Page 1264 – RTO Insider

August 8, 2019

Grid Innovation Waiting on DER Rule, Group Says

By Amanda Durish Cook

Nearly 1,000 days have passed since FERC issued a Notice of Proposed Rulemaking to remove barriers to entry from aggregated distributed energy resources participating in the country’s wholesale energy markets.

And since then, potential participants in a major grid modernization have been waiting for their cue, top executives with Advanced Energy Economy told RTO Insider in an interview.

“It’s a long time,” AEE Director Dylan Reed said. The NOPR was issued Nov. 17, 2016. The commission also proposed the same treatment for energy storage resources, which eventually led to Order 841 in February 2018, but it said it needed more information on the DER portion before it could take action, opening a separate docket (RM18-9). (See FERC Rules to Boost Storage Role in Markets.)

“We’ve had members that say, ‘We’d love to participate in these markets, but we can’t or are not going to because we don’t know what the rules will be.’ … It’s regulatory uncertainty that harms investment.”

AEE is a D.C.-based trade association representing a gamut of industry players, including those involved in energy efficiency, demand response, solar, wind, electric storage, electric vehicles, fuel cells, combined heat and power and enabling software — as well as large corporate buyers of clean energy (Microsoft, Amazon, Nest and Tesla are among its members).

The group is on a mission to identify and eliminate structural barriers to participation in U.S. wholesale energy markets, which it estimates would allow the country’s high-tech energy market to expand by $65 billion.

AEE argues that many wholesale market rules are not technology-neutral and have become too outdated to be inclusive. A FERC ruling on aggregated DER participation could jumpstart a more inclusive wholesale market, it says.

Jeff Dennis, the group’s managing director and general counsel, contends RTO market rules are still generally rooted in the past and designed with older generation in mind.

“These barriers to participation come in various different forms today,” Dennis said.

“Some are explicit barriers, but a lot of them are implicit barriers,” Reed added.

Reed pointed to MISO’s Tariff, which explicitly prohibits wind and solar generation from providing frequency regulation, spinning reserves and supplemental reserves — one of the 21 case studies AEE reviewed in a May report on real-world barriers to wholesale market participation by clean energy resources.

“It sounds like a small thing, but if you’re undercutting that, it can put financing for projects at risk,” Reed said.

Dennis also pointed to emerging proposals that could create barriers to participation, such as Study Challenges PJM Energy Storage Rule.)

“You can get a lot of capacity value out of two or four hours of discharge during that peak day. It would unfairly devalue that resource,” Dennis said.

No Risk to Cooperative Federalism

For wholesale markets to foster true competition on a technology-neutral basis, all resources should be allowed to compete on price and performance, AEE argues.

“One of the things we point out is that the markets are designed for large resources to provide lots of a product, but in the future, you’re going to have collections of smaller resources providing smaller but high-performing chunks of services,” Dennis said.

Reed added that such a grid transformation is dependent on a change in RTO market structures.

“That’s when we’re going to see a shift,” Reed said. “We’ve created these rules for all these existing resources, but the resources are changing.”

Dennis said good participation frameworks will give RTOs visibility into DER behavior and generation. He also stressed that no one is expecting perfection in early participation plans.

“There will certainly be a learning curve. I don’t want to be too hard on the RTOs,” Dennis said. But he is adamant that resources on the distribution system will be useful in providing wholesale services.

“It’s going to certainly require coordination between state and wholesale operators. FERC can play a role in ensuring that the RTOs set up frameworks for that communication and coordination,” he said.

Dennis also said distribution utilities can ask FERC to approve tariffs that allow them to recover any verifiable costs they incur from DERs participating in the wholesale markets.

“It’s not an insurmountable barrier,” he said, adding that FERC has already taken this approach with regard to distributed storage, adopting a brand of “cooperative federalism” that ensures greater utilization of those resources.

“I do worry that we’re hearing some utilities claim that FERC setting up this framework is somehow destructive to cooperative federalism,” Dennis said. “FERC has long respected state authority when it comes to wholesale participation by resources connected to distribution, and it continued to do that with storage.”

Dennis noted that, under their retail ratemaking authority, states can restrict DERs participating in retail programs from also participating in wholesale markets, which would still provide DER owners a choice of where to participate. He expects that as states gain experience with DERs, they will see the benefit in allowing wholesale DER transactions.

Despite that vision, Dennis expects the distribution system will still fundamentally serve the purpose of delivering energy to customers and not become like federally regulated transmission.

“We don’t think we’re going to see so many distributed resources participating at wholesale that it swamps the distribution system and creates a situation where [distribution and transmission] perform the same function,” he said.

In the Meantime

AEE says RTOs can take effective steps now while they wait on a FERC order, particularly in alleviating the need for DERs to undertake separate processes to interconnect with both the distribution and transmission systems.

Dennis praised PJM’s examination into how it can streamline its interconnection process for distributed resources and NYISO’s pre-emptive FERC filing to integrate DERs. AEE, however, did t ake issue with parts of the proposal, including proposed metering practices, buyer-side mitigation measures, a capacity value derate provision and a strict, six-second telemetry requirement (ER19-2276).

“I certainly appreciate that New York has gone ahead with something knowing that it’s needed, particularly in response to New York state policy,” Dennis said.

The AEE leaders say they will be pleased if FERC’s final DER rules come close to Order 841.

“I think it will look a lot like Order 841,” Dennis predicted. “We’re hoping for a rule that allows distributed energy resources to provide all the services that they’re technically capable of providing.”

AEE says that while not perfect, RTO compliance plans for storage resources are thorough and well thought out. “All of them have taken the potential of energy storage very seriously,” Dennis said.

He also expects the RTOs’ compliance with a DER rule will be as varied as their responses to Order 841. Importantly, he said, RTOs will begin that work under a FERC deadline and with commission guidance on a workable framework for participation.

“They’ll comply in their own unique way, but we’ll have markets thinking about how they can include these DERs.”

August 8, 2019

Lacking Quorum, FERC OKs ISO-NE Energy Security Plan

By Michael Kuser and Rich Heidorn Jr.

ISO-N E’s controversial proposal to compensate resources for maintaining inventoried energy during the winter months is now effective “by operation of law” because of inaction by FER C stemming from a lack of quorum (ER19-1428-0 0 1).

The commission issued an unusual Chapter 2B notice Tuesday, saying, “Pursuant to Section 205 of the Federal Power Act, in the absence of commission action on or before Aug. 5, 2019, ISO-NE’s proposal, as amended, became effective … May 28, 2019. The commission did not act on ISO-NE’s filing because of a lack of quorum at this time.”

“Since we know Commissioner LaFleur has been recused from ISO-NE matters, that means one of the other three is either (1) recused or (2) choosing not to participate for some reason. If (2) is what’s happened, that strikes me as very rare,” tweeted former FERC attorney Jeff Dennis, now general counsel for Advanced Energy Economy.

Sierra Club spokesman Brian Willis issued a statement calling FERC’s action “odd and infuriating.”

“Back in May, FERC gave ISO-NE a laundry list of what was wrong with its controversial market proposal that would have forced New England ratepayers to shell out about $150 million a year for several years to uneconomic fossil fuel plants through a ‘inventoried energy program.’ The inventoried energy program was broadly opposed by New England stakeholders, who presented evidence that ISO-NE’s program was discriminatory and unnecessary. ISO-NE refused to provide any of the additional information requested by FERC. In light of this, it appeared likely FERC would reject the inventoried energy program outright or order ISO-NE to rewrite its rules based on new principles, legal precedent or with greater consideration for costs to ratepayers.”

Dennis, however, had a different perspective. “Some version of the inventoried energy program has been approved every winter for MANY years now. No one likes it, FERC always wrings its hands when it approves it, but it always does.”

“The ISO will move forward with implementation of the short-term program as we continue working on the long-term, market-based solutions to the region’s energy security challenges,” ISO-NE spokeswoman Marcia Blomberg said in a statement. (See “Assessing ESI Risk Premiums,” NEPOOL Markets Committee Briefs: July 30, 2019.) She pointed to the RTO’s June 6 response to FERC’s request for additional information.

Chatterjee, Glick Split

Section 205 of the FPA requires each commissioner to explain his or her views with respect to the Chapter 2B changes. On Thursday, the commissioners filed their comments, with LaFleur and Commissioner Bernard McNamee indicating they had not participated.

Chairman Neil Chatterjee said he would have approved ISO-NE’s filing, saying it “provides reasonable interim compensation, which can serve as a bridge to development of the longer-term market solution.”

“It is well settled that the entity filing a proposal need only demonstrate that the proposed revisions are just and reasonable, not that the proposal is the most just and reasonable proposal,” he said. “While some parties argue that ISO New England’s previous winter reliability programs are less expensive and may be more effective than the proposal in this proceeding, those programs are not the subject of this proceeding and are not before the commission.”

Chatterjee said the program “also aims to ameliorate the misaligned incentives issue” that prior programs did not address.

But Commissioner Richard Glick said he would have opposed the program as “patently unjust and unreasonable.”

“The program will cost New England consumers as much as $300 million without any evidence to suggest that it will actually improve the region’s fuel security or that any improvement is likely to be worth the cost. Indeed, the program goes so far as to hand out substantial payments to nuclear, coal and hydropower generators with no indication that these payments will change their behavior in the slightest,” Glick wrote. “That is a windfall, not a just and reasonable rate.”

FCAs 14 & 15

The RTO’s fuel security program is an interim plan for its 14th and 15th Forward Capacity Auctions, covering the capacity commitment periods of 2023/24 and 2024/25. In March, it filed Tariff revisions; the commission on May 8 said the filing was deficient; and the RTO submitted its response on June 6.

At a July 15 technical conference, New England regulators and stakeholders told FERC that ISO-NE’s fuel security proposal could increase costs without solving the region’s winter supply concerns and urged the commission to postpone the RTO’s Oct. 15 filing deadline and require it to provide more analysis before drafting Tariff changes. (See FERC Staff Hear Doubts on ISO-NE Fuel Security Plan.)

Jeff Bentz, the New England States Committee on Electricity’s director of analysis, testified the schedule could be delayed by six months without impacting the proposed implementation.

New England Power Pool Chair Nancy Chafetz, of Customized Energy Solutions, asked the commission to “keep an open mind” on the proposals. Although NEPOOL has the “jump ball” right to propose an alternative to the RTO’s proposal, Chafetz said the stakeholder body wouldn’t have an official position until it votes in October.

According to an email from Day Pitney attorney Pat Gerity, “while NEPOOL intervened in the Chapter 2B proceeding, it took no substantive position, and absent express direction from the [Participants] Committee, will not challenge the Chapter 2B Notice.”

Gerity noted FERC had previously been unable to act on an ISO-NE filing, but Congress has since stepped in to allow such non-action by the commission to be challenged on rehearing and appeal. “Specifically, the ‘Fair Ratepayer Accountability, Transparency, and Efficiency Standards Act’ was included as part of ‘America’s Water Infrastructure Act of 2018’ (Oct. 23, 2018), the result of which will be to treat the Chapter 2B notice for purposes of rehearing to be an order issued by the FERC accepting the changes,” Gerity said, adding that any request for rehearing of the Chapter 2B notice will be due on or before Sept. 4.

Section 205 of the FPA requires each commissioner to explain his or her views with respect to the Chapter 2B changes, though none has yet filed a written comment.

In a related matter, the New England Power Generators Association asked the commission Tuesday to reverse its decision to require generators needed for fuel security to offer at zero in FCA 14. It asked the commission to issue a rehearing order by Sept. 26, “before key deadlines lapse” for the auction (ER18-2364-001 and E L 18-182-002).

August 8, 2019

NYISO Manual Changes for New SRE Penalty OK’d

In a brief teleconference meeting Wednesday, the NYISO Business Issues Committee approved manual changes to accommodate a new penalty scheme to improve the ISO’s ability to call on external capacity resources.

The revisions to the Installed Capacity Manual and Transmission and Dispatch Operations Manual, aligning them with the external supplemental resource evaluation (SRE), passed without opposition.

Under the new scheme, any external resource that fails to meet delivery criteria would be subject to the penalty, which is equal to 1.5 times the applicable spot price multiplied by the number of megawatts of shortfall and the percentage of the SRE call hours to which a supplier fails to respond.

LBMP import transactions use an external proxy bus as the source and the NYISO reference bus as the sink. | *NYISO*

External capacity suppliers would not be subject to the penalty if their failure to deliver is beyond their control. The ISO would calculate deficiencies monthly, using the total number of SRE call hours in a given month that the resource could be available and the total megawatt shortfall in that month.

The market operations report was not included in the BIC meeting materials because the data had not yet been compiled. It will be added to the meeting materials once completed, said Robb Pike, director of market design and product management.

— Michael Kuser

August 8, 2019

Earnings Soaring, NRG Prepares for Tight ERCOT Supply

By Michael Kuser

NRG Energy’s profits jumped sharply in the second quarter, boosted by a surge in earnings for the company’s power generation division.

The rise was “driven primarily by higher wholesale power prices, offset by higher retail supply costs and mild weather,” NRG CEO Mauricio Gutierrez said in a call with analysts on Wednesday.

The company repor t ed second-quarter earnings of $189 million ($0.75/share), compared to $27 million in the same period last year.

NRG’s generating arm earned $618 million for the quarter, up 145% from a year earlier, while losses from the retail division grew from $84 million to $280 million.

The company said that generation gains on hedge positions this year were partially offset by losses on retails hedges, “both driven by large movements in gas prices and ERCOT heat rates.”

During the quarter, NRG launched its “capital-light” strategy by signing approximately 1.3 GW of solar power purchase agreements at an average length of 10 years, complementing its generation portfolio. The company also highlighted that its 385-MW combined cycle Gregory plant in Corpus Christi returned to service in June.

NRG’s ERCOT data show mild weather impacting power prices. | *NRG*

Gutierrez noted NRG has spent $1.25 billion so far this year on a share buyback program and announced plans to spend $250 million more by year-end.

“We will address our plans for the remaining $259 million of 2019 excess cash, as we usually do, on the third-quarter earnings call,” Gutierrez said, noting that the company is reserving up to a $124 million in capital for the Petr a Nova project. The coal-fired power plant captures carbon dioxide from one of the eight units at the 3.65-GW WA Parish Generating Station southwest of Houston, which is then injected into mature oilfields to release more oil.

In May, NRG agreed to spend $325 million for Stream Energy’s retail electricity and natural gas business, increasing its retail portfolio by approximately 450,000 customers. The acquisition closed on Aug. 1.

Markets Update

Gutierrez said NRG expects ERCOT’s supply-demand balance to remain tight, given strong load growth, previous generator retirements and a lack of new builds. He pointed out that ERCOT’s own projections for its future supply margins rely on its semi-annual Capacity, Demand and Reserves report, which has typically been a “poor indicator of what actually gets built in the current year.”

He noted the report includes 1.7 GW of natural gas-fired generation that has been delayed an average of five years “with no signs of moving forward” and 1.4 GW of thermal generation already set to retire, while little more than half the 7 GW of solar projects listed have posted the financial security needed to interconnect to the grid.

“ERCOT needs a lot of generation … needs a lot of investment,” Gutierrez said. “And even the numbers that we’re providing you are only sufficient to maintain the current load reserve margin that we have.

“Obviously, the implication of that is we expect the ERCOT market to continue to be robust over the foreseeable future but, more importantly, to be pretty volatile,” he said. “This price environment should prove difficult for pure retailers or generators that will be exposed to swings in the market.”

Gutierrez also referred to a recent FERC Halts PJM Capacity Auction.)

“While we’re hopeful a final order will be issued by the end of the year, the timeline for FERC action remains uncertain,” Gutierrez said. “We continue to view a strong [minimum offer price rule] as the simplest and most cost-effective way to reduce the harmful impact of subsidies on the capacity market.”

Call transcript courtesy of Seeking Alpha.

August 7, 2019July 8, 2025

Exelon: Market Flaws Threaten Ill. Carbon Policy

By Christen Smith

Exelon leadership told investors last week Illinois’ transition toward 100% carbon-free power can’t succeed without PJM market reforms to keep the company’s nuclear plants running.

Chris Crane, Exelon | © RTO Insider

“The bottom line is fundamental market reforms are needed in the United States if we want to meet the nation’s clean energy climate goals, maintain fuel security and a reliable system,” Exelon CEO Chris Crane said. “We need to sustain and increase electrification [and] preserve a significant economic value through good paying jobs and property taxes. We’ll continue to work at the state level and the national level with both Congress and the administration to make this happen.”

The company’s quarterly earnings report said its Dresden, Byron and Braidwood nuclear plants in Illinois are “showing increased signs of economic distress, which could lead to an early retirement, in a market that does not currently compensate them for their unique contribution to grid resiliency and their ability to produce large amounts of energy without carbon and air pollution.”

Exelon said PJM’s most recent capacity auction in May 2018 “resulted in the largest volume of nuclear capacity ever not selected in the auction, including all of Dresden, and portions of Byron and Braidwood.”

Illinois legislators enacted a zero-emissions credit (ZEC) program in 2016 to rescue Exelon’s Quad Cities plant along the Mississippi River. The company collected $150 million in ZEC revenue for the second half of 2017.

“We are pursuing a number of market reforms addressing the financial challenges many of our [nuclear] plants face,” Crane said. “Against this backdrop, I can also again assure you we will not operate our unprofitable or negative free cash flow plants. You’ve seen us close money-losing plants in the past. You should expect that discipline to continue if reforms are not enacted.”

In the longer term, Exelon told investors the company hopes energy price formation and carbon pricing will help address the market inequities currently hurting its bottom line.

The company’s lobbying for clean energy has produced mixed results, so far. While New Jersey approved $300 million in ZECs last year, Pennsylvania lawmakers stalled a plan that would have added nuclear energy into its alternative energy portfolio and saved the remaining operating reactor at Three Mile Island.

“Either we have a clear path to securing them or the units will be shut down,” said Joseph Nigro, Exelon’s chief financial officer. “We will not damage the balance sheet sitting around for years with negative free cash flow or negative earnings.”

As FERC mulls PJM’s proposed revision of its minimum offer price rule (MOPR) — which would carve out subsidized generation and then adjust clearing prices as if the resources never left — Exelon continues campaigning for clean energy policies in states throughout the PJM footprint. The company’s executive team told investors in Illinois that a coalition of stakeholders wants to expand the state’s clean energy mandate from 25% by 2025 to 100% by 2030 to match other progressive states across the country.

That could be a monumental task under current laws, however.

Last month, the Illinois Power Agency warned that the state only secures about 10% of its power from renewable resources. In an interview with WTTW, Director Anthony Star blamed rate caps and a 2016 energy bill that ramped up the agency’s procurement responsibilities. He said he hoped legislation would fix both issues.

Kathleen Barron, Exelon’s vice president of regulatory affairs, said the Citizens Utility Board, the Clean Jobs Coalition and both the labor and renewable resources industries all stand behind an expansion of the mandate, noting “the consumer advocate is heavily focused on this policy as well because the question of the state having to pay twice for capacity has been very much in the forefront.”

In October 2018, Exelon joined with consumer advocates from D.C. and Illinois, the Sierra Club, the Natural Resources Defense Council, the Nuclear Energy Institute and others to a s k FERC for a fixed resource requirement (FRR) mechanism that would allow load-serving entities to satisfy their capacity obligations outside of PJM’s capacity market by procuring capacity from state-supported resources (EL18-178, et. al.).

“There are a number of parties who will come together in the end to help communicate the message that Chris [Crane] mentioned this is important for the state, but it’s not going to be possible if we can’t allow these resources to count as capacity,” Barron said. “And that’s why the FRR is foundational to getting this policy done.”

Earnings Drop

Exelon reported earnings of $494 million ($0.50/share) for the quarter, a decrease from $539 million ($0.56/share) a year earlier. Adjusted operating earnings dropped to $0.60/share from $0.71/share in the second quarter of 2018 as revenue dropped to $7.689 billion from $8.076 billion.

Crane noted the company has filed distribution rate cases for Baltimore Gas and Electric, Commonwealth Edison, and Pepco.

On July 22, Pepco and other parties filed a settlement agreement with FERC for PECO Energy’s formula transmission rate that includes a 10.35% return on equity, including a 50-basis-point RTO membership adder.

Crane said the company was happy with the Trump administration’s decision not to impose quotas on uranium, which he said “would have jeopardized the continued operation of commercial nuclear reactors” in the U.S.

August 7, 2019

PJM Operating Committee Briefs: Aug. 6, 2019

VALLEY FORGE, Pa. — PJM’s Operating Committee unanimously endorsed clarifications for non-retail behind-the-meter generation (NRBTMG) business rules on Tuesday, completing the first two key work activities identified in a problem statement/issue charge approved in March. (See “PJM Continues Review of non-Retail BTM Generation Business Rules” in PJM Operating Committee Briefs: Feb. 5 , 2019.)

The revision s to Manuals 13 and 14D will clarify the reporting, netting and operational requirements of NRBTMG that will ensure member and PJM responsibilities, processes and procedures are clear and adequately captured, said Terri Esterly, PJM’s senior lead engineer for Capacity Market Operations.

The PJM Operating Committee met on Aug. 6, 2019 in Valley Forge, Pa. | © *RTO Insider*

NRBTMG refers to resources used by municipal electric systems, electric cooperatives or electric distribution companies to serve load. They do not participate as supply resources in PJM markets but can be netted against their wholesale load to reduce transmission, capacity, ancillary services and administrative fee charges.

PJM’s rules on such resources resulted from a 2005 settlement agreement (EL0 5 -127), before development of the RTO’s capacity market and CP constructs. NRBTMG resources can be called upon during the first 10 maximum generation emergencies annually, while CP resources are required to perform during all performance assessment intervals (PAIs). BTM operators that fail to perform face reduced netting benefits. In 2006, the grid operator identified about 400 MW of NRBTMG.

Esterly said the manual updates will not change the terms of the 2005 settlement agreement. She also told stakeholders preliminary data collection suggests PJM’s existing nameplate capacity clocks in around 1,800 MW. Several generators, however, did not submit summer-rated ICAP values, likely contributing a significant undercount.

Operations Reports Staying in SOS

PJM will no longer review systems operations reports during the monthly OC — unless it is answering specific stakeholder questions or highlighting an unusual event, like a polar vortex, Secretary Don Wallin said.

The reports will be posted along with other meeting documents, as usual, but verbal reviews will only occur at the Systems Operations Subcommittee (SOS).

In its last review with the OC, however, PJM said it set a new weekend peak value of 150,454 MW — displacing the 149,644 MW record set on July 7, 2012. This year’s summer peak of 152,315 MW was hit July 19 during a five-day hot weather alert that covered the majority of the RTO’s footprint.

January 2018 Extreme Cold Weather Report

PJM continues its review of recommendations included in the NERC/FERC January 2018 Extreme Cold Weather report and may bring necessary recommendations to stakeholders at the September OC.

FE R C last month called for reliability rules requiring generator owners and operators to winterize their units and provide their reliability coordinators and balancing authorities with information about their preparations. (See FERC Calls for C o ld Weather Reliability Standard.)

The commission issued the directive as a result of a joint FERC-NERC investigation into the abnormal cold and higher-than-forecast demand that caused MISO and SPP to seek voluntary load reductions and nearly forced load shedding in MISO South on Jan. 17, 2018. (See FERC, NERC to Prob e January Outages in MISO South.)

Alpa Jani, PJM’s senior consultant for dispatch, said many of the report recommendations were previously discussed in the context of previous polar vortexes and the capacity market.

August 7, 2019

CenterPoint Q2 Earnings Beat Expectations

CenterPoint Energy on Wednesday beat both analysts’ expectations and its performance a year ago by reporting second-quarter earnings of $165 million ($0.33/share).

The results exceeded Zacks Investment Research’s projection of 31 cents/share and the second quarter of 2018, when the company lost $75 million ($0.17/share). Last year’s loss included a pre-tax write down of $242 million to reflect the company’s investment in Time Warner, which has since been acquired by AT&T.

“It was a solid second quarter,” CEO Scott Prochazka told analysts during a Wednesday earnings call.

The Houston-based company said its performance was driven by its utility operations and cash contributions from non-utility businesses such as Enable Midstream Partners, a joint venture with OGE Energy and ArcLight Capital Partners. The pipeline company reported $74 million of equity income for the quarter, a $16 million improvement over last year.

Prochazka said CenterPoint no longer intends to sell common units of Midstream, as “much has changed since we first considered the sale.” He said Midstream, which has contributed $1.7 billion in cash distributions to CenterPoint since 2013, “now reports a smaller percentage of our earnings” with the closing of the $6 billion Vectren merger in February.

Vectren contributed $25 million in operating income.

CenterPoint’s stock opened at $28.85/share Wednesday morning but quickly dropped to $27.47. The stock recovered to close at $28.14, down 2.5%.

— Tom Kleckner

August 7, 2019December 12, 2023

SERC Draws Lessons from Arkansas Sabotage

By Rich Heidorn Jr.

SERC Reliability used part of its quarterly open forum last week to provide lessons learned from a series of attacks on Arkansas’ power grid in 2013.

Bill Peterson, SERC’s manager of outreach and training, told the story of Jason Woodring, who was sentenced to 15 years in prison for attacks on grid facilities in the state between August and October 2013.

“We’re trying to share some awareness topics [that will] help you proactively consider some security enhancements to protect your substations,” Peterson said.

Peterson prefaced the presentation with a reference to the April 2013 attack on Pacific Gas and Electric’s Metcalf substation, in which a sniper shot 17 transformers, causing outages in nearby neighborhoods and forcing grid operators to reroute power. (See Substation Saboteurs ‘No Amateurs’.)

The attack ultimately led to NERC reliability standard CIP-014-1, which requires utilities to protect transmission facilities whose loss could cause instability, uncontrolled separation or cascading outages. The standard led utilities to add fencing, cameras and alarms to their facilities. At Metcalf, PG&E removed vegetation near the substation boundary and replaced a chain link fence with a concrete wall to prevent a line of sight into the substation.

Woodring, a pool maintenance worker with a methamphetamine habit, told the court in June 2015 he wanted to cause a power outage to “get everybody’s attention” to what he saw as the deterioration of society. He said he had noticed how people united during an emergency.

“When I went up there on that 500,000-volt power line, I actually thought I was going to be helping people,” he said in his guilty plea.

Woodring’s sabotage began when he attempted to topple an Entergy transmission tower adjacent to a rail line in the city of Cabot, spending weeks removing about 100 steel bolts that secured the tower to its concrete foundation. He then strung a steel cable from the tower to a tree on the other side of the tracks, hoping that a passing train would hit the cable and pull the tower down.

But the cable — insulated with blue plastic hosing used for pool maintenance — was snapped by a train without causing the tower to budge.

On Aug. 21, Woodring returned, climbing the tower armed with a hacksaw, which he used to cut the connectors holding one of the 500-kV lines, and the line itself, which fell onto the track.

“What he was trying to do apparently is get the cable to itself attach to a bypassing train in an attempt to pull the entire tower down,” Peterson said. Later that morning, a Union Pacific freight train struck the line, blacking out nearby homes. Again, the tower did not come down.

The FBI offered a $20,000 reward for the person responsible, speculating that the attacker must “possess above-average knowledge or skill in electrical matters.”

Less than a month after the first incident, Woodring broke into an Entergy extra-high-voltage substation in nearby Scott after surveilling it for several days.

Using bolt cutters to get through a fence and padlocks on the door of the control house, he dumped a gallon of gasoline and oil on the control panel and the floor before setting it ablaze. The building was destroyed.

He left a cryptic, crudely written message: “YOU SHOULD HAVE EXPECTED U.S.”

“Local law enforcement assumed that he was trying to hide his identity and show that it was a [foreign] terrorist attack instead of somebody local,” Peterson said.

A week after setting the fire, and after the FBI raised its reward to $25,000, Woodring used a chain saw and an axe in an attempt to cut through a distribution pole near his house in Jacksonville. After that failed, he discovered an unattended tree maintenance vehicle near his house and drove it back to the poles, dragging one of them down and blacking out 10,000 customers of First Electric Cooperative.

“How easy is it to access these vehicles? Are keys … just left in them? Are there fences around these vehicles? Are they parked in certain locations?” Peterson asked. “What other types of equipment do you use that could be used against you?”

Woodring was arrested after a fourth attempt at sabotage when he used a fishing pole to cast a piece of wire over the power lines near his home, causing an explosion.

That led law enforcement agents to Woodring’s house, where they discovered blue plastic hosing like that found at the scene of the transmission tower sabotage. He confessed.

Woodring was sentenced to 15 years in federal prison and ordered to pay almost $4.8 million in restitution to Entergy and almost $49,000 to First Electric Cooperative.

Peterson said the Woodring story “brings up a couple areas for us to … think about improving our awareness of our infrastructure.”

“Stay in contact with local law enforcement. Make sure you preserve evidence if you do think there’s a disruption or damage done to a facility. … Keep in mind that could become a crime scene.”

Audit Evidence

The quarterly forum also featured a tutorial by SERC officials on best practices for providing audit evidence.

Asked whether audit documentation was improving or getting worse, SERC’s Clay Shropshire said it depends on the entity.

“There are entities that we go to and they really seem to get it. And we can even be asking for something a little different and before we even finish the question they go, ‘OK, I know exactly what you want.’ And they go run off grab it and they come back. [And we say], ‘Yeah that’s what we need.’

“There are other entities we ask for [evidence] six or seven times and we finally run out of time.”

August 7, 2019January 26, 2025

MISO to Cease GADS Reporting

CARMEL, Ind. — MISO will next year discontinue submitting data to NERC’s Generating Availability Data System (GADS) on behalf of generation in its footprint.

Executive Director of Resource Planning Patrick Brown announced the move Wednesday during a Resource Adequacy Subcommittee meeting. The RTO will send its last report Feb. 15, 2020, NERC’s deadline for 2019 GADS data. Generators will be on their own for first-quarter 2020 reporting, due May 15. GADS is mandatory for conventional generating units at or above 20 MW, and for wind farms of 75 MW or higher that were commissioned in 2005 or later.

MISO currently submits GADS data for about 56 generators, but staff have previously said the RTO wants to remove itself from the process.

Weighted equivalent forced outage rate by fuel type | NERC

“When we started submitting them, it was a smaller group. … It doesn’t seem like we’re adding much value by doing them, from our perspective,” Director of Resource Adequacy Coordination Laura Rauch said at a July Market Subcommittee meeting.

Independent Market Monitor staffer Mike Chiasson recommended that MISO ensure it still has visibility into GADS reporting. He noted that RTO members have had issues with GADS accuracy in the past.

MISO is still planning to make a formal announcement on the change during the September RASC meeting. To assist its generators, the RTO has begun coordinating a training, scheduling and communication plan with NERC, SERC Reliability, Midwest Reliability Organization and Reliability First Corp.

— Amanda Durish Cook

August 6, 2019

Air Force: US Must Take `Higher Ground’ in Space

By Rich Heidorn Jr.

The electromagnetic spectrum could be the next field for war, and China is already planning for it, an Air Force strategist told NERC’s Electromagnetic Pulse (EMP) Task Force.

Air Force Col. Douglas “Cinco” DeMaio said the U.S. must place weapons in orbit between the earth and the moon to protect against adversaries such as China, which landed a space probe on the far side of the moon in January.

“This is not about growing potatoes. This is a land grab on the far side of the moon from which to build a space station to launch out to further places in the solar system,” said DeMaio, vice commander of the Air Force’s LeMay Center for Doctrine Development and Education in Montgomery, Ala. Defending the electromagnetic spectrum (EMS) means competition in space, he said. “No longer is it just the sea and the air and the land [and] low-earth orbit. It is the space between us and the moon.”

The Defense Intelligence Agency repor ted in February that China and Russia reorganized their militaries in 2015 to emphasize their “counterspace” programs, which include anti-satellite missiles, jamming of signals to or from satellites and ground-based directed energy weapons (lasers, high-power microwaves and other radiofrequency devices).

“The military is just starting to wake up to the fact this is a place to compete,” DeMaio said during the July 24 workshop. “We grabbed onto cyber very quickly. We didn’t appreciate EMS.” (See related story, EMP Task Force Looks at Black Start, Nukes.)

China Threat

DeMaio cited China as the U.S.’s biggest threat.

“China has competed very well against us, negating our defenses, our forward bases, our static bases that are very vulnerable to attack in the EMS. … It has really taken away our ability to execute our strategy, which is forward deployment. We do not have the range, the speed and the firepower right now that we need to reach from long range. So, what I propose is that we need to get up higher. We need weapons that go up into orbit — cislunar — between here and the moon. … And that’s exactly what the Chinese are doing. That is their strategy. If we do not match that, they will gain the high ground.”

DeMaio said space could be used to site directed energy weapons that could trigger EMPs. “If we’re talking about an electromagnetic attack … I think we have to think a little bit more about not just the shotgun of a nuclear weapon, but a sniper rifle from orbit that can target some very specific places in our infrastructure,” he said.

Lessons from World War I and II

DeMaio said the U.S. should learn from the 1940’s Battle of France, when that nation’s “static defenses” were overrun in six weeks by nimble, mobile German forces using the new weapons of tanks and aircraft.

“The French built static defenses based on their lessons from WWI against a direct assault: artillery, manpower,” he said. “The Germans learned something different. They learned to integrate aircraft [and] surface weapons together, connecting them with a radio. And they built that upon their history of maneuver warfare. And instead of going direct where the French wanted them to go, they went around, they went under, they went over.

“So, I have to ask, is our nation akin to the French side or the German side? Are we leading the new methodology for maneuver in this coming battle?”

The U.S. now faces continuous competition, DeMaio said. “We’re playing Go, not chess,” he said, referring to the ancient Chinese board game. “We have to shift to that mindset. … It’s not just this [one] catastrophic event.”

“The United States is really good when you get an in-your-face threat: Nazi Germany, Imperial Japan, even the attacks of 9/11. We find the threat and we go after it,” he added. “This is very hard to attribute in EMS.”