NRG purchased rooftop solar installer Roof Diagnostics Solar in March 2014.
NRG Energy will continue to focus on its residential solar and renewable energy technology businesses, despite posting losses of $53 million and $163 million in those units respectively in 2014, company executives said in an earnings call Friday.
Those losses — and another $981 million in losses in the “corporate” segment, which includes international business and electric vehicle services — were offset by net income of more than $1 billion in NRG Business, the unit that primarily serves businesses and includes the company’s generation assets. Total net income for the company in 2014 was $134 million ($0.23/share), compared to a loss of $386 million in 2013.
CEO David Crane said the industry was undergoing a paradigm shift, and that the company’s investments in renewables now would pay off in the long run.
“Our industry is in the early but unmistakable stage of a technology-driven disruption of historic proportion,” Crane told investors Friday. “This disruption ultimately is going to end in a radically transformed energy industry where the winners are going to be those who offer their customers, whether they be commercial, industrial or individual customers, a seamless energy solution that is safer, cleaner, more reliable, more convenient and increasingly wireless.”
According to Kelcy Pegler Jr., president of NRG Home Solar, the company ended 2014 with 13,000 total residential solar customers, 9,000 of which were gained that year. NRG has a goal of adding 22,000 to 27,000 more by the end of 2015.
“It’s our view at NRG that traditional centralized energy service models are significantly at risk,” said Steve McBree, president of NRG Home, the parent of Home Solar. “We believe that the future eventually will belong to demand-driven decentralized models of service that empower individual consumers.”
Responding to an analyst’s question about upcoming Environmental Protection Agency regulations on carbon emissions from existing power plants, Crane said NRG was not worried. “As long as the rules imposed are imposed in a fair and reasonable way, tightening environmental regulations actually enhance us relative to our competition,” he said. According to its year-end earnings filing with the Securities and Exchange Commission, the company has a goal to reduce its carbon emissions 90% by 2050.
Q4 Results
The company posted a $119 million profit for the fourth quarter of 2014, after reporting a $297 million loss in the same period of 2013.
Analysts were less than thrilled, however. The quarterly earnings amounted to 21 cents per share, far less than the average estimate of analysts surveyed by Zacks Investment Research of 93 cents.
Zacks said NRG’s Goal Zero product, a portable solar panel used to charge mobile devices, would attract more customers and help it retain existing ones, but that the company’s reliance on weather conditions was concerning. During the call, Chief Operating Officer Mauricio Gutierrez said, “The recent cold front in the northeast once again proved the value of our diversified portfolio, where unlike gas generation, our coal and oil assets benefited from spikes in gas and power prices. Our strategy is to extend the life of our assets and maintain a cheap option in energy that can benefit from short-term dislocations in the market like the ones we experienced the past two winters.”
D.C.’s consumer advocate asked the Public Service Commission last week for more time to respond to Exelon’s sweetened offer in its proposed $6.8 billion acquisition of Pepco Holdings Inc., saying Exelon’s Feb. 18 filing is a “procedural mess.” If granted, a final decision from the PSC could be delayed until fall.
Exelon submitted an updated filing with data responses and hundreds of pages of testimony shortly after announcing it would more than double the customer credits to D.C. ratepayers to $33.75 million. (See Exelon Sweetens the Deal for DC in Pepco Takeover.)
In a joint filing with the Apartment and Office Building Association of Metropolitan Washington on Wednesday, the Office of People’s Counsel complained that Exelon’s filing doesn’t point out the differences between it and its original submission. The OPC is asking to file its responses — due March 18 — in April, with a May 26 deadline for any supplemental testimony.
“Due process, fairness and the need for a clean evidentiary record must prevail over corporate expedience,” the OPC said.
Exelon has said it expects approval from the two remaining authorities it still needs, Maryland and the District, by the third quarter.
Exelon said last week that it will oppose the delay. “The six-week extension that the commission recently granted is more than adequate, and the request for additional time is unwarranted,” Exelon spokesman Paul Adams said.
The PSC has scheduled hearings for late April into June. If it grants the OPC request, hearings probably wouldn’t start until June, with a final decision from the PSC in September or October.
Antitrust Institute Weighs In
Also last week, the president of the American Antitrust Institute asked the U.S. Department of Justice to block the merger or impose mitigation measures.
“A merged Exelon-Pepco would possess an enhanced ability and pre-existing, powerful incentive to engage in vertical foreclosure and block entry by rivals,” wrote AAI President Diana Moss in a letter to Assistant Attorney General William J. Baer on Wednesday. “If unaddressed through antitrust remedies, the proposed merger stands not only to harm competition and consumers but also to reverse some of the gains from restructuring.”
Adams said the organization’s complaint was without merit. “These same allegations were already considered and rejected by the Federal Energy Regulatory Commission, which approved the merger.”
RTO Insider reported in December that the Justice Department was investigating the interconnection process in PJM’s MAAC sub-region as part of its anti-trust review of the acquisition. (See DOJ Probing Interconnection Process in Exelon-Pepco Merger.)
AAI says it advocates on behalf of consumers to “challenge abuses of concentrated economic power.”
Although the Exelon-Pepco deal has already gained the approval of regulators in Virginia, New Jersey and Delaware, “the state settlements that we have seen so far do not produce any additional remedies that give us the comfort level we need that a merged Exelon-Pepco would not be able to exercise their market powers,” Moss said in an interview.
If Exelon acquires Pepco, “you will now have a bigger transmission owner, sitting on a pretty substantial pile of generation,” she said. “The problem is, if you control the network, and you also own generation, you have the ability and the incentive to frustrate access by competing developers.”
Ameren reported a 30% jump in fourth-quarter earnings and said it expects future growth from new transmission projects, even as federal regulators consider lowering the rate of return on such investments.
The St. Louis-based company reported net income of $48 million ($0.20/share) compared with $37 million ($0.15/share) during the fourth quarter of 2013.
Electric revenues grew 19% to $360 million in Illinois, due in part to increasing residential and industrial demand, while falling 3% to $692 million in Missouri.
For the year, earnings soared to $586 million ($2.40/share) from $289 million ($1.18/share) in 2013, when the costs of the divestiture of its deregulated power generation unit crimped results.
On a continuing operations basis, net income in 2014 was $587 million ($2.40/share) versus $512 million ($2.10/share) in 2013.
“We delivered strong earnings growth in 2014,” Ameren CEO Warner Baxter told analysts during a Feb. 25 conference call. “I am pleased with the progress we made last year.”
Current Year Growth
Executives said they expect 2015 earnings to rise to between $2.45 and $2.65 per diluted share. Diluted earnings per share from continuing operations are expected to grow at a 7 to 10% compound annual rate.
Those estimates assume the Missouri Public Service Commission’s approval of the company’s request for a $190 million annual rate increase. A decision is expected by May.
Ameren expects a higher average estimated rate base of $1.4 billion in 2015 compared to $900 million in 2014.
Transmission Potential
Transmission services revenues in 2014 increased to $33 million from $19 million in 2013.
Last fall, MISO industrial customers filed a complaint contending that the MISO transmission operators’ current base return on equity — 12.38% except for American Transmission Co. — is too high. Industrials argue the base ROE for TOs including Ameren should not exceed 9.15%.
Ameren said it has established a reserve for the potential ROE reduction. Although the amount wasn’t disclosed, the company assumed a scenario similar to what the Federal Energy Regulatory Commission set last June involving New England TOs — a 7.03 to 11.74% “zone of reasonableness.”
Ameren officials said the ROE decision may not come until 2016. Regardless, Baxter said the company sees “robust opportunities” in additional transmission projects. He noted that not only does Ameren’s territory sit on the seams of multiple RTOs but that there are a number of local reliability projects that could be explored.
“We see meaningful investment opportunities in the transmission businesses,” Baxter added.
The biggest current transmission project for Ameren and its Ameren Transmission Co. of Illinois subsidiary is the nearly 400-mile Illinois Rivers project, a 345-kV line crossing the Mississippi River that will head east to nearly the Indiana border. It’s estimated to cost about $1.4 billion.
Ameren is also eyeing about $1 billion in local reliability projects for completion by 2019.
WILMINGTON, Del. — PJM will not charge transmission developers fees on any projects estimated to cost less than $20 million under a revised proposal it plans to file with the Federal Energy Regulatory Commission.
FERC last month rejected an earlier proposal that would have assessed a $30,000 fee on all greenfield transmission proposals and transmission owner upgrades of $20 million or more.
The commission said the proposal was discriminatory because PJM failed to show that the costs of studying upgrades under $20 million would be different than the costs of studying greenfield projects with similar costs (ER15-639). (See FERC Rejects Fee on Greenfield Transmission Projects.)
“We think it makes most sense to refile the proposal … with the change that there would be no fees for any projects under $20 million, and that would eliminate the concern that FERC had raised,” Steve Herling, vice president of planning, told the Markets and Reliability Committee.
The committee will be asked to endorse the proposed revisions at its next meeting.
MRC Greenlights PJM/MISO Scheduling Product
The MRC on Thursday endorsed the creation of a new, optional Coordinated Transaction Scheduling product intended to reduce uneconomic power flows between PJM and MISO. There were two abstentions but no objections.
Under CTS, traders can submit “price differential” bids that clear when the price difference between MISO and PJM exceeds a threshold set by the bidder.
The product is expected to be implemented by November 2016, said Becky Carroll, PJM manager of real-time operations. PJM and MISO would evaluate traders’ bids individually, and the commonly cleared set would be the transactions that flow.
Thursday’s endorsement was just the start of several approvals of the Joint Operating Agreement. PJM and MISO also will be adding details of their forward-price projection methodology, and stakeholders will have to approve the accuracy of the pricing models.
The product is similar to the one launched Nov. 4 with NYISO. Of that initiative, Carroll said, “We’re definitely seeing more participation than we expected. We thought market participants would be slow in getting comfortable with the product.”
Unlike NYISO, MISO does not currently post look-ahead prices, but it expects to introduce a calculating mechanism by the end of 2015.
Manual Changes Approved
The MRC approved the following Thursday with no opposition:
Manual 02: Transmission Service Request — Changes clarify and more accurately describe the Available Transfer Capability (ATC) processes and the Initial Study process for long-term firm transmission service requests. They include a grammatical cleanup; updated references to the Joint Operating Agreement; and links to the deliverability analysis in Manual14A and Manual 14B.
Manual 14A: Generation and Transmission Interconnection Process — Adds Feasibility Study data form and Impact Study data form so that developers can more easily see data requirements.
Manual 14B: PJM Regional Transmission Planning Process —Updated to reflect existing long-term deliverability analysis procedures and cleanup language regarding voltage drop analyses, generator deliverability analyses, load deliverability analyses and cost allocation. Revisions make no changes to upgrades or cost allocations.
Manual 40: Training and Certifications Requirements — Revisions resulting from the annual review required by North American Electric Reliability Corp. standard PER-005-2; includes a new section on training of operations support personnel.
Members Committee
TOs Propose Cost Allocation Change
PJM’s Transmission Owners are proposing a change to the way costs are allocated for reliability projects that are included in the Regional Transmission Expansion Plan due only to an individual Transmission Owner’s planning criteria.
The revision to Schedule 12 of the PJM Tariff, presented Thursday’s Members Committee meeting, clarifies that such costs will be allocated to the local Transmission Owner. If the project is required by regional criteria from PJM, it will be subject to regional cost allocation.
The change was recently announced by the Transmission Owners Agreement Administrative Committee.
Historically, the application of TO planning criteria has resulted in lower voltage projects. However, that has evolved to include criteria more stringent than required by PJM, due to aging infrastructure and storm hardening, which necessitate more significant investment.
Iberdrola SA announced Thursday it is acquiring UIL Holdings, which has electric and gas distribution companies in Connecticut and Massachusetts, in a cash and stock deal valued at $3 billion.
The Spanish energy conglomerate will incorporate UIL’s operations into its U.S. subsidiary, Iberdrola USA.
UIL shareholders will each receive one share of Iberdrola USA and $10.50 for each of their UIL shares, giving them 18.5% of the U.S. subsidiary. Iberdrola SA will own 81.5% of Iberdrola USA, which will be traded on a yet-to-be-determined U.S. exchange.
UIL unit United Illuminating provides electric service to Connecticut’s two largest cities, New Haven and Bridgeport. UIL also owns Southern Connecticut Gas, Connecticut Natural Gas and Massachusetts utility Berkshire Gas. UIL acquired the gas units from Iberdrola in 2010 for $1.25 billion.
The deal implies a share price of $52.75, a 25% premium to UIL’s closing share price on Wednesday.
Iberdrola USA already owns New York State Electric and Gas, Rochester Gas & Electric and Central Maine Power, with a combined 3 million customers.
UIL CEO James P. Torgerson will become Iberdrola USA’s new CEO. Iberdrola said Torgerson will select a U.S.-based leadership team from among UIL and Iberdrola USA executives.
Torgerson and two other UIL directors will join Iberdrola USA’s board, which will have up to nine members.
In earnings reported two weeks ago, Iberdrola highlighted U.S. operations in New York and New England as one of its bright spots as it coped with lower Spanish subsidies for its renewable energy operations.
It is also one of the leading wind energy companies in the U.S., with operations in about 20 states.
UIL Holdings has about 700,000 customers. The deal is expected to close later this year.
The agreement, which has been unanimously approved by both companies’ boards of directors, must be approved by the Connecticut Public Utilities Regulatory Authority, Massachusetts Department of Public Utilities, Federal Energy Regulatory Commission, Department of Justice, Federal Trade Commission and Committee on Foreign Investment in the United States.
The combined company intends to invest $6.9 billion in regulated electric and gas infrastructure and other capital expenditures over the next five years.
Exelon’s year-long lobbying campaign has won bipartisan backing for a bill that would charge Illinois electricity users a fee to ensure continued operation of three nuclear generators that the company says are unprofitable.
The proposal could increase Commonwealth Edison and Ameren bills by $300 million a year, according to the Citizens Utility Board, a consumer watchdog group.
The Low Carbon Portfolio Standard (SB1585, HB3293), announced Thursday, came a week after the introduction of a dueling measure, the Clean Energy Jobs Bill (SB1485, HB2607), supported by environmental and consumer advocates.
Both proposals say they will increase renewable energy and jobs while lowering carbon emissions as required by the U.S. Environmental Protection Agency’s Clean Power Plan. Both have bipartisan support.
Exelon says its plan would ensure the operation of the state’s nuclear power plants, which produce nearly half of Illinois’ power, provide more than 5,900 jobs and represent $9 billion in economic impact.
“There is simply no way Illinois will achieve meaningful carbon reductions and meet the EPA goals without preserving our current nuclear fleet,” said state Rep. Larry Walsh Jr., a Democrat who represents many nuclear plant workers in his Will County district and co-sponsored HB3293.
Walsh told the Chicago Tribune that the final proposal likely would represent a compromise bill hammered out with the proponents of the Clean Energy Jobs Bill. He could not be reached for comment on Friday.
That bill and its companion were introduced by state Sen. Don Harmon and Rep. Elaine Nekritz, both Democrats.
“If we can raise the energy efficiency standard to 20% and raise the renewable portfolio standard to 35%, we can create 32,000 new clean energy jobs every year,” Harmon said in introducing his bill. “The potential for Illinois if we act is great — and at the same time, the risk if we fail to act is enormous.”
The Exelon legislation was drafted in response to a 269-page, House-commissioned report released Jan. 8 that presented options to improve the finances of Exelon’s nuclear power plants. (See Exelon in Lobbying Push to Save Ill. Nukes.)
Under the proposed legislation, beginning next year, 70% of the electricity delivered by ComEd, which is owned by Exelon, and Ameren would have to be generated by “clean-energy” sources: solar, wind, hydro, nuclear, tidal, wave and clean coal.
The fee to customers would fund low-carbon energy credits that would be auctioned by the Illinois Power Agency.
The system would result in an average $2/month surcharge to electricity bills, not to exceed a 2.015% annual increase compared with 2009 rates. It would sunset at the end of 2021, or earlier if the state is in compliance with the EPA’s program.
While Exelon has said the legislation is needed to save the nuclear plants it maintains are struggling – Byron, Quad Cities and Clinton — the bill does not require the company to keep them open even if the new standard is adopted.
Critics of the power company’s proposal point to a Crain’s Chicago Business study of Exelon’s Securities and Exchange Commission filings that concluded its nuclear fleet is profitable. Exelon has declined to open its books to prove its contention.
“Exelon has made more than $20 billion in profits over the past decade, its overall nuclear fleet is profitable — and consumers have already paid for those plants several times over, from when the facilities were owned by ComEd,” said David Kolata, executive director of the Citizens Utility Board. “The solution to Illinois’ energy issues requires a much more comprehensive and long-term plan than Exelon’s proposal, which would raise ComEd and Ameren electric bills by an estimated $300 million a year.”
Exelon Senior Vice President Joseph Dominguez addressed the profits issue in an interview with Northern Public Radio.
“No one from Exelon has ever denied that the company is profitable. It is,” he said. “What we’re talking about is the profitability of units that are persistently losing money and our inability to keep those units open unless we recognize the important attributes that they provide.”
Ten people protesting the 550-mile Atlantic Coast Pipeline project were charged after blocking the entrance to Dominion Virginia Power’s Richmond headquarters last week.
About 50 protestors said they object to the proposed pipeline that would supply customers in North Carolina with shale gas from West Virginia. “This proposal would be a dangerous investment in fossil fuel infrastructure at a time when the scientific consensus is clear that we must invest in renewables, such as wind and solar, to avoid further warming of our planet,” said Whitney Whiting, a protester from Newport News, Va.
Nine were charged with traffic obstruction, and another was given a misdemeanor citation for disorderly conduct.
The Delaware River Basin Commission will consider at its March 10 meeting whether to allow Exelon to increase the amount of water the Limerick nuclear plant may draw from the Schuylkill River on days when the air temperature is 87 F or higher.
Exelon’s request seeks to make permanent the temporary permission it was given Aug. 19 to boost the amount of water it can use on hot days by 3.3 million gallons, from 44 million. The company said recent repairs that increased the efficiency of its closed circuit cooling water system led to the loss of more water through evaporation.
Exelon addressed concerns about taking too much water out of the river during heat waves, when river levels are at their lowest, by seeking permission to add water upstream. That would ensure against higher water temperatures dissolving oxygen and harming aquatic life downstream, according to the company.
The plant’s Unit 1 was out of service for three days last week after a main steam isolation valve closed unexpectedly. The Nuclear Regulatory Commission said the unit shut down without any further problems. Unit 2 was not affected by the event.
Ameren Illinois President Named One of Top Business Leaders by Magazine
Richard J. Mark, president of Ameren Illinois, was named one of the top business leaders by African-American Career World magazine.
“The executives on our inaugural list of top African-American business leaders were selected for their business acumen, leadership and vision to drive their company’s success, often during difficult times,” said Joann Whitcher, editorial director of Equal Opportunity Publications.
Mark oversees utility distribution operations to more than 1.2 million electric customers and 812,000 natural gas customers. He has led the company on a 10-year, $3.5 billion upgrade program.
SunEdison’s Maine Wind Energy Project Gets Environmental Staff Approval
The staff of a Maine environmental permitting appeals panel recommended upholding approval of SunEdison’s Bingham Wind project.
Maine’s Department of Environmental Protection in September granted a permit for the 62-turbine, $398 million project in western Maine, but activists appealed the decision. The staff of the Board of Environmental Protection, which hears appeals of the regulatory agency’s actions, said that the company’s plan was financially sound and recommended approval.
The board could rule on the final permit application March 5.
Clean Line Energy’s Rock Island Project Faces Appeal of ICC Ruling
Landowners and Commonwealth Edison are appealing the Illinois Commerce Commission’s approval of Clean Line Energy’s $2 billion Rock Island Line transmission project.
The proposed 3,500-MW direct-current line would deliver wind-generated power to Illinois from Iowa, Nebraska and South Dakota. The 500-mile line is the first merchant-owned transmission project approved by the ICC.
Heavy Snowfall in Carolina Causes 200,000 Duke Energy Outages
A rare heavy snowfall in North Carolina last week left more than 200,000 Duke Energy customers without power.
Up to 10 inches of thick, heavy snow caused outages in the upper third of the state. The lack of sunlight and weight of the snow on trees caused limbs to break and fall on power lines. The company worked into the weekend to restore service.
NRG Home Solar, fast becoming one of the largest residential solar companies in the U.S., is moving into the North Carolina market.
“North Carolina is an ideal market for solar and specifically for residential solar where we see significant untapped market potential throughout the state,” said Kelcy Pegler Jr., president of NRG Home Solar. The company is offering homeowners solar systems with zero-money down financing. It will open an office in Charlotte this spring.
NEW ORLEANS — MISO plans a Tariff filing in March to create a pool of alternate representatives to serve on the six-member Alternative Dispute Resolution Committee. Deputy General Counsel Eric Stephens told the Advisory Committee the ADR panel can fall short of its four-member quorum in disputes that result in multiple recusals because of conflicts.
MISO lawyers also are drafting changes to language requiring elections of the Board of Directors be conducted at the annual meeting. In the last election, 7% of members voted via electronic ballots before the meeting — the highest response rate ever — said General Counsel Steve Kozey. MISO made paper ballots available at the meeting to comply with the current rules but no one used them, he said.
Kozey said MISO will make a FERC filing this summer to eliminate the need for the paper ballot “safety valve.”
Consumer Reps Seek Funding for ROE Fight
Consumer representatives asked MISO to approve $200,000 in funding so that they can hire outside experts to help them in their bid to convince FERC to lower transmission owners’ return on equity (EL14-12).
Robert Mork, of the Indiana Office of Utility Consumer Counselor, representing the Public Consumer sector, said the group had used its own resources during settlement discussions but that it needs additional expertise now that the case has been scheduled for hearing. “We know how to litigate rate cases at the states; we do that all the time. But we don’t know how to do it at FERC,” he explained.
The consumers and other parties filed testimony in the case last week.
Kip Fox of American Electric Power questioned the need for the spending, saying there were nearly two dozen groups claiming to represent consumers in the docket.
“It’s wonderful that others are involved, but we think we have a central role,” Mork responded.
Fox said transmission owners would be essentially funding their opposition. Mork noted that utilities pay their lawyers and experts from revenues generated from retail ratepayers. In this case, he said, “it’s a matter of the shoe being on the other foot.”
Fox asked Kozey if the request might set a precedent for other groups seeking funding from MISO.
“Yes, and that’s the problem,” Kozey responded, saying the issue raises the question of what constitutes a “MISO expense.”
Kozey noted that MISO got itself removed as a defendant in the case. “It’s not our job to defend the transmission owners’ ROE. Nor do we think it’s our job to oppose” it, he said.
Kozey said stakeholder sectors will be given two weeks to file comments on the request.
“Absent stakeholder feedback, I would not be pushing my board” to authorize the payment, Kozey said.
Three Elected to Finance Subcommittee
The Advisory Committee elected three new members to the Finance Subcommittee: Venkata Bujimalla, manager of policy development for the Iowa Utilities Board (representing State Regulators); Marty Blake, a principal of The Prime Group who has represented Southern Illinois Power Cooperative and Hoosier Energy (representing Transmission Owners); and Mitchell Myhre, a manager of regulatory affairs for Alliant Energy (representing Municipals, Cooperatives and Transmission Dependent Utilities).
Advisory Committee Charter
Members approved a revised Advisory Committee charter with little discussion. The new charter reflects MISO’s 2013 name change (replacing “Midwest” with “Midcontinent”) and its increase to 10 sectors from nine.
‘Hot Topic’ Process Change?
Michigan Public Service Commissioner Sally Talberg said some stakeholders felt excluded from the planning of February’s “Hot Topic” discussion on resource adequacy.
Members assigned the Steering Committee to consider whether there should be a more formal procedure for organizing and conducting the Advisory Committee “Hot Topic” drafting team meetings.
“We’ve expressed concerns that the framing of the questions can sometimes lead to a [policy] direction. The Advisory Committee is designed to be balanced by sector,” said Alcoa Power Generating’s Dewayne Todd, representative of the End Use Customers sector.
“It’s increasingly becoming more of an issue,” said Michigan Public Service Commissioner Sally Talberg. “It became abundantly clear there was a problem” on the resource adequacy issue.
“We see it as more of a one-time concern,” said Great River Energy’s Matt Lacey, who noted it is difficult to get members involved in planning most Hot Topic discussions.
The Steering Committee put the issue on its March agenda for discussion.
ISO-NE filed the results of its ninth Forward Capacity Auction with the Federal Energy Regulatory Commission on Friday, starting the clock on a 45-day comment period (ER15-1137).
The RTO said 34,695 MW of capacity was acquired region-wide in the Feb. 2 auction, including more than 1,400 MW of new resources needed to help replace generators that have recently retired or will retire in the next few years. The total cost for the 2018-2019 commitment period is about $4 billion, up more than one-third from the $3 billion for the 2017-2018 commitment period. (See Prices up One-Third in ISO-NE Capacity Auction.)
The RTO cleared at $9.55/kW-month outside of the Southeastern Massachusetts/Rhode Island (SEMA/RI) zone, where a shortage of resources triggered administrative pricing rules that resulted in a price of $17.73/kW-month for new resources and $11.08/kW-month for existing resources.
ISO-NE’s capacity auction results are subject to commission review under the just and reasonable standard, the result of a 2006 settlement to address stakeholder concerns over New England’s market design. Objections to the auction results must be filed with FERC by April 13.
The results of FCA 8 became effective as an “operation of law” in September when the commission — then short one member — deadlocked 2-2 over whether to reject the results due to unchecked market power. (See FERC Commissioners at Odds over ISO-NE Capacity Auction).
Virginia Gov. Terry McAuliffe signed a controversial bill last week that suspends the State Corporation Commission’s reviews of Dominion Virginia Power’s base rates for the next seven years, allowing the company to collect potentially hundreds of millions in excess profits.
The bill (SB1349) was introduced by Sen. Frank Wagner (R-Virginia Beach), who has acknowledged that Dominion helped him write it. The bill freezes the utility’s base rates for five years and prevents the SCC from conducting its biennial reviews until 2022. Dominion, however, would still be able to request increases for fuel and infrastructure costs.
The freeze locks Dominion’s base rates at a level that the commission concluded in November 2013 was resulting in $280 million a year in excess profits.
“This bill is the result of strong collaboration among bipartisan legislative leaders and General Assembly members along with business, consumer, community and environmental groups,” Dominion said in a statement. “As a result, Dominion Virginia Power customers will see a rate cut and long-term rate stability.”
The “rate cut” is a reference to an early reduction in Dominion’s fuel cost surcharge. Bills for typical residential customers will drop by 5.5% in April rather than July, as previously scheduled. Commercial customers will see bills drop about 7% and industrials will save 10%.
The lopsided votes were typical of the treatment Dominion receives in the Virginia legislature.
During the 2015 legislative session, Dominion helped defeat a cap-and-trade proposal, legislation that would have prevented the utility from erecting power lines in parts of Haymarket, Va., and a bill that would have limited Dominion’s ability to conduct surveys on property owners’ land for its proposed Atlantic Coast Pipeline, according to the Associated Press.
In addition to the rate freeze, Dominion also won continuation of a coal-related tax credit.
“Nobody does it better,” Democrat state Sen. Adam Ebbin told the AP. “Unfortunately consumers don’t have full-time, highly paid lobbyists.”
Political Contributions
Dominion is perennially a top campaign contributor in Virginia, which has no limits on the size of donations.
In 2014-15, according to the Virginia Public Access Project, Dominion contributed $744,540 — more than any other donor aside from party and candidate campaign committees. The company’s contributions were more than double that of the second-ranked Virginia Bankers Association. (See chart).
Dominion’s political donations are almost evenly split between Republicans and Democrats, with the largest contributions going to statewide candidates and legislative leaders. McAuliffe campaign committees have received $160,000 from Dominion since 2013.
Wagner’s campaigns have collected more than $38,000 from the utility since 2000.
Dominion also courts allies through its charitable arm, the Dominion Foundation, which gives away about $15 million annually. Three groups that testified in favor of the bill — Senior Connections, the American Red Cross and the Better Housing Coalition — each received donations from the foundation in 2013, the Richmond Times-Dispatch reported.
“No single company even comes close to Dominion in terms of its wide-ranging influence and impact on Virginia politics and government,” University of Virginia political analyst Larry Sabato told the Times-Dispatch.
‘Concessions’ for McAuliffe
McAuliffe (D) said that he negotiated directly with Dominion Resources CEO Thomas Farrell II, at the latter’s request, while the bill was being debated in the General Assembly. McAuliffe asked the company to accept several proposed amendments as a condition for his support, the governor told reporters at the state Capitol on Wednesday, the day after he signed the bill.
“When this bill was introduced, I expressed concerns about several of its provisions,” McAuliffe said in a statement. “However, after working with the General Assembly to make several key changes, I have concluded that this legislation represents a net positive benefit to Virginians and to our economy.”
Those changes include encouraging the utilities to invest in up to 500 MW of solar generation and requiring them to implement energy-assistance programs for low-income, elderly and disabled ratepayers. The solar project was already planned, but the announcement was accelerated to win environmentalists’ support, the Times-Dispatch reported.
Rate ‘Certainty’
Wagner said the purpose of the bill was to provide stability while the U.S. Environmental Protection Agency’s proposed rule on carbon emissions from existing power plants is being finalized. In a statement, Wagner praised McAuliffe for signing “a clear and unmistakable, bipartisan call for electric rate certainty during this time of regulatory turmoil.”
Virginia would be forced to reduce its emissions by 38% under the proposed EPA rule. Dominion, which has said it could have to close coal-fired power plants worth up to $2.1 billion as a result, agreed to cover the cost if the plants close before 2020.
While base rates are frozen, the suspension of biennial reviews means customers won’t get refunds if the company’s profits exceed what was approved by the SCC. Normally, the commission can reduce base rates if profits are judged too high for two consecutive reviews.
Dominion paid $78.3 million in refunds after its 2011 review. The SCC also reduced the company’s return on equity to 10.9%, down from 12.5% (PUE-2011-00027).
In 2013, the commission found that Dominion’s annual revenues were $5.15 billion, $280 million more than the $4.87 billion needed to recover its cost of service and earn a fair return. The SCC reduced the company’s ROE further to 10% but did not order refunds (PUE-2013-00020).
The rate freeze bill signed last week also requires all electric utilities in the state to file their integrated resource plans annually. Previously, utilities were required to file them every two years.
It was amended to apply to American Electric Power subsidiary Appalachian Power as well, though its review suspension period begins and ends earlier.
The bill starts Dominion’s suspension period on Jan. 1, so the SCC can conduct its rate review of the utility for the past two years. Originally, the suspension would have begun in 2013 and lasted until 2023.
Because of the freeze, SCC spokesman Kenneth Schrad said, the commission won’t be able to adjust base rates regardless of what the review finds, although there could be a partial refund of any over-earnings.
However, he noted that while the 2011/12 review suggested that base rates might be higher than necessary, the 2014 General Assembly passed legislation allowing the company to recover an estimated $600 million in expenses it incurred exploring the possibility of a third nuclear unit at North Anna.
“Allowing that recovery to be included in the coming biennial review more than likely ensures that the company’s earning fall within the authorized range,” he said.
