ERCOT Board of Directors Briefs

AUSTIN, Texas — ERCOT’s Independent Market Monitor said last week that negative prices are becoming less frequent and that they have virtually no impact on average energy prices, despite media attention given to them.

Steve Reedy, the IMM’s deputy director, told the Board of Directors during his regular update that while negative prices “are not a problem, they’re certainly something as an economist that interest me.”

Reedy said the Monitor saw “significant amounts” of negative pricing in ERCOT’s West zone — where most of the ISO’s 15,764 MW of wind capacity resides — during the first year of the nodal market, which went live in 2010. The completion of the $6.8 billion, 3,600-mile Competitive Renewable Energy Zone (CREZ) transmission buildout in February 2014 resolved most of the congestion issues.

“For the most part, we’ve seen [those prices] go away,” Reedy said. “We still have negative prices, but rather than being the norm early in the nodal market and in the zonal market, it’s now the exception.”

Reedy expressed mild frustration that a September Slate article detailing prices reaching as low as -$8.52/MWh led to a flurry of additional press coverage. He said the Sept. 13 event was typical of wind energy being offered into the market at off-peak hours.

Testing his hypothesis, Reedy asked Monitor staff to calculate negative prices’ effect on the ERCOT market by replacing every negative price with a zero.

The end result? An energy-weighted price of $26.78/MWh for 2015, virtually identical to the $26.77 average including the negative prices.

“It’s a late-night, early-morning phenomenon. It’s not an example of the CREZ being used up,” Reedy said. “It’s driven a lot of press, but it’s not had a major effect on the price.”

Ken-Anderson, PUCT at the ERCOT Board of Directors Meeting — Anderson © *RTO Insider*

Texas Public Utility Commissioner Ken Anderson asked whether ERCOT would be seeing the same behavior without the federal production tax credit, which is worth $23/MWh. “No, I don’t think that would be the case without the PTC,” Reedy told the commissioner.

“We’ve seen over the last five years that the west export capacity, due to CREZ, has expanded significantly,” he said. “Even with the growth of wind energy, we rarely get that crossover where [we end up with negative prices].”

Asked what was causing the low-priced energy, Reedy could only reply with anecdotal evidence, suggesting that some coal generators might be running overnight to reduce their fuel stockpiles, and that other market participants might be running units overnight to eliminate start-up risks.

Reedy also discussed the operating reserve demand curve (ORDC), a price adder created to reflect the value of reserves during high-load periods. ERCOT staff compiled stakeholder proposals for revising the ORDC in a white paper earlier this year, following Anderson’s call for a PUC review of it and its methodology. (See “State Regulators Seeking Answers to Summer Incident,” ERCOT: No Consensus on Operating Reserve Changes.)

Texas regulators are considering whether to artificially raise wholesale power prices, as ERCOT is seeing prices at 14-year lows. The PUCT met April 14 to consider the issue and will again discuss the topic May 4. Commission staff has issued a memo summarizing comments it has received from market participants.

[Editor’s Note: An earlier version of this article stated incorrectly that the white paper contained ERCOT staff’s recommended changes to the ORDC.]

Board Easily Passes LOC Revision

The board approved the Technical Advisory Committee’s recommended parameters for payments of lost opportunity costs to generators ordered to ramp down for grid reliability, with just two opposing votes and no discussion.

“No questions?” board Chair Craven Crowell asked the members, surveying the room. Addressing TAC Chair Randa Stephenson, he said, “Sounds like you did a good job on it then.”

“We worked hard,” Stephenson responded.

The board had remanded Nodal Protocol Revision Request (NPRR) 649 back to the TAC at its February meeting. Last month, the committee was able to reach agreement on one of three options, amending the language to reflect comments it received from the board. (See ERCOT Stakeholders Agree on Lost Opportunity Costs Rule.)

The Texas Office of Public Utility Counsel’s Tonya Baer (Residential Consumers) and the City of Dallas’ Nick Fehrenbach (Commercial Consumers) cast the two negative votes.

Stephenson, of the Lower Colorado River Authority, said the request’s original impact analysis of $100,000 to $150,000 had been reduced to the $50,000-$75,000 range, assuming high-dispatch limit (HDL) overrides remain at current levels. She said ERCOT has revised its procedures since Odessa-Ector Power Partners claimed its combined cycle plant had lost $300,000 because of three days of HDL overrides in November 2012 and only one HDL since last May.

“We anticipate costs to the load … when this does occur [again], it will be an uplift,” Stephenson said. She said the TAC will continue to monitor and report back on any uplifts.

The board also approved NPRR 745, which changes the emergency response service’s availability from an hourly to 15-minute interval evaluation and makes other minor changes.

ERCOT Net Above Budget, Despite Mild Weather

Bill-Magness,-ERCOT-CEO at the Board of Directors meeting — Magness © RTO Insider

ERCOT CEO Bill Magness told the board that 2016’s net revenues are $1.8 million above expected, despite system administration fees being $1.7 million under budget due to mild weather conditions. Timing differences kept spending $3.1 million under budget, he said in his report.

Pointing to an overhead screen filled with maps of Texas, Magness said, “That’s five different ways up there of saying it’s warm. The basic story is, we did have a pretty warm, pretty dry winter.”

Magness also reported that staff is testing an upgrade to ERCOT’s energy management system, which could go live as early as May 26. He noted the EMS is just one of several software systems scheduled to go live this year.

The CEO also mentioned ERCOT’s creation of the Grid Resilience Working Group, which will assess low-probability but “potentially high-impact” risks to the ISO’s system. Its first meeting is scheduled for April 26.

Bermudez, NPRRs Approved

The board re-elected unaffiliated Director Jorge Bermudez to a third and final term. His second term expires in June.

It also unanimously approved seven NPRRs and one change-request on its consent agenda:

NPRR 741: Clarifications to estimated aggregate liability (EAL) and total potential exposure (TPE) credit exposure calculations.
NPRR744: Reliability unit commitment trigger for the reliability deployment price adder and alignment with RUC settlement.
NPRR 746: Adjustments due to negative load.
NPRR 748: Revisions associated with NERC reliability standard COM-002-4 and other clarifications associated with dispatch instructions.
NPRR 749: Requires ERCOT to publish the cost of options for all outstanding congestion revenue rights within the CRR auction process.
NPRR 750: Clarifies the practice for setting telemetry when providing fast-responding regulation service.
SCR 787: Changes the net-dependable capability and reactive capability (NDCRC) application to provide historical generator information to all associated resource entities.

— Tom Kleckner

April 25, 2016

NIPSCO Settlement with Indiana Wind Farms Wins OK

By Amanda Durish Cook

FERC approved an uncontested partial settlement between Northern Indiana Public Service Co. and the owners of seven Indiana wind farms that contend the utility overcharged them for transmission upgrades.

NIPSCO - FERC - Indiana wind farms - Meadow Lake Wind Farm (Meadow Lake Wind Farm) — Meadow Lake Wind Farm *Source: Meadow Lake Wind Farm*

The April 21 order (EL14-66-003) resolves issues related to NIPSCO’s 138-kV transmission upgrade funded by the Meadow Lake and Fowler Ridge wind farms. Under the settlement, the utility will pay $400,000 to Meadow Lake and $450,000 to Fowler Ridge to withdraw their complaint.

E.ON Climate & Renewables North America filed the original complaint against NIPSCO in 2014, objecting to the multiplier rate used in two transmission upgrade agreements with its Pioneer Trail and Settlers Trail wind farms. FERC later that year ruled that the multiplier was unreasonable and instructed the two companies to enter into settlement proceedings to determine a new rate (EL14-66).

Meadow Lake and Fowler Ridge filed a similar action after the ruling. NIPSCO charged their facilities and several other wind farms $35.8 million to cover 35 years of operating costs on top of the $50.4 million to build transmission. (See NIPSCO Blows Back at Wind Farm Complaints.)

FERC’s acceptance of the partial settlement also closes out Meadow Lake and Fowler Ridge’s request for rehearing in E.ON’s complaint (EL14-66-002).

April 25, 2016

SPP News Roundup from FERC Open Meeting

FERC denied reconsideration of a 2012 ruling that granted in part Exelon Wind’s petition for a declaratory order, but it once again declined to initiate an enforcement action against the Public Utility Commission of Texas (EL12-80).

The owner of several qualifying facilities under the Public Utility Regulatory Policies Act, Exelon Wind had protested that a PUCT order approving Southwestern Public Service’s treatment of QF energy purchases violated PURPA.

While rejecting the request for an enforcement action, FERC’s 2012 order concluded that the PUCT’s approval of avoided cost rates linked to the locational imbalance price (LIP) at a QF’s node in the SPP Energy Imbalance Service market was inconsistent with PURPA.

The PUCT, Occidental Permian and SPS parent Xcel Energy filed requests for reconsideration in September 2012, saying the revised methodology for calculating avoided costs approved by FERC was inconsistent with PURPA.

FERC said the PUCT’s reliance on SPP’s LIP to calculate avoided costs was moot, as the RTO replaced the Energy Imbalance Market with the Integrated Marketplace, which relies on LMPs, in March 2014. The Texas commission has approved SPS’s request to substitute LMP for LIP in calculating avoided costs. “Accordingly, we find that the issue of whether LIP may be used to calculate avoided costs has been overtaken by events,” FERC said.

SPP-IS Partial Settlement Offer Accepted

The commission accepted a partial settlement on behalf of SPP, the Western Area Power Administration-Upper Great Plains Region (Western-UGP), Missouri River Energy Services and the Municipal Energy Agency of Nebraska, resolving issues over the October integration into SPP of Western-UGP, Basin Electric Power Cooperative and the Heartland Consumers Power District as transmission-owning members (ER14-2850, ER14-2851).

The Nebraska MEA had intervened in SPP’s original September 2014 filing, raising concerns about seams issues resulting from the decision of the Integrated System’s entities (Western-UGP, Basin and Heartland) to become SPP members.

Missouri River Energy Services (MRES) asked FERC for relief from marginal loss and marginal congestion payments associated with the exercise of its transmission rights. Basin Electric and Heartland also requested such “carve out” treatment. FERC found the concerns to be of “material fact” best addressed through hearing and settlement judge procedures.

The parties to the settlement agreed to forego a full evidentiary hearing before an administrative law judge and brief the issue directly to the commission, using stipulated facts, legal precedent and pleadings previously filed with the commission addressing carve-out treatment under the SPP Tariff.

FERC Accepts Termination of Northwestern-So. Montana Interconnection Pact

FERC accepted NorthWestern Corp.’s termination of a large generator interconnection agreement with Southern Montana Electric Generation and Transmission Cooperative, saying NorthWestern does not have to make further reimbursements to the co-op for network upgrade costs (ER16-763).

The 2011 agreement governed the interconnection with Southern Montana’s Highwood Generating Station, which the co-op decommissioned, dismantled and sold for parts in June 2014.

Northwestern filed a termination notice in January, asking for confirmation that it would not be required to pay $5.84 million in unreimbursed upgrade costs and interest.

Southern Montana and Beartooth Electric Cooperative — a Southern Montana member that advanced a portion of the funds for the network upgrades — protested the filing, saying they were entitled to refunds. FERC found for NorthWestern, saying a transmission operator “has no further obligation to reimburse the interconnection customer for its upfront payment if the generating facility ceases commercial operation before the interconnection customer has been completely reimbursed.”

FERC Denies a Waiver

FERC denied Montana-Dakota Utilities’s (MDU) request for a waiver of SPP Tariff charges assessed to pay the commission’s annual fees (ER16-866).

MDU made the request in February, saying the charges were the same as those paid to MISO for serving the same transmission load. SPP agreed not to oppose the waiver request if its FERC assessment calculation did not include Montana-Dakota’s transmission service.

But the commission likened MDU’s situation to that in which two or more transmission operators transmit power “sequentially” over long distances, one after the other. In that case, the commission said, “each RTO public utility or individual public utility will be assessed an annual charge based on its respective transmission of such electric energy.”

– Tom Kleckner

April 25, 2016

Federal Briefs

As the Paris Agreement on climate change was being signed on Earth Day, scientists and media outlets sounded a steady drumbeat of sobering climate change news.

According to studies, the first three months of 2016 have been the hottest ever recorded, Australia’s Great Barrier Reef is slowly being bleached to death and Greenland’s ice sheet is melting faster than scientists have ever seen. “The strongest hurricane on record for both the Northern and Southern Hemisphere, unprecedented continuing drought in California, the warmest start to a year that we’ve ever seen, on the heels of what was the warmest full year on record for the globe,” said Michael Mann, a Pennsylvania State University climate scientist.

The climate agreement, signed by officials from 174 countries, is a pledge to cut greenhouse gas emissions and slow the warming of the planet.

More: The Washington Post

Secretary Moniz Disputes ‘War on Coal’ by Obama

Energy Secretary Ernest Moniz said the Obama administration has not declared war on coal, as many critics say, but is committed to using innovation to breathe continued life into the fuel.

“Make no bones about it,” he said, “we start with the assertion, the commitment, that we are talking about a progressively lower carbon future. But we have not abandoned coal as part of that future.”

Moniz was speaking at a University of Kentucky forum focused on energy innovation. He noted the administration’s investment of billions of dollars for research on carbon capture and storage, including $6.5 billion in tax credits for the technology. If the administration wanted to kill off coal as a fuel, he said, “we wouldn’t have put $6 billion into CCS.”

More: Lexington Herald-Leader

Virginia Officials Ask FERC to Reject Pipeline Route

The Augusta County Board of Supervisors asked FERC to reject an alternate route for the $5 billion, 550-mile Atlantic Coast Pipeline, saying the proposed pipeline would have a negative impact on the county.

The developers of the proposed pipeline, designed to bring natural gas from Appalachian shale plays, had already shifted the route to avoid going through the Monongahela and George Washington National Forests. But Carolyn Bragg, the August County board chair, says the new route goes through land with protected conservation easements, and near protected water sources. In a letter addressed to “Chairman” Cheryl LaFleur, Bragg also complained that no public hearings for the new routes had been held.

A spokesman for Dominion Resources, the pipeline’s developer, said the route has already been changed several times after consultation with the U.S. Forest Service.

More: The News Virginian

Army Still Undecided on Dominion Tx Project

The U.S. Army Corps of Engineers said it believes the need still exists for a 500-kV transmission line by Dominion Virginia Power despite contrary research by opponents, but it isn’t yet prepared to approve a plan to build the line, which would cross over the James River.

Dominion says it needs to import power to areas that were formerly served by two units at its now-retired Yorktown generating station. Consultants for the National Parks Conservation Association have concluded that the line isn’t necessary.

The corps has called for more study before making a decision.

More: The Virginia Gazette

Lower Wind Speeds Slow Wind Power Growth in US

Wind generation grew by only 5.1% in the U.S. in 2015, the smallest annual increase since 1999, due primarily to a change in weather patterns in the West, according to the Energy Information Administration.

Those same weather patterns, however, resulted in higher average winds in the central part of the country, pushing up wind generation totals in the heartland.

Construction of new wind farms continues apace. Wind capacity grew 12.9%, a greater growth rate than the two previous years, with 8.1 GW installed. The agency said wind is projected to supply more than 5% of U.S. electricity generation in 2016.

More: Energy Information Administration

US NatGas Production Continues to Climb

U.S. natural gas production hit a record high of 79 Bcfd in 2015, up about 5% from the previous year, despite continued low prices for the fuel, according to the Energy Information Administration. While production dipped in much of the U.S. gas fields, increased production in five states — Pennsylvania, Ohio, West Virginia, Oklahoma and North Dakota — more than made up for any decrease.

Pennsylvania’s growth rate slowed from the previous year — dropping from 2.6 Bcfd in new production in 2014 to 1.5 Bcfd of new production. But it still reported the fastest-growing production rate in the nation.

More: Energy Information Administration

DOE Tasked to Study Albedo Modification

The U.S. Senate wants the Department of Energy to study the value of using reflected sunlight to fight global warming.

A proposed spending bill would fund the department with an undetermined amount of money to examine whether climate change trends could be reduced by increasing the amount of sunlight reflected from the Earth’s surface back into space.

Harvard University scientist David Keith was promoting the study on reflectivity. “Ignorance is not a good basis for making decisions, so learning more about this is extremely valuable even if we find out that it will never work,” he said.

More: Science

Army Ammo Base Switching From Coal to Natural Gas

The Army is building a $60 million, natural gas-fired generating plant to replace a 77-year-old coal-fired unit at its Radford Army Ammunition Plant. The announcement came a day after protesters gathered outside U.S. Rep. Morgan Griffith’s Christiansburg, Va., office to protest the open burning of hazardous waste at the plant.

The Army pointed to its switch to natural gas from coal as an example of its commitment to the environment. It also said it recently received $7 million to design and build an enclosed incinerator and close the open-burn unit.

“We absolutely take our obligation to the environment very seriously,” said Lt. Col. Alicia Masson, the base commander.

More: The Roanoke Times

Environmental Groups Sue Four Corners Plant

A coalition of environmental groups and the Navajo tribe last week announced it had formally filed suit against the U.S. government for extending operations at a New Mexico coal plant and its associated mine.

The suit was filed in the U.S. District Court for Arizona against the Interior Department’s Office of Surface Mining and U.S. Fish and Wildlife Service, among others, over a July decision to allow the Four Corners Power Plant and Navajo Mine to operate until 2041. The 52-year-old power plant and coal mine is in the Navajo Nation, about 15 miles southwest of Farmington, and operated by Arizona Public Service.

The owners plan to shut three of five generation units, reducing its capacity from 2,100 MW to 1,540 MW. Opposition groups argue that the 25-year extension did not take into account the assessment of clean energy alternatives and environmental risks. The groups also cite the recent string of bankruptcies, shutdowns and regulations facing the coal industry.

More: The Durango Herald

Spurned in ND, Nuke Waste Firm Looks to SD

A group sponsoring a federal study to explore for an underground nuclear waste storage site is scouting potential properties in South Dakota after North Dakota rejected a plan to study sites there.

Battelle Memorial Institute, the nonprofit research firm behind the Department of Energy project, has planned two public meetings in Spink County to explain the exploration.

Battelle says its deep borehole test will not involve any radioactive waste. Its purpose is to find deep underground rock layers that may be suitable for the storage of nuclear waste in the future.

More: The Associated Press

April 25, 2016

District, OPC Ask PSC to Reconsider Exelon-PHI Merger

By Suzanne Herel

The D.C. Office of the People’s Counsel and the district government asked the Public Service Commission Friday to reconsider its March 23 approval of Exelon’s $6.8 billion acquisition of Pepco Holdings Inc., saying the commission’s rewrite of settlement terms was improper.

Friday was the deadline for the nine parties to the case to request such reconsideration. Aside from OPC Sandra Mattavous-Frye and D.C. Government, the only qualified party to do so was Grid 2.0, which advocates for distributed generation. (See Grid 2.0 Asks DC PSC to Reconsider Merger Approval.)

Exelon and Pepco didn’t wait for the deadline, closing the merger the day of the PSC’s approval. (See Exelon Closes Pepco Merger Following OK from DC PSC.) Last week, Pepco asked Maryland regulators for a 10% rate increase for most of its customers.

Mattavous-Frye said the decision was important for future cases. In her application, she asked that the PSC reopen the record and allow all parties to comment or reject Exelon and Pepco’s unilateral request for adoption of new merger terms as being “procedurally improper.”

“I strongly believe that the manner in which the decision was reached was legally flawed,” she said. “If the flaws in this order are not corrected, it will erode the trust and confidence of consumers and all parties that practice before the commission.”

The D.C. government, in a filing submitted by Attorney General Karl Racine, said, “By unilaterally modifying the terms of the non-unanimous settlement agreement and approving the terms of the revised non-unanimous settlement agreement as a resolution on the merits, the commission committed a series of procedural and substantive errors that require it to reconsider and vacate Order No. 18148.

“The order will have a chilling effect on future settlement negotiations because parties will fear that, in agreeing to proposed settlement terms, they run the risk of the commission proposing and approving alternative settlement terms without the parties’ consent.”

If the PSC does not reconsider and vacate the order, it should reject the merger or approve the non-unanimous settlement agreement subject to “such additional terms as the commission determines will satisfy the public interest,” the filing said.

Mattavous Fry Source DC PSC, DC OPC — Mattavous Fry *Source DC OPC*

Mattavous-Frye and the government opposed the initial merger proposal, which the commission rejected last August. They signed on to a later settlement brokered by Mayor Muriel Bowser’s office in October. District officials withdrew their support after two of three PSC commissioners revised that settlement, saying the changes substantially weakened protections for ratepayers.

If the commission stands by its decision, parties may seek relief from the D.C. Circuit Court of Appeals.

April 25, 2016

FERC Orders Changes to MISO-PJM Interregional Planning

By Suzanne Herel

FERC last week ordered MISO and PJM to make changes in their interregional transmission planning process, granting in part a 2013 complaint by Northern Indiana Public Service Co. (EL13-88).

NIPSCO, which operates on the seams of the RTOs, pointed to “significant congestion costs [and] operating issues” along the seam and noted that no transmission project had ever been approved under the RTOs’ joint operating agreement.

The company said that although market-to-market redispatch had helped day-to-day operations, the RTOs had not developed solutions to long-standing congested flowgates. It proposed several changes that it said would incent cross-border transmission projects. (See FERC Considering NIPSCO Proposals on PJM-MISO Seam.)

First, it recommended the RTOs run their cross-border transmission planning process at the same time as their regional transmission planning cycles, rather than after them.

FERC said it agreed with NIPSCO that the existing open-ended planning process can delay the “identification, analysis and potential approval of beneficial interregional economic transmission projects.”

The commission gave MISO and PJM 60 days to revise the JOA “to include timely, specific deadlines for each step in the coordinated system plan study process” and establish a deadline for how much time it should take from proposal to approval.

“We also find that … it is unclear how the coordinated system plan study in the JOA interacts and aligns with the [MISO Transmission Expansion Plan] and the [PJM Regional Transmission Expansion Plan],” FERC ruled. “A clear process laid out in the JOA may resolve these disagreements and help provide a consistent understanding of the process for all stakeholders.”

FERC denied NIPSCO’s request that the MTEP, RTEP and JOA processes follow a common timeline. But it asked MISO and PJM to submit an informational filing within 120 days describing how it could do so and what impacts that would have on the RTOs’ planning process as well as interregional coordination with neighboring regions.

The commission also denied NIPSCO’s suggestion that MISO and PJM be required to conduct a coordinated system planning study on a regular basis. Requiring that “even when the RTOs’ annual review of transmission issues finds it unnecessary would not be an efficient use of MISO’s, PJM’s and stakeholders’ time and resources,” FERC said.

NIPSCO also recommended that the RTOs develop a single model using the same assumptions in the cross-border transmission process. FERC rejected that suggestion but directed MISO and PJM to “explore the potential use of a joint model with the same assumptions and criteria” and submit an informational report on the issue.

Finally, NIPSCO asked that the RTOs use a common set of criteria in evaluating cross-border efficiency projects.

FERC agreed with NIPSCO that the current cost and voltage thresholds can remove from consideration certain projects that could benefit both regions. It ordered MISO to reduce its minimum voltage threshold for interregional economic transmission projects from 345 kV to 100 kV and eliminate the $5 million cost threshold for such projects. (See PJM, MISO to Scrap $20M Threshold for Joint Tx Projects.)

It also ordered the removal of the requirement for a third, separate benefit-cost analysis for the combined regions.

April 25, 2016

Energy Bill Faces Tight Calendar, Partisan Divide in House

By Rich Heidorn Jr.

WASHINGTON — The U.S. Senate overwhelmingly passed its first major energy bill in almost a decade Thursday but faces a tight calendar to reach agreement with the House, where Republicans approved their own measure with little Democratic support.

Senators Cantwell (L) and Murkowski (R) - u.s. senate energy bill — Cantwell (left) and Murkowski

The Senate’s Energy Policy Modernization Act of 2016 passed 85-12, with support of all but a handful of Republicans. The House’s North American Energy Security and Infrastructure Act cleared 249-170 in December with support from only three Democrats.

President Obama has threatened to veto the House bill but expressed support for most of the Senate provisions.

House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) said he hopes to craft a compromise that can clear both houses and win Obama’s approval.

Senate Energy Committee Chair Lisa Murkowski (R-Alaska) acknowledged some House Republicans won’t be pleased that the Senate bill permanently authorized the Land and Water Conservation Fund and did not end the controversial Department of Energy loan guarantee program.

“My hope is that the House takes a look at the strong vote over here,” she said in a press conference with the committee’s top Democrat, Sen. Maria Cantwell (D-Wash.), after the vote. “I think we have demonstrated, with the process that we have used here on the Senate side … we can work through issues. [The] calendar is a little more challenging,” she added, noting that a formal conference committee would require that both houses be in session at the same time.

Cantwell praised Murkowski’s stewardship of the bill. “Because of her willingness to work in a bipartisan fashion — have an open amendment process in the committee and on the floor and consider so many pieces of legislation by our colleagues — I think that was what the success in today’s resounding vote is about.”

The 424-page Senate bill authorizes increased spending on energy research, improves cybersecurity protections and encourages more efficient buildings and vehicles. It also adds taxpayer protections to the loan guarantee program and streamlines federal approvals of electric transmission, pipeline, hydropower and LNG facilities.

Compromises

The bill won broad support by largely sidestepping polarizing issues such as climate change and oil and gas production. Nevertheless, there were some provisions that displeased environmentalists, including its support for accelerated approval of LNG export terminals.

And although it won the backing of the U.S. Chamber of Commerce, the conservative Heritage Foundation decried it as a “continuation of government meddling in the energy economy.”

Below is a summary of the provisions of interest to electric industry stakeholders. Bill sections are identified in parentheses.

Efficiency

Buildings

Noting that the federal government is the single largest energy consumer in the country, the bill directs the head of each federal agency to reduce their building energy intensity by 2.5% annually through fiscal year 2025 (1017).

It also requires the Secretary of Energy to revise federal building energy efficiency performance standards (1016); develop an efficiency metric for data centers (1011); and support the updating of energy efficiency provisions in model building codes (1001).

The bill encourages federal agencies to implement energy and water conservation measures (1006) and extends the maximum length of utility energy service contracts from 10 to 25 years (1005).

It repeals the requirement that new federal buildings and those undergoing major renovations phase out fossil fuel-generated energy consumption by 2030 (1015).

The legislation also blocks a final rule establishing a condensing furnace efficiency standard absent a finding by an advisory group convened by the Energy Secretary that a nationwide requirement is “technically feasible and economically justified” (1103).

Appliances

The bill cites a prediction that appliance standards put in place for more than 30 products since 2009 will reduce consumers’ utility bills by almost $1.8 trillion by 2030. It requires the Energy Department to establish a rebate program to encourage the replacement of inefficient electric motors (1101) and transformers (1102).

Manufacturing

The manufacturing sector, which represents 12% of the gross domestic product, uses almost one-third of the primary energy in the U.S.

The legislation amends the Energy Independence and Security Act (EISA) of 2007 to direct the Energy Department’s Industrial Assessment Centers to coordinate with other federal manufacturing programs, the National Laboratories and energy service and technology providers, and the department’s Office of Energy Efficiency and Renewable Energy to provide onsite technical assessments to manufacturers seeking efficiency opportunities (1201).

It also expands the scope of technologies covered by Industrial Assessment Centers to include smart manufacturing technologies and provides the centers tools and training to provide technical assistance to manufacturers (1202). It directs the department to provide small and medium manufacturers access to high-performance computers at the National Labs (1203).

Vehicles

The bill authorizes research and development to reduce petroleum use in passenger and commercial vehicles (1306) and improve the efficiency of medium- to heavy-duty commercial, vocational, recreational and transit vehicles (1308) and Class 8 truck and trailer platforms (1309).

Cybersecurity

About 32% of reported cyberattacks involve the energy sector, the bill says. The bill establishes the Energy Department as the agency responsible for energy sector cybersecurity protections and directs it to carry out cybersecurity research and development (2002).

The bill adds a new section to the Federal Power Act (224) that gives the Secretary of Energy authority to order actions necessary to protect the grid from cyber threats in an emergency. It also orders FERC to permit entities to seek recovery of prudently incurred costs as a result of an emergency. The new FPA section also prohibits the unauthorized disclosure of critical electric infrastructure information (CEII) by FERC personnel or agents of the commission (2001), a provision apparently inspired by the controversy over former FERC Chairman Jon Wellinghoff’s public disclosures of information from a confidential FERC analysis on grid security. (See FERC Criticism of Ex-Chair Mounts.)

The bill also creates programs to identify and test supply chain vulnerabilities and response capabilities between the DOE and other agencies. It increases industry participation in information sharing and expands the department’s cooperation with the intelligence community (2002).

Infrastructure Permitting

Electric Transmission

The Energy and Natural Resources Committee report on the bill refers to the federal permitting process for electric transmission as “notoriously slow and unpredictable,” citing NERC data that transmission projects take six to 15 years to engineer, site, permit and construct.

The Obama administration sought to improve coordination in federal agencies’ review of electric transmission facilities on federal land through a 2009 memorandum of understanding signed by nine agencies. To accelerate the deployment of seven pilot transmission projects, the administration in 2011 created a Rapid Response Team for Transmission with the nine signatories.

The bill codifies the Rapid Response Team and creates an ombudsperson at the Council of Environmental Quality to resolve intra-agency disputes or delays related to transmission permits (2309).

Section 215 of the Federal Power Act is amended to require regional reliability entities to submit to Congress and FERC within six months, and every three years thereafter, a report describing the state of and prospects for electric reliability. They are also required to submit a reliability impact statement (RIS) on any proposed federal rule they believe will affect the reliable operation of the bulk power system. The statements are to be submitted to FERC for forwarding to the proposing agency, which “shall consider the RIS and include a detailed response in the final rule” (4301).

It also provides liability protection for generators ordered by DOE to run for grid reliability to insulate them from litigation over exceeding their environmental permits (4303).

Gas Pipelines

The Senate committee called the federal review process for natural gas pipelines “complex and cumbersome,” noting that the Secretary of the Interior lacks authority to grant pipelines permission to cross National Parks — requiring an act of Congress. “This issue has come to the forefront in recent years because of growing demand for natural gas in the Northeast and rising natural gas production in the Marcellus Shale (e.g., Pennsylvania). The limited infrastructure that connects the two regions is greatly constrained, and the area is comprised of significant National Park holdings,” the committee said.

The bill designates FERC as the lead agency for all federal authorizations and National Environmental Policy Act compliance related to natural gas transportation; says such authorizations should be issued within 90 days after applications are deemed complete; and orders FERC to establish an interagency schedule and refer all interagency disputes to the CEQ for resolution. Agencies that do not act within the 90-day deadline would be required to explain delays to Congress and FERC and provide plans for eliminating the delay (3103).

LNG

Five LNG projects in Louisiana, Florida, Texas and Maryland have received final authorizations to export a total of 6.5 Bcfd. As a result, the Energy Information Administration expects the U.S. to become a net exporter of natural gas by 2020.

LNG projects require both Energy Department authorization to export the commodity and approval from FERC, which has jurisdiction over the terminals. The bill requires the department to issue a final decision on applications to export natural gas to countries that do not have free trade agreements with the U.S. within 45 days after completion of NEPA reviews of LNG facilities (2201).

The bill also requires the Secretary of Energy to submit within one year a study on the economic impacts of LNG exports, addressing manufacturers’ concerns that exports will raise domestic gas prices (3102).

Distributed Energy Resources, Storage

The bill requires the Secretary of Energy to conduct R&D and a demonstration program to address challenges identified in DOE’s 2013 Strategic Plan for Grid Energy Storage (2301). The department would be required to develop model grid architecture and a set of future scenarios to examine the impacts of different combinations of resources on the grid and to determine whether any additional standards should be developed to ensure the interoperability of the grid and associated communications networks (2302).

The bill requires the Energy Department within two years to provide Congress with an evaluation of the performance of the electric grid and a description of the quantified costs and benefits associated with the changes evaluated under the scenarios developed under section 2302 (2306).

When requested by a state, the department would partner with states and regional organizations to develop electric distribution plans (2307).

It also requires RTOs and ISOs to submit reports to FERC within six months identifying barriers to the deployment of distributed energy systems and microgrid systems. The reports must include potential changes to the operational requirements and costs associated with interconnecting these resources (2310). The Energy Department is to undertake a study of net energy metering (2311).

Hydropower

The bill seeks to simplify what the Senate committee called “a Byzantine” relicensing process for hydropower projects, noting that more than 250 projects totaling 16 GW will need new licenses in the next decade. Hydropower supplies 6% of U.S. electricity and 52% of renewable power. Relicensing currently takes eight to 10 years.

To reduce permitting backlogs, the bill designates FERC as the agency responsible for setting a binding licensing schedule and coordinating all federal authorizations. It authorizes the chairman of the CEQ to resolve interagency disputes to ensure timely decision making; requires FERC administrative law judges to preside over trial-type hearings on issues of material fact; and orders the commission to establish a voluntary pilot program to consider a regionwide approach to hydropower licensing (3001).

It also extends through fiscal year 2025 the incentives for hydroelectric production and efficiency improvements contained in the Energy Policy Act of 2005 (3002). It reinstates the license for Clark Canyon Dam in Montana and extends the deadline for starting construction for three years (3003). It also authorizes FERC to extend the construction deadline for the Gibson Dam in Montana for six years (3004).

Geothermal Energy

The bill urges the Secretary of Interior to ‘‘significantly increase’’ geothermal production from federal lands and asks the U.S. Geological Survey to identify sites capable of producing 50 GW of geothermal power within 10 years (3005, 3006).

It also allows geothermal development by co-production of electricity from oil and gas leases on federal lands (3007) and creates a noncompetitive leasing process through which existing geothermal leaseholders on federal lands can lease adjoining lands without rebidding (3008).

Research and Development Funding

The bill authorizes spending of $500 million over 10 years on energy storage R&D, $290 million through 2021 on projects involving marine and hydrokinetic energy and $2 billion on technologies to improve the grid, including microgrids. However, Congress often appropriates far less than originally authorized.

Coal, Carbon Capture

The legislation repeals the existing EPACT 2005 coal programs and establishes a new coal technology program including R&D, large-scale pilot projects and demonstration projects. It authorizes $610 million annually from 2017 to 2020, and $560 million for 2021 (3401, 3402).

Nuclear Power

It requires the Energy Department to submit a report to Congress on its ability to host privately funded fusion and fission reactor prototypes at DOE-owned sites (3501), and removes the requirement that the project be built at Idaho National Laboratory (3502).

Workforce Training

The legislation establishes the 21st Century Energy Workforce Advisory Board at the Energy Department to develop a strategy for developing a skilled workforce for the energy sector, including underrepresented populations (3601), and establishes a four-year pilot program to award competitive grants for job training programs that lead to an industry recognized credential (3602).

DOE Loan Program

The bill changes DOE’s Section 1703 loan guarantee programs created by EPACT 2005 to prohibit the subordination of taxpayer interests to those of private investors. It also sets a minimum 25% of credit subsidies to be paid by borrowers (4001) and amends EPACT 2005 to establish the terms for state participation in loan guarantees (4002).

The bill also orders the Comptroller General to issue a report on the effectiveness of DOE’s advanced fossil loan guarantee program and other incentive programs for advanced fossil energy (4003).

Energy-Water Nexus

The Energy and Interior departments are required to establish an Interagency Coordination Committee, co-chaired by the agencies’ secretaries, to identify “energy-water nexus activities” across the federal government; improve coordination of R&D activities; and create a Nexus of Energy and Water Sustainability (NEWS) office (4101).

Holding RTOs Accountable

The committee expressed skepticism about organized RTO markets, saying their low prices are undermining the finances of nuclear generation and questioning whether they are producing “meaningful price signals” to indicate where new supply is needed. Reflecting the opinions of the American Public Power Association and other critics, the committee said RTO “capacity markets have been controversial … with a number of parties calling for their reform or elimination.”

RTOs and ISOs are required to report to FERC within six months on their reliability, capacity resources, wholesale electric prices, generation diversity and the ability of public power entities to self-supply capacity (4302).

April 25, 2016

NYPSC OKs Municipal Aggregation for Energy Purchases

By William Opalka

ALBANY, N.Y. — The New York Public Service Commission voted 3-1 Wednesday to allow municipalities statewide to make bulk purchases of electricity and natural gas, including renewable power (14-M-0224).

Solar Farm (NYSERDA) NY PSC municipal aggregations — Community Solar Farm *Source: NYSERDA*

The Community Choice Aggregation program is part of the state’s Reforming the Energy Vision initiative to encourage the greater use of cleaner and distributed energy resources.

“The CCAs started in California and in Illinois and it was largely around aggregating supply,” NYPSC Chair Audrey Zibelman said. “I think the New York version is going to be much more about aggregating demand.”

By combining their purchasing power, communities can get the cleaner energy supplies they desire at a better price, she said. “I’m [as] excited about this element of REV as anything else we’re doing,” she added.

The commission, which started a proceeding to explore aggregation in December 2014, said CCA programs in other states have only been successful where opt-out aggregation is permitted for mass-market customers. “Opt-in aggregation has proved valuable to certain larger customer groups, but opt-out aggregation appears necessary for CCA programs to achieve the scale that will enable [energy service companies] to create meaningful benefits for mass market customers,” the commission said.

The program will be open to villages, towns and cities. Municipalities will be required to conduct a minimum two-month information and education program to potential CCA members, after which residents would have at least 30 days to respond to opt-out notifications.

Municipalities will be encouraged to design CCA programs that include integration of distributed energy resources and procurement of clean energy, both through direct procurement and opt-in programs for customers. “Since CCA programs are intended to promote greater consumer awareness and bill savings, they present a formidable opportunity to advance the state’s clean energy objectives,” the PSC said.

Municipalities that contract with energy service companies will be required to conduct open competitive processes, and contracts must “offer value to their residents through favorable pricing, significant clean energy in their energy supply portfolio or another commission-approved energy-related value-added product.”

The New York State Energy Research and Development Authority will provide technical assistance to participating communities.

Commissioner Diane Burman dissented from the order, saying she supports CCA but thought the state was moving too quickly. She said she wanted to learn first from Sustainable Westchester’s pilot program, which has not yet started. The program has 110,000 residents enrolled in 17 communities and is now mailing opt-out notices to residents.

Sustainable Westchester and a partner want to develop 10 MW of solar arrays in five locations.

“My concern is truly understanding what we’re doing in the pilot program and the lessons learned,” Burman said, adding that she feared “moving too quickly into a statewide application when we haven’t done or asked for real analysis.”

April 25, 2016

FERC to Consider Electric Utility Purchases of Gas Pipeline Capacity

By William Opalka

FERC will convene a technical conference May 9 to consider a proposal by New England officials that electric utilities purchase natural gas pipeline capacity (RP16-618).

The commission said the conference would examine issues raised by Algonquin Gas Transmission’s Feb. 19 petition asking FERC to allow exemptions from its capacity release bidding requirements. The proposed changes to the company’s tariff would permit “prearranged releases” of firm capacity to utilities or generation owners. Algonquin, a unit of Spectra Energy, owns a network of pipelines in the Northeast that it is proposing to expand.

“Such tariff modifications are consistent with the commission’s current policy of exempting releases pursuant to state-regulated retail access programs of natural gas local distribution companies from bidding requirements,” Algonquin wrote. The company said the exemption is needed to increase the supply of available gas in periods of high demand.

Generators have protested the petition, saying the exemption would distort the secondary market for natural gas and depress electricity prices. Other protests note that “state-regulated electric reliability programs” referenced by Algonquin either do not yet exist or are on shaky legal ground. A plan by Massachusetts regulators that would allow electric distribution companies to recover costs from ratepayers was challenged by the attorney general and is before that state’s Supreme Judicial Court.

Kinder Morgan last week scrapped plans to develop a major pipeline into New England to help supply natural gas-fired power plants, citing a lack of commitments from electric generators due to regulatory uncertainty over their cost recovery. (See related story, Kinder Morgan Suspends Northeast Energy Direct Pipeline.)

The cancellation of Kinder Morgan’s project, and New York regulators’ decision last week to deny an environmental permit to the proposed Constitution Pipeline, may improve the fortunes of a third major pipeline expansion into New England, Algonquin Gas Transmission’s Access Northeast project. (See related story, New York Rejects Constitution Pipeline.)

Two electric utilities, Eversource Energy and National Grid, own a combined 60% of the project, which would provide fuel for 5,000 MW of generation. Spectra Energy’s Algonquin Gas Transmission owns the remaining 40%. (See Algonquin Submits Pre-Filing Request for Access Northeast Pipeline.)

April 25, 2016

PJM MRC and Members Committees Preview

Below is a summary of the issues scheduled to be brought to a vote at the Markets and Reliability and Members committees Thursday. Each item is listed by agenda number, description and projected time of discussion, followed by a summary of the issue and links to prior coverage in RTO Insider.

RTO Insider will be in Wilmington, Del., covering the discussions and votes. See next Tuesday’s newsletter for a full report.

Markets and Reliability Committee

2. PJM Manuals (9:10-9:30)

Members will be asked to endorse the following manual changes:

Manual 19: Load Forecasting and Analysis. Revisions remove outdated rules for legacy air conditioner and water heater cycling programs and correct formulas for end-use/weather variables.
Manual 12: Balancing Operations. Manual, Tariff and Operating Agreement changes incorporate business rules for dynamic transfers.

3. Governing Documents Enhancement and Clarification Subcommittee (GDECS) (9:30-9:40)

Changes eliminate redundant definitions and list definitions in alphabetical order.

4. Demand Response Emergency Energy Settlement Measurement and Verification (9:40-9:55)

New method changes the emergency energy default customer baseline (CBL) from the hour before to the current default economic CBL. (See “Members Endorse New Way to Measure Emergency DR,” PJM Market Implementation Briefs.)

5. External Capacity Performance Enhancements (9:55-10:15)

Members will be asked to endorse a problem statement and issue charge studying the challenges of the pseudo-tie construct for external CP resources.

Members Committee

Consent Agenda (1:20-1:25)

Members will be asked to approve revisions to governing documents related to updated definitions developed by the GDECS.

Endorsements (1:25-1:55)

Governing Documents Enhancements and Clarification Subcommittee (GDECS) (1:25-1:35)
Members will consider revised definition of “capacity import limit.”
See MRC item 3 above.