Ontario-based Algonquin Power is buying the remaining 40% of a 400-MW U.S. wind power portfolio from Gamesa Wind US for about $117 million. Algonquin already holds 60% of the three projects, which include Minonk in Illinois, Sandy Ridge in Pennsylvania and Senate in Texas.
Dominion promoted executives to head two business units, effective Jan. 1. Robert M. Blue, now a vice president, will become president of Dominion Virginia Power and Diane Leopold, vice president at Dominion Transmission, will become president of Dominion Energy. Among other changes, Dominion also named P. Rodney Blevins to senior vice president and chief information officer and Katheryn B. Curtis to senior vice president for power generation.
Duke Energy renamed its Cliffside Steam Station after former President and CEO Jim Rogers, who will retire as board chairman this month. The 1,375-MW James E. Rogers Energy Complex comprises two coal units. Because of Rogers’ efforts, 825-MW Unit 6 is “one of the cleanest, most efficient coal units in the world,” the company said.
The Nuclear Regulatory Commission is reviewing Duke Energy’s safety plans at the shuttered Crystal River plant due to concerns over a possible strike by the plant’s unionized workers. Duke’s contract with 1,800 members of the International Brotherhood of Electrical Workers expired last week. The IBEW represents operations, maintenance, chemistry, radiation protection and warehouse personnel.
Houston-based Dynegy closed on its purchase of five Illinois coal plants from Ameren, which is focusing more on its regulated businesses. The closing came about two weeks after Dynegy got a five-year pollution control waiver from the Illinois Pollution Control Board for the Ameren plants. The deal had hinged on that waiver.
PJM generators told the Federal Energy Regulatory Commission last week that it should go beyond PJM’s qualification rules for demand response providers — with some proposing that planned DR resources be banned from the capacity market altogether.
Seven generators and two generator trade groups filed comments last week following a FERC technical conference Nov. 13 on PJM’s proposal to require “Sell Offer Plans” certified by the DR company officers and resource-specific data in some zones. Only a single Curtailment Service Provider, Comverge Inc., submitted comments opposing the rules, filed by PJM Aug. 2.
Support from Market Monitor
The generators — Calpine, Exelon, PSEG and four Ohio utilities — said the overwhelming stakeholder support for the proposed rules and the silence of most DR providers means the changes are reasonable and should be approved.
PSEG, the PJM Power Providers trade group and the Ohio utilities — FirstEnergy, AEP, Dayton Power & Light and Duke-Ohio — went further, saying FERC should order PJM to take tougher action against DR than the RTO could get through the stakeholder consensus process.
The failure to do so will allow speculative DR offers to continue suppressing capacity market prices and threatening reliability, they said. “The issue here is not `existing generation versus DR’ as some may seek to cast it,” the Ohio utilities wrote. “The issue is real versus speculative capacity resources.”
The generators have an ally on this issue in the Market Monitor, which called the PJM proposal a “compromise that does not solve the issue and which will lead inevitably to the need for further changes.”
Rules Vague
Comverge insisted in its filing that PJM’s rules are vague and unnecessary and will depress DR’s growth, echoing comments the company’s vice president of regulatory and market strategy, Frank Lacey, made at the hearing.
“PJM has neglected to provide any objective substantive criteria upon which it will determine the adequacy of DR Sell Offer Plans,” the company wrote. Allowing PJM “complete discretion” in accepting or rejecting the DR Sell Offer Plans violates the Federal Power Act’s prior notice requirements, the company said.
Ohio Utilities’ Filing
FirstEnergy and Duke protested the PJM proposal as insufficiently tough in a joint filing in August. For the post-conference comments, the two companies teamed up with DPL and AEP with a joint filing that cited analyses by a former FERC economist and a former PJM manager.
Former PJM transmission planning manager Scott Gass said in an affidavit that the RTO needs resource-specific information to identify locational delivery areas, which are priced as separate regions in the base auction. Gass performed an analysis of the ATSI transmission zone that he said shows that a reliability event that could be solved with 400 MW of targeted DR would require twice as much if the resources’ precise location cannot be identified.
The utilities also filed an affidavit from former FERC economist David Hunger, who analyzed the impact of “non-physical” DR offers on capacity prices. Because of the steepness of the demand curve, Hunger said, “a relatively small increase in the supply due to non-physical supply offers can result in a very large drop in the RPM clearing price.”
PJM’s Proposed Changes
The proposed Tariff changes require that officers of CSPs certify that they have a “reasonable expectation” of delivering the demand resources offered into the base Residual Auction. Comverge said the officer certifications are vague and give PJM too much discretion in enforcement.
The rules also set conditions under which PJM will flag transmission zones in which CSPs are claiming high levels of DR. CSPs offering resources from those zones will have to provide detailed site-specific information.
Comverge said the requirement creates a barrier to entry and is not motivated by reliability concerns. “Clearly, PJM is not basing its tariff changes on reliability concerns, because the changes proposed do not involve any sort of reliability analysis; they just say `X% of Demand Response is too much,’” Comverge said.
Generators have their own complaints about the criteria for flagging zones, saying they are too lenient.
Additional Changes Sought by Generators
The Ohio utilities said the commission should require DR to offer into the day-ahead energy market as is required of generators. The lack of such a requirement obscures the cost of energy in high demand periods, resulting in higher overall production costs and uneconomic dispatch of DR, the utilities said. A must-offer obligation would allow PJM operators to dispatch DR economically rather than as a block.
PSEG said PJM should require customer-specific information for all DR, not just those in flagged zones. The company also said PJM should either “tighten up the proposed DR Sell Offer Plan requirements” or be ordered to “enforce the Tariff provisions that already exist – which would require a contract between the CSP and its customers for the committed load reduction prior to the BRA.”
The Tariff requires that a “Capacity Market Seller may submit a Sell Offer for a Capacity Resource in a Base Residual or Incremental Auction only if such seller owns or has the contractual authority to control the output or load reduction capability of such resource.”
The PJM Power Providers, an organization representing more than a dozen generators and headed by the former chairs of the Pennsylvania and Michigan utility commissions, told FERC that the changes are needed but that “there is more work to be done” and questioned whether PJM should reevaluate “the participation of Planned DR in RPM.”
Market Monitor: Enforce Current Rules
The Market Monitor said PJM has not properly enforced its rules requiring that Planned DR must be a specific, physical resource. “This rule requires identification of a specific customer and a specific site, but does not require a contract,” the Monitor wrote.
“Under the current application of the rules, DR providers may not have identified Planned DR customers, may not have clear plans for implementing DR measures for these customers, and may not receive commitments from new customers until relatively close to the delivery year and well after the RPM BRA is run for that delivery year.
“PJM’s approach would not address the problem as well as the preferred option to enforce the existing rules and modify the existing rules to make explicit the obligation of cleared BRA resources to provide physical resources in the delivery year.”
What Will FERC Do?
The commission will weigh PJM’s filing against Congress’ direction in the 2005 Energy Policy Act that “unnecessary barriers to demand response participation in energy, capacity and ancillary service markets shall be eliminated.”
In ordering the technical conference, the commission said the proposed changes had not been proven just and reasonable and might be discriminatory. FERC staff expressed similar skepticism at the technical conference.
But Republican Commissioners Philip Moeller and Tony Clark have indicated they are leaning in support of PJM’s changes and Comverge’s arguments lacked the amplification the multiple generators provided in PJM’s support.
Comverge’s argument that the requirements are onerous could be undercut by the fact that PJM found “nearly all DR Providers” that offered into the 2013 BRA submitted adequate Sell Offer plans.
The rules will automatically take effect unless FERC rules by March 2 with an order modifying them. Another option is that the commission could delay a ruling in order to evaluate them along with other DR changes making their way through the stakeholder process. (See Members Deadlock on DR in Capacity Auctions.)
No one spoke up when Market Monitor Joe Bowring opened the floor to stakeholders in the Monitor’s annual Advisory Committee meeting Friday.
No matter. Bowring and his staff took the opportunity to renew their case for eliminating “sham scheduling” and changing PJM rules on opportunity costs.
Opportunity Costs
The Monitor told the more than 20 members and PJM staffers who attended that he will seek Federal Energy Regulatory Commission approval for changes to the opportunity cost calculations because stakeholders have been unable to agree on a solution.
The Monitor says current methods of calculating opportunity costs for some markets and services are “inconsistent and inaccurate” and that there are no Tariff definitions for costs for black start units, reactive services and synchronous condensing.
Bowring said he plans to file proposed changes with FERC next year but is “very much open to discussion” with stakeholders beforehand.
‘Sham Scheduling’
Bowring also reiterated his call for an end to so-called “sham scheduling.” The Market Implementation Committee agreed in April to investigate the Monitor’s concern but the issue hasn’t surfaced since then. (See MIC to Probe “Sham Scheduling”) The MIC’s 2014 work plan shows the issue scheduled for discussion beginning next month.
PJM prices transactions with external balancing authorities based on the source and sink identified on the NERC eTag.
The Monitor said some traders could be manipulating PJM’s interface pricing points by breaking schedules into multiple “back-to-back” transactions that hide the actual source of generation.
Monitoring Analytics’ John Dadourian gave an example of a New York-to-PJM transaction that should result in a settlement of $16. Done by separate transactions through the other regions, the total settlement involved would be $37, Dadourian said.
In another example, a trade from Ontario to MISO, which should result in a net settlement of $5, instead totals $20 after separate transactions involving PJM. Such transactions also have loop-flow impacts of the kind that led the New York ISO to ban certain paths in 2008, Dadourian said.
To stop these transactions, the monitor recommends eliminating the Ontario interface price and requiring scheduling of complete paths, instead of “patching together” transactions with separate eTags.
Priorities
In answer to a stakeholder question at the end of the session, Bowring said the Monitor’s biggest priority is fixing problems with the capacity market — issues now before stakeholders and FERC. He also cited concerns over up-to congestion trades, allocation of uplift charges and scarcity pricing.
Coal plant retirements will boost PJM on-peak energy prices by $3 to $4/MWh — and as much as $11/MWh if gas prices increase — according to a study released last week by The Brattle Group.
(Source: The Brattle Group)
The analysis — which evaluates the “feedback” effects from coal plant retirements, retrofits and increased gas demand on capacity and energy prices — is a case study of PJM’s Mid-Atlantic (MAAC) region.
Brattle said the retirement of 2.8 GW of coal capacity in MAAC, 15% of the region’s total, would increase on-peak prices $3-4/MWh by 2015, assuming delivered gas prices of $5-6/MMBtu. The impact would decline to about $1/MWh by 2025 as new gas-fired plants increase supply. Off-peak prices would increase by $1-2/MWh under the same scenario.
If all of the replacement capacity came from combined cycle units and combustion turbines, however, the increased fuel demand would boost gas prices by 5% to 10%. As a result, on-peak prices could jump more than $10/MWh by 2015, declining to $6/MWh by 2025. Off-peak prices would increase about $5/MWh throughout.
The analysis compared projected prices with futures prices for the PJM-West hub as of summer 2012. It noted that PJM West prices in October 2013 were about $5/MWh lower than the 2012 baseline.
The increase in margins — with a present value of $100-300/kW — “are not likely to be large or persistent enough to alter the extent of overall plant retirements,” Brattle said but could be enough to reverse some retirement decisions.
Capacity Price Impact
Capacity prices will rise in the short-term as reserves drop but drop long-term as increased energy prices reduce the net Cost of New Construction Entry (net CONE). “This effect decreases the long-run equilibrium price of capacity until the energy price impacts of retirements disappear,” the study said.
While numerous studies have projected the volume of coal capacity likely to retire and undergo retrofits, Brattle said few studies have evaluated the impact of these changes on energy and capacity prices and the feedback effects on plant economics. (A 2011 MISO study estimated an increase of up $4.80/MWh in its region due to environmental regulations. Exelon predicted in 2011 that the regulations could increase PJM prices by $12/MWh.)
Caveats
Note: For On-Peak Energy Prices.
The size of the price increases will depend on the amount and timing of plant retirements, the spread between coal and gas prices and the mix of peaking, intermediate and baseload generators that enter the market. The study did not evaluate the impact of retirements on renewable generation or new transmission projects, which in turn would also influence power prices.
Brattle also cautioned that its results did not take into account other potential changes in the market. “For instance, it is possible that a material portion of the nuclear fleet in the U.S. will shut down if gas prices and resulting wholesale power prices continue to be low. And gas usage itself could increase sufficiently that it begins to dampen its own attractiveness.”
The study included a sensitivity analysis to determine the impact if natural gas prices remain at current levels of $3-4/MMBtu. Under this “Low Gas” scenario, coal retirements had almost no impact except for near-term on-peak prices. “This is not surprising because the coal plants that would potentially retire are the less efficient ones and they would not run a lot under such low gas prices if remained in-service. Thus, the marginal units that set the market prices would stay the same whether or not the coal plants retire.”
EcoPower Generation, developer of a 58 MW wood-burning plant in Perry County, hopes to begin construction this year and qualify for tax credits. The Public Service Commission approved the sale of power from the plant to Kentucky Power, but its order is being challenged by an industrial group.
The Public Service Commission denied Attorney General Jack Conway’s request to reconsider its approval of Kentucky Power’s purchase of a 50% stake in a West Virginia’s Mitchell coal plant. The purchase will replace supply from a Big Sandy unit set to retire. Conway may take his objections to court.
The Public Service Commission approved spending almost $95 million on the state’s EmPOWER Maryland program. The program’s goal is a 15% reduction in per capita and per capita peak consumption by the end of 2015. About half of the goal has been reached, but progress is lagging.
Most local speakers favored development of Exelon’s 30 MW Fair Wind project for the revenue it would provide to Garrett County. Environmental interests still oppose it, though, as they did when it was owned by Clipper Windpower.
FirstEnergy’s Potomac Edison finished a $5.3 million reconstruction of a 138-kV line in western Maryland, a project that replaced more expensive work the utility had planned when it was part of Allegheny Energy.
A research project is studying snow’s effects on solar power production and how to minimize it. The two-year Michigan Technological University project is testing at the university and at other locations, including in Pennsylvania.
Regulators filed notice that they will appeal the October federal court ruling that called the state’s Long-Term Capacity Pilot Project unconstitutional. The Board of Public Utilities’ legal arguments were not laid out in the notice. The capacity program — similar to one in Maryland that was also rejected by a court — was intended to get cost-effective supply in needed areas where the state said PJM’s capacity market had failed.
Trinity Solar has finished installing 12.3 MW of solar generators at the residential facilities for Joint Base McGuire-Dix-Lakehurst. The installation — more than 10,000 modules on 650 rooftops — is expected to provide over 30% of the community’s annual power needs.
A bill to promote combined heat and power was approved by a state committee, but the way forward for CHP is unclear. Interests are divided on the question of subsidies and the state cut CHP money from its clean energy fund. Board of Public Utilities examination of the issue has made little progress.
Assemblyman Upendra Chivukula, chair of the Telecommunications and Utilities Committee, wants to cut the Board of Public Utilities’ membership and restructure its operations because he says it is not doing its job.
Eighty-five municipalities and counties have expressed strong support for Public Service Electric & Gas’ controversial Energy Strong program, which would spend $3.9 billion to fortify the utility system. PSE&G now has filed changes that may cut the cost by 15%.
The nuclear industry contributes $20 billion to the Carolinas’ economy, according to a Clemson study commissioned by the industry. The impact is attributable to the states’ seven nuclear plants, but also to the associated nuclear industries and facilities housed in the Carolinas.
The Charlotte Douglas airport is seeking bids to install up to 53 MW of solar panels, which would make it among the largest solar producers in the state. The output probably will be sold to Duke Energy.
Duke Energy asked regulators to approve a program allowing big customers to offset new power needs with renewable energy or certificates. The green power would come from sources in or out of state not already meeting the state’s renewables requirements.
American Electric Power surprised at least some observers by coming out for a bill that would ease the state’s energy efficiency and renewables mandates. As protests mounted against S.B. 58, a Senate committee cancelled its markup of the measure and an unusual coalition of environmentalists and user groups started trying to work out a compromise.
Iberdrola Renewables said it will reconsider the two wind farms it is developing in the state if the legislature approves S.B. 58. The company chose Ohio for the new plants, and the 304 MW wind farm it already operates, because of the current law’s requirement that half of the state’s renewables come from in-state resources.
Developers of an 18 MW wind farm in Lake Erie were peppered with questions at the state Siting Board’s first public hearing on the pilot project. The six-turbine development, which is vying for a federal grant, would feed its output to Cleveland Public Power.
The state Ballot Board said backers of a green-energy constitutional amendment may collect signatures to get their amendment on the November 2014 ballot, but the board’s chairman urged voters to reject it. The amendment would authorize a $1.3 billion annual bond issue to develop renewables.
Cabot Oil & Gas wells in Susquehanna County may be among the most productive on the planet, resetting geologists’ expectations. The company’s top two wells will produce 14 billion cubic feet over their lifetime, multiples of normal output.
New Material for Solar Panels (Source: Drexel University)
Solar Breakthrough for Penn, Drexel?
Researchers at the University of Pennsylvania and Drexel University have created a material they say would be more efficient and less expensive than those used now to make solar power panels. “A new category of ways of making a solar cell,” one professor said.
The Public Utility Commission must release documents it used to reach a $60,000 penalty agreement with PPL concerning 2011 storm-caused power outages, the Office of Open Records said.
A property developer’s lawsuit adds to more than 30 filed recently against the 23-turbine, 55 MW Pinnacle Wind Farm, whose output is being sold to Maryland. Plaintiffs charge noise and vibration from the 2.4 MW turbines are damaging health and property values. Pinnacle is a unit of Edison Mission Energy.
Constellation NewEnergy signed a 25-month power supply agreement with the city of Chicago that saves the city 2% from its last power contract. In accordance with a City Council directive, the deal sources the power from non-coal sources: nuclear and natural gas generation based in Illinois. The rate and annual weighted average price for the fixed facility portion of the contract is $42.67/MWh. The power will supply 450 city facilities as well as street and traffic lights.
FirstEnergy will invest $2.8 billion more in the “Energizing the Future” transmission plan announced last year. Most of the work will be on 69 kV lines and substations in the Ohio Edison, Cleveland Electric Illuminating, Toledo Edison and Penn Power territories.
One analyst said the company’s new focus — after years of investing on its unregulated businesses — has it looking more like rival American Electric Power.
Duke CEO Lynn Good chose her management team after Duke’s merger with Progress Energy based on “capabilities and track record.”
“There is a comfort level with people you’ve known for a long time — you’ve been in the foxhole with them. But when you bring an organization together, you need to be agnostic about background,” she said in an interview.
PPL has set up a partnership with 21 Pennsylvania banks that will provide a $300 million revolving credit facility to support investments, including the $4 billion in utility infrastructure improvements that PPL companies plan to make.
The Tennessee Valley Authority will shut Units 1 and 2 at its Paradise coal station near Central City once a new natural gas plant is built at the site. Paradise 3, a 1,100 MW coal unit with mercury-emission controls will remain in operation.
The retirements of the two 700 MW Paradise units were among 3,000 MW of retirements TVA just authorized, bringing its total coal retirements to 5,600 MW. Also being shuttered are six coal generators at two locations in Alabama.
Senate Democrats’ move last week to abolish the filibuster for judicial nominees clears the way for President Obama to fill vacancies on the appellate court that frequently reviews federal energy and environmental policy.
Meade and Prettyman Courthouse (Source: DC Circuit)
The U.S. Court of Appeals for the District of Columbia is widely considered second only to the Supreme Court in its influence. Also known as the D.C. Circuit, the court is the frequent forum for oversight of rulemakings by the Federal Energy Regulatory Commission and the Environmental Protection Agency.
The court’s eight current full-time judges are split between Democratic and Republican appointees; five of the six part-time senior judges were appointed by Republicans. With the elimination of the filibuster threat, Obama’s nominees for three vacancies on the court are expected to be confirmed. Cases before the court are often heard by three-judge panels.
A coalition of utilities, including Public Service Enterprise Group, told the D.C. Circuit that the Federal Energy Regulatory Commission’s Order 1000 mandates for interregional planning and cost sharing amount to “a regulatory sea change” with no basis in law. FERC has no authority “to direct utilities to fund transmission developers from whom they do not take service,” the coalition said in a brief.
The D. C. Circuit stopped collection of Nuclear Waste Fund fees, calling Department of Energy arguments for them no more than “razzle dazzle.” The Nuclear Regulatory Commission resumed work, at a low level, on a study of Yucca Mountain as a depository.
The Environmental Protection Agency is not ruling out the possibility of allowing state-level carbon taxes as a way of complying with the rules it is writing for control of greenhouse gas emissions from existing power plants.
A survey of 100 IT professionals working on critical infrastructure protection (CIP) standards showed that 70% believe compliance with standards is only the start of protection.
Coal being loaded into a hopper (Source: James River Coal)
Coal Still Big in PJM
Coal-fired generators are producing nearly half of the electricity in PJM thanks to cheap supplies from the Illinois Basin. While Ohio and Pennsylvania are shifting to natural gas coal is holding its own in Indiana and Illinois.
Changes to the following PJM manuals were endorsed by the Markets and Reliability Committee on Nov. 21.
Manual 13: Emergency Procedures
Reason for Change:Updates to terms, procedures and day-ahead scheduling reserve components.
Impacts: Sets Load Forecast Error and Forced Outage Rate effective Jan. 1. References to interruptible load for reliability (ILR), no longer a valid term, are removed. Revised order of emergency procedures so that curtailment of non-essential plant and building load is curtailed as step 6, prior to issuing a manual load dump warning (step 7) and voltage reduction (step 8).
PJM Contact: Chris Pilong, Tom Hauske
Manual 14A: Generation and Transmission Interconnection Process
Reason for Change: Align cost allocation rules for new service customers with Tariff.
Reason for Change: A problem statement concerning cyclic peaking and starting factors was referred to CDS by the MRC. CDS came to consensus on the issue at their September 2013 meeting.
Impacts: Resource owners shall use Original Equipment Manufacturer (OEM) values if available and grandfather in OEM values for technologies no longer being built. Section 11.5 changed to read “Battery and Flywheel Units do not have No Load costs.”
PJM Contact: Jeff Schmidt
Manual 18: PJM Capacity Market
Reason for Change: Conforming revisions to reflect filings ER12-513, ER13-535, ER13-2140, ER13-1023.
Impacts: Updates Cost of New Entry (CONE) values; revises Minimum Offer Price Rule (MOPR); changes deadline for submission of must-offer exemption request; corrects NEPA qualification calculation; other changes.
PJM Contact: Jeff Bastian
Manual 41: Managing Interchange
Reason for Change: Both Manual 41 and the Regional Practices Document cover topics related to interchange scheduling.
Impacts: The content of Manual 41 will be merged into the Regional Practices document and Manual 41 will be retired.
The Markets and Reliability Committee approved the sunset of the Regulation Performance Senior Task Force, which has completed all of the tasks in its charter. The task force was created in 2011 to create ways to grade and compensate regulation sources based on performance as well as optimizing their deployment.
The Members Committee selected Jim Jablonski, representing the Public Power Association of N.J., as committee vice chair for 2014. Dana Horton, of AEP, moves from vice chair to chair, replacing Neal Fitch of NRG Energy.
The committee also selected members of the Nominating and Finance committees as well as sector whips:
Nominating Committee (one-year term)
Electric Distributors — Lisa McAlister, American Municipal Power
End Use Customers — Jackie Roberts, West Virginia Consumer Advocate Division
Generation Owners — Reem Fahey, Edison Mission
Other Suppliers — Joe Wadsworth, Vitol
Transmission Owners — Paul Napoli PSEG
Finance Committee (three-year term)
Electric Distributors — Charlie Bayless, NCEMC
Generation Owners — Joe Kerecman, Calpine
Sector Whips (one-year term)
Electric Distributors — Steve Lieberman, ODEC
End Use Customers — Susan Bruce, PJM Industrial Customer Coalition
Generation Owners — Joe Kerecman, Calpine
Other Suppliers — Katie Guerry, EnerNOC
Transmission Owners — John Horstmann, Dayton Power & Light
