This week the state of New Jersey took an innovative step in its continuing quest to remain Stronger than the Storm. The N.J. Board of Public Utilities (“BPU”) approved Docket No. QO14060626, a subrecipient agreement with the N.J. Economic Development Authority (“EDA”) to work jointly in the establishment and operation of the Energy Resilience Bank (“ERB”). The EDA and BPU also announced the hiring of staff to fill two ERB leadership positions. Utilizing $200 million through New Jersey’s second Community Development Block Grant-Disaster Recovery allocation, the ERB will support the development of distributed energy resources at critical facilities throughout the state with a primary goal of improving resiliency.

Superstorm Sandy caused extensive damage to New Jersey’s energy infrastructure, disrupting delivery of electricity, petroleum and natural gas to consumers across the state, and leaving an estimated five million residents without electricity. Distributed energy resources, including combined heat and power (CHP), fuel cells (FC) and off-grid solar inverters with battery storage, allowed some critical facilities, such as hospitals, wastewater treatment plants and universities, to remain operational while the electric grid was down. The launch of the ERB will enable many more such facilities to remain operational during future outages. In addition to providing resilience, the benefits of distributed energy resources also include lower and stable energy costs, a cleaner environment through reduced emissions, and increased overall efficiency.

BPU President Dianne Solomon said, “Increasing energy resilience, whether through the Energy Resilience Bank, the BPU-approved resiliency improvement measures implemented by utility companies or NJ’s Clean Energy Program, will minimize the potential impacts of future widespread power outages due to major storms like Superstorm Sandy.”

Governor Christie’s press release says the Energy Resilience Bank is the first of its kind in the nation to focus on resilience.

On June 30, 2014, the Supreme Court declined to hear Kansas City Power & Light Co.’s appeal of a lower court’s affirmation of the Missouri Public Service Commission order denying the utility the right to recover FERC-approved transmission costs, estimated at $100 million. The costs are for delivering power 500 miles from a natural gas plant in the Mississippi Delta to western Missouri customers. The Missouri PSC approved the purchase power but concluded the $5 million yearly interstate transmission cost at FERC-approved rates wasn’t “just and reasonable” because the plant was only used to meet summer peak demand. However, KCP&L was paying for transmission access all year and passing that cost on to its customers. KCP&L argued the decision to disallow FERC-approved transmission costs violated the supremacy clause of the U.S. Constitution, which gives federal law jurisdiction over state law.

The impact of the ruling further supports the concept that FERC approval no longer provides certainty regarding cost recovery. Billions of dollars in interstate transmission costs may or may not be recoverable from customers. It is already a hot summer and things could really heat up to the extent other state utility commissions consider denying recovery of FERC-approved transmission costs related to the growing area of distantly-sited generation, especially the popular natural gas and wind generation.

And there is more… I find the most interesting thing about this case is the fact that the Missouri PSC approved the recovery of the cost of the generation facility in base rates, yet denied the cost to transmit the power from the approved facility.

Bonus: The Solicitor General explains why cert should be denied.

In a recent order, the Massachusetts Department of Public Utilities (“Department” or “DPU”) stated that time varying rates are an essential component of grid modernization. As a result, the design of basic service must change to incorporate time of use (“TOU”) rates for all customers, including residential customers. The Department noted that in 2013, the average wholesale market price of electricity over the course of the year was $56 per megawatt-hour (“MWh”), but the peak wholesale price in the summer reached nearly $870 per MWh and in winter nearly $1,300 per MWh. However, despite the volatility in the wholesale market, basic service customers’ rates did not reflect the time varying nature of electricity supply costs. The Department sees this as a problem. (Warning: DPU should take a short flight down to PJM land where customers’ exposure to last winter’s price spikes is still being discussed.) Nevertheless, DPU is concerned because under the current basic service structure in Massachusetts, rates do not reflect the time varying nature of electricity supply costs. Additionally, customers who are able to shift more of their electric usage to off-peak/lower wholesale cost hours subsidize customers who use more electricity during hours with higher wholesale electricity prices.

The Time Varying Rates Order describes a policy framework that will require electric distribution companies to offer two basic service TOU options:

  1. A default product with time of use pricing that includes a critical peak pricing (“CPP”) component. Under this TOU pricing structure, the retail electricity price will be higher during certain hours of the week when customers typically use more electricity and wholesale energy prices rise (e.g., the “on-peak” hours of noon to 8:00 p.m. each weekday) than during the remaining hours of the week when electricity usage and wholesale prices are typically lower (i.e., the “off-peak” hours).
  2. A flat rate with a peak time rebate (“PTR”) option. With a PTR, customers will receive a rebate if they lower their electricity use relative to a pre-established baseline during times when wholesale hourly energy prices are highest. Thus, under PTR, customers will have an incentive to lower their electricity usage when it is most critical to do so, but even those who ignore the incentive will be insulated against higher peak prices because they will pay one price for all electricity consumption.

The Department anticipates that the on-peak rate will be higher and the off-peak rate lower than a flat-rate product. Thus, customers who respond to price signals by reducing on-peak energy consumption will pay less than they would under a flat rate.

Written comments regarding this policy framework may not exceed 25 pages and must be submitted no later than the close of business (5:00 p.m.) on July 3, 2014.

This month the Environmental Protection Agency (“EPA”) released its Clean Power Plan proposal. The Plan cuts carbon pollution from existing power plants, which according to the EPA is the single largest source of carbon pollution in the United States. The Agency says the proposal will protect public health, move the United States toward a cleaner environment, fight climate change and continue to supply Americans with reliable and affordable power. Milestones and goals of the plan include:

  • Reduce carbon emission from the power sector to 30 percent below 2005 levels
  • Reduce electricity bills by approximately 8 percent by increasing energy efficiency and reducing demand in the electricity system.

The Clean Power Plan provides guidelines for states to develop plans to meet state-specific goals to reduce carbon pollution and gives them the flexibility to design a program that makes the most sense for their unique situations. States can choose the right mix of generation using diverse fuels, energy efficiency and demand-side management to meet the goals and their own needs. It allows them to work alone to develop individual plans or to work together with other states to develop multi-state plans. States better get busy because a year will fly by. Here are the proposed state plan dates:

June 30, 2016 – Initial plan or complete plan due
June 30, 2017 – Complete individual plan due if state is eligible for a one-year extension
June 30, 2018 – Complete multi‐state plan due if state is eligible for two-year extension (with progress report due June 30, 2017)

EPA is accepting comments and will hold four public hearings for the Clean Power Plan the week of July 28, 2014. The hearings will provide interested parties the opportunity to present data, views or arguments concerning the proposed action. The hearings will be held on:

The Federal Energy Regulatory Commission (FERC) and the Nuclear Regulatory Commission (NRC) held a joint meeting on Wednesday, May 28, 2014, at NRC headquarters. Most of the meeting was open to the public and concluded with a tour of NRC’s new control center. Commissioners from both agencies participated. Speaking on the topic of Grid Reliability, Markets and Extended Loss of All Alternating Current Power were:

  • Mr. Burgess, NERC – 2014 State of Reliability Report
  • Mr. Quinn, FERC – Market Dynamics that May Affect the Financial Viability of Nuclear Power Plants
  • Mr. Smith, NRC – Nuclear Power Plants – License Renewals and Projections of New Units, Extended Loss of All AC Power Mitigation Strategies – Order Implementation and the Scope of the Rulemaking Activity

With EPA rulings, plant closures, polar vortexes as well as cyber and physical security issues, 2013 was a rough year. Despite the challenges, the first key finding from Mr. Burgess’ presentation is that the bulk power system has a sustained high performance level. This highlights the strength of the grid. You can read the transcript and presentations on NRC’s website.

The New York State Public Service Commission (“PSC” or “Commission”) recently petitioned the U.S. Court of Appeals for the Second Circuit to force the Federal Energy Regulatory Commission (“FERC”) to respond to the PSC’s pending requests for rehearing of FERC’s decisions to create a new capacity zone (“NCZ”) in the lower Hudson Valley. The PSC states that as a result of the NCZ, residential customers using 600 kWh/month in the lower Hudson Valley would experience increases in their total electric bill of between six percent to thirteen percent and industrial customers could experience a ten percent increase, causing unnecessary and unreasonable electricity price increases in the lower Hudson Valley.

Pending full judicial review of FERC’s decisions, the PSC has filed an emergency motion asking the Court to issue a stay of FERC’s decisions implementing the upcoming capacity auctions in the NCZ and ensure consumers are not harmed further. However, in previous pleadings, the New York ISO (“NYISO”) states that the NCZ Study determined that the Upstate New York/Southeast New York (UPNY/SENY) Highway interface into Load Zones G and H was constrained because it was bottling 849.2 MW of generation from Load Zones A through F, and therefore, NYISO is required to create a new capacity zone.

Entergy Nuclear also supports the creation of the new capacity zone and asserts that the erosion of the electric system in the lower Hudson Valley over time provides proof of the harm that results when inaccurate price signals fail to adequately value capacity in a region. It states that the capacity price signal for the lower Hudson Valley zones was suppressed by the excess capacity levels in the remainder of the Rest-of-State region that cleared against the NYCA curve, but were not deliverable to the lower Hudson Valley zones due to the UPNY/SENY constrained interface.

FERC has stated it does not believe the new capacity zone will result in unjust and unreasonable rates. Higher capacity prices in the new capacity zone will help to encourage the development of new generation and/or transmission capacity to help alleviate the constraint NYISO has demonstrated. FERC’s position is that the price changes promote efficient decisions and are not unreasonable. The NCZ capacity auctions have begun and the PSC has filed a Petition for a Writ of Mandamus and Emergency Motion for Stay to prevent what it believes is irreparable harm to customers in the lower Hudson Valley:

Because FERC has not acted prior to the implementation of the NCZ capacity auctions, New York electricity ratepayers face the possibility of paying an additional $158 million for electricity in the summer of 2014, without realizing a corresponding benefit. If the Court reverses FERC it will be difficult, if not impossible, to rerun the auctions to reflect whatever relief the Court provides.

– PSC Petition and Motion page 10

These are interesting grid management issues. The industry will be watching the Second Circuit.

Camps have changed a lot since my childhood days of learning to swim at the Y. Somewhere between the increased competition for college admission and the universities’ quest to monetize all that empty space during the summer, parents have started spending a lot of money for “enrichment.” Admittedly, I have fallen prey. Recently, I sat down with my 10th grader to finalize his summer plans. I was amazed at his options. There are camps pre-college programs for all of his hobbies and every interest he didn’t know he had! One in particular caught my eye – Rensselaer Polytechnic Institute has a Smart Grid Camp Pre-College Program! In this week-long program, students conduct a market experiment to learn about electricity pricing. Using a simulation tool, they will explore how the grid responds to loss of equipment, extreme power demands and other problems that might lead to blackouts. Students learn how the electric grid is being adapted to incorporate renewable sources of energy such as solar arrays and wind turbine farms. Working with RPI faculty and graduate students, high schoolers will learn about computer networks, cyber security and even tour power grid manufacturing or control facilities. Wow! This description is certainly deserving of the pre-college label. Unfortunately I will not be able to provide you with insider details. My interest in the smart grid has not rubbed off on my son. He selected a Gaming Academy and was not persuaded when I pointed out you need energy to power those games he will be designing.

Rensselaer also offers a Smart Lighting – Smart Power – Smart Systems Pre-College Program. It introduces high school students to lighting, power and sensor technologies and how they can be integrated into real world, sustainable and well-engineered Smart Systems. Students will be engaged in hands-on activities using the fundamentals of electronics and photonics to engineer solutions that address today’s social and environmental challenges. They will interact with engineers and scientists and participate in guided tours of high-tech manufacturing and/or research facilities. (Applications accepted until full.)

There are a variety of energy camps and pre-college programs across the country; some start as early as 3rd grade. This is good news. Optimizing the grid will require energy literacy. Like other transformations, children often lead the way. While it will not help with immediate needs, utilities should find developing the pipeline helpful to the looming talent shortage they face. Here’s a sampling of what is being offered:

  • Rethink Energy Florida hosts an Energy Ball to raise funds so that no kid is turned away from its Energy Camp for 3rd-6th graders. Campers make their own solar ovens.
  • The Touchstone Energy Camp in Indiana is just for 6th graders. A mixture of traditional camp, kids learn about electric distribution and go from rides in bucket trucks to horseback riding, swimming and archery.
  • The Green Energy Camp at the University of Washington-Seattle provides 6th-8th graders with a STEM approach to our energy future. Campers will build their own electricity-generating wind turbines and use math to measure the energy output of their designs and make them more efficient. (Waitlist available.)
  • The Shell Energy Venture Camp at LSU provides 9th-11th graders and teachers with the opportunity to learn about energy careers while having fun. They will perform hands-on experiments to explore the entire process of energy development; from how oil and natural gas are formed to the ways various types of energy are used. Campers will build a generator, a motor, a car, a windmill, a solar house and a robot! (Still accepting applications.)
  • University of Southern California/Chevron Frontiers of Energy Resources Summer Camp offers high school juniors and a few math and science teachers a preparatory, interactive training program focusing on various energy resources including fossil fuels, solar, biofuels, nuclear energy and information technologies for energy efficient operations
  • Also at USC, ExxonMobil sponsors the Bernard Harris Summer Science Camp providing activities, experiments, projects and field experiences for students entering 6th-8th grade in the fall of 2014. The camp promotes science, technology, engineering and mathematics (STEM) education and supports historically underserved and underrepresented students with limited opportunities. Selected students attend this two week residential camp free of charge! (Deadline May 9, 2014.) This camp is offered at other schools throughout the US and includes mentoring from Dr. Bernard A. Harris, Jr., the first African-American to walk in space and camp founder.
  • Purdue University is home to the Duke Energy Academy. Purdue University has launched an Energy Academy to address the looming national crisis in the number and quality of students entering the STEM disciplines. Concerned that a decline in STEM-based education will impact our nation’s ability to lead the world in the energy sector, the Duke Energy Academy provides a week-long course in STEM-related energy topic areas of power generation, transportation, power transmission, energy efficiency and new research frontiers. After camp, students and teachers will be encouraged to launch energy clubs in their schools.
  • The Renewable Energy Camp at University of Wisconsin-Platteville is a week-long program that immerses 9th-12th graders in programming that provides insight into the dynamic field of renewable energy. Activities focus on practical applications of renewable energy in the field. Students will develop core knowledge of systems at the intersection of physics, chemistry, biology, materials science, electrical and mechanical engineering and agriculture. (Registration is currently open.)
  • Skyline College in San Bruno, California provides high school juniors and seniors an opportunity to earn two units of college credit for free at its Green Energy Camp. Students will learn valuable marketing and business skills as well as an overview of solar and energy efficiency products and services. The camp is part of the Energy Systems Technology Management program.

I am impressed. I can’t recall specifics about my high school summers but I am pretty sure I did not do anything nearly as academic. This list is not exhaustive. Next year I plan to do a similar post earlier in the year, ahead of application deadlines. However, thanks to DOE’s Office of Energy Efficiency and Renewable Energy, no one has to be left out this year. Parents and teachers can create their own energy camp experience utilizing this lesson plan. There are so many energy related camps and pre-college opportunities, I am confident we will have a powerful future.

Utilities and generators will find this recent decision by the Minnesota District Court interesting because the issues are similar to energy and environmental laws in other states. The plaintiffs include the State of North Dakota, the Industrial Commission of North Dakota, the Lignite Energy Council, Basin Electric Power Cooperative, the North American Coal Corporation, Great Northern Properties Limited Partnership, Missouri Basin Municipal Power Agency d/b/a Missouri River Energy Services, and Minnkota Power Cooperative, Inc. They filed suit against the Commissioners of the Minnesota Public Utilities Commission and the Commissioner of the Minnesota Department of Commerce alleging that Minn. Stat. § 216H.03 violates the Commerce Clause of the U.S. Constitution (Count I), the Supremacy Clause of the U.S. Constitution because the statute is preempted by the Clean Air Act and the Federal Power Act (Counts II and III, respectively), the Privileges and Immunities Clause of the U.S. Constitution (Count IV), and the Due Process Clause of the Fourteenth Amendment of the U.S. Constitution (Count VI).

The statute at issue is Minnesota’s Next Generation Energy Act (“NGEA”). It establishes energy and environmental standards related to carbon dioxide emissions and seeks to limit increases in “statewide power sector carbon dioxide emissions,” stating:

Unless preempted by federal law, until a comprehensive and enforceable state law or rule pertaining to greenhouse gases that directly limits and substantially reduces, over time, statewide power sector carbon dioxide emissions is enacted and in effect, … no person shall:

  1. construct within the state a new large energy facility that would contribute to statewide power sector carbon dioxide emissions;
  2. import or commit to import from outside the state power from a new large energy facility that would contribute to statewide power sector carbon dioxide emissions; or
  3. enter into a new long-term power purchase agreement that would increase statewide power sector carbon dioxide emissions. For purposes of this section, a long-term power purchase agreement means an agreement to purchase 50 megawatts of capacity or more for a term exceeding five years.

In finding the law unconstitutional the Court emphasized that neither the parties, nor the Court, dispute that carbon dioxide emissions are a problem that this country needs to address.

The question here is not the environmental issue. The question is whether the Minnesota Legislature has the power, under the U.S. Constitution, to address that issue through the means articulated in Minn. Stat. § 216H.03. Because the Court finds that Minn. Stat. § 216H.03, subd. 3(2)–(3), violates the dormant Commerce Clause, the answer to that question is ‘no.’

Decision, Page 26

Providing me with flashbacks to first year Con Law, the court defines the dormant Commerce Clause as the negative implication of the Commerce Clause. States may not enact laws that discriminate against or unduly burden interstate commerce. The court then explained the three levels of analysis under the dormant Commerce Clause.

  • First, a state statute that has “an ‘extraterritorial reach,’ that is, … the statute has the practical effect of controlling conduct beyond the boundaries of the state,” is per se invalid. Cotto Waxo Co., 46 F.3d at 793 (citing Healy v. Beer Inst., Inc., 491 U.S. 324, 336 (1989)).
  • Second, a state statute that is discriminatory on its face, in practical effect, or in purpose is subject to strict scrutiny. Id. (citations omitted).
  • Third, a state statute that is not discriminatory, but indirectly burdens interstate commerce, is evaluated under the balancing test set forth in Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970).

If you think this is not smart grid related think again. The court took the time to explain the unique nature of electricity, pointing out it is different from tangible products. Electricity cannot be shipped directly from Point A to Point B and MISO, the RTO for the utilities in this case, does not match buyers to sellers. Once electricity enters the grid, it is indistinguishable from the rest of the electricity in the grid. A North Dakota generation-and-transmission cooperative cannot ensure that the coal-generated electricity that it injects into the MISO grid is used only to serve its North Dakota members and not its Minnesota members. Consequentially, in order to ensure compliance with Minn. Stat. § 216H.03, subd. 3(2)– (3), out-of-state parties must conduct their out-of-state business according to Minnesota’s terms—i.e., engaging in no transactions involving power or capacity that would contribute to or increase Minnesota’s statewide power sector carbon dioxide emissions. This is the “paradigm” of extraterritorial legislation according to the court. Most likely there will be an appeal. Given the increase in interconnections and the growing RTO markets, this case will be watched by many.

AT&T, Cisco, GE, IBM and Intel recently announced the formation of the Industrial Internet Consortium (IIC), an open membership group focused on breaking down the barriers of technology silos to support better access to big data with improved integration of the physical and digital worlds. The consortium will enable organizations to more easily connect and optimize assets, operations and data to drive agility and to unlock business value across all industrial sectors. The IIC’s charter will be to encourage innovation by:

  • Utilizing existing and creating new industry use cases and test beds for real-world applications;
  • Delivering best practices, reference architectures, case studies and standards requirements to ease deployment of connected technologies;
  • Influencing the global standards development process for Internet and industrial systems;
  • Facilitating open forums to share and exchange real-world ideas, practices, lessons and insights;
  • Building confidence around new and innovative approaches to security.

Like the smart grid, the Industrial Internet is the next frontier. It merges the physical with the digital to predict, control and create systems that produce better outcomes. Through the Industrial Internet, companies will shift from responding to events and will instead use connected machines, big data and analytics to predict and plan, resulting in large gains in industrial productivity, bottom line results and societal outcomes. Stay tuned for a more detailed analysis on how the Industrial Internet will benefit the energy industry.

The members of the Smart Grid Interoperability Panel (“SGIP”) are working on standards, policies and guides to help modernize the electric power grid. Last month, the Smart Grid Cybersecurity Committee of SGIP released a helpful resource: A straight forward thirty page User’s Guide to help utilities navigate the previous released hefty 597 page Interagency Report (NISTIR) 7628, Guidelines for Smart Grid Cyber Security. Although not as lengthy as the main event, the User’s Guide contains practical suggestions utilities will find useful. The guide has its share of charts and graphs but I find the gray shaded boxes noteworthy. They serve as a jab in the side to remind utilities about information they may have overlooked while engrossed in the details. For example, on page nine of the report, the gray box says, “Every organization is unique, so portions of the NISTIR Logical Reference Model may not be directly applicable for every business process for every utility. Optionally, instead of solely using the NISTIR 7628 Logical Reference Model diagram, you may create a flowchart that identifies the way the different Actors interface with each other. This will help you conceptualize how the NISTIR 7628 Logical Reference Model aligns to your own organizational business processes.”

If there were doubts, these next few sentences will confirm I am an energy geek. While researching this post, I noticed the most beautiful prose regarding our electric grid on the NIST.gov homepage. It gives big kudos to the current grid while pushing towards the future… and it made me smile. Happy Friday!

Today’s electric power grid ranks as the single greatest engineering achievement of the 20th century. And tomorrow’s smart grid will be one of the greatest achievements of the 21st century. By linking information technologies with the electric power grid—to provide “electricity with a brain”—the smart grid promises many benefits, including increased energy efficiency, reduced carbon emissions, and improved power reliability.

– NIST.gov homepage.