Page 186 – RTO Insider

November 5, 2023February 7, 2024

California Climate Reporting Requirement Paves Way While SEC Delays

California’s new climate reporting requirements may precede the U.S. Securities and Exchange Commission’s proposed rules, but they are being carefully designed to minimize duplication of efforts once the SEC catches up, panelists said at an Oct. 31 webinar hosted by Ceres.

Gov. Gavin Newsom last month signed two landmark climate disclosure bills into law: Senate Bill 253, the Climate Corporate Data Accountability Act, which requires annual reporting of Scope 1, Scope 2 and eventually Scope 3 greenhouse gas emissions; and Senate Bill 261, the Climate-Related Financial Risk Act, which requires biannual reporting of financially material climate risks.

“The California laws are crucial, first-of-their-kind mandatory disclosure standards” in the U.S., said Jake Rascoff, director of climate financial regulation with the Ceres Accelerator for Sustainable Capital Markets.

An estimated 5,300 companies globally will be required to report emissions under SB 253, including at least 75% of Fortune 1000 companies, while about 10,000 will need to report climate risks under SB 261.

All companies, private and public, are required to follow the reporting requirements if they meet the criteria. That includes having annual revenue above $1 billion to comply with SB 253 and above $500 million for SB 261, as well as being categorized as doing business in California, defined as having sales exceeding $610,395 or having property or payroll exceeding $61,040 in the state.

Some other key details:

- The rules apply to companies based in any location that do business in California, including those based in other parts of the U.S. or other countries.
- Reporting takes place at the parent company level and with global, not California, totals.
- Reporting begins in 2026 for all but Scope 3 emissions, which begin in 2027.
- Emissions reporting will require third-party verification.
- Climate risk reports need to be publicly available, not submitted to the state.
- An annual administrative fee will be charged and is expected to be about $1,000 to $1,500.

The ball now is in the court of the California Air Resources Board, which will develop and adopt regulations for corporate emissions disclosures, contract with a climate organization and adopt regulations for administrative penalties.

If the California emissions disclosure requirements sound familiar, it’s because they nearly mirror disclosures the SEC has been planning for some time, as well as the recently adopted European Union reporting requirements.

Avoiding Duplication of Disclosures

While groundbreaking for the U.S., the California requirements follow the EU’s Corporate Sustainability Reporting Directive, which was finalized in December 2022 and begins coming into effect in 2024. Those rules will affect about 50,000 EU companies and 10,000 others, one-third of which are U.S.-based. California, the EU and the proposed SEC reporting rules all draw from the widely accepted GHG Protocol’s definitions of Scope 1, 2 and 3 emissions.

The climate risk reporting rule also follows a global protocol to lessen duplication of effort: the International Task Force on Climate-Related Financial Disclosures’ framework.

The California reporting requirements are harmonized with other reporting requirements to minimize the burden on companies while ensuring key climate data are disclosed. By focusing the reports on full global emissions, affected companies will not need to separate out California-specific emissions, and the reports for California may be identical to those created for the EU and the SEC.

Sarah Sachs, Western state policy manager at Ceres, credited this harmonization to California State Sen. Scott Wiener, who authored SB 253.

“He and his team made a huge amount of effort to ensure that California was not reinventing the wheel with this bill and was creating a standard that was aligned with broader global best practices around emissions disclosure, and this is why the bill identifies the GHG Protocol, which is the most widely used global framework for emissions disclosures.

“The goal of this is to reduce any duplicative reporting that you all might feel like you might have to undertake,” Sachs said.

One Step Ahead of the SEC

The California laws were passed while the markets are in a holding pattern awaiting a final SEC rule. The SEC requirements will affect all SEC registrants, about 8,000 companies with U.S. public equity listings, including foreign private issuers, but will not cover privately held companies.

“Everything in the SEC proposed is very much through the lens of financial materiality for the most part; basically, how are climate risks impacting companies’ operational and financial well-being?” Rascoff said. The driver of the SEC requirements are very different, however. “The commission has zero climate policymaking role whatsoever. This is just about providing investors with consistent, comparable, decision-useful information.”

With its eye on informing investors, the proposed SEC reporting has some nuances that extend beyond the California requirements. Most notably, Rascoff said, “the SEC has proposed a footnote to audited financial statements calling out where climate-related metrics have moved any individual financial statement line 1% in either direction, so companies can explain how climate risks and metrics are actually flowing through the audited financial statements.”

The SEC is expected to take a lighter stance on Scope 3 emissions, requiring disclosure only if they are material or the company has set a target. This means it will exclude one of the most controversial requirements of the California rule, one that came most under attack by some corporate lobbying groups.

“California’s laws were designed to provide this information not only for investors, but for a broad range of stakeholders,” Rascoff said. “But the investing public still really needs this information in the same place that they get audited financials, risk factors, MD&A [management discussion and analysis] and everything else, and that’s why it’s so important that the SEC move forward to finalize and adopt their rule.”

Climate Reporting Breaks out of ESG/CSR Silo

For companies, climate-related reporting will take on a new weight.

“We’re going to see climate-related disclosures move out of sustainability or corporate social responsibility reports and into legal documents, like SEC filings or like the filings contemplated with the California laws,” Rascoff said. “So companies are going to need to embed their climate disclosure strategy into multiple business units.”

Moving from voluntary sustainability reports to mandatory requirements raises the stakes and opens companies to possible penalties: “potential exposure to liability risk in the case of the SEC or civil penalties in the case of California,” Rascoff said. “This now takes on the same sort of weight and scrutiny within a company that a financial filing does.”

November 5, 2023November 5, 2023

Dominion Highlights Successful Offshore Wind Development on Q3 Call

Dominion Energy reported third-quarter earnings Friday, with executives focusing on why its offshore project is successful and on its business review that is nearing completion.

“Our fully regulated offshore wind project is on time and on budget and is expected to save customers more than $3 billion in fuel costs over the first 10 years of operation while creating hundreds of jobs and millions of dollars of local economic benefit,” CEO Robert Blue said.

The Coastal Virginia Offshore Wind (CVOW) project is being built off the coast of Virginia Beach and is planned to have 176 turbines producing a nameplate capacity of 2.6 GW. The wind plant won final approval from federal regulators earlier in the week and saw the delivery of the first monopiles to a nearby port facility in late October. (See BOEM Approves Coastal Virginia Offshore Wind.)

“The next transport ship for monopiles is expected to be loaded at the factory later this month and delivered to the port in December,” Blue said. “Also worth noting is that turbine blades and the cells remain on track with a fixed production schedule and mature existing manufacturing facilities.”

The monopile delivery included a ceremony with politicians from across the spectrum in the commonwealth, with Blue noting the project has “bipartisan support” a few days before an election that could give the Republican Party control over both chambers of the legislature and the governor’s office for the first time in years. The polling in the election shows a very close race.

The project has a priority position in the offshore wind supply chain, and Dominion has proven successful at getting approvals from the required regulators, Blue said.

The firm expects to complete CVOW by the end of 2026, and most of its $9.8 billion in costs already are fixed.

“We updated the project expected [levelized cost of energy] in our filing earlier this week to approximately $77/MWh, as compared to our previous range of $80 to $90,” Blue said. “The decrease reflects updated and refined estimates around production tax credit, cost of capital and [renewable energy credit] values.”

The project’s total lifetime costs are expected to come in well below the ceiling set by the legislature when it approved the development.

Dominion will have invested $3 billion into CVOW by the end of the year, and the rest of the $9.8 billion is 92% fixed, with just the costs of interconnecting the project to the transmission grid, some commodities such as fuel used for construction, and installation and project oversight costs yet to be nailed down, Blue said.

“We’ve been very clear with our team and with our vendors that delivery of an on-budget project is the expectation,” he added.

Dominion has been in talks with counterparties to sell a minority share in CVOW to help raise the remaining equity. Blue said those talks have generated much interest.

“It’s in the long-term best interest of our customers and shareholders that we make the right, not just the expedient, decision,” Blue said. “A properly structured partnership with the optimal counterparty is an attractive option. But only if the terms of a potential transaction make sense for our customers and shareholders.”

A decision picking a counterparty for the wind project is the last part of Dominion’s ongoing business review, which has seen it sell its share of the Cove Point LNG project and exit the natural gas utility business, Blue said. The firm expects to make a choice in the next few months.

The review was launched after investors expressed worries about the firm’s earnings, the Virginia regulatory model (which was revised early this year) and its balance sheet, Blue said.

“The review must comprehensively and finally address the foundational concerns that have eroded investor confidence over the last several years,” Blue said. “This can’t be a series of partial solutions that leave key elements and risks unaddressed. That’s how we’ve approached this top-to-bottom review.”

November 5, 2023April 11, 2024

NYISO Stakeholders Question Proposed Interconnection Timelines, Deposit Rules

RENSSELAER, N.Y. — Stakeholders at NYISO’s Nov. 4 Interconnection Issues Task Force meeting expressed reservations about the grid operator’s proposed interconnection queue rules, citing concerns over the length of time to make project decisions and deposit requirements.

Following the ISO’s presentation of proposed study deposits and withdrawal penalties, Troutman Pepper partner Stu Caplan, who represents the New York Transmission Owners, highlighted the uncertainty surrounding the transition to NYISO’s proposed phased cluster approach. “There’s a big variable that we don’t know the answer to yet, the feasibility of the timeframes to complete the [interconnection] studies,” he said.

NYISO’s proposal to comply with FERC Order 2023 would give developers a seven-day window after each phase to decide whether to proceed or withdraw from the queue based on results from the preceding study phase.

The ISO proposes to charge interconnection applicants a non-refundable $10,000 fee, as well as a one-time study deposit ranging from $100,000 to $250,000 based on the size of the proposed project. For capacity resource interconnection service-only projects, the deposit would be $50,000. Additionally, in lieu of regulatory milestones, developers would be required to make commercial readiness deposits to progress through the queue phases, with amounts escalating at each stage: depositing $4,000/MW to enter Phase 1, depositing the greater of either the Phase 1 deposit or 20% of the cost estimate determined in Phase 1 to move into Phase 2, and 100% of a project’s cost estimate to move out of Phase 2.

Proposed study deposits for certain generation facilities seeking interconnection | NYISO

NYISO also outlined penalties for developers who withdraw from the queue: up to 100% of their study deposit, plus 20% of the Phase 2 deposit if they withdraw during the decision period at the end of Phase 2.

Reid Wagner, a clean energy markets analyst with the Alliance for Clean Energy New York, said the ISO’s proposed timelines are too short. “Seven days could be hard for some companies, particularly international ones, to secure the funding in that short period of time,” he said.

ISO attorney Sara Keegan responded that developers would “have ample time to get their ducks in a row” and make decisions about whether to move a project forward through the queue. Project cost estimates would be available “well before the seven-day trigger,” she said.

Wagner then asked if the ISO would consider conducting a “harm test” at the end of each phase, as currently done by MISO, to “test how much harm a withdrawn project has caused to the other queued projects.”

Keegan responded that NYISO is not considering a harm test akin to MISO’s. “It is perhaps overly complicated, and we feel like that would make it incredibly difficult to administer, since we would end up needing a whole department to administer withdrawal penalties,” she said.

Stakeholders also expressed frustration with NYISO’s initial plan to accept only cash for study deposits, rather than allowing the use of credit.

Saad Syed, grid and interconnection manager with OW Ocean Winds, argued for flexibility, saying, “putting up much money in cash in such short intervals seems very difficult, on top of the withdrawal penalties that may occur. So, I strongly recommend using at least an ability to use letters of credit for [these deposits], since otherwise it might become untenable.”

Echoing this sentiment, Abhishek Josh Ghosh, associate director with Cypress Creek Renewables, recommended that NYISO draw insights from PJM, which allows letters of credit in its processes. “It would be nice to have some flexibility in posting these deposits,” he said.

Thinh Nguyen, NYISO senior manager of interconnection projects, acknowledged these concerns and committed to revisiting the payment options. “We are still considering whether a letter of credit is another option. But as you are aware, when we receive letters of credit, that means we have to do some kind of credit check on that entity,” he said. “That’s why we want to make sure that whatever the process we want to use is able to support and meet the very tight defined timelines.”

FERC last month extended the Order 2023 compliance deadline from Dec. 5 to April 3, 2024. (See FERC Extends Interconnection Queue Compliance Deadline.)

Despite the extension, Keegan informed the IITF that NYISO still intends to submit a partial compliance filing by Dec. 1. (See NYISO Plans Early November Filing for Partial Order 2023 Compliance.) The IITF will reconvene Nov. 14.

November 5, 2023June 2, 2024

$10B Fund for Gas Plants on Texas Ballot

Texas voters will finish casting their ballots Tuesday on Proposition 7, a constitutional amendment that would create a nearly $10 billion state fund for dispatchable energy that opponents say amounts to a handout for the natural gas industry.

A result of legislation passed earlier this year, the Texas Energy Fund is a $7.2 billion low-interest loan program intended for the development of up to 10 GW of natural gas plants. Some $5 billion will be set aside for 20-year, 3% interest loans to build new generation with at least 100 MW of fully dispatchable capacity. Power plants that come online before June 29 are eligible for bonus payments.

Another $2.8 billion will be dedicated to grants for infrastructure improvements in non-ERCOT regions and for grants to strengthen resiliency at hospitals, fire stations and other critical facilities through microgrids.

ERCOT considers energy storage as a dispatchable resource, but it is restricted from the program.

Prop 7 is supported by gas heavyweights such as ConocoPhillips, Koch Companies and Valero Energy, along with industrial users. They say the amendment will stabilize a creaky ERCOT grid that has struggled to meet growing demand since the 2021 winter storm.

The opposition, primarily environmental and consumer groups, object to what they call a “cleverly disguised handout to Texas gas companies that are already making record profits.”

“Proposition 7 is the key to building a stronger and more resilient energy infrastructure, ensuring that we always have the electricity we need, when we need it,” state Sen. Charles Schwertner, who guided Senate Bill 2627 through the Legislature, said on X, the social media platform formerly known as Twitter.

“We don’t need to subsidize power plants in a private market with taxpayer funds,” the Sierra Club’s Cyrus Reed countered on X.

During debate over the bill this spring, several generators came out against SB2627. The Association of Electric Companies of Texas said it was concerned about government intervention in the competitive wholesale market. Other company representatives said the loans are similar to other regional programs that create market distortions.

“If you’re a gas power plant developer, why would you ever develop another power plant in Texas without a grant and a low-interest loan? Do Texans need to put up billions more the next time we need more energy?” Stoic Energy CEO Doug Lewin said, while admitting “there’s virtually no chance” Prop 7 will fail.

The amendment enjoys wide public support, according to a poll released last month by the University of Houston and Texas Southern University. The survey found 68% of voters favor the amendment, with 15% opposed and 17% undecided, despite its costs filtering down to ratepayers.

ERCOT called numerous conservation alerts and a Level 2 energy emergency alert during a record-breaking summer this year. The grid operator set 10 records for peak demand this summer, topping out at 85.46 GW after just exceeding the 80 GW threshold in 2022. Four years ago, peak demand was 74.82 GW. (See ERCOT Voltage Drop Leads to EEA Level 2.)

The fund would be endowed with $10 billion taken from the state’s general revenue fund. More money from the revenue fund could be transferred into the Energy Fund.

Early voting began in Texas on Oct. 23.

November 5, 2023

New Report Finds MISO, PJM Could Save Billions Through Interregional Tx Expansion

A new report from the American Council on Renewable Energy (ACORE) concludes MISO and PJM could save ratepayers $15 billion in a little more than a decade if they concentrate on building more interregional transmission.

The report, Billions in Benefits: A Path for Expanding Transmission between MISO and PJM, concludes more interregional ties between the Midwest and mid-Atlantic could reduce customer costs primarily through curbing the need for new generation capacity.

ACORE, Grid Strategies, the Solar Energy Industries Association (SEIA) and the American Clean Power Association (ACP) had a hand in producing the report.

Grid Strategies Vice President and report author Michael Goggin said greater interregional transfer capability along the seam would allow MISO and PJM to “tap into” their geographic diversity from renewable energy stretching from the Dakotas to Virginia. In turn, PJM and MISO Midwest could scale back capacity needs by about 11 GW. He said it’s unlikely extreme weather envelops both regions simultaneously and both have depleted capacity reserves.

Michael Goggin, Grid Strategies | Grid Strategies

During a Nov. 2 teleconference to discuss report findings, Goggin said if MISO-PJM lines are built, reduced capacity needs alone could save MISO and PJM ratepayers about $9 billion by 2035. The report also expects that expanded interregional transmission could provide more than $1 billion in energy market savings per year by reducing transmission congestion between the RTOs.

Goggin said more transmission capacity is valuable to maximizing existing generation during storms or heat waves “because of how weather systems move across the country,” with either MISO or PJM peaking first and then being able to export lower-cost power.

“In the likely scenario that solar penetrations are higher in PJM and wind penetrations are higher in MISO, PJM will export power to MISO during the day and during the summer, while it will import wind power from MISO at night and during the fall, winter and spring, when wind output tends to be highest,” Goggin wrote in the report.

The report didn’t analyze greater links between PJM and MISO South due to the subregion’s distance. It focused instead on the “long and tangled border across Illinois, Indiana, Michigan and Kentucky.”

Goggin said MISO-PJM interregional transmission “functions like an insurance policy, and we need to plan and pay for it accordingly.” He urged MISO and PJM to “look across the seam” and plan beyond their footprints.

Goggin said MISO and PJM’s interregional planning needs a “proactive, multivalue planning approach” that accounts for the most economic future fleet mix alongside state decarbonization goals and isn’t simply reactive to interconnection queue entrants.

“There are billions of dollars on the table. I think there’s a way PJM and MISO can come together and make this work,” Goggin said.

Goggin said congestion costs between MISO and PJM due to constraints last exceeded $1.7 billion in the 2021/22 planning year.

“This adds up to a large amount of money,” he said.

He also said from 2011-2020, interregional transmission builds nationally have averaged just 70 miles per year, a “dismal” figure.

Goggin recommended MISO and PJM model their interregional planning using the success stories from SPP, ERCOT and MISO’s own regional processes. He said MISO and PJM also could model planning after MISO and SPP’s Joint Targeted Interconnection Queue (JTIQ) study, which is meant to interconnect generation at the seams.

Goggin pointed out that PJM’s 2014 Renewable Integration Study and MISO’s 2017 Regional Transmission Overlay Study yielded similar, possible high-voltage solutions in northern Indiana and Illinois and at the MISO seam at the Iowa border.

He said MISO and PJM’s current affected system studies — the RTOs’ means of studying interconnecting generation near the seam — are designed so additional transmission upgrade costs are tacked on nearly at the finish line of the RTOs’ queues, a “nasty surprise that reshuffles the entire queue.”

Goggin said MISO and PJM should allow merchant transmission developers to “propose interregional solutions and be fully compensated for the value their projects provide.” He said projects like the Grain Belt Express and SOO Green HVDC Link are poised to be valuable in increasing links between the Midwest and mid-Atlantic and they should be accounted for in MISO and PJM planning processes.

However, Goggin warned PJM lags in building proactive, large projects even regionally, focusing instead on local reliability projects to replace aging infrastructure.

SEIA Counsel and Director of Energy Markets Melissa Alfano said more powerful interregional connections would allow the country to move away from “toxic” thermal resources that often fail during extreme weather events, especially in recent winter storms. She said a stronger interregional system also would help alleviate cascading project withdrawals in the MISO and PJM generator interconnection queues.

“All of these benefits are undeniable. … Yet here we are not building interregional transmission,” Alfano said.

She added that aside from groups urging MISO and PJM to do more, FERC should issue a rule on interregional planning standards. She said it seems meaningful interregional planning between MISO and PJM won’t happen absent a FERC mandate.

Jeff Dennis, deputy director of transmission at the Department of Energy’s Grid Deployment Office, said significantly more interregional transfer capacity between the Midwest and mid-Atlantic is one of the key needs outlined in last week’s National Transmission Needs Study from the DOE.

Katharine McCormick, assistant director of policy division at the Illinois Commerce Commission, said both PJM and MISO have been consistently warning over 2023 that they’re facing reliability risks by the end of the decade. She said building interregional transmission would aid reliability.

ACP Senior Counsel Gabe Tabak said DOE’s recent funding assist for MISO and SPP’s JTIQ $2 billion portfolio of 345-kV lines is a good starting point to encourage more interregional planning. (See DOE Announces $3.46B for Grid Resilience, Improvement Projects.)

“Meaningful” federal cost sharing is a way to “unstick the process that we all know needs to be advanced,” Tabak said.

MISO, PJM Mum on Conclusions

Both MISO and PJM said they still are reviewing the study and couldn’t speak to the findings.

“MISO is committed to interregional coordination in both planning and operations,” spokesperson Brandon Morris said in an emailed statement to RTO Insider.

At the Organization of MISO States’ annual meeting at the end of October, MISO Senior Vice President of Planning and Operations Jennifer Curran said MISO will attempt to plan a JTIQ-style portfolio with PJM. However, she warned that MISO and PJM employ different planning styles that are difficult to reconcile. (See OMS Leaders Reminisce on 20 Years at Annual Meeting.)

MISO and PJM have approved one large interregional market efficiency project in 2020 and four sets of smaller transmission projects aimed at relieving congestion since 2017.

Still, the nonprofits that signed onto the report are hoping for more from MISO and PJM.

“The U.S. Department of Energy has found that the MISO-PJM seam has the greatest need for expanded interregional transmission ties,” ACP Vice President of Markets and Transmission Carrie Zalewski said in a press release. “In fact, the intertie with MISO accounts for around 80% of PJM’s total need for interregional transmission. These grid operators must collaborate on the transmission planning necessary to bridge this gap, preserve reliability and benefit millions of customers.”

“Interregional transmission lines have helped save American lives during extreme weather events, yet today’s transmission planning processes do not value the added reliability they provide our grid,” ACORE CEO Gregory Wetstone said. “Consumers should not be forced to endure outages when study after study shows additional line capacity would help keep the lights on and reduce power costs.”

November 5, 2023

AEP Discloses SEC Subpoenas, Investigation

American Electric Power has revealed it’s been issued two subpoenas from the Securities and Exchange Commission (SEC) as part of an investigation into the company’s involvement in Ohio legislation that eventually led to a politician’s bribery conviction.

In its regular quarterly 10-Q disclosure filing to the SEC on Nov. 2, AEP said it had received subpoenas from the commission in 2021 and 2022. The first subpoena requested documents related to the passing of Ohio House Bill 6 and to the company’s policies and financial processes. The second sought additional documents related to the investigation.

AEP said it is “cooperating fully” with the SEC’s investigation and is discussing resolving the inquiry with the commission and “potential claims under the securities law.”

“The outcome … cannot be predicted and could subject AEP to civil penalties and other remedial measures,” AEP said in the filing. “Management is unable to determine a range of potential losses that is reasonably possible of occurring, but management does not believe the results of this investigation or a possible resolution thereof will have a material impact on results of operations, cash flows or financial condition.”

The Columbus, Ohio-based company said it “does not believe that AEP was involved in any wrongful conduct in connection with the passage of HB 6.”

The legislation provided $1 billion in subsidies to a pair of coal plants in which AEP has a 43% stake and two nuclear plants. AEP lobbied for the bill’s passage, which resulted in the federal indictment of Ohio House Speaker Larry Householder for his role in taking bribes from another in-state utility, FirstEnergy, to pass the legislation. Householder was convicted and imprisoned earlier this year. (See Former Ohio House Speaker Householder Sentenced to 20 Years in Prison.)

AEP executives did not address the 10-Q filing during its quarterly earnings conference call with financial analysts, who did not ask any questions about it.

The disclosure took a little shine off AEP’s reported quarterly earnings of $954 million ($1.83/share). That was an improvement from the same period in 2022, when earnings were $684 million ($1.33/share).

AEP CEO Julie Sloat said the company continues to de-risk and simplify its business. She pointed to the completed sale of its 1,365-MW unregulated renewables portfolio that netted about $1.2 billion, and the sales processes for the company’s retail and distributed resources businesses that remain on track.

AEP continues its strategic review of the Transource Energy joint venture with Evergy. Sloat said the review is expected to be completed before the year is up.

Sloat said the company’s commercial load growth was up 7.5% year over year, attributing the vast majority of the increase to data centers in Ohio and Texas.

AEP’s share price closed Friday at $79.72, a gain of $3.24 (4.2%) over the last two days of the week.

OGE Earnings Down

OGE Energy, parent company of Oklahoma Gas & Electric, also reported third-quarter results Thursday, delivering earnings of $241.9 million ($1.20/diluted share). That compared unfavorably with the same period a year ago, when earnings were $262.8 million ($1.31/diluted share).

Although earnings were down year over year from 2022, OGE CEO Sean Trauschke told financial analysts the “solid” performance was due to operational excellence. OG&E sent a new hourly peak on Aug. 21 during the height of the summer’s heat, and did so without calling for public conservation, he said.

“Our system was designed, built and operated for conditions like we saw this summer, and I’m proud of our team for always meeting our customers’ need for reliable and safe electricity, and always keeping affordability top of mind,” Trauschke said.

The company’s share price gained 75 cents after earnings were posted, closing Friday at $35.25.

November 5, 2023

SPP Membership Elects Solomon, Dimitry to Board

LITTLE ROCK, Ark. — SPP’s membership elected Stuart Solomon and Irene Dimitry to three-year terms on its independent Board of Directors during last week’s Annual Meeting of Members.

Current board member Liz Moore also was elected to serve a second term, having joined the board in 2020. All three selections are effective Jan. 1.

Solomon, who has more than 30 years of utility experience, is a familiar presence among SPP members. He served on the Members Committee during his 14 years as Public Service Company of Oklahoma’s president before retiring from American Electric Power in 2019 as senior vice president of generation services. Solomon was at Central and South West Corp. when the company merged with AEP in 2000.

Stuart Solomon | © RTO Insider LLC

“One hundred percent he knows what he’s getting himself into, which I love about Stuart,” CEO Barbara Sugg said during the board’s Oct. 31 meeting. “Yet, he’s still excited about continuing to talk about [SPP members] and anything else.”

“It’s a very important time of transition in the electric utility industry, and SPP is well positioned to lead the ongoing evolution of the industry,” Solomon said in a statement. “I’m excited to be part of such a dynamic and forward-thinking organization during this time.”

Dimitry retired in 2020 as vice president of renewable energy at DTE Energy, where she led the launch and daily operations of the company’s renewable energy business. She has more than 26 years of utility experience.

“The clean energy transition will bring many changes and innovations over the next few years,” Dimitry said. “I look forward to working with management and stakeholders as SPP’s regional role grows and evolves.”

Solomon and Dimitry will replace long-time directors Josh Martin and Larry Altenbaumer. The two, who have almost 38 combined years on the board, are retiring at the end of December. (See “Board Search Underway,” SPP Board/Members Committee Briefs: July 24-25, 2023.)

The board recognized Martin and Altenbaumer with honorary resolutions and standing ovations during the meeting, along with a dinner where they were joined by former SPP CEO Nick Brown and former director Graham Edwards. Brown and Edwards left during the COVID-19 pandemic and did not receive honorary fetes.

SPP’s membership also approved 16 nominees to the 24-person Members Committee. All but two were incumbents; Google’s Betsy Beck and Evergy’s Kayla Messamore will begin three-year terms in January representing the large retail customer and investor-owned utility segments, respectively.

The small retail customer segment’s seat remained vacant.

Texas’ McAdams to Lead RSC in 2024

The Regional State Committee, comprised of state regulators from SPP’s footprint, elected its leadership for 2024 by approving a committee’s recommendations in a voice vote.

Texas’ Will McAdams will serve as the RSC’s president. He already chairs SPP’s REAL Team, in addition to his day jobs on the Public Utility Commission and helping manage the family farm near College Station.

Referencing McAdams’ leadership in guiding the REAL Team as it assesses SPP’s current resource adequacy construct and makes policy recommendations, Sugg said, “If we’ve got the will, we can get this thing done, and I think we’ve got Will McAdams.

“I can’t commend him enough,” she added. “From the conversations I’ve had with people who were and from what I observed from somewhat of a distance. He just did a remarkable job and I’m so thrilled that we had his leadership involved in terms of moving this thing forward.”

Minnesota’s John Tuma will serve as the RSC’s vice president and Nebraska’s Chuck Hutchinson as its secretary and treasurer.

The RSC also considered two motions related to SPP’s safe harbor criteria used to determine which project costs should be borne by the load-serving entities (LSEs) making long-term transmission service requests (TSRs). The safe harbor exempts LSEs from upgrade costs when a TSR meets the aggregate studies’ waiver criteria, which include:

- Wind generation not exceeding 20% of designated resources;
- A minimum five-year term for designated network resources TSRs; and
- Designated resources not exceeding 125% of forecasted load.

The commissioners rejected the Cost Allocation Working Group’s recommendation to eliminate the 20% wind criteria but approved its proposal to increase the resource limit from 125% to 100% plus the higher of summer or winter seasonal planning reserve margin plus 10%.

Future RSC Members Observe

Several potential future RSC members joined the table for an up-close look at how SPP stakeholders make the sausage: Colorado’s Eric Blank, Utah’s Thad LeVar and Arizona’s Kevin Thompson.

Their three commissions would be eligible to appoint representatives to the RSC as SPP’s RTO West is stood up and begins operations in 2026. The grid operator uses an outreach program when it anticipates additional states will become part of the footprint.

Mary Throne, who chairs the eligible Wyoming Public Service Commission, also has attended SPP meetings this year. The Wyoming commission is eligible to join the RSC.

Calling RTOs a “significant milestone in the western United States,” LeVar said, “I appreciate the chance to watch this mature and useful process that happens here and I look forward to the tariff development that will happen between now and implementation of RTOs.”

Thompson said Arizona is determining whether to join SPP’s Markets+ “RTO-lite” day-ahead market or CAISO’s Extended Day-ahead Market (EDAM).

“There’s a lot to learn,” he said. “I’m here to learn, I’m here to absorb and to take in everything that I can to make sure that [at] the end of the day, our utilities are protected and that our consumers are protected.”

Blank, who chairs the Markets+ State Committee comprised of western commissioners, jokingly suggested a bylaw change, saying he would prefer a president’s title.

“I covet your title,” he told RSC President Andrew French.

Naturally, almost every speaker then addressed the committee’s leader as “President French” for the meeting’s duration.

Lucas, Rew Update Stakeholders

Antoine Lucas, SPP’s markets vice president, said during the quarterly stakeholder reports that the Integrated Marketplace set new records for maximum load (56.18 GW on Aug. 21), bettering the previous high of 53.24 GW set in July 2022, and renewable energy production (25.02 GW on Sept. 4). Wind accounted for 51.69% of the fuel mix at its peak Sept. 4.

Bruce Rew, senior vice president of operations, said load exceeded the 2022 record during 24 hours the week of Aug. 21.

Day-ahead prices and real-time prices both increased more than 35% from the second quarter to the third, Lucas said, a result of increased fossil fuel generation during late-summer calm days. Day-ahead prices were up from $24.17/MWh to $33.13/MWh and real-time prices went from $23.11/MWh $31.26/MWh.

The Marketplace has 331 participants.

Rew said SPP has received commitment letters from all nine utilities and Western Area Power Administration regions who want to be in SPP RTO West when it goes live, targeted for April 1, 2026. The commitment obligates them to reimburse SPP for development expenses if membership agreements are not executed in March 2026.

The western expansion will affect SPP’s existing members in the Eastern Interconnection as changes will be made to the settlements system and all market participants will have to go through some activities, Rew said. He expects about 15 revision requests will come before the board and RSC in January and April.

Lucas, who is leading the Markets+ development, said the project is on schedule to meet its target date, but that staff and stakeholders are working to mitigate issues that could cause delays. The project team plans to vet funding proposals with the Finance Committee in February.

“We’re spending more of our time focusing on areas where there are certain unique areas of western market operations that need slightly different market design to what we have here in the east,” Lucas said, a nod to greenhouse gas restrictions, congestion rent allocation and mitigation pricing for hydro storage.

November 5, 2023

Nonprofits Attempt to Force a More Transparent TVA IRP Process

Several nonprofits are calling on the Tennessee Valley Authority to make its integrated resource planning process more transparent as the federal utility charts its resource mix over the next 25 years.

Energy Alabama, Appalachian Voices, Southern Alliance for Clean Energy, Center for Biological Diversity, Vote Solar and Green Workers Alliance submitted a motion to intervene this week in TVA’s 2024 integrated resource plan and environmental impact statement. They pressed the TVA Board of Directors to direct TVA to hold public hearings, create a more open process and let stakeholders sound off on the resource planning study.

The groups said TVA’s IRP will “influence reliability, electricity bill affordability, air and water quality, and regional jobs over the next two to three decades.” They noted that unlike most utilities, TVA’s IRP isn’t regulated by a public service commission and impacted stakeholders aren’t permitted to participate in the process unless “hand-selected” by TVA to join its 24-member IRP working group. The nonprofits said it remains unclear how an interested party can approach TVA to express interest in serving on the working group. They also said it appears the IRP working group simply comments on plans already under development by TVA, with no indication the group offers any meaningful alternatives to generation plans.

“TVA’s IRP and [environmental impact statement] process is not transparent. There is no publicly available list of working group members. Agendas are not posted before meetings. There is no public comment opportunity at working group meetings, nor are these meetings open to the public. To the extent that information is made available to the public, such information consists of perfunctory summaries of decisions made, rather than the data and models that are used in the development of initial and final energy resource strategies and scenarios,” the nonprofits wrote in the motion.

TVA anticipates releasing its IRP sometime next year. It last conducted an IRP in 2019.

The federal utility issued a notice of intent for its 2024 IRP in mid-May, followed by a 45-day public comment period (PPLPWR-11-2023). The nonprofits criticized TVA for imposing multiple, overlapping comment periods on environmental impact statements for key projects that will factor into the IRP, including a guidance analysis for solar and battery additions, a study on the Kingston Fossil Plant retirement, a study to evaluate increasing pumped storage hydropower capacity and an evaluation of the planned, 900-MW, natural gas-fired Cheatham County Generation Site.

The groups also said it was inadequate for TVA to hold just two limited participation scoping meetings in late spring on the IRP where the public was permitted only to ask “clarifying questions.” They said TVA’s timeline doesn’t account for public comment on its resource strategies and scenario modeling, and that modeling already may have begun or will begin soon.

“TVA’s reluctance to adopt a public Integrated Resource Plan process is truly a shame,” Vote Solar Regulatory Director Jake Duncan said in a press release accompanying the motion. “Having worked in IRPs in other states, I’ve personally witnessed the transformative power of a public process, which not only enhances outcomes but also provides an opportunity for utilities to embrace clean energy and address energy justice concerns, benefiting everyone.”

“Advocates are asking for an open and transparent planning process, including bare-minimum standards for public input that are available in IRPs at similar-sized utilities,” Appalachian Voices’ Bri Knisley said. “The TVA board can and should call for a public hearing and allow input and analysis from any relevant outside experts who wish to provide input in the IRP.”

Gaby Sarri-Tobar, energy justice campaigner at the Center for Biological Diversity, said by “concealing” its long-term planning, TVA is failing its customers.

“As energy prices go up and extreme weather looms, there’s absolutely no excuse for TVA to keep people in the dark about plans that will affect their lives for decades. These folks are paying TVA’s bills, and they live with the health and safety costs of the fossil fuel status quo. It’s insulting to exclude them from the planning process,” Sarri-Tobar said.

TVA Maintains IRP Process is Transparent

TVA, however, insists its IRP procedure is already “fully transparent,” with stakeholder engagement a critical piece of the process.

Scott Fiedler, of TVA’s media relations team, said the TVA IRP working group is a “diverse” stakeholder group and that TVA updates the public on its IRP process through meetings of the TVA board and its Regional Energy Resource Council, which is composed of regional governmental representatives, academics and consumer advocates.

Fiedler noted that council meetings are open to the public, with the next occurring Nov. 7 in Tupelo, Miss. He said that will be followed by a TVA board listening session and TVA board meeting — also in Tupelo — Nov. 8 and Nov. 9, respectively. Fiedler also said TVA is planning to host another public webinar on the IRP in December.

Finally, Fiedler said TVA will again collect public opinions in spring when it releases its draft IRP and environmental impact statement. He said TVA will plan “a number of public meetings and other engagements to share those drafts and have opportunities for the public to provide feedback.”

“Bottom line: TVA is fully transparent, and we encourage the public to get involved in how their energy is generated. Together, we can build an energy system that is low cost, reliable, resilient and sustainable that will continue to drive jobs and investment into our region and power the new clean economy,” Fiedler said in an email to RTO Insider.

November 2, 2023December 20, 2023

New York Seeks to Unlock Geothermal Potential for Buildings

OSSINING, N.Y. — This Westchester County village will be the first place in the state to take advantage of a newly enacted law that expands the accessibility and affordability of geothermal energy.

Ossining is making geothermal energy the centerpiece of a mixed-used building on a 3.4-acre remediated brownfield site once used to turn coal into manufactured gas. The project will benefit from a law co-sponsored by Sen. Pete Harckham (D) (S6604) that exempts closed-loop geothermal boreholes from the state Oil, Gas and Solution Mining Law.

Before S6604, which Gov. Kathy Hochul (D) signed on Sept. 21, geothermal boreholes deeper than 500 feet were subject to the same regulations as oil and gas wells. The law’s proponents said the regulations added unnecessary costs and complexities to ground-source heat pump (GSHP) installations, which have little environmental impact because they do not involve injection into or extraction from the ground.

“We often make technical changes to laws in Albany, and people don’t necessarily see the tangible results, but today we have a very visible example of how one of those technical fixes is going to really revolutionize geothermal,” Harckham said at a Nov. 1 press conference at the site of the project, which will provide heating and cooling to 109 units in a mixed-use building that includes affordable housing. The project will be drilled by Dandelion Energy, a Northeast geothermal supplier, in partnership with the New York Geothermal Energy Organization (NY-GEO) and ZDF Geothermal.

Backers said the exemption from the mining law will cut costs, increase geothermal efficiency and make GSHPs possible in more places by limiting the footprint needed for drilling boreholes. The previous regulations applied on a per-well basis, adding costs and permitting barriers.

Heather Deese, senior director of policy and regulatory affairs at Dandelion, told NetZero Insider that S6604 “is one of the many steps needed to unlock the role that geothermal can play.” She said it allows Dandelion “to keep the cost of the drilling for a home geothermal installation as low as possible, because now we can drill one deeper hole for the ground-loop piping, rather than two shallower holes.”

Shallow systems also tend to underperform compared to their deeper projects that can tap higher sources of Earth heat.

“We can now use many more sites, particularly urban sites, and it will be much more cost effective,” said Harckham. “Before, drilling [a geothermal well] below 500 feet, all of the sudden, qualified you as an oil or gas well, and inherent with that were a host of financial obligations and permitting and reporting requirements. But now we will be able to take advantage of going beyond 500 feet for geothermal, opening up many, many more projects.”

Drilling Down

The sponsors project the legislation could reduce the cost of decarbonization by about $900 million by 2030 and another $9 billion between 2030 to 2050.

The Climate Leadership and Community Protection Act calls for a 40% reduction in building emissions by 2030 and the electrification of 85% of homes and commercial spaces by 2050. The Climate Action Council’s Scoping Plan, which laid out the roadmap to achieve CLCPA goals, says New York must install 250,000 electric heat pumps — including air- and ground-source units — annually to meet the mandates for 2030.

“Tapping into the potential of geothermal energy is critical to advancing New York’s transition to cleaner energy sources,” said Basil Seggos, commissioner of the Department of Environmental Conservation.

Tom Staudter, director of communications for Harckham, said that residential projects could save approximately $3,000 per job because they only need to drill one borehole versus several. For commercial buildings, he said the savings will be around $6 per square foot of floor space, if not more. He said the law will enable about 50% of commercial buildings to transition to geothermal systems; many previously were not able to transition because of cost concerns or a lack of space for multiple boreholes.

Staudter said many in the geothermal industry have been reaching out to Harckham’s office since the bill was signed. “They are ready to expand markedly because of the new law,” he said. “The transition to geothermal energy systems will increase exponentially, as more consumers and developers learn about capabilities, savings and ease of implementation.”

Installers say a geothermal heat pump for a 2,000-square foot home can cost between $15,000 and $38,000, double the price for a conventional HVAC system. They also estimate that drilling to install a GSHP costs about $5 to $40/foot. Total costs average between $4,000 to $8,000/ton installed. (One ton of refrigeration equals about 12,000 BTU/hour.)

Households switching from a fuel oil furnace to a geothermal system can save an average of 53% on their annual energy bill, or almost $1,900 a year, according to Dandelion.

Benefits & Barriers

Geothermal energy, one of the oldest forms of green power, dates back at least 10,000 years. Its first commercial usage was in Arkansas around 1830. The technology involves drilling vertical boreholes and inserting a closed-loop piping system filled with heat-conductive fluid that exchanges heat with the earth to either heat or cool a building.

Geothermal energy and GSHPs offer numerous environmental, health and economic advantages over fossil fuel systems, but high costs, geographic limitations and a shortage of skilled labor have thwarted widespread adoption.

The International Energy Agency says geothermal heat pumps have been growing at 3% per year in the U.S., with more than 1.7 million units installed. About 40% of installations are residential; the other 60% are commercial or institutional.

The U.S. also has about 3.7 GW of geothermal electric generating capacity, more than 90% of which is in California and Nevada. That represents less than 1% of U.S. capacity, but IEA says it could grow to more than 8% by 2050. Geothermal’s potential for direct use is 231 GW by 2050, including up to 17,500 district heating and cooling systems, according to the agency.

Geothermal heating and cooling system representation | NYSERDA

The 2022 Utility Thermal Energy Network and Jobs Act required the New York Public Service Commission to create regulatory frameworks for thermal energy networks and utilities to pilot at least one district or community-scale geothermal infrastructure project (S9422). The PSC issued guidance on this law in a September order, requiring utilities to submit their proposals by the end of this year. If approved, the projects will move on to engineering design and construction, with a target of being operational by 2025 (22-M-0429).

To encourage growth of the technology, New York offers a Geothermal Income Tax Credit that covers 25% of expenditures up to $5,000 for homeowners. The New York State Energy Research and Development Authority’s (NYSERDA) Clean Heat initiative offers rebates to incentivize the switch from fossil fuel-based systems (18-M-0084). Additionally, the state promotes the use of federal tax credits under the Inflation Reduction Act, which can cut installation costs by 30% through 2032, plus a 10% domestic content bonus, though these decrease in 2033 and 2034.

New York City offers an online feasibility tool to identify areas where ground source systems could be used to retrofit buildings’ heating and cooling systems. HeatSmart CNY offers assistance to building owners considering geothermal in Central New York.

Harckham said his goals for geothermal energy during the next legislative session is to “make it more accessible” by increasing state incentives.

Reactions

Reactions to S6604 have been overwhelmingly positive.

Sen. Mario Mattera (R), the ranking member of the Environmental Conservation Committee, praised Harckham for proposing S6604, saying, “This is a great bill. Me, being in the plumbing business, this is very, very important for renewable energy and for our future.”

In an interview with NetZero Insider, John Ciovacco, a board member at NY-GEO and president of Aztech Geothermal, said that New York’s actions will “simplify the conversion of buildings to these systems.”

“Having agencies like the [Department of Environmental Conservation] at the table opens us up to try and develop appropriate regulations and formulate ways to address everyone’s concerns,” Ciovacco said.

Pat McClellan, policy director at the New York League of Conservation Voters, described S6604 as “just another brick in the wall” to expand geothermal energy in the state, calling it a “common sense measure.”

McClellan emphasized that while New York has made significant strides in geothermal action, challenges like public awareness and long-term planning remain. State agencies and utilities “did an excellent job laying out ‘here’s where we are and here’s how we get there,’” he said, but there still is not enough attention paid to the 10-, 15- or 20-year time frames, “which is the time horizon we need to start think about in order to avoid future price shocks.”

Dandelion’s Deese said the state should consider raising its geothermal income tax credit to encourage consumer adoption. “More definitely needs to be done to raise awareness of geothermal,” she said, because many people have “not heard of geothermal heating and cooling before seeing a Dandelion advertisement.”

In response to questions from NetZero Insider, the DEC said it is assessing the best ways to communicate with stakeholders impacted by the new regulations, including by updating public websites and advising about best practices around these systems.

Michal Charles Moore, a visiting professor of economics and systems engineering at Cornell University, emphasized the importance of legislative recognition for geothermal energy. Cornell researchers last year drilled a 2-mile-deep exploratory Earth Source Heat borehole to demonstrate geothermal’s capabilities.

Moore said bills like S6604 are a “nod from the government” that stimulates additional research funding, collaboration and public trust.

“The industry just got a big boost,” Moore added. “They got acknowledged but are now on the hook to deliver.”

November 2, 2023November 13, 2023

Exelon Q3 Earnings Call Links Transmission Expansion to Rate Cases

Exelon utilities have scored some big wins in the past few weeks, beginning with PJM’s selection on Oct. 31 of project proposals for a competitive transmission solicitation, including an $850 million package of projects for the utility and its subsidiaries, CEO Calvin Butler announced during a Nov. 2 third-quarter earnings call.

The package includes projects for Baltimore Gas and Electric (BGE), PECO, Pepco and Delmarva Power & Light, with completion dates scheduled for 2029 and 2030, timeframes that “extend beyond the current guidance range,” Butler said. “It provides another good indication of the trends in place and degree of work that the grid will require, well into the future.”

Other forward-looking developments include Exelon’s active role in two of the seven regional hydrogen hubs the Department of Energy announced Oct. 13, Butler said. Commonwealth Edison (ComEd) is part of the team working on the Midwest hub, while PECO and Pepco will be similarly involved in the mid-Atlantic hub. (See DOE Designates Seven Regional Hydrogen Hubs.)

ComEd and PECO also were named to receive $50 million and $100 million, respectively, as part of DOE’s $3.46 billion Grid Resilience and Improvement Program, announced Oct. 18. A total of 58 projects received grants from the program, which is funded by the Infrastructure Investment and Jobs Act. (See DOE Announced $3.46B for Grid Resilience, Improvement Projects.)

ComEd will use the money to deploy “next-generation technologies” that will support wider adoption of electric vehicles and solar, while PECO’s grant will go to grid hardening in “vulnerable areas” of the utility’s service territory to help keep the power on during extreme weather events.

“The federal support is critical to supporting an affordable and equitable transition,” Butler said. “The need for transmission expansion, the investment in new energy supply and the ever-increasing need for more resilient grids all highlight the impact that an economy that is increasingly dependent on electricity will have on our investment plan.

“The energy transformation will last decades, not years, which is why we are confident that investment opportunities will continue to strengthen and lengthen our rate base growth.”

The PJM selection is a case in point. The grid operator opened the window for the solicitation to expand transmission to meet new demand being created by the rapid expansion of data centers in Northern Virginia, as well as the impact of the pending retirements of fossil fuel generation, such as Maryland’s Brandon Shores coal-fired plant.

While Butler did not provide details on the Exelon projects, PJM said it is recommending a mix of new substations and transmission as well as upgrades to existing facilities. The recommendations will go back to PJM’s Transmission Expansion Advisory Committee before being sent to the Board of Managers for final approval.

Looking at local grid improvements, Chief Financial Officer Jeanne Jones highlighted a recently completed grid upgrade on Maryland’s Eastern Shore, the 11-mile East New Market to Cambridge project, which installed new state-of-the-art steel poles to bolster local reliability. The new poles can withstand 120-mph hurricane force winds, she said.

Tackling Multiyear Rate Plans

The connection between transmission buildout, the energy transition and Exelon’s rate base was a central theme throughout the call, as Butler and Jones gave a rundown of the six rate cases the company’s utilities have before regulators in Illinois, New Jersey, Maryland, Delaware and the District of Columbia.

In ComEd’s rate case, a recent proposed order from an Illinois administrative law judge (ALJ) recognized “that meeting the ambitious electrification and decarbonization goals set by [the state’s] groundbreaking Climate and Equitable Jobs Act will require ComEd to make significant investments,” Butler said.

But the ALJ set a return on equity below the national average, he said. “It does not allow for prudent capitalization of the business.”

According to Butler, a recommendation from staff at the Illinois Commerce Commission (ICC) set an 8.9% rate of return, which the ALJ upped to 9.28%. ComEd’s proposal calls for a 10.5% rate of return in 2024, rising incrementally to 10.65% in 2027, according to a report in Crain’s Chicago Business.

A final order is expected in December, and ComEd will continue to make its case before the ICC, Butler said. Jones noted that the ComEd filing is its first run at a multiyear rate plan and framed the ALJ’s proposed order as “just another data point in the process,” given the number of variables at play in multiyear plans.

Four of the six rate cases — for BGE, Pepco Maryland, Pepco DC and ComEd — are for first-time multiyear plans, she said.

The Numbers

Butler noted that despite a mild winter and late summer storms with 110-mph wind gusts that knocked out power to 1.3 million Exelon customers, the utility’s earnings were still on track with its 2023 predictions.

The utility’s third quarter GAAP net income was $700 million ($0.70/share), while non-GAAP adjusted net income was $671 million ($0.67/share).

Butler said the utility is narrowing its guidance for 2023 as a whole to $2.32 to $2.40/share.