New NYISO Head Brings Broad Experience

By Tom Kleckner and William Opalka

Bradley C. Jones joined ERCOT little more than two years ago from Energy Future Holdings as the grid operator’s vice president of commercial operations. The job gave him responsibility for market operations, design and development, settlements, retail operations and client relations.

He wouldn’t stay long.

In January, ERCOT appointed him senior vice president and chief operating officer, putting him in line to potentially succeed CEO H.B. “Trip” Doggett, who announced in June that he will retire in 2016.

In August, however, ERCOT named General Counsel Bill Magness as Doggett’s successor. So last week, after less than nine months in his new job, Jones announced he would succeed Stephen C. Whitley as CEO of NYISO.

Jones (left), Whitley (right) (Source: NYISO)

Jones will take over Oct. 12, as the New York power market faces a proposed overhaul led by the state’s governor and utility regulators.

In January, Gov. Andrew Cuomo called for the Public Service Commission to review the ISO, saying its market design is at odds with his administration’s Reforming the Energy Vision initiative, which seeks increased deployment of distributed resources and clean energy. Cuomo also called for more public and consumer representation on the ISO’s Board of Directors. (See NYISO: We’ll Cooperate with PSC Review.)

The ISO’s other challenges include the continuing shift to natural gas generation; reliability concerns caused by coal retirements and above-market contracts needed to keep some generators operating; transmission constraints into New York City; and discussions to change the capacity market that have not reached consensus.

Three Decades

Those who know him at ERCOT say Jones’ nearly three decades of experience in the industry have prepared him for the challenges.

“Brad was integral in the creation of the successful ERCOT market,” said Theresa Gage, ERCOT’s vice president of external affairs and corporate communications. “We are sad to see him go, but we are proud that NYISO recognizes the excellence in Brad that benefited the ERCOT market for so long.”

His new bosses in New York say Jones’ experience in the private sector and with the Texas grid is what made him the best candidate.

“The board gave serious consideration to a number of highly qualified and impressive candidates — both internal and external — and ultimately selected Mr. Jones because of his long and distinguished career in the electric sector,” NYISO spokesman David C. Flanagan. “His diverse background — with experience in grid operations, power plant operations, generation development, project finance, market design, and regulatory and legislative affairs — was the best fit for the NYISO at this point in its history.”

Whitley announced in January he would step down after more than seven years as the ISO’s head. He will remain with NYISO during a transition period and will become an adviser to the Board of Directors.

Jones last week declined an interview request, saying he is not yet ready to talk publicly. In a statement, he said he was “excited about the opportunity to work with the NYISO’s employees and stakeholders, as well as with government officials.”

Florida Native, Texas Career

Though born in Florida, Jones has spent most of his time in Texas, where he and his wife raised their six children.

He earned a bachelor’s degree in mechanical engineering from Texas Tech University and a master’s degree in finance from The University of Texas at Arlington. He is a registered professional engineer in Texas.

Last Coal Plant

He joined TXU Corp. as a plant engineer, rising through the ranks and various executive positions in retail, generation, investor relations, government relations and regulatory affairs. He led the development of TXU’s Oak Grove Project, a 1,634-MW coal-fired generating station located near College Station, Texas, and the last coal plant to be built in the state.

He remained with TXU after Energy Future Holdings (EFH) acquired the utility and its subsidiaries in a 2008 leveraged buyout. When he was tapped by ERCOT, Jones was serving as vice president of government relations for EFH’s competitive businesses.

While with TXU and EFH, Jones chaired ERCOT’s Technical Advisory Committee, which is comprised of stakeholders that make recommendations on operating guides and market protocols to the ISO’s Board of Directors.

Texas Market

“With his deep knowledge of the industry, Brad was always such a great resource for me,” said Pat Nichols, a senior communication strategist with TXU and EFH. “I was sorry to see Brad leave EFH but glad for his success.”

During the 1999 legislative session, Jones worked with the Texas Legislature to restructure the electric industry and allow customers to choose their electric suppliers. Then, as the Texas electric market prepared for retail competition, he led several ERCOT workgroups and committees that created the state’s competitive electricity market.

In 2001, Jones became one of only four recipients of the Public Utility Commission of Texas Commissioner’s Award for his leadership in preparing the state’s electric market for competition. He is well connected within the industry, having served on the boards of the Gulf Coast Power Association and FutureGen Industrial Alliance, chaired an Edison Electric Institute advisory committee and participated on a Texas Reliability Entity committee.

[Editor’s Note: An earlier version of this article mistakenly suggested that ERCOT had not yet chosen a successor for retiring CEO H.B. “Trip” Doggett.]

September 22, 2015

PJM to FERC: We’re Prepared for Winter

By Suzanne Herel

PJM is prepared to meet this winter’s load — even if it’s a bit higher than the record peak seen last season, COO Mike Kormos told FERC last week.

PJM’s winter preparedness study considered a peak load of 135,350 MW (not including demand response), below the record winter peak of 143,086 set Feb. 20.

“We did not identify any reliability problems,” he said. “Our margins are fairly sufficient as well. We do not see anything at this point that is problematic to us.”

pjm — PJM is responding to generation retirements (blue circles) with new generation (orange circles) and transmission (yellow lines).

PJM officials are feeling more comfortable, in part, because of the improved generator performance last winter.

Generator outage rates, which exceeded 20% during the 2014 polar vortex, were generally less than 15% last winter. Officials plan to repeat the winter preparation checklist and a testing program for seldom-run units that were credited with improving performance. (See Why Did PJM Grid Fare Better This Winter?)

Kormos noted that about 10,000 MW of generation has retired since last winter, only about 3,000 MW of which has been replaced. Although the RTO feels confident it can make up the losses, in part due to new transmission, “it is a 7,000-MW difference,” Kormos said.

In addition to making enhancements to the grid, PJM has been working on its relations with the gas industry. “We have spent a lot of effort since last winter continuing coordination,” Kormos said.

PJM this summer signed an information-sharing agreement with nine interstate pipelines. (See PJM, Pipelines Pledge Increased Cooperation to Boost Reliability.)

Beginning Nov. 1 until March, PJM will be holding weekly calls with the pipelines to talk about upcoming maintenance on either side, projected peak loads and forecasting conditions, he said.

Kormos said he was encouraged by one pipeline’s recent announcement that it is considering offering firm service customized for generators’ needs.

“Generators are not [local distribution companies]. They don’t draw gas every hour, seven days a week, 365 days [a year] like an LDC does. They don’t have storage contracts in place like LDCs do,” Kormos said. “They need a different service.

“We feel we are in a much better situation after the past two winters,” he continued. “We believe we’re doing a better job coordinating.”

September 22, 2015

SPP to Push Regional Approach in First CPP Webinar

By Tom Kleckner

SPP’s Clean Power Plan (CPP) Task Force was given an advance look last week at a webinar that will open the dialogue with state and utility officials charged with implementing the Environmental Protection Agency’s CO₂ emission rule.

SPP is hosting the webinar Tuesday for air quality regulators, utility commissions and government contacts at its member utilities in each of the RTO’s 14 states. More than 70 had registered to attend as of last week.

SPP met its goal of having each state represented by at least one registrant, said SPP Vice President for Engineering Lanny Nickell, the RTO’s point person on the CPP.

“We want to introduce ourselves as an RTO, particularly to the air quality and environmental regulators,” Nickell said. “We haven’t done that before in a programmatic approach. They don’t all know who SPP is and how it works.”

Southern States Slower to Embrace Regional Compliance

The webinar attendees will hear from SPP that state-by-state compliance with EPA’s final CPP rule will be more costly than regional compliance, and that more new generation and transmission infrastructure will likely be needed. In addition to being more expensive, SPP says state-by-state compliance would be more difficult for the RTO to manage.

Asked about the SPP states’ early plans, Nickell said, “The states in our north have expressed the most interest in working with each other.” Pausing, he said, “I don’t get that same sense from the states in the South.”

Several of SPP’s states — Arkansas, Kansas, Louisiana, Nebraska, Oklahoma and Texas — are led by Republican governors and legislatures that have pledged to battle EPA’s final rules rather than comply.

SPP’s Sam Ellis, who led a staff team that “pored over” the final rules, said states have flexibility under the regulations, but “they would lose it if they don’t implement their own plan.” EPA says it will implement a federal plan in the states that do not submit an “approvable” plan of their own.

Trading Framework

The final rule provides a framework for trading of CO₂ allowances. Nickell is expected to tell the webinar attendees that there are merits to developing regional carbon trading markets and will encourage states to develop their own plans.

Ellis told the task force EPA will consult with “planning authorities” in developing the federal plan and accept comments on whether to include allowances for reliability emergencies. He said the agency believes its rate-based and mass-based approaches contain sufficient flexibility to mitigate reliability issues without having to seek extensions under the reliability safety valve.

“The EPA may not have considered interactions between the federal plan and potential state plans for a given region,” Ellis said.

The Clean Power Plan Task Force was formed under the Strategic Planning Committee’s direction to review EPA’s federal implementation plan and recommend the role SPP should play in assisting states’ compliance. The group will also work to ensure regulators have a clear communications path to SPP.

“Our hope is SPP develops concepts and policies the states can embrace,” said Michael Desselle, SPP’s chief compliance and chief administrative officer and the task force’s staff secretary.

The webinar is the beginning of SPP’s communication effort. Besides the broad overview of SPP and its responsibilities, registrants will receive SPP’s take on the CPP and a high-level overview of the three analyses it has already performed on the CPP — though, as Nickell noted, those assessments were done on the EPA’s earlier draft rules. (See SPP: State-by-State Compliance Would Hike Costs.)

“We want to talk about what we believe our role to be, and that’s reliability,” he said. “We want to encourage the regulators in our states to talk with us, and to do so early in the process.”

September 22, 2015

DER, Capacity Performance Issues at PJM Market Summit

By Suzanne Herel

PLYMOUTH MEETING, Pa. — PJM staff, stakeholders, financiers, regulators and industry leaders debated the effects of environmental rules and RTO policies on the capacity market, reliability and investments at Infocast’s PJM Market Summit 2015 last week.

Following are some highlights. (Presentations for the executive forum, “Disruptive Factors in the PJM Market,” can be found here.)

Mike Kormos, PJM executive vice president and chief operations officer, gave the keynote address, “Priorities and Future Directions for the PJM Interconnection.”

Kormos borrowed a phrase from outgoing CEO Terry Boston for his presentation: “The future ain’t what it used to be,” highlighting the differences between projections from two decades ago and the reality of today.

One of the biggest game changers is gas.

“Even as late as 2007, gas wasn’t being talked about. Gas was too volatile. People didn’t want to get into that part of the business,” he said. “Now, gas is king. It’s all we’re seeing.

“Everyone is thinking gas will remain cheap and plentiful.” But, he said, “We were wrong in 2000. Are you sure we’re right in 2015?”

Prospects for Adoption of Distributed Energy Resources

“The future is quite uncertain,” said Steve Fine, vice president at ICF International. “A lot is going to depend on how DER interacts with the wholesale market.” There, aggregators would play an important role.

He added: “We’re moving away from a net metering system and more toward a distribution resource planning process.”

There are barriers to adoption, he said, including customer pushback, the impact on rates and utility financials, policy uncertainty, metering and data transmission issues, and interconnection standards.

Implications of EPA 111(d) on the PJM Market

pjm — From left to right: Reid Harvey, EPA; Asim Haque, PUCO; Harry Singh, Goldman Sachs; Kathleen Barron, Exelon; and Joe Kerecman, Calpine. © RTO Insider

Reid Harvey, director of the Environmental Protection Agency’s Clean Air Markets Division, said that the agency is holding calls with states and groups of states to determine how they plan to implement the final Clean Power Plan released in August.

Joe Kerecman, director of government and regulatory affairs for Calpine, said he favors a regional approach. “Just like in PJM, scale matters to market efficiency, and we think that would be the best outcome,” he said.

Kathleen Barron, senior vice president of federal regulatory affairs and wholesale market policy for Exelon, said the Illinois energy giant will be keeping an eye on how the plan’s implementation will affect its nuclear plants, some of which are struggling.

“The CPP is really the last big unknown,” she said. “We’ll be looking very closely at how states are trending for CPP implementation and what that means for our nuclear stations. It’s too soon to know whether the CPP will be the missing link for this particular sector, but we’re keeping an eye on it.”

For his part, Asim Haque, vice chairman of the Public Utilities Commission of Ohio, said his state would be litigating the rule.

A New Day for Demand Response

Greg Poulos, manager of regulatory affairs for EnerNOC, said demand response provides an “incredible value” to consumers. “If you take demand response out of the capacity market, it would cost consumers about $10 billion annually,” he said.

Allen Jones, a consultant for the OPENADR Alliance, said the use of DR is changing, regardless of what the Supreme Court decides on the D.C. Circuit Court of Appeals ruling threatening FERC’s authority over DR.

“It’s being used for more than just, ‘Oh we have a terrible problem, we need to curtail some load,’” he said, noting that retail giant Walmart, among others, has piloted a program integrating it into its energy use plan. “Demand response is going to be something you’re going to see more and more of.”

The Results of the Capacity Auction

pjm — From left to right: Jason Barker, Exelon; Jason Cox, Dynegy; Mike Bryson, PJM; and John Rohrbach, ACES. © RTO Insider

The winners of the new capacity market construct are the consumers, said Jason Barker, director of wholesale market development for Exelon. “We’ve estimated the net benefits to consumers somewhere in the neighborhood of $1 billion to $7 billion per year,” he said.

Among the surprises for George Katsigiannakis, principal of ICF International, was the amount of new generation. “I expected a larger amount,” he said.

“The price of the base product was the biggest surprise from that auction. The amount of DR was a surprise for me, also — I was expecting less DR,” he said.

Pricing, however, was not a shock, he said. “We were expecting those levels.”

Steve Lieberman, director of RTO and regulatory affairs for Old Dominion Electric Cooperative, said he expected a much greater spread between the Capacity Performance and base products.

Now, he said, “I’m hoping we can sit on our hands and stop fussing with it. … Let the auctions run, take a step back, digest the results and take it from there.”

September 22, 2015

Iberdrola, UIL Would Clean Up Site if Connecticut Acquisition Approved

By William Opalka

Iberdrola USA and UIL Holdings have agreed to clean up an abandoned power plant site in New Haven if Connecticut regulators approve their proposed $3 billion merger.

The companies on Thursday agreed to a consent order with the state’s Department of Energy and Environmental Protection that would allow the contaminated English Station site to be cleaned up for reuse.

The Connecticut Public Utilities Regulatory Authority rejected the proposed acquisition in June on other grounds, saying that the plan was not in the public interest. The companies refiled a new plan in July that they said addressed regulators’ objections. (See Iberdrola Refiles Acquisition Bid for UIL Holdings.)

The state estimates site remediation would cost under $30 million. The companies have committed to spend any amount in excess of that if necessary.

The agreement was announced in a statement by Gov. Dannel P. Malloy, Attorney General George Jepsen and DEEP Commissioner Robert Klee. “The state will strongly oppose any attempt to recover remediation costs from ratepayers. The companies will propose the scope of work to fully examine the pollution and clean it, and DEEP will review and approve the scope of work,” they said.

“This is an important settlement — to New Haven and to Connecticut. The English Station has long been a site that absolutely needed to be cleaned up and given a second life, and now it will be,” Malloy said in the statement.

The plant is situated on Ball Island in the middle of the Mill River in New Haven. It was operated by UIL unit United Illuminating for 63 years and closed in 1992. It is contaminated with polychlorinated biphenyls, heavy metals and other contaminants.

Administrative proceedings will continue against UIL to determine responsibility for cleanup of contamination in the river, according to state officials.

The acquisition, which includes natural gas distribution companies in Massachusetts, must also be approved by that state’s regulators.

Connecticut regulators will conduct hearings on the acquisition in October. A decision is expected by Dec. 4.

September 22, 2015

FERC to Look over NERC’s Shoulders on Reliability

By Rich Heidorn Jr.

FERC said last week it will require the North American Electric Reliability Corp. to provide the commission access to NERC databases in what Chairman Norman Bay said is an effort to apply “Moneyball” techniques to reliability.

The commission issued a Notice of Proposed Rulemaking that would give FERC access to NERC’s transmission availability data system (TADS), generating availability data system (GADS) and protection system misoperations databases (RM15-25).

“It takes the concept of ‘Moneyball’ to our analytics on reliability,” said Bay, referring to the best-selling book on Oakland Athletics General Manager Billy Beane’s use of statistical analysis in evaluating baseball players.

The commission said access to the data “would inform the commission more quickly, directly and comprehensively about reliability trends or reliability gaps that might require the commission to direct [NERC] to develop new or modified reliability standards.”

TADS and GADS contain data on transmission and generation outages, respectively, including cause codes.

The protection system database collected information on about 2,000 misoperations in 2014, including causes. “Protection system misoperations have exacerbated the severity of most cascading power outages, having played a significant role in the Aug. 14, 2003, Northeast blackout,” FERC said.

“While the aggregated TADS, GADS and protection system misoperations data provided in NERC’s periodic reports afford the commission some insight into the reliability and adequacy trends identified by NERC, we believe that having direct access to the underlying data will assist the commission in its understanding of the periodic reports, thereby helping the commission to monitor causes of outages and detect emerging reliability issues,” FERC said.

FERC Micromanaging NERC?

Commissioner Cheryl LaFleur issued a concurring statement expressing concern that the proposal could be seen as micromanaging NERC. Although FERC has ordered NERC to initiate standards on geomagnetic disturbances and physical security, LaFleur said that authority should be used sparingly.

“It is important that we recognize the distinction between [FERC’s] oversight role and NERC’s primary responsibility to monitor reliability issues and propose standards to address them. Ultimately, I believe our efforts to sustain and improve the reliability of the bulk electric system are furthered by mutual trust and shared priorities between the commission and NERC,” she said.

“I understand that today’s proposal might be controversial within the NERC community. I therefore welcome comment on the proposal, including any potential issues or concerns not identified in the NOPR.”

Comments on the proposal are due 60 days after publication in the Federal Register.

The commission also gave final approval to two sets of reliability standards and preliminary approval to a third.

FERC approved reliability standards PRC-002-2, which specifies requirements for time-synchronized data for post-disturbance analysis (RM15-4), and PRC-005-4, adding sudden pressure relaying systems to the protection system maintenance rules (RM15-9).

It also approved a NOPR proposing to approve standard PRC-026-1, which would require that protective relay systems differentiate between faults and stable power swings (RM15-8).

September 22, 2015

ISO-NE: Little Room for Error in Winter

By William Opalka

The six New England states aren’t an island, but the region sometimes feels that way when it comes to its winter power supply. Although transmission ratings and maximum generation output is higher during the cold weather and peak load is lower, the ability to import power is a major concern.

“Transmission interfaces into New England are going to be loaded up pretty much around the clock every day,” Peter Brandien, ISO-NE’s vice president of system operations, told FERC on Thursday. “Which means that any sort of contingencies … I’ll have to handle with the resources internal to New England.

“People are talking about ramping up their efforts for the winter, but for us, [preparation occurs] throughout the year,” he continued. “I look forward to the time when I can come down here and say that we’re all set and we don’t have any concerns going into the winter. I feel like a broken record every time I’m down here talking about the same concerns.”

In addition to the familiar concerns over constraints on gas pipelines from the west, he also cited worries about diminished supplies from Nova Scotia. Natural gas supplied 44% of the region’s power in 2014, nearly tripling its share since 2000.

The lack of infrastructure also causes New England prices to be “higher than just about anywhere else,” Brandien said.

ISO-NE will again rely on the winter reliability program it has used for the last two winters, which gives oil generators incentives to secure fuel at the beginning of the winter. Last year, it added incentives for liquefied natural gas. “Hopefully, there will be LNG injections like last year,” Brandien said.

The RTO’s Pay-for-Performance program, which rewards successful generators and penalizes those who fail to meet their commitments, goes into effect in 2018.

Gas-electric communication, “a 12-month project,” has improved in response to FERC orders, he said.

iso-ne — Peter Brandien, ISO-NE © RTO Insider

The RTO hired a former gas industry veteran to help evaluate gas availability and developed a gas usage tool that scrapes the electronic bulletin boards of the five interstate pipelines serving the region.

This winter, the RTO also will begin allowing generators to change offers on an hourly basis in the day-ahead and real-time markets, improving incentives for following dispatch orders. “We think that’s going to pay dividends to us,” he said.

The RTO’s assumptions for the Winter 2015/16 Forward Reserve Auction included a reserve requirement of 2,363 MW.

“I’m somewhat comfortable that we have insight into all of [the challenges, that] we have the right communication, that we have the right emergency procedures and that we’ll be able to implement any operational actions in time,” Brandien said.

Still, ISO-NE said in its presentation: “[The] loss of any major non-gas unit or significant disruptions in gas supply or pipeline capability will create major challenges for ISO operations.”

September 17, 2015

NOPR Requires RTOs Switch to 5-Minute Settlements

By Rich Heidorn Jr.

FERC issued a preliminary order Thursday that would require RTOs and ISOs to align their settlement and dispatch intervals, saying it was the first of a number of proposals the commission plans to act on based on what it learned from the price formation proceeding it began last year.

The Notice of Proposed Rulemaking (RM15-24) would require organized markets to settle real-time energy and operating reserve transactions financially at the same five-minute time interval that it dispatches those resources. It would also require the markets to eliminate any lag between declaring a shortage and beginning shortage pricing.

Inaccurate Price Signals

The commission said current practices in some markets are not resulting in appropriate price signals.

Although all organized markets dispatch resources in five-minute intervals, ISO-NE, MISO and PJM settle those transactions based on the average price for all dispatch intervals during the hour (“hourly integrated prices”).

“This misalignment between dispatch and settlement intervals may distort the price signals sent to resources and fail to reflect the actual value of resources responding to operating needs because compensation will be based on average output and average prices across an hour rather than output and prices during the periods of greatest need within a particular hour,” the commission said.

In addition, some markets do not trigger shortage pricing unless the shortage lasts a minimum time — resulting in a delay before prices begin reflecting the shortage. The rule would require a shortage of any duration to be reflected in prices.

FERC said the changes “will help provide correct incentives for market participants to follow commitment and dispatch instructions, to make efficient investments in facilities and equipment, and to maintain reliability. The proposed reforms will also help provide transparency and certainty so that market participants understand how prices reflect the actual marginal cost of serving load and the operational constraints of reliably operating the system.”

“Requiring settlement intervals to match dispatch intervals would make resource compensation more transparent by, among other things, increasing the proportion of resource payment provided through payments of energy and operating reserves rather than uplift,” the commission continued. “This increased transparency, in turn, better informs decisions to build or maintain resources and enhances consumers’ ability to hedge.”

Comments on the proposed rule will be due 60 days after its publication in the Federal Register.

Offer Cap Issue Coming to FERC

FERC’s price formation proceeding included workshops and staff reports touching on a variety of obscure — but often controversial — issues, including offer caps and uplift allocation. (See FERC Sets Feb. 19 Deadline on Price Formation Comments.

In its Thursday order, FERC said it “expects to undertake further action addressing various price formation topics, including offer price caps, mitigation, uplift transparency and uplift drivers,” though it gave no schedule for future action.

But the commission will be facing the offer cap issue shortly, with PJM planning to seek a rule change — with or without stakeholder consensus — by the end of October. The Markets and Reliability Committee will discuss the issue in a special meeting Thursday. (See PJM Stakeholders Weigh 4 Options on Offer Cap; No Agreement in Sight.)

MISO also plans a filing on the cap before winter. (See related story, MISO Focused on Gas-Electric Coordination, Fuel Assurance for Winter.)

Commissioner Tony Clark had indicated his desire for a gradualist approach last month. (See FERC’s Clark: Energy Markets Need Tweaks, not Overhaul.)

But Commissioner Philip Moeller was impatient. “I wish we had done a little bit more and a little bit sooner,” he said Thursday. Moeller’s term expired June 30, but he has remained on the panel awaiting a new nominee from President Obama.

Industry, RTO Reactions

The Edison Electric Institute praised the commission’s action.

“We thought [the NOPR] was a good start to a really comprehensive look at these issues,” said Richard McMahon, EEI’s vice president of energy supply and finance. “The fact that they teed up these other important issues [for future action] is very encouraging.”

The current disconnect means resources will be under-compensated for energy produced during price spikes, or overpaid for energy produced during low prices in an hour where most intervals have high prices.

MISO

MISO’s Market Monitor David Patton has been recommending five-minute settlements since his 2012 State of the Markets Report.

“Even though a very small share (1 to 2%) of the energy produced and consumed in MISO is settled through the real-time market, the spot prices produced by the real-time market affect the outcomes and prices in all other markets,” Patton said in his 2014 report in June. “For example, prices in the day-ahead market, where most of the energy is settled, should reflect the expected prices in the real-time market. Similarly, longer-term forward prices will be determined by expectations of the level and volatility of prices in the real-time market. Therefore, one of the highest priorities from an economic efficiency standpoint must be to produce real-time prices that accurately reflect supply, demand, and network conditions.”

Patton said MISO has the metering and data necessary to make the change, which he said will require “only modest changes to MISO’s existing settlement calculations.”

At its Market Subcommittee meeting in August, MISO categorized the switch to five-minute settlements for generation schedules as “planned” and said that it was evaluating the “market efficiency benefits” and “process and system impacts.”

MISO implemented five-minute settlements for interchange schedules, as required by FERC Order 764, on June 30.

“We’re in the process of reviewing the NOPR now and will begin discussions with stakeholders soon about the implementation and timing,” MISO spokesman Andy Schonert said. The RTO addressed the implications of sub-hourly settlements in its comments to FERC on the price formation initiative in March. (See pp. 17-18 of the comments.)

PJM

In an April order on pricing of reserves, FERC rejected as out of scope a call from Public Service Enterprise Group that PJM implement five-minute settlements (ER15-643).

PJM Executive Vice President and COO Mike Kormos said in an interview after the FERC meeting that the change “was on the radar for sure.”

He noted that the order may require generators to make software changes and update old meters.

“It’s not just going to be ‘What’s the impact on PJM?’” he said. “It’s ‘What’s the impact on everybody?’”

ISO-NE

ISO-NE is already discussing with market participants a switch to five-minute settlements. At the Sept. 2 New England Power Pool Markets Committee meeting, RTO officials said they plan to settle generation, pump hydro and imports and exports on a five-minute basis but will continue to settle load assets and bilaterals hourly in real-time.

ISO-NE spokeswoman Marcia Blomberg said the idea of settling bilaterals subhourly also is under discussion.

Real-time reserve payments and inadvertent energy also would be settled every five minutes but the charge allocations would remain hourly.

On Sept. 2, the RTO told the NEPOOL Markets Committee that it plans to present Tariff language changes in November with a vote in December and implementation in 2017.

“We’re still reviewing the NOPR and evaluating what’s needed for compliance, but in terms of the proposal we’re discussing with participants, significant changes to the ISO’s settlement systems would be required to accommodate new calculations and significantly increased data volume, and market participants’ information systems would also require changes,” Blomberg said Monday.

September 16, 2015

NYISO Taps ERCOT Exec as New CEO

NYISO announced Wednesday that its Board of Directors has selected Bradley C. Jones, senior vice president and COO of ERCOT, to replace Stephen G. Whitley as president and CEO, effective Oct. 12.

Jones is a distinguished energy industry executive with 29 years of wide-ranging experience, including grid operations, power plant operations, generation development, project finance, wholesale and retail market design, and regulatory and legislative affairs.

At ERCOT, Jones had responsibility for operations, grid planning and commercial operations.

Jones joined ERCOT from Luminant, the competitive generation subsidiary of Energy Future Holdings, where he was vice president for government affairs. He previously worked at TXU Corp., rising from a plant engineer to become vice president for generation development.

A licensed professional engineer, Jones has a bachelor’s in mechanical engineering from Texas Tech University at Lubbock and an MBA from the University of Texas at Arlington.

“Brad has a strong commitment to reliability and a firm belief in the power of markets to benefit consumers,” NYISO Chairman Michael Bemis said in a statement. “His talent, experience and demonstrated commitment to excellence make him a great choice.”

Jones was chosen following a nationwide search conducted by Heidrick & Struggles. He could not be immediately reached for comment.

Whitley, appointed CEO in 2008, will remain with the ISO during the transition and then act as an advisor to the board.

Rich Heidorn Jr.

September 15, 2015

FERC ALJ Rejects $10 Million in PATH Transmission Project Recovery

By Rich Heidorn Jr.

The developers of the abandoned PATH transmission project would be denied recovery of more than $10 million of their $121.5 million claim under an initial decision by a FERC administrative law judge Monday.

Judge Philip C. Baten recommended that the commission deny the developers, American Electric Power and the former Allegheny Energy (now FirstEnergy), recovery of lobbying and advertising costs as well as part of their legal costs and losses on the sale of the property they acquired (ER09-1256-002, ER12-2708-003). The commission can accept the recommendations in whole or in part.

The proposed 765-kV “coal by wire” Potomac-Appalachian Transmission Highline project was approved by PJM in 2007 to run from AEP’s John Amos coal generator in St. Albans, W.Va., to New Market in Frederick County, Md.

By 2011, however, PJM said the need for the line had moved several years beyond 2015 due to reduced load growth following the recession. The PJM Board of Managers ordered transmission owners to suspend work on the line pending a more complete analysis in 2011 of all upgrades in its regional transmission plan and terminated it in 2012.

Victory for Pro Se Interveners

Although the developers would recover most of their request, the judge’s ruling was a victory for two PATH opponents from West Virginia, Keryn Newman and Allison Haverty, who filed a pro se intervention challenging the companies’ request for recovery of $6 million in spending on lobbying and advertising campaigns intended to win political support for the project. The judge denied recovery of any of the expenses.

Baten also said $3.6 million in losses that the companies incurred on past land sales are not recoverable and that recoveries from any future land transactions “must be accomplished by commercially reasonable procedures.”

The judge also denied recovery for part of $3.9 million in legal expenses, for which the companies’ failed to provide documentation, and cut the companies’ proposed 10.4 % return on equity for the abandonment costs to 6.27%.

But Baten approved recovery for the purchase of property for a planned substation in Maryland and rejected a request by state consumer advocates to reject $29 million in spending incurred in 2010-2012 as imprudent.

The advocates said that the PATH companies should have recommended to PJM that the project be terminated by the beginning of 2010 and that expenses between that point and the actual termination should be denied.

The judge ruled that the expenses were recoverable because the PATH companies had a contractual obligation to construct the transmission projects as assigned by PJM. “The PATH companies did behave as a prudent utility by proceeding with their assigned obligations until otherwise instructed by PJM,” he wrote.

First Impression

Baten said that the case “presents significant issues of first impression” on FERC Order 679, a 2006 initiative that sought to accelerate transmission investment through incentives.

“This case addresses some new issues and gives the commission a unique one-stop opportunity to review and set policies for the comprehensive litigation scheme arising from Order No. 679,” Baten wrote.

The PATH project was initiated with PJM’s 2007 Regional Transmission Expansion Plan, and in 2008 FERC accepted a formula rate that entitled the developers to recover all prudently incurred costs if the project were cancelled.

In 2012, the companies filed for recovery of $121.5 million in abandonment costs. After settlement attempts with opponents failed, hearings in the case were held in March and April.

Lobbying Campaign

The pro se interveners contested spending on public relations agencies, advertising and public coalitions intended to influence public officials during the zoning and certificate of public convenience and necessity (CPCN) proceedings in Maryland, Virginia and West Virginia.

“When utilities are seeking selection or CPCN approvals from governmental entities, the utilities should rely on the established governmental approval processes to persuade the officials and not indulge in collateral efforts such as public education, outreach and advertising activities,” the judge ruled. “… If the selection or CPCN application has merit, the governmental selection process provides a sufficient vehicle for the utilities to present their engineering, marketing and economic studies and thereby hope to merit the vote of approval from these officials. In this regard the PATH companies spent over $8 million on attorney fees to prosecute the CPCNs before the respective governmental bodies, which begs the need for these collateral expenses.”

Among the spending rejected was $332,000 on a public opinion poll, $2.7 million in advertising and $94,000 paid to the then head of the West Virginia Democratic Party, Larry Puccio.

The judge said that the “nature and origins of the PATH companies’ business relationship with Puccio are somewhat amorphous” and that the companies paid him $31,000 “before his assignments were even formulated.”

“The invoices of record provide little description of his services. When the PATH companies were asked in discovery to provide additional details, their response was that such records are not available. While the PATH companies make protestations that Puccio’s services were not to lobby and instead were to educate the public and public officials, without proper documentation the only factual inference that can be drawn is that his services were to influence public officials, and the PATH companies have failed in their burden of proof to show otherwise.”