Attorneys for hedge fund twins Rich and Kevin Gates and their associate Houlian “Alan” Chen asked the Federal Energy Regulatory Commission on Tuesday for more time to respond to market manipulation allegations that could carry fines totaling nearly $30 million.
The reason? They argue that FERC’s Office of Enforcement has unfairly withheld evidence that could prove that PJM’s Independent Market Monitor didn’t think their trading strategy — which collected line-loss rebates on what FERC contends were riskless up-to-congestion trades — was illegal.
Their motion (IN15-3), which was filed after the Office of Enforcement denied their request for the information on Monday, asks the commission to compel its release and grant them a two-week extension on the Feb. 2 deadline for responding to the allegations.
FERC issued an Order to Show Cause in December seeking $29.8 million in fines in an unusually high-profile case that figured in a debate over FERC enforcement policy during Commissioner Norman Bay’s confirmation process earlier this year. (See FERC Staff Seeks $30 Million Fine in Powhatan Case.)
At his Senate confirmation hearing, Norman Bay defends his handling of FERC enforcement cases as Rich Gates (R) looks on.
The Gates brothers and Chen, who traded on behalf of their Powhatan Energy Fund, have denied wrongdoing.
In their filing, they say that they’ve learned that the Office of Enforcement has a tape in which PJM’s Independent Market Monitor Joe Bowring is talking to another trader discussing trades like those at the heart of the Powhatan investigation.
According to the filing, on the tape, “Dr. Bowring says that the trades did not violate the rules, that he understands why the traders engaged in them and that the rules need to be changed to remove the incentives that drove the trading. He also says that he would not refer the trading conduct to Enforcement if the traders stopped the trading in question.
“That last point is key because the PJM Tariff requires Dr. Bowring to refer trading that he thinks might be market manipulations,” according to the filing.
Under the so-called Brady rule, prosecutors are required to provide targets exculpatory evidence in the government’s possession.
The Gates’ attorneys said they asked for possible Brady material in August, and although materials were provided, the tape recording in question was not. On Monday, Enforcement refused to agree to an extension of the Feb. 2 deadline, and on Tuesday the attorneys filed the request with the full commission to grant the extension.
The filing notes that Enforcement recently asked PJM to run simulations that could have relevance to their case. The Gates’ attorneys asked for those as well.
“It appears that Enforcement has asked for PJM to perform these simulations for purposes of addressing alleged market harm related to the trades at issue,” the filing said. “That request could have been made years ago. Instead it was made after the Show Cause Order issued, while we were preparing our response.”
In an interview yesterday, Kevin Gates declined to say how he learned of the recording. He said he was surprised to learn that the Enforcement apparently had it and didn’t share it with his attorneys.
“If this doesn’t count as something under Brady,” he said, “why even have a Brady policy? What is the purpose?”
In his Senate confirmation hearing in May, Bay — then the director of the Office of Enforcement — said the office adopted the Brady doctrine at his suggestion.
Bay was responding to criticism by former FERC General Counsel William Scherman and other members of the energy bar that the commission has engaged in heavy-handed enforcement tactics. Scherman alleges that FERC officials have failed to abide by the doctrine. (See LaFleur Cruises, Bay Bruises in Confirmation Hearing.)
Bay’s replacement, acting Enforcement Director Larry Gasteiger, responded to similar allegations at an Energy Bar Association forum in April. (See FERC, CFTC Reject Due Process Complaints.)
FERC spokeswoman Mary O’Driscoll declined comment yesterday on the Gates’ filing. Bowring could not be reached for comment.
Members of the Louisiana Public Service Commission last week expressed concern with the adequacy of the transmission construction MISO has planned for their state, which is seeing a surge in industrial development thanks to low natural gas prices.
MISO officials briefed the commissioners on the RTO’s 2014 Transmission Expansion Plan (MTEP) — the first transmission planning cycle to include the full participation of the MISO South Region — at the commission’s monthly Business & Executive (B&E) meeting in Baton Rouge last week.
The presentation by MISO’s outside counsel David Guerry and Patrick Brown, executive director of transmission asset management for MISO South, also included discussion of MTEP 2015.
MTEP 2014, approved by MISO’s board last month, included 369 projects totaling $2.5 billion.
MISO South (Arkansas, Louisiana, Mississippi and Texas) received $359 million, including 29 projects in Louisiana at an estimated $182 million. Distribution ($64 million), economic ($56 million) and baseline reliability ($41 million) projects dominate the work in Louisiana, with other reliability projects adding $17 million and “relaying” projects at $2 million.
MISO didn’t perform any calculations on projected rate impacts because the projects are deemed local and thus not eligible for regional cost allocation, Brown said.
Assurances Sought — and Obtained
Several commissioners asked for assurances that MISO will build enough transmission to serve Louisiana’s industrial growth. A state economic development report released last month found Louisiana ranked second in the South and fifth in the nation in private-sector job growth rate since 2008.
Commissioner — and gubernatorial candidate — Scott Angelle said he expected the transmission investment in Louisiana to be higher in light of the industrial expansion.
Commissioner Eric Skrmetta expressed concern about the WOTAB (West of the Atchafalaya Basin) and Amite South load pockets, saying that the Louisiana Energy Users Group (LEUG), which represents industrial customers, is “hyper-interested” in reliability issues in Amite South.
Entergy attorney Karen Freese responded by noting that MTEP 2014 includes $56 million in projects to improve reliability and increase imports into the Amite South/New Orleans area. The projects should enhance generation deliverability in Amite South, especially for one large industrial cogenerator that is a member of LEUG, she said.
The Amite South projects showed a 6-1 benefit-cost ratio, Brown said. Guerry said such economic-based projects are exactly the kind of projects LEUG is seeking.
Freese, referring to evaluations by both SPP and Entergy, said that the proposed “Houma loop” project in southern Louisiana wasn’t economically justifiable.
Skrmetta wasn’t entirely satisfied, saying the commission wants the ability to order transmission construction if MISO isn’t doing what needs to be done. He also asked Entergy and LEUG to meet with him to discuss the issues in more detail.
Guerry noted the commission has a key role in the transmission construction process because it must approve siting and cost recovery. He also noted the MTEP 2014 projects are expected to be in service in 2018, which is before the industrial expansion projects are expected to be in operation.
MTEP 15
Guerry said that while there wasn’t much involvement by MISO South stakeholders in MTEP 2014, the RTO is seeing more robust participation in MTEP 2015.
MISO plans to continue promoting increased participation and wider acceptance of the MTEP process across the MISO South footprint. MISO will hold planning forums as well as workshops to promote stakeholder education and increased involvement in MISO’s planning processes.
As part of MTEP 2015, MISO is evaluating four projects proposed by Cleco Power and 35 submitted by Entergy Louisiana.
Lake Charles Project
(Click to zoom.)
The briefing included a description of $187 million in transmission improvements planned by Entergy Gulf States Louisiana for the Lake Charles area.
Entergy says the project, which includes two new substations, expansion of a third and 25 miles of 500-kV and 230-kV transmission, will support industrial expansion, improve reliability and provide Southwest Louisiana access to cheaper generation elsewhere in MISO. Pending LPSC approval, construction is scheduled to begin in 2016 with a projected in-service date in 2018.
“Nearly 500 MW of new load have already signed up for facilities in the Lake Charles area and the potential exists for another 500 MW that are in various stages of exploration by new or existing customers in that part of the state,” Gulf States CEO Phillip May said in a statement announcing the project Jan. 8.
The project is an “out-of-cycle” proposal and will receive expedited review outside of the usual MTEP process. MISO is sensitive to the need to serve economic growth, so it is assigning a higher priority and streamlining the process as much as possible, Brown said.
Lake Charles is expected to be the state’s fastest-growing region, with $81.7 billion in industrial project announcements projected to add 12,000 jobs over the next two years, a 12% increase, according to an October 2014 report by Louisiana State University economists.
[Editor’s Note: Author David Cruthirds provides general regulatory and government relations consulting services to Sempra LNG, whose Cameron liquefied natural gas terminal may receive benefits from the Lake Charles project.]
Load Growth in MISO North
Skrmetta asked about generation trends in MISO North. Brown said MISO is projecting resource shortages in certain MISO North zones due to the Environmental Protection Agency’s proposed carbon regulations. Skrmetta noted MISO North is benefitting from generation located in MISO South, so that needs to be considered in the transmission cost allocation process. Guerry assured him it was.
Holloway Named LSPC Chair, Angelle Vice Chair for 2015
The commission unanimously elected Commissioner Clyde Holloway as chairman and Angelle as vice chairman for 2015 on the motion of outgoing Chairman Skrmetta.
The vote came at last week’s B&E meeting, which Skrmetta chaired at Holloway’s request. Holloway made a brief statement, thanking his colleagues for their support and saying he wants to keep Louisiana’s rates “the lowest in the nation.” According to the Energy Information Administration, the state had the second lowest residential rates in the U.S. in October 2014, the latest data available, second only to Washington state. Louisiana ranked eighth for all sectors.
Skrmetta was unanimously elected as the commission’s representative to the Entergy Regional State Committee and the Organization of MISO States.
Commissioner Foster Campbell, reported to be ailing with the flu, did not attend the meeting.
The Federal Energy Regulatory Commission gave PPL a 10-day extension, until Friday, to prepare its mitigation plan for the proposed spinoff of its generating assets into a merchant power producer.
FERC had set a Jan. 20 deadline for PPL to respond to conditions the agency set for the new generating company, Talen Energy, which will be created from a combination of assets from PPL and Riverstone Holdings. PPL spokesman George Lewis said last week that PPL received the filing extension.
Cape Wind Contracts Terminated, Company Suspended from ISO-NE
Troubled wind developer Cape Wind ended contracts to buy land and buildings in Massachusetts and Rhode Island and was suspended from participating in ISO-NE.
The announcements are the latest gloomy news for Cape Wind, whose power purchase agreements with utilities National Grid and NSTAR were terminated earlier this month. The utilities said they backed out because Cape Wind failed to meet financing and construction deadlines. Its 468-MW project has been in the planning and permitting stage for more than a decade.
ISO-NE notified the Federal Energy Regulatory Commission that it had suspended Cape Wind from its wholesale power market. Dennis J. Duffy, vice president of governmental and regulatory affairs for Cape Wind, said the suspension was a “nonissue” and that it would be reversed “well in advance” of the project beginning operations.
Amazon Commits to Indiana Wind Project to Power Data Centers
Amazon Web Services is teaming up with Pattern Energy Group to build a 150-MW wind farm in Indiana to provide electricity for a planned data center.
Pattern will construct and operate the 150-MW wind farm in Benton County, Ind. The facility will be called the Amazon Web Services Wind Farm, and it is scheduled to go into operation in a year. Amazon is catching up to Google and Facebook in a quest to power cloud-based web services with clean energy.
NRG Installs 24 Vehicle Chargers in Greater DC Area, More Coming
NRG Energy has installed 24 fast electric vehicle (EV) charging stations in the D.C. area, and another one is due to become operational later this month.
NRG’s eVgo subsidiary installs and operates the chargers. They allow for fast charging of vehicles, in some cases providing an 80% charge in 30 minutes.
Duke Energy Building 13-MW Solar Facility at Marines’ Camp Lejeune
Duke Energy is teaming with the U.S. Navy and Marines to construct and operate a 13-MW solar facility at Marine Corps Base Camp Lejeune near the North Carolina coast.
“Secretary of the Navy Ray Mabus set an aggressive but critical goal for the [Department of the Navy] to produce or procure 1 GW of renewable energy by the end of 2015,” said Robert Griffin, executive director of the Navy’s Renewable Energy Program Office.
The estimated $25 million to $30 million project, which would be built on about 80 acres, needs regulatory approval from the North Carolina Utilities Commission.
End of Duke Power Contract Spells End for Carolina Plant
A North Carolina biomass energy plant has closed following the expiration of a power contract with Duke Energy.
Coastal Carolina Clean Power of Kenansville, which burned wood chips and scrap lumber to produce electricity, shut down after Duke declined to renew its contract because the electricity cost up to 200% of the price on the open market. The closing has left 17 people out of work.
Dominion Virginia Power Files to Build 20-MW Solar Plant
Dominion Virginia Power will build a 20-MW solar facility in Fauquier County, in Northern Virginia, its first commercial solar venture in the state.
The company, in a filing with the Virginia State Corporation Commission, said the $47 million plant is to be built on about 125 acres near its Remington Power Station. The plant would be financed by a surcharge of about 4 cents per month for a typical residential consumer during construction, and then drop to about 2 cents a month after the plant goes into service. The commission needs to approve the surcharge.
Dominion has about 344 MW of solar capacity in six states, but it was under pressure from environmentalists to build a project in Virginia, where it operates 18,366 MW of conventional power generation.
Businessmen Sign Contract for Exelon’s Delaware Station
A developer and caterer are teaming up to buy the old Delaware Station generating plant on the Delaware River in Philadelphia, with an eye to develop two boutique hotels on the site.
Developer Bart Blatstein and caterer Joseph Volpe say they’ve signed a contract to buy the retired, Revival-style building on 1,000 feet of riverfront. They declined to comment on the price.
Exelon Generation spokesman Robert Judge confirmed a sales agreement had been signed but wouldn’t identify the buyers.
Environmentalists, Property Owners Join Protest Against Atlantic Coast Pipeline
Dozens of environmentalists and property owners rallied at the Virginia State Capitol in Richmond against plans by Dominion Resources and other utilities to build a $5 billion, 550-mile natural gas pipeline across the state and into North Carolina.
The protesters, organized by the Sierra Club and Friends of Nelson, asked the General Assembly to block the Atlantic Coast Pipeline, which would carry 1.5 billion cubic feet of gas a day from Appalachian shale gas fields.
One bill before the legislature would repeal a 2004 law giving interstate gas companies the right to survey and test pipeline routes without property owners’ consent.
NextEra to Develop Wind Energy on Hawaiian Parker Ranch Land
NextEra, which is acquiring Hawaiian Electric, has signed an agreement with the Parker Ranch Foundation Trust to develop wind farms on land the trust oversees on Hawaii Island.
The foundation began an effort in 2013 to look for a partner to help develop renewable energy on its holdings. “We have been aggressively seeking ways to reduce the cost of electricity for our community and our island by using the potential renewable energy resources available on PRFT’s Hawaii Island lands,” said Neil “Dutch” Kuyper, president and CEO of Parker Ranch.
The Federal Energy Regulatory Commission last week denied a challenge to PJM’s capacity import limit, rejecting rehearing requests by American Municipal Power, the Northern Illinois Municipal Power Agency and the Illinois Municipal Energy Agency (IMEA) (ER14-503-002).
PJM sought the limit after imports nearly doubled in the May 2013 Base Residual Auction, leading some to question their deliverability.
The new rules, which FERC approved in April, created five export zones with a combined limit of 6,499 MW for the 2014 BRA. Cleared generation imports dropped to 4,526 MW in 2014, a reduction of almost 40% from 2013. (See Capacity Prices Jump Following Rule Changes.)
In requesting a rehearing, IMEA said there was no substantial evidence supporting the requirement that external generation resources be pseudo-tied to PJM to qualify for an exemption to the import limit. It also argued that the revisions discriminate against load-serving entities that own generation resources outside of PJM.
FERC said that PJM established that a pseudo-tie is needed to address the risk of curtailment, noting that firm transmission into PJM was curtailed under 151 transmission loading relief-5 events between January 2009 and July 2013. “The risk of a TLR-5 event interrupting the transmission of energy necessary in an emergency situation is a sufficient basis to justify the capacity import limit, since such a risk demonstrates that resources external to PJM may not be equal to internal resources in satisfying a capacity requirement,” FERC said.
It rejected IMEA’s discrimination claim, saying the import limits are analogous to capacity emergency transfer limits, which apply to internal generation.
FERC also rejected the allegation by AMP and Northern Illinois that it had approved the limit without a proper analysis of its effect on competition in PJM’s capacity market.
“We find that an over-commitment of external resources in the Base Residual Auction would run a deliverability risk and distort the Base Residual Auction process by displacing resources that are deliverable,” FERC said. “… Systematic commitment of external resources at levels that cannot be reliably delivered will add resources to the supply curve in the auction and tend to reduce the clearing price below the level offered by resources that are actually deliverable to PJM.”
Environmental activists celebrated their successful forced recess of FERC’s open meeting last week. (Source: PopularResistance.org)
WASHINGTON — Federal Energy Regulatory Commission Chairman Cheryl LaFleur called an unscheduled recess to the commission’s monthly open meeting Thursday due to a series of interruptions by protesters from environmental group Beyond Extreme Energy.
LaFleur began the meeting after allowing a speaker from the group to voice its grievances over FERC’s approval of natural gas and oil projects, something that has become a regular occurrence at the past few meetings. However, she was continually interrupted by members of the group. After about 10 minutes of continuous interruptions, and chants of “FERC doesn’t work” and “If not FERC then who,” LaFleur adjourned the meeting while security cleared the room of protesters.
The group’s members, who usually wear red T-shirts with “FERC Doesn’t Work” emblazoned on the front, have become increasingly emboldened over the past few months. Notably, the group in November led a march of climate change activists from the Capitol building to the commission’s front doors, blocking employees from entering. Last month, a member wearing a Santa Claus hat sang “Jingle Bells,” with the lyrics changed to protest FERC’s activities.
The disruption last week, however, was by far the most heated. One FERC staff member quickly pulled away a banner that protesters were attempting to hold up. As security cleared the room of the protesters, it began asking attendees if they were a part of the group. One activist, who was sitting with members of the press and taking video of the meeting, was physically removed by security. FERC does not allow photography or video to be taken at its open meetings, except by its own photographers.
LaFleur said the protests have the commission and its staff vexed.
“This is relatively new territory for FERC, and I think we’re a bit learning on the job on how to handle situations like this,” she said.
The activists who spoke came from different states and took issue with the commission’s approval of natural gas pipelines, storage facilities and export terminals, such as Dominion Resources’ Cove Point LNG in southern Maryland.
“People and animals in some of these areas are dying from diseases caused by these processes,” said Kathleen Hale, the activist who spoke before the meeting. “And others have been uprooted from farms and from communities where their families have lived for generations and are losing their land to large swaths taken by eminent domain for unneeded pipelines.”
Before adjourning, LaFleur tried to tell the protesters that they have opportunities to file comments in dockets and attend scoping meetings, where the public is able to comment on FERC’s environmental impact statements and assessments of infrastructure projects. It’s clear from the activists’ speeches and protests, however, that they feel their comments have fallen on deaf ears. One protester shouted back to LaFleur, “Your meetings are a joke!”
“Our actions are peaceful, coordinated and, as is the case for the growing movement in our country, the result of too many years of everyday people not simply being misheard, but being overtly ignored by elected officials and various colluded private business entities,” Jimmy Betts, one of the speakers who interrupted the meeting, wrote on PopularResistance.org. He vowed that the protests would continue.
PJM CEO Terry Boston opened 2015’s first Markets and Reliability Committee meeting last week with a plea for compromise.
Boston lamented that PJM took unilateral action on several contentious proposals sent to federal regulators in 2014 after stakeholders were unable to reach consensus, including the increase in the price-based energy offer cap. He said the year ahead presented more challenges, including “the fastest fuel change in industry history” as coal-fired plants are replaced by natural gas due to environmental rules.
“We have to reach consensus on some of the issues that are before us,” Boston said. “It’s a new year. We have a new opportunity in front of us to build these relations [among stakeholders] and build consensus.”
There was no evidence of rifts Thursday, thanks to an unusually light agenda that saw the MRC and Members Committee complete their work before noon, with only manual changes brought to votes. “This may be the first time I try to stretch out an MRC meeting,” MRC Chairman Mike Kormos joked.
Update on Winter 2015/16 Plans
PJM officials provided the MRC an update on the status of efforts to postpone generation retirements or accelerate new generation to help the RTO overcome potential shortages next winter. (See PJM Seeks to Postpone Some Generation Retirements through 2015/16.) PJM’s Scott Baker said initial feedback from generation owners and developers indicates that there are less than 2,500 MW available.
Because of retirements expected as a result of the Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS) and New Jersey’s High Energy Demand Day (HEDD) regulations, Kormos said PJM will have less generation available in 2015/16 than it did last winter. PJM also is concerned about its ability to meet summer loads if it loses the ability to call on demand response resources. (See FERC Files EPSA DR Appeal with Supreme Court.)
“Under normal weather conditions we are fine,” Kormos said. But under a repeat of last year’s polar vortex, “we will be close to the line and we will be relying on the outside for help,” he said.
Kormos added that generator performance this winter has improved over last January, when as much as 21% of generators were unable to produce.
On Dec. 24, PJM asked the Federal Energy Regulatory Commission to allow it to enter into capacity agreements made outside the Reliability Pricing Model auctions (ER15-739). PJM also asked for a one-time waiver on rules that would otherwise require it to release 2,000 MW of capacity in the Feb. 23 Third Incremental Auction for 2015/16 (ER15-738).
Kormos said PJM would limit operation of generators subject to HEDD regulations to emergencies to keep them under the emission threshold in the New Jersey rules. “That seems to be the path of least resistance,” he said.
Manual Changes on $1,800 Offer Cap OK’d
The MRC approved conforming changes to two manuals in response to FERC’s approval of a temporary increase in the cost-based energy offer cap to $1,800/MWh from $1,000.
The increased offer cap — one of the issues on which stakeholders were unable to reach consensus last year — became effective with the Jan. 16 order and will expire on March 21. (See FERC OKs $1,800 Offer Cap in PJM.)
The order requires changes to Manual 11: Energy and Ancillary Services Market Operations and Manual 28: Operating Agreement Accounting.
Manual 11 was changed to read that generators’ incremental energy offers “may not exceed $1,000/MWh or a market seller’s lowest available and applicable cost-based offer provided such cost-based offer is greater than $1,000/MWh (and in no instance may be greater than $1,800/MWh).” (New text in italics.)
LMPs will be limited to the $1,800/MWh offer cap, plus primary- and synchronized-reserve penalty factors and the impacts of congestion and marginal losses. Costs above $1,800/MWh can be compensated via make-whole payments with an after-the-fact review, but they would not set clearing prices.
Cost-based adders under such offers will be limited to the lessor of 10% or $100/MWh. Price-based energy offers can rise above $1,000 simultaneously with cost-based offers “to avoid inappropriate market signals,” PJM said.
Other Manual Changes Approved
The MRC also approved the following manual changes with little discussion or debate:
Manual 03A: Energy Management System (EMS) Model Updates and Quality Assurance (QA) — Includes updates and formatting changes to improve consistency and readability; new table added for important links.
Manual 14A — Updates related to MISO-PJM queue coordination. MISO will evaluate the impact of new PJM interconnections at the impact study phase. The previous procedure, in which MISO’s review occurred during the facility study phase, caused delays in studies and final agreements, PJM’s Aaron Berner said.
Manual 18: PJM Capacity Market — Updated to reflect revisions recently approved by FERC to the shape of the Variable Resource Requirement Curve, gross cost of new entry values, and the Net Energy & Ancillary Services Revenue Offset methodology. (See PJM Board Orders Filing on Capacity Parameter Changes.)
Regional Transmission and Energy Scheduling Practices document — Changes made to comply with FERC Order 676H and North American Energy Standards Board standards. PJM is primarily impacted by FERC requirements for “Service Across Multiple Transmission Systems” (SAMTS). (See FERC Proposes Revised Communication, Business Rules.)
Members Committee
The Members Committee also approved several changes with no debate:
Tariff and Operating Agreement (OA) revisions developed by the Demand Response Subcommittee to change the way PJM measures and verifies residential demand response. The revisions allow statistical sampling and clarify rules for all residential customers. (See “Sampling to be used for Measuring Residential DR” in MRC/MC Briefs, Nov. 25.)
Tariff revisions to remove seller credit, a form of unsecured credit, from the credit policy, which RTO officials say is no longer necessary.
Tariff and OA revisions related to data availability for the bus distribution factors for zonal and residual metered load aggregates. When technical limitations restrict PJM’s ability to obtain the load distribution factors from the 0800 snapshot one week prior to the operating day, or if the data is unavailable, the load distribution factors from the most recently available day of the week that the operating day falls on will be used in the day-ahead energy market. (See “Tariff Revisions to Metered Load Aggregates” in Markets and Reliability Committee Briefs, Dec. 22.)
Southwestern Electric Power Co. asked the Public Service Commission to deny a request by Save the Ozarks to pay for legal expenses the organization incurred during its battle against a transmission line.
SWEPCO withdrew its power line application last month following a 20-month legal battle with the opposition group. SWEPCO says there is legal precedent to allow it to withdraw an application without prejudice, and that the PSC has no authority to award legal fees.
SWEPCO’s motion was joined by SPP and the Arkansas Electric Cooperative.
Exelon CEO Complains About PSC Staff Report on Merger
Crane
Exelon called on the Public Service Commission to reject staff recommendations to place additional conditions on the company’s proposed merger with Pepco Holdings Inc., parent company of Delmarva Power.
The commission staff asked for a total of $68 million in incentives to allow the merger to go ahead in the state, Exelon said. CEO Christopher M. Crane said a “particularly inappropriate” recommendation was for the regulatory agency to “micromanage” appointments to the utility’s board of directors. Crane said Exelon “must have the ability to exercise control over its subsidiaries.”
Connie McDowell, PSC senior regulatory policy administrator, said that the PSC should look at staff’s recommendation requirements as “an essential ingredient” to commission approval. Without the additional incentives, she said, the commission should reject the merger.
Peoples Gas Wins Rate Hike from Commerce Commission
The Commerce Commission approved a $74.8 million rate increase for Peoples Gas, costing a typical residential customer about $2.75 more a month. The boost was about 30% less than the company’s original request.
Meanwhile, Ameren Illinois filed Friday for a $53 million increase in the annual gas delivery rate. That request, if approved, would go into effect January 2016.
Energy Efficiency Bill to Replace Energizing Indiana Passes Senate
The state Senate approved a bill that would allow utility companies to develop their own energy efficiency rules rather than be directed by a state mandate, as was done by a previous now-repealed law called Energizing Indiana.
The bill, crafted by Gov. Mike Pence’s office, was introduced by Sen. Jim Merritt. The proposal directs utility companies to set “reasonably achievable” efficiency goals. Critics said the rule would result in less aggressive energy efficiency efforts than utilities would achieve under a state mandate.
Kentucky Power Ordered to Refund $13 Million in Overcharges
The Public Service Commission has ordered Kentucky Power to refund $13 million in overcharges to customers and barred the company from collecting $41 million in additional fuel costs that were scheduled to be collected through May.
The refund will appear as credits on customers’ bills and will total about $155 per customer over a 17-month period. The commission also criticized the company for failing to disclose additional fuel costs associated with its purchase of 50% of the Mitchell power plant in West Virginia and declined to allow the utility to raise rates to recover the cost.
PSC Approves Entergy’s Baton Rouge Gas Main Upgrade
The Public Service Commission approved a $65 million plan by Entergy to replace aging natural gas cast-iron mains in Baton Rouge. Entergy said the project should take about a decade to complete.
The commission voted 3-1 to allow Entergy to finance the gas-main replacement program through a special rider. The surcharge would increase the typical residential customer’s bill by about 43 cents for the first year, $1.28 for the second year and $2.28 the third year, with increases of about 2% for each of the following years.
Entergy replaced about 300 miles of gas lines in New Orleans after Hurricane Katrina.
Eastern Shore Firm Seeking Permits for Poultry Waste Plant
CleanBay Biofuels is seeking various permits to build and operate a poultry-waste recycling plant that would relieve farmers and processors from having to dispose of hatchery wastes. The so-called slurry conversion plant, planned for a 133-acre site near Princess Anne in Somerset County, would cost about $18 million and take two years to build.
Unlike plants that burn poultry litter to generate energy, the CleanBay process uses chemicals to convert the waste into fuel. The plant would have its own power station, according to CleanBay CEO Jason Levine.
A bill introduced by state Rep. Sam Singh would require electricity providers to cut annual energy sales 2% by 2019 by promoting energy efficiency, doubling the current goal.
“I’ve been a longtime advocate for energy efficiency because there is a direct benefit to the consumer,” Singh said. The current law, passed in 2008, sets an energy-reduction target of 1%. Natural gas providers would also have to trim 1.5% by 2019, which is also double the current target.
Raising Renewable Standard Would Boost Capital Investment to $6.2 Billion
A study by the Union of Concerned Scientists suggests that raising the renewable energy standard to 40% by 2030 would boost capital investment in the state to $6.2 billion with minimal impact on consumers.
The report was released as part of an effort to push state legislators to pass a 40% standard. The state’s current standard sets a 25% goal by 2025.
The strengthened RES would create another 3,100 MW of renewable energy in Minnesota, the report said, while reducing electricity imports so much that the state would become a net power exporter.
Vap Succeeds Landis as Public Service Commission Chair
Jerry Vap was elected chairman of the Public Service Commission last week, replacing Frank Landis. Vap said his priorities are broadband expansions, improvements to the 911 system and consumer-protection laws.
The PSC is comprised of five commissioners with six-year terms who each represent a district.
The Board of Public Utilities has unanimously approved a 16-mile transmission line project proposed by Jersey Central Power & Light.
JCP&L said the $64 million project is crucial to improving the reliability of the electric system in Monmouth County. The line was previously approved by PJM. There was no public opposition to the project, possibly in part because it does not require any new rights of way.
Another Group Pulls Out of San Juan Station Agreement
Western Resource Advocates, an environmental organization, is now the third group to withdraw its support for Public Service Company of New Mexico’s plan to shut down two of four units at the coal-fired San Juan Generation Station.
The environmental group announced it was pulling its support after learning that PNM Resources, parent company of Public Service, may buy 65 MW of generation from one of San Juan’s two remaining generation units. PNM’s plan to retire two of the units was intended to meet emissions mandates.
“If PNM Resources acquires that generation, it would mean PNM and its affiliate would actually be absorbing nearly 200 MW more of capacity in that generating unit, and that’s just too much for us,” said Steve Michel, chief counsel for Western Resources.
Supreme Court Rejects AG’s Challenge of Duke Energy’s Rate Request
The state Supreme Court on Friday rejected Attorney General Roy Cooper’s challenge of a 5.1% Duke Energy rate increase approval, ending a two-year attempt by Cooper to block the rate increase.
Cooper, who is expected to run for governor in 2016 as a Democrat, argued that the Utilities Commission didn’t take into consideration the effect of a rate increase on Duke’s customers when it approved it. The ruling represented the third time in the last year that the Supreme Court rejected challenges to rate increases for a Duke subsidiary.
3 Million Gallons of Brine Spill from Drilling Pipeline
Nearly 3 million gallons of salty wastewater from oil and gas drilling has spilled from a North Dakota pipeline, leaking into at least two streams, officials said. The brine leak was nearly three times the magnitude of any earlier spill.
A state Department of Health official said Summit Midstream Partners first noticed the spill in early January but didn’t give state officials a full account until last week. Dave Glatt, chief of the Department of Health’s environmental health section, said it was too soon to know the scope of the damage and said some earlier brine spills took years to clear up.
The nominating committee of the Public Utilities Commission forwarded four finalists to Gov. John Kasich, who will choose one for a five-year term on the commission, subject to state Senate confirmation.
The candidates are Steven Lesser, a commissioner since 2010 who is seeking reappointment; Andre Porter, former PUCO commissioner and secretary of the state Commerce Department; Thomas Waniewski, Toledo city councilman and former state Public Works Commission member; and John Honabarger, a Verizon Communications executive. Lesser is a Democrat and the other three are Republicans.
Ohio law requires that one political party can hold no more than three seats on the five-member commission. There are currently two Republicans, one Democrat and two who are not members of either party, so Kasich, a Republican, can select any nominee regardless of party affiliation.
Opponents of FirstEnergy’s proposed plan to guarantee returns for its power plants dominated a five-hour hearing last week before the Public Utilities Commission.
The majority of the 78 speakers who testified said they thought FirstEnergy doesn’t deserve any ratepayer subsidies.
“Facilities like the Sammis coal-burning power plant are exactly the type of facilities we should be seeking to phase out, not facilities we should seek to keep going at full capacity for another 15 years by giving them special financial deals,” testified 16-year-old Hilary Vogelbaum, a Moreland Hills resident and a high school junior.
Labor leaders, two mayors and representatives of non-profit organizations that are supported by the company spoke out in favor of the proposal. PUCO is scheduled to vote on the plan later this year.
PPL, PUC Urge Supreme Court to Let Privacy Ruling Stand
PPL Utilities and the Public Utility Commission have asked the Supreme Court to uphold a lower court ruling that allows them to conceal the identity of a customer who got special treatment during an outage restoration effort in 2011.
PPL paid $60,000 to settle a PUC investigation into charges that a customer moved up the priority list during the outage restoration. The PUC denied the request of several news media outlets to release materials from the investigation. The state Office of Open Records ordered the file open. The Commonwealth Court reversed that decision. The media have appealed that ruling to the Supreme Court.
About 100 people turned out for a public meeting in Iroquois, population 250, to voice concerns and support for the proposed $3.8 billion, 1,134-mile Dakota Access crude oil pipeline.
Citizens asked the builders of the project, which would deliver North Dakota crude oil to a pipeline interconnection in Illinois, to pay more to compensate landowners for easements along its 272 miles through South Dakota.
Craig Walker, a farmer, suggested the company had set aside too little money to acquire rights of way. “That’s one of the reasons I came today, was to see how sharp your pencil was,” he said.
Appalachian Power Customers Getting SCC-Ordered Refund
Appalachian Power’s customers in Virginia will see a $5.8 million refund, thanks to a State Corporation Commission ruling.
The refunds will average about $1.11 a month for a typical residential customer, and will be paid in six monthly bill credits. The refund is derived from excess company earnings from 2012 to 2013.
The House of Delegates and Senate voted to repeal the Alternative and Renewable Energy Portfolio Standard, a law that called for large utilities to generate 25% of their power from alternative sources by 2025.
The law that was repealed broadly defined “alternative sources” to include some coal- and natural gas-fired technologies, as well as those burning tires. City-owned utilities and cooperatives were exempt. But in the coal mining state, repealing the standard was seen as a move to benefit the coal industry, which is coming under increasing federal regulation and economic pressure.
“The purpose of the bill is, if we save just one coal miner’s job, it’s well worth it,” said Del. John Shott, a Republican.
It’s official: Wisconsin Public Service plans to construct a 400-MW, natural gas-fired combustion turbine combined-cycle power plant.
In filings with the Public Service Commission last week, the company said it is going forward with plans to build the $517 million Fox Energy Center plant near Kaukauna. The company announced its intentions last year, but its plan came under review during the proposed acquisition of its parent company Integrys by Wisconsin Energy.
“We have to make decisions for our customers and the best decision is to move forward,” spokesman Kerry Spees said. “The studies say this is the best thing to do to meet our needs in 2019. It’s the right site, it’s the right time, it makes great sense.”
Solar energy advocates in Indiana are decrying a proposal that would allow utilities to seek fixed charges for customers generating their own electricity.
House Bill 1320 would allow utilities to petition the Indiana Utility Regulatory Commission for fixed charges “to avoid, reduce or eliminate” a subsidy to customers that use distributed generation. The commission would authorize the charge if it concludes that the proposed “nonvolumetric rate design is based on principles of cost causation.”
As currently drafted, the law would not affect those who installed solar systems before Jan. 1, 2015.
Currently, Indiana’s small-time generators can sell their excess power back to a utility for roughly what they would otherwise pay for an equivalent kilowatt.
Reducing that return for those generating less than 1 MW by introducing a charge would be a disincentive for customers to install solar or wind generation and would effectively gut the state’s decade-old net metering law, opponents say.
“This is probably one of the most aggressive pieces of legislation we’ve seen to eliminate net metering,” said Amy Heart, a policy analyst for The Alliance for Solar Choice.
“Investor-owned utilities are fine with solar — if they can own it, if they can control it and then charge ratepayers what they want to charge,” Heart added.
Making Solar Affordable?
The bill’s chief backer, the utility trade group Indiana Energy Association, counters that HB 1320 would actually promote distributed generation, in part by allowing leased generating equipment to be eligible under the state’s net metering law.
A rooftop solar system can cost more than $25,000 to buy, which is beyond the means of many electric customers, said Mark Maassel, president of the trade group, whose members include Duke Energy Indiana, Northern Indiana Public Service Co., Indianapolis Power & Light and Indiana Michigan Power.
The utility group also said HB 1320 would ensure that those who generate their own power are also paying for the upkeep of the grid — not just ordinary ratepayers.
Those ratepayers effectively subsidize neighbors who can afford to purchase solar or wind generation of their own, Maassel said. “What we’re doing [under current law] is creating an advantaged group of people.”
The bill also would prevent counties and municipalities from prohibiting distributed generation in their jurisdictions.
Common Theme
The Indiana legislation is similar to what is being pursued by utilities in other fast-growing solar generating states, such as Wisconsin.
Last year, We Energies proposed raising its fixed charge by 75% while reducing what customers are paid for their own solar generation fed back to the grid. Consumer groups countered that WE’s proposed capacity charge would offset nearly 30% of a customer’s savings from solar.
They also argued that utilities, while paying consumers less for power they generate and feed back to the grid, could then turn around and re-sell the same power for much more during peak summer hours.
Maassel paints a different picture. A utility may be more often in a situation where it has to pay a generating customer for his excess electricity at the retail rate, say around 10 cents/KWh, whereas the utility otherwise could have purchased the same power for just 3 cents/KWh on the wholesale market.
Small-but-Growing Presence
Like Wisconsin, Indiana’s solar generation remains a tiny sliver of the overall power produced, although that share has been growing quickly.
From virtually nothing in 2005, there are now about 500 net metering customers — mostly generating solar power — with a nameplate capacity of 7,000 kW in Indiana.
Heart, of the Alliance for Solar Choice, said electric utilities are trying to nip that growth before it can blossom. She questioned claims by utilities that solar generators are contributing to grid costs, saying utilities have not provided convincing evidence.
In September, a study conducted for the Public Service Commission of Mississippi found “very little substantiated evidence that there are significant costs incurred by grid operators or distribution companies as a result of low levels of solar distribution resources.”
The study, by Synapse Energy Economics, concluded that solar net metering would have estimated benefits of $170/MWh and estimated costs of $143/MWh, resulting in $27/MWh of net benefits to Mississippi.
The Alliance for Solar Choice has been especially critical of Duke Energy, painting it as schizophrenic on net metering. While a key backer of HB 1320 in Indiana, Duke recently won praise for its support to help South Carolina become the 44th state to institute net metering.
Duke Indiana spokeswoman Angeline Protogere acknowledged that the utility was among those supporting HB 1320. Protogere said the bill was developed with the goal of “beginning the Indiana discussion [on the proper policy for customer-owned generation], one that balances the interests of customers who have their own generation and those who don’t.”
The Federal Energy Regulatory Commission last week approved a revised reliability standard, PRC-005-3 (Protection System and Automatic Reclosing Maintenance). The standard proposed by the North American Electric Reliability Corp. requires testing and maintenance of auto-reclosing relays and includes one new definition and six revised definitions (RM14-8). FERC required NERC to modify the standard to include maintenance and testing of supervisory relays.
ISO-NE must find a market-based solution for ensuring adequate generation by next winter, the Federal Energy Regulatory Commission said last week in a clarification of a previous order.
FERC’s Jan. 20 order (ER14-2407) sided with the region’s generators, who contended ISO-NE was not acting with the urgency the commission intended in a Sept. 9 ruling, in which it approved the second year of the RTO’s Winter Reliability Program.
The program provides dual-fuel capable generators with out-of-market incentives to ensure they can switch to oil when cold weather stresses natural gas supplies. The RTO had previously won FERC approval of a long-term, market-based reliability plan, the Pay-for-Performance program, which will result in a two-settlement process for capacity resources starting in 2018 (ER14-1050).
“We’ll continue with the stakeholder process, which we began a couple of months ago. We’re still assessing the impact of this order, in light of the work that’s been done so far,” ISO-NE spokeswoman Marcia Blomberg. “A jump-ball filing [reflecting a lack of consensus among stakeholders] is theoretically a possible outcome of a stakeholder process on any proposal but, as I said, it’s premature to speculate on the possible outcomes of this stakeholder process.”
The Sept. 9 order directed ISO-NE to start a stakeholder process by Jan. 1, 2015, to develop a market-based solution before Pay-for-Performance takes effect.
Generators: No More ‘Band-Aids’
The RTO began the process last fall, filing a schedule of New England Power Pool stakeholder meetings on Oct. 8, but it made no promises that it would result in an interim market-based solution.
The New England Power Generators Association responded Oct. 9 with a filing complaining that the RTO was misinterpreting FERC’s directive.
“ISO-NE is interpreting the commission’s order to allow ISO-NE to continue proposing out-of-market fixes for the three consecutive winters after winter 2014/2015,” the group wrote. “… The commission’s order should not be read to condone three additional years … of seasonal, out-of-market Band-Aids in lieu of market rule changes based on the competitive market principles necessary to efficiently price system reliability.”
It asked the commission to clarify that the September order required ISO-NE to implement a market-based solution for 2015/16, saying it wanted “to avoid potentially wasting valuable NEPOOL stakeholder meeting time on out-of-market solutions, if any, proposed by ISO-NE.”
ISO-NE: No Consensus
In a Dec. 8 progress report to FERC, ISO-NE said that in response to “concerns that the winter reliability programs to date have not been resource-neutral and market-based, ISO-NE has committed to have a dialogue with stakeholders on current and alternative objectives for winter reliability programs, and the feasibility of designing and implementing a market-based solution for future winters.”
But the RTO said that at a November meeting of the NEPOOL Market Committee, stakeholders were split over what alternatives they should pursue for future winters, with some calling for the development of “price formation projects,” others supporting continuation of the existing winter program, and others for a market-based solution.
“In short, no consensus emerged,” the RTO said, adding that it would discuss the issue again at future Markets Committee meetings.
In its Jan. 20 order, FERC agreed with the generators.
“The commission intended that ISO-NE would determine whether a winter reliability solution is necessary for the 2015-2016 winter and future winters and, if so, develop an appropriate market-based solution through the stakeholder process that can be implemented beginning with the 2015-2016 winter,” FERC wrote. “While the two-settlement capacity market design could help address winter reliability concerns in the future, that design will not be fully implemented until the 2018-2019 Capacity Commitment Period.”
