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August 10, 2024

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Exelon Focuses on Energy Transition, Growth in Q2 Earnings Call

Exelon released its 2022 Sustainability Report in mid-July, and CEO Calvin Butler had top-line figures to crow about during the company’s second-quarter earnings call Wednesday.

“We have connected over 200,000 customers with over 3 GW of renewable energy resources, a 16% increase over 2021,” Butler said. “We saved close to 25 million MWh in 2022 … a 9% increase that avoided 9.5 million metric tons of greenhouse gases and saved customers over $30 million at our average retail rate.”

Exelon CEO Calvin Butler | Exelon

Butler sees the U.S. energy transition as a major growth driver for Exelon as a pure-play transmission and distribution company, following its separation from Constellation Energy last year, a message that reverberated throughout the call.

“We anticipate investing over $31 billion to support the energy transformation” over the next four years, he said. Also, the Exelon Foundation has invested $20 million in companies developing innovative climate solutions, he said.

Other key moves to advance the transition included an announcement that PJM had assigned Exelon utilities $870 million of projects for transmission system upgrades related to the 2025 deactivation of the 1,295-MW Brandon Shores coal-fired power plant south of Baltimore.

PJM originally had set and approved the upgrade costs at $786 million, but Exelon has since “refined” the project scope and cost, which is now estimated at $870 million, according to a company email. (See “Brandon Shores Deactivation to Require $786M in Grid Upgrades,” PJM PC/TEAC Briefs: June 6, 2023.)

Butler also talked up Pepco’s new three-year rate plan for its Maryland customers, submitted to the state’s Public Service Commission in May.

The “Climate Ready Pathway Plan” is aligned with Maryland’s goal of reducing its GHG emissions 60% by 2031 and reaching net zero by 2045, Butler said. “The proposal includes over $150 million in climate solution programs to help Maryland meet its goals in the areas of transportation electrification, building decarbonization, beneficial electrification and distributed energy integration.”

The 12 programs include a series of “make-ready” incentives ― to install wiring or other behind-the-meter infrastructure ― aimed at increasing the installation of residential and commercial electric vehicle chargers and supporting building electrification. Grid upgrades and modernization to improve reliability and allow for increased integration of renewables also are part of the plan.

If approved, the plan would add about $5.85/month to consumers’ electric bills in 2024-2027, according to Pepco.

Pepco submitted a similar multiyear Climate Ready Pathway Plan to the D.C. Public Service Commission in April, with an estimated $6.13 increase in monthly bills. The utility is projecting final decisions from Maryland and D.C. regulators in the second quarter of 2024.

Exelon’s other utilities — Delmarva Power in Delaware, Commonwealth Edison in Illinois, Atlantic City Electric in New Jersey, and Baltimore Gas and Electric in Maryland — also have rate cases in progress.

The companies have not experienced any supply chain delays related to transformers or other core system equipment, Butler said in response to an analyst question. The company is able to use its size “to not only access our current suppliers, but identify new ones,” he said. “We have not seen a shortage in our transformers. We have not seen a shortage in workforce” that might affect the utility’s operations.

EVs, Data Centers to Drive Growth

Though down from a year ago, the company’s second-quarter financial results were in line with expectations, Butler said. Exelon posted total operating revenue of $4.818 billion for the quarter, with GAAP net income of $343 million ($0.34/share), compared to $465 million ($0.47/share) in 2022.

Butler had stronger results to report on utilities’ performance on industry reliability metrics in outage frequency and duration, with the companies operating “in at least the top quartile.” Keeping customers online and getting them back online as quickly as possible if outages do occur “is getting harder to do with storms getting more frequent and severe,” he said.

“But it’s increasingly important to do as society depends more and more on electricity” he said. “Nationally, we expect to see 50% annual growth in electric cars and 12% annual growth in data centers … [which] will only strengthen as industries increasingly rely on cloud services and AI.”

In other company news, Butler announced that ComEd had reached the end of its three-year deferred prosecution agreement (DPA) with the U.S. Justice Department over 2020 bribery charges against the utility and its former CEO, Anne Pramaggiore.

A federal jury in May found Pramaggiore guilty of bribery in connection with a multiyear conspiracy to pay former Illinois House Speaker Michael Madigan (D) for passage of legislation favorable to the utility. (See Jury Finds Former ComEd CEO, 3 Others Guilty in Bribery Trial.)

Also found guilty were former ComEd lobbyist and Madigan associate Michael McClain, former ComEd Vice President John Hooker and former ComEd consultant Jay Doherty.

ComEd pleaded guilty to bribery in a DPA in July 2020, agreeing to pay a $200 million fine and cooperate with Justice Department prosecutors for three years. A federal judge dismissed the bribery charges against ComEd last month.

Butler said “the company fully complied with the DPA. … We remain committed at all levels of the company to the highest standards of integrity and ethical behavior, and we look forward to building on the trust of our customers as we continue to move forward.”

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Utilities, Generators and Wind Developers Spend Big on Lobbying in Massachusetts

National Grid and Eversource, Massachusetts’ largest investor-owned gas and electric utility companies, were the highest-spending energy companies on lobbying in the state over the first half of this year, while Shell Oil, NextEra and several offshore wind developers also spent big.

The lobbying data sheds light on the political influence, broad agreements and simmering tensions that underlie Massachusetts’ climate and energy policy.

While industry, environmental and labor groups largely supported bills promoting offshore wind, the utilities lobbied against several bills aimed at phasing out the state’s natural gas infrastructure, which were supported by climate organizations. Meanwhile, the utilities supported legislation promoting hydrogen, renewable natural gas and renewable propane for heating, which faced opposition from environmental groups.

The state’s two largest utilities, National Grid and Eversource, spent about $285,000 and $180,000 on their respective lobbying operations, significantly more than any other energy industry stakeholder.

National Grid used its funds to lobby in favor of bills supporting offshore wind, large-scale solar and ending the practice of competitive electric supply in the state. The company also lobbied in favor of H.2938 (introduced by Rep. Jeff Roy (D), co-chair of the Telecommunications, Utilities and Energy Joint Committee) which would subsidize blending alternative fuels like hydrogen, renewable natural gas and renewable propane into the gas network. The state’s gas utilities have argued that blending these fuels into the gas system would be a cost-effective way to decarbonize while making use of existing infrastructure.

In contrast, lobbyists for climate organization Green Energy Consumers Alliance opposed the bill. Most of the state’s environmental organizations have strongly opposed a decarbonization-by-blending strategy for the heating sector, arguing that widespread electrification — accompanied by decommissioning the bulk of the state’s gas system — would be more viable and cheaper, plus better for residents’ health and safety. (See Mass. Stakeholders Debate the Scope of Clean Heat Standard.)

In keeping with this tension, National Grid lobbied against several bills supported by climate and environmental organizations, including the “Future of Clean Heat” bill, S.2105 and H.3203. The legislation aims to facilitate the managed retirement of the state’s gas system and transition to electrified heating and is supported by climate groups including Gas Transition Allies, HEET, Green Energy Consumers Alliance and the Environmental League of Massachusetts.

The American Petroleum Institute and Liberty Utilities also lobbied against the bill, while Eversource registered its lobbying activity on the bill as “neutral.” The company categorized nearly all its lobbying activity as “neutral,” in keeping with a trend from the company’s past lobbying disclosures.

Due to the state’s lobbying laws, the Secretary of the Commonwealth Lobbyist Division does not verify the accuracy of companies’ disclosures relating to specific legislation, nor does the law explicitly prohibit companies from registering all their lobbying activity as “neutral.” Eversource did not respond to requests for clarification on the company’s lobbying activity.

The American Petroleum Institute and National Grid also lobbied against H.3689, which would require the state to reach 100% clean electricity by 2035 and 100% clean energy in the buildings and transportation sectors by 2045. State law currently requires emissions reductions of 93% for electricity, 86% for transportation, and 95% for residential heating and cooling by the year 2050. The Massachusetts Public Interest Research Group, Environment America, the Union of Concerned Scientists, the Sierra Club and Vote Solar lobbied in favor of the bill.

National Grid also opposed H.3137, which would increase community access to Department of Public Utilities (DPU) proceedings by requiring the DPU to accept intervenor applications by municipalities, legislators, relevant nonprofits and groups of more than 10 ratepayers. The legislation also would require utilities to provide information on gas infrastructure to municipalities upon request. The Sierra Club lobbied in favor of the bill, while Gas Transition Allies, a coalition of environmental groups in the state, considers the bill a top priority.

Other major lobbying spenders in the state from the energy industry included Shell Oil ($150,000); NextEra ($124,000), which owns and operates a natural gas plant in the state, as well as the Seabrook nuclear plant in New Hampshire; Covanta Energy ($100,000), which operates waste-to-energy facilities throughout the state; and Fusion for America ($100,000).

While there is little publicly available information on Fusion for America, Liesl Sheehan, listed as president of Fusion for America in the group’s initial lobbying registration, is a partner at Tremont Strategies, the sole lobbying firm employed by Fusion for America.

Sheehan and Tremont Strategies did not respond to repeated requests for comment on this story asking for basic information on the fusion advocacy group.

Overall, industry lobbying operations significantly outweighed those of the state’s environmental movement; the highest-spending environmental groups were the Sierra Club ($87,000, about $42,000 of which went to paying rent for the group’s Boston office), Mass Audubon ($80,000), Environment America ($49,000, the bulk of which went to door-to-door canvasing) and the Environmental League of Massachusetts ($35,000).

Several of the companies developing offshore wind projects in the region also spent major sums on their lobbying operations, including Vineyard Offshore and Vineyard Wind 1 ($132,000), Avangrid Renewables ($90,000), Equinor ($87,000) and Ørsted ($75,000).

Orsted lobbied in favor of H.3161, which directs the state’s electric utilities, in coordination with the Department of Energy Resources (DOER), to solicit 11,200 MW of offshore wind capacity by June of 2035, while authorizing DOER to make additional procurements after that date.

A wide range of organizations representing industry, environmental and labor interests also lobbied in favor of the bill, including National Grid, the Environmental League of Massachusetts, the Union of Concerned Scientists, the Acadia Center and the North Atlantic States Regional Council of Carpenters.

Industry, environmental and labor groups also lobbied in favor of a separate bill that would direct utilities to contract for 12,000 MW of capacity by June of 2030 and 15,000 MW by June of 2025.

Some of the lobbying disclosures for lobbying entities hired by various clients still are unreleased, as the state processes the disclosures of clients and individual lobbyists first. The state’s legislative session ends Nov. 15.

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Environmentalists Call on Utility CEOs to Split with EEI on EPA Rule

A coalition of environmental groups wrote a letter this week to every Edison Electric Institute member CEO asking them to support EPA’s proposed emissions standards for power plants. (See EPA Proposes New Emissions Standards for Power Plants.)

The groups say that EEI is going to come out against the rule when it files official comments by the Aug. 8 deadline. The letter was signed by 29 organizations but was spearheaded by Evergreen Action, a group founded by staffers of Washington Gov. Jay Inslee’s (D) 2020 presidential campaign.

“During the hottest summer ever recorded, EEI is attempting to tear apart one of our best chances at ramping down the pollution that’s fueling the climate crisis,” Evergreen Action Executive Director Lena Moffitt said in a statement. “The power sector is the second largest contributor of the greenhouse gas emissions that are warming our planet and placing hundreds of millions of Americans under extreme heat warnings. EPA’s proposed carbon standards are both common sense and one of the most powerful tools we have to ramp down that pollution.”

The coalition — which includes the League of Conservation Voters, Sierra Club and Southern Environmental Law Center — claims EEI’s comments will “flatly attack” EPA’s proposal, especially in how it treats natural gas plants.

“We are asking you to communicate to EEI leadership that your company will not sign or endorse EEI’s comments unless they commit to collaboration; and to publicly confirm that your company will engage constructively with EPA to support carbon standards for not only existing coal but also for new and existing gas plants in their final form,” the groups said.

An EEI spokesperson said Wednesday that the investor-owned utility trade group was working with its “members to finalize extensive comments that are intended to help EPA develop final rules that support the ongoing clean energy transition, prioritize customer affordability and are legally durable.”

“There are elements of the proposal that are favorable, and we are making recommendations to strengthen them; elements that are fixable with additional flexibilities; and elements that miss the mark,” the spokesperson said. “Throughout this rulemaking process, EEI has provided EPA with extremely detailed and constructive feedback, and our filing next week will offer the same.”

The environmentalists argued that utilities could leverage the billions of dollars available under the Inflation Reduction Act and other laws to control pollution, build a clean energy grid and sell to new customers as electrification efforts grow.

“On the other hand, if you align with the fossil fuel industry, rather than with clean electricity — and hide behind EEI’s deeply misguided comments — the public will know where your company stands,” the groups wrote. “You can expect ratepayers, regulators, climate advocates and government funders to question whether your decarbonization commitments are serious; whether you are properly mitigating ratepayer and investor risk in light of the growing crisis; and whether federal and state funds should flow towards companies doubling down on yesterday’s unstable power system.”

EPA’s latest attempt to regulate greenhouse gas emissions from power plants has led to some criticism so far, but it also has some clear support from some industry. Advanced Energy United in June wrote a letter to EPA arguing that the grid’s transition to clean energy could bolster reliability and that the proposed rule can be implemented without issue.

“Advanced energy technologies offer a variety of grid- and residential-scale solutions to weather-related and demand-side disruptions that fossil fuels do not,” AEU said. “Proven methods such as demand response and energy efficiency have bolstered vulnerable grids in times of need.”

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Comptroller Says NY Needs to Step Up Energy Transition

New York needs to further streamline its regulatory process — and achieve a 200% increase in renewable energy production — if it is to meet a key 2030 climate protection goal, the state’s financial watchdog said in a new report.

The Office of the State Comptroller said present-day efforts to reduce emissions are improved over past initiatives but are not enough.

Only 29% of the electricity generated in-state came from renewable sources in 2022. One of the major milestones in the state’s landmark Climate Leadership and Community Protection Act of 2019 is that 70% of generation must be emissions-free and renewable by 2030.

As of mid-2023, the state has a strong pipeline of contracted renewable projects awaiting construction, but the pipeline is flowing slowly. Also, the developers behind thousands of megawatts of nameplate capacity in that pipeline said in June they need more money to proceed amid soaring inflation and interest rates.

The report raises a cautionary flag on these costs, as well: New York already has the 10th-highest retail electric rates in the nation and the billions being spent on the energy transition will be borne mostly by residents.

“New York State has rightly pursued an aggressive campaign to reduce greenhouse gas emissions to limit the most dangerous impacts of climate change,” Comptroller Thomas DiNapoli said in a news release announcing “Renewable Electricity in New York State: Review and Prospects.”

“New York’s energy goals are attainable, but require careful attention and management to address challenges, meet ambitious deadlines and avoid future pitfalls.”

Mixed Record

Looking back to well before CLCPA codified the state’s climate goals, the report finds a mixed record for programs that tried to achieve similar results under different names.

The state’s Renewable Performance Standard and Clean Energy Standard, for example, suffered from inconsistent incentives, lengthy review timelines and project cancellations in its early years.

As a result, the state came nowhere near its earlier goals, such as 30% renewable electricity by 2015 or 15% reduction in electricity sales from 2008 to 2015.

But funding has become consistent, and the state in 2020 formed the Office of Renewable Energy Siting, dedicated solely to the expedited permitting of larger projects.

However, problems remain, the report states: Local opposition can cause extensive delays; review by the Department of Public Service and Public Service Commission takes time; and NYISO has one of the longest interconnection processes in the nation.

NYISO itself has begun to streamline its procedures and is showing a marked annual increase in both the number and combined capacity of projects approved. But interconnection will need to move much more quickly if the state is to meet the 2030 goal, the report warns.

Installed renewable capacity now is approximately 6.5 GW, the report says, and most of that is hydropower. NYISO estimates a need for 20 GW of additional renewable capacity to meet the 2030 goal, most of which will be solar and wind.

If all the contracted renewable energy projects already in the pipeline get built, New York will hit 66% renewables, just shy of the 2030 goal.

“But this is a big ‘if,’” the report states — projects are at risk of cancellation due to financial and other pressures. Only 3.1% of the renewable capacity placed under contract since 2015 is operational, it said.

All this bears directly on state residents, who will suffer the impact of climate change, reap the benefit of climate protection and likely be stuck paying the costs of success or failure.

The report concludes that “every effort should be made to clearly identify” how the transition’s costs will affect consumer costs.

“Given the ongoing concerns with affordability of electricity and the difficulty that some state residents face in paying their electric bills, the state could consider alternative funding mechanisms to per kilowatt hour charges on electric consumption,” the report recommends.

Familiar Message

The message in the Comptroller’s report is neither new nor unfamiliar to those working on the energy transition but it presents a concise summary of progress and challenges in the long-running effort.

Alliance for Clean Energy New York Executive Director Anne Reynolds was happy to see the report and appreciated it coming from outside the legislative and executive branches, which are funding and directing the transition.

“I think the comptroller adding his voice to that chorus is welcome,” she told NetZero Insider. “The more attention that is brought to this issue the better.”

As the report indicated, the state has made progress in streamlining the review process, Reynolds said, but it needs to make more progress and make it more quickly, she said.

“All of the state agencies have to be rowing in the same direction … it’s a good number of megawatts we need to get online.”

ACE NY represents many of the renewable energy developers who are asking New York to add an inflation adjustment mechanism for projects proceeding under older contracts.

The New York State Energy Research and Development Authority, one of the state’s lead agencies in planning and carrying out the transition, said Tuesday the report lays out important issues.

NYSERDA told NetZero Insider via email:

“The Comptroller’s report, ‘Renewable Electricity in New York State,’ issued yesterday highlights the importance of investing in renewable energy and committing the necessary resources to install transmission-related upgrades throughout the state. New York currently has a robust portfolio of 120 large-scale renewable energy and transmission projects — either in operation or in development — which are expected to deliver over 14 gigawatts of clean power to the electric grid when completed, capable of powering over 66% of New York’s electricity when combined with the State’s currently operating renewables.

“This portfolio will be bolstered by the State’s future offshore wind and Tier 1 large-scale renewable energy solicitations. NYSERDA works in partnership with many organizations, both public and private, to responsibly advance the development of renewable energy in pursuit of achieving 70% renewable energy by 2030 and 100% zero-emission electricity by 2040.”

The Department of Public Service in late July quantified its efforts to make the state meet the CLCPA goals in an annual report. A spokesperson told NetZero Insider on Tuesday that DPS continues to work with other state agencies on the important initiative but had no comment on the report.

NYISO has repeatedly publicized New York state’s impending potential shortfall in energy generation capacity, and its CEO has pledged continued efforts to speed up the interconnection process. NYISO did not respond to a request to comment for this story.

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WEC Energy Group Touts Expanding Capacity, Load in Q2 Earnings

WEC Energy Group executives were optimistic over a new large industrial customer and new capacity additions during a second-quarter earnings call this week.

WEC reported net income of $289.7 million ($0.92/share) for the quarter, slightly more than the $287.5 million ($0.91/share) it earned over last year’s second quarter.

“After a down first quarter marked by one of the warmest winters on record, we delivered solid results in the second quarter and we’re firmly on track for a strong 2023,” WEC Energy Group Executive Chairman Gale Klappa said during an Aug. 1 earnings call. (See WEC Energy Group’s Earnings Droop on Mild Winter.)

The utility is reaffirming its earnings guidance for the year at $4.58 to $4.62/share, he added.

Klappa said WEC is enthusiastic over Microsoft’s $1 billion plan to create a new data center campus in its service territory. The complex will be built south of Milwaukee, in the Wisconsin Innovation Park.

“Microsoft has purchased 315 acres … and is moving full speed ahead. In fact, earthwork at the site began just a few days ago. So along with American Transmission Co., we’re working closely — in fact, on a weekly basis with Microsoft — to determine the full extent of the energy infrastructure that will be needed to serve this development,” he said.

Klappa said he expects Microsoft’s new facility to be operational near the end of 2025 at the earliest.

WEC Energy Group CEO Scott Lauber said at the beginning of June, the company closed on its first 100-MW option of the natural-gas fired West Riverside Energy Center for $95 million. He said over the next few weeks, WEC will file to purchase another 100 MW of Alliant Energy’s Riverside capacity under its remaining option.

Lauber also noted that WEC placed 128 MW of new natural gas generation in service last month through a $170 million investment to build additional reciprocating internal combustion engines at the Western Power Plant site in northern Wisconsin.

Laubner added that WEC is making progress on the Badger Hollow II solar facility and the Paris and Darien solar battery parks.

“The Badger Hollow II site has begun receiving panels using non-Chinese polysilicon. Also, we continue to work on securing customs release of panels from a bonded warehouse in Chicago. We’re still expecting Badger Hollow II to go into service late this year or early next year, with Paris Solar Park to follow. In addition, work has begun on the Darien solar facility, which is planned to go into service in 2024,” he told shareholders.

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Plan for GOP President: Cut Climate Programs, ‘Re-examine’ RTOs

If former FERC Commissioner Bernard McNamee has his way, the next Republican president will eliminate the Department of Energy’s clean energy programs and lead the repeal of the two bills enacted under President Joe Biden to combat climate change. McNamee also would direct FERC to introduce “reliability pricing” in the wholesale electric markets.

McNamee offered his recommendations as part of the conservative Heritage Foundation’s recently published “Mandate for Leadership,” a book-length guide for incoming Republican presidents to reduce the size and scope of the federal government.

McNamee authored the chapter on DOE and its related agencies, which calls for the president to direct FERC to “re-examine the premise of RTOs.”

In an interview Aug. 1 with RTO Insider, McNamee did not deny climate change, but he also would not say what, if anything, a Republican successor to Biden should do. Instead he argued that the costs of the Inflation Reduction Act are out of proportion to its projected reduction in greenhouse gas emissions. He cited the Congressional Research Service’s report on the law that said the IRA could reduce U.S. GHG emissions by 32 to 40% by 2030 compared to 2005 levels; without it, the U.S. was already on a path to reducing emissions by 24 to 35%.

“So the issue is, what’s the cost-benefit to the American people [and] how do these programs impact energy security for the American people?” McNamee said.

In the forward to its most recent Mandate, its eighth, Heritage argues that “the long march of cultural Marxism through our institutions has come to pass. The federal government is a behemoth, weaponized against American citizens and conservative values, with freedom and liberty under siege as never before.”

In his chapter, McNamee argues that climate change policies are threatening U.S. energy security, creating an artificial scarcity crisis that is leading to unwarranted higher costs to consumers.

“Under the rubrics of ‘combating climate change’ and ‘ESG’ (environmental, social and governance), the Biden administration, Congress and various states — as well as Wall Street investors, international corporations and progressive special-interest groups — are changing America’s energy landscape,” he writes. “These ideologically driven policies are also directing huge amounts of money to favored interests and making America dependent on adversaries like China for energy.

“In the name of combating climate change, policies have been used to create an artificial energy scarcity that will require trillions of dollars in new investment, supported with taxpayer subsidies, to address a ‘problem’ that government and special interests themselves created.”

Instead, the department — which McNamee says should be renamed the Department of Energy Security and Advanced Science (DESAS) — should go back to focusing on the core missions it was created to complete, including cleaning up former Cold War nuclear material sites, working on “fundamental advanced science” and developing new nuclear weapons.

It should also prioritize studying cyber and other threats to the electric grid and pipeline networks and develop new technology to prevent disruptions, he argues.

To that end, McNamee calls for eliminating the offices of Clean Energy Demonstrations, State and Community Energy Programs, Energy Efficiency and Renewable Energy, and Grid Deployment; the Loan Program Office; and the Advanced Research Projects Agency-Energy (ARPA-E).

“ARPA-E is effectively funding projects that the private sector is unwilling to fund,” he writes. “Taxpayers should not in effect be picking winners and losers — and having their dollars at risk but not gaining the economic rewards of success. … The agency is unnecessary, risks taxpayer dollars and interferes with risk-benefit decisions that should be made by the private sector.”

Ending Green Subsidies

A nominee of former President Donald Trump, McNamee served on FERC from December 2018 to September 2020. Prior to that, he worked as DOE’s deputy general counsel for energy policy. In that role, he worked on the department’s Grid Resiliency Pricing Rule, a controversial Notice of Proposed Rulemaking that would have directed FERC to order RTOs and ISOs to compensate the full operating costs of generators with 90 days of on-site fuel.

He was narrowly confirmed by the Senate, 50-49, with all Democrats in opposition, including Sen. Joe Manchin (W.Va.). (See Senate Confirms McNamee to FERC.) Manchin had initially supported the nomination but rescinded his approval when a video surfaced that showed McNamee criticizing renewable energy and questioning the science of climate change when he worked at the Texas Public Policy Foundation.

In his interview, McNamee noted that China is the global leader in emissions and that its government this year approved 106 GW of new coal-fired capacity. “So, the issue is really about making sure the American people have reliable and affordable energy.”

McNamee writes that the administration should work with Congress to repeal the IRA and the Infrastructure Investment and Jobs Act, both of which he frames as intended to subsidize “renewable energy developers, their investors and special interests.”

“DOE should be focused on fundamental research and science,” McNamee told RTO Insider. The offices established by the laws, as well as ARPA-E, support technologies that have “been developed, but it’s hard to get financing from the private sector to bring it to market. … That’s not appropriate for taxpayers to be taking that risk, covering that burden, covering that potential loss, especially when we’re $32.6 trillion in debt. Let the private sector do it.”

FERC

Many of McNamee’s suggestions for FERC are familiar from when he was a commissioner and are similar to concerns made by current Republican Commissioners James Danly and Mark Christie.

“RTOs no longer seem to work for the benefit of the American people,” McNamee writes. “Marginal price auctions for energy are not ensuring the reliability of the grid and are not passing the full economic benefits of subsidized renewables on to customers. FERC needs to re-examine the RTOs under its jurisdiction to make sure that they procure reliable and affordable electricity for the benefit of the American people.”

States-subsidized renewable resources are jeopardizing reliability in RTO regions, so FERC should direct “RTOs to establish reliability pricing for eligible dispatchable generation resources or require intermittent resources to procure backup power for times when they are not available to operate,” he writes. “A grid that has access to dispatchable resources such as coal, nuclear and natural gas for generating power is inherently more reliable and resilient.”

Trump has pledged to rein in “out-of-control” independent agencies if he is returned to office and his allies have already drafted an executive order requiring agencies to submit actions to the White House for review, the New York Times reported last month. That pledge applies to FERC, according to The Washington Post.

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NYISO ‘Still Digesting’ FERC Order 2023

RENSSELAER, N.Y. — NYISO on Tuesday shared its first impressions of FERC Order 2023 with stakeholders in a high-level overview of the landmark ruling, though it remained reluctant to delve too deeply into how it might impact its work (RM22-14).

Thinh Nguyen, NYISO senior manager of interconnection projects, told members of the Transmission Planning Advisory Subcommittee that “we are still digesting all of this information from FERC but plan on coming back to the next TPAS or sooner to discuss this order in more detail.”

FERC’s July 27 order seeks to unclog backlogged generator interconnection queues by imposing financial penalties on developers whose projects fail to complete studies on time. (See FERC Updates Interconnection Queue Process with Order 2023 and FERC Interconnection Rule Sets Penalties, Ends ‘Reasonable Efforts’ Standard.)

Stakeholders praised NYISO for how quickly it developed its presentation and acknowledged that the ISO was unlikely to discuss the order in detail, given the timing. But they still pressed staff for as much information as possible during the meeting.

Anthony Abate, lead energy market adviser for the New York Power Authority, asked how FERC’s prescriptions will impact the ISO’s ongoing work to improve its queue. (See NYISO Stakeholders Still Questioning Interconnection Queue Proposal.)

“We’re still sifting through this … 1,400-plus page document … but the order is not preventing ISOs or RTOs from reforming their interconnection process procedures, so I think that we could use some of FERC’s suggestions, though we haven’t mapped all this out yet,” Nguyen responded.

Howard Fromer, who represents Bayonne Energy Center, asked how projects currently in the queue would be affected by the order.

Nguyen said “business will continue on as is,” with studies underway continuing under the current tariff, but promised to come back with more information. The next TPAS meeting is scheduled for Aug. 21.

Compliance filings are due within 90 days of the rule’s publication in the Federal Register. In the order, FERC said, “We recognize that many transmission providers have adopted or are in the process of adopting similar reforms to those adopted in this final rule. We do not intend to disrupt these ongoing transition processes or stifle further innovation. On compliance, transmission providers can propose deviations from the requirements adopted in this final rule — including deviations seeking to minimize interference with ongoing transition plans — and demonstrate how those deviations satisfy the standards discussed above, which the commission will consider on a case-by-case basis.”

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DC Circuit Rejects Appeal of SPP Zonal Criteria

The D.C. Circuit Court of Appeals on Tuesday denied a petition to review FERC’s approval of SPP’s tariff revisions setting up a uniform planning criteria in each transmission zone to evaluate zonal reliability upgrades.

The court said Evergy Kansas Central, GridLiance High Plains and Oklahoma Gas & Electric “oversell” the risk that the proposal “will foist the costs of new projects on individual owners” (22-1252).

“In any case, FERC may balance the need to ensure that transmission owners bear perfectly proportional costs and benefits with other policy goals,” said Circuit Judge Justin Walker, writing for a three-judge panel. “It did that here by approving a regime that allows participants in regional transmission zones to collaborate on selecting and funding new projects.”

FERC last year approved SPP’s second attempt to establish an annual process allowing each pricing zone to develop uniform planning criteria. The commission affirmed its decision in October when it rejected rehearing requests from Evergy, OG&E, GridLiance and ITC Great Plains. (See FERC Affirms SPP’s Zonal Planning Criteria.)

Evergy, GridLiance and OG&E appealed to the D.C. Circuit, saying FERC approved an unjust and unreasonable change to SPP’s transmission-funding regime. They claimed the methodology would likely force TOs to pay for projects that benefit the entire RTO.

Under a two-step voting process, each zone’s customers vote on the criteria, with approval determined by a percentage of votes greater than or equal to the largest customer’s load plus half of the zone’s remaining load. In the second step, all the zone’s transmission customers and TOs vote, with a simple majority needed for approval.

The petitioners said a backup plan that allows any TO in the zone to create its own local planning criteria and build a project — though it would have to foot the bill — violated the cost-causation principle that generally prohibits FERC from “singl[ing] out a party for the full cost of a project, or even most of it, when the benefits of the project are diffuse.”

The court said that rule “is not rigid” and found that, according to Consolidated Edison Co. v. FERC, the commission “may permissibly approve a rate that does not perfectly track cost causation,” particularly if it is balancing competing goals.

“That is what FERC did here. [SPP]’s old funding regime let transmission owners unilaterally thrust the costs of new transmission facilities onto customers — whether it benefited them or not,” the court said. “When FERC approved [SPP’s] new proposal, it balanced the benefit of eliminating that unfairness against the risk that transmission owners might pay for some upgrades alone.”

It said balancing competing policy goals on a ratemaking matter is left to FERC’s “considered judgment.”

The court also denied five additional challenges to FERC’s order, saying, “None persuades.”

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BPA Keeps Rates Flat, Plans $2B in Grid Upgrades

The Bonneville Power Administration said Friday it would keep its power and transmission rates flat for the next two years, even as it pursues a $2 billion grid modernization effort.

“BPA will hold the average Tier 1 power rate and all transmission rates, including ancillary and control area service rates, flat for the next two-year period beginning Oct. 1, 2023,” it said in a news release. “This determination was part of the final record of decision for the BP-24 power and transmission rate case released today.”

The BP-24 rate case reflected a settlement between BPA and most of the rate case parties in a proceeding that began in November.

“The great collaboration with our customers and other rate case parties helped us to offer rates that are stable, predictable and low while preserving BPA’s strong financial health,” Administrator John Hairston said in Friday’s statement.

Tribal governments and environmental groups continued to object to the settlement agreement, saying it insufficiently funds efforts to increase salmon and steelhead runs and protect the tribes’ fishing rights in the Columbia River watershed.

“BPA’s BP-24 Rate Proposal takes steps to defund fish and wildlife protection, mitigation and enhancement, affording neither equitable treatment nor consistency,” to bolster fish populations, the Confederated Tribes and Bands of the Yakama Nation and the Confederated Tribes of the Umatilla Indian Reservation argued in their initial brief.

“The BPA Administrator should reject the BP-24 Rate Proposal and significantly increase fish and wildlife funding in the BP-24 rate calculation to ensure sufficient progress towards measurable increases in adult salmon and steelhead returns in the coming years,” the brief said.

But Hairston said in the news release that “BPA is well positioned to meet our customers’ needs across our service territory, including reinforcement of our existing grid and new infrastructure to meet anticipated load growth and the further proliferation of renewable resources coming into the region.”

On July 13, BPA said it was “moving forward with more than $2 billion in multiple transmission substation and line projects necessary to reinforce the grid. These projects are intended to increase capacity and accommodate regional growth, as well as an abundance of new, clean energy resources.”

Six of the projects will “reinforce existing major BPA transmission lines that run from east to west, allowing the flow of energy from the east side of the region to load centers such as the Puget Sound area and Portland,” it said. Projects in Central Oregon, “where utilities are experiencing significant growth and are attracting large commercial customers,” include a new transmission line and substations, with an estimated cost of $839 million.

BPA said grid modernization helps it participate in CAISO’s Western Energy Imbalance Market, which it joined last year. It is also participating in the development of CAISO’s proposed extended day-ahead market for the real-time WEIM and in SPP’s development of its planned Markets+ offering in the West, which includes a day-ahead market.

To pay for the infrastructure projects, BPA received a $10 billion boost in its borrowing authority with the U.S. Treasury under the Infrastructure Investment and Jobs Act of 2021, which raised BPA’s borrowing line from $7.7 billion to $17.7 billion.

BPA is self-funded; it must repay the Treasury with revenues from its power and transmission rate revenues.

“BPA sets its rates to ensure the probability of repaying its annual U.S. Treasury debt is at least 95%, which is the last payment it makes after all other obligations are paid,” it said in Friday’s news release. “BPA has made its Treasury payment on time and in full for the past 39 years. With the increased funds [$258 million] set aside for risk and its other sources of liquidity, the probability of making the Treasury payment over the BP-24 rate case period is more than 99%.”

The rate case takes effect Oct. 1 and runs through Sept. 30, 2025.

“BPA will file the case with the Federal Energy Regulatory Commission, requesting interim approval for the rates while awaiting final FERC approval,” it said.

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Eversource Takes Hit on Sale of Offshore Wind Assets

Eversource announced an after-tax impairment charge of $331 million related to the sale of its offshore wind assets in its quarterly earnings call Tuesday.

Eversource CFO John Moreira said the impairment “will not have any impact on our cash flows and operations” but noted that the impairment charge could be significantly larger if Eversource is unsuccessful in repricing the Sunrise Wind contract with the New York State Energy Research and Development Authority, or if the Revolution Wind and Sunrise Wind projects do not qualify for investment tax credit adders. (See OSW Developers Seeking More Money from New York.)

Moreira estimated these two issues could cost the company an extra $400 million each but said the company is confident it will avoid those costs.

“We have included both of those components in our impairment analysis, and obviously for us to be in a position to do that, there needs to be a certain level of conviction and probability, and on both of those we feel very good,” Moriera said.

The $331 million impairment charge amounted to $0.95 per share and contributed to reduced second-quarter earnings of $0.04 per share compared to $0.84 per share in the second quarter of 2022. It largely offset increased earnings in Eversource’s electric transmission and distribution businesses.

Eversource previously partnered with the world’s largest offshore wind developer, Denmark’s Ørsted, to pursue projects off the Northeast U.S. coast, but has decided to exit the partnership and the offshore wind business altogether.

The company completed the sale of its uncommitted lease area to Ørsted in May for $625 million and said it is “near the goal line” on the sale of its stake in the South Fork Wind, Revolution Wind and Sunrise Wind development projects. (See Eversource Begins Its Exit from OSW Development.)

The costs and in-service dates for these projects have not changed since May of this year, and about 93% of the costs of the three projects are locked in, Eversource said. The in-service dates range from late 2023 for South Fork Wind to late 2025 for Sunrise Wind.

Eversource CEO Joe Nolan said the company remains committed to clean energy and still sees offshore wind as a key resource for the region despite the recent setbacks.

“We feel very strongly that wind is going to play a major role as we transition to this clean energy environment,” Nolan said. “I don’t see anyone taking their foot off the gas. The policymakers are very excited about wind, so I really don’t see that waning.”

He added that Eversource is focused on making the necessary infrastructure improvements to enable the clean energy transition.

“We continue to emphasize the need for system investments to support increased electrification and distributed generation to help ease the current reliance on natural gas generation in the region,” Nolan said.