Page 1448 – RTO Insider

May 12, 2016

FERC Rejects Challenges to PJM Capacity Performance

By Rich Heidorn Jr.

FERC late Tuesday rejected multiple rehearing requests on PJM’s Capacity Performance rules, but ordered the RTO to revise Tariff language regarding auction revenue rights and clarify language on several other issues, including risk premiums and “nonphysical” constraints.

The ruling, on the eve of PJM’s Base Residual Auction Wednesday, granted only one rehearing request, ordering the RTO to change its force majeure rules regarding load-serving entities’ ARRs (ER15-623, EL15-29, EL15-41).

The commission rescinded its approval of Tariff language allowing the RTO to deny financial transmission rights awards for an “unanticipated event outside the control of PJM.” The commission had agreed that PJM should have some discretion in determining when to relax a binding constraint in allocating FTRs. (FTRs can be purchased or converted from ARRs, which are allocated to network and firm point-to-point customers.)

American Municipal Power, Old Dominion Electric Cooperative and Southern Maryland Electric Cooperative complained that the change could affect LSEs’ shares of stage 1A ARRs and thus their abilities to hedge transmission costs.

The complainants said the language was different from PJM’s other force majeure changes because it applied to PJM’s obligations to LSEs rather than market participants’ performance obligations.

They argued the revised Tariff lacked any limits on PJM’s exercise of its discretion. In most cases, they added, FTR allocations will have already been made or be underway before PJM makes its decisions, leaving them facing “the prospect of an unlikely post-settlement remedy.”

FERC agreed.

“Upon further consideration, we agree that PJM has not adequately explained why its existing rules are unjust and unreasonable regarding its duties to load-serving entities as they relate to the allocation of ARRs and FTRs,” it said, ordering the RTO to reinstate “its prior just and reasonable” Tariff language.

Nonperformance Charges

The commission also required several revisions to PJM’s July 29, 2015, compliance filing in response to FERC’s June 9 order conditionally approving Capacity Performance. (See FERC OKs PJM Capacity Performance: What You Need to Know.)

One required change concerns whether a capacity resource will be subject to nonperformance charges if PJM does not schedule it solely because of operating parameter limitations in the resource’s offer.

FERC said a literal reading of the Tariff suggests that a provision exempting resources from the nonperformance charge if the resource is not scheduled through PJM’s security-constrained economic dispatch takes precedence — meaning a resource’s undelivered megawatts would not be counted as a performance shortfall even if it would otherwise be needed.

“This outcome is inconsistent with the commission’s finding in the Capacity Performance order,” it said.

It directed PJM to revise the Tariff “to make clear that, notwithstanding PJM’s determination that a scheduling action was appropriate to the security-constrained economic dispatch of the PJM region, any undelivered megawatts will be counted as a performance shortfall if such megawatts otherwise would be needed but for an operating parameter limitation specified in the market seller’s energy offer.”

Fixed Resource Requirement Phase-in

The commission also found fault with PJM’s proposal to apply the Capacity Performance rules to all fixed resource requirement (FRR) entities beginning with the 2019-20 delivery year.

FERC said the proposal to apply Capacity Performance rules to FRR entities with no ongoing five-year election commitment beginning with delivery year 2020/21 was “reasonable in concept.”

But it said its intent was that the rules would not apply to an entity that was within its initial five-year FRR commitment period when the CP order was issued, meaning an entity that first elected to use the FRR option for delivery year 2015/16 would not become subject to the rules until delivery year 2020/21.

“PJM’s proposed compliance to apply the Capacity Performance requirements to all fixed resource requirement entities beginning with the 2019/20 delivery year is therefore not consistent with the commission’s intent,” it said.

Quantifiable Risk

NRG Energy, Dynegy, Public Service Enterprise Group, the PJM Power Providers Group and the Independent Market Monitor won their requests for clarification of Tariff language regarding “quantifiable risks” of becoming a capacity resource.

The commission said it disagreed with complaints that PJM’s language narrowed sellers’ ability to include quantifiable, reasonably supported risks in their offers.

But it required the RTO to clarify that the method it described for justifying such risks was not all-inclusive “and that a capacity market seller may use other methods or forms of support for a risk premium to meet the ‘reasonably supported’ threshold.”

“The risk that market sellers face from becoming capacity resources under the new capacity market construct requires a complex calculation that depends on the company-specific nature of valuing performance risk,” the commission said.

PJM had said a risk would be considered reasonably supported “if it is based on actuarial practices generally used by the industry to model or value risk and … used by the capacity market seller to model or value risk in other aspects of the capacity market seller’s business.”

Nonphysical Constraints

FERC also said PJM went too far in requiring that gas generators seeking to qualify for consideration of “legitimate, constraints unrelated to the characteristics of the unit” — which PJM calls nonphysical constraints — must obtain the most flexible gas pipeline transportation contract.

The commission said PJM’s filing went beyond the scope of its compliance directive requiring the RTO to allow parameter limitations for operational constraints.

“PJM’s proposal also is unclear since operational constraints imposed by a gas pipeline may have little relationship to the underlying flexibility of a transportation contract, but are related to pipeline operational characteristics, and cannot be eliminated by contract term or service choice,” the commission said.

“Furthermore, we find that provision unduly discriminatory as it establishes a prerequisite applicable only to gas generators. We also agree with protesters that the language is vague and would require PJM to exercise significant discretion in determining whether a generator has obtained the most flexible contract available.”

It ordered the RTO to remove the offending language from its Operating Agreement and Tariff and to “make explicit that the revisions here do not preclude resources other than natural gas generators from establishing legitimate, nonphysical constraints.”

Bay Again Dissents

Chairman Norman Bay, who voted against the original Capacity Performance order, also opposed the latest ruling, issuing an 11-page dissent reiterating his position that the construct’s “multi-billion-dollar cost to consumers exceeds the benefits.”

“Furthermore, and equally important, the market design itself is flawed. Compensation for capacity resources is so generous, and the penalties for nonperformance are so weak, that resources can profit even if they are unable to perform when they are most needed, thereby undercutting the very purpose of the program,” he said.

May 12, 2016

Ohio Gov. Kasich Names Asim Haque for PUCO Chair

Gov. John Kasich on Monday named Public Utilities Commission of Ohio Vice Chair Asim Haque to replace outgoing Chairman Andre Porter.

Porter announced last month that he would be leaving the commission on May 20. While Porter, who served little more than a year, hasn’t said where he would be going, industry speculation has him taking a position with MISO. The RTO has declined repeated requests to comment on the speculation.

Asim Haque, PUCO, Kasich — Asim Haque *Source: PUCO*

Haque, appointed to the commission three years ago by Kasich, will be the fourth PUCO chairman in four years. Haque will be guiding the commission through the ongoing controversy over power purchase agreements for American Electric Power and FirstEnergy.

“Throughout his three years of service on the PUCO, Commissioner Haque has demonstrated an exceptional command of the issues and challenges facing Ohio’s energy markets. No one is better prepared to apply that level of expertise and independent judgment to the role of chairman,” Kasich said.

“I am honored by the governor’s confidence in my ability to lead the commission, and I look forward to working with my fellow commissioners and the talented PUCO staff to foster energy policies that further strengthen Ohio’s job growth with affordable, reliable power,” Haque said.

Haque has bachelor’s degrees in chemistry and political science from Case Western Reserve University and a law degree from the Ohio State University Moritz College of Law.

A nominating council will now have to come up with four names to submit to Kasich for consideration to fill Haque’s old seat, a process that could take months.

— Ted Caddell

May 12, 2016

CFTC to Add ‘Private Rights’ to RTO Exemption

By Tom Kleckner

The U.S. Commodity Futures Trading Commission said Tuesday that it is amending its 2013 order exempting RTO energy transactions from certain provisions of the Commodity Exchange Act to clarify that it does not bar private rights of action.

The proposed amendment, approved in a 2-1 vote, would “explicitly” provide that the RTO-ISO order does not prevent private parties from filing lawsuits.

CFTC said the private right of action’s existence is “not inconsistent with or detrimental to cooperation between the CFTC and FERC.” Preserving that right, the commission said, “will not cause regulatory uncertainty or duplicative or inconsistent regulation.”

“Moreover, conflicting judicial interpretations regarding the nature of the covered transactions would not affect the jurisdiction of FERC or any relevant state regulatory authority.”

The amendment stems from CFTC’s April 2013 order, which exempted financial transmission rights and other electricity transactions subject to tariffs approved by FERC or the Public Utility Commission of Texas from most of the CEA’s provisions, while retaining its general anti-fraud and anti-manipulation authority.

SPP was the only grid operator not party to the order, as its day-ahead market did not become fully operational until March 2014. The RTO sought the same exemptions that the commission granted the others, but the commission’s May 2015 draft order on SPP included a preamble stating its intent to preserve private rights of action under Section 22 of the CEA.

Although the commission said it did not intend to exclude private suits in its 2013 order, the 5th Circuit Court of Appeals ruled in February that it had done so. The appellate court upheld a 2015 ruling by the U.S. District Court for the Southern District of Texas dismissing a lawsuit alleging that some generators in ERCOT were intentionally withholding electricity and manipulating prices in the derivatives commodities market (Aspire Commodities v. GDF Suez Energy N. Am., No. H-14-1111). The court said that the private right of action was “unavailable to [p]laintiffs” due to the CFTC’s exemption order.

In March, the ISO/RTO Council, the Texas PUC, the Edison Electric Institute and other witnesses asked the commission to reverse its position, saying the SPP order could undermine the broad exemptions earlier granted to the other grid operators. PJM, ERCOT and CAISO also raised objections last year.

Last month, U.S. Sen. John Boozman (R-Ark.) introduced an amendment to CFTC’s reauthorization bill that would prevent the agency from adding the private rights option to the 2013 order. (See Congress May Order CFTC to Back Down on Private Rights.)

CFTC Chairman Timothy Massad said he appreciated “the desire of businesses to have as little regulatory uncertainty as possible” but that the commission must also ensure “there is adequate recourse” for market participants.

“Private rights of action have been instrumental in helping to protect market participants and deter bad actors,” Massad said in a statement. “These actions can also augment the limited enforcement resources of the CFTC and serve the public interest by allowing harmed parties to seek damages in instances where the commission lacks the resources to do so on their behalf.”

In a lengthy dissent, Commissioner J. Christopher Giancarlo said the amendment “manages to simultaneously toss legal certainty to the wind and threaten the household budgets of low- and middle-income ratepayers by permitting private lawsuits in heavily regulated markets that are at the heart of the U.S. economy.”

The proposed amendment will be open for public comment for 30 days once it is published in the Federal Register.

May 9, 2016

Company Briefs

More than 60% of Exelon shareholders voted against the company’s 2015 executive compensation plan, a nonbinding vote that the proxy advisory firm Institutional Shareholder Services said reflected discontent with the easy terms of CEO Chris Crane’s $16 million compensation package.

“Exelon’s stock performance lagged [behind] many of its peers over the last three- to five-year periods,” ISS said in a report released before the vote. “However, nearly every component of CEO pay increased during FY2015, and incentive awards, both long and short, were earned at above-target levels and based on nearly flat or lowered performance goals.”

Exelon said it was taking the vote into advisement. “Our shareholders have spoken on executive compensation and although it was an advisory vote, we take the vote and shareholder feedback very seriously and are currently re-evaluating our executive compensation programs to address this feedback.”

More: Crain’s Chicago Business

PPL Cuts Default Price For Pa. Electric Customers

PPL Utilities said it is cutting its default price for residential customers who don’t shop for electricity from 7.878 cents/kWh to 7.393 cents, and from 7.731 cents/kWh to 6.593 cents for small commercial customers. The new prices for “default service” take effect in June.

The company sets the “price to compare” twice a year, in December and June. This supply charge is based on what it costs PPL to obtain the power, so it is a direct pass-through with no profit to the utility.

More: The Morning Call

Xcel Moves Wis. Solar Projects Ahead Despite Slow Sales

Xcel Energy will proceed with the construction of two community solar farms in La Crosse and Eau Claire counties in Wisconsin even though the company has only sold 12% of the available 2 MW.

The company’s report to the Wisconsin Public Service Commission shows four commercial customers have reserved 140 kW and 42 residential customers reserved 99 kW. Xcel, however, estimates it will sell at least 95% of the power from both projects by the end of the year, when they are expected to begin producing electricity.

“While we have not received a large number of nonresidential subscriptions yet to date, many of our nonresidential customers are in the process of running large subscription recommendations through their internal decision-making processes,” Xcel wrote in the PSC report.

More: The Chippewa Herald

DTE’s Fermi 2 Nuclear Plant Closes for Repairs

DTE Energy’s Fermi 2 nuclear power plant has been shut down to repair a component in the electrical distribution system, according to spokesman Stephen Tait.

DTE’s monitoring program, Tait said, indicated the reactor in southeastern Michigan needed the repair. Other maintenance work will take place during the shutdown.

No date was given on when the plant would resume service.

More: The Monroe News

Cracked Bolts Lead to Prolonged Salem Outage

The discovery of cracks to a number of bolts inside the core of the Salem 1 nuclear reactor on Artificial Island have delayed the unit’s coming back online, according to the Nuclear Regulatory Commission and PSEG Nuclear.

A routine inspection found cracks on 18 of the reactor’s 832 baffle bolts during a refueling outage. The company is extending the outage to conduct further inspections.

NRC spokesman Neil Sheehan said some of the bolt heads had broken off, but he and PSEG officials said there was no danger. A recent inspection at Entergy’s Indian Point nuclear station in New York found 227 of its 832 bolts needing replacement.

More: NJ.com

Eversource Energy Names New CFO

Eversource Energy last week announced that Phil Lembo will succeed Jim Judge as the company’s CFO. The announcement came the same day Judge took over as CEO for the retiring Tom May.

Lembo had been vice president and treasurer for Eversource since the 2012 merger between Northeast Utilities and NSTAR. Before that, he served as vice president and treasurer for NSTAR since 2009. He has been with the company for 33 years.

More: Eversource

More Solar Power to Go Online for Duke Energy

The sixth 5-MW solar project that Duke Energy Renewables purchased from Community Energy is set go live this month in North Carolina.

The generation is being sold to Dominion NC Power under a 15-year agreement. Duke has installed about 450 MW of solar in North Carolina.

More: power-technology.com

Exxon Partnering with Fuel Cell Co. to Capture Carbon

ExxonMobil has agreed to invest an unspecified amount into Connecticut-based FuelCell Energy to develop a process that could dramatically cut carbon dioxide emissions from power plants while improving electrical output.

The initial phase of the deal will finance one to two years of research. A second phase would test the technology in “a small-scale pilot project.”

FuelCell and ExxonMobil have been cooperating on research since 2014. The goal of the project is to eventually create large-scale systems that can capture CO₂from the steam turbines used in coal- and natural gas-powered electric generating plants and convert it to additional electricity in fuel cells.

More: Hartford Courant

May 9, 2016

FERC Upholds 3 MISO SSR Cost Allocations in Upper Peninsula

By Amanda Durish Cook

FERC last week rejected all challenges to system support resource rate schedules for three aging power plants in Michigan’s Upper Peninsula.

miso, ferc, ssr, ssr cost allocations — Presque Isle Plant *Source: We Energies*

The commission upheld MISO’s SSR cost allocation for the Presque Isle, Escanaba and White Pines power plants (ER14-2952, et al.), rejecting requests for rehearing from a dozen parties, including the Michigan Public Service Commission, the City of Mackinac Island, the Sault Ste. Marie Tribe of Chippewa Indians, Upper Peninsula Power Co., the City of Escanaba and Cloverland Electric Cooperative.

FERC also accepted MISO’s compliance filing, which detailed the calculation for load distribution factors. The RTO also eliminated a proposal to select load buses that have an 80% effect on transmission constraints as SSR unit beneficiaries.

In September, FERC generally accepted MISO’s SSR cost allocation methodology, saying it “assigns SSR costs directly to load-serving entities serving loads that would contribute to thermal or voltage reliability violations in the absence of the Presque Isle, Escanaba and White Pine SSR units.” (See FERC OKs MISO’s SSR Allocation for 3 Plants.)

The approved cost allocation took the place of an optimization-load balancing authority approach found in MISO’s Business Practices Manuals. While FERC defended the new allocation on several fronts, it ordered MISO to file a report by mid-June that details how the RTO plans to distribute refunds to LSEs overcharged under the former approach. The commission said it would address arguments over effective dates and refund obligations “upon the filing of the refund report.”

May 9, 2016

CAISO EIM Boosts Market for Renewables in Q1

By Robert Mullin

The recently expanded western Energy Imbalance Market (EIM) provided California a new outlet for its surplus renewable output last quarter, according to CAISO’s quarterly economic benefits report.

The EIM produced $18.9 million in overall financial benefits for its participants during the first quarter of 2016, up from $12.3 million the previous quarter, the report said.

CAISO attributed the increase to the participation of NV Energy, which joined the real-time market in December 2015. The utility’s addition significantly improved transfer capability between the ISO and the balancing areas belonging to PacifiCorp — the EIM’s first participant — creating a more unified footprint. (See NV Energy has Smooth EIM Integration, CAISO Says.)

Despite its key contribution to unifying the market, NV Energy realized just $1.7 million of the gross benefits during the quarter. The largest share — $10.85 million — flowed to PacifiCorp, while CAISO picked up $6.35 million.

CAISO: Exporter

Nested into the report was what could be the most significant development of the quarter: the rise of CAISO as a real-time energy exporter into other areas of the EIM. CAISO has generally been an importer of electricity since the launch of the market in November 2014. NV Energy’s entry into the market expanded transfer capacity between the ISO and PacifiCorp East from 200 MW to about 570 MW.

“A significant level of the energy that was exported by the ISO was renewable generation,” CAISO said.

That data supports arguments for an expanded EIM — and potentially a Western RTO. Advocates contend a larger market is necessary to reduce curtailments of the increasing amount of renewable generation in the West. CAISO estimates that its EIM operation helped it avoid curtailing 112,948 MWh of renewable generation during the first quarter.

“If not for energy transfers facilitated by the EIM, some renewable generation located within the ISO would have been curtailed via either economic or exceptional dispatch,” CAISO said.

The renewable output made possible by the reduced curtailments prevented the emission of more than 48,000 metric tons of CO₂for the quarter, CAISO estimates. The ISO also speculates that the cut in curtailments also reduced the number of renewable energy certificates retracted, although that benefit was not quantified in the report.

The ISO’s calculations are based on estimated cost savings from EIM dispatch compared with a “counterfactual” case of dispatch without the market. Benefits fall into three categories, including:

More efficient inter- and intraregional dispatch in the 15-minute and real-time markets;
Reduced curtailment of renewable energy; and
Reduced need for flexibility reserves in all balancing areas.

For individual EIM participants, benefits take the form of either cost savings — such as from reduced need for reserves — or increased profits from merchant operations. CAISO’s quarterly report does not break down estimates along those lines.

CAISO says the EIM has benefited participants to the tune of $64.6 million since the market’s 2014 rollout.

May 9, 2016

SPP Sees Hope for Joint Studies in NIPSCO Order

By Tom Kleckner

With prospects for a second coordinated system plan study with MISO looking bleak, SPP’s Seams Steering Committee considered last week whether it might find some relief in a recent FERC order related to the MISO-PJM seam.

FERC last month ordered MISO and PJM to make changes in their interregional transmission planning process as a result of a complaint filed by Northern Indiana Public Service Co. (EL13-88). (See FERC Orders Changes to MISO-PJM Interregional Planning.)

That led the SSC — which met via conference call Friday as MISO and PJM were holding their Interregional Planning Stakeholder Advisory Committee meeting — to wonder whether the commission’s directives in the NIPSCO docket would apply to the MISO-SPP seam as well.

“It’s hard for me to imagine the rationale for having different criteria for different seams,” SSC Chair Paul Malone said.

“If they change things on the PJM seam, I don’t see why [MISO] would be opposed to being consistent on the SPP seam,” American Electric Power’s Jim Jacoby said.

David Kelley, SPP’s director of interregional relations, noted that FERC directed MISO and PJM to make changes to their joint operating agreement’s cost allocation for interregional projects. The commission ordered that costs be allocated in proportion to the total benefits as calculated in “each RTO’s respective tariff,” rather than how benefits are calculated in the JOA.

FERC said with the change, “each RTO will then determine whether the potential interregional economic transmission project meets its individual 1.25-to-1 benefit-to-cost threshold using the RTO’s pro rata share of the total cost based on its share of the total dollar value of the benefits.”

“We have the same exact language PJM and MISO have. It’s hard for me to fathom there wouldn’t also be a directive to apply it to our seams,” Kelley said. “We don’t have a threshold test, which I believe MISO and PJM do, [but] the order asked them to get rid of it.”

Ameren’s Pat Hayes, who was also participating in the IPSAC meeting, told the SSC that MISO was planning to seek clarification from FERC on whether the NIPSCO issues were unique to the MISO-PJM interregional process or applied to all interregional processes.

SPP is not an intervenor in the docket, though some of its members, including AEP, are. “We’re more than happy to submit those questions” raised, AEP’s Kip Fox said.

Kelley said SPP is still digesting the order, but he promised to have more feedback for the committee’s June meeting.

MISO’s 345-kV threshold for interregional projects has been one of the stumbling blocks in selecting interregional projects on the MISO-SPP seam. The RTOs were unable to agree on a single project in last year’s joint study, and MISO staff is currently recommending not to pursue a second study this year. (See MISO, SPP Disagree on 2016 Joint Study.)

MISO’s Planning Advisory Committee is scheduled to take a final vote on whether to pursue the joint study during its May 18 meeting. SPP staff said stakeholders unable to participate in the March SPP-MISO IPSAC meeting had requested extra time and additional materials from MISO before making a decision.

The SSC voted last month to pursue a targeted transmission study with MISO. (See “Seams Steering Committee Seeks ‘Targeted’ MISO Seam Study,” SPP Briefs.) Staff said in the future, such votes will be held at joint IPSAC meetings to avoid delays.

SPP’s Gerardo Ugalde said MISO paid SPP more than $1 million for temporary and permanent flowgate relief in March. Since market-to-market operations began in March 2015, SPP has used the process to manage congestion on 45 SPP flowgates and 50 MISO flowgates, he said.

Ugalde shared staff’s analysis of flowgates where real-time congestion was observed for more than 10 days. SPP compared internal flows against firm-flow entitlements. But because the six-flowgate sample size was so small, staff is currently running studies to determine how day-ahead clearing would change if SPP started using FFE limits.

May 9, 2016

AEP, FirstEnergy Revise PPA Requests to Avoid FERC Review

By Ted Caddell

After a yearlong battle to win approval from Ohio regulators for their controversial power purchase agreements, FirstEnergy and AEP Ohio asked the state last week to start over.

FirstEnergy asked the Public Utilities Commission of Ohio to withdraw its PPA and replace it with a customer charge that would still protect its aging power plants (14-1297-EL-SSO).

Kyger Creek Plant Source: OVEC (first energy, aep, ferc, ppa) — Kyger Creek Plant *Source: OVEC*

AEP whittled down its original request for PPAs for all of its 3,100-MW Ohio merchant fleet, asking PUCO for agreements covering only its 440-MW share of the Ohio Valley Electric Corp. (14-1693-EL-RDR, 14-1694-EL-AAM). AEP said it will stand by its commitment to develop 900 MW of renewable energy — a promise that convinced the Sierra Club to sign on to its plan — with certain provisos.

Both AEP and FirstEnergy are seeking to reformulate their plans in order to avoid a review by FERC. The commission ruled April 27 that the PPAs — in which AEP’s and FirstEnergy’s regulated utilities would purchase output from the companies’ merchant generators — must be reviewed under the Edgar affiliate abuse test (EL16-33 and EL16-34).

AEP CEO Nick Akins said the company would either lobby Ohio lawmakers to reregulate the state’s electricity market or sell off its Ohio fleet rather than submit to FERC review. FirstEnergy CEO Chuck Jones has also said he would welcome reregulation. (See All Eyes on AEP, FirstEnergy with Ohio PPAs in Doubt.)

FirstEnergy is asking for an expedited ruling from the commission by May 25. The deadline for parties to respond to AEP’s and FirstEnergy’s new proposals is May 12.

Rehearing Requests

The companies’ new requests came on the deadline for PPA opponents to seek rehearing of PUCO’s March 31 ruling.

Among those renewing their call for rejection of the PPAs were the Electric Power Supply Association, the Ohio Consumers’ Counsel, the Environmental Defense Fund, the Sierra Club (which is opposing the FirstEnergy deal but is still a party to the AEP agreement), the Retail Energy Supply Association and the PJM Power Providers Group.

The OCC noted that FERC rescinded the waivers “under which AEP Ohio claimed it could proceed with the PPA without FERC review, [so] accordingly, the PPA rider is effectively dead.”

Shannon Fisk, managing attorney at Earthjustice, a nonprofit law firm representing the Sierra Club, said Friday that FirstEnergy’s newest filing was “a transparent attempt to avoid FERC review.” He said he hopes PUCO “won’t join with FirstEnergy to snub FERC.

“It would be seriously inappropriate for a state commission to do that,” he said.

AEP Wants Stake in Renewable Projects

In its latest filing, AEP said it is committed to the renewable portion of its PPA agreement but wants to own half of the projects, rather than purchasing the power on the market. “This is especially vital given that AEP Ohio is attempting to fully honor the renewable commitment even though the previously featured affiliated PPA is no longer part of the PPA proposal,” the company wrote.

“The company is productively attempting to salvage rather than terminate the commitments made as part of the beneficial package of the stipulation in a reasonable and modest way,” it wrote. “The company is pursuing this even though the central feature of the affiliated PPA is no longer included.”

May 9, 2016

UPDATED: The RTO Insider Top 30

We are proud to announce the initiation of the RTO Insider Top 30, the first in what will be a quarterly review of the top publicly traded companies (by market capitalization) with significant presence in the seven RTOs and ISOs in the U.S.

Any list is bound to provoke debate — and we trust this will be no exception. It’s a particular challenge in the ever-changing electric industry, as new technologies, environmental mandates and other factors force shifts in business models and regulatory rules.

The list includes both integrated utilities and independent power producers. It doesn’t include some companies such as out-of-the ashes Dynegy and EnerNOC, whose voices in policy matters outweigh their market capitalizations.

This new initiative also coincides with our expansion to CAISO and its expanding Energy Imbalance Market. So the list includes companies such as Pinnacle West Capital (parent of Arizona Public Service), Sempra Energy, Pacific Gas and Electric, Edison International (parent of Southern California Edison), about which we haven’t written much before. We’ve also included Berkshire Hathaway Energy, which reports its financials as if it were a standalone company although it trades as part of Warren Buffet’s Berkshire Hathaway holding company.

So, consider this a beta test and share your feedback with us. We expect to refine — and perhaps enlarge — this list in the future.

Company	Mkt cap ($ billions)	Revenue Q1 2016 ($ billions)	% change vs. 2015	Net income Q1 2016 ($ millions)	% change vs. 2015
NextEra Energy	$54.51	$3.84	-7%	636	-2%
National Grid	$54.15	***	***	***	***
Duke Energy	$54.14	$5.62	-7%	$699	-19%
Dominion Resources	$43.48	$2.92	-15%	$524	-2%
Exelon	$33.15	$7.57	-14%	$123	-83%
American Electric Power	$31.43	$4.00	-13%	$501	-20%
Pacific Gas and Electric	$29.19	$3.97	2%	110	224%
Berkshire Hathaway Energy	NA	$4.04	-4%	$495	5%
Sempra Energy	$25.97	$2.62	-2%	330	-28%
PPL	$25.91	$2.01	-10%	$481	-26%
Edison International	$23.35	$2.44	-3%	296	-7%
Public Service Enterprise Group	$22.75	$2.62	-17%	$471	-20%
Consolidated Edison	$21.38	$3.16	-13%	$310	-16%
Xcel Energy	$20.36	$2.77	-6%	$241	59%
WEC Energy Group	$18.48	$2.20	58%	$347	77%
Eversource Energy	$18.06	$2.06	-18%	$244	-4%
DTE Energy	$15.97	$2.57	-14%	$240	-12%
FirstEnergy	$13.88	$3.87	-1%	$328	48%
Entergy	$13.54	$2.61	-11%	$230	-23%
Avangrid	$12.46	$1.67	***	$212	100%
Ameren	$11.53	$1.43	-8%	$105	-3%
CMS Energy	$11.48	$1.80	-15%	$164	-19%
CenterPoint Energy	$9.31	$1.98	-18%	$154	18%
Alliant	$8.22	$0.84	-6%	$99	0%
Pinnacle West Capital	$8.08	$0.68	1%	$9	-55%
NiSource	$7.50	$1.45	-21%	$180	-7%
Westar Energy	$7.22	$0.57	-4%	$69	29%
OGE Energy	$5.91	$0.43	-10%	$25	-42%
Calpine	$5.59	$1.62	-2%	$(198)	NA
NRG Energy	$5.10	$3.23	-16%	$47	NA
Totals		$76.59	-7%	$7,472	-12%

***Companies had not reported as of press time.

Mild Winter Cuts Revenues

It wasn’t a very good quarter for most of the companies in our grouping. Largely because of a mild winter and continued low natural gas prices, revenues dropped by a median of 7% and net income both fell by a median of 7% in the first quarter of 2016 versus a year earlier.

Total profits declined by 12%, falling to $7.5 billion for the 29 companies that have reported thus far, from $8.5 billion for the same group a year earlier.

Q1-2016-Revenue-%-Change-vs-2015-(company-filings)-web — Companies in the RTO Insider Top 30 reported a median 10% drop in revenues in the first quarter of 2016 vs. 2015.

Only three companies saw an increase in revenue in the quarter, led by WEC Energy Group, which was formed last June from Wisconsin Energy’s acquisition of Integrys Energy Group. The merger boosted its top line 58% to $2.2 billion (see details below). PG&E and Pinnacle West showed modest revenue gains.

Excluding the incremental $980 million in revenue WEC gained from Integrys, however, total revenues declined 8% to $75.6 billion.

Six companies saw an increase in net income: WEC, PG&E, FirstEnergy, Westar Energy, Xcel Energy and Avangrid, which was formed in December following Spanish conglomerate Iberdrola’s acquisition of UIL Holdings.

Avangrid’s net income for the quarter included a one-time gain of $17 million from the sale of its interest in the Iroquois Gas Transmission System.

All but one company was profitable for the quarter. Calpine showed a net loss of $198 million ($0.56/share), an increase from the $10 million loss ($0.03/share) reported a year earlier. The company’s revenues declined 2% to $1.62 billion. The company attributed the loss primarily to mark-to-market losses resulting from decreases in forward power and natural gas prices.

Below are some of the highlights from the first quarter.

– Rich Heidorn Jr.

Integrys Acquisition, Influx of New Customers Amplify WEC Q1 Earnings

WEC’s Integrys acquisition boosted first-quarter revenue, with earnings per share jumping 19 cents from $0.90 in 2015 to $1.09 in 2016.

“We are achieving the results we expected from the Integrys acquisition,” CEO Allen Leverett said in a conference call last week.

WEC recorded net income of $347 million, up from $196 million in the first quarter of 2015. The addition of Integrys boosted revenues by $980 million despite decreased demand over a mild winter.

Leverett said the company is serving 8,000 more electric customers and 11,000 more natural gas customers in Wisconsin compared to a year ago. Another 6,000 natural gas customers were added in the past year in Illinois, Michigan and Minnesota, and WEC gained 10,000 Minnesota natural gas customers from Alliant Energy in April 2015, Leverett reported.

On Monday, UBS Securities upgraded WEC to neutral from sell, citing the company’s projected 5 to 7% earnings-per-share growth rate.

– Amanda Durish Cook

PSEG: ‘New Urgency’ to Cost Cuts

Public Service Enterprise Group CEO Ralph Izzo blamed “the complete absence of a winter” in part for its 17% drop in revenues. Weather in PSEG’s service territory was 10% warmer than normal and the fifth warmest on record.

Izzo said low gas prices and stricter reliability requirements for capacity resources in PJM have “added new urgency to the company’s efforts to improve its cost structure and efficiency,” leading it to make what he called “judicious reductions” in its nuclear workforce.

The CEO also said the company “is working closely with the industry to identify additional means of reducing its cost structure” to keep its nuclear plants operating.

During an earnings call, Izzo was asked about the rationale for PSEG’s partnership with Indiana gas and electric utility Vectren to seek competitive transmission opportunities in MISO. “I think that there is a lot of value to be had by combining forces with someone who understands the local transmission grid and system with our expertise now having put over $2 billion to work on an annual basis for a good number of years in terms of cost and schedule management on transmission construction.”

Izzo said the company would continue to be judicious in its generation expansions. “We have demonstrated that we’re pretty bad at acquiring assets,” he said. “By that I mean we seem to have a more conservative view of where the market is going and are consistently outbid.”

– Rich Heidorn Jr.

Dominion Hoping Conn. Legislature will Help Millstone

Dominion Resources’ lackluster results — a 15% drop in revenue and net income down 2% — left CEO Thomas Farrell having to open his earnings call with analysts by boasting about the company’s No. 1 safety ranking among electric utilities in the Southeast. Occupational Safety and Health Administration “recordables for each of our business units were roughly one-half the level recorded last year, and last year had tied an all-time company record,” Farrell said.

He also took note of the beginning of commercial operations at Dominion’s 1,358-MW Brunswick County Power Station, “completed ahead of time and under budget.”

Farrell said the company is “much more interested” in solar than wind assets. “Wind is not a good asset in the territories where we do business for producing power reliably,” he said.

The CEO also said Connecticut lawmakers had ended their session without taking action on legislation that could aid the company’s Millstone nuclear plant. Farrell said he expects the Connecticut House to consider the bill, which cleared the Senate, when it reconvenes in January.

The bill could allow Millstone to sell up to half its power in a new market under long-term contracts.

“We’re following the legislation, obviously, closely,” Farrell said. “But I think it’s part of an overall dialogue that will take place over the next few months in New England generally about how to protect” Millstone and NextEra Energy’s Seabrook nuclear plant in New Hampshire.

– Rich Heidorn Jr.

CMS Energy Q1 Earnings Down on Record Warm Winter

CMS Energy attributed its first-quarter earnings decline to Michigan’s second-warmest winter on record.

John Russell, CMS’ outgoing CEO, said “weather was the primary factor” for why net income dropped 19% to $164 million. Mild temperatures undercut gas deliveries and electricity sales, while an upsurge in storm activity increased restoration-related expenses, Russell said during an April 28 call.

The Michigan-based company is the parent of Consumers Energy, which reduced its electric rates by $38 million annually (1%) effective with the April 15 retirement of its seven oldest coal plants. Consumers is using power from renewables and the recently acquired Jackson natural gas-fired plant to fill the gap.

“We retired seven coal plants totaling 950 MW, bringing our capacity mix to less than 25% coal,” Russell said.

Patti Poppe, senior vice president of distribution operations and incoming CEO, said CMS’ electric and gas distribution business can improve its per customer operation and maintenance cost, which is in the third quartile when compared with peer companies.

Russell, who retires July 1, also used the call to appeal for a change to a Michigan law that he said requires CMS customers to subsidize about 300 large customers by paying an extra 3 to 4% in their bills. “This is simply not fair,” he said. He said Consumers staff are willing to work with legislators on a new energy plan.

– Amanda Durish Cook

NRG Beats Expectations with $82M Net Income

NRG Energy’s first-quarter earnings surpassed Wall Street expectations, validating the company’s “integrated competitive power platform,” CEO Mauricio Gutierrez said.

“We are off to a really good start for the year,” Gutierrez said during a conference call May 5. “We have turned the page on this period of uncertainty.”

The company reported first-quarter net income of $47 million after losing $136 million during the same period a year earlier. Earnings per share came in at 24 cents, after some analysts had predicted losses averaging 17 cents/share. NRG posted $3.23 billion in revenue for the quarter.

Gutierrez said the company has made “significant progress” in its goal of selling $500 million in assets this year, pointing to $138 million in sales during the quarter. NRG also announced the sale of its stake in the electric vehicle charging business, EVgo, to Vision Ridge Partners for total consideration of approximately $50 million, and the streamlining of its residential solar program in its retail business.

The company’s effort to transform coal plants to gas offers opportunities in the ERCOT market, Gutierrez said. “We’re optimistic … as we see up to 9 GW of coal generation at risk due to upcoming environmental regulations and strong growth,” he said, also noting revisions to the operating reserve demand curve will increase scarcity pricing. (See ERCOT: No Consensus on Operating Reserve Changes.)

– Tom Kleckner

Earnings call transcripts courtesy of Seeking Alpha.

May 9, 2016

Atlantic Bridge Environmental Assessment Released

By William Opalka

FERC last week released an environmental assessment of the Atlantic Bridge natural gas pipeline expansion project, finding “no significant impact” (CP16-9).

Atlantic Bridge Project Map Source: Spectra Energy (environmental assessment, ferc) — Atlantic Bridge Project Map *Source: Spectra Energy*

Spectra Energy has proposed expanding its Algonquin Gas Transmission and Maritimes & Northeast Pipeline systems’ capacity by 132,700 dekatherms/day to serve the New England and Canadian natural gas markets.

Six miles of existing pipeline in New York and Connecticut would be widened from 26 inches to 42 inches. A 7,700-horsepower compressor station would be built in Massachusetts, along with numerous infrastructure improvements.

The project has a proposed in-service date of November 2017. Public comment on the project is open until June 1.

While only a fraction of the size of other natural gas projects seeking to tap into abundant shale gas from Pennsylvania, the project has provoked opposition from climate change activists and landowners fearing encroachments on their properties. (See Hearing on Algonquin Pipeline Expansion Highlights Local, National Issues.)

The developers have commitments from New England gas distribution companies and manufacturers for 40% of the additional capacity, with the other 60% committed to commercial and industrial customers in the Canadian Maritime provinces. The developers say none of the gas is destined for the LNG export terminals proposed in Maine or the Maritimes, a major source of controversy for any infrastructure expansions in New England.

“The additional supply from Atlantic Bridge will help enhance the reliability of energy throughout the region and generate savings for homeowners, businesses and manufacturers,” according to Spectra.

FERC said its review did not find significant issues that rise to the level of requiring a more extensive environmental impact statement.