, such as other PJM states, either at the start of the program or at a future date. RGGI states also need to consider what the CPP targets mean for the overall RGGI cap as the states undertake the RGGI program review, and how will such decisions may affect states outside of RGGI,” she said.
Nancy Seidman, assistant commissioner at the Massachusetts Department of Environmental Protection, credited EPA for recognizing the emission reductions achieved by the RGGI states. “We’ve done a lot and fortunately EPA considered that,” she said.
“What’s important now is, where do we want to go next? What are our goals for 2030 with or without the Clean Power Plan? And how does that mesh with states’ individual goals?” she said.
PUC staff said last month that ratepayer subsidies were unnecessary because market conditions have changed dramatically since 2013, when the proposal was first made. (See Maine PUC Staff Advises Against Pipeline Contracts.)
NAESB’s new standards were adopted by its Wholesale Electric Quadrant (WEQ) and filed with the commission last October.
The commission already requires generators interconnecting under the large GIA to meet such requirements.
The commission issued a new Notice of Proposed Rulemaking at its open meeting, abandoning a NOPR issued last September that would have required RTOs and ISOs to register market participants through common alpha-numeric identifiers, with lists of their connected entities and a description of their relationships (
