Page 1478 – RTO Insider

February 14, 2016

Fitzpatrick Closure Could Leave NY Generation Short

By William Opalka

Closure of the FitzPatrick nuclear plant will leave New York at least 325 MW short of its generation requirement by 2019, according to a new assessment from NYISO.

The assessment, released Thursday, was ordered following Entergy’s announcement last year that the 882-MW plant would close at the end of its current fueling cycle, later this year or early in 2017.

“The resource deficiency equates to approximately 325 MW statewide but would likely require more than 325 MW of new or retained capacity resources to resolve, depending on forced outage rates and the location of the resources,” the assessment says.

NYISO is requesting solicitations for a “gap solution” from market participants that may include generation, transmission or demand response to address the shortfall. The RTO normally addresses reliability needs biennially but said the expected shortfall in 2019 requires action now.

About 2,600 MW of capacity is expected to leave the New York fleet by mid-2017. Besides FitzPatrick, NYISO has already lost, or is expecting to lose, the coal-fired plants Dunkirk, Cayuga and Huntley, along with the Ginna nuclear plant. (See Entergy Rebuffs Cuomo Offer; FitzPatrick Closing Unchanged.)

Currently inactive or close to deactivation are a 50-MW biomass plant in Niagara Falls and several gas peaking units in New York City. (See TransCanada may Mothball 3 NYC Gas Peakers.)

An 820-MW gas-fired plant in southern New York is expected to be in service by March 2018 and several transmission upgrades planned by mid-2020 are expected to mitigate the plant closures.

The assessment says new resources would be less effective to the state overall if they were added to Zone A in western New York. “Due to transmission system limitations between Zones A and B, capacity added in Zone A is not as effective as capacity added in other locations, unless that capacity also improves the transfer limitations,” it states.

Zone A is a relatively large area around Buffalo. Zone B is a narrow strip that runs from the Pennsylvania border to Lake Ontario and includes three nuclear power plants.

FitzPatrick Inspection

On Wednesday, meanwhile, the Nuclear Regulatory Commission released an inspection report that identified two violations of “very low safety significance” at FitzPatrick.

In November the plant took one of its backup emergency diesel generators offline while another backup generator was being serviced. In December, Entergy failed to tell NRC when a secondary containment ventilation system was inoperable.

The report, which summarized NRC’s three-month inspection ending Dec. 31, also included a third violation, self-reported by Entergy and considered of low significance. The company said it discovered it was operating during its previous fuel cycle, from October 2013 to October 2015 without the required number of safety relief valves.

February 14, 2016

PJM Operating Committee Briefs

Cold-weather testing continued into the second week of January due to the region experiencing one of the mildest Decembers on record.

The cost of the testing was cheaper than the previous year — $3.4 million compared with $4.9 million.

Two out of three eligible units declined to test, which Operating Committee Chair Mike Bryson said was a good thing because they would have been turned down anyway because of the warm weather. Some units have indicated they are going to test themselves, he said.

The success rate by unit was 97%; by megawatt, it was 98%.

The largest cause of failures, at 38%, was liquid fuel handling problems, followed by control system issues (15%).

Session will Study Transmission, Energy Scheduling Practices

An educational session will be held Feb. 24 on proposed changes to PJM’s regional transmission and energy scheduling practices.

The updates stem from the alignment of the gas-electric market timeline and generator offer flexibility proposals.

The changes add a five-minute “shotgun” start window for the hourly spot-in product — spot market imports — in which all reservations will be considered simultaneously.

“This process is going to give everybody a better shot at receiving the request they submitted,” PJM’s Chris Pacella said.

PJM Prepares for Annual Security Drill

PJM is asking members wanting to take part in the annual Grid Security Disturbance Drill to respond by March 11. The drill will be held on Nov. 9.

Transmission owners will participate in the drill from their workplaces. Generation owners will take part in a tabletop exercise at PJM.

The purpose of the drill is to assess the RTO’s ability to respond to disruptions caused by coordinated cyber and physical attacks and restore the grid to normal operations.

A kick-off meeting will be held in May. For more information, email BCP_Mailbox@pjm.com.

— Suzanne Herel

February 14, 2016

Federal Briefs

The Mixed Oxide Fuel Fabrication Facility to turn weapons-grade plutonium into commercial reactor fuel is on the chopping block as the Obama administration has proposed switching to an alternative disposal method. South Carolina officials say they will sue the federal government for missing deadlines and to force it to pay contractual penalties of $1 million a day for failing to complete the project.

The U.S. Energy Department has already spent $4.5 billion on the half-built plant at the Savannah River Site near Aiken, S.C., designed to dispose 34 tons of plutonium as part of international weapons agreements. The MOX project is now estimated to cost between $9.4 billion and $21 billion, and may not begin operations until 2040.

A new department budget calls for spending $285 million to blend the plutonium with other materials and then dispose of it underground in New Mexico.

More: Aiken Standard; The New York Times

DOE Announces $18 Million in Grants for Solar-Battery Storage

The Energy Department is devoting $18 million to help develop ways to integrate solar generation and battery storage in order to overcome the challenge of matching the intermittent production of solar power to market demands.

The grants will go to Austin Energy, Carnegie Mellon University, Commonwealth Edison, the Electric Power Research Institute, Hawaiian Electric and the Boston-based Fraunhofer Center for Sustainable Energy Systems.

The money will go toward developing new integrated photovoltaic energy generation and storage projects using Internet-capable inverters that will join solar arrays, smart buildings and appliances, and utility communication and control systems.

More: Transmission and Distribution World

Solar Companies Form First National Trade Association

Seven energy companies have joined to create a national trade association to promote community solar projects, which are financed by subscribers who receive solar energy credits on their bills.

“Community solar is the necessary next step to bringing solar to the majority of Americans for whom solar is not yet an option,” said Jeff Cramer, the executive director of the new group, the Coalition for Community Solar Access.

The coalition’s founding leadership includes Clean Energy Collective, Community Energy, Ecoplexus, Ethical Electric, First Solar, NRG Energy and Recurrent Energy.

More: CCSA

Despite NRC OK, No Plans to Build South Texas Nukes

The Nuclear Regulatory Commission approved licenses to build two new reactors at the South Texas Project nuclear plant southwest of Houston, but NRG Energy and its partners have no plans to build them because of competition from cheaper power suppliers.

The partnership is continuing to look for new U.S. investors to eventually move the stalled project forward, said NRG spokesman David Knox. The company said five years ago it wasn’t investing any more money in the expansion, which then had an estimated cost of about $14 billion.

The existing South Texas Project’s two reactors are owned jointly by NRG, Austin Energy and San Antonio’s CPS Energy. NRG has sought additional partners in the expansion since CPS Energy, once a 50% partner, reduced its stake to 7.6%.

More: Fuelfix Blog

Fort Hood Looks to Renewables to Cut Costs

The U.S. Army has signed a 30-year contract with Apex Clean Energy to provide 65 MW of solar and wind energy at Fort Hood in Texas. The Army will pay Apex as much as $497.4 million over the life of the deal, about $168 million less than what it would pay for power from the traditional electricity grid, according to the Defense Logistics Agency.

Officials broke ground in January at the Army installation 75 miles north of Austin on a 132-acre solar farm that includes 63,000 panels. The solar project is paired with an investment in a Panhandle wind farm.

The military, the single largest consumer of energy in the U.S., is dedicating at least $7 billion to renewable energy projects, part of the Obama administration’s efforts to emphasize alternative sources of energy.

More: Austin American-Statesman; Bloomberg

FERC Infrastructure Report Shows Solar 2015 Project Leader

A report from FERC’s Office of Energy Projects shows that solar generation led the way for new generation in the U.S. in 2015, followed by wind and then natural gas, on the basis of number of projects. Solar accounted for 248 projects but ranked third behind wind and natural gas in terms of capacity.

Wind came in second with 69 projects, but the combined installed capacity of nearly 8,000 MW led the pack. Natural gas came in third in both number of projects (50) and capacity (6,000 MW).

Combined, solar, wind and natural gas accounted for nearly 97% of all new capacity installed in the U.S. in 2015.

More: JDSupra

Solar and Wind to Account for 6% of Generation in 2016

Utility-scale wind and solar will account for 6% of electric generation in the U.S. in the coming year, according to a report from the Energy Information Administration. Although solar’s share is less than 1%, it represents a 28% increase over 2015.

EIA did not count distributed solar, the most common type among residential and small business customers. If small-scale rooftop systems were included, solar would supply about 1.2% of 2016 generation.

Wind and hydro will come in at 5.2% and 6% respectively, according to EIA. When biomass and geothermal power are included, renewable energy overall is expected to account for 14.5% of power generation in 2016.

More: pv magazine

FERC Wants More Info from PennEast Pipeline

FERC last week ordered PennEast Pipeline to provide more information on its proposed 110-mile natural gas pipeline that would run from Pennsylvania under the Delaware River and into New Jersey, saying it wants to know more about how the pipeline would affect several nature preserves.

FERC is preparing its environmental impact statement for the pipeline proposal and wants to know how PennEast would protect wildlife and how it would mitigate any effect on wetlands.

Pipeline opponents saw FERC’s demand as a win and called on the federal agency to suspend its review of the project. “FERC’s letter demonstrates once again that the information that PennEast has submitted to date is incomplete and inaccurate,” said Michael Pisarro of the Stony Brook-Millstone Watershed Association.

More: Mercer Me

February 14, 2016

PJM Market Implementation Committee Briefs

VALLEY FORGE, Pa. — Stu Bresler, senior vice president for market operations, told the Market Implementation Committee Wednesday that discussions with market participants and among staff have highlighted the need for manual changes to clarify rules regarding capacity bilateral transactions.

“Neither the Tariff nor the manual provides clarity about those transactions,” said Bresler, delineating them as unit-specific, auction-specific and locational unforced capacity.

He explained that in such transactions, the performance obligation remains with the seller, while the title to the megawatts for the capacity is transferred to the buyer. If the resource earns bonus credits, they go to the buyer.

At issue is the physical nature of the transactions, Bresler said.

“A court could say it’s not a physical transfer of megawatts, it’s just an assignment of receivables,” he said. “The more the physicality of a transaction is questionable, the more likely in a bankruptcy proceeding that the credit associated with that would be yanked away from the buyer and included in the bankruptcy estate.”

A second issue involves the fact that a buyer indemnifies PJM against a seller’s non-performance. “What happens if the seller in the transaction replaces the resource that was the subject of the transaction in the first place?” Bresler said. “What should the replacement rules be?”

Bresler suggested that the issue be expedited.

After Months of Debate, Data Confidentiality Rule Changes Endorsed

With 16 opposing votes, members endorsed changes to data confidentiality rules that have been the subject of debate since June. (See “Market Data Confidentiality Rule Change Gets First Reading,” PJM Market Implementation Briefs.)

Current rules prohibit PJM from talking about certain information even after it’s been disclosed publicly. At the heart of the deliberation has been how to provide PJM the ability to discuss situations such as generator outages while at the same time not disclosing commercially sensitive information.

The proposal allows PJM to release and discuss:

Information on individual generation outages involving an unusual operating condition on the transmission system such as a severe weather event;
The amount of demand response in an area no smaller than three ZIP codes (specific offers or suppliers would remain confidential);
The total amount of capacity offered and cleared, aggregated by transmission zone;
Uplift payments in an area no smaller than a transmission zone, and for no shorter a time period than one operating day;
Aggregated statistics related to the results of the three pivotal supplier test; and
Data made public by a PJM member or a state or federal regulator.

One minor change was made since the first reading. A sentence was added to specify the circumstances in which DR information would be released. The revised language allows such disclosures for incidents including, but not limited to, a severe event on the transmission system, a severe weather event, the formation of a closed-loop interface or the need for a transmission system upgrade.

Operating Parameters to be Subject of Special Session

An educational session will be held Feb. 24 to explain updated operating parameter definitions.

A number of operating parameters whose definitions appear only in the eMKT/Markets Gateway Users Guide have led to confusion among members about what values should be entered.

PJM also wants to clarify several terms in Manual 15.

A new “soak time” parameter has been proposed that would define the minimum length of time a unit must run to reach its economic minimum.

— Suzanne Herel

February 14, 2016

PJM Asks FERC to Reconsider CP Parameter Rules

By Suzanne Herel

PJM and its Independent Market Monitor asked FERC Thursday to revise Capacity Performance rules to address concerns that generators might ignore dispatch instructions to avoid penalties.

FERC’s June 2015 order approving PJM’s tougher capacity requirements directed the RTO to eliminate language that would allow generator parameter limitations to be used as an excuse for nonperformance (ER15-623, EL15-29). The order argued that if resources were held only to parameter limits based on their physical characteristics, those that were less flexible would be able to avoid nonperformance charges more readily than more flexible units. (See What is Changing in PJM’s Proposal?)

However, PJM said in a Dec. 22 informational filing that eliminating any consideration of parameter limits from penalty calculations might lead some generators to self-schedule at maximum output in anticipation of a performance assessment hour, ignoring economic dispatch.

In a joint statement last week, PJM and the Monitor asked the commission to allow consideration of parameter limits but incorporate the Monitor’s recommendation that the limits be based on original equipment manufacturer (OEM) specifications rather than on historical performance data. This, they said, would ensure that resources not escape penalties “as a result of economic decisions about maintenance and investment.”

Under the proposal, resources would not face nonperformance charges if their operating parameters complied with the OEM limits and they followed dispatch orders. Resources that offered parameters less flexible than the OEM specifications would be ineligible for uplift and could be vulnerable to penalties.

They also asked FERC to approve the Monitor’s proposal that parameter limits be defined for ramp rate and boiler temperature retention times.

February 14, 2016

DTE Earnings Down on Non-Utility Businesses

By Amanda Durish Cook

DTE Energy reported 2015 net income of $727 million ($4.05/share), a 20% decline from 2014’s $905 million ($5.10/share). The company’s $80 million net income for the fourth quarter was off 73% from the $299 million reported a year earlier.

However, the company reported that 2015’s operating earnings, which exclude non-recurring items, certain adjustments and discontinued operations, totaled $863 million ($4.82/share), a 5.8% increase over 2014’s $816 million ($4.60/share).

The Detroit company blamed its lower 2015 earnings on non-utility business lines — power and industrial projects, natural gas pipelines, gathering and storage, and energy marketing and trading — where earnings dropped 65.6% to $101 million, due in part to a $22 million loss by the trading unit. Earnings for DTE Electric rose 3% to $542 million for the year.

Operating revenues were $10.3 billion for the year, down from $12.3 billion in 2014. At the same time, DTE trimmed operating expenses to $9.1 billion in 2015 from $10.7 billion a year earlier.

Peter Oleksiak, DTE senior vice president and CFO, said the company forecast a mild winter before the fourth quarter began and went into a “lean mode,” paring down expenses.

During a Feb. 10 conference call, DTE CEO Gerry Anderson said some gas storage and pipeline projects across the industry might be “sub-investment grade.” He said the company will monitor its own investments in gas storage and pipelines but would be open to purchasing other companies’ assets if they were offered. He said that DTE’s industrial segment lagged in 2015 because of a weak steel market, but overall he saw no problems in the balance of the company’s portfolio.

The company paid dividends of $2.84/share for the year, up from $2.69/share in 2014.

Among 2015’s bright spots, Anderson said in a press release, were the company’s completion of more than 100 reliability improvement projects and its success in meeting Michigan’s 2015 target by sourcing 10% of electricity production from renewables.

“DTE made great strides in 2015, both operationally and financially,” Anderson said. “The year brought significant improvements … contributing to the best overall reliability performance in eight years.”

Anderson said DTE would continue to focus on reliability and pledged to invest $6.5 billion in distribution infrastructure over the next 10 years. DTE also said it plans to begin construction this year on what it described as the largest utility-owned solar array east of the Mississippi, a 45-MW project in Michigan’s “thumb” region.

February 14, 2016

New ERCOT CEO Relies on People Skills, Experience

By Tom Kleckner

AUSTIN, Texas — When Bill Magness was named as ERCOT’s new CEO last August, ISO Chairman Craven Crowell cited his leadership skills, utility experience and commitment to “strong working relationships” with key stakeholders as the primary reasons for his elevation from legal counsel.

Asked in an interview about his networking skills, Magness laid it on thick. “I’m old,” he said. “I’ve known many people.”

His comment drew a laugh, as it was meant to, much the same way as when Magness introduced himself to ERCOT staff by flashing a picture of his younger, long-haired self on the meeting room screen.

“Some things change, some things are different,” he said, pointing to his long-ago locks. Then, touching his clean-shaven upper lip — a contrast with his mustachioed predecessors, Trip Doggett and Bob Kahn — he said, “See, no mustache. I’m different.”

Stepping before ERCOT’s Board of Directors for the first time as its CEO last week, Magness fiddled with his ear clip microphone.

“I really appreciate, No. 1, the people who gave me this fancy, Madonna microphone,” he said, pausing for a moment. “For you younger people, that would be like Lady Gaga.”

Quarter Century

Magness’ self-deprecating humor wins him friends. But ERCOT’s board also selected him because of his quarter century of experience in what he calls the “utility restructuring business.”

Before joining ERCOT in 2010 as legal counsel, Magness was a partner for about 10 years with an Austin law firm, specializing in electric and telecomm utility matters. He served as lead counsel in cases before regulatory commissions in 16 states.

He also spent several years practicing before and working at the Public Utility Commission of Texas, where he worked alongside future FERC Chairman Pat Wood, future PUCT commissioner and current ERCOT Vice Chair Judy Walsh and current PUCT Chair Donna Nelson.

“I’ve been in the mix. … The people in the industry, we’ve all been in this together for a long time,” Magness said. “We’ve been through lots of challenges over the years as we’ve implemented the restructured markets. We’re all sort of change natives, working through these issues together. I just hope I can bring the best of that to my work.”

Nelson has no doubt that he will.

“Bill is a bright visionary with great people skills,” she said. “He has shown impeccable judgment and is uniquely qualified to build on the high standards set by Trip.”

Working together with the board, Magness is focusing ERCOT on five strategic priorities: adapting to a changing resource mix; providing “thought leadership” on the market and operations; effective and transparent communication; continually strengthening cyber and physical security; and developing ERCOT’s people and technology resources.

“They are the company’s top priorities, and we need to emphasize them internally and externally,” Magness said.

Magness drove home that point during last week’s board meeting by asking members of ERCOT’s retail operations team to “come inside the horseshoe” — the conference room’s semicircle of desks — to recognize process improvements the team made that will save more than $400,000 a year.

“They made things faster and better, cheaper and better, and so much cheaper it’s got to be better,” Magness said, leading the applause for the group.

Magness sought a seamless transition from Doggett. Under his predecessor, ERCOT was named one of Austin’s best places to work last year by the Austin Business Journal. Like Doggett, Magness enjoys kibitzing with staff and takes an interest in their work. All that’s missing, aside from a mustache, is Doggett’s North Carolina accent.

No Surprises

So what has he learned from Doggett?

“We don’t want to surprise people, if we can avoid it,” Magness said, referring to ERCOT staff. “We have to rely on our ability to stay ahead of issues and let people know the good, the bad and the ugly of what we’re seeing. That’s true of everybody in this ISO/RTO business.

“We could not run markets with the level of sophistication and precision we do [and] we could not turn out the amount and quality of data we do if we didn’t have the best technology and people who understand how to use it.”

To that end, ERCOT’s board last year approved $48 million to update the Texas grid operator’s software and hardware, a “technology refresh” so “we could ensure the market we would have the latest technology and upgrade it out into the future.”

The approved budget resulted in a 9-cent increase in the ISO’s system administration fee to 55.5 cents/MWh — a fee that had remained flat for nine years until 2014, and which ERCOT hopes to maintain until at least 2020. ERCOT officials said the increase was necessary after the heavy investment to bring the nodal market live in 2011.

“Because we did a big bang with nodal go-live, a lot of those things are aging out,” Magness said. “We’re doing a better job of trying to space things out, so you don’t have these huge big bangs every five years. It’s just time. I mean, you’re not using a seven-year-old iPhone.”

The technology update is needed for other reasons. Texas already leads the nation in wind-generation capacity with more than 17,700 MW — it would rank sixth if it were a country.

ERCOT, which serves about 90% of the state’s load, has 15,764 MW of installed wind and current projections see ERCOT’s solar capacity increasing from 288 MW to more than 1,000 MW by this summer.

Wind energy’s usage surpassed that of nuclear in ERCOT’s footprint for the first time last year, accounting for 11.8% of the grid’s energy consumption. Wind met almost half of ERCOT’s load on Dec. 20 (44.7%), generating 13,057 MW. (See ERCOT Energy Use up 2.2% in 2015; Wind Surpasses Nuclear.)

Texas’ $7 billion Competitive Renewable Energy Zone initiative added 3,600 miles of transmission lines from West Texas’ wind farms to population centers.

“The day we saw [wind] at 40% of load, wind units in ERCOT were running about 90% of nameplate,” Magness said. “The increase of intermittent generation and the need to continue to integrate it is very important to us.”

Ahead of the Curve

Staff and stakeholders are also looking at how to incorporate distributed generation, storage devices and smart grid technologies. An ERCOT future ancillary services team has developed a proposal to unbundle those services based on their characteristics.

“We’re trying to stay ahead of the curve,” Magness said.

That’s where thought leadership comes in, Magness said. “We have a very active and effective stakeholder process that vets issues very thoroughly so that before an issue gets to our Board of Directors, it’s been through a whole lot of discussion and consideration.”

The board “looks to us to develop a range of options and see what makes sense to them. The balance of industry experience and ERCOT experience that stakeholder board members bring and unaffiliated board members bring get us to a solution where you don’t need further consideration.

PUCT Role

“This works most of the time,” he said. “My evidence is you seldom see a decision of the ERCOT board appealed to the Public Utility Commission. [The PUCT] is very engaged. It looks to us for analysis and understanding.”

Most of the time, but not always. Just last week, the board was asked to consider a proposal arising from a PUCT appeal regarding generators’ lost opportunity costs. (See related story, Lost Opportunity Cost Rule Sent Back to ERCOT’s Stakeholder Process.)

Magness recalled frigid February 2011, when generation outages led to rolling blackouts in the state just as the Dallas-Fort Worth area was preparing to host the Super Bowl.

“When things don’t go well, [the PUCT] gets concerned. Our legislature gets concerned,” he said. “We’ve done a lot better reaching out and explaining what we do, so that when something does happen — like it does — people … and especially the media … know, ‘Oh, yeah. It’s those guys.’”

Thus, the priority placed on “effective and transparent communication.”

“We generate, receive and send back a tremendous amount of data. One of the things that makes markets work is the transparency of that data,” Magness said. “We want to be sure all the data coming into the ISO is consistent. Most of the information we receive is not our information. We’re getting it out to folks to use in their own business. It’s not an area I think is weak, but if you don’t think about it strategically, an ISO can get way behind.”

ERCOT is located in the “Silicon Hills,” an area encompassing Austin and San Antonio that is home to tech giants Dell, IBM and Oracle and hundreds of startups. That provides fertile ground for technical expertise but also makes it a competitive environment for employers.

“We don’t have a whole lot of [physical] assets,” Magness said. “We have a lot of sophisticated hardware and software and people. We have to keep [all] of them working crisply.”

February 14, 2016

Company Briefs

Corporate procurement of renewable energy nearly doubled in 2015, Bloomberg New Energy Finance reported in its 2016 Sustainable Energy in America Factbook. Procurement totaled 3,000 MW last year, up from less than 500 MW in 2012 and more than 1,500 MW in 2014. Wind and solar dominated, with a small amount of biomass and waste.

Google has been the largest buyer, with 71 MW of solar and 1.2 GW of wind. Amazon is second, with 80 MW of solar and 458 MW of wind contracted in 2015.

The Factbook was commissioned by the Business Council for Sustainable Energy, which represents companies and trade associations in energy efficiency, natural gas and renewable energy.

More: Business Council for Sustainable Energy

GridLiance Adds Industry Vets Boston, Morris to its Board

Competitive transmission company GridLiance named former PJM CEO Terry Boston and former American Electric Power CEO Michael Morris to its board of directors.

“Terry and Mike share our commitment to create a strong, proactive entity that will represent and serve public power’s needs in regional and national transmission planning and award processes,” GridLiance CEO Ed Rahill said.

The new appointments, effective March 31, expand the company’s board to six seats.

More: GridLiance

Change in Leadership Coming at CMS

CMS Energy CEO John Russell is expected to leave his post on July 1, and Patricia Kessler Poppe, currently the company’s senior vice president of distribution operations, engineering and transmission, is set to replace him.

Poppe says she will dedicate her time to advancing subsidiary utility Consumers Energy’s renewable portfolio and meeting standards under the Clean Power Plan.

“We are committed to making sure that our customers have the kind of energy that they need when they need it and so we’re focused on a balanced portfolio,” Poppe said during a Michigan-based radio show.

More: MLive

Navy and Mississippi Power Team Up on Solar Project

The U.S. Navy Department and Mississippi Power said they are teaming up to construct a 4-MW solar plant on 23 acres of the Naval Battalion Center in Gulfport.

Instead of compensating the base monetarily for the land, Mississippi Power has committed to providing electrical infrastructure upgrades to the base. The electricity that the solar facility would provide will be routed to Mississippi Power’s electric grid. Hannah Solar, a Mississippi Power developer, will finance and build the project, which it aims to complete by the end of the year.

“This project, coupled with our existing energy programs, will increase the energy security of the installation, which will allow us to operate more effectively during times of crisis,” said Capt. Cheryl M. Hansen, the base’s commanding officer.

More: WLOX

Ameren Missouri May Lose Largest Customer

Ameren Missouri could stand to lose 10% of its business if Noranda Aluminum suspends operations at its New Madrid smelter as announced last week. The loss of the smelter’s business to Ameren, valued at about $160 million per year, has some speculating that the utility would look to ratepayers to make up the loss.

Noranda Aluminum, which has filed for Chapter 11 bankruptcy protection, said work on its last remaining potline in southeast Missouri would be scaled back after March. (A potline is a collection of “pots,” or large electrolytic cells, in which aluminum is made.)

The Missouri Industrial Energy Consumers, a consumer advocate group, filed a request in early February, asking the Missouri Public Service Commission to grant the smelter a lower power rate. The group says if the smelter closes, Ameren would be forced to sell the excess power at a discount on the wholesale market, then recover costs from ratepayers.

More: KFVS

Westar Energy Gets Exemption from FAA for Drone Usage

Westar Energy is set to deploy drones to help it perform a variety of tasks, such as pinpointing storm damage and inspecting wind turbine blades.

The SPP member obtained a rule exemption from the Federal Aviation Administration in January to begin using two remote-controlled aerial drones.

The nation’s major electric utility associations have urged FAA to streamline the process for utilities to license drones.

More: The Wichita Eagle

Former FERC Chair Joins kWantera Board

Former FERC Chairman Jon Wellinghoff was named to the board of directors of kWantera Inc., a company that provides predictive analytics to identify wholesale electric prices around the world.

Wellinghoff said he believes kWantera, which is based in Pittsburgh, can help the U.S. develop a cleaner and more efficient power grid. “We can help translate, for instance, for the average wind farm developer who may not understand how to use the tools to help him maximize the profits from his assets,” he said.

It is the first board membership Wellinghoff has accepted since leaving FERC at the end of 2013 to become co-chair of the energy practice at the Stoel Rives law firm.

More: kWantera

Duke Energy to Sell International Business

Duke Energy said it is considering selling its international business unit that runs Central and South American power plants.

Duke Energy International, which is based in Houston, owns 4,400 MW of generation capacity in power plants in Argentina, Brazil, Chile, Ecuador, El Salvador, Guatemala and Peru. Two-thirds of the power plant portfolio is hydropower and half of the plants are located in Brazil.

The company has released few details on the plan, but it did say it planned to retain its 25% stake in the National Methanol Co. in Saudi Arabia, a producer of methanol and methyl tertiary butyl ether, a gasoline additive.

More: FuelFix Blog

Exelon Has Spent $259M on Pepco Merger Effort

Exelon has spent about $259 million so far in its attempt to acquire D.C.-based Pepco Holdings Inc., according to Securities and Exchange Commission filings. The Chicago-based energy giant has spent $121 million on integration costs, and a further $138 million on financing, through the end of 2015.

The company is awaiting a final decision from the D.C. Public Service Commission, the last approval it needs. Exelon CEO Christopher Crane said that if the company doesn’t get the approval by March 4, it would pull out of the deal.

Exelon launched its bid nearly two years ago to acquire Pepco. The D.C. PSC first rejected the deal, in which Exelon offered $14 million in incentives to the district. The company later came back, promising $78 million in incentives and winning Mayor Muriel Bowser’s approval.

More: Washington Business Journal

Talen Energy Completes Sale of Ironwood Plant

Talen Energy this month closed the sale of its Ironwood combined cycle natural gas power plant in Pennsylvania to a subsidiary of TransCanada. The sale, part of FERC-ordered market mitigation efforts, was completed Feb. 1 for $657 million.

The 704-MW plant in Lebanon County was one of several Talen had to sell after it was formed last year from the spun-off competitive power generation business of PPL and generation assets owned by private equity firm Riverstone Holdings.

Several more mitigation-ordered sales are expected to be announced in the next few months, the company said.

More: PennEnergy

DONG Energy Targets Jersey Shore for Project

Danish wind farm developer DONG Energy has unveiled plans to build a project 10 miles offshore from Atlantic City.

The site covers about 160,000 acres and has an average water depth of 80 feet. “The site conditions are quite similar to those we currently work with in Northwestern Europe, which means that the project could be developed using well known technology,” DONG wind power executive Samuel Leupold said in a statement.

The New Jersey project would be DONG’s second wind farm in the U.S., following a project of a similar scale that would be built south of Martha’s Vineyard. For both projects, DONG acquired the development rights from another company, RES Americas Development, which won the rights in auctions held by the U.S. Bureau of Ocean Energy Management.

More: The Boston Globe

Old Exelon Power Plant for Sale in Boston

Exelon has put the old Boston Edison power plant in South Boston up for sale, probably for redevelopment.

The 18-acre New Boston Generating Station has reportedly attracted interest from a half dozen developers. Reuse plans haven’t been made public, but experts say any winning bidder would likely turn the little-used power plant into a mix of housing and commercial space. An Exelon spokesman said the company hopes to close a deal this year.

The plant was built in 1892, first to burn coal, then oil, then natural gas. It was largely retired in 2007, though Exelon still turns on a small generator during periods of peak electricity demand.

More: The Boston Globe

February 14, 2016January 31, 2024

Canada’s Algonquin Power to Buy Missouri’s Empire District

By Ted Caddell

Canada’s Algonquin Power & Utilities has agreed to purchase The Empire District Electric Co. for $2.4 billion, including the assumption of Empire’s debt.

The Missouri-based Empire, with 218,000 customers in Missouri, Kansas, Oklahoma and Arkansas, will be folded into Algonquin’s Liberty Utilities unit at the close of the transaction, Algonquin said. Liberty Utilities has about 485,000 customers in Arizona, Arkansas, California, Georgia, Illinois, Iowa, Massachusetts, Missouri, New Hampshire and Texas.

Empire’s headquarters will remain in Joplin after the deal closes, the companies said. Empire shareholders will receive $34 per common share, a 21% premium to Empire’s Feb. 8 closing price. The Ontario-based Algonquin said all of Empire’s 750 employees will be retained, and customer rates are not expected to change.

Algonquin said it doesn’t expect to close the deal until the first quarter of 2017. Approval is needed from various state and federal regulatory agencies, including FERC and the Department of Justice, as well as the Federal Trade Commission. Because Algonquin is a Canadian company, the acquisition will also need the approval of the federal interagency Committee on Foreign Investment.

“The acquisition of Empire represents a continuation of our disciplined growth strategy, which strengthens and diversifies Algonquin’s existing businesses and strategically expands our regulated utility footprint in the Midwest,” said Algonquin CEO Ian Robertson.

It was the second takeover of an American utility company by a Canadian firm in the same week. Earlier, Newfoundland-based Fortis announced it plans to buy ITC Holdings, the largest independent transmission operator in the U.S., for $11.3 billion. (See related story, Fortis to Acquire ITC Holdings for $11.3B.)

U.S. utilities are an attractive target for Canadian companies. They are typically permitted a larger return on equity than Canadian firms. At the same time, analysts say, Canadian companies have access to cheaper financing, making it easier for them to complete transactions and to outbid U.S. competitors for acquisitions.

ITC and Empire aren’t the only companies attracting Canadian interest. Last fall, Nova Scotia-based Emera announced its intention to buy Florida-based TECO Energy for $10.4 billion. TECO owns electric and gas companies in Florida and New Mexico. That deal is expected to close in the middle of this year.

February 14, 2016

Utilities Make Their Case to Skeptical Wall Street

By Rich Heidorn Jr.

NEW YORK — Investor-owned utilities will have a central role in the expansion of distributed generation and renewables, ensuring profit growth even as load remains flat, the industry’s trade group told securities analysts Wednesday.

At its annual Wall Street briefing, leaders of the Edison Electric Institute touted utilities’ dividend growth and partnerships with technology companies to make their case for utility stocks.

But when EEI President Tom Kuhn and five other executives completed their presentations and opened the floor to questions, the first query addressed the lack of load growth, an analyst calling it “the elephant that, frankly, is not in the room.”

“You have had no sales growth whatsoever in something like the past eight years despite the increase in the economy. My question to you is: What are you going to be selling … to customers in the future if they’re not buying electricity?”

Kuhn said that while increasing efficiency has disconnected load growth from the gross domestic product, it is also providing opportunities for capital expenditures — about $7 billion annually, he told about 150 analysts at the luncheon session at the University Club off Fifth Avenue in Manhattan.

He also cited spending on grid security and opportunities in the electrification of transportation.

“You want to sell what’s best for the customer,” Kuhn said. “In the future it may be things that flatten load — storage and other kinds of things … I think [vehicle] electrification is an important part of the equation, but [we’re] not really counting on major electricity growth to deliver what’s best for the customer.

“Over the past seven years, although load hasn’t really increased, you’ve seen utilities do pretty well,” he continued, citing the growth in dividends (39 of 46 publicly traded companies tracked by EEI raised dividends in 2015) and stock prices (up 71.5% over five years, despite a 3.9% drop in 2015).

Kuhn blamed 2015’s drop on rising interest rates and low natural gas prices. The EEI index’s 2015 performance trailed the Dow Jones Industrial Average (0.2%), the S&P 500 (1.4%) and the NASDAQ (5.7%). EEI’s five-year average beat the Dow Jones (70.8%) but fell short of the S&P (80.8%) and NASDAQ (88.8%).

The EEI index was up 7% in January, however, while broader indexes lost more than 10% amid concern over slowing economic growth in China.

Kuhn noted that utility credit ratings have improved to an average of BBB+, with 84% of companies rated as stable or positive as balance sheets have shifted toward regulated operations and away from competitive businesses.

Capital expenditures, which hit a record $108.6 billion in 2015, are forecast at $101.2 billion for 2016 and $92.2 billion next year. Spending, which was formerly dominated by generation, has shifted to distribution, which has doubled its share over the last five years, he said.

‘Enhanced Relationship’

In recent strategy meetings with utility CEOs, EEI identified grid modernization, clean energy and customer solutions as areas for growth, said David Owens, executive vice president for business operations and regulatory affairs.

“It’s not just about electricity sales. It’s about your enhanced relationship with the customer,” Owens said.

It is utilities that are developing microgrids for military bases and that will build the charging infrastructure needed for electric vehicles, he said.

“We have many customers who are looking at a full array of technologies where they have greater control over their usage and greater control over their bills,” he said. “We’re seeking to become a full-service provider behind the meter… so we see a bright future.”

Role in Renewables

Richard McMahon, vice president of energy supply and finance, said utilities are the “primary investors” in all forms of renewables, with utility-scale solar representing 60% of all installed solar capacity.

EEI’s solar value proposition is cost. Utility-scale solar costs less than half as much as roof-top panels ($1.48/W versus $3.55/W for the first three quarters of 2015), according to the group.

The group cited Energy Information Administration projections that non-hydro renewables will triple between 2010 and 2040. (See related story, EEI: Power Sector Carbon Reductions to Continue Despite CPP Stay.)

McMahon said utilities also will be “major players” in buying and deploying storage. “Maybe the one silver bullet in energy storage hasn’t emerged yet, but there’s a lot of testing … currently going on in the industry and its happening really across the value chain,” he said, citing uses at the wholesale level for peaking, at transmission for voltage control and in distribution for power quality.

Brian Wolff, executive vice president for public policy and external affairs, touted EEI’s 182 technology partnerships with the likes of Tesla, Apple, Google and Nest Labs. “We view many of the so-called ‘competitors’ or ‘disruptors’ to our industry as partners,” he said.

EEI members spent more than $90 million last year to add 800 plug-in electric vehicles to their fleets. Seventy utilities have committed to invest at least $250 million over the next five years to increase their EV fleets. “This helps to push down vehicle development costs for automakers, making EVs more affordable for customers,” Wolff said.

Policy Initiatives

In addition to making their case for utility stocks in investors’ portfolios, EEI officials also briefed analysts on the group’s policy initiatives — chief among them changing state net metering policies to eliminate cost shifting from customers with rooftop solar. Owens said legislatures or utility regulators in more than three dozen states are considering changes.

The issue could be addressed by increasing charges for the fixed costs of the grid; through separate rates for buying and selling power; or a three-part rate, including a monthly basic service charge, a demand charge and an energy charge, Owens said.

Wolff expressed disappointment that a bipartisan energy bill stalled in the Senate earlier this month over aid to Flint, Mich., which is seeking funding to address lead in its water system. Assuming the hurdle is overcome, it would have to be reconciled with legislation that cleared the House earlier.

Although Senate leaders said they will reconsider their bill later this year, Wolff said, chances of passage are far from certain. “The closer we get to the election, the less appetite Congress has for doing big things,” he said.

Former FERC Commissioner Philip Moeller, who joined EEI last month as senior vice president of energy delivery and “chief solutions officer,” expressed disappointment at the Supreme Court’s January ruling upholding FERC Order 745.

Moeller was the lone dissenter on the order, which required RTOs to pay demand response at the same LMP rate as generation. Moeller argued for payment of LMP minus the avoided cost of generation. “I hope the commission will [revisit DR pricing] sooner rather than later,” he said. (See Clark Calls for New Look at Order 745.)

Ohio PPAs

EEI executives declined to take sides when asked about the power purchase agreements FirstEnergy and American Electric Power are seeking for their merchant generation in Ohio. The issue has pitted EEI Chairman Nick Akins, AEP’s CEO, against EEI Vice Chairman Chris Crane, CEO of Exelon. (See Exelon Calls FirstEnergy PPA ‘Grossly Lopsided,’ Says it Can Offer a Better Deal.)

All but one of the Ohio plants at issue are coal-fired, the exception being FirstEnergy’s Davis-Besse nuclear station.

But EEI’s McMahon chose to focus on the woes of nuclear plants whose revenues have decreased as low natural gas prices have lowered clearing prices — an issue on which AEP, FirstEnergy and Exelon are in agreement.

“I think there’s an overall recognition that companies are going to do what they need to do” to protect their baseload generation, he said. “Our focus has been more working with the FERC, working with the other trades and the RTOs to address these issues so that the markets really provide the appropriate price signals to those companies.”