Capacity Panel to Vote on Arbitrage Fix

Stakeholders will hold a formal vote on measures to eliminate speculation in the capacity market this week after narrowing the proposals from seven to five in a lengthy meeting Friday.

Because clearing prices in incremental auctions (IAs) are usually lower than those in the base residual auction (BRA), participants can profit by selling capacity in the BRA and buying out their commitments in the IAs. PJM and the Market Monitor say such buyouts are suppressing capacity prices and could undermine system reliability.

PJM’s proposed solution (#2 in the matrix) would reduce the number of incremental auctions (currently three) and set conditions eliminating the potential to arbitrage between the BRA and IA.

RC Cape May Holdings LLC (#3), Old Dominion Electric Cooperative (#4), the Market Monitor (#9) and Exelon (#10) adopt some of PJM’s changes but differ in other details. (See “Incremental Auction Proposals Compared”)

Increased penalties for bidders who fail to deliver promised capacity, under proposals by PJM and other stakeholders. (Based on May 2013 clearing prices.) *MAAC includes EMAAC, SWMAAC. **Assumes no reduction for milestones. — Increased penalties for bidders who fail to deliver promised capacity, under proposals by PJM and other stakeholders. (Based on May 2013 clearing prices.)*MAAC includes EMAAC, SWMAAC. **Assumes no reduction for milestones.

All of the proposals would increase the penalties for failing to deliver promised resources. (See chart, right)

An informal poll conducted last week among 41 respondents representing 206 members and affiliates found overwhelming support for reducing speculative offers in the base auction but a split over the urgency of the issue: 59% of votes called for implementing changes in time for this May’s base auction as PJM has insisted; 34% said stakeholders should take more time to vet the issue. About 7% said there was no need for changes.

PJM’s proposal was the most popular proposal, followed by ODEC and the Market Monitor.

At Friday’s meeting of the Capacity Senior Task Force, Calpine (#7) and Duke (#8) withdrew their proposals, with Duke throwing its support behind the PJM plan. Citigroup Energy (#6) had withdrawn its proposal earlier.

Force Majeure

Much of the meeting was spent discussing the Market Monitor’s demand that the new rules bar bidders from buying out of their obligations except under force majeure.

Market Monitor Joe Bowring said the condition wouldn’t be limited strictly to “acts of God.” The reason for buying replacement capacity “has to be out of your control and it can’t be [a] financial” motive, he said.

None of the proposal sponsors were willing to add that condition to their packages Friday although some said they might agree after vetting it with their companies. Stu Bresler, PJM vice president of market operations, said he feared the restriction would be difficult to administer.

Unintended Consequences

Dan Griffiths, executive director of the Consumer Advocates of PJM States, said the RTO risks “overcorrecting” and should wait to evaluate other recent initiatives impacting demand response and the capacity market before making additional changes. (See Members Deadlock on DR in Capacity Auctions; PJM May Seek FERC OK Despite Stakeholder Opposition.)

“Our concern is the pancaking of a variety of issues,” Griffiths said “We’ve repeatedly asked PJM about the impact of these changes and have been repeatedly told: `We don’t know.’”

Carl Johnson, representing the PJM Public Power Coalition, said the changes could result in “a huge number of megawatts whose price is administratively determined” rather than set by the market.

Walter Hall, of the Maryland Public Service Commission, said the PSC is concerned that PJM may not be able to sell excess capacity in incremental auctions if it refuses to sell below the base auction clearing price, as it has proposed.

Milestones

The task force also discussed the inclusion of development milestones, which Exelon and RC Cape May Holdings LLC proposed using to reduce credit requirements. RC Cape May would also use the accomplishment of milestones to reduce penalties for failing to deliver promised resources.

Hall and a second stakeholder said they supported the concept of development milestones but feared it would make it more difficult to reach consensus. “It just feels like it doubles the complexity of the replacement capacity issue,” the stakeholder said.

The vote on the proposals will run between tomorrow and Friday, with results released next Monday, in time for a first read at the Markets and Reliability Committee Jan. 30. The MRC will vote on Feb. 27, with a Members Committee vote the same day or at a special meeting afterward in time for a mid-March filing with the Federal Energy Regulatory Commission.

Bresler said the Board of Managers may file the PJM proposal with FERC even if it does not receive a two-thirds vote in support.

January 14, 2014

Import Limit Manual Changes Clear Planning Committee

The Planning Committee last week endorsed manual changes implementing PJM’s new capacity import limits.

Reason for Change: Stakeholders approved the limits in November out of concerns that PJM might lack sufficient transmission to accommodate its growing volume of capacity imports. Cleared imports grew from about 3,000 MW to more than 4,500 MW in 2009-2012 before more than doubling to nearly 7,500 MW this year. The limits are detailed in Manual 14B: PJM Region Transmission Planning Process.

Impact: The revised methodology will limit external generation resources in next year’s base capacity auction to 6,200 MW – a 17% drop from the volume of imports that cleared in the May 2013 auction, while also setting five import zones with their own limits. (See Members OK Capacity Import Limit; Prices May Rise.)

January 14, 2014

New Pricing Interface in PA Feb. 1

PJM will begin pricing at a new interface near the Seneca pumped storage station in Warren County, Pa., beginning Feb. 1.

RTO officials said they expect to use the pricing point when the 451 MW Seneca plant operates in pumping mode. It will only be used to set locational marginal prices when off-cost generation is necessary to provide voltage support for the Seneca plant to pump. It is not an IROL (Interconnection Reliability Operating Limits) transfer interface.

The new interface is comprised mainly of the 230 kV buses and connected generation buses at Seneca, Glade, Forest, Elko and Shawville in the PN transmission zone. (See full interface definition.) Seneca was among 11 hydroelectric power stations LS Power agreed last year to purchase from FirstEnergy Corp.

January 14, 2014

Federal Briefs

The Federal Energy Regulatory Commission and Commodity Futures Trading Commission, after long and difficult negotiations, signed two memorandums of understanding concerning information-sharing procedures and jurisdiction over regulation of energy trading. But, disappointing some attorneys, the MOUs do not address questions of enforcement jurisdiction, which means answers will have to come from the courts.

More: Risk.net; CFTC, FERC

Obama Sets Energy Review

President Obama directed the administration to conduct what the White House said was the first Quadrennial Energy Review. It will focus on developing a comprehensive strategy for pipelines and the power grid, with issues including changing markets, aging facilities and cyber threats.

More: White House

Gas Share to Drop in 2014

Natural gas-fired generation will account for 26.8% of generation in 2014, down from 27.5% in 2013 because of rising gas prices, according to the Energy Information Administration. Coal’s share will rise this year, from 39.1% to 40.2%. In 2015, though, coal’s share should drop to 38.6% as federal mercury and air toxics regulations take effect.

In its Short-Term Energy Outlook, EIA estimated total generation averaged 11.1 TWh/day in 2013 and projected it would rise 0.3% this year and 1% in 2015. Per-customer consumption will continue to decline with energy efficiency, but industrial users will increase consumption in 2015, EIA predicts.

More: EIA

Panel to Act Against GHG Rule

Now that the Environmental Protection Agency has published its regulations for greenhouse gas emissions from new power plants, the House Energy and Power Subcommittee has set Jan. 14 to vote on a bill that effectively would block it. The measure introduced by subcommittee Chairman Ed Whitfield (R-Ky.) requires that a standard for coal units must have been achieved for a continuous 12 months, commercially, by a least six units at different plants. This aims at EPA’s requirement for carbon capture and storage.

The measure also requires a separate subcategory for lignite units. Sen. Joe Manchin (D-W.Va.) introduced a companion bill in the Senate.

More: The Hill; Energy and Commerce Committee

Meanwhile, EPA’ Science Advisory Board has scheduled a Jan. 21 teleconference to discuss “whether to review the adequacy of the science” behind the rule.

More: Science Advisory Board; APPA

Democrats Launch Climate Task Force

Democratic Sens. Barbara Boxer of California and Sheldon Whitehouse of Rhode Island have established the Climate Action Task Force to raise the visibility of the issue. Boxer, who chairs the Environment and Public Works Committee, said the group has a dozen members and the backing of Senate leadership. “[W]e want Congress to take off the blindfolds,” she said.

More: National Journal

NRC Seems Satisfied with Fuel Pools

Four of the five members of the Nuclear Regulatory Commission said they believe spent fuel could continue to be stored safely in pools and did not have to be moved to dry storage, which some experts say would be safer. Chairwoman Allison Macfarlane was the only member whose questions at a commission meeting last week indicated she could be open to moving more fuel to dry casks.

More: The New York Times

January 14, 2014

Consensus Still Elusive on Auction Arbitrage Fix

Time is growing short for stakeholders hoping to reach consensus on rules banning capacity market speculation before May’s auction.

After two meetings last week, the Capacity Senior Task Force was still debating nine “replacement capacity” proposals — almost as many as the 11 packages the panel was considering when it failed to reach consensus in November.

Since Nov. 21, when the Markets and Reliability Committee returned the issue to the CSTF, the task force has held four meetings, including two last week. (See Arbitrage Fix Returned to Committee.)

PJM officials want to submit a plan to the Federal Energy Regulatory Commission by mid-March in order win approval in time for the Base Residual Auction. The schedule laid out by CSTF Chair Scott Baker calls for a CSTF vote after its meeting Friday, with a first read before Markets and Reliability Committee Jan. 30.

The odds of reaching an agreement may become clearer as a result of a poll CSTF Chair Scott Baker submitted to task force members yesterday.

The poll, which closes at 5 p.m. Wednesday, is an effort to thin the candidates by identifying consensus on core concepts. One question, for example, seeks to measure support for proposals eliminating the ability to profit in cleared buy bids in incremental auctions. The question then seeks to parse support for addressing the issue in time for this year’s auction or whether the task force should take more time to vet solutions.

Versions of this “IA Settlement Agreement” are featured in packages proposed by PJM, J.P. Morgan Ventures Energy Corp., Citigroup Energy and Duke Energy. Taking different approaches are proposals by Market Monitor Joseph Bowring, Old Dominion Electric Cooperative, Calpine, Exelon and Gabel and Associates. Bowring would eliminate replacement of capacity in incremental auctions except for capacity lost to force majeure events.

The poll also will gauge support for using development milestones to reduce credit obligations or capacity deficiency penalties. Another set of questions focuses on proposed requirements that bidders certify their intent to provide physical resources and not plan to buy out of their obligations in the incremental auctions, when prices are much lower than in the BRA.

An earlier poll found 90% support for raising the Capacity Resource Deficiency Charge (currently the greater of 1.2 times the Resource Clearing Price or the Resource Clearing Price + $20). A proposal to make the penalty the greater of 1.5 times the Resource Clearing Price or the Resource Clearing Price + $50 also had strong support at 86%

The same percentage of respondents endorsed changing the PJM sell offer price (currently an upward sloping offer curve with a starting price equal to the intersection of the updated VRR curve and current commitment level). A proposal to switch to an upward sloping offer curve with the starting price floored at the BRA clearing price won almost 73% support, although that could drop in a binding, sector-weighted vote.

Cutting the number of incremental auctions from three to two won 83% support while only 67% backed a cut from three to one.

January 14, 2014

Company Briefs

American Electric Power moved its Ohio generation into a separate subsidiary in December and acknowledged that it could consider selling the assets. “They’re ahead of their pack in terms of jumping on the transmission bandwagon,” said a UBS Securities analyst.

Meanwhile, President and CEO Nick Akins assumed the position of chairman as well.

More: The Columbus Dispatch; AEP

Rogers Heads to Retirement

Jim Rogers’ seven-year run atop Duke Energy ends this month in a rush of industry tributes, legacy look-backs and, like a retiring Super Bowl champion, a trip to Disney World.

“My best guess is that Jim Rogers is someone who wanted to do more toward clean energy than he ever found a way to make happen during his time,” environmentalist Jim Warren said. “I favor that over a more cynical approach that he was more a figment of corporate PR or greenwashing.”

More: The Charlotte Observer

Start-ups, Google Pursue Airborne Turbines

aerial wind turbine (Source: Altaeros Energies)

University of Delaware wind power researcher Cristina Archer sees the Great Plains as an ideal place for airborne wind turbines in the summertime because of the presence of something called “wind speed maxima,” strong currents of wind that resemble the jet stream but occur at much lower altitudes.

Airborne wind turbines are devices resembling blimps or gliders that can generate electricity as they are flown like kites in the lower atmosphere. Activity on the concept has accelerated in the past five years with at least 20 startup companies working on various concepts, including Makani Power, which was acquired by Google in May.

More: Midwest Energy News

January 14, 2014

State Briefs

Big Rivers Rate Hike Protested

Big Rivers Electric’s proposal for a rate increase is generating opposition in the state. The hike — about 21% for residential customers and 25% for industry — is meant to make up for revenue the cooperative will lose when a second aluminum smelter leaves its system this month. The increase would “cause us to think about generating our own power,” a Kimberly Clark plant manager said at a Public Service Commission hearing.

More: Kentucky.com

MARYLAND

Meter-Reading Case Unsettled

A dispute between the Office of People’s Counsel and FirstEnergy’s Potomac Edison about meter reading and billing could go to a Public Service Commission law judge if the parties do not reach a settlement by this week. Customers allege overbilling because the utility did not read their meters as often as required.

More: Herald-Mail

NEW JERSEY

Pinelands Pipeline Plan Fails

The Pinelands Commission was evenly split, 7-7, Jan. 10 when it surprised onlookers by voting down South Jersey Gas’ politically hot proposal for a 22-mile pipeline through the protected area to the BL England power plant. With 8 votes required, the proposal failed, and it is unclear what steps will come next from its supporters, who include Gov. Chris Christie as well as numerous officials who back converting BL England to gas from coal.

The commission’s deliberations on the pipeline have been fraught with charges of political interference, and one columnist linked the dynamics to those involved in the George Washington Bridge lane-closing scandal.

More: StarTribune; The New York Times

Panel OKs Retail Shopping Bill

The Assembly’s Telecommunications and Utilities Committee approved a bill sponsored by Chairman Upendra Chivukula aimed at increasing the amount of retail power shopping by residential and small business customers. Utilities oppose the measure. While the bill cannot pass the legislature this session, it is a welcome “beginning of a conversation” about the issue, said Jay Kooper of the Retail Energy Supply Association.

More: NJSpotlight

Wind Farm Awaits BPU Decision

Closing arguments in Fishermen’s Energy case at the Board of Public Utilities ended late in December, and the offshore-wind company is waiting to see if the regulators will approve the state’s first offshore renewable energy certificates to fund the project. Fishermen’s 25-MW demonstration project offshore Atlantic City first went before the BPU three years ago; several months ago the company worked out a deal with the Division of Rate Counsel to lower the cost to customers.

More: Press of Atlantic City

BPU Eyes Storm-Cost Recovery

The Board of Public Utilities begins this week to consider Jersey Central Power & Light’s request to recover $640 million in storm costs. The case is one of a number involving more than $1 billion in costs for the state’s utilities.

More: NJSpotlight

OHIO

AEP Proposes 9% Rate Cut

American Electric Power proposed to the Public Utilities Commission a retail rate cut of 9% over three years, beginning in 2015. It attributed the reduction to oversupply and sluggish demand. The state’s ratepayer watchdog says the cut should be bigger.

More: Akron Beacon Journal

PUC Travel Spending Questioned

The Public Utilities Commission spent $34,660 to send all five commissioners and 15 staffers to the Orlando annual meeting of the National Association of Regulatory Utility Commissioners – a sum that some believe is excessive. “Twenty people to Orlando. There is no excuse for that,” one former commissioner said. Documents released to the Dayton Daily News show the PUC has paid $156,082 in commissioners’ travel since 2009.

More: Power Engineering

Low-head Hydro Company Starts Up

KW River Hydroelectric, a firm that has developed a device to capture power from low-head dams, has opened an office in Hamilton and is seeking investors and grants. The start-up was launched by a former Duke Energy executive and an Air Force retiree who invented the device, a prototype of which is to be tested on the nearby Great Miami River.

More: Journal-News

Group Promotes Green Initiative

The Ohio Energy Initiative Commission LLC, a private group whose members and backers are not identified, said it would begin this month to accept early green-energy project proposals for $1.3 billion in annual funding that would be created if state voters approve the Ohio Clean Energy ballot initiative. Supporters need to collect 385,247 signatures by July 4 to get the issue on the November ballot.

More: Associated Press; Yes for Ohio’s Energy Future

PUC Chief Won’t Seek Reappointment

Potential appointees have until Jan. 16 to apply for Public Utilities Commission Chairman Todd Snitchler’s position. Snitchler announced this morning that he will not seek reappointment. During his tenure the PUC has pushed utility restructuring and electricity competition.

More: The Columbus Dispatch, PUC of Ohio

EPA Director Out, Cryptically

Scott Nally (Source: OH EPA) — Scott Nally

Scott Nally, director of the state Environmental Protection Agency, created a stir by resigning abruptly Jan. 7 after three years in the post. He was replaced on an interim basis by Craig Butler, Gov. John Kasich’s senior director of energy and environmental policy. A cryptic resignation letter from Nally provided no reason for his departure, leading to speculation.

More: The Columbus Dispatch

Ormet Workers Picket AEP

Former employees of Ormet’s Hannibal aluminum smelter picketed American Electric Power headquarters Jan. 8 to call attention to the power rates they say forced bankrupt Ormet to shut the facility. Ormet shut the plant in October, blaming its decision on a Public Utilities Commission ruling that did not approve as large a rate discount as Ormet said it needed.

More: The Columbus Dispatch;

Wind Operational at Honda Plant

Wind Turbines at Honda Plant (Source: ConEdison Solutions) — (Source: ConEdison Solutions)

Two wind turbines began operating at Honda Transmission Manufacturing in Russells Point. The company says the turbines’ 10,000 MWh/year will supply about 10% of the plant’s needs, making it the first automotive company in the U.S. to get a substantial amount of its power from onsite wind.

More: Automotive World

Villager Wants to Disband Muni

Officials in Bethel are fighting a citizen petition to have the village disband its utility. Sponsor Jeff Coulter wants the village to turn over its electric operations to a company like Duke Energy or American Electric Power, from which the village currently buys its electricity. Coulter says cutting out Bethel Utilities as the “middle man” will save residents money. Town officials disagree.

More: Cincinnati.com

PENNSYLVANIA

Low-Income Customers Can Shop

The Public Utility Commission voted to let customers in PECO’s CAP Rate program sign up with competitive suppliers. Consumer advocates worry that suppliers might win these low-income customers initially and later boost their rates. But the PUC rejected a proposal to limit the suppliers from charging more than PECOs default rate.

More: The Philadelphia Inquirer

Storage Company Gets Big Financing

Pittsburgh-based Aquion Energy, maker of batteries and energy storage systems, closed a $55 million financing round that includes an investment from Microsoft founder Bill Gates. “We are expecting Aquion Energy’s commercial launch in 2014 to be disruptive to the world of stationary energy storage,” said Ray Lane, partner emeritus at Kleiner Perkins, the first firm to invest in Aquion.

More: Aquion Energy

Beacon Project at Half Capacity

Beacon Power’s 20-MW flywheel storage project at the Humboldt Industrial Park is operating at about half capacity and plans to be at full strength by summer, the company said. The project was among those identified in a recent “60 Minutes” segment about ventures that received Department of Energy stimulus funding and then went bankrupt. Beacon reformed after its bankruptcy, and completed a 20-MW facility in New York state and undertook the Humboldt construction.

More: The Standard Speaker

PPL Line Wins Approval

The Public Utility Commission approved PPL Electric Utilities’ proposal for a $335 million transmission line expansion and upgrade in the Poconos. The company will build three new substations and 60 miles of new 230 kV lines, and rebuild 20 miles of existing 69 kV lines in parts of Lackawanna, Monroe, Wayne, Pike and Luzerne counties.

More: The Morning Call

Duquesne Set for Smart Meters

Duquesne Light plans to install its first 5,000 smart meters this year, after the Public Utility Commission approved the installation last week. Duquesne is the third utility to receive final PUC go-ahead, following PECO and PPL. By 2020, a spokesman said, all 585,000 customer meters are to be replaced.

More: Tribune-Review

VIRGINIA

Dominion Nukes Had Best Year Yet

Dominion Resources’ four nuclear plants posted a record efficiency rate in 2013, with an average capacity factor of 93.7%, up from a 2009 record of 93.1%. In Virginia, the company’s two nuclear plants supply about 42% of its customer load.

More: Richmond Times-Dispatch

Dominion Line Case Reopened

The State Corporation Commission reopened its case involving Dominion Virginia Power’s proposed Surry-Skiffes Creek power line after the utility was unable to get a right-of-way agreement with the James City County Economic Development Authority. The SCC, which approved a route in November, reopened the case not to have it reargued but to allow further review of the on-land portion of the route. It has scheduled a hearing Jan. 29

More: Williamsburg Yorktown Daily

January 14, 2014

UTC Inquiry Moves Ahead

Members agreed last week to move forward with an initiative that could result in reduced restrictions on up-to congestion transactions.

About 70 percent of stakeholders at the Market Implementation Committee voted in favor of an issue charge to consider lifting the UTC bid cap and restrictions on the nodes that are eligible for such trades.

The measure passed over opposition from the Market Monitor and several stakeholders, who said the product is already exacerbating the underfunding of Financial Transmission Rights.

A UTC combines a day-ahead offer to sell energy at a source with a bid to buy the same quantity at a sink. The transaction is only executed if the difference between the Locational Marginal Prices at the source and sink are under a threshold set by the bidder. Current market rules limit such bids to differentials of $50 or less.

Noha Sidhom, of Inertia Power LP, proposed the review in a problem statement last month, saying the bid cap forces traders to place price insensitive bids that don’t reflect market conditions. (See PJM to Consider Relaxing UTC Rules.)

The current rules also limit such transactions to nodes historically available for interchange transactions, excluding those load buses below 69 kV and buses for generators below 100 MW. “Expanding nodes would make [UTCs] a true hedge when the market is more volatile,” Sidhom said.

The issue charge directs the MIC to consider alterations to UTCs during special sessions in the first quarter of 2014, with a FERC filing for approval of Tariff changes anticipated in July.

January 14, 2014

TEAC Roundup

Impact of FirstEnergy Hunterstown Project (Source: PJM Interconnection, LLC) — (Source: PJM Interconnection, LLC)

As expected, PJM transmission planners said last week they will recommend the PJM Board of Managers approve FirstEnergy’s proposed $8 million congestion-relief upgrade in the MetEd zone.

“We’re already looking at the FirstEnergy project as the project we would like to move forward on,” PJM’s Tim Horger told the Transmission Expansion Advisory Committee Thursday.

The FirstEnergy project bested two proposals by LS Power to relieve congestion on the Hunterstown 230/115 kV transformer. The LS Power projects, estimated at more than $60 million each, had benefit to cost ratios of less than 2, far below FirstEnergy’s B/C ratio of more than 6.

Reliability tests of the LS Power proposals indicated one would require a new circuit breaker and the other caused reliability violations, additional costs that would further reduce their benefit-cost ratios. Adding either LS Power proposal to the FirstEnergy project would have an incremental B/C ratio of less than 1, Horger said.

The FirstEnergy project, expected to be completed in 2017, includes the installation of a second Hunterstown 230/115 kV transformer and reconductoring of the Hunterstown-Oxford 115 kV line

The project has a total revenue requirement of $11.7 million and is expected to produce savings with a net present value of $71.6 million over 15 years, a payback of 6.1 to 1. The calculations are based on a carrying charge rate of 16.7% and a 7.7% discount rate.

The three projects were among 17 congestion relief transmission proposals submitted by developers in September. PJM rejected the other 14, saying they failed to provide sufficient benefits or targeted problems that were already addressed by other upgrades. (See PJM to OK Only 1 of 17 Congestion Relief Proposals.)

$238M in Additional Reliability Projects

The FirstEnergy project will be recommended to the Board of Managers in February along with seven reliability projects totaling more than $238 million, including four in Penelec (total $82 million) and one each in PPL ($350,000), AE ($300,000). The biggest project of the seven is a $155 million upgrade in Dominion to correct overloads on the Franconia 230kV to Van Dorn 230kV line and four other lines.

2014 RTEP Timeline

Transmission owners are conducting a second-round review of inputs to the 2019 Regional Transmission Expansion Plan model. The Model incorporates updated information provided by TOs following their initial review.

PJM staff is updating contingency, interchange and generation dispatch data, with plans to finalize the case by the end of January and begin testing the model in February.

$141M in Upgrades for Generator Retirements

Upgrade Costs for Plant Retirements (Source: PJM Interconnection, LLC)

Planners said they have identified more than $141 million in upgrades needed to correct reliability problems resulting from the retirements of 14 plants announced late in 2013. (See chart)

PPL’s retirements of Sunbury units 1-4 will require upgrades totaling $52 million. Large upgrades were also identified as a result of the closing of the Mad River combustion turbines ($45.7 million) and Dickerson units 1-3 and Chalk Point units 1 and 2 ($43 million).

The reliability analysis on BGE’s Riverside unit 4 identified no issues.

January 14, 2014

PJM Shivers to New Winter Demand Record

Sub-zero temperatures from Toledo to Tennessee pushed PJM to its limits last week as the RTO overcame the loss of nearly 40,000 MW of generation during an arctic blast that set a new winter demand record.

Outages by Fuel Type (Source: PJM Interconnection, LLC) — (Source: PJM Interconnection, LLC)

Demand response, voluntary conservation and imports helped PJM avoid shedding load as demand hit 141,500 MW Tuesday evening, besting the previous winter peak — set Feb. 5, 2007 — by nearly 5,000 MW.

The RTO survived Tuesday’s peak despite about 38,000 MW in generation outages, almost 20% of its installed capacity. “We really exhausted every megawatt we had on the system,” Adam Keech, director of wholesale market operations, told the Market Implementation Committee in a briefing Wednesday.

Some plants failed to start, suffered tube leaks or were unable to convert to backup fuel. “We’ve seen everything,” Executive Vice President for Operations Mike Kormos said during a press conference Tuesday morning.

What sent temperatures plunging and power and natural gas prices skyward was an unusual visit by the polar vortex, a low pressure system that normally circles around the North Pole.

Temperatures of -10 or below were recorded Tuesday in Ohio, Michigan and Pennsylvania. The negative numbers reached as far south as Kingsport, TN, which reported -1 and Blacksburg, VA, which registered -5.

PJM power prices were above $200/MWh for most of the period from Monday evening through Tuesday evening, peaking at more than $1,800/MWh during Tuesday’s morning and evening peaks.

Natural gas for Tuesday delivery hit a record $95/mmBtu at Transco’s Zone 6 non-New York hub in PJM, Natural Gas Intelligence reported. U.S. gas demand hit a record 130 billion cubic feet per day Monday, topped by a new record of 134 Bcf/d Tuesday, according to Bentek Energy.

Generators told PJM, “`I can get gas but it’s very expensive. Do you still want it?’” Executive Director of System Operations Mike Bryson told Platts Energy Week later. “And we were in a position where we needed every megawatt we could get on the system.”

One bright spot: The gusts that accompanied the cold boosted PJM wind production to more than 3,000 MW, according to the American Wind Energy Association.

Below is a chronology of PJM’s response to the arctic blast, based on PJM records and briefings from PJM officials and industry news reports.

Monday, Jan. 6

PJM braced for the arrival of the vortex Monday as subzero temperatures began moving east from the western portion of the RTO. Shortly before noon, PJM issued a Maximum Emergency Generation Alert for Tuesday for the entire PJM RTO — a signal that the RTO may need every available megawatt of generating capacity. They also issued a press release calling on consumers to conserve power the following day.

Arctic Blast Boosts LMP's Above $1000/MWh (Source: PJM Interconnection, LLC) — Arctic Blast Boosts LMP’s Above $1000/MWh (Source: PJM Interconnection, LLC)

PJM and state regulators urged consumers to reduce energy use during the emergency. “Every little bit helps,” Kormos said. “There’s 60 million people in our footprint. If everyone does their part, that could easily add up to one nuclear plant, which is 1,000 MWs.”

“We’re very close [to generation limits],” Kormos added. “The last couple hundred megawatts could allow us to not have to take any forced interruptions.”

PJM received a waiver from the Federal Energy Regulatory Commission under Order 787, allowing RTO officials to share information with natural gas pipelines serving the region. PJM held conference calls with pipelines Friday and Monday and individually validated gas nominations for the RTO’s gas generators. Keech said there were no natural gas curtailments.

“The pipelines came through pretty well,” Gary Helm, lead market strategist, told the Market Implementation Committee in a briefing. “We only saw two compressor outages.”

At about 5 p.m., the RTO lost about 1,500 MW of generation, including the FirstEnergy’s 911 MW Beaver Valley nuclear unit 1, which tripped after a transformer malfunction. Operators requested synchronized reserves and shared reserves from NYISO. Load mounted faster and higher than expected, topping off 5,000 MW above forecast at 131,900 MW.

Keech said operators’ ability to forecast load was hamstrung by a lack of comparable temperature data. “We couldn’t find a temperature set [with extreme cold throughout the RTO] for the last decade. And if you go back that far the [RTO] footprint was so different it’s probably not even useful.” Keech said.

The synch reserve event was ended after a little more than an hour at 6:09 p.m. Shortly before 7:30 p.m., another large generator tripped.

At 7:50, with reserves growing short, operators reduced voltage across the RTO by 5% to help them through the evening peak. The action, which lasted about an hour, triggered scarcity pricing — sending prices briefly above $1,000/MWh.

Tuesday, Jan. 7

Overnight, operators became alarmed after the “valley load” — the lowest load of the day —came in 4,000 MW higher than the projected 116,000 MW. About 2 a.m., expecting a morning peak of 140,000 MW, operators issued a request for emergency energy for 6 through 11 a.m.

Shortly before 3 a.m., they issued a warning that they might again reduce voltage.

At 4:30, they issued a call for 1,900 MW of emergency demand response and issued a Maximum Emergency Generation Action, notifying market participants that off system energy sales from PJM capacity resources may be recalled. Demand response provider EnerNOC Inc. said it was the largest winter dispatch in PJM history.

About 1,100 MW of emergency energy began flowing from MISO and NYISO at 6 a.m., but at 6:30 operators called on 100% synchronized reserves to respond to a low Area Control Error. A second spin event was initiated shortly after 8 a.m., when an unnamed unit tripped.

The morning peaked at 138,600, a new — if short-lived — winter record. Prices were in the $1,800/MWh range from 7 to 11 a.m.

At 3 p.m., operators again called on DR for an evening peak projected at 142,000 MW. However, an unexpected influx of imports — as much as 10,000 MW — allowed them to cancel the DR call shortly after 6 p.m.

The evening peaked at 141,500 — below projections but a new winter record nonetheless.

Bryson credited voluntary conservation. “There were times when we thought we were going to be short on reserves and the load just didn’t come in,” he said. “And it’s probably representative of a very good consumer response.”

Wednesday, Jan. 8

Expecting a morning peak of 136,600 MW, PJM again issued a Maximum Emergency Generation Action, called on DR and issued a request for emergency energy.

Generator outages would peak Wednesday morning at 39,520 MW. But with temperatures rebounding, the morning peak would hit only 134,500. With load coming in lower than expected, the RTO cancelled the DR call at 6:30 and the Maximum Generation Action at 9 a.m.

The crisis was over.