Friday, December 14, 2018

SPP Board of Directors/Members Committee Briefs: April 24, 2018

Board Forced to Table NDVER Conversion Change

KANSAS CITY, Mo. — SPP’s Board of Directors was last week forced to table the appeal of a rejected revision request, cutting short the discussion when they realized the supporting documentation was not included in the background materials.

The Tariff change (MWG-RR272) requires non-dispatchable variable energy resources (NDVERs) to register as dispatchable variable energy resources (DVERs) within a multiyear transition period. It failed to receive the Markets and Operations Policy Committee’s (MOPC) endorsement by a handful of votes. (See Vote to Make Variable Resources Dispatchable Falls Short at MOPC.)

SPP board revision request

April’s Board of Directors/Members Committee meeting. | © RTO Insider

However, additional information on the measure was not part of the 638 pages of background material for the Apr. 24 meeting, leading Director Phyllis Bernard to move to table the measure “until we have further background information in front of the Members Committee before we vote.”

The Members Committee agreed with Bernard. Oklahoma Gas & Electric abstained from the vote.

The rejection was appealed by members, SPP staff and the Market Monitoring Unit (MMU).

Director Larry Altenbaumer, in one of his final comments before assuming the board’s chairmanship, told directors and members to plan on making a decision during their next meeting in July.

“If you have ideas to improve the process, you’ve got a quarter to make that decision,” he said.

In bringing forward the revision request, the Market Working Group said it would increase reliability and market efficiency through the reduction of manual out-of-merit energy orders to mitigate constraints.

The proposal applies to about 6 GW of NDVERs, which are generally older wind resources. However, it exempts about 2 GW of resources that don’t have direct interconnection agreements with SPP or are registered as qualifying facilities under the Public Utility Regulatory Policies Act (PURPA).

MMU Executive Director Keith Collins argued for the change, saying it’s a “global market efficiency issue” and would help reverse the recent growth of negative real-time pricing in SPP’s markets.

“To the extent resources are not flexible and capable of availing themselves to the system, we see an increase not only in frequency but [also] the magnitude of prices when we are unable to dispatch those resources,” Collins said. “Operators have to skip over the NDVER and find another resource.”

He pointed out that recent SPP analysis has found that dispatchable resources classified as non-dispatchable have “significant effects on the market congestion we’re seeing.”

The measure found resistance from stakeholders with renewable interests who said the rule change would add costs to existing power purchase agreements.

“If we can address the rule change, we’re taking a negative from the system, and that has a lot of global benefits,” Collins said. “We don’t deny some resources will face increased costs, but we believe the whole market can benefit from that.”

SPP Operations Vice President Bruce Rew said the rule would lead to a more efficient market through better management of congestion.

“It’s a much smoother operation for us to be able to dispatch those resources that may be down at the time, rather than the generator making that decision when to come on and off,” Rew said.

Directors Approve Previously Tabled Sponsored Upgrade

While the board was forced to table one voting item, it took another one off the table when it approved a sponsored upgrade of an OG&E transmission line that MOPC was unable to take action on.

SPP Board revision request

Engineering VP Lanny Nickell reviews SPP’s history of sponsored upgrades. | © RTO Insider

OG&E requested MOPC delay a vote until it could address its concerns about the upgrade with SPP. The project is sponsored by EDF Renewable Energy, which wants to upgrade terminal equipment and rebuild an 11-mile, 138-kV line near Ponca City and its 154-MW Rock Falls wind farm, which became operational in December. (See “OG&E Raises Concerns over Third-party Tx Line Upgrade” in SPP Markets and Operations Policy Committee Briefs: April 17, 2018.)

SPP answered all 23 of the questions submitted to it by OG&E, but the utility said it still has questions about the project’s cost allocation and asked for additional time to get answers.

“This is a small project, in and of itself. It’ not going to break the bank for anybody,” OG&E’s Greg McAuley said. “The precedent here is what some of the [transmission owners] are concerned about. If you had a $100 million to $200 million project, you would see a much different amount of concern. We’re continuing to work to close the gaps in the Tariff we think exist, so we still ask for additional time to get those questions answered.”

EDF has said it will seek cost recovery through SPP’s Attachment Z2 revenue crediting or incremental long-term congestion rights. Attachment Z2 of SPP’s Tariff assigns financial credits and obligations for sponsored transmission upgrades, with directly assigned Z2 network upgrades allocated to SPP’s base plan.

“A project like this, if it just remains between EDF and OG&E, I don’t think it will have impacts,” said Nebraska Public Power District’s Paul Malone, who chairs the MOPC. “But to the extent this project qualifies for Z2 credits, we’re all going to end up paying for that. Thus, the vested interest.”

Attorney Dan Simon represented EDF and said he saw no legal reason for members to delay their endorsement of the project.

“We’ve gone through the process as dictated by the Tariff and the staff,” Simon said. “We understand OG&E has a number of important questions,” but “all of those questions are things that are already dictated by the current language in the Tariff,” and therefore do not provide a justification to delay the request.

Simon said EDF worked with OG&E to develop a cost estimate before it submitted its official upgrade request to SPP, noting OG&E did not raise concerns until the MOPC meeting.

 

“It’s been based on that information that we’ve continued to proceed through the transmission process to submit this request. We don’t think it’s appropriate to allow these questions coming so late in the process to delay our upgrade request,” he said.

“This project is time-sensitive. The sooner this gets placed into service, the sooner it will relieve congestion, and we all realize economic benefits from that,” Simon said.

The measure passed the Members Committee by a 14-3 margin, with OG&E, American Electric Power and the Omaha Public Power District voting in opposition. The Oklahoma Municipal Power Authority abstained.

MMU Shares Draft of State of the Market Report

Collins shared the MMU’s draft of its annual State of the Market Report with the board and members. He declared the market to be “competitive and efficient,” citing low energy prices, declining mitigation and make-whole payments, along with declining levels of excess online capacity and the alleviation of a congestion bottleneck.

Collins said total market costs last year approximated $24/MWh, a 7% increase from 2016, driven by a 14% rise in natural gas prices. As an example, the MMU pointed to the Panhandle hub, where the average gas price increased from $2.32/MMBtu in 2016 to $2.65/MMBtu in 2017.

Wind resources accounted for about 70% of the SPP footprint’s 2.2 GW increase in nameplate generation capacity last year, but the rate of new additions has declined significantly. SPP added about 11.4 GW of generation in 2015 and 3.9 GW in 2016.

“Even so, wind generation continued to increase as it represented almost 23% of system generation, up from 18% in 2016 and 14% in 2015,” the MMU said. In contrast, coal-fired units saw their share of total generation continue to slide, from 55% or more before 2016 to 46% last year.

Collins said SPP has a reserve margin of about 30%. “That can contribute to the high levels of competition we see,” he said.

He noted several issues that bear watching in the months ahead:

  • Self-commitment has declined but is still high overall.
  • Wind generation is under-scheduled in the day-ahead market.
  • The frequency of negative prices has doubled.
  • Real-time price volatility has increased.
  • Congestion has increased significantly.
  • Very few resources are being retired.

The final report will be released later in May.

Director Josh Martin, who chairs the Oversight Committee that oversees the MMU, said the monitor is fully staffed “for the first time in a long time.” The MMU added CAISO’s Adam Swadley as its lead economist to reach its full staffing level.

Finance Committee Looks to Engage Stakeholders

Finance Committee Chair Larry Altenbaumer told the board and members the committee has been studying a recovery mechanism that “appropriately” reflects the administrative fee as it tries to maintain a simple rate-design structure.

The committee has determined membership’s “full engagement” is necessary, Altenbaumer said, and will work with MOPC’s leadership in July to involve a broader stakeholder group.

The board unanimously approved three recommendations from the Finance Committee:

  • Accepting BKD’s 2017 financial audit, which noted “no issues or material/significant weaknesses.”
  • Engaging BKD to perform the 2018 financial audit and Thomas & Thomas to audit the employee benefit plan’s financial statements.
  • Taking out an $80 million bank loan with a 5-year maturity and floating rate pricing on outstanding balances under the guidance line.

SPP RE Tying Up Loose Ends

“As you all know, we’re going out of business,” said Dave Christiano, chairman of the SPP Regional Entity’s board of trustees, as he delivered what is likely to be the final RE update to the board.

Christiano said the RE will cease its compliance and enforcement activities by the end of June and be officially dissolved by September. The RE has already successfully transferred 25% of its data to NERC, the Midwest Reliability Organization and the SERC Reliability Corporation, he said, but it still has a number of loose ends to resolve.

“It’s pretty complicated, as you can guess,” Christiano said

SPP said last July it would dissolve the RE, ending a reliability oversight role that has been a source of concern at NERC and FERC. NERC approved the dissolution in February. (See NERC Board Approves Dissolving SPP Regional Entity.)

The RE’s staff of two dozen has dwindled to 17 employees, with all but five either having already found work within the RTO and other organizations or having decided to retire.

Christiano also recommended members read a joint report from the FBI and Department of Homeland Security, “Russian Government Cyber Activity Targeting Energy and Other Critical Infrastructure Sectors.”

SPP’s 2017 Annual Report: ‘Focus’

As it does every April, SPP handed out copies of its 2017 annual report during the meeting.

The report, titled “Focus,” highlights the “people, milestones, accomplishments, and challenges that made 2017 another exceptional chapter in [SPP’s] story.”

SPP’s 2017 Annual Report | SPP

The report includes comments from a broad section of SPP staffers and how they work with their members.

Last Board Meeting for Westar’s Harrison

The board meeting was the last for Westar Energy’s Kelly Harrison, who represents public transmission-owning members on the Members Committee.

Harrison, who is nearing 60 years of age, said he is taking advantage of the Westar-Great Plains merger to take retirement. He said he would miss the SPP meetings, as well as the people who attend the meetings — who treated Harrison to a standing ovation.

SPP Board revision request

Nick Brown (left), with Chair Jim Eckelberger, delivers the CEO’s update. | © RTO Insider

“I, for one, am extremely appreciative of the care and the intellect Kelly has brought to the Members Committee,” Brown said, singling out Harrison’s financial acumen and participation on the Oversight Committee. “I couldn’t begin to count all the task forces and working groups Kelly has worked on over the years. Thank you, Kelly, from the bottom of my heart.”

Consent Agenda Clears Sponsored Upgrade, 7 Tariff Changes

Members unanimously approved the consent agenda, which included the re-baselining of a Nebraska Public Power District 69-kV and 161-kV project from $37.8 million to $27.5 million; a sponsored upgrade with the addition of a second 161/69-kV transformer at City Utilities of Springfield’s (Mo.) James River Power Station; funding the SPP retirement and post-retirement healthcare plans; and seven revision requests.

  • GIITF RR267 eliminates the “standalone scenario,” which considers each interconnection request by itself, from the definitive interconnection system impact study process. This will free SPP resources to focus on binding cluster study results, permitting their earlier availability. Staff will provide the standalone equivalent study models through existing confidentiality provisions to customers seeking to conduct a standalone scenario of their own.
  • MWG RR252 assigns an out-of-merit energy (OOME) cap and/or floor, allowing staff to economically dispatch the resource down or up within the ranges.
  • MWG RR259 modifies the market settlement posting and dispute timelines being implemented with the new settlement system, reducing the number of resettlement postings and manual processes resulting from revisions to meter and bilateral settlement schedules.
  • MWG RR273 automates several of the market settlement system’s charge types that are not yet part of revenue neutrality uplift processing, resulting in rounding/residual amounts that must be manually processed and distributed through miscellaneous charges. The new system is scheduled to go live in May 2019.
  • ORWG RR268 clarifies or removes outdated language from the operating criteria, improving SPP’s ability to perform reliability coordinator, balancing authority, transmission service provider and reserve sharing group functions.
  • ORWG RR269 clarifies language and removes antiquated and redundant language in SPP’s operating criteria and describes the existence of multiple standalone documents.
  • ORWG RR270 converts the operating criteria Appendix OP-2 to a standalone document, clarifies language and adds formatting improvements.

— Tom Kleckner

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