Board Approves NDVER Conversion, Ponders Virtual Trades
OMAHA, Neb. — SPP’s Board of Directors last week approved a Tariff change requiring non-dispatchable variable energy resources (NDVERs) to register as dispatchable variable energy resources (DVERs), prompting a discussion on the value virtual trades offer the markets.
Staff said the Tariff change (MWG-RR272), which will require resources to reduce their output when instructed, will improve SPP’s ability to manage congestion and lead to an increased convergence between day-ahead and real-time prices.
However, several directors wondered aloud whether the measure would lead to unintended consequences. Virtual transactions are driven by market inefficiencies, so the more efficient the market, the less value in virtuals.
Director Bruce Scherr noted that staff cited as one benefit an expected reduction in profits for virtual traders.
“I never really understand whether we are encouraging or discouraging the participation of virtuals in our market,” he said during the board’s July 31 meeting with the Members Committee. “I think we flip and we flop on that. It’s never been clear to me whether we find virtual participation a positive or a negative.”
Fellow Director Graham Edwards pointed out virtuals are a small part of SPP’s market and asked, “If we start driving the virtuals out, is there a negative?”
SPP’s Market Monitoring Unit said in its most recent market assessment that virtual transactions as a percent of load increased to 17% this spring, compared to 10% in 2017.
“There are times when virtuals can be a help, there are times when virtuals can be parasitic,” responded Keith Collins, the MMU’s executive director. “In this scenario, if they are benefiting as a result of something that is a result of modeling inconsistency, are they really adding a benefit or value to the market? Yes, they are making money, but they’re making money on consistent modeling differences.”
Collins said virtuals can make the day-ahead market more efficient when load is under-scheduled.
“The value here [with RR272] is switching from virtuals to other resources and reducing uplift payments everyone around this table is paying,” he said.
Resources must convert by Jan. 1, 2021, or the 10-year anniversary of its original commercial operation date, whichever is later. Qualified facilities under the Public Utility Regulatory Policies Act and run-of-river hydro projects incapable of following dispatch instructions are exempt.
The Tariff change passed the Markets and Operations Policy Committee earlier in July, after having been rejected during the committee’s April meeting. (See SPP Markets and Operations Policy Committee: July 17-18, 2018.)
Staff’s analysis of RR272’s economic effects found the change would improve congestion management and convergence of real-time and day-ahead prices. The analysis projects about $15,000 in additional monthly real-time energy payments to converted NDVERs and about $20,000 in additional revenue to other resources.
“The more dispatchable resources we have, the easier it is to solve congestion,” said Gary Cate, SPP’s manager of market design. “NDVERs are generally located in areas where they are one of the few that are dispatchable. Opening them up allowed us to get rid of those breaches … by a fairly significant amount.”
Liberty Utilities, Omaha Public Power District (OPPD) and Walmart opposed the measure, which also received a pair of abstentions.
“This is an after-the-fact rulemaking scenario, where we’re required to upgrade equipment on older facilities,” said OPPD’s Joe Lang. “We’re concerned about the oppressive nature of this on wind power and setting precedent for other generation. The EPA has new-source-review requirements that properly limit the applicability of new rules on older facilities that give us concerns about walking down this path.”
The Wind Coalition’s Steve Gaw, who didn’t have a vote, said his group is “very supportive” of market efficiency, but he also expressed his concerns about RR272’s wording. He pointed to ambiguity as to when the conversions should take place for non-SPP generator interconnections and the excessive burden it places on the conversion of certain older wind farms.
“There are two issues of substance,” Gaw said. “One, whether or not SPP should be directly stating the conversion costs should be on the interconnection customer, as is stated in the new language. And two, the lack of any kind of exception for resources that have a substantial cost to convert.”
In written comments, the coalition said the conversion of fixed-speed (Type 1) and variable-slip (Type 2) turbines “can amount to millions” in capital expenditures.
SPP, MISO Resolving Jan. 17 Issues
CEO Nick Brown told stakeholders during his president’s report that SPP has reached an agreement with MISO on “specific operating procedures pursuant to our operating agreement” that arose during a Jan. 17 severe-weather event staff refer to as “The Big Chill.”
Colder-than-normal weather and generation shortfalls in MISO South led to MISO exceeding its regional dispatch limit on transfers between its northern and southern footprints across SPP’s system. The ISO made emergency energy purchases from Southern Co. before operations returned to normal.
“I, for one, get extraordinarily nervous when there is a disagreement or misunderstanding between our operators,” said Brown, who noted the meetings are continuing.
He said SPP added three new members during the previous quarter, bringing its membership to 97. The newest members include the Crocker Wind Farm, Walmart and NextEra Energy Transmission Southwest. Walmart joined as the RTO’s first large retail customer, a segment that has existed since 2003.
Brown also said that halfway through SPP’s fiscal year, the RTO has over-collected $8.4 million from members. Revenues are up because the number of completed interconnection studies and network services billing have both exceeded projections, Brown said.
An over-recovery this year will reduce rates in 2019, when this year’s actuals are reconciled with budgeted figures.
Board, Members Honor SPP RE Leadership
The board and members recognized SPP Regional Entity Trustees Mark Maher and Steve Whitley and RE President Ron Ciesiel with resolutions and applause following a final report. Dave Christiano, the trustees’ chair, was not present, spending his time instead in Ecuador following his passion for botany.
Maher said the RE successfully transferred 825 GB of data and more than 687,000 files to the Midwest Reliability Organization, SERC Reliability Corp. and NERC. The RE ended all compliance monitoring and enforcement activities for its 122 registered entities on June 29, with the MRO and SERC taking over those duties. (See SPP RE Ending Compliance Monitoring, Enforcement Activities.)
The trustees will hold a conference call Aug. 30 to officially terminate the RE’s regional delegation agreement.
Stakeholders Look at Changing Admin Fee’s Recovery
MOPC Chair Paul Malone said John Olsen of Evergy will chair the task force charged with developing a new rate structure allowing SPP to recover its administrative costs from energy transactions. (See SPP Stakeholders to Study Admin Fee Changes.)
Stakeholders Add 3 to Members Committee
Members approved three new representatives to the Members Committee during a special meeting of the committee: Northwestern Energy’s Bleau LaFave (Investor Owned Utilities), NextEra Energy Resources’ Holly Carias (Independent Power Producer) and Walmart’s Chris Hendrix (Large Retail Customer).
LaFave’s term ends in 2019, those of Carias and Hendrix in 2020.
Members also approved removing from the bylaws references to the RE, while incorporating a de minimis investment requirement. FERC’s Orders 888 and 2000 bar grid operators, staff and non-stakeholder directors from holding financial interests in any market participant and require them to maintain independence from “any entity whose economic or commercial interests could be significantly affected by the RTO’s actions or decisions.”
Board Approves $47M in Near-term Projects
As part of its consent agenda, the board unanimously approved the Integrated Transmission Planning process’ 2018 near-term assessment portfolio, a package of 13 projects in six states with an estimated total investment of $47 million.
The portfolio is expected to resolve 101 reliability needs resulting from increased load in the Texas Panhandle and announced generation retirements along the Kansas-Missouri border. Notices to construct will be issued by Aug. 21, staff said.
The projects include a new 345-kV, 50-MVAR reactor at City Utilities of Springfield’s (Mo.) Brookline substation, originally identified as an interregional project with Missouri’s Associated Electric Cooperative, Inc. (See SPP: No Need for Joint Study with AECI in 2018.)
Six previously approved projects, expected to cost $85 million, were removed from the assessment because they were no longer needed.
Consent Agenda Includes 11 Revision Requests
The consent agenda also included a recommendation that Oklahoma Gas & Electric’s Jerry Peace fill a vacancy on the Finance Committee; a new baseline cost estimate for Southwestern Public Service’s 115-kV loop rebuild in West Texas; approval of NorthWestern Energy’s sponsored upgrade of a new 115-kV line in Aberdeen, S.D.; charter changes to the Model Development and Reliability Compliance working groups; and 11 revision requests:
- CTPTF RR279: Modifies the competitive project proposal process to allow a re-evaluation request before awarding a notice to construct.
- MWG RR177: Clarifies references to NERC standards in the Integrated Marketplace’s protocols and the Tariff’s Attachment AE, the marketplace’s governing rules to eliminate confusion over whether entities are performing obligations for market reasons or compliance with NERC standards. The change also modifies the attachment’s definition of operating reserve to that defined in the Tariff.
- MWG RR266: Allows any resource to elect to be a combined ownership resource through the modeling option. Those that choose this option will be run through the market-clearing software as a single resource, with post market revenue allocations dispersed to each share based on designated ownership percentages.
- MWG RR277: Corrects language in Attachment AE to accurately reflect the settlement formula for the auction revenue rights daily amount by reversing the sequence of the source and sink.
- MWG RR304: Streamlines the process by which frequently constrained areas are re-evaluated, to make adjustments in a timely manner.
- MWG RR306: Minimizes potential gaming opportunities identified by the MMU. The change allows market-committed resources that have a minimum run time extending beyond initial reliability unit commitment or day-ahead commitment periods to be eligible for make-whole payments after their initial commitment period.
- MWG RR310: Adds three reporting requirements to comply with FERC Order 844: zonal make-whole payment reports, resource-specific make-whole payment reports and operator-initiated commitment reports. Also requires public posting of transmission constraint penalty factors; the circumstances in which violation relaxation limits (VRLs) could set prices; and procedures for temporarily changing VRLs in the Tariff.
- ORWG RR309: Removes section 7.3.1 (FAC-011-3 System Operating Limits Methodology) from SPP’s planning criteria and places it in a separate document for reliability coordination purposes.
- RTWG RR278: Corrects Attachment O’s Addendum 1 to include only current and applicable interregional coordination agreements and an update link to the joint operating agreement with MISO.
- RTWG RR314: Adds clarifying language to the ITP manual addressing ambiguity in the base reliability and short-circuit model builds.
- RTWG RR315: Removes references to the RE from governing documents.
— Tom Kleckner