Page 1489 – RTO Insider

June 23, 2015

Louisiana Commission Loses Challenge on Ouachita Transmission Upgrade

By Tom Kleckner

The Federal Energy Regulatory Commission denied the Louisiana Public Service Commission’s request to reconsider Entergy’s allocation of transmission upgrade costs at its Ouachita Power Facility in northeast Louisiana, saying regulators should make their case in proceedings addressing changes to the company’s system agreement.

The Louisiana regulators had requested rehearing of a 2012 order in the matter (EL11-63-001).

At issue is the allocation of $70 million in transmission upgrades necessary to qualify the Ouachita plant as a network resource for Entergy’s operating companies.

Entergy Arkansas purchased the three-unit, 789-MW natural-gas fired facility from Cogentrix Energy in 2008, selling one unit to Entergy Gulf States Louisiana in 2009.

The LPSC contended Entergy Louisiana should not be liable for costs that allowed Entergy Arkansas to receive energy from the Ouachita plant, as the Arkansas utility had received approval to withdraw from Entergy’s system agreement effective in 2013.

In its January 2012 order, FERC said the LPSC’s arguments were premature because the Arkansas utility had not yet left the system agreement. Entergy Arkansas formerly withdrew from the system agreement Dec. 19, 2013, when it was integrated into MISO’s footprint.

In denying the LPSC’s request for a rehearing, FERC said the LPSC failed to support its contention that the pre-withdrawal allocation of the plant’s transmission upgrade costs could not be justified. “As Entergy has explained, until Entergy Arkansas’ departure from the system agreement, the Ouachita plant provided benefits to all operating companies.”

FERC said “the fact that planning of the Ouachita plant acquisition occurred after Entergy Arkansas provided notice of intent to withdraw from the system agreement does not provide a basis for treating it differently from other system resources for the purpose of allocating associated transmission costs.”

The LPSC contended the 2012 order violated section 306 of the Federal Power Act, which requires a public utility to answer a complaint filed by a state regulatory commission. FERC countered by saying complainants “bear the burden to prove their allegations under both sections 206 and 306 of the FPA, irrespective of the FPA section 306 requirement.”

FERC’s denial said the LPSC had “misread” section 306 and said the section “provides a public utility that is the respondent to a complaint with two options: it may either (1) ‘satisfy’ the complaint or (2) answer the complaint in writing.” FERC said the LPSC’s misreading “has the effect of improperly shifting the burden of proof to a respondent” and that Entergy had fulfilled its obligations under section 306.

FERC said it saw no reason its findings conflicted with cost-causation principles and said “the appropriate forum for the Louisiana commission to raise issues regarding cost causation with respect to the post-withdrawal period was in the proceedings addressing changes to the system agreement following Entergy Arkansas’ withdrawal.”

June 23, 2015

Con Ed Rates Fixed for Another Year

Consolidated Edison of New York and the New York Public Service Commission reached a settlement that keeps distribution rates stable through 2016.

The NYPSC on Wednesday approved a plan negotiated over the past five months between its staff, the company and various stakeholders.

In January, the company, which serves New York City and Westchester County, had filed for a two-year rate increase that originally sought an additional $368 million in 2016. The increase would have increased customers’ delivery bills by 7.2%, the PSC said. Instead, electric customers will see rates frozen for a third consecutive year.

“The proposal adopted today by the commission keeps electric delivery charges for residential and small commercial customers unchanged from such charges paid in 2013 for yet another year,” commission Chairman Audrey Zibelman said in a statement.

PSC staff suggested using available customer credits, similar to the way a projected rate hike in 2014 was avoided. The 2014 rate decision provided for rate increase of $47.7 million in 2015. Customers were insulated from the increase due to a bill credit in the same amount.

The adopted joint proposal addresses Con Ed’s advanced metering infrastructure (AMI) proposal. The proposal includes small capital expenditures for AMI in 2016, but the commission also set up a collaborative process that would help Con Ed develop its AMI business plan. The results of the collaborative will be presented to the commission later this year.

June 23, 2015June 15, 2023

FERC OKs PJM Revisions on Reactive Power Payments

By Michael Brooks

PJM generating companies that deactivate or transfer ownership of units in their fleet will have to revise their reactive power rates or explain why they have decided not to under Tariff revisions approved by the Federal Energy Regulatory Commission last week (ER15-696).

Generators receiving compensation for reactive power would be required to make an informational filing notifying PJM and FERC of their plans at least 90 days before the effective date of changes in their fleet.

PJM submitted the revisions to Schedule 2 of its Tariff in December after FERC issued an Order to Show Cause in which the commission said it was concerned that the RTO’s Tariff lacked explicit provisions preventing generators that have been retired or sold from receiving reactive power payments. (See Impatient FERC Orders Immediate PJM Action on Reactive Power Payments to Retired Plants.)

In its filing, PJM argued that it lacked the power to force a generator to terminate or revise its rate schedule or to stop paying it for reactive power; doing so would be a violation of companies’ rights under section 205 of the Federal Power Act, it said.

PJM said its rule change reduces the probability that a retired generator would continue receiving reactive power payments while avoiding putting the RTO in a ratemaking role.

Some stakeholders disagreed. Public Service Enterprise Group argued that the revisions were equal to forcing generators to submit a section 205 filing, something neither PJM nor FERC can do.

FERC agreed with PJM that its proposal preserves the companies’ section 205 filing rights. “We disagree with [PSEG] that the informational filing requirement is tantamount to requiring a section 205 filing. Court and commission precedent recognize that the commission retains the ability to require informational filings without exceeding its authority under section 205.”

FERC ordered the RTO to further revise Schedule 2 of the Tariff to specify that the informational filings must include each resource’s fuel source, wattage and MVAR capability.

June 23, 2015June 15, 2023

Federal Briefs

On a party-line vote, the Senate Appropriations Committee voted 16-14 to approve a $30 billion spending bill that reduces funding for the Environmental Protection Agency and the Interior Department.

The approved funding is $400 million less than what was approved for 2015. It’s also $2.2 billion less than what the Obama administration was seeking.

Sen. Barbara Mikulski (D-Md.), the ranking member on the committee, said Democrats would oppose the bill. Sen. Tom Udall (D-N.M.) said the bill takes direct aim at the Clean Air Act, the Clean Water Act and the Endangered Species Act.

Under the bill, the EPA would be banned from enforcing the carbon mandates in states that have signaled opposition to the regulation.

More: The Hill

NRC says Entergy Can Use Decom Fund for Fuel Storage

The Nuclear Regulatory Commission will allow Entergy to use $225 million of its $665 million decommissioning fund at the retired Vermont Yankee nuclear station to pay to store the plant’s spent nuclear fuel.

Before Entergy can tap into the decommissioning fund, NRC said the company must first spend $143 million in a line of credit. NRC said it believed that Entergy has sufficient funds invested in the fund to cover decommissioning costs over the next 60 years.

More: VTDigger.org

Tritium Found in Groundwater at Exelon’s Peach Bottom Plant

A groundwater monitoring well at Exelon Nuclear’s Peach Bottom Atomic Power Station in Pennsylvania has detected radioactive tritium at levels above industry safety thresholds, but the Nuclear Regulatory Commission said the material poses no safety or environmental concern.

“It’s possible that the water could eventually migrate into the plant’s outlet canal, and from there it could make its way into the [Susquehanna] River,” NRC spokesman Neil Sheehan said. “If so, the potential dose would be negligible. If the amount were to make its way into the Susquehanna, the dilution effect would be so great that, even if you were to take multiple water samples, it would not be detectable.” Exelon is still working to determine how the tritium escaped and to devise a remediation plan.

Paul Gunter, a director of the public interest group Beyond Nuclear, said NRC’s finding is troubling. “This is a one-off measurement in one well,” he said. “It doesn’t say how much got out. This is what they detected at that one point.”

More: York Daily Record

NRC Considering Development of Small Nuclear Reactors

The Nuclear Regulatory Commission is ready to start accepting design specifications for reactors in the 300-MW range, and the Energy Department is spending more than $450 million to assist in the licensing of plants using the smaller reactor.The move toward examining and encouraging the development of smaller reactors has gained the interest of several federal lawmakers, including Sen. Lisa Murkowski (R-Alaska), chair of the Senate Energy and Natural Resources Committee. “I have long supported and advocated for the development and deployment of small modular reactors,” she said recently.

Most commercial reactors, including several in ongoing projects around the world and in the U.S., are greater than 1,000 MW. Proponents say the smaller reactors, which can be built off-site, would help cut greenhouse gases at a lower cost.

More: The Hill

Environmental Group Asks FERC to Expand Comment Deadline for Pipeline

The Blue Ridge Environmental Defense League filed a formal request with the Federal Energy Regulatory Commission to extend the deadline for public comment on the proposed 300-mile Mountain Valley Pipeline, which would transport natural gas from northwestern West Virginia to southern Virginia.

“The FERC has certainly not gone out of its way to ensure that the public’s voice is heard,” said Anne Armistead, a member of Preserve Floyd, part of the Blue Ridge Environmental Defense League. “I could not even get the e-comment feature to work on the day of the deadline when I tried to submit my comment.”

The group said the June 16 deadline didn’t allow the public time enough to learn about and comment on the proposed pipeline and that technical problems prohibited attempts to file comments electronically. Others complained that even when they did show up for public comment sessions, they didn’t get a chance to speak.

More: SWVAToday.com

DOE Investigating Worker Exposure at Nevada National Security Site

The Energy Department is investigating possible radiation exposure of workers at the Nevada National Security Site.

Two incidents took place last year at the National Criticality Experiments Research Center, located at the site. Both incidents involved highly enriched uranium used in nuclear weapons. But the department’s Office of Enforcement said exposure levels were “extremely small and health risks essentially zero.”

More: Las Vegas Review-Journal

Massachusetts Town Sues FERC for Allowing Pipeline Construction

Dedham, Mass., has sued the Federal Energy Regulatory Commission for approving construction of a natural gas pipeline before the town’s appeal against the project had been heard.

FERC approved the Algonquin Incremental Market project in March, allowing for the construction of a spur, or lateral line, through the towns of Dedham and West Roxbury. The town appealed the ruling, but FERC allowed construction to begin before hearing the appeal.

Dedham argued that FERC’s decision was illegal and asked the U.S. District Court of Massachusetts to halt construction. Boston Mayor Martin J. Walsh, U.S. Rep. Stephen Lynch and several other local politicians have written FERC threatening to sue if the commission does not halt construction until it hears the appeal.

More: Boston Globe

June 23, 2015

FERC Won’t Investigate Offshore Wind Contract

By William Opalka

The Federal Energy Regulatory Commission has for the third time refused to take up a Rhode Island citizen’s allegations that an offshore wind power contract is illegal (EL15-61).

FERC declined without comment to refer the contract between Deepwater Wind and National Grid to its Office of Enforcement.

Benjamin Riggs Jr. claimed the 20-year power purchase agreement violated the Federal Power Act and the Supremacy Clause of the U.S. Constitution. He sought an enforcement action against the Rhode Island Public Utilities Commission under the Public Utility Regulatory Policies Act for violating the “commercially reasonable” provisions of that law.

Deepwater is constructing a 30-MW offshore wind farm near Block Island. The company and National Grid signed a contract that cost $500 million more than the avoided costs of conventional generation over the project’s life, which regulators approved in 2010. The commission had initially rejected an agreement, but the companies amended the contract after the state passed legislation to promote the wind farm as a clean energy resource and as an economic development project.

The final permit, from the U.S. Army Corps of Engineers, was issued last year and the project is now under construction. It would be the first offshore wind farm in the U.S.

National Grid argued that Riggs did not have standing to bring the action before FERC under the various statutes that he cited.

Riggs had filed complaints in 2011 and 2012 with the same allegations that also failed (EL12-16, EL12-100). He tried again in April because he said a recent Supreme Court decision, which he did not name, “suggests that any possible administrative remedy should be explored before resorting to the courts.”

The courts appear to be his only option.

“Our decision not to initiate an enforcement action means that Mr. Riggs may himself bring an enforcement action against the Rhode Island commission in the appropriate court,” FERC wrote.

The Rhode Island Supreme Court rejected a ratepayer challenge in 2012.

June 23, 2015June 15, 2023

Southwestern Energy: Gas Industry Paying Heed to Environmentalists

By Rich Heidorn Jr.

MILWAUKEE — Gas producers are “listening loud and clear” to environmental concerns about fracking, James Tramuto, vice president of governmental and regulatory strategies for Southwestern Energy, said at the MISO Annual Meeting last week.

Southwestern Energy, the fourth-largest natural gas producer in the U.S., has committed to becoming a net-zero user of fresh water in its operations by the end of the year. “We’ll get there through conservation,” Tramuto said during a panel discussion. The company currently claims to use rainwater collected in ponds and water recycled from its operations for 83% of its water use, with 17% from streams.

Southwestern is one of eight gas companies in the ONE Future Coalition, a voluntary effort whose members have pledged to reduce methane emissions from leaks or loss to 1% across the supply chain.

While gas is expected to increasingly displace coal-fired generation, and the industry has plentiful supplies, producers must address the “hot-button issues” of pollution and local moratoriums if it is to continue its growth, Tramuto said.

The Sierra Club, which won $80 million in donations from billionaire Michael Bloomberg for its “Beyond Coal” campaign — with a goal of retiring half of U.S. coal plants by 2017 — is also running a “Beyond Natural Gas” program, albeit without Bloomberg’s support.

Anti-gas protests have become a regular feature at open meetings of the Federal Energy Regulatory Commission.

“I would not discount the chance that gas may become the next ‘evil,’” said CAISO CEO Stephen Berberich, who also spoke on the panel.

Gas, Electric Schedules

Tramuto also commented on FERC’s efforts to better align the market schedules of the gas and electric industries. In April, the commission approved a rule adopting two gas scheduling changes but declined to move the start of the gas day to 4 a.m. CT from 9 a.m. CT. (See FERC Approves Final Rule on Gas-Electric Coordination.)

At the beginning of the scheduling discussions, Tramuto said, “people weren’t talking to one another, they were talking past one another and not really understanding the other side and what their needs were versus what our capabilities are.”

He added, “It’s the first time I’ve seen in a long time that the gas community collectively — that was the producers side, the pipelines, the whole group — all spoke with one voice on not changing that 9 a.m. start time.”

June 23, 2015

FERC Proposes Streamlined Reliability Rules for TOs, RCs

The Federal Energy Regulatory Commission last week proposed revisions to several sets of reliability standards:

In a Notice of Proposed Rulemaking (NOPR) on transmission operations (TOP) and interconnection reliability operations and coordination (IRO) standards, the commission outlined language it said would clarify standards for transmission operators and reliability coordinators, combining the eight current TOP standards into three. The commission said that the North American Electric Reliability Corp. had addressed concerns it raised in November 2013 about outage coordination and the treatment of system operating limits and interconnection reliability operating limits (IROLs) (RM15-16).
A second NOPR is designed to streamline and clarify requirements of emergency preparedness and operations (EOP) and protection and control (PRC) reliability standards. It would revise the definition of a remedial action scheme (RM15-7, RM15-13, RM15-12).

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

June 23, 2015June 15, 2023

FERC Upholds ComEd Charge on Energy Storage

By Michael Brooks

The Federal Energy Regulatory Commission last week rejected a rehearing request on its approval of Commonwealth Edison’s wholesale distribution charge on an energy storage facility (ER15-3).

In its request, the Energy Storage Association contested ComEd’s classification of Energy Vault — a Chicago-based company whose energy storage facility is connected to ComEd’s distribution system and participates in PJM’s ancillary services markets — as a load-serving entity. The association argued that because the commission has previously classified energy storage resources as generators, the charge should not apply, as ComEd has exempted generators from such charges.

“By defining an [energy storage resource] as a market seller it was PJM’s and FERC’s clear intention to ensure battery facilities, such as Energy Vault, would be treated similar to other market sellers, such as generators and pumped storage facilities, rather than as a market buyer or load, which ComEd proposes to do here,” ESA said.

Energy Vault echoed these arguments in its protest to FERC’s November 2014 approval of the charge, which costs the company $3,449 annually.

FERC disagreed, saying that energy storage could be classified as generation, transmission or distribution, depending on the circumstances. In this case, Energy Vault’s battery “spends a substantial share of its operating life being charged by withdrawing energy from the distribution system,” the commission said. “Generation does not.”

“Notwithstanding the label applied to Energy Vault, be it deemed a wholesale customer serving load, generation, market seller or some combination, it is indisputable that Energy Vault seeks to use the ComEd distribution system to both inject into and withdraw power from its batteries,” FERC said. “The Nov. 28, 2014, order was not based on any particular label or classification for Energy Vault, but upon the fact that Energy Vault is using ComEd’s distribution system to withdraw energy for battery charging and therefore should contribute to its costs.”

ComEd exempted generators from wholesale distribution charges in 2009. The company found that reverse flows from renewable generation potentially benefit its system by reducing congestion.

“While a storage device discharging to the distribution system should also provide beneficial counterflow, a storage device differs from generation in that it must spend a substantial amount of time charging,” FERC said. “During charging, it will add to the flow and load on the distribution system just like any other load and, crucially, unlike a generator.”

FERC said that while it does treat energy storage as generation for specific purposes, that does not preclude a transmission owner from recovering the costs of its system through distribution charges.

Energy Vault’s storage facility, E-Vault, is a 100-kW prototype battery system that stores and provides power for the company’s Solar Plugs, solar-powered EV charging stations, including one on Northerly Island in Chicago.

June 23, 2015June 15, 2023

MISO Sets Term Limits for Board

By Rich Heidorn Jr.

MILWAUKEE — MISO’s Board of Directors will generally be limited to three three-year terms, while the board chairman will be allowed to hold the gavel for a maximum of five years, under rule changes approved amid much gnashing of teeth last week.

The three-term limit comes with a caveat: Directors may petition for a waiver allowing a single additional term upon the determinations by the board and the Corporate Governance & Strategic Planning Committee “that a director’s continued service is necessary to retain his or her skills or expertise, to maintain geographic or other diversity of the board, or is otherwise in the best interest of” MISO.

The board rejected setting an age limit, accepting the Corporate Governance Committee’s position that “directors should be evaluated on their knowledge, skills and engagement, rather than an arbitrary limitation based on age.”

The five-year maximum for the chairman is up from the current two-year limit. That would allow Walsh, who was elected to a second one-year term for 2016, a longer tenure.

The board tabled action on a proposal to expand the Nominating Committee — currently three directors and two stakeholders — to add more stakeholder representatives. It will consider the expansion again in October, when they said they would have the benefit of the stakeholder governance discussions. (See related story, MISO Straw Man: Eliminate 10 of 27 Committees.)

The term limits vote was unanimous, although Director Mike Evans expressed misgivings, saying the board was getting sufficient turnover without the rule. “At some time in the future I’m going to say, ‘Why in the blazes did we do that?’” he said.

Director Paul Feldman objected to the fourth-term waiver, saying it was inconsistent with term limits and could create a “nasty dynamic” among board members. “Everyone is replaceable,” he said.

Director Thomas Rainwater said he supported the term limit, citing research suggesting directors are no longer independent after about 11 years.

But Director Mike Curran joined Evans in expressing unease, recalling a discussion with Howard Schneider, who has chaired PJM’s Board of Managers since its formation as an independent panel in 1997. “‘Why are you guys doing this to yourself?’” Curran said Schneider asked him after hearing that MISO was considering limits.

“A four-[term] limit would clear the decks at PJM,” joked Feldman.

Actually, PJM adopted both term and age limits in May. Directors will be ineligible for re-election once they either turn 75 or have served five terms. (See New PJM Board Member Elected, Re-election Eligibility Changed.)

The PJM board’s action was announced at the RTO’s Annual Meeting in Atlantic City, N.J., without any explanation — let alone the public debate that the MISO board engaged in before voting. Unlike MISO, PJM’s board does not meet in public.

June 23, 2015

Rural Utilities Allowed to Continue ROE Fight

By Chris O’Malley

Five small, rural utilities — hailing from places like Yazoo City, Miss. (population: 11,000) — have won the right to continue their fight against 24 of MISO’s large transmission-owning members, whom the utilities contend are earning too much.

The Federal Energy Regulatory Commission on Thursday set the utilities’ complaint for a hearing under section 206 of the Federal Power Act (EL15-45).

Commissioners said they would leave to the discretion of the Chief Administrative Law Judge whether it would be appropriate to consolidate the case with a similar complaint MISO industrial customers filed against MISO TOs that is set for an August hearing (EL14-12). (See ROE Talks Between MISO Industrials, TOs Collapse.)

This latest case was filed last February by Arkansas Electric Cooperative Corp., Mississippi Delta Energy Agency, the Clarksdale Public Utilities Commission, the Public Service Commission of Yazoo City and Hoosier Energy Rural Electric Cooperative.

The five argue that the TOs’ base return on equity (12.38%, except American Transmission Co. with an ROE of 12.2%) should be no higher than 8.67%. The complainants cited a recent Court of Appeals ruling that found that a complainant need only demonstrate that the existing rate is unjust and unreasonable and do not have to prove the reasonableness of a suggested replacement rate.

TOs Not Persuasive

The MISO TOs argued that the consultant for the five utilities used flawed data and failed to consider other relevant capital models.

But FERC in its June 18 decision said the complainants had used appropriate data and conducted the proper cash flow analysis in making their case.

The commission also rejected the TOs’ request that it dismiss the complaint because their base ROEs fall within the commission’s “zone of reasonableness.”

“The commission has previously rejected the contention that every ROE within the zone of reasonableness is necessarily just and reasonable, and we do so again here.”

Among other MISO TOs whom the five utilities have challenged in their ROE complaint are ALLETE, Entergy, ITC Midwest and Northern States Power.

New Methodology

FERC last year changed the way it sets rates for electric utilities, switching to a two-step discounted cash-flow methodology similar to what it uses for natural gas and oil pipelines.

A number of stakeholders have argued that the current financial market allows transmission companies to use more leverage while still maintaining an investment-grade bond rating.

MISO industrials argued that the capital structures of certain MISO TOs have unreasonably high levels of common equity and should be capped at 50% common equity. Last October, FERC rejected the industrials’ capital structure argument but granted a hearing on the base ROE.