PJM stakeholders have lingering questions about the RTO’s plan to implement a fuel-cost policy review process — despite a three-hour discussion intended to help sort out the issue.
Those questions focused on how the review will unfold in light of an ongoing debate between PJM and its Independent Market Monitor about who has the final word on policy approval.
Responses from PJM and the Monitor only added to the confusion.
The issue provoked tension between the two during PJM’s submission of a compliance filing with FERC on hourly generation offers. While that filing was supposed to focus on improving flexibility for such offers, PJM also initiated a petition under Section 206 of the Federal Power Act to implement changes to its policy-approval rules and penalties.
During that proceeding, Monitor Joe Bowring argued that the RTO was attempting to usurp his authority to review fuel-cost policies. PJM requires generation units that use fuels with volatile prices to explain their methodology for purchasing fuel so the RTO and Monitor can confirm it was secured through a competitive process.
PJM argued that approval of the policies was wholly under its authority, and FERC accepted the RTO’s proposal earlier this month, including its delineation of review responsibilities. (See FERC Seeks More Details on PJM Fuel-Cost Policy Proposal.)
The debate extended into a Feb. 21 special session of the Market Implementation Committee, where PJM was emphatic that generators can’t hold separate discussions with the Monitor on such policies.
“PJM needs to be involved in those discussions,” said Jeff Schmitt, manager of market analysis. “There is only one process.”
Bowring responded that his role remains separate from that of PJM.
“Just to be clear: We have our own separate standard of review that we’ve had for some time,” he said. “If we ultimately disagree with PJM’s decision, we’ll make that clear [to PJM]. Our role remains our role.”
“You review for market power, but what you do not do is approve the fuel-cost policy,” PJM attorney Steve Shparber responded.
Shparber said that generators must follow PJM’s policy on the matter — not a Monitor “shadow” policy.
“There’s only one fuel-cost policy, and that’s approved by PJM,” he said.
Bowring countered that he wasn’t suggesting that there is a “parallel process.”
“We understand the process, but it’s not definitive about market power,” Bowring said.
The Monitor added that FERC’s ruling isn’t going to change how his team reviews policies, and that he didn’t think the ruling was intended to have that effect.
That exchange occurred near the middle of the meeting, but it colored many subsequent questions from stakeholders, who asked what shape the process would take and how generators would be notified about whether their policies need approval.
“In the last 18 months, we’ve been in touch with every single owner in PJM, so no one should be oblivious,” Bowring said.
Schmitt clarified that generators currently only require a policy that covers any fuel type the unit might use, but PJM plans to enhance that in the future.
“Ideally, we’d like to have a one-for-one where every unit has its own policy [for each fuel type], but we’re not there yet,” he said.
Bowring has repeatedly called for policies to be systematic, algorithmic and verifiable, but PJM has hesitated to require algorithmic accounting. That didn’t sit well with stakeholders.
“I guess my concern is you’re asking us to be comfortable with a standard that is: They comply with a document that the public cannot see,” said Gregory Carmean, the executive director of the Organization of PJM States Inc.
Catherine Mooney, who works for Bowring’s firm Monitoring Analytics, suggested developing sample-approved language that’s verifiable but not algorithmic, but Schmitt declined to commit to that.
Schmitt said PJM’s long-term plan is to get all policy information into a database rather than an approved document. Until then, RTO staff stressed that stakeholders need to follow the guidelines in the manuals.
During the meeting, PJM also displayed a slide that compared maintenance costs for units that run — which can recover for variable operations and maintenance (VOM) — versus units that don’t run, which recover avoidable cost rates. Dave Pratzon of GT Power Group questioned PJM’s grouping of combustion turbine hot gas path inspections under VOM when 2015 rule changes excluded major overhauls and inspections of CTs and combined cycle units in VOM.
Natural gas plants in PJM’s energy market, such as Duke Energy’s 620-MW Buck Combined Cycle Station in Rowan County, N.C., would be subject to the RTO’s rules on fuel-cost policies. Photo Source: Duke Energy
Schmitt said revisions to the CT and CC rules might be necessary but will likely need to be handled with a problem statement after the fuel-cost policy issue is resolved to figure out the best way to “unwind” them, given the complexities of three-year forward-looking energy auctions.
WASHINGTON — Scott Pruitt had his coming out at the EPA last week, promising to root for the Washington Nationals, obey the rule of law and “be a good listener.”
Pruitt
The new administrator took no questions following the 11-minute noontime speech Feb. 21.
Pruitt received an EPA lapel pin, an EPA baseball cap and a polite, partial standing ovation, as he was introduced as a father, husband, former state senator and a businessman — the former co-owner of the Texas Rangers’ AAA farm club in Oklahoma City. Because the Rangers are in the American League, Pruitt joked, he would feel no divided loyalties becoming a Nationals fan.
His low-key speech did not mention any of the more than a dozen lawsuits he filed against the agency, including the one now pending against the Clean Power Plan, nor the executive orders President Trump is reportedly readying that would undo the CPP and one expected Tuesday requiring a review of the 2015 Waters of the United States rule. There was no hint of the 25% budget cut President Trump is reportedly proposing for the agency.
But without mentioning any specific targets, Pruitt gently lectured the approximately 75 EPA employees in the Rachel Carson Green Room that “process matters,” saying the job of the regulator is “to give certainty to those that they regulate.” He also criticized the use of consent decrees that he said bypass the Administrative Procedures Act, calling it “regulation through litigation.”
Jefferson, Madison and Hamilton
Pruitt’s address came the day before Oklahoma officials released thousands of emails illustrating a cozy relationship between the former state attorney general and energy companies.
Pruitt opened the speech by telling a story from Joseph Ellis’ book “Founding Brothers” about how Thomas Jefferson, James Madison and Alexander Hamilton reached a deal over a bill authorizing the federal government to assume the states’ debts. Pruitt recounted how Madison and Jefferson agreed over dinner to Hamilton’s plan — in return for a promise to move the capital from New York to the banks of the Potomac.
Pruitt said the anecdote was meant to harken days when compromise was possible, contrasting it with the “very toxic environment” he said dominated the country now. “I seek to be a good listener,” he promised. “You can’t lead unless you listen.”
He also quoted from Daniel Hannan’s “Inventing Freedom,” to highlight the principle that “process matters.”
“Regulations ought to make things regular. Regulators exist to give certainty to those that they regulate. Those that we regulate ought to know what’s expected of them so that they can plan and allocate resources to comply. That’s really the job of the regulator,” he said.
‘Informed Decisions’
Pruitt said following the proper processes “sends a message that we take seriously our role of taking comment and offering response and making informed decisions.” In oral arguments over Pruitt’s challenge of the CPP in September, EPA had defended its outreach, saying it received 4.3 million comments and held more than 600 meetings with stakeholders during the rulemaking. (See Analysis: No Knock Out Blow for Clean Power Plan Foes in Court Arguments.)
The new administrator also said rulemaking “needs to be tethered to the statute.”
“The only authority that any agency has in the executive branch is the authority given to them by Congress. Sometimes those authorities are broadly stated, giving much discretion to agencies … but other times Congress has been very prescriptive … we need to respect that.”
Pruitt also said the agency should see itself as a “partner” with state regulators “and not adversaries.”
He closed the speech by quoting Sierra Club founder John Muir’s observation that man “needs beauty as well as bread,” insisting that one can be “both pro-energy and jobs and pro-environment.”
In his confirmation hearing in January, Pruitt had defended letters he sent to EPA and other federal officials — on state government stationary and signed by him — that had been authored by oil and gas companies, saying he was representing the state’s interest because the industry is responsible for one-quarter of the state’s budget.
Sierra Club Executive Director Michael Brune did not appreciate the shout out to his organization’s founder. “John Muir is rolling over in his grave at the notion of someone as toxic to the environment as Scott Pruitt taking over the EPA,” he said in a statement.
Confronting the Bureaucracy
Pruitt’s plans for the agency are certain to be met with skepticism, if not hostility, by many in the EPA bureaucracy.
John O’Grady, an EPA environmental scientist who leads the union that represents 9,000 EPA employees, toldThe Guardian that Pruitt’s remarks came across “very professionally and conciliatory. He didn’t come out heavy handed.”
“Mr. Pruitt isn’t a proponent of addressing climate change or of a strong EPA, so it won’t surprise me when they start to whittle away at what we do as an agency,” O’Grady added. “I’m wondering when the hammer is going to fall.”
Before Pruitt’s confirmation, dozens of EPA employees took part in a lunch hour rally outside the agency’s Chicago regional headquarters opposing his appointment. More than 400 former EPA officials signed a letter to Congress also seeking to block him.
But the new administrator is doing his best to wrest control of the agency. Immediately following his confirmation, EPA issued a press release quoting elected officials and industry leaders celebrating him and criticizing the agency’s “harsh regulatory overreach,” “runaway bureaucracy” and “toxic regulatory environment.” Rep. Jim Bridenstine (R-Okla.) was quoted calling EPA “one of the most vilified agencies in the ‘swamp’ of over-reaching government.”
The EPA workforce would be far smaller, if Trump has his way. The president will reportedly call for a 24% cut in EPA’s budget, part of broad cuts in domestic spending intended to fund increases in defense outlays.
EPA’s budget would be cut by $2 billion to $6.1 billion, according to news reports, with staff cut to 12,000 workers from 15,000.
The cuts would be far deeper than Congress has proposed, reducing EPA’s budget to its lowest level since the early 1990s and its staffing to the lowest since the 1980s. The House Appropriations Committee in 2015 called for reducing the agency’s funding by only $718 million.
Trump officials have said they will not slash the 40% of the agency’s budget that is sent to state, tribal and local governments as environmental grants. That means the cuts would fall more heavily on programs protecting air and water.
“We have real doubts that can be done without substantially weakening the ability of EPA to respond to environmental problems and to carry out its core functions that are all established in law,” John Coequyt, global climate policy director for the Sierra Club, told Bloomberg.
Emails Released
The day after Pruitt’s speech, the Oklahoma attorney general’s office released more than 6,000 pages of his email correspondence in response to an open records lawsuit by the watchdog group Center for Media and Democracy.
The emails show Pruitt taking talking points from energy companies, including American Electric Power and Oklahoma Gas & Electric, for letters complaining to federal environmental officials over rules on ozone, fracking and greenhouse gas emissions from oil and gas production.
Among the emails were some obtained previously by The New York Times, which reported in 2014 that Pruitt had sent letters to EPA, above his signature on state letterhead, that had been drafted by Devon Energy, an Oklahoma oil and gas producer.
The emails were “basically a big, long bear hug between Pruitt and oil and gas companies,” said Ken Cook, president of the Environmental Working Group, a nonprofit group that claims a mission of protecting human health and the environment.
The release of the emails also called into question Pruitt’s assertion in his confirmation hearing that he had never used private email for state business. KOKH, the Fox affiliate in Oklahoma City, reported that the attorney general’s office confirmed Pruitt had used a private account for some official correspondence.
Below is a summary of the issues scheduled to be brought to a vote at the Markets and Reliability and Members committees meetings Thursday. Each item is listed by agenda number, description and projected time of discussion, followed by a summary of the issue and links to prior coverage in RTO Insider.
RTO Insider will be in Wilmington, Del., covering the discussions and votes. See next Tuesday’s newsletter for a full report.
Markets and Reliability Committee
2. PJM Manuals (9:10-9:30)
Members will be asked to endorse the following proposed manual changes:
Members will be asked to endorse the proposed shortage pricing and operating reserve demand curve solution and associated manual revisions. (See “Order 825 Implementation Moves Forward,” PJM Market Implementation Committee Briefs.)
4. Transmission Substation Equipment in FERC Order 1000 (9:50-10:05)
Members will be asked to endorse proposed a Regional Transmission Expansion Plan process changes related to the treatment of transmission substation equipment under FERC Order 1000, and associated Operating Agreement revisions. (See “Endorsements Sail Through by acclamation,” PJM Planning Committee and TEAC Briefs.)
5. Draft Pseudo-Tie Agreements (10:05-10:20)
Members will be asked to endorse a pro forma pseudo-tie agreement and a reimbursement agreement for pseudo-ties into PJM, along with related Tariff and Operating Agreement revisions. (See “Committee Endorsements,” PJM Operating Committee Briefs.)
6. Replacement Capacity (10:20-10:40)
Members will be asked to endorse a proposed problem statement and issue charge regarding procurement of replacement capacity in the Incremental Auctions. (See “PJM Has No Objection to IMM’s ‘Paper Capacity’ Report,” PJM Market Implementation Committee Briefs.)
Members Committee
Consent Agenda (1:20-1:25)
Members will be asked to endorse:
B. Tariff, Operating Agreement and Reliability Assurance Agreement revisions to clean up definitions.
C. Revisions to the PJM Tariff regarding operating parameters.
1. Transmission Substation Equipment in FERC Order 1000 (1:25-1:45)
Members will be asked to endorse changes to RTEP processes. See MRC item 4, above.
2. Energy Market Uplift Senior Task Force (EMUSTF) (1:45-2:15)
NEW ORLEANS — Two consultants on either side of MISO’s rejected capacity auction redesign faced off in a post-mortem debate at the Gulf Coast Power Association’s MISO South Regional Conference last week.
Kathleen Spees, a principal adviser at The Brattle Group who endorsed MISO’s forward auction design for the RTO’s retail-choice areas and worked on a simulation analysis for the RTO, said some of MISO’s design elements could be revised to win FERC approval. But Independent Market Monitor David Patton pressed for a reconsideration of the hybrid prompt proposal he designed with the RTO last year.
The rejected auction proposal was an attempt to provide investment price signals to incent generation in retail choice areas in southern Illinois and Michigan. (See FERC Rejects MISO’s 3-Year Forward Auction Proposal.)
Spees, who joked that she and Patton should have come dressed as Hillary Clinton and Donald Trump for the debate, said FERC’s unusually short order lacked commission guidance on how MISO’s proposal could be salvaged. The order was among more than 60 the commission issued in the last week before losing its quorum with the resignation of former Chairman Norman Bay.
“I think that leaves many of us scratching our heads about what to do next,” Spees said at the Feb. 16 conference. She said she thought a compromise could be reached over how far into the future the auction is held and suggested that, in a new proposal, MISO keep a sloped demand curve for its retail-choice areas while regulated utilities maintain vertically integrated statuses.
Patton said MISO “dodged a bullet” with the rejection. “You operate the system as a whole. You can’t pretend that 10% of your footprint operates separately,” he said.
The Monitor continued to advocate for his own proposal, which would apply a sloped demand curve to deregulated areas and produce separate clearing prices for retail-choice and regulated load.
Spees said MISO’s proposal failed because it did not maintain an integrated market or contain a transmission allocation plan between two markets. “MISO has a uniquely challenging situation where there are two business models in conflict,” she said. There is “a not-so-small-it-can’t-be-ignored portion of the system that relies on market signals.”
Patton said current rules only buoy regulated utilities, which continue to expand generation even when wholesale prices don’t support construction.
“We exist in an environment where only a regulated market can afford to build anything,” he said. “We’ve designed a capacity market in MISO that doesn’t set efficient prices; it sets inefficiently low prices, especially in MISO South.”
Patton said while he monitors both prompt and forward markets, he prefers a prompt design. He said while it’s “nifty” for future resources to be able to sell capacity, an owner of a plant with a 30-year lifespan won’t usually make decisions on the viability of their generation based on clearing prices in year one.
Spees, however, said a three-year forward auction provides more of an opportunity for supply and demand to reach equilibrium and avoid “boom and bust” cycles with volatile clearing prices. However, she said accurate load forecasting in a three-year market presents a challenge. “In my view, we’ve seen both prompt and forward markets do well…They both can be workable constructs,” she said.
The two were in agreement in opposing MISO’s adoption of New England’s Pay-for-Performance capacity bonuses and penalties. PJM adopted similar rules in its Capacity Performance construct. Patton said he preferred incentives to stay in the energy market. (See FERC Defends PJM Capacity Performance Model Before DC Circuit.)
“If it ever hits on days where no one is expecting it, it can cost people a heck of a lot of money,” Patton said, adding that unpredictable load is not the fault of the generator.
Spees also said performance incentives belong in the energy market, not the capacity market. However, she said there is no MISO enforcement for capacity underperformance, and she said the penalty should be “something north” of $0/MW-day.
Water levels behind the FERC-regulated Oroville Dam have continued to decline in recent days, falling to nearly 50 feet below the height of a severely damaged emergency spillway, according to the California Department of Water Resources (CDWR), the dam’s operator.
On Feb. 12, local officials ordered the evacuation of about 188,000 residents after the erosion of a hillside beneath the dam’s emergency spillway threatened to flood areas near the Northern California town of Oroville, located about 75 miles north of Sacramento. CDWR was required to use that spillway for the first time since the dam’s completion nearly 50 years ago after heavy flows out of the reservoir tore a massive hole in the concrete lining of the main spillway.
Residents have since been allowed to return to their homes but face the potential for another evacuation if weather conditions once again destabilize the ground around the dam.
Criticism for FERC, California Agency
The spillway failure has generated criticism of both CDWR and FERC for their failure to heed previous warnings by three environmental groups who — during the dam’s 2005 FERC relicensing proceeding — requested that the state pave the hillside below the emergency spillway to avoid the kind of erosion experienced earlier this month.
CDWR and the commission rejected the request, with a FERC engineer writing that the emergency spillway could safely handle 350,000 cubic feet of water per second (cfs). The flow was only 6,000 to 12,000 cfs when the spillway was damaged, according to a report from the Bay Area News Group.
Outflows are outpacing flows into the reservoir despite stormy conditions, and CDWR said it will continue to prioritize bringing the depth of the reservoir to a target level of 895 feet. The agency said Feb. 20 that it had increased outflows from 55,000 cfs to 60,000 cfs in anticipation of increased inflows from recent rains.
“As runoff flows into the reservoir, water levels will likely fluctuate but will remain within acceptable and typical depths during times of storm activity,” the agency said in a Feb. 19 incident update.
CDWR said work crews continued to place rock and cement slurry into the areas affected by erosion, as ordered by FERC in a letter Feb. 13. In addition to ordering emergency repairs, FERC also ordered the state to convene an independent board of consultants to review current conditions and risk-reduction measures and to later conduct a forensic analysis to determine the cause of the failure.
“We have people there 24/7 from our San Francisco office as well as our Washington, D.C., office working with state officials … to protect public safety,” acting Chairman Cheryl LaFleur said in remarks at the winter meeting of the National Association of Regulatory Utility Commissioners on Feb. 14.
Rainy Winter
After years of drought, the region has experienced unusually high levels of precipitation this winter, which has filled the reservoir to capacity and left the lake’s elevation at about 900 feet above sea level. Snowpack in the Sierra Nevada mountains currently stands at about 175% of normal ahead of the spring melt, which tends to peak at the beginning of April, sending additional flows into the lake.
The 770-foot-high Oroville Dam in Butte County is the tallest in the U.S. and impounds one of California’s largest manmade lakes, a key source of water for farms in the state’s Central Valley and residents in Southern California, hundreds of miles to the south.
The dam’s Edward Hyatt and Thermalito generating facilities, which have a combined 933 MW capacity, remain offline, and three 230-kV transmission line segments in the area under CAISO control have been de-energized. The ISO said it had reoptimized its dispatch system to maintain reliability while continuing to meet demand within its balancing authority area.
“The loss of the Edward Hyatt power plant at Oroville dam is handled as we do with all generator outages,” the ISO told RTO Insider. “The outage, as well as the line outages, do not threaten grid reliability.”
County Seeks FERC Help
Officials from Butte County last week urged FERC to order CDWR to immediately establish its own public safety program to relieve the county of the “severe strain” on its “limited resources” (P-2100).
The county asked that the CDWR be ordered to provide law enforcement and other personnel needed to ensure public safety in the face of threats attributable to the dam, “including not just flood hazards but also fire, crime and other emergency services.”
Those personnel “should have the capacity to organize and implement all necessary public safety measures to prevent death from a failure of the dam spillways, including the orderly evacuation of the hundreds of thousands of people from the area downstream of the dam,” the county said in its Feb. 15 filing.
The filing also called out FERC for its failure to address Butte County’s previous entreaties, including a 2009 complaint in which the county argued that CDWR was in violation of its federal license for not contributing to covering the costs of ensuring adequate public safety at the Oroville site.
The commission rebuffed that complaint, and later denied the county a rehearing, after determining that the dam was in good condition and that the county had not pointed to any direct license violations.
“Because the commission has refused to order DWR to do what DWR is legally and morally obligated to do, and what other similarly situated licensees have done, Butte County has no choice but to request the commission to exercise its authority … to order DWR to take actions to effect its obligations as a Federal Power Act licensee, to protect public health, safety and welfare,” the county said.
WASHINGTON — A recent survey of state cybersecurity practices provided some surprising results, New Jersey Board of Public Utilities President Richard Mroz told the National Association of Regulatory Utility Commissioners’ winter meeting last week.
“We found most of the states actually do have a fusion center of some sort, so states are taking that seriously,” Mroz said, referring to locations at which state agencies share intelligence on security threats. “On the other hand we hear … from our colleagues that they don’t know what the best [cybersecurity] practices are — what’s working elsewhere.”
Mroz is chairman of NARUC’s Critical Infrastructure Committee, which sent the survey last year to the 34 states that are members of the committee; 19 had responded as of January. The committee is now seeking responses from the remaining states, including those not on the panel. The results will be included in what NARUC intends as a “living” catalog of information about state regulators’ efforts on critical infrastructure resilience. The survey is also referenced in the latest edition of NARUC’s cybersecurity primer, which was released Jan. 31.
Also speaking on the NARUC General Session panel Tuesday was former Sen. Rick Santorum (R-Pa.), who expressed concern over the shortage of cybersecurity personnel and their lack of preparation for “war.”
“These are people who went to school for computer service or a whole variety of other things and they’re the people who are our quote ‘war fighters.’ They’re not trained as war fighters … and yet they’re in the middle of a battle,” said Santorum, an unsuccessful presidential candidate in 2012 and 2016.
“So they don’t take the approach of ‘How do we comprehensively deal with this problem?’ … We seem to be saying just ‘How do we defend ourselves?’ instead of ‘How do we really put a strategy together to attack the enemy to make sure they aren’t attacking us?’
“I’m not too sure we want corporations out there attacking those who might attack them, but I think we have to start thinking about innovative ways in which to deter people from coming at us,” he added.
In conversations with former colleagues on Capitol Hill, Santorum said, he has proposed “retasking” the National Guard for a cyberdefense role. “We need these people to be out across America to be almost like a Minute Man type of operation to be able to respond to some of these threats we have.”
Jonathon Monken, PJM’s senior director of system resiliency and strategic coordination, a West Point graduate and former director of the Illinois State Police, responded that officials need to “de-conflict … the lanes of effort” by clearly defining roles and responsibilities to determine “who’s best suited to do what.”
Monken said the electric industry also needs to improve the security of its tools.
“Recognizing the fact that our systems are interconnected. Our [information technology] configurations are very, very similar. They’re not identical. It’s not if you breach one that you get access to everybody. But it’s not like there’s that many different [energy management system] providers out there. It’s just a handful of system types and the architectures are very similar.”
Separately, acting FERC Chairman Cheryl LaFleur talked about the importance of collaboration between government and industry and of not relying on just meeting NERC’s standards on critical infrastructure protection.
“While mandatory standards are important, the cyber challenges are evolving so quickly, you can’t really regulate your way out of it. You can’t do a standard fast enough for some new piece of malware or ransomware that comes along,” she said. “The non-mandatory piece is becoming more and more important.”
WASHINGTON — Choices made by customers on issues ranging from carbon dioxide to technology could rank alongside decisions made by policymakers in shaping the future of the grid, RTO officials said last week.
McCoy | Smartwires
This was a recurring theme during a Feb. 16 briefing by WIRES, the House Grid Innovation Caucus, the National Electrical Manufacturers Association (NEMA) and the Environmental and Energy Study Institute (EESI). “Unlike ever before, the electric customers are actively participating in the industry,” said Adriann McCoy, a vice president of Smart Wires, which makes advanced power flow control technology. The growing clout of end users is reflected in rooftop solar, plug-in electric vehicles and consumers’ purchasing of renewable power from alternative suppliers, she said.
“Anytime consumers start playing more actively in a market,” it brings about innovation, McCoy said.
Coal plant retirements, such as the recently announced plans to close the Navajo power plant in Arizona, will require that electricity be moved from other sources, McCoy said. The utility owners of the Navajo plant said Feb. 13 that they don’t plan to operate the facility beyond December 2019.
Speakers said people’s choice about where their power is coming from is driving the transmission system. This includes decisions favoring renewable energy and less-carbon-emitting sources.
“The planning is only slightly less complicated than the engineering” these days, said former FERC Chairman Jim Hoecker, counsel to WIRES. “It’s a challenging time, it’s a transformative time, for the electricity business.”
At the same time, a robust transmission system will save consumers billions every year in avoided power disruptions, Hoecker said. “That’s not pocket change,” he added.
Moeller | MISO
MISO Executive Vice President Clair Moeller said it is resilience and the need to move power from new low-carbon resources that is driving new transmission. “There is essentially no load growth in the nation,” he said. “My job at MISO is mostly about planning,” Moeller said. Sometimes “you get cheaper electricity from your next-door neighbor,” rather than from the generating unit in your own area, Moeller said.
Congress in 1992 said it wanted to see more electric competition, said Craig Glazer, PJM vice president for federal government policy. But even since the Energy Policy Act of 1992, lawmakers still engage in picking winners and losers, Glazer said.
The wind production tax credits and state bailouts of struggling nuclear plants can make things complicated, Glazer said. But Glazer cautioned against too much market tinkering, noting that the goal of competition was to shift risk from ratepayers to shareholders.
Ross | SPP
Innovation happens quickly, but “Congress doesn’t move very fast,” said former U.S. Rep. Mike Ross, senior vice president for government affairs at SPP. Congress needs to ensure its laws “don’t get in the way” of innovation, Ross said.
Many panelists said while the concept of regional planning is popular in the abstract, it often runs into roadblocks in the real world. For example, states are all over the board on issues like renewable mandates, Moeller said.
“States have not wanted to relinquish their regulatory authority over utility operations. This is a tremendous burden to interstate commerce,” Hoecker said.
“We want to make sure this [electric transmission issue] is front and center … that people know how important this is,” said Rep. Jerry McNerney (D-Calif.), who co-chairs the House Grid Innovation Caucus along with Rep. Bob Latta (R-Ohio).
NEW ORLEANS — Three years after the region’s integration, MISO South, with its plentiful gas generation, constrained interface into the North and capacity for severe weather, still doesn’t feel fully “in” the RTO, speakers told the Gulf Coast Power Association’s MISO South Regional Conference on Thursday.
Jennifer Vosburg, president of Louisiana generating at NRG Energy, said MISO’s North-South transfer constraint under the RTO’s settlement with SPP limits South’s participation in North. “It’s a challenge to how competitive MISO South continues to be,” Vosburg said.
“The drive to integrate into MISO was, ‘We’re going to be fully in MISO,’” Vosburg said. “We’re proud that the Planning Resource Auction limit is 600 MW more this year. That’s not fully integrated … MISO South is not on the same playing field as MISO North.”
Multiple panelists said the constrained North-South interface has exacerbated an “illiquidity” issue in MISO South.
Plentiful capacity in South is unable to help shortage conditions in North, Vosburg said, and South will remain isolated until it can fully participate in the market. She added that since integration, it is often easier to sell in the PJM capacity market than participate in MISO’s capacity market.
Vosburg said MISO’s once-thriving independent power producers have become “a lonely table.”
Paul Zimmering, an attorney at Stone Pigman who has represented the Louisiana Public Service Commission, said the North-South transfer limit should have been examined by MISO much earlier than its currently underway footprint diversity study. “This is 2017, and we were hoping this would have been looked at earlier. We thought that we would get an evaluation earlier on, but it’s happening now and it’s great,” Zimmering said.
However, Zimmering said MISO is doing a good job through its Transmission Expansion Plan playing catch-up on other transmission projects in the Entergy territory that were ignored prior to the incorporation of MISO South. He said 86% of Public Utility Regulatory Policies Act qualifying facilities in South now participate in the MISO market.
“One MISO is a goal, and I don’t think we’re there just yet,” he added.
Zimmering also said regulation challenges exist in MISO South, where states — Louisiana, Texas and Arkansas — are located in both SPP and MISO. “There are a lot of — I wouldn’t call them divided loyalties — but different interests to look out for,” he said.
MISO President and CEO John Bear pointed out the $2.3 billion in transmission investment since MISO South’s addition in 2014 and said the RTO has created almost $2.5 billion in total savings over the region’s three years of existence.
The value “is real and it’s happening, and I think it’s a really good story,” Bear said.
Although the region hasn’t experienced a hurricane since integration, operations have withstood significant weather events, Bear said: tornados in northern Arkansas in 2014; a Texas dam at risk because of heavy rains in 2015; flooding in eastern Texas and Louisiana; and persistent regionwide heat in 2016.
Matt Brown, vice president of federal policy at Entergy, said MISO’s footprint-wide climate differences are a benefit to MISO South, allowing lower planning reserve margins. Brown said Entergy operating companies saved about $412 million in 2014 and 2015 after joining the RTO. Transmission investment in MISO South has doubled from $359 million in MTEP 14 to $886 million in MTEP 16.
Jim Schott, vice president of transmission for Entergy Louisiana, said the company has noticed that the RTO can better identify congestion for future projects and has sounder congestion management practices, decreasing instances of transmission loading relief (TLR).
“Since December of 2013, TLR and [local area procedures] have hardly been uttered once,” Brown said.
Schott also said MISO membership means Entergy plans projects further in advance to fit into the annual MTEP schedule.
He also made a case for allocating costs of economic transmission upgrades to benefiting local resource zones alone. The RTO is considering changing cost allocation for economic projects in time for 2018, when costs can be shared with MISO South. “Benefits generally flow to some region, and the region should bear those costs,” he said. (See MISO Stakeholders Propose Changes to Market Efficiency Cost Allocation Process.)
Ted Kuhn, consultant at Customized Energy Solutions, said integration has brought pricing transparency — and added bureaucracy — to MISO South. “It takes time to get things through a larger process. It takes time to know which stakeholder meetings to go to, which person to talk to. It’s a process that will kill you if you don’t know it,” he said.
SPP Seam and MISO South
Laurie Dunham, vice president and manager of regional planning for Duke-American Transmission Co., said SPP and MISO need better coordination of the models in their joint studies. She urged stakeholders to get involved in interregional planning meetings.
Dunham said large-scale transmission projects aren’t always needed to resolve reliability issues, and, in some cases, the addition of “2 to 5 miles of line and a reactor” eliminates a problem.
Patrick Clarey, a FERC attorney adviser, noted that SPP is facing challenges with greater wind penetration. MISO and SPP’s possible overlay study, designed to last through 2019, could produce transmission projects to solve SPP’s problem, he said. (See related story, SPP Eyes 75% Wind Penetration Levels.)
Ted Thomas, chairman of the Arkansas Public Service Commission, said his state is in a good position — for now.
“It’s easy to be in my position when gas prices are low. Our utilities aren’t stirred up, our customers are satisfied, the legislature is calm,” Thomas said. However, he added, “if the last three weeks are any indication of the next three years, administrations will change, federal policies will zig-zag … and the consumer needs to be protected throughout.”
MISO South and the Climate
Thomas said the electric industry’s long 30- to 40-year capital cycles create a high risk of stranded costs. He said with Arkansas, Texas and Louisiana’s low-cost energy when compared to California’s prices, MISO South can wait to implement more expensive and experimental carbon-reduction measures.
“We can’t stick our heads in the sand. But we can wait and see. We don’t have to take the risk that the high-cost states take,” Thomas said. “I know that carbon is a long-term problem, and I question if we have a solution. I know that some states have a political appetite to reduce carbon, but I also know that Arkansas, and I suspect Louisiana, aren’t those places,” Thomas said. He added that even if Arkansas eliminated carbon emissions by 2018, it would not be enough to impact global temperature rise.
Other panelists maintain that MISO South is ripe for increased renewable penetration and more energy efficiency programs.
Siobhan Foley, the City of New Orleans’ FUSE Executive Fellow for Climate Action, said solar has come down dramatically in price and now is viable in terms of cost. She said MISO South can reduce carbon through several smaller solar projects. “It really is about smaller wedges and more of them, sharing and distributing in different ways,” Foley said.
Dunham said that the Clean Power Plan’s uncertain future should not stop the adoption of renewables and storage. “I don’t think it’s ever ‘pencils down.’ We need to be always modifying and adapting,” she said.
Low Rates, High Bills
Some officials think MISO South could do with more energy efficiency programs to reduce the region’s high energy consumption.
“We have low rates, but we have really high bills,” said Logan Atkinson Burke, CEO of consumer advocate Alliance for Affordable Energy. She said Entergy New Orleans customers have among the highest energy use rates in the country. Mississippi, Alabama and Louisiana rank among the worst in the country in available energy efficiency programs.
Thomas said energy efficiency programs can help defer “big decisions” and capital expenses by keeping demand low.
Jeff Baudier, chief development officer of Louisiana-based Cleco Holdings, said the company’s addition of a heat recovery steam generator to the Cabot coal plant in the St. Mary Parish in Franklin, La., will add 50 MW of capacity with no additional emissions. The project is expected to be in service in the first quarter of 2018.
Ted Romaine, director of origination for renewable generation developer Invenergy, said commercial and industrial customers, especially Internet companies like Google, Amazon and Facebook, are increasingly making off-site renewable energy deals such as virtual power purchase agreements.
“This is a market that’s really picked up steam in the last few years. … We see more buyers come into the market, and interest continues to grow. This isn’t a Silicon Valley-exclusive market,” Romaine said.
ERCOT, SPP and PJM lead in corporate off-site renewable deals with a 77% share of the U.S. and Mexico, Romaine said. He said although MISO doesn’t have any such contracts, it will in the future. He expects more than 20 first-time corporate renewable buyers nationwide in 2017. He added that vertically integrated MISO South utilities might bend to pressure from big energy users such as Google to create green tariffs — renewable energy purchasing programs — even if they have no legal obligation to do so. He said there is “strong potential” for solar-based virtual power purchase agreements in MISO South.
“If we don’t start recognizing that multinational corporations have sustainability agendas, they’re going to go somewhere else,” Baudier said.
PPL’s earnings from ongoing operations rose 11% to $1.67 billion last year, boosted by a 39% jump in the fourth quarter as the company benefited from a strong performance by its utilities and gains on currency hedges.
Reported earnings more than doubled to $1.9 billion ($2.79/share) for the year, compared with $682 million ($1.01/share) in 2015, which included a $921 million loss from discontinued operations, primarily the spinoff of its competitive supply business to Talen Energy.
PPL workers raising an osprey nesting platform at Owl Creek Reservoir near Tamaqua, Pa. | PPL
The company’s results exceeded the high end of its 2016 reported earnings forecast range of $2.55 to $2.70/share.
Reported fourth-quarter earnings were $465 million ($0.68/share), compared with $399 million ($0.59/share) in 2015. Eliminating special items, fourth-quarter earnings from ongoing operations were $409 million ($0.60/share) versus $294 million ($0.43/share) a year earlier.
CEO William Spence said the company made $3 billion in infrastructure investments last year and plans an additional $16 billion over the next five. “We are confident in our ability to deliver our projected 5 to 6% compound annual earnings growth range from 2017 to 2020 even if the exchange rate declines well below current levels,” Spence said in a statement.
The company announced that it is increasing its quarterly common stock dividend from 38 cents/share to 39.5 cents/share, payable to shareowners of record as of March 10. The increase is PPL’s 15th in 16 years.
Duke Energy saw its 2016 earnings drop more than 20% to $2.15 billion ($3.11/share) from $2.82 billion ($4.05/share) in 2015 largely because of a loss on the sales of its international energy operations.
For the fourth quarter, Duke reported a loss of $227 million ($0.33/share), compared to a profit of $477 million ($0.69/share) for the same period in 2015.
The company’s adjusted earnings were $3.24 billion ($4.69/share) for the year up from $3.15 billion ($4.54/share) a year earlier. Adjusted earnings exclude merger costs, severance charges, asset impairments, a 2015 charge associated with the Edwardsport IGCC regulatory settlement, and the loss on the sale of its hydroelectric and natural gas generation plants, transmission and natural gas processing facilities in Central and South America.
The company said results were bolstered by favorable weather, cost controls and the early close of its acquisition of Piedmont Natural Gas.
Nashville CNG Fueling Station | Piedmont Natural Gas
“2016 was a transformational year for Duke Energy as we acquired Piedmont Natural Gas and exited our international business,” CEO Lynn Good said.
Duke has realigned its reporting segments into three major categories: Electric Utilities and Infrastructure; Gas Utilities and Infrastructure; and Commercial Renewables.
The Electric Utilities segment earned $483 million in the fourth quarter, down from $569 million in the last quarter of 2015. The company blamed higher operations and maintenance expenses, tax rates, interest expenses and depreciation and amortization costs.
The Commercial Renewables unit earned $10 million in the fourth quarter, down from $17 million a year earlier, because of lower investment tax credits resulting from lower solar investments, partially offset by higher production tax credits from additional wind facilities placed in service.
