Welcome back to the EnerKnol Pulse, the quickest way to catch up with the latest energy policy news. In this week's edition, owners of the troubled Vogtle nuclear plant decide to proceed with construction despite ever increasing costs; Massachusetts regulators release their SMART solar incentive program designed to add 1,600 megawatts to the state's mix; A federal appeals court upholds Illinois and New York's nuclear subsidies in a victory for the financially crippled industry. All of this coverage and more made possible with the EnerKnol Platform.

October 1, 2018


Featured Topics

Climate and Green Energy

Developing the Grid

Rates and Power Markets

Fuels and Pipelines


Featured Entities

Alpena Power

Dalton Utilities

DPL

Enefit American Oil

EQT Midstream Partners

MDU Energy Capital

Michigan Gas Utility

Intermountain Gas

Korea Electric Power

Municipal Electric Authority of Georgia

Northern States Power

Oglethorpe Power

Piedmont Natural Gas

PJM

SEMCO

Southern Company

SunPower

TransCanada

Upper Michigan Energy Resources

Westar Energy

Top News

Southern Company Agrees to More Cost Risks to Keep Vogtle Nuclear Project Alive

The owners of the Vogtle nuclear plant on Sept. 26 agreed to continue with the project expansion after resolving issues over budget overruns. The deal follows majority owner Southern Company’s announcement in August to raise project costs by $2.3 billion, prompting a vote on the future of the project under provisions of the joint ownership agreement. Oglethorpe Power, the only holdout, sought cost-control options such as a cap on the budget to move forward with the project. The agreement establishes cost overrun thresholds that, if exceeded, will require Southern Company subsidiary Georgia Power to bear a higher share and also allows other owners to sell a portion of their stakes in exchange for Georgia Power paying 100 percent of their remaining share of costs. Last month, the U.S. Energy Department cautioned that the project cancellation will prompt repayment of billions in loans. The department has disbursed $5.6 billion of an $8.3 billion loan guarantee. Georgia Power, which has a 45.7 percent stake, took over as the main contractor, following bankruptcy of reactor designer Westinghouse Electric, to continue the project despite cost overruns and delays. Oglethorpe Power Corporation, Municipal Electric Authority of Georgia, and Dalton Utilities own 30 percent, 22.7 percent, and 1.6 percent, respectively, in the plant.

Massachusetts Launches SMART Incentive Program to Advance 1.6 Gigawatt Solar Goal

The Massachusetts Department of Public Utilities on Sept. 26 approved compensation for new solar owners under the Solar Massachusetts Renewable Target or SMART program, a long-term, sustainable solar incentive solution that replaces the Solar Renewable Energy Certificate or SERC II program. The program has a goal of 1,600 megawatts, implying that ten percent of the state’s annual electricity needs must be met by solar. The department issued regulations for the program in August 2017, following legislation enacted in 2016 that called for a statewide solar incentive program to encourage continued solar generation. The program provides compensation for new solar projects under 5 megawatts in size in the investor-owned utilities service territory allowing solar owners to receive incentives directly from the utility company. While SRECs are market-based instruments with a value that can vary over time, the SMART approach calls for a fixed tariff aimed at establishing predictable revenue, with base compensation rates based on a “declining block structure.” The program is expected to save ratepayers an estimated $4.7 billion over current programs. Massachusetts currently has more than 2,200 megawatts of solar installed.

New York, Illinois Nuclear Subsidies Survive Legal Challenges

The U.S. Court of Appeals for the Second Circuit on Sept. 27 upheld New York’s zero emission credit program adopted in August 2016 to support the state’s financially struggling nuclear plants. The ruling rejects complaints that the program depresses energy and capacity prices in the wholesale power auction overseen by the Federal Energy Regulatory Commission. Petitioners, a group of power generators, argued that the subsidized nuclear plants receive zero emission credits – which compensated eligible plants for every megawatt-hour of carbon-free electricity – in addition to what they earn in the power markets. The court said that the credits, similar to renewable energy certificates, are independent of the purchase or sale of wholesale energy and are not conditioned on participation in the power auction. The U.S. Court of Appeals for the Seventh Circuit on Sept. 13 upheld similar subsidies in Illinois finding that states hold authority to enact measures to promote clean generation so long as it is “untethered to a generator’s wholesale market participation.” The case is Coalition for Competitive Electricity, et al. v. Zibelman, et al (17‐2654‐cv).

Climate and Green Energy

SunPower Wins FERC Approval to Sell 125-Megawatt Solar Project in Nevada

The Federal Energy Regulatory Commission on Sept. 25 authorized SunPower Corporation to sell its membership interests in Boulder Solar III LLC to 174 Power Global Corporation and KOMIPO America Inc. The Boulder Solar project is a 125-megawatt solar photovoltaic electric power generating facility under development in Nevada. The project is expected to come online in the fourth quarter of 2020. 174 Power Global is a subsidiary of H Solutions Corporation, a South Korean corporation owned by three individuals. KOMIPO is a subsidiary of Korea Electric Power Corporation, whose shares are publicly traded, and are mainly owned by the Korea Development Bank, Government of Korea, and foreign investors. SunPower Corporation is a subsidiary of Total Solar International SAS.

U.S. Energy-Related Emissions Fell by 14 Percent Since 2005 as Natural Gas, Non-Carbon Sources Overpower Coal: EIA

U.S. energy related carbon emissions in 2017 dropped 0.9 percent from the prior year and 14 percent below 2005 levels, according to a Sept. 25 report from the U.S. Energy Information Administration. Although the gross domestic product grew by 2.3 percent from 2016 to 2017, the agency said that emissions were more than offset by a decline in carbon intensity in energy supply, energy intensity, and overall economy. Natural gas replacing coal in the power sector and increasing generation from non-carbon sources have lowered the carbon intensity of electricity generation. From 1990 to 2017, the share of coal in power generation fell to 30 percent from 52 percent, while the share of natural gas rose to 32 percent from 12 percent. While nuclear remains the main source of carbon-free power, wind and solar continue to grow, accounting for 22 percent of carbon-free power last year, from less than one percent in 2000, decreasing the carbon intensity of the electricity supply. Of the four end-use sectors, transportation produced the most emissions, with a 0.8 percent increase. Industrial, commercial, and residential sector emissions fell by 1.3 percent, 2.1 percent, and 2.6 percent, respectively.

Illinois Regulator Launches Inquiry to Examine Grid Impact of Electric Vehicles, Explore Policy Tools

The Illinois Commerce Commission opened a proceeding to gather information on the impact of electric vehicles on grid resiliency and energy efficiency, according to a Sept. 24 press release. The move follows two policy sessions that the commission held in April and September to examine transportation electrification. The commission said that regulatory uncertainty hinders widespread electric vehicle adoption, pointing to the need for clear policy to guide efficient grid integration of EVs, ownership of charging infrastructure, appropriate rate structures, and efficient charging practices for grid stability. Large-scale EV adoption is expected to result in benefits of up to $43 billion by 2050 in the form of lower utility bills, emissions, and fuel and fuel and vehicle expenses. Decreasing battery costs and low maintenance expenses – despite high up-front costs – are making EVs more attractive compared to vehicles with internal combustion engines. Comments are due by Oct. 23, 2018.

U.S. Enacts Laws to Foster Advanced Nuclear Technologies, Encourage Private Sector to Boost Energy Innovation

U.S. President Donald Trump signed legislation that will eliminate financial and technological barriers to nuclear innovation, according to a Sept. 28 press release from the U.S. Energy Department. The department said the legislation builds on the success of its Gateway for Accelerated Innovation in Nuclear or GAIN initiative, which seeks to enable the industrial community to commercialize new or advanced nuclear technologies. The law calls for a cost-share grant program to fund a portion of the licensing fees that the U.S. Nuclear Regulatory Commission charges to review new reactor technologies. The department will develop a fast test reactor to speed up the development of advanced reactor fuels and materials. The law directs the department to partner with private industry to facilitate the siting of demonstration facilities. The national labs, universities, and private sector will collaborate to develop software tools that enhance research on fission and fusion reactors. The department has 180 days to submit a report to Congress regarding its ability to support experimental reactors. Trump also signed legislation directing the department to permit the use of national lab funds for early stage technology demonstration and overcome barriers impeding private sector interest. (S.97, HR. 589)

U.S. Energy Department Announces $30 Million For Carbon Capture Systems to Support Fossil Power Generation

The U.S. Energy Department is providing the funding for cost-shared research and development to develop technologies that can lower the cost of capturing carbon dioxide from coal-fired power plants, according to a Sept. 27 press release. The projects selected under the department’s “Novel and Enabling Carbon Capture Transformational Technologies” will facilitate the development of solvents for high-performance carbon capture systems, sorbents targeted to specific applications, and membrane materials that lower pressure drop and energy consumption. These projects will add to 11 projects that were selected to receive about $28.9 million in the first part of the funding opportunity for fiscal year 2018.

Developing the Grid

Pennsylvania State Lawmaker Proposes Bill Allowing Revenue Decoupling For Electric Utilities Implementing Efficiency Plans

Pennsylvania House lawmaker Christopher Quinn, a Republican, introduced legislation on Sept. 24 that would allow electric distribution companies to use a revenue decoupling mechanism to recover decreased revenues due to lower energy consumption or demand changes. The bill would limit upward adjustments through the mechanism to two percent of rates. The legislation would also allow financing incentives for energy efficiency plans of distribution companies based on the achievement of energy savings and peak demand reduction goals set by the commission. The incentives would be limited to 10 percent of customer benefits or eight percent of utility expenses resulting from the efficiency measures for the year. Revenue decoupling disconnects sales and profits so as to eliminate the potential for revenue losses that may result from utility deployment of distributed energy resources and removes financial disincentives to invest in conservation programs. (HB 2662)

FERC Cost Allocation Settlement For Transmission Projects Passes on $318 Million to Illinois Ratepayers

The Illinois Commerce Commission announced that Commonwealth Edison Company’s customers will see $318 million in benefits as a result of a settlement concerning the allocation of costs for transmission facilities in the PJM Interconnection LLC’s footprint, according to the agency’s Sept. 25 press release. The settlement, approved by the Federal Energy Regulatory Commission, is a result of negotiations after two court rulings and remand proceedings before FERC against a 2007 order which directed PJM to allocate 100 percent of the costs on a load-ratio share basis to merchant transmission facilities and zones of the responsible customers. The commission said it has fought since 2005 to protect Illinois ratepayers from bearing the costs of certain large transmission projects without demonstrating corresponding benefits.

U.S. Energy Department to Invest $5.8 Million to Maximize Ability of Grid Sensors, Improve Resiliency

The U.S. Energy Department announced a funding opportunity for projects designed to study the application of big data, artificial intelligence, and machine learning technology and tools to enhance the value of sensor data used to monitor the power grid, according to a Sept. 25 press release. The department said that advanced sensors called “phasor measurement units,” currently deployed at more than 2,500 locations across the bulk power system, enable access to near real-time information about the grid’s status, and that advanced tools are needed to analyze actionable information contained in the unprecedented quantities of data available to grid operators and owners. The projects are expected to facilitate faster grid analytics and modeling, improved grid asset management, and sub-second automatic controls that will help avoid outages, enhance operations, and lower costs. Applications are due by Nov. 9.

Rates and Power Markets

U.S. Enacts Law Establishing $10 Million Threshold For Merger Transactions to Seek FERC Approval

U.S. President Donald Trump signed legislation on Sept. 28 that requires mergers or consolidations of public utilities with a value above $10 million to be first approved by the Federal Energy Regulatory Commission. For transactions valued below that threshold but above $1 million, the law requires the utilities seeking merger to notify the commission within 30 days of consummation. The commission has 180 days to establish rules governing the notification. Currently, FERC must approve all mergers and acquisitions, irrespective of the amount, while similar transactions, such as sales and dispositions, require commission authorization only if they exceed $10 million. (H.R. 1109)

Ohio Regulator Slashes Dayton Power & Light’s Rate Hike by Half to Reflect Federal Tax Cut Savings

The Ohio Public Utilities Commission approved a settlement allowing Dayton Power & Light Company to raise its distribution revenues by $29.78 million annually, and set a rate of return of 7.27 percent, according to a Sept. 26 press release. The rates reflect savings under the federal tax law which slashed corporate income tax to 21 percent from 35 percent effective Jan. 1. The change is expected to increase monthly residential electric bills by $2.64. In November 2015, the utility asked for an annual revenue increase of $65.7 million, which would have raised residential electric rates by $4.07. The settlement also requires the utility to examine grid modernization opportunities, and adopt revenue decoupling, a mechanism that lowers incentives to increase energy sales. The Dayton Power and Light Company is as a subsidiary of DPL Inc.

Kansas Regulator Lowers Westar’s Electric Rates by $66 Million, Adds Demand Charge For Solar Customers Citing Cost Shifts

The Kansas Corporation Commission approved a settlement that lowers electric rates for customers of Westar Energy Inc. by $66 million annually, resulting in a $3.80 cut in monthly bills, according to a Sept. 27 press release. The settlement includes bill credits of about $50 million to reflect savings from the federal tax law that slashed the corporate income tax to 21 percent from 35 percent. Customers will also receive about $23 million resulting from the merger of Westar and Kansas City Power and Light Company. The commission approved a three-part rate design for customers who installed distribution generation after Oct. 28, 2015 finding that these customers are not paying their share of fixed costs which are unduly borne by other customers under the current two-part rate. The settlement adds a demand charge of $3 in the winter and $9 in the summer for residential distributed generation customers, leaving service charges intact and lowering energy charges by 40 percent.

Intermountain Gas Company’s Cost Adjustment to Return $24.5 Million to Idaho Customers

The Idaho Public Utilities Commission approved Intermountain Gas Company’s purchased gas adjustment that will lower gas bills by about 10 percent for residential customers and 11.9 percent for commercial customers on Oct. 1, according to a Sept. 26 press release. The annual adjustment reflects changes in the costs incurred by the utility to purchase, store, and transport gas needed to serve its customers. The utility attributed the change to factors including lower transportation costs and a decrease in the weighted average cost of gas. Benefits stemming from the company’s management of storage and capacity rights on pipeline systems, as well as changes in federal and state corporate income tax laws contributed to the change. Some industrial customers are expected to see an increase in rates. Intermountain Gas is a subsidiary of MDU Energy Capital LLC.

Michigan Regulator Approves $7.6 million in Second Round of Refunds From Federal Tax Cut Savings

The Michigan Public Service Commission on Sept. 28 approved settlements that will return a total of about $7.6 million under the second round of federal tax cut adjustments to electric customers of Alpena Power Co. and Upper Michigan Energy Resources Corp., and gas customers of Michigan Gas Utility Corp., Northern States Power, SEMCO Energy Gas Co., and Upper Michigan Energy Resources. The adjustments called Credit B determine refunds from Jan. 1 until the date when the first round called Credit A adjustments were reflected in customer bills. The commission so far authorized about $379.5 million in rate cuts for 10 regulated utilities under the first round. In August, the commission approved the first Credit B reduction of $135,383 for Northern States Power Co. The commission established the three-step process to reflect the short- and long-term impacts of the federal tax law which slashed the corporate income tax rate to 21 percent from 35 percent.

Fuels and Pipelines

Trump Administration to Offer 78 Million Acres in Gulf of Mexico Oil, Gas Lease Sale

The U.S. Interior Department proposed to offer all available unleased areas in the Gulf of Mexico for oil and gas leasing in the auction to be held in March 2019, according to a Sept. 25 press release. The auction marks the fourth offshore sale under the 2017-2022 leasing program. The last auction held in August also offered about 77 million acres and generated about $178 million in high bids. In January, the agency proposed to open more than 90 percent of the outer continental shelf acreage for oil and gas development under its 2019-2024 draft program, in a sharp reversal from current rules that put 94 percent of acreage off limits. The auctions are part of the Trump administration’s push to drive domestic oil and gas production.

Trump Administration Eases Oil, Gas Safeguards Developed in Response to Deepwater Horizon Spill

The U.S. Interior Department’s Bureau of Safety and Environmental Enforcement on Sept. 28 updated the 2016 well control rule, one of the spate of safety regulations implemented in the wake of the 2010 Deepwater Horizon spill that spewed 4.9 million barrels of oil into the Gulf of Mexico over nearly three months. The agency said that the rule would remove provisions that are burdensome for stakeholders and facilitate increased oil and gas production in keeping with the administration’s energy dominance agenda. The agency said it analyzed 484 provisions in the original rule and determined that 84 of were suitable for changes, and that changes will not contradict with recommendations developed in response to the Deepwater incident. The final rule removes unnecessary notifications, clarify when documentation is needed, and codify 12 updated industry standards.

U.S. Crude Oil Exports Rose by 80 Percent During First Half of 2018 Amid Growing Production: EIA

The U.S. exported 7.3 million barrels per day of crude oil and petroleum products in the first half of 2018, the largest recorded for the first six months of a year, according to a Sept. 24 report from the U.S. Energy Information Administration. Crude oil exports, which exceeded hydrocarbon liquids exports, were about 80 percent higher compared to the first half of 2017, with 1.8 million barrels per day exported. The agency said that much of the crude went to regions in Asia and Oceania such as China, South Korea, and India. Europe was the next biggest market, led by Italy, the United Kingdom, and the Netherlands. Canada was the only major U.S. crude oil export destination where exports decreased, the agency said. In March, EIA reported exports had almost doubled from 2016 to 2017, attributing the increase to growing U.S. production and expanded infrastructure. U.S. production surpassed that of Russia in June and August, for the first time since 1999, after beating Saudi Arabia in February.

FERC Schedules Environmental Review For TransCanada’s Portland Xpress Gas Infrastructure Project

The Federal Energy Regulatory Commission set a Nov. 27 deadline to issue an environmental assessment for TransCanada Corporation’s proposed Portland Xpress Project, according to the agency’s Sept. 24 notice. The project would boost natural gas supply to New England and Atlantic Canada markets by modifying the existing compressor station in Westbrook, Maine, and adding horsepower to station in Eliot, Maine, according to the company website. Both stations are jointly owned by Portland Natural Gas Transmission System and Maritimes and Northeast Pipeline LLC. The project would supply 214,375 million cubic feet per day of gas to New England on the Portland transmission system and 22,339 million cubic feet per day on the Portland and Maritimes joint facilities. A final decision is due by Feb. 25, 2019.

U.S. Interior Department Approves Utility Corridor For Enefit’s Oil Shale Project in Utah

The Bureau of Land Management on Sept. 26 authorized right-of-way grants for the Enefit American Oil Utility Corridor Project which would provide access, natural gas, electricity, and water to Enefit American Oil’s South Project while allowing transport of processed oil. The South Project comprises commercial oil shale mining operations on 7,000- acre to 9,000-acres of private land in Utah. Upon completion, the project is expected to produce 50,000 barrels of oil per day for up to 30 years from shale formations on Enefit’s private property holdings. The proposed corridor is about 40 miles south of Vernal. Enefit American Oil is a subsidiary of Eesti Energia AS.