Page 1437 – RTO Insider

January 12, 2016

Exelon Calls FirstEnergy PPA ‘Grossly Lopsided,’ Says it Can Offer a Better Deal

By Ted Caddell and Suzanne Herel

Exelon, which is seeking subsidies for its Illinois nuclear plants, has joined the opposition to FirstEnergy’s attempts to win guaranteed payments for its Ohio power plants. And it says it has a better offer.

In a filing with the Public Utilities Commission of Ohio, Exelon said regulators should reject FirstEnergy’s “grossly lopsided” power purchase agreement, proposing a competitive bidding process to supply the 3,000 MW for which FirstEnergy is seeking guaranteed rates (the combined value of FirstEnergy’s W.H. Sammis coal plant and its Davis-Besse nuclear station).

Exelon Director of Regulatory and Government Affairs Lael Campbell said the company would submit an offer providing “well over $2 billion in savings to Ohio families and businesses” compared to FirstEnergy’s proposed PPA.

“Today we are taking the unprecedented step of committing to offer into that competitive process at a price level that will guarantee billions in savings so that no one can misunderstand the gravity of the harm that would occur to Ohio customers if the commission approved” the FirstEnergy PPA, he said. “We are putting our money where our mouth is.”

The specifics of Exelon’s offer were redacted, but Campbell said it would be an eight-year fixed price for energy and capacity of about 3,000 MW that would come from “100% zero carbon resources” — nuclear, hydro, wind and solar facilities in PJM.

Exelon spokesman Paul Elsberg said there have been no further communications with PUCO regarding the offer.

FirstEnergy spokesman Doug Colafella said the Exelon offer ignores one of the fundamentals of the FirstEnergy offer — a way to secure power from in-state generators and the almost 1,000 jobs of those who work at the Sammis and Davis-Besse plants.

Exelon, he said, has “no plants in Ohio, no jobs in Ohio.”

AEP PPA

PUCO also is considering a settlement calling for eight years of guaranteed rates for some of American Electric Power’s plants. Exelon said time constraints prevented it from making a similar offer in that case.

“Exelon requested additional time to file testimony in the AEP case, but the motion was not granted,” Elsberg wrote in an email. “The arguments made by Exelon against the First Energy proposal apply equally to the AEP proposal.”

Last week, PUCO ruled that the Sierra Club, IGS Energy and Direct Energy must submit to questioning to explain why they are supporting the AEP proposal.

PJM Urged to Oppose PPAs

On Jan. 6, the PJM Power Providers Group (P3) and the Electric Power Supply Association sent a letter to the PJM Board of Managers urging the RTO to actively oppose the AEP and FirstEnergy PPAs, contending they would undermine PJM’s competitive electricity market.

Last month, PJM submitted testimony to PUCO, saying the PPAs needed changes to preserve competition and the state’s ability to attract merchant generation. PJM has said it plans to issue a market analysis of the PPAs this spring, but that may be after the commission renders a judgment. (See PJM Seeks Changes to AEP, FirstEnergy PPAs.)

P3 and EPSA said the RTO’s actions were too little, too late.

“In testimony recently submitted to the PUCO long after the cases were underway and the dangers known, PJM indicated that PJM did not take a position on these nefarious efforts to undermine PJM’s markets,” they wrote. “Rather than advising the PUCO on the devastating impacts to the market in the short and long term, PJM instead sent a message that these subsidies would somehow be acceptable if certain conditions were attached.”

The groups said that the RTO is leaving the commission to evaluate the proposals “in a vacuum.”

“PJM should not be afraid to say when a program being considered at the state level directly undermines the wholesale market,” it said. “One would expect that the Ohio commission, while reserving the opportunity to disagree, would welcome the input of PJM on the full ramifications of what has been proposed.”

The groups said the reliability and competitive prices provided by PJM “will evaporate if the market is corrupted by state actions that subsidize uneconomic units.”

PJM declined to comment on the letter.

Pablo Vegas, president and CEO of Ohio Power Co. (AEP Ohio), responded to the letter with his own to PJM, saying P3 and EPSA were wrong to accuse the company “of undermining the very markets AEP Ohio has long sought to support and improve.”

“AEP Ohio has carefully worked to confine the proceedings before the PUCO … to matters of retail rate recovery,” he said.

He noted that PJM historically has refrained from “intruding upon retail ratemaking proceedings — or attempting to influence retail policies,” and urged it not to deviate from that precedent.

In a Jan. 7 order, PUCO denied PJM’s request to be a late intervenor in the AEP case but invited the RTO to submit a friend of the court brief to outline its concerns and make recommendations.

Exelon’s Campbell said FirstEnergy was a champion of the competitive process until now. “Ironically, FirstEnergy led the drive to competition and up until this proceeding took positions before this commission and other agencies and public officials which embraced competition and retail choice,” Campbell testified. “FirstEnergy was right then; it is wrong today.”

Exelon Seeks Relief for Ill. Nukes

While it is opposing FirstEnergy’s PPAs in Ohio, Exelon is seeking relief for its nuclear generators in Illinois. The company has requested that Illinois expand its clean energy subsidies to include nuclear power alongside wind and solar energy.

A bill backed by Exelon stalled in the Illinois legislature last year. Those critical of the Exelon subsidies have called them a nuclear “bailout” and said they would cost ratepayers around $300 million annually in surcharges.

In November, Exelon announced it has delayed for a year a decision on whether to mothball its Clinton reactor. (See Exelon Defers Clinton Closure; MISO Hints at Changes.)

January 12, 2016

FERC: Spy Software Provides Evidence of UTC Scam

By Michael Brooks

An energy trading company’s use of employee-monitoring software provided FERC investigators with evidence documenting its strategy of making riskless up-to-congestion transactions to collect line-loss credits from PJM, officials said last week.

FERC last week issued a show cause order demanding more than $42 million from Coaltrain Energy (IN16-4).

The commission used email and instant messages in lodging similar allegations against Powhatan Energy Fund and City Power Marketing. FERC’s Office of Enforcement found an additional source of evidence in their investigation of Coaltrain — the company’s use of Spector 360, software that logs users’ every keystroke and automatically takes screenshots every 20 seconds.

The commission said Enforcement staff was tipped off to the software’s existence by a former Coaltrain employee in June 2012, almost two years after it had begun its investigation into the company. Coaltrain employees initially claimed they had forgotten about the software when Enforcement made its original data requests and repeatedly delayed releasing the logs when asked for them, FERC said.

When Enforcement finally gained access to the Spector 360 logs, they received a voluminous amount of information — about 10 GB per employee — detailing the company’s actions in the summer of 2010, including emails, instant messages, Internet search and browsing history and, perhaps most important, internal logs of every single trade the company made over that time period.

A Familiar Story

Prior to June 2010, Coaltrain specialized in UTC trading, correctly predicting the changes in spreads between PJM’s real-time and day-ahead markets. This “spread strategy” involved complex analyses of transmission constraints and the impacts on LMPs. The company was very successful at these legitimate trades, FERC noted, earning profits of $12.8 million in 2008 and $18.7 million in 2010.

Coaltrain changed its trading strategy once it learned it could make more money from PJM’s marginal loss surplus allocation (MLSA) program, which refunds a portion of transmission loss charges to companies who contribute to the fixed costs of the grid. (See FERC: PJM Entitled to Recoup Line-Loss Credits.)

The company “discovered that they could profit from MLSA payments alone if UTC price spreads could be minimized or avoided entirely,” FERC said. Coaltrain devised a new “OCL strategy” — “over-collected losses” being its internal term for MLSA.

The allegations are similar to those against Powhatan and City Power. In fact, FERC said, when PJM released a report on June 1, 2010, showing how much in MLSA it had paid to companies, the Spector 360 logs show that Coaltrain co-owner Peter Jones sent City Power founder Stephen Tsingas an instant message congratulating him on collecting nearly $16 million in credits.

A few days later, Coaltrain employees began searching PJM’s website and Google for more information on MLSA, the Spector 360 logs show.

From June 15 to Sept. 10, 2010, Coaltrain traded 4.61 million MWh, losing more than $96,000 on the UTC price spreads and $3.83 million in transaction costs. However, it collected $8.05 million in MLSA payments, resulting in a profit of about $4.12 million.

“In contrast to the spread strategy that involved a complicated analysis using congestion-based constraints, the OCL strategy did not rely on constraints at all,” FERC said. “While there is voluminous evidence showing that [Coaltrain’s] strategy was designed not to profit from price spreads but instead to capture MLSA, a contemporaneous comment from [Adam] Hughes — who designed the software tools [the traders] used to carry out their scheme — sums it up: ‘create application to find deals for loss credits.’”

Severe Penalties

FERC is seeking $38.25 million in civil penalties from Coaltrain, its two owners and four employees, along with the $4.12 million in profits.

Enforcement staff said that it is seeking severe penalties because Coaltrain lied to them about the information it had logged using Spector 360. In comparison, the commission has assessed $29.8 million in penalties against Powhatan and $15 million against City Power.

“Coaltrain misrepresented material facts about relevant documents in an effort to hide them from Enforcement and made false and misleading statements concerning those documents as well as the availability of their witnesses to testify,” FERC said.

Coaltrain issued a statement Tuesday insisting it “was always responsive” to FERC’s information requests.

“The existence of computer monitoring software was disclosed to FERC and its staff in filings at the commission in 2009, which is before the investigation even began. When asked for the materials, Coaltrain cooperated with its former vendor to obtain a new license and provide the information requested. Suggestions that there was any delay in responding to FERC are erroneous and uninformed by the facts,” the company said. “Coaltrain is eager to cooperate with FERC to resolve this matter and has cooperated at every step of the process.”

FERC noted that Coaltrain’s owners had terminated an employee in their previous company, Energy Endeavors, based on the information received through the software about his activities.

In 2009, Jones and fellow owner Shawn Sheehan discovered that employee Moussa Kourouma was attempting to form his own energy trading business, in violation of a non-compete clause in his employment contract. The owners were able to use Spector 360 to track Kourouma’s activity down to his bank transactions.

Based on this information, they were able to protest Kourouma’s filing for market-based rate authority for his new company to trade in PJM. FERC said that in a confidential affidavit attached to the protest, Sheehan said the information came from “a commercially available software program for monitoring employee use.”

“The company regularly used Spector 360, and any claims that they ‘forgot’ about it are false,” FERC said.

The commission issued a Notice of Alleged Violation in September. (See FERC Charges Third Firm with UTC Scam in PJM.) Coaltrain has until Feb. 6 to respond to the Order to Show Cause.

January 8, 2016

Md. Judge Upholds PSC’s OK of Exelon-Pepco Merger

By Suzanne Herel

A Maryland circuit court judge Friday upheld the state Public Service Commission’s approval of Exelon’s acquisition of Pepco Holdings Inc., denying an appeal led by the Office of People’s Counsel.

“The court’s scrutiny has revealed Order 86990 to be the product of substantial evidence supporting the conclusions and was clearly a rational review of the evidence by reasoning minds,” Judge Thomas G. Ross ruled.

The Office of People’s Counsel was joined in the appeal by the Sierra Club, Chesapeake Climate Action Network and Public Citizen. The parties had asked for the judicial review after Ross denied their request to stay the commission’s 3-2 decision. (See Md. Judge Denies Stay in Exelon-Pepco Deal.)

The petitioners had the support of Maryland Attorney General Brian Frosh, who filed a friend of the court brief asking that the merger decision be reconsidered.

People’s Counsel Paula Carmody could not be reached for comment Friday evening.

Exelon issued a statement saying it was “gratified” by the ruling.

“The commission correctly found that our merger proposal meets the requirements of Maryland law. The merger is in the public interest and provides direct, immediate and long-term benefits to customers, enhances reliability, promotes the growth of clean energy and increases Delmarva Power and Pepco’s roles as community partners.”

The petitioners asked the court to review five questions, among them whether the commission’s decision could be considered arbitrary because of its “unexplained conclusion that allegations of harm to the distributed generation and renewable energy markets were ‘speculative.’”

They also questioned the decision on several procedural matters and asked whether the PSC’s “failure to consider the acquisition premium in assessing the ‘no harm,’ ‘benefits’ and ‘public interest’ requirements of the Public Utilities article constitute an error of law.”

In the 12-page ruling, Ross shot down all of the concerns, saying the PSC had properly considered each issue. He sided with the commission in its opinion that merger opponents had “failed to articulate concrete examples” of public harm resulting from the deal.

D.C. is the last jurisdiction standing in the way of the $6.8 billion merger. The district’s Public Service Commission initially rejected the merger but agreed to reconsider the proposal after Mayor Muriel Bowser’s administration brokered a settlement.

Last month, the General Services Administration — the district’s largest consumer of electricity — filed a brief with the PSC saying the merger should be rejected unless it is retooled to include benefits for commercial customers. (See GSA Opposes Exelon-Pepco Settlement.)

The PSC is expected to make a ruling early this year. The deal has already been approved by FERC and regulators in Delaware, New Jersey and Virginia.

January 8, 2016

FERC Again Rejects Challenge to ISO-NE New Entry Pricing

By William Opalka

FERC on Thursday reaffirmed the zero-price offer requirement in ISO-NE’s new entrant pricing rule, again rejecting complaints by Exelon and Calpine that it unreasonably suppresses capacity prices and discriminates against existing resources (EL15-23-001).

The commission denied rehearing of an order from January 2015. (See FERC Upholds ISO-NE New Entry Pricing; Rejects Challenges by Generators.)

ISO-NE’s rule allows new resources to lock in their first-year clearing price for up to six subsequent delivery years by offering as a price-taker with a price of zero.

Exelon and Calpine argued that the rule creates a discriminatory two-tiered pricing scheme, with existing resources receiving lower prices than new ones if clearing prices fall in subsequent Forward Capacity Auctions.

The companies said the commission ignored the precedent it set in 2009 in rejecting PJM’s proposed zero-offer requirement, when it ruled that new and existing resources are similarly situated and should receive the same price (ER05-1410-013, et al.).

In its new order, however, FERC said its view has “evolved” since the PJM case, which was decided by members who have since departed the commission.

Because new resources have little maintenance needs, their going-forward costs are near zero, the commission said, and thus consistent with a zero-price offer strategy that ensures they continue to clear the FCA.

“Based on further consideration, the commission has realized that a zero-price capacity offer from a new merchant resource that has cleared in at least one previous auction and has incurred construction costs can be a competitive offer that reflects the resource’s going-forward costs, not an attempt to lower capacity market clearing prices,” FERC wrote.

The companies said ISO-NE’s new entry rule results in greater price suppression than PJM’s because of a longer lock-in period (seven years in ISO-NE, three in PJM) and broader eligibility. New England’s lock-in option is generally available to any new entrant, while PJM’s “applies only in narrow circumstances and thus is rarely triggered,” FERC said.

The order comes a month before FCA 10, scheduled for Feb. 8. The commission had said ISO-NE’s zero-price rule was acceptable because it used “differing clearing mechanics” than PJM’s. The companies said the disparate treatment is no longer valid since ISO-NE is introducing a sloped demand curve similar to PJM’s.

The commission acknowledged that the existence of the lock-in option “may result in lower capacity clearing prices” but said this was part of “a reasonable balance between incenting new entry through greater investor assurance and protecting consumers from very high prices.”

FERC said the relief the companies sought — requiring new entrants to submit offers higher than zero in subsequent auctions, as in PJM, or offering a lock-in option to existing resources — could raise costs.

“In a scenario where one or more new ISO-NE resources lock in their prices in year one, and auction clearing prices in subsequent years drop such that those resources do not clear at the year-one price, New England customers could incur significant costs to pay the lock-in resources out-of-market,” the commission wrote.

January 6, 2016

FERC Orders MISO to Change Auction Rules

By Amanda Durish Cook

FERC has ordered MISO to change the way it conducts capacity auctions beginning with the 2016/17 auction in April as it continues to investigate allegations of market manipulation against Dynegy (EL15-70).

While the commission didn’t rule on the issue of consumer refunds, several parties to the case predict such relief might be in the works.

“We find that the record shows that certain of the Tariff provisions governing market mitigation measures are no longer just and reasonable,” FERC wrote in its determination.

According to the commission, MISO stumbled on two fronts: The $155.79/MW-day maximum bid was too high for a “vibrant market” and needed to be set closer to $25, and MISO didn’t accurately gauge power exports. FERC said MISO’s current approach to determining capacity import limits doesn’t take into account counter-flows created by neighboring RTOs.

MISO has 30 days to file revised capacity import limits and set the initial reference level for capacity at $0/MW-day and 90 days to file Tariff revisions to develop default technology-specific avoidable costs ahead of the 2017/18 auction. The $0 default will replace MISO’s current practice of allowing offers based on the estimated opportunity cost of exporting capacity.

More Rulings to Come

More is to come on the matter, however, as the Dec. 31 order only addressed parts of the complaints brought forward by Public Citizen, Illinois Attorney General Lisa Madigan, the Illinois Industrial Energy Consumers and Southwestern Electric Cooperative that deal with Tariff provisions on the auction “given the limited amount of actionable time prior to the 2016/17 auction,” according to the commission. FERC is continuing its non-public investigation into the matter. (See FERC Launches Probe into MISO Capacity Auction.)

Public Citizen, the consumer advocacy group that filed the first complaint in May, called the ruling a “partial victory.” The group alleged that Houston-based Dynegy manipulated the April capacity auction by withholding capacity, resulting in prices clearing at $150/MW-day for the Zone 4 portion of Illinois, up to 40 times greater than clearing prices elsewhere in the footprint. The spike represented a nine-fold price increase in the zone compared with the year before and prompted FERC to call an October technical conference. (See MISO Stakeholder Process Under Scrutiny.)

Dynegy said it is “looking forward to working with MISO” to implement the changes mandated by FERC.

Spokesman Micah Hirschfield said it is “imperative” that the market construct in Zone 4 work with Southern Illinois’ competitive structure to avoid future retirements.

“Generators in Southern Illinois rely on the markets for revenues, unlike the traditionally regulated utilities in the neighboring states that embed their costs into their rates. Generation has, and will continue to, retire in Southern Illinois unless the market design reflects the competitive nature of the market, which has delivered lower costs to consumers than many of the neighboring states,” Hirschfield said.

Dynegy continues to maintain that it offered all of its megawatts into the April capacity auction “with no physical or economic withholding” and followed MISO’s Tariff.

MISO to Weigh Rehearing

FERC’s order that MISO set offers to a zero default elicited a critical reaction from MISO Independent Market Monitor David Patton, who said entering offers at $0 makes little economic sense. “I can’t imagine what the economic theory is behind that,” he said.

“We’re weighing whether to file for rehearing. I don’t know that we will because we argued all of this at the technical conference,” Patton said. He added that FERC and MISO seem to be employing separate economic principles, and that he will reach out to MISO to see how the Tariff will have to be revised to comply with the order.

“I think they recognize a problem, but at this point, [FERC is] unwilling to address it,” Patton said of FERC’s decision.

Refunds to Come?

The ruling has some groups anticipating refunds, and FERC has allowed for a refund effective date of May 28, 2015, the date of Public Citizen’s initial complaint.

“If FERC follows the logic of its New Year’s Eve ruling, and regardless of whether the commission finds Dynegy manipulated the market, then Illinois consumers will be in line for tens of millions of dollars in refunds,” Tyson Slocum, director of Public Citizen’s energy program, said in a statement.

Madigan also said refunds are in order. “It’s great news that FERC has acknowledged downstate electric customers deserve relief from an inflated and absurd pricing process. I am pleased with FERC’s decision to fix the auction rules, but FERC still needs to order refunds to consumers for the outrageously high prices,” she said in a press release.

FERC’s Ruling Limited

FERC stated in the order that MISO is under no obligation to modify zones or combine Zones 4 and 5. “Nevertheless, we encourage MISO to continue to work with its stakeholders to ensure its zonal boundaries reflect the physical realities of the transmission system,” the commission wrote.

FERC also determined that use of a sloped demand curve would not be addressed, as it falls outside of FERC’s response to the complaint. “We will not address potential revisions to MISO’s capacity construct, including a sloped demand curve, longer forward period and a minimum offer price rule, here because they are beyond the scope of these proceedings.

“However, we recognize that MISO is working with stakeholders to explore potential revisions to the capacity construct, including concerns specific to Zone 4, and we encourage them to continue doing so,” FERC wrote.

January 5, 2016

LS Power’s Artificial Island Rate Filing Challenged

By Suzanne Herel

The Delaware Public Service Commission, the Delaware Municipal Electric Corp. and American Municipal Power are protesting the formula rates proposed by LS Power’s Northeast Transmission Development for the Artificial Island project (ER16-453).

Northeast Transmission “has failed to demonstrate that its proposed return on equity [ROE], formula rate protocols, process for using a projected transmission revenue requirement, capital structure approach, depreciation rates or incentives are just and reasonable,” the PSC wrote.

The protesters asked FERC to suspend Northeast Transmission’s filing for the maximum of five months and conduct an evidentiary hearing on the matter.

Northeast Transmission is a subsidiary of LS Power, which PJM chose to build a stability fix for the the Salem and Hope Creek nuclear reactors in New Jersey. (See PJM Board OKs LS Power’s Artificial Island Project Despite Objections.)

In its 810-page, Dec. 2 filing, the company requested that FERC approve its annual transmission revenue requirement and five categories of transmission rate incentives — including 100 basis points in adders for participation in PJM and “the increased risks and challenges” of the project — effective Feb. 1. It asked to replicate the rate and incentives for future projects conducted by yet-to-be-formed affiliates.

In its protest, the Delaware Municipal Electric Corp. took issue in part with the proposed 10.5% base ROE, which it called “unjustified and inconsistent with commission precedent.” It also criticized the company’s request for a 50-basis-point adder for participation in PJM as unwarranted. If awarded, the adder should not take effect until the project goes into service, expected to be June 1, 2019, it said.

AMP also challenged Northeast Transmission’s proposed ROE and depreciation rates. It asked that FERC issue a delinquency filing requiring the company to provide additional information supporting its income tax calculations and post-employment benefits expense and said it would participate in any settlement judge procedures.

The project will consist of a new 230-kV transmission line between the Salem substation in New Jersey and the 230-kV Red Lion-Cartanza and Red Lion-Cedar Creek transmission lines in Delaware by way of the newly constructed Silver Run substation. Northeast Transmission will construct the river crossing, with Public Service Electric & Gas and Pepco Holdings Inc. doing related substation and connection work.

PJM’s proposed cost allocation, which would bill nearly all of the $146 million price tag to consumers in Maryland and Delaware, will be the subject of a Jan. 12 FERC technical conference. The conference will “explore both whether there is a definable category of reliability projects within PJM for which the solution-based DFAX [distribution factor] cost allocation method may not be just and reasonable, such as projects addressing reliability violations that are not related to flow on the planned transmission facility, and whether an alternative just and reasonable ex ante cost allocation method could be established for any such category of projects,” FERC said (EL15-95). (See FERC Questions Fairness of Artificial Island Cost Allocation.)

January 5, 2016

SPP Report Shows 16% Decrease in Coal Generation

SPP has seen a 16% drop in coal-fired generation over the last two years, thanks in no small part to consistently low gas prices.

The SPP Market Monitoring Unit’s quarterly market report for September-November said coal-fired resources accounted for 52.1% of generation in the fall of 2015, compared to 62.7% in 2013, the last few months of SPP’s energy imbalance services market.

spp The Monitor noted the decline in coal generation has been offset by increases in wind (up 3.7%), nuclear (up 3.4%) and combined cycle generation (up 3.3%). Hydro generation increased 2.1% over the two-year period, primarily because of the addition of the Western Area Power Administration-Upper Great Plains.

According to the report, Panhandle Hub gas costs averaged $2/MMBtu in November. Average gas prices for the fall were $2.25/MMBtu, compared to $3.76/MMBtu in 2014.

Average LMPs for both the real-time balancing market and the day-ahead market also saw significant declines. Real-time LMPs averaged $20.73/MWh (-$8.84 from fall 2014) and day-ahead LMPs averaged $19.98/MWh (-$8.19).

Lower prices were “prevalent in the north due to less expensive generation” and in the west-central due to the area’s “abundant low-cost wind,” the report said.

The MMU said SPP is experiencing divergence between day-ahead and real-time prices, partially because of “significant price volatility” in the real-time market.

— Tom Kleckner

January 5, 2016

FERC Asked to Toss Huntley RMR Agreement

The New York Public Service Commission staff on Dec. 28 asked FERC to throw out a proposal to keep a doomed coal-fired power plant operating for several months at above-market rates (ER16-81).

The PSC said FERC should reject the proposal made by NRG Energy to keep the 380-MW Huntley plant in Tonawanda, N.Y., going past March 1. NRG is seeking a cost of service agreement for reliability-must-run service that could keep Huntley running for an additional three months or longer. (See NRG Seeks Change on Huntley Reliability Contract.)

NRG had apparently pinned its hopes on concerns that the area would need voltage support until National Grid completes transmission upgrades. Even that justification for Huntley’s operation has fallen away.

“NYISO and National Grid recently exchanged correspondence which demonstrates conclusively that even without the transmission projects (including its capacitor banks and reactors), facility deactivation will not give rise to any local or bulk system reliability need on or after the proposed March 1, 2016, retirement date,” the state commission wrote. “Consequently, there is no basis to consider — much less approve — an RMR agreement that would subsidize facility operation after the proposed retirement date.”

NRG spokesman David Gaier said the company would be willing to negotiate an RMR agreement with NYISO and National Grid, but he seemed resigned. “At this moment … the Huntley station will retire as previously announced on March 1,” he said.

— William Opalka

January 5, 2016

Federal Briefs

Tennessee Gas Pipeline took strong issue with Massachusetts Attorney General Maura Healey’s contention that the proposed Northeast Energy Direct pipeline is unneeded in a 503-page response to questions posed by FERC and other interested parties about the natural gas pipeline.

The pipeline company said Healey’s study ignores important information and doesn’t fully take into account the amount of baseload generation that is being retired in the Northeast, and the resulting need for more fuel for gas-fired generation.

In addition to addressing issues such as its use of protected land and possible greenhouse gas emissions, the company also rejected assertions that the pipeline would be partially funded by ratepayer tariffs. “The proposed project is not relying on subsidies to be built,” Tennessee Gas wrote.

More: The Recorder

FERC Begins Review of PennEast Pipeline Project

FERC has begun an environmental impact study of the PennEast Pipeline, a proposed 114-mile project that would deliver natural gas from the Marcellus Shale formation in Pennsylvania to markets mostly in New Jersey.

The commission has asked EPA, the U.S. Army Corps of Engineers and the U.S. Fish and Wildlife Service to participate in the study. A draft of the study will be made available for public review, and comments from the public will be incorporated. PennEast has said it wants to begin construction in early 2017.

More: The Morning Call

Texas Joins States in Challenge to EPA Ozone Rule

Texas last week announced it would join eight states that are contesting EPA’s ozone rule, which would cut power plant and industry ozone release from 75 parts per billion to 70 ppb. Texas Attorney General Ken Paxton said the new rule would “impose a serious financial burden on the Texas economy for dubious public health benefit.”

“The EPA’s new ozone rule is not supported by scientific data,” Paxton said. “Areas of the country that fail to comply with these impossible standards will be subject to costly new regulations that will harm our economy and kill jobs.”

The environmental agency finalized the National Ambient Air Quality Standards for ozone on Oct. 1. Arizona, Arkansas, Kentucky, New Mexico, North Dakota, Oklahoma, Utah and Wisconsin have announced they would challenge the new standards.

More: Power Magazine

DOE Launches Spent Nuclear Fuel Initiative

The Energy Department has launched an initiative to develop an alternative repository for spent nuclear fuel to the failed proposal to build the Yucca Mountain site in Nevada. The new effort will concentrate on developing a site with the consent of a local community.

“The launch of our consent-based siting initiative represents an important step toward addressing this nuclear waste management challenge, so that we can continue to benefit from nuclear technologies,” Lynn Orr, the deputy secretary for science and energy, wrote in a blog post last week.

More: The Hill

FERC Agrees to Allow Missouri Hydro Project to Move Forward

FERC has granted a permit allowing a three-year study on the feasibility of an 8-MW hydro project at an existing dam near Hannibal in Ralls County, Mo.

Energy Resources USA wants to build a new, 770-foot-long intake area at the Mississippi River Lock and Dam No. 22, which is owned by the federal government. The project would funnel water to a concrete powerhouse containing four hydro turbines. FERC’s approval means the company can move forward with the study and start to prepare a license application.

More: HydroWorld

South Carolina: DOE Owes $1 Million Daily for MOx Plant Failures

South Carolina says it is beginning to tally a $1 million/day tab against the Energy Department for failing to fulfill a promise to get its trouble-plagued mixed-oxide fuel fabrication facility operating by the end of 2015.

The MOx facility was supposed to be disposing of 34 metric tons of weapons-grade plutonium by Dec. 31 under a 2003 agreement between the department and South Carolina. Gov. Nikki Haley wrote to Energy Secretary Ernest Moniz informing him that the state intended to start imposing the fine for the missed milestone. “Promises made must be promises kept,” she said in the letter.

Moniz has not yet responded.

More: Aiken Standard

January 5, 2016

MISO to Tackle Capacity, Queue, Caps and CPP in 2016

By Amanda Durish Cook

It’s been 15 years since FERC approved MISO as an RTO and, like a teenager, MISO is experiencing a growth spurt.

Last month, the board approved an annual Transmission Expansion Plan consisting of 345 projects valued at $2.75 billion. With the exception of 2011, the plan represents the footprint’s largest expansion since the annual process began in 2003.

This year’s spending plan includes a $31 million capital budget and a $225 million operating budget, a 3% increase over 2015.

Busy Year Ahead

MISO expects a busy 2016.

In January, it will begin selecting a developer for its first competitively bid transmission project under FERC Order 1000, southern Indiana’s Duff-Coleman 345-kV project.

In February, design review will begin on MISO’s proposed two-season capacity market construct. Under a draft proposal, the RTO would obtain capacity based on a June-September summer season and an October-May winter, with separate seasonal resource accreditations, reserve margins and capacity import/export limits. (See MISO Proposes Two-Season Capacity Market.) FERC filings are expected in March.

MISO capacity auctions still won’t be mandatory, as FERC struck down the RTO’s request for compulsory capacity auction participation in November.

Resource adequacy will continue its presence on MISO agendas in 2016. In the first six months, the RTO will consider recommendations from a task team appointed by its Supply Adequacy Working Group on how to accommodate merchant generators in Illinois’ Zone 4, where retail choice is permitted. The move followed an October FERC technical conference and two policy sessions of the Illinois Commerce Commission on problems in the area.

“I think what’s been identified in Illinois is a gap,” Jeff Bladen, MISO’s executive director of market design, said in early December. “It is a very targeted, surgical matter that needs to be tackled.” (See Stakeholders to ICC: MISO Resource Adequacy Fine — for now.)

MISO also will continue its modeling of the potential impacts of the Clean Power Plan. According to initial results released last month, compliance costs could vary widely in the footprint, with the price of natural gas a major variable. (See MISO: Coal Retirements, Gas Prices, Flexibility Key to CPP Compliance Costs.)

MISO’s new interconnection queue rules will begin Feb. 20. Following a transition, projects will move through a reformed queue that includes a non-refundable $5,000 study deposit and two “off-ramps” where owners can choose to withdraw projects for a refund. (See MISO Unveils Queue Reform Transition as Wind Advocates Seek Delay.)

SPP Dispute Settled

In October, MISO settled a grid-use dispute with neighboring SPP regarding the 1,000-MW transfer limit in their joint operating agreement. The settlement replaced the RTOs’ operations reliability coordination agreement and the resulting $9.57/MWh hurdle rate that had been in place since 2014. (See SPP, MISO Reach Deal to End Transmission Dispute.)

Late 2015 also saw the adoption of a new stakeholder redesign. The changes, which include closing out completed task forces, merging redundant groups, emphasizing joint meetings and re-evaluating meeting schedules, will take effect over the next three months. (See MISO Stakeholders OK Redesign, Begin Implementation.)

The redesign absorbed or consolidated seven groups. The RTO’s Advisory and Steering Committees will oversee the transition.

Michelle Bloodworth, executive director of external affairs, said the redesign was “a great step to making sure stakeholders are well positioned to address the big challenges our region faces.”

Meanwhile, a mild winter so far has made it easy to live with MISO’s October decision to delay raising its energy offer cap. Instead, the RTO asked FERC to approve another waiver allowing recovery of generators’ costs above $1,000/MWh through uplift payments. MISO says it plans to put together a “permanent solution” in time for next winter. (See MISO: No Change to Energy Offer Cap this Winter.)