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August 28, 2024

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CenterPoint Takes the Heat, Raises Earning Guidance

Texas’ record-breaking heat through June boosted CenterPoint Energy’s (NYSE:CNP) second-quarter earnings and led its management to again raise its earning guidance.

The Houston-based utility reported quarterly earnings of $179 million ($0.28/diluted share) as compared to $221 million ($0.37/diluted share) in the same quarter last year, driven primarily by favorable weather and continued customer growth in its Houston Electric footprint.

CEO David Lesar said the performance of its transmission and distribution company gave CenterPoint the confidence to raise its 2022 earnings guidance from $1.37/share to $1.39, a 9% increase and the fifth time in two years his team has done so.

“We are setting a new and higher baseline for future earnings growth,” he said in a statement.

Lesar told financial analysts that Houston Electric accounts for only about 2.5% of ERCOT’s service territory but about 20% of its delivered energy. CenterPoint continues to see about 2% organic customer growth in Houston, which will be important as electric vehicle ownership and electrification increase.

“Consistently hot” temperatures that have reached as high as 105 degrees Fahrenheit in the nation’s fourth largest city have stressed the grid, but it has “held up well,” Lesar said.

CFO Jason Wells said CenterPoint will recover about 80% of its $1.1 billion in incremental gas costs from the February 2021 winter storm when the state’s securitization process begins to distribute funds.

The company’s non-GAAP earnings came in at 31 cents/share, up 11% from the comparable quarter in 2021. That beat Zacks’ consensus estimate of 31 cents/share.

CenterPoint shares were trading at $31.70 in the after-hours market, up 7 cents for the day.

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SPP Monitor: Impacts of WEIS in Year 1 ‘Limited’

SPP’s Western Energy Imbalance Service (WEIS) market saw “very limited growth” in its first 13 months, SPP’s Market Monitoring Unit said in its first annual report on the market.

Unlocking renewable resources in the market’s region — which spans six states in the West, from Montana south to Arizona — has been cited as one of the market’s key benefits. But the footprint’s nameplate capacity increased by only 207 MW, all of it wind. Coal generation produced more than 62% of the market’s total generation. Hydro was second at 22% and wind third at 9%.

Generation by technology types (SPP) Content.jpgSPP’s generation by technology types | SPP

The market continues to struggle with limited capacity and ramp constraints and is often unable to procure sufficient power in real time to balance, the MMU said. It has urged the market to address ramping issues, through either a minimum requirement per participant or a fully developed ramp capability product, and supply adequacy.

WEIS has been a net exporter of energy since its inception, with an hourly average of 800 MWh of net exports. The addition of Colorado Springs Utility this month and three more participants next April will essentially double the amount of generation and load within the market.

The market began service Feb. 1, 2021, just prior to the historic winter storm that month. Prices that month averaged $90/MWh, but the storm’s impact was limited because of the generation mix and a limited ability to export to the east. The MMU found that market prices averaged around $36/MWh for the first 13 months, but that drops to just over $31/MWh when February 2021 is removed.

The MMU also recently released its spring Quarterly State of the Market report, which found that day-ahead prices were $31.66/MWh during the quarter (March through May), double last year’s average of $15.97/MWh. Average real-time prices also more than doubled, up 112% to $29.37/MWh.

Wind generation accounted for 48% of total generation, up from 45% for the same period a year ago. Coal generation remained flat at 28%, and combined cycle and simple cycle gas generation fell from 18% to 14%.

Average gas prices at the Panhandle Eastern hub were more than double from where they were last spring, up 146% to $6.02/MMBtu this year from $2.45/MMBtu. Gas prices peaked at $7.59/MMBtu in May, an all-time high if not for the winter storm in February 2021.

The MMU is hosting a webinar Wednesday at 2 p.m. to discuss both reports.

SPP Releases VRL Analyses

SPP last week released its annual analysis of violation relaxation limits (VRLs) for the Integrated Marketplace and the WEIS.

The grid operator is recommending changes to the operating constraint VRL blocks and increasing the spinning reserve constraint VRL to $250 from $200. Its analysis showed the slight increase reduces the number of scarcity intervals and product shortage with only a slight increase to cost.

SPP did not recommend any changes to the WEIS VRL block, penalties or VRL related to resource capacity.

The RTO says that its market clearing engine (MCE) attempts to enforce all constraints when generating a solution. When this results in solutions that are not feasible, SPP will apply VRLs in the MCE solution. The VRLs and their associated values attempt to achieve a reasonable balance between honoring operating requirements and constraints while mitigating large price excursions or other extreme prices.

The security-constrained economic dispatch (SCED) for day-ahead and real-time balancing markets optimizes constraints to determine the most efficient and reliable solution, SPP said. When system limitations cause a constraint’s shadow price to exceed a defined VRL, the constraint’s limit is relaxed and the shadow price is replaced with the VRL penalty, allowing SCED to solve more economically.

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PSEG Eyes Democrats’ Climate Bill for Nuclear Plant Support

Public Service Enterprise Group’s (NYSE:PEG) departing CEO Ralph Izzo said Tuesday he is optimistic that the Democrats’ proposed climate bill will pass Congress and provide stable, long-term support for the utility’s three nuclear plants, now subsidized by New Jersey ratepayers to the tune of $300 million a year.

As proposed, the federal subsidy, which would run for six years from 2024, includes the Nuclear Production Tax Credit that “we have advocated for over the last two years,” Izzo said during the company’s second quarter earnings call.

Izzo-Ralph-2018-05-10-RTO-Insider-FI.jpgPSEG President & CEO Ralph Izzo | © RTO Insider LLLC

He also cited several other recent green energy developments that will put the company in a strong position for the future. They include the New Jersey Board of Public Utilities’ (BPU) June 29 approval of the company’s $511 million Infrastructure Advancement Program, spending largely intended to upgrade the “last mile” of the company’s distribution system, he said. The company, through its environmental, social and governance strategy, is also finalizing company-wide emissions reduction goals to be submitted to the United Nations by September 2023 for validation that they meet the requirements of the Paris climate agreement, he said.

Izzo, who steps down as CEO Sept. 1 after 30 years at the company, will be succeeded by current Chief Operating Officer Ralph LaRossa. Izzo will continue as executive chair of the board until his retirement on Dec. 31.

He told the conference call that the company sees a growing recognition that nuclear plants are necessary to cut carbon emissions.

“We continue to observe a positive shift in public sentiment in support of preserving these nuclear plants,” he said. “This pricing floor for nuclear generation squarely addresses our need for a longer-term framework within which we can continue to own and operate our fleet with extended revenue visibility beyond the current three-year zero-emission certificate cycle.”

Solid Cash Flow

The enactment of the Democrats’ Inflation Reduction Act  (HR 5376),  is far from certain, with a possible Senate vote planned for this week. (See What’s in the Inflation Reduction Act, Part 2.) But its passage and the delivery of a federal nuclear subsidy would relieve PSEG of the pressure to secure state nuclear subsidies, at least for a while. The BPU in 2019 and 2021 awarded the company three-year subsidy packages of $300 million a year under the zero-emission certificate program. The state created ZECs to support nuclear plants that otherwise could be forced to close because they are financially unviable, undermining the state’s effort to meet its clean energy goals. The PSEG subsidies stoked criticism, however, that the company did not need a $10/MWh rate, the maximum allowed under New Jersey’s law creating the subsidies, to remain open.

According to an analysis by Taxpayers for Common Sense, the maximum subsidy awarded under the IRA would be $15/MWh, which the nuclear operator could only receive if it paid prevailing wage levels and met apprenticeship requirements.

Izzo said he is “very encouraged” by the bill, adding that based on his talks with legislators the “odds are looking quite good” that it could be passed. If that happens, and all goes to plan, he said, the nuclear plant will provide a “very predictable earnings stream with a very solid cash flow generation that I think serves the state of New Jersey very well, serves the company very well, serves the planet very well.”

PSEG officials said the company would no longer receive the state subsidy if it was getting the federal tax credit. Izzo said that talks continue with New Jersey legislators over future nuclear subsidies, should they be needed.

Those “policy level” talks with legislators include discussions with state legislators about “a longer duration alternative to the current zero-emission certificate framework for nuclear should the price levels contained in the [federal] reconciliation bill prove elusive,” he said.

OSW Investment or Sale

Izzo’s departure comes as the company faces a rapidly changing environment, which includes the sale earlier this year of the last of its 6,750-MW portfolio of 13 fossil generating units. The company owns 25% of 1,100-MW Ocean Wind 1, the first New Jersey offshore wind project to be developed, which is co-owned with Danish developer Ørsted.

And the company is awaiting the BPU’s decision on whether to adopt any of the 80 proposals for grid upgrades that would tie future offshore wind projects to the grid, among them several submitted by PSEG. Izzo has said in the past that the company’s proposals could be worth $1 billion to $3 billion.

Izzo said its part-ownership of the offshore project will have no bearing on whether the BPU adopts any of the utility’s projects to upgrade the grid.  He added that “as related to the opportunity to co-invest with Ørsted, we continue to have conversations on a variety of fronts.”

Under questioning from an analyst, he elaborated, saying the company would evaluate whether it should sell its share of the offshore project.

“It should be obvious to everyone, New Jersey is going to build seven and a half gigawatts of offshore wind.  I think half a dozen states are going to build 30 gigawatts of offshore wind,” he said. “That’s going to have a significant impact on power markets,” he said, adding that it would present “opportunities to grow earnings per share for companies. So it’s something that we want to make sure we are taking the long view in terms of the role we should or shouldn’t play in that.”

PSEG reported net income of $131 million ($0.26/share) in the second quarter, compared with a net loss of $177 million ($0.35/share) a year earlier. Non-GAAP operating earnings for the second quarter of 2022 were $320 million ($0.64/share) compared to non-GAAP operating earnings of $356 million ($0.70/share) in 2021.

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DC Circuit Upholds FERC Rejection of Midwestern Co-op Contract

FERC acted reasonably in rejecting a Wabash Valley Power Association power contract and denying it a Mobile-Sierra presumption, the D.C. Circuit Court of Appeals ruled Tuesday (20-1286).

The court upheld FERC’s April 2020 ruling over how to determine the reasonableness of rates for the sale of electricity from an energy cooperative to its individual member utilities (ER20-1101).

Indiana-based Wabash Valley generates and transmits electricity to 25 members in Indiana, Illinois and Missouri. Wabash’s bylaws give each member one seat on its board of directors, which acts by majority vote.

In 2020, Wabash executed new contracts with all but two of its 23 retail-serving members. The new contracts continued the prior practice of requiring members to pay the formulary rate tariff and empowering Wabash’s board to raise the rate to produce sufficient revenue to meet the co-op’s costs. But it also added a new provision asserting that any changes to the formulary rate tariff were entitled to the Mobile-Sierra presumption of justness and reasonableness, which can only be overcome only if FERC concludes that the contract seriously harms the public interest.

Tipmont Rural Electric Membership Cooperative, one of the two member utilities that did not sign the new contracts, protested to FERC that the Mobile-Sierra presumption should not apply to changes to the formulary rate tariff. The commission agreed, ruling that the tariff is a “generally applicable rate” rather than a contract rate, making the new language “an unlawful attempt to apply the public interest presumption to proposed changes to Wabash’s tariffs.”

In denying rehearing, FERC said the rate “is generally applicable to all Wabash members and is not negotiated between Wabash and its executing members on an individualized basis. Rather, the Wabash board of directors determines the rates.” In determining whether a unilaterally set tariff rate is just and reasonable, FERC must balance the interest of the investor and the consumer.

In its appeal, Wabash challenged FERC’s refusal to apply the Mobile-Sierra doctrine.

The D.C. Circuit agreed with FERC, saying a “contract requiring the purchaser to pay a utility’s ‘going rate’ on file with FERC, without more, does not eliminate review under the ordinary just-and-reasonable standard.”

The court noted that Wabash’s contracts with individual members are virtually identical, suggesting that “individual members face a ‘binary,’ take-it-or-leave-it choice” — not the “presumptively equal bargaining power” required under Mobile-Sierra.

Wabash contended its rate changes are not unilateral because member utilities control the board. But the court noted that each individual member controls only 4% of the board’s votes.

While individual members collectively own the cooperative and benefit from higher prices charged by Wabash and passed on to retail customers, the individual utilities “lack the same incentive as a buyer negotiating with an unrelated seller for the lowest possible prices,” the court said. “In other words, the utilities are effectively on both sides of the transaction. And the Mobile-Sierra presumption applies only to rates that are ‘the product of adversarial negotiations between sophisticated parties pursuing independent interests.’”

The court declined to rule on FERC’s assertion on rehearing that a contract must contain individualized terms to enjoy the Mobile-Sierra presumption.

“We do not read FERC’s decision as resting on a per se rule that the presumption can never apply to form contracts, and we do not opine on such a sweeping rule. We simply conclude that, in this case, the small bargaining power of any individual member relative to the cooperative plus the highly standardized nature of the governing contracts supports FERC’s conclusion that the contracts impose a unilateral tariff rate as opposed to a freely negotiated bilateral contract rate,” it said.

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California Sees First V2G Reliability Project

Small fleets of electric school buses near San Diego will be part of the first vehicle-to-grid (V2G) project to participate in a program intended to boost reliability during electric emergencies, such as the rolling blackouts that hit California in August 2020.

The Lion Electric buses in the Cajon Valley Union School District will be aggregated with others in the nearby Ramona Unified School District to form a participating resource under the Emergency Load Reduction Program (ELRP), started last year by the California Public Utilities Commission.

The state’s three large investor-owned utilities — Pacific Gas and Electric (NYSE:PCG), Southern California Edison (NYSE:EIX) and San Diego Gas & Electric (NYSE:SRE) — manage the five-year ELRP pilot, which CAISO can call on as a last resort when shortfalls are imminent, as they were during electric emergencies the past two summers.

In the Cajon Valley school bus yard, SDG&E installed six 60-kW, bidirectional DC fast chargers able to participate in the ELRP, which pays business customers $2/kWh to export energy or reduce demand in grid emergencies. The first set of bidirectional chargers went live on SDG&E’s grid last month.

A V2G project participating in the ELRP is a first, said Jacqueline Piero, vice president of policy for Nuvve (NASDAQ:NVVE), a V2G technology developer that is partnering with the school districts and SDG&E in the effort.

“It’s a great demonstration of how electric vehicles don’t need to just be providing emergency backup,” Piero said. “They can actually be substantively contributing to the reliability of the grid in an aggregated manner.”

Nuvve previously worked with the Torrance Unified School District near Los Angeles on a demonstration V2G bus project, but it was connected to school district buildings and not to SCE’s grid. A similar project at the University of California, San Diego, supplied electricity to the university’s microgrid but did not connect to SDG&E’s system.

Bidirectional EV charging, allowing vehicle fleets to connect to the grid, was not permitted prior to September 2020, when the CPUC changed its interconnection rules, letting fully integrated V2G projects move forward.

“We’re really just now being able to take advantage of the updates in the interconnection rules,” Piero said. “So even though we did a project in Torrance where we were doing real work with their demand charges, we were not interconnected, and we were not allowed to export.”

The company was part of a V2G project in Denmark that showed connected vehicles could provide frequency response and other grid support services. It was one of dozens of V2G demonstration and pilot projects started in Europe, the U.S. and Asia over the past 10 years.

California is home to more than 1 million EVs and is under a mandate to sell only emissions-free passenger vehicles, primarily EVs, starting in 2035.

Earlier this year the CPUC signed onto the U.S. Department of Energy’s Vehicle to Everything (V2X) agreement, a “collaboration for accelerating development and commercialization of vehicle-to-everything technologies, which include vehicle-to-grid, vehicle-to-building and vehicle-to-load capabilities, by validating the technologies and demonstrating the commercial viability of such technologies.”

The effort is intended to bring together cutting-edge resources from the department’s National Laboratories, state and local governments and utilities to “evaluate technical and economic feasibility as we integrate bidirectional charging into energy infrastructure,” DOE said in a news release.

SDG&E was a signatory to the V2X agreement, along with PG&E, SCE and the California Energy Commission.

“Electric fleets represent a vast untapped energy storage resource and hold immense potential to benefit our customers and community, not just environmentally but also financially and economically,” SDG&E Vice President of Energy Innovation Miguel Romero said in a joint news release with the Cajon Valley school district and Nuvve.

PG&E and Ford said in March they would test the V2G potential of the automaker’s F-150 Lightning electric pickup trucks. Bus and commercial truck fleets with predictable schedules and more capacity are optimal V2G candidates.

“School buses are an excellent use case for V2G,” Nuvve CEO Gregory Poilasne said in the news release. “They hold larger batteries than standard vehicles and can spend peak solar hours parked and plugged into bidirectional chargers. Nuvve’s technology enables the grid to draw energy from a bus when it is needed most, yet still ensuring the bus has enough stored power to operate when needed.”

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CARB Awaits EPA Decision on Advanced Clean Trucks Rule

California regulators are waiting for a green light from the EPA for a rule that would require an increasing percentage of medium- and heavy-duty trucks sold in the state each year to be zero emission.

The California Air Resources Board (CARB) adopted the regulation in June 2020. Known as Advanced Clean Trucks (ACT), the rule will require vehicle manufacturers to sell a certain percentage of zero-emission trucks starting in 2024.

The rule will help California meet its climate goals and clean up the air in the state’s most disadvantaged and polluted communities, CARB said upon adopting ACT.

The regulation is also a key component of a multi-state action plan released last week aimed at speeding the adoption of zero-emission trucks. States including Massachusetts, New Jersey, New York, Oregon and Washington have adopted the ACT regulation, according to the report from the Multi-State ZEV Task Force. The group was facilitated by the Northeast States for Coordinated Air Use Management.

“Regulatory requirements mandating [medium- and heavy-duty] ZEV sales establish a regulatory floor that provides market certainty needed to drive investments in zero-emission technologies and charging and fueling infrastructure,” the plan said.

Wavering on Waivers?

But EPA approval of the California regulation might not be a slam dunk. A recent report from E&E News said the EPA is considering partially denying a waiver to California for Advanced Clean Trucks and another regulation related to heavy-duty truck emissions. The denial would reportedly impact the regulations in their first years, according to the news story, which quoted an unnamed source.

The story noted that denial of a California waiver request would be a first under a Democratic administration.

The EPA Office of Transportation and Air Quality told NetZero Insider in an email that the agency is at the beginning of its process for considering CARB’s waiver requests.

“As such, no decisions have been made by EPA at this point,” the agency said.

A CARB spokesperson did not respond to a request for comment.

The EPA held a virtual public hearing on the regulations on June 29. The deadline for the public to submit comments is Aug. 2.

Three Waiver Requests

Under the federal Clean Air Act, California may set its own vehicle emission standards if they are at least as stringent as federal standards. The EPA issues a waiver to the state if the rules meet certain criteria. The state must receive the EPA waiver before it may enforce the rule.

Other states may decide to adopt California emissions regulations.

The EPA is currently evaluating three California waiver requests.

Advanced Clean Trucks requires manufacturers to sell a certain percentage of zero-emission trucks each year based on the vehicle classification. For Class 2b and 3 trucks, which typically include step vans and city delivery trucks, the rule requires 5% ZEV sales in 2024, increasing annually to 55% in 2035.

Truck classes 4 to 8, which might include bucket trucks, beverage trucks and buses, start with a 9% ZEV sales requirement in 2024, growing to 75% in 2035. The ZEV sales requirement for Class 7 and 8 tractors ranges from 5% in 2024 to 40% in 2035.

CARB is also seeking an EPA waiver for the Heavy-Duty Low NOx Omnibus Regulation, which aims to reduce emissions of nitrogen oxides from trucks. The rule sets new standards starting with the 2024 model year and tightens the standards further in 2027. The CARB board approved the regulation in August 2020.

The Multi-State ZEV Task Force report recommends that other states adopt California’s low NOx omnibus regulation to reduce emissions from heavy-duty trucks while the market transitions to ZEVs.

The third regulation awaiting an EPA waiver is an amended emission warranty regulation that extends emissions warranty periods for heavy-duty diesel trucks in model years 2022 and later.

In comments submitted to the EPA, CARB Chair Liane Randolph urged the agency to quickly approve waivers for the regulations. California needs to address the climate crisis and improve air quality as soon as possible, she said, and a delay would hurt other states that are adopting the California regulations.

“A partial or full denial of the waiver at this point would also have negative impacts on ZEV and diesel engine manufacturers who have been investing significant resources to comply with California’s standards,” Randolph said.

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ERCOT Technical Advisory Committee Briefs: July 27, 2022

Members Endorse Two Tier 1 Transmission Projects

ERCOT stakeholders endorsed two transmission projects with a combined capital cost of more than $760 million during last week’s Technical Advisory Committee meeting.

The Regional Planning Group classified both the Bearkat-North McCamey-Sand Lake project in West Texas and the Roanoke upgrade project north of the Dallas-Fort Worth area as Tier I projects because their costs exceed a $100 million threshold. Their status requires they receive TAC endorsement and the Board of Directors’ approval.

ERCOT staff said during the Wednesday meeting that it chose one of the first project’s three options to address reliability needs driven by rapid load growth in the Permian Basin’s Delaware Basin and to improve the region’s ability to import power. The recommended option will result in building two double-circuit, 345-kV transmission lines totaling about 165 miles, with the two segments meeting in McCamey, a former oil boomtown since labeled “the Wind Energy Capital of Texas” by the state legislature.

Bearkat-North McCamey-Sand Lake has a projected cost of $477.6 million in 2021 dollars, up from $371 million in 2019 dollars, and an estimated completion date of June 2026.

The Roanoke upgrade project involves 7 miles of 138-kV lines, 26 miles of 345-kV lines, four 345/138-kV transformers and five 138-kV low-voltage buses. Staff analyzed four options, choosing the one they say provides better operational flexibility and long-term load-serving capability for future load growth.

Oncor, the incumbent transmission service provider, expects to complete the upgrades by May 2025 at an estimated capital cost of $285.9 million.

The company has a hand in both projects. It paired with Lower Colorado River Authority Transmission Services and Wind Energy Transmission Texas to submit the first project to the RPG. It was alone in suggesting the upgrade project.

TAC approved the projects as part of its combination ballot, where they were included with unopposed revision requests and other measures. The board will consider both projects during its Aug. 16 meeting.

Staff Defer Comment on CSAPR

Staff told TAC they were unsure as to whether the Supreme Court’s recent decision voiding the Obama-era Clean Power Plan would affect a federal rule’s implementation that limits nitrogen oxide emissions. (See Supreme Court Rejects EPA Generation Shifting.)

Texas is one of more than 20 states that, under EPA’s Cross-State Air Pollution Rule (CSAPR) plan, must establish NOx emissions budgets beginning with the 2023 ozone season (May 1-Sept. 30). The agency says the reductions are necessary to address upwind states’ interstate transport obligations.

Staff were non-committal when asked whether the high court’s 6-3 decision in West Virginia vs. EPA would scuttle the CSAPR. The court rejected EPA’s assertion that “generation-shifting” was the “best system of emissions reductions” available and invoked the “major questions doctrine” that agency decisions involving “economic and political significance” require them to show “clear congressional authorization.”

Senior Corporate Counsel Katherine Gross noted that CSAPR was proposed under a different section of the Clean Air Act than was the CPP.

“At this point, we’re not sure of the significance of this case, and we don’t want to speculate too much about what it will mean for the ozone transport rule,” Gross said. “If the EPA rule here does have a significant economic impact, the EPA is going to need to be able to point to very clear congressional authorization, which they were not able to do in the Clean Power Plan rule, according to the court. And if they’re not able to do that, then that rule is going to be susceptible to being overturned.”

Gross said ERCOT would defer to the state’s Office of the Attorney General and the Public Utility Commission, both of which filed comments with EPA asking for the CSAPR rule’s withdrawal as it pertains to Texas (EPA-HQ-OAR-2021-0668-0007.)

The AG’s Office alleged the agency “acted arbitrarily and capriciously in several distinct ways, abused its discretion and failed to observe procedures required by law.”

“Regional actors are in the best position to determine how to meet the 2015 ozone transport obligations, but EPA failed to consult the necessary experts and denied states, specifically Texas, the opportunity to regulate where appropriate,” the office said.

The PUC said the transport implementation plan will have “significant, detrimental impacts on reliability” in the ERCOT region, as well as those portions of the state served by SPP and MISO.

ERCOT staff in June told the board that its preliminary analysis of the CSAPR rule assumed that over 10 GW of installed thermal generation would leave the market by 2026, requiring up to $1.5 billion to resolve local reliability issues. (See “10 GW Thermals Could Retire with EPA Rule,” ERCOT Board of Directors Briefs: June 21, 2022.)

Woody Rickerson, vice president of system planning and weatherization, told TAC that the thermal units staff “retired” in its analysis do not have the necessary emissions-reduction equipment and “seemed likely candidates” to be retired or retrofitted.

TAC Liaisons with R&M Trimmed

TAC Chair Clif Lange, with South Texas Electric Cooperative, told members that the committee’s leadership continues to work with several board members to iron out its reporting relationship under ERCOT’s new structure. (See ERCOT Technical Advisory Committee Briefs: June 27, 2022.)

He said TAC’s proposal to have as many as 11 liaisons with the board’s newly created Reliability and Markets Committee was found to be “cumbersome” and “unwieldy.” Lange said that in meeting with Directors Bob Flexon, the committee’s chair, and Peggy Heeg, they agreed that TAC’s chair and vice chair would act as liaisons. Segment representatives would be present should the R&M Committee want to hear from them.

Lange said the directors have additional changes they would like to see and they will continue to work with stakeholders on the details.

ERS Budget Increase Endorsed

The committee endorsed a Nodal Protocol revision request (NPRR1142) and its accompanying Other Binding Document revision request (OBDRR042) that had been granted urgent status by the Protocol Revision Subcommittee. The measure increases the annual budget for emergency response services (ERS) from $50 million to $75 million and gives ERCOT the ability to contract ERS for up to 24 hours in a standard contract term.

The NPRR is a result of a July PUC order that also allows the grid operator to broach the budget by up to $25 million for contract term renewals (53493).

Clayton-Greer-(RTO-Insider)-FI.jpgClayton Greer, Morgan Stanley | © RTO Insider LLC

Morgan Stanley’s Clayton Greer cast the lone opposing ballot in the 28-1 vote, saying he had requested information from ERCOT, still outstanding, on how many loads were already offline before ERCOT deployed them.

“We have waivers that allow loads to go offline when prices are high. We’re paying people to do what they would already do on their own,” he said. “There’s no additional value to this. I would rather see a capacity market where we pay all capacity that’s online.”

Staff said they wouldn’t have the data available until the end of August.

“We’re more than happy to bring this analysis to whatever stakeholder meeting would like to see it,” ERCOT’s Mark Patterson said.

RUC Scaling Factor to 100%

TAC members agreed with staff’s recommendation to change the reliability unit commitment’s (RUC) scaling factor from 20% to 100%, adding the measure to the combo ballot that passed unanimously.

ERCOT instituted a 20% scaling factor in 2018 with NPRR864, which modified the start-up and minimum energy costs for resources with a cold start time of one hour or less. This allowed the grid operator to defer commitment decisions and provide market participants additional time to self-commit their resources.

However, that has changed with ERCOT’s new conservative operations posture that makes greater use of the RUC process. Staff said the scaling has led to operators needing to make many of their RUC decisions outside of the process’s economic-based recommendations, leading to inefficient commitments.

Changing the cost-scaling factors to 100% will help ensure the commitment decisions better reflect the economically optimal commitment decision, ERCOT said.

“We’ve just seen more manual commitments occurring this year because of a desire to commit resources further in advance of the peak hours,” ERCOT’s Dave Maggio said.

The combination ballot also included six NPRRs, single changes to the Planning Guide (PGRR) and the Retail Market Guide (RMGRR), and a system change request (SCR):

    • NPRR1085: improves the physical responsive capability calculation and dispatch’s validity by requiring quicker updates from qualified scheduling entities (QSEs) on telemetered resource status, high sustained limit and other relevant information.
    • NPRR1133: clarifies the responsibilities of DC tie facility owners and operators for reporting DC tie model data.
    • NPRR1134: removes references to first available switch date (FASD) after recent mass transition/provider of last resort events indicated ERCOT’s use of FASD when processing switch transactions created an unintended negative experience for customers being transitioned from a bankrupt retailer.
    • NPRR1135: modifies the definition of real-time generation resources with an offline non-spin (OFFNS) schedule  to allow non-zero values for the billing determinant only if the resource is offline when it telemetered OFFNS. This ensures an accurate settlement when an online resource erroneously telemeters OFFNS.
    • NPRR1136: adds clarifying language to the logic in place as fast frequency response is developed to ensure a QSE does not replace a regulation service with fast-responding regulation service.
    • NPRR1137: replaces the annual requirement to review the OBD list with a four-year review cycle.
    • PGRR101: clarifies that a DC tie’s owner will provide the appropriate dynamic model data to its tie operator, which will then provide the data to ERCOT.
    • RMGRR168: synchronizes ERCOT’s role and responsibilities with current market transactional solutions upon the removal of the “out-of-cycle” switch term and market process.
    • SCR822: creates a new daily integration report and dashboard for energy storage resources similar to the current wind and solar integration reports and dashboards.
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Massachusetts Legislators Send Climate Bill Back to Baker

Massachusetts legislators sent an amended climate bill back to Gov. Charlie Baker’s desk in a flurry of lawmaking that saw the year’s legislative session end in the early hours of Monday morning.

After the House and Senate passed a compromise version of the bill two weeks ago, Baker sent back a list of amendments Friday, giving the legislature two days to decide how to incorporate them before the session ended. (See Mass. Legislators Reach Deal on Clean Energy Bill.)

The legislature accepted Baker’s key amendment to eliminate a price cap on offshore wind procurements. It also added his changes to the board selection process for the Massachusetts Clean Energy Center.

But lawmakers rejected several of Baker’s other proposed amendments.

The State House did not go for provisions from the governor that would weaken a portion of the bill allowing 10 Massachusetts municipalities to ban fossil fuels from new buildings and major renovations. (Baker had proposed that multifamily housing be exempt and that the ordinances take effect when there is more clean energy on the grid.)

Legislators also denied Baker’s amendment to allocate $750 million in American Rescue Plan Act funding to the clean energy investment fund that the bill creates.

“A very strong climate bill for [Massachusetts], the second in as many years, is now on the governor’s desk,” said Sen. Michael Barrett, one of the bill’s lead sponsors.

Because the bill does not include any new funding, Baker cannot veto individual line items.

“Now all eyes are on you,” tweeted Ben Hellerstein, director of Environment Massachusetts. “Sign the bill!”

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SPP Board of Directors/Members Committee Briefs: July 26, 2022

Members Approve SPS Tx Project over Staff’s Recommendation

SPP’s Board of Directors last week approved stakeholders’ recommendation to issue a notification to construct for a 345-kV double-circuit transmission project in eastern New Mexico.

The Crossroads-Hobbs-Roadrunner project, proposed by Southwestern Public Service (NASDAQ:XEL) as an alternative to a previously identified project in the 2021 Integrated Transmission Plan, was recommended by two stakeholder groups following its re-evaluation after load-projection errors were discovered in the original solution.

At $395 million, Crossroads-Hobbs-Roadrunner is $15 million cheaper than the original Crossroads-Phantom project and offers SPS operational flexibility. It solves reliability concerns in a load pocket in the state’s petroleum-rich Permian Basin region and could lead to additional renewable development there. The line, about 150 miles long, runs from Crossroads to Roadrunner. SPS, the incumbent transmission owner, added a substation in Hobbs that SPP staff said gives more access to operating reserves in the load pocket.

The line also saves about $6 million by eliminating four EHV crossings that the original line, recommended by staff, would cross.

The Markets and Operations Policy Committee found both projects address the area’s reliability needs and economic congestion and endorsed both as potential solutions during its meeting earlier in July. But it pointed out that Crossroads-Hobbs-Roadrunner provides better net benefits over its 40-year life of between $2.8 billion to $3 billion, and that could increase to between $3.1 billion and $3.2 billion once the area’s residual congestion is mitigated. (See “MOPC Keeps SPS’ Tx Alternatives Alive,” SPP Markets and Operations Policy Committee Briefs: July 11-12, 2022.)

“We see a lot of benefits from routing line through Hobbs,” SPS’ Jarred Cooley said during the July 26 board meeting. “It’s in the high-growth load in New Mexico; generation is located in close proximity; and it gives a path to the southern part of our territory. Lingering congestion issues … [are] something that can be further investigated in future studies. We see Hobbs as more reliable … with the ability to adapt to more load growth.”

Staff recommended Crossroads-Phantom during the ITP study, saying it solved the majority of load and voltage issues at the Phantom substations. However, it agreed Crossroads-Hobbs-Roadrunner creates more flexibility for other interconnections.

“These projects are very similar. We can’t give a real strong preference to either project,” said Antoine Lucas, SPP’s vice president of engineering. “It depends on what happens next. We know there are potential new loads looking to interconnect to the southern end of the SPS system, but at this stage, those things are speculative. They don’t meet the level of certainty in our normal ITP processes.”

The Members Committee’s advisory vote passed unanimously with five abstentions: American Clean Power, Dogwood Energy, Golden Spread Electric Cooperative, Liberty Utilities and Oklahoma Municipal Power Authority (OMPA).

“I can’t help but wonder about the direction we’re going,” OMPA General Manager Dave Osburn said. “We have a load pocket that needs transmission because of a lack of generation. How long can we build out transmission with other regions paying for it without getting new generation built? It seems like we’re fixing a problem we could fix locally.”

Staff will now assess both upgrades to determine whether either qualifies as a competitive project. If they don’t, SPS will be awarded the NTC.

“There’s a good chance both could be competitive,” SPP General Counsel Paul Suskie said.

NextEra Energy Resources’ Matt Pawlowski pointed out that recent competitive projects have shown cost savings of 30 to 50% in the initial phase. Board Chair Larry Altenbaumer agreed, saying that it is an issue that haunts him.

“At the end of the day, the real determinant over which is the better project will be the competitive proposals that come forward with actual costs,” Altenbaumer said. “Those differences in [benefit-to-cost] ratios are the noise range. What we’ve seen historically is that competitive projects seem to bring improvements in actual costs to the table than what are frequently determine in planning estimates.”

Summer of ’22 ‘Wild One’

Calling this summer a “wild one,” CEO Barbara Sugg detailed for the board and stakeholders just how wild it’s been during her quarterly CEO’s report.

SPP has set six new records for peak demand this month, with the latest — 53.2 GW on July 19 — being a 4.23% increase over the previous mark of 51.04 GW set last year, she said.

Sugg said the RTO has sold more generation over the first six months of the year than ever before. The grid has recorded all-time highs for five of those months. Staff said load assumptions for the rest of year could result in a $6.8 million over-recovery that will be used to reduce next year’s recovery.

Sugg said the RTO has issued six resource advisories and one call for conservative operations in its 14-state balancing authority in the Eastern Interconnection. She noted that the grid operator’s footprint has spent 21 days under a resource advisory, nine under conservative operations, since May 1.

Make that 22 days under a resource advisory. Following the board meeting, SPP issued its seventh such advisory of the summer for July 27.

“Summer is far from over,” Sugg said. “Hot summers are becoming more of a regular thing.”

Sugg also welcomed the RTO’s three newest members: Oklahoma’s People’s Electric Cooperative, Colorado’s United Power, and the National Resources Defense Council. They raise SPP’s membership count to 113.

Search on for 2 Board Directors

The Corporate Governance Committee will bring nominations for two board vacancies to October’s meeting. SPP already has one opening for a director’s seat with Julian Brix’s retirement; a second will open up at year-end when Mark Crisson’s term expires and he retires.

The board will lose longtime members Altenbaumer and Joshua W. Martin III in December 2023, when both will retire. They have 34 years of experience between them, with Martin serving 18 and Altenbaumer 16.

The bylaws limit SPP to nine independent directors, but Sugg said the CGC could bring two recommendations for the vacancies in October because of the expected steep learning curve.

“The search is highly focused on the competencies we’ll be losing,” she said of Altenbaumer’s and Martin’s experience.

Western RC Calls 2 EEAs for EPE

SPP had to twice place El Paso Electric (EPE) under energy emergency alert (EEA) status in June when two of the utility’s 345-kV transmission lines tripped offline within a week of each other.

Senior Vice President of Operations Bruce Rew told the board and stakeholders that EPE was pleased that SPP, the reliability coordinator for it and 14 other utilities in the Western Interconnection, was “able to respond and get through it.”

“We were able to provide assistance over [a] DC tie,“ Rew said. “It was only 200 MW, but when you’re short or really close, 200 MW is 200 MW.”

Early in the morning on June 10, the West Mesa-Arroyo line in Eastern New Mexico tripped, causing a derate on EPE’s import capability because of the risk of overloading an underlying 115-kV line. When the utility said it had concerns about meeting its contingency reserve obligation later that afternoon, SPP West RC placed the EPE balancing authority in a Level 1 EEA while working to determine projected system conditions.

At 2:42 p.m. CT, SPP raised the EEA to Level 2 because it and EPE agreed interruptible demand was necessary to compensate for the lack of local generation and its import capability given the load forecast. The EEA was called off when load dropped off that night.

At 6:50 p.m. June 16, the Luna-Diablo line out of El Paso into New Mexico tripped offline, causing a derate for the same reasons as the June 10 event. The RC placed EPE in EEA 1 over concerns it could not cover its most severe single contingency and then an EEA 2 because of the use again of interruptible loads. The event ended at 8:36 p.m. when load dropped and additional generation was supplied over the Artesia DC tie.

SPP’s Western Energy Imbalance Service (WEIS) market is also active in the Western Interconnection, balancing generation and load in real time for eight participants. That will grow to 12 when Colorado Springs Utilities joins Aug. 1 and Black Hills Energy, Platte River Power Authority and Xcel Energy-Colorado join next April, Rew said.

“It’s encouraging to see the continued growth of SPP’s energy services in the west,” Rew said in a press release issued Monday. “Organized markets save utilities and their customers money, make the delivery of electricity to customers more reliable, and help utilities and states achieve clean energy goals.”

“Participation in the [WEIS] is a significant step in our pursuit of clean energy goals and sends a strong signal that we’re doing everything possible to secure a reliable electric grid and reduce energy-related costs for our customers,” CSU CEO Aram Benyamin said.

The RTO’s Integrated Marketplace lost a couple of financial-only participants during the second quarter, leaving 184 in that category, Rew said. SPP’s markets have 103 asset-owning participants and 287 overall. They’ve been drawn by the markets’ bountiful wind resources, which have grown from 24 GW of installed capacity two years ago to 31.85 GW in 2022.

Board Approves DC Tie Solution

The board’s consent agenda included a congestion-hedging solution for three DC ties that will connect the SPP’s Eastern and Western interconnection footprints. The DC ties are owned by members of SPP’s Western Energy Imbalance Service market, providing up to 510 MW of capacity for RTO operations.

The measure was previously endorsed by the Regional State Committee on July 25. (See related story, SPP Regional State Committee Briefs: July 25, 2022.)

By passing the consent agenda, the board also approved:

  • bylaw revisions that clarify RSC membership is only available to regulatory agencies in states within SPP’s footprint that receive RTO services;
  • filling vacancies on the Strategic Planning Committee (Matt Caves, Western Farmers Electric Cooperative) and Human Resources Committee (Matt Dills, ITC Great Plains);
  • creating a third withdrawal deposit category to allow certain non-load-serving entities to terminate their membership without providing a withdrawal deposit;
  • forming the 18-person industry expert pool that will evaluate competitive transmission proposals in 2022;
  • sponsored upgrades studies for NextEra of terminal equipment on two 161-kV lines near Warrensburg, Mo.; Invenergy’s proposal to build a 345-kV line between two substations in West Texas and its upgrade of two 345/230-kV transformers in South Dakota to a 581-MVA rating; and Oklahoma Gas & Electric’s reconductoring of a 69-kV transmission line to increase their normal and emergency ratings of the lines while replacing aging assets;
  • a revision request (RR452) adding a standardized process for evaluating projects proposed by transmission owners for reasons other than meeting SPP regional criteria or a limited subset of local planning criteria evaluated in the planning process;
  • the 2023 operating plan that describes SPP’s high-level objectives and initiatives for next year (strategic opportunities, implementing FERC orders 881 and 2222, addressing two major FERC proposals related to transmission-planning processes, and responding to the 2021 winter weather event) and serves as the foundation for the annual budget process; and
  • removing the suspension earlier this year of an NTC, originally awarded in 2018 to Nebraska Public Power District, for a 115-kV project valued at $53.8 million.
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Study Tallies Economy-wide Benefits of Western RTO

Adoption of an RTO could yield significant economic benefits for the West, adding billions to the region’s annual gross product and generating tens of thousands of new jobs, according to a new report.

Released last week by Advanced Energy Economy (AEE), the Western RTO Economic Impact Study was prepared by Energy Strategies and Peterson & Associates. It draws on analysis Energy Strategies performed for a state-led study published last year to quantify the electricity system benefits of a Western RTO.

Speaking on a call July 26 to discuss the study, Energy Strategies’ Caitlin Liotiris said that while previous RTO-related studies have focused on the savings to the Western electricity system itself, there has not been much research on how those savings “might flow into the broader economy and can create ripple effects, creating additional jobs and attracting more businesses from more competitive electricity prices.”

“And this study really aims to fill that gap, looking at high-level impacts to the Western region as a whole,” Liotiris said, adding that state-by-state summaries will be coming out in the future.

Last year’s state-led study, which was a collaboration among energy offices from Colorado, Idaho, Montana and Utah, found that an RTO covering the entire U.S. portion of the Western Interconnection could save the region $2 billion in annual electricity costs by 2030. (See Study Shows RTO Could Save West $2B Yearly by 2030.)

The AEE economic impact study focuses on a similar time frame, finding that an 11-state RTO could generate $18.8 billion to more than $79.2 billion in additional gross regional product (GRP) by 2030, equivalent to 0.4 to 1.6% of the region’s current GRP. The study also found that an RTO could help create between 159,000 and 657,000 permanent jobs at an average total compensation (including benefits) of $73,000 a year.

“The analysis shows that the growth from lower electricity prices may be substantial, ranging from about 51,000 to 230,000 jobs, and would affect industries crucial to the West’s long-term economic prospects,” the study said. “Notably, things like data center expansion or new data center location in the West, which one would expect to be affected by lower electricity costs afforded by a Western RTO, shows up as a substantially affected industry. Manufacturing and construction also show up as industries likely to be impacted, on aggregate, across the West.”

Other financial benefits include incremental tax contributions ranging from $619 million to $2.4 billion a year and 2,800 to 13,700 temporary construction jobs in 2030 from the development of clean energy resources needed to meet additional corporate demand.

Tim Nadreau, assistant research professor at Washington State University and one of the study’s authors, said that the economy-wide benefits from a Western RTO would likely fall in the lower end of the study’s estimates, with the higher end “certainly feasible if market conditions improve.”

Nadreau said the study leaned on three separate analyses, with the first considering the increased purchasing power for consumers stemming from the $2 billion in electricity savings estimated in last year’s state-led study, and how that additional money will ripple through the larger economy.

The second analysis focused on the potential for increased business activity in the West resulting from lower electricity rates, assuming improved recruitment of businesses into region and increased business formation and expansion.

The third leg of the study’s analysis looked at increased investment in clean energy and “backstop technologies” to largely meet corporate demand, and to comply with some state and local initiatives.

“The range of results is really a reflection of the uncertainty in the market response for businesses and firms,” Nadreau said. “So business relocation, business growth and business formation — there are a lot of factors that go into that, and uncertainty in the markets contributes to those decisions. But the lower energy costs are a driving factor in those business decisions.”

Corporate Buildout

Rising corporate demand for clean energy would contribute significantly to the economy-wide benefits of an RTO, according to the study.

“On one hand, many states in the West are already on a path to significant clean energy penetration (with six targeting 100% clean electricity in the coming decades), indicating there is likely to be significant clean energy development across the West regardless of the region’s wholesale electricity market status,” the study states. “On the other hand, corporate buyers tend to drive further renewable energy investments in areas with RTOs, and previous studies have found that in order to achieve these state clean energy goals, more organized wholesale electricity markets (which provide needed system flexibility) may be required.”

Citing data from the Clean Energy Buyers Alliance, the study notes that the volume of clean energy capacity associated with corporate buyers rose from 3.22 GW in 2015 to more than 11 GW in 2021.

In calculating the low-end estimates in the AEE study, the authors assumed that corporate deals nationwide would fall to 50% of 2020 levels, equating to 5,250 MW of deals per year from 2025 to 2035, while high-end estimates assumed a continuation of the 2020 growth rate of 10,500 MW annually.

CEBA data show that 82% of corporate clean energy deals in 2020 occurred in organized electricity markets, which served only about two-thirds of the nation’s demand, meaning those markets contained 25% more corporate deals than their straight-load ratio, “suggesting that organized wholesale markets facilitate clean energy development used to meet corporate sustainability goals,” the study said.

Applying that 25% above-straight-load ratio to an organized Western market, the study found that from 2025 to 2035, the region would see an additional 1,888 MW of clean energy development on the low end of estimates and 9,409 MW on the high end.

“The West is home to some of the best wind resources in the country, though many wind resources are currently far from load and their development may be hampered by the additive transmission costs to bring them to a large load. However, the transmission cost structures would be modified under an RTO, making remote resources, such as wind, more attractive and more likely to be developed under an RTO framework,” the study said.

The study also noted that the Southwest is home to “high-quality” solar resources, and the authors assumed that solar contracted to corporate buyers would include a battery storage component.

Time is of the Essence

“I think one of the highlights of this study really shows how if we can move more rapidly to an RTO, there’s huge savings for customers, but there’s also a huge upside for new investment, new jobs and how that ripples out through the rest of the economy. And that was really how we tried to approach this debate in Colorado,” state Sen. Chris Hansen (D) said Tuesday. Hansen sponsored a bill (SB 72) passed by Colorado lawmakers last year requiring utilities with transmission assets in the state to join an RTO by 2030.

“I guess my only concern [is that] 2030 seems like a long time because at my age, I’m not even buying green bananas right now, so we need to get this done,” said Colorado Sen. Don Coram (R), another SB 72 sponsor.

“I’m very concerned about the Colorado River. We’ve got 40 million people dependent on the Colorado River; power production could be at risk. And without this grid set up to relieve that gap, we’re treading on thin ice here. So I think it’s very important that we as a region get this organized,” Coram said.

“The study confirms what we’ve known in Nevada for some time: that joining a Western RTO will save consumers on energy costs, create jobs and allow for more transmission of Nevada’s abundant clean energy resources,” said David Bobzien, director of the Nevada Governor’s Office of Energy.

Bobzien said the expanded transmission resulting from an RTO will foster increased sharing and trading of renewable energy, helping to reduce electricity prices and help Nevada meet its clean energy and carbon-reduction goals.

“We’ll also be able to offer companies with sustainability targets the opportunity for clean energy procurement as well, as more Western states and utilities pursue clean energy policies and climate goals,” he said.