FERC on Thursday greenlighted FirstEnergy’s plan to spin off the transmission assets of Jersey Central Power & Light, Metropolitan Edison and Pennsylvania Electric into a new subsidiary, rejecting motions for a stay by New Jersey and Pennsylvania regulators, who also must approve the deal.
New Jersey regulators could vote on the transaction as early as this week.
FirstEnergy said the stand-alone transmission company will have a better credit rating, enabling it to save money on grid-strengthening projects under its Energizing the Future program (EC15-157).
The company told the New Jersey Board of Public Utilities and the Pennsylvania Public Utility Commission it expects to save $135 million over the 30-year life of $1.5 billion in projects. It said total transmission spending over the next 10 years could reach $3 billion in the two states.
State regulators had asked FERC not to rule on the deal until after they had rendered their decisions, saying that doing so would impair the states’ proceedings. Both state boards took issue with the classification of the new transmission company as a public utility, raising “jurisdictional issues regarding the safety and reliability oversight of the transmission systems,” according to the FERC order.
FERC determined that the transaction would not adversely affect state or federal regulation, and said that it is not the commission’s policy to delay a decision because of parallel proceedings.
The commission also rejected LSP Transmission’s request that FERC prohibit the new company from claiming a right of first refusal in a broader area than the FirstEnergy operating companies could individually. FERC Order 1000, which opens up new projects to non-incumbent bidders, reserves to incumbents upgrades to existing facilities as well as “local” projects.
In Order No. 1000-A, LSP noted, the commission clarified that “a local transmission facility is one that is located within the geographical boundaries of a public utility transmission provider’s retail distribution service territory, if it has one, otherwise the area is defined by the public utility transmission provider’s footprint.”
In rejecting the request, FERC cited as precedent a 2014 order in which it ruled that “the combined retail distribution service territories of the Entergy operating companies together constitute a single footprint for purposes of defining local transmission facilities.”
In its comments, the Public Power Association of New Jersey recommended FERC accept FirstEnergy’s offer to maintain a hypothetical capital structure of 50% debt and 50% equity for at least two years in order to not adversely affect rates.
FERC agreed and noted that the transaction includes a hold-harmless component preventing MAIT from passing on transaction-related costs to customers.
WASHINGTON — FERC Chairman Norman Bay said he expects the Supreme Court to take a nuanced view of federal-state jurisdictional issues when it hears oral arguments Wednesday in a dispute involving state subsidies for generation developers.
Bay said he considered the case as one of the court’s “FERC trilogy,” following its April 2015 ruling in ONEOK v. Learjet and its Jan. 25 ruling upholding the commission’s jurisdiction over wholesale demand response (FERC v. Electric Power Supply Association).
In the ONEOK case, the court found that state antitrust suits aimed at pipelines’ price manipulation do not improperly interfere with federal jurisdiction under the Natural Gas Act.
“The court ended up saying these state antitrust actions don’t have a direct aim of trying to interfere with the natural gas markets,” Bay explained. “Rather, they’re directed at many, many different kinds of markets. And so they said state jurisdiction there was not preemptive.”
The court will consider lower court rulings throwing out contracts in which generation developers won state-issued subsidies to build plants in New Jersey and Maryland. Competitive Power Ventures and state regulators have argued that the subsidies are legal. The courts ruled that the subsidies violated FERC jurisdiction over the wholesale electric market.
The two cases, Hughes v. Talen Energy, et al. (14-614) and CPV Maryland v. Talen Energy Marketing, et al. (14-623) were consolidated.
Based on its rulings in ONEOK and EPSA, Bay said, “I would expect the court to look to see what the aim of the state law is as well as the impact on the wholesale market” in its ruling.
“I think this is a sensible way of looking at things because the relationship between the wholesale and the retail markets is not one in which the two markets are hermetically sealed from one another,” he said.
CPP Ruling may not Come Until 2018
NARUC General Counsel Brad Ramsay said a Supreme Court ruling on the merits of the Clean Power Plan is unlikely before late 2017 and might not come before 2018.
The court granted a stay, preventing EPA from enforcing the rule, on Feb. 9.
The case is scheduled for oral arguments June 2 before a three-judge D.C. Circuit Court of Appeals panel, with a decision likely about three months later, Ramsay said.
The losing party will have 45 days to request rehearing by the entire 11-judge circuit. A rehearing ruling would come three to four months later.
The earliest the Supreme Court will decide whether to hear the final D.C. Circuit ruling is the end of 2016, Ramsay said. “I think it’s far more likely [in] the first quarter of 2017. It could easily go three, four months beyond that.”
If the court schedules briefing and oral arguments in the first part of 2017, the court could rule on the merits before the end of its term in June 2017.
“I think it’s more likely … to see the decision in the second half of the year, maybe even into 2018,” he said.
The Feb. 13 death of Justice Antonin Scalia, who sided with the majority in granting the stay, could change the timeline, however.
If Scalia’s seat is not filled before the case reaches the court, the timeline could be shorter, wroteThe Washington Post’s Robert Barnes. “If the appeals court upholds the plan, would the four remaining conservatives feel it was worth accepting an appeal if it were clear that it would be impossible to get a fifth vote from one of the liberals?” he asked.
Ramsay said the court’s unusual decision to stay the rule absent a lower court ruling on the merits indicated that the court is likely to grant certiorari and that several of the judges have serious doubts about the legality of the rule.
The stay “doesn’t tell you what they’re going to do on the merits, but it’s the only hint we have,” he said.
NARUC’s Assistant General Counsel Jennifer Murphy gave an additional update following a conference call with EPA officials Tuesday.
Murphy said EPA officials acknowledged the September 2016 deadline for filing initial compliance plans “will slip although interestingly, Janet McCabe [acting assistant administrator for the Office of Air and Radiation] seemed to leave open that perhaps the compliance deadline of 2022 would not be slipping.”
AWEA: Wind Growth to Continue Regardless of CPP Fate
American Wind Energy Association officials said wind power will continue growing for the next five years under the extended production tax credit even if the Clean Power Plan is struck down.
The trade group cited a report by Bloomberg New Energy Finance finding that 8.6 GW of wind power was added in the U.S. in 2015, besting solar (7.3 GW) and natural gas (6 GW). About 9.4 GW of wind is under construction with another 4.9 GW in advanced stages of development.
“The pipeline’s busy. It’s full,” AWEA CEO Tom Kiernan said at a press conference at the NARUC meetings.
“The Clean Power Plan — I would say for the five-year PTC window — probably doesn’t [have an] effect,” said Chris Brown, president of turbine maker Vestas Americas and incoming AWEA board chair.
Without the PTC, Brown said, the loss of the CPP could have an impact on wind’s competitiveness, along with “many different drivers — whether it’s the price of gas, whether it’s the other alternative sources of energy. What would we assume in terms of how much more efficient we can get?
“Obviously it’s a better looking forecast with the CPP, but it’s not a bad forecast without it either.”
Although the levelized cost of wind energy has dropped by almost two-thirds over the past six years, Brown said there’s no reason the wind industry can’t continue to reduce costs by increasing tower heights and rotor sizes. He noted that onshore turbines are not yet as large as the 7-MW turbines used offshore.
“Our friends in the solar business aren’t stopping [their cost-reduction efforts], so I don’t think that’s going to allow us to sleep very easy at night.”
APPA, ISO-NE Spar on Capacity Markets
One of the livelier sessions at the winter meetings came Tuesday afternoon, when Sue Kelly, CEO of the American Public Power Association, sparred with ISO-NE CEO Gordon van Welie over mandatory capacity markets.
Kelly was on the offense, complaining that capacity markets originally intended to supplement other resource procurement strategies have become dominant in the eastern RTOs.
“We believe resource decisions are better made closer to the customer. And that means at the state level and, in our case, at the community level,” she said. She warned state regulators in attendance of an effort to include in the House energy bill a provision that would require other RTOs to adopt provisions similar to ISO-NE’s Pay-for-Performance and PJM’s Capacity Performance rules.
Under Capacity Performance, she said, “consumers are paying a lot more money for most of the same resources.” She said RTO officials must be precise in how they identify the attributes they are seeking to procure, using “a scalpel rather than a meat cleaver.”
Van Welie responded that ISO-NE’s Forward Capacity Auction 10 last month saw a drop in prices from FCA 9, the first year that incorporated Pay-for-Performance, which rewards generators that over-perform while punishing those that fail to deliver. “One doesn’t have to pay more for performance,” he said. “This illustrates that a competitive market is really powerful at producing cost efficiencies. I would argue that there’s a greater danger that long-term contracting will lock in obsolete technology.”
Kelly and van Welie found some common ground, however, when the discussion turned to the Clean Power Plan.
Kelly said, “Regardless of what you thought of the [capacity] markets up until now, the era we are now entering into, I think is fundamentally unsuited for the current capacity market construct.
“We’re going to be trying to balance a lot of policy factors, including fuel and resource diversity, the need for ramping capacity, environmental compliance, greenhouse gas emission reductions, minimizing the long-term cost to consumers, which we’ve always cared about, and coordination of the infrastructure we have in our industry, including transmission and generation with pipeline capacity and other subsidiary infrastructure in other industries that’s needed for us,” she said. “We feel like these markets do not support those goals and therefore need to be fundamentally re-looked at.”
Van Welie acknowledged a conflict between the policy objectives of ensuring reliability and moving to more renewable and low-carbon energy.
“The challenge facing all of us is how do we keep these two policy objectives in balance?” he said. “Markets are working for reliability but they are not designed to favor fuel diversity.”
Van Welie said the shifts are rendering the term “baseload” obsolete.
“The baseload of the past … was coal and nuclear. I think we’re moving very quickly into baseload being natural gas, nuclear, energy efficiency — which is off all the time — and in the future I think we’re going to see renewables being baseload. So to me, baseload is just whatever is most efficient at producing energy … certain technologies are going to have high capital costs and low operating costs and those are going to tend to be the baseload resources.”
WASHINGTON — The National Association of Regulatory Utility Commissioners ended its winter meetings Wednesday with NARUC President Travis Kavulla’s interview of broadcaster Ted Koppel, whose 2015 book “Lights Out” alleges the U.S. is unprepared for the threat of cyberattacks on the nation’s grid.
Critics have accused Koppel of sensationalizing the threat and omitting key facts. But one might not have known that from the gentle probing Koppel received from Kavulla.
The Montana regulator pressed Koppel on his contention that investor-owned utilities lack sufficient incentives to aggressively pursue cybersecurity. But he left unchallenged the author’s claim that the electric industry can block FERC from imposing reliability standards that receive less than a two-thirds NERC membership vote.
“It’s a unique situation where an industry, in effect, is granted the right to draw a line under any restrictive legislation that the federal government might want to impose upon it and say ‘Sorry, we don’t accept it,’” Koppel said. “You’re all aware of the fact that … if FERC proposes something to NERC, NERC takes a vote on it and unless there is a two-thirds majority of NERC members — of the 3,200 or so U.S. power companies — unless they have two-thirds majority vote in favor, it is not accepted. The federal government has no unilateral power to impose legislation on the power industry.”
NERC Responds
NERC CEO Gerry Cauley, who was in the audience, disputed Koppel’s statements in an interview afterward.
“He’s missing the part where FERC can direct us to do a standard,” Cauley said. “We have the physical security, upgrading the cybersecurity standard, the GMD standard [that were ordered by FERC]. So when they tell us to do a standard, it’s not optional. And we actually have a backstop in our procedures … which says if the industry fails to approve a standard by the majority vote that we’ve been directed to do, our board takes over and approves that standard.
“We would never let that fail. And it’s never failed at this point. … Our continued existence as the [Electric Reliability Organization] is dependent on being responsive.”
Cauley said allowing NERC members to vote on standards is “valuable because it shows their support, that it’s a practical standard, the costs being passed to the customer are reasonable and there’s not going to be any litigation around it once it’s done. … There’s a value-add for having a vote, but it’s not the end. There’s no veto power by industry.”
Koppel’s publisher, Crown, did not respond to requests for comment on the criticism. FERC declined to comment.
Kavulla: Precise Language Needed
In an interview Friday, Kavulla defended his questioning of Koppel and said he was aware of controversy over the book.
He said both Koppel and Cauley — who complained to the NARUC president after the session — need to be more precise in their language.
“I’m not defending Ted Koppel. It seems to me clear that when he said the federal government had no unilateral authority, I think technically that’s untrue,” Kavulla said. “But what Gerry Cauley has told you is inaccurate or at least slightly misleading. Mr. Cauley is defending an approach where industry works to write regulations that regulate itself under generic direction by FERC … and then you seem to have Ted Koppel arguing the opposite position: that this industry is too sensitive to leave it up to regulations written by industry and that the federal government should take a more proactive role. I don’t know which is right.”
Although FERC can order standards, “it doesn’t proscribe what the standard should include,” Kavulla continued.
“There is a so-called backstop in theory, but to be clear that has never actually happened. Gerry Cauley uses the present tense voice in saying ‘Our board takes over.’ The one thing Gerry Cauley isn’t telling you is that has never occurred.”
EEI Weighs In
One industry expert who was interviewed by Koppel for the book said the author seemed uninterested in any information that didn’t support his thesis.
“We’ve heard this trope before: It’s the fox guarding the henhouse,” Scott Aaronson, the Edison Electric Institute’s managing director for national security issues, said in an interview. “Every other piece of fact proves that’s not the case.”
Aaronson said the NERC standards drafting process follows American National Standards Institute rules. “It is an open process. Anyone can participate,” he said. “We think that the process works very, very well despite Mr. Koppel’s protestations.”
Aaronson said Koppel also ignores “the important partnership that has developed between the government and owners and operators of critical infrastructure,” including the Electricity Subsector Coordinating Council, which includes 30 CEOs of operating companies and trade groups that meet three times a year with senior federal government security officials.
“He came to this with a thesis,” said Aaronson, who acknowledged he had not read the entire book. “It was effectively that the government is inept, the industry is profit motivated and our only option is to buy canned goods.”
Cauley agreed that Koppel appeared to dismiss the industry’s preparations, particularly its plans for the grid’s recovery after an attack.
“It’s a very serious area of concern — cyberattacks can happen. Our systems are particularly well guarded, but you can never say it won’t happen,” Cauley said. “I think he’s just not as aware of the things that have been done in preparation. … There are playbooks that exist that talk about roles and responsibilities. We exercise them thoroughly. The Grid Ex III, the exercise we went through for two days [in November], was actually more severe than his scenarios and we learned a lot. We found out what we had, what we didn’t have. We iterate on that every two years to keep getting better.” (See Two-Day GridEx III Tests Vulnerability to Terrorist Attacks.)
“Whoever [Koppel] got to talk to, he needs to talk to some more people to get the whole story.”
In an earlier session, retired Gen. Keith Alexander, former director of the National Security Agency, said the federal government needs to increase its information sharing, and the speed at which it does so, to address cybersecurity threats. “The government [has to] share what it knows about these threats. My experience in dealing with industry is they knew about 25% of what the government did. That’s insufficient. We’ve got to address that.”
Marcus Sachs, NERC’s chief security officer and the head of the Electricity Information Sharing and Analysis Center, agreed. “The offense needs to inform the defense. There’s a lot of really good national capabilities that are locked up [inside the] classified world. But those techniques need to be known to the defenders.”
Kavulla said the issue of NERC’s voting rules shouldn’t distract from the broader policy debate: Is it better to have stakeholders write standards subject to federal oversight, or should regulators write the rules subject to stakeholder feedback?
“How different would the standards look,” he asked, “if they were not subject to a two-thirds vote?”
Md. Enters Fray over Dominion’s Coal Ash Water Release Plan
Maryland Gov. Larry Hogan’s administration said it intends to appeal a permit approved by Virginia regulators that would allow Dominion Virginia Power to release 215 million gallons of treated coal ash water into Quantico Creek, which empties into the Potomac River.
Dominion wants to seal five coal ash residue ponds at the Possum Point plant, where ash has been stored since the plant last burned coal in 2003. A company spokesman said its disposal proposal meets stringent limits imposed by the Virginia’s Department of Environmental Quality.
But Hogan isn’t so sure. “The fact is, Virginia’s decision to dump millions of gallons of polluted wastewater into the Potomac River could adversely impact both human and aquatic life,” chief Hogan spokesman Matthew Clark said. “Ignoring the risk simply isn’t an option.”
Entergy Says Fuel-Cost Savings Will Offset 8% Rate Increase
Entergy Arkansas says a projected decrease in fuel costs would help offset the customer impact of a requested 8% base-rate increase before the Public Service Commission.
The utility met with the PSC last month to discuss a settlement rate proposal for a $133.6 million rate increase. If approved, a customer with a $100 monthly bill would see it increase to $108.30/month.
United Illuminating, Eversource Propose Integrating Renewables
The United Illuminating Co. and Eversource Energy have submitted proposals to the Department of Energy and Environmental Protection for pilot projects to better integrate renewable energy into the electric distribution system.
Both utilities propose to install battery storage systems to help integrate the growing number of distributed energy sources on the grid. Another proposal is an online mapping tool that would allow the utilities to view existing power generators and proposed projects at the substation and circuit levels. “It would indicate where our distribution network has capacity to support in a neighborhood or whether that area has more solar generation feeding into it than the system can really handle,” said Camilo Serna, vice president strategic planning and policy for Eversource.
DEEP has until January 2017 to report to the legislature about the proposals, which were mandated last year.
Madigan Accuses Utility Execs of Misleading Regulators
Madigan
In a filing with the Commerce Commission, Attorney General Lisa Madigan said the chief executives of Peoples Gas and previous parent Integrys Energy Group violated state law last year when they withheld information from regulators on the soaring costs of the utility’s program to replace 2,000 miles of aging gas mains in Chicago.
Madigan said former Peoples President John Kleczynski and former Integrys CEO Charles Schrock knew the program’s costs had nearly doubled, from $4.6 billion to $8 billion, when they testified last year before the ICC on the proposed acquisition of Integrys by Wisconsin Energy Corp. The commission, which approved the $5.7 billion merger, is now investigating whether it should impose fines on company executives for misrepresenting material facts.
Madigan’s office, in seeking more information from the ICC, said the merger could have been impacted by the disclosure and raised questions of whether finalizing the transaction “was the primary concern of Integrys executives given the tremendous financial incentives that were conditioned upon the completion of the merger.”
A local attorney and his wife are challenging a recent settlement between Duke Energy and several parties concerning the Edwardsport coal gasification project. The agreement with the state’s Office of Utility Consumer Counsel and industrial customers would limit rates and provide money for solar projects and low-income customers.
Michael Mullett, co-founder of an advocacy group that was granted intervenor status by the Utility Regulatory Commission, says the settlement doesn’t protect residential ratepayers. He said that ratepayers should not be asked to finance any of the project’s $145 million in start-up costs. The settlement allows the utility to recover about $80 million of startup costs from customers.
Legislators are proposing to boost funding for a popular solar credit from $5 million to $7.5 million in an effort to maintain momentum for the solar industry. State Sen. Joe Bolkcom, the bill’s sponsor, said the Solar Energy System Tax Credit has been “hugely important” in convincing homeowners and business owners to install solar panels.
“There’s been $90 million in private investment for $11 million in tax credits,” said Bolkcom, a Democrat from Iowa City. “It’s created jobs in almost every county. It’s made a huge difference here.”
The solar tax credit was launched in 2012 with a budget of $1.5 million and funding has since been twice increased. The credit works out to about 18% of the cost of a typical solar installation.
Senate Moves to Block State’s Clean Power Plan Study
Olson
The state Senate has advanced a bill that would block the Corporation Commission from spending any money to study how to comply with the federal Clean Power Plan until a pending legal challenge is resolved.
Sen. Rob Olson (R-Olathe) added the amendment onto a bill that calls for disbanding the Kansas Electric Transmission Authority, an agency that was established to coordinate construction of new transmission lines to move wind energy to urban markets.
Lawmakers last year authorized the KCC and the Department of Health and Environment to develop a response to the Clean Power Plan, but only after review by a legislative oversight committee. The KCC is searching for a consulting firm to work on the state’s study.
Utilities Square off over Tx Right of First Refusal Bill
A bill that would allow existing state transmission owners first crack at building new local power lines attracted a standing-room-only crowd of rival industry advocates to a hearing in the House of Representatives.
The legislation was prompted by FERC’s decision to eliminate the federal right of first refusal on new transmission facilities ranging from 100 to 200 kV. FERC Order 1000 allows states to maintain transmission owners’ rights of first refusal for projects on their existing networks.
Supporters said the bill would ensure a reliable electric grid. But skeptics, including Bill Riggins, senior vice president for Kansas Electric Power Cooperative, said it would concentrate the transmission market. “The bill would eliminate open competition for transmission ownership, thus allowing current transmission owners, and their chosen affiliates, to monopolize future transmission in Kansas,” he said.
An administrative law judge questioned whether state regulators should allow the $4.9 billion sale of Cleco Power to a consortium of Canadian and Australian investors, citing a provision that allows buyers to pocket about $30 million in taxes collected from the utility’s customers.
Chief Administrative Law Judge Valerie Seal Meiners said the deal may be good for Cleco shareholders but not for the utility’s 286,000 customers in the state. Meiners has been reviewing the deal behind closed doors for the past 18 months.
The Public Service Commission has scheduled a vote Wednesday to decide whether the sale goes through. Cleco shareholders would sell their stock at a 15% premium, about $55.37/share, to a consortium of investors led by Macquarie Infrastructure and Real Assets, based in Sydney, Australia.
A legislative panel supports the idea of giving utilities the ability to reserve storage space in a proposed LNG facility, which would hold the equivalent of 1 billion cubic feet of gas for customers during peak winter heating months.
Northern LNG, which has proposed building the facility, has been pushing the bill, which the Legislature’s Energy, Utilities and Technology Committee is expected to endorse next week after working on final language.
One potential roadblock: The Legislature in 2013 gave utilities the authority to sign long-term supply contracts to finance an expansion of natural gas pipeline capacity. Lawmakers say pipeline expansion is a priority and they don’t want the LNG proposal to interfere.
Utilities in 2015 surpassed the state’s 10% renewable energy mandate, the Public Service Commission said in its sixth annual report, prompting conservationists to call for the state to set a higher target.
The PSC said all 75 power producers in the state met the target by Dec. 31. Under a 2008 energy law, they are required to maintain the same amount of renewable energy credits in the future.
Jack Schmitt, deputy director of the Michigan League of Conservation Voters, said the renewable energy standard now needs to expand beyond the 10% level. Schmitt said investment in renewable sources has leveled off at around $2.9 billion.
Ameren may be Forced to Install More Pollution Controls
EPA’s recent designation of St. Charles and Franklin counties as areas where sulfur dioxide levels are too high could force Ameren Missouri to install more pollution control equipment on its Labadie Plant on the Missouri River.
The state Department of Natural Resources also showed SO2 exceeding limits, but it recommended deferring action until the federal agency weighed in.
The SO2 levels have declined since Ameren switched to low-sulfur coal from the Western Powder River basin, but it has not been enough to comply with the law, according to EPA.
Six of the 10 bills in the state legislature that would have complicated Kinder Morgan’s controversial Northeast Energy Direct pipeline project are already dead, and the other four also seem imperiled.
Lawmakers are still considering a bill that would force pipeline operators like Kinder Morgan to pay reluctant landowners three times market value for any property taken under eminent domain. Another bill would require utilities using eminent domain to buy an entire property, not just the right of way.
Kinder Morgan’s Tennessee Gas Pipeline is pushing the $5 billion natural gas transmission project that would deliver Marcellus Shale gas to New England markets. The pipeline has aroused intense public opposition.
Voters will continue to choose members of the Public Regulation Commission.
The House Judiciary Committee voted Feb. 11 to table a proposed constitutional amendment to change the commission from an elected body to one appointed by the governor, effectively killing the bill. The 8-3 vote came after three of the five members of the commission spoke in opposition to the measure.
State Rep. Carl Trujillo said 40 states and U.S. territories have regulatory bodies whose commissioners are appointed and said he wanted to make sure that the commission’s decisions “are not changed by political winds.”
The state has joined the 17-state, bipartisan Governors’ Energy Accord Coalition, which develops energy policies and initiatives that expand clean energy sources, modernize energy infrastructure and build a clean energy economy.
“From the creation of a $5 billion Clean Energy Fund to implementing our ambitious Clean Energy Standard, New York is fully committed to our role as a national leader in growing the clean tech economy,” said Gov. Andrew Cuomo.
The governors of California, Connecticut, Delaware, Hawaii, Iowa, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia and Washington have also joined the effort.
The staff of the Utilities Commission appears poised to recommend approval of Duke Energy Progress’ plan to replace a coal-fired plant at Lake Julian in Asheville with two natural gas units.
But staff said the company’s request for permission to build a third contingency plant if needed by 2024 was unwarranted.
If the project is rejected, the deadline for Duke to clean up coal ash at Lake Julian generation complex will be advanced.
Dynegy Presses Opposition to FirstEnergy, AEP PPAs
Opponents of the proposed power purchase agreements that would give FirstEnergy and American Electric Power guaranteed rates in the state are ratcheting up the rhetoric.
“The middle class is getting screwed,” Dynegy CEO Robert Flexon said at an energy forum in the state. “And quite honestly, folks, that’s how I feel about these PPAs. These only exist for Wall Street.” The Alliance for Energy Choice says nearly 55,000 emails protesting the proposed PPAs have been sent to elected officials and the Public Utilities Commission.
The agreements would guarantee the companies eight-year returns on power generated by some of the plants in their fleets. The companies have argued the PPAs are necessary to keep the plants operating in the competitive market.
Will Cap on Net Metering Stifle Alternative Energy Growth?
Solar energy advocates worry that a recent decision by the Public Utility Commission to limit the amount of energy residents can sell back to utilities might curtail alternative energy growth.
Under the ruling, residents who install new rooftop solar panels would be limited to 200% of a building’s historical usage or 50 kW.
Utilities had asked for even stricter caps, saying that the expense of paying residential providers the retail cost of their power was being passed down to consumers.
SPS Asks for $71.9M Increase to Cover Infrastructure Costs
Southwestern Public Service has filed for a $71.9 million rate increase for its Texas customers, just two months after the Public Utilities Commission of Texas denied the utility’s $42 million rate request and actually ordered a $4 million cut in revenue.
SPS said the increase in base rates is necessary because a significant amount of investment was not included in them, which are based on costs from a historical test period. The new request would increase a typical 1,000-kWh residential bill by $9.56/month, or 9.2%.
The PUCT in December answered the utility’s rate-increase request with a $4 million cut in revenue, but reallocated revenue among various customer classes so that the rate for residential customers actually went up $1.11/month on Feb. 1. SPS, however, says that reductions for fuel and purchased power costs over the past year have reduced a typical residential bill by more than $9/month.
Assembly Moves to Take Control of Clean Power Plan Compliance
The State Assembly is advancing bills that would require its approval of any proposal to comply with EPA’s Clean Power Plan, which has been stayed by the U.S. Supreme Court.
The bills were approved last week by House and Senate panels in the Republican-controlled legislature. Republicans contend that the federal mandates will raise energy costs and hurt businesses.
ETRACOM and its principal trader Michael Rosenberg said last week they will seek a de novo review of FERC’s allegations that they manipulated the CAISO energy market in a scheme that allegedly netted $315,000 in profits. That would mean a federal court would decide all issues of fact and law in the beginning of the case, rather than the company potentially appealing an unfavorable FERC ruling afterward.
The company announced its decision in its response to FERC’s Dec. 16 Order to Show Cause (IN16-2), which accused the company of submitting uneconomic virtual supply transactions at the New Melones intertie at the CAISO border in order to affect power prices and benefit its congestion revenue rights there. (See FERC Seeks $2.5M Fine in CAISO Market Manipulation.) The company said its bidding was proper and that FERC “cherry-picked facts” to show manipulation, ignoring CAISO’s market design flaws and modeling errors. Its response includes statements from former FERC attorney and economist Shaun Ledgerwood, of The Brattle Group, and Harvard University professor William Hogan in support.
“This proceeding is significant as it is the first public enforcement action by FERC where every document, email and instant message, as well as witness testimony, supports legitimate trading activity; significant undisclosed and unknowable market design flaws and software pricing/modeling errors caused the alleged harms and substantially influenced the underlying trading activity; and a grid operator violated its own tariff,” the company’s attorney, Robert Fleishman, said in a statement.
Nuclear Regulatory Commissioner William Ostendorff said he will not seek another term at the agency and will leave when his current term expires June 30.
Ostendorff has been on the commission six years. He said he will return to a teaching position at the U.S. Naval Academy.
Ostendorff, a Republican, is one of two remaining commissioners from the post-Fukushima period, when the commission came under fire for its response following the meltdown in Japan.
EPA Says Luminant Coal Plants Violate Federal Standards
EPA has tentatively determined that sulfur dioxide in the air around Luminant’s coal-fired Big Brown, Martin Lake and Monticello plants violates federal standards.
The agency announced a plan in December requiring reductions in SO2 emissions at those plants and four others in Texas. The test results released Feb. 17 target the same pollutant, but are triggered by a different part of the Clean Air Act.
Luminant questioned EPA’s latest testing. “The proposed SO2 designations by the EPA are based on computer modeling funded by environmental groups,” spokesman Brad Watson said. “We firmly believe these models do not accurately predict actual emissions measurements and that these designations should be determined by real-world emissions data from air quality monitors.”
NRC Info Officer Moving to USDA Farm Service Agency
Ash
Darren Ash, chief information officer for the Nuclear Regulatory Commission for the past nine years, is leaving to take a similar position with the Department of Agriculture’s Farm Service Agency.
While at NRC, Ash prepared the agency for what was expected to be a flood of permit applications for new nuclear plants. But when that didn’t happen, he turned his attention to transitioning the agency to cloud computing and mobile applications.
NRC Increasing Oversight at Entergy’s Pilgrim Plant
Entergy’s Pilgrim nuclear station is coming under increased oversight from Nuclear Regulatory Commission inspectors following a performance review of the Massachusetts station. The commission said the scrutiny is a result of reviews of issues the plant has had with safety relief valves.
The inspection took place in September. The 728-MW plant experienced difficulty during a harsh snow storm last year when it lost offsite power, triggering an automatic shutdown. Entergy took the plant offline earlier this year as a blizzard approached.
Entergy has said it will permanently close the plant by 2019.
NRC Finds Five Safety Violations at PSEG’s Salem-Hope Creek
The Nuclear Regulatory Commission said it found five safety violations at the Salem and Hope Creek nuclear plants but characterized the violations as low significance. The three-reactor complex is operated by PSEG Nuclear.
Four of the violations were found at Salem Units 1 and 2: failing to keep appropriate maintenance records for containment cooling fans, failure to conduct proper equipment tests, improper removal of a radiation barrier and failure to properly maintain a radiation monitor. The fifth violation, also ranked “low” by NRC, related to Hope Creek employees’ failure to document and correct a loss of heat and air conditioning in the station’s main control room during a station blackout.
A PSEG spokesman said the violations are being corrected.
Citing a lower-than-expected load-growth forecast, the Tennessee Valley Authority has decided against building two new units at its Bellefonte nuclear plant and is considering selling the two incomplete units, where construction halted in the 1980s.
In filings with the Nuclear Regulatory Commission, the federally owned company withdrew its combined operating licenses for the proposed Units 3 and 4 at the site, a 1,600-acre peninsula on the Tennessee River near Hollywood, Ala. TVA CEO Bill Johnson later said the authority would consider selling the entire site, if it made sense for shareholders.
“It’s time we answer the question of whether TVA is serving the public well by retaining control of the Bellefonte site, or if others could make more beneficial use of it,” Johnson said. “And with economic development as a cornerstone of our mission, TVA wants to know if there is an entity interested in investing and creating jobs at this location.”
CARMEL, Ind. — Only a heavy, region-wide build-out of solar, wind and energy efficiency could make rate-based compliance less expensive than the mass-based path — and only if all states go along — according to MISO’s near-term analysis of the Clean Power Plan.
Jordan Bakke, senior policy studies engineer at MISO, told the Planning Advisory Committee Wednesday that it would take a major change in the region’s resource mix to make the rate-based option attractive. Even varying natural gas prices don’t change the bottom line.
When looking at the states individually, MISO found that only Michigan and Louisiana realized economic advantages using rate-based compliance. But that benefit was lost when groups of other states choose mass compliance, the models indicate.
MISO used Arkansas’ coal-heavy generation fleet to study capacity scenarios and found the state would need to buy emission rate credits or allowances to achieve compliance unless “a balance of coal retirements and renewables penetration positions it as a seller.” Eddy Moore of the Arkansas Public Service Commission said he was impressed with MISO’s level of modeling, which he hadn’t seen from other RTOs.
The new state-specific results bolster MISO’s earlier conclusion that mass-based compliance would be far cheaper than rate-based compliance. (See MISO: Mass-Based CPP Plan 1/3 Cost of Rate-Based).
MISO said its analysis indicates similar amounts of additional generation and transmission would be needed under both rate-based and mass-based compliance. Although states have a lot of latitude in what generation they choose to expand with, MISO’s near-term modeling is not identifying an optimal resource mix or looking at which pipelines or transmission projects need to be built.
The RTO said mass-based compliance would foster interstate trade in emission rate credits and “produces a more balanced mix of buyers and sellers within MISO.”
MISO said it will present additional near-term results at the March Planning Advisory Committee.
Analysis Continues Despite Stay
Bakke said MISO was continuing its analyses despite the Supreme Court’s Feb. 9 order preventing EPA from enforcing the CPP pending an appellate court challenge. The uncertainty over the impact of the stay only increased with the death, four days later, of Justice Antonin Scalia. (See Scalia Death Scrambles Clean Power Plan Odds.)
Rate-based compliance in the footprint becomes less expensive than mass-based compliance only if a widescale build-out of renewables occurs. (Source: MISO)
The stay “means it’s still in effect but on hold. It’s not overturned. Because it’s only a hold, MISO feels it’s important to continue studying the impacts of the Clean Power Plan,” Bakke said.
Anthony Artman of Ameren asked how long-term study efforts will be affected if states in the footprint decide to delay CPP plan development.
Bakke said the near- and mid-term analyses will be largely unaffected by any delays in compliance resulting from the stay. “The big change will be how the stay impacts the long-term analysis,” he said.
MISO said it intends to use state plans as they become available for modeling.
To date, most states in the footprint are either still reviewing the stay or haven’t announced plans. Kentucky, North Dakota, South Dakota and Montana have suspended planning, while Minnesota said it will continue. Bakke said MISO would continue to be in touch with stakeholders and state officials. He also said questions about how the stay will affect long-term modeling would be best answered in upcoming stakeholder CPP workshops.
“We have a bit of a chicken-and-egg problem here when we don’t know how states plan to comply,” Bakke said. He said the RTO will refine the modeling as it receives more information from states over the next three years. “There’s definitely going to be a lot of uncertainty and a lot of iteration until then,” Bakke said.
Impact on MTEP
Bakke said MISO’s mid-term analysis will still be used to influence its Transmission Expansion Plan 2017 futures and its siting process review. “After the study is complete, we’re feeding this information into our processes, so it won’t be lost,” he said.
Planning will kick off at the Feb. 23 MTEP Futures Development Workshop, according to Senior Transmission Planning Engineer Matt Ellis.
Ellis said the futures need “bookends” to determine how anticipated coal retirements, natural gas prices and the economic viability of renewables affect the fleet. He said although MISO would use a presentation with examples to start discussion on the futures’ parameters, the numbers would not be final.
“Anytime we bring numbers to stakeholders, we run the risk of ‘Oh MISO, you’ve already got this figured out,’” Ellis said. “And that’s definitely not the case. These are just to start the conversation. … Future definitions are still to be determined.”
Cross State Rule
In tandem with long-term CPP modeling, MISO will conduct a study to evaluate the impact of the proposed Cross State Air Pollution Standard (CSAPR) on its system. The standard, which could be implemented in 23 states by May, would mandate that states install modern combustion controls such as low NOx burners, operate existing control technologies, shift generation to lower NOx-emitting units and increase dispatch of natural gas combined cycle plants while reducing coal-fired generation.
“All-pollutant modeling is something we do, and we have studied cross-state air pollution in the past,” said J.T. Smith, MISO’s director of policy studies.
“Like with the Clean Power Plan, we need to have discussions with stakeholders … on the nuances of the [state emission limits],” Smith said, noting that CSAPR might be subject to additional court challenges.
He said MISO would examine the standard’s impact on reliability as well as costs, drawing on a business-as-usual model from the 2015 Transmission Expansion Plan for the study. Based on the findings, the standard could be incorporated into MTEP17.
While Smith said MISO would move “as quickly as possible to get this off our plate,” he didn’t place any deadlines on the study.
LITTLE ROCK, Ark. — SPP conducted its second wind summit in as many years last week, delving into the technical details of a recent study that indicated the RTO could handle wind penetration levels of up to 60% with additional transmission and monitoring tools.
As if to underscore the point, SPP’s balancing authority recorded new records for wind peaks and penetration levels during both nights of the summit.
“I find it ironic that during this summit, we’re predicting 43% wind penetration levels tonight and 48% tomorrow night,” said Casey Cathey, SPP’s manager of operations engineering analysis and support, as he kicked off the presentations and discussion.
SPP set new wind penetration levels of 43.3% Feb. 17 and then 43.9% after midnight on the early morning of the 19th. The penetration levels shattered the previous record of 39.1%, which lasted all of 18 days.
SPP also topped 10,000 MW of wind energy for the first time Feb. 17, recording a new wind peak of 10,439 MW. That eclipsed the old mark of 9,948 MW set in December. The Feb. 19 wind peak was 9,804.5 MW, when load was 22,332 MW.
The RTO began the year with 156 wind resources totaling 12,400 MW of installed capacity, accounting for almost 14% of its fuel mix. It expects to finish 2016 with 16,960 MW of wind generation and to add at least 2,035 MW more in 2017.
Because of the amount of wind generation being brought online in its 14-state footprint, SPP last year commissioned its first wind integration study since 2009. The analysis was presented to the Markets and Operations Policy Committee last month. (See Study: 60% Wind Penetration Possible in SPP.)
“We’re looking at [potentially] 12 [GW] of wind today,” Cathey said. “We want to ensure we continue to operate reliably and economically with this wind.”
The reliability-based study analyzed wind penetration at 30%, 45% and 60% of load during spring and fall seasons and compared them to current system conditions. SPP staff, with an assist from the Electric Power Research Institute, also performed steady-state thermal and voltage analyses, and voltage-stability, re-dispatch and ramping analyses.
Not surprisingly, staff said as wind penetrations increased, they saw “significant” transmission constraints, along with system overloads and wind farm curtailments. Cathey said SPP has sufficient ramping capabilities for today’s wind penetration levels, but vast swings in wind’s intermittency can cause problems.
“We can go from 1,000 MW to 9,000 MW and 9,000 MW to 50 MW over the course of hours,” he said. “We’re preparing for that and ensuring we’re not too fat or too lean.”
Cathey said the study showed the need for additional transmission beyond those projects identified by SPP’s current planning process. The study also calls for expediting approved projects, monitoring ramping issues with real-time operations tools and providing additional flexibility for non-dispatchable variable energy resources.
Cathey said staff will next develop a cost-benefit analysis comparing the cost of accelerating projects with the benefits of additional wind penetration. The analysis will be vetted by stakeholders, being first shared with SPP’s Transmission Working Group during the next two months.
The cost-benefit analysis and a transient stability analysis are both likely to be part of the wind integration study’s second phase. The scope has yet to be determined, with staff asking for stakeholder feedback.
“We’re definitely looking into what else do we not know,” Cathey said.
“This gives us a baseline to get the discussion off the ground,” said SPP senior engineer Jason Tanner. “With this study, we can look farther into the future.”
SPP wasn’t the only RTO that set records for wind the night of Feb. 18-19. MISO hit a peak of 13,084 MW, surpassing the previous 12,720-MW record. Meanwhile, ERCOT topped out at 14,023 MW with a penetration level of 45%.
After a late amendment, the Planning Advisory Committee last week approved a document describing the process for reviewing Business Practices Manual changes.
PAC Chair Bob McKee, with consent from the sector representatives, asked that a single sentence be added to allow an additional stakeholder review of any BPM changes made during MISO legal and compliance review. Previously, stakeholders had no procedure for getting a final look at changes made by MISO’s legal department at the end of the process.
Matthew Tackett, a MISO principal adviser, agreed to the addition.
Based on stakeholder input since December, MISO also included a statement to the language to explain how to update the document itself. MISO has worked on the updated process since November. (See “Business Practices Manuals Review Process Gets a Final Look,” MISO Planning Advisory Committee Briefs.)
However, MISO would not commit to allowing the comment period for new BPM language to extend over two consecutive meetings, as stakeholders advocated. “MISO will endeavor to provide additional time for comments… However, there may be times when BPM changes must be expedited, and under these situations, less time may be available for comments,” the RTO wrote.
MISO staff said it would post the finalized BPM process language on the MISO website under the planning tab, but the document will not be considered an official MISO governing document. MISO said it would be “posted for informational purposes only to codify the general process used by the Planning Advisory Committee and reporting committees regarding the review of BPM changes.”
Attachment Y Adjustments Put on Hold for a Month
Changes to Attachment Y of MISO’s Tariff, which deals with the planning process behind system support resources, will be put on hold for a month, said Neil Shah, an adviser on seams administration.
Shah said MISO didn’t receive enough substantive comments on the proposed changes. As a result, MISO is now planning to file Tariff language by the end of March instead of the end of February. Shah said staff wants to discuss the changes at the March 1 Market Subcommittee meeting before filing.
MISO is proposing that all generation resources planning to suspend or retire, including pseudo-tied units, black start units and generators on a forced outage, be required to submit Attachment Y notices to MISO.
Six environmental groups called Wednesday for the immediate closure of the Indian Point nuclear plant.
The Sierra Club, Riverkeeper, Hudson River Sloop Clearwater, the Indian Point Safe Energy Coalition, Scenic Hudson and Physicians for Social Responsibility asked the Nuclear Regulatory Commission to suspend plant operations until Indian Point’s safety is reviewed by state and federal investigators.
Indian Point Nuclear Plant
The plant is under investigation following a series of mishaps in recent months, including radioactive water leaks and two unplanned outages. NRC is investigating the leakage of radioactive water into test wells. The New York departments of Health and Environmental Conservation are conducting their own investigation along with the Public Service Commission. (See NRC: No Further Leakage at Indian Point.)
“Currently Entergy is unable to properly access its aging labyrinth of more than 3 miles of pipes beneath the Indian Point site,” said Sierra Club President Aaron Mair. “Entergy focuses on tritium, but the actual leak likely contains a collection of radioactive elements, including Strontium-90, Cesium-137, Cobalt-60 and Nickel-63, that could migrate off the property.”
Federal officials and plant owner Entergy say the incidents have not endangered the public.
Entergy dismissed the most recent criticism. “Some organizations who are longtime opponents of nuclear power will take opportunities to try and frighten the public. The fact is this issue cannot have any impact on public health or safety,” spokesman Jerry Nappi told RTO Insider Friday.
U.S. Sen. Charles Schumer said he understands critics’ frustration and said he was among the plant’s harshest critics. But he also told the Mid-Hudson News Network that the plant’s continued operation is vital to keeping electricity affordable.
“I have told some of the environmental people, if you can show me a plan to figure out a way to replace that electricity, fine, but if you can’t, it’s going to raise electricity rates 30% or 40%, [rates] which are high enough on average people and that’s not the way to go. In the meantime, I have emphasized very strong safety,” Schumer said.
Gov. Andrew Cuomo has advocated the plant’s closure due to its proximity to New York City.
“The NRC shouldn’t ask the public to take its chances when so many questions are unanswered and the stakes are so high,” said Riverkeeper President Paul Gallay. “Since May 2015, Indian Point has suffered seven major malfunctions, from pump failures to transformer explosions, to radiation leaks, power failures, fires and oil spills. … Pending completion of the state and federal investigations, we must close Indian Point. These mishaps are happening on an accelerated pace. We shouldn’t be asked to wait for the next one.”
Consolidated Edison on Thursday reported 2015 net income of $1.19 billion ($4.07/share) compared with $1.09 billion ($3.73/share) in 2014.
Excluding the impairment of certain assets held for sale, the gain on sales of solar electric production projects, the impact of lease in/lease out transactions and the net mark-to-market effects of the competitive energy businesses, the company earned $1.2 billion ($4.08/share) in 2015, compared with $1.14 billion ($3.89/share) the year before.
For the fourth quarter of 2015, unadjusted net income totaled $176 million ($0.60/share) compared with $81 million ($0.28/share) in the fourth quarter of 2014. Adjusted, earnings were $178 million ($0.61/share) in 2015 compared with $171 million ($0.58/share) in fourth quarter 2014.
The company expects adjusted earnings of $3.85 to $4.05/share for 2016. The forecast reflects capital investments of $4.15 billion, which includes $985 million for the competitive energy businesses’ renewable and energy infrastructure projects.
“We embrace new technologies that are changing the energy industry and use them to partner with our customers,” CEO John McAvoy said in a statement. “Customers want more options, including the ability to generate power in their own homes or businesses and greater access to cleaner energy. We see potential throughout our businesses, and are confident that our experience and expertise make us a leader in our field.”
Con Ed said it will meet its 2016 capital requirements from cash flow and by issuing $1 billion to $1.5 billion in long-term debt at its utility subsidiaries. Additional debt will be secured by its renewable electric production projects. Con Ed also plans to issue up to $200 million in new common equity, in addition to equity created through its dividend reinvestment, employee stock purchase and long-term incentive plans.
Maryland Gov. Larry Hogan’s administration said it intends to appeal a permit approved by Virginia regulators that would allow Dominion Virginia Power to release 215 million gallons of treated coal ash water into Quantico Creek, which empties into the Potomac River.
Entergy Arkansas says a projected decrease in fuel costs would help offset the customer impact of a requested 8% base-rate increase before the Public Service Commission.
The United Illuminating Co. and Eversource Energy have submitted proposals to the Department of Energy and Environmental Protection for pilot projects to better integrate renewable energy into the electric distribution system.
A local attorney and his wife are challenging a recent settlement between Duke Energy and several parties concerning the Edwardsport coal gasification project. The agreement with the state’s Office of Utility Consumer Counsel and industrial customers would limit rates and provide money for solar projects and low-income customers.
An administrative law judge questioned whether state regulators should allow the $4.9 billion sale of Cleco Power to a consortium of Canadian and Australian investors, citing a provision that allows buyers to pocket about $30 million in taxes collected from the utility’s customers.
A legislative panel supports the idea of giving utilities the ability to reserve storage space in a proposed LNG facility, which would hold the equivalent of 1 billion cubic feet of gas for customers during peak winter heating months.
EPA’s recent designation of St. Charles and Franklin counties as areas where sulfur dioxide levels are too high could force Ameren Missouri to install more pollution control equipment on its Labadie Plant on the Missouri River.
Six of the 10 bills in the state legislature that would have complicated Kinder Morgan’s controversial Northeast Energy Direct pipeline project are already dead, and the other four also seem imperiled.
The staff of the Utilities Commission appears poised to recommend approval of Duke Energy Progress’ plan to replace a coal-fired plant at Lake Julian in Asheville with two natural gas units.
ETRACOM and its principal trader Michael Rosenberg said last week they will seek a de novo review of FERC’s allegations that they manipulated the CAISO energy market in a scheme that allegedly netted $315,000 in profits. That would mean a federal court would decide all issues of fact and law in the beginning of the case, rather than the company potentially appealing an unfavorable FERC ruling afterward.
EPA has tentatively determined that sulfur dioxide in the air around Luminant’s coal-fired Big Brown, Martin Lake and Monticello plants violates federal standards.
Entergy’s Pilgrim nuclear station is coming under increased oversight from Nuclear Regulatory Commission inspectors following a performance review of the Massachusetts station. The commission said the scrutiny is a result of reviews of issues the plant has had with safety relief valves.
The Nuclear Regulatory Commission said it found five safety violations at the Salem and Hope Creek nuclear plants but characterized the violations as low significance. The three-reactor complex is operated by PSEG Nuclear.
Citing a lower-than-expected load-growth forecast, the Tennessee Valley Authority has decided against building two new units at its Bellefonte nuclear plant and is considering selling the two incomplete units, where construction halted in the 1980s.
