Page 295 – RTO Insider

May 1, 2023

FERC OKs Duke Energy Rate Changes to Reflect Tax Cuts

FERC on Friday approved Duke Energy’s (NYSE:DUK) settlement with two co-ops to reflect lower corporate tax rates from the Tax Cuts and Jobs Act of 2017 enacted under former president Donald Trump (ER23-1206).

FERC Order 864 required utilities to reflect the cut in the federal corporate income tax from 35% to 21% in their formula rates, specifically their accumulated deferred income tax (ADIT). ADIT is meant to account for the timing differences between filing taxes with the IRS and the method of computing them for regulatory and ratemaking processes.

The lower federal taxes meant that some of utilities’ ADIT collected from consumers was no longer due to the IRS. Order 864 was meant to ensure that ratepayers were made whole for those over-collections and that going forward utilities would have to reflect tax changes in their rates in a transparent manner.

Duke made its initial compliance filings for Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida in 2020, as required, but FERC sent it back for some additional clarifications. (See FERC Directs More Clarity in Order 864 Filings.)

The utility filed changes, but a limited protest came from two of its wholesale customers: North Carolina Electric Membership and Central Electric Power Cooperative.

The two customers said that Duke proposed changes that were not required by FERC’s initial order. Duke’s filing would have changed how it calculated “average rate assumption method” (ARAM) rates, using the “best available data” instead of calculating them in the fourth quarter of the previous year.

They argued that the changes were ambiguous and would let Duke base its calculation on a period other than the fourth quarter of the previous year, which could lead to a mismatch in how ARAM and ADIT rates are calculated. Neither the customers nor FERC had a chance to fully vet the proposal, they said.

Duke asked FERC to hold the proceeding in abeyance so it could negotiate with the co-ops and came to a deal with them before submitting the compliance filing approved Friday.

The firm is proposing revisions to each utility’s formula rate to clarify that the ARAM rate used for the amortization of excess deferred income tax from the tax cut will be the “ARAM rate based on the last filed final federal corporate income tax return, after all permitted federal extensions” as of the date of posting the annual update.

FERC found that Duke’s proposal complies with Order 864 and addresses the co-ops’ concerns, making their protest moot.

The commission accepted Duke’s proposal to return excessive ADIT to customers — or collect shortfalls from them — effective June 1, 2020. The commission said the utility had held customers harmless for the new tax rates in its 2018 and 2019 annual updates. FERC agreed that the June 2020 date would not adversely impact customers.

May 1, 2023February 7, 2024

Michigan Petition to Ban Solar Projects on Farms Withdrawn for Now

LANSING, Mich. — Organizers of a petition drive to ban new, large-scale solar projects on Michigan farmland withdrew their proposal for an initiated law after state officials and opponents warned the language was not specific enough and could shut down projects already in development.

But one of the organizers of Michigan Citizens for the Protection of Farmland said the petition’s language would be redrafted and resubmitted to the Michigan Board of State Canvassers.

The group needs at least 356,958 signatures from registered Michigan voters to place the proposed law before the voters in the 2024 election.

Petition organizer Erin Hamilton told the Canvassers at their April 28 meeting it was not the group’s intent to “create a disastrous situation” that would jeopardize current solar projects.

In a Change.org post, Hamilton said her group was responding to a recent decision by the Michigan Department of Agriculture and Rural Development (MDARD) to allow utility-scale solar on agricultural land enrolled in the department’s Farmland and Open Space Preservation Program.

Hamilton said MDARD’s policy “created a situation where communities without enough commercial or industrial-zoned land available for green power production may have to offer up their farmland, and makes them vulnerable to litigation from massive power corporations, something that America’s farmers and rural communities should never have to worry about.

“We believe that this decision undermines the core purpose of the Farmland and Open Space Preservation Program, which was created to protect our state’s valuable agricultural land for future generations,” she said.

Michigan Citizens for the Protection of Farmland

Although petition sponsors do not need the Canvassers’ approval of their language, most groups seek it to prevent court challenges that claim the language is impermissibly vague or that the petition fails to meet other state requirements. Such challenges have kept some petition proposals from going before the voters.

The proposal is intended to ban any new solar energy projects in Michigan on property zoned for agricultural purposes. It would not affect the ability of a farmer to install a solar project for personal energy usage. Violators would be subject to fines of $10,000 a day.

Under Michigan’s Constitution, petitions for initiated laws need signatures equal to 8% percent of the vote in the most recent gubernatorial election. If a petition gets enough certified signatures, the legislature has 40 days to enact the proposed law. If the legislature enacts the law, it is not subject to a gubernatorial veto. If the legislature does not enact the law, it would go before the voters.

If the initiated act is approved by the voters, it can only be amended or repealed by a three-fourths vote of the legislature. Voters can also repeal it through another initiative.

Hamilton lives in Livingston County, long one of the most conservative counties in Michigan, which has seen disputes over renewable energy projects in a number of townships.

Fights against renewable energy projects are becoming almost endemic in the state and starting to stretch beyond township boundaries. Clinton County, a largely rural area that includes one of Lansing’s fast-growing suburbs, will consider a proposal in May to enact a one-year moratorium on new renewable energy projects. There has been some discussion, though no proposal, for a countywide moratorium in Shiawassee County, east of Lansing.

In November, voters in Montcalm County rejected a plans for a 75-turbine wind park and recalled the local officials who supported the development. (See Wind, Solar Opponents Defeat Four Proposals In Rural Michigan County.)

On April 19, Michigan Senate Democrats introduced SB 277, which would allow farmland owners to contract for solar projects if there is a development agreement for the land and it meets certain standards in terms of pollinator protection and approved plantings. The bill is part of a package introduced to help the state meet its goal of carbon-neutral status by 2050. (See Michigan Dems Seek to End Coal-fired Plants by 2030.)

The anti-solar proposal before the Canvassers was opposed by environmental groups and others worried about the effect it could have on the state’s adoption of renewable energy. Former Michigan Democratic Chair Mark Brewer, representing the Michigan League of Conservation Voters, said the proposal could kill thousands of jobs in the state developing and maintaining renewable energy projects.

Ed Rivet, of the Michigan Conservative Energy Forum, and Brendan Miller, of the Land and Liberty Coalition, said the petition would strip local control from renewable energy projects and put it in the hands of the state.

CMS Energy told NetZero Insider it will take less than 2% of the state’s existing farmland to meet its goal of adding 8,000 MW of utility-scale solar power by 2040.

Katie Carey, director of external relations, said each megawatt of solar takes between five and 10 acres of “flat, open and treeless land with direct access to the sun.”

“Ideal project sites for utility-scale solar power plants are about 500 to 900 acres and are often comprised of multiple, neighboring landowners. We’re considering potential locations such as farm fields — including those less ideal for growing crops — brownfield sites and publicly owned properties,” she said. “Distance to existing transmission infrastructure is also a critical factor for solar developments. The closer, the better. Lack of access or long distances to high-voltage transmission and distribution can increase costs and other siting issues.”

May 1, 2023

Vision for U-M EV Center: Building Ecosystem Where Auto Industry was Born

Already internationally renowned for its Center for Automotive Research, the University of Michigan opened a new Electric Vehicle Center last week that will focus on research and development and workforce development. The goal, the university said, is to “cultivate a robust electric vehicle ecosystem in the state where the modern auto industry was born.”

“We need to address areas like the workforce, cost, vehicle range, charging infrastructure and sustainability,” Dean of Engineering Alec D. Gallimore said. “Our center will build on more than a century of U-M leadership in transportation to tackle these and other critical areas.”

The Michigan legislature authorized funding for the center in the state’s 2022-23 budget. The center plans $130 million in spending:

$20 million to expand educational offerings for “mobility workers,” with a goal of reaching more than 1,200 students per year;
$50 million for research and development of innovative technology through public-private partnerships; and
$60 million for campus infrastructure that could include a teaching, training and development facility with an expansion of the university’s Battery Lab.

Alan Taub, an engineering professor at U-M and a former automotive executive, will head the center. Taub, former vice president for global research and development at General Motors (NYSE:GM), also worked for both Ford (NYSE: F) and General Electric (NYSE:GE).

Taub said EVs will require a “redefinition of personal mobility” not seen since the automotive industry began. That redefinition will affect vehicle design and manufacturing, consumer behavior, infrastructure and policy. It will require the efforts of government, academia and the automotive industry to resolve workforce issues, vehicle range, vehicle servicing, charging and other challenges.

For example, Michigan’s current automotive workforce could be largely displaced as EV production develops. Although there will be increases in employment for EV production, other jobs in supplier companies — such as those who produce parts like oil pumps — will face displacement. Michigan, Indiana and Ohio — all major auto parts supplier states — could lose up to 22% of parts jobs, the university said.

The center will seek to fill industry gaps by identifying where to expand undergraduate and master’s degree programs, as well as continuing education courses and credentials, the university said. It also will participate in the Michigan EV Jobs Academy for education at the pre-apprentice, apprentice and associate degree level.

Mich. Departments Call for Public Input on EV Charging

In related news, the Michigan Department of Environment, Great Lakes and Energy and the Department of Transportation are seeking public input on EV charging as the state considers whether to seek funding under the U.S. Department of Transportation’s Charging and Fueling Infrastructure Discretionary Grant (CFI) program.

The program will provide funding for the build-out of direct current (DC) fast chargers along designated alternative fuel corridors and “community” Level 2 or DC fast chargers along any public road. States, regional planning organizations, local governments, tribes and public transportation authorities are eligible to apply.

“We are hoping to learn more about what organizations are applying to the CFI program and what organizations have project plans/ideas but will not/cannot apply to the CFI program,” the departments said in a joint release. “This information will be used to inform the State of Michigan’s approach to this funding opportunity.”

EGLE and MDOT ask interested organizations to fill out a questionnaire outlining their interest by May 8.

April 30, 2023November 9, 2023

CARB Approves Clean Locomotives Regulation

The California Air Resources Board approved a groundbreaking regulation Thursday to replace the worst-polluting diesel locomotives with cleaner engines by 2030 and to transition to 100% zero-emission (ZE) locomotives over the next three decades.

Diesel-powered locomotives run through many California cities, emitting greenhouse gases, nitrogen oxides (NO_x) and fine particulate matter. Their emissions are expected to eclipse big-rig pollution as CARB’s clean-truck regulations take effect. (See Groundbreaking California Clean Truck Rules Win EPA Waiver.)

“It is imperative that locomotives moving freight as well as people transition to zero-emission, especially as additional new railyards are being built in the state and passenger rail services are expected to expand,” CARB Chair Liane Randolph said at Thursday’s board meeting.

“Communities near facilities where locomotives operate bear a disproportionate health burden due to their proximity to toxic emissions from diesel-powered locomotives,” Randolph said. “These communities tend to be low-income communities and communities of color.”

CARB’s “in-use locomotive” regulation requires locomotive operators to begin funding their own trust accounts based on emissions starting in 2024.

“The dirtier the locomotive, the more funds must be set aside,” CARB’s website says.

The funds can be used to buy or rent the cleanest types of diesel locomotives through 2030. They could also be used to purchase or lease ZE locomotives, to fund ZE locomotive pilot and demonstration projects, and to pay for ZE locomotive infrastructure.

Under the proposed regulation, locomotives older than 23 years are prohibited from operating in-state starting in 2030.

Switchers — short-haul locomotives used to move train cars — and passenger locomotives with original build dates of 2030 and beyond would be required to “operate in a ZE configuration,” CARB says. More powerful “line-haul” locomotives will have to be ZE if built after 2034.

Locomotives also will be prohibited from idling for more than 30 minutes, an effort to reduce emissions near homes.

CARB Executive Officer Steven Cliff said the board has been working with EPA to “coordinate on reducing emissions from locomotives … not only in California but throughout the United States.”

EPA responded to a 2017 CARB petition on locomotives in November, acknowledging the need for changes, and has proposed revising regulatory language to accommodate California’s stricter train emissions rules, Cliff said.

‘No Clear Path’

Dozens of community activists and representatives of environmental groups addressed CARB prior to board members’ unanimous vote Thursday. They urged the commission to do more to protect residents, including children.

“Today you have the power to change the course of history for Californians who have suffered from locomotive pollution for far too long,” Yasmine Agelidis, a Los Angeles-based attorney for environmental law organization Earthjustice told board members.

“I urge you to please adopt this locomotive rule today and save more than 3,500 lives, 63 tons per day of NO_x emissions and $32 billion in health costs,” she said, citing CARB’s own estimates of the new rule’s impact.

Freight rail operators have not been so enthusiastic, fighting the regulation and threatening litigation, board members said.

Adrian Guerrero, assistant vice president of Western public affairs for Union Pacific Railroad, said the “rail industry has demonstrated a strong and productive commitment to reducing its environmental footprint and continues to search for ways to reduce air emissions” even without the regulation.

Union Pacific’s actions since 1998 “resulted in significant gains for clean air from line-haul and yard operations in California well ahead of the rest of the United States,” Guerrero said. “Today UP and the California railroads are exploring and testing technologies such as battery-electric and hydrogen fuel-cell locomotives in addition to modernizing our current locomotive fleets to be more efficient.”

The railroad has committed to net-zero operations by 2050, but “currently there is no clear path to zero-emission locomotives,” he said.

In contrast, CARB staff cited examples of a number of projects in the works, including:

a collaboration by BNSF Railway and Caterpillar’s Progress Rail Services to produce battery-electric locomotives, the first of which are expected to be delivered in 2024 to operate in railyards and on freight routes in Southern California;
an agreement by BNSF and Progress with Chevron to develop hydrogen-powered locomotives;
the California Department of Transportation’s order last year of four hydrogen-powered passenger locomotives from Swiss train maker Stadler Rail; and
a California Energy Commission award of $4 million to Sierra Northern Railway to develop a hydrogen fuel-cell switcher locomotive for use in West Sacramento.

Currently, however, the only hydrogen-powered freight locomotive operating in North America is Canadian Pacific Railway’s experimental model, which it tested successfully in 2022. The railroad says it is hoping to have two more — one for hauling freight and another for switching cars — in operation by the end of this year.

April 30, 2023April 11, 2024

MISO Releases JTIQ Portfolio Cost-allocation Details

CARMEL, Ind.— MISO last week released details about how it will allocate costs for its portion of the $1 billion Joint Targeted Interconnection Queue (JTIQ) portfolio of 345-kV projects with SPP.

The grid operator plans to recover a 90-10 split from incoming generation and load, respectively, for their cost share of the JTIQ portfolio through a monthly charge. MISO said it and SPP’s generation developers will make fixed payments that reduce the select transmission pricing zones’ revenue requirements over 20 years.

During a Planning Advisory Committee (PAC) meeting Wednesday, MISO counsel Chris Supino said the RTOs will use a subscription model for JTIQ planning cycles. When 125% of the portfolio’s megawatts are spoken for, it will be considered fully funded.

Should the grid operators come up short on new megawatts before all JTIQ projects are in-service, load will temporarily pay for the unclaimed megawatts. Generation projects that queue up will repay load later.

MISO staff said they are still outlining the process of what happens when a JTIQ portfolio doesn’t have enough willing takers of transmission capacity through new generation in the queue. However, Supino said it’s unlikely that the portfolios won’t be fully subscribed and funded, as they’re planned to support the evolving resource mix.

Supino said MISO is considering adding a new JTIQ participation agreement to its generator interconnection agreements that would bind parties to the cost schedules’ terms.

Potential federal funding might complicate the process. The Department of Energy in early March said the RTOs and two member entities can apply for full funding under its Grid Resilience and Innovation Partnerships (GRIP) program. (See DOE Clears JTIQ Projects to Proceed with Funding App.)

Clean Grid Alliance’s Beth Soholt asked how payments might be modified should the DOE award funding to the portfolio.

“That’s a great question, but we can’t assume we’ll have a pot of money until we actually get that money,” Supino said.

Supino said staff plans to mention the DOE application when memorializing the JTIQ study and payment process in its joint operating agreement with SPP. The RTOs plan to file with FERC as early as July.

Supino said he doesn’t yet know how DOE funding will affect repayments or reimbursements.

JTIQ portfolio map with costs and adjusted production cost benefits | MISO and SPP

During a Tuesday cost-allocation working group meeting, Mississippi PSC consultant Bill Booth asked MISO to provide more details around the payments’ “timing and flow.” He said he wanted to know whether cost assignments to load will be capped and how they would be tracked in the case of temporary overpayment.

Sustainable FERC Project’s Natalie McIntire said that analyses indicate load will receive 20% on the JTIQ projects’ benefits, but only shoulder 10% of the cost.

Stakeholders asked during the PAC meeting whether staff will begin a JTIQ portfolio for the MISO-PJM seam.

Dave Johnston, an Indiana Utility Regulatory Commission staffer, said he thought it was premature to ponder a MISO-PJM JTIQ portfolio when the MISO-SPP’s process is untested and cannot be deemed a success yet.

MISO’s Andy Witmeier said in March that it’s more cost-effective for comprehensive seams planning to replace the RTO’s “back-and-forth, across the fence” affected system study process with SPP that identities expensive network upgrades.

“A lot of time those solutions are too costly for those set of projects to take on,” Witmeier said. He said it’s appropriate that most JTIQ projects’ costs be allocated to generation because they are designed to facilitate new resources.

“They’re not being built to fix market-to-market congestion or increase transfer capability, he said. “There might be tertiary benefits.”

“This is all new and novel, and if we want this to work, we’re going to have to accept some level of risk,” SPP’s David Kelley said. “I truly believe this is going to be successful and our new way of planning.”

That risk could be reduced considerably if the JTIQ portfolio wins up to a 50% share of funding through the GRIP program.

The Minnesota Department of Commerce is leading the DOE application, due May 17, with help from the Great Plains Institute. The Institute’s Matt Prorok said during April’s Organization of MISO States board meeting that the parties have a “compelling case.”

If the federal dollars are approved, the awards will be granted to RTOs and transmission developers. Prorok said parties must negotiate any awarded grant.

Prorok said the DOE application shouldn’t interfere with the RTOs’ cost-allocation discussions with their stakeholders.

“If the DOE can help us out with funding, I think those [cost-allocation] discussions will go very smoothly,” Kansas Corporation Commissioner Andrew French said during the Gulf Coast Power Association’s MISO-SPP conference in March.

“I hope JTIQ can move forward, and we can use it as proof of concept,” he said.

Aubrey Johnson, MISO’s vice president of system planning, has said DOE funding would provide certainty to members and make interconnections more attractive for developers.

During MISO’s Board Week in March, Johnson said more needs to be done to figure out how DOE funds will intermingle with cost allocation. He joked that the process won’t be as simple as the DOE “cutting a $500 million check, as much as I ask them to.”

April 30, 2023August 13, 2024

ACORE: MISO Should Retool Market for Resources’ Transition

[EDITOR’S NOTE: A previous version of this article misspelled Michael Goggin’s last name on first reference and incorrectly labeled him as ACORE’s “grid strategies vice president.”]

A new American Council on Renewable Energy (ACORE) report recommends MISO make multiple changes to its markets to take advantage of a shifting resource mix.

Michael Goggin, vice president at Grid Strategies and the report’s author, said during an April 25 webinar that he would like see markets with new design elements maximize optimal dispatch and minimize control room operators’ out-of-market commitments.

Goggin said MISO should improve the accuracy of its market participants’ minimum generation levels and filed ramp rates by tightening their rules. He said the grid operator should ensure submitted generator bid parameters reflect the units’ true flexibility, including ramp rates and start-up times or minimum output limits that aren’t physical but economic in nature. He said bid parameters that underplay a unit’s actual flexibility result in excess payments to slow-moving generation.

“I think a common theme across our recommendations here is to use markets,” he said. “Markets are extremely effective and efficient for aggregating a lot of information, which is what the power system has. In many of these RTOs, you have thousands of generators, millions of customers. … Markets are extremely good for aggregating that information and sending the right price signal to the generator to do what is needed to maintain reliability.”

Goggin said incoming battery storage, which is nearly “perfectly flexible,” has a lot of reliability potential. However, he said MISO’s market is “shortsighted” in that it currently prohibits dispatchable renewable energy from furnishing a range of operational reserves.

“We think this is harming customers because wind and solar resources have extremely flexible capabilities to provide a range of operating reserves,” he said.

Much of MISO’s existing generation is inflexible and can’t be dispatched up and down quickly, Goggin said. He said MISO should make a point to “price inflexibility” and remove uplift and out-of-market payments from inflexible resources, saying a failure to so can harm the resource transition.

“Traditionally, we got used to operating the power system that way, but now that we have new resources that are highly flexible, and you can actually add things like batteries to your existing plant, we think that a lot of the market design that made sense decades ago no longer make sense,” he said.

Goggin said controllable wind and solar resources are “underappreciated.” They’re underused for flexibility services, he said, and left navigating market rules that weren’t designed for them.

“We hear a lot from RTOs fretting about losing so-called flexible resources and talking about the need to directly compensate for flexibility. And that may be true, but I feel like there’s often less thought put into how to get rid of these market features that reward inflexibility,” Sierra Club senior attorney Casey Roberts said.

Roberts said she thinks resources owners understating flexibility in their bid parameters is a pervasive problem and that RTOs should take steps to hold them accountable. She said observing how many thermal resource owners alter their startup times compared to what was on the books before MISO introduced its new availability-based capacity accreditation was “interesting.”

“Several generation owners suddenly discovered they were a lot more flexible than they had previously thought and asked for waivers from those rules so their ‘true’ greater flexibility could be reflected in their capacity accreditation,” she said.

Roberts also said MISO is making an unfortunate choice by disqualifying its wind and solar resources from providing ramping capability. (See MISO Plans to Bar Intermittent Resources from Ramp Capability.)

“This is not based on the technical capabilities of these resources, but rather an inability of MISO’s own software systems to discern whether any resource’s ramp-up capability would actually be deliverable or whether they appear to be available to deliver ramp-up because they’re curtailed due to transmission constraints,” Roberts said. “That results in a situation where MISO has to manually confirm each resource’s availability to deliver ramp up, which it’s willing to do for thermal resources but not for renewable energy simply because there are so many of them it would be an untenable problem.”

That issue illustrates that MISO needs software and transmission upgrades in market updates, she said.

Leeward Renewable Energy’s Emma Nix agreed that RTOs need transmission buildout to support interconnecting inverter-based resources. She said that MISO is entering capacity markets’ next phase considering the daily times that capacity is most needed.

Goggin urged MISO to use a sloped demand curve in its capacity auction and account for simultaneous unavailable capacity caused by widespread generation outages. He said it’s common for much of the generation portfolio to trip offline at the same time during weather events. (See MISO Charts Course on Capacity Auction’s Sloped Demand Curve.)

MISO should add probabilistic forecasting to commit resources and shrink the time it takes to commit resources as close to real-time as possible, he said. MISO can reduce forecasting errors by shortening the time that passes from commitment to output, Goggin said.

He praised real-time, five-minute markets as the most effective means of incenting flexibility. He said energy price caps can sometimes interfere with the market because they can mask the operating day’s riskier periods and can trigger units to prematurely release all available output. He added that higher wholesale market price caps will have “very little” rate impact because most customers will never pay a real-time price.

April 30, 2023

FirstEnergy Pressured to Acquire W.Va. Coal Plant

Pressure to purchase and run a West Virginia coal-fired power plant poses financial and political complications for Ohio-based FirstEnergy (NYSE:FE).

Analysts participating in the FirstEnergy’s first-quarter earnings conference call Friday questioned whether the company’s regulated West Virginia subsidiary Monongahela Power would purchase the Pleasants Power Station, a deregulated plant the company previously owned that is now struggling to compete in the PJM market and slated for shutdown on May 31.

The Public Service Commission of West Virginia in December asked FirstEnergy to consider approving Mon Power’s purchase of the 44-year-old, 1,300-MW coal plant, located on the West Virginia side of the Ohio River.

FirstEnergy briefly owned Pleasants after buying the Pennsylvania-based utility Allegheny Energy in 2011. But in 2017 it tried to move ownership and operation of the plant from what had become unregulated Allegheny Energy Supply to regulated Mon Power. FERC blocked the move. (See FirstEnergy Shutting Down Unsold Coal Plant.)

The plant is now owned by Maryland-based Energy Transition and Environmental Management, a company that demolishes old power plants and repurposes the sites. ETEM is leasing the plant to its previous owner, Energy Harbor, which will handle shutdown at the end of this month.

Energy Harbor is the company that emerged from the bankruptcy of FirstEnergy’s power plant subsidy FirstEnergy Solutions.

FirstEnergy agreed to review the request from the PSC, but earlier this spring it asked for a subsidy of $3 million/month to cover operating Pleasants for a year while it continues to evaluate whether to purchase and operate it as a regulated facility. Consumer groups and the state’s consumer advocate are opposing the idea.

FirstEnergy CFO Jon Taylor explained the West Virginia situation to analysts during a review of the company’s rate increase plans pending or planned before utility regulators across its 10 electric distribution companies.

“Mon Power proposed an option to enter into an interim arrangement with Pleasants’ current owner that would keep the plant operational beyond its May 31 deactivation date. This would allow the needed time to do a thorough analysis and evaluation as requested by the West Virginia PSC,” he said.

Taylor said the PSC approved the company’s request for the subsidy earlier in the week.

“We will begin negotiations with the plant’s current owner. If we reach an interim agreement that we believe is in the interest of customers and FirstEnergy, we will submit it to the commission. And if approved, this would allow recovery of associated costs through a surcharge. If we can’t reach an agreement that is in the interest of our customers, we will file an update with the commission,” he said.

A complication is that Mon Power and a second regulated FirstEnergy subsidiary, Potomac Edison, already own two other large coal-fired power plants in the state.

If FirstEnergy approves Mon Power buying Pleasants, the company will likely close one of the other plants, said Taylor. “We don’t see it as a viable option for Mon Power to operate three coal-fired power plants in West Virginia,” he said.

FirstEnergy “is moving forward with efforts to support the energy transition across our footprint,” Taylor told the analysts. “And we remain committed to our climate strategy and our goal to achieve carbon neutrality … by 2050.”

The company is planning to build five solar farms in the state with a total output of 50 MW, he said.

An analyst with KeyBanc asked whether the company will face an “impossible situation” and will “pay a political price” in the state if it does not purchase the Pleasants power plant.

Interim CEO John Somerhalder responded that the company is committed to working closely with the state. Noting that the Pleasants plant is newer and equipped with enhanced environmental controls, the request from the PSC is “a good question that needs to be evaluated,” he said.

Somerhalder’s review of the company’s overall financial performance in the first quarter was equally upbeat.

“Despite record-high temperatures across our footprint this winter, we’re off to a good start in 2023 as we continue positioning FirstEnergy for greater resiliency and growth by strengthening our financial position, enhancing our operations and optimizing the customer experience,” he said.

The company reported first quarter earnings of $292 million ($0.51/share) on revenue of $3.2 billion. That compares with earnings of $288 million a year ($0.51/share) on revenue of $3 billion.

April 30, 2023November 9, 2023

CARB Adopts Clean Fleets Rule Despite Broad Skepticism

California regulators approved a rule that will ban the sale of diesel trucks in the state starting in 2036, requiring all new medium- and heavy-duty trucks sold to be zero-emission.

The regulation, called Advanced Clean Fleets (ACF), also requires truck fleet operators to start transitioning to zero-emission vehicles beginning on Jan. 1, 2024.

The California Air Resources Board (CARB) voted unanimously on Friday to adopt the regulation.

“This is an absolutely transformative rule to clean our air and mitigate climate change,” CARB Chair Liane Randolph said just before the board’s vote.

But Randolph acknowledged there are challenges in the transition to zero-emission trucks. Some board members, while supporting the regulation, expressed doubts that sufficient infrastructure would be available to support the ZEVs.

“Those challenges aren’t going to be tackled unless we move forward,” Randolph said. “No one is going to build infrastructure in the abstract. So, we need to adopt this rule, move forward, get it going, and work through all of these implementation challenges.”

The agency initially had proposed banning the sale of diesel trucks starting in 2040. But during a hearing on the proposed regulation in October, the board asked to move up the ban to 2036. CARB called the 2036 ban on diesel trucks “a first-in-the-world requirement.”

Timeline Questioned

Critics called the timeline unreasonable.

American Trucking Associations CEO Chris Spear said fleet operators are just getting acquainted with zero-emission trucks. He said they are finding that the vehicles are more expensive than internal-combustion vehicles and that charging and refueling infrastructure is “nonexistent.”

“California is setting unrealistic targets and unachievable timelines that will undoubtedly lead to higher prices for the goods and services delivered to the state and fewer options for consumers,” Spear said in a statement following Friday’s vote.

In response to feedback during the October board meeting, CARB staff revised the regulation to give fleet operators more flexibility in complying with ACF. (See CARB Examining Obstacles on Road to ZEV Fleet Adoption.) The changes were released in March for 15 days of public comment.

But many local governments across the state still objected to the regulation.

The Nevada County Board of Supervisors said in a letter to CARB that ACF doesn’t consider local agency budget constraints. The regulation also doesn’t factor in the time needed to build the infrastructure needed to support the ZEVs, the letter said.

“Electrifying service yards to support an electrified fleet is a much greater undertaking than a simple electricity panel upgrade or some quick trenching in the parking lot,” said the letter, signed by Board of Supervisors Chair Ed Scofield.

CARB member Bill Quirk, who was appointed to the board in January, asked agency staff on Friday about the availability of zero-emission drayage trucks with a range of at least 400 miles. That’s an issue that some speakers raised during public testimony on Thursday.

Heather Arias, CARB’s transportation and toxics division chief, said some hydrogen fuel cell trucks with that range are now available. As for fueling, Arias said, there are two hydrogen stations at San Pedro ports and two more are expected near the Port of Oakland. In addition, the California Energy Commission is considering funding several hydrogen fueling stations throughout the Central Valley.

“Within a year, we anticipate that drayage fleets would be able to buy hydrogen fuel-cell trucks with upwards of a 500-mile range and be able to fuel anywhere from the Port of Oakland all the way down to San Pedro and several spots in between,” Arias said.

Quirk, who owns a hydrogen fuel cell vehicle, noted the difficulties of fueling near his home in the Bay Area. He said the CEC “cannot be depended upon to do this.”

“I’m just not optimistic that the infrastructure’s there, and I think we need to put pressure on the Energy Commission to make sure it is there,” said Quirk, a former state Assemblyman. “And not only that the stations are there, but the hydrogen is there. Because again, these stations run out of hydrogen all the time.”

Board member John Balmes said providing infrastructure to support the ZEVs would be “a huge lift.”

“I’m personally skeptical that we can pull it off,” he said.

Other board members focused on the anticipated benefits of ACF.

Board member Diane Takvorian noted that ACF is expected to generate $26 billion in health savings, as cleaner air leads to fewer premature deaths, emergency room visits, hospitalizations and lost workdays.

“It’s resulting in an amazing number of health benefits,” Takvorian said.

ACF is also expected to reduce cumulative GHG emissions in California by 327 million metric tons from 2024 to 2050, making it a key step toward the state’s goal of reaching carbon neutrality by 2045.

Fleets Covered by ACF

The ACF regulations apply to three categories of fleets: drayage fleets; state and local government fleets; and federal and high-priority fleets. Fleets are considered high-priority if they have 50 or more vehicles or more than $50 million in annual revenue.

The requirements are the most stringent for drayage trucks, the heavy-duty vehicles at ports and railyards that transport cargo. The idea was to prioritize air quality improvements in disadvantaged communities near ports and warehouse districts.

All new trucks added to drayage fleets must be zero-emission starting in 2024, and all drayage trucks must be ZEVs by 2035.

And while operators of other types of fleets have the flexibility to add ZEVs or near-ZEVs, such as plug-in hybrid trucks, to comply with ACF through 2035, the near-ZEV option isn’t available for drayage fleets.

For high-priority fleets, all new trucks must be ZEVs or near-zero-emission starting in 2024.

For state and local fleets, half of new trucks must be ZEVs or near-zero-emission from 2024 to 2026, and all must be ZEVs or near-zero-emission beginning in 2027.

Fleet operators may also request more time to comply under a range of circumstances, such as a delay in ZEV infrastructure construction that’s outside their control. An extension of up to five years may be available if the utility needs more time to bring power to the site.

Fleet operators may also be allowed to buy an internal combustion vehicle if they’re looking to replace a specialty truck for which there’s no ZEV equivalent.

And ACF offers an alternative compliance option in which fleet operators can still buy internal combustion trucks but commit to increasing the percentage of ZEVs in their fleets over time. For light-duty package delivery vehicles, for example, half of the fleet would need to be ZEVs by 2031, followed by a full ZEV requirement in 2035. The alternative compliance option isn’t available to drayage fleets.

Advanced Clean Fleets is a complement to the Advanced Clean Trucks regulation that CARB adopted in 2020. That regulation requires manufacturers of medium- and heavy-duty trucks to sell an increasing percentage of zero-emission vehicles starting in 2024.

Even with Advanced Clean Trucks and Advanced Clean Fleets, an estimated 480,000 heavy-duty combustion-powered trucks will still be on California roads in 2037, CARB said last year in its State Implementation Plan submitted to the EPA. The agency expects to start work on an additional zero-emission truck measure to address remaining diesel trucks, with a target of board adoption in 2028.

April 30, 2023

CenterPoint’s $43B Capex Plan on Track

CenterPoint Energy (NYSE:CNP) navigated high interest rates and milder winter weather to turn in a “tremendous start” to 2023, the company said last week.

“We also have great momentum from the continued execution of our long-term growth strategy through which we have deployed more than $8 billion of capital over the past two years,” CEO David Lesar told financial analysts Thursday.

The Houston-based company reported earnings of $313 million ($0.49/diluted share), compared to $518 million ($0.82/diluted share) for the first quarter of 2022. Last year’s opening quarter included gains from the sale of Energy Transfer common and preferred units and local gas distributors in Arkansas and Oklahoma.

CenterPoint’s adjusted earnings of 50 cents/share beat the Zacks consensus estimate of 48 cents, the 12th straight quarter it has met or exceeded expectations.

The utility said it deployed about $1 billion of the $3.6 billion capital it has planned for the year during the quarter. It has a long-term goal of investing $43 billion of capital through 2030 in its Texas and Indiana footprints.

Legislative and regulatory decisions went CenterPoint’s way during the quarter. Texas issued its state gas company about $1.1 billion of securitization funds related to the extraordinary gas costs it incurred during the February 2021 winter storm. The bonds are not on the utility’s balance sheet.

The Texas Public Utility Commission also approved the recovery of costs incurred during the storm for its leased emergency temporary mobile generation units.

“It highlights the commission’s awareness of the important role of this critical tool can play to help mitigate the number and duration of customer outages during extreme weather events,” Lesar said.

On Wednesday, CenterPoint filed an integrated resource plan (IRP) for its Indiana business that would end its use of the state’s coal by 2027. The company said the proposed plan will save customers nearly $80 million compared to the continued use of coal and will reduce carbon emissions by more than 95% over the next 20 years.

Coal generation currently accounts for 85% of the electricity for the utility’s southwest Indiana customers. By 2030, CenterPoint projects more than 80% of its electricity in the state will be generated by solar and wind, with natural gas providing the rest.

The company plans to convert its last coal plant, F.B. Culley 3, to natural gas by 2027 and maintain its 270-MW capacity. It will also add 200 MW of wind and 200 MW of solar by 2030; another 400 MW of wind resources could be added by 2032.

CenterPoint plans to submit the final IRP to the Indiana Utility Regulatory Commission by June 1, with a response expected next year. The plan is also designed to comply with MISO’s new, more stringent capacity requirements to meet peak energy demand across all four seasons. The company serves 150,000 customers in southwestern Indiana.

CenterPoint’s share price finished the week at $30.47, a gain of 12 cents from Wednesday’s close.

April 30, 2023

MISO: Long-range Tx Needed for 369 GW in Interconnections

MISO last week laid out more reasons why it needs a second long-range transmission plan (LRTP) portfolio, saying it will connect several hundred gigawatts of new resources over the next 20 years to avoid reliability crises.

The grid operator expects to add 369 GW of new resources, mostly renewable, by 2042. Even with 103 GW of capacity expected to retire from the existing fleet, MISO will have 466 GW of installed capacity. However, only 202 GW of that capacity is accredited; staff assumes a declining effective load-carrying capability for the renewable additions.

During a teleconference Friday with stakeholders, James Slegers, MISO’s senior expansion planning engineer, said the RTO’s middle-of-the-road, 20-year future scenario shows that it needs transmission capacity to manage resource expansion and increased load.

MISO has three transmission planning futures, ranging from conservative to aggressive. The second LRTP cycle is based on the second future, which assumes all states’ climate goals and members’ integrated resource plans are realized.

Staff have said the second portfolio could cost as much as $30 billion. MISO aims to recommend the portfolio during the first half of 2024. (See MISO Says 2nd LRTP Portfolio Still in Flux.)

Slegers said an energy adequacy analysis indicates risks will be most pronounced during the “twilight hours” on hot summer days, when load is still high, solar has dropped off and wind production is low. He said MISO could find itself needing up to an additional 29 GW of flexible resources over what it has now for those three or four hours in 2042 on the most challenging operating days.

Staff said they expect to connect new types of flexible resources to the system, including green hydrogen, long-duration battery storage, small modular nuclear reactors, and reciprocating internal combustion engines. The RTO forecasts 3 GW of offshore wind farms in the Gulf of Mexico will meet Louisiana’s goal of net-zero carbon emissions by 2050.

MISO says the second LRTP’s benefits include avoided load-shedding during extreme weather events, less transmission investment, greater access to capacity and meeting decarbonization goals.

Having completed the latest resource expansion forecasts, staff will now build reliability and economic models into the fall meant to identify beneficial projects.

MISO is also considering hosting a Planning Advisory Committee meeting May 31-June 1 to delve into the footprint’s need for future 765-kV and HVDC lines alongside other transmission technologies. Committee leadership has invited stakeholders to prepare presentations.

MISO will host its next LRTP workshop June 5.