Page 1469 – RTO Insider

February 23, 2016

FERC Likely to Eliminate Must-Offer Rule for West

By Robert Mullin

FERC last week proposed eliminating a market transparency rule imposed on the Western Electricity Coordinating Council (WECC) region during the height of the California energy crisis of 2000-2001, citing a decade of advances designed to protect state’s organized electricity markets from price manipulation.

The commission on Thursday ordered a Section 206 investigation into whether its West-wide must-offer obligation is still necessary in light of a progression of technical and structural developments that have improved the resiliency of California markets. But the wording of its order made clear the commission intends to end the 15-year-old policy (EL16-27).

“Due to the passage of time and significant changes to California’s wholesale markets, the must-offer obligation established for the WECC in 2001 appears to have outlived its usefulness,” FERC said.

FERC implemented the must-offer rule in June 2001 in response to what it called “serious market dysfunction” in California — the concerted effort by some of the region’s generators to withhold power supplies to drive up prices in the now-defunct California Power Exchange.

The rule required most generators serving California to offer all capacity not already committed under bilateral agreements into the state’s real-time market. The rule also required public and non-public utilities to post a daily log of available capacity on their websites, as well as to a site hosted by the Western Systems Power Pool (WSPP).

The must-offer and posting obligations were originally set to expire in September 2002, but a second commission order extended both requirements until “long-term market-based solutions” could be fully implemented in California.

In March 2015, WSPP sent a letter to then-Chairman Cheryl LaFleur, asking the commission to clarify whether the obligation was actually still in effect, given that the event precipitating the rule — the Western energy crisis — no longer existed.

In last week’s order, FERC said the rule no longer was necessary and that the posting requirement “may have become burdensome.”

The commission said California has met the standard for long-term solutions, spelling out “significant changes” implemented in the CAISO balancing area since the must-offer requirement was instituted. Those changes include LMP-based day-ahead and real-time energy markets, ancillary services markets, a day-ahead residual unit commitment process and local market power mitigation measures.

The order also notes that California’s ambitious renewable portfolio standard (RPS) and resource adequacy program have reduced the state’s reliance on spot markets, ameliorating a flaw in the previous market that left the state’s load-serving entities exposed to short-term price spikes. FERC credited the RPS and CAISO’s improved generation interconnection process for producing “robust” reserve margins, and said that a recent build-out in WECC has been adequate for all western subregions to meet reserve margin targets for the 2014-2024 period.

“[G]iven the significant improvements in CAISO’s market design and infrastructure outlook in the West, we believe that it may be appropriate at this time to eliminate the West-wide must-offer requirement and the related requirement to post available capacity on the WSPP website or on the utilities’ own websites,” FERC wrote.

A CAISO spokesperson said Friday the grid operator was still reviewing the FERC order. The California Public Utilities Commission did not respond to a request for comment. Broad must-offer requirements have already been eliminated from the CAISO tariff with the adoption of longer-term resource adequacy provisions.

One Pacific Northwest utility analyst familiar with regional compliance issues said the rule’s termination should have little effect on operations at her company.

“It won’t change anything except a requirement to post a number on OASIS every day that nobody looks at,” said the analyst. “So it’s good news.”

FERC asked interested parties to submit comments on the termination of the must-offer requirement within 30 days. The commission expects to render a decision on the issue by June 18.

February 23, 2016

FERC: PSEG Can Recover Costs if Artificial Island Project is Canceled

By Suzanne Herel

FERC on Thursday approved an incentive filing by PJM that will allow Public Service Electric and Gas to recoup all of its costs if the Artificial Island reliability project is canceled due to reasons beyond the company’s control.

“PSE&G contends that the permitting, construction, coordination and procurement risks greatly increase the chance of delay and cost increases, thereby increasing the chance that the A.I. project could be canceled after PSE&G has invested time and money,” the order said (ER16-619).

The project’s crossing of the Delaware River alone will necessitate nearly 50 federal, state and local permits, it said.

PSE&G called the proposed work “unique,” requiring it to design and order materials and equipment that could not be used readily if the project is canceled.

ferc — Salem Nuclear Generating Station on Artificial Island (Source: Wikimedia)

The project consists of building a 230-kV transmission line from the New Jersey nuclear complex housing the Hope Creek and Salem reactors to Delaware to resolve stability issues. PSE&G competed to win the full project, but the bulk of the work was awarded to LS Power, with PSE&G and Pepco Holdings Inc. assigned the necessary connection facilities. (See PJM Staff Picks LS Power for Artificial Island Stability Fix; Dominion Loses Out.)

PSE&G’s portion of the project involves expanding the Salem substation and building a static VAR compensator (SVC) upgrade at New Freedom, estimated to cost $31 million to $38 million at the time PJM recommended the project.

The FERC order quotes a $126 million estimate from PSE&G.

American Municipal Power asked FERC to require PSE&G to submit a filing detailing any costs sought to be recovered in customers’ rates in the event the A.I. project is scuttled. FERC included the requirement in its ruling that PSE&G be able to fully recover “prudently incurred” expenses.

The Delaware Public Service Commission submitted comments saying PSE&G had not adequately justified the need for an abandonment incentive.

Separately, Delaware and Maryland regulators and consumer advocates have opposed the allocation of the project’s cost, nearly all of which has been designated to customers on the Delmarva Peninsula. FERC accepted but suspended PJM’s Tariff changes involving the project’s cost assignment pending additional review (EL15-95).

At a Jan. 12 technical conference ordered by the commission, stakeholders debated cost allocation based on the solution-based distribution factor (DFAX) method. (See DFAX: ‘Poison Pill or ‘Best Method’ of Cost Allocation?)

FERC last week set a March 9 deadline for filing post-technical conference comments.

February 23, 2016

PJM MRC and Members Committee 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 (9:10-9:20)

Members will be asked to endorse the following manual change:

Manual 18: Capacity Market. Changes conform with FERC’s Dec. 22 order accepting for filing revisions to the Reliability Assurance Agreement (ER16-333). They address the circumstances under which fixed resource requirement (FRR) entities aren’t mandated to meet the percentage of internal resource requirement, how such entities may terminate their five-year minimum commitment period and alternative election dates for new FRR entities. (See IMEA Reaps Limited Relief from Capacity Rule Change.)

3. End-of-Life Transmission Projects (9:20-9:35)

Ed Tatum of American Municipal Power will present a problem statement and issue charge that would develop uniform PJM-wide criteria and guidelines for assessing end-of-life transmission facilities. The work is not intended to address any cost allocation issues and is expected to be completed by the end of the third quarter.

4. Governing Documents Enhancement & Clarification Subcommittee (GDECS) (9:35-9:45)

The committee will be asked to approve various cleanups, corrections and clarifications of terms included in the governing documents.

Members Committee

Consent Agenda (1:20-1:25)

Members will be asked to approve Tariff revisions exempting some reliability projects below the 200-kV threshold from the proposal window process. (See Low-Voltage Projects to be Exempted from Competitive Window Process.)
The committee will be asked to approve updated definitions and a cleanup of governing documents developed by the Governing Documents Enhancement & Clarification Subcommittee Group

— Suzanne Herel

February 23, 2016

Avangrid Posts Profit in First Earnings Results

By William Opalka

Avangrid, the result of the U.S. arm of Spanish conglomerate Iberdrola acquiring UIL Holdings, released its first-ever earnings results Monday, showing net income of $267 million for 2015.

Divided PURA Approves Utility Takeover.)

But Avangrid said the combined net income of Iberdrola USA and UIL for the full year — excluding $71 million in merger costs and UIL’s $130 million in earnings prior to the acquisition — was $468 million, compared with $538 million in 2014. Iberdrola’s wind assets reported lower income due to the effects of El Nino and warm winter weather impacted electricity sales.

The company had not posted a full earnings report showing operating revenue, expenses and fourth-quarter results as of press time.

“In 2015, we successfully completed our merger transaction on target, obtaining all regulatory approvals and closing within 10 months of our announcement,” CEO James P. Torgerson said in a statement. “In 2016, we will rapidly conclude our transition planning within the first quarter, focus on executing our capital expenditure plan in all of the businesses and proceed with our important initiatives.”

Avangrid includes eight gas and electric distribution utilities in New York and New England, and renewable energy operations in 25 states coast-to-coast, primarily wind farms. The company is the second-largest operator of wind facilities in the U.S.

In a presentation to Wall Street analysts on Monday, Torgerson said, “We are now a large energy company with regulated businesses and investments in clean energy. Ninety percent of our generation is totally emissions-free, so we can focus very much on the renewable business.” The CEO said about two-thirds of its assets are in fixed, long-term power purchase agreements that create predictable earnings.

Avangrid projects earnings of $1.65/share for its distribution business, 40 cents/share for its renewables business and a 5-cent loss from corporate operations and its gas storage and transportation business.

For comparison going forward, the company is using the combined operations of Iberdrola USA and UIL from 2014 as the base in projecting future earnings of 8 to 10% per year. It gave an estimate of consolidated earnings of $2/share for 2016. The company’s board of directors declared a quarterly dividend of $0.432/share on its common stock.

New York Rate Case

Company officials announced that a settlement had been reached in New York for its two electric and gas distribution utilities, New York State Electric and Gas and Rochester Gas & Electric.

A joint proposal with numerous stakeholders — including regulatory staff, large commercial and industrial customers, and consumer and environmental representatives — was filed with the New York Public Service Commission on Friday (15-E-0283).

Depending on the year and segment of the three-year proposed settlement, the increases range from 1 to 7%. In aggregate, the total in incremental revenue is $390 million. Also included in the settlement is the recovery of $262 million over about seven years for storm-related costs in the NYSEG territory, primarily related to Superstorm Sandy.

The company expects public hearings to begin in April, PSC consideration in May and rates effective on June 1.

February 23, 2016

FERC Grants 12.28% Rate in GIA for Illinois Wind Farm

FERC last week approved a revised generation interconnection agreement proposed by MISO to link the Hoopeston wind project in rural Illinois to Ameren’s transmission.

FERC accepted MISO’s option A GIA, which proposed a 12.28% fixed charge rate on network upgrades, and rejected option B, which proposed a 12.82% rate. The restated GIA bears an Aug. 15, 2013, effective date.

The order (ER13-2157) approved in part MISO’s December 2014 compliance filing and denied Ameren’s October 2014 rehearing request.

Apex Clean Energy’s Hoopeston Wind consists of 49 wind turbines spread across east-central Illinois farmland. The wind company disputed Ameren’s proposed cost recovery for network upgrades, which stipulated that upgrade costs be subject to participant funding only if an interconnection customer offers up-front funding for the work.

MISO presented the two GIA options in response to an order directing the RTO to revise the restated Hoopeston GIA “so that the self-fund option does not include the recovery of costs other than the return of and on the capital costs of the network upgrades.”

— Amanda Durish Cook

February 23, 2016

Entergy Granted Waiver in New Orleans 15th Ward Transfer

By Amanda Durish Cook

FERC last week granted Entergy permission to use a one-time load adjustment in the transfer of transmission facilities in New Orleans’ 15th Ward, Algiers, from Entergy Louisiana to Entergy New Orleans.

The order (ER15-1922) grants a limited waiver to include an estimate for the Algiers load in the historical Entergy New Orleans calculation and subsequent removal from the Entergy Louisiana calculation to avoid discrepancies. Without the waiver, the transfer would require a responsibility ratio calculation and a phase-in period that would occur over a year, the company said. Responsibility ratios, used to allocate costs in the Entergy intra-system bill, are calculated as a rolling 12-month average.

Entergy said the Algiers asset transfer required immediate, not gradual, cost allocation and asked for a “one-time reset of the Entergy New Orleans and Entergy Louisiana responsibility ratios to complete the Algiers asset transfer.”

Entergy sought the asset transfer in December 2014 because Entergy Louisiana had been subject to retail jurisdiction of the New Orleans City Council in addition to the Louisiana Public Service Commission. Entergy Louisiana serviced Algiers as well as customers outside the city. Entergy New Orleans delivered electricity to all of the city except Algiers.

In April 2015, FERC approved the transfer, and in September, approximately 8.3 miles of 115-kV and 230-kV transmission lines and two transmission substations were passed to Entergy New Orleans, ending Entergy Louisiana’s dual jurisdictions. As a result, 1.84% of the capacity from Entergy Louisiana’s existing generation portfolio moved to Entergy New Orleans.

The commission determined that the historical load estimate Entergy developed was thorough, relying on “load research sample interval data, sample and total class billing kilowatt-hours, sample strata weighting factors and monthly Entergy system peak demand times.”

February 23, 2016

NiSource’s Income Down

By Amanda Durish Cook

NiSource earned $64.4 million ($0.20/share) from continuing operations in the fourth quarter of 2015, below the $79.5 million ($0.25/share) reported for the last three months of 2014. NiSource’s full-year earnings totaled $198.6 million ($0.63/share), compared with $256.2 million ($0.81/share) during 2014.

The company split from Columbia Pipeline Group through a distribution of its stock to its shareholders during the third quarter of 2015.

“Now in our first full year as a pure utility company, we’re deeply committed to leadership in safety and service to our customers and communities as core drivers of sustained and growing value,” CEO Joseph Hamrock told shareholders.

The Merrillville, Ind., company invested a record $1.37 billion in 2015 in its gas and electric utilities in the seven states it serves. NiSource pledged to spend another $1.4 billion on system upgrades in 2016. Hamrock said NiSource replaced 361 miles of pipeline in 2015 and continued or began modernization programs at its subsidiaries in Virginia, Massachusetts and Ohio. The company also installed automated meter reading devices for 4 million customers.

NiSource pointed to successful rate settlements last year in Massachusetts, Pennsylvania and Virginia, along with the Indiana Utility Regulatory Commission’s approval of a settlement between , its large industrial customers and the Indiana Office of Utility Consumer Counselor over NIPSCO’s seven-year electric infrastructure modernization plan. Under the settlement, NIPSCO had to refund just under $1 million. The company refiled the plan request, asking for $1.33 billion and rate hikes over the next seven years to improve its infrastructure.

In a separate case, NIPSCO is seeking the IURC’s approval to increase monthly residential charge from $11 to $20. NiSource said the increase would “update rates to reflect the current costs of generating and distributing power, plus ongoing investments which are delivering substantial benefits to customers, including programs that have reduced the duration of power outages by 40%.”

February 23, 2016

Company Briefs

DTE Energy and Wisconsin Power and Light are looking for buyers of their closed power plants near Cassville in southwest Wisconsin.

DTE Energy is selling its Stoneman biomass plant, which closed in November, while WPL is listening to proposals for its shuttered coal-fired Nelson Dewey Generating Station, which closed at the end of 2015. The closures eliminated about 85 jobs in the area.

A DTE spokesperson said the company plans to demolish Stoneman in 2017. A local commerce group wants the WPL plant, located on 130 acres of Mississippi River waterfront, developed into a port facility. WPL’s parent company, Alliant Energy, has hired a consulting firm to come up with a marketing plan for future uses. The site will require environmental cleanup before it is redeveloped.

More: Dubuque Telegraph Herald

Talen Energy Sells Crane Plant in Md.

Talen Energy has sold the 399-MW C.P. Crane power plant in Maryland to an affiliate of investment firm Avenue Capital Group. Terms of the sale were not released.

The coal-fired plant, near Baltimore, is the second plant sold by Talen recently to satisfy a FERC-mandated plan to mitigate the market effects of the company’s creation from PPL and Riverstone Holdings last year.

Talen says it plans to sell two Pennsylvania hydro plants before the end of the first quarter to satisfy the FERC divestiture requirements: Holtwood, on the Susquehanna River in Lancaster County, and Lake Wallenpaupack in Wayne County.

More: The Morning Call

Hawaiian Electric Cancels Contracts with Troubled SunEdison

SunEdison, once a high-flying solar developer, absorbed another blow when Hawaiian Electric canceled a contract to purchase 148 MW of output because of construction delays.

In a regulatory filing about the contract cancellation, Hawaiian cited SunEdison’s “apparently precarious financial condition” as a cause for numerous missed deadlines. The company’s stock has fallen 92% in the past year.

“SunEdison missed multiple deadlines throughout the process, did not provide adequate assurances that it could secure financing to develop these projects and did not propose viable options to address the significant risks to our customers of not securing lower cost renewable energy,” a Hawaiian Electric spokesman said.

More: Bloomberg

Duke Nuke Fleet Beats National Capacity Average

Duke Energy’s nuclear fleet ran at 94.2% of capacity last year, the company reported, noting that its Oconee Nuclear Station in South Carolina turned in a 98% capacity factor for 2015. The national average for 2015 was 91.2%.

Duke, like Exelon, continues to tout nuclear generation as a carbon-free power source, an important consideration as federal emissions mandates get stiffer. In addition to having plans to build the new, $12 billion Lee Nuclear Station in Gaffney, S.C., Duke intends to seek license extensions ranging from 20 to 40 years for its other plants.

Duke operates 11 nuclear generating stations. Its fleet has operated at better than 90% capacity for 17 consecutive years.

More: Charlotte Business Journal

Oncor Bidders Defend Their Plan from Critics Who Fear a Windfall

The group trying to buy Oncor said its plan to restructure Texas’ largest utility could save electricity customers hundreds of millions of dollars, but critics of the plan say it doesn’t take into account a tax-related windfall that could send $250 million a year to the buyers.

Dallas billionaire Ray L. Hunt leads the group that is seeking to buy Oncor and help take it out of bankruptcy. The group filed a detailed response to the Public Utility Commission of Texas on Feb. 19 that addresses objections raised by several parties, including PUCT staff, former Gov. Rick Perry, the current Oncor chief executive and AARP.

The commission is expected to indicate whether it will approve the Hunt group’s plan at its March 3 meeting. The group wants to put up $18 billion for the business and split it into two new companies.

More: The Dallas Morning News

Sierra Club Files Suit Against 3 Companies over Earthquakes

The Sierra Club filed suit in U.S. District Court against three oil and gas exploration companies, charging that their wastewater disposal in deep injection wells is triggering earthquakes in Oklahoma and Kansas. The suit names Chesapeake Energy, New Dominion and Devon Energy for contributing to a staggering increase of seismic activity.

The suit says the companies “contributed and continue to contribute to the increased seismicity triggered by the waste handling, transport and disposal activities at the injection wells owned or operated by the defendants throughout the state of Oklahoma and southern Kansas.”

The suit asks a judge to curtail the number of gallons of drilling waste being injected into deep rock layers and that the companies pay to protect buildings from earthquake damage. “The oil industry is on its knees, the business models are busted,” said Bloomberg Intelligence Analyst Peter Pulikkan. “And now you have this threat of disposal wells being linked to earthquakes that could put companies with material exposure permanently out to pasture.”

More: Bloomberg

February 23, 2016

Overheard at GCPA’s MISO South Conference

The Gulf Coast Power Association (GCPA) held its MISO South Regional Conference in New Orleans Feb. 18. Here’s a sampling of what we heard:

[metaslider id=”102404″]

February 23, 2016

FirstEnergy Q4 Earnings down

By Suzanne Herel

FirstEnergy last week reported fourth-quarter operating earnings of $0.58/share, compared with $0.80/share for the same period in 2014, citing greater planned operating expenses, higher tax rates and lower distribution deliveries.

Those factors were tempered by increased transmission revenue, a greater commodity margin for its competitive business and resolved rate cases in West Virginia, New Jersey and Pennsylvania, the company said.

“This year, we will continue to focus on regulated growth through our Energizing the Future transmission initiative, while strengthening our utilities business and managing risk across the company,” CEO Charles Jones said. “We also look forward to resolving our Ohio Electric Security Plan, which will shape our longer-term strategic outlook.”

On a non-adjusted basis, the Akron, Ohio, company reported a net loss for the quarter of $226 million ($0.53/share) on revenue of $3.5 billion, compared with a net loss of $306 million ($0.73/share) on equal revenue for the same quarter in 2014.

Operating earnings for the full year were $2.71/share, compared with $2.56/share for 2014.

Jones provided first-quarter 2016 guidance of 75 to 85 cents/share. He said in a call with analysts that he would not provide guidance for the full year until the Public Utilities Commission of Ohio rules on a proposed power purchase agreement proposal designed to shore up FirstEnergy’s Davis-Besse Nuclear Power Station and the Sammis Plant. He expects a decision in March. (See Next up in Ohio PPA Battle: Dynegy Weighs in.)

Peppered with questions from analysts regarding the potential effects on the company if PUCO denies the agreement, Jones and Chief Legal Officer Leila Vespoli said they were optimistic and declined to prognosticate.

“What I’ve said is we will deal with that outcome when we have it, and we will communicate at that time what our earnings guidance for 2016 is, what our future growth plans for the utilities are, what our future equity needs might be, if anything, to support that growth.” Jones said. “I’ve consistently said I think that generation, transmission and distribution are all critical assets in terms of serving customers, and right now I don’t see any strategic change there for us.”

Opponent of the plan have asked FERC to weigh in, and Vespoli said she expects the commission to do so before PJM’s Base Residual Auction in May.

FERC last week approved a separate initiative in which FirstEnergy plans to spin off the transmission assets of Jersey Central Power & Light, Metropolitan Edison and Pennsylvania Electric into a new subsidiary. (See FERC OKs FirstEnergy’s Tx Spin-off; N.J., Pa. Approval Still Needed.) The deal also needs the approval of regulators in Pennsylvania and New Jersey, which Jones said he expects by mid-year.