NYISO Business Issues Committee Briefs: May 19, 2022

Ancillary Services Manual Updates

The NYISO Business Issues Committee on Thursday approved revisions to the Ancillary Services Manual to increase participation in the ISO’s Demand-Side Ancillary Services Program (DSASP) by allowing resources to establish communications directly with the ISO, rather than through the resource’s transmission owner.

In order to maintain grid reliability, NYISO established a 200-MW limit on DSASP resources in the New York Control Area communicating directly with the ISO; that limit has been met.

The changes allow for the establishment of an alternative communications pathway between a DSASP resource and the applicable TOs under Interim Control Operations (ICO). Absent such alternative communications, during ICO, the TO would be unable to dispatch a DSASP resource that directly communicates with NYISO, but “now that the TO has a communication pathway with the resource, they would be able to ultimately dispatch them if the ICO conditions would ever be enacted,” said Mitchell Braun, associate engineer of distributed resources operations.

Resources participating under such alternative communication procedures with the TO will no longer be included in the 200-MW limit.

Because one or more TOs may not be able to establish appropriate communication infrastructure with DSASP resources by the time the model is deployed, NYISO will seek to align the period for existing DSASP resources to transition with the time it takes to establish the TO communications connection.

The ISO will begin quarterly posting of the magnitude of DSASP resources utilizing direct communications to its website around June 30.

ICAP Manual Updates

The BIC also approved revisions to the Installed Capacity Manual to reflect faster turnaround time for the processing of dependable maximum net capability (DMNC) testing because of software automation.

DMNC is the sustained maximum net output of a generator, as demonstrated by the performance of a test or from actual operation. DMNC values must be determined each season to establish a generator’s capability for the capacity market, and generators cannot offer capacity without a valid DMNC.

Under the current rules, data submitted beyond the applicable 60-day deadline are rejected per the ICAP Manual, so generators without a valid in-period DMNC test are required to conduct an out-of-period test. The out-of-period window opens just two months before the applicable season, and testing out-of-period introduces additional risk, as the windows occur in shoulder seasons and can coincide with maintenance schedules, said Dylan Zhang, manager for ICAP market operations.

New submittal deadlines of Feb. 1 for summer test data and Aug. 1 for winter test data will be reflected in the automated market system event calendar. The new submittal deadlines will apply for winter 2021-2022 in-period DMNC tests.

Mitigation Review Update

Director of Market Design Michael DeSocio led a discussion on the implications of FERC’s May 10 approval of NYISO excluding from its buyer-side market power mitigation (BSM) rules any new capacity resources required to satisfy the state’s environmental mandates. (See FERC OKs NYISO Capacity Market Changes Stemming from NY Climate Law.)

“The very favorable order from FERC provides a huge win for New York and takes away a lot of risk that had been described from stakeholders for a long period of time,” DeSocio said.

Effective May 11, the change automatically eliminates offer floors for wind, solar, storage, hydroelectric, geothermal, fuel cells that do not use fossil fuel, demand response and other qualifying resources under the Climate Leadership and Community Protection Act (ER22-772-001).

“We do have an active class year: There’s currently 13 energy storage projects and three solar projects that are looking to locate in mitigated capacity zones, and they are now excluded from BSM,” DeSocio said.

NYISO will also discontinue evaluations for any new special-case resources (SCRs) within mitigated capacity zones that come into the market and immediately remove all existing offer floors for existing SCRs, he said.

The ISO is reviewing and ultimately will be recommending the technique for calculating capacity accreditation factors, DeSocio said.

April LBMPs Steady but up Year over Year

NYISO locational-based marginal prices averaged $56.46/MWh in April, down from $56.78/MWh the previous month and more than double the $22.79/MWh average in April 2021, driven by higher fuel prices, Rana Mukerji, senior vice president for market structures, said in delivering the monthly operations report.

NYISO locational-based marginal prices averaged $56.46/MWh in April, down from $56.78/MWh the previous month and more than double the $22.79/MWh average in March 2021, driven by higher fuel prices. | NYISO

Day-ahead LBMPs came in higher and real-time load-weighted LBMPs were lower compared to March. Year-to-date monthly energy costs averaged $91.92/MWh, a 117% increase from $42.41/MWh in the same period a year ago.

April’s average sendout was 359 GWh/day, down from 390 GWh/day in March and higher than 354 GWh/day a year earlier. Transco Z6 hub natural gas prices averaged $6.13/MMBtu for the month, up from $4.47/MMBtu in March and up 187.8% year-over-year.

May 23, 2022

NJ Rate Counsel Adds to OSW Easement Opposition

The New Jersey Division of Rate Counsel added its voice Thursday to community opposition facing Ørsted’s proposal to run cables bringing electricity from its Ocean Wind offshore wind project through the tourist town of Ocean City to an inland substation.

During a hearing on the plan, Deputy Rate Counsel T. David Wand told the Board of Public Utilities that his agency has “some concerns” about the route that the Danish developer is proposing to run the cable, which would take it across several land parcels upgraded with funding from the state’s Green Acres program.

The project is the first test of a new law approved in July that allows offshore wind developers to override local officials for the siting, construction and operation of “wires, conduits, lines and associated infrastructure” on public land if it’s needed to connect an offshore wind project to the grid. To get BPU backing for the easement, the developer must show that it is “reasonably necessary” for the project’s construction.

Ørsted is seeking a 30-foot-wide easement running the length of the city’s main island, which is about 8 miles long, for a 275-kV cable that will connect Ocean Wind’s turbines, about 15 miles offshore, to the PJM grid at a substation, sited on a closed coal-fired power plant in neighboring Upper Township.

Wand said that Ørsted has testified in the past that it had identified an alternative route to the one that would run over the Green Acres land, along an abandoned railroad right of way. The route, “although longer in distance, may result in fewer disturbances,” Wand said.

Ørsted, which discarded this route as a possibility, has declined to provide its cost nor that of any of the routes it has analyzed, Wand said. He recommended that the BPU require the developer provide that information.

“Although the company maintains that it bears the risk of the preferred route’s cost, Rate Counsel believes the board should have the opportunity to review ongoing project costs,” he said. That would “ensure that the board-approved offshore renewable energy certificate price, which was established to incentivize development of offshore wind, was not set at an unreasonably high or low rate.”

Wand added that the route chosen could affect the cost of upgrading the grid to accommodate the power from Ocean Wind, so the developer also should be required “to demonstrate its preferred route is also the least-cost plan when including the transmission upgrade costs to minimize cost impact repairs.”

The Rate Counsel also said it has concerns about the BPU’s “procedural approach” to soliciting public input and noted that the board has “allowed for discovery, testimony, and public and evidentiary hearings” to illuminate other, similar, land-use questions, which has not happened in the easement case.

BPU President Joseph L. Fiordaliso rebutted what he called Wand’s “insinuations” and said “none of this has been done in secret. … This board is committed to transparency.”

Negotiations

Among the dozen or so speakers at the hearing were Ocean City residents who complained that the hearing had not been widely publicized — which Fiordaliso denied — and opposed not only the easement but the project as a whole.

Yet the opposition was more muted than a March 7 hearing on the easement held by Ørsted, at which more than 35 people spoke, many of them opposed to the project. (See Ørsted NJ Wind Project Faces Local Opposition.)

Madeline Urbish — head of government affairs and policy for Ørsted, who represented the developer at the meeting — said that it had been in “extensive outreach” with Ocean City since 2019 about “property right and consents” for the project and to acquire the easement. Those talks continued into early 2022, she said.

“However, Ocean City has not been willing to reach the necessary agreements to allow the process to proceed with the acquisition of the easements or for the New Jersey [Department of Environmental Protection] permit and accompanying environmental review,” Urbish said. As a result, Ørsted filed the petition seeking BPU approval to move ahead anyway under the new law.

The developer “remains ready and willing to come to a voluntary agreement with Ocean City,” she said. But she added that “time is of the essence if the project is going to meet its commitments to New Jersey.”

Asked after the hearing if Ørsted wanted to respond to the Rate Counsel’s comments, or any others voiced at the hearing, Urbish did not respond directly, saying: “These public hearings are an essential part of the petition process, as outlined by the state to provide regulatory oversight and encourage public participation, and we are committed to adhering to this important process.”

Local Construction Impact

Residents said they are concerned about the disruption, health issues and the negative impact of the project on the ocean view, marine life and tourism, the last of which the town relies heavily on.

“We know that these cables are going to emit EMFs [electromagnetic fields], which have been linked to brain cancers, bone cancers, blood cancers, birth defects,” said Suzanne Hornick, an Ocean City resident and environmental activist. “We don’t want this here. And if the BPU approves this, you’re going to have serious resistance, including people laying across the beach.”

Mike DeVlieger, a former Ocean City councilman, said that “overwhelmingly our community is against this, and it’s not even close.”

“They’re against this line coming up through our beaches; they are against it being run through our Green Acres land; they’re against it being run past our playgrounds and our ball fields and just through our streets,” he said. “This presents medical concerns; it can present environmental concerns.”

DeVlieger suggested that Ørsted consider an alternative route. “They have an alternative viable way of doing this. And they are doing what they want to do, not what they can do. And that’s wrong.”

But Frank Worrell, an Ocean City resident, said the impact of climate change around the country is too great to ignore.

“I believe in climate change. I believe we need these wind turbines and [to] build them as economically and as safe — and I underline safe — as you can,” he said. “If you’re going to go through 35th Street and make it safe, then I am all for it. I think climate change is of major concern, and I wish people would open up their eyes and get on board.”

Three environmental groups — Environment New Jersey, Sierra Club and New Jersey League of Conservation Voters — emphasized the threat of climate change and highlighted the job creation and economic benefits of offshore wind projects.

Richard Isaac, chairman of the Sierra Club’s New Jersey chapter, said the organization takes Green Acres diversions very seriously but is not concerned about the Ørsted project.

“In this case, here in Ocean City, the deep horizontal drilling will still leave every last inch of the beach available to the public [and] will not only help address climate change but, in doing so, will also help slow down sea level rise and maintain local businesses,” he said. “This proposal is clearly a win-win. From everything we’ve seen, we don’t have concerns regarding the health or potential hazards.”

Norah Langweiler, a resident of Egg Harbor Township, about 10 miles from Ocean City, said the “threats of climate change really feel more present than ever.”

“I totally understand that folks have concerns about the transmission lines coming onshore,” she said. “But any new infrastructure project brings some level of construction, and offshore wind turbines also bring jobs, energy security and resilience for the future by doing our part to mitigate climate change.”

May 23, 2022January 20, 2024

FERC Orders Show-cause Proceedings for SPP Utilities’ Transmission Rate Protocols

FERC on Thursday ordered show-cause proceedings on the transmission formula rate protocols of four utilities in SPP, saying they do not appear to provide customers and regulators the ability to challenge the resulting rates.

The commission ordered Grand River Dam Authority (EL22-44), Lincoln Electric System (EL22-45), Nebraska Public Power District (EL22-46) and Omaha Public Power District (EL22-47) to either show why their protocols remain just and reasonable, or explain what changes they could make to address FERC’s concerns.

FERC said the protocols did not meet the standards it has required since a 2012 order regarding MISO’s transmission owners. Under formula rates, the commission does not require TOs to make FPA Section 205 filings to update their annual transmission revenue requirements. Instead, the utilities update the input data in the formulas.

“Safeguards need to be in place to ensure that the input data is correct; that calculations are performed consistent with the formula; that the costs to be recovered in the formula rate are reasonable and were prudently incurred; and that the resulting rates are just and reasonable,” the commission said in each of the orders.

FERC found that each of the four utilities’ protocols fell short on one or more of the following:

“the scope of participation (i.e., who can participate in the information exchange);
the transparency of the information exchange (i.e., what information is exchanged); and
the ability of customers to challenge transmission owners’ implementation of the formula rate as a result of the information exchange (i.e., how the parties may resolve their potential disputes).”

In the 2012 order, the commission ruled that MISO’s protocols inappropriately limited who could participate in the review processes and directed the RTO and its TOs to revise them to include all interested parties, including customers under the MISO tariff, state utility regulatory commissions, consumer advocacy agencies and state attorneys general.

The commission ordered each of the SPP utilities to respond within 60 days.

May 23, 2022June 14, 2023

Overheard at IPPNY 2022 Spring Conference

Chris LaRoe 2022-05-18 (RTO Insider LLC) FI.jpg

Chris LaRoe, Brookfield Renewable | © RTO Insider LLC

Achieving New York’s climate goals should not come at the cost of “cannibalizing” existing renewable resources, said Chris LaRoe, senior director of regulatory affairs at Brookfield Renewable and chair of the Independent Power Producers of New York (IPPNY).

“We also need to make sure the transmission system is up to the challenge and that we are not bottling public policy resources,” LaRoe said Wednesday at IPPNY’s 36th annual spring conference.

Legislative, Regulatory Update

During the conference, New York Sen. Kevin Parker (D), chair of the Energy and Telecommunications Committee, drew a line from the May 14 mass shooting of Black people in Buffalo to the issue of making energy affordable for all people in the state.

“In this moment you have everyone feeling like they cannot make, not just unrepresented groups, but working class and poor whites across the country, particularly in our great state, feel like there’s no chance for them,” Parker said.

With gas prices headed toward $6/gallon, he added, it’s critical that the energy market “create the kind of economic opportunities such that people are not thinking that they have to murder other folks in order to make their way in this state.”

The pandemic disrupted both lives and livelihoods and created a dynamic in which the state put moratoriums on service cutoffs for overdue utility bills, and now utility arrears total nearly $4 billion in New York just as energy prices are spiking, he said.

Parker said he has to remind his constituents that net-zero emissions means net and that bakeries and restaurants will still be able to use gas-fired ovens for their work.

The benefits of the competitive wholesale electricity market are important, and principally they shield energy consumers from unwarranted risk, said Assemblymember Michael Cusick (D), chair of the Energy Committee.

“Competitive procurement is also an important pathway in meeting the state energy goals and the benefit of this approach is evidenced by the energy storage law (S8384) I created in the legislature along with my good friend and colleague Senator Parker,” Cusick said.

Rory Christian 2022-05-18 (RTO Insider LLC) FI.jpg

NYPSC Chair Rory Christian | © RTO Insider LLC

The electric system won’t be powered entirely by renewable resources and numerous reports highlight that various capabilities are needed to support a grid with significant levels of power generated by intermittent resources, said New York Public Service Commission Chair Rory Christian.

Generation assets are only effective if the transmission line is available to move power, which is why the PSC established a coordinated planning process between utilities and NYISO to align processes and procedures (20-E-0197), he said. (See NY Looks to Improve Tx Headroom Assessments.)

“Working collectively, we can set up a full spectrum of transmission needs, both bulk and local. … In the past, project needs were mainly driven by reliability, whereas today many of these projects will be needed to meet public policy and climate goals,” Christian said.

The commission has so far approved just under 200 local transmission projects, which will allow moving up to 15 GW of renewable energy, but it has approved only two large-scale transmission projects, Christian said. He noted that the PSC last September established a public policy category for transmission and distribution investments to help achieve the state’s environmental goals. (See New York Adopts Groundbreaking Tx Investment Rules.)

Fast Transition

Lawmakers, regulators and agency administrators — together with power producers — are transforming the state in a significant way over what many would say is not an extended period, said New York State Energy Research and Development Authority CEO Doreen Harris, who moderated a panel on offshore wind and energy storage.

“For many people this feels very quick, and certainly how we got here was anything but quick as to the system that we have built together,” Harris said.

Gavin Donohue 2022-05-18 (RTO Insider LLC) FI.jpg

IPPNY CEO Gavin Donohue | © RTO Insider LLC

IPPNY President and CEO Gavin Donohue said siting was the main challenge for both storage and renewables.

“We have developed 12,800 new megawatts over the last 20 years; we have 6,500 MW of renewable capacity installed in the state; and we’ve closed over 10,500 MW of less efficient facilities,” Donohue said. “Coal has been eliminated in New York state. It’s safe to say that upstate New York is a carbon-free area based on our electricity mix.”

The grid was not designed with points of interconnection on the coast, and because transmission is a long-term planning process, industry and policymakers must keep working on the issue, said Fred Zalcman, executive director of the New York Offshore Wind Alliance.

Emilie Nelson 2022-05-18 (RTO Insider LLC) FI.jpg

Emilie Nelson, NYISO | © RTO Insider LLC

“First and foremost, we see that in order to achieve the [Climate Leadership and Community Protection Act’s] expectation that we have 70% renewable energy by 2030, we really need to stay laser-focused on the buildup of infrastructure, be that transmission, be that resources,” NYISO Executive Vice President Emilie Nelson said. “This will be critically important. A lot of times the focus is on some of the intangibles, some of the unknowns.”

Nelson said that the PSC proceeding on integrating 3,000 MW of OSW into Long Island and increasing the transfer capability from Long Island to New York City will help ensure that the buildout can meet the needs of customers in load centers (18-E-0071).

New York has distinct advantages in managing resource adequacy in that NYISO has sole authority, while in California the responsibility is distributed over more entities, CAISO President and CEO Elliot Mainzer told RTO Insider.

Regarding public policy transmission needs, the ISO is between the viability and sufficiency assessment and evaluation, Nelson said.

“We’ve had 19 projects that have submitted proposals into this process and recently had to identify if they will move on, for the 16 projects that are still included, if they’ll continue into the evaluation phase,” she said. “From there we will be evaluating the projects across a set of metrics to identify the more cost-effective and efficient solution.”

IPPNY OSW Panel 2022-05-18 (RTO Insider LLC) Alt FI.jpg

From left: NYSERDA CEO Doreen Harris; Fred Zalcman, NYOWA; Beth Treseder, Equinor; Emilie Nelson, NYISO; Shane Ogren, Macquarie Capital; and IPPNY CEO Gavin Donohue. | © RTO Insider LLC

The most efficient place to build OSW projects is closer to shore, and as the wind resource is very strong in the northeastern part of the U.S., farther south becomes less economic, especially as you get farther south from New Jersey, said Shane Ogren, vice president for investment banking at Macquarie Capital.

Despite a burgeoning OSW industry in the U.S., “I expect you to see cost declines that will continue to make the investment look better and better over the years,” Ogren said.

Significant global demand for OSW is making the supply chain “very strained,” said Beth Treseder, head of U.S. renewables development for Equinor. “When we talk about domestic investment supply chain, it’s not purely to generate jobs; it’s fundamentally because we need the supply chain to develop the industry effectively in this country.”

May 22, 2022

Dominion’s Virginia Offshore Wind Project Gets Some Love in Hearings

Dominion Energy’s (NYSE:D) proposed offshore wind project won support from labor and political leaders in four days of hearings before the Virginia State Corporation Commission (SCC) last week, while commission staff called for ratepayer protections and local residents sought changes to transmission routing (PUR-2021-00142).

“There are many challenges facing mega-projects such as this,” observed Senior Assistant Attorney General C. Meade Browder Jr. of the Division of Consumer Counsel in remarks on the second day of the hearings May 16-19.

Hearings are scheduled to resume on Tuesday. The SCC is expected to reach a decision by August.

Virginia Beach Mayor Bobby Dyer (R) testified in support of the 2.6-GW Coastal Virginia Offshore Wind (CVOW) project, saying Dominion “has kept the city well-informed every step of the way.”

In addition to the obvious benefit of generating an anticipated 9,500 GWh of carbon-free energy per year, the jobs and economic impact that go along with this project are a critical part of a game-changing environment for us,” Dyers said in written testimony. “According to Dominion, the CVOW project will bring over 1,000 jobs to our area at all skill levels [and] over $10 million annually in local and state tax revenue is expected.”

In written comments, state Del. Shelly Simonds (D) expressed “strong support” for the project, citing “the urgent need for bold action to address climate change.”

Jason Parker, of the Virginia State Building and Construction Trades Council, said the council believes “that it’s going to bring lots of good jobs to the Tidewater area and to Virginia. We believe that it’s smart economics to diversify our energy source portfolio.”

Transmission Line Routing Questioned

Residents of a neighborhood where Dominion is proposing to build transmission lines for CVOW were less excited. Although not opposing the entire project, Virginia Beach resident Jacob Gotliboski testified May 16 that when he and his wife bought their home a year ago, they checked with the city and were told there was no project pending behind their home. He requested that the power lines be placed underground instead of becoming “an eyesore in our backyard.”

Ian Brown, president of the Mayberry Homeowners’ Association in Virginia Beach, who said he was also speaking on behalf of three neighboring homeowners’ associations, testified May 17 that he was there to “plead with the SCC to require Dominion Energy to use one of their alternate routes” instead of siting the transmission lines nearby.

Protecting Ratepayers

Probably the biggest question still hanging over CVOW, however, concerns its rising cost, and how much of it ratepayers will have to absorb. In November, Dominion announced that the projected cost had increased by more than 20% to $9.8 billion, citing “commodity and general cost pressures.” (See Dominion’s OSW Project to Cost $9.8B, up from $8B.) Testifying May 17, Joshua Bennett, vice president for offshore wind at Dominion, revised that figure to $9.65 billion, a reduction of 1.5%.

In testimony filed with the SCC, commission staff and the state attorney general’s Division of Consumer Counsel questioned the cost of the project and called for a performance guarantee on the project’s capacity factor. (See Va. AG, SCC Staff Question Costs on Dominion’s OSW Project.)

Browder testified May 17 that there is a need to “avoid problems like they had in South Carolina and Georgia, where ratepayers were left holding the bag.” He was referring to two nuclear projects — Santee Cooper’s V.C. Summer, which was cancelled, and Georgia Power’s Vogtle, which is still under construction — both of which had major budget overruns.

SCC staffer Katya Kuleshova said the record “may or may not support” granting the project a presumption of reasonableness and prudence because staff identified “certain scenarios” in which it could exceed the 1.4 levelized cost of energy (LCOE) metric, or $12.4 billion in costs incurred prior to the commercial operations date.

If the commission does approve the project, staff said it should require a performance guarantee to mitigate the risks to ratepayers. It suggested protections similar to those imposed by the commission over the construction of the 610-MW coal-fired Virginia City Hybrid Energy Center, in which it said Dominion would be required to prove the prudence of any cost overruns above $1.8 billion (PUE-2007-00066).

In comments filed May 16, John Warren, director of the Commonwealth’s Department of Energy, noted that the public interest declaration in state law “requires that the projected levelized cost of energy of the project does not exceed 1.4 times the comparable cost of a conventional simple cycle combustion turbine generating facility.” He said the company should be required to guarantee the 42% capacity factor it used in computing the project’s LCOE.

May 22, 2022

Biden to Re-nominate Glick as FERC Chair

The White House announced Friday that President Biden will nominate FERC Chair Richard Glick for another five-year term.

If confirmed, Glick could be on the commission well into 2027 and could remain chair as long as Biden remains president or another Democrat succeeds him after 2024. If a Republican is elected, Glick would be demoted, but the commission could retain a Democratic majority until 2026, when Commissioner Willie Phillips’ term expires.

Glick was originally nominated alongside Republican Neil Chatterjee by President Donald Trump and joined FERC in November 2017, when the commission’s sole member was acting Chair Cheryl LaFleur. Glick filled the seat left open by Colette Honorable’s resignation and was the lone Democrat — and often voice of dissension — for more than a year, between when LaFleur resigned in August 2019 and Commissioner Allison Clements joined in December 2020.

Before joining the commission, Glick was general counsel for the Democratic members of the Senate Energy and Natural Resources (ENR) Committee.

Glick was unavailable for comment over the weekend and had not tweeted anything as of press time.

Transmission Planning, Gas Policy Highlight First Term

His tenure has so far been marked by efforts to re-examine the commission’s policies on transmission planning, natural gas pipeline certificates and RTO capacity markets. Those efforts have been appreciated by renewable energy interests and environmentalists and criticized by the fossil fuel sector and the commission’s Republican minority, especially Commissioner James Danly.

In February, he and his fellow Democrats received more widespread criticism for a pair of policy statements on how the commission would more closely scrutinize evidence of need for pipeline projects and evaluate the impacts of their greenhouse gas emissions in environmental analyses. The statements were released without notice for comment and would have applied retroactively to all projects already pending before the commission.

The Democratic majority was later excoriated for the move by members of the ENR Committee — mostly Republicans, but also Chair Joe Manchin (D-W.Va.), whose support may prove necessary for Glick to continue in his post. (See Glick: No Regrets over Gas Policy Statements.)

A month later, FERC walked the policy statements back, labeling them as drafts and saying any new rules would apply only to future projects. (See FERC Backtracks on Gas Policy Updates.)

Glick won plaudits for his outreach to state regulators in a bid to accelerate transmission development. (See FERC-State Task Force Considers Clustering, ‘Fast Track’ to Clear Queues,)

But he has come under criticism for proposing a reinstatement of federal rights of first refusal (ROFR) in the commission’s April 21 Notice of Proposed Rulemaking on transmission planning and cost allocation. (See ANALYSIS: FERC Giving up on Transmission Competition?)

Former FERC Chair Jon Wellinghoff and Paul N. Cicio, chairman of the Electricity Transmission Competition Coalition and CEO of the Industrial Energy Consumers of America, called the ROFR proposal “a costly giveaway” to incumbent utilities that have circumvented FERC Order 1000’s rules encouraging competition in transmission development, citing data that only 3% of all transmission projects are competitively bid.

In a May 15 op-ed in The Hill, Wellinghoff and Cicio said that transmission costs in RTO/ISO markets “increased by $74.9 billion or 78.7%, while electricity demand was flat” from 2014 to 2020.

“Competition brings out innovation, a solution to inflation and an American norm — but the power sector is different,” they wrote. “Utilities make money by spending money and recover it in consumer rates with a 10 to 12% annual after-tax return on investment. The more they spend the more they earn.”

Reaction

On Friday, Chatterjee — himself a former Senate adviser, on the other side of the aisle — tweeted that Glick “is a great person and dedicated public servant. He’ll have to answer some tough questions, but if he continues to strive for bipartisan consensus on the contentious issues before FERC, he’ll be in a strong position for a second term.”

Responses to the news from stakeholders ranged from celebratory to tepid.

Both Advanced Energy Economy and the American Council for Renewable Energy “applauded” the announcement, with AEE Managing Director Jeff Dennis saying Glick “has provided steady leadership at FERC” and ACORE CEO Gregory Wetstone saying he has been “exceptionally effective as chair.”

WATT Coalition Chair Ted Bloch-Rubin congratulated Glick, saying that “FERC has made great strides towards policy to improve the United States’ transmission system planning and operation” under his leadership.

Electric Power Supply Association CEO Todd Snitchler was less enthused, saying that the organization “looks forward to a robust conversation around issues critical to the Federal Energy Regulatory Commission’s jurisdiction with the re-nomination. … [It] comes at a time when FERC’s mission to ensure reliable, safe, secure and economically efficient energy for consumers has never been more important.”

EPSA is challenging PJM’s narrowed minimum offer price rule (MOPR) in the 3rd U.S. Circuit Court of Appeals. The group contends it threatens the competitiveness of the capacity market and that FERC failed to give adequate reasoning for allowing the rules to go into effect. (See PJM MOPR Challenge May Set Legal Precedent on FERC Deadlocks.)

Glick was among four other intended nominees “to serve as key leaders” in the administration that the White House announced late Friday afternoon; none of the four other posts is related to energy policy.

May 22, 2022

PJM MRC Preview: May 25, 2022

Below is a summary of the agenda items scheduled to be brought to a vote at the PJM Markets and Reliability Committee meeting Wednesday. Each item is listed by agenda number, description and projected time of discussion, followed by a summary of the issue and links to prior coverage in RTO Insider.

RTO Insider will be covering the discussions and votes. See next Tuesday’s newsletter for a full report.

Markets and Reliability Committee

Consent Agenda (9:05-9:10)

B. Stakeholders will be asked to endorse proposed revisions to Manual 3: Transmission Operations resulting from a periodic review. The changes include updating stability limitation process language in accordance with FERC docket ER21-1802 and aligning language with the current TO/TOP matrix language.

C. The committee will be asked to endorse proposed revisions to Manual 11: Energy & Ancillary Services Market Operations, Manual 12: Balancing Operations and Manual 28: Operating Agreement Accounting addressing conforming changes for stability limits in markets and operations. FERC ruled in February that PJM has the right to refuse lost opportunity cost payments to generators that are temporarily required to limit output to prevent loss of synchronization and additional strain on the system during transmission outages. (See FERC: PJM Right to Block Gen Stability Limit Payments.)

D. Members will be asked to endorse proposed revisions to Manual 21A: Determination of Accredited UCAP Using Effective Load Carrying Capability Analysis addressing an effective load-carrying capability model run timing update. PJM rules allow voluntary submission of unit-specific wind and solar parameters for development of backcasts for newer resources, but current manual language has an expiration date of March 1 for voluntary submissions. The quick fix would remove the March 1 expiration date.

E. Stakeholders will be asked to endorse proposed revisions to Manual 36: System Restoration resulting from a periodic review. The minor changes include replacing System Restoration Coordinators Subcommittee with System Operations Subcommittee and updating the under-frequency load shed table with new data.

Endorsements (9:10-10:20)

1. Start-up Cost Offer Development (9:10-9:30)

The committee will be asked to endorse a revised PJM/Independent Market Monitor proposal addressing start-up cost offer development worked on through the Cost Development Subcommittee, including revisions to the tariff, Operating Agreement and Manual 15: Cost Development Guidelines. Stakeholders endorsed the proposal at the Market Implementation Committee’s meeting April 13. (See “Start-up Cost Offer Development Endorsed,” PJM MIC Briefs: April 13, 2022.)

2. Dynamic Line Ratings (9:30-9:50)

Members will be asked to endorse a proposal — and corresponding revisions to Manual 1: Control Center and Data Exchange Requirements, Manual 3: Transmission Operations and Manual 3A: Energy Management System Model Update and Quality Assurance — to address interim measures for the integration of dynamic line ratings (DLRs) into PJM operations. PPL is tentatively scheduled to go live in June with a DLR system on some of its transmission lines, and PJM wants to have operational implementation in place pending submission of the RTO’s FERC Order 881 compliance filing.

3. Application of Designated Entity Agreement (9:50-10:20)

Stakeholders will be asked to endorse a proposed solution and corresponding OA revisions addressing the application of the designated entity agreement. FERC rejected a filing in February by PJM in its Order 1000 compliance docket that would have updated the definition of “designated entity,” agreeing with a coalition of stakeholders that it infringed on their due process rights. (See FERC Rejects PJM Redefinition of ‘Designated Entity’ Under Order 1000.)

May 22, 2022

SPP, MISO Propose Scrapping Affected System Studies

MISO and SPP said Friday they plan to ditch their current affected systems study process for more interregional transmission analyses like their joint targeted interconnection queue (JTIQ) transmission effort.

The RTOs announced the transition to more transmission planning at the seams to allow generation interconnections during a conference call Friday.

“Essentially, we’re proposing a framework … whereby we believe the JTIQ and subsequent studies could serve as a replacement for the affected system studies,” SPP Director of Seams and Tariff Services David Kelley told stakeholders.

Kelley said for the current $1.65 billion JTIQ portfolio and other transmission studies to replace affected system studies, the new studies should occur at least every two years. He also said the grid operators’ proposal is proactive when considering FERC’s advanced notice of proposed rulemaking to improve transmission planning, cost allocation and generator interconnections (RM21-17). (See FERC Issues 1st Proposal out of Transmission Proceeding.)

“We’ve been listening to stakeholders over the last several months,” Kelley said. “MISO and SPP have reflected on these comments and concerns. … The affected system study process (AFS) is problematic, even from our perspective of administering these studies.”

Kelley said MISO and SPP have come to regard the AFS process as “a separate layer of inefficiency.”

“We need to design a more optimized transmission system around these seams,” he said.

While conducting the JTIQ study, Kelley said, MISO and SPP have noticed several similarities to the AFS: they detect the same constraints, seek to bring more generation online through transmission construction and dole out cost assignments for system upgrades to interconnecting generation.

The RTOs are attempting to distribute JTIQ portfolio costs based on the projects’ beneficiaries, including their respective loads, and a share to interconnection customers on either side of the seam whose generation will flow between the footprints. They have also said they might assign costs based on added benefits like increased flows or more economic dispatch. (See Now, the Hard Part: MISO, SPP Tackle JTIQ Cost Allocation.)

The grid operators have kicked around using a per-megawatt charge to allocate costs based on the interconnecting generation distribution factor’s effect on the JTIQ portfolio.

MISO and SPP intend to replace the AFS’ upgrade costs with the predetermined cost per megawatt

Kelley said, “more generation can afford to interconnect” under the new flat fee because it “eliminates unknown cost exposure from other RTOs.”

SPP’s Neil Robertson said the RTOs will determine the per megawatt charge for new generation based on the first JTIQ portfolio and refresh the amount in subsequent interregional transmission planning cycles.

“I just don’t want to see a situation where the charge escalates until load ends up holding the bag,” Adam McKinnie, chief regulatory economist for the Missouri Public Service Commission, said of the fluctuating charge.

Stakeholders appeared to approve replacing the AFS, even though the RTO staffs admitted they still must work through several details.

“At a high level, I think this is a good step … and needs to happen to produce higher levels of certainty early on at the beginning of the process instead of the end,” Advanced Power Alliance’s Steve Gaw said.

“It’s a creative proposal, and I think it has the potential to introduce more timing certainty and cost certainty,” Clean Grid Alliance’s Natalie McIntire said.

But multiple stakeholders pointed out that the JTIQ study and cost-allocation design remains untested and unproven.

EDF Renewables’ Arash Ghodsian said he is worried that MISO and SPP might not be able to adhere to a biennial schedule.

“It is concerning that MISO and SPP spent two years evaluating this portfolio,” Ghodsian said.

Robertson said the RTOs envision the JTIQ becoming “a more enduring process” that’s conducted on a regular basis.

Under the proposal, the grid operators said they will likely create a “JTIQ affected system zone,” where they identify new transmission facilities near their seams that are likely to be impacted by their neighbor’s generation-interconnection requests. Nearby interconnecting generators will be assigned the per-megawatt charge based on their zonal impact. Staff said the zonal charge will be adjusted prospectively based on successive JTIQ studies.

Gaw said assigning costs to generators based on their zone seems like “rough justice.”

Kelley said the zonal method would eliminate individual developers depending on other higher-queued interconnection customers’ upgrades to get their own projects online.

Rafik Halim of National Grid Renewables asked how the RTOs will transition existing projects working their way through the respective queues to the new JTIQ charge. He said he was particularly concerned about the projects cycles that entered the MISO queue in 2018 and 2019 and have yet to receive AFS results from SPP.

“We have projects that are effectively being held hostage by an affected system study process,” he said.

Kelley said MISO and SPP have yet to work through a transition plan, but he said they will continue processing their queues until the new system can take effect.

“What MISO and SPP can’t afford to do is to put on hold any of our current study processes,” Kelley said.

The RTOs promised more meetings on the proposal beginning next month.

MISO Director of Resource Utilization Andy Witmeier asked stakeholders to provide their input on the proposal

“We want to really see if this new avenue is worthwhile,” he said.

May 22, 2022

FERC OKs MISO’s Bifurcated Cost-allocation Tx Design

FERC last week approved MISO’s separate-but-equal postage stamp rate divided between its Midwest and South footprints for some of its major transmission buildout. The Thursday order gives MISO a clear-cut cost allocation for its long-range transmission plan’s (LRTP) first two cycles of projects (ER22-995).

The 100% postage stamp-to-load rate will be used to divide costs on MISO’s $10 billion long-range transmission package, the first of four portfolios the RTO plans to recommend. (See MISO Updates Stakeholders on $10B Long-range Tx Package.)

MISO will limit cost sharing on the first half of its LRTP projects to MISO Midwest, where the projects will be physically located, thus shielding its southern states from the transmission costs. The grid operator has said the allocation design is temporary and that it will seek approval for a new cost-allocation design when it begins studying transmission needs in MISO South and increasing its Midwest-to-North transfer constraint in a few years. (See MISO Seeking New Tx Cost Allocation for Major Buildout.)

FERC said that MISO’s proposal to limit regional cost assignments is fair because it follows the commission’s cost-causation principles that benefits be roughly commensurate with allocation. The agency cited a Brattle Group analysis commissioned by MISO that showed the benefits of Midwestern transmission projects would be overwhelmingly confined to the Midwest unless the RTO secures more transfer capability between the subregions. (See MISO Finalizes Long-range Tx Cost Sharing Plan.)

The design “appropriately reflects the transfer limits between the Midwest subregion and the South subregion,” the commission said.

FERC also noted that MISO replicated its established cost allocation from its 2011 Multi-Value Projects to divvy up long-range transmission costs.

MISO’s clean energy organizations called the allocation design a “prudent interim solution to the transfer limits.” However, industrial customers argued that the RTO didn’t present enough evidence that it will allocate costs commensurate with benefits. They also derided MISO’s method of analyzing the first cycle of transmission projects as a portfolio instead of individually and said applying a uniform postage-stamp-to-load rate is clumsy because project benefits fluctuate over time.

The Mississippi Public Service Commission agreed with separating the Midwest from the South but asked that FERC not consider the postage stamp rate as the default method when MISO begins prescribing projects for its South region. The PSC said it would protest the rate as not specific enough if it were applied to Southern projects.

FERC disagreed and said the postage stamp is an appropriate allocation tool. The commission quoted itself from Order 1000 and reminded industrial customers and the PSC that a postage stamp method is “appropriate where all customers within a specified transmission planning region are found to benefit from the use or availability of a transmission facility or class or group of transmission facilities, especially if the distribution of benefits associated [therewith] is likely to vary considerably over the long depreciation life of the transmission facilities amid changing power flows, fuel prices, population patterns and local economic considerations.”

The commission also reminded Mississippi that the postage stamp rate is already the default allocation style under MISO’s past Multi-Value Projects, even though that portfolio predated MISO South’s integration and none of those project costs were ever assigned to the South. FERC said it considered the PSC’s ask a collateral attack on its past rulings.

FERC pointed out that the U.S. Seventh Circuit Court of Appeals has held that FERC “need not ‘calculate benefits to the last penny, or for that matter to the last million or ten million or perhaps hundred million dollars,’ but rather must have ‘an articulable and plausible reason to believe that the benefits are at least roughly commensurate with’ the allocation of the costs.”

The commission also blessed MISO’s portfolio approach to the LRTP and again referenced itself, this time quoting from its acceptance of the RTO’s portfolio style for its 2011 Multi-Value Projects.

“The portfolio approach will help [MISO] to prioritize its transmission expansion projects in such a way as to ensure global benefits from the projects afforded regional cost sharing and maximize the number of system users who will share in those benefits,” the commission said.

FERC also dismissed as premature some stakeholders’ concerns that MISO would design a different and more favorable cost allocation for the South, thus violating FERC’s cost allocation principle that inconsistent allocations must not be applied to the same class of projects. The commission said that was speculation because MISO has yet to develop the cost allocation it plans to apply for projects concerning MISO South.

Christie’s Cautious Concurrence

Commissioner Mark Christie wrote separately to concur with the order, hinting that MISO may not be doing enough to ensure thorough cost allocation.

“In a large, geographically sprawling transmission entity — MISO stretches from the Gulf of Mexico to Canada — it simply makes sense to allow for more granular cost allocation arrangements that may be subregional rather than imposing an identical cost allocation framework across the entirety of MISO,” Christie wrote.

However, he expressed misgivings with the “pure socialization” of the postage stamp rate and said he hoped MISO and stakeholders could arrive at a more granular allocation for the second half of the long-range transmission effort.

“While MISO’s case for postage stamp cost allocation is weak, I do not believe there has been a showing that this method is unjust and unreasonable,” he said, adding that he was ultimately swayed by the Organization of MISO States’ support of the allocation’s design.

Christie said he is concerned that Brattle’s benefits spread analysis rested on MISO’s internal benefit evaluation of its Multi-Value Project portfolio, and not an outsider’s view of the projects’ benefits. The Brattle Group’s Johannes Pfeifenberger “apparently accept[ed] the benefit-cost ratios in MISO’s 2017 report as self-proving,” Christie said.

He added that the Brattle Group should not accept MISO’s benefit claims “on faith,” especially when billions of dollars are at stake.

“There is nothing in the record to indicate whether MISO’s 2017 analysis was ever introduced into evidence in a rate case or other formal proceeding; whether discovery by other parties ever took place to glean information about the methods, bases and benefit calculations of the 2017 analysis; whether it was ever sponsored by a witness who had to take the stand and be cross-examined on the report by lawyers who knew how to conduct cross; or whether other parties had the opportunity to put their own expert witnesses, friendly and hostile, on the stand who could testify about the MISO analysis,” Christie wrote. “Indeed, ideally, a third-party report without a witness who can authenticate it and be cross-examined on it would not even be admitted as evidence in any serious evidentiary proceeding … the evidence in support of assigning billions of dollars in new costs to consumers should certainly get the same scrutiny as in a routine rate case involving far lower amounts of costs.”

Christie urged “state regulators and all affected stakeholders throughout MISO, especially those representing both residential and industrial consumers, to scrutinize very closely the planning criteria and cost allocation for future [long-range portfolio cycles] as well as claims of projected benefits used to justify regional cost allocation proposals because billions of dollars of consumer costs will be allocated here.”

May 22, 2022December 7, 2023

MRO Annual Reliability Conference Spotlights Need for Generation and Transmission

Midwest Reliability Organization’s annual reliability conference last week emphasized the inevitability of the transition to clean energy and avoiding future supply shortfalls with more generation and transmission.

“I don’t have to tell you that we’re seeing a transition in the resource mix,” Mark Lauby, NERC senior vice president and chief engineer, told conference attendees Wednesday.

Lauby said it’s not that today’s fuels are “inherently less secure,” but they are more uncertain. He said reliability should extend beyond the one day in 10-year standard to more multidimensional rules of thumb. He also said he “very forcefully believes” that the country is going to need more transmission projects, although they may be difficult to build.

Lauby said the grid needs more energy, not capacity, to serve future load.

“Capacity was king, but the king has no clothes,” he said. “It was a good trick and we got away with it for a while.”

MRO COO Richard Burt said energy and load are now unreliable variables, to the point where he questions reserve margins. He said that from 2010 to 2020, capacity in North America has dropped by 23 GW while load has grown by 85 GW.

“We’ve created a 100-GW gap,” Burt said.

Currently, MRO estimates that its footprint contains almost 51 GW of wind generation and about 1 GW of solar generation between MISO, SPP, Saskatchewan Power and Manitoba Hydro. But those entities’ interconnection queues show that 43 GW of wind generation and a whopping 102 GW of solar are planned by 2031.

“We could have more solar than wind in 10 years,” Burt said, adding that if all the potential solar is built, it will cover a surface area that spans “all the Disney parks” 40 times over.

Lauby said the transition to renewables is a “good thing” for the country but will require a rethink of reliability.

“It’s time now to no longer admire the problem. It’s time to solve the problem,” he said, noting solutions will require participation from not only the industry, but also state and federal government.

NERC’s Energy Reliability Assessment Task Force might lean toward requiring a new energy reliability assessments standard, Lauby said, but NERC must tread carefully and continue to abide by its policy of not prescribing generation or transmission construction.

“If shedding load is the answer, then that’s the answer,” Lauby said.

Mark Ahlstrom, NextEra Energy Resources’ vice president of renewable energy grid integration, called the resource shift “huge and inevitable.” He said that although “there’s no shortage of technology” to aid the transition, wholesale markets will have to adapt to the disruption.

“We’re talking changing not just the hardware, but markets. … It can be overwhelming, or it can be fascinating,” Ahlstrom said.

He said every renewable energy prediction that the U.S. Department of Energy or the National Renewable Energy Laboratory issued about 15 years ago has now been “far exceeded.” He also pointed out that the nation had about 100 years to perfect reliable electricity delivery using thermal generation.

“It’s not that they were prefect; they have their quirks,” Ahlstrom said of thermal generators, adding that new software is necessary to furnish services that complement clean energy sources.

Despite supply chain issues and solar panel tariff disputes with China, Ahlstrom was bullish on investing in renewable energy and storage facilities. He predicted that prices on commodities like gas, oil and coal will continue to rise.

He said grid operators’ GI queues are hampering new generation and the wait times are so long that some study models must be revised because better technology options are available by the time generation can connect. He said a five-year IC timeline doesn’t make sense when inverters available to developers change and advance about every two years.

Ahlstrom criticized MISO and SPP’s affected system study process for being inconsistent, sluggish and resulting in pricey network upgrades that upend projects.

“We can’t build a future transmission system using band aids from one generator at a time,” he said. “If we’re going to get to [net-zero emissions by] 2050, we’ve got less than 28 years to build massive transmission.”

Ahlstrom said the nation can use an HVDC national backbone and, though it may be unpopular, a national transmission planning committee to recommend projects.

“Society will still do this; it’ll just be twice as expensive,” he said of the pendulum swing to clean energy.