PJM provided members a glimpse last week of the new visualization tools that will soon be available to transmission operators as a result of the deployment of synchrophasors.
The Real Time Dynamics Monitoring System will provide wide area situational awareness data to help analyze system performance & events. It will include several measures of grid dynamics, including phase angle differences (grid stress); small signal stability (oscillations & damping); frequency instability; generation-load imbalance; power-angle sensitivity and power-voltage sensitivity.
TOs will be offered training on the tool Feb. 28.
PJM officials said they will consider in the System Operations Subcommittee whether generator owners, which are being required to installed synchrophasors, should also have access to the system.
Members endorsed rules describing when economic demand response is eligible for compensation, over the objections of some demand response providers, who said they are unfair.
The changes to Manual 11: Energy & Ancillary Services Market Operations specify that economic DR will be compensated at full Locational Marginal Pricing for “demand reductions that are executed in response to the real‐time and/or day‐ahead LMP or as dispatched by PJM and that are not implemented as part of normal operations.”
Excluded will be “load reductions from normal operations that would have occurred without PJM dispatch, or that would have occurred absent PJM energy market compensation.”
The changes, meant to clarify rules that took effect in April 2012 to comply with FERC Order 745, won 110 votes in support with 22 no votes and 18 abstentions.
Pete Langbein, of PJM, explained that some electricity customers manage their resources in a sophisticated manner that can lead to inflated settlement costs.
“This is just consistent with the way we’re interpreting the Tariff now,” Langbein said. “This is not crafted to have some mysterious meaning behind it.”
One representative said his clients oppose “PJM speculating” about DR participants’ intent.
Frank Lacey, of curtailment service provider Comverge, set up a hypothetical situation in which a retailer dims its lights or turns off escalators in response to day-ahead pricing. “If that was done for the last 10 years, now that can’t be offered into the energy market as a load reduction” under PJM’s interpretation, he said.
John Webster, of Icetec Energy Services, said the change “introduces a lack of transparency.” He said the new language could be “discriminatory based on the level of [customer] sophistication.”
Despite the reservations, stakeholders endorsed the Manual changes with 83 percent support. It will go to the MRC for consideration later this month.
Flow of Emissions Value (Source: The Brattle Group)
Instead of making individual generators or states meet coming carbon emission limits, The Brattle Group proposed that regional transmission operators such as PJM build the limits into their markets. Brattle and Great River Energy, in Minnesota, have broached the idea, and Brattle is developing details of it, as the Environmental Protection Agency prepares to release carbon regulations expected by June.
EPA has been meeting with many stakeholders to come up with a proposal that is effective and can withstand legal challenges.
Jolted by the armed attack on a Pacific Gas and Electric substation last April, members of Congress are considering making a stronger role for the Federal Energy Regulatory Commission in setting standards for protection of critical grid facilities. The current reliability regime, which governs FERC and the North American Electric Reliability Corp., allows the commission to act on standards submitted by NERC but not to rewrite them or initiate its own standards.
One proposal Congress is discussing would allow FERC to impose interim rules on grid defenses while allowing the industry the opportunity to influence permanent requirements.
The Obama administration is worried that economic problems that may lead to additional nuclear plant closures will hurt the nation’s ability to reach carbon dioxide emission reduction goals. Assistant Energy Secretary Pete Lyons, a former member of the Nuclear Regulatory Commission, said DOE is studying plant retirement scenarios and is “very, very concerned.” (See related story, Exelon Warns of Nuke Closings.)
Environmentalists have mixed emotions about the shuffling of chairmanships in the Senate. Sen. Mary Landrieu, a Democrat from oil- and gas-producing Louisiana, is set to chair the Energy and Natural Resources Committee as Oregon’s Ron Wyden moves to Finance to replace Sen. Max Baucus, the new ambassador to China.
Wyden’s move to Finance gives some wind power interests hope that he can win an extension of the production tax credit. Many Republicans want to address extensions as part of comprehensive tax reform; Wyden said he sees them as “a bridge” to comprehensive action.
The Department of Energy signed off on new energy conservation standards for external power supplies used to charge devices such as laptops and cellphones. The standards will save consumers up to $3.8 billion on top of $42.4 billion in savings estimated by 2032 from standards implemented in 2007, DOE said.
The Environmental Protection Agency intends to update and expand its regulations for radiation from nuclear power plants. In addition to addressing radiation emitted to the air, the new standards will cover ground water protection, radioactive waste disposal and decommissioning old plants, subjects that the current regulations do not address.
FERC Uses Emergency Power To Order Propane Shipments
The Federal Energy Regulatory Commission for the first time used its emergency authority under the Interstate Commerce Act to order priority propane shipments from Mont Belvieu, Texas, to the severely cold and propane-short Midwest and Northeast.
“We’re mindful of the emergency situation that has developed in parts of the country where bitter cold weather has created problems for consumers who need supplies of propane,” Acting FERC Chairman Cheryl LaFleur said. “The problem is acute enough that we feel it is important for us to take this step.”
ITC Bill Would Help Solar Projects Get Tax Credits
Senators Michael Bennet (D-Colo.) and Dean Heller (R-Nev.) have introduced a bill to change the qualification rules for the investment tax credit so that more projects can use it. The bill would allow the credit for projects that are under construction, instead of completed, by Dec. 21, 2016, a change that would aid the solar industry.
Four out of five Reliability Must-Run generation units in the ATSI zone will shut down this year rather than 2015, PJM told the Planning Committee Thursday.
Ashtabula Plant (Source: FirstEnergy)
East Lake 1-3 and Lake Shore 18 will be retired Sept. 15, thanks to transmission upgrades in the area that will help maintain reliability in ATSI. Ashtabula 5, however, will maintain generation for the next 16 months.
Lake Shore 18 unit, which was originally slated to be converted to a synchronous condenser at a cost of $20 million, was scrapped in favor of a $34.7 million SVC project due for completion in June 2015. Paul McGlynn, general manager of system planning, said the SVC project should prove more economical when including maintenance costs for the synchronous condenser.
American Transmission Systems, Inc. provides the bulk of its transmission services in northern Ohio and northwest Pennsylvania.
PJM plans to survey generation owners to determine what can be done to increase resource flexibility.
Adam Keech, manager of wholesale market operations, told the Operating Committee that the survey will “be looking at the decline in generation flexibility in the last five-ten years,” a worrisome trend that recent weather events — and accompanying unforced outages that seriously challenged grid reliability — have brought to the fore.
“We want to know, ‘What are the [barriers] to resource flexibility?’” said Keech. “Is it a case of [older] generators not being able to run as much? Is it market rules or fuel … limitations? It will be a mixed bag of questions for generators.”
Keech said PJM will request feedback by April 1 and evaluate responses during the second quarter of this year. The goal is to offer solutions on how to increase resource flexibility by the end of the year.
PJM announced tonight that it will ask members to pay more than $2 million in defaults by two retail marketers unable to cover high power costs during January’s arctic cold.
Suzanne Daugherty, PJM chief financial officer, told the Credit Subcommittee this afternoon that two – then unnamed ̶ retailers had defaulted on collateral calls Friday and had until 5 p.m. Tuesday to “cure” the defaults.
One was CCES LLC, operating as Clean Currents, which announced its collapse Friday (see High Prices Claim Green Retailer). The company, which reportedly had 6,000 residential and 2,000 commercial customers in Maryland, Pennsylvania and the District of Columbia, owes $1.6 to $1.8 million.
The other – which Daugherty said had hoped to come up with the collateral by the deadline – was revealed tonight as People’s Power & Gas LLC, which was suspended by ISO New England in late December, returning thousands of customers to Public Service of New Hampshire. It owes PJM $400,000 to $600,000.
“For both of these retail companies, in a single day they jumped from below their working credit to above their working credit.” The crunches resulted, she said, from “a combination of prices and volume.”
Daughterty said that PJM had issued calls for more than $2 billion in collateral in January, at least four times the total for all of 2013.
In an interview after the meeting, Daugherty noted that eight of the top ten winter demand peaks in PJM’s history occurred last month. PJM, which billed $33 billion in all of 2013, billed “a lot more than 1/12th of that” in January, she said.
Mike Bryson, executive director of system operations, told the Operating Committee earlier today that PJM may now have one or two additional winter-peaking zones in addition to East Kentucky Power Cooperative, the only one prior to January. He did not name the zones and said the numbers were tentative.
PJM will ask the Board of Managers at its Feb. 12 meeting to approve an assessment on members to collect the defaults. The allocations will show up in March bills.
Exempt are associate members, municipal members that have received waivers, Emergency and Economy Load Response and ex-officio members, such as state consumer advocates.
The assessment formula, detailed in section 15.2.2 of the Operating Agreement, prorates 10% of the default over all non-exempt members — about $250 to $350 per member. The remainder will be assessed based on total gross activity for the month of the default and the two previous months.
One company, later identified as Peoples, told PJM that an employee had incorrectly entered a day-ahead transaction. It unsuccessfully attempted to raise the collateral within PJM’s grace period, two business days.
The other, Clean Currents, told PJM that it was hopelessly “cash-illiquid.”
“I haven’t seen anything remotely like this, not even in the summer,” Clean Currents Chief Executive Gary Skulnik told The Philadelphia Inquirer. “We were not sufficiently hedged. When the wholesale market started going through the roof, we weren’t able to cover it.”
“There were more members who went into collateral payment default in January but they cured them” Daugherty said. “On any given day there are outstanding collateral calls.”
While PJM isn’t aware of any of other companies in financial distress, Daugherty said that she couldn’t promise “there’s no one else.”
PJM and other RTOs asked EPA Jan. 28 to allow states to meet pending greenhouse gas regulations through regional caps and to include a “safety valve” to maintain reliability.
EPA is drafting its first limits on carbon dioxide emissions from existing power plants. The ISO/RTO Council (IRC) said that it usually doesn’t take policy positions on EPA regulations but that it wanted to ensure the rules “recognize the relationship between proposed environmental rules, electric system reliability, and economically efficient dispatch.”
The council’s seven-page proposal asks EPA to allow states to adopt State Implementation Plans (SIPs) based on “a regional measurement mechanism for determining compliance with CO2 rule obligations.” The group also said EPA’s regulations should include “a process to assess, and, as relevant, to mitigate, electric system reliability impacts resulting from related environmental compliance actions.”
Meanwhile, major business and manufacturing trade groups announced a coalition to ensure any GHG rules are cost effective, technologically achievable and allow use of all domestic energy resources.
The Partnership for a Better Energy Future is undertaking the effort “because we want a better outcome, not because we want to throw obstacles in the way,” said Karen Harbert of the U.S. Chamber of Commerce’s Institute for 21st Century Energy. The Edison Electric Institute and American Public Power Association are not on the membership list, though the National Rural Electric Cooperative Association is.
The Environmental Protection Agency will issue a final rule on disposal of power plant coal ash by Dec. 19, according to a consent decree EPA signed with environmental groups. Spurred by the disastrous 2008 ash pond collapse at a Tennessee Valley Authority site, EPA started developing regulations but never finalized them. Environmental groups sued and won a ruling requiring the agency to specify a timeline for action. EPA’s proposed rule included options to regulate ash as a hazardous or a non-hazardous waste. Utilities and coal interests oppose a hazardous designation.
The Department of Energy has made $2 million available for development of taller wind turbines that research shows could capture more wind energy. Although wind towers in the U.S. max out at about 300 feet now, the funds would go toward studying 400-foot towers. The taller units are not uncommon in Europe. According to DOE, National Renewable Energy Laboratory research shows higher turbines could unlock more than 1,800 GW of wind potential.
The Internal Revenue Service will be giving special scrutiny to recipients of Section 1603 renewable energy “stimulus” grants because it has found that some also claimed energy tax credits. The grants were meant to be in lieu of credits. A report released last week by the Treasury Inspector General for Tax Administration said the IRS is conducting a compliance study on the 1603 program, which is expected to be completed by June 30. The IRS said some tax practitioners have encouraged use of leasing transactions “because that allows fair market value to be overstated to increase the grant amount.” As of May 2013, Treasury had awarded 9,016 of the grants totaling $18.5 billion.
California Democrat Henry Waxman, a leader of major environmental legislation in the House of Representatives for decades, will not seek reelection. Waxman, who will have served 20 terms, is the top minority member of the Energy and Commerce Committee, and spearheaded the Clean Air Act Amendments of 1990 and the ultimately unsuccessful greenhouse gas cap-and-trade legislation. It is not clear who will succeed him in the lead-Democrat position, but Rep. John Dingell, the Michigan Democrat who is the longest-serving member in history, expressed interest. He is 87 and has served 59 years.
There were more than a few concerned stakeholders at last week’s Members Committee webinar when Market Monitor Joe Bowring presented data showing that only 10 generating units were responsible for 38% of the RTO’s uplift charges in 2013.
Whose generators are they and where are they located? Bowring would like to tell you. But PJM officials said they are prevented by the RTO’s confidentiality rules from disclosing the names.
(Source: Monitoring Analytics LLC)
“The only way that’s ever going to get released by PJM is if we get a FERC order,” Executive Vice President for Markets Andy Ott told the Markets and Reliability Committee Thursday.
The 10 units were responsible for about $335 million of uplift charges in 2013. In total, PJM had $882 million in uplift, or operating reserve charges, for the year, a $231 million increase over 2012. Reactive service charges increased $263.5 million, while black start costs jumped $78 million. (See related story, Black Start Units to See More Green.) Balancing and day ahead charges decreased by a combined $110 million.
Ott said the recent spike in reactive charges is temporary – a result of coal plant closures forcing operators to order more out-of-merit dispatch -– and will be corrected by the addition of new generation and reactive upgrades.
“The reactive issue will be done before we could get [FERC approval for] language changes” to the confidentiality rules, Ott said.
Howard Haas, representing the Monitor, told the MRC the confidentiality rules don’t apply because it is not market-sensitive information. “This is a non-market payment. It’s not hedgeable, so there’s no problem in releasing the information,” he said.
Dave Anders, PJM manager of member services, said that while the Energy Market Uplift Senior Task Force is devising strategies to reduce uplift, PJM staff is considering operational changes it can make without modifying the Tariff or Operating Agreement. “Can we change the model and how we commit units? We may be able to take steps to limit the cost of reactive uplift,” he said.
Bruce Bleiweis, of DC Energy, said it was improper for PJM to take actions “that divide us all into winners and losers without subjecting it to the stakeholder process.”
Ott insisted the changes were permitted. “Similar decisions are made every day.”
The coal industry lobby that sank Ron Binz’ nomination to the Federal Energy Regulatory Commission won’t have a clear shot at President Obama’s new choice as FERC chair.
But that doesn’t necessarily mean smooth sailing for nominee Norman Bay, who has served as director of FERC’s Office of Enforcement since 2009.
While Binz, a former Colorado regulator, called for a new “regulatory compact” and opined on the future of coal and natural gas, those combing through Bay’s history will find little on utility law or energy policy.
A former federal prosecutor and law school professor, Bay has written extensively on criminal law and national security issues. But his opinions on the major policy issues facing the commission — the role of demand response and renewables, implementing Order 1000 — are unknown. Unlike most FERC commissioners in the last decade, Bay has never served as a state utility regulator.
Of the 15 FERC commissioners who have served since 2000, 10 served as commissioners or staffers at state regulatory agencies prior to their appointments. Four of the others worked in energy-related posts in state or federal legislative committees or executive agencies; one was a former utility executive. (See table.)
Of the 15 FERC commissioners who have served since 2000, 10 previously served as members or staffers at state regulatory agencies.
The last five chairmen served a median of 30 months before becoming chair. Only one, Patrick H. Wood III, served less than a year on the panel before his promotion.
Alaska Sen. Lisa Murkowski, ranking Republican on the Energy and Natural Resources Committee, had criticized Obama’s plan to elevate Binz directly into the chairmanship. She also has reservations about the president’s plans for Bay. “It’s curious that they would elevate him to chairman over existing qualified members,” spokesman Robert Dillon told Bloomberg News.
In his favor, Bay has no obvious enemy constituencies — except, perhaps for members of the energy bar, some of whom believe his office has been overzealous in its enforcement actions.
Harvard Law Graduate
The son of Chinese immigrants, Bay studied history at Dartmouth before getting his law degree from Harvard. He clerked with a judge on the Ninth Circuit appeals court and worked in the Legal Adviser’s Office of the U.S. State Department before beginning an 11-year stint as an assistant U.S. Attorney in Washington and Albuquerque, where he prosecuted violent crime.
In 2000, President Clinton appointed him U.S. Attorney for New Mexico, where Bay led a staff of more than 130 and inherited the government’s controversial case against Wen Ho Lee, a scientist at the Los Alamos Nuclear Laboratory.
Lee was indicted on 59 counts for allegedly stealing secrets about the U.S. nuclear arsenal for the People’s Republic of China. But after keeping Lee in solitary confinement for nine months, the government dropped the case in return for Lee’s guilty plea to a single count of mishandling classified material.
The judge who accepted the plea apologized to Lee for what he called misconduct by senior Justice Department officials and Bay’s predecessor as U.S. Attorney. In 2006, Lee received $1.6 million from the federal government and five media organizations to settle a civil suit he had filed against them for leaking his name to the press before charges had been filed.
Although he was not personally implicated in any wrongdoing, Bay was called before a Senate oversight hearing into the case. He resigned as U.S. Attorney in 2001, after the election of President George W. Bush.
As a professor at the University of New Mexico School of Law between 2002-2009, he taught criminal law, evidence, constitutional law, national security law, and ethics. His law journal articles include Prosecutorial Discretion in the Post-Booker World and Executive Power and the War on Terror.
Evolution of FERC Enforcement Unit
When manipulative schemes by traders at Enron and other power marketers roiled the Western energy markets in 2000-01, FERC’s enforcement staff consisted of 20 lawyers in the Office of General Counsel. The maximum penalty FERC could impose was $10,000 per violation per day.
Since then, FERC created a separate enforcement division now staffed with 200 economists, accountants, auditors, former traders and attorneys, including former prosecutors. (Full disclosure: RTO Insider editor Rich Heidorn Jr. worked for the Enforcement Division between 2002-2010.)
Bay created a new unit in 2012, the Division of Analytics and Surveillance, which runs automated screens to detect potential manipulative behavior.
Since passage of the 2005 Energy Policy Act, which increased the penalties to $1 million per violation per day, FERC has collected $873 million in civil penalties and disgorgements. They included cases against Morgan Stanley, Constellation Energy Group Inc., Deutsche Bank AG and JP Morgan Chase.
Barclays PLC meanwhile is fighting a FERC order that it pay a $453 million fine and $35 million in unjust profits over alleged manipulation of Californian and other western power markets by the British bank in the last decade.
But consumer advocates and other critics say regulators’ enforcement actions have neither provided sufficient deterrent nor made consumers and honest market participants whole. Moreover, some say regulators will never be able to catch up with clever traders looking to exploit the rules. (See JP Morgan Settlement: A Verdict on Electric Markets?)
Appellate Loss
FERC also has been criticized for overreaching in its enforcement under Bay. The D.C. Circuit last year threw out FERC’s market manipulation case against Brian Hunter, whose natural gas trades contributed to the collapse of hedge fund Amaranth Advisors LLC.
FERC had accused Hunter of selling natural gas futures contracts at the end of the trading day, which depressed the futures closing price but benefited the hedge fund’s swap positions in physical markets.
The court ruled that the agency had encroached on the jurisdiction of the Commodity Futures Trading Commission (CFTC), which sided with Hunter in the case in claiming exclusive jurisdiction over futures contracts.
“Although the Commission reads the Hunter decision as narrow in scope, some market participants interpret the decision more broadly to cover not only manipulation in the futures market, but also many additional transactions and products, including those squarely within FERC’s jurisdictional markets,” Bay told the Senate Banking Committee in testimony last month. “Accordingly, a legislative fix to eliminate uncertainty on this matter could ensure that FERC has the full authority needed to police manipulation of wholesale physical natural gas and electric markets.”
FERC and the CFTC took a step toward settling their long-running turf battle in January, signing two Memoranda of Understanding to address jurisdictional issues and information sharing.
Criticism of FERC Enforcement
At the National Association of Regulatory Utility Commissioners annual meeting in November, a panel including former FERC Chairman Joseph Kelliher and former General Counsel William Scherman attacked FERC’s enforcement as opaque and a threat to market liquidity.
Kelliher, now executive vice president for NextEra Energy Inc., said he now realizes “it’s much harder to comply [with market rules] than I thought.” He said the commission has not clearly defined what constitutes a “strong compliance culture,” a consideration when calculating penalties. Because most of FERC’s enforcement cases have resulted in settlements, the agency has not created a full record to define behavior it considers manipulative.
Scherman went further, saying that FERC’s actions are causing companies to leave the energy markets, reducing liquidity and increasing volatility.
They were joined in criticism by Harvard professor William Hogan, who said FERC needs to be transparent regarding its definition of market manipulation.
Bay was not present at the NARUC conference. His deputy, Larry Gasteiger, defended FERC’s record, saying it was following the direction of Congress, which allowed FERC to determine on a case-by-case basis whether trading behavior is manipulative.
LaFleur’s Future?
Bay’s nomination leaves the future of acting FERC Chair Cheryl LaFleur in question. LaFleur, named acting chair in November with the expiration of former Chairman Jon Wellinghoff’s term, told reporters last week she’d like to be renominated for another term, whether or not it was as chair. (See Acting FERC Chair Wants to Keep Her Job.) Her term expires in June.
Asked Friday whether President Obama will nominate LaFleur to a second term, a White House spokesman replied cryptically, “I have no personnel announcements to make.”
Wellinghoff, who hired Bay at FERC, reportedly lobbied for him as his replacement. “Norman Bay did a great job as the Office Director of the Office of Enforcement and I think he will make a great commissioner,” Wellinghoff said in an email to RTO Insider.
The Federal Energy Regulatory Commission ordered PJM to provide more information in support of its proposed limits on capacity imports, as opponents said the proposal would unreasonably increase prices.
PJM proposed methodology that will limit external generation resources in this May’s base capacity auction to 6,200 MW — a 17% drop from the volume of imports that cleared in last year’s auction. (See Members OK Capacity Import Limit; Prices May Rise.)
The commission’s Jan. 28 order (ER14-503) came after the MISO Market Monitor and others called on FERC to conduct fact finding on the proposal, contending the reduced competition from imports will increase PJM’s prices. PJM’s Market Monitor and some PJM generators, meanwhile, say the limit doesn’t go far enough to protect reliability.
Among the issues on which FERC requested more information were:
Protests by the PJM Market Monitor and the Indicated PJM Utilities, who contend that all external resources should be required to meet the standards set for resources exempt from the limits (firm transmission service, pseudo-tie, and must-offer requirement).
How PJM planners decided on the five external zones for calculating the limits.
How the methodology used to determine the capacity limits compares with that used to determine the installed reserve margin (IRM) for the capacity auctions.
The contention of MISO’s Market Monitor, Potomac Economics, that PJM should remove the requirement for unit specific deliverability testing. The MISO Monitor contends PJM’s requirement is based on an unrealistic notion that when PJM needs firm capacity-backed energy “from an external resource in MISO that the energy will be sourced at that particular unit.”
How the limit affects the MISO/PJM fact-finding effort on capacity deliverability across the RTOs’ seam.
PJM must respond to FERC’s questions within 30 days.
The PJM proposal won support from PJM generation owners, state regulators, the North Carolina Electric Membership Corp., the Electric Power Supply Association and others. Among those opposing the change in addition to the MISO Monitor are American Municipal Power (AMP) and the Illinois Municipal Energy Agency.
The Illinois agency contended the PJM proposal “grossly overreaches the problem claimed.”
AMP suggested the capacity import limits (CILs) were like “territorial allocations or refusals to deal, both of which can and often do run afoul of federal and state antitrust laws.”
AMP said it would be hurt by the limits because it owns generation in MISO that was planned when about half of its native load was in MISO. Less than 5% of AMP member native load remains in MISO as a result of the moves to PJM by ATSI in 2011 and Duke Energy-Ohio in 2012.
AMP says the value of its MISO generation “would be greatly impaired if PJM’s CILs were to prevent AMP from utilizing those resources to serve the capacity needs of its PJM-area members.” The company said it is already suffering from the “very substantial congestion charges AMP is assessed in bringing energy from MISO into PJM.”
The PJM Power Providers Group counters that the PJM proposal won more than 85% support in a sector-weighted vote by stakeholders.
The Maryland Public Service Commission staked out the middle ground, saying that while it “largely supports” the proposal, it has concerns that big reductions in imports from MISO could “significantly increase costs for end-users.”
It urged the commission to “fully utilize its evidentiary procedures” before ruling.
PJM provided members a glimpse last week of the new visualization tools that will soon be available to transmission operators as a result of the deployment of synchrophasors.
