Company Briefs

Dominion Resources announced Monday that it is buying the Utah-based natural gas distributor Questar for $4.4 billion in cash in a deal aimed at expanding its gas business into the West.

Dominion said it expects to complete the acquisition by the end of the year. The company also said it would be assuming Questar’s approximately $1.31 billion in long- and short-term debt.

Like Duke Energy, which announced in October it would purchase Piedmont Natural Gas, Dominion expects the value of natural gas to increase as more and more states switch to the fuel for electric generation in order to meet state and federal emissions mandates.

It is Dominion’s latest big natural gas play. The company is one of the majority owners of the Atlantic Coast Pipeline project, a $5 billion, 550-mile pipeline that would bring natural gas from the shale fields in Pennsylvania, West Virginia and Ohio to markets and terminals in Virginia and North Carolina. It also has invested $3.8 billion to convert its liquefied natural gas import terminal at Cove Point, Md., on the western shore of the Chesapeake Bay into an export facility.

More: Wall Street Journal (subscription required)

GPI Names Bilek to Govt. Affairs and Communications

Amanda Bilek, who has held various positions at the Great Plains Institute since 2008, will become the director of government affairs and communications for the energy think tank.

“I look forward to the challenge of ensuring that our government affairs and communications efforts enhance the impact of our programs,” she said.

“Amanda’s extensive legislative and policy experience coupled with her management and communications skills make her a perfect fit for this new role,” said GPI President Rolf Nordstrom.

More: Great Plains Institute

Invenergy Cuts Deal to Sell Wind Energy to Google

Invenergy announced it has signed a deal with Google to provide the Internet giant with 225 MW of wind energy. Craig Gordon, Invenergy’s vice president of sales and marketing, said the power will be generated at the company’s proposed wind facility near Lubbock, Texas, and will be transmitted through SPP to Google’s energy-hungry data centers.

“They are always looking to partner up with folks like us to green up their energy supply,” Gordon said. “Their needs are growing by leaps and bounds every year, and as a result their energy needs are growing by leaps and bounds every year.” A price was not disclosed.

The agreement is part of a plan Google announced in December to partner with six companies in the U.S., Sweden and Chile to obtain 842 MW of clean energy.

More: Chicago Tribune

Duke Starts Coal Ash Removal from Riverbend Steam Station

Riverbend Steam Station (Source: Duke Energy)

Duke Energy began loading coal ash from its retired Riverbend Steam Station in Gaston County, N.C., using a rail spur it had built for the purpose. The company said each train can carry as much coal ash as 420 dump trucks, alleviating some of the community’s traffic concerns.

Riverbend, on the Catawba River, was retired in 2013, but the coal ash dump there is one of four high-priority sites that have to be cleaned up by 2019. Duke says it will clean up all its coal ash sites by 2029.

More: WSOC TV

Montana Co-ops May Be Facing $5B Bill to Comply with CPP

Montana’s electric cooperatives will likely share in a $5 billion bill to comply with the federal Clean Power Plan, officials said recently.

The $5 billion is what Basin Electric Power Cooperative, an SPP member, estimates it will need to cut greenhouse gases from its coal-fired power plants while also adding wind farms and gas-fired generators as replacement energy sources.

More: Billings Gazette

Basin Electric Growth Rate Projected to Drop to 1.4% Annually

Basin Electric Power Cooperative forecasts new load will increase 1,350 MW over the next 20 years, 739 MW lower than its forecast last year.

The forecast projects a 1.4% annual growth rate across Basin’s membership, down from the previous year’s estimate of 2.5 to 2.9% annually. The cancelled Keystone XL pipeline and oil price fluctuations account for much of the difference.

The load forecast show Basin Electric’s service area growing at twice the rate of the rest of the U.S., even with oil prices at 12-year lows.

More: Basin Electric Power Cooperative

PNM Opens 3rd Solar Facility This Year, Adding 9.5 MW

Public Service Company of New Mexico opened a 9.5-MW solar facility south of Santa Fe, its 15th in the state.

The 40,000-panel solar center is part of the utility’s much debated and critiqued energy portfolio, 15% of which is required by the state to be derived from renewable sources.

In December, the state Public Regulation Commission approved PNM’s plan to close two of four coal-burning units at the aging San Juan Generating Station and replace that power with energy from nuclear and natural gas plants, additional coal power and some solar energy.

More: The Santa Fe New Mexican

Nonprofit Says PNM Broke Law with 64-MW Palo Verde Purchase

An advocacy group is fighting a requested rate increase by Public Service Company of New Mexico, which it says quietly purchased a 64-MW share of the Palo Verde Nuclear Generating Station in Arizona for $163.3 million without getting prior approval from state regulators. PNM previously had leased the capacity from the nuclear plant.

The nonprofit New Energy Economy filed a motion Jan. 20 with the state Public Regulation Commission, along with Bernalillo County, to dismiss a third of the utility’s requested $123.5 million rate hike that would cover the $40 million cost of operating Palo Verde’s Unit 2 for a year, including taxes, maintenance and fuel.

The advocacy group, which has been at odds with PNM for years, said that the utility should have submitted its proposed purchase first to the state commission. PNM said it filed the request in March with FERC, and no public comments were submitted.

More: The Santa Fe New Mexican

Austin Energy Proposes Rate Cut for Most Businesses

Austin Energy has proposed cutting rates for most business customers to reduce revenue by $17.5 million a year.

Austin Energy officials publicly released their suggested rates Jan. 25 in what is shaping up to be a contentious discussion about reallocating costs among different customer classes.

The utility, which has 448,000 customers, says that residential customers as a whole are paying $53 million less than it costs to serve them, while businesses collectively are paying about $62 million more. Its new rates require City Council approval.

More: Austin American-Statesman

Akron Delves into Battery Storage with Solar Project

Smart battery builder Design Flux Technologies, a University of Akron spinoff, is building a battery-management system for a rooftop solar array being built in Akron, Ohio.

The facility will be built by Prism Solar Technology of Highland, N.Y., and will be affixed to the roof of the former B.F. Goodrich Tire plant, a 19th century building that now houses the Akron Global Business Accelerator, a business development organization. Design Flux Technologies is a resident company of the Akron Global Business Accelerator.

The city of Akron’s $173,000 investment in the solar panels and storage equipment is expected to be recovered within five years, with power cost savings estimated between $30,000 and $40,000 annually.

More: Crain’s Cleveland Business

WEC Energy to Replace Retiring CEO with Current President

WEC Energy Group announced last week that current president Allen Leverett will succeed Gale Klappa as chief executive on May 1.

Klappa, 65, is retiring and will serve as nonexecutive chairman. Leverett, 49, was recruited to WEC by Klappa in 2003 after the two worked together at Georgia Power in Atlanta.

The incoming CEO said his priorities will include the continued transition of the Integrys merger, working on upgrades as needed to WEC’s natural gas distribution infrastructure and compliance with Wisconsin’s Clean Power Plan strategy.

More: Milwaukee Journal Sentinel

Exelon Appoints Gioia to Board of Directors

Nancy Gioia, retired director of global connectivity, electrical and user experience for Ford Motor Co., has been appointed to Exelon’s board of directors, effective Feb. 1.

Gioia, 55, will serve on the generation oversight and finance and risk committees.

In more than 30 years at Ford, Gioia led global electrification efforts, working closely with the Edison Electric Institute and the Department of Energy.

More: Exelon

PECO: Smart Ideas Program Increasing Energy Efficiency

PECO Energy customers have received more than $500 million in energy savings, incentives and rebates in the past seven years using the Smart Ideas program, the Philadelphia utility says.

The program provides 15 ways to help residential and business customers save energy and money.

Smart Ideas is part of the company’s effort to increase energy efficiency and demand response capability under the Pennsylvania Public Utility Commission’s Act 129, which requires electric utilities to increasingly reduce their customers’ energy usage through 2021.

More: PECO

FirstEnergy: Lake Shore Power Plant to be Demolished

FirstEnergy engineers say the architecturally significant, defunct Lake Shore power plant in Cleveland is too degraded to restore and will be demolished.

The coal-fired plant, which first generated power in 1911, sits on 57 acres overlooking Lake Erie.

FirstEnergy hopes to begin the $15 million demolition in late spring or early summer, and then offer the cleared site for sale. But the utility can’t proceed with demolition until the city’s Downtown/Flats Design Review Committee issues a permit.

More: The Plain Dealer

$1B Privately Funded Plant will Power 1M Ill. Homes

Competitive Power Ventures plans to open a 1,100-MW combined cycle generating facility in the Three Rivers area of Grundy County, Ill.

The $1 billion CPV Three Rivers Energy Center will consist of two General Electric turbines and one steam turbine. It will be fueled by an existing 36-inch natural gas pipeline on the 80-acre site. The site is near Exelon’s Dresden Generating Station in Goose Lake Township.

Construction is expected to start in 2018, with the facility in operation by 2021.

More: Morris Herald-News

Entergy Names 30-Year Industry Vet to Lead its Nuclear Operations

Chris Bakken will become Entergy’s executive vice president and chief nuclear officer, effective April 6. Bakken replaces Jeff Forbes, who announced his retirement last year, and will report to Leo Denault, Entergy’s chairman and chief executive.

Bakken will be responsible for oversight of New Orleans-based Entergy’s 10 nuclear units at eight sites, which have nearly 10,000 MW of capacity. He will also be responsible for the company’s management services to the Cooper Nuclear Station for the Nebraska Public Power District.

Bakken’s career began in 1982 as a test engineer at Duquesne Light in Pittsburgh. He was most recently executive director for EDF Energy’s nuclear new build group and has also worked for American Electric Power, Public Service Enterprise Group and British Energy.

More: Entergy

February 2, 2016February 27, 2025

ISO-NE Could See Worse Supply Crunch in 2 Years

By William Opalka

New England’s winter energy supply crunch could be worse in two years because the closure of the Brayton Point coal-fired plant and the potential retirement of the Pilgrim nuclear plant will come before additional natural gas pipelines can fill the gap.

“The winter of 2017-2018 is the one that worries me the most, because we will have lost Brayton Point at that point, [and] there’s a question mark about whether Pilgrim is available,” said CEO Gordon van Welie during ISO-NE’s annual “State of the Grid” media briefing last week.

Entergy Closing Pilgrim Nuclear Power Station.)

The RTO’s performance incentives to make additional generation available won’t go into effect until mid-2018. Two proposed large-capacity natural gas pipelines, Northeast Energy Direct and Access Northeast, won’t be ready to serve New England until 2018 at the earliest.

“This will be a period of vulnerability,” van Welie added.

Non-gas generation is finding it increasingly difficult to compete in the energy market, van Welie said.

“During most of the year, the low price of natural gas is setting the wholesale price of electric energy, so power plants using more expensive fuels are getting squeezed financially. As a result, more and more non-natural gas-fired generators are retiring,” he said.

Van Welie

For the third consecutive year, the RTO will use its winter reliability program, which rewards dual-fuel gas/oil generators.

Meanwhile, higher capacity prices have attracted new investment. Capacity auction revenues have quadrupled from about $1 billion three years ago to $4 billion last year. Since auctions for those supplies are held three years in advance, customers have so far been shielded and will not see those price hikes for another year, he said.

Forward Capacity Auction 10, for the 2018/19 period, will be held Feb. 8. Van Welie said 147 new resources, totaling 6,700 MW of new generation, demand response and energy efficiency capacity, have qualified to participate.

February 2, 2016April 7, 2025

SPP Board of Directors/Members Committee Briefs

OKLAHOMA CITY — Acknowledging members’ dissatisfaction, SPP CEO Nick Brown promised the Board of Directors and Members Committee that the RTO will complete the oft-delayed Z2 crediting project this year.

“I know the frustration that’s out there. I’ve had meetings with a number of members over the last year,” Brown said in delivering his annual president’s report during SPP’s quarterly board meeting last Tuesday. “Z2 will be the focus of the organization this year, as it has been the focus of the organization the last several years.”

Brown (© RTO Insider)

The Z2 project began in 2008 as a result of years of incorrect credits for transmission upgrades. SPP staff told the Markets and Operations Policy Committee on Jan. 12 the project’s complexity and challenges in processing historical data has pushed its expected completion to November of this year. (See Latest Z2 Credit Project Delay Renews Old Frustrations.)

Members have been frustrated with their inability to get an idea of their liabilities or credits.

SPP has resisted giving a rough estimate of the sponsored upgrades. Were staff to provide an estimate, “it would be nothing more than a shot in the dark,” Brown said. “I’m hopeful, and I promise we’re looking at engaging all internal resources to accelerate that [November] date.”

According to the project’s latest schedule, staff will begin processing historical data in late March, concluding the process in late August. The first reports will be submitted and reviewed in August and September, with invoicing beginning Nov. 4.

The software handling the process consists of 58 system components and still requires some manual intervention. Brown pleaded for members’ patience, saying, “We’re on a course to get these calculations performed in this calendar year.

“From [a software] engine perspective, it’s a thing of beauty. From a business perspective, boy it’s complex. We’ve got to work very hard this year to balance the persistence of the effort and the patience to wait for the results.”

Noman Williams, MOPC chairman and COO for South Central MCN, said SPP staff and outside consulting firm Accenture have accelerated the project by adding resources, reassigning work and compressing the testing schedule.

While the Z2 project will consume a significant amount of SPP’s resources this year, Brown said the RTO also will be preparing for several audits, helping its members and states prepare to comply with the Clean Power Plan’s federal rules and dealing with cybersecurity issues.

SPP is set for a SERC audit this year, and Brown said he expects the RTO to be one of the first to be audited under NERC’s new Critical Infrastructure Protection version 5 standards effective April 1. He said staff will expend “a tremendous amount of energy the next several months” preparing for the audits.

“We’re pursuing independent third-party assessments, penetration assessments … to get a sense of comfort we’ve done everything we can do” on cybersecurity, he said.

Brown said the RTO will continue to collaborate with states to prepare for the Clean Power Plan and possible trading plans. He said the “winners” will be able to maximize their assets, while the “losers” will be able minimize the effect on their end-use customers.

“It’s going to be an interesting year.”

FERC Audit Reviewing Market Monitor’s Independence

SPP’s Market Monitoring Unit is undergoing a FERC audit to assess its independence, said SPP Director Josh Martin, chair of the Oversight Committee.

Unlike most RTO market monitors, SPP’s monitoring unit is housed internally. Martin said the Oversight Committee has finalized a position statement on the unit’s independence.

“It’s a step beyond where we’ve been in the past,” Martin said. “We wanted to be as clear as we can the MMU is an independent entity.”

According to the position statement, “The Oversight Committee is confident that an internal MMU provides both an appropriate level of independence and the level and depth of expertise needed to perform its functions and does so at a more economical cost than an external contractor.”

The committee performs an annual assessment to “ensure the continuing effectiveness of the SPP’s market monitoring approach,” the statement said.

Potomac Economics, which performs market monitoring for MISO, ISO-NE, NYISO and ERCOT, is conducting this year’s review of the Market Monitoring Unit. It also will be supplementing the Monitor’s staff until two vacancies are filled.

Alan McQueen, the unit’s director, will retire at the end of 2016, Martin announced. He said McQueen has offered to stay for a transition period.

Martin said Boston Pacific’s annual “Looking Forward” report will cover retail customer reactions to the cost of transmission facilities, how to pay for transmission used to export power from the SPP region and market effects from the unit’s decisions.

Market Working Group Addressing Monitor’s Recommendations

American Electric Power’s Richard Ross, chair of the Market Working Group, reviewed the group’s plan for addressing MMU recommendations to improve the Integrated Marketplace.

The Monitor identified nine issues in last year’s annual State of the Market report, ranging from quick-start logic and ramp-constrained shortage pricing, to potential manipulation of make-whole payment provisions. The market report was the unit’s first since the Integrated Marketplace’s March 2014 implementation.

The MWG is working on numerous revision requests and has suggested forming a task force. While the group continues to work on some of the items, Ross said the group can always use SPP’s revision-request process separately, if it thinks progress is too slow.

“I don’t agree with everything being done, but that’s to be expected,” McQueen said. “These are complicated issues, but I agree with Richard’s assessment [that] these things are in flight. I agree … these action items are being addressed.”

Board Chairman Jim Eckelberger said the eventual disposition of the items will be on the July agenda, when a final report is expected.

“I hope it’s final,” Eckelberger said.

Board Approves MISO Settlement Language, Tariff Revisions

The board approved Tariff revisions, previously endorsed by the MOPC, that will set guidelines for distributing revenues from last year’s settlement with MISO over its use of SPP’s transmission grid. The approval was opposed by Xcel Energy and Golden Spread Electric Cooperative. Dogwood Energy abstained from the members’ vote.

“Whenever we have cross-boundary issues on the Xcel system, we’re following protocols,” said David Hudson, president of Xcel subsidiary Southwestern Public Service. “[SPP] will have to show us why this is preferential to what’s already in the Tariff.”

MISO has agreed to pay SPP and impacted members $9.6 million to settle claims for compensation back to 2014. (See SPP Board, Members Discuss MISO Settlement.)

The Regional Tariff Working Group drafted language to handle revenues accrued during three different phases affecting SPP’s transmission system: pre-Integrated System, with the Integrated System and moving forward. It also revised other Tariff sections to take the new revenue distribution into account. SPP has said it favored allocating the money to transmission owners, with benefits flowing through to the grid’s load.

The board also passed a consent agenda that included seven Tariff revisions, five notification-to-construct modifications and the 2016 SPP Transmission Expansion Plan report (Markets and Operations Policy Committee Briefs.)

The STEP report consists of 480 transmission upgrades costing $6.1 billion.

Wind Study, Capacity Margin Work Nears Completion

Bruce Rew, SPP vice president of operations, updated the board on the RTO’s recent wind integration study, which indicated it can handle wind-penetration levels of up to 60% with additional transmission and monitoring tools. (See Study: 60% Wind Penetration Possible in SPP.)

The RTO’s first wind integration study in six years projects the grid operator’s wind energy will grow significantly beyond its current 14% of system capacity.

CEO Brown said he was happy to see the study recommend an additional study using phasor measurement unit applications to provide real-time analysis.

“I’m concerned we’re evaluating our current situation with X-ray technology, when MRI technology is available,” Brown said.

Rew said he was optimistic he can bring full results back to the board’s next meeting in April. SPP is holding a two-day wind study summit in Little Rock, Ark., Feb. 17-18 to gather further stakeholder input.

The board also could see final reports and policy suggestions in April from the task forces looking at SPP’s capacity margin and transmission-planning improvements.

“Get your comments in,” Eckelberger urged the board and members, “because we’re going to have some big decisions to make.”

Longtime Member Working Group Chair Retires

Dennis Reed, most recently director of FERC compliance for Westar Energy, was recognized by the SPP board and members with a standing ovation for his 10 years as chairman of the Regional Tariff Working Group. Reed retired from Westar at the end of 2015, but he has promised to remain a presence at SPP meetings through his new venture, Midwest Regulatory Consulting.

Brown said Reed oversaw 16 RTWG meetings and conducted 92 votes last year alone, which he extrapolated to nearly 1,000 votes overall. He also said SPP’s Tariff was only 796 pages in 2005 when Reed first chaired the working group, but today “it’s 5,530 pages of rates, terms and conditions.”

— Tom Kleckner

February 1, 2016

Dynegy, NRG Ask FERC to Void Ohio PPAs

By Rich Heidorn Jr.

Dynegy, NRG Energy and other independent power producers asked FERC Wednesday to void the power purchase agreements FirstEnergy and American Electric Power have proposed to Ohio regulators, saying the deals fail the commission’s Edgar/Allegheny test regarding affiliate transactions.

PJM, meanwhile, filed an amicus brief with regulators Monday, calling AEP’s assertions that reliability would be threatened if its units retired “a red herring.”

The IPPs and the Electric Power Supply Association jointly filed complaints against the AEP (EL16-33) and FirstEnergy (EL16-34) proposals, saying they were seeking to ensure that “abusive” affiliate power sales contracts do “not evade [FERC] review.”

The Ohio-based companies have proposed PPAs to the Public Utilities Commission of Ohio that would provide a guaranteed return for their embattled generating stations for eight years. PUCO staff has signed on to both proposals.

The complainants said FERC should revoke the waivers it granted AEP and FirstEnergy regarding affiliate power sales to ensure a Section 205 review of the PPAs under the standards the commission set out in its 1991 Edgar Electric Energy Co. (55 FERC ¶61,382) and 2004 Allegheny Energy Supply Co. rulings (108 FERC¶61,082).

The Edgar ruling required demonstration that long-term PPAs utilities sign with their marketing affiliates are reasonably priced compared to alternatives. The commission said such a demonstration could include evidence of competition between affiliated and unaffiliated suppliers or a showing of prices paid by non-affiliated buyers. FERC refined its guidance in Allegheny.

“The fact that AEP has devised, and that the PUCO may approve, a clever scheme to shift costs of this abusive affiliate contract onto consumers does not alter the commission’s statutory duty to protect consumers from the effects of unjust and unreasonable wholesale rates or in any way make it less critical to ensure the integrity of the PJM markets,” the plaintiffs wrote, using nearly identical language in their FirstEnergy complaint.

The complainants cited “fundamental changes in circumstances since the commission granted the waiver that make it unjust, unreasonable and unduly discriminatory to allow AEP Generation Resources to enter into the affiliate PPA pursuant to its blanket market-based rate authorization.”

Quick Action Sought

They asked the commission to act quickly, noting that PUCO may rule on the PPAs as soon as next month and contending the agreements could have a major impact on PJM’s 2019/20 Base Residual Auction in May.

Joining EPSA, Dynegy and NRG in the complaint were the Retail Energy Supply Association and Eastern Generation, a subsidiary of a private equity fund managed by ArcLight Capital Partners, whose generation holdings include an 825-MW natural gas-fired generation facility in Vinton County, Ohio.

The Ohio Consumers’ Counsel filed comments supporting the call for FERC review.

“We expected allegations similar to those made in the complaint that was filed at FERC, and we are confident that the PPA will pass the test,” said FirstEnergy spokesman Doug Colafella.

“FirstEnergy’s Ohio Utilities were granted authority to conduct transactions with our unregulated affiliates after Ohio restructured its electric markets to allow shopping with energy suppliers. This arrangement extends to our proposed purchased power agreement, so absent further FERC orders, separate FERC approval of the PPA is not necessary,” he added. “We carefully evaluated this issue when preparing our filing with the Public Utilities Commission of Ohio — the regulatory agency that is solely authorized to approve the proposed retail stability rider on customer bills associated with the PPA.”

AEP spokeswoman Melissa McHenry said PUCO “is fully able to protect retail customers. So, any allegations that AEP Ohio customers need to be protected from excessive charges are simply untrue.

“The core question for FERC is whether there is retail competition under Ohio law. FERC has determined in other cases that there is competition in Ohio and has agreed that the PUCO is better equipped to make that determination. The AEP Ohio PPA will provide rate stability for all AEP Ohio customers, and they can still choose any supplier for their electricity needs.

“The PUCO has conducted an extensive review process over the last two years to ensure that AEP Ohio customers are treated fairly and benefit from the PPA. The parties filing at FERC should participate in that process instead of appealing to a federal agency for relief at the last stage of the process,” she said.

The plaintiffs said the affiliate PPAs threaten “exactly the harm to both captive consumers and markets that prompted the adoption of [FERC’s] restrictions in the first place,” saying it would “saddle captive Ohio consumers with hundreds of millions or even billions of dollars in above-market costs” and distort prices in the PJM markets by subsidizing the continued operation of more than 6 GW of generation that AEP and FirstEnergy say would otherwise retire.

AEP has said that PUCO must approve or reject the PPA as is, saying it “lacks jurisdiction over the rates and terms” of the agreement. At the same time, the company says it does not intend to submit the agreement for FERC review.

“Failure to review the affiliate PPA would recreate precisely the sort of regulatory gap that the [Federal Power Act] was enacted to fill” in 1935, the plaintiffs said.

‘Greedy Tiger’

To conduct a review of the AEP proposal, the plaintiffs said the commission should first revoke the waiver it granted in 2014 regarding AEP Ohio, a franchised public utility, and its market-based affiliate AEP Generation (ER14-593). Because of Ohio’s retail choice, the AEP companies said in their petition for a waiver, AEP Ohio would not have captive retail customers.

The plaintiffs said that is not true regarding the proposed PPAs because they would be funded by surcharges on all customers within AEP and FirstEnergy’s service territories, regardless of whether they take provider of last resort service from the utilities or purchase from a competitive retail supplier.

“These retail customers could not be more captive with respect to costs of the affiliate PPA[s] if they were locked in a cage with a greedy tiger,” they said.

As evidence that the PPAs would impose above-market costs, they cited the counteroffer Dynegy made to PUCO earlier this month, which the company said would save consumers $5 billion. Exelon also has made a counteroffer it says would be cheaper. (See Next up in Ohio PPA Battle: Dynegy Weighs in.)

The plaintiffs also cited the “enormous” impact the PPAs would have on the PJM markets.

“This case involves the same issue of ‘uneconomic non-exit’ — i.e., subsidized retention of resources that would otherwise have left the market — with which the commission has been confronted in other proceedings. Because capacity markets are designed to convey the price signals needed both to encourage entry of economic new resources and to discourage the premature exit of economic existing resources, it follows naturally that uneconomic non-exit will present the same threat to such markets as uneconomic entry.”

$8 Billion in Excess Costs

The Ohio Consumers’ Counsel (OCC) said it was up to FERC to protect the state’s consumers from excess costs that could top $8 billion.

The counsel cited testimony by its consultant James Wilson, who projected that FirstEnergy’s 1.9 million consumers could each pay about $800 ($3.6 billion total) and AEP’s 1.3 million consumers could each pay about $700 ($1.9 billion) over the eight years of the PPAs.

Dan Doron, spokesman for the OCC, said the costs could be much higher if the power plants fail to clear in PJM’s energy and capacity markets.

PJM Market Monitor Joe Bowring has said the generators should not be allowed to participate using subsidized prices. In testimony to PUCO, Bowring said that the generators would “be returned to the cost of service regulation regime that predated the introduction of competitive wholesale power markets.”

Doron said that if the plants cannot participate in the PJM wholesale markets, “the estimated subsidies could increase to over $1,100, on average per customer, for FirstEnergy consumers ($5.15 billion) and over $1,000, on average per customer, for AEP Ohio consumers ($3.1 billion).”

PJM: Reliability Arguments a ‘Red Herring’

On Monday, PJM filed a 12-page amicus brief with PUCO, criticizing AEP’s assertions that reliability would be threatened if its units retired.

The RTO said new generation has replaced plants that retired in the past, ensuring Ohio continues to meet resource adequacy targets.

“Arguments that approval of the stipulation is needed to ensure reliability in Ohio are wide of the mark and represent a proverbial ‘red herring’ that should not distract from consideration of the issues presented in the record as to the merits of the proposed stipulation itself,” PJM said.

PJM also urged the commission, if it approves the proposal, to clarify that offers from the units must be no lower than their actual cost, without consideration of revenue under the deal.

The RTO also said that the generators’ owners — not ratepayers — should bear any nonperformance penalties under its Capacity Performance construct.

CEO Andy Ott echoed the RTO’s position in a response to several of those who have written letters to PJM’s Board of Managers seeking its intervention against the PPAs.

Timothy R. Eves, vice president of NTE Energy, which is building a 475-MW natural gas generator in Butler County, Ohio, said in a Jan. 27 letter to the board that the PPAs would “undermine confidence in the PJM markets and can lead to a chilling effect on future power plant development.”

He asked PJM “to swiftly take necessary actions at the state-level, RTO-level and at FERC to mitigate this looming harm.”

Oregon Clean Energy, an 860-MW gas-fired generator under construction in Lucas County, Ohio, made a similar appeal in a letter Jan. 22.

Suzanne Herel contributed to this article.

January 28, 2016November 5, 2023

Entergy: Clean Energy Standard Won’t Save FitzPatrick

By William Opalka

Entergy said Wednesday that New York’s proposed incentives for three of the state’s four nuclear sites is too little, too late to save the James A. FitzPatrick plant. The company’s stance appears calculated to provide leverage for its Indian Point plant, which was excluded from the state’s plan.

Staff of the New York Public Service Commission on Monday released a clean energy standard proposal that includes incentives for the state’s upstate nuclear fleet to remain a zero-emissions “bridge” until large-scale renewable generation is in place. Gov. Andrew Cuomo wants the PSC to adopt the CES by June. (See New York Would Require Nuclear Power Mandate, Subsidy.)

“We have advocated for a clean energy standard in New York for several years. Unfortunately, whatever this program may turn out to be, it would not be in place in time to change the outcome for FitzPatrick,” the statement said.

The company in November said it would close the 838-MW plant near Syracuse in early 2017 due to low energy prices and repeated that stance a month later when Cuomo’s offer of incentives became known. (See Entergy Rebuffs Cuomo Offer; FitzPatrick Closing Unchanged.)

“We do not know when the support might become effective, how much it might be, what terms and conditions would apply to receiving support or many other important details. And it appears that those details will not be addressed until later this year, at the earliest. Under these circumstances, we remain focused on safely operating FitzPatrick through the end of its current operating cycle, then safely decommissioning the plant,” the statement continued.

Entergy is advocating the CES be applied to its Indian Point plant in the Hudson Valley, a facility Cuomo has vowed to close due to its proximity to New York City.

“If the state is focused on reducing CO₂emissions, the clean energy standard should apply to Indian Point, which is an essential generation resource critical to the state’s goal of reducing CO₂ emissions,” it said.

Exelon, the owner of New York’s other two nuclear plants, was more receptive to the CES plan.

“Our initial impression is that the proposed mechanism to support the continued operation of upstate nuclear facilities as a ‘bridge’ to a low-carbon future could provide a meaningful path to sustain these facilities, which are vital to achieving New York’s clean air objectives,” Exelon said.

The company’s R.E. Ginna plant outside Rochester is likely to close in early 2017 when its ratepayer-subsidized reliability support services agreement expires. Its Nine Mile Point plant, adjacent to FitzPatrick, is also under financial stress.

“The implementation timeline is reasonable. We need to be certain that the mechanism provides the ability to maintain the safety and reliability of these facilities as the primary consideration. The economics of the proposal will be a critical determiner of its success, and we look forward to working with the governor, the PSC and other stakeholders to learn more,” Exelon said.

January 26, 2016November 5, 2023

New York Would Require Nuclear Power Mandate, Subsidy

By William Opalka

New York utilities would be required to procure more than 15% of their forecasted load in 2020 from struggling upstate nuclear power plants under a proposal now before the state’s Public Service Commission (15-E-0302).

The staff white paper on a Clean Energy Standard released late Monday also sets a goal of obtaining 29.5% of the state’s energy from renewable resources by 2020. Gov. Andrew Cuomo wants the PSC to finalize the CES by June.

The interim targets are part of Cuomo’s proposal to procure 50% of its energy from “clean” sources by 2030. The nuclear component is an economic lifeline to three struggling plants in western New York while also providing a “bridge” until renewable resources are developed at a mass scale, said Scott Weiner, director for markets and innovation. The three plants provide about half of the state’s nuclear energy; overall, nuclear provides 30% of New York’s electricity. The state’s fourth nuclear facility, Indian Point north of New York City, has been targeted for closure by Cuomo and is excluded from the proposal.

“The closure of the upstate New York nuclear plants due to the current natural gas market prices, and concomitant electric prices, would have a large negative impact on the state’s ability to meet its carbon reduction goal,” the paper states. “If the upstate New York power plants were to close in the near term, New York would have to procure more of its electricity from fossil fuel generating plants, primarily those burning natural gas, resulting in significant increases in carbon dioxide, nitrogen oxide and other air pollutants.”

‘Tier’ for Nukes

A new “Tier 3” would be created for nuclear facilities under the CES.

States with a renewable portfolio standard or a CES create tiers to distinguish between different types of clean energy resources and designate load requirements for each. In New York, Tier 1 is reserved for new renewable resources and Tier 2 is divided among existing renewables.

“The use of these three tiers will allow for clear connectivity among CES program elements and desired outcomes,” the proposal states.

Under the proposal, the nuclear requirement would start out at 4.6% in 2017 and escalate yearly through 2020. The mandate would start April 1, 2017, the day that both Exelon’s R.E. Ginna and Entergy’s James A. Fitzpatrick nuclear stations on Lake Ontario are now expected to close.

Ginna is seeking ratepayer subsidies to continue operating temporarily for grid reliability. Entergy announced plans to close the FitzPatrick plant because of low energy prices, and a third plant, Exelon’s Nine Mile Point, is under financial pressure.

All three plants are assumed by the white paper to remain open, although Entergy said last month that the governor’s incentives would not change their plans to retire FitzPatrick. (See Entergy Rebuffs Cuomo Offer; FitzPatrick Closing Unchanged.)

The renewable energy goals also would increase over time, from 26.8% in 2017 and 29.5% in 2020, reaching 50% in 2030. Targets for 2020 through 2030 will be added later.

Nuclear plants would be eligible to earn Zero Emission Credits (ZECs), similar to renewable energy credits (RECs) earned by wind and solar generators. Like RECs, ZECs will be tradable, but the two would not be interchangeable under the plan.

The maximum price of ZECs would be administratively set by the PSC. The white paper said that is intended to counter the potential exercise of market power, because of the limited number of facilities producing nuclear energy.

Prices “should be updated every year based upon the difference between the anticipated operating costs of the units and forecasted wholesale prices. In this manner the commission will be only setting an appropriate and fair value of the environmental attribute and will be acting independent of the actual wholesale prices for energy and capacity in the NYISO administrative market,” the proposal states.

An environmental group that advocates the closure of the plants said the nuclear component of the CES is a “slap in the face to the communities” affected by the plants.

“Nuclear power reactors may not emit carbon dioxide or methane, but that doesn’t make them clean or safe,” said the Alliance for a Green Economy. “The Public Service Commission is writing a blank check from electricity consumers to Exelon and Entergy corporations, owners of the aging upstate nuclear plants. Exelon and Entergy stand to gain hundreds of millions of dollars per year from this policy, while everyday people are left in the cold and the dark.”

A business group supports the overall policy but is worried about its cost.

Darren Suarez, director of government affairs for The Business Council of New York State, said Monday that his group supports the commission’s efforts to “grow renewable energy and conservation measures, and address the challenges of the state’s nuclear generators.”

“However, we remain concerned that the projected savings could vanish quickly, especially if customers are forced to subsidize a costly CES,” he added.

Anne Reynolds, the executive director of the Alliance for Clean Energy New York, said its members have a “keen interest” in the CES. ACENY has no position for or against nuclear power but hopes New York’s moves to keep it in the state’s energy mix are temporary.

“We were glad to see the reference to nuclear as a bridge to a renewables future, but we hope it does not become a permanent bridge that would preclude the development of renewables,” Reynolds said.

New York’s most recent renewable portfolio standard expired in 2014. State regulators have been discussing a revised RPS for months in a so-called large renewables proceeding. Nuclear generation has now been added to the proceeding.

‘Drama’

The nuclear mandate was outlined at Thursday’s commission meeting.

The meeting started with “drama,” as PSC Chair Audrey Zibelman put it, when the Republican-led state Senate hand-delivered a letter to the commission seeking a delay in action on the CES and the creation of a $5.3 billion Clean Energy Fund.

The letter, signed by Majority Leader John Flanagan, his deputy and the head of the energy committee, said action was “premature” on the CEF, another order that’s part of the state’s Reforming the Energy Vision proceeding.

“The CEF is a major fiscal initiative and has the potential to be even larger when taking into account the CES,” they wrote. “While we do not believe the commission is taking the fiscal implications of these initiatives lightly, it is the position of the conference that these proceedings would be strengthened by a real cost-benefit analysis and genuine opportunity for public input.”

The commission held a 38-minute executive session to discuss the letter but decided to proceed. Zibelman was particularly pointed in saying the letter failed to demonstrate any reason for the commission to delay action.

“This petition was filed in 2014 and there has been considerable opportunity for public commentary both in terms of the number of public statements, hearings and meetings … as well as the process before us,” she said. “There’s no question that we have in front of us a very robust record.”

For administrative ease, Zibelman said, the CES has been rolled into the existing proceeding for large-scale renewables (15-E-0302) rather than a new docket.

January 26, 2016April 22, 2024

State Briefs

PSC Considering Entergy’s $133M Rate Increase

The Public Service Commission is considering a proposed settlement that would increase Entergy Arkansas rates by more than 8%.

The commissioners will vote in February on a settlement that would give Entergy an increase of $133.6 million, 20% less than the $167 million increase the utility originally sought. The settlement was reached between the utility and several entities, including the attorney general’s office and Entergy’s major commercial customers.

Entergy said the increase is needed because of improvements to its electrical infrastructure and its $237 million purchase of an interest in a gas-fired generation plant. The settlement would allow Entergy a 9.75% return on equity.

More: Arkansas Democrat-Gazette

CONNECTICUT

Rooftop Solar Program Praised by Governor

Gov. Dannel Malloy showed up as a booster for a public-private partnership that brings solar panels and lower electricity bills to the state’s residents. The Solar for All initiative links residents with PosiGen Solar and Energy Efficiency, a solar system installation company.

The company offers solar panel installation under a 20-year agreement at an introductory price of $20/month for the first year if more than 50 households sign up. After the first year, the basic charge goes up to $79/month for a 6-kW system. The program is subsidized by a $5 million investment by the state’s Green Bank program as part of a way to lower greenhouse gas emissions in the state.

More: New Haven Register; PosiGen

INDIANA

Wind Turbine Shrinks School District’s Power Bill

The Shenandoah School District reported it had a zero balance on its December electricity bill, thanks to a wind turbine it installed two years ago.

According to school officials, the 900-kW turbine is intended to supply 85% of the power used by the elementary, middle and high schools. District Business Manager Julia Miller said the district pays between $105,000 and $112,000 annually for electricity, about half its bill before the turbine went into service.

Shenandoah School District used government bonds to finance the $2.6 million turbine, which is expected to pay for itself within 10 years.

More: News-Sentinel

KANSAS

Legislators Blast $20M Deal for Capitol Grounds’ Power Plant

Legislators are upset Gov. Sam Brownback’s administration signed a $20 million lease-purchase for construction of a new state power plant in Topeka that they say sidesteps legislative oversight.

Members of the House and Senate expressed frustration with the 15-year contract executed Dec. 29 because the total cost was millions of dollars higher than previously disclosed, the first payment wasn’t included in Brownback’s budget and the arrangement had not been approved by the state’s joint building committee.

In October, the Department of Administration said the heating and cooling plant to be located one block north of the Capitol would cost about $12 million. The previous estimate shared with legislators monitoring state building projects was $9 million.

More: The Topeka Capital-Journal

Bill Killing Tx Authority Criticized by Wind Advocates

A bill that would terminate the funding for the Electric Transmission Authority, which was formed a decade ago because it was thought utilities were not developing sufficient transmission lines, is being seen as a threat to future wind projects in the state.

Sen. Robert Olson, chairman of the Senate Utilities Commission, said transmission planning is now largely done by SPP and the transmission authority is unnecessary. But wind energy advocates say the state-centric transmission authority stimulated the growth of wind energy by developing a robust transmission system in Kansas.

More: Midwest Energy News

MICHIGAN

PSC Launches Investigation into Consumers’ Estimates

The Public Service Commission is investigating the way Consumers Energy estimates bills after about 300 customers last year complained about inaccurate bill estimates. The commission has asked the company to file a report by Feb. 18 detailing its staffing levels and its communications process with customers on billing estimates, along with an accounting of the number of bills that were underestimated or overestimated.

“One of the issues that has come up in our meetings is the algorithm the software uses in calculating and estimating what a bill would be,” said Judy Palnau, a PSC spokesperson. “Is it possible the algorithm needs adjusting?”

A company spokesman said it estimates bills when it is unable to read a customer’s meter.

More: Mlive

MISSOURI

Ameren to Help Noranda Smelter, Asks for Regulation Changes

Ameren Missouri said it is working with lawmakers to change utility regulations to help Noranda Aluminum, a smelter that buys 10% of the utility’s power. The smelter has threatened to shut down if it cannot reduce its energy costs.

The St. Louis utility wants regulations modeled on those in neighboring Illinois, where “near-automatic” annual rate increases are offered in return for more grid investment. The change would reduce the Public Service Commission’s authority in utilities’ rate structure and rate adjustments.

Noranda has said it will lay off almost 500 of the 850 smelter workers by February and will wind down operations by March 12 unless it can “secure a substantially more sustainable power rate for the smelter,” according to the St. Louis Post-Dispatch. The announcement was prompted by a power outage that shut down two of the smelter’s three aluminum production lines.

More: St. Louis Post-Dispatch

MONTANA

CPP Rules Threaten Coal Plant, Economy Officials Say

Shutting down one or more units at Colstrip’s 40-year-old coal-fired power plant complex would devastate the state’s economy through possible job losses and higher power bills, state elected officials and industry backers said Jan. 18 in Billings.

The discussion centered on concerns that EPA’s proposed Clean Power Plan, which calls for the state to reduce its carbon emissions by 47%, will have an adverse impact on Colstrip, where four power units produce 2,094 MW and employ about 350 workers. The plants are the state’s biggest producers of greenhouse gases.

The Colstrip plant has six owners: NorthWestern Energy, Talen Energy, Portland General Electric, Puget Sound Energy, Avista and PacifiCorp. The latter four market power in Washington and Oregon, where legislators are proposing new laws this year to cut cross-state purchases of coal power.

More: Billings Gazette

NEBRASKA

Local Utilities Rejecting NPPD’s 20-Year Wholesale Contracts

A dozen towns and one regional power provider have spurned Nebraska Public Power District’s demands for 20-year wholesale electric contracts.

NPPD’s current 20-year contracts expire at the end of 2021, but the utility asked its customers to commit to new contracts now to protect its bond rating. NPPD has inked new contracts with 62 of its 75 wholesale customers, which include rural public power districts and municipal buyers that made up 92% of the district’s revenue in 2014.

But some wholesale customers have opted to shop around SPP for competitive suppliers. For most of NPPD’s wholesale customers, this is the first contract negotiation in which it has been feasible to look for alternative suppliers in the RTO’s broader market.

More: Lincoln Journal Star

NEW HAMPSHIRE

Jury Slams ENH Power for Stealing Customer Info

A Superior Court jury ordered the parent company of the state’s largest competitive supplier of electricity, ENH Power, to pay more than $500,000 in damages to a smaller competitor for stealing confidential customer lists, sales leads and other proprietary information.

The Rockingham County jury found that ENH officials convinced an employee of Freedom Companies to steal the information and give it to them. An attorney for ENH vowed to appeal.

More: New Hampshire Union Leader

Anti-Pipeline Bills Reviewed by Lawmakers

Two bills introduced to impede efforts to build a natural gas pipeline through the state came under review by lawmakers, but some legislators questioned whether they have the ability to regulate interstate projects, which typically come under federal jurisdiction.

The legislation was introduced in response to Kinder Morgan’s plan to build the $5 billion Northeast Energy Direct pipeline to deliver shale gas from Pennsylvania through Massachusetts and part of New Hampshire. One bill would levy a tax on gas transported through the state, and the second would prohibit passing any of the construction charges to state residents.

Kinder Morgan has vowed to oppose the legislation. “We believe that at a time when New Hampshire residents are paying among the highest energy rates in the country, that it would be inappropriate to potentially increase those costs through a new tax,” said spokeswoman Susan Geiger.

More: New Hampshire Union Leader

NEW JERSEY

Environmental Group Fights Proposed Power Plant

The Sierra Club is protesting a Massachusetts company’s proposal to build a natural gas-fired power plant on 423 acres in Hillsborough.

Jeff Tittel of the Sierra Club said the site is environmentally sensitive because of its proximity to the Delaware and Raritan Canal and it contains wetlands.

Genesis Power’s $1 billion Amwell Energy Center would generate enough electricity to power 700,000 homes.

More: myCentralJersey.com

NEW MEXICO

Town Gets Solar Farm, New Wholesale Power Contract

Guzman Energy has struck a seven-year agreement with the city of Aztec that supplies the city with power at a substantial savings from the current municipal supplier.

Guzman agreed to build a 1-MW solar farm that will generate about 8% of the city’s electricity and supply the remainder of the power from Guzman’s other assets. The new contract sets the price at 5 cents/kWh.

The agreement will replace Aztec’s expiring 10-year deal with Public Service Company of New Mexico that started out at 7.5 cents/kWh and included yearly increases based on natural gas futures, the city said. Those yearly increases mean the city is actually paying PNM closer to 8 cents/kWh.

More: The Daily Times

NEW YORK

NYC Launches Pilot to Switch Food Trucks to Solar

New York City has started a pilot program to convince mobile food vendors to switch to clean energy by subsidizing food carts that are equipped with solar panels and battery storage systems.

MOVE Systems, a New York firm that has developed carts with solar panels on their roofs, hopes the PV carts would reduce vendors’ energy costs by 20%, and could also cut greenhouse gas emissions from the city’s estimated 8,000 food trucks and carts by 60%. The carts would also have backup propane generators.

Most of the vendors now use propane or diesel generators.

More: International Business Times

NORTH DAKOTA

PSC Sets Hearing for Wind Farm, Tx Project

The Public Service Commission scheduled a public hearing for March to consider a proposed wind energy project and transmission line in Stark County.

Brady Wind, a subsidiary of NextEra Energy Resources, proposes to erect as many as 87 wind turbines to generate 150 MW of electricity at an estimated cost of $235 million. The company is also looking to build a 19-mile 230-kV transmission line from the project.

It’s the second attempt for NextEra to build a wind farm in the area. The Stark County Commission in May rejected a conditional use permit for a project of similar size, which was planned for a 61-square-mile area in eastern Stark County between Gladstone and Richardton.

More: The Bismarck Tribune

OKLAHOMA

PSO Enacts Interim Rate Increase While it Awaits Ruling

Public Service Company of Oklahoma said it will put an interim electric rate increase into effect that will generate $75 million while it awaits a final decision from the Corporation Commission on its formal $169 million rate-increase request.

Under state law, utilities are allowed to implement interim rates if they don’t get a final decision from the commission within six months. The interim rates are subject to refund if the commission doesn’t grant PSO’s full request.

The utility said that customers will actually pay less under the new rate structure because the higher rates are more than offset by lower electricity costs attributed to cheap natural gas prices. PSO said a typical residential customer using about 1,100 kW of electricity a month should see bills fall by $2.44.

More: The Oklahoman

PENNSYLVANIA

UGI Utilities Requesting Distribution Rate Increase

UGI Utilities is asking for a distribution rate increase now that a settlement with the Public Utilities Commission barring it from doing so has expired.

After a 2011 gas explosion killed five people in Allentown, the company agreed to expedite its replacement of old natural gas distribution lines, improve leak detection and pay a $500,000 civil penalty. The settlement also prohibited UGI from imposing a distribution system improvement charge for two years.

Filing for a base rate increase is a prerequisite to adding a system-improvement charge. The requested hike would raise an average residential customer’s bill by about 19.7% and a commercial consumer’s bill by about 7.4%.

More: The Morning Call

State Orders Crackdown on Methane Emissions

Gov. Tom Wolf announced a state-directed crackdown on methane emissions from shale gas wells and pipelines last week, in an attempt to address the problem of releases of the gas that had so far been unregulated. The four-part plan will involve a new permitting process for shale gas wells, a new permitting process for pipeline compressor stations and gas processing facilities, leak limits at existing gas and oil facilities, and establishment of best practices to address leaks.

Methane has 84 times the heat-trapping capabilities of carbon dioxide, another greenhouse gas that gets more attention.

“These regulations will improve our air, address the urgent crisis of climate change and help businesses reclaim product that is now wasted,” Wolf said. “The best companies understand the business case for reducing methane leaks. Methane that doesn’t leak into the atmosphere can be used for energy production.”

More: Pittsburgh Post-Gazette

VIRGINIA

Draining of Dominion Coal Ash Ponds Months Away

Dominion Resources says it needs to complete design work before it begins to drain two coal ash ponds into the Potomac and James rivers.

The State Water Control Board granted Dominion permission to “dewater” its coal ash retention ponds at its Possum Point and Bremo Bluff stations. Possum Point is on the Potomac River and Bremo Bluff is on the James River. Several environmental groups, and at least one state agency, say they plan to appeal the board’s decision.

Dominion is also investigating remediating ash impoundments at two other plants.

More: Bay Journal

January 26, 2016April 7, 2025

FERC to Investigate Rates of 4 Natural Gas Pipeline Cos.

By Suzanne Herel

FERC on Thursday called for an investigation into four interstate natural gas pipelines that it believes might be charging shippers in PJM, ISO-NE, NYISO and CAISO too much.

The pipelines — Empire Pipeline (RP16-300-000), Iroquois Gas Transmission System (RP16-301-000), Columbia Gulf Transmission (RP16-302-000) and Tuscarora Gas Transmission (RP16-299-000) — have been ordered to file a cost and revenue study within 75 days and appear before an administrative law judge for evidentiary hearings.

The ’ earnings were flagged in a FERC review of annual reports filed by 129 pipeline companies for 2013 and 2014. The analysis found returns on equity for the four pipelines ranged from 15.8% (Empire, 2013) to 24.9% (Tuscarora, 2014). The industry average ROE is a little more than 12%.

“These estimated levels of returns led staff to believe that these four pipelines are over-recovering their costs of service and may be charging rates that are no longer just and reasonable,” James Sarikas, of FERC’s Office of Energy Market Regulation, said in a presentation to the commission. “In addition, none of these pipelines have an existing settlement with its customers that places a currently effective moratorium on existing rates, or requires it to file a new general [Natural Gas Act] Section 4 rate case in the future.”

First Probes Since 2013

The probes are the first in two years to be conducted under Section 5 of the NGA, designed to protect consumers from excessive rates and charges.

Empire Pipeline’s Tioga County Extension Project (Source: National Fuel Gas)

FERC in 2009 began a regular, in-depth review of the cost and revenue information filed by large pipelines and in 2011 expanded its focus to include smaller operations.

In that time, the commission initiated 10 proceedings to determine if the pipelines’ transportation and storage rates might not be just and reasonable. Eight of those investigations ended in settlement agreements, and two were terminated.

Dena Wiggins, president of the Natural Gas Supply Association, which represents gas producers and marketers, said her group was pleased that FERC had opened the investigations, adding that they underscore a need for revisions to Section 5.

“Legislation that reforms Section 5, granting FERC the authority to award refunds to shippers in cases where pipelines are determined to have overcharged, would further enhance consumer protections, since currently FERC can only order an overearning pipeline to lower its rates going forward from the date of the commission’s order,” she said in a statement. “Now that FERC has adopted a new modernization surcharge policy that grants interstate pipelines new opportunities to recover costs outside of a general rate case, Section 5 reform is more important than ever.”

Pipelines Span the Country

FERC’s orders outlined their concerns over the companies’ earnings:

Empire, an affiliate of National Fuel Gas, received authorization in 2011 to construct the Tioga County Extension Project, which enables it to transport natural gas south from Canada and product from the Marcellus shale north from Pennsylvania. It had not filed a rate case since 2006. The commission’s review found Empire earned $24.6 million after income taxes in 2013, an ROE of 15.8%, and $28.6 million (20.2%) the following year.
Iroquois, which owns pipelines from the Canadian border through New York and western Connecticut, has not adjusted its rates since 2004. FERC said it had an after-tax return of $54 million (16.2%) in 2013 and $55.6 million (16.3%) in 2014.
Columbia Gulf operates about 3,400 miles of pipeline located primarily in Louisiana, Mississippi, Tennessee and Kentucky. Its current rates are the result of a 2011 settlement agreement, which barred it from seeking to modify rates before April 1, 2014. The company earned $21.9 million (17.3%) for 2013 and $26.4 million (18.2%) for 2014.
Tuscarora, which operates a 229-mile pipeline in Nevada and northwestern California, had not had a rate examination since a 2012 settlement with the Nevada Public Utilities Commission. FERC’s review indicated earnings of $9.7 million (23.6%) for 2013 and $9.6 million (24.9%) for 2014.

January 26, 2016

ATC to Separate Legacy Assets from Development Arm

American Transmission Co. won permission from FERC last week for a corporate reorganization that will split its existing transmission assets from its development partnership with Duke Energy.

ATC said the separation was driven by its owners — utilities, co-operatives and municipalities — who were unwilling or unable to take part in projects outside of the company’s 9,500 miles of “existing core transmission” in Wisconsin, Michigan, Illinois and Minnesota.

FERC approved the creation of a new holding company, ATC Holdco LLC, which will assume most of ATC’s 50% share in Duke-American Transmission Co., which is seeking development opportunities in PJM, MISO and SPP (EC16-47).

ATC’s owners can remain invested in the legacy transmission only or exchange their interests for shares in the development arm.

The companies pledged to not pass on any transaction-related costs to customers for five years, but FERC reminded them that the commission doesn’t allow rate recovery to finance transactions.

“Regardless of the terms of applicants’ hold-harmless commitment, we remind applicants that the commission historically has not permitted rate recovery of acquisition premiums,” FERC wrote in the order, issued Wednesday. “If applicants seek recovery of any acquisition premium associated with the transaction, they must be able to demonstrate in a subsequent proceeding … that its acquisition was ‘prudent and provides measurable, demonstrable benefits to ratepayers.’”

No comments were filed opposing the transaction. Wisconsin Electric Power Co. and Wisconsin Public Service Corp. submitted their written support.

— Amanda Durish Cook

January 26, 2016

FERC: Entergy not Required to Buy from Large QFs

By Tom Kleckner

Entergy’s operating companies don’t have to sign new purchase power agreements with most qualifying facilities above 20 MW, FERC ruled last week (QM14-3-000).

Because of their membership in MISO, the commission said, the Entergy companies had met their “statutory standard” under a 2006 order in which the commission revised its regulations implementing the Public Utility Regulatory Policies Act.

In a separate order, the commission granted Arkansas Electric Cooperative Corp. (AECC) similar relief based on the 2006 order, which said that QFs with net capacity above 20 MW were presumed to have “nondiscriminatory access” to wholesale markets in RTOs such as MISO.

The commission denied Entergy’s request for relief regarding one QF, Dow Chemical’s Plaquemine facility south of Baton Rouge, La., which it said faced transmission constraints.

Excluding the Dow facility, FERC said MISO provides all “over-20 QFs” in Entergy’s territories “nondiscriminatory access to independently administered, auction-based day-ahead and real-time wholesale markets for the sale of electric energy and to wholesale markets for long-term sales of capacity and electric energy.”

Entergy’s request was supported by the Louisiana Public Service Commission but protested by several industrial customers with QFs.

The Louisiana PSC said QFs in Entergy’s service territory have nondiscriminatory access to MISO’s markets and noted the company’s request “was made in part to satisfy the Louisiana commission’s requirements — which included removing the PURPA ‘put’ obligation — in approving MISO membership for Entergy Gulf States Louisiana and Entergy Louisiana.”

Justice Department Investigation

Protests by Occidental Chemical and Formosa Plastics cited an open Department of Justice antitrust investigation into Entergy’s transmission practices. Formosa said FERC should deny Entergy’s application pending a resolution of the investigation, noting that the department sought to have Entergy divest its transmission system. Occidental said that MISO had not approved transmission improvements to relieve the Amite South load pocket.

The commission said that because Amite South is import constrained, Occidental’s Taft QF was not prevented from selling energy outside the load pocket, and noted that LMPs at the plant are higher than average LMPs in MISO.

“Moreover, as Entergy points out, any energy which the Taft QF sells to load-serving entities outside the Amite South load pocket, including through the sub-regional power balance constraint to load-serving entities in MISO Midwest would, therefore, most often relieve congestion caused by the constraint, rather than be barred by it, and would instead receive congestion credits,” FERC said.

In contrast, FERC said, Dow’s 1,491-MW Plaquemine QF is located in a generation pocket, which is export constrained and subject to lower LMPs than the rest of MISO.

Entergy told FERC that transmission upgrades are scheduled to go in service around the Dow facility in December 2018. FERC said Entergy will be able to file for termination of its obligation to the Dow QF once the upgrades are completed.

The commission emphasized that granting Entergy’s application “does not relieve Entergy of its obligation to abide by its existing agreements.”

Entergy told FERC it would honor existing contracts “pending satisfaction of applicable contract termination requirements” and said it would not “seek to terminate any existing agreements effective prior to 120 days” after its request was accepted. FERC’s order was effective Oct. 23, 2015, the date of Entergy’s filing.

AECC Request Approved

In a related order, FERC also granted AECC’s request to terminate its PURPA obligations for “over-20” QFs in MISO (QM15-3-000).

AECC made the request in April on behalf of itself and its 17 members, 14 of which are in MISO, but later amended the application so that it applied solely to the cooperative. The commission agreed with AECC that it relies on Entergy Arkansas’ transmission system to serve its members’ load.