Page 968 – RTO Insider

March 7, 2021November 2, 2023

Carbon Tax Bill Gains Supporters in Wash.

A proposed Washington state tax on carbon emissions drew strong support at a Thursday legislative hearing.

Environmentalists and activists for low-income residents and communities of color praised the tax bill introduced by Democratic state Sen. Liz Lovelett. The legislation garnered a mixed response from industrial and corporate players, and a few anti-tax advocates were strongly opposed.

“This is not a bill that makes everybody happy off the bat. This is not going to be a silver bullet for climate change. … We need more work on the low-income mitigation piece,” Lovelett said at the hearing. In a separate interview, she said, “We worked hard to enfranchise everyday people in this.”

Her bill (SB 5373) would implement a tax of $25/ton of carbon emissions beginning Jan. 1, 2022. The tax rate would increase by 5% a year. Breaks would be given to energy-intensive industries vulnerable to foreign competition — a category whose exact criteria still needs to be finalized by the state government. The tax would be levied on Washington’s five oil refineries for motor fuels sold in the state but not for fuel exports.

The tax revenue would be distributed to transportation programs, low-income residents and communities of color to make homes more energy efficient and address pollution-related health problems. Funds would also help rural areas reduce carbon emissions, including transportation improvements.

The bill would require the state government to review the proposal in 2025 to see if it is meeting the goals set by a 2008 law to trim carbon emissions. In 2018, Washington’s carbon emissions totaled 99.57 million tons. The 2008 law set emission goals of 50 million tons by 2030, 27 million tons by 2040 and 5 million tons by 2050.

The committee’s staff calculated that the proposed tax would raise $1.587 billion in the 2021-2023 budget biennium, $4.162 billion in 2023-2025 and $4.595 billion in 2025-2027.

Fifty-three of 68 people testifying Thursday supported the bill. The majority belonged to environmental and social advocacy organizations. They also included some local government officials, a few farmers and labor interests.

Supporters liked money going to transportation programs and pollution mitigation measures for low-income communities, arguing that polluting industries tend to be in low-income neighborhoods and communities of color. Allocations to help farms deal with carbon-emission costs and equipment upgrades also drew fans.

“It solves multiple problems at one time,” said Bobby Righi, representing Puget Sound Advocates for Retirement Action. Judy Twedt of the Union of Academic Student Employees and Postdocs Local 4121, said, “It generates much needed revenue for unhealthy communities.”

Tax Resistance

Opponents zeroed in on taxes.

Tim Eyman, Washington’s leading anti-tax activist, noted that the state voters defeated carbon tax initiatives by 59% to 41% in 2016 and by 57% to 43% in 2018. (See High Failure Rate for Western Ballot Initiatives.) “I think people are angry and frustrated, and rightly so because people in Olympia are ignoring them,” Eyman said. Washington resident Jeff Peck added, “What you see are two-legged ATMs running around.”

The Washington Farm Bureau opposes carbon taxes on general principle but liked that some revenue would go to agriculture — with the caveat that farming should be a higher priority in distributing that money.

The Association of Washington Business, the state’s leading business-lobbying organization, and the food processing organization Food Northwest opposed Lovelett’s bill because it does not sufficiently protect facilities vulnerable to foreign trade or define the criteria for designating such facilities.

The Western States Petroleum Association (WSPA) is neutral on the bill, waiting to see how subsequent tweaks turn out. Those tweaks include how the final bill addresses industries vulnerable to foreign competition. However, U.S. Oil & Refining supported the bill, believing it incentivizes industry to lower emissions.

WSPA representative Jessica Spiegel voiced concern about the multiple carbon emissions bills currently in play in the legislature. These bills include a complicated cap-and-invest program (SB 5126), a plan to trim the carbon content in motor fuels (HB 1091) and a requirement that all new car sold in Washington be electric by 2030 (SB 5256). (See Wash. EV Bills Spark Concern About Buildout.)

“We need a single approach. Unfortunately, right now we have a scattershot approach,” Spiegel said.

The two biggest bills in play are Lovelett’s and Democratic Sen. Reuven Carlyle’s cap-and-invest bill, which is a more complex version of a cap-and-trade program.

In her interview, Lovelett said both bills can coexist because they largely complement each other.

But Dr. Annmarie Dooley of Physicians for Social Responsibility disagreed. “Cap-and-invest is like allowing public smoking in a hospital as long as they donate to the hospital,” she said.

March 7, 2021November 2, 2023

Green Transition Sparks Comeback for Utility Securitizations

Utility securitizations, once used to reimburse power companies for assets that became stranded under electricity market deregulation, are making a comeback. Utilities and state governments are using the ratepayer-backed bonds to deal with the huge costs associated with green energy transition, climate change and even the COVID-19 pandemic.

“Utility securitizations are set for a resurgence as electric utilities deal with costs surrounding the transition out of hydrocarbons into green energy,” said Joseph Fichera, CEO of utility securitization advisory expert Saber Partners. “There are also attempts being made to apply the ratepayer securitization model to costs from the COVID epidemic, as well as the increasing costs associated with climate change.”

Saber Partners’ forward calendar for ratepayer bond issuance lists five states — California, North Carolina, Wisconsin, New Mexico and Michigan — that have legislation in place for utility securitizations. Utilities in these states are expected to issue as much as $24 billion of ratepayer bonds in the near future.

Colorado and Montana have also recently passed utility securitization enabling legislation. In addition, six states — Kansas, Missouri, Minnesota, Iowa, South Carolina and Arizona — are considering new utility securitization authorizations.

To give an idea of the extent of the resurgence, only $51.1 billion of ratepayer bonds were issued 1997 through 2019, with just $4.1 billion in principal currently outstanding, according to Saber Partners.

“If securitization were used for early retirement of all coal plants in the nation, as well as to pay for COVID costs, perhaps hundreds of billions of dollars in ratepayer bonds would need to be issued,” Fichera said. “Not all coal plants and COVID costs will be dealt with using securitization. Ratepayer issuance going forward, however, very well could surpass the $50.8 billion issued from 1997 through 2019.”

California: $12B+

California’s three investor-owned utilities are seeking to issue more than $12 billion in bonds.

After a long absence from the ratepayer bond market, Southern California Edison in mid-February issued $338 million of ratepayer bonds designed to mitigate future damage from wildfires. Over the last three years, California has seen an unprecedented series of wildfires — fires that some, including California Gov. Gavin Newsom, have attributed to climate change.

Legislators in Sacramento have approved unprecedented levels of utility securitizations, Saber Partners says. SoCal Edison’s February ratepayer issue is likely to be the first in a series of ratepayer bonds as the utility has been authorized to issue up to $1.6 billion worth.

Troubled Pacific Gas and Electric has authorization to issue $3.2 billion for wildfire mitigation costs and is seeking another $7.5 billion of ratepayer bonds to pay wildfire victims, Saber Partners said.

California consumer advocates are vigorously litigating the 7.5 billion securitization authorization, claiming the interests of ratepayers aren’t being adequately considered, though PG&E has promised that securitization deals will be neutral with respect to overall electricity rates for consumers.

“If utility securitizations are to be done on a best practices basis, the interests of consumers must be of paramount importance,” Fichera said. “Ideally that means consumers must be represented in the negotiations where the structure of securitizations are laid out.”

Last June, Saber Partners was retained by the Public Staff of the North Carolina Utility Commission to advise on Duke Energy’s $1 billion proposed securitization to pay for storm damage. In total, Saber Partners has advised on more than $9 billion of utility securitizations, mostly retained by utility regulators who wanted guidance on protecting consumers.

Funding Deregulation

Utility securitizations saw their genesis during the electric utility deregulation movement of the late 1990s. Vertically integrated utilities in many states were required to separate transmission, which remained regulated, from power generation, which was opened to competition.

The idea was to promote efficiency by allowing unregulated generating companies to compete with each other to offer electricity at lower prices to win market share.

Importantly, electric industry reformers also wanted market price signals to start determining when and in what form new generation assets would be built or disposed of — unlike the centralized, command and control under the utility industry model that prevailed for more than 100 years.

But splitting transmission and generation created some headaches, not the least of which was the fact that many generation assets had yet to be fully paid for in the utility customer rate base. As a result of deregulation, generation assets were held in unregulated entities that had zero ability to amortize costs through a normally captive customer base.

These generation assets became known as “stranded assets,” a term that is now in ubiquitous usage in the electric power industry. Among the stranded assets were generators such as Philadelphia Electric Co.’s Limerick nuclear plant, which produced power at a cost that was no longer competitive in the deregulated environment.

Enter utility securitization. Ratepayer-backed bonds were used to refinance utility holding company balance sheet debt, as well as to pay back equity associated with the investments in the newly stranded assets.

By going to state utility boards and through special legislation, electric utility holding companies were given permission to float these new ratepayer bonds to get reimbursed and spread the costs to ratepayers over time at a lower cost of funds. This idea then spread to massive storm damage costs, starting with Hurricane Katrina and Rita in 2005, and for rising environmental costs. PG&E and other California utilities are planning to use ratepayer bonds to reimburse COVID related costs, according to Saber Partners.

In a ratepayer bond deal, a special purpose vehicle (SPV) — a trust, basically — is set up that holds an irrevocable claim to a new charge on customer bills, a charge specifically levied to reimburse for any utility costs approved by state legislators. Regulators monitor the SPV trust and every six months adjust the special charge to ensure that there is enough money in the SPV to pay off the ratepayer bond on time.

Enthusiastic Reception

Credit rating agencies have given ratepayer bonds AAA ratings based mostly on the irrevocability of the claim to the cash flow from the special charge. Another credit positive is the fact that regulators periodically adjust the level of the special charge to ensure adequate funding of the trust.

Judging by the enthusiastic reception investors gave So Cal Edison’s $338 million transaction in February, there should be no problem selling upcoming utility securitizations. The offering was eight to 10 times oversubscribed, sources say.

Utility securitizations have brought together interest groups that have traditionally been adversarial.

“Environmental groups and renewable energy advocates have joined utilities in pushing for securitizations,” said J. Paul Forrester, partner at Chicago-based law firm Mayer Brown. “It’s not often that you see utilities and environmentalists working hand-in-hand, but it makes sense because utility securitizations will smooth and accelerate the path for power company green energy transition.”

In 2019, the Sierra Club threw its weight behind utility securitizations. “Securitization is a key financing tool that can help electric utilities accelerate the retirement of uneconomic, polluting coal plants and move more quickly toward a grid powered by clean, safe renewable energy,” the group said in announcing a report on the subject.

While utility securitizations will lower overall costs for dealing with stranded coal assets and climate change costs, the extremely complex nature of the deals means that the costs of structuring securitized utility transactions are very high.

Saber Partners said that some deals have had structuring costs north of $20 million, costs that Forrester is working to mitigate.

While he would not name his client because of confidentiality concerns, Forrester says he has been retained by a nonprofit to build a utility securitization deal template — a kind of “plug and play” solution — that utilities and state governments can use to allow for more securitizations while also reducing costs considerably.

March 7, 2021November 2, 2023

Virginia Takes $43.6M in its 1st RGGI Auction

Virginia sold $43.6 million in carbon dioxide allowances in its first Regional Greenhouse Gas Initiative (RGGI) auction since joining the cap-and-invest program in January.

“Virginia’s participation in RGGI signals our commitment to addressing climate change while creating economic and health benefits for communities across the commonwealth,” David Paylor, director of the Virginia Department of Environmental Quality, said in a press statement Friday. “Through the work of our agency partners at the Virginia Department of Conservation and Recreation and the Virginia Department of Housing and Community Development, auction proceeds will protect those most vulnerable to the risks of sea-level rise and flooding and apply badly needed upgrades to new and existing residential buildings.”

RGGI’s 51st auction on Wednesday generated $178.4 million for the 11 participating states from the sale of 23,467,261 allowances at a clearing price of $7.60, 19 cents higher than that for the 50th auction in December and 78 cents higher than the 49th auction’s in September.

Allowances in the 11.98 million cost-containment reserve remained unsold, and no allowances in the 11.31 million emissions-containment reserve were withheld. The fixed cost-containment reserve supply was available if allowance prices exceeded $13, while the emissions containment reserve supply was available for withholding if the clearing price fell below $6.

The minimum bid price was $2.38, and the maximum bid price was $12.86, according to the “Market Monitor Report for Auction 51″ prepared by Potomac Economics.

There were 44 winning bidders in the auction, with five bidders purchasing 1 million tons or more and 21 bidders purchasing 200,000 tons or more, the report said. Each allowance represents the authorization to emit 1 ton of CO2. The highest three bidders purchased 4.75 million, 4.075 million and 4.07 million allowances, respectively, according to the report.

Bidders in the auction, the report said, represent organizations in the following categories:

organizations that acquire and hold allowances primarily for their compliance obligations;
investors that have compliance obligations but hold allowances in excess of their compliance obligations, potentially for transfer to unaffiliated firms; and
investors without compliance obligations.

Organizations with compliance obligations and investors with compliance obligations together purchased 44% of the allowances sold in the auction, while organizations with compliance obligations alone purchased 42% of the allowances, the report said. In addition, 31 organizations with compliance obligations and 17 investors submitted bids, and 63 entities were qualified as potential bidders.

RGGI Hopefuls

North Carolina or Pennsylvania could be the next state to join RGGI.

Pennsylvania is in the middle of a rulemaking process to authorize RGGI participation. The Department of Environmental Protection started that process under a 2019 executive order from Gov. Tom Wolf. The department is considering public comments on its proposed rulemaking before issuing a final rule.

The plan to enter RGGI has met significant opposition from the state legislature, which passed a bill last year that said the state could not join the program without legislative action. Wolf vetoed the bill, but Rep. Jim Struzzi (R) reintroduced the legislation (HB 637) at the end of February. The bill now is in the House Environmental Resources and Energy Committee.

In North Carolina, the Southern Environmental Law Center (SELC) filed a petition for rulemaking with the Environmental Management Commission (EMC) for the state to join RGGI.

The petition, which SELC filed on behalf of Clean Air Carolina and the North Carolina Coastal Federation, piggybacks on the state’s effort to identify prudent state carbon policy, Nick Jimenez, staff attorney at SELC, said Thursday during a public outreach webinar. The state released a clean energy plan in 2019, but it did not select any specific policy action. Instead, Jimenez said, the plan called for an academic review of carbon policy options.

The North Carolina Clean Energy Plan “didn’t turn into action,” he said. “It sat on a shelf, and we just don’t have time for that to happen this time.”

The petition to join RGGI sets a timeline to act, he added, but it does not exclude other actions that might come from the academic policy review.

Jimenez said that SELC filed the petition on Jan. 11, and the EMC has 120 days to act on it.

“We don’t expect action sooner than May, but the clock is ticking, and action will come soon,” he said.

The EMC’s Air Quality Committee will hold a public meeting on March 10, during which it will hear a summary of a report on carbon-reduction policies for the North Carolina power sector, as recommended by the energy plan. The report was conducted by Duke University’s Nicholas Institute for Environmental Policy Solutions and the University of North Carolina’s Center for Climate, Energy, Environment and Economics.

March 7, 2021November 26, 2023

Hawaii Report Poses ‘Living’ Shoreline to Counter Sea Level Rise

A new report by the University of Hawaii Community Design Center explores the idea of creating “living” shorelines to fight sea level rise in Oahu’s urban and tourism core.

Authored by University of Hawaii professor Judith Stilgenbauer and funded by the state’s Office of Planning, the report focuses on the South Shore of Oahu, from Diamond Head through Waikiki and Honolulu, all the way to the Honolulu International Airport and Pearl Harbor.

The report explains that a sea level rise of 3.2 feet would flood 9,400 acres of land, displacing 13,300 residents and swamping 3,880 structures and nearly 18 miles of major roads. It would amount to “over $12.9 billion in economic loss and uncalculated number of billions of dollars in critical infrastructure loss.”

In addition to submerging sections of the shoreline, a 3.2-foot sea level rise, would increase the risk of flooding from tsunamis and hurricanes enough to put the entire urban core at risk. A 6-foot rise (assumed in the report to be reached by 2100) would put many of Waikiki’s famous beaches and hotels — and portions of Honolulu’s airport and central business district — underwater.

The project report explores a multifaceted approach to mitigate this risk: creating a living shoreline, adapting infrastructure to sea level rise and performing a “managed retreat” to higher elevations when necessary.

Much of Oahu’s South shoreline has been modified, with coastal wetlands filled to expand the airport, create harbors and extend land for public use and private construction. The report recommends reversing this development and creating a living shoreline, defined as “wetlands, tidal marshes and other vegetated coastal buffers that rely on ecosystem services and increase the distance between water and development, retain and absorb inundation, slow erosion and provide habitat.”

The value of a living shoreline would not only be its resilience to the evolving effects of rising sea level, but also in providing opportunity for “improved waterfront access, non-automobile circulation, recreation, culture, placemaking and education,” in addition to “traditional and productive Hawaii-specific biocultural land-water practices where possible and appropriate.”

Adapting infrastructure and conducting a managed retreat are simpler affairs, at least conceptually. For adaptation, the report recommends a combination of elevating structures, “floodable” development (structures designed for an occasional influx of water), and floating development. Suggestions conjure science fiction imagery: “floating buildings, transportation elements and infrastructure; elements are designed with fluctuating water levels in mind.”

Managed retreat would be a “withdrawal of development from the shoreline over time through managed abandonment of areas subject to frequent inundation.”

‘Catalytic’ Sites

In order to explore proof-of-concept, the report devised five criteria to help identify valuable areas: areas affected by a 3-foot sea level rise and exacerbated by tsunami or hurricane events; areas that could regularly be affected by a six-foot rise by 2100; properties large enough to avoid causing too many ownership conflict issues; tax parcels that have been affected by the previous criteria; and areas that would be affected by a 3-foot sea level rise by 2050.

The report identified three areas as “catalytic” sites: Ala Wai Canal in Waikiki, Ke’ehi Lagoon near the airport and the surrounding areas of the Pearl Harbor Visitor Center and Aiea Bay Recreation Area.

Perhaps the most important catalytic site would be the Ala Wai Canal, which runs from mountain streams behind Waikiki to the ocean. Long known as a polluted waterway with runoff from rivers and human trash dumping, its reach from the east side of Waikiki around the back of the area creates a pincer-like danger from rising sea level. The report cites a 2015 US Army Corps of Engineers study saying that damages associated with a 100-year flood event in the canal’s watershed are estimated at $1.14 billion.

Bordering the canal on one side is an 18-hole golf course, a park and canoe launching site, a public library and an elementary school; on the other side, the three-lane Ala Wai Boulevard and an additional lane for parking. The proof-of-concept design would reduce the golf course to nine holes and, over time, eliminate it completely, changing the entire site into a mixed-use area of an amphibious habitat, wetlands and urban agriculture. It would also, over the long term, eliminate automobile use of Ala Wai Boulevard and convert it for “multimodal transit, as well as improved pedestrian and bicycle connectivity and water access — all while providing flood-control for Waikiki (Ala Wai side), facilitating the elevation of critical infrastructure elements and, more generally, the adjacent urban fabric’s phased adaptation to increasing climate-crisis threats over time.”

The entire site would include walking paths, raised viewing platforms, water access and public facilities for recreation. The canal would use natural methods to keep the water clean, such as oysters, which are known to filter water and aid in water health. The Gowanus Canal in Brooklyn, New York, for example, is one of the most polluted waterways in the U.S., but programs such as the Billion Oyster Project are using this idea to help clean the polluted water.

Catalytic sites 2 and 3 — Ke’ehi Lagoon to the east of the airport and the Pearl Harbor Visitor Center and surroundings, respectively — would commit to many of the same practices: slowly changing the shoreline into coastal wetlands using native plant species and building public facilities to engage with the area and provide water access.

The report recommends connecting these three catalytic sites with the rest of the urban core via multimodal transit. Dubbed the South Shore Promenade, it would be a bicycle and pedestrian path along the urban core’s entire waterfront. This path would coincide with stations of the Honolulu Area Rapid Transit (HART), a raised rail transit system currently under construction.

The report also recommends the creation of a water taxi and ferry system with stations linked to the promenade to further reduce reliance on cars. This plan would help the traffic-jammed streets and highways of Honolulu, which for years has been rated one of the worst cities in the nation for traffic.

March 7, 2021November 2, 2023

Nev. Program Seeks Calif. Standards for Vehicle Emissions

A Nevada state agency is seeking approval by year-end for a program to tighten vehicle emission standards and increase availability of electric cars, bringing the state’s regulations in line with those of California.

The program, Clean Cars Nevada, was announced by Gov. Steve Sisolak in June. The Nevada Division of Environmental Protection (NDEP) has released draft regulations that would implement the program, with a goal of receiving approval from the State Environmental Commission by December.

If all goes as planned, the program will take effect for model year 2025 vehicles.

LEV and ZEV

Clean Cars Nevada has two components: the low-emissions vehicle (LEV) and zero-emissions vehicle (ZEV) programs.

Nevada’s transportation sector has grown to account for the largest share of the state’s GHG emissions with the reduction of electricity generation emissions. | Nevada Division of Environmental Protection

The LEV program would apply California’s emission standards for greenhouse gases and other pollutants to cars for sale or for lease in Nevada. Those would include passenger cars, light-duty trucks and medium-duty vehicles.

Under the federal Clean Air Act, federal standards apply to tailpipe emissions unless a state decides to implement California’s more stringent emission standards, which 13 other states have adopted. Nevada, Minnesota and New Mexico are in the process of evaluating or adopting the California standards.

Under the ZEV program, Nevada would require automakers to sell an increasing percentage of zero emission vehicles. The program uses a system of credits that are awarded based on the type of zero-emission vehicle sold and the vehicle’s range.

Ten states in addition to California have adopted the ZEV program.

However, Clean Cars Nevada faces a potential roadblock. The Trump administration in September 2019 revoked California’s waiver allowing the state to implement its own emission standards and ZEV program.

The rule revoking the waiver has been challenged in court. It’s also possible that the Biden administration will reverse it.

For now, NDEP’s authorization to implement Clean Cars Nevada states that the regulation will take effect only if the California waiver is reinstated or a new waiver is issued.

Support, Opposition

Clean Cars Nevada has the support of more than 70 organizations, including environmental, business and public health groups that have joined to form the Nevada Clean Cars Coalition, according to the National Resources Defense Council.

Travis Madsen, transportation program director with the Southwest Energy Efficiency Project, said electric vehicles are almost three times as efficient as their gas-powered counterparts.

“That translates into major benefits, including saving consumers money, improving public health and reducing climate-changing pollution,” Madsen said during a public listening session that NDEP hosted in January.

But Madsen had concerns about a provision in the proposed regulation that would award ZEV credits to automakers based on their balance in California’s credit bank. That would in effect give automakers a pass for several years of the Nevada program, Madsen said. Instead, he’d like to see the state focus on awarding ZEV credits to automakers who act early to increase the availability of electric cars.

Andrew MacKay, executive director of the Nevada Franchised Auto Dealers Association (NFADA), said regulation of fuel economy and emissions should be left to the federal government to provide more regulatory certainty. NFADA opposes Clean Cars Nevada.

MacKay said the affordability of new vehicles to consumers should also be considered.

“If we lose affordability, we will lose vehicle sales,” MacKay said during the NDEP listening session. “And if we lose sales, all that we will do is keep older, less safe, less fuel-efficient vehicles on the road, potentially shifting our environmental goals into neutral or reverse.”

Next Steps

NDEP hosted a webinar introducing Clean Cars Nevada in December, followed by the listening session in January. Last month, the agency held a technical session to discuss the LEV program.

The next steps are a technical session on the ZEV program on March 30, from 9-11 a.m., and a technical session on the ZEV credit bank sometime in April.

NDEP will analyze the impacts of the program on air quality and small businesses and post the findings on the program’s website.

NDEP expects to revise the proposed regulations based on feedback. That will be followed by a public workshop in June. The regulation is tentatively scheduled for a State Environmental Commission hearing in September.

The Nevada Department of Motor Vehicles will also review the proposal.

Meeting GHG Goals

Clean Cars Nevada is intended to help the state meet greenhouse gas reduction goals set by Senate Bill 254, which was signed into law in 2019. The state aims to reduce GHGs to 28% below 2005 levels by 2025, 45% below by 2030, and achieve zero or near-zero emissions by 2050.

NDEP projections show the state falling short of meeting those targets, with a 24% reduction in greenhouse gases by 2025 and a 27% reduction by 2030.

The transportation sector has been the biggest contributor to GHG emissions in the state since overtaking the electricity generation sector in 2015, according to the agency’s most recent greenhouse gas inventory. As of 2017, the transportation sector accounted for 36% of the state’s GHG emissions, followed by electricity generation at 30% and industry at 15%.

When broken down by fuel type, gasoline accounted for 59% of Nevada’s GHG emissions from transportation in 2017, followed by diesel at 23% and aviation fuels at 16%.

March 5, 2021

ERCOT Board Cuts Ties with Magness

Following the ERCOT Board of Directors’ decision to fire CEO Bill Magness during an emergency teleconference Wednesday night, names of his potential successor have already begun to circulate.

During a hearing before the state House’s State Affairs Committee on Thursday, Rep. Phil King (R) proposed former FERC Chair Pat Wood as a potential short-term caretaker to oversee ERCOT reforms. Wood, now Hunt Energy Network’s CEO, also chaired the state’s Public Utility Commission.

One media report said the board “reportedly already [has] a frontrunner” in former NYISO CEO Brad Jones. However, others suggest Texas’ political leaders will favor someone without personal connections at ERCOT should they need to clean house; Jones spent two years with the grid operator and was its COO before taking over at New York’s grid in 2015.

ERCOT Bill Magness — The ERCOT board fired CEO Bill Magness (left), shown here during a media briefing following the February winter storm alongside Dan Woodfin, senior director of system operations. | *ERCOT*

Jones abruptly left NYISO in 2018 in what was termed a “personal decision.” His LinkedIn profile lists him as “retired.” (See Brad Jones out at NYISO.)

One thing’s for sure, according to one industry insider: The next CEO will be a “tried and true, 10-gallon hat-wearing” Texan.

Magness drew political heat following the system’s near collapse last month that led to long-term power outages and misery for millions of Texans. Testifying for almost 11 hours before four state Senate and House committees on Feb. 25, Magness said he would not have done anything differently in the leadup to the massive load shed, but he admitted that ERCOT’s communications efforts could have been much better. (See Texas Lawmakers Dig into Power Outages.)

Lt. Gov. Dan Patrick, who on Monday had called for the resignations of Magness and PUC Chair DeAnn Walker (who resigned that same day) welcomed the board’s vote. (See PUCT’s Walker Steps Down from Commission.) Late Monday, Shelly Botkin also resigned from the PUC, leaving the commission with just Chair Arthur D’Andrea.

“Good news … they are both gone,” he tweeted. “Next — one of my top 31 priorities — reforming ERCOT and fixing what went wrong.”

The board voted 6-1 to invoke the termination notice in Magness’ contract without cause; however, he turned down the option to receive another year of his current base salary he was entitled to under his contract. Magness will continue in his role for 60 days, working with state leaders and regulators on potential reforms to ERCOT, the grid operator said in a statement.

The board also directed ERCOT to engage with a search firm “as soon as reasonably possible” to find a new CEO. A transition plan will be discussed during future board meetings.

Nick Fehrenbach, manager of regulatory affairs and utility franchising for the city of Dallas and representing the commercial consumer segment, voted against the motion. Magness, who was not present for an executive session before the vote, and Lori Cobos, CEO of the Office of Public Utility Counsel, both abstained.

“I would have preferred to have more time to evaluate this important matter … to evaluate my concerns,” Cobos said.

ERCOT General Counsel Chad Seely conducted the board meeting in the absence of a chair and vice chair, who were among the four independent directors who resigned Feb. 23. (See ERCOT Chair, 4 Directors to Resign.)

Magness joined ERCOT in 2010 after 14 previous years in the electric industry and served as its general counsel. He was appointed CEO in January 2016 and made $837,931 in base salary last year.

ERCOT’s board, ideally composed of 16 members, is now down to 10, including Magness. Two of the seven members who have resigned are currently being replaced by acting directors; the independent retail electric market segment’s director and alternate director are both vacant. The nominee for the fifth independent director’s seat has withdrawn his nomination.

Arthur D’Andrea, whom Gov. Greg Abbot appointed as chairman of the Public Utility Commission on Wednesday, took Walker’s seat as a non-voting member after she stepped down.

Monitor: $16B ERCOT Overcharge

ERCOT’s Independent Market Monitor on Wednesday said the grid operator incorrectly priced electricity for 32 hours following the winter storm, resulting in $16 billion in additional costs to the market.

In a letter filed with the PUC, the Monitor said it agreed with the commission’s Feb. 15 order that set wholesale prices at the $9,000/MWh systemwide price cap, designed to incent electric generation to come online. However, it noted ERCOT exceeded the PUC’s mandate by continuing to maintain the cap “after it ceased the firm load shed.”

The Monitor recommended the commission direct ERCOT to correct 33 hours of real-time prices during Feb. 18-19 “to remove the inappropriate pricing intervention” that occurred during that time. It suggested removing “most, if not all,” of the real-time online reliability deployment price adder during the price intervals, which would nearly eliminate the real-time ancillary service imbalance charge.

“We recognize that revising the prices retroactively is not ideal,” IMM Director Carrie Bivens said. “In this case however, given that the prices are inconsistent with ERCOT’s protocols and [a] commission order and that allowing them to remain will result in substantial and unjustified economic harm, we respectfully recommend that the commission take the action described above to correct ERCOT’s real-time prices.”

The PUC is scheduled to hold an open meeting Friday morning.

ERCOT’s Kenan Ögelman, vice president of commercial operations, said the market “is under a lot of financial duress” during testimony Thursday before the Texas Senate Business and Commerce Committee.

Ögelman said ERCOT — essentially the market’s billing agent — normally processes about $11 million in settlements a day. That figure exceeded $1 billion on Feb. 19, topping that each day until the grid operator cleared $2.1 billion on Feb. 24. After suspending the market on Feb. 25, staff processed more than $12.5 billion on Feb. 26.

ERCOT on Wednesday revoked retail provider Entrust Energy’s right to participate in the market because of a payment breach and transferred its 11,780 customers to other retailers known as providers of last resort (POLRs). Entrust is the second retailer to have its rights revoked, joining Griddy Energy.

A recent PUC emergency order set up TXU Energy or Reliant Energy, ERCOT’s two largest electric retailers, as the primary POLRs. (See Texas PUC Turns Focus to Customer Bills.)

ERCOT Shares List of Generator Outages

ERCOT on Thursday sent a list of all the generator issues that “had issues” during the Feb. 15-19 grid emergency to the Texas Legislature’s members. The information includes the generators’ names, the amount and length of their outages or derates, and their fuel types.

The information was requested by the four committees investigating the near collapse of the grid and its ensuing long-term outages.

The generator information is normally confidential for 60 days after each applicable operating day. Staff messaged market participants on Feb. 22, requesting they be allowed to publicly release the information in anticipation of legislative and regulatory requests.

Not all generators authorized the release. Their information is blank, with the exception of their outage or derate’s start and end times.

March 5, 2021

FERC Approves ISO-NE’s New Method for Calculating DDBT

FERC on Monday approved revisions to the ISO-NE tariff on recalculating the dynamic delist bid threshold (DDBT) for the Forward Capacity Auction (ER21-782).

DDBT, which was previously updated every three years, will now be calculated annually using a tariff-based “recalibration method.” Values for each auction will be updated based on recently available supply conditions and up-to-date projected demand conditions using the estimated systemwide demand curve for the FCA.

The revisions were a compromise proposal between stakeholders and the RTO, which the NEPOOL Participants Committee overwhelmingly approved in November. (See “Amended DDBT Passes,” NEPOOL Participants Committee Briefs: Nov. 5, 2020.)

The New England States Committee on Electricity (NESCOE), Calpine and Vistra’s Dynegy had offered an amendment to ISO-NE’s proposal to lower the DDBT upper bound to 75% of the net cost of new entry (CONE) and set the DDBT at the RTO’s estimated clearing price plus a margin adder calculated using 75% of net CONE.

NESCOE had concerns that the RTO’s proposal did not balance design objectives, resulting in the DDBT being too high if capacity prices increase. NESCOE said the risk of the DDBT being higher, especially as it approaches net CONE, had potential cost implications for consumers. Calpine and Dynegy said ISO-NE’s design interfered with competitive price formation, added significant administrative burden and risks to existing suppliers, and created an unnecessary barrier to market exit. The amendment allowed for a modest margin adder to low prices when supply curves are typically flat. The adder diminishes as expected prices increase, which they argued preserves some of the benefits of the DDBT.

FERC said the three components of the recalibration method “produce a value that reasonably balances the objectives of protecting against the exercise of market power and minimizing interference with competitive bidding in the FCA” when taken together. Additionally, suppliers’ incentive to exercise market power at times of capacity surplus is reduced because the demand curve flattens with decreasing prices. The commission said it was “persuaded that the minimum constraint will not undermine” the ability of the RTO’s Internal Market Monitor to “mitigate the exercise of market power.”

While the Monitor supported the filing, it did express reservations about the margin adder, asserting that it may allow resources to submit bids above their going-forward costs because offers from resources between the initial DDBT and the adder will not be subject to its review.

But because the margin adder has a sliding-scale design, the commission said the proposal “will adequately protect against the exercise of market power as it eases some administrative burden on capacity suppliers.”

“Market power is a greater concern at higher prices where the demand curve is steeper, which is where the proposed adder would be smallest, a design feature that tempers the IMM’s concerns,” FERC said.

The commission acknowledged the Monitor’s argument that the margin adder shifts the administrative burden “from resources with costs just above the DDBT to resources with costs above the DDBT plus a margin adder.”

“We note that any reasonably set DDBT creates an incentive for a set of resources to offer just below the DDBT to avoid the administrative burden of the static delist bid review process,” the commission wrote.

In the final analysis, FERC said that the proposed DDBT does not hinge on “which group of capacity suppliers this incentive applies to, but rather whether the proposal adequately mitigates the potential exercise of market power such that the resulting market prices represent just and reasonable rates for capacity. … We find that it does.”

March 5, 2021

Senate Panel Advances Haaland

The Senate Energy and Natural Resources Committee on Thursday approved Rep. Deb Haaland’s (D-N.M.) nomination as secretary of the interior, sending her on to a floor vote.

Haaland, who had attracted fire from GOP members from oil and gas producing states, won the support of only one Republican, Sen. Lisa Murkowski (Alaska), in the 11-9 vote.

Senate Deb Haaland — The Senate Energy and Natural Resources Committee approved the nomination of Rep. Deb Haaland as interior secretary. | *Senate Energy and Natural Resources Committee*

Murkowski said she was torn between wanting to support the first Native American cabinet secretary and Haaland’s opposition to resource development on public lands, noting that Alaska has “more federal lands [and] more mineral resources … than any other state.”

“So I have really struggled through this one,” she said. “I am going to place my trust in Rep. Haaland and her team despite some very real misgivings.”

Directing her comments to Haaland, Murkowski added: “I am also going to hold you to your commitments to ensure that Alaska is allowed to prosper.”

Committee Chair Joe Manchin (D-W.Va.) also expressed misgivings before signaling his support.

“While I may not personally agree with some of her past statements and policy positions, as secretary she will be carrying out President Biden’s agenda,” Manchin said. “At her [confirmation] hearing she confirmed that she and the administration recognize that our country will remain dependent on fossil fuels for years to come.” (See Haaland Commits to Balanced Approach to Energy.)

Manchin also said he “deeply impressed” by Rep. Don Young’s (R-Alaska) endorsement of Haaland as someone with a “strong commitment to bipartisanship.”

Young “has been in Congress long enough to be able to read people and know their heart and soul,” he said.

But ranking member John Barrasso (R-Wyo.) said he opposed Haaland because of her “radical views,” citing her statements opposing fracking and drilling on federal lands and her support of the Green New Deal. Her positions are “squarely at odds with the mission of the Department of the Interior and outside of the mainstream,” he said.

He also criticized her confirmation hearing performance, saying she “struggled or refused to answer basic questions,” including ones on the impact of Biden administration policies on energy workers. Biden has ordered a temporary freeze on new drilling leases on all public lands and waters and a review of the leasing program. He also froze drilling activity in the Arctic National Wildlife Refuge.

“In Wyoming alone, a long-term leasing ban would result in 33,000 workers losing their jobs,” Barrasso said.

Sen. Martin Heinrich (D-N.M.) came to Haaland’s aid, thanking Murkowski for her “pragmatism” and saying Barrasso’s characterization of the nominee was neither “accurate nor appropriate.”

“I am disappointed by the tenor of the debate in this committee. I voted for two Interior nominees whose views may have been consider quite radical by many of my constituents. I never used those terms because we have to get a lot of work done on this committee, and the tenor of this committee over the past several years has been very productive.”

Thursday’s vote came after Sen. Susan Collins (R-Maine) on Wednesday announced she would support Haaland, a move that observers said likely assured she will survive a floor vote.

In other action, the committee held a confirmation hearing for David Turk, Biden’s nominee as deputy energy secretary, and approved the chairs and ranking members, respectively, of four subcommittees:

Energy: Mazie Hirono (D-Hawaii) and John Hoeven (R-N.D.);
National Parks: Angus King (I-Maine) and Steve Daines (R-Mont.);
Public Lands, Forests and Mining: Catherine Cortez Masto (D-Nev.) and Mike Lee (R-Utah); and
Water and Power: Ron Wyden (D-Ore.) and Cindy Hyde-Smith (R-Miss.).

March 5, 2021

NERC RSTC Briefs: March 2-3, 2021

NERC’s Reliability and Security Technical Committee took a number of actions in a two-day meeting this week.

DER Standard Request Denied

The committee rejected a standard authorization request (SAR) to revise reliability standard TPL-001-5.1 (Transmission system planning performance requirements). The SAR was proposed by the System Planning Impacts from Distributed Energy Resources (SPIDER) Working Group based on a white paper endorsed by the RSTC at its meeting in October. (See “Consent Agenda Items Approved After Debates,” NERC RSTC Briefs: Oct. 14, 2020.)

Only 19 of the 31 members present voted to endorse the SAR, short of the two-thirds majority required for passage; eight voted against endorsement, while four abstained.

Several members said that while they agreed with the need to update NERC’s standards to account for the growing penetration of distributed energy resources (DER), the decision to put forward a SAR seemed premature. For example, David Jacobson of Manitoba Hydro reminded the committee that it had only just voted to endorse the guideline for verifying aggregated DER models the same day and warned that starting the standards development process without reliable data and models seemed to put the “cart before the horse.”

NERC RSTC — Brian Evans-Mongeon, Utility Services Inc. | *NERC*

Brian Evans-Mongeon of Utility Services Inc. raised several questions for SPIDER Chair Kun Zhu of MISO: first, whether the working group intended for the proposed changes to take effect before July 2023, the enforceable date of TPL-001-5.1; second, why the SAR did not specify its applicability to non-bulk electric system devices; and third, whether SPIDER and the Inverter-based Resources Performance Working Group (IRPWG) deemed MOD-032-1 (Data for power system modeling and analysis) sufficient “to provide the necessary data collection to support … these planning assessments.”

In response to the first and third questions, Zhu told Evans-Mongeon that the groups had not taken “specific … positions” on the issues he raised; on the second, he said “the applicability [of the existing standard] doesn’t change” with regard to non-BES devices. Evans-Mongeon suggested that more revisions were needed to make the SAR “ready for prime time.”

“I just think that there’s additional clarification and the need to eliminate confusion as we move forward … and I just feel that this SAR does not go far enough,” Evans-Mongeon said. “I think it can be expanded upon [and] can be improved, but right now I just don’t think it’s ready … especially if we’re looking at something that’s not going to be enforceable for two-plus years.”

The vote not to endorse the SAR does not mean the effort to revise TPL-001-5.1 is dead, as SPIDER can bring the proposal to the Standards Committee without endorsement. However, Howard Gugel, NERC’s vice president of engineering and standards, recommended that because members agreed on the importance of the project, the committee should try to work with the group to address their concerns.

“Since the RSTC, or its predecessors … authorized this group to begin its work [and] is now saying that it shouldn’t proceed, there should be some specific information … provided to this team” to help rework the SAR into an acceptable form, he said.

Approvals

Members approved scope documents and work plans for several of the RSTC’s subcommittees, working groups and task forces. Included were the scopes for the Performance Analysis Subcommittee, Event Analysis Subcommittee, Security Working Group and Standing Committees Coordinating Group, as well as the scope and work plan for the Energy Reliability Assessment Task Force (ERATF).

The RSTC also approved its own work plan, comprising “consolidated and updated” subgroup work plans.

The ERATF documents were approved with an amendment proposed by Evans-Mongeon regarding language in the draft that would allow the task force to “evaluate whether [SARs] are needed to enhance existing or create new reliability standards” to address potential fuel assurance concerns. His amendment allows for the issuance of reliability guidelines or the use of other NERC processes that might “get something out there quicker and more effectively … to help the industry along.”

Two reliability guidelines — “Model verification of aggregate DER models used in planning studies” and “Battery energy storage systems and hybrid power plant modeling and performance” — were approved as well, as was a white paper on possible misunderstandings of the term “load loss” developed by the System Analysis and Modeling Subcommittee in 2020.

The committee also endorsed a special assessment on the performance of NERC’s Energy Management System (EMS), intended to “gain a better resolution on the contribution of EMS outages to the loss of situational awareness risk and the effect of [reliability standard] EOP-004-4.”

Subgroups Disbanded

The committee agreed to disband two of its subgroups this week: the Security and Reliability Training Working Group (SRTWG), formed last year by the merger of the Reliability Training Working Group (previously part of the now-defunct Operating Committee) and the Security Training Working Group.

RSTC Vice Chair David Zwergel of MISO said the committee had concluded that this group is neither relevant to the RSTC’s mission nor necessary in the broader sector.

“We went back and looked over what the SRTWG was doing and looking at its deliverables. It’s really redundant with other efforts in industry as a whole,” Zwergel said. “It’s not that the RSTC doesn’t endorse or support training. It’s really [that] the training that this group was doing [was] focused on how to be a trainer, how to improve training techniques, [which is] covered elsewhere.”

Also shuttered was the Geomagnetic Disturbance Task Force (GMDTF), which last year concluded its two-year effort alongside the Electric Power Research Institute (EPRI) with the publication of EPRI’s white paper Research Findings for Geomagnetic Disturbance Research Work Plan. As recommended in the task force’s final report, the RSTC agreed to add GMD monitoring to the scope of the Real Time Operating Subcommittee.

March 5, 2021January 30, 2025

NY Panel Says Circular Economy Will Cut Waste Emissions

Building end-markets for a circular economy is critical to reducing methane and carbon dioxide emissions from organic waste in the future, according to the New York State Climate Action Council (CAC) Waste Advisory Panel.

The organics diversion and landfills subpanel wants to see materials recovered for their next highest and best use to help meet New York’s climate goals, said Dereth Glance, executive director of the nonprofit Onondaga County Resource Recovery Agency.

“The secret to material management is movement, so we can’t have this stuff stockpiling,” Glance said during a Waste Advisory Panel meeting Wednesday. “We need to keep it moving all the time.”

The New York State Climate Action Council (CAC) Waste Advisory Panel met March 3. Clockwise from top left: New York DEC Deputy Commissioner Martin Brand; Bernadette Kelly, Teamsters Local 210; Michael Cahill, Germano & Cahill; Jane Gajwani, NYC DEP; Lauren Toretta, CH4 Biogas; Dan Egan, Feeding New York State; and Dereth Glance, OCRRA (center). | NYDPS

It is important to have procurement policies at the state and local level for municipalities purchasing recycled content material, buying compost for parks departments, road development, erosion control and other kinds of construction projects, she said.

Dereth Glance, OCRRA | NYDPS

“Not only are we going to be able to move food waste out of landfills and other disposal and into more productive use, but once we create that product, that compost, it has a reliable place to go to be used again,” Glance said.

Routing at least 90% of organics to composting should dramatically reduce organic waste, even in a city as large as New York, said Michelle “Tok” Oyewole, policy and communications organizer at the New York City Environmental Justice Alliance.

Brigitte Vicenty, founder of another recycling group, Inner City Green Team, said she supports imposition of a modest ($2) monthly recycling service fee, on a sliding scale, to be paid by both tenants and property owners to support door-to-door recycling. The fee, she said, would increase participation since people will feel that they already have “skin in the game.”

Brigitte Vicenty, Inner City Green Team | NYDPS

The Waste Advisory Panel is sharpening its recommendations to the full council ahead of a March 19 deadline.

“We are in the last push to get over the finish line and present final recommendations to the council toward the end of March,” said New York Department of Environmental Conservation (DEC) Deputy Commissioner Martin Brand, who chairs the waste advisory panel.

The waste panel received updates from its various subgroups on materials handling; wastewater treatment and recovery; organics diversion and landfills; local scale diversion; and climate justice.

Brand encouraged the subgroups to “keep honing the product down,” promising to get back to the panel members if the DEC arranges “some cross-panel deliberations, particularly on the renewable natural gas, biogas and bioeconomy piece,” because it is still a source of frustration and confusion.

Cash Incentives

The landfills subgroup recommended establishing an energy floor price not less than 10 cents/kWh for power purchase agreement payments for renewable natural gas and non-energy producing compost facilities to stimulate infrastructure upgrades and construction for management of organic wastes at landfills, combustors, digestors and compost facilities.

“We need a new generation of facilities,” said Michael Cahill, partner at the law firm Germano & Cahill. “We don’t have the digestors, we don’t have the compost facilities, we don’t have anything in that gap between generation and landfilling and combustion to fill the need, and we need to get a variety of people on the job to figure out how to make it work.”

The 10 cents/kWh charge would provide an incentive for planners to begin the process of experimentation, innovation and coordination to find a solution in the first five to seven years, according to Cahill.

Keep the Focus

The waste panel also plans to recommend to the full CAC building a distributed energy model that uses local waste and associated emissions/energy recovery to enable communities to be more climate resilient.

Resa Dimino, Resource Recycling Systems | NYDPS

Resa Dimino, senior consultant at Resource Recycling Systems, said it was not clear whether the distributed energy recommendation focuses on development of new waste disposal facilities, or maximizing the efficiency of existing facilities.

“If we want to get real climate benefits, we need to be investing in waste reduction, reuse, recycling and composting,” Dimino said. “Investing in landfills or waste-to-energy facilities that are slightly better than where we are now is not going to get us to the goals we need to reach.”

Eric Goldstein, New York City environment director at the Natural Resources Defense Council, agreed, saying “there is some ambiguity here when we’re talking about financial assistance and investments like encouraging private-public partnership investments through joint funding that values low-emission solid waste infrastructure investments.”

Eric Goldstein, Natural Resources Defense Council | NYDPS

One person’s definition of low-emission might not be another’s, so the focus of the waste advisory panel under the Climate Leadership and Community Protection Act ought to be on reducing emissions, he said.

The distributed energy idea is unique “in that it’s almost equally if not more an adaptation strategy as it is a mitigation strategy,” said Lauren Toretta, president of Greenwich, Conn.-based CH4 Biogas.

She said that extensive work by utilities and NYSERDA to support microgrid infrastructure will help communities benefit from waste-to-energy opportunities.

“We see it as an opportunity if you can leverage the waste resources and associated energy generation to help communities be more independent and more resilient,” Toretta said.