Page 1622 – RTO Insider

July 29, 2016

FirstEnergy Posts $1.1B Loss, Eyes Exit from Merchant Generation

By Ted Caddell

FirstEnergy on Friday posted a $1.1 billion second-quarter loss, much of it related to the pending closure of five coal-fired units, and CEO Chuck Jones said the company will not make any large investments to prop up its merchant generation business credit rating.

“We do not see baseload generation as a good fit for our company,” Jones said during a call with analysts on Friday. The company will not rule out “the possible sale or deactivation” of additional units as wholesale energy prices continue to languish, he said.

The losses make the outcome of the company’s two-year struggle with the Public Utilities Commission of Ohio to garner guaranteed income for its generators that much more critical.

FirstEnergy has 1,360 employees at its Akron, Ohio headquarters. The company says its total economic impact is $568 million annually in the state. *Photo Source: Wikipedia*

On July 25, it filed testimony with PUCO saying that a staff-recommended plan for a Distribution Modernization Rider of $131 million a year for three years wouldn’t be enough to provide credit support to the company so it can maintain its investment-grade credit rating and begin grid modernization initiatives (14-1297-EL-SSO). (See PUCO Staff Recommends $131M Annual Rider for FirstEnergy.)

It also balked at staff’s recommendation that the company be required to refund the subsidy if it moves from its Akron headquarters.

FirstEnergy has proposed a Retail Rate Stability rider that would provide it $558 million a year for eight years for credit support. Eileen Mikkelsen, vice president of rates and regulatory affairs, said the rider should be increased by an amount reflecting the economic development value of maintaining its headquarters in Akron.

In testimony filed July 22, Sarah Murley, an economic consultant hired by the company, said the headquarters has an annual economic impact of $568 million on Ohio’s economy, based on the 1,360 employees there (an annual payroll of $151.3 million) and its support of an additional 2,047 jobs ($93.3 million in annual payroll) by other businesses throughout Ohio.

Critics said the RRS rider and the economics benefits adder FirstEnergy is seeking could result in more than $8 billion in ratepayer-funded subsidies if they lasted the full eight years.

Shannon Fisk, an attorney with Earthjustice, said the annual price tag could be as high as $1.126 billion, if PUCO grants the $558 million RRS rider and the $568 million the company claims as the economic development value of its operations.

“FirstEnergy is proposing that the DMR would last through May 31, 2024, almost eight years, so the total amount of captive customer money provided under FirstEnergy’s proposal would be somewhere between $4 billion and more than $8 billion,” Fisk said.

Generation Business Driving Losses

FirstEnergy’s $1.1 billion loss represents $2.56/share on revenue of $3.4 billion. That compares with net income of $187 million, or 44 cents/share, during the same period last year.

In a news release, the company attributed the loss primarily to “asset impairment and plant exit costs in the company’s competitive business,” a reference to its recently announced plan to sell or close its Bay Shore plant near Toledo and retire four coal-fired units at its W.H. Sammis plant on the Ohio River. (See FirstEnergy Closing Largest Coal Plant in Ohio; Bay Shore also in Peril.)

It is with its eye on the corporation’s credit rating that Jones said the company will be looking to concentrate on its regulated businesses and begin to look for ways to exit the merchant generation business in the coming years.

“Our long-term goal is to operate as a fully regulated company,” he said. To illustrate its concentration on driving down generation costs, the company announced it was postponing by three years the expensive steam generator and reactor pressure head replacement at its Beaver Valley nuclear station in Pennsylvania, “and we’ve already identified $80 million in fossil fleet savings” annually going forward, he said.

Success Hinges on PUCO

Earlier in its negotiations with PUCO, the company proposed a 15-year period of guaranteed income for its struggling merchant plants. When that was denied, it came back with an eight-year plan, which was approved by PUCO but eventually jettisoned when FERC ruled that it would need to undergo federal review under the Edgar affiliate abuse test.

FirstEnergy withdrew its request and filed a modified request with PUCO that was not tied to any specific generation assets, with the understanding that it would not need FERC review. Critics have charged that it could cost customers between $3.6 billion and $4 billion.

The latest rider request would be an alternative to that plan.

In testimony, the company warned that it could receive a credit downgrade without the increase in revenue. Their latest rider plans, Mikkelsen said, would provide a “more reliable hedge against increasing market prices by using proxy costs and generation capacity and output for diverse generation in the marketplace without reference to any particular generating facilities.”

“By ‘priming the pump,’ the companies will be able to obtain lower financing costs when grid modernization spending begins, resulting in lower rates for customers,” she said.

Although the rider would be, in part, to fund grid modernization projects, she said the company should be able to collect it before that work commences.

Jones said during the analyst call that the company expects a ruling from PUCO by September. He declined to say what they would do if PUCO rules against the company.

“When we know that outcome, we will let you know what the impact is on our credit ratings,” he said. “We have a number of other strategic options we can execute, but it is premature to speculate.

“We are focused on keeping our investment-grade rating of our holding company and the rest of our regulated entities,” he said. He said there would be no large infusions of capital in the merchant business in any attempt to shore up its sagging credit rating.

Another company facing the same economic pressures relating to low wholesale prices, American Electric Power, has said it will devote its energies to “reregulating” the energy market in Ohio. Jones said he is “pulling for” AEP’s efforts, but “at this point in time, we are not actively joining in with them.”

Critics Blast Rider Plans

To FirstEnergy critics, the new testimony is hard to swallow.

“FirstEnergy’s recent testimony asks the PUCO to reject the staff’s criticism of — and embrace — its proposal for a ‘virtual PPA,’ in which the utility’s distribution subsidiary would receive what the Ohio Consumers’ Counsel estimates would be some $4 billion over eight years,” said Dick Munson of the Environmental Defense Fund.

“FirstEnergy’s level of greed is laughable, if it were not so seriously expensive for Ohio consumers … and should be completely rejected,” he said.

“The customers should not be providing credit support, and without serious restrictions, there is nothing to ensure it will not be just the same type of bailout” it already failed to get, Earthjustice’s Fisk said.

July 29, 2016

NextEra Reaches Deal for Oncor

By Rory D. Sweeney

NextEra Energy announced Friday morning that it had reached an agreement to buy cash-strapped Energy Future Holdings’ profitable Oncor assets in a deal that values the Texas transmission and delivery subsidiary at $18.4 billion.

The sale, along with a favorable tax decision also announced Friday, would move EFH closer to an exit from its Chapter 11 bankruptcy, which it declared in April 2014.

The deal for Oncor — Texas’ largest utility, with 119,000 miles of distribution and transmission lines and more than 3 million meters — also bolsters NextEra’s position as a player in the Texas energy market. It has been involved in Texas since 1999 through transmission provider Lone Star Transmission.

nextera, oncor — Location of NextEra generation *Source: NextEra*

NextEra CEO Jim Robo said he plans to continue business as usual at Oncor, which he called “one of the most efficient, reliable and low-cost utilities in the nation.”

“We are incredibly impressed by Oncor’s management team and its employees, and we are committed to retaining the Oncor name, its Dallas headquarters and local management,” Robo said. “NextEra Energy shares Oncor’s strategy of making smart, long-term investments in transmission and distribution.”

Approvals Needed

The sale must be approved by both the Public Utility Commission of Texas and a federal bankruptcy court. If approved, it would divest EFH of its 80% stake in Oncor for about $14.9 billion, NextEra said. The deal would be primarily cash, along with some NextEra stock, according to an 8-K EFH filed Friday with the U.S. Securities and Exchange Commission.

The deal can be canceled if the PUCT’s approval includes any of several conditions that the agreement outlines as overly “burdensome” or if it hasn’t closed by March 26, 2017, though there is the potential for a 90-day extension.

Although EFH is allowed to seek other offers, it would be on the hook for a $275 million termination fee if the NextEra deal receives PUCT and court approval and EFH eventually sells to someone else.

Other Suitors

That creates a hurdle for other rumored Oncor suitors, including Berkshire Hathaway Energy, Fidelity Management, Edison International and Hunt Consolidated. Also interested was the investor group led by Borealis Infrastructure Management and Singapore’s GIC Special Investments that together own the other 19.75% of Oncor. (See With Oncor Back on the Market, Multiple Suitors Line Up.)

Hunt remains optimistic, releasing a statement that called the announcement “not a surprise and, as we know, is just another step in a very long process.”

“Hunt will remain involved as the process unfolds, as the advantages of maintaining ownership of Oncor by Texans for Texans are clear,” Hunt spokeswoman Jeanne Phillips said.

Hunt previously appeared to be a frontrunner for Oncor, but its bid foundered in May when the PUCT imposed conditions it said were unacceptable. Hunt has since sued to reopen the case. (See Hunt Reopens Oncor Bid in Lawsuit Against PUCT.)

Tax Liability Eliminated

EFH’s 8-K also announced a favorable ruling from the Internal Revenue Service that eliminates a potential $4 billion tax liability for its remaining assets.

EFH has proposed a separate path for its Luminant generation arm and TXU Energy retailer, selling them to senior creditors who are owed $24.4 billion. Bankruptcy court hearings on the proposed sales are scheduled to begin Aug. 17 in Delaware.

NextEra’s Other Moves

NextEra also announced on Friday that its competitive energy subsidiary, NextEra Energy Resources, is selling its interests in two Pennsylvania gas-fired generation plants to a Connecticut-based investment firm for $760 million.

Starwood Energy Group Global, which focuses on gas-fired and renewable generation, transmission and storage facilities, agreed to buy the 790-MW combined cycle Marcus Hook Energy Center and the 50-MW simple cycle Marcus Hook 50 Energy Center in Marcus Hook, Pa.

NextEra says the sale, which is expected to close in the fourth quarter of 2016, will result in net proceeds of approximately $255 million after repayment of the existing project-related financing.

July 28, 2016

Exelon’s Constellation to Buy Con Ed’s Retail Operation

By Ted Caddell and Rich Heidorn Jr.

NASHVILLE, Tenn. — Exelon’s Constellation Energy Resources unit is buying Consolidated Edison’s retail energy business as it continues its efforts to hedge against falling wholesale power prices.

Constellation’s purchase of the retail division of ConEdison Solutions will give it another 560,000 residential, commercial and business electricity and natural gas customers in Texas, D.C. and 12 states in the Northeast, Mid-Atlantic and Midwest. If completed, it will make Constellation the largest competitive energy supplier in the U.S., with 2.5 million customers. Terms of the deal were not disclosed.

“This agreement provides an opportunity to grow our retail electricity and natural gas business in strategically attractive markets where we’re best suited to match load served with Exelon generation assets,” Constellation CEO Joseph Nigro said. “ConEdison Solutions has a reputation for delivering value to customers, and our combined companies will continue that tradition with a broad array of energy products and services at competitive prices.”

“With their industry-leading position, we are confident that the retail electricity and natural gas business will continue to thrive as part of Constellation,” ConEdison Solutions CEO Mark Noyes said. “This move will enable our company to focus our attention and our resources on making energy services and renewable energy offerings even more competitive and well-positioned for rapid growth.”

Having guaranteed customers for its wholesale generation fleet protects the company from volatility in wholesale prices.

It was the company’s efforts to minimize price risk that also led Exelon to its $6.8 billion purchase of Pepco Holdings Inc. this spring. The addition of PEPCO, Delmarva Power and Atlantic City Electric brought Exelon’s customer base to 10 million.

No More Debt

Exelon CEO Chris Crane gave no hint of the Con Ed deal in an appearance Monday at the National Association of Regulatory Utility Commissioners’ summer meeting.

In an interview with NARUC President Travis Kavulla, Crane said the company would not seek debt-financed acquisitions despite the current low interest rates.

exelon, coned, constellation — Exelon CEO Christopher Crane (L) and NARUC President (and Montana PSC Vice Chair) Travis Kavulla © *RTO Insider*

Independent power producers who seek greater leverage when interest rates are low can find themselves squeezed when rates rise, he said.

“We operate in probably a little bit more conservative way,” he said. “Our focus is actually reducing debt and maintaining a strong capital structure and understanding we’re at a low point in the [interest rate] cycle. It would not be prudent to think that this is a sustainable environment going forward.”

Meanwhile, Exelon is seeking help from state officials to eliminate the losses at its nuclear plants in Illinois and New York.

The company said in June it will close its Clinton and Quad Cities nuclear plants after the Illinois General Assembly adjourned without acting on a bill that would have subsidized the money-losing stations. (See Exelon to Close Quad Cities, Clinton Nuclear Plants.)

Crane said the company wants to preserve the plants’ 4,200 jobs — “The tax base for DeWitt County dries up and goes away if the Clinton plant shuts down,” he said — but can’t continue to absorb the losses.

In New York, where the company has three nuclear plants, it has offered to buy Entergy’s struggling FitzPatrick plant if state regulators complete a plan to subsidize them.

Crane said the company has had a “very productive dialog” in New York, adding that the state’s proposed zero emission credits would create a “level playing field for carbon-free generation.”

“If other states that our … nuclear assets [operate in] want to approach the market like that we would like to do that,” he said. (See Commenters Laud, Blast New York’s Nuclear Subsidy Plan.)

July 28, 2016January 23, 2024

Governance Plan Critics Urge Slowdown of Western RTO Development

By Robert Mullin

Critics of CAISO’s most recent draft proposal of principles for governing a Western RTO contend the ISO is moving too quickly to get a plan to California lawmakers before the close of the current legislative session in September.

Speaking at a joint state agency workshop in Sacramento on Tuesday, multiple industry participants expressed concern that the ISO’s expedited effort to complete a proposal will result in a governance framework that defers too many issues to be resolved in the future.

The workshop — hosted by CAISO, the California Public Utilities Commission and the California Energy Commission — marked the last public forum in which stakeholders could discuss the proposal before it gets forwarded to Gov. Jerry Brown, who is expected to transmit a final version to lawmakers in August. California law requires the legislature to approve the ISO’s transformation into an RTO, a process that would result in the state losing direct authority over the grid operator.

‘One of the Largest Issues’ in CAISO History

“Regionalization is one of the largest issues facing the ISO in its history,” said Carolyn Kehrein, principal consultant for the Energy Users Forum, which represents large energy customers in California. “Unfortunately, the changes [to the original proposal] were made to meet a quick turnaround.”

Among those changes were provisions that clarify the composition and responsibilities of a transitional committee tasked with creating a final governance plan; reaffirm that any such plan must respect individual states’ sovereignty over electricity matters they currently regulate; and set a specific timeframe for the appointment of a final RTO board (See Revised Western Governance Plan Highlights State Authority.)

The revised proposal defined the makeup of a Western States Committee (WSC), which would consist of state-appointed representatives and two nonvoting members representing publicly-owned utilities and federal power marketing administrations (PMAs). A provision requiring load-weighted voting on the WSC was altered to enable the transitional committee to develop a process that factors in “some form of weighted voting based on load,” such as a supermajority requirement.

An expanded CAISO would first take in PacifiCorp’s service territories, but the ISO is preparing for other transmission owners to join in the near future.

CAISO also added a provision for the RTO to adopt a capacity market at the request of member states, while eliminating a provision for tracking greenhouse gas emissions — a measure the ISO contended was more suited for inclusion in market operations than as a principle in an overarching governance plan. The GHG mechanism would have monitored carbon emissions from all thermal plants participating in the RTO, not just those located in California.

Western States Committee Powers

“Our biggest concern is — how many more revisions will there be before this is final?” said Matt Freedman, an attorney with The Utility Reform Network (TURN), which represents small customers. “This feels like a working draft.”

Freedman said his organization was concerned that the WSC’s powers were reduced in the revised proposal, which now stipulates that the RTO’s board can — in certain circumstances — override the requirement for the committee’s approval for Section 205 filings with FERC.

TURN was also worried about the “watering down” of an earlier prohibition on capacity markets, as well as the removal of the reference to GHG tracking.

Sierra Club staff attorney Travis Ritchie wondered how California would manage its GHG program without making emissions tracking a core principle, saying that the absence of tracking in the Energy Imbalance Market has allowed carbon leakage into the state’s power market.

“We need to agree what our fundamental principles are before opening up this market,” Ritchie said. “We have to set out our clear requirements first.”

Tony Braun, an attorney representing the California Municipal Utilities Association (CMUA), criticized the proposal for deferring the decision to create an RTO market advisory committee to the transitional committee.

“We think the transitional committee scope is too broad,” Braun said. “I don’t think the states are going to go for it.”

He cautioned the ISO not to move too quickly to advance a proposal to lawmakers given the number of “outstanding issues” related to governance.

‘Shouldn’t be Rushing’

“We shouldn’t be rushing forward now. The train is not going to come off the tracks,” Braun said. “Let’s not get embedded in a discussion in the legislature this year.”

“It seems to me that you’re placing a heavy burden on the people in the building just north of this,” said Imperial Irrigation District (IID) General Manager Kevin Kelley, referring to legislators in the nearby state capitol.

Kelley said that his utility, which operates its own balancing authority area in Southern California’s Inland Empire region, is opposed to CAISO’s regionalization because it will require the state to relinquish its oversight over an organization that suffered costly market manipulation during the 2000-2001 Western Energy Crisis. IID last month sued CAISO to force public disclosure of protected information related to the ISO-commissioned studies supporting regionalization.

Kelley suspected the “driver” of regionalization was a “for-profit corporation” — namely, PacifiCorp.

“I would encourage you not to hurry it up because that’s what PacifiCorp wants you to do,” he added.

Supporters Weigh In

The revised proposal also had its supporters.

“We do feel like this process [for creating the proposal] has been very transparent,” said Jennifer Gardner, staff attorney for Western Resource Advocates, an environmental group. “We’ve been pleasantly surprised that recommendations were taken to change the second proposal.”

Gardner called the regional market “the best opportunity to improve business as usual” in the West and said that any proposal taken to the legislature “should be as broad as possible to not tie the hands of the transitional committee.” She said that GHG tracking on a regionwide basis would be important for assessing the environmental benefits of the market.

Jonathan Weisgall, vice president of legislative and regulatory affairs at PacifiCorp parent Berkshire Hathaway Energy, said CAISO’s regionalization studies made it “very clear” that the region’s 2030 GHG reduction goals “won’t happen without a market.”

In the “unlikely event” that regionalization did increase emissions from PacifiCorp’s coal plants, the company would work to mitigate them, Weisgall said.

“In our Midwest utility [MidAmerican Energy], where we’re moving to 80% renewables, we could not do that without a regional ISO,” Weisgall said.

Preserving State Authority

Jan Strack, a transmission planning manager with San Diego Gas & Electric, said his utility has been in favor of expanding the market for a long time. He said the infrastructure for the market is already in place and that it wouldn’t cost much money to expand it. Strack also contended that an expanded market would enable California to achieve its GHG goals at a lower cost.

“We need to avoid some roadblocks [in the governance plan],” Strack said. “The first one is preserving state authority.

“At the same time, we have to recognize that FERC has authority over interstate commerce,” he added. “That’s one area we would be uncomfortable handing over to the Western States Committee.”

“We support regionalization of the ISO and the associated market because, frankly, they work,” said Robin Smutny-Jones, director of California policy and regulations for Avangrid. “That’s why there’s been a proliferation of RTO-like structures across the country and around the world.”

Smutny-Jones acknowledged the RTO would need to work through contentious issues such as transmission access charges and regional resource adequacy, both of which would be left to a newly constituted RTO.

“But other states have done it, and the West can too,” she said.

July 26, 2016

New York ESCO Order Vacated by Court

By William Opalka

A New York judge has vacated the Public Service Commission’s February “reset order” that sought to overhaul the business practices of retail energy suppliers.

The July 22 order by acting state Supreme Court Justice Henry Zwack said energy service companies (ESCOs) were denied due process by the commission, especially by the strict time frame for compliance (870-16, et al.).

The order bars the PSC from enforcing a requirement that ESCOs guarantee retail and small commercial customers will pay no more than they would for default service (excluding contracts offering at least 30% renewable power) (15-M-0127, et al.).

It also throws out a requirement that ESCOs receive “affirmative consent” from such customers before renewing them from a fixed rate or guaranteed savings contract into one that provides renewable energy but does not guarantee savings.

Zwack left standing language the commission added to its business practices imposing tougher enforcement measures against those who prey on vulnerable or uninformed customers.

While regulators insisted they acted to protect customers from deceptive business practices, ESCOs said the order effectively killed customer choice in New York.

The order “is arbitrary and irrational in that it imposes the unexplained and harsh 10-day implementation period for the order, which amounts to a major restructuring of the retail energy market — or even its collapse,” Zwack wrote in his 26-page opinion. “The court is perplexed that implementation would be so immediate, when by the PSC’s own admission so many questions remain.”

PSC officials said they will address the judge’s procedural concerns promptly.

The commission acted in response to what it said was unscrupulous business practices by some retailers. ESCOs immediately challenged the order in court and also sought a rehearing by the PSC. (See Retailers Ask for Rehearing of NY Guaranteed Savings Order.) A stay was granted in March as the court challenge was pending.

Retail Energy Supply Association spokesman Bryan Lee said the group was “gratified that the court vacated the … order, finding the PSC action to be ‘irrational, arbitrary and capricious’ and failed to offer ESCOs ‘an opportunity to be heard in a meaningful manner and at a meaningful time.’ The court found that ESCOs were ‘stripped of any meaningful opportunity to participate in the promulgation of the reset order.’”

Zwack reaffirmed that the PSC maintains jurisdiction over retail rates, turning aside a challenge from the ESCOs.

“The court’s affirmation that the PSC has legal jurisdiction over ESCOs is an important win for the PSC and millions of consumers in New York,” PSC spokesman James Denn said in a statement. “The procedural flaws highlighted by the court have been addressed, or will be, as we continue to move forward with Gov. [Andrew] Cuomo’s far-reaching plan to protect customers from unscrupulous ESCOs. Make no mistake, we are putting an end to deceptive ESCO practices that harm electric and gas customers.”

Zwack’s ruling does not affect a PSC order earlier this month imposing a moratorium on ESCOs signing up additional low-income customers. Regulators issued the order after a collaborative effort failed to develop a formula under which customers could be guaranteed savings. (See NYPSC Declares Moratorium on Low-Income Sign-ups.)

In a statement released Tuesday, PSC Chair Audrey Zibelman defended the commission’s actions.

“When ESCOs were charging multiple times the prices that utilities charge for energy, and consumer complaints of deceptive marketing practices poured in by the hundreds, the commission took bold action in February to protect consumers,” she said. “Unfortunately, as a result of the litigation, ESCO customers are still paying millions of dollars more every month than they should be paying for electric and gas services. But this injustice will be short-lived. … The commission will easily address the procedural concerns raised by the court and will continue our work to ensure that all electric and gas consumers in New York have the protections they need and deserve.”

July 26, 2016

FERC OKs Settlement, Orders Earlier Refunds in MISO Voltage Cost Allocation Case

FERC last week approved a settlement in a dispute between WPPI Energy and MISO over how to allocate voltage and local reliability (VLR) costs to pseudo-tied load (ER12-678-006).

The commission also granted WPPI rehearing in a related case, ordering MISO to pay refunds from September 2012 rather than July 2014 in a reallocation of costs for revenue sufficiency guarantees paid to resources providing VLR support (ER12-678-004, EL14-58-001).

In 2012, FERC approved MISO’s proposal to allocate VLR costs to all loads in a local balancing authority area (BAA), including pseudo-tied loads — load that is effectively transferred from a source local BAA, in which that load is physically located, to a different host (or “sink”) BAA. In a later order, the commission had reasoned that “the local BAA of the host load is responsible for voltage management in the pseudo-tied local BAA, and therefore MISO’s proposal comports with cost causation.”

FERC reversed course in June 2014, saying it had “erred” in approving MISO’s cost allocation and setting the issue for settlement discussions.

The commission said the settlement resolves the issue of “whether MISO should allocate VLR costs incurred in responding to a localized constraint to a market participant such as WPPI based on its load that is physically remote from the constraint, because that load has been pseudo-tied into the LBA area affected by the constraint.”

The settlement will revise MISO’s Tariff by adding a new term, “internal commercially pseudo-tied load,” and new language requiring submission of meter data by market participants that have such loads. MISO agreed to resettlements of WPPI’s VLR payments as soon as possible after the installation of necessary software changes and WPPI’s submission of required meter data.

In the related order, the commission agreed with WPPI that refunds from the reallocation should be effective as of Sept. 1, 2012, the date MISO’s original rate proposal went into effect, rather than July 9, 2014, the date FERC originally set.

July 25, 2016

FirstEnergy Closing Largest Coal Plant in Ohio; Bay Shore also in Peril

By Suzanne Herel

FirstEnergy will retire four units at its largest coal-fired power plant in Ohio and sell or deactivate its Bay Shore plant by 2020, the company said Friday, citing “challenging market conditions.”

Together, the units represent 856 MW, of which 136 MW is generated by Bay Shore in the City of Oregon, Ohio. Units 1-4 of the seven-unit W.H. Sammis Plant in Stratton produce 720 MW. The remaining two units there will continue to provide 1,490 MW of baseload generation.

first energy, coal, ohio, bay shore — Sammis Power Plant *Source: Bechtel*

The 78 employees at Bay Shore would be offered jobs elsewhere in FirstEnergy if that plant were deactivated, and the company would work with any potential buyer to arrange their retention. Likewise, the 368 employees at Sammis would be offered other job opportunities, the company said.

Last year, the units headed toward closure or sale generated 4% of the electricity produced by all of FirstEnergy’s plants.

“We have taken a number of steps in recent years to reduce operating costs of our generation fleet,” FirstEnergy Generation President Jim Lash said in a statement. “However, continued challenging market conditions have made it increasingly difficult for smaller units like Bay Shore and Sammis Units 1-4 to be competitive. It’s no longer economically viable to operate these facilities.”

The announcement comes as the staff of the Public Utilities Commission of Ohio has proposed a rider for FirstEnergy that would allow it to recover $131 million annually from customers over three to five years so it may retain an investment-grade credit rating as it struggles to maintain some of its aging, mostly coal-fired plants. (See PUCO Staff Recommends $131M Annual Rider for FirstEnergy.)

FERC in April had ruled that an eight-year power purchase agreement PUCO had approved for FirstEnergy, and another for American Electric Power, would be subject to federal review. The ruling prompted FirstEnergy to return to PUCO with a modified proposal that commission staff said should be rejected in favor of the recommended rider.

FirstEnergy’s announcement was welcomed by environmental advocates who had denounced the company’s power purchase request as a corporate bailout.

“Closing these outdated, dirty power plants not only shows FirstEnergy finally recognizes the market momentum toward coal’s inevitable demise, the decision is great news for Ohio customers, who avoid paying a massive subsidy to keep the units afloat,” said Dick Munson of the Environmental Defense Fund.

According to the Sierra Club, FirstEnergy’s announcement brings the total amount of coal generation that has retired or is set to retire in the state since 2010 to 10,093 MW.

“Today’s announcement is further proof that Sammis is an outdated and costly coal plant that customers should not be forced to prop up,” said Shannon Fisk of Earthjustice. “We will continue to fight efforts that could be used to bail out other FirstEnergy coal units, as now is the time for significant investments in renewable energy, energy efficiency and grid modernization activity that will create jobs and economic development throughout Ohio.”

Bay Shore Unit 1, whose boiler is fueled by petroleum coke, went online in 2000. Units 2-4 were deactivated in 2012 because of environmental regulations.

Units 1-4 at Sammis date to 1959 through 1962. Units 5-7 came online from 1967 to 1971.

According to FirstEnergy, it pays $1.7 million annually in Bay Shore property taxes. The company pays more than $7 million in property taxes on the Sammis plant, making it the largest taxpayer in Jefferson County.

July 25, 2016

Solar Poised for Texas-sized Growth in ERCOT

By Rory D. Sweeney

HOUSTON — Texas, which ranks 10th in installed solar capacity among the states, boasts two assets that could see it rise in the rankings.

“We have a lot of sun and a lot of land,” Christine Wright, SolarCity’s deputy director of policy and electricity markets, told a Gulf Coast Power Association luncheon last week. “Those are two key things there that make Texas a great resource for solar.”

GCPA_Houston---content-(RTO-Insider) - ercot texas solar — Christine Wright, the deputy director of policy and electric markets at SolarCity, speaks during the GCPA luncheon in Houston on Thursday. Solar capacity is making great strides in Texas. © *RTO Insider*

Installed solar capacity is growing at a rate of 50% annually, and every time the world’s solar power doubles, the cost of photovoltaic panels falls 26%. In the 15 years since 2000, the industry’s share of generation capacity has doubled seven times, and the average cost for a solar facility in the U.S. was cut more than two-thirds to roughly $3/W.

Although Texas ranks first among states in solar potential, it has only 534 MW installed, putting it behind California, Arizona, North Carolina, New Jersey, Nevada, Massachusetts, New York, Hawaii and Colorado. The state saw $372 million in solar investment in 2015, which was a 48% increase over 2014 spending. While top-ranked California has nearly 25 times more installed capacity than Texas, Wright said ERCOT expects solar capacity to grow by a factor of 50 by 2030.

Wright said the driving forces are cost stability and customers’ demand for independence from the grid. Since solar incurs very few costs after installation and no fuel expense, it can act as a hedge against increasing energy bills. Wright referenced a 2015 Gallup poll that found approximately 80% of respondents preferred more emphasis be put on developing solar infrastructure.

Tax incentives add to the appeal. Congress extended the solar investment tax credit through 2023, and the state’s property-assessed clean energy program allows local governments to help residential and commercial applicants to secure loans for solar projects in exchange for an increased property tax assessment.

The state has enacted favorable legislation, Wright said, such as SB1626, which reduces builder restrictions on solar development, and HB706, which simplifies property tax form filing. But “we have seen that policymakers in other states don’t always make decisions that are consistent with customer demand,” which is why she said the industry needs to maintain an active education campaign. In Nevada, for example, rooftop solar drove $833 million in investment in 2015 but ground to a near halt after the state Public Utilities Commission promulgated rates that increased the bills for solar customers by more than 50%, she said.

She acknowledged that issues will arise as the industry gains market share, but that they are known. Efforts are being made to collect necessary data and address “growing pains,” she said, citing ERCOT’s formation of the Distributed Resource Energy and Ancillaries Market Task Force.

July 25, 2016

FERC Issues Ride-Through Requirement for Small Generators

By Rich Heidorn Jr.

Generators under 20 MW will be required to ride through abnormal frequency and voltage events under a revised pro forma small generator interconnection agreement approved by FERC last week (RM16-8).

The commission already requires generators interconnecting under the large GIA to meet such requirements.

“It would be unduly discriminatory not to also impose these requirements on small generating facilities,” the commission said, noting that technology now available to small generators, such as smart inverters, gives them the capability to comply.

The revisions require small generators to not disconnect automatically or instantaneously from the transmission system for under- or over-frequency conditions and under- or over-voltage events. “The specific ride-through settings must be consistent with good utility practice and any standards and guidelines applied by the transmission provider to other generating facilities on a comparable basis,” the commission said.

The commission said its order reflected input received in response to its March Notice of Proposed Rulemaking. (See FERC Issues Reliability Orders on Relays, Small Generators.)

FERC said its action was warranted by the increase in grid-connected solar PV generation and generator interconnection requests driven by state renewable portfolio standards.

It cited NERC’s finding that “a lack of coordination between small generating facilities and reliability standards can lead to events where system load imbalance may increase during frequency excursions or voltage deviations due to the disconnection of distributed energy resources, which may exacerbate a disturbance on the bulk power system.”

July 25, 2016

FERC Issues Revised Connected Entity, Data Collection Proposal

By Michael Brooks

WASHINGTON — Responding to a flood of criticism, FERC last week revised its proposed rules for collecting data from market-based rate traders to monitor against market manipulation, narrowing the definition of “connected entity” and streamlining the collection process (RM16-17).

The commission issued a new Notice of Proposed Rulemaking at its open meeting, abandoning a NOPR issued last September that would have required RTOs and ISOs to register market participants through common alpha-numeric identifiers, with lists of their connected entities and a description of their relationships (RM15-23).

The new proposal aligns the definition of a “connected entity” with existing MBR affiliate definitions, eliminating references to stock and ownership thresholds. The original NOPR had included as connected entities companies controlling more than 10% of another, as well as top executives and traders, a definition heavily criticized by stakeholders.

The revised definition would limit relationship reporting to only those entities engaged in FERC-jurisdictional markets and those that trade energy transaction derivatives. The new proposal also would not require reporting debt instruments or structured transactions and submitting organizational charts.

The new NOPR also adopts changes in a December proposal to reduce the amount of information MBR sellers are required to provide the commission to prove they lack market power (RM16-3). (See Less is More? FERC Proposal Would Streamline Market-Based Rate Filings.)

“Today’s NOPR attempts to avoid duplication, minimize compliance burdens, modernize data collections and make information collected through its programs more usable and accessible for the commission and its staff,” FERC said.

The commission held a technical conference on its original connected entity NOPR in December, where stakeholders criticized the proposal as cumbersome and confusing. (See ‘Connected Entity’ Proposal Too Broad, Burdensome, Market Participants Tell FERC.)

At FERC’s open meeting last week, commissioners admitted that they had had concerns about the original proposal and expressed appreciation for stakeholders’ feedback.

“I had written separately … on the connected entities proposal to express some questions and concerns, but I’m very pleased to support the revised proposal before us today,” Commissioner Cheryl LaFleur said.

“Sometimes when the commission puts out a Notice of Proposed Rulemaking, there is a huge body of evidence that we have,” Commissioner Tony Clark said. “Sometimes — and I think this is one of those cases — the commission is putting something out, and we’re always genuinely interested in your feedback, but we’re interested in hearing your feedback on something that probably just isn’t quite as well fleshed out.”

FERC also proposed a database using an extensible markup language (XML) schema to keep track of entities’ relationships. The NOPR contains a draft data dictionary that lays out how to submit the required information.

The commission said it plans a “substantial outreach” effort to get input on the NOPR. As a first step, it announced it would convene a technical conference Aug. 11 to discuss the data dictionary. Comments on the proposal are due 45 days from its publication in the Federal Register.