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November 16, 2024

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Western Plan to Add 13 GW by Summer Comes with Risks

Up to 13 GW of new generation and storage resources are planned to come online in the Western Interconnection by the end of this summer, helping to ensure the West remains resource adequate, but supply chain disruptions and other problems could undermine those plans, analysts said Thursday in the latest installment of WECC’s resource adequacy discussion series.

The West has been expecting “exponential growth” of clean energy resources, and this year could be the “turning point where we start seeing a huge ramp up,” said Matthew Elkins, WECC’s principal analyst for reliability assessments. But 13 GW by this summer is “a lot of resources to bring online with supply chain issues and things like that.”

Last year, new solar installations in the West fell nearly 3 GW short of expectations because of tariffs on solar panels from Southeast Asia and supply chain constraints, said Amanda Sargent, WECC senior resource adequacy analyst.

“There are always deviations from the plan year to year, usually small ones, but you can see in 2022, there was a large deviation in what was planned for solar capacity to come online in 2022 versus what did,” Sargent said. “We also saw an increase in the energy storage that was not able to come online, in part because it was usually a hybrid resource with the solar.”

In June 2022, President Joe Biden ordered a two-year waiver of the solar tariffs, and he is expected to veto a Senate resolution passed Wednesday to override his waiver. (See related story, Biden to Veto Bipartisan Rollback of Solar Tariff Moratorium.)

Most of the new resource additions will be solar, battery storage and wind, with some natural gas and biogas generation, WECC said.

Supply chain constraints could delay commissioning new generation and transmission resources and put off scheduled maintenance. For instance, 3.5 GW of new batteries are planned to come online by July and another 2 GW by September, but supply chain problems with battery components could reduce those amounts, Sargent said.

On the upside, retirements of existing generators through the summer should be minimal, she said.

WECC’s resource adequacy analysis gathers data from 38 balancing authorities in four regions of the Western Interconnection: California and a small part of Mexico; the Desert Southwest (Arizona and New Mexico); Canada (Alberta and British Columbia); and the Northwest, which covers the Pacific Northwest, the Rocky Mountain states, Utah and Nevada.

The results of WECC’s analysis showed no significant resource adequacy concerns except for short periods in California and the Northwest later this summer as hydroelectric power wanes. The analysis assumes the availability of imports and that thousands of megawatts of the new resources will come online.

The resources and imports are needed to cover the so-called net peak, after solar drops offline but demand remains high on hot evenings.

“All areas are resource adequate on the peak hour,” Sargent said. “However, we are seeing demand at risk outside of the peak hours. That is mediated if the resources that are planned come online on time, and if there is market availability for imports when it’s needed.”

In addition to supply chain problems, fuel constraints could reduce generating capacity, she said. A spike in natural gas prices drove up demand for coal, limiting supply, she said.

“We heard very loud and clear from our stakeholders that there are significant ongoing supply chain issues and fuel constraints that could impact connecting new resources, scheduling needed maintenance before summer and potentially the availability of transfer capabilities,” Sargent said.

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National Grid Proposes Quebec-New England Transmission

National Grid (NYSE:NGG) is proposing a 1.2-GW transmission project to carry power from Quebec hydroelectric plants to southern New England through Vermont and New Hampshire.

The Twin States Clean Energy Link has a preliminary cost estimate of $2 billion. It would entail a new HVDC line running 75 miles underground from the Canada-Vermont border to a retired converter station in Monroe, N.H., that would be repurposed as part of the project.

The existing 110 miles of above-ground AC infrastructure would be upgraded between Monroe and a new 345-kV substation Londonderry, N.H.

National Grid is partnering with the nonprofit Citizens Energy on the project. The Northeastern Vermont Development Association would aid in programming the estimated $100 million of community benefits associated with the project, and the International Brotherhood of Electrical Workers would support construction.

The company is promoting the project as a way to reduce dependence on fossil fuel generation when variable wind and solar power output lag. It would reduce New England’s carbon emissions by millions of metric tons per year and save ratepayers billions of dollars over the first 15 years, developers said.

National Grid said it has submitted the proposal to the U.S. Department of Energy’s Transmission Facilitation Program (TFP), a $2.5 billion funding stream created by the Infrastructure Investment and Jobs Act.

The company said federal investment and initial cost recovery through TFP is critical to Twin States moving forward on the planned timelines. A spokesperson said Friday the earliest construction could begin would be in late 2026.

The line would be bidirectional, able to export power to Quebec if the profusion of solar and wind projects being planned and built in southern New England should generate a surplus of electricity in a period of low demand.

There will be demand for it on the other side of the border: Quebec is mounting a clean-energy transition just as New England is, and Hydro-Quebec in its recent strategic plan forecasts a more than 50% increase in demand for its electricity through 2050.

The government-owned utility reported record income in 2022, thanks to high electricity prices and heavy exports, but reports by Bloomberg and other media outlets suggest its aggressive marketing will soon leave it short of power for Quebec’s own needs. It has begun planning to add generation from solar, wind and other renewable sources.

Slow Process

Building transmission lines to carry Quebec’s hydroelectric power south to the U.S. grid has proved challenging at times.

There has been strong local opposition from people who do not want to look at power lines or see trees cleared to build them; criticism from activists that hydropower is not as benign for the environment as advertised; and extensive regulatory processes to navigate.

New Hampshire shot down Eversource Energy’s plan to build the 1.09-GW Northern Pass line in 2018. (See New Hampshire Rejects Permit for Northern Pass.)

Avangrid’s 2017 proposal for the 1.2-GW New England Clean Energy Connect line in Maine has stalled amid multiple legal challenges. (See New England Clean Energy Connect Wins Court Battle.)

The 1.25-GW Champlain Hudson Power Express, first proposed in early 2010, finally began construction in New York early this year. Its projected completion is in 2026. (See Champlain Hudson Power Project Receives Landmark Delivery.)

National Grid is emphasizing that construction of the Twin States line would have a light impact and heavy benefit for the communities through which it would pass. The underground portion of the line would run along state roads, reducing its visual and environmental disruption. The above-ground portion would mostly entail replacing existing wires and reinforcing existing structures.

National Grid and its partners did not formally announce the proposal, but it gained public attention last week when New Hampshire Gov. Chris Sununu (R) threw his support behind it.

“New Hampshire is always looking to put solutions on the table that lower energy rates for consumers, and the Twin States Clean Energy Link makes use of clean, renewable energy to do just that,” Sununu said. “With a low-impact plan that utilizes already existing infrastructure, this project is a win-win for families and businesses across the Granite State.”

In a letter to U.S. Energy Secretary Jennifer Granholm, Sununu endorsed the project for inclusion in the TFP and said it would have the added benefit of allowing small renewable energy projects to be developed in northernmost New Hampshire.

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Dominion Sees Earnings Drop, but CEO Blue Predicts Bright Future

Dominion Energy (NYSE:D) on Friday said warm weather in the first quarter of this year led to lower operating earnings of 99 cents/share, compared to $1.18 a year earlier.

Despite the mild winter weather, Dominion CEO Robert Blue said the firm was in a good position given projected demand growth and the new Virginia law on regulations, providing it with certainty to make needed investments going forward. (See Virginia Legislature Passes Utility Regulation Bills Backed by Dominion.)

“With nearly unanimous bipartisan support, the legislation provides the certainty we need to fund and execute critical energy investments in support of the commonwealth’s robust electric demand growth, long-term energy security and reliability, leading decarbonization goals and impressive economic growth,” Blue said on a conference call with analysts.

Blue said the new law will lead to lower customer bills through the elimination of $350 million in riders and the securitization of fuel costs, cutting the average residential customer’s bill by about 10%, which positions the company’s Virginia utility about 21% below the national average.

“The law prescribes certain regulatory parameters for use in rate-setting for the next few years and establishes an authorized ROE of 9.7%, up from 9.35% currently,” said Blue.

The new law compliments previous legislation — such as the Virginia Clean Economy Act, which set up decarbonization goals for the utility in midcentury — to create a regulated utility framework that balances customer benefits, regulatory oversight and Dominion’s need for capital to invest in its system for decades to come, he added.

“That stability and certainty is especially critical now, as we ramp into the very substantial and growing multidecade utility investment required to address resiliency and decarbonization public policy goals,” said Blue.

The decarbonization policy comes on top of fast load growth in Dominion’s system, which is dominated by data centers in Northern Virginia. PJM’s load forecast for Dominion’s territory this year calls for 5% growth, compared to 2.1% last year, and the RTO is projecting a 2033 peak demand of 35.8 GW, a 39% increase over last year’s projection of 25.8 GW.

“This isn’t hypothetical growth. It’s demand we’re seeing and investing to serve every day,” Blue said.

Dominion is working on a business review, but the exact plans are still being worked out. Blue and other executives offered no real details beyond their schedule. The firm plans to discuss the review at an investor day in the third quarter.

While the firm said recent developments in Virginia set it up for future success, exactly who will be helping to implement the new law is still unclear because the State Corporation Commission is down just one member.

Former commissioners have been stepping in to help vote out orders as needed, and the commission has been able to issue several orders on Dominion cases recently, including approving a transmission line needed to serve growing load from data centers and the company’s request to procure 800 MW of solar and storage. (See Virginia SCC Approves 800 MW of Renewables for Dominion.)

The Virginia Constitution gives legislators the right to appoint new members to the SCC, though if they are out of session, then the governor can make temporary appointments, Blue said.

“If you look just at where we’ve been in Virginia: We’ve got low rates; we’ve got strong reliability; we’ve got a clear mandate from policymakers for energy security within an energy transition,” Blue said. “And as our [integrated resource plan] indicates, we’ve got very strong load growth. So, we’re sitting in a very good spot moving forward in the Virginia regulatory process.”

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Biden to Veto Bipartisan Rollback of Solar Tariff Moratorium

With nine Democrats crossing the aisle, a joint resolution (S.J.Res.15) rolling back a two-year moratorium on tariffs on solar panels and cells from four Southeast Asian countries passed the Senate on Wednesday.

Following a 56-41 vote, the measure now goes to President Joe Biden, who intends to veto it.

The resolution passed in the House of Representatives on April 28, 221-202, with both Democrats and Republicans crossing the aisle. In that case, 12 Democrats joined the GOP majority, while eight Republicans opposed the measure.

Biden ordered the waiver on tariffs on solar panels and cells imported from Cambodia, Malaysia, Thailand and Vietnam in June 2022, after the Commerce Department announced an investigation into whether panels and cells from those countries contain components from China that would be subject to tariffs. (See Biden Waives Tariffs on Key Solar Imports for 2 Years.)

Because neither house is likely to muster the two-thirds majority needed to override a veto, the House and Senate votes and the resolution itself were mostly political posturing, giving Democrats and Republicans cover to appear tough on China and the solar industry’s ongoing reliance on overseas suppliers. About 80% of solar panels used in the U.S. come from the four Asian countries in question, according to the Commerce Department.

“We cannot continue to let China get away with laundering solar energy components through other nations with absolutely no consequences,” Sen. Joe Manchin (D-W.Va.), chair of the Senate Energy and Natural Resources Committee, said in a statement announcing his decision to vote for the resolution. “American manufacturers — some of the most innovative in the world — are more than ready to rise to the occasion and help realize the goals of the [Infrastructure Investment and Jobs Act] and the Inflation Reduction Act to onshore our energy supply chains.”

The other Democrats voting for the resolution in the Senate were Sherrod Brown (Ohio), Ron Wyden (Ore.), Bob Casey (Pa.), Jon Tester (Mont.), Debbie Stabenow (Mich.), Gary Peters (Mich.), John Fetterman (Pa.) and Tammy Baldwin (Wis.).

An analysis of the vote from ClearView Energy Partners suggested that “many of the key defections against party lines … came from notionally ‘at-risk’ members up for re-election in 2024.”

In response, both the administration and solar advocates have said that the moratorium was intended as a “bridge” to allow for the buildout of a domestic solar supply chain while also ensuring ongoing demand for solar projects is met.

“More than 90 GW of private sector investments in solar manufacturing have been announced since the president took office, with about half of that coming in just seven months since the passage of the Inflation Reduction Act,” according to a White House statement announcing Biden’s decision to veto.

A recent report from the American Clean Power Association (ACP) lists 26 new solar manufacturing facilities and another 10 factories for energy storage announced since the IRA was signed into law.

ACP CEO Jason Grumet called the congressional resolution “misguided” in the face of an “American solar industry [that] has announced billions of dollars in investments in domestic solar manufacturing and energy production facilities.”

“The attempt to impose punitive retroactive tariffs on U.S. companies would harm American workers and once again cede ground to China and other nations,” Grumet said in a statement released after the Senate vote. “Congress should work to protect existing clean energy jobs, not undermine a growing American industry that is harnessing abundant domestic resources.”

“Any legislation that threatens 30,000 American jobs and weakens our nation’s energy security to this degree should be dead on arrival,” said Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association (SEIA). “Demand for American solar products far outpaces what we can build now. Curbing supply at this critical time will hurt American businesses and prevent us from deploying clean, reliable energy in the near term.”

The Clock Is Ticking

Prior to the passage of the IIJA and IRA, tariffs on Chinese solar panels and cells were not particularly effective in kickstarting a domestic supply chain. Even after former President Donald Trump approved the tariffs on Chinese solar panels and cells in 2018, the solar industry continued its dependence on Southeast Asian and Chinese manufacturers. Despite heavy lobbying by the solar industry, Biden extended the tariffs in February 2022, with an exemption for bifacial panels.

But the announcement of the Commerce Department investigation the following month threw the industry into a panic, with more than 300 projects delayed or canceled, according to SEIA. Biden’s moratorium, and the IIJA’s and IRA’s tax credits, finally provided the impetus for companies to start investing in new facilities in the U.S.

“The IRA unlocked the U.S. market for us,” said Scott Graybeal, CEO of Caelux, a California startup that has developed a new technology using perovskite, a nanomaterial, that could boost solar panel performance while cutting costs. “It’s been instrumental in shaping our business plan.”

A solar industry veteran who has worked in Southeast Asia, Graybeal expects to launch the company’s first products by the end of 2024. But, he said, imposition of tariffs could “impinge on plans for manufacturing expansion if there isn’t a healthy market.”

He also sees a potential knock-on effect that could make solar projects riskier and therefore harder to finance, which again could affect efforts to build out a manufacturing supply chain.

The ACP report notes that “in the last eight months, over $150 billion in domestic utility-scale clean energy investments have been announced. This amount is equivalent to five years’ worth of American clean energy investments, surpassing total investment into U.S. clean power projects commissioned between 2017 and 2021.”

But the onslaught of optimistic figures from the White House and solar advocates may not translate into an adequate domestic supply chain that is up and running by June 2024, when the current moratorium on tariffs on panels and other components from the four countries runs out.

The Commerce Department issued a preliminary finding in the investigation in December, stating that “certain Chinese solar panel manufacturers were indeed attempting to bypass the [tariffs] via transport through these investigated Southeast Asian partners.” A final decision has been pushed back from May to August, and while Biden has pledged to veto the resolution rescinding the moratorium, he does not intend to extend it.

In other words, the clock is ticking, and figures from solar industry analysts Clean Energy Associates (CEA) provided to NetZero Insider suggest that not all the recent announcements of new solar manufacturing will turn into factories employing thousands of U.S. workers.

A plant producing solar panels can be built and reach mass production within two years, according to CEA, but the upstream supply chain — specifically the factories needed for ingots and wafers, critical components for panels — could take three to four years. Standing up plants to produce the polysilicon needed for the ingots and wafers could take five years.

CEA expects that only about half the announced panel factories and 40% of cell production facilities will actually come online. Building a domestic source for ingots and wafers could be even more challenging, as U.S. companies simply do not have the necessary experience, CEA says.

The analysts expect only three of 20 announced ingot and wafer facilities to come online by 2027, and with IRA tax credits tapering off in 2030 and disappearing after 2032, they say, building new polysilicon plants may not pencil out.

A recent report from SEIA said that rebalancing the solar industry’s “dangerous overdependence on China for equipment and raw materials” would still require an “ethical global supply chain. … Allowing necessary and ethical imports to continue” as the U.S. builds out its own supply chain will be critical, it said.

Graybeal agreed that timelines will need to be staggered for the wafer and polysilicon supply chain in the U.S. “These are capital-intensive projects, particularly manufacturing polysilicon,” he said. “We’re going to have to go through a learning curve. …

“It will be easier to do modules; the next will be cells, and then further up the chain, getting into wafers and polysilicon manufacturing, that’s probably the more complex endeavor,” he said. “Building in the U.S. is more complicated than it is in certain parts of Asia. We have permitting requirements; environmental impact issues. … Often times these are local issues that need to be managed.

“We have to give it some breathing room,” he said. If and when tariffs are levied on solar imports from Southeast Asia, he would like to see them phased in over time.

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AEP Continues to ‘De-risk’ its Businesses

American Electric Power (NASDAQ:AEP) said Thursday that it plans to sell its AEP Energy competitive retail business in PJM as it continues to simplify and de-risk its operations.

CEO Julie Sloat told analysts on a quarterly earnings call that the company has completed a strategic review of AEP Energy, which serves 700,000 electricity and gas customers in six states and D.C. She said AEP will include its unregulated distributed resources business in the sale, which she expects to close in the first half of 2024.

“We’re focused on our core regulated utility operations and continue to evaluate all value additive potential activities to enhance their performance and look for opportunities to recycle capital,” Sloat said.

To that end, AEP is selling its 50% share in the solar-focused New Mexico Renewable Development joint venture with Public Service Company of New Mexico. Sloat said AEP is also pursuing a strategic review of its ownership interests in three non-core transmission joint venture businesses, Prairie Wind Transmission, Pioneer Transmission and Transource Energy, to determine whether they fit with the company’s long-term plan.

“Active review of our portfolio allows us to continue prioritizing investment in our regulated utilities to enhance service for our customers,” Sloat said.

AEP in February reached an agreement with IRG Acquisition Holdings to sell 1,365 MW in unregulated contracted renewable assets comprising 14 large-scale projects. The sale is pending FERC approval, but AEP hopes to close the transaction by July.

Sloat said $1.2 billion of the sale’s cash proceeds will be funneled into AEP’s regulated businesses as the company transforms its generation fleet.

“Actively managing our portfolio also means staying flexible and being ready to change our focus and adapt our strategy when it becomes clear that certain transactions or initiatives may no longer be viable,” she said, a nod to AEP’s termination last month of its Kentucky businesses’ sale.

AEP is renewing its focus on the Kentucky region, Sloat said, saying that Kentucky Power’s first-quarter return on equity of 2.9% “does not reflect a financially healthy utility.” She said AEP will be addressing the utility’s underperformance over the next year and will file a base case with Kentucky regulators in June to take effect in January.

AEP reported first-quarter earnings of $397 million ($0.77/share). That compares unfavorably to the same period a year ago when earnings were $714.7 million ($1.41/share). The company’s operating earnings per share of $1.11 fell short of the Zacks consensus estimate of $1.14.

AEP’s share price gained 57 cents during the day, closing at $91.44.

OGE Earnings Miss Expectations

OGE Energy (NYSE:OGE), Oklahoma Gas & Electric’s parent company, reported earnings Thursday of $38.3 million ($0.19/diluted share), compared to last year’s first quarter of $279.5 million ($1.39/diluted share). Earnings just missed financial analysts’ expectations of $0.20/diluted share.

“We’re off to a really strong start for the year,” CEO Sean Trauschke said, pointing out that the first quarter typically represents less than 10% of utilities’ earnings. “However, this quarter does provide momentum for the year. And I really like what I see.”

OGE is working through three requests for proposals to meet its capacity needs. Trauschke said not all the responses have delivered full value, so the company will issue a new integrated resource plan later this year with updated planning assumptions.

“Our goal is to implement a generation plan that supports our customers and business smoothing investments in the steady incremental way without large spikes or bumps,” he said.

OGE’s share price closed at $37.33 after the earnings release, a gain of 52 cents for the day.

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PG&E’s Distribution System Needs Replacing, Monitor Says

The independent safety monitor that keeps watch on Pacific Gas and Electric said much of the utility’s distribution system is “stressed” with age and needs to be replaced for reliability and to avoid wildfires, but that the utility has greatly reduced the number of fires its equipment starts by quickly de-energizing lines when faults occur.

The findings were part of a 38-page report drafted by Filsinger Energy Partners and released Tuesday by the California Public Utilities Commission, which hired Filsinger last year to monitor PG&E’s safety work and report back every six months. (See CPUC Orders Independent Safety Monitor for PG&E.)

Filsinger, a Denver-based advising firm, filed its first report Oct. 4. (See PG&E Slow to Replace Old Equipment, Monitor Says.)

Its second report, dated April 3 but made public May 2, covers PG&E’s activities from October to March.

During that time, the independent safety monitor (ISM) “participated in meetings where several PG&E managers reported that a shift in strategy is required as the PG&E distribution asset base ages more towards its end of life, and that elevated investment levels will be required to adequately control and mitigate the associated risks,” the report says.

PG&E’s 70,000-square-mile overhead distribution system includes 161,500 miles of power lines, 2.25 million wooden poles and more than 669,000 transformers, the report notes.

Much of the system serves high-risk fire areas, where PG&E equipment started major wildfires each year from 2017-2021.

Parts of the utility’s vast distribution system “are currently stressed or are forecast to become stressed,” and a third of its overhead conductor qualifies for “asset health replacement in the next 10 years,” the report says.

“While half of the distribution circuits have good reliability, approximately 20% of the circuits are responsible for 50% of the average customer outage duration across the distribution system,” it says. “There is a considerable backlog of distribution asset maintenance and/or upgrade items needing to be addressed, including approximately 120,000 poles tagged for replacement.”

PG&E’s annual spending on reliability-oriented projects plunged from more than $180 million in 2013 to less than $5 million in 2020, in part because of spending on wildfire mitigation since 2017, it says.

From 2015 to 2020, PG&E’s System Average Interruption Duration Index (SAIDI), a measure of the duration of unplanned outages, increased by 53% while reliability spending fell, the report says.

The outage index rose when PG&E began using public safety power shutoffs (PSPS) in 2018 and when its Enhanced Powerline Safety Settings (EPSS) program took effect in 2021, it says. EPSS increases the fault detection sensitivity on power lines and quickly de-energizes them when it senses a change in current.

“During the current ISM reporting period, the ISM observed that PG&E’s unplanned distribution SAIDI increased by an additional 66% since 2020, and PG&E sits in the fourth quartile for SAIDI as compared to all other U.S. based electric utilities,” the report says.

Maintenance Backlog

PSPS and EPSS have angered many residents and endangered those who rely on plug-in medical equipment, but they have been effective at reducing ignitions by PG&E equipment.

The report says that, since 2017, the number of ignitions in high fire-threat districts “attributed to PG&E equipment failure has been in steady decline.” There were 59 ignitions in 2017 and 14 in 2022 — a 76% decrease, it says.

“The largest contributing factor for this decrease in the last two years has been the introduction of EPSS enablement across all of PG&E’s HTFD [high fire-threat district] distribution circuits in 2022,” it says.

PG&E believes that “wire down rate is a key indicator of public safety,” the report says, quoting the utility. “Wire downs per year have stayed steady over the past five years. However, [PG&E expects] the number of wire downs to increase as conductors are aging faster than the replacement rate.”

PG&E, which has been criticized for its lack of record keeping, has age data on only 47% of its primary conductors and 12% of its secondary conductors, the report says.

Using an alternative methodology, PG&E determined that it should replace approximately 800 miles of overhead conductor per year, but “over the past seven years, the miles of proactive replacement of deteriorated conductor have averaged approximately 40 miles per year,” the report says.

PG&E said in a statement Wednesday that it “has made significant progress in the areas of safety and risk reduction, including in the focus areas identified by the ISM team,” but that its wildfire mitigation efforts have created a maintenance backlog.

“Our increased inspections, which exceed CPUC General Order requirements and better address wildfire risk, created a build-up of repair work,” the utility said. “In our 2023 Wildfire Mitigation Plan, we committed to providing targets for addressing repairs found during inspections [and] prioritizing work with the most ignition risk within the high fire threat districts.”

The utility said it has refocused its efforts on “addressing … asset replacement, including developing strategies for managing wear-out failures.”

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Exelon CEO: Energy Transition ‘Requires Investments,’ Rate Increases

With utilities in states with aggressive clean energy goals — including Illinois, Maryland and D.C. — Exelon CEO Calvin Butler spent part of Wednesday’s first-quarter earnings call talking about how the company’s recently filed multiyear rate cases will help meet those decarbonization targets.

“We are well underway in a number of jurisdictions with three new filings initiated since the fourth-quarter earnings call,” Butler said in his second earnings call as the company’s CEO. “Building a stronger, smarter, resilient and cleaner grid requires investments. We are engaging with our stakeholders to align on our shared goals and ensure this investment is compensated fairly.”

For example, Baltimore Gas and Electric’s (BGE) multiyear plan, filed in February, calls for $2.3 billion in investments for Maryland’s electric grid and natural gas systems and another $400 million for electric vehicle and building efficiency programs, CFO Jeanne Jones said.

“BGE’s infrastructure plan includes more than 300 projects and maintenance programs designed to continue meeting customers’ needs that lay the foundation for the state of Maryland to reach its goal of net-zero emissions by 2045,” Jones said.

The rate increases to pay for these investments would start with a 6.8% hike in 2024, ramping down to 4.5% in 2025 and 3.7% in 2026, according to the company summaries of its current rate base applications included in the earnings call presentation.

Butler also sees opportunities emerging for BGE with Maryland’s Promoting Offshore Wind Energy Resources (POWER) Act, recently signed into law by Gov. Wes Moore (D). The law calls for the deployment of 8.5 GW of offshore wind and a regional study on the associated transmission needs.

“We’ll prioritize leveraging existing infrastructure, permitting risks and grid challenges, use of open access of collective transmission system and avoiding any single-contingency items,” Butler said.

At the same time, the Maryland and Illinois multiyear plans will be facing new regulators. In Illinois, Gov. JB Pritzker (D) has named Doug Scott, energy systems vice president at the Great Plains Institute, to chair the Illinois Commerce Commission, beginning in June. Scott previously chaired the ICC from 2011 to 2015 and also served as head of the state’s Environmental Protection Agency.

In Maryland, Moore has nominated Fred Hoover, an attorney with the Office of the People’s Counsel, to head the Public Service Commission. Hoover also served as director of the Maryland Energy Administration under former Gov. Parris Glendening (D).

Butler described the leadership changes as “part of the process” of working with regulators. “Given this [energy] transformation will be measured in decades, it reinforces the importance of building a shared, forward-looking understanding across a variety of stakeholders, which is accomplished through transparency and collaboration,” he said.

Asked if he had been in communication with Scott, Butler said, “There has been communication, but the communication has been around moving the state’s goals forward.” The Climate and Equitable Jobs Act, which Pritzker signed in 2021, commits Illinois to moving toward net-zero by 2050, with 40% of its power coming from renewable energy by 2030 and 50% by 2040.

Exelon is still expecting that Commonwealth Edison’s multiyear rate plan will be approved by the end of the year, Butler said. If approved, customers rates could jump 7.3% in 2024. ComEd has asked to defer 35% of the increase to 2026, to soften the impact, but that deferment would mean a 6% increase in rates in 2026.

Elephant in the Room

Following its first full year of separation from Constellation Energy, Exelon reported first-quarter earnings of $669 million on revenue of $5.56 billion. GAAP earnings per share were 67 cents, while adjusted, non-GAAP earnings were 70 cents.

The company reported $597 million in earnings on revenues of $5.3 billion for the same period last year.

“These results keep us on track to deliver earnings within our guidance range of $2.30 to $2.42/share for 2023,” Butler said.

In addition, Exelon’s four utilities — Atlantic City Electric, BGE, ComEd and Pepco — “had [their] best on-record reliability performance” in the first three months of 2023, he said. All four scored in the top quartile in terms of outage frequency and duration.

While Butler and Jones kept the call upbeat, the first question from analysts was on Tuesday’s guilty verdict in the trial of former ComEd CEO Anne Pramaggiore for a multiyear conspiracy to pay former Illinois House Speaker Michael Madigan (D) for passage of legislation favorable to the utility.

Former ComEd lobbyist and Madigan associate Michael McClain, former ComEd Vice President John Hooker and former ComEd consultant Jay Doherty were also found guilty. (See related story, Jury Finds Former ComEd CEO, 3 Others Guilty in Bribery Trial.)

The four were charged with nine counts of conspiracy to bribe Madigan in exchange for his help in passing bills that set certain rate charges that could not be debated before the ICC, producing millions of dollars of profits for the company over several years.

ComEd pleaded guilty to bribery in a deferred prosecution agreement in 2020, paying a $200 million fine and cooperating with Justice Department prosecutors for three years. But Butler said, “We have done more than that. We have made substantial changes to our contracting, lobbying and compliance operations to ensure that the conduct that was at issue in the trial would not happen again. … We are committed to the highest standard of integrity and ethical behavior.”

Solar in South Jersey

Both Butler and CFO Jones kept the call focused on Exelon’s investments in improving and decarbonizing the grid and the value and benefits customers will get for their increased rates.

Jones talked up the multiyear rate case for Pepco in D.C., filed with the district’s Public Service Commission on April 13. The nation’s capital is targeting 2045 for citywide carbon-neutrality, and in support of that goal, “Pepco is requesting a $190.7 million revenue increase over the 2024 to 2026 period,” she said.

The money will be invested in “system equipment and infrastructure that will enable integration of more renewable energy such as solar,” Jones said. It “will also help customers access and adopt cleaner energy technology like electric vehicles and will allow Pepco to manage load to ensure the electric service customers depend on is available when they need it.” On a similar note, Jones talked about Atlantic City Electric’s smart meter program, which has been installing about 30,000 new meters per month since September 2020.

“Smart meters are foundational for smarter power grids,” she said. Benefits include being able to restore power faster and “better integration of new clean energy technologies, including solar.”

ACE has the highest level of solar penetration of all Exelon’s utilities, 25% of peak demand, she said.

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Markets+ State Committee Adopts Inclusive Membership Policy

Western state utility regulators last week unanimously voted to revise the charter for SPP’s Markets+ State Committee (MSC) to allow additional states and Canadian provinces to join the group.

As originally envisioned by SPP, the MSC was to be comprised of a member from each state in which a Markets+ participant has generation or load in the market. Ten states were listed as being members of a committee that is designed to advise the Markets+ stakeholder groups on policy issues and initiative prioritization as they draft the tariff language and protocols for the RTO’s proposed day-ahead market. (See SPP MPEC Briefs: April 18-19, 2023.)

The modified charter deletes the states’ names and adds language that “initial membership may include representatives from any of the states or provinces with entities that may plausibly choose to participate” in Markets+.

MSC Chair Eric Blank, chair of the Colorado Public Utilities Commission, said during the April 28 conference call that California, Texas and South Dakota have all expressed interest in joining the committee. The Canadian province of British Columbia has also been mentioned as a possible member.

South Dakota Public Utilities Commissioner Kristie Fiegen, a member of a similar SPP committee in the Eastern Interconnection, joined the call to say her state would “love to be involved.” She pointed out that Black Hills Corp., which has subsidiaries that serve customers in eight states, is headquartered in South Dakota.

“I’ve been watching Black Hills Power for the last five years to see what they are going to possibly do and bringing them into the commission to ask them questions,” she said. “Markets+ is part of their strategy right now, so we look forward to working with you.”

Blank urged flexibility for the MSC, given the current state of flux surrounding Markets+, which is competing with CAISO’s extended day-ahead market, with some Western entities evaluating both.

“Given the uncertainty about the footprint, the shape of the table and the evolving policy and market context, I’m just hoping we’re as inclusive as reasonably possible,” he said. “I continue to believe that the whole is greater than the sum of the parts and that we’re far stronger when we work together.”

The MSC also discussed initial points of contact to represent the committee on the various Markets+ working groups and task forces.

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SPP Issues Resource Advisory for May 8-9

SPP has issued a resource advisory for its 14-state balancing authority area in the Eastern Interconnection next week, effective Monday at 10 a.m. CT through 8 p.m. Tuesday, because of an expected shortfall from wind resources and generating units offline on maintenance outages.

The RTO said it is expecting 13 to 14 GW of planned outages and another 8 to 9 GW of forced or unplanned outages early next week. A spokesperson said that as of Thursday, 14 GW of capacity are currently on planned outages and 9 GW are on unplanned or forced outages.

The difference is a forecast that projects wind energy to be significantly lower during the advisory period. As a result, SPP’s BAA might use greater unit commitment notification time frames, including making commitments prior to the day-ahead market and/or committing resources in reliability status.

SPP issues resource advisories when extreme weather, significant outages, wind forecast uncertainty or load-forecast uncertainty are expected in its reliability coordination service territory. Resource advisories do not require public conservation.

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New Law Expands Indiana ROFR Law for Transmission Buildout

Indiana has become the latest state to give incumbent utilities a right of first refusal to develop regional transmission projects.

HB 1420 acquired Gov. Eric Holcomb’s signature on Monday, along with 67 other bills. Indiana already maintained rights of first refusal for incumbent utilities to build, own and operate new transmission lines for reliability purposes within their service territories. The new law extends utilities’ rights to projects approved through an RTO transmission planning process that can cross multiple states, preventing competitive developers from bidding on segments of them.

The bill advanced 55-39 from the House of Representatives last month, with opposition coming from both sides of the aisle.

The final bill included amendments that require utilities to use competitive bidding when they subcontract out construction on portions of their projects and notify their RTO within 90 days of project approval if they intend to pass on a project, so they can initiate their request for proposals process.

American Electric Power’s Indiana-Michigan Power is a member of PJM. All other utilities in the state — AES Indiana, CenterPoint Energy, Duke Energy Indiana and Northern Indiana Public Service Co. — are members of MISO.

MISO automatically assigns approved transmission projects, or portions of them, to incumbent utilities in states with ROFR laws in place.

It is unclear what PJM’s policy is regarding state ROFR laws; the RTO had not responded to a request for more information as of press time.

Indiana Rep. Ed Soliday (R), the bill’s author, has said that the objective of the law is to ultimately lower rates for customers and secure better cost controls for incumbent utilities, which are best positioned to own and operate transmission in their territories.

Danielle McGrath, president of the Indiana Energy Association — a trade group representing utilities — has also said that incumbent utilities are best situated to manage restoration after grid-disrupting events.

Opponents of the law have argued that it will stymie competition and increase rates while holding back innovation. The Electricity Transmission Competition Coalition (ETCC) said it was disappointed in the bill’s passage and had called on Holcomb to veto the bill.

In a statement, Paul Cicio, chair of ETCC, said “the decision by Gov. Holcomb to sign this anticompetitive, anti-consumer and inflationary legislation is regrettable. HB 1420 will hurt families and businesses with higher monthly utility bills.”

The ETCC said ROFR bills give incumbent utilities “no reason to reduce or even contain costs and will pass higher transmission costs onto consumers.” It said that according to MISO’s zonal transmission rates, transmission costs in Indiana have climbed by an average 63% over the past five years. It did not address transmission rates in PJM.

“HB 1420 will see those rate hikes accelerate for decades to come. Hoosiers have had to deal with the fourth highest increase in electricity prices in the country,” the coalition said, citing pricing data from the U.S. Energy Information Administration and a 2019 Brattle Group study that concluded transmission competition saves consumers money. “HB 1420 will make a bad problem worse. Electricity transmission competition has been shown to lower costs by as much as 40%. Indiana needs an upgraded grid, and Hoosiers deserve affordable electricity, and electricity transmission competition is the only way to deliver both.”

Indiana’s law takes effect weeks after the Iowa Supreme Court overturned the state’s ROFR, which could potentially shake up the construction and ownership of a couple billion dollars’ worth of MISO’s approved long-range transmission project portfolio. (See Iowa Regulators Ponder MISO Tx Projects After ROFR Ruling.) Multiple MISO state legislatures have considered ROFR bills since the beginning of the year as MISO mounts a second long-term transmission portfolio that could contain as much as $30 billion worth of new projects. (See MISO States Ramp Up ROFR Legislation.)