ST. PAUL, Minn. — MISO, SPP and intervenors in the dispute over MISO’s use of SPP transmission to deliver power between its northern and southern regions have begun circulating drafts of a settlement amid optimism that it will be filed with FERC in October (ER14-1174).
Discussions on how costs paid to SPP will be allocated within MISO will begin in September “on a separate track,” Eric Stephens, deputy general counsel, told members at the MISO Informational Forum last week. Stephens said confidentiality rules on the settlement talks prevented him from discussing specifics of the deal.
But Market Monitor David Patton told the Markets Committee of the Board of Directors later that the settlement will allow MISO to eliminate use of its $9.57/MWh “hurdle rate” in determining whether to allow more than 1,000 MW of power flows between its two regions.
“We need to make sure that’s the case, but I think the team at MISO did a good job of moving the settlement in a direction that allows us to do that,” Patton said.
MidAmerican Energy’s Dehn Stevens told the Board of Directors meeting later that the Transmission Owner sector is “very comfortable with where [the settlement is] at.”
Organization of MISO States President Libby Jacobs told the board that her group is “very optimistic that there’s resolution on the horizon.”
“OMS would encourage that to be rapidly finished so that everyone’s focus can be on other issues,” she said.
In spring 2014, MISO began limiting flows between its northern and southern regions after SPP complained that MISO breached their joint operating agreement by moving power over its transmission footprint in excess of a 1,000-MW contract path.
While seeking to resolve the dispute with SPP, MISO implemented a $9.57/MWh hurdle rate — an adder to the LMPs of the importing sub-region — to establish market signals indicating when the savings from avoided redispatch costs exceed SPP’s additional transmission charges.
Patton: Fear of FTR Gaming over WAPA Integration Hasn’t Materialized
Patton told the Markets Committee that his staff has seen little evidence to confirm fears that SPP’s integration of the Western Area Power Administration (WAPA) could give market participants an opportunity to game the market by buying financial transmission rights from SPP “whose value predictably would change significantly” following the integration.
“We didn’t see a lot of participants engage in strategic FTR purchases the way we had thought they would,” Patton said.
He said his staff is continuing to review how SPP’s dispatch including WAPA affects MISO’s constraints in the FTR market and market-to-market process.
“We don’t have significant concerns, but it is a significant change because WAPA stretches from the Dakotas down to the southern end of SPP. It’s a huge change in their configuration. You can think of it as similar to our integration of MISO South.”
“So, no red flags, just continued vigilance?” asked Director Michael Curran.
The New York Public Service Commission on Friday requested NYISO to perform reliability studies in western New York after NRG Energy announced it was retiring one coal plant and suspending plans to convert another to natural gas.
NRG said Aug. 25 it would retire the 380-MW Huntley Generating Units in Tonawanda, north of Buffalo, and halt plans to convert the 435-MW Dunkirk Station, southwest of Buffalo, to natural gas.
The PSC request capped a week in which NRG’s announcement and protests over ratepayer subsidies to a third plant roiled the upstate New York power market, putting more than 1,100 MW of generating capacity in question.
NRG said it plans to mothball Dunkirk on Dec. 31, when a current reliability support services agreement expires, and retire Huntley on March 1, 2016.
NRG won approval from the PSC more than a year ago to convert the Dunkirk plant to natural gas at above-market rates. Dunkirk would have received out-of-market payments of $20.4 million per year from National Grid and a one-time $15 million subsidy from New York state.
Entergy, owner of the 838-MW James A. FitzPatrick nuclear plant in western New York, sued the PSC in federal court in February, claiming the subsidies interfered with FERC’s jurisdiction over the wholesale power market. (See FERC: Hearing or Settlement on Dunkirk RSSA Charges.)
NRG said the lawsuit made the planned conversion unworkable. “Currently, NRG expects that the Entergy lawsuit will go to trial and litigation on this case could take years to resolve,” spokesman David Gaier said. “Unfortunately, the Entergy lawsuit has created a tremendous amount of uncertainty for NRG in moving forward with the Dunkirk project, and at this point the project remains on hold.”
NRG blamed low natural gas prices, low energy prices and low capacity prices for the Huntley closure. “Thus, because the facility is not currently economic and is not expected to be economic, NRG intends to retire the units. Should circumstances change, NRG will notify all parties to this notice,” it said.
The PSC requested NYISO consider three scenarios: both Huntley and Dunkirk close; Dunkirk closes but Huntley remains open; and Huntley closes but three Dunkirk generators (Units 2, 3 and 4) remain in service after March 1. The ISO was also asked to describe transmission upgrades or alternative resources that could address any reliability problems resulting from the closures, including cost estimates and implementation schedules.
The PSC also requested that distribution company National Grid reassess its transmission needs. The company had assumed Dunkirk would continue operating, so it may need to plan transmission alternatives if the closure is permanent.
NRG’s announcements could force NYISO to reconsider the conclusions of a recent study that said previous concerns about system reliability were mitigated for 2016 by the restoration of plants such as Dunkirk. (See NYISO: Reliability Concerns Raised Last Year Resolved.)
If the PSC determines reliability is again an issue, it could order National Grid to negotiate an RSSA with NRG to keep the plants running.
Capacity Performance resources cleared at $134/MW-day in the transition auction for the 2016/17 delivery year, PJM announced Monday.
PJM held the auction Aug. 26-27 to obtain CP resources for 60% of the updated reliability requirement for 2016/17, procuring its target of 95,097 MW.
The clearing price was well below the price cap of $165.27 — results that Stu Bresler, senior vice president for markets, said “demonstrated the competitiveness of the auction.”
But speaking at a conference in Boston, Jim Wilson, a consultant for consumer advocates, said PJM paid far more than it needed to, asserting it could have procured the CP resources for only an additional $30/MW-day rather than the “windfall” that resulted from the auction.
Market Monitor Joseph Bowring, also appearing at the conference, declined to comment on the results, saying he would be issuing a comprehensive report in a few weeks.
Of the capacity that cleared, 90,851 MW represented resources committed in previous auctions that now will be converted to the new product at a higher price. The remaining 4,246 MW did not have a prior commitment, or surpassed the level of a previous commitment.
Total capacity offered into the auction was 117,753 MW.
“There wasn’t anything that surprised me that much,” Bresler said in a press conference after the results were announced late Monday. “The clearing price was just about at the point where we expected it to be.
“I thought the level of demand response and energy efficiency was not surprising, so really I think in just about every way it was consistent with what we expected.”
The auction, part of a five-year transition period leading up to a single capacity product type for the 2020/21 delivery year, had been delayed in order to allow DR and energy efficiency resources to participate, per a FERC order. A second incremental auction, for the 2017/18 delivery year, is set for Thursday and Friday, with results expected to be posted on Sept. 9.
The Base Residual Auction for the delivery year — held in 2013, before the introduction of the tougher CP requirements — cleared at prices ranging from $59 to $119/MW-day in most of PJM, with the PSEG locational deliverability area at $219. (See Capacity Auction: New Generation, Imports Up, Prices, DR Down.)
Bresler said 619 MW of DR cleared the auction, of which 227 MW represented a new commitment. All 949 MW of energy efficiency offered cleared, including 423 MW of new resources.
Under the rules of the transition auctions, participation is optional, and market participants may offer all or part of resources that were committed under the Base Residual Auctions for those years as Capacity Performance resources.
The parameters of the transition auctions differ in three aspects, Bresler said: There were no locational constraints modeled; the target was 60%, not 100%, of the reliability requirement; and a price cap was implemented that was calculated to be 50% of the net cost of new entry.
The incremental cost of the transition auction was $2.3 billion, slightly below the estimate of $2.5 billion to $3.6 billion PJM and the Market Monitor had predicted, Bresler said.
Bresler sought to counter news reports that the new Capacity Performance auctions would greatly increase consumers’ power bills, noting that CP costs make up about 15% to 20% of energy bills, and that energy payments are expected to be lower because the new construct will result in better resource availability during times of extreme weather and grid stress.
Breaking down cleared megawatts of capacity by generation source, coal cleared 32,622.3; gas 29,629.4; and nuclear 26,099.8.
The RTO’s first Base Residual Auction under its new Capacity Performance rules, the results of which were released Aug. 21, saw prices rise 37% to $164.77/MW-day in most of the RTO, while the ComEd zone broke out at $215 and Eastern MAAC hit $225.42.
The construct allows capacity resources to receive higher prices in exchange for taking on more responsibilities and stiffer penalties for non-performance.
Capacity Performance resources, which represented more than 80% of capacity acquired in the BRA, were priced at a $15/MW-day premium to base capacity in most of the RTO. In the winter-peaking PPL LDA, the premium was $90. (See PJM Capacity Prices Up 37% to $165 /MW-day.)
FERC on Tuesday rejected complaints from NextEra Energy and Direct Energy seeking to change the way PJM conducts its incremental capacity auctions to transition to its new Capacity Performance product (EL15-88).
The commission found that the companies failed to show how PJM’s clearing methodology for the auctions was inconsistent with the RTO’s Tariff and that their proposed alternative plan “relies on a complicated and untested algorithm to clear the capacity markets.”
“Implementing an untested alternative proposal would require other changes to either PJM’s market design or [Tariff] in order to be justly and reasonably implemented, and therefore complainants’ alternative clearing methodology cannot be said to conform to the [Tariff] itself,” FERC said in its order.
The transition auctions are being held to procure Capacity Performance resources for delivery years 2016/17 and 2017/18. PJM ran the first Base Residual Auction, for 2018/19, under the new product earlier this month. (See PJM Capacity Prices Up 37% to $165/MW-day.) It allows capacity resources to receive higher prices in exchange for taking on more responsibilities and stiffer penalties for non-performance.
Under the rules of the transition auctions, participation is optional, and market participants may offer all or part of resources that were committed under the BRAs for those years as Capacity Performance resources. If cleared, the Capacity Performance commitment would replace the old one and participants would receive the new, higher price.
Incremental Costs
NextEra and Direct Energy argued that this methodology would result in increased costs, in violation of both PJM’s Tariff and FERC’s order authorizing Capacity Performance, which the companies said directed the RTO to procure capacity resources using the “least-cost solution.”
The companies said that in order to do this, PJM needs to take into account the results of the BRAs for 2016/17 and 2017/18 when selecting offers. Rather than simply selecting the lowest price, they suggested that the RTO base its selection of resources on the lowest incremental cost — the difference between the new Capacity Performance price and the price under the original BRA. (See table below.)
Direct Energy and NextEra Energy proposed an alternative clearing methodology for the transition auctions in which PJM would select resources based on the lowest incremental cost (the Capacity Performance price minus the original BRA price), and not simply on the lowest new price.
FERC disagreed.
The RTO’s Tariff does not “require PJM to minimize costs by taking into account existing capacity revenues for the delivery year or other savings in determining the lowest price at which to clear an auction for Capacity Performance products,” the commission said.
FERC also insisted that ordering PJM to revise its methodology now would delay the transition auctions and reduce the amount of time that generators have to install upgrades needed to meet Capacity Performance’s more stringent requirements.
The commission issued its order the day before the first transition auction began. Results for this auction were released on Monday. (See related story, PJM 2016/17 Transition Auction Clears at $134/MW-day.) The second auction will be Sept. 3-4, with results posted on Sept. 9.
Bay Dissents — Again
In a dissent, FERC Chairman Norman Bay agreed with the companies. He said that the transition auctions allow the RTO to avoid making payments it would otherwise make and, in turn, save consumers money.
Bay illustrated NextEra and Direct Energy’s argument with an example of two hypothetical companies, A and B, that are entitled to receive $120/MW-day and $60/MW-day respectively as a result of the BRA. They both bid in the transition auction at $140/MW-day and $100/MW-day respectively. As PJM is required to accept the lowest bid, it takes company B’s bid, resulting in a $40 increase in the price, as opposed to a $20 increase had company A’s bid been taken.
Bay argues that because both companies are offering the same Capacity Performance product, “it simply permits consumers to be charged more in exchange for no additional benefit.” He lamented that “PJM’s methodology ignores the value of this opportunity.”
“This auction will impose a considerable cost on consumers for no additional reliability benefit,” the chairman said, warning that those costs could reach more than $1 billion. “Today’s outcome demonstrates the problems inherent in a complex, flawed design.”
Bay also dissented in FERC’s June order approving Capacity Performance. (See FERC OKs PJM Capacity Performance.) He noted that vote in his dissent to Tuesday’s order.
“I would not have agreed to transitional auctions at all, but having created them, it is the commission’s responsibility to ensure that they result in just and reasonable rates,” he said. “Unfortunately, that has not happened here.”
WASHINGTON — The D.C. Public Service Commission last week unanimously denied Exelon’s proposed $6.8 billion acquisition of Pepco Holdings Inc., sparking applause in the hearing room and sending PHI shares tumbling on Wall Street.
“When this proposed merger is considered as a whole … we conclude that the joint applicants have not met their burden of persuading this commission that the proposed merger is in the public interest,” the three-member PSC said.
Upon the news, PHI shares dropped more than 18%, and Exelon stock dipped more than 3%.
In a joint statement, Exelon and PHI said, “We are disappointed with the commission’s decision and believe it fails to recognize the benefits of the merger to the District of Columbia and its residents and businesses. We continue to believe our proposal is in the public interest and provides direct immediate and long-term benefits to customers, enhances reliability and preserves our role as a community partner.
“We will review our options with respect to this decision and will respond once that process is complete.”
Exelon and PHI have 30 days to ask the commission to reconsider its 181-page order. The companies on Monday released a joint statement, saying they would continue working to complete the merger.
“We remain convinced the decision fails to recognize the substantial immediate and long-term benefits of our merger proposal to citizens, businesses and communities in the District of Columbia,” the companies said. “We want to deliver these benefits to customers and will strive to make that happen.”
Some analysts, however, are pessimistic about the deal succeeding. “While none of the negative items cited by the PSC in their order are glaring hurdles that could not be overcome, the magnitude of ‘small cuts’ appears in our view to suggest a deeper mistrust between the commission and Exelon,” UBS Global Research said.
Following their initial fall, the companies’ stock prices remained steady over the week, and Monday’s statement did little amid another bad day on Wall Street: Exelon closed at $30.75/share, down 2% on the day, while Pepco closed at $22.98/share, a less than 1% drop.
7 Factors of Public Interest
The PSC called the rejection “one of the most significant decisions” it would ever make, noting, “This proceeding has generated more interest and more active participation by parties and interested persons than any other proceeding in the commission’s more than a century of operations.”
The commission said it weighed the proposal on seven factors of public interest, among them the effects on ratepayers and shareholders, market competition and preservation of natural resources and the environment.
“The public policy of the district is that the local electric company should focus solely on providing safe, reliable and affordable distribution service to district residences, businesses and institutions,” Chairwoman Betty Ann Kane said. “The evidence in the record is that the sale and change in control proposed in the merger would move us in the opposite direction.”
Commissioner Joanne Doddy Fort concurred, saying, “The proposed merger would diminish Pepco’s ability to directly raise issues that address the needs of district ratepayers.”
Commissioner Willie Phillips voted to reject the merger application, but he dissented in a secondary vote to issue the actual order.
He agreed the proposed merger was a “bad deal” for the district, but said, “I am disappointed in the loss of the many opportunities inherent in the proposed merger that could have achieved benefits — tangible benefits — for our local communities and across the region.”
Surprise: Md. Wasn’t Biggest Obstacle
When Exelon proposed the deal 16 months ago, analysts predicted Maryland would be its biggest stumbling block. But after months of securing strategic alliances, Exelon won that commission’s 3-2 approval — albeit with 46 conditions. (See How Exelon Won Over Maryland.)
Meanwhile, in the district, opposition steadily stiffened. More than half of the Advisory Neighborhood Commissions and nearly half of the 12-member City Council opposed the deal. The Office of People’s Counsel and the attorney general’s office also advised against approval without significant concessions. (See Deadline Looms for Decisions in Exelon-Pepco Deal.)
As Kane read the commission’s summary of the order, there was a murmur in the room, as those attending the meeting realized that the commission was siding against the merger.
Many in attendance said they were surprised by the ruling, as they were prepared for the commission to approve the deal with concessions similar to other jurisdictions, such as Maryland.
“Honestly, I was pleasantly shocked. I commend them for their courageousness,” People’s Counsel Sandra Mattavous-Frye said of the commissioners. “It will have a domino effect on the entire proposal. The joint applicants have said they cannot go forward without D.C.
“The commission listened to the parties and, more importantly, they looked at the record,” she said, noting, “The applicants had the opportunity to supplement the record. They, too, heard the concerns being raised and chose not to address them.”
“I’m stunned,” said Anya Schoolman, executive director of DC Solar United Neighborhoods, a local solar power advocacy group. “I think … the commonly accepted wisdom was that they would approve it with conditions. And we were waiting to see how stringent those conditions would be.”
“I would almost go to say I’m shocked, because I fully expected that … the commission could have possibly come out in favor of the merger,” said D.C. Councilwoman Mary Cheh, who led the opposition in the district’s legislature.
“I’m just happy for the people of the District of Columbia,” she said. “The real beneficiaries of this, had this gone through, would have been the officers and the shareholders of Pepco and Exelon Corp. The people who would have been harmed are the ratepayers.”
“It was somewhat of a shocker that all other jurisdictions did in fact support this merger,” said D.C. Councilman Vincent Orange, who said he has remained neutral throughout the process. “At the end of the day, the Public Service Commission has ruled, and we’ll have to live with it and move on.”
‘David and Goliath’ Win
Power DC, which had organized opposition, said it was glad the PSC had “followed the will of the district’s electric customers.”
“The proposed acquisition would have been a substantial step backwards in the district’s efforts to move toward more sustainable electricity generation and greater reliance on local, renewable energy. It would have exposed D.C. residents and businesses to the risk of steeply rising electricity bills.
“Pepco has always affirmed its capability to provide a high level of service for its customers without this merger, and it has demonstrated a much greater willingness than Exelon to integrate new, customer-centered technologies.”
Mattavous-Frye called the win a “David and Goliath” scenario.
“I want to commend the public participation,” she said. “This was about consumer empowerment. People did not think their participation would be meaningful, and it is.”
Other Jurisdictions Approved Deal
The deal had been more than a year in the making. All of the other affected jurisdictions had approved it: Virginia, Maryland, Delaware, New Jersey and FERC.
Dave Bonar, Delaware’s Public Advocate, said the decision was a disappointment, but that it “doesn’t mean the deal is not salvageable.”
“They could appeal, or they could make more concessions,” he said. “Or they could just fold their tent and go back to Chicago.”
He said those who worked on getting Exelon’s concessions and reaching consensus were “disappointed.”
“We worked very hard to get this done,” Bonar said.
Critics in Md. Pleased
Mike Tidwell, director of the Chesapeake Climate Action Network, a group that intervened before the PSC in Maryland against the proposed merger, called the decision a “major victory” for the growth of clean energy across the region.
“One good idea that emerged from the proposed Exelon-Pepco (merger) was to create a PSC-guided process to explore ‘performance-based ratemaking.’ Utilities should be rewarded based on how well they perform on energy improvements that enhance our economy and reduce carbon emissions and climate change,” he said. “Hopefully, we can now move on to these solutions.”
Paula M. Carmody, People’s Counsel for the State of Maryland, had urged the state commission to reject the deal.
Last week, she said of its D.C. counterpart, “I think they got it right.
“They hit on the very issues identified in the proceeding before the Maryland commission,” she said, noting that the D.C. group had concerns about the “loss of local influence” over a utility with headquarters in Chicago.
Carmody, whose organization has one of three appeals pending before the Maryland commission, said she is not sure if the district’s decision is a death knell for the merger, “but clearly they can’t close” the deal as it stands now.
“It depends on what the companies do now,” she said. “They could appeal, they could file for reconsideration.” But, she said, the rejection makes the acquisition “problematic.”
A Win for Consumers, Environment
Roger Berliner, an attorney and Montgomery County councilman who had led that area’s opposition, applauded the D.C. PSC for standing up for consumers and the environment.
“As the testimony of countless expert witnesses made clear, Exelon has shown time and time again its interest in favoring its own nuclear generation holdings over renewable technologies like solar and wind, and the merger does far too little to provide benefits to ratepayers, while Pepco’s shareholders stand to benefit tremendously.”
The acquisition would have created the Mid-Atlantic’s largest electric and gas utility — and the country’s largest utility by customer count. Exelon has said the deal would boost its customer base to nearly 9.8 million from 7.8 million and increase its rate base to almost $26 billion from $19 billion.
FERC last week denied the SPP Market Monitoring Unit’s request for rehearing of a December 2014 order that rejected the Monitor’s use of a market-impact test to track physical withholding.
The commission found the test to be “overly limiting” and said the Monitor failed to demonstrate FERC was mistaken in requiring the test’s elimination (ER15-21-001).
FERC’s 2014 order required SPP to eliminate proposed revisions that added the market-impact test as a monitoring threshold for instances of physical withholding and said the RTO did not show how its proposal addressed FERC concerns.
The Monitor requested the rehearing in late December, saying including the market-impact test in its withholding screen was consistent with other grid operators’ practices. The Monitor said the test is “designed to be liberal in identifying capacity withheld” and if it is not used, monitoring for physical withholding “will continue to produce excessive false positive screen failures for the [Monitor] to analyze.”
FERC noted the Monitor did not challenge allegations that the proposed changes to the physical-withholding provisions “would sufficiently limit the number of screen failures.” The commission further said neither SPP nor the Monitor explained how the SPP proposal addressed FERC’s concerns about the test’s overly limiting nature.
“Thus,” FERC said in its order, “neither SPP nor the MMU supported the contention that the [market-impact test] was just and reasonable.”
The SPP Monitor had said MISO uses the impact test for physical withholding and argued the SPP Tariff should also have limits for the Integrated Marketplace.
FERC said the Monitor had not explained why the MISO mitigation test was appropriate for SPP. “The use of a specific threshold for mitigation purposes in one market does not necessarily make the threshold appropriate to use in monitoring and referral in another market,” the commission said.
Gov. Continues Fighting Artificial Island Cost Allocation
Markell
Gov. Jack Markell is urging FERC to rework a ruling by PJM that would force Delaware customers to pay for most of the cost of building a transmission line to stabilize a New Jersey power plant.
Markell and representatives of Delmarva ratepayers have protested PJM’s cost allocation of the project, which would bill Delaware ratepayers for 89.5% of a $275.5 million project to improve the reliability of electric deliveries from the Salem/Hope Creek nuclear complex on Artificial Island in New Jersey. (See Officials Urge PJM to Reject Artificial Island Proposal.)
Markell also weighed in on a complaint filed by Linden VFT, which is disputing another PJM construction plan on similar concerns about cost allocation.
SC Lawmakers Opposing Duke Plan for New NC Tx Line
Duke Energy’s plan to run a new transmission line from a South Carolina natural gas plant into North Carolina is being opposed by a number of South Carolina lawmakers, who say the project is not beneficial to the Palmetto State. Four elected officials, led by Rep. Doug Brannon (R-Landrum) have sent protests to the South Carolina Office of Regulatory Staff.
“None of our constituents will benefit from this transmission line project,” Brannon wrote. “On the contrary, the property value for the properties impacted by this project will be devastated. The properties in question are some of the most valuable in South Carolina.”
Duke said the line is necessary to serve load in the Ashville, N.C., area, which has seen demand double since the 1970s. The North Carolina Utilities Commission has not yet ruled on the project.
Hydropower has growth potential in the state, say advocates looking for alternative forms of carbon-free energy to comply with pending government regulations to reduce carbon emissions.
“The rivers are not producing as much as they can,” Arkansas Waterways Commission Executive Director Gene Higginbotham said recently. “Arkansas is a water-rich state, and we have a good state water plan that is saving aquifers and using more surface water.”
The state currently has seven hydropower plants. The U.S. Army Corps of Engineers, which operates two hydropower dams on the Arkansas River, has studied adding another plant near Pine Bluff, at a cost of about $202 million.
ICC Laying off 24, Part of Broader State Furloughs
Rauner
Gov. Bruce Rauner’s administration has announced the layoffs of 94 unionized workers in four state agencies, saying the legislature’s inability to pass a balanced budget made the moves necessary. The layoffs include 24 employees at the Commerce Commission.
The American Federation of State, County and Municipal Employees said the governor is jumping the gun and putting the public at risk. The ICC layoffs would reduce its staff by 35%, the union said. “Other layoffs would throw out of work men and women involved with nuclear safety, tourism, recycling and overseeing utilities,” said an AFSCME spokesperson.
Annapolis Backing Solar Facility Built on Closed Landfill
The City of Annapolis has signed a 20-year power purchase agreement with the developers of a solar facility built atop a closed landfill.
The city signed the agreement with Annapolis Renewable Energy Park, a 16.8-MW photovoltaic park on 80 acres of landfill outside of the city. The city says the power will offset CO2 emissions of 12.5% of the city’s annual household electrical usage.
“This project is about turning a liability into an asset,” Mayor Michael Pantelides said. “This park will turn a large plot of unused land into a revenue generator and a job creator.”
Lawmakers Urge Residents to Write to Canada to Stop Nuke Waste Plan
State and federal lawmakers are urging residents to oppose a Canadian plan to bury nuclear waste in an underground vault less than a mile from the Lake Huron coastline. Congressman Dan Kildee (D) and state Senate Minority Leader Jim Ananich have proposed a “community initiative” of letter writing to the Canadian government to protest Ontario Power Generation’s waste storage plan.
The company wants to bury low- and medium-level radioactive waste more than 600 meters deep, very close to the shore of Lake Huron. The utility says there is no risk to the lake.
Holland Using Waste Heat to Power Snow-Melt System
The City of Holland has a novel use for the waste heat from its municipal power plant: keeping city sidewalks clear of snow and ice.
The city, which is replacing its old coal-fired DeYoung plant with a natural gas unit, says the 145-MW plant will continue to use its waste heat to run a snow-melt system that keeps its downtown sidewalks and parking lots clear during the winter. The system, a network of underground 1-inch plastic pipes that carry warm water from the plant’s cooling system, was installed in the 1980s.
The $240 million gas plant will begin operations next year.
Columbia is switching its municipal power plant from coal to wood due to Environmental Protection Agency rules on coal combustion residuals.
Columbia’s Municipal Power Plant is scheduled to accept its final delivery of Indiana coal from Peabody Energy in October, when the rules go into effect. Officials say it would be too costly to retrofit the plant to meet the new standards.
The Public Service Commission last week approved KCP&L Greater Missouri Operations’ request to reduce the fuel-adjustment charge on its monthly bills. The change takes effect Sept. 1. It will mean a decrease of about $3.11/month for the typical residential customer in the Kansas City area and a decrease of about $2.69/month for the typical residential customer in the St. Joseph area.
The fuel adjustment charge reflects fuel and purchased-power costs during the six-month period of December 2014 through May 2015. The company’s tariff allows it to pass through increases or decreases in its energy costs to customers outside of a general rate case.
KCP&L-GMO provides electric service to 314,900 electric customers in the state.
Judge Upholds PSC’s Denial of NorthWestern’s Rate Increase
A district court judge has upheld a ruling by the Public Service Commission that shot down NorthWestern Energy’s proposed rate increase. The request dates from 2012, when the company sought compensation for outage costs and for revenue losses due to the success of its energy efficiency programs.
The PSC estimated the increase would have boosted customer rates by about $4.2 million if it had been in effect for the past three years. The judge ruled that the PSC acted reasonably in denying the request. The company is considering an appeal to the state Supreme Court.
The Board of Public Utilities says it is seeking a consultant to help it implement a five-year-old law to develop offshore wind power. The law mandated that the state develop regulations that would govern project financing, including how much of the cost would be borne by ratepayers.
BPU President Richard Mroz and Commissioner Joseph Fiordaliso disclosed the plan during their Senate confirmation hearings. Both were confirmed.
The law requiring offshore wind power has been the subject of political wrangling and is now four years past due. The state’s Energy Master Plan calls for development of 1,100 MW of wind energy by 2020. Nailing down financing guidelines is crucial to advancing the plans, which could cost as much as $1 billion.
Two intervenors in plans to shut down a pair of coal-fired units at the San Juan Generating Station filed documents last week opposing a compromise between Public Service Company of New Mexico (PNM) and environmental groups. New Energy Economy and Southwest Generation Operating Co. oppose the agreement reached by PNM, Western Resource Advocates and the Coalition for Clean Affordable Energy, made up of 12 environmental, clean energy and consumer advocacy groups.
The deal calls for PNM to submit to a hearing before the Public Regulation Commission in 2018 to determine whether the power plant near Farmington, built in 1972, should continue to operate after 2022. The agreement would keep in place the basic tenets of PNM’s current plan to close two of the plant’s four coal-fired units; PNM says that under the plan, the San Juan complex would burn about 49% less coal than it does now.
New Energy Economy argued in its filing that the agreement “contains no commitment by PNM to retire any of its remaining coal-fired capacity” at the power plant. New Energy also said PNM’s promise to procure renewable energy credits in the plan do not mean PNM will use more renewable energy.
A contractor working for Long Island Power Authority and PSEG Long Island claims in a federal lawsuit that the utilities mismanaged a controversial high-voltage transmission line project through North Hempstead, then shortchanged the firm by at least $1.5 million.
Energy Contract Recovery, of Port Huron, Mich., claims in the breach-of-contract suit that LIPA and PSEG failed to obtain permits and traffic control restrictions on time; did not accurately describe the site and underground conditions; and failed to deliver materials needed for the job and properly coordinate with other contractors. When the contractor’s representatives exerted their expertise to finish the project, PSEG employees rebuffed them and became “abusive and threatening,” according to the suit.
The 5-mile transmission line from Great Neck to Port Washington drew criticism from residents who claimed its 80-foot utility poles were unsightly and dangerous. ECR was initially contracted by National Grid in 2013 to construct the 69-kV line, which PSEG said was needed to ensure reliable power to the region. The work was scheduled to begin in December 2013, but the necessary permits weren’t secured until Feb. 11, 2014, according to the lawsuit.
Solar companies say a federal tax credit is essential to making residential and commercial projects economically viable, and they warn that the loss of the credit would be a serious blow to the industry.
U.S. Sen. Chuck Schumer (D) held a news conference Wednesday at the massive SolarCity factory now under construction in South Buffalo to call for an extension of the federal solar tax credit program and a change in federal regulations that would let homeowners and businesses take advantage of the tax credit sooner. The 30% federal solar investment tax credit is set to expire for residential projects in 2016 and to shrink to 10% for commercial projects.
Extending the tax credit and letting residents and companies receive the tax benefits as soon as construction begins, instead of waiting for projects to be completed, would encourage long-term investments in solar energy, provide certainty for solar customers and boost sales for companies such as SolarCity, for which the state is building the largest solar panel factory in the Western Hemisphere at the RiverBend site.
The Public Service Commission approved a siting permit for a $6 million natural gas liquids pipeline that will connect Oneok’s Lonesome Creek gas plant to its Garden Creek pipeline. The pipeline will have a capacity of 30,000 barrels a day. The gas plant, which is to be completed by December, will be able to process 200 million cubic feet of natural gas per day, according to the PSC.
PUCO Chairman to Utilities: ‘Stop Trying To Scare Ohioans’
Porter
The chairman of the Public Utilities Commission has warned utilities to stop using scare tactics in their lobbying efforts.
“Stop trying to scare Ohioans,” said Andre Porter, who chastised state utilities for suggesting that the state’s deregulation was imperiling system reliability.
FirstEnergy, one of the utilities seeking to adjust its power purchase agreements to guarantee a steadier revenue stream, denied it was fear mongering. CEO Chuck Jones “made it very clear we’re not seeking re-regulation in Ohio,” spokesman Doug Colafella said in response to Porter’s comments. “Our priority is the PPA in front of the commission.”
Two electrical cooperatives have postponed their consolidation plans after questions were raised about the motivations and duties of one of the co-op’s board members. Canadian Valley Electric Cooperative and Central Rural Electric Cooperative have been studying consolidation plans for two years. The co-ops had picked a new name, Cenergy Electric Cooperative and distributed marketing materials to members touting the benefits of consolidation, including projected savings of $48 million over 10 years. But votes by co-op members were postponed after an allegation arose about the “fiduciary duty” of a Canadian Valley board member.
Meanwhile, two western co-ops will consolidate next year after their members approved the plan earlier this month. Kiwash Electric Cooperative and Caddo Electric Cooperative will become CKenergy Electric Cooperative on Jan. 1, with a combined 25,000 meters and more than 7,600 miles of electric distribution lines. A report says consolidation would save the co-ops between $20 million and $30 million over a 10-year period.
Federal Judge Sets Court Date in Wind Farm Lawsuit
DeGuisti
An Oklahoma federal judge has ordered a trial next year over nuisance claims against a wind farm west of Oklahoma City. U.S. District Judge Timothy D. DeGiusti set a bench trial for April 11 against Kingfisher Wind, a unit of Apex Clean Energy.
Construction has started already on the 298-MW wind farm, but a group of landowners want the turbines to be placed at least 2 miles from their homes. About 150 people are working on the construction of the project, which will have 149 turbines. The company has said it expects the project to be finished by year’s end.
“Apex is taking a big risk in continuing to construct these industrial wind turbines when a ruling could require removal shortly after construction,” said Terra Walker, one of the plaintiffs.
Commission Finds No Changes in Marcellus Region Streams
A study by the Susquehanna River Basin Commission of 58 watersheds in the Marcellus Shale region found no change in the water quality as a result of drilling for natural gas in the area. The study showed that from 2010 to 2013, the water quality in the studied watersheds remained good.
The Remote Water Quality Monitoring Network, which began in 2010, now tests the water quality of the streams continuously. The electronic devices transmit reports remotely to the commission’s headquarters in Harrisburg every two to four hours.
Trains Carrying Oil Won’t be Slowed Despite Safety Report
A request from Gov. Tom Wolf’s office to reduce the speed limit for the up to 70 trains that daily transport crude oil through the state is being resisted by the two major railroad companies.
The suggestion comes from a report Wolf commissioned from the Railroad Engineering and Safety Program at the University of Delaware, which contained 27 recommendations, including reducing by 5 mph the federal speed limit of 40 mph.
Norfolk Southern and CSX said they believe their safety procedures already are sufficient.
The Environmental Protection Agency has proposed the first-ever federal regulations governing methane emissions by oil and natural gas drillers. Janet McCabe, EPA’s acting assistant administrator for the Office of Air and Radiation, estimated that exploration companies would need to invest up to $420 million to stop leaks and capture methane from working wells. But she said the industry could save as much as $550 million from captured gas.
The new rules are part EPA’s broader efforts to cut planet-warming emissions. Methane can trap 25 times more heat than carbon dioxide, but dissipates more rapidly. McCabe said the target for methane emission reduction is 20% to 30%.
The oil and natural gas industries are expected to challenge the rules.
July Hottest Month on Record, Federal Weather Agencies Say
July’s average global temperature was 61.86 degrees, making it the warmest month on Earth since records have been kept, federal weather officials said. Scientists from the National Oceanic and Atmospheric Administration said the new mark broke previous records set in 1998 and 2010 by a seventh of a degree, the largest margin ever by which an old record was eclipsed.
“It just reaffirms what we already know: that the Earth is warming,” NOAA climate scientist Jake Crouch said. “The warming is accelerating and we’re really seeing it this year.” NOAA records go back to 1880. The findings were confirmed by records kept by NASA and a Japanese weather agency.
Union of Concerned Scientists Cites DOE Study Slamming MOX Facility
The Union of Concerned Scientists said that a Department of Energy study concludes that the federal program to convert surplus plutonium to commercial grade nuclear fuel is an expensive and risky disposal method.
The UCS said it has obtained a study written by experts from the Nuclear Regulatory Commission, the Tennessee Valley Authority and the commercial nuclear industry that concludes the mixed-oxide fuel (MOX) program under construction in Aiken, S.C., is caught in “difficult, downward spiraling circumstances.”
The report said the cost of the MOX facility has ballooned from $1.6 billion to $30 billion. The report said it would be cheaper and less risky to ship the plutonium to the Waste Isolation Pilot Plant in New Mexico for burial.
The U.S. Department of Agriculture has awarded a $46 million federal loan to North Dakota-based Central Power Electric Cooperative to help finance 51 miles of new power lines and several substations. The funds come from USDA’s Rural Utilities Service electric loan program.
“Demand is the main driver of this,” said Dennis Hill, executive vice president and general manager of the North Dakota Association of Rural Electric Cooperatives. “The little single line with a small transformer just doesn’t work anymore.”
The new lines would be spread throughout the cooperative’s existing 1,300-mile network, according to Hill, who added that the project would commence after a four-year work plan is submitted. CPEC serves nearly 56,000 customers in 25 North Dakota counties.
A FERC administrative law judge has found that BP manipulated the natural gas market in Texas in 2008, and now the company faces millions in penalties and disgorged profits.
“This is a classic case of physical for financial benefits,” Judge Carmen Cintron said. “The evidence in this case shows that the Texas team had hundreds of affirmative acts in furtherance of the manipulative scheme during the investigative period.”
Federal regulators in 2013 proposed that BP pay a $28 million penalty and pay back profits of $800,000 plus interest. The ruling will now go before the full five-member commission for a final ruling. BP has vowed to appeal. “The evidence overwhelmingly demonstrated that BP’s natural gas traders did not engage in any market manipulation,” a company spokesman wrote in an e-mail.
Federal Gulf Oil Leases Attract Low Interest, Prices
A federal auction for drilling rights in the Gulf of Mexico is attracting the weakest interest since 1986.
Plummeting oil prices and industrial contraction meant that only five companies bid, for a total of $22.7 million. The auction happened on a day when American oil prices fell to about $40/barrel. Last summer prices were $100/barrel. The integrated oil giants ExxonMobil, Shell and Chevron didn’t even bother to bid.
“Concerns over the pace of economic growth in emerging markets, continuing (albeit slowing) supply growth, increases in global liquids inventories and the possibility of increasing volumes of Iranian crude entering the market contributed to the changed forecast,” the Department of Energy said.
DOE Gives $5.2 Million Grant to Duke Algae Uses Study
The Department of Energy has awarded a $5.2 million grant to Duke University to study possible uses of algae for renewable energy.
Zackary Johnson, an assistant professor of molecular biology at Duke, is heading a three-year study called MAGIC, or Marine Algae Industrialization Consortium. There have been efforts to derive fuel from algae, but so far none have been economically viable.
“To make algae a competitive player in this field you have to consider all the things the algae are producing,” Johnson said. “We’re essentially trying to make oil the waste product, so that it can compete with fossil fuels.”
A power generator fined $5 million for allegedly cheating ISO-NE wants federal regulators to drop two other allegations or combine them with the original complaint (IN15-4).
FERC fined Maxim Power in May for overcharging ISO-NE by offering into the day-ahead market with a price for oil-fired generation when in fact it was burning cheaper natural gas. (See FERC Fines Maxim Power $5M in Switching Scheme.)
FERC filed suit July 1 in U.S. District Court in Massachusetts to enforce its penalty.
FERC’s suit followed a Notice of Alleged Violations in November that included two other alleged schemes: that the company gamed ISO-NE market mitigation rules in 2012 and 2013, and that it boosted its generators’ outputs during testing using “extraordinary measures” in order to collect inflated capacity payments from 2010 to 2013.
Those two allegations were not mentioned by the commission in its filings seeking to collect the fine.
On Wednesday, Maxim attorney William S. Scherman sent a letter asking four FERC commissioners to add the “unpursued claims” to their federal court suit or confirm that they are no longer pursuing them. Commission Chairman Norman Bay, who headed the Office of Enforcement during the cases’ investigations, has recused himself in the matter.
“Maxim Power should not be forced to litigate piecemeal in federal district court,” Scherman wrote. “This would not only be inefficient and burdensome but also significantly add to Maxim Power’s litigation costs. As the commission knows, all companies consider litigation costs as part of their case assessment. But intentionally seeking to drive up a private entity’s litigation costs is not a reasonable litigation strategy.”
Scherman asked the commission to take action by Sept. 3.
PJM generators will earn $10.9 billion from this year’s capacity auction — a 45% jump from last year — in the first test of the RTO’s new Capacity Performance requirements. But some merchant generators smarting from low gas prices and competition from wind say that’s not enough for what ails them.
Securities analysts said the results will boost earnings for Exelon, Dynegy, NRG Energy, Public Service Enterprise Group, Calpine and Talen Energy.
The results have particular implications for Exelon’s Illinois nuclear fleet and American Electric Power’s potential sale of its merchant fleet.
Exelon: Retirements Still on the Table
Exelon announced Monday that three of its nuclear plants in PJM failed to clear the 2018/19 auction, including the 1,819-MW Quad Cities plant in Illinois, the second year in a row that it failed to clear. Company officials say they may retire Quad Cities if the Illinois General Assembly does not pass legislation that would boost revenues for the company’s nuclear fleet.
Exelon must notify PJM by September of any plants it won’t offer into the May 2016 Base Residual Auction for delivery year 2019/20.
Quad Cities, which has lost about $300 million over the last six years, is expected to lose about $50 million annually, according to Joseph Dominguez, executive vice president for government and regulatory affairs at Exelon.
Analysts from UBS Global Securities called Exelon “the clearest ‘winner’” in the auction because of its assets in both the ComEd zone, where prices hit $215/MW-day, and EMAAC, which cleared at $225/MW-day.
But Dominguez said the increase in capacity prices was a “marginal improvement” for Exelon’s generation. “What we got today is important, but it’s one year’s worth of revenue,” he told the Chicago Tribune on Friday. “We have to see a sustainable path forward.”
FirstEnergy spokesman Mark Durbin echoed Exelon Monday, saying PJM’s rule changes “resulted in clearing prices that really come closer to the operating costs of plants. But it’s only representative of one year; we’re not sure how reflective it is of long-term trends. It is a snapshot in a one-year time frame.”
Capacity revenue represented less than one-fifth of energy market revenue in PJM in 2014.
The results also did not help Exelon’s money-losing Clinton, Ill., plant in MISO. Exelon faces a December deadline for informing MISO if the 1,065-MW plant will be shut down before the planning year beginning June 1, 2016.
Seeking Help from the States
Exelon wants Illinois legislators to approve legislation that would require utilities to purchase credits from low-carbon generators including nuclear and wind. Illinois lawmakers did not take action on the Low Carbon Portfolio Standard before the spring legislative session ended, but they may consider it in November.
AEP and FirstEnergy also are seeking aid from state officials. The companies have asked the Public Utilities Commission of Ohio to approve above-market purchase power agreements from their coal generators.
PUCO has scheduled evidentiary hearings beginning Sept. 28 to consider the request from AEP, which is hoping to boost the value of its merchant fleet for a possible sale. (See Cold Weather, Low Gas Prices Drive AEP Earnings.) The commission is expected to consider FirstEnergy’s “Electric Security Plan” proposal as part of a rate case later this month.
In FirstEnergy’s second-quarter earnings call, CEO Chuck Jones cited PJM’s capacity market changes and the Ohio ESP as “key initiatives [that] will drive the near-term financial strategy” of the company.
Meanwhile, Dominion Resources won approval from the Virginia legislature in February for a nine-year rate freeze, meaning it won’t have to share the rise in capital revenues with ratepayers. Dominion said it wanted to suspend its biennial rate reviews to provide it and customers with “rate stability” as it responds to the Environmental Protection Agency’s Clean Power Plan.
While Dominion is assuming the risk of increased compliance and operating costs, analysts said the freeze allows the company to retain an additional 5 to 8 cents per share of earnings from PJM capacity revenues.
Transition Auctions
With the first auction under PJM’s new rules behind them, generators are now turning their attention to this month’s CP transition auctions for the 2015/16 and 2016/17 periods.
PJM will hold a transition auction on Wednesday and Thursday to obtain CP resources for 60% of the updated reliability requirement for delivery year 2016/17. Results are expected Monday, Aug. 31. The transition auction for 2017/18 (70% CP) will be Sept. 3-4, with results posted Sept. 9.
Participation is voluntary and open to any resource able to meet CP requirements, regardless of whether the resource cleared in the BRA for the delivery year.
FirstEnergy’s Jones said the transition auction results will have a big impact on how much the company is willing to spend to boost its plants’ reliability.
“We need to see where both the Base Residual Auction and then where in particular the transition auctions clear, because those are the more imminent,” he said. “For the Base Residual, you got three years to figure how to get your units reliable for that one. The transition auctions are a little more pressing in terms of time.”
UBS is predicting CP resources will clear the two auctions at about $120/MW-day, a “modest risk premium” to the base capacity resources, which cleared at $59/MW-day for 2016/17 and $120/MW-day for 2017/18 RTO-wide.
Other Generators
PSEG announced that its planned Sewaren Unit 7 had cleared the auction — the only new generation in EMAAC. The company said it plans to begin construction on the $600 million combined-cycle plant in early 2016. The company said it will replace the nearly 70-year-old Units 1, 2, 3 and 4.
PSEG said it cleared about as much capacity as in the 2014 auction, with all but one unit clearing as CP.
Talen declined to share the details of its offerings, but spokesman George Lewis said, “In general, we see the CP product as a positive, and the results from Friday are generally good and certainly within what was expected. It met most people’s expectations.
“Our view is it’s a partial picture at this point,” Lewis said. “We’ll find out more next week and the week after what the outcome of the [transition] auctions will be, and whether the results of the [BRA] will change the way generators or capacity resources will view bidding into these capacity auctions.”
Dynegy and Calpine had no comment on the results. AEP, NRG and AES did not respond to requests for comment.
A Calpine spokesman noted, however, that 4,600 of its 5,700 MW of PJM generation is in either ComEd or EMAAC.
Stocks Tumble
PJM generators saw their shares drop slightly on Monday, but it was a day when the market was down across the board on fears of economic weakness in China. The Dow Jones industrial average finished the day down 588 points, or 3.6%.
Exelon closed the day down 1.1% at $32.64 after an intraday high of $33.54. Dynegy was down 2.4% at $24.71, with an intraday high of $26.51. NRG shares dropped 1.8% to close at $19.22 after seeing an intraday high of $20.36. PSEG closed down 3.31% at $40.65, with an intraday high of $41.83. Calpine dropped 3.82% to close at $15.87, with a high of $16.76.
Talen saw the biggest slump, 4.7%, which brought its shares down to $15.17.
Discussions on how costs paid to SPP will be allocated within MISO will begin in September “on a separate track,” Eric Stephens, deputy general counsel, told members at the MISO Informational Forum last week. Stephens said confidentiality rules on the settlement talks prevented him from discussing specifics of the deal.
