Page 1426 – RTO Insider

February 14, 2016

LOC Rule Sent Back to ERCOT’s Stakeholder Process

By Tom Kleckner

AUSTIN, Texas — The ERCOT Board of Directors Feb. 9 remanded to the Technical Advisory Committee a proposal to pay lost opportunity costs to generators ordered to ramp down for grid reliability.

Nodal protocol revision request (NPRR) 649, in the works since September 2014, received 56% support in a TAC roll call vote in November, short of the two-thirds threshold for approval.

ERCOT submitted the NPRR to satisfy a settlement agreement with Odessa-Ector Power Partners, owner of a West Texas combined cycle plant that said it lost $300,000 because of dispatch overrides during three days in November 2012.

The settlement came in response to an appeal the company and Merrill Lynch, its qualified scheduling entity at the time, filed with the Public Utility Commission of Texas (docket #41790).

Odessa-Ector, a subsidiary of Koch Ag & Energy Solutions, asked the ERCOT board to override the TAC’s rejection. “While nearly all out-of-merit actions have financial protection in the protocols, these specific actions, which were not foreseen during the original protocol development, result in financial losses for those complying with ERCOT’s instructions,” the company said, predicting that remanding the issue to TAC would not resolve the impasse.

ERCOT CEO Bill Magness proposed that the board return the issue to the TAC.

“We believe if we remand this [to the TAC], there could be an opportunity for further discussion around the compensation issue and put further alternatives on the table,” Magness said. “We would commit to filing comments and identifying options we might put forward. It seems like it might be better to take one more crack at it [in the TAC] and work it out.”

Interested parties who had filed position statements supported Koch.

“After more than a year of work on this NPRR by stakeholders and ERCOT staff, it is clear that there is no acceptable resolution that would be achieved by additional time or debate,” said Texas Competitive Power Advocates, which called the NPRR “fair and appropriate.”

South Texas Electric Cooperative and Golden Spread Electric Cooperative also asked the board to grant the appeal, saying “strong support at multiple TAC subcommittees are indicative of a NPRR that is well vetted and developed.”

The Wholesale Market Subcommittee unanimously endorsed the proposal in October and the Protocol Review Subcommittee endorsed it with one opposing vote.

Twelve voters from ERCOT’s Consumer, Cooperative and Independent Retail Electric Provider (IREP) market segments opposed the proposal at the TAC meeting, where there were also three abstentions from the IREP and Investor-Owned Utility segments.

Some opponents said that since ERCOT’s nodal market went live in December 2010, ramp-down dispatch orders have been rare and do not justify the estimated cost. Others contended that that the proposal could overcompensate generators rather than making them whole.

“It’s a slippery slope when you start paying opportunity costs and lost profits,” said Valero Services’ Jack Durland, who represents industrial customers. “ERCOT does everything it possibly can, but it can’t always take power. Should generators be guaranteed payments?”

“There are solid arguments on both sides of this issue,” said unaffiliated director Karl Pfirrmann. “It’s important for stakeholders to reach [a] solution, rather than us direct it from above.”

Pfirrmann said he was “concerned about precedent-setting issues as we go forward,” expressing his hope that “we find resolution in our committee structure.”

The motion to remand the issue to the TAC carried with one abstention. The board also directed ERCOT staff to file suggested alternatives that might satisfy the two-thirds majority requirement.

TAC Chair Randa Stephenson promised the board her committee would be “very diligent” about bringing the NPRR back to the board for its next meeting in April.

February 14, 2016

PJM to Proceed on CPP Study Despite Supreme Court Ruling

By Suzanne Herel

The Supreme Court’s stay of the Clean Power Plan won’t affect PJM’s planned analysis of the economic and reliability implications of complying with the federal program.

“Our main concern is reliability. We don’t have a position on the Clean Power Plan as far as merits, but we recognize it is a transformational change that we need to be prepared for,” PJM’s Muhsin Abdurrahman told the Transmission Expansion Advisory Committee on Thursday. (See Supreme Court Blocks Clean Power Plan.)

Earlier in the week, PJM released the methodology it will use to study the CPP for a report to be published by May 31. That target date still stands.

PJM said the report will “identify potential economic, operational, resource adequacy and transmission usage implications” of the CPP, emphasizing that the review will not be used to decide on specific transmission upgrades.

pjm — PJM’s analysis of the Clean Power Plan will model various scenarios to provide states with detailed information about the impact and costs of possible compliance pathways.

States had faced a Sept. 6 deadline to file a compliance plan or request an extension. Now that they have more time, Abdurrahman said, they are asking for even more sensitivity studies.

“They want to know, is my state a net buyer or seller of allowances? Do I have to incentivize more wind and solar, or do I have an option to purchase it externally, and what would it cost?” he said.

PJM’s first review will address the long-term impacts of the plan and be confined to the PJM footprint. Future analyses coordinated with other balancing authorities will address energy market interchange and broader emissions trading in the medium term and short term, the RTO said.

The EPA rule includes performance standards for generators. Together, PJM said, the standards would “shift the way energy is produced and delivered within the PJM system and influence future investments in generation sources.”

In PJM, the rule would reduce carbon emissions by 36% from 2005 levels by the year 2030.

The key variable in compliance will be the choice of a rate- or mass-based approach, along with the level of credit trading in which generators will be permitted to engage. Rate-based compliance limits emissions in tons per megawatt-hour; the mass-based method caps emissions in tons per year.

A similar study recently released by MISO concluded that mass-based compliance would cost a third less than the rate-based design. (See MISO: Mass-Based CPP Plan 1/3 Cost of Rate-Based.)

PJM published a study a year ago based on EPA’s proposed rule that concluded that a regional approach to compliance could be 30% less costly than a state-by-state path. (See PJM: EE, Renewables Could Save Some Coal Plants under Carbon Rule.)

“Each of the compliance pathways is likely to yield different economic and reliability results for the PJM region over the interim (2022-2029) and final (2030 and beyond) compliance periods,” PJM said in announcing its methodology. “PJM’s modeling approach is designed to provide states with answers on how compliance with the CPP will drive market outcomes and the need for additional investment in the electric system.”

Natural gas prices and state renewable portfolio standards “have the potential to affect power sector-wide economic outcomes and incremental CPP compliance cost perhaps more than any other driver,” according to PJM. “Consequently, PJM will study each of the compliance pathways and the reference case with and without the renewable portfolio standards and for a high and low natural gas price forecast.”

Analysts will employ the reliability pricing model base case — used to develop the parameters for PJM’s capacity auctions — for their initial transmission and generation assumptions.

Initial assumptions regarding renewable resources available in 2019/20 will be based on an evaluation of the historic commercial probability of resources that enter the generation queue and the incentives from the extension of the federal production and investment tax credits, PJM said.

February 14, 2016

RTOs, States Respond to CPP Stay

Texas, one of the states suing to block the EPA rule, said it will take no steps to comply while the challenge is pending. It would be required to cut CO₂ emissions by almost one-third by 2030.

“The whole point of the stay is to stop us from having to provide any implementation plan, so we’re not moving forward with anything until this case is resolved,” state Attorney General Ken Paxton said in a press conference Wednesday.

ERCOT said in a statement that it “will continue to monitor developments and provide information as needed to Texas policymakers on this and other matters that could affect future electric reliability.”

ISO-NE

The New England states are supporting EPA in the legal challenge.

Connecticut Gov. Dannel Malloy called the stay “disappointing and shortsighted.”

“Through programs like the Regional Greenhouse Gas Initiative, we already have achieved significant reductions in carbon pollution from the electric sector, while growing our economies and maintaining reliable power. We have an obligation to combat greenhouse gases, and Connecticut is going to continue to do just that,” Malloy said.

“As we have always done, ISO New England will continue to provide support to the New England states as they develop their clean energy policies, while the [D.C. Circuit] takes this under consideration,” ISO-NE spokeswoman Marcia Blomberg said.

MISO

All but three of MISO’s 15 states — Iowa, Minnesota and Illinois — are opposing the EPA rule.

“MISO is still studying the Supreme Court’s stay, and we will have discussions with our stakeholder community to better understand their perspectives as we move forward,” MISO spokesperson Andy Schonert said in statement. “Our job as a reliability and transmission planner is to plan into a future that is uncertain as to how much and how fast policy might shift. Because of that, MISO’s modeling and planning efforts are designed to capture various potential outcomes.”

cpp — Ark.Department of Environmental Quality Director Becky Keogh and Public Service Commission Chairman Ted Thomas said that the state would “balance our obligation to be wise stewards of taxpayer money with our obligation to be fully prepared should the Supreme Court ultimately uphold the plan.” (© RTO Insider)

MISO said it is considering modeling a “partial CPP future,” which would assume that legal and political disputes slow the rule’s compliance or even bring it to a standstill, culminating in limited implementation.

Schonert said no decisions have been made yet to add the additional modeling option. Late last month, MISO was presenting results from a near-term analysis while it began to run scenarios under a mid-term analysis. The RTO also submitted comments to EPA on the federal plan that asked for the addition of a reliability safety valve. (See MISO: Mass-Based CPP Plan 1/3 Cost of Rate-Based.)

Minnesota Gov. Mark Dayton said the court’s stay would not affect the state’s clean energy initiatives. “We shouldn’t need a federal edict to understand how vital it is that we keep doing everything in our collective powers to reduce harmful greenhouse gas emissions, improve energy efficiency and advance Minnesota’s clean energy economy,” he said.

In Missouri, the leaders of the House budget committee said last week they will add language into the state spending plan to prevent the Department of Natural Resources from working on compliance. It would need a 37% emissions reduction.

Montana, which would have to cut emissions by 47%, is putting its compliance plans “on hold,” Gov. Steve Bullock said.

NYISO

The stay is unlikely to affect New York, which would be required to cut CO₂ emissions by 19.5%.

Last month, the New York Public Service Commission approved a 10-year, $5.3 billion Clean Energy Fund to accelerate the state’s switch to cleaner resources. The commission moved forward on creation of a Clean Energy Standard that would mandate 50% of New York’s electricity come from clean energy sources by 2030. (See NYPSC OKs $5.3B Clean Energy Fund.)

New York Attorney General Eric T. Schneiderman issued a statement on behalf of his and 14 other states professing confidence that the rule will ultimately be upheld.

NYISO did not respond to requests for comment.

PJM

PJM said last week that the stay won’t affect its planned analysis of the economic and reliability implications of compliance. (See related story, PJM to Proceed on CPP Study Despite Supreme Court Ruling.)

“PJM is committed to delivering to the states, as promised, the analysis of the potential effects of the Clean Power Plan on wholesale markets and reliability,” PJM spokeswoman Paula DuPont-Kidd said. “Our role is to provide data and analysis to help inform the states should the states need to make decisions in the future.”

A Pennsylvania Department of Environmental Protection spokesman told the Pittsburgh Business Times the state “will continue planning and engagement with stakeholders on the Clean Power Plan, pending final decision” by the courts.

Virginia Gov. Terry McAuliffe vowed to “stay on course and continue to develop the elements for a Virginia plan to reduce carbon emissions and stimulate our clean energy economy.”

SPP

SPP has been urging states in its recently expanded territory to work together in compliance, arguing that state-by-state compliance would be more expensive and more difficult for the RTO to manage. (See SPP to Push Regional Approach in First CPP Webinar.)

“SPP is still evaluating the implications of the Supreme Court’s decision to stay the EPA’s Clean Power Plan,” said Lanny Nickell, SPP vice president of engineering. “We will work closely with our stakeholders to determine how this action impacts both our ongoing regional transmission planning efforts and our work to facilitate compliance with the federal government’s carbon reduction goals.”

Oklahoma, which faces a one-third emission reduction, said it is banking on a rejection by the courts. “Since the Supreme Court has stayed implementation, Oklahoma no longer faces a September compliance date and can focus on assisting the attorney general on overturning this rule,” Oklahoma Secretary of Energy and Environment Michael Teague said.

— Amanda Durish Cook, Rich Heidorn Jr., Suzanne Herel, Tom Kleckner and William Opalka

February 14, 2016

States Evaluating Options Following CPP Stay

By Michael Brooks

Since EPA finalized its Clean Power Plan last August, RTOs have been working to evaluate the compliance options for states in their territories and how they may affect energy prices and transmission needs.

Last week, the Supreme Court gave them another variable to account for.

The court’s surprise stay prevents EPA from enforcing the rule pending the outcome of court challenges, meaning states will most likely not have to file compliance plans or extension requests by September, as the rule requires.

RTOs said they will continue to analyze the plan but that it was too early to say how the court’s stay would affect their evaluations. (See related story, RTOs, States Respond to CPP Stay.)

States Hedging Bets

The stay was requested by officials from 29 states, led by Texas Attorney General Ken Paxton and West Virginia Attorney General Patrick Morrisey.

When EPA released its final version of the Clean Power Plan, Senate Majority Leader Mitch McConnell advised states to ignore the rule, calling it illegal.

On Wednesday, Paxton told reporters that Texas would heed that advice. “We had no plans to proceed with anything other than fighting this,” he said in a joint conference call with Morrisey.

And, he said, the state has no intention of preparing a compliance filing in case the rule is ultimately upheld. “The whole point of the stay is to stop us from having to provide any implementation plan, so we’re not moving forward with anything until this case is resolved,” Paxton said.

But while the plaintiff attorneys general joined Paxton in celebrating, some states are hedging their bets.

In Arkansas, Attorney General Leslie Rutledge said the stay “helps ensure that Arkansas and other states are not forced to comply with a rule that will likely be found unlawful and will skyrocket energy rates.”

But Department of Environmental Quality Director Becky Keogh and Public Service Commission Chairman Ted Thomas said that the state would “balance our obligation to be wise stewards of taxpayer money with our obligation to be fully prepared should the Supreme Court ultimately uphold the plan.”

The two officials, who have been leading the state’s work on an implementation plan, scheduled public hearings around the state to gathered stakeholder feedback. An ADEQ spokesperson last week did not know the status of those hearings.

“We’re evaluating our options on next steps,” Keogh said. “We’re seeking input from our stakeholders on what those next steps will be and will continue to engage our stakeholders on environmental policy matters.”

States that were not part of the challenge, such as Virginia and Pennsylvania, said they will continue to work on their compliance plans regardless of how the case proceeds.

“We will stay on course and continue to develop the elements for a Virginia plan to reduce carbon emissions and stimulate our clean energy economy,” Virginia Gov. Terry McAuliffe said in a statement.

For its part, EPA remains open to engaging with states.

“EPA firmly believes the Clean Power Plan will be upheld when the merits are considered because the rule rests on strong scientific and legal foundations,” EPA said in a statement posted on the rule’s website. “For the states that choose to continue to work to cut carbon pollution from power plants and seek the agency’s guidance and assistance, EPA will continue to provide tools and support.”

EPA Administrator Gina McCarthy told state regulators that they should continue work on emissions reductions. The stay “doesn’t mean we won’t continue to support any state that voluntarily wants to move forward,” she said at a meeting of the National Association of State Energy Officials in D.C.

President Obama also put on a brave face at a Democratic National Committee fundraiser in California on Thursday. “One of reasons I want to talk about this is because in the last couple of days I’ve heard people say, ‘The Supreme Court struck down the Clean Power Plan rule,’” Obama said. “That’s not true, so don’t despair, people. This a legal decision that says, ‘Hold on until we review the legality.’ We are very firm in terms of the legal footing here.”

‘Baked In’

Exactly why the court took the highly unusual — if not unprecedented — step to grant a stay before a lower court ruling on the merits is unknown. The one-page order provided no details. (See related story, Supreme Court Blocks Clean Power Plan.)

Opponents of the rule asked the court to prevent EPA from “baking in” its mandates before the court could rule to avoid a repeat of Michigan v. EPA, in which the court declared EPA’s Mercury and Air Toxics Standards illegal.

In their stay application, the plaintiffs pointed out that by the time the court reached a decision, most companies had put in place irreversible plans to shutter or upgrade plants to comply with the rules. (See MATS Challenge Too Late for Targeted Coal Plants.)

“The day after this court ruled in Michigan that EPA had violated the Clean Air Act in enacting its rule regulating fossil fuel-fired power plants under Section 112 of the CAA, EPA boasted in an official blog post that the court’s decision was effectively a nullity,” the plaintiffs wrote. “Because the rule had not been stayed during the years of litigation, EPA assured its supporters that ‘the majority of power plants are already in compliance or well on their way to compliance.’”

“In the present case, EPA is seeking to similarly circumvent judicial review, but on an even larger scale” and “deploy again the cynical tactic that [it] successfully used just last term to nullify this court’s holding” in the MATS case, they wrote.

— Amanda Durish Cook, Rich Heidorn Jr., Suzanne Herel, Tom Kleckner and William Opalka contributed to this report.

February 14, 2016

Scalia Death Scrambles Clean Power Plan Odds

By Rich Heidorn Jr.

WASHINGTON — The death of conservative Supreme Court Justice Antonin Scalia likely improved the odds that the Clean Power Plan will survive court challenges.

Four days before his death Saturday, Scalia was in the majority in the court’s 5-4 vote to stay the EPA rule pending legal challenges.

Many observers took the stay as a sign that the court would likely reject the plan — which relies on a novel interpretation of the Clean Air Act — when it hears it on the merits.

But without a ninth member, a 4-4 split would prevent the court from overturning the D.C. Circuit Court of Appeals if it backs EPA. (If the lower court rejects the rule, of course, there would be no chance for the liberal justices to save it without help from another justice, such as swing vote Anthony Kennedy.)

While Democrats want President Obama to appoint Scalia’s successor, Republicans said the appointment should come after the presidential election. The GOP, which controls the Senate 54-46, could deny Obama the 51 votes needed for confirmation.

Senate Majority Leader Mitch McConnell (R-Ky.) and Judiciary Committee Chairman Charles Grassley (R-Iowa) said Saturday that it should be Obama’s successor who replaces Scalia.

Backfire?

scalia, clean power plan — President Obama commenting on Scalia’s death

Denying Obama the chance to add a fifth liberal to the court has implications for a number of divisive and high profile cases facing the court, including abortion, affirmative action and immigration. But it could backfire on efforts by McConnell and others to block the Clean Power Plan.

The three-judge D.C. Circuit panel appointed to hear the CPP appeal — which had earlier rejected a stay request — includes two jurists appointed by Democrats. (One of them, Obama appointee Sri Srinivasan, has been widely mentioned as a possible Supreme Court nominee himself.)

The D.C. Circuit will hear oral arguments June 2 and is expected to rule this fall. It would be up to the Supreme Court to decide first whether to hear an appeal of the D.C. Circuit’s ruling and second to rule on the merits.

In a 4-4 deadlock, “there is no majority for a decision and the lower court’s ruling stands, as if the Supreme Court had never heard the case,” wrote attorney and SCOTUSblog publisher Tom Goldstein. “Because it is very unlikely that a replacement will be appointed this term, we should expect to see a number of such cases in which the lower court’s decision is ‘affirmed by an equally divided court.’”

Goldstein noted that the court was also limited to eight members during Chief Justice John Roberts’ first term. To avoid equally divided rulings, he said, the court “decided a number of significant cases by instead issuing relatively unimportant, often procedural decisions.”

In televised remarks Saturday, Obama promised he will nominate Scalia’s successor before leaving office. After praising Scalia as a “brilliant legal mind,” Obama said he will nominate a new justice “in due time.”

“There will be plenty of time for me to do so and for the Senate to fulfill its responsibility to give that person a fair hearing and a timely vote,” he said.

Earlier in the day, McConnell had taken the opposite stance. “The American people should have a voice in the selection of their next Supreme Court justice,” he said. “Therefore, this vacancy should not be filled until we have a new president.”

McConnell famously vowed in 2010 that his top priority would be to deny Obama a second term. The coal-state senator took a similar stance when EPA released its final version of the Clean Power Plan, advising states to ignore the rule. (See related stories, States Evaluating Options Following Clean Power Plan Stay, EEI: Power Sector Carbon Reductions to Continue Despite CPP Stay.)

Precedent

Republicans cited historical precedent in contending Scalia’s replacement should be chosen by Obama’s successor. “The fact of the matter is that it’s been standard practice over the last 80 years to not confirm Supreme Court nominees during a presidential election year,” Grassley said.

In 1988, however, McConnell and Grassley voted to confirm Justice Anthony Kennedy, appointed by President Ronald Reagan during his last year in office. Kennedy was confirmed 97-0 by the Senate, which was then controlled by the Democrats. Kennedy’s confirmation ended a seven-month vacancy on the court, coming after the Senate rejected Robert Bork, and a second nominee, Douglas Ginsburg, withdrew.

If Republicans have their way, Scalia’s seat would likely be open for more than a year, a gap Senate Minority Leader Harry Reid (D-Nev.) called “unprecedented in recent history.”

From 1967 through 1994, according to a 2005 Congressional Research Service report, 12 of 19 court nominations were pending in the Senate for more than nine weeks before receiving final action.

CRS says the Senate has confirmed all but 36 of 160 Supreme Court nominees since 1789. Both of Obama’s previous nominees, Justice Sonia Sotomayor (August 2009) and Justice Elena Kagan (August 2010), were confirmed — albeit when Democrats controlled the Senate.

Scalia’s replacement has already become an issue in the presidential race, with Republican candidates calling for a delay and Democrats backing Obama.

Electoral politics also could be at play if Obama gets a nominee to a confirmation vote. Twenty-four Republican senators are seeking reelection including those in the swing “purple” states of Wisconsin, Pennsylvania and Illinois, where blocking a nominee could undermine their appeal to Democratic voters.

Obama would need at least 14 Republicans to compile the 60 votes to force a vote in event of a filibuster. In 1968, the Senate refused to vote on President Lyndon Johnson’s chief justice nominee Abe Fortas. The seat was filled by Johnson’s successor, President Richard Nixon, who nominated Warren Burger.

Political fallout over Scalia’s replacement also could poison attempts to pass a bipartisan energy bill this year. (See Utilities Make Their Case to Skeptical Wall Street.)

February 11, 2016

Prices Down 26% in ISO-NE Capacity Auction

By William Opalka

Prices dropped 26% in ISO-NE’s 10th Forward Capacity Auction as new resources more than made up for retiring generation, the RTO reported on Thursday.

The capacity auction, held Monday for the 2019/20 commitment period, cleared more than 1,800 MW of new generation and demand response.

The clearing price dropped to $7.03/kW-month from last year’s $9.55/kW-month, the first decline in four years.

Almost 36,000 MW of capacity was acquired at a total cost of about $3 billion, down from $4 billion in FCA 9. (See ISO-NE Capacity Prices Likely to Fall in Future.)

“Competition was robust in this year’s Forward Capacity Auction,” ISO-NE CEO Gordon van Welie said in a statement. “The high participation in the auction demonstrates the interest in the New England marketplace and bodes well for meeting future resource adequacy requirements.”

The region is expected to lose 4,200 MW of coal, oil and nuclear generation by 2019, including Entergy’s 680-MW Pilgrim Nuclear Power Station.

RTO officials said 35,567 MW of capacity cleared the auction to meet the 34,151-MW installed capacity requirement for 2019/20:

31,371 MW of generation, including 1,459 MW of new generation;
2,746 MW of demand-side resources, including 371 MW that is new; and
1,450 MW of imports from New York and Canada.

New Generation

Three new gas-fired generators totaling 1,302 MW cleared the auction.

“These resources cleared at a price that was lower than the estimated cost of building a new power plant,” Robert Ethier, vice president of market operations, said during a media briefing. “Even at that price, three new, large power plants cleared at the auction.”

The pre-auction estimate for a new gas-fired plant was $10.81/kW-month. Like all recent construction in New England, the plants will have dual-fuel capability to burn fuel oil in the winter when necessary.

Ethier said ISO-NE and other financial analysts two years ago arrived at the higher figure based on their estimates of where the market was headed. “It certainly came in lower than a lot of industry observers expected,” he said.

The new generation is being built in areas where they are most needed, Ethier said, relatively close to where the Pilgrim plant is located.

About 485 MW of the Burrillville Energy Center 3 in Burrillville, R.I., cleared the auction. Chicago-based Invenergy is developing the $700 million, 900-MW combined cycle facility in the northwest corner of the state.

NRG Energy’s 333-MW Canal 3 in Sandwich, Mass., also cleared. The fuel oil-burning plant is being repowered to natural gas.

“I think it’s fair to project that those resources will provide energy to the region where the Pilgrim generation is retiring from,” Ethier said.

The auction also cleared a new 484-MW natural gas-fired combined cycle plant in Bridgeport, Conn., owned by Public Service Enterprise Group’s PSEG Power. The $550 million plant is expected to begin construction in 2017 and will be located at the site of the existing coal-fired Bridgeport Harbor Station site.

PSEG said Thursday it will finalize plans to retire the 400-MW Bridgeport Harbor and create a $2 million fund to support environmental projects and improvements for city residents to meet a state law that mandates community environmental benefit agreements to mitigate environmental effects of development projects. It also said it will work with Bridgeport to support local hiring. The city has promised “unqualified support” for the new power plant.

Unlike in FCA 9, the same clearing price will be paid to all capacity zones in New England. About 850 MW of the new resources will be built in the reconfigured Southeastern New England zone.

In its former configuration, the Southeast Massachusetts/Rhode Island zone last year failed to attract adequate resources. Administrative prices there were set at $17.73/kW-month as a result.

This year, the region was divided into two zones: Rest of Pool, which comprises Connecticut, western and central Massachusetts, Vermont, New Hampshire and Maine; and Southeastern New England (SENE), which includes Northeast Massachusetts/Greater Boston and Southeast Massachusetts/Rhode Island. (See ISO-NE Proposes New Capacity Zones for FCA 10.)

Firsts

The auction included several firsts, the RTO said.

The first offshore wind farm in the U.S. cleared the auction, with 6.8 MW, or 20% of its nameplate 34-MW capacity. Deepwater Wind is building the facility off Block Island, R.I. It is expected to be operating by the end of the year.

Two large fuel cell facilities, providing 2.5 MW each, also cleared.

ISO-NE said 27 MW of new wind and 44 MW of new solar cleared the auction; in all, 135 MW of wind and 65 MW of solar facilities cleared in FCA 10.

A total of 40,131 MW of resources, including 6,700 MW of new resources, qualified to compete in the auction.

February 10, 2016

EEI: Carbon Reductions to Continue Despite CPP Stay

By Rich Heidorn Jr.

NEW YORK — The Supreme Court’s stay of the Clean Power Plan throws the fate of President Obama’s signature environmental initiative into doubt, but it is not likely to end the shift to gas and renewables and away from coal, the Edison Electric Institute said Wednesday.

“Yesterday’s ruling, while fascinating, doesn’t really change anything,” Quinlan Shea III, EEI’s vice president for the environment, told analysts at EEI’s annual Wall Street briefing in Manhattan. “There’s a lot of drivers. A lot of what we’re seeing now in the domestic utility fleet is occurring anyway.”

Power sector CO₂ emissions and carbon intensity have dropped by about 17% and 11%, respectively, since 2000, according to EEI data. The organization cited an Energy Information Administration projection that non-hydro renewables will more than triple from 2010 levels by 2040. “Greenhouse gas reductions are going to continue in our industry,” Shea said.

That’s not to say the stay announced late Tuesday wasn’t a jolt, said Shea. “I think anybody who wasn’t surprised is somebody you’d like to take with you to Vegas.” (See Supreme Court Blocks Clean Power Plan.)

A lawyer who began his career at EPA, Shea predicted the D.C. Circuit Court of Appeals will rule on the merits of the legal challenges by fall, with a likely Supreme Court ruling within 16 months, before the end of 2017. Other observers have said a Supreme Court ruling is unlikely before 2019. (See Former EPA Official: Clean Power Plan won’t Survive.)

That means, Shea said, that the stay will only affect for certain the September 2016 deadline for states to file compliance plans or seek extensions. Later deadlines — the first emission target in 2022 and the final 2030 target — could be undisturbed if the Supreme Court ultimately upholds the rule.

That is a big “if,” however.

Shea noted that Justice Anthony Kennedy — the swing vote between the liberal and conservative wings of the court, who authored the 2007 ruling that gave EPA the authority to regulate carbon dioxide — sided with conservatives in the 5-4 ruling ordering the stay.

“It makes you wonder what his thinking is.”

The one-page stay order did not disclose the majority’s rationale. “Do [the five justices] have the same reason for agreeing with the stay? None of us know what their reasoning was.”

(The death Saturday of Justice Antonin Scalia, who supported the stay, may also change the rule’s prospects. See Scalia Death Scrambles Clean Power Plan Odds.)

Another question is whether the states and RTOs will slow down their compliance efforts as a result of the ruling.

One thing virtually certain is that Obama will leave office not knowing whether the CPP will be part of his legacy.

EEI officials said it’s unlikely Obama’s successor will seek to revoke the CPP immediately after taking office.

“This probably won’t be the first thing” on the new president’s to do list, said EEI President Thomas Kuhn, who noted the formal process required to revoke regulations. “They will be waiting for the Supreme Court to speak and then figure out where to go from there,” he said.

February 10, 2016

Supreme Court Blocks Clean Power Plan

By Rich Heidorn Jr.

WASHINGTON — The Supreme Court Tuesday blocked EPA from implementing the Clean Power Plan pending legal challenges.

The court ruled 5-4 in favor of a stay, with the court’s liberal wing in the minority.

The court’s one-page order (15A773, et al.), which surprised many observers, means that states won’t have to submit initial compliance plans or extension requests in September, as required by the final EPA rule released last summer.

It also suggests EPA will face a skeptical, if not hostile, court majority if the rule survives challenges now pending before the D.C. Circuit Court of Appeals. Oral arguments before the D.C. Circuit are scheduled for June 2.

A three-judge panel of the D.C. Circuit rejected a stay request last month, ruling that opponents had not proven they had a good chance to prevail in the challenge and that allowing EPA to implement the rule while the case was litigated would result in irreparable harm. (See DC Circuit Rejects Stay on Clean Power Plan.)

States’ Arguments

Twenty-nine states, led by West Virginia, Texas and Oklahoma, asked the Supreme Court to reconsider, saying that EPA had overreached its authority under the Clean Air Act and that the states would suffer “immense sovereign and financial harms as a direct result of the plan, on a scale exceeding any environmental regulations the states have ever faced.”

“In response to the [CPP], the states need to design and enact transformative legislative and regulatory changes, to give their state regulators the authority both to require generation shifting and to react to the rate and reliability impacts of such shifting. Specifically, as several states explained in declarations before the D.C. Circuit, compliance with the plan will require new legislation in the next one to two years to ensure that there is sufficient growth in their domestic natural gas, wind, and solar power sectors to meet the [CPP]’s reductions in coal-fired generation,” the states said in a brief filed Jan 26.

“The sources of energy that EPA assumes will replace coal take years to plan, develop, approve, and then build. Indeed, EPA admitted in the plan that at least some states will need to enact legislation to comply. In addition, states have to revise numerous regulations to ensure that state public utility commissions can respond to and mitigate the plan’s energy price and reliability impacts,” the brief continued.

“These massive legislative and regulatory changes, which are irreparable harms in and of themselves, will also undermine the states’ ability to maintain or achieve their own sovereign priorities. Requiring state regulators to design, mandate and then implement federally mandated ‘generation shifting’ will displace contrary policies that many states have carefully crafted over decades. Once made, many changes will be ‘impossible’ to reverse.”

In a brief on behalf of EPA, Solicitor General Donald Verrilli called stay requests “extraordinary and unprecedented” and said the court had never before “granted a stay of a generally applicable regulation pending initial judicial review in the court of appeals.”

The government argued that states could obtain extensions on filing compliance plans until 2018 and that the first deadlines would not come until 2022. The EPA rule seeks to cut the power sector’s carbon emissions by 32% by 2030, compared with 2005 levels.

The Supreme Court stayed the rule pending a ruling by the D.C. Circuit and the court’s disposition of a petition for a writ of certiorari after that. “If a writ of certiorari is sought and the court denies the petition, this order shall terminate automatically. If the court grants the petition for a writ of certiorari, this order shall terminate when the court enters its judgment.”

Justices Stephen Breyer, Ruth Bader Ginsburg, Elena Kagan and Sonia Sotomayor opposed the stay.

Opponents Rejoice

West Virginia Attorney General Patrick Morrisey called the stay “a great victory for West Virginia.”

“We are thrilled that the Supreme Court realized the rule’s immediate impact and froze its implementation, protecting workers and saving countless dollars as our fight against its legality continues.”

Mike Duncan, CEO of the American Coalition for Clean Coal Electricity, called the stay “a signal the Supreme Court has serious concerns with the” EPA rule.

Without the stay, said Jeffrey Connor, interim CEO of the National Rural Electric Cooperative Association, “co-ops would have been forced to take costly and irreversible steps to comply with the rule, which is a huge overreach of EPA’s legal authority. The Clean Power Plan is a direct threat to co-ops’ ability to provide affordable and reliable electricity to their member consumers and should be erased from the books.”

Enviros Take the Long View

The Natural Resources Defense Council professed confidence that the rule will ultimately be upheld. “The electricity sector has embarked on an unstoppable shift from its high-pollution, dirty-fueled past to a safer, cleaner-powered future, and the stay cannot reverse that trend,” said David Doniger, director of NRDC’s climate and clean air program.

“Nor can it dampen the overwhelming public support for action on climate change and clean energy. Smart industry, financial and governmental leaders will not count the Clean Power Plan out and will keep moving to incorporate strategies and public policies leading toward a clean energy economy.”

Tom Kiernan, CEO of the American Wind Energy Association, expressed disappointment, saying the stay “may signal eventual delays in reducing both the carbon pollution that is causing climate change and getting proven, clean, and affordable wind energy to more Americans.”

Legal Issues

The Supreme Court ruled in 2007 that EPA had authority to regulate carbon dioxide. At issue is how the agency defined the “best system of emission reduction (BSER),” the standard set in Section 111(d) of the Clean Air Act. Opponents contend that the Clean Power Plan is based on a novel — and improper — interpretation.

The opponents also contend that EPA cannot regulate CO₂ under 111(d) because it is also regulated under Section 112 through the Mercury and Air Toxics Standards. (See Legal Debate over Clean Power Plan Takes Center Stage.)

February 9, 2016

Fortis to Acquire ITC Holdings for $11.3B

By William Opalka

ITC Holdings, the largest independent transmission operator in the U.S., agreed to be acquired by Canadian utility operator Fortis in a deal valued at $11.3 billion, the companies announced Tuesday.

ITC is based in Novi, Mich., where it will remain as an independent company. It has been seeking a strategic partner since November.

ITC shareholders will receive $22.57 in cash and 0.752 Fortis shares per ITC share. The companies said the price reflects a 33% premium over ITC’s closing share price on Nov. 27, 2015, before news broke that ITC was shopping itself. The deal is worth $6.9 billion in cash and stock and assumes $4.4 billion in ITC debt.

For Fortis, the attraction of ITC — a pure-play transmission company — is its high regulated returns and the prospect of future growth. It earned an adjusted return on equity of more than 17% in 2014, according to Bloomberg, well above the 11% average of electric utility holding companies.

In a presentation to analysts Tuesday, the company cited a Brattle Group projection that the grid will require investments of $120 billion to $160 billion per decade through 2030 because of the shift away from coal power and integration of more wind power under EPA’s Clean Power Plan.

Fortis said the deal would make it the 13th largest North American public utility — up from its current number 20 ranking— with an enterprise value of $30 billion.

“Fortis has grown its business through strategic acquisitions that have contributed to strong organic growth over the past decade. Our performance in 2015 is a clear demonstration of the success of this strategy,” Fortis CEO Barry Perry said in a statement. “The acquisition of ITC … is a continuation of this growth strategy. ITC not only further strengthens and diversifies our business, but it also accelerates our growth.”

ITC owns and operates high-voltage transmission facilities in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma. It serves a combined peak load of more than 26,000 MW extending over 15,600 miles of transmission lines. All of its employees would be retained, Fortis said.

The deal has been approved by both companies’ boards of directors and will be presented to shareholders. Upon closing, ITC will become a Fortis subsidiary, with its shareholders holding approximately 27% of Fortis stock.

Regulators from the various states, FERC, the Committee on Foreign Investment in the United States, the Federal Trade Commission and the Department of Justice will have to approve the deal. Closing is expected in late 2016.

ITC CEO Joseph Welch said the acquisition “accomplishes our objectives by better positioning the company to have a higher level of focus on pursuing our long-term strategy of investing in transmission opportunities to improve reliability, expand access to power markets and allow new generating resources to interconnect to transmission systems and lower the overall cost of delivered energy for customers.”

Fortis, which is now listed on the Toronto Stock Exchange, will apply to list its common shares on the New York Stock Exchange.

Fortis owns New York-based distribution utility Central Hudson Gas and Electric and UNS Energy in Arizona, the parent of Tucson Gas & Electric.

Fortis said the acquisition aligns with its strategy of building its portfolio by acquiring low-risk regulated energy companies with predictable returns. The transaction is expected to provide earnings of 5% per share in its first full year of operation.

The company will finance the acquisition by issuing $2 billion in debt and by selling up to 19.9% of ITC to other investors.

February 9, 2016

NRC Inspector Due at Indian Point Thursday

By William Opalka

A special inspector for the Nuclear Regulatory Commission is expected to arrive at the Indian Point station Thursday to conduct an inquiry into why elevated levels of tritium were found in groundwater under the plant.

Plant owner Entergy reported the finding to New York state officials after routine monitoring found elevated levels in three out of 40 wells at the site in the Hudson Valley, about 40 miles north of New York City.

“Although we don’t have an exact cause, we believe its likely cause is activities done in preparation for an upcoming refueling operation,” Entergy spokesman Jerry Nappi said Monday.

Early indications point to a sump pump failure that allowed contaminated water to leach into the holding wells, according to an NRC spokesman.

The latest incident provides more ammunition for Gov. Andrew Cuomo, who has sought the plant’s shutdown and who ordered state regulators to investigate its operations after two unplanned outages in December. (See NYPSC Denies Entergy Arbiter in Indian Point Investigation.)

Cuomo ordered the state departments of Health and Environmental Conservation to begin investigations of the incident.

“This latest failure at Indian Point is unacceptable,” Cuomo said in a statement on Saturday.

“This failure continues to demonstrate that Indian Point cannot continue to operate in a manner that is protective of public health and the environment,” the governor said in the letter he wrote to the state commissioners.

Entergy said there is no danger to the public or its workers.

“While elevated tritium in the ground on-site is not in accordance with our standards, there is no health or safety consequence to the public, and releases are more than a thousand times below federal permissible limits,” the company said in a statement.

NRC spokesman Neil Sheehan repeated that ground water contamination offers no threat to the public or workers on the site.

The groundwater will eventually leach into the Hudson “where it will barely be detectable and will pose no threat to the public water supply,” Sheehan said.

Three permanent inspectors are stationed at the plant and they will offer support to the special investigation. If additional action is warranted, NRC will expand the investigation.

“I am urging NRC to fully investigate all the wells surrounding Indian Point and determine why the pump was not working, how far the contamination spread, how to prevent future spills and more importantly determine if local residents’ health and safety are at risk.” U.S. Sen. Charles Schumer (N.Y.) said in a statement.