FERC on Tuesday rejected complaints from NextEra Energy and Direct Energy seeking to change the way PJM conducts its incremental capacity auctions to transition to its new Capacity Performance product (EL15-88).
The commission found that the companies failed to show how PJM’s clearing methodology for the auctions was inconsistent with the RTO’s Tariff and that their proposed alternative plan “relies on a complicated and untested algorithm to clear the capacity markets.”
“Implementing an untested alternative proposal would require other changes to either PJM’s market design or [Tariff] in order to be justly and reasonably implemented, and therefore complainants’ alternative clearing methodology cannot be said to conform to the [Tariff] itself,” FERC said in its order.
The transition auctions are being held to procure Capacity Performance resources for delivery years 2016/17 and 2017/18. PJM ran the first Base Residual Auction, for 2018/19, under the new product earlier this month. (See PJM Capacity Prices Up 37% to $165/MW-day.) It allows capacity resources to receive higher prices in exchange for taking on more responsibilities and stiffer penalties for non-performance.
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 BRAs for those years as Capacity Performance resources. If cleared, the Capacity Performance commitment would replace the old one and participants would receive the new, higher price.
Incremental Costs
NextEra and Direct Energy argued that this methodology would result in increased costs, in violation of both PJM’s Tariff and FERC’s order authorizing Capacity Performance, which the companies said directed the RTO to procure capacity resources using the “least-cost solution.”
The companies said that in order to do this, PJM needs to take into account the results of the BRAs for 2016/17 and 2017/18 when selecting offers. Rather than simply selecting the lowest price, they suggested that the RTO base its selection of resources on the lowest incremental cost — the difference between the new Capacity Performance price and the price under the original BRA. (See table below.)
Direct Energy and NextEra Energy proposed an alternative clearing methodology for the transition auctions in which PJM would select resources based on the lowest incremental cost (the Capacity Performance price minus the original BRA price), and not simply on the lowest new price.
FERC disagreed.
The RTO’s Tariff does not “require PJM to minimize costs by taking into account existing capacity revenues for the delivery year or other savings in determining the lowest price at which to clear an auction for Capacity Performance products,” the commission said.
FERC also insisted that ordering PJM to revise its methodology now would delay the transition auctions and reduce the amount of time that generators have to install upgrades needed to meet Capacity Performance’s more stringent requirements.
The commission issued its order the day before the first transition auction began. Results for this auction were released on Monday. (See related story, PJM 2016/17 Transition Auction Clears at $134/MW-day.) The second auction will be Sept. 3-4, with results posted on Sept. 9.
Bay Dissents — Again
In a dissent, FERC Chairman Norman Bay agreed with the companies. He said that the transition auctions allow the RTO to avoid making payments it would otherwise make and, in turn, save consumers money.
Bay illustrated NextEra and Direct Energy’s argument with an example of two hypothetical companies, A and B, that are entitled to receive $120/MW-day and $60/MW-day respectively as a result of the BRA. They both bid in the transition auction at $140/MW-day and $100/MW-day respectively. As PJM is required to accept the lowest bid, it takes company B’s bid, resulting in a $40 increase in the price, as opposed to a $20 increase had company A’s bid been taken.
Bay argues that because both companies are offering the same Capacity Performance product, “it simply permits consumers to be charged more in exchange for no additional benefit.” He lamented that “PJM’s methodology ignores the value of this opportunity.”
“This auction will impose a considerable cost on consumers for no additional reliability benefit,” the chairman said, warning that those costs could reach more than $1 billion. “Today’s outcome demonstrates the problems inherent in a complex, flawed design.”
Bay also dissented in FERC’s June order approving Capacity Performance. (See FERC OKs PJM Capacity Performance.) He noted that vote in his dissent to Tuesday’s order.
“I would not have agreed to transitional auctions at all, but having created them, it is the commission’s responsibility to ensure that they result in just and reasonable rates,” he said. “Unfortunately, that has not happened here.”
WASHINGTON — The D.C. Public Service Commission last week unanimously denied Exelon’s proposed $6.8 billion acquisition of Pepco Holdings Inc., sparking applause in the hearing room and sending PHI shares tumbling on Wall Street.
“When this proposed merger is considered as a whole … we conclude that the joint applicants have not met their burden of persuading this commission that the proposed merger is in the public interest,” the three-member PSC said.
Upon the news, PHI shares dropped more than 18%, and Exelon stock dipped more than 3%.
In a joint statement, Exelon and PHI said, “We are disappointed with the commission’s decision and believe it fails to recognize the benefits of the merger to the District of Columbia and its residents and businesses. We continue to believe our proposal is in the public interest and provides direct immediate and long-term benefits to customers, enhances reliability and preserves our role as a community partner.
“We will review our options with respect to this decision and will respond once that process is complete.”
Exelon and PHI have 30 days to ask the commission to reconsider its 181-page order. The companies on Monday released a joint statement, saying they would continue working to complete the merger.
“We remain convinced the decision fails to recognize the substantial immediate and long-term benefits of our merger proposal to citizens, businesses and communities in the District of Columbia,” the companies said. “We want to deliver these benefits to customers and will strive to make that happen.”
Some analysts, however, are pessimistic about the deal succeeding. “While none of the negative items cited by the PSC in their order are glaring hurdles that could not be overcome, the magnitude of ‘small cuts’ appears in our view to suggest a deeper mistrust between the commission and Exelon,” UBS Global Research said.
Following their initial fall, the companies’ stock prices remained steady over the week, and Monday’s statement did little amid another bad day on Wall Street: Exelon closed at $30.75/share, down 2% on the day, while Pepco closed at $22.98/share, a less than 1% drop.
7 Factors of Public Interest
The PSC called the rejection “one of the most significant decisions” it would ever make, noting, “This proceeding has generated more interest and more active participation by parties and interested persons than any other proceeding in the commission’s more than a century of operations.”
The commission said it weighed the proposal on seven factors of public interest, among them the effects on ratepayers and shareholders, market competition and preservation of natural resources and the environment.
“The public policy of the district is that the local electric company should focus solely on providing safe, reliable and affordable distribution service to district residences, businesses and institutions,” Chairwoman Betty Ann Kane said. “The evidence in the record is that the sale and change in control proposed in the merger would move us in the opposite direction.”
Commissioner Joanne Doddy Fort concurred, saying, “The proposed merger would diminish Pepco’s ability to directly raise issues that address the needs of district ratepayers.”
Commissioner Willie Phillips voted to reject the merger application, but he dissented in a secondary vote to issue the actual order.
He agreed the proposed merger was a “bad deal” for the district, but said, “I am disappointed in the loss of the many opportunities inherent in the proposed merger that could have achieved benefits — tangible benefits — for our local communities and across the region.”
Surprise: Md. Wasn’t Biggest Obstacle
When Exelon proposed the deal 16 months ago, analysts predicted Maryland would be its biggest stumbling block. But after months of securing strategic alliances, Exelon won that commission’s 3-2 approval — albeit with 46 conditions. (See How Exelon Won Over Maryland.)
Meanwhile, in the district, opposition steadily stiffened. More than half of the Advisory Neighborhood Commissions and nearly half of the 12-member City Council opposed the deal. The Office of People’s Counsel and the attorney general’s office also advised against approval without significant concessions. (See Deadline Looms for Decisions in Exelon-Pepco Deal.)
As Kane read the commission’s summary of the order, there was a murmur in the room, as those attending the meeting realized that the commission was siding against the merger.
Many in attendance said they were surprised by the ruling, as they were prepared for the commission to approve the deal with concessions similar to other jurisdictions, such as Maryland.
“Honestly, I was pleasantly shocked. I commend them for their courageousness,” People’s Counsel Sandra Mattavous-Frye said of the commissioners. “It will have a domino effect on the entire proposal. The joint applicants have said they cannot go forward without D.C.
“The commission listened to the parties and, more importantly, they looked at the record,” she said, noting, “The applicants had the opportunity to supplement the record. They, too, heard the concerns being raised and chose not to address them.”
“I’m stunned,” said Anya Schoolman, executive director of DC Solar United Neighborhoods, a local solar power advocacy group. “I think … the commonly accepted wisdom was that they would approve it with conditions. And we were waiting to see how stringent those conditions would be.”
“I would almost go to say I’m shocked, because I fully expected that … the commission could have possibly come out in favor of the merger,” said D.C. Councilwoman Mary Cheh, who led the opposition in the district’s legislature.
“I’m just happy for the people of the District of Columbia,” she said. “The real beneficiaries of this, had this gone through, would have been the officers and the shareholders of Pepco and Exelon Corp. The people who would have been harmed are the ratepayers.”
“It was somewhat of a shocker that all other jurisdictions did in fact support this merger,” said D.C. Councilman Vincent Orange, who said he has remained neutral throughout the process. “At the end of the day, the Public Service Commission has ruled, and we’ll have to live with it and move on.”
‘David and Goliath’ Win
Power DC, which had organized opposition, said it was glad the PSC had “followed the will of the district’s electric customers.”
“The proposed acquisition would have been a substantial step backwards in the district’s efforts to move toward more sustainable electricity generation and greater reliance on local, renewable energy. It would have exposed D.C. residents and businesses to the risk of steeply rising electricity bills.
“Pepco has always affirmed its capability to provide a high level of service for its customers without this merger, and it has demonstrated a much greater willingness than Exelon to integrate new, customer-centered technologies.”
Mattavous-Frye called the win a “David and Goliath” scenario.
“I want to commend the public participation,” she said. “This was about consumer empowerment. People did not think their participation would be meaningful, and it is.”
Other Jurisdictions Approved Deal
The deal had been more than a year in the making. All of the other affected jurisdictions had approved it: Virginia, Maryland, Delaware, New Jersey and FERC.
Dave Bonar, Delaware’s Public Advocate, said the decision was a disappointment, but that it “doesn’t mean the deal is not salvageable.”
“They could appeal, or they could make more concessions,” he said. “Or they could just fold their tent and go back to Chicago.”
He said those who worked on getting Exelon’s concessions and reaching consensus were “disappointed.”
“We worked very hard to get this done,” Bonar said.
Critics in Md. Pleased
Mike Tidwell, director of the Chesapeake Climate Action Network, a group that intervened before the PSC in Maryland against the proposed merger, called the decision a “major victory” for the growth of clean energy across the region.
“One good idea that emerged from the proposed Exelon-Pepco (merger) was to create a PSC-guided process to explore ‘performance-based ratemaking.’ Utilities should be rewarded based on how well they perform on energy improvements that enhance our economy and reduce carbon emissions and climate change,” he said. “Hopefully, we can now move on to these solutions.”
Paula M. Carmody, People’s Counsel for the State of Maryland, had urged the state commission to reject the deal.
Last week, she said of its D.C. counterpart, “I think they got it right.
“They hit on the very issues identified in the proceeding before the Maryland commission,” she said, noting that the D.C. group had concerns about the “loss of local influence” over a utility with headquarters in Chicago.
Carmody, whose organization has one of three appeals pending before the Maryland commission, said she is not sure if the district’s decision is a death knell for the merger, “but clearly they can’t close” the deal as it stands now.
“It depends on what the companies do now,” she said. “They could appeal, they could file for reconsideration.” But, she said, the rejection makes the acquisition “problematic.”
A Win for Consumers, Environment
Roger Berliner, an attorney and Montgomery County councilman who had led that area’s opposition, applauded the D.C. PSC for standing up for consumers and the environment.
“As the testimony of countless expert witnesses made clear, Exelon has shown time and time again its interest in favoring its own nuclear generation holdings over renewable technologies like solar and wind, and the merger does far too little to provide benefits to ratepayers, while Pepco’s shareholders stand to benefit tremendously.”
The acquisition would have created the Mid-Atlantic’s largest electric and gas utility — and the country’s largest utility by customer count. Exelon has said the deal would boost its customer base to nearly 9.8 million from 7.8 million and increase its rate base to almost $26 billion from $19 billion.
SunEdison has begun construction on a 156-MW solar project near Pueblo, Colo. The company said it will be the largest solar power plant east of the Rocky Mountains.
The $253 million Comanche Solar project, which is scheduled to be completed in the first half of 2016, is being financed by tapping into a $1.5 billion line of credit, the company said. Xcel Energy subsidiary Public Service Company of Colorado will buy the energy under a 25-year power purchase agreement.
Public Service said it decided to buy the solar power over other energy sources, including natural gas-fired generation. “SunEdison, through the Comanche Solar project, is helping move us in the right direction,” said David Eves, president of Public Service. “It demonstrates that large-scale solar power can play an increasingly larger role in our customers’ energy future at a competitive price point.”
Dominion’s Ratepayer-Funded Donations Subject of AP Investigation
An Associated Press investigation has found that Dominion Resources billed Virginia residential customers for more than $1 million it spent in recent years on donations, including some to charities with close ties to influential politicians.
The wire service said it is legal in Virginia to charge ratepayers for the costs of charitable contributions, but lobbying expenses or political donations are not recoverable in rates.
The practice has attracted the ire of former Republican Attorney General Ken Cuccinelli. “Why should captive ratepayers, who have no option to get electricity from another company, be compelled to fund the charitable choices of a company?” Cuccinelli said. “Leave the ratepayers their money, and let them make their own charitable choices.”
Alliant Energy Reaches Agreement on Solar Field in Wisconsin
Wisconsin-based Alliant Energy is jumping into the solar energy market by signing a deal with a private solar farm in Beloit that could be running by early 2016.
Alliant announced last week it has reached a 10-year power purchase agreement with South Korean company Hanwha, which plans to build a 2.25-MW solar plant at a former landfill that’s part of the Beloit power-generation complex. Hanwha plans to build, own and operate the ground-mounted solar power field, which would sit on a 30-acre, capped landfill. Alliant said the facility will generate enough power to supply about 2,000 customers.
An Alliant spokesman said the solar facility could be running by early 2016, pending regulatory approval for construction and the power purchase agreement. The facility could be the largest solar power field of its kind operating in Wisconsin.
First Cross-Border Wind Farm Opens in Baja California, Mexico
A 155-MW wind farm in Mexico went into operation last week and is selling its power to Sempra Energy’s San Diego Gas & Electric, the first cross-border operation of its kind.
The solar facility is near the city of Tecate, in Baja California, and consists of 47 wind turbines. Power is exported through a new 4.8-mile transmission line.
Bloom, Constellation to Develop 40 MW of Fuel Cell Capacity
Bloom Energy has partnered with Constellation Energy to create 40 MW of fuel cell capacity at 170 installations on the East Coast and in California, where Bloom Energy is based.
The deal would double Bloom’s existing installed base. Bloom’s East Coast assembly plant is located in Newark, Del., on the previous site of a Chrysler assembly plant.
Duke Pushing for Smart Grid Battery Storage Standards
Duke Energy is joining the MESA Standards Alliance to push for new standards for smart grid technology and battery storage. The MESA (Modular Energy Storage Architecture) alliance was formed last year in an attempt to reach standards for interactivity between grid-scale battery storage and smart grid systems.
The goal is to develop a common methodology for joining grid-scale batteries with utility companies’ control systems, said Thomas Golden, Duke’s technology development manager. “We went out into the marketplace to see what standards are out there, and there wasn’t really anything beyond MESA,” he said. “What we get out of this is an opportunity to influence the standard we think will push the industry to the next level.”
A recent study predicted that 2015 will see about 220 MW of energy storage going into operation in the U.S., with more to come as utilities strive to reach renewable standards.
Startup Claims its Windows Produce 50x Energy of Traditional PVs
Startup SolarWindow Technologies has announced that its power-generating windows, which it claims can generate 50 times more energy than conventional solar panels, will hit the market within 28 months.
The technology can be applied as a coating to glass windows or plastic surfaces, where the film instantly generates electricity, the company said.
The coatings would be primarily organic, made from carbon, hydrogen, nitrogen and oxygen.
ACE, JCP&L and Rockland Electric Seeking Proposals for Solar Projects
Atlantic City Electric, Jersey Central Power & Light and Rockland Electric in New Jersey are accepting proposals for projects that will produce Solar Renewable Energy Certificates.
The companies are looking to obtain nearly 80 MW of SRECs.
They said net-metered projects up to 2 MW and grid supply projects certified to be sited on old landfills, brownfields or historic fill are eligible.
MISO last week revealed yet another twist in its deliberations over two southern Indiana transmission projects, leading some stakeholders to question whether RTO officials are following their planning rules.
In July, MISO said it would consider swapping the proposed 345-kV Duff-Coleman transmission project, estimated to cost $67.2 million, for a previously rejected Rockport-Coleman 345-kV transmission line estimated to cost $76 million. (See MISO Plan to Revisit Runner-up Tx Project Rekindles Shareholder Angst.)
PJM offered to share the cost of the latter project, which could solve stability problems at its Rockport substation. PJM’s contribution would reduce MISO’s spending on the line by about $29 million.
At last week’s MISO Planning Advisory Committee in Eagan, Minn., MISO staff proposed a “loop-in” giving the Rockport substation paths to both Duff and Coleman.
It’s attractive to PJM in part because the RTO needs two 345-kV circuits to its 745-kV substation. PJM officials say they have had stability problems at the substation because the area has added thousands of megawatts of generation but no new transmission since 1989. (See “PJM: Despite Lack of Cost Allocation Rules, MISO Project Too Good to Ignore” in PJM TEAC Briefs.)
“They need two lines out of Rockport. So we can build the original, single-circuit Duff-Coleman, loop it in, and that loop-in would give them two lines out — one to Coleman, one to Duff,” said Jeff Webb, MISO director of expansion planning.
Costs are still being studied, but MISO estimates the new alternative would add about $200,000 to the Duff-Coleman cost, an amount that would have a negligible impact on its cost-benefit ratio.
Shareholders, however, pressed MISO officials about the additional costs, asking whether customers would bear some of them. Webb said MISO would only agree if PJM picked up the costs of its benefits, holding MISO harmless.
If not, “then all bets are off and we’re going back to the original [Duff-Coleman] project,” Webb said.
But several stakeholders questioned whether MISO should be concerned with PJM’s needs in the context of MISO’s own need to address southern Indiana congestion problems. They also questioned whether MISO was following the proper processes in evaluating the expansions.
Kevin Murray of the Coalition of Midwest Transmission Customers asked why MISO was not constructing Duff-Coleman as a market efficiency project under MISO’s Transmission Expansion Plan (MTEP) and then evaluating Rockport-Coleman as an interregional project on its own merits.
“Well, because I think we have an opportunity here to be efficient about building out the grid on both sides without any harm to MISO,” Webb replied.
“You’re going to run into the same thing PJM ran into with Artificial Island,” Murray countered. “You’re pursuing an outcome where people are going to say you didn’t follow the process. And you’re going to get tied up in litigation at FERC and the customer is going to be the loser in all this because they’re going to end up paying for transmission congestion for a period in time when it doesn’t need to happen.”
He noted that other stakeholders, such as Northern Indiana Public Service Co., weren’t happy with the idea.
“NIPSCO objects to the fact that neither of the competing recommended projects … has been studied under the process specified by the MISO/PJM Joint Operating Agreement to determine cross-border benefits and RTO cost allocations,” NIPSCO said in a letter presented at the PAC meeting.
NIPSCO said the recent actions by MISO and PJM to modify the southern Indiana proposal “suggests that there are difficulties and inconsistencies” in resolving cross-border issues through current planning processes.
“Rather than address these issues, the RTOs have circumvented the defined JOA processes for an ad hoc solution,” the company said.
NIPSCO said the proposed projects should be studied under the JOA process using a joint MISO-PJM model.
David Davis of NextEra Energy asked whether MISO had the time to study the new proposal and allow for stakeholder review before the recommended projects in MTEP 15 are submitted to the MISO board Dec. 10. “It seems like that’s a pretty long putt,” he said.
Webb said he was confident that answers could be found within six weeks.
MISO’s Planning Advisory Committee last week deferred for a future meeting a vote on Wind on the Wires’ request to require external generators seeking network resource interconnection service to pay the dollars-per-megawatt portion of M2 milestone costs.
After a lengthy discussion, several stakeholders said they needed more information before voting.
Wind on the Wires, which represents the wind industry, argued that the M2 deposit should be applied to external generators because internal generators already put cash at risk to demonstrate that they are serious about moving forward. The deposits discipline generators to not jump in and out of the queue and cause re-studies, the group said.
MISO officials said they do not agree with Wind on the Wires’ proposed requirement for external units. They said not all internal generators pay an M2 deposit.
Two of three proposed MISO-SPP interregional projects touted to offer $235 million in benefits look much less attractive following additional modeling and are likely doomed.
MISO revealed the disappointing news at last week’s Planning Advisory Committee meeting, saying the new results indicate a disconnect in coordination between the two RTOs.
MISO and SPP staff worked for several months to find economic projects to relieve congested flowgates. At one point they had identified 70 such candidates.
New analyses appear to have doomed the Elm Creek-NSUB and S. Shreveport-Wallace Lake interregional projects. The Alto-Swartz 115-kV project continues to meet the benefit-cost threshold.
By June the list had been whittled down to three projects totaling $156.9 million near the RTOs’ seams in Kansas, Nebraska and Louisiana. (See 3 MISO-SPP Transmission Projects Move Forward.)
But the numbers turned out to be markedly different after the RTOs ran regional reviews that used different assumptions:
The Elm Creek-NSUB 345-kV project that previously showed $165 million in present value benefits over 20 years fell to $29.2 million in benefits. The benefit-cost ratio decreased to 0.89 from 1.22.
The rebuild of the S. Shreveport-Wallace Lake 138-kV line, which initially showed $46 million in benefits, is now projected at $2.7 million. The benefit-cost ratio dropped to 0.25 from 2.61.
The series reactor on the Alto-Swartz 115-kV line showed a slight benefit decrease — to $20.7 million from $23.4 million. The project originally was estimated to have an overall benefit-cost ratio of 4.32. Based on its $4.6 million share of the cost, the benefit-cost ratio for MISO is 5.98.
“The benefit-to-cost ratio for two out of the three projects did not meet the … criteria,” said Arash Ghodsian, technical advisor for economic studies at MISO. “We were not able to see the same level of congestion that we saw in the interregional models versus the regional.”
He said the interregional and regional models differed in their generation assumptions, the impact of MISO South’s industrial renaissance load growth and their handling of MISO Transmission Expansion Planning for 2015 and out-of-cycle projects. One key factor is differing predictions on generation retirements resulting from the Environmental Protection Agency’s Mercury and Air Toxics Standards.
“Are you saying MISO applied MATS retirement assumptions about SPP generation in the MISO model, but SPP did not have the same retirement showing in their model?” asked Cynthia Crane, principal regulatory analyst at ITC Holdings.
“That’s correct,” Ghodsian said.
Crane said the inconsistencies in the modeling is a “cause for concern.”
Ghodsian agreed. “It’s part of the process differences. Moving forward, we need to do better coordination between” MISO and SPP, he said.
The fate of the projects wasn’t officially determined at the PAC meeting. They will be discussed at next month’s PAC for potential recommendation “if any,” according to Ghodsian’s slide presentation.
MISO planners who just completed the third phase of a study on the Clean Power Plan said last week that a “multibillion dollar” transmission build-out will be necessary in almost every compliance scenario they’ve anticipated.
“Our final rule analysis will look to characterize the amount of that and the scope of it and what needs to be done. But we definitely see a big impact coming to the MISO system,” Jordan Bakke, senior policy studies engineer at MISO, told the Planning Advisory Committee.
Purple indicates economic generation that cannot be dispatched under state-level compliance with the EPA Clean Power Plan. Green indicates generation dispatched under state-level but not regional compliance.
The estimated costs for transmission expansion to meet compliance could be up to $10.8 billion in net present value over 20 years, according to the study.
“Transmission expansion will be needed to mitigate reliability impacts as well as economic congestion impacts of compliance. And a lot of this is driven by the level of coal plant retirements,” Bakke added.
The study also agreed with those by PJM and SPP in concluding that regional compliance with the Environmental Protection Agency’s carbon emission rule will be more cost-effective than if states go it alone.
MISO’s study concludes that a regional approach — including MISO, SPP, PJM, NYISO, the Tennessee Valley Authority, the Midwest Reliability Organization and the SERC Reliability Corp. in the Southeast — will save $4 billion to $11 billion in net present value over 20 years versus individual state compliance.
A sub-regional approach — through MISO’s North, Central and South areas — would save $2.5 billion to $11.5 billion over state compliance.
Coal Retirement, Transmission Needs Still Fuzzy
Planners said they won’t know how many plants will retire until they get a better read of the final EPA rule and get more feedback from stakeholders.
The analysis looked at five compliance scenarios, including increased cycling of coal units and higher utilization of combined-cycle units and combustion turbines.
The location of new gas and renewable generation will pose infrastructure challenges. Some of the new gas generation units, for example, will be located near existing gas pipelines but will be farther out from the existing transmission system. Generation will be coming from different parts of the system, “parts that the transmission system historically was not designed to fully deliver,” Bakke said.
Coal-to-gas conversions expected by 2030 under one scenario included in MISO’s analysis of EPA’s carbon emission rule. The scenario assumed that in addition to the 12.6 GW of MISO coal generation expected to retire under EPA’s Mercury and Air Toxics Standards, 25% of the remaining coal capacity in the Eastern Interconnection will convert to gas-fired combined cycle units.
The study found that the cost of adding electric and gas infrastructure for new or converted gas generators would be comparable regardless of the siting assumptions.
The study, which took more than a year, looked at candidates to relieve congestion identified in the draft rule analysis. In June, 107 congested areas were identified for potential economic transmission expansion. In July, that list was narrowed to 34 potential transmission projects related to the Clean Power Plan.
“This creates a first step,” Bakke said, adding that more potential transmission projects resulting from the rule will need to be reviewed.
Regional Approach More Cost-Effective
Another outcome of the study was confirmation that regional compliance approaches will be more cost-effective than more numerous, sub-regional approaches.
“We found this throughout our different phases that we looked at … It was more cost-effective from production cost standpoint, from a resource capital build-out — a variety of different metrics,” Bakke said.
Although the analysis is based on EPA’s draft plan and not the final rule, Bakke said the study allows MISO to “hit the ground running.”
Next, MISO will dive into more than 1,500 pages of the final rule and supporting documentation. “We’re confident that the generic or the overall framework is good, and we’re going to be taking feedback on how we can improve it going into our final rule analysis,” Bakke said.
Further Study Challenging
Stakeholders had a number of questions. Miles Taylor, an engineer at Northern Indiana Public Service Co., asked how MISO would deal with issues such as whether there might now be fewer coal plant retirements than some had expected initially.
Bakke said that while MISO looked at a variety of scenarios, it is hoping to get more specific feedback from stakeholders as they make more sense of the final rule in the months ahead.
George Dawe, vice president of Duke-American Transmission Co., representing the transmission developer sector, asked how MISO would assess the future if several individual states decide to go it alone rather than engage with a regional compliance solution.
Bakke replied that initial state plans are due to be filed just over a year from now. “We should at least have an indication going into that what states have planned to do.”
MISO said that if some states refuse to file a compliance plan, the RTO could make some modeling assumptions based on what EPA would likely prescribe for a state.
One thing that’s clear is that there’s an appetite for the information that MISO will gather in the next phase of its Clean Power Plan study. Darren Kearney, an analyst at the South Dakota Public Utilities Commission, said states will rely on the RTOs to help them understand the least-cost compliance options.
Bakke assured him that MISO will provide as much information as it can as soon as it can.
FERC last week denied the SPP Market Monitoring Unit’s request for rehearing of a December 2014 order that rejected the Monitor’s use of a market-impact test to track physical withholding.
The commission found the test to be “overly limiting” and said the Monitor failed to demonstrate FERC was mistaken in requiring the test’s elimination (ER15-21-001).
FERC’s 2014 order required SPP to eliminate proposed revisions that added the market-impact test as a monitoring threshold for instances of physical withholding and said the RTO did not show how its proposal addressed FERC concerns.
The Monitor requested the rehearing in late December, saying including the market-impact test in its withholding screen was consistent with other grid operators’ practices. The Monitor said the test is “designed to be liberal in identifying capacity withheld” and if it is not used, monitoring for physical withholding “will continue to produce excessive false positive screen failures for the [Monitor] to analyze.”
FERC noted the Monitor did not challenge allegations that the proposed changes to the physical-withholding provisions “would sufficiently limit the number of screen failures.” The commission further said neither SPP nor the Monitor explained how the SPP proposal addressed FERC’s concerns about the test’s overly limiting nature.
“Thus,” FERC said in its order, “neither SPP nor the MMU supported the contention that the [market-impact test] was just and reasonable.”
The SPP Monitor had said MISO uses the impact test for physical withholding and argued the SPP Tariff should also have limits for the Integrated Marketplace.
FERC said the Monitor had not explained why the MISO mitigation test was appropriate for SPP. “The use of a specific threshold for mitigation purposes in one market does not necessarily make the threshold appropriate to use in monitoring and referral in another market,” the commission said.
Gov. Continues Fighting Artificial Island Cost Allocation
Markell
Gov. Jack Markell is urging FERC to rework a ruling by PJM that would force Delaware customers to pay for most of the cost of building a transmission line to stabilize a New Jersey power plant.
Markell and representatives of Delmarva ratepayers have protested PJM’s cost allocation of the project, which would bill Delaware ratepayers for 89.5% of a $275.5 million project to improve the reliability of electric deliveries from the Salem/Hope Creek nuclear complex on Artificial Island in New Jersey. (See Officials Urge PJM to Reject Artificial Island Proposal.)
Markell also weighed in on a complaint filed by Linden VFT, which is disputing another PJM construction plan on similar concerns about cost allocation.
SC Lawmakers Opposing Duke Plan for New NC Tx Line
Duke Energy’s plan to run a new transmission line from a South Carolina natural gas plant into North Carolina is being opposed by a number of South Carolina lawmakers, who say the project is not beneficial to the Palmetto State. Four elected officials, led by Rep. Doug Brannon (R-Landrum) have sent protests to the South Carolina Office of Regulatory Staff.
“None of our constituents will benefit from this transmission line project,” Brannon wrote. “On the contrary, the property value for the properties impacted by this project will be devastated. The properties in question are some of the most valuable in South Carolina.”
Duke said the line is necessary to serve load in the Ashville, N.C., area, which has seen demand double since the 1970s. The North Carolina Utilities Commission has not yet ruled on the project.
Hydropower has growth potential in the state, say advocates looking for alternative forms of carbon-free energy to comply with pending government regulations to reduce carbon emissions.
“The rivers are not producing as much as they can,” Arkansas Waterways Commission Executive Director Gene Higginbotham said recently. “Arkansas is a water-rich state, and we have a good state water plan that is saving aquifers and using more surface water.”
The state currently has seven hydropower plants. The U.S. Army Corps of Engineers, which operates two hydropower dams on the Arkansas River, has studied adding another plant near Pine Bluff, at a cost of about $202 million.
ICC Laying off 24, Part of Broader State Furloughs
Rauner
Gov. Bruce Rauner’s administration has announced the layoffs of 94 unionized workers in four state agencies, saying the legislature’s inability to pass a balanced budget made the moves necessary. The layoffs include 24 employees at the Commerce Commission.
The American Federation of State, County and Municipal Employees said the governor is jumping the gun and putting the public at risk. The ICC layoffs would reduce its staff by 35%, the union said. “Other layoffs would throw out of work men and women involved with nuclear safety, tourism, recycling and overseeing utilities,” said an AFSCME spokesperson.
Annapolis Backing Solar Facility Built on Closed Landfill
The City of Annapolis has signed a 20-year power purchase agreement with the developers of a solar facility built atop a closed landfill.
The city signed the agreement with Annapolis Renewable Energy Park, a 16.8-MW photovoltaic park on 80 acres of landfill outside of the city. The city says the power will offset CO2 emissions of 12.5% of the city’s annual household electrical usage.
“This project is about turning a liability into an asset,” Mayor Michael Pantelides said. “This park will turn a large plot of unused land into a revenue generator and a job creator.”
Lawmakers Urge Residents to Write to Canada to Stop Nuke Waste Plan
State and federal lawmakers are urging residents to oppose a Canadian plan to bury nuclear waste in an underground vault less than a mile from the Lake Huron coastline. Congressman Dan Kildee (D) and state Senate Minority Leader Jim Ananich have proposed a “community initiative” of letter writing to the Canadian government to protest Ontario Power Generation’s waste storage plan.
The company wants to bury low- and medium-level radioactive waste more than 600 meters deep, very close to the shore of Lake Huron. The utility says there is no risk to the lake.
Holland Using Waste Heat to Power Snow-Melt System
The City of Holland has a novel use for the waste heat from its municipal power plant: keeping city sidewalks clear of snow and ice.
The city, which is replacing its old coal-fired DeYoung plant with a natural gas unit, says the 145-MW plant will continue to use its waste heat to run a snow-melt system that keeps its downtown sidewalks and parking lots clear during the winter. The system, a network of underground 1-inch plastic pipes that carry warm water from the plant’s cooling system, was installed in the 1980s.
The $240 million gas plant will begin operations next year.
Columbia is switching its municipal power plant from coal to wood due to Environmental Protection Agency rules on coal combustion residuals.
Columbia’s Municipal Power Plant is scheduled to accept its final delivery of Indiana coal from Peabody Energy in October, when the rules go into effect. Officials say it would be too costly to retrofit the plant to meet the new standards.
The Public Service Commission last week approved KCP&L Greater Missouri Operations’ request to reduce the fuel-adjustment charge on its monthly bills. The change takes effect Sept. 1. It will mean a decrease of about $3.11/month for the typical residential customer in the Kansas City area and a decrease of about $2.69/month for the typical residential customer in the St. Joseph area.
The fuel adjustment charge reflects fuel and purchased-power costs during the six-month period of December 2014 through May 2015. The company’s tariff allows it to pass through increases or decreases in its energy costs to customers outside of a general rate case.
KCP&L-GMO provides electric service to 314,900 electric customers in the state.
Judge Upholds PSC’s Denial of NorthWestern’s Rate Increase
A district court judge has upheld a ruling by the Public Service Commission that shot down NorthWestern Energy’s proposed rate increase. The request dates from 2012, when the company sought compensation for outage costs and for revenue losses due to the success of its energy efficiency programs.
The PSC estimated the increase would have boosted customer rates by about $4.2 million if it had been in effect for the past three years. The judge ruled that the PSC acted reasonably in denying the request. The company is considering an appeal to the state Supreme Court.
The Board of Public Utilities says it is seeking a consultant to help it implement a five-year-old law to develop offshore wind power. The law mandated that the state develop regulations that would govern project financing, including how much of the cost would be borne by ratepayers.
BPU President Richard Mroz and Commissioner Joseph Fiordaliso disclosed the plan during their Senate confirmation hearings. Both were confirmed.
The law requiring offshore wind power has been the subject of political wrangling and is now four years past due. The state’s Energy Master Plan calls for development of 1,100 MW of wind energy by 2020. Nailing down financing guidelines is crucial to advancing the plans, which could cost as much as $1 billion.
Two intervenors in plans to shut down a pair of coal-fired units at the San Juan Generating Station filed documents last week opposing a compromise between Public Service Company of New Mexico (PNM) and environmental groups. New Energy Economy and Southwest Generation Operating Co. oppose the agreement reached by PNM, Western Resource Advocates and the Coalition for Clean Affordable Energy, made up of 12 environmental, clean energy and consumer advocacy groups.
The deal calls for PNM to submit to a hearing before the Public Regulation Commission in 2018 to determine whether the power plant near Farmington, built in 1972, should continue to operate after 2022. The agreement would keep in place the basic tenets of PNM’s current plan to close two of the plant’s four coal-fired units; PNM says that under the plan, the San Juan complex would burn about 49% less coal than it does now.
New Energy Economy argued in its filing that the agreement “contains no commitment by PNM to retire any of its remaining coal-fired capacity” at the power plant. New Energy also said PNM’s promise to procure renewable energy credits in the plan do not mean PNM will use more renewable energy.
A contractor working for Long Island Power Authority and PSEG Long Island claims in a federal lawsuit that the utilities mismanaged a controversial high-voltage transmission line project through North Hempstead, then shortchanged the firm by at least $1.5 million.
Energy Contract Recovery, of Port Huron, Mich., claims in the breach-of-contract suit that LIPA and PSEG failed to obtain permits and traffic control restrictions on time; did not accurately describe the site and underground conditions; and failed to deliver materials needed for the job and properly coordinate with other contractors. When the contractor’s representatives exerted their expertise to finish the project, PSEG employees rebuffed them and became “abusive and threatening,” according to the suit.
The 5-mile transmission line from Great Neck to Port Washington drew criticism from residents who claimed its 80-foot utility poles were unsightly and dangerous. ECR was initially contracted by National Grid in 2013 to construct the 69-kV line, which PSEG said was needed to ensure reliable power to the region. The work was scheduled to begin in December 2013, but the necessary permits weren’t secured until Feb. 11, 2014, according to the lawsuit.
Solar companies say a federal tax credit is essential to making residential and commercial projects economically viable, and they warn that the loss of the credit would be a serious blow to the industry.
U.S. Sen. Chuck Schumer (D) held a news conference Wednesday at the massive SolarCity factory now under construction in South Buffalo to call for an extension of the federal solar tax credit program and a change in federal regulations that would let homeowners and businesses take advantage of the tax credit sooner. The 30% federal solar investment tax credit is set to expire for residential projects in 2016 and to shrink to 10% for commercial projects.
Extending the tax credit and letting residents and companies receive the tax benefits as soon as construction begins, instead of waiting for projects to be completed, would encourage long-term investments in solar energy, provide certainty for solar customers and boost sales for companies such as SolarCity, for which the state is building the largest solar panel factory in the Western Hemisphere at the RiverBend site.
The Public Service Commission approved a siting permit for a $6 million natural gas liquids pipeline that will connect Oneok’s Lonesome Creek gas plant to its Garden Creek pipeline. The pipeline will have a capacity of 30,000 barrels a day. The gas plant, which is to be completed by December, will be able to process 200 million cubic feet of natural gas per day, according to the PSC.
PUCO Chairman to Utilities: ‘Stop Trying To Scare Ohioans’
Porter
The chairman of the Public Utilities Commission has warned utilities to stop using scare tactics in their lobbying efforts.
“Stop trying to scare Ohioans,” said Andre Porter, who chastised state utilities for suggesting that the state’s deregulation was imperiling system reliability.
FirstEnergy, one of the utilities seeking to adjust its power purchase agreements to guarantee a steadier revenue stream, denied it was fear mongering. CEO Chuck Jones “made it very clear we’re not seeking re-regulation in Ohio,” spokesman Doug Colafella said in response to Porter’s comments. “Our priority is the PPA in front of the commission.”
Two electrical cooperatives have postponed their consolidation plans after questions were raised about the motivations and duties of one of the co-op’s board members. Canadian Valley Electric Cooperative and Central Rural Electric Cooperative have been studying consolidation plans for two years. The co-ops had picked a new name, Cenergy Electric Cooperative and distributed marketing materials to members touting the benefits of consolidation, including projected savings of $48 million over 10 years. But votes by co-op members were postponed after an allegation arose about the “fiduciary duty” of a Canadian Valley board member.
Meanwhile, two western co-ops will consolidate next year after their members approved the plan earlier this month. Kiwash Electric Cooperative and Caddo Electric Cooperative will become CKenergy Electric Cooperative on Jan. 1, with a combined 25,000 meters and more than 7,600 miles of electric distribution lines. A report says consolidation would save the co-ops between $20 million and $30 million over a 10-year period.
Federal Judge Sets Court Date in Wind Farm Lawsuit
DeGuisti
An Oklahoma federal judge has ordered a trial next year over nuisance claims against a wind farm west of Oklahoma City. U.S. District Judge Timothy D. DeGiusti set a bench trial for April 11 against Kingfisher Wind, a unit of Apex Clean Energy.
Construction has started already on the 298-MW wind farm, but a group of landowners want the turbines to be placed at least 2 miles from their homes. About 150 people are working on the construction of the project, which will have 149 turbines. The company has said it expects the project to be finished by year’s end.
“Apex is taking a big risk in continuing to construct these industrial wind turbines when a ruling could require removal shortly after construction,” said Terra Walker, one of the plaintiffs.
Commission Finds No Changes in Marcellus Region Streams
A study by the Susquehanna River Basin Commission of 58 watersheds in the Marcellus Shale region found no change in the water quality as a result of drilling for natural gas in the area. The study showed that from 2010 to 2013, the water quality in the studied watersheds remained good.
The Remote Water Quality Monitoring Network, which began in 2010, now tests the water quality of the streams continuously. The electronic devices transmit reports remotely to the commission’s headquarters in Harrisburg every two to four hours.
Trains Carrying Oil Won’t be Slowed Despite Safety Report
A request from Gov. Tom Wolf’s office to reduce the speed limit for the up to 70 trains that daily transport crude oil through the state is being resisted by the two major railroad companies.
The suggestion comes from a report Wolf commissioned from the Railroad Engineering and Safety Program at the University of Delaware, which contained 27 recommendations, including reducing by 5 mph the federal speed limit of 40 mph.
Norfolk Southern and CSX said they believe their safety procedures already are sufficient.
The Environmental Protection Agency has proposed the first-ever federal regulations governing methane emissions by oil and natural gas drillers. Janet McCabe, EPA’s acting assistant administrator for the Office of Air and Radiation, estimated that exploration companies would need to invest up to $420 million to stop leaks and capture methane from working wells. But she said the industry could save as much as $550 million from captured gas.
The new rules are part EPA’s broader efforts to cut planet-warming emissions. Methane can trap 25 times more heat than carbon dioxide, but dissipates more rapidly. McCabe said the target for methane emission reduction is 20% to 30%.
The oil and natural gas industries are expected to challenge the rules.
July Hottest Month on Record, Federal Weather Agencies Say
July’s average global temperature was 61.86 degrees, making it the warmest month on Earth since records have been kept, federal weather officials said. Scientists from the National Oceanic and Atmospheric Administration said the new mark broke previous records set in 1998 and 2010 by a seventh of a degree, the largest margin ever by which an old record was eclipsed.
“It just reaffirms what we already know: that the Earth is warming,” NOAA climate scientist Jake Crouch said. “The warming is accelerating and we’re really seeing it this year.” NOAA records go back to 1880. The findings were confirmed by records kept by NASA and a Japanese weather agency.
Union of Concerned Scientists Cites DOE Study Slamming MOX Facility
The Union of Concerned Scientists said that a Department of Energy study concludes that the federal program to convert surplus plutonium to commercial grade nuclear fuel is an expensive and risky disposal method.
The UCS said it has obtained a study written by experts from the Nuclear Regulatory Commission, the Tennessee Valley Authority and the commercial nuclear industry that concludes the mixed-oxide fuel (MOX) program under construction in Aiken, S.C., is caught in “difficult, downward spiraling circumstances.”
The report said the cost of the MOX facility has ballooned from $1.6 billion to $30 billion. The report said it would be cheaper and less risky to ship the plutonium to the Waste Isolation Pilot Plant in New Mexico for burial.
The U.S. Department of Agriculture has awarded a $46 million federal loan to North Dakota-based Central Power Electric Cooperative to help finance 51 miles of new power lines and several substations. The funds come from USDA’s Rural Utilities Service electric loan program.
“Demand is the main driver of this,” said Dennis Hill, executive vice president and general manager of the North Dakota Association of Rural Electric Cooperatives. “The little single line with a small transformer just doesn’t work anymore.”
The new lines would be spread throughout the cooperative’s existing 1,300-mile network, according to Hill, who added that the project would commence after a four-year work plan is submitted. CPEC serves nearly 56,000 customers in 25 North Dakota counties.
A FERC administrative law judge has found that BP manipulated the natural gas market in Texas in 2008, and now the company faces millions in penalties and disgorged profits.
“This is a classic case of physical for financial benefits,” Judge Carmen Cintron said. “The evidence in this case shows that the Texas team had hundreds of affirmative acts in furtherance of the manipulative scheme during the investigative period.”
Federal regulators in 2013 proposed that BP pay a $28 million penalty and pay back profits of $800,000 plus interest. The ruling will now go before the full five-member commission for a final ruling. BP has vowed to appeal. “The evidence overwhelmingly demonstrated that BP’s natural gas traders did not engage in any market manipulation,” a company spokesman wrote in an e-mail.
Federal Gulf Oil Leases Attract Low Interest, Prices
A federal auction for drilling rights in the Gulf of Mexico is attracting the weakest interest since 1986.
Plummeting oil prices and industrial contraction meant that only five companies bid, for a total of $22.7 million. The auction happened on a day when American oil prices fell to about $40/barrel. Last summer prices were $100/barrel. The integrated oil giants ExxonMobil, Shell and Chevron didn’t even bother to bid.
“Concerns over the pace of economic growth in emerging markets, continuing (albeit slowing) supply growth, increases in global liquids inventories and the possibility of increasing volumes of Iranian crude entering the market contributed to the changed forecast,” the Department of Energy said.
DOE Gives $5.2 Million Grant to Duke Algae Uses Study
The Department of Energy has awarded a $5.2 million grant to Duke University to study possible uses of algae for renewable energy.
Zackary Johnson, an assistant professor of molecular biology at Duke, is heading a three-year study called MAGIC, or Marine Algae Industrialization Consortium. There have been efforts to derive fuel from algae, but so far none have been economically viable.
“To make algae a competitive player in this field you have to consider all the things the algae are producing,” Johnson said. “We’re essentially trying to make oil the waste product, so that it can compete with fossil fuels.”
