PJM Transition Auction Means Reprieve for Exelon Nukes

By Suzanne Herel and Rich Heidorn Jr.

VALLEY FORGE, Pa. — Capacity Performance resources cleared at $151.50/MW-day in the transition auction for the 2017/18 delivery year, PJM said Wednesday, calling the results “demonstrably competitive” at nearly $60/MW-day below the RTO’s price cap.

The results meant at least a temporary reprieve for Exelon’s Quad Cities and Byron nuclear plants, which cleared the transition auction after failing to clear in the Base Residual Auction for 2017/18. Exelon said Thursday morning that all of its nuclear plants in PJM cleared in the transition auction and that the company will defer any decisions about the future of Quad Cities and Byron for one year.

PJM held the auction Sept. 3-4 to obtain CP resources for 70% of the updated reliability requirement for 2017/18, procuring its target of about 112,195 MW, said Stu Bresler, senior vice president for markets. The clearing price cap was $210.83/MW-day, or 60% of the net cost of new entry.

Bresler said the results showed “a very steady, very rational progression of clearing prices given the steadily increasing proportion of our reliability requirement that we procured as Capacity Performance for these three delivery years.”

The RTO-wide clearing price was $134/MW-day for the 2016/17 transition auction, which obtained 60% of total requirements as CP. (See PJM 2016/17 Transition Auction Clears at $134/MW-day.)

The transition auction for 2017/18, which cleared $17.50/MW-day higher, procured 70% of total requirements. Neither transition auction had locational restraints.

In the Base Residual Auction for 2018/19, where 80% of resources were CP, most of the RTO cleared at $164.77.

New Generation in COMED, ATSI Zones

Total capacity offered into the 2017/18 transition auction was 133,769 MW. Of the capacity that cleared, 102,178 MW represented resources committed in previous auctions that now will be converted to the new product at a higher price.

About 10,000 MW of the CP that cleared were from resources that did not clear in the Base Residual Auction in 2014, less than 9% of the total.

Bresler said most of the newly cleared generation was in the COMED (almost 4,000 MW) and ATSI (more than 2,300 MW) zones.

“I think it was fairly well publicized after the Base Residual Auction for ’17/18 the resources that did not clear,” he said. “It just speaks to those that were available to do so in this particular auction from those zones. And I think that’s what we saw.”

PJM reported that 4,339 MW of nuclear cleared for the first time in the transition auction.

Exelon confirmed that Byron Units 1 and 2 (2,336 MW) and Quad Cities Units 1 and 2 (1,737 MW) in Illinois, which did not clear the BRA for 2017/18, were among the winners this time around. (See How Exelon Won by Losing.)

The company said Thursday that it will continue operating Quad Cities through at least May 2018. Byron is already obligated to operate through May 2019. It said it will bid all its eligible nuclear plants, including Quad Cities, Byron and Three Mile Island into the 2019/20 BRA next year.

“While Quad Cities and Byron remain economically challenged, we are encouraged by the results of the recent capacity auctions. The new market reforms help to recognize the unique value of always-on nuclear power, while preserving the reliability of our electric system,” Exelon CEO Chris Crane said in a statement. “However, these plants are long-lived assets with decades of useful life left, and today’s decision is only a short-term reprieve. Policy reforms are still needed to level the playing field for all forms of clean energy and best position the state of Illinois to meet [the Environmental Protection Agency’s] new carbon reduction rules.”

The company said it will “continue its dialogue” with Illinois policymakers for state support for the nuclear units.

New Coal Also Clears

Some 4,165 MW of coal-fired generation also cleared for the first time in the transition auction.

In total, coal cleared 37,455 MW; gas 35,298 MW; and nuclear 29,970 MW.

Higher percentages of energy efficiency (almost 28%) and demand response (65%) came from new rather than previously cleared resources. Of 700 MW of DR acquired, 455 MW represented new commitments.

“I can’t really speculate on the drivers there,” Bresler said. “My hypothesis, I guess, would be that these demand response providers have since the Base Residual Auction for ’17-18 found additional resources that could provide the Capacity Performance level of reliability and therefore offered those resources into the auction.”

$1.7 Billion Increase

The Base Residual Auction for 2017/18 — held in 2014, before the introduction of the tougher CP requirements — cleared at $120/MW-day in most of PJM, with the PSEG locational deliverability area at $215. (See Capacity Prices Jump Following Rule Changes.)

The incremental cost of the transition auction was $1.7 billion, below the estimate of $3.1 billion to $4.2 billion PJM and the Market Monitor had predicted, Bresler said.

Independent Market Monitor Joe Bowring declined to comment on the results aside from saying that they were consistent with the rules. He said his office is working on a comprehensive report on all three CP auctions.

Walter Hall, of the Maryland Public Service Commission, said his agency is keeping an eye on how the prices will affect consumers. “Obviously, it’s going to increase prices somewhat,” he said. “That is a negative. It is a problem, but it’s a problem we knew was coming.”

Dan Griffiths, executive director for the Consumer Advocates of PJM States, said he still had to review the numbers.

But, he said, “I don’t think our position has changed, that this was an extremely excessive solution to the problems we faced.”

PJM, he said, “never considered the impact on consumers.”

Higher Risks, Rewards

The Capacity Performance construct allows capacity resources to receive higher prices in exchange for taking on stiffer penalties for non-performance.

The transition auctions, part of a five-year shift leading to 100% CP for the 2020/21 delivery year, had been delayed in order to allow DR and energy efficiency resources to participate, per a FERC order.

Under the rules of the transition auctions, participation is optional, and market participants may offer all or part of resources that were committed under the Base Residual Auctions for those years as Capacity Performance resources.

The RTO’s 2018/19 Base Residual Auction, the first BRA under the CP rules, saw prices rise 37% to $164.77/MW-day in most of the RTO, while the ComEd zone broke out at $215 and Eastern MAAC hit $225.42.

CP resources were priced at a $15/MW-day premium to base capacity in most of the RTO. In the winter-peaking PPL LDA, the premium was $90. (See PJM Capacity Prices Up 37% to $165 /MW-day.)

September 1, 2015

Timing of PJM Auction Announcement Sparks Real-Time Debate

By Rich Heidorn Jr.

CAMBRIDIGE, Mass. — PJM’s 2016/17 transition auction results were released shortly after the stock market closed at 4 p.m. Monday — coincidentally during an EUCI conference in Cambridge, Mass., that attracted PJM Market Monitor Joe Bowring, PJM Senior Economic Policy Advisor Paul Sotkiewicz and Jim Wilson, a consultant to consumer advocates in the RTO.

Wilson, a featured speaker, reported — critically — on the results shortly after they were released, sparking a lively debate with Sotkiewicz. Bowring, uncharacteristically, declined to offer an opinion.

“Unfortunately, the way [PJM] ran the auction, instead of paying people $10, $20, maybe $30 [per MW-day] to upgrade their capacity commitment to Capacity Performance, they created a new clearing price of $134/MW-day, paid to everybody,” Wilson said.

“Of the 95,000 MW that cleared, almost all of it was in the RTO region and not in [MAAC], and they were able to go from $60 their previous clearing to $134. They basically get a $60 windfall — or about $1.7 billion,” Wilson said, concluding: “Very inefficient.”

That sparked a response from Sotkiewicz, who had appeared on an earlier panel with Bowring — both of them already aware of the results but sworn to secrecy until their release.

Sotkiewicz said that during the January 2014 polar vortex, “a lot of [the high generator outages were] coal resources in the west, gas generators in the west who were behind the [local distribution company] city gate who had no firm transportation to the city gate. Even if they did, they could be curtailed by the LDC. [They] also didn’t have dual-fuel capability.

“So, quite to the contrary, a lot of the problems that we did see were in the west during January. So to say that [the CP acquired was] in the west and it’s useless I think is disingenuous and incorrect.”

Asked for his opinion on the “efficiency” of the auction after the conference ended, Bowring seemed uncharacteristically tongue-tied, pausing and exchanging glances with Sotkiewicz.

“We’ll be doing a report on it fairly soon and have a detailed analysis,” he said finally. “It’s hard to tell just looking at the prices. We reviewed the outcome. The outcome was consistent with the rules.”

September 1, 2015

State Briefs

Market Monitor Report: RGGI Prices Increasing

The Independent Market Monitor for the Regional Greenhouse Gas Initiative found no evidence of anti-competitive conduct in the CO₂ allowance secondary market, according to its “Report on the Secondary Market for RGGI CO₂ Allowances: Second Quarter 2015.”

Potomac Economics found the average CO₂ allowance futures price was $5.53, 2% higher than in the first quarter and 19% higher than in the second quarter of 2014. Prices ranged between $5.30 and $5.60 from April until Auction 28 in early June, and then prices increased steadily during June and reached $5.80 at the end of the quarter.

The report addresses the period from April to June 2015. It is based on data reported to the Commodity Futures Trading Commission and the Intercontinental Exchange, as well as other data.

More: Potomac Economics

INDIANA

Consumer Agency Objects to IPL’s Payments to Parent

The Office of Utility Consumer Counselor has asked regulators to deny Indianapolis Power & Light’s 5.6% rate hike request that would generate $68 million more per year, saying IPL deserves only a fraction of that — just $6 million more a year.

The state agency representing consumers alleges the utility has given lip service to asset management while sending $507 million in dividends to parent AES between 2010 and 2014. Since 2010 there have been 14 fires or explosions of IPL equipment, including some events that launched manhole covers into the air in crowded downtown Indianapolis.

The consumer advocate told the Utility Regulatory Commission it doesn’t think IPL has done enough to improve maintenance of its system. IPL countered that it has made numerous upgrades, including locks to keep manhole covers earthbound. IPL has not had a rate case since 1995.

More: Indianapolis Star

IOWA

Local Officials Shoot Down Black Hawk County Wind Project

The Black Hawk County Board of Adjustment last week rejected a proposed wind farm, citing residents’ concerns about health, decreased property values and dangers to wildlife.

An attorney for the project’s developers, Optimum Renewables, said there was no evidence that industrial turbines could endanger people or wildlife and said the harm to eagles and birds was exaggerated.

More: Associated Press

Co-op Rolls over on Solar Fee After Customers Complain

Pella Cooperative Electric is withdrawing its plan to charge customers with solar panels an extra $57.50/month after the plan touched off a firestorm of complaints. Pella notified the state Utilities Board that it was withdrawing the tariff it had filed earlier this year.

All Pella residential customers currently pay a $27.50 fixed monthly fee, and the co-op had wanted to increase that fee to $85 for solar customers. Pella maintained the fee was a fair way to assign costs of operating its system to users. “We have decided to withdraw the proposed increase on the facility charge for members who own or lease distributed generation until such time that we can better educate our members and the community as to the fair and equitable recovery of fixed costs,” it said.

Solar customers rejoiced. “It kinda made my day,” hog farmer Bryce Engbers said. He added he would have taken the solar arrays off his barns rather than pay the increased fee.

More: MidWest Energy News

LOUISIANA

PSC Approves Merger of 2 Entergy Subsidiaries

By a 4-1 vote, the Public Service Commission approved a merger of Entergy Louisiana and Entergy Gulf States Louisiana. Company officials said the merger of the Entergy subsidiaries will result in up to $140 million in consumer benefits over the next nine years, including $107 million in bill credits.

The lone dissent was Commissioner Foster Campbell, who said he thought it unfair that residents and customers in the northern part of Louisiana will now be charged to help repair equipment damaged by storms that hit the southern Gulf Coast side of the state included in the Entergy Gulf States service territory.

Entergy Louisiana has about 700,000 customers. Entergy Gulf States Louisiana has about 400,000 electric and 93,000 gas customers.

More: The News Star

MINNESOTA

Xcel Energy Dragging Feet on Community Solar

Despite prodding from the state Commerce Department, Xcel Energy has approved just one community solar garden project, which has not yet been built.

The state issued a 2013 mandate to encourage development of community solar. Utility companies need to review and approve each proposed solar facility, and Xcel is currently reviewing 1,100 solar facilities.

Sunrise Energy Ventures, a Minnetonka-based solar developer, complained to state regulators about Xcel’s delay in approving its proposal. SunShare, another community solar developer, and Sunrise each have submitted plans to build 100 MW of solar gardens that collectively would serve more than 30,000 Xcel customers.

More: Star Tribune

NEW JERSEY

Borough Introduces Ordinance Banning Unregulated Pipelines

The Borough Council of Bloomingdale has introduced an ordinance that would prohibit unregulated pipelines from being built or operated in the borough, a move to discourage the Pilgrim Pipeline from locating within municipal boundaries.

The borough and its residents have been actively fighting construction of the proposed Pilgrim Pipeline, a dual, 178-mile petroleum pipeline that would carry crude oil from a rail terminal in Albany, N.Y., southward to a refinery in Linden, N.J., and refined products back to Albany. The pipeline would replace Hudson River barges, which now move most of those products.

As a petroleum pipeline, the Pilgrim project is not subject to approval by FERC.

More: The Record

OHIO

State Reports Record Oil and Gas Production

Shale wells in the state produced record amounts of oil and natural gas in the second quarter of this year, the state Department of Natural Resources reported last week.

The state reported that more than 10 million barrels of oil and 405 billion cubic feet of natural gas were produced. During the same period in 2014, wells produced about 4.4 million barrels of oil and 156 billion cubic feet of natural gas.

More: WKYC

PENNSYLVANIA

Clean Air Council Suing Sunoco over Eminent Domain Use

The environmental group Clean Air Council is suing the developers of a planned 350-mile natural gas liquids pipeline in the state in an attempt to block it from invoking eminent domain to gain access to properties owned by uncooperative landowners.

The group argues that Sunoco Logistics Partners, developers of the planned Mariner East 2 pipeline, is not a public utility corporation and cannot invoke eminent domain. But the Public Utility Commission has ruled that the partnership’s subsidiary, Sunoco Pipeline, is a public utility, which Sunoco maintains gives it the authority to acquire easements through eminent domain.

More: StateImpact

September 1, 2015

Company Briefs

Capital spending to comply with the Obama administration’s environmental regulations is dinging the credit outlook for Alliant Energy, parent company of Wisconsin Power and Light and Interstate Power and Light in Cedar Rapids, Iowa.

Moody’s Investors Service has changed its outlook for Alliant to negative from stable. “The negative outlook on the Alliant family’s ratings reflects financial metrics that are weak for their ratings and likely to deteriorate over the next few years as its utility subsidiaries incur incremental debt to finance their extensive, multi-year capital expenditure plans,” analyst Lesley Ritter said. If trends continue, Moody’s said, Alliant’s A3 senior secured rating “would likely be more appropriately reflected in a Baa1 rating.”

Since 2011 Alliant has invested $1 billion in environmental retrofits and is projected to spend up to $1.8 billion more to build gas-fired generating units to replace aging coal and gas units.

More: Moody’s

DTE Plans Solar Facility for Ypsilanti

DTE Energy is planning to build a 2,800-panel solar farm in Ypsilanti, Mich., by the end of next year. The 800-kW facility would power about 150 homes.

DTE says it’s the largest solar developer in Michigan, with 10 MW from 22 sites in the southeast part of the state. The utility said it has now met a state-mandated renewable portfolio standard.

The company did not release the estimated cost of the Ypsilanti project.

More: Zacks Equity Research

Duke Energy’s South Carolina Transmission Project Draws Angry Opponents

A Duke Energy proposal to build a 45-mile transmission line and a new substation in South Carolina to serve growing demand in western North Carolina drew about 800 people to a public hearing.

Most of the speakers at the South Carolina Public Service Commission’s hearing oppose the project. Their objections include the line’s location, the technique or type of transmission line or the very fact of its planned existence.

Bill Mills of Caroland Farms in South Carolina said he has studied all of the options and concluded that “the best solution for the Carolinas is to have this project canceled.”

More: Charlotte Business Journal

Philadelphia Businessmen Buy Retired Exelon Plant for Hotel Project

Two Philadelphia businessmen, operating under the moniker Delaware Station LLC, have put down $3 million for the old Delaware Generating Station, formerly operated by Philadelphia Electric Co. They hope to convert the 16-acre property on the Delaware River to one or more hotels, as well as a shopping and catering complex.

Joseph Volpe and Bart Blatstein are the listed owners. Although there remain some small gas-fired turbines on the site, the main generating equipment at the station was retired decades ago.

More: The Philadephia Inquirer

FirstEnergy Starts Demolishing Cleveland’s Lake Shore Plant

FirstEnergy has begun tearing down its retired Lake Shore Generating Station in Cleveland, a process that is expected to take about 16 months. The first steps are a full site survey and the demolition of several smaller outbuildings.

The former coal-fired power plant went into service in 1911 and was officially retired earlier this year. FirstEnergy plans to retain the property for alternative uses, a company spokeswoman said. While all generating equipment will be removed, some transmission equipment will remain on the site.

More: Crain’s Cleveland Business

BP Repairs, Restarts Indiana Refinery

BP restarted a crude distillation unit at its giant Indiana refinery near Chicago last week, a move that is expected to put the brakes on spiking gasoline prices in the Midwest.

The unit at the Whiting, Ind., refinery was shut down Aug. 8 for repairs, which took longer than expected. The extended outage of the 413,500-barrel-per-day refinery, BP’s largest in America, caused fuel shortages that sent pump prices skyward.

More: Associated Press

Dominion Resources Settles Pump Dispute

Dominion Resources, owner of Millstone Station nuclear plant, has reached a settlement with the Nuclear Regulatory Commission for its decision to halt the use of a safety-related pump in the event of a severe accident.

NRC on Thursday cited a “willful violation” for changes Dominion made without regulatory approval at its Millstone Unit 2 plant in Waterford, Conn. A Millstone spokesman said Dominion does not agree that the violation was deliberate.

Dominion agreed to change plant procedures governing the operation and testing of the charging pumps and provide complete and accurate information. Regulators said they became aware in September 2011 that Dominion submitted requests for approval of changes to the Unit 2 operating license that were incomplete and inaccurate.

More: Associated Press

September 1, 2015

Dueling Studies Dispute Need for More Pipelines in New England

By William Opalka

Two studies released last week came to opposite conclusions on the need for additional natural gas pipeline capacity in New England.

The results were unsurprising: One study was funded by domestic natural gas producers; the other by a liquefied natural gas importer.

GDF SUEZ

One report, funded by GDF SUEZ Energy North America, which operates an LNG import terminal in Everett, Mass., concluded that the region has adequate pipeline capacity to meet winter power demand, especially if contributions from dual-fuel-capable generation and LNG are expanded.

Studies sponsored by domestic gas producers and a gas importer came to unsurprisingly opposite conclusions about the need for additional pipelines in New England.

The report, written by international consultant Energyzt Advisors, is highly critical of the proposal embraced by several New England governors to help fund added natural gas infrastructure with a tariff assessed on electricity ratepayers. (See New England Governors Revise Energy Strategy.)

“The proposed electricity ratepayer funding of additional gas pipeline capacity is an expensive and dangerous proposition in terms of ratepayer cost and healthy market function in New England,” the report says.

ANGA, API

The second report, sponsored by America’s Natural Gas Alliance and the American Petroleum Institute, which represent domestic oil and gas producers, says that the region will pay $5.4 billion in higher energy costs (2014 dollars) between 2016 and 2020 unless more pipelines and other infrastructure are built.

“The $5.4 billion in added costs will ramp up from 2016 through 2020, increasing the region’s electricity and natural gas costs by 9% in 2020, according to forecasted energy demand and costs,” says the report, written by Boston-based LaCapra Associates and the Economic Development Research Group.

It was issued by the newly formed New England Coalition for Affordable Energy, which also includes business groups, real estate interests and a utility workers union.

New England’s governors and ISO-NE have said existing pipelines are inadequate to supply the generation base, especially as more natural gas generation enters the power plant portfolio and older coal-fired plants retire.

The GDF SUEZ report says pipeline projects already underway are enough to meet peaking needs. It cited several projects, including Spectra Energy’s Algonquin Incremental Market Project and the Atlantic Bridge Project, which are expected to increase capacity by 600 million cubic feet per day by the winter of 2017-2018. (See Hearing on Algonquin Pipeline Expansion Highlights Local, National Issues.)

Winter Reliability Program

ISO-NE has used a winter reliability program the past two years to combat tight natural gas supplies that are diverted to heat homes and businesses on the coldest days. The program has created incentives for LNG use and for power generators to store oil on-site for plants that can burn either fuel. The GDF SUEZ report also cites ISO-NE’s Pay-for-Performance program, set to debut in 2018, as another reason additional pipelines are not needed.

“The issue is not lack of infrastructure but insufficient commercial contracts to access existing energy,” the report says. “The market is responding with dual-fuel capability and LNG contracts. This past winter 2014/15 has demonstrated the powerful ability of competitive natural gas and electricity markets to respond to price signals,” it adds.

The ANGA/API report counters that energy infrastructure constraints have cost the region at least $7.5 billion over the past three winters. “Pipeline infrastructure has not kept pace with this increased demand and is reaching maximum capacity, especially during the winter months, to meet both electricity generation and space heating demands,” it said.

The authors said their study is more comprehensive than other analyses that considered only a single type of infrastructure. It includes a scenario in which no new additional infrastructure investments are made and an “unconstrained” case assuming $9 billion in spending for natural gas pipelines, electric transmission and generation.

September 1, 2015

Federal Briefs

A federal district court judge in North Dakota has blocked the Environmental Protection Agency’s new water pollution rule just hours before it was to go into effect. Judge Ralph Erickson issued a preliminary injunction blocking implementation of the rule in 13 states that had joined the suit. But a day earlier, a judge in West Virginia ruled in favor of the Obama administration and declined to interfere with EPA’s rule.

The lawsuits are among 10 court challenges against the water rule filed by 29 states, along with groups representing the energy industry, real estate developers, farmers and others. The cases have been consolidated into one lawsuit at the Court of Appeals for the Sixth Circuit in Cincinnati, but Erickson argued that he could still issue his injunction.

The so-called Waters of the United States rule redefines and expands EPA’s jurisdiction under the Clean Water Act. An EPA spokeswoman said the rule would go into effect in the states that did not join the suit blocking the rule. The 13 states where the rule is on hold are: Alaska, Arizona, Arkansas, Colorado, Idaho, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota and Wyoming.

More: The Hill

US Economic Growth at 9-Year High, If You Ignore Energy

The U.S. economy grew at the fastest rate in nine years — if you don’t count energy, according to Bloomberg Business.

The plunge in oil and natural gas prices, along with the bleak outlook for coal, show an energy sector under pressure.

Investment in oil and mining projects by corporate investors fell 68% between April and June, following a 44.5% plunge for the January to March period.

More: Bloomberg Business

Penn State Gets $2.9 Million to Study New PV Panels

Electrical and mechanical engineering teams at Pennsylvania State University are working with experts at the University of Illinois and a photovoltaics company in Durham, N.C., to develop the next generation of solar panels, inspired by technology used in spacecraft.

The teams have received $2.9 million from the Department of Energy’s Advanced Research Projects Agency-Energy (ARPA-E) to work on what they call “fixed-tilt photovoltaic cells.” The cells use plastic “lenslets” and a tracking system that follows the sun to concentrate sunlight at 400 times intensity. The panels are constructed of common materials, such as Plexiglas, which reduces construction costs.

The technology aims to exploit the high-efficiency solar cells installed on spacecraft to generate power.

More: Pennsylvania State University

Obama: Time to Go Full Steam Ahead on Renewables

President Obama used his platform at last week’s National Clean Energy Summit in Las Vegas to urge further investment and research on renewable energy. “This is not the time to pull back” on working on renewable technology and implementation, he said.

“We refuse to surrender the hope of a clean energy future to those who fight against it,” he said. He noted that some firms that used to be concentrated on fossil fuel technology, such as Southern Co., are beginning to make serious investments in renewable energy.

Increasingly, individuals are driving the movement, he said. “People are beginning to realize they can take more control over their own energy — what kind they use, how much and when,” he said.

More: National Journal

Appeal of EPA Clean Power Plan on Accelerated Timetable

The D.C. Circuit Court of Appeals panel hearing challenges to the Environmental Protection Agency’s Clean Power Plan have agreed to an expedited pace for the case and ordered both sides to file their major legal arguments before the Labor Day weekend.

Those challenging the plan — state and industry groups — say the expedited schedule puts them at a disadvantage. States challenging the Clean Power Plan said the Aug. 3 promulgation of the rule is forcing them to develop sweeping regulatory changes before the legal challenges to the rule are heard.

Some observers say EPA’s push for a hurried schedule can be attributed to the planned global summit on climate change to be held in December in Paris. The Obama administration’s EPA says it wants the rule in place before the summit so that it “shows the world that the United States is committed to leading global efforts to address climate change.”

More: Fox News

Schumer Proposes Extension, Changes to Solar Tax Credit

Sen. Charles Schumer (D-N.Y.) is proposing changes to the federal solar investment tax credit that would extend the credit and make it apply to more businesses.

The tax credit, scheduled to phase down from 30% to 10% after 2016, would be extended “beyond 2016,” he said. One reason for the longer timetable is to allow large-scale solar projects to develop. A phase-down of the credit is making it difficult for developers to secure financing.

Schumer also wants the tax credits to apply earlier in a project’s life than currently allowed, which provides that solar-panel owners can get tax credits only when the system is placed in service. In contrast, wind tax credits are applied as soon as a project begins construction.

More: FierceEnergy

September 1, 2015

What Happens to All Those MISO Market Monitor Recommendations?

By Chris O’Malley

ST. PAUL, Minn. — MISO has a pile of 22 active recommendations made over the years by its Independent Market Monitor, all in various stages of progress.

One, which would optimize the interchange and improve price convergence with PJM and SPP, dates back to 2005.

“We are working through all those,” Jeff Bladen, MISO’s executive director of market design, said at last week’s Markets Committee of the Board of Directors. Bladen said action on some items has been delayed by technology upgrades and others by the need to reach agreement with neighboring regions.

His update on the status of Monitor David Patton’s State of the Market recommendations was instructional about the roadblocks that can stand in the way of even what arguably are the best ideas.

Dependencies

Of 15 past recommendations through the 2013 State of the Market Report, MISO is working to implement six. Two are “externally dependent” and the other two are “infrastructure-dependent.” Five are still being evaluated: one from 2008 and two each from 2010 and 2012.

Perhaps the best-known externally dependent recommendation is to eliminate the hurdle rate involving transfer of power between MISO’s southern and central regions, the subject of settlement talks with SPP. The IMM has recommended collecting transmission costs that may be payable to SPP and other parties under the settlement through a fixed charge. (See related story in MISO Market Committee Briefs.)

As an example of an infrastructure-dependent recommendation, Bladen cited a five-minute real-time settlement for generation, which he said is dependent on rule changes and replacement of the RTO’s settlement software. A virtual spread product is another example.

Board Chair Judy Walsh called for urgency on technology upgrades needed to address some recommendations, saying they should be identified by staff and vetted by the board “sooner rather than later.”

Director Baljit “Bal” Dail said he was curious if MISO tracks the time it takes to “close out” a recommendation. “I’m just trying to get a sense of [whether] things are progressing at the pace they should be progressing,” Dail said.

Bladen said MISO does not have such a metric but that it might be worth considering.

ELMP

Director Paul Feldman noted a past recommendation that has come to fruition — extended LMP — and asked whether it has achieved expectations.

ELMP allows fast-start resources that are either scheduled at limits or offline to set price, an effort to smooth price spikes and minimize uplift. (See “Extended LMP Starts” in MISO Board of Directors Markets Committee Briefs.)

Bladen said ELMP “has met our rather modest” expectations since it was initiated March 1. “We’ve seen noteworthy changes in price that reflects the kind of change we would have thought should occur given the design,” he said.

Bladen said MISO staff would provide a fuller report at the November Markets Committee meeting, when it will have eight months of operating data under the new rules.

Director Michael Curran drew laughter when he recommended that MISO provide a “scientific, wild-ass guess” as to when a recommendation might be completed.

Curran also recommended that staff include a chart indicating what recommendations have already been implemented. “Otherwise you’re just looking at backlog and not really getting the credit you should for the successes you’ve had,” he said.

September 1, 2015

Cayuga Power Plant Repowering Opposed

The owner of the Cayuga power plant near Ithaca last week filed its second revised proposal to repower the 312-MW facility from coal to natural gas (12-E-0577).

Cayuga Operating Co. had previously sought to mothball the facility in 2012, but the New York Public Service Commission determined the plant was needed to maintain system reliability. The company also has a reliability support services agreement from 2013 with New York State Electric and Gas that runs through June 2017.

Cayuga filed its first repowering proposal in February 2015 after negotiations with NYSEG failed to produce a joint agreement. NYSEG has maintained that a transmission alternative is less costly.

Under the new proposal, Cayuga would have NYSEG contribute $49.5 million toward the plant construction and another $96 million over the next 10 years.

The deal faces opposition from locals and environmentalists, as well as the authors of an economic analysis.

“Not only does a ratepayer-subsidized repowering of the Cayuga plant fail to address long-term reliability or economic development needs, it also would be antithetical to New York State and the commission’s ambitious and groundbreaking effort, Reforming the Energy Vision of New York,” Earthjustice told the PSC.

“If Cayuga’s revised repowering proposal is approved, by the 2027 end of the 10-year repowering period, NYSEG customers will have paid more than $265 million to keep the plant operational. There also is a serious risk that ratepayers will be called upon to provide continued subsidies to the facility even after the 10-year term of the proposal ends,” said the Institute for Energy Economics and Financial Analysis in its report.

Entergy has also filed protests in the Cayuga proceeding, using the same arguments it made against the Dunkirk project, saying subsidized payments interfered with FERC’s jurisdiction over the wholesale market.

— William Opalka

September 1, 2015

MISO Board of Directors Briefs

ST. PAUL, Minn. — FERC Commissioner Tony Clark told the MISO Board of Directors meeting last week that the biggest surprise in the Environmental Protection Agency’s final carbon emission rule was that it put a “bull’s-eye” over MISO and SPP, giving their states the toughest compliance targets.

Clark said he was optimistic that the electric industry will ensure reliability but that the Clean Power Plan will result in “hundreds of millions [of dollars]” in stranded generation that will be forced to retire before the end of its operating life. There’s “only expensive and really expensive” ways to comply, he said.

Claire Moeller, executive vice president of transmission and technology, said the final rule reduced MISO’s overall carbon limit, tightening caps for eight states and relaxing them for seven. “So most of the input assumptions in [MISO’s modeling based on the draft rule] were dead wrong,” he said. (See MISO: EPA Carbon Rule Will Mean ‘Multibillion Dollar’ Transmission Build-Out.)

Moeller said, however, that the modeling helped planners understand “the intersection” of the gas and electric industries and determine whether the lowest cost compliance means more gas pipelines or more electric transmission. “Unsurprisingly it’s a combination of those things,” he said.

Moeller said EPA’s two-year delay in the interim compliance targets “really didn’t take the pressure off” states because of the long lead time needed for compliance measures.

He questioned EPA’s prediction that the rule will result in a “dramatic” load reduction that will result in reduced end user bills despite the compliance costs. “Lots of people worry about that assumption,” he said to laughter from the audience.

Director Baljit “Bal” Dail agreed, noting that many consumers in MISO’s footprint struggle to pay their day-to-day bills. “The notion that they’re going to go out and upgrade their appliances [to more energy efficient models] is highly unlikely,” he said.

Moeller also criticized the “vagaries” of EPA’s modeling, which will credit existing wind turbines differently from new generators.

He said it is impossible to estimate now what the cost of the rule will be to end consumers because much will depend on how states choose to comply. Moeller noted that Arkansas has no renewable portfolio standard, and little wind power. “Will they build wind or will they retire coal and build new gas [generation]?” he asked.

He said staff will share its plan for analyzing the impact of the final rule at the October board meeting.

Board May Slow Term Limit Transition

MISO’s board is considering slowing the transition to the term limit rule it enacted in June, concerned that a rapid transition could leave it without enough “institutional knowledge.”

Chairman Judy Walsh called on the board last week to amend the rule, which limits directors to three three-year terms.

“Without some thoughtful transition, we will very shortly find ourselves with a majority of our directors who will have three years of experience or less,” Walsh said. “The implementation of term limits will work out that three directors could easily term out in the same year. So I would like to request the Governance committee to consider a transition … to keep greater institutional knowledge on the board and ideally to have only one director terming out each year.”

Corporate Governance & Strategic Planning Committee Chairman Eugene Zeltmann said the committee is already considering the request.

Directors Michael Evans and Michael Curran had expressed misgivings about the term limits at the June meeting. (See MISO Sets Term Limits for Board.)

The three-term limit already comes with a caveat: Directors may petition for a waiver allowing a single additional term upon the determinations by the board and the Governance 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.

In a related matter, the board discussed guidelines for the Nominating Committee process. Walsh asked for revisions to make it clear that the document “should be helpful to the Nominating Committee but not [too] prescriptive.”

Director Dail said the Nominating Committee is reviewing 29 resumes of director candidates.

TOs Make Joint Order 1000 Filing with PJM

MidAmerican Energy’s Dehn Stevens noted that MISO and its transmission owners made their most recent Order 1000 interregional compliance filing jointly with their counterparts in PJM. The filing was submitted July 31 (ER13-1943).

In 2013, MISO and PJM filed competing proposals because of disagreements. (See PJM in Standoff with MISO, NYISO on Order 1000 Filing.)

“This time around we were able to bridge the gap,” Stevens said, calling it “a pretty significant accomplishment.”

Consumers Energy Joins TO Sector

Consumers Energy, which sold off its high-voltage transmission in 2001 to what is now ITC Holdings, was approved last week as MISO’s newest member of the Transmission Owners sector.

The company sold about 5,400 miles of 345-kV and 138-kV transmission and 80 substations in Michigan’s Lower Peninsula, while retaining its radial 138-kV lines.

Jim Anderson, Consumers’ executive director of electric transmission and high-voltage engineering, said the shift in the company’s MISO membership reflected the North American Electric Reliability Corp.’s reclassification of Consumers’ 138-kV transmission as part of the Bulk Electric System (BES).

FERC approved a new BES definition, which refines the exclusions for radial facilities and local networks, in March 2014. (See FERC Refines Bulk Electric System Definition.)

In April, FERC approved Consumers’ request to reclassify as transmission 65 138-kV line segments and six substations connecting those lines to the company’s bulk power substations (ER15-910). (See Consumers Energy, Wolverine Power OK’d to Reclassify Facilities as Transmission Assets.)

Consumers had been a member of the Municipals, Cooperatives and Transmission-Dependent Utilities sector.

— Rich Heidorn Jr.

September 1, 2015

IMEA Reaps Limited Relief from Capacity Rule Change

By Suzanne Herel

WILMINGTON, Del. — The Illinois Municipal Electric Agency, which had been working with PJM staff all year to find a way to continue using external capacity to fulfill its internal resource requirements, finally received the approval it had been seeking last week.

Its relief was short-lived, however.

Because the clearing price for the ComEd locational deliverability area separated from out of the RTO’s footprint in the Base Residual Auction last month, the new rules approved by the Markets and Reliability Committee on Thursday only exempt IMEA until the next auction.

“IMEA will be considering how best to manage its resources and its loads over the next several months,” Troy Fodor, vice president and general counsel, told RTO Insider.

“The [reliability assurance agreement] provisions approved by the MRC … solve a problem with the [fixed resource requirement] alternative that IMEA believes needed to be fixed,” he said. “The fact that the auction prices for the ComEd LDA have now separated for the first time does affect IMEA’s ability to fully benefit from the revised RAA provisions, but they are still a positive improvement.

“Moving forward, IMEA will continue to watch for opportunities to have a voice on future decisions regarding self-supply and the proper treatment of external resources.”

The rule change allows load-serving entities to meet their internal capacity requirements using historic resources under certain conditions: The percentage internal resource requirement is enforced only if the LDA has been separately modeled due to certain triggers; an FRR entity is permitted to terminate its FRR alternative election prior to meeting the minimum five-year commitment period requirement under certain conditions; and first-time elections of the FRR alternative are due four months prior to a Base Residual Auction instead of the current two-month deadline. (See “Members OK Rule Change on External Capacity Transfer Rights” in PJM Market Implementation Committee Briefs.)

Stu Bresler, PJM senior vice president for markets, said that while ComEd did bind as a constrained LDA in the auction, “Making these changes puts FRR entities on equal footing if this happens anywhere else. It still has applicability in the near term.”

FERC in January rejected IMEA’s request for an extended waiver that would allow it to use generation resources outside the ComEd LDA to meet its internal resource requirement in serving its Naperville, Ill., load. (See FERC Denies IMEA Request for Extended Waiver on Capacity Obligation.)

That waiver had been granted in May 2014 for the 2017/18 delivery year after the ComEd LDA was modeled for the first time with a separate variable resource requirement curve.