Welcome back to the EnerKnol Pulse. In this roundup AEP's $4.5-billion Wind Catcher project clears U.S. review, EPA tackles waste disposal rules for the nation's 400 coal plants, and Hawaii launches a fresh take on the utility business model. All of this and more made possible by the EnerKnol Platform. We welcome your feedback at research@enerknol.com

April 30, 2018


Featured Topics

Greening Energy Mix

Net Metering

Evolving Power Markets

Protecting Ratepayers

Developing the Grid

Fossil Fuels & Pipelines


Featured Entities

AEP

Ameren Gas

Central Hudson Gas & Electric

Consumers Energy

Entergy

GridAmerica

Idaho Power

Invenergy

National Grid

Nicor Gas

North Shore Gas

Orange Rockland Utilities

Oregon State University

Peoples Gas

PPL Electric Utilities

PSEG

Public Service Company of Oklahoma

Rochester Gas & Electric

Rocky Mountain Power

Solar Liberty

SolarCity

Southwestern Electric

Tesla Energy

WPPI Energy

Top News

American Electric Power Wins U.S. Approval for $4.5-Billion Wind Catcher Project

The Federal Energy Regulatory Commission on April 25 authorized a transaction allowing Public Service Company of Oklahoma and Southwestern Electric Power Company to acquire the 2,000-megawatt wind generation project from a subsidiary of Invenergy Renewables LLC. The output of the wind facility, located in the Oklahoma Panhandle, will be delivered via a 350-mile transmission line connected to the Southwest Power Pool. Over a 25-year lifespan the project is expected to result in about $1.9 billion in benefits to retail and wholesale customers of Southwestern Electric Power, which holds a 70 percent ownership stake. Public Service Company of Oklahoma and Southwestern Electric Power are subsidiaries of American Electric Power Company Inc.

U.S. EPA Advances Repeal of Coal Ash Rule Said to Reap $100 Million in Annual Savings for Coal Fleet

The U.S. Environmental Protection Agency held a public hearing April 24 on its bid to weaken federal standards for the disposal of coal ash, a toxic byproduct of coal-fired power plants, advancing the administration’s latest efforts to roll back environmental regulations for the energy sector. The administration seeks to impose more than a dozen changes to a 2015 rule by the Obama administration, which set minimum requirements for the location, design and operation of new and existing coal ash dumps at more than 400 coal-fired power plants nationwide. The proposal would give states more flexibility over the coal ash disposal, saving the industry up to $100 million a year in compliance costs. The move has been met with protests from environmental groups including Earthjustice, which said that the reforms pose health risks by removing critical clean up requirements.

Hawaii Enacts Law Establishing Performance-Based Ratemaking in Latest Evolution of Utility Business Model

Hawaii Gov. David Ige, a Democrat, signed legislation on April 24 to update the state’s electric utility business and regulatory model, to better align ratemaking with the growth in renewable energy resources. The legislation requires the state utilities commission to establish incentive and penalty mechanisms that link utility revenues to the achievement of performance metrics by Jan. 1, 2020. The metrics to be considered include volatility of rates and bills, electric service reliability, customer engagement, access to utility system information, speedy integration of renewables, and timely execution of competitive procurements. (SB 2939)

Greening Energy Mix

New York’s Second Large-Scale Renewable Solicitation Expected to Spur $1.5 Billion in Investments

New York Governor Andrew Cuomo, a Democrat, on April 26 announced its second large-scale renewable solicitation under the Clean Energy Standard, a statute which mandates that 50 percent of the state’s electricity must come from renewable sources by 2030. The solicitation for up to 20 projects is expected to drive $1.5 billion in private investment and support 1.5 million megawatt-hours of renewable electricity per year, sufficient to supply 200,000 homes. The first solicitation results announced in March awarded $1.4 billion for 26 renewable energy projects.

Idaho Power Wins Approval to Recover Over $200 Million to Relicense its Largest Hydro Complex

The Idaho Public Utilities Commission approved Idaho Power Company’s request to include $216.5 million in expenses related to relicensing its 1,167-megawatt Hells Canyon hydro complex in customer rates, according to the commission’s April 16 press release. Although Idaho Power doesn’t expect a federal licensing decision until 2021, the commission hopes that the Federal Energy Regulatory Commission will act early considering the value of the complex, which accounts for 30 percent of the company’s total generating capacity. Idaho Power began its relicensing efforts in 1991, and the complex has been operating under annual licenses after its previous 50-year license expired in 2005. Idaho power is a subsidiary of IDACORP Inc.

Oregon University Seeks U.S. License for 20-Megawatt Offshore Wave Energy Test Site

Oregon State University is seeking federal approval for a 25-year license for a test site to advance the development of utility-scale wave energy technology. The university’s Pacific Marine Energy Center South Energy project would be located about 6 nautical miles off the coast of Newport, Oregon, and would support up to 20 commercial-scale wave energy converters for a combined installed capacity of up to 20 megawatts. Testing data from the project would support state and national goals to develop technologies for non-emitting power generation. The application opens a 90-day comment period.

Hawaii Legislature Passes Bill Requiring Inclusion of Climate Evaluations in State Plans

The Hawaii legislature on April 27 passed legislation that would mandate the incorporation of climate-related assessments, predictions, and recommendations into hazard-mitigation plans and strategies of the state and counties. Last year, Hawaii became the first state to enact legislation for a commitment to the goals of the Paris climate agreement. (SB 2334)

Net Metering

Michigan Sets Payouts for Customer-Generated Power Supplies to Reflect Grid Costs

The Michigan Public Service Commission announced new rules April 18 directing utilities to credit net metering customers for power supplies exported to the grid at the utility’s so-called avoided cost to ensure that those customers pay their fair share for the use of the power grid. The avoided cost reflects the expenses a utility would incur to buy electricity supplies instead of generating the power itself. Utilities are required file the new rules in rate proceedings submitted after June 1. The move echoes a national trend by commissions to overhaul net metering policy amid concerns that higher payouts for customer-generated power will raise grid maintenance costs for standard ratepayers.

SolarCity Denied Extension of Remote Net Metering Credit as Projects Failed to Meet Benchmarks

The New York State Public Service Commission on April 24 rejected petitions to extend the deadlines set by a transition plan to shift to volumetric crediting for certain remote net metering projects, finding that the petitioners failed to meet the necessary progress milestones. The commission created the plan in 2015 finding that monetary credits for remote net metering had greater value than the volumetric credits for on-site systems, and resulted in unexpected arbitrage. To shield projects developed with genuine financial expectation, the commission set a default in-service deadline of December 31, 2017 to grandfather certain categories of projects for 25 years. The petitioners are Solar Liberty Energy Systems Inc., Town of Dewitt, and Tesla Energy subsidiary SolarCity Corp.

PacifiCorp Clarifies That Net Metering for Grandfathered Customers Ends in 2035

The Utah Public Service Commission on April 25 approved Rocky Mountain Power’s update to its electric service schedule to underscore that the termination date of its net metering program is December 31, 2035. The commission asked for the update to provide clarity of the termination date consistent with legislation enacted last month repealing net metering on January 1, 2036. In a settlement approved last year, retail rate net metering reached its sunset on Nov. 15 grandfathering existing customers until 2035 and beginning a transition program that gives export credits measured in 15-minute intervals for energy sent to the grid. Rocky Mountain Power is a division of PacifiCorp and Berkshire Hathaway Inc.

Michigan State Lawmakers Introduce Bill to Establish a Distributed Generation Program for Net Metering Customers

A bipartisan coalition of Michigan state House lawmakers introduced legislation on April 25 that would establish a distributed generation program for customer generators, crediting the value of electricity supplies in accordance with a fair value tariff, a standard-offer contract, or net metering. The bill would limit participation of utilities or alternative suppliers to the net metering component of the program. Within a year of enactment, the bill would require the public service commission to establish a statewide uniform method that utilities can use to set a fair value tariff. Under the tariff, participating customers would pay the same delivery and power supply charge as similarly-situated non-participating customers. Credits would be awarded for excess generation at the retail rate, deducting delivery charges and including benefits accrued over a 20-year period. (HB 5862)

Evolving Power Markets

U.S. Regulator Unveils Rule to Tackle Out-of-Market Payments in Latest Bid to Boost Generator Revenues

The Federal Energy Regulatory Commission announced April 19 that it’s adopting rules requiring regional grid operators to beef up reporting of the out-of-market payments they make to generators to ensure system reliability, the latest in the agency’s ongoing efforts to improve revenues for generators in the wholesale power markets. The rule seeks to reduce instances when the grid operator pays a generator to run because market prices failed to rise high enough to attract a sufficient amount of power supplies to meet electricity demand. Regulators argue that because the grid payments, known as uplift, are not reflected in the energy market clearing prices, they cut the revenues competing generators earn, leaving those power plants under-compensated for the service they provide as well as stifling investments needed to meet growth in electricity consumption. FERC also withdrew a proposal to allocate the costs of the uplift payments amid concerns about how the regional grid operators would implement the order.

PJM Approved to Implement Energy Efficiency Market Restrictions to Reduce Regulatory Risk for Participants

The Federal Energy Regulatory Commission on April 17 allowed PJM Interconnection LLC to establish a process to implement electric retail regulatory authorities’ restrictions on the sale of energy efficiency resources into the power market. PJM will create a verification process to ensure that participating resources comply with any restrictions imposed by retail regulators and grant relief for resources that already cleared the capacity auction but were later restricted from participation. Last December, the commission held that Kentucky Public Service Commission may restrict its retail customers from participating in the capacity market because the commission agreed to such condition when Kentucky approved integration of Kentucky Power into PJM.

PSEG Accepts $39-Million Fine for Violating PJM Energy Market Rules Over Nine Years

The Federal Energy Regulatory Commission on April 25 approved an agreement resolving claims that PSEG Energy Resources & Trade LLC violated PJM Interconnection LLC’s bidding rules when it submitted incorrect cost-based offers into the energy market between 2005 and 2014. The company agreed to pay PJM $26.9 million in disgorgement, a civil penalty of $8 million, and interest of about $4.5 million, as well as file annual reports to ensure compliance with commission regulations. PSEG is the trading arm of its affiliate PSEG Power, which is a unit of Public Service Enterprise Group Incorporated.

Michigan State Lawmaker Introduces Bill to Expand Membership in Joint Electricity Projects

Michigan state House lawmaker Aaron Miller, a Republican, introduced legislation on April 19 that would allow municipal units or political subdivisions of another state or Canadian province to become members of a joint agency in the same manner as a municipality to engage in the generation, distribution, and transmission of electricity. (HB 5837)

Protecting Ratepayers

Illinois Approves Utilities’ Tax Adjustment to Pass on Federal Tax Cut Savings to Customers

The Illinois Commerce Commission on April 20 approved income tax adjustment riders requiring Peoples Gas, North Shore Gas, Nicor Gas, Ameren Gas and Illinois-American Water Company to start crediting customers for savings from the federal tax overhaul, which slashed the corporate income rate to 21 percent from 35 percent. The commission ordered each utility to start crediting customers from their next billing cycle and file a proceeding at the end of each year to adjust the estimated and actual savings to ensure that they are properly reflected in customer rates.

U.S. Energy Regulator Grants PPL Corporation Approval to Include Tax Law Changes in Revenue Projections

The Federal Energy Regulatory Commission on April 23 granted a waiver allowing PPL Electric Utilities Corporation, a subsidiary of PPL Corporation, to include the new federal income tax rate in the calculation of its projected annual transmission revenue requirement for the upcoming rate year beginning on June 1. The federal tax overhaul reduced the corporate income tax rate to 21 percent from 35 percent effective January 1. The company said that its formula rate uses inputs from the prior year to project the requirement which is then reconciled through a true-up process in the next annual update, and so transmission customers would not receive the benefits until the reconciliation in 2019.

Midwest Wholesale Power Customers Seek $23-Million Refund Amid Allegations of Excessive Rates

Wholesale power consumers in the market run by the Midcontinent Independent System Operator Inc. filed a complaint with the Federal Energy Regulatory Commission on April 20 seeking a refund for what they argue are excessive rates charged by the International Transmission Company, ITC Midwest LLC, and Michigan Electric Transmission Company. The complainants argue that the transmission companies are no longer eligible to receive a return on equity incentive based on their independence from market participants following the acquisition by Fortis Inc. and GIC (Ventures) Pte. Ltd. The transmission companies were previously entitled to the incentive, called an “independent adder,” to incent continued market participation. The ratepayers are Consumers Energy Company, Interstate Power and Light Company, Midwest Municipal Transmission Group, Missouri River Energy Services, Southern Minnesota Municipal Power Agency, and WPPI Energy.

Developing the Grid

Illinois Rejects $2-Billion Midwest Power Line Following Adverse Court Rulings

The Illinois Commerce Commission issued an order April 27 terminating Clean Line Energy Partners LLC’s application to site and construct the 500-mile, 3,500-megawatt Rock Island Wind Line following a series of successful legal challenges by project opponents. Rulings by the state appellate court in August 2016 and the Illinois Supreme Court in September 2017 found that the the commission had no authority to consider Clean Line’s permit application because Rock Island did not qualify as a public utility under the state’s law. The project was designed to connect wind farms in northwest Iowa and nearby areas in South Dakota, Nebraska, and Minnesota with electricity markets in northeast Illinois and elsewhere in the PJM Interconnection LLC’s grid. Appeals are due within 30 days from the date of the order. Clean Line is owned by GridAmerica Holdings Inc., a unit of National Grid USA, as well as Clean Line Investor Corp., Michael Zilkha, and Clean Line Investment LLC.

New York Regulator Approves Changes to Utilities’ Demand Management Programs to Improve Operations

The New York State Public Service Commission on April 19 accepted changes to the dynamic load management programs of Central Hudson Gas & Electric Corporation, New York State Electric & Gas Corporation, National Grid, Rochester Gas & Electric Corporation, and Orange and Rockland Utilities Inc. The changes intend to enhance the operations and cost-effectiveness of the program that is used to support peak shaving and local reliability. The commission also approved Central Hudson’s request to discontinue its program due to lack of enrollment. The commission also directed the utilities to study their programs at the end of the 2018 summer capability period, the period from May through September, and file plans for improvement or cancel program components that are futile.

New York Grid Operator Ordered to Complete Timely Reviews of Plant Closures to Aid Market

The Federal Energy Regulatory Commission directed the New York Independent System Operator Inc. to establish a reasonable timeline for completing reviews of retiring generators to provide greater transparency and certainty to power plants and wholesale markets, according to an April 23 order. The order addresses Entergy Nuclear Power Marketing LLC’s request for clarification of the timeline following its settlement last December with the state of New York to shutter Indian Point’s reactor units 2 and 3 by 2020 and 2021, respectively. The commission disputed the grid operator’s 120-day timeline, and said that lack of a clear schedule could affect the generator’s ability to make informed decisions about closing. Entergy Nuclear Power Marketing LLC is a unit of Entergy Corp.

Midwest Grid Operator Expects Sufficient Power Supplies to Meet Summer Demand

The Midcontinent Independent System Operator Inc. said that it is prepared for a warmer-than-normal summer, projecting summer demand to peak at 124.7 gigawatts with 148.6 gigawatts of available supply, according to the grid operator’s April 25 press release. The grid operator said that declining demand and growth in demand-response and behind-the-meter generation contributed to a higher reserve margin reserve margin of about 19 percent for 2018.

Michigan State Lawmakers Introduce Bill to Promote Microgrid Development for Emergency Preparedness

A bipartisan coalition of Michigan state House lawmakers introduced legislation on April 25 that would allow electric utilities, including municipally-owned utilities and private entities, to establish microgrids to support critical facilities and operate in island mode during emergencies. The bill would require that rates for microgrids reflect a fair cost of service for utility revenue and prohibit the inclusion of standby charges. It would set a Dec. 31 deadline for the public service commission to submit an analysis to the legislature and governor on the state’s distribution system reliability and a July 1, 2019 deadline to issue a report to the legislature on the costs and benefits of microgrids. (HB 5865)

Fossil Fuels and Pipelines

U.S. Energy Regulator Launches Review of Two-Decade Gas Pipeline Policy as Approvals Draw Scrutiny

The Federal Energy Regulatory Commission issued a notice April 19 seeking feedback on the process for approving natural gas projects as the agency mulls an overhaul to its policy set in 1999 amid a historic expansion of the pipeline network. The commission is exploring revisions to how it determines the need for a project through precedent agreements and contracts, how it should take into account the use of eminent domain and landowner interests, and how it evaluates environmental impacts. The move comes as an unprecedented flurry of pipeline approvals has drawn heightened opposition from landowners and environmental groups, as well as rare opposition from members of the commission itself. The commission has rejected only two out of the more than 400 pipeline applications received since 1999. The notice opens a 60-day comment period.

DTE Cleared for $1 Billion Michigan Natural Gas Plant to Meet Region's Power Demand

The Michigan Public Service Commission awarded DTE Electric Company a permit to construct a 1,100-megawatt combined cycle natural gas plant at the site of the utility’s Belle River Power Plant and to recover $952 million through rates for its construction after finding the facility is the most prudent option for meeting the region’s short-term electricity demand, according to an order by the agency April 27. The plant, which would be located in St. Clair County, is scheduled to start as early as 2022. DTE Electric is a unit of DTE Energy Co.

U.S. Became Net Natural Gas Exporter For First Time Since 1950s on Booming LNG Shipments: FERC

The U.S. became a net exporter of natural gas last year, a status it hasn’t attained since 1958, amid surging shipments of liquefied natural gas as well as pipeline deliveries to Mexico, according to the Federal Energy Regulatory Commission’s market report issued on April 19. LNG exports rose to 2.19 billion cubic feet per day, up from to 0.63 billion cubic feet in 2016, with Mexico as the top market destination. Natural gas pipeline flows to the nation’s southern neighbor also grew, topping 4.2 billion cubic feet per day on average in 2017, a rise of about 0.5 billion cubic feet from the prior year. In total, about 12 billion cubic feet per day of capacity and 773 miles of natural gas pipelines went into service last year across the U.S., with many projects linking the Marcellus and Utica shale fields to markets in the Northeast and Midwest, and boosting transportation to the Gulf Coast.

Pennsylvania to See Ten-Fold Jump in Gas-Powered Generation Through 2050 With Shale Boom: Report

Pennsylvania will see demand for natural gas for electricity generation increase 925 percent from 2005 to 2050 thanks to the state’s prolific supplies and cheap prices, according to an April 24 report by the state’s Department of Environmental Protection. Coal and nuclear power are projected to decline by 35 percent and 36 percent, respectively, the report found. Natural gas exports are expected to grow by 97 percent between 2015 and 2050 with continued growth in shale gas production and pipeline development. Pennsylvania features the Marcellus and Utica deposits, prolific tight-rock shale formations that have been instrumental in positioning the nation as a net exporter of the fossil fuel.

Citgo Petroleum Launches Challenge Against Colonial Pipeline for Excess Costs

Citgo Petroleum Corporation asked the Federal Energy Regulatory Commission to set new rates and issue refunds over what it says are Colonial Pipeline Company’s excessive charges for transporting petroleum products since 2016, according to an April 20 complaint filed with the Federal Energy Regulatory Commission. Citgo said that Colonial’s revenues from the shipment of petroleum products in 2017 surpassed its cost of service by at least 50 percent. Citgo, a refiner of petroleum products, is a subsidiary of PDV America, Inc.