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December 10, 2025

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FERC Order 1000 Upheld — UPDATE

By Rich Heidorn Jr.

WASHINGTON — A federal appellate court Friday upheld the Federal Energy Regulatory Commission’s landmark Order 1000, rejecting arguments from those who claimed FERC exceeded its authority and those who complained it didn’t go far enough.

A three-judge panel for the D.C. Circuit Court of Appeals unanimously rejected challenges to FERC’s jurisdiction and claims that allowing competition in transmission development will harm reliability, saying it found them “unpersuasive.”

The 97-page order by Judges Thomas B. Griffith, Nina Pillard and Ann Wilson Rogers was a complete vindication for the commission and a shutout for challengers.

The ruling responded to challenges from 45 petitioners and considered input from 16 intervenors. The main threat to the order came from challengers in the Southeast and West who alleged the commission exceeded its authority under the Federal Power Act in requiring that public utility transmission providers participate in regional transmission planning, and in eliminating incumbent transmission providers’ monopoly on building and running transmission.

The court found that FERC had authority under Section 206 of the FPA to require:

  • Transmission providers participate in a regional planning process;
  • Removal of federal rights-of-first-refusal provisions “upon determining they were unjust and unreasonable practices affecting rates;” and
  • The allocation of the costs of new transmission facilities based on forecasted benefits.

In addition, the court found that:

  • There was “substantial evidence of a theoretical threat to support adoption of the reforms” in Order 1000;
  • FERC “reasonably determined that regional planning must include consideration of transmission needs driven by public-policy requirements;” and
  • FERC “reasonably relied upon the reciprocity condition to encourage non-public utility transmission providers to participate in a regional planning process.”

FERC Chairman Cheryl LaFleur said she was pleased with the ruling. “Our nation needs substantial investment in transmission infrastructure to adapt to changes in its resource mix and environmental policies,” she said in a statement. “Order No. 1000 is critical to the commission’s efforts to support efficient, competitive and cost-effective transmission.”

Order 1000, issued in July 2011, changed the process for planning and paying for new regional and interregional transmission lines. It also allows independent developers to compete with traditional utilities in building new lines.

The ruling was not a surprise for those who attended oral arguments in the case in March. The judges questioned attorneys seeking to overturn the order far more aggressively — and interrupted them far more often — than they did when responding to FERC’s attorneys. (See Appellate Court Skeptical of Order 1000 Challengers.)

Below is a summary of the issues raised by the challengers and the court’s response.

MANDATORY REGIONAL PLANNING

Petitioners led by the South Carolina Public Service Authority alleged the commission lacks authority to mandate transmission planning because the FPA only allows FERC “to regulate existing voluntary commercial relationships.” As precedent, the petitioners cited the D.C. Circuit’s 2004 ruling that invalidated FERC’s attempt to change the composition of the California ISO board of directors.

The court said Order 1000 was justified by the commission’s concern that a lack of competition would lead to higher costs for new transmission needed to address environmental, economic and reliability concerns.

“Reforming the practices of failing to engage in regional planning and ex ante cost allocation for development of new regional transmission facilities is not the kind of interpretive ‘leap’ that concerned the court in CAISO but rather involves a core reason underlying Congress’ instruction in Section 206” to remedy unjust or unreasonable rates and practices, the court said.

Petitioners embraced a “false premise” that commission-mandated transmission planning is new, the court said, citing prior commission Orders 890 and 888.

The judges also said the challengers mischaracterized “mandated transmission planning as mandating binding commercial relationships.”

The allegation that Order 1000 interferes with state regulation of planning “poses a closer question,” the court acknowledged. “But while petitioners’ argument is not without force, relevant precedent” supported FERC, the court ruled, saying “the commission possesses greater authority over electricity transmission than it does over sales.”

‘THEORETICAL THREAT’ BASIS FOR ORDER 1000

Opponents said the commission failed to provide evidence needed to justify the rule and that it was improperly seeking to change already just and reasonable planning practices.

The commission justified Order 1000 on the “theoretical threat” that “the narrow focus of current planning requirements and shortcomings of current cost allocation practices create an environment that fails to promote the more efficient and cost-effective development of new transmission facilities.”

The court said the challengers “misconceived the nature of the commission’s evidentiary burden.”

It backed FERC’s conclusion that Order 890 was insufficient to ensure just and reasonable rates because it did not require transmission providers to consider regional transmission alternatives that might be more cost effective than solutions identified in local transmission plans.

The challengers’ contention that FERC had failed to recognize that electric transmission is a natural monopoly “misconceives the basis for the competitive benefits predicted by the commission,” the court said. It cited antitrust literature that concludes that competition for a natural monopoly can be beneficial.

“Even in a naturally monopolistic market, the threat of competitive entry (e.g., through competitive bidding) will lead firms to lower their costs, which thereby generally lowers cost-based utility rates,” the court said.

REMOVAL OF FEDERAL RIGHTS OF FIRST REFUSAL

Public Service Electric and Gas and other incumbent transmission owners contested Order 1000’s requirement that utilities eliminate from their tariffs and agreements certain rights of first refusal (ROFR). ROFRs give incumbents the option to construct any new transmission facilities in their service territory, even those proposed by third parties.

Continuing ROFRs would discourage non-incumbents from identifying cost-efficient projects, resulting in the development of transmission facilities “at a higher cost than necessary,” the commission said.

The challengers said the commission should be required to provide evidence that existing ROFRs were adversely affecting rates. Such evidence did not exist, they contended, because awarding projects to non-incumbents would mean the loss of economies of scale and scope.

The incumbents also contended that eliminating ROFRs would undermine reliability because non-incumbents might lack the financial backing or technical expertise to complete essential projects on time.

The court said FERC properly addressed reliability concerns by continuing ROFRs for projects that would be located entirely within a utility’s service territory and would not be subject to regional cost allocation.

The challengers also said there was only a tenuous relationship between the incumbents’ monopolies and rates. As a result, they contended, FERC lacked authority to remove them under Section 206, which is limited to practices “affecting” a rate.

The court again made a distinction between Order 1000 and the CAISO case cited by opponents.

“The relationship between rights of first refusal and rates is far more direct than the relationship between corporate governance and rates. Nothing suggests that replacing the members of a board will necessarily affect rates. … The challenged orders here provide what was lacking in CAISO: an economic principle that directly ties the practice the commission sought to regulate to rates.”

The court also rejected arguments that differences between the FPA and the Natural Gas Act (NGA) undercut FERC’s jurisdiction.

While the NGA contains a provision analogous to FPA Section 206 that gives the commission authority to regulate practices affecting rates, it also contains a separate provision expressly authorizing the commission to regulate the construction of natural gas pipelines. The FPA does not include a similar provision regarding construction of electric transmission.

The court said it found the petitioners’ argument “unconvincing,” concluding that Section 206 does not “unambiguously” limit the commission’s authority.

“We think that the commission’s reading of Section 206 is reasonable. Petitioners give us no persuasive reason to think otherwise,” the court ruled. “…The challenged orders take great pains to avoid intrusion on the traditional role of the states.”

The court also rejected complaints that the ROFR removal violates the Mobile-Sierra doctrine, which presumes that freely negotiated wholesale-energy contracts are just and reasonable unless found to seriously harm the public interest.

Some petitioners argued that the commission unlawfully deprived them of their rights of first refusal without first making the finding required to rebut the Mobile-Sierra presumption. The court said FERC had committed to hearing the petitioners’ Mobile-Sierra arguments when it reviews the new tariffs utilities must file to comply with Order 1000.

COST ALLOCATION

Order 1000’s cost allocation rules came under fire from both sides, with some challengers accusing FERC of overstepping its authority, and ITC Holdings and others urging stronger measures.

The court said the commission had used a “light touch” in requiring that the costs of new transmission are allocated to beneficiaries while leaving the details to transmission providers.

ITC contended Order 1000 is inconsistent with the commission’s cost causation principle because it required interregional transmission lines to be approved by each transmission planning region in which the line is located.

The commission acknowledged that its rule “may lead to some beneficiaries of transmission facilities escaping cost responsibility because they are not located in the same transmission planning region as the transmission facility.”

FERC said it went this route because “allowing one region to allocate costs unilaterally to entities in another region would impose too heavy a burden on stakeholders to actively monitor transmission planning processes in numerous other regions.”

The court said it would not second guess the commission’s compromise. “The commission’s balancing of the competing goals of reducing monitoring burdens and adopting policies that ensure that cost allocation maximally reflects cost causation is wholly reasonable under the deferential review we accord in rate-related matters.”

PUBLIC POLICY REQUIREMENT

FERC faced three challenges to its requirement that transmission planners account for federal, state and local laws and regulations, such as renewable portfolio standards.

One faction said FERC exceeded its authority while a second said FERC should have required transmission planners to consider the needs of load serving entities. A third said the rule was too vague, leaving transmission providers unable to determine what is required of them.

“None [of the arguments] is persuasive,” the court ruled, saying they were based on misunderstandings of the rule.

The court said those challenging FERC’s jurisdiction “seem to argue that the commission can only exercise authority to promote goals specified in the FPA and that the public-policy mandate cannot be justified with respect to any of those goals.”

“This argument misunderstands the nature of the mandate. It does not promote any particular public policy or even the public welfare generally. The mandate simply recognizes that state and federal policies might affect the transmission market and directs transmission providers to consider that impact in their planning decisions.”

RECIPROCITY

The commission was also attacked from two sides for its requirement that non-public utility transmission providers that want access to a public utility’s transmission lines must participate in transmission planning and cost allocation. Non-public utilities, such as municipal utilities and rural cooperatives, are not subject to Section 206 of the FPA, and thus not directly covered by Order 1000.

One group of challengers said the commission lacked justification for expanding the reciprocity conditions of Orders 890 and 888 to include planning and cost allocation. The Edison Electric Institute said the commission should have mandated the participation of non-public utilities in planning and cost allocation.

“Both contentions miss the mark,” the court said, saying the commission’s conditional requirement for non-public utilities had “a reasoned and adequate basis.”

The reciprocity condition in Order 1000 “is fundamentally the same [as that required by Orders 888 and 890]. … The current orders simply apply that principle to transmission planning and cost allocation,” the court continued.

“The commission provided an adequate justification for that change — namely, that non-public utilities that take service from public utilities will benefit greatly from the reforms announced in the Final Rule, because ‘a well-planned grid is more reliable and provides more available, less congested paths for the transmission of electric power in interstate commerce.’”

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FirstEnergy Wants Regulated Companies to Subsidize Generation

firstenergyBy Ted Caddell and Rich Heidorn Jr.

Ohio electricity consumers paid FirstEnergy $6.9 billion to compensate the company for generation assets “stranded” when its monopoly over energy sales was eliminated in 1999.

Now, FE is asking them to pay again to prop up nuclear and coal generating plants the company says are at risk of closing due to low energy and capacity prices.

While the economics of the proposal aren’t convincing to consumer advocates and environmentalists, the company seems to be betting on its appeal to state lawmakers eager to save the plants’ jobs and tax revenues.

Under a proposal dubbed “Powering Ohio’s Progress,” the company asked the state Public Utility Commission last week to order three of its regulated utilities to sign 15-year purchase-power agreements with the Davis-Besse nuclear plant, the mammoth coal-fired W.H. Sammis plant and two Ohio Valley Electric Corp. (OVEC) units — located in Gallipolis, Ohio, and Madison, Ind. — in which it owns a 105-MW interest.

FirstEnergy Assumptions

In effect, FE wants distribution customers of Toledo Edison, Ohio Edison and The Illuminating Company to subsidize the plants in at least the short term in return for the potential upside in the later years. FE projects market revenue will begin exceeding costs in 2019 and continue to do so throughout the remainder of the program, saving retail customers $2 billion (nominal) or $800 million in net present value — an average of $360 (nominal) per customer — over the 15-year term.

The projected savings are based on layers upon layers of assumptions, including future fuel prices, economic growth and operating expenses. Some of the assumptions, such as an ICF International projection on future electricity prices, have been redacted and cannot be inspected by the public (though the numbers will be available to Ohio PUC analysts).

UBS Securities said the PPA was priced to begin at about $65/MWh — $26 above current market prices —and increase by $2/MWh annually.

FE said the plan will “help mitigate rising retail prices and help ensure that vital baseload power plants built to serve Ohio customers remain available to support the state’s electric consumers and businesses.”

“Ohio’s economic security and quality of life is highly dependent on maintaining a diverse mix of baseload coal and nuclear power plants,” FirstEnergy CEO Anthony Alexander said in a statement. “Powering Ohio’s Progress helps ensure these vital facilities continue powering the state’s energy-intensive economy, helps protect customers against volatility as future prices rise, and preserves $1 billion in annual statewide economic benefits, vital tax revenues for local communities and an estimated 3,000 direct and indirect jobs created by these plants.”

Deja Vu

The proposal makes no sense to the Office of the Ohio Consumers’ Counsel.

“1.9 million consumers paid billions of dollars to FirstEnergy for its transition to deregulated power plants under a 1999 Ohio law,” OCC spokesman Scott Gerfen said. “Fifteen years later, FirstEnergy is again asking consumers to pay charges related to the power plants. FirstEnergy’s requests include asking the government to guarantee profits for what are deregulated power plants whose profits should instead be determined by the electricity market.”

The Sierra Club also was critical.

FE “is essentially asking for a blank check to bail out their dirty, aging coal plants at the expense of customers, the environment and public health,” said Daniel Sawmiller, senior campaign representative for the Sierra Club’s Beyond Coal campaign. “We are urging the PUCO and Gov. [John] Kasich not to make Ohioans pay more every month for dirty coal plants.”

“The fact is,” Sawmiller said, “Ohio is a de-regulated state. They just want to go back to rate base. That is not what the law is in Ohio.”

Volatility Protection

That’s not how FE sees it. Company spokesman Douglas G. Colafella said Friday that the plan is aimed, in part, at preserving the reliability of regional power grid, and protecting FE customers from weather-related price spikes.

“Recent weather events, such as last winter’s polar vortex and September 2013’s unseasonable heat wave, have exposed potential vulnerabilities on the electrical grid serving Ohio and surrounding areas — in some cases resulting in severe retail price spikes,” he said. “In addition, a significant number of baseload power plants are being prematurely retired due to a variety of factors. Together, these issues are putting Ohio’s energy future at risk by challenging the reliability and affordability of electricity in our region.”

Under the plan, FE’s regulated Ohio utilities will buy the plants’ output from unregulated FirstEnergy Solutions, the power plant owners, and then sell it into PJM’s capacity, energy and ancillary services markets from June 2016 through May 2031.

The regulated utilities would pay all of the plants’ expenses, including fuel, operations and maintenance, depreciation and taxes, plus a “reasonable” return on invested capital of 11.15%.

The three utilities would net the revenues against costs, with the difference being passed along to customers through a “retail rate stability rider” that would act as a charge or credit on their monthly bills based on the fortunes of the plants in PJM’s markets. The utilities would freeze distribution rates, which they say have increased only 1% since 2009, through 2019.

“As power prices increase as projected over time, proceeds from the market sales that exceed costs from the purchased power agreement will be applied as credits on customers’ electric bills to mitigate volatility and address rising retail prices,” FE said in a press release.

The company predicts that its regulated utility customers in Ohio would pay higher prices for the first three years — about $3.50 per month for the first year — and then the market prices would increase and the surcharge would transform into a credit. None of it, however, is guaranteed.

Tough Sell

UBS analysts, who last month changed their outlook on FE from “hold” to “sell,” issued a report last week expressing skepticism that the company will win commission approval for the proposal, although a smaller, less expensive plan might pass muster.

“Given the PUCO staff’s rejection of AEP’s proposal to add just its OVEC ownership into a PPA rider, we suspect a similar reaction from staff,” UBS said. “The fundamental question for Ohio remains how politically palatable will it be to continue to allow substantial coal and nuclear retirements?”

FE is portraying the plan as an attempt to save two of its largest generation assets — the 2.2-GW Sammis plant and the 908-MW Davis-Besse nuclear plant. But UBS said the company’s leverage with state officials was reduced by the disclosure that the two plants cleared PJM’s Base Residual Auction in May.

In its quarterly earnings filing last week, FE reported that it cleared 8,930 MW in the capacity auction, up from 7,440 in the 2013 auction but down from the more than 10,000 MW that cleared in the prior three auctions.

Mansfield Retirement Risk

FE officials said that because its 2.4-GW Bruce Mansfield coal-fired plant had not cleared the auction, it would delay spending on a dewatering facility it needs to continue operation beyond the end of 2016, when the plant’s coal ash waste impoundment must close. The plant is Pennsylvania’s largest generator.

The Ohio PUC has not yet set a hearing date on the 1,000-page filing; the company has requested a decision by next April.

There are certain to be many eyes on the plan going forward.

“Needless to say, we are concerned for consumers,” OCC’s Gerfen said. “We are analyzing FirstEnergy’s new request, including its claim that there will be future cost savings. We then will make recommendations on behalf of consumers to the PUCO.”

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Minimum Generation Event Exposes Flaws in Response

PJM has created a new emergency procedure and is testing a software fix following poor generator response to a minimum generation event July 5, officials told the Operating Committee last week.

Extremely mild temperatures and a holiday weekend resulted in an RTO peak of 61,300 MW — unusually light but in line with PJM’s forecast — forcing PJM officials to curtail 2,000 MW of imports and order cuts of 100% of reducible generation.

Of about 200 generation owners, only 31 (16%) responded to the eDart minimum generation report. Of those that responded, only half reported an emergency reducible value greater than 0 MW.

But only 1,458 MW of the 1,665 MW of reducibles — units that said they were willing to go below their economic minimum — responded, PJM’s Chris Pilong told the committee.

Among combined-cycle owners that responded, all reported economic minimum ratings — the lowest level a unit can achieve while following economic dispatch — equal to their emergency minimum — the minimum generation that can be produced by a unit while maintaining stability.

“We only know what the generation operators, owners tell us,” said Mike Bryson, executive director of system operations.

Pilong said the responses indicate the need for additional training. “We really need to be sure we have the right rules in place so that people are reporting the real emergency min and not the eco min.”

Low Prices

Pilong said many generators entered low-priced offers for the weekend, wanting to keep running over the holiday to capitalize on hot weather forecast for the following week. Pilong said operators also were stressed by the inability of PJM’s dispatch engine to set proper price signals for wind units bidding below $0/MWh.

The RTO is testing a software fix to allow prices as low as -$60/MWh, which should help incent wind units to respond automatically via automatic generation control (AGC). Currently, some wind operators do not respond to AGC signals, requiring phone calls from PJM operators.

In addition, PJM has created a new minimum generation advisory procedure that it can issue one or two days in advance of anticipated light load days.

Minimum Generation Event Chronology

PJM declared a minimum generation alert at 10:25 p.m. July 4, saying the RTO was within 3,286 MW of normal minimum energy limits.

At 12:25 a.m. July 5, a Saturday, operators issued a minimum generation emergency declaration, reducing prices to $0/MWh and indicating a need to cut generation at 3 a.m.

Shortly before 3 a.m., operators declared a minimum generation event, ordering a 50% cut in reducible generation. Generators were encouraged to sell energy outside the control area.

Thirty-five minutes later, operators upped the call for reducible generation cuts to 100%. It remained there until shortly before 8 a.m., when it was reduced to 50%.

Before then, at 3:30 a.m., operators manually ordered all remaining wind (1,000 MW) to zero and ordered three other generators offline. All hydro was either offline or pumping into storage.

Hot Water Heaters

John Farber of the Delaware Public Service Commission said the incident illustrated why PJM should create a resource category for thermal storage, such as hot water heaters, that can provide load. “PJM could help [the Department of Energy] move off the dime,” Farber said.

Farber was referring to DOE’s pending decision on whether to exempt large capacity grid-interactive water heaters from current energy efficiency standards or regulate them under a separate category.

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Federal Briefs

TVAashspillSourceWikiA federal judge approved a $27.8 million settlement between the Tennessee Valley Authority and property owners harmed by the utility’s massive coal ash spill in 2008. The spill occurred when a dike burst at TVA’s Kingston Fossil Plant and released more than 5 million cubic yards of toxic ash sludge from a containment pond. The sludge flowed into a river and fouled hundreds of acres along the river about 35 miles west of Knoxville, affecting about 800 property owners. U.S. District Court Judge Thomas Varian found TVA at fault in 2012.

More: PennEnergy

FERC Approves Settlement in Southwest Blackout

The Federal Energy Regulatory Commission last week approved a consent agreement that its Office of Enforcement and the North American Electric Reliability Corporation reached with the Imperial Irrigation District relating to a Sept. 8, 2011 blackout that left more than 5 million in the dark. NERC and FERC found that the IID violated four Reliability Standards in its operations leading up to the blackout that spread from Southern California to Arizona and Baja California, Mexico. The settlement mandates that the IID spend at least $9 million on system reliability improvements, with the remaining $3 million going to the U.S. Treasury and NERC.

More: FERC

DOE’s Research Info More Accessible Now

The Department of Energy has developed an Internet-based portal to a trove of its scholarly publications and research data. The Public Access Gateway for Energy and Science – PAGES – provides free access to manuscripts and published scientific journal articles within a year of publication.

“Increasing access to the results of research … will enable researchers and entrepreneurs to capitalize on our substantial research and development investments,” Secretary of Energy Ernest Moniz said. PAGES already contains a collection of accepted manuscripts and journal articles, and more data and links to articles and accepted manuscripts will be added as they are submitted. DOE hopes it grows by up to 30,000 articles and manuscripts a year.

More: Department of Energy

EPA Names New 2nd-in-Command

Lisa Feldt
Lisa Feldt

The Environmental Protection Agency last week named Lisa Feldt as acting deputy administrator, the second highest position in the agency. She replaces Bob Perciasepe, who served in the position since 2009. Perciasepe is leaving to become director of the Center for Climate and Energy Solutions, an advocacy group. Feldt’s appointment was among several staffing announcements at the agency.

More: The Hill

EPA Chief: Climate Change Should Be Taught in Schools

Gina McCarthy
Gina McCarthy

Environmental Protection Agency Director Gina McCarthy said in an interview she thinks the science behind climate change should be taught in the nation’s schools. “I think part of the challenge of explaining climate change is that it requires a level of science and a level of forward thinking and you’ve got to teach that to kids,” McCarthy said in an interview published last Friday in the magazine Irish American. Observersbelieve her remarks will generate controversy, especially among Republican lawmakers who remain skeptical of the idea of man-caused climate change.

More: The Hill

Final Rule on Nuke Waste Expected Soon

The Nuclear Regulatory Commission is expected to issue the final rule governing storage of nuclear waste, a rule that has impacted nuclear generating stations’ ability to store used fuel on site. The U.S. Court of Appeals for the D.C. Circuit in 2012 found that the NRC rule allowing on-site storage for up to 60 years violated the National Environmental Policy Act and ordered the NRC to come up with a new rule. The new rule is expected to be released within a month and will be named “Environmental Impacts of Continued Storage of Spent Nuclear Fuel Beyond the Licensed Life for Operation of a Reactor.”

More: PowerMag

NRC Cites Calvert Cliffs for Safety Violation

The Nuclear Regulatory Commission last week cited Exelon, operator of the Calvert Cliffs nuclear station in Lusby, Md., for a miscalculation that could have led to an unnecessary evacuation. Radiation detectors at the plant were accidentally set to trigger an alarm at radiation levels 100 times lower than what would have posed a safety threat. The alarm was never activated, and workers discovered the mistake and corrected it four months later.

NRC inspectors said the mistake could have caused an unnecessary evacuation and deemed it a safety violation. “Ideally, we want them to be in the right zone if they have an emergency event,” NRC spokesman Neil Sheehan said, “not under-classifying it but not over-classifying it, either.” The violation could result in increased NRC scrutiny of the plant.

More: The Baltimore Sun

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Order 1000 Window Draws 106 Proposals, 15 Companies

PJM received 106 proposals to fix about 50 reliability problems in the first Regional Transmission Expansion Plan window for 2014.

Fifteen companies made proposals in the window that closed July 28. PPL was the most ambitious, offering 16 projects totaling almost $3 billion.

It was the first full-scale reliability window opened by PJM under the Federal Energy Regulatory Commission’s Order 1000. Last year, PJM opened a window for a single reliability problem at Artificial Island and one for “market efficiency” proposals intended to reduce congestion.

The PPL projects include the reliability portion of a 725-mile, 500-kV transmission line that would run from Western Pennsylvania into New York and New Jersey, with a spur running south into Maryland, at an estimated cost of $4 billion to $6 billion. PPL said the line would address reliability problems on three 230-kV lines, as well as relieve congestion and move power from planned generators fueled by shale gas in northern Pennsylvania.

Four other companies – Public Service Enterprise Group, Transource Energy, ITC Holdings and LS Power’s Northeast Transmission Development – each proposed projects totaling more than $500 million.

They include 61 greenfield projects (total $5.7 billion) and 45 transmission owner upgrades totaling $522 million. Targeted were 18 transmission zones in 10 states, with Atlantic City Electric (AE), PPL, American Electric Power and American Transmission Systems Inc. each attracting 10 or more proposals.

The proposals are intended to address reliability violations that would occur through 2019. Some problems may be moot by that time, however, according to Paul McGlynn, general manager of system planning. Some violations in the AEP transmission zone, for example, will be eliminated by the planned retirement of AEP’s Tanners Creek generators, scheduled for mid-2015.

“We may not act on [all of] these issues,” McGlynn said. “There’s a lot of failings that won’t actually be problems.”

Conversely, problems identified in the AE zone because of capacity injection rights for the BL England generator may not manifest if the plant retires and is not replaced, planners said.

PJM plans to open a “long-term” window in November for market efficiency and reliability proposals addressing problems over a 15-year horizon.

Artificial Island Update

Meanwhile, McGlynn told the Transmission Expansion Advisory Committee that PJM will be sending Artificial Island project finalists Public Service Electric & Gas, Dominion Resources and Transource letters next week asking them whether they will join finalist LS Power in agreeing to cap the costs of their proposals.

PJM announced July 23 that the Board of Managers had delayed action on planners’ recommendation that it select PSE&G to construct the project. (See PJM Board Puts the Brakes on Artificial Island Selection.)

McGlynn said the finalists would have no more than two weeks to respond and that PJM is still planning to make a selection by year’s end. “The answers we get back from the finalists may lead to more questions,” he said, promising an “open and transparent” process for comparing any revised proposals.

Planners told the TEAC they had discovered an error in the cost allocation they announced in May for certain 500-kV proposals, including PSE&G’s. (See Delaware Unhappy with Artificial Island Cost Allocation.)

The allocation was split 50/50 based on load-ratio share and a distribution factor (DFAX) analysis. Planners said the original DFAX analysis assumed flows for a new 500-kV line between Artificial Island in New Jersey and Red Lion, Del., would be predominantly west to east when they are actually the reverse.

Although revised calculations have not been completed, planners said they expect allocations for transmission zones west of Artificial Island to increase.

The original allocation would have assigned costs to among two dozen transmission zones and merchants with the Jersey Central Power & Light zone responsible for about 27% of the project and the AE zone picking up almost 20%.

The error did not affect the cost allocation for LS Power’s proposed 230-kV line between Artificial Island and Cedar Creek, Del., all of which would be allocated to the Delmarva Power & Light zone, according to PJM.

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PJM Backs Off on Regulation Market Fix

regulationPJM dropped a proposal to consider changes to the regulation market after receiving a cool reaction from stakeholders and the Market Monitor.

PJM officials drafted a proposed problem statement in response to the polar vortex in early January, when regulation market prices spiked to 4.5 times normal levels.

Regulation prices hit $3,296/MWh at the peak of the polar vortex as real-time energy prices rose above $1,800/MWh. Including lost opportunity costs — for example forgone revenue in the energy market — PJM rang up a $65 million bill for regulation in January.

PJM’s Jeff Schmidt said the jump was due in part to the fact that high-performing generators were being used for energy and reserves instead of regulation, leaving the RTO to rely on poorer-performing generators to maintain system frequency at 60 hertz. Regulation market prices can be influenced by poorer-performing resources because the calculation uses a “historic performance score” in the denominator.

The issue was first raised in PJM’s analysis of the system’s performance during January’s cold. PJM said stakeholders should consider whether the division by the performance score is appropriate and whether the minimum participation requirements are high enough. It also said they should consider whether to go short on regulation during system peaks.

But the 4x jump in regulation prices was actually far below the increases in operating reserve (10x) and synchronized reserve (9x) costs for the same period.

“I don’t understand why it’s a problem,” Market Monitor Joe Bowring said during a discussion before the Market Implementation Committee last week. “Poor-performing resources raised the prices. That’s exactly the way it’s supposed to work.”

Brock Ondayko of American Electric Power Energy Supply agreed with Bowring. “If we start weeding out the slower performers I guess you would end up with no regulation resources,” he said.

“That certainly could happen,” Schmidt acknowledged.

Public Service Enterprise Group’s John Citrolo said it was improper for PJM to take an “administrative role” in controlling volatility “rather than letting the market handle it.” He said load-serving entities can hedge against such risks.

John Webster of Icetec said increasing the performance requirement for regulation resources might actually increase prices.

After an extended discussion, MIC Chair Adrien Ford said she would table the matter, though PJM may bring it back at a later meeting.

Performance-Based Pricing

In response to the Federal Energy Regulatory Commission’s Order 755, PJM switched in October 2012 to performance-based regulation, which is intended to pay resources based on the accuracy, speed and precision of their response.

In the 2013 State of the Market report, the Monitor said that the changes had improved the regulation market, but that the market’s design remained “flawed,” including an incorrect definition of opportunity cost and an inconsistent implementation of the marginal benefit factor — a conversion calculation — in optimization, pricing and settlement.

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State Briefs

DELAWARE
Lawmaker Proposes Study for Power Aggregation

Colin Bonini
Colin Bonini

A Delaware lawmaker included a proposal for an electricity aggregation study into the state’s capital budget this year in a move that could lead to lower electricity prices for local governments and their residents. The measure, penned by state Sen. Colin Bonini (R-Dover South), calls for the assessment of local conditions and a study of best practices in other states. Aggregation programs allow for large groups to buy power in blocks, with the idea that the group could negotiate a better deal than the standard offer from utilities. Delmarva Power & Light officials said they were studying the proposal.

More: The News Journal

ILLINOIS

Wisconsin Energy Promises Rate Freeze in Acquisition

we-energiesSourceWEWisconsin Energy is promising to freeze rates and guarantee jobs for at least two years in an attempt to convince the Illinois Commerce Commission to OK its proposed acquisition of Integrys Energy Group. Wisconsin Energy is trying to buy Integrys, parent company of Peoples Gas and North Shore Gas of Illinois. The company said if it obtained ICC approval, it would freeze rates for Illinois customers and keep the same number of Illinois employees – about 2,000 – for at least two years, in addition to honoring all labor contracts. The ICC is only one of several state and federal approvals necessary for the acquisition.

More: Milwaukee Business Journal

NRG to Cut Emissions at 4 Coal Plants

NRG Energy said it has a plan to cut emissions at four of its coal-fired stations in the state that would bring the state more than halfway toward meeting new Environmental Protection Agency-mandated emissions limits. The company said it would stop burning coal at one of its Romeoville plant units, convert its Joliet plant to burn natural gas and upgrade the Pekin and Waukegan plants with new emissions-control technology. About 250 jobs would also be cut. NRG said the plan would cut about 16 million tons of carbon dioxide emissions a year. The plan would cost about $567 million, the company said.

More: Chicago Tribune (subscription required)

INDIANA

$400K Grant to Fund Small Solar Projects

The Indiana Association for Community Economic Development received a $400,000 grant to help start up small solar energy projects in the Indiana Michigan Power service territory. The grant, which came from a legal settlement between American Electric Power and the U.S. Environmental Protection Agency, will be used to start Solar Uniting Neighbors (SUN). The economic development association said the grant would be enough to provide funding for 10 to 17 solar installations.

More: WANE TV

MICHIGAN

Solar, Wind Metering Growing

Small-scale solar- and wind-power installations in the state have increased their energy production by 18% since 2012, according to a Public Service Commission report. Since a state-mandated metering system went into effect in 2008, the state has seen 1,527 customers enter the net metering program.Under a net metering program, when customers produce more electric energy than they consume, the excess is sent back to the grid and the customer gets a credit. The PSC report noted that the number of net metering customers increased from 1,330 in 2012 to 1,527 in 2013.

More: Michigan Public Service Commission

NEW JERSEY

Environmentalists Urge State to Rejoin RGGI

RGGISourceRGGIClean energy and environmental advocates urged state officials to rejoin the Regional Greenhouse Gas Initiative during a court-ordered hearing last week. Two years after Gov. Chris Christie withdrew from the RGGI, a state appeals court ruled that the administration and the state Department of Environmental Protection didn’t follow the proper rules, and ordered a hearing to reconsider the move.

While it is unclear whether the court-ordered hearing would have an effect on the decision, many speakers took the opportunity to urge state leaders to rejoin the regional effort.Doug O’Malley, the director of Environment New Jersey, which filed the lawsuit along with the Natural Resources Defense Council, said he hoped the legislature would invalidate the repeal. “Gov. Christie is on the wrong side of public opinion on his decision to pull New Jersey out of this landmark climate program,” O’Malley said.

More: New Jersey Herald

State Consumer Agency Calls for More Protection

The state Division of Rate Counsel is again asking the Board of Public Utilities to tighten rules governing third-party energy suppliers. The consumer advocate’s efforts were spurred by a tough winter, skyrocketing energy prices and widespread accusations of misleading or fraudulent business practices.

Rate Counsel Director Stefanie Brand said her new petition was produced after consultation with the Retail Energy Suppliers Association. “The most important improvement is increased disclosure, in clear and plain language, of all contract terms,’’ one part of the petition explains.

Some of the proposed rules mirror those being considered in the state legislature.

More: NJ Spotlight

Fishermen’s Energy Goes Forward with DOE Funds

fishermensenergySourceFishermensenergyWind energy developer Fishermen’s Energy signed an agreement with the Department of Energy last week, giving it access to almost $47 million to develop a 25-MW wind project off Atlantic City. The project seems to be going forward, even though the New Jersey Board of Public Utilities has denied it ratepayer subsidies and said the project is too expensive and risky. Fishermen’s is appealing that ruling.

One of the terms of the DOE grant is that the project have a customer for its energy one year from now. But the developers are optimistic. “Our goal here in Atlantic City is to build a commercially operational wind farm that demonstrates job creation and specifically to show that these types of projects create benefits that far exceed their costs,” said Chris Wissemann, Fishermen’s CEO.

More: Recharge

NORTH CAROLINA

Study: New State Policies Could Boost Solar

While North Carolina ranks fourth in the nation for overall solar capacity, it is only 10th per capita, behind cloudier states such as New Jersey and Massachusetts, according to a report by an environmental group calling for more solar-friendly state policies.

Environment North Carolina said the state has benefited from the rise of large-scale solar farms but lagged in residential and commercial rooftop systems. The report recommends the state enable third-party sales of electricity, improve net metering laws and expand renewable energy standards.

More: Environment North Carolina

OHIO

State to see 1,000th Utica Shale Well

The state Department of Natural Resources said the 1,000th Utica Shale well will be drilled as early as this week. Through last week 997 horizontal wells had been drilled out of 1,428 permits issued since the shale boom started in 2010.

More: Columbus Business First

Net Metering Case Headed to High Court

OhioSupremeCourtSourceOHIOThe Ohio Supreme Court will be called on to determine how much net metering customers should be paid for electricity they feed back into the grid in a case pitting the Public Utility Commission of Ohio against several large utilities.

PUCO ruled recently that net metering customers are entitled to full value of the electricity, including capacity. FirstEnergy and American Electric Power have argued that their compensation should be based only on the energy portion of their bills. AEP appealed PUCO’s latest ruling, in July, to the state Supreme Court.

More: Midwest Energy News

PENNSYLVANIA

PUC Ponders Limits on Solar Net Metering

The Public Utility Commission is considering a rule that would limit the amount of solar energy customers can sell back to the grid. “By customer-generators producing more electricity and selling it back to the grid and the utility, this could actually be passed through and affect the rates for other customers,” PUC spokeswoman Robin Tilley said. The proposed rule would limit energy production for households and businesses to 110% of annual consumption. The solar industry opposes the rule.

More: WHYY

WEST VIRGINIA

Chesapeake Energy Eyes Shale Fields

CHK_3C_logo.epsState Department of Environmental Protection filings show that Chesapeake Energy, one of the largest shale gas energy players in the Midwest, is looking at the state as its next gas frontier. Chesapeake was one of the first companies to start drilling into Ohio’s Utica Shale Field. The Point Pleasant formation, in West Virginia, could be the scene of the next rush for shale gas production. State Department of Environmental Protection files show that Chesapeake is outlining plans to drill wells in the Point Pleasant formation.

More: Columbus Business Journal

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Norris Departure Opens Another FERC Seat

ferc
(Source: FERC)

It’s time for President Obama to start reviewing resumes again.

Just days after Norman Bay was sworn in as the Federal Energy Regulatory Commission’s fifth member, Democrat John Norris announced he will resign his position almost three years early, creating yet another opening on the panel.

Bay was sworn in Monday after taking a swipe at the PJM energy traders who had dogged him through his confirmation process.

On Friday, Norris confirmed long-standing rumors of his departure by announcing he will leave FERC Aug. 20 to take a post as the Minister-Counselor for the U.S. Department of Agriculture in Rome.

In between, newly promoted Chairman Cheryl LaFleur asserted her authority by filling the General Counsel’s post.

All in all, just another week at 888 First St. NE.

In one of his last acts as director of the FERC Office of Enforcement, Bay authorized the issuance of a Staff Notice of Alleged Violations against a group of investors over what staff said was illegal “wash” trades intended to capitalize on transmission line-loss rebates in PJM.

The notice, issued Tuesday, targets Kevin and Richard Gates, who launched a publicity campaign and lobbied against Bay’s nomination to highlight their complaints over FERC’s investigation. (See related story, PJM UTC Case Likely Headed to Court.)

Obama had indicated his intent to make Bay chairman immediately after his confirmation. But in order to win crucial votes in the Senate, the White House agreed to delay Bay’s promotion until April 15.

Cheryl LaFleur Flexes

That makes LaFleur, who had served as acting chair since November, kind of a Cinderella chairman.

But, apparently emboldened by Obama’s decision July 30 to remove her “acting” title, she asserted her authority Thursday by doing the same for former acting General Counsel David Morenoff, who has been doing that job since October 2012.

Meanwhile, Norris announced he would leave — not to return to his home in Iowa, as some had expected, but to Italy, thanks to Secretary of Agriculture Tom Vilsack.

Norris had served as Vilsack’s chief of staff, both in the Agriculture Department and before, when Vilsack was Iowa’s governor.

Norris issued a statement praising his FERC colleagues before heading off to a camping trip in Maine with his family. He was unavailable for comment yesterday.

Colette Honorable Next?

ferc
Colette Honorable

With Norris departing, speculation on his replacement has focused on Arkansas Public Service Commission Chair Colette Honorable. She was named chair of the Arkansas commission by Gov. Mike Beebe, whom she previously served as chief of staff when he was attorney general. Her six-year term expires in 2017. Honorable is also three-quarters through her one-year term as president of the National Association of Regulatory Utility Commissioners (NARUC).

A lawyer and native of Little Rock, she previously served as executive director of the Arkansas Workforce Investment Board and as an attorney in the Attorney General’s Office, where she worked on Medicaid fraud cases. She has also worked as an attorney at the Center for Arkansas Legal Services, a law clerk in the Arkansas Court of Appeals and as an assistant public defender.

She did not return a request for comment yesterday.

Lame Duck

Norris’ departure was widely expected after he told a conference in June that he would not seek renomination when his term ended in 2017. Norris said industry stakeholders had told him he could not win Senate confirmation if he was reappointed because he is too “pro-consumer.”

Last year, Norris blasted Senate Majority Leader Harry Reid (D-Nev.) for blocking his bid to become FERC chair. Norris said Reid had opposed his elevation to chairman because the majority leader thought he was “too pro-coal” during his time on the Iowa Utilities Board.

Since last year, Norris has increasingly forged his own path. After issuing 11 dissents or concurring statements in 2010, and 11 in 2011, he issued 19 last year and 11 through the first six months of 2014.

Norris’ wife Jackie ran the 2008 Obama campaign in Iowa and briefly served as Michelle Obama’s chief of staff; she is now executive director of the Points of Light Corporate Institute, an organization that helps companies develop employee-volunteer programs, in D.C.

Before Norris’ announcement last week, an editorial in The Storm Lake Times urged him to return home to run for office, suggesting he was one of the few Democrats who could oust Rep. Steve King or Gov. Terry Branstad. He had run unsuccessfully for the House in 2002.

The Work Goes On

Republican Commissioner Tony Clark said yesterday he will miss working with Norris, who he has known since they were both state regulators.

Clark said while it would be nice to have a full panel, there haven’t been many occasions when the panel locked in 2-2 ties.

While Bay may emphasize new initiatives when he becomes chair, Clark said, much of the commission’s day-to day activities will be unchanged. “A lot of the work is just driven by the filings themselves,” he said.

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PJM: Can’t Delay Interface Postings for FTR Auctions

interfacePJM officials last week defended their practice of creating interfaces to capture operator actions in response to voltage problems, saying they can’t guarantee the constraints will be modeled in Financial Transmission Right auctions.

In the last year, PJM has created “closed loop” interfaces in at least four locations so that operator actions — such as sub-zonal dispatch of demand response — are captured in Locational Marginal Prices rather than uplift. PJM said it must use the interfaces to set prices because its modeling software can only set prices for thermal constraints, not voltage problems.

But in its effort to reduce uplift, PJM is exacerbating FTR underfunding, DC Energy’s Bruce Bleiweis told the Market Implementation Committee during a discussion last week.

PJM has promised to provide notice of any new interfaces at least one day before implementing them. But that’s not enough time for FTR holders to react, said Bleiweis, who noted that the RTO requires 90 days’ notice before implementing special protective schemes (SPS).

He proposed PJM provide notice of the potential need for a new constraint as soon as it has identified one and discuss the results of their analysis at the next meeting of the MIC or Markets and Reliability Committee. Interfaces should be announced prior to the next FTR or Balance of Planning Period auction and not implemented until the beginning of the next month, Bleiweis said.

PJM “shouldn’t be in the position of choosing who will gain and who will lose,” he said.

PJM officials said Bleiweis’ proposal was unworkable.

“A lot of those things come up quicker than the time that Bruce would want,” said Adam Keech, director of wholesale market operations. “We might know two days before we need it, not 45 days. Forty-five days later we may not need it. We’re just printing uplift in between.”

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Company Briefs

VivintSourceVivintVivint Solar, an upstart business in the home security and automation fields, is planning an initial public offering for its solar segment, according to sources. Vivint’s IPO could come out as soon as September.

Vivint is the second biggest residential solar installation company in the U.S., behind SolarCity, which went public in December 2012 at $8 per share. Solar City shares closed Friday at $70.14.

More: Utility Dive

Sunoco Logistics Eying 2nd Shale Gas Pipeline

Sunoco Logistics, still finalizing its first cross-state pipeline in Pennsylvania to transport Marcellus Shale gas liquids, has already signed up a customer for a second pipeline. Austrian chemical company Borealis signed a 10-year agreement to buy ethane produced in the Marcellus and Utica shale fields. Ethane is used in plastics production.

The new agreement would go into effect in 2016. Sunoco is in the final stages of constructing its first line, Mariner East. It is scheduled to go into operation later this year. That project generated controversy among residents of the areas the pipeline crossed. Sunoco has been asking the state Public Utility Commission to designate the pipeline a public utility, which would ease the process of gaining rights of way. So far, it has been unsuccessful.

More: The Philadelphia Inquirer

LaSalle Unit 2 Shuts Down with Valve Problem

(Source: Exelon)
(Source: Exelon)

Unit 2 at Exelon’s LaSalle Nuclear Generating Station went into automatic shutdown last Tuesday when one of the station’s steam valves closed. The shutdown went according to plan, and no damage or impact on customers occurred, a station spokesperson said. The company is looking into the cause.

More: News Tribune (subscription required)

TVA Layoffs Reduced by Attrition, Retirements

The Tennessee Valley Authority said last week that it will accomplish most of its 2,000 job reductions through attrition, retirements and voluntary resignations, avoiding the need for massive firings. The cuts are TVA’s largest in 20 years.

TVA began the year with about 12,500 employees. This is down from 51,000 employees in 1981. TVA President Bill Johnson said the employee reductions are necessary in order to cut down on expenses and to keep electricity rates competitive in the region.

Labor unions are concerned that the layoffs merely mean that TVA is hiring more contractors. “As TVA is laying off some of our workers, they are filling some of that work with contractors or selecting managers or others to do the work from outside of our bargaining unit. Those are our major concerns,” said Faye Headrick, senior international representative for the Office and Professional Employees International union. The union represented 3,000 TVA employees 40 years ago but only about 600 now.

More: Chattanooga Times Free Press

FirstEnergy’s Harrison Plant Union Gets Contract

Workers at FirstEnergy’s Harrison Power Station in Haywood, W.Va., have been given their first contract. The Utility Workers Union of America, which has been negotiating since 2010, announced the contract last week. The coal-fired plant employs 184 workers. They’ve been fighting for a contract since they voted to unionize in September 2010. The 3.5-year collective bargaining agreement covers wages, benefits and working conditions. The plant was owned by Allegheny Energy and became part of FE’s fleet through a merger in February 2011.

More: The State Journal

PSEG One Step Closer to Permit for New Nuke

PSEG Nuclear is close to filing a draft environmental impact study on its plan to build a new nuclear station on Artificial Island. The company would need to complete a land swap of 631 acres with the U.S. Army Corps of Engineers on the island in order to go forward. Other studies, including a storm surge study, are also necessary. The environmental impact study could be filed as soon as September. Final action could come late next year, with a separate decision on technologies, design and construction to follow.

More: The News Journal