Search
`
September 27, 2024

Posted on

PJM Capacity Prices Jump in 5 Regions

PJM capacity prices dropped in much of the RTO for delivery year 2024/25, but ratepayers in five regions will face increases due to locational constraints.

PJM said its overall capacity bill will be unchanged at $2.2 billion as prices in the “rest-of-RTO” dropped 18% to $28.92/MW-day from $34.13 for 2023/24. But prices in the Base Residual Auction were considerably higher in five regions, an increase from three regions that saw price separation in the previous auction:

  • DEOK (Duke Energy Ohio and Duke Energy Kentucky): $96.24;
  • DPL-South (Delmarva Power south of Chesapeake & Delaware Canal): $90.64;
  • MAAC (Met Ed, Penelec, Pepco, PPL): $49.49;
  • Eastern MAAC (Atlantic City Electric, Delmarva Power North, Jersey Central Power & Light, PECO, PSE&G, and Rockland Electric): $54.95; and
  • BGE (Baltimore Gas and Electric): $73.

Constrained LDAs

“We continue to see indications that … some locational deliverability areas are increasingly constrained,” PJM Senior Vice President of Market Services Stu Bresler said in a press conference after the results were released Monday afternoon.

“The congestion is really due to the combination of the available transmission into the locational deliverability area, along with the available resources and the offer prices of those resources in those constrained LDAs,” Bresler said. “It’s really an indication that we need to commit higher cost resources there than we did in the rest of … the RTO, in order to maintain reliability. So it’s not necessarily an indication that we are or will be short, in that area. Certainly none of these LDAs got anywhere close to the maximum price on the demand curve.”

While none of the LDAs were near the maximum price cap in each of the zones’ variable resource rate (VRR) curve, the report notes that all five had less than 5% supply offered in excess of the megawatts that cleared the auction.

PJM capacity prices by delivery year (RTO Insider LLC using PJM data) Alt FI.jpgPJM capacity prices by delivery year | © RTO Insider LLC, from PJM data

 

PJM said prices in DPL-South would have been four times higher had FERC not accepted the RTO’s proposal to address a “mismatch” between the resources included in the calculation of the LDA’s reliability requirement and those that entered the auction.

Supporters of the proposal, largely public utilities and state advocates, said it protected ratepayers while keeping the market in line with supply and demand, while generation owners decried the order as undermining confidence in the markets and a violation of rules against retroactive ratemaking. (See FERC OKs PJM Proposal to Revise Capacity Auction Rules.)

‘Healthy’ Margin vs. Retirement Concerns

Although the RTO said it will maintain a “healthy” reserve margin at 20.4%, officials expressed concern at a 2,198-MW drop in offered capacity, the third year in a row that saw a reduction. Bresler said the reduction in offered supply was almost all comprised of fossil fuel units, mostly coal-fired generation, which saw a 2,050-MW decrease in offers. Demand response, hydro and wind saw more modest declines.

“If this trend continues, it represents a potential concern for long-term resource adequacy, depending on the rate of replacement of these resources,” PJM said.

A white paper published by PJM last week warned of reliability problems within a few years if the pace of generation interconnections does not increase to match deactivations. The report states that approximately 40 GW of generation is expected to retire by 2030, while as little as 15 GW is projected to be installed at the current trajectory. The PJM Board of Managers concurrently announced that it has initiated a fast-track rulemaking process to find solutions to address the reliability concerns. (See PJM Board Initiates Fast-track Process to Address Reliability.)

Energy Market Impact

Bresler said the reduced prices in rest-of-RTO reflected higher energy market revenues driven by higher gas, oil and coal prices.

“So you would expect to see lower capacity market offers,” he said. “But we do remain concerned about market sellers’ ability to include risk in their capacity market offers, particularly learning from the events of December 23rd and 24th, where there were … quite a few performance assessment intervals, and therefore penalties that will apply to capacity resources that failed to perform.” (See PJM Gas Generator Failures Eyed in Elliott Storm Review.)

The auction results may have also been impacted by a “marginally higher” net cost of new entry used to determine the VRR curve, according to PJM’s auction report. The figure rose from 6.2% to 7.2% in the 2024/25 BRA. The RTO’s reliability requirement also increased by 236 MW up to 132,056, although the report notes there were “significant” changes to the requirement for LDAs.

“While the auction’s low capacity clearing price represents savings for customers in the short term, we continue to sound the alarm when it comes to the reality that critical generation resources needed to secure reliable electricity … are at risk of retirement,” the Electric Power Supply Association (EPSA) said in a statement after the results were announced. “The market must be designed properly and avoid rule changes intended to accommodate specific preferred resources or technologies. EPSA has long called on PJM leadership, policymakers, and regulators to address the serious foundational issues at hand, and we stand ready to continue to provide recommendations and work collaboratively to forge a solution.”

Winners, Losers

PJM procured 140,416 MW of capacity, excluding energy efficiency resources, whose impact is reflected in a lower load forecast. Fixed resource requirement (FRR) capacity plans — load-serving entities that choose to provide their own resources outside of the BRA — added 32,545 MW for a total of 172,961 MW.

Including FRR resources, PJM saw increases in cleared capacity for natural gas (+1,615 MW) and solar (+1,297 MW). Energy efficiency cleared or committed in an FRR plan increased by 2,198 MW.

In contrast, demand response (-451 MW), nuclear (-331 MW), coal (-278 MW), hydro (-237 MW) and oil (-230 MW) cleared less than in the prior auction.

New generation cleared 328.5 MW in the BRA, while an additional 173.8 MW capacity was procured from uprates to existing or planned generation, which Bresler said was a “fairly significant reduction in offers from new or upgraded generation” compared with the approximately 3,000 MW that cleared in the previous auction.

The RTO as a whole failed the three-pivotal supplier test, resulting in market power mitigation being applied to all existing generation capacity resources, resulting in the RTO utilizing the lower of the resources’ market seller offer cap or the submitted offer price when determining the resource’s RPM clearing.

In the 2023/24 BRA, prices in most of the MAAC region dropped nearly 50%, while those in rest-of-RTO fell nearly one-third. (See PJM Capacity Prices Crater.)

Posted on

PJM MRC/MC Briefs: Feb. 23, 2023

Markets and Reliability Committee

Stakeholders Endorse Increased FTR Bid Limit

VALLEY FORGE, Pa. — The PJM Markets and Reliability Committee last week endorsed an RTO proposal to increase the maximum number of bids a single corporate entity can enter into financial transmission rights auctions from 15,000 to 20,000.

Market participants had complained that the transition from weekend on-peak and daily off-peak class types made it take a larger volume of bids to buy and sell the same number of hours of an FTR, according to the problem statement adopted by the Market Implementation Committee in December. The change was pursued through the RTO’s “quick fix” process, which allows a proposal to be endorsed concurrently with its issue charge and problem statement. (See “FTR Bid Limit Increase Endorsed Under Fast Track Pathway,” PJM MIC Briefs: Jan. 11, 2023.)

During the MRC’s first read of the proposal, Senior Engineer Emmy Messina said the 20,000 figure was viewed as a balance between the usage of the class types and bid submission performance. The approved manual changes will be effective for the auction occurring in March.

Updated Default CONE and ACR Figures

PJM presented a first read of the updated default gross cost of new entry (CONE) and avoidable-cost rate (ACR) formed through its Quadrennial Review.

Following advisory votes at the MRC and Members Committee, PJM is set to submit a filing with the parameters to FERC. If approved, the values will be in place for the 2026/27 delivery year.

The gross CONE for all resource types, except storage, would increase, which PJM’s Skyler Marzewski said was expected given the tendency for costs to rise, the Inflation Reduction Act’s changes to the investment tax credit and different reference resources for combined cycle and onshore wind facilities.

Stakeholders questioned the nine-fold difference between the proposed net CONE values for fixed solar panels versus those with tracking technology, which Marzewski said is attributed to the higher energy and ancillary services revenues and effective load-carrying capability rating for tracking panels.

The most significant changes to the gross ACRs proposed are the introduction of steam oil and gas as a new resource type, refined property tax and insurance costs, and expanded data from the Nuclear Energy Institute on resource costs. Single-unit nuclear generators would be the only resources to see their default ACR decrease under the proposal.

Members Committee

PJM Board to Review Monitor Contract

PJM board membersPJM Board of Managers Member Paula Conboy | PJM

PJM Manager Paula Conboy told the MC that the Board of Managers plans to review the RTO’s contract with its Independent Market Monitor, Monitoring Analytics.

The contract is up for renewal at the end of 2025. Responding to stakeholder questions, Conboy said that the review is to look at terms and conditions, as well as any areas that may need clarification.

“This is about the terms and conditions of the contract; this isn’t about the IMM [Joe Bowring] himself,” she told the committee. “With the evolving market and so many things changing, we just want to make sure we’re all on the same page about what’s in the contract.”

PJM General Counsel Chris O’Hara said the RTO has not engaged in a pre-emptive review or redline of the contract.

Posted on

PJM Board Initiates Fast-track Process to Address Reliability

PJM’s Board of Managers is opening an accelerated stakeholder process to address rising reliability concerns about the RTO’s capacity market.

The effort includes last week’s release of a PJM white paper detailing a potential imbalance between deactivating resources and new development if interconnections do not speed up.

“Notwithstanding the efforts to date, given recent events and analyses, the Board believes near-term changes to the Reliability Pricing Model (RPM) are necessary to ensure that PJM can maintain resource adequacy into the future,” the board said in a letter to stakeholders Friday. “The Board also continues to value robust stakeholder review, input and challenge to help solve complex problems such as this.”

In invoking PJM’s Critical Issue Fast Path process, the board aims to submit a FERC filing by Oct. 1 to address many of the issues stakeholders have been deliberating in recent months. The letter also noted that FERC recently announced the opening of a forum to examine PJM’s capacity market, saying the commission’s interest underlines the need for the fast-track process and could provide a venue to vet potential solutions ahead of the potential October filing. (See FERC OKs PJM Proposal to Revise Capacity Auction Rules.)

The scope of the fast-track process includes revising the capacity performance model and how penalty risks can be accounted for in capacity offers; improving resource accreditation to ensure that reliability contributions are accounted for and compensated; and enhancing risk modeling to improve understanding of winter risk and correlated outages. The board also aims to align the RPM and fixed resource requirement rules to ensure that supply and demand are held to comparable standards.

The board will be exploring whether any potential changes it proposes should be applicable to auctions prior to the 2027/28 Base Residual Auction, which could require delays to future auctions. It has directed staff to draft possible alternative auction schedules.

PJM White Paper Expounds Reliability Concerns

The letter was released the same day PJM published a white paper finding that the rate of deactivating generation is outpacing the development of new resources. (See PJM White Paper to Highlight Future RA Concerns.)

“For the first time in recent history, PJM could face decreasing reserve margins … should these trends — high load growth, increasing rates of generator retirements, and slower entry of new resources — continue,” the paper states.

About 40 GW of generation is expected to retire by 2030, representing 21% of the current installed capacity, while one of the scenarios PJM identified would see only 15 GW of new resources installed. The RTO could fall below its target reserve margin by the 2026/27 delivery year and continue declining through the rest of the decade.

PJM also found that increasing data center growth and the electrification of vehicles and home heating could exacerbate the decreasing amount of capacity available by pushing its long-term load forecasts higher.

“Along with the energy transition, PJM is witnessing a large growth in data center activity. Importantly, the PJM footprint is home to Data Center Alley in Loudoun County, Va., the largest concentration of data centers in the world … In 2022, the [load analysis subcommittee] began a review of data center load growth and identified growth rates over 300% in some instances,” the white paper states. (See Policymakers Working to Meet Spiking Demand of Data Centers in Virginia.)

PJM’s estimates for new generation are based on existing projects in the interconnection queue and the historical rate for resources to reach commercial status, paired with a series of projections through 2030 from S&P Global. The low-entry scenario is based on the current rate of approximately 5% of projects entering the interconnection queue reaching commercial operation, while the high-entry alternative includes a “fast transition” model assuming “carbon net neutrality by 2050 through the IRA and additional policies.”

The pairing of the accelerating electrification projection and low-entry scenario could result in a reserve margin of 3% by 2030, while pairing that projection with the high-entry model would see a 12% margin. According to the PJM Independent Market Monitor’s third quarter State of the Market Report, the 2023 installed reserve margin target is 14.8%, far exceeded by the projected reserve of 21.6%.

PJM said the reliability risks underline the need to continue its work on changes to its capacity market, interconnection process and clean energy procurement, while embarking on “combined actions to de-risk the future of resource adequacy while striving to facilitate the energy policies in the PJM footprint.”

The 40 GW of deactivations is largely attributed to government and private sector policies, with an estimated 25 GW due to various on-the-book and proposed policies. A further 12 GW of retirements are either underway or announced over the next few years and another 3 GW is estimated to be due to economic reasons.

Monitor Joseph Bowring said he agrees with PJM’s assessment of the scale of policy deactivations and pace of resource development; however, he believes PJM is underestimating the likely number of economic retirements by understating the avoidable cost rate he believes generators are likely to face.

He also believes PJM is overstating the amount of capacity available by including demand response and by using an inaccurate approach to calculating the capacity provided by renewable resources. 

“An essential part of addressing expected reliability issues is to identify the expected sources of new generation. That resource mix will include both renewables and gas-fired generation, but PJM needs to focus on exactly how new generation will meet peak loads,” Bowring said. “There are a lot of resources in the queue, but the question is whether they will provide reliability when it is most needed, including the expected performance of renewables and the adequacy of firm gas supply.”

Bowring believes the first step PJM must take is to modify the current capacity market design, including eliminating extreme penalties from the capacity market, relying on energy market incentives and adding firm fuel and testing requirements to ensure reliability during cold- or hot-weather emergencies. To support the first recommendation, he pointed to the $1-$2 billion estimate of the capacity performance penalties generators are facing from the Dec. 23 winter storm.

“The extreme penalties in the current capacity market design create an administrative process that adds unacceptable uncertainty to the process and that can never approach the effectiveness of the energy market in providing price signals and timely settlement,” he said. “There is no reason that in a rational market design, less than 24 hours of cold weather would result in a crisis and a level of administrative complexity that threatens to undermine the incentives to invest in existing and new supply resources at a time when those resources are needed. The current capacity market design undermines incentives rather than creating positive incentives to invest and perform.”

While he’s glad to see PJM directly discussing future reliability more often, Bowring said he does not believe the best approach is to take the response out of stakeholders’ hands through the board’s fast-track process.

Tom Rutigliano, senior advocate with the Natural Resources Defense Council, said the report shows that new resource development is key in addressing a critical risk a few years away. 

“To be clear: the problem for 2030 is PJM’s project completion rate for new renewables and transmission, not the retirement of polluting, high-emitting plants,” Rutigliano said. “It is PJM’s responsibility to identify worst-case scenarios with time to avoid them, and this report highlights the urgent need to remove barriers to new supply in PJM. PJM and states now must work together to rapidly speed interconnection, get needed transmission upgrades built, and fix rules that keep supply from other regions and new technologies from supporting reliability.”

PJM Power Providers (P3) President Glen Thomas said recent actions by PJM and FERC have undermined both the capacity market and the reliability it’s meant to provide. In particular, he said the commission’s order last week accepting PJM’s proposal to revise the reliability requirement of locational delivery zones under specific circumstances follows a pattern that is “not only unsupportive of competition, but directly damaging to markets and market participants’ confidence in them.”

“The results of the report are not surprising,” Thomas said. “Reliability will be compromised when demand is increasing and state and federal policies are actively promoting the retirement of resources that are needed to maintain reliability. Not mentioned in the report is the significant impact that PJM and FERC actions to undermine the capacity market, PJM’s tool for ensuring reliability, have had to drive investors away from PJM. That represents a direct threat to reliability and will cost consumers more money than they should be paying for that reliable supply of power. PJM is headed toward a bad spot, and it’s going to take a collective effort to make sure we don’t get there.”

Posted on

SPP Selects Sterzing as New CFO

SPP said Monday it has selected Deborah Sterzing, who has more than 20 years of experience in finance and electric industry financial planning, as its new CFO. She replaces Tom Dunn, who retired in December after 21 years with the RTO. (See “CFO Dunn Retires,” SPP Board/Members Committee Briefs: Oct. 25, 2022.)

Sterzing will be responsible for developing and executing SPP’s overall financial strategy, aligning it with the RTO’s vision and objectives. She previously served as CFO of Wind Energy Transmission Texas and has also held financial roles at Citigroup, High Bridge Energy Development, Skaia Energy, Green Mountain Energy and General Electric.

“[Sterzing’s] strategic, financial and regulatory expertise will ensure SPP has the organizational readiness necessary to lead our industry to a brighter future,” SPP CEO Barbara Sugg said.

Posted on

Virginia Legislature Passes Utility Regulation Bills Backed by Dominion

Compromise bills that will change how utility rates are regulated in Virginia sailed through both chambers of the General Assembly during the last day of its session Saturday.

The legislation, which was passed nearly unanimously, is backed by Gov. Glenn Youngkin (R) and the state’s largest utility, Dominion Energy (NYSE:D).

The legislation removes some rate riders and will set Dominion’s return on equity at 9.7%, which is about halfway between the current 9.3% and the 10.03% in an earlier version of the bill. That rate will be in effect later this year until 2025, when the State Corporation Commission will set its rates, freed from basing them on a peer group of its fellow Southern utilities that had been the practice in Virginia for more than a decade.

“I applaud the legislators who took the lead on writing and negotiating this landmark bill, which will save customers money on their monthly bills, restore the independent oversight of the State Corporation Commission and support the long-term stability of Virginia’s largest electric utility,” Youngkin said. “Today, the General Assembly came together and put Virginians first.”

Richard Saslaw (Virginia Senate) Content.jpgSenate Majority Leader Richard Saslaw (D) | Virginia Senate

The companion bills — SB 1265, introduced by Senate Majority Leader Richard Saslaw (D), and HB 1770, introduced by Del. Terry Kilgore (R) — cleared the Senate unanimously in votes Saturday and only drew one opposing vote in the House of Delegates from Del. Dave LaRock (R).

“What we got here today, though, finally is a good, well rounded deal,” Kilgore said. “A deal that’s good first and foremost, for Virginians. And a deal that’s good for Dominion, a utility whose health that we need to deliver energy reliably.”

The bill shifts $350 million from rate adjustment clauses into the base rates and spreads $1.7 billion in fuel costs that Dominion has incurred because of recent price rises over 10 years, Saslaw told his fellow senators as they debated the bill on the floor.

“Instead of getting a $17/month increase on July 1, it won’t happen,” Saslaw said. “It’ll be pennies more to the average bill as a result of being able to spread it out like that.”

Getting rid of the rate adjustment clauses will save the average customer between $6.50 and $7/month, he added.

The bill also includes changes to Dominion’s “rate collar,” so that if the utility over-collects by more than 70 basis points on its ROE, 85% of the excess will return to customers; if it over-collects by 150 points, all of it goes back to consumers.

“We’re going to vote on a bill that was not dictated to us by Dominion Power, but rather it was people working together from different viewpoints: the ratepayer viewpoints, the power company viewpoint, the industrial consumer viewpoint, even environmentalist viewpoint,” Sen. John Chapman Petersen (D) said. “Not everybody got what they wanted. But you didn’t have one entity dominating the conversation.”

Senate Minority Leader Thomas Norment (R) pushed back on the notion that Dominion dictates the commonwealth’s electricity policies, noting that major corporations were behind the push to deregulate the electric industry more than two decades ago; years later, many of them also supported legislation stopping retail deregulation from going into effect.

How the law gets implemented is ultimately up to the SCC, but it only has one member now, and the legislature did not address the two vacancies, Sen. Scott Surovell (D) said. Currently the SCC only has Jehmal Hudson serving as a commissioner after Judith Jagdmann stepped down, and the legislature did not reappoint Angela Navarro, who had finished out Mark Christie’s term after he left to join FERC.

Surovell had introduced SB 1482, which would have added a fourth commissioner to the SCC, then eliminated that position when the next vacancy occurred, in an effort to break the logjam at the legislature.

“In order for somebody to be looking out for the little guy, we have to have a regulator that’s ready to follow through on all the discretion that’s been given under this bill,” Surovell said. “And right now, there’s only one commissioner sitting on the SCC and there’s two vacancies. And that’s not getting resolved today.”

Dominion welcomed the legislation’s passage, calling it a win for consumers and regulatory oversight.

“It will lower electricity bills for our customers, reduce the impact of rising fuel costs and strengthen SCC oversight,” a utility spokesman said in a statement. “We appreciate the leadership of the patrons, Gov. Youngkin, Attorney General [Jason] Miyares and lawmakers from both parties in getting this bipartisan legislation across the finish line.”

Posted on

Maine Finalizes Offshore Wind Roadmap

One of the early drivers in the effort to site floating power generation off the U.S. coast outlined a plan last week to continue its early work, enlarging its economy and shrinking its carbon footprint in the process.

The Maine Offshore Wind Roadmap is the result of 18 months’ work by 96 committee members studying the concept from every angle.

Much of the roadmap boils down to core concepts: gathering data; collaborating on plans to use the data; communicating those plans; minimizing adverse impacts and maximizing benefits of those plans; and ensuring those benefits are shared equitably.

Bringing those concepts to fruition is where the challenges and disagreements will crop up, and the roadmap seeks to prevent as many of them as possible.

Speaking to the U.S. Department of Energy’s Floating Offshore Wind Shot Summit on Thursday, after her Energy Office released the roadmap, Gov. Janet Mills cited all the groundwork Maine has done to prepare for the effort, including placement of the first test turbine in U.S. waters.

Alfond W2 Wind-Wave Ocean Engineering Lab (University of Maine) Alt FI.jpgThe University of Maine…s Alfond W2 Wind-Wave Ocean Engineering Laboratory is shown. | University of Maine

“Maine has the tremendous potential to become a global leader in offshore wind, and that means more good paying jobs, cleaner energy and a healthier environment,” she said. “We’ve already started the work to get us here as well.”

With its strong and sustained winds, the Gulf of Maine is considered one of the best potential U.S. sources of offshore wind energy. But it is too deep for wind turbines with rigid sea-floor foundations, so development there will rely on floating turbines, a concept still in development.

Meanwhile, a large part of Maine’s economy is linked to its oceanfront and fishing industry, which are anxious to avoid harm from placement of wind power arrays. In response, Mills in 2021 signed into law a 10-year moratorium on offshore wind development in state waters, pushing the nascent industry farther out into federal waters.

Outsized Plans

Large states such as California, New York and New Jersey have been one-upping each other with high-megawatt offshore wind goals, but small states such as Maine and Rhode Island (whose combined population is one-eighth New York’s) are also contributing to the growth of the sector.

The first few fixed-base offshore wind turbines in the U.S., in Rhode Island waters, have yielded empirical knowledge that can be incorporated into future projects, and Maine has been researching floating offshore wind (FOSW) technology for more than a decade.

The University of Maine’s Advanced Structures & Composite Center has developed VolturnUS, a semisubmersible concrete hull for FOSW applications, and hopes to commercialize it. The center’s executive director, Habib Dagher, told the FOSW summit Thursday that it shares technology with bridge construction and can be manufactured in local communities. A decade ago, the university placed a 1:8 scale test turbine off the coast at Castine.

Habib Dagher (University of Maine) Alt FI.jpgHabib Dagher, executive director of the Advanced Structures and Composites Center at the University of Maine, poses at the Alfond W2 Wind-Wave Ocean Engineering Laboratory. | University of Maine

In 2024 the university and its partners plan to anchor a single 11-MW floating turbine near Monhegan Island. This will pave the way for a planned research array of 10 to 12 FOSW turbines, with a capacity of up to 144 MW, farther out to sea. Maine hopes to gain U.S. Bureau of Ocean Energy Management approval in 2023 for the project. (See BOEM Continues Planning Process for Maine OSW.)

The university also has reported advances in floating light detection and ranging technology, synthetic mooring lines and 3D printer fabrication of components. It has built a wind-and-wave test basin, expanded its FOSW engineering team to 45 people and added graduate student concentrations in offshore wind.

Maine is known for harsh winters, and its residents are more dependent on heating oil than any other state. The state’s decarbonization efforts and Mills’ goal of 100% clean energy by 2040 are expected to double the state’s power demand.

Against this backdrop, the state considers FOSW a source of both new energy and economic stimulus: Nearly 80 Maine firms already are engaged in or are poised to enter the offshore wind industry, and 117 occupations would be involved to some degree in a buildout, the roadmap states.

Objectives and Strategies

The roadmap and the supporting technical reports are posted on the Maine Offshore Wind Initiative website. The roadmap breaks out five broad objectives and suggests several strategies for achieving each:

  • boost offshore wind supply chain, infrastructure and workforce investments by creating opportunity for Maine businesses; investing in port and manufacturing infrastructure; attracting workforce; ensuring workforce opportunity and inclusivity; and developing export opportunities for businesses and research institutions.
  • harness renewable energy to control costs and fight climate change by establishing a FOSW procurement and coordinating it regionally for cost effectiveness; pursuing regional transmission strategies; ensuring a stable and predictable investment environment; and advocating for federal leasing mechanisms that support Maine’s goals.
  • advance Maine-based innovation to compete nationally and globally in offshore wind by continuing development of FOSW demonstration projects; commercializing the state’s R&D capabilities; establishing an in-state FOSW innovation hub; leveraging and expanding in-state capabilities in artificial intelligence, data science and robotics; and researching complementary technology such as energy storage and clean fuels.
  • support Maine’s seafood industries and coastal communities by seeking engagement and integrating technical feedback from fishers and residents; promoting open research and data-gathering; learning from information yielded by research turbines; seeking to avoid or minimize conflicts by prioritizing development outside key lobster and fishing areas; designing wind farms to ensure safe navigation; and promoting fair and equitable benefits.
  • protect the environment, wildlife and fisheries ecosystem in the Gulf of Maine by collecting high-quality data in cooperation with fishers, scientists and others; proactively reducing conflicts and minimizing impacts while facilitating timely permitting; strengthening Maine’s policy framework, including through the review authority conferred by the federal Coastal Zone Management Act; enhancing collaboration with other states in the gulf; continuing state funding and pursuing federal funding; facilitating open engagement and integration of technical advice; and promoting and advancing new technologies, then allowing for their integration into planning.
Posted on

DTE Seeks Rate Increases for Reliability, Clean Energy

DTE Energy executives warned Thursday that the utility needs to continue its investments in grid reliability and cleaner generation, investments that won’t come cheap.

CEO Jerry Norcia said during DTE’s (NYSE:DTE) year-end conference call with financial analysts that the utility didn’t request base rate increases during the COVID-19 pandemic to keep rates affordable. He said DTE now needs to reflect investments in “system reliability, grid modernization and cleaner generation.”

“Since 2020, we invested more than $8 billion in DTE electric system while keeping base rates nearly flat,” Norcia said. “After four years of essentially no base rate increases, we are requesting an increase that would go into effect at the end of 2023. This request supports investments in Michigan to improve reliability and deliver clean energy while maintaining affordable rates.”

The utility last month filed a $622 million annual rate increase with the Michigan Public Service Commission that would begin at the end of this year. The commission in 2022 reduced DTE’s request for a $388 million rate increase to $30.5 million, disputing projections of declining residential consumption. The PSC said residential use was on the upswing in 2020 and again in 2021.

“Although there were a lot of positive aspects to the outcome for which we are very grateful … we were disappointed by the projected residential sales volume in the final order,” Norcia said.

He said DTE is refreshing residential sales volume projections in the rate case. The utility also has requested an infrastructure recovery mechanism to allow it to recover the cost of grid investments between the rate cases.

“[DTE is] committed to working with all interested parties to pursue a settlement that strikes the right balance between continuing to increase reliability and providing cleaner energy for our customers, all the while maintaining affordability,” Norcia said.

CFO David Ruud said that because the PSC allowed only a modest increase, DTE will enact “one-time cost reductions that are not sustainable over the long term,” including delaying hiring, reducing the contractor workforce, deferring near-term maintenance work, and limiting overtime.

“These initiatives are all in areas where we have achieved success in the past like during the start of the pandemic, and during the last recession,” Ruud said. “[W]e remain confident that we will achieve our financial goals for the year without sacrificing safety, reliability or customer service.”

Despite the smaller-than-expected rate recovery, DTE reported earnings of $1.1 billion ($5.52/diluted share) for the year, compared to 2021’s earnings of $907 million ($4.67/diluted share).

For the quarter, earnings were $265 million ($1.31/diluted share). Earnings were $306 million ($1.57/diluted share) the year prior.

Norcia said 2022 was a record year for grid reliability and renewable energy investments, with the utility investing more than $1 billion in its grid last year to help improve reliability. He said the system operated reliably 99.9% of the time last year, with 21% fewer power outages than 2021. Average outage-duration times were reduced by more than 40%, he said.  

“In communities where DTE completed some of our most focused work on a grid’s more challenged infrastructure, customers experienced up to a 70% improvement in reliability,” Norcia said. “2022 was a record year for investment in our grid, and the result was stronger reliability.”

DTE conducted the earnings call while working to restore service to about 400,000 customers after ice storms rolled through the service territory Wednesday.

Norcia said DTE needs to continue reinforcing the grid for more “violent weather” and the added strain of electric vehicle load growth.

The utility has increased its five-year capital plan by 20%, $3.5 billion more than last year’s plan, owing to “infrastructure renewal and cleaner generation,” Norcia said.

He noted that DTE in 2022 secured contracts with Ford Motor Co. and automaker Stellantis under its voluntary renewable energy program, MIGreenPower. The company said it currently has 900 businesses and 85,000 residential customers enrolled in the 2.25-GW program.

“[I]t continues to grow daily and exceed expectations,” Norcia said.

He said DTE’s five-year plan for cleaner generation includes spending $1 billion on its voluntary renewable program and $1 billion for solar generation development.

The utility retired two coal plants last year. DTE called it a “milestone” in its efforts to achieve net zero emissions by 2050. In the interim, it is targeting an 85% reduction in emissions by 2035 and 90% by 2040.

Posted on

Critics Seek Changes to Wash. EV Road Usage Fee Bill

OLYMPIA, Wash. — Critics of a Washington bill to impose a road usage fee on electric and hybrid vehicles lined up to testify at the state capitol Thursday.

The bill (HB 1832) by Rep. Jake Fey (D) proposes to establish a voluntary road usage charge (RUC) program in 2025 that would levy a 2.5-cent fee for every mile that an electric or hybrid vehicle drives on public roads and highways. The fee would likely be calculated by an instrument connected to an EV’s odometer. The charge would then become mandatory in 2030, replacing special fees that Washington EV and hybrid drivers currently pay to the state. (See EV Road Usage Charge Bill Floated in the Wash. House.) 

The measure is intended to replace shrinking state gasoline tax revenue used to maintain the state’s highways. 

The bill’s critics include several business groups and contractor associations, which on Thursday testified before the House Transportation Committee, which Fey chairs. They voiced concern that HB 1832’s language could allow some road usage revenue to be redirected to non-highway transportation projects, something they contend would violate the 18th amendment of the Washington constitution, which requires gas tax and vehicle license fees deposited into the state’s motor vehicle fund be used for “highway purposes.”

“We don’t want to dilute the current [highway] funding we already have,” Mike Ennis, government affairs director at the Association of Washington Business, testified. Jerry Vanderwood, chief lobbyist for the Associated General Contractors of Washington, said highway projects already have to fight for money in the state’s budget.

Last year, Gov. Jay Inslee issued a mandate prohibiting the sale of new gas-powered cars in 2035, prompting Fey to address a road usage fee at this time.

The legislature needs to discuss and hammer out a road usage fee system to counteract shrinking gas revenues, Fey said. 

Currently, electric and hybrid vehicle owners in Washington pay two annual fees that total $150. Under the current bill, starting in 2025, a vehicle owner would have the choice of paying either the $150 in annual fees or a fee calculated by odometer readings, which would be capped at $150. The RUC becomes mandatory for all EVs and hybrids in 2030.

“It’s clear that there is no other concept to replace the gas tax,” said Sharon Nelson, a member of the RUC steering committee that advised the State Transportation Commission on the issue. 

Thursday’s hearing was a continuation of a hearing that was suspended Tuesday due to a lack of time.

After the hearing, Fey said changes are likely in the bill, but he expects to shepherd it to a full House vote this session.

Posted on

PG&E Scales Back Plan to Underground Lines

Pacific Gas and Electric (NYSE:PCG) has reduced the total miles of power lines it intends to bury over the next three years, saying it needs to proceed more gradually to show that undergrounding can be performed cost effectively and to appease critics.

PG&E wants to eventually underground 10,000 miles of distribution lines in high fire-threat areas at a cost of $25 billion or more. The controversial plan, which needs regulators’ approval, is part of PG&E’s efforts to prevent its equipment from starting catastrophic wildfires like those in the past five years. (See PG&E Pleads Not Guilty to Manslaughter Charges.)

The utility had sought to bury 3,600 miles of lines by 2026 but revised that figure down to 2,275 miles, a move it discussed in a fourth-quarter earnings call Thursday.

“We reduced our mileage as a result of conversations with our key stakeholders,” CEO Patti Poppe said on the call. “We have to earn the right to do that underground. We have to prove that we can, in fact, do it at the unit cost that we’ve described …

“I remind myself that the Golden Gate Bridge wasn’t built in a year,” Poppe said. “It was built over time, and it’s beloved, and that’s what our undergrounding program is going to be. It’s going to be built over time, and it’s going to be beloved. And we have to earn the right to grow those miles year after year after year. And so, we’re very focused on doing that well.”

Poppe said PG&E had buried 180 miles of lines last year for less than the $3.75 million per mile that it had estimated in its earnings call a year ago. During that call, Poppe said the utility expected to bring down the cost of undergrounding to $2.5 million per mile by 2026 through efficiencies of scale and technical advances. (See PG&E Plans to Spend $25B to Bury Lines.)

The utility asked the California Public Utilities Commission to approve nearly $10 billion for undergrounding in its 2023 general rate case but revised that figure down to about $6 billion with the decreased mileage.

PG&E plans to file a 10-year undergrounding plan with the state later this year under the terms of Senate Bill 884. Signed by Gov. Gavin Newsom in September, the bill provides for expedited review of undergrounding plans submitted by large electrical corporations to the CPUC and the state Office of Energy Infrastructure Safety.

“That will clarify mileage and unit cost targets,” Poppe said. “And I also want to remind everyone that, look, this undergrounding program is very important from a risk reduction and a customer satisfaction [perspective], but it’s not a big bet. The undergrounding program is less than 20% of our total capital plan. It is flexible and dynamic in nature. We’re going to be working with our regulators and those stakeholders to make sure that we do undergrounding at a pace that they support.”

Undergrounding Opposition

The pace supported by some intervenors in PG&E’s rate case is far more limited than even the utility’s revised proposal.

In January filings, the CPUC’s Public Advocates Office, the California Farm Bureau Federation and communications companies such as AT&T questioned the feasibility and cost of PG&E’s downsized plan.

The Utility Reform Network, a consumer watchdog group, said in a Jan. 23 brief to the CPUC that PG&E had lowered its mileage target in a December filing because it knew it was falling behind meeting the 2023 goals that it had outlined a year ago.

“PG&E suggests that its mileage reduction responds to intervenor concerns about the company’s ability to achieve its February 2022 targets but never admits that PG&E itself has come to realize that those targets were unrealistic,” TURN said.

It cited an internal slide presentation it received from PG&E that said, “Work readiness for 2023 [underground] work execution is behind target as of mid-October” because of challenges with permitting, land rights acquisition and the availability of materials.

Despite the delays, the utility is “moving ahead with plans to underground 350 miles in 2023, at a forecast cost of approximately $1 billion,” TURN said. “PG&E appears committed to this path, even though it has not received any authorization from the commission for any rate recovery for its 2023 undergrounding proposal. Needless to say, PG&E’s undergrounding request is hugely controversial and subject to CPUC disapproval, in full or in part.”

TURN recommended to the CPUC that PG&E should focus its system hardening work on “installing 450 miles of covered conductor in 2023 at a cost of $358 million, with a more focused and feasible undergrounding deployment in 2023 that targets the 50 highest-risk miles at a cost of $167 million.”

“In TURN’s view, the prudent course for PG&E in 2023 would be to focus on covered conductor — a proven strategy that the commission has already endorsed — with a much more targeted use of undergrounding,” it said.

“The execution challenges that PG&E is already experiencing and the company’s lack of transparency about those problems should raise concerns,” TURN said. “The nature of the challenges underscores the huge question marks about the timing and executability of PG&E’s plan.”