A former president of the California Public Utilities Commission said Tuesday that the state attorney general should look into the rolling blackouts of mid-August with an eye toward signs of market manipulation in CAISO’s grid.
Loretta Lynch, CPUC president from 2000 to 2002 and a commissioner through 2005, spoke during a webinar held by the Clean Coalition, a Santa Barbara, Calif., group that advocates for renewable energy and microgrids.
Loretta Lynch | University of California
“I think it’s time for the California attorney general to investigate what happened at the ISO and, more than that, the ISO’s market practices that can’t keep the lights on,” Lynch said.
California should have had ample supply to meet peak demand this summer, including Aug. 14-15, when CAISO ordered rolling blackouts, she said in her online presentation.
The state had ordered load-serving entities to procure nearly 53,000 MW for summer load, including a 15% reserve margin. Blackouts were ordered when demand was less than 46,000 MW on Aug. 14 and less than 45,000 MW on Aug. 15, she noted.
Lynch asked why CAISO had allowed large amounts of energy to be exported on those days despite knowing that a Western heat wave would stretch supply and limit imports.
“On Aug. 14, as Californians are being begged to conserve power, the ISO allowed over 4,000 MW of electricity to be exported out in the middle of an extreme heat wave despite the carefully constructed and planned-for demand forecast,” she said.
As a public benefit corporation, CAISO is primarily responsible for ensuring in-state reliability, and the attorney general has additional authority to investigate it, she said.
Like other critics, Lynch questioned the role that convergence bidding, a purely financial hedge, may have played in exacerbating the August shortages. CAISO maintained convergence bidding during the blackouts but stopped it in the days afterward, explaining that the practice was clouding its picture of physical supply.
CAISO spokeswoman Anne Gonzales said the ISO has been open and forthright in its take on what happened, including regarding exports.
Among its findings, the preliminary root cause report said that on Aug. 14 and 15, “under-scheduling of load [by LSEs’ scheduling coordinators] and convergence bidding clearing net supply signaled that more exports were supportable.”
That report “has been shared publicly and presented in a public hearing to the California State Assembly shortly after its release,” Gonzales said in an email. “The ISO, CEC and CPUC stand behind the preliminary findings and will continue to work on a final report, which will be completed by the end of the year.
“There has been no factual basis to suspect that market manipulation played a role in the August outages,” she said.
David Olsen, who until last month served as chair of the CAISO Board of Governors, plans to retire Nov. 30, the ISO said Wednesday.
A clean energy leader and former head of outdoor-gear maker Patagonia, Olsen joined the board more than eight years ago and served as its chair from February 2018 to Oct. 1. He led the ISO during a time of great change, as California moved to phase out carbon-emitting resources and adopt renewable energy and storage.
He was also instrumental in the creation of the Western Energy Imbalance Market (EIM), which by 2022 is scheduled to include 22 participants in states across the West.
“I’ll be 75 years old soon, and have been on the CAISO board for almost nine years. That’s long enough on both fronts,” Olsen said in an email, explaining his decision to retire more than a year before the end of his term.
“Dave Olsen has been a pioneer in the development of the renewable energy industry,” CAISO CEO Elliot Mainzer said in a statement. His knowledge, vision and operating experience with highly reliable, low-carbon microgrids helped CAISO embrace the broader opportunities offered by new resources. His life’s work in the fields of clean energy and corporate sustainability initiatives is reflected in thousands of megawatts of clean energy projects and progressive policies adopted across the country.
“All of us at the ISO thank him for his service and wish him the very best,” Mainzer said.
The search for Olsen’s replacement has begun, the ISO said.
California Gov. Jerry Brown appointed Olsen to the board in 2012, and Gov. Gavin Newsom reappointed him in January 2019 to a term that expires at the end of 2021.
Olsen served as managing director of Western Grid Group from 2003 to 2013, leading an organization of former Western state energy officials who advocated for grid modernization, a transition to a clean energy economy and the creation of the EIM, according to his CAISO biography.
In the business world, Olsen led development of wind, solar, hydroelectric and geothermal power projects in more than 20 countries as president of Clipper Windpower (2001-2003), founder and president of Peak Power (1988-1995), vice president of Magma Power (1993-1995) and CEO of Northern Power Systems (1984-1988), the ISO said.
From 1996 to 1999 he served as president and CEO of Patagonia, leading the company’s carbon-reduction efforts and making it the first U.S. corporation to get its electricity from wind and solar power.
“I’m extremely grateful to Dave for his commitment to the ISO and California’s decarbonization goals,” said Angelina Galiteva, who took over as board chair last month. “He is a thoughtful, innovative and collaborative leader and leaves a legacy of championing the transition to 100% renewable energy while safeguarding the health and wellbeing of all Californians. His dedication, deep knowledge and tireless enthusiasm for building the grid of the future will be difficult to replicate.”
Olsen said in the statement he was privileged to have worked with such “excellent board colleagues and outstanding management and staff.”
“Together, we’ve steadily improved the organization’s capabilities and made it an internationally recognized leader in the transition to a low-carbon future,” he said. “I’m leaving CAISO in very good hands.”
SERC Reliability held a two-day Operations & Planning (O&P) Compliance Webinar Nov. 10-11, with discussions on operations under the coronavirus pandemic, recent enforcement trends and 2021’s enforcement priorities. Below are the highlights of what we heard.
‘Focusing on the Why’
SERC and its stakeholders have taken advantage of the shutdown of in-person meetings this year to improve their ability to address small reliability issues as well as reconsidering whether their practices are in line with their strategic goals, CEO Jason Blake told 175 people who turned out Tuesday for the beginning of the annual meeting.
SERC CEO Jason Blake | SERC
“It’s been impressive the way our industry has been able to navigate these unusual times,” Blake said. “We have the pandemic, a record-breaking hurricane season, social unrest and then the traditional things that challenge us, such as the evolving nature of the grid itself and increased cyber activity.”
Challenges bring opportunities by forcing people to rethink their routine ways of working, Blake said.
“Taking this approach allows you to unleash all types of potential and creativity,” he said. “The point is the criticality of focusing on the why. Why are we here? Why do I have this program in place back at my shop? Why is this standard a standard? What is its purpose?”
Blake said the shutdown has shown SERC the value of self-logging and remote audits, which, “if deployed properly,” can be a great tool for the organization even without a pandemic.
“The thing I’m very proud of is how our productivity has remained so high,” Blake said. “We’re taking this opportunity to improve our programs, understanding that the way we focus ourselves has a ripple effect across industry … and unresolved issues create a bottleneck. We have been working very hard to drive even further enhancements … make sure we have robust mitigation in place, as well as to properly resolve noncompliance based around risk.”
For the first time in years, SERC staff are regularly resolving issues faster than they come in the door.
Blake touted SERC’s 2020 Reliability Risk Report issued in September, which was drafted by the Reliability Risk Working Group.
The top 10 reliability risks for 2020 as identified by the SERC technical committees | SERC
The report identifies the top risks to focus on and prioritizes them, which “really demonstrates our commitment to be a data-driven, risk-based organization,” Blake said.
2021 Enforcement Priorities
The COVID-19 pandemic has affected compliance monitoring mainly by forcing it off-site, a precaution that will now extend through the first quarter of 2021, said Todd Curl, SERC senior manager of compliance monitoring.
Having replaced the former SPP and FRCC regional entities, SERC’s footprint now has about 264 registered entities. | SERC
Having replaced the former SPP and Florida Reliability Coordinating Council regional entities in 2018 and 2019, respectively, SERC now has about 264 registered entities in its footprint, Curl said.
“We have on the schedule a total of 62 CIP [critical infrastructure protection] and O&P audits for 2021, and also four spot checks scheduled in addition to those audits, so that gives you an idea of what we’re looking at for next year,” Curl said.
While no audits will be done on-site through the first quarter, some activities need to be done on-site, especially around some aspects of NERC reliability standards CIP-014 and FAC-008, the latter relating to facilities, design, connections and maintenance, he said.
Curl also gave a presentation on the ERO’s 2021 Compliance Monitoring and Enforcement Program (CMEP) Implementation Plan, which is focused on:
remote connectivity and supply chain (CIP-005-6, CIP-007-6, CIP-010-3 and CIP-013-1);
poor quality models impacting planning and operations (MOD-026-1, MOD-027-1 and MOD-033-1);
loss of major transmission equipment with extended lead times (TPL-001-4);
inadequate real-time analysis during tool and data outages (IRO-008-2 and TOP-001-4);
determination and prevention of misoperations (PRC-004-5 and PRC-027-2); and
gaps in program execution (CIP-010-2, FAC-003-4, FAC-008-3 and PRC-005-6).
The plan “looks at ERO-wide risk,” Curl said. “Each region beyond that needs to focus on region-specific risks.”
Todd Curl, SERC | SERC
As a result, Curl said, SERC auditors will continue their focus on CIP-002, although it is no longer among the ERO’s priorities.
“As the [plan] was being discussed by NERC and the regions and we were talking about what needs to stay in, what needs to come out, what needs to go in for the first time … it was SERC and one other region who still seem to see CIP-002 as high risk. All the other regions feel like it was a much lower risk than in the past,” Curl said. “We’re going to continue for at least another year in 2021 to focus on CIP-002.”
SERC’s 2020 Reliability Risk Report cited the standard as an example of gaps in program execution. The standard is designed to ensure entities maintain complex programs that handle large amounts of data, such as accurate inventories of equipment, following asset transfers and the addition of new equipment.
FAC-008 Enforcement Trends
SERC legal counsel Dulce Plaza gave a briefing on enforcement trends regarding standard FAC-008.
Dulce Plaza, SERC | SERC
FAC-008-3 became effective on Jan. 1, 2013, when FAC-008-1 and FAC-009-1 were retired. FAC-008-3 R6, which is very similar to FAC-009-1 R1, requires each transmission owner and generator owner to have facility ratings consistent with their ratings methodology.
Facility ratings were a NERC “area of focus” in the 2019 and 2020 ERO Enterprise CMEP Implementation Plans because of compliance engagements and self-report findings that identified potential reliability gaps. The 2020 SERC Reliability Risk Report by the RE’s Engineering Risk Committee identified FAC-008 as a major risk.
Plaza said FAC-009-1 and FAC-008-3 remain two of the most frequently violated O&P standards, representing 13% of SERC’s current O&P violation inventory.
Between Jan. 1, 2013, and Aug. 31, 2020, the region identified 33 violations of FAC-009-1 R1 and 24 violations of FAC-008-3 R6, most of them from self-reports. More than 50% were considered “minimal” risk and less than 10% considered “serious” risks.
Most discrepancies in facility ratings were the result of ineffective asset identification or change management controls, Plaza said.
She said some entities failed to correctly identify all their equipment in the field at the beginning of the enforceable period for FAC-008-3 and had not completed a “walk-down” of their facilities to verify if the equipment in the field was what was included on the one-line diagrams and facility ratings database. Thus, some noncompliance start dates for issues initially identified as FAC-008-3 violations extend back to 2007 and were processed under FAC-009-1.
Plaza also cited entities that consolidated equipment in the database rather than listing equipment individually, resulting in a single rating for different pieces of equipment. Entities also failed to remove retired devices from their database and diagrams in some instances.
“I would say based on the data, we are seeing improvements” in compliance, Plaza said. “An uptick in violations doesn’t mean that we’re doing worse. It just means that we’re finding things that we didn’t find before, especially during audits.”
Mike Kuhl, SERC | SERC
Mike Kuhl, SERC’s manager of O&P monitoring, said common errors are one-line diagrams that fail to include all switches and jumpers. “The transformer ratings — your large pieces of equipment — usually they’re good. But a lot of times, there’s a component that can be easily overlooked and catch you.”
Kuhl said that although the standard requires entities to consider all equipment rather than just the most limiting, “we’re not expecting absolute compliance from an auditing perspective.”
“If there’s one or two [violations, and] an auditor exercising professional discretion [determines] that there is reasonable assurance of compliance overall, we’re not going to call that out,” he said.
Curl said FAC-008 is one standard for which off-site monitoring is a handicap. “We’re auditing FAC-008 off-site as best we can to have reasonable assurance, but there may be some time after COVID is over [that] we may do a follow-up spot check,” he said.
Data to Include in Self Reports and Mitigation Plans
Jimmy Cline, SERC managing counsel, and Todd Beam, SERC manager of risk assessment and mitigation, gave a presentation on data that should be included in self-reports and mitigation plans.
Beam said self-reports should be as detailed as possible at the time of submission. “Let us know how the issue was identified: What was occurring that led to the discovery. Identify any internal controls … associated with the identification of the violation. Did it help identify [the violation or] did an internal control fail? Detail that out for us.”
He said self-reports also should identify what share of the total population in the program was affected. “Was it one out of 10,000, or 900 out of 1,000? That helps us understand the magnitude of the issue.”
Identification of the causes of noncompliance also should be detailed, Beam said.
“You can’t say, ‘The procedure was deficient,’ or perhaps, ‘An individual required training,’” he said. “We’re going to have to understand what was specifically deficient in the procedure. What needed to be added that wasn’t there? What was possibly misinterpreted or misapplied? Same with training: Why was the training not already provided? What was the deficiency? Identify the aspects of training that require improvement: the frequency of training; the training topics. Help us understand that.”
SERC expects self-reports within 90 days of discovery. “If there’s a delay, anticipate some questions, because we’re going to want to know why,” Beam continued. “If you as an entity are having difficulty in meeting that 90-day criteria, things to ask yourself: Are your internal business processes or review cycles too complex? … Do you have the proper staffing levels? … Are the necessary skill sets available?”
Winter Weather Plan
Tim Hattaway, energy service manager for PowerSouth Energy Cooperative, presented a winter weather plan for its service territory providing wholesale power to 20 distribution members in Alabama and northwest Florida.
PowerSouth owns and operates 1,680 MW of generation, mostly natural gas-fired but including the only compressed air energy storage facility in the country, a 110-MW facility in McIntosh, Ala., Hattaway said.
PowerSouth Energy Cooperative, which provides wholesale power to 20 distribution members in Alabama and northwest Florida, rarely experiences singe-digit winter temperatures. | PowerSouth
The cooperative, a registered balancing authority, is much better versed in hurricane preparedness than in cold-weather operations, “because we really got hammered with hurricanes, this year especially,” he said. “We don’t have a lot of cold, freezing weather, but we do deal with weather in the Gulf of Mexico.”
The cooperative is a winter-peaking system, with approximately 85% residential load, and generally sees fewer than 30 hours per year of temperatures below 25 degrees Fahrenheit. But after that figure climbed over 110 hours in the polar vortex of 2014, it hired an outside engineering firm to help.
“They performed a detailed analysis on all of our generators, even our small hydro facilities that are 1-MW units … and they highlighted our heat tracing, our insulation, things like that,” Hattaway said.
Tim Hattaway, PowerSouth | SERC
One finding was that generation unit operators tended to face cold weather by adding more heat tracing — electric cables to heat a pipe — rather than by trying to understand how to winterize units properly. For example, the study taught them that wet insulation causes pipes to freeze approximately two times faster than with dry insulation, and that even a small amount of moisture in instrumentation lines can cause false readings and unit trips.
It took the company over a year to go over the 800-page report and implement all its recommendations, he said.
One questioner asked whether the co-op ever experienced units that would not start, and if so, how long it took to fix the issue.
“One reason we like the day-ahead start-up is because if we have an issue with a unit starting, and … if we stuck to our economic dispatch plan, we might call on that unit at 3 in the morning, but if it doesn’t start at 3, we’ve only got about an hour to resolve the problem,” Hattaway said.
Typically, the company has been able to get the units online in time for when needed the following morning, and unit operators much prefer a good lead time on getting started, he said.
“We also have a 20-day or 25-day start-up procedure where we start units just to make sure they’re in running order,” Hattaway said.
Registered Entity Forum Election
Ballots are due Nov. 13 in the vote to fill four open positions on SERC’s Registered Entity Forum Steering Committee for two-year terms. The committee requires at least one representative with a CIP background.
The committee, which meets quarterly, provides a conduit to SERC staff and an opportunity for discussion among registered entities regarding reliability and compliance issues, including sharing lessons learned and best practices. Registered entities that want to ask SERC questions without subjecting themselves to scrutiny can approach a committee member, who can ask the question while maintaining the RE’s anonymity.
Ballots were sent to primary compliance contacts Nov. 5. Those elected will be notified the week of Nov. 23 and announced in the SERC Transmission newsletter in December.
RC West praised its members for collaborating to manage the Western “heat storm” in mid-August that prompted CAISO to initiate California’s first rolling blackouts since the energy crisis of 2000/01 and pushed utilities elsewhere to the brink of calling for outages.
“The first point I want to make is the only place that firm load-shed did occur was in California,” Tim Beach, director of reliability coordination for RC West and CAISO, told the RC West Oversight Committee on Tuesday.
While other balancing authority areas “within the RC West area didn’t have firm load shedding … they were a contingency away, perhaps. Many times, it was imminent, and that’s why they were in” a Level 3 energy emergency alert (EEA 3), Beach said.
To give a sense of the scope of the event, Beach noted that RC West BAs have called 52 EEAs since the reliability coordinator commenced operations in 2019. Out of those 52 EEAs, 35 occurred during the Aug. 14-18 heat wave.
“So, it was a very large-impact heat storm that was stalled across the region,” he said.
This chart shows how many energy emergency alerts have been called in RC West since it began operations in July 2019 and how many of those occurred during the mid-August heat wave event. | CAISO
The heat wave produced the all-time record peak demand in RC West’s short history: 127.6 GW on Aug. 17. WECC, which is performing an event analysis for NERC and stakeholders, estimates that demand across the entire Western Interconnection peaked at just over 162 GW on Aug. 18. (See WECC Examining August Heat Wave Through West-wide Lens.)
Beach noted that RC West is still responding to data requests for WECC’s analysis. “We expect to get some lessons learned out of that [report] as well.”
He shared some of the lessons RC West already gleaned based on firsthand experience with the event.
The first lesson was the benefit of “proactive communication” across the interconnection. Beach said RC staff initiated “ad hoc” daily conference calls with BAs and transmission operators (TOPs) throughout the event. Calls started as early as 3 a.m., with RC “canvassing” BAs and TOPs in the Southwest and Pacific Northwest about any potential capacity issues they might expect that day.
“We used those calls to sort of cue [RC staff] to follow up with other individual companies as the day progressed,” Beach said.
He offered a “hats off” to BA and TOP operators for “doing an excellent job” of joining conference calls during the day and communicating the status of the system.
“It was in some respects a good event that everybody sort of linked their arms together and we marched through the heat storm and were able to manage it pretty well,” Beach said.
RC West’s second key lesson was recognizing the need for bringing in relief, as it added shift staff to assist with peak hours.
“Normally we have three RCs [operating staff] on shift — a lead and two regular RCs,” Beach said. “We brought a fourth RC that usually started around noonish and then actually worked well through peak up until 10 at night to help with the RCs on staff.”
He said the first objective of EEAs is to help BAs navigate capacity emergencies. The second — “which is probably equal to the first” — is to protect the wider interconnection from a BA “that’s in trouble.”
Beach wants to ensure that staff provide a “proper sounding board” for BAs as they escalate to emergency procedures. He said at times he thought RC West’s approval of EEAs during the event was “more like a rubber-stamp.”
“I would’ve liked to have a little more rigor around that, so we’re going to look at that going forward,” he said.
Beach said RC West this year began performing capacity drills with individual BAs to walk through EEA steps, explore scenarios of reserves deficiency or sufficiency, and examine ways to work through capacity emergencies.
“Then we can exercise some muscle memory going into next year,” he said.
Controlled Control Room
CAISO has reactivated a third control room in order to protect staff against potential COVID-19 infections as cold and flu season looms.
“If we do have somebody that has a sick child at home, for example, we don’t have to quarantine them at home. We can put them in a controlled environment, and they can still operate from that control room,” Beach said, adding that the room is “physically cordoned off” from the rest of the ISO population.
Beach assured the Oversight Committee that CAISO staff remain healthy and have not registered a single COVID case, despite some direct contacts with infected people. “But we have a process for making sure we quarantine those people in those instances,” he said.
Regulators respond to power industry mergers and acquisition pressure by ceding leadership, underestimating the negatives and accepting minor positives, lawyer and author Scott Hempling said Monday during National Association of Regulatory Utility Commissioners’ annual meeting.
“M&A applicants tend to frame a proposal as simple and positive, and commissions tend to start by viewing it that way, not as a transfer of a government-created franchise for gain; they view it as ‘oh, these people are coming and they’re going to bring us something,’” Hempling said. “The regulators don’t question what transaction they are precluding by considering a deal, and some commissions actually advocate for the transaction by trying to fix it with conditions.”
NARUC hosted Hempling, former director of the National Regulatory Research Institute (NRRI) to talk about his new book, “Regulating Mergers and Acquisitions of U.S. Electric Utilities.”
A self-professed “blunt-speaking” New Jersey native now living in the D.C. metro area, Hempling described his book between fielding questions relayed by current NRRI Director Carl Pechman.
Razzle Dazzle
When electric utility monopolies try to acquire other utilities “undisciplined” by competition, they present the deal in “wrapping paper” that distracts regulators, who tend to be unprepared and thus fall for the “WYSIATI” syndrome: believing that “what you see is all there is,” Hempling said.
NARUC on Nov. 9 hosted author and former NRRI director Scott Hempling, top, to discuss his new book on mergers and acquisitions with current Director Carl Pechman. | NARUC
These deals can be described as “mergers,” but they are acquisitions, and what is being acquired is control of a government-protected franchise to sell electricity, he said.
“Make the mental effort to think it through, and take a stand; define your terms; say you won’t accept too much debt buying the target, or you’ll only accept such a percentage of debt and why,” Hempling said. “There is no invisible hand in these government-created monopolies.”
Commissions have checklists instead of visions, he said. Laws tend to say only that a merger shall be consistent with the public interest, and so they grant regulators vast discretion over defining the public interest.
“I have looked and have yet to find a commission that has actually defined the public interest in terms of a vision … of enforceable expectations for the types of services that the public wants in a state,” Hempling said.
The term “economies of scale” is a marketing tool, not a data point, and people use it without understanding what exactly it means, he said.
Public Utilities Commission of Ohio Chair Samuel Randazzo asked Hempling whether he could identify any merger not driven by economies of scale that nonetheless has served the public interest.
Hempling replied that none came to mind, but he talked about a hypothetical situation in which a state seeks a better performing company to replace an incumbent utility.
“The issue is not economies of scale; the issue is somebody is more innovative; somebody can run a pipeline system without blowing up neighborhoods; somebody can run a transmission system without causing fires across thousands of acres in California … so I can hypothesize a transaction not driven by economies of scale but that does serve the interests of customers because its core purpose is performance,” he said. “These mergers have wrapping paper that talk about performance but … are not driven by performance.”
Pechman mentioned a current exception. “The city of San Diego is investigating reissuing the franchise to San Diego Gas & Electric, and they’re looking at alternatives, which could potentially lead to a merger in terms of providing better customer service,” he said.
Hierarchical Conflict
Harms may arise from the changed market structure, and the current era is characterized by a desire to decentralize supply, while at the same time PUCs are presiding over concentration of control, Hempling said.
“Remember that at the top of the merged company is a holding company. Well, the holding company has no statutory obligation to utility customers, so its private, for-profit aspirations can conflict with its utility subsidiary’s public service obligations,” Hempling said. “Let us not kid ourselves: There is conflict between the parent and the utility.”
As an example, he brought up D.C. regulators in 1999 getting Potomac Electric Power Co. (Pepco) to divest its generation assets because the district’s legislature wanted to introduce retail choice.
“Well, along comes Exelon as a prospective acquirer of Pepco,” Hempling said. “That merger was going to convert Pepco from a wires-only company into a minor subsidiary of a major generation owner, so you’re going to have a conflict, because a wires-only company is going to want low generation prices, and the generation company wants high generation prices.”
In approving Exelon’s acquisition of Pepco, D.C. regulators “completely ignored” their own policy of separating generation from monopoly distribution services, he said.
Public Service Company of New Mexico (PNM) is its own entity, but if acquired by Iberdrola, it will be a small part of a multinational conglomerate, he noted. (See Avangrid to Acquire PNM Resources for $4.3B.)
Regulators underestimate the conflicts, and “I have yet to see a commission decision that is straight about the private/public conflict,” Hempling said.
Commissions have erred in focusing on avoiding harm rather than maximizing benefits, and “there is a failure to recognize that now that Exelon has bought Pepco, it can buy anybody else,” he said. “When the Connecticut commission approved Iberdrola’s acquisition of United Illuminating … did the commission think about whether Iberdrola would next be acquiring [PNM]? Does it matter?”
Hempling credited reading the work of behavioral economists in helping him understand what it is about the regulators’ mindset that causes them to make what he believes are legal and logical errors.
“I will argue that there’s a passion gap … as exemplified by the maximizing return versus no harm, and that passion gap leads to deference,” he said. He faulted regulators for taking mental shortcuts, opting for automatic thinking instead of making the effort required to find what is best for the public interest.
The aim is a deal that is excellent, not the best financial engineering, Hempling said.
Consolidated Edison last week reported third-quarter net income of $493 million ($1.47/share), about 4% higher than the same period in 2019, even as total revenue slipped because of the COVID-19 pandemic.
The company brought in $3.33 billion for the quarter, down about 1% from last year off of lower gas and steam revenues to its primary New York City utility, Consolidated Edison Company of New York (CECONY). The “lower non-weather-related steam net revenues due to lower usage by customers” impacted earnings by about $6 million, Con Ed said.
However, CECONY residential electric delivery volume and revenue were up 11% and 8%, respectively, from March 16 to Oct. 31 compared to the same period last year. This helped offset lower commercial and industrial delivery (17%) and revenue (14%) during the same period. Between CECONY and Con Ed’s other utility subsidiary, Orange and Rockland Utilities (O&R), the company brought in $2.77 billion in electricity revenue, up by less than 1% from last year.
Con Edison reported impacts of COVID-19 on electric delivery volume and revenues for March 16 to Oct. 31, 2020. | Consolidated Edison
When the pandemic-related shutdowns began in March, Con Ed suspended service disconnections, certain collection notices, and new late payment charges, among other fees and collection activities, for all customers. For the nine months ending Sept. 30, the company estimates foregone revenues of approximately $44 million and $2 million for CECONY and O&R, respectively.
Con Ed narrowed its earnings guidance for the year to $4.15 to $4.30/share, with the upper bound sliding by 5 cents, which the company attributed to “revised expectations due to the effect of the COVID-19 pandemic on the utilities.”
More than 8,000 of its employees continue to work from home or remotely, the company said.
Unfortunately, wildfire season is becoming a way of life in the Western U.S. and for their electric utilities.
The region suffered through a near record season this year. August thunderstorms that continued into September, strong winds, and hot, dry conditions combined to burn more than 8.2 million acres and kill more than 37 people in California, Oregon and Washington. The region saw the most megafires — blazes that char more than 100,000 acres — since 2008, with California recording five of its six largest fires ever.
Five of California’s six largest fires took place in 2020. | California Department of Forestry and Fire Protection
Heather Rosentrater, senior vice president of energy delivery and shared services for Spokane, Wash.-based Avista, is not surprised.
“Wildfire risk for us has been the No. 1 risk on our enterprise risk register as long as I’ve been at Avista,” Rosentrater, who joined the company in 1996, said during a Critical Infrastructure Committee meeting last week during the National Association of Regulatory Utility Commissioners’ Annual Meeting and Education Conference.
Washington’s Department of Natural Resources responded to a decade-high 1,851 fires during this year’s fire season, which typically lasts from April through October. The state’s fires burned more than 496,000 acres, the most since 2015.
“Last wildfire season was so devastating across the territory,” Rosentrater told the committee during its meeting Friday. “It’s not a new risk. We see the risk as increasing.”
Recognizing the challenge, Avista earlier this year released a comprehensive 10-year Wildfire Resiliency Plan that includes improved defense strategies and operating practices and a capital cost of $270 million. The company, which also has a presence in neighboring Idaho and Montana, says the plan builds on prevention and response strategies it has had in place for many years.
Heather Rosenstrater, Avista | Avista
It took Avista a year to develop the plan through a series of internal workshops, industry research and engagement with state and local fire agencies.
The company took a comprehensive look at its existing wildfire defenses and considered each tactic individually to determine whether it could be expanded or improved. Improving Avista’s infrastructure and operational practices were identified as the plan’s key components.
“We normalized the plan in early 2020 before the wildfire season started,” Rosentrater said. “We recognize that wildfires start from a number of areas, so we’re working to reduce the risk that our infrastructure starts any fires.”
The plan’s recommendations are focused in key areas:
Grid hardening with fire-resilient materials and the addition of fiberglass cross-arms to reduce the likelihood of spark-ignition sources. Aerial surveys will strengthen power-line inspections.
Vegetation management by increasing oversight of fire-prone areas.
Situational awareness will be improved by leveraging current systems to better monitor and control the grid, improving operational decisions in the process.
Operations and emergency response by physically patrolling outage areas during severe conditions before re-energizing distribution lines. Avista personnel will undergo advanced training and simulation so they can better work with fire professionals during wildfires.
Strengthening worker and public safety through partnerships with emergency first responders and by incorporating designated Avista personnel into the company’s incident command system.
“There’s no silver bullet to wildfire-risk mitigation,” Rosentrater said. “We see this process as a process of continuous improvement. We recognize we’ll continue to learn and continue to apply new opportunities.”
Not included in the plan, she made sure to point out, was a risk analysis of proactive, pre-emptive power shutoffs like those California utilities are now using during fire season.
“It’s a top-of-the-mind topic for us on the West Coast,” Rosentrater said. “We recognize it has its own risks and challenges. … We don’t currently have pre-emptive shutoffs as part of our plan.”
Asked whether the tone is shifting in Avista’s footprint, Rosentrater said it is.
“We’ve been visiting with community leaders in the devastated area,” she said. “If you had asked us a couple of months ago [if we would] be supportive of proactive outages, we would have said, ‘No way.’ Not after this [season]. Starting those conversations with community leaders helped us understand those perspectives.”
FirstEnergy on Sunday released its top lawyer and chief ethics officer in the aftermath of the alleged $61 million bribery scheme resulting in the passage of Ohio House Bill 6.
Chief Legal Officer Robert Reffner and Chief Ethics Officer Ebony Yeboah-Amankwah “separated” from the company, according to a filing with the U.S. Securities and Exchange Commission.
Robert Reffner, chief legal officer (left), and Ebony Yeboah-Amankwah, chief ethics officer, “separated” from FirstEnergy on Nov. 8. | FirstEnergy
The moves came before a Monday announcement in which FirstEnergy pledged to achieve carbon neutrality by 2050. The company issued a climate position and strategy statement to go along with the announcement.
Acting CEO Steven Strah — who received a pay raise to $950,000 per year, according to the SEC filing — said FirstEnergy was dedicating itself to achieve ambitious environmental goals.
“We believe climate change is among the most important issues of our time,” Strah said. “We will help address this challenge by building a more climate-resilient energy system and supporting the transition to a carbon-neutral economy.”
Internal Moves
FirstEnergy did not provide a reason for the departures of Reffner and Yeboah-Amankwah. A company spokesperson said there would be no further comments on the leadership changes.
Reffner was appointed to his position in May when the company announced other major changes to its management, including Strah as president. Yeboah-Amankwah was also appointed to her position in the same round of changes, reporting to Reffner. (See Strah Named New President of FirstEnergy.)
FirstEnergy President Steven Strah | FirstEnergy
In a press release issued Oct. 29, FirstEnergy announced the termination of CEO Charles Jones, along with two other executives: Dennis Chack, senior vice president of product development, marketing and branding; and Michael Dowling, senior vice president of external affairs. Officials said an internal review related to “government investigations” determined the executives “violated certain FirstEnergy policies and its code of conduct.” (See FirstEnergy Fires Jones over Bribe Probe.)
FirstEnergy is alleged to have supported the election of former Ohio House Speaker Larry Householder (R) and his associates in a three-year scheme that resulted in the approval of zero-emission credits for the company’s money-losing Perry and Davis-Besse nuclear plants.
More Compensation
Also included in the new SEC filing was a salary of $75,000 a month for Director Christopher Pappas, who was named executive director of the board in the aftermath of the termination of Jones and the promotion of Strah. Pappas will receive three months advanced payment, the filing said.
Non-executive board Chairman Donald Misheff will be paid a cash stipend of $62,500 a month, with three months advanced payment.
And Leslie Turner, a former executive with The Hershey Co. who was named chair of a new subcommittee set to review FirstEnergy’s compliance programs, will receive $3,750 a quarter in her new role and a pro-rated amount of $2,500 for November and December, according to the filing.
In a second filing Monday, FirstEnergy told the SEC it cannot file its latest 10-Q on time because of the ongoing criminal investigations. The utility released financial results for the third quarter on Nov. 2. (See FirstEnergy Earnings Call Overshadowed by Probes.)
“In connection with the ongoing government investigations, the company’s re-evaluation of its controls framework, which could include identifying one or more material weaknesses, the company requires additional time to complete its quarterly review and closing procedures and to provide appropriate disclosure in the Form 10-Q,” FirstEnergy said.
Environmental Goals
Besides the management moves, FirstEnergy said it was busy moving forward with its carbon-neutrality plan. The company set an interim goal of a 30% reduction in greenhouse gas emissions within its direct operational control by 2030, based on 2019 levels, and full carbon neutrality by 2050.
FirstEnergy’s strategy calls for several environmental initiatives to reach the goals, including:
hardening transmission and distribution systems to reduce physical risks of climate change;
replacing conventional utility trucks with electric and hybrid vehicles;
preparing for a transition away from coal-fired power in West Virginia by 2050;
seeking approval next year to construct a solar generation source of at least 50 MW in West Virginia;
utilizing advanced technology to allow customers to manage their energy use; and
integrating carbon pricing into financial forecasting.
The company also plans on creating an executive steering committee partnering with the board and leadership for “oversight, accountability and risk mitigation for the climate policy.”
“Our ambitious new carbon goal and comprehensive climate strategy are fully aligned with our regulated business strategy and support our commitments to our customers, communities and investors, as well as environmental stewardship,” Strah said.
Without the blue wave forecast by some pollsters, the Biden administration will likely go for moderate, incremental change to federal energy policy rather than large, ambitious packages, National Association of Regulatory Utility Commissioners’ Energy Resources and the Environment (ERE) Committee heard on Tuesday.
“It’s really about the art of the possible, given the divided government at the national level, assuming Republicans hold the Senate,” said Emily Duncan, director of federal government relations for National Grid, who presented a brief post-election assessment for the committee.
Two runoff elections in Georgia scheduled for Jan. 5 will determine which party controls the Senate: If the two parties are tied, effective control would go to the Democrats, as Vice President-elect Kamala Harris would have the tie-breaking vote.
Democrats flipped two Senate seats (Arizona and Colorado), while Republicans flipped one (Alabama). Two runoff elections in Georgia on Jan. 5, both with GOP incumbents, will decide control of the chamber during the first two years of the Biden administration.
President-elect Joe Biden has said his top four priorities are the coronavirus, the economic recession, systemic racism and climate change.
“We could see the Democratic-controlled House put together packages on each of those issues; however, I think it’s highly unlikely that a Republican-controlled Senate would take any of those up,” Duncan said. “The real question is what is Majority Leader [Mitch] McConnell [R-Ky.] willing to negotiate with a President-elect Biden?” (See GOP Senate May Limit Biden Climate Ambitions.)
Path of Least Resistance
The new administration will likely pursue regulatory action under existing statutory authorities rather than legislative wins, Duncan said. Biden spent 40 years of his career in the Senate and knows the people and the rules, so “if there is going to be any bipartisanship, Biden is the one to get it done,” she said.
Emily Duncan, National Grid | NARUC
McConnell has called for a COVID relief package to be passed during the lame-duck session of Congress, and if that happens, there may not be another in the first 100 days of the new administration, she said.
“I think we will continue to see pressure at the federal level on energy items related to COVID, in particular federal efforts to implement moratoriums on utility shutoffs and disconnections,” Duncan said. “Obviously as an industry, we work very hard with you, our state regulators, on those issues and would prefer to keep that at the state level, so we’ll be following that closely.”
There also is the possibility for increased funding for the Low Income Home Energy Assistance Program, and technology R&D has always enjoyed bipartisan support, she said.
But there will also be increased conservative judicial scrutiny of any regulations that the administration issues, and a Republican Senate will moderate Biden’s cabinet nominations, and more moderate cabinet secretaries will likely moderate regulations that come out of those agencies, she said.
On FERC
President Trump last week replaced FERC Chairman Neil Chatterjee with fellow Republican Commissioner James Danly. (See Trump Names Danly FERC Chair.)
“We are hearing that [the] Senate Energy [and Natural Resources Committee] may vote as early as next week to advance the two FERC nominees,” Democrat Allison Clements and Republican Mark Christie, Duncan said. With Danly becoming chair, “it will be interesting to see what happens over the next two and a half months” at FERC.
Emily Duncan of National Grid on Nov. 10 presented an outlook on post-election federal energy policy to NARUC’s Energy Resources and the Environment Committee. | NARUC
Duncan said that Biden would very quickly move to name Commissioner Richard Glick as chairman, even though Democrats would remain in the minority if the full Senate confirms Clements and Christie.
While Danly has not been supportive of carbon pricing, there is even a question as to whether Glick would be supportive or choose another path, she said.
“However, as chairman, Glick will set the agenda and determine what items are voted on, so it will be interesting to see if the Senate moves to confirm the two commissioners and bring FERC to its full quorum,” she said. “Certainly most in the regulating community would like to see five commissioners at FERC, so we’re hopeful that that will happen.”
Under Glick, the commission is likely to revisit its policies on certifying new natural gas infrastructure projects and probably revise how it conducts environmental assessments under the National Environmental Policy Act, Duncan said.
Colorado Public Utilities Commission Chairman Jeffrey Ackermann, who also chairs the ERE Committee, asked how the Energy Department and EPA might differ under Biden.
Duncan listed an expanded definition of “Waters of the United States” under the Clean Water Act, “fuel economy standards for model years beyond what the original California waiver was for … new source performance standards on methane on private lands … [and] methane flaring controls on public lands as well.”
Nonetheless, with the federal government still divided, states will remain in the driver’s seat in terms of transitioning away from fossil fuels and toward renewable energy resources, she said.
As his path to re-election narrowed late Thursday, President Trump demoted FERC Chairman Neil Chatterjee, replacing him with fellow Republican James Danly.
Trump’s move — which came as his electoral leads in Georgia and Pennsylvania appeared at risk of evaporating as vote counting continued — could be just the first of a series of personnel changes the president has contemplated, according to The Washington Post, which reported that he was considering sacking infectious disease expert Anthony Fauci, FBI Director Christopher Wray and Defense Secretary Mark T. Esper. (On Monday, Trump announced via Twitter that he had fired Esper.)
Chatterjee likely became a target after joining with Democratic Commissioner Richard Glick on Oct. 15 in supporting a proposed policy statement inviting states to introduce carbon pricing in wholesale electricity markets to address climate change. (See FERC: Send Us Your Carbon Pricing Plans.) Trump’s action came a day after the president, who had promised to restore the coal industry, formally withdrew the U.S. from the Paris Agreement on climate change.
Chatterjee’s willingness to address climate policies got the attention of the Washington Examiner, which published an article describing him, “a Kentucky Republican, [who] used to be known as [Senate Majority Leader] Mitch McConnell’s coal guy, eager to advance President Trump’s pro-fossil fuel agenda” as “staking a claim as one of the government’s leading problem solvers on addressing climate change.”
The author of the Examiner article, Joshua Siegel, tweeted that the policy statement and Order 2222 — which directed RTOs and ISOs to make their markets accessible to distributed energy resource aggregations — “was a clear driver in this decision by the White House.”
Danly dissented on both issues.
In an interview with RTO Insider, Chatterjee said he was informed of the decision around 6 p.m. Thursday. He said was given no reason for the move and could only speculate that it had to do with his “promoting market-based solutions to climate change,” citing the commission’s policy statement on carbon pricing.
“Perhaps folks [at the White House] weren’t in favor of that, and I think that validates my independence,” he said.
Although he said he was given no earlier indication that the move was coming, Chatterjee said he was not surprised. “I knew I was taking a risk when I was pursued these policies.”
Chatterjee also confirmed to E&E News that he had refused to follow Trump’s executive order in September prohibiting diversity training at federal agencies.
Former FERC Chairman Neil Chatterjee photographed General Counsel James Danly (right) as he watched the Senate confirm him to be a commissioner March 12. | Neil Chatterjee
FERC announced Danly’s promotion in a statement at 9:05 p.m. Thursday night that provided no reason as to why Trump made the decision to switch chairs. Danly only became a commissioner in March after serving as general counsel since 2017.
Glick tweeted: “Although we haven’t always agreed, I know that Chairman Chatterjee arrived at his views honestly and independently. And I appreciate his willingness to ignore party affiliation and work with me on several key initiatives that will prove beneficial to this nation.”
Chatterjee served as chair August to December 2017 while Trump’s pick for chair, Kevin McIntyre, went through the Senate confirmation process. The president made Chatterjee chair again in October 2018 when McIntyre resigned from the position, ailing with brain cancer that would claim his life. (See McIntyre Steps Down; Chatterjee Named FERC Chair.)
In the statement and on Twitter, Chatterjee congratulated Danly on the promotion and said he was proud of his time as chair. “It’s been the honor of a lifetime to serve as the chairman of FERC alongside my colleagues and staff, who represent some of the most talented and hardworking professionals in the U.S. government,” he said.
Chatterjee also indicated he would complete his term, which ends at the end of June 2021. “Our work — my work — at the commission isn’t over. I look forward to working with my friend, Chairman Danly, as well as the next administration to continue to carry out our important mission.”
He posted a more emotional statement on his personal Facebook page early Saturday morning, saying that he didn’t “give a f@&! what people think of me. I will be judged by my grandchildren. And as of this moment I am confident that I will be able to look them in the eyes when they ask me where I stood on the most significant issues of this time and be proud.”
Though he told RTO Insider he was “at peace” with the move and sounded upbeat, he admitted on Facebook that “it’s been a difficult few days. I have dedicated almost the entirety of my professional career to public service. I am a deeply flawed person. I know for certain I have not always made the right decision. But I can honestly say that I tried to get it right to the best of my limited abilities.”
“It has been my utmost pleasure to have served under Neil Chatterjee, both as general counsel and alongside him as commissioner,” Danly said via FERC’s statement. “I have learned a tremendous amount from his expertise and insight, and I am proud of the work we’ve been able to accomplish under his thoughtful watch.
“Neil has truly left his mark on FERC and the energy sector by brokering a significant agreement allowing us to move forward with liquefied natural gas terminals, which helped secure our American energy independence,” he added. “He also made a lasting impact through his commitment to protecting competitive markets, modernizing our policies under [the Public Utility Regulatory Policies Act], expediting the approvals of much needed critical energy infrastructure and so much more. I thank Neil for his leadership, and I look forward to continuing to work with him in this new role.”
Up in the Air
The president cannot fire members of FERC without cause, but he can name any sitting member that is also a member of his party as the chair. Given former Vice President Joe Biden’s election as president Saturday, Danly’s time as chair will be limited to little more than two months.
Biden and Senate Democrats will also have control over three of FERC’s five commission seats once Chatterjee’s term expires. Though Biden will ultimately be able to nominate at least four commissioners during his term, only three of them may be Democrats.
In July, Trump nominated Democrat Allison Clements, energy policy adviser for the Energy Foundation, and Republican Mark Christie, chair of the Virginia State Corporation Commission, to fill FERC’s two current vacancies. (See FERC Nominees Bob and Weave Through Senate Hearing.)
ClearView Energy Partners noted that “it is customary but not required that a chairman appointed by an outgoing administration to tender his resignation to allow a new president to fill the seat and change the majority.” It is unclear at this point whether the Senate will vote on Clements’ and Christie’s nominations during Trump’s lame duck period. If it doesn’t, Biden will be able to nominate two Democrats to fill the vacancies.
While Chatterjee has said he intends to complete his term, Danly’s intentions are unknown. His term ends June 30, 2023.
“We don’t have anything on that right now,” Mercedes Kearney, Danly’s executive coordinator, said Friday when asked whether Danly would give up his seat if Biden wins. “So much is going on right now.”
Consolidated Edison last week 
