The utility industry has a reputation for being stodgy and slow to innovate and change. Yet one of its main regulators is quite different. The Federal Energy Regulatory Commission (FERC) has often taken the lead when it comes to embracing technology and adopting new ways of connecting with the public. From electronic filing to webcasts of public meetings, the FERC seemed to be an early adopter. Last month, FERC did it again with the launch of “Open Access,” the podcast series. According to host Craig Cano, the goal is

“to have a conversation about FERC, what it does and how that can affect you. FERC can get very legal and very technical, so we will strive to keep it simple.”

The podcast begins by explaining what FERC does:

“… oversees the interstate transmission of electricity, natural gas and oil. FERC’s authority also includes review of proposals to build interstate natural gas pipelines and liquefied natural gas terminals, and licensing of nonfederal hydropower projects. FERC protects the reliability of the high-voltage interstate transmission system through mandatory reliability standards and it monitors interstate energy markets to ensure that everyone in those markets is playing by the rules.”

In the first episode, Mary O’Driscoll of FERC talks with Charles Curtis, the first chairman of the FERC. They take a walk down memory lane where I learned the good ole days were not always so good. The former commissioner states,

“The Federal Power Commission, before it, was a commission in significant disarray. It had a decisional process that assigned the Commission about 22,000 decisions per year, and it had a backlog of some 20 to 25 years of matters awaiting decision of the Commission.”

Ouch, I can’t imagine any business waiting that long for adjudication.

In the second episode, Ms. O’Driscoll connects us with then-commissioner Tony Clark, who reflects on his time at the Commission as he prepared to leave at the end of September 2016. Former commissioner Clark served one term at FERC, having been nominated by President Obama and sworn in on June 15, 2012. Prior to that, he served 12 years as a member of the North Dakota Public Service Commission, including a term as its president. With this being one of the most lethal presidential elections since I have been voting, it is refreshing to hear former commissioner Clark discuss FERC’s nonpartisan approach:

“When you’re talking about something as important as energy, which is critical to the safety and well-being of the nation’s economy and our people, you want to have decisions that are made in a nonpartisan, nonpolitical way. … You may disagree from time to time with commissioners on a certain issue, but it tends to not be political. It is often said around here there’s not a Republican way or a Democrat way to keep the lights on. So I think that nonpartisan nature of it makes it easy to work with people in good faith. Over the four-plus years that I’ve been here it would be difficult to find any particular pattern in terms of vote. Here was a coalition of commissioners that always voted together and here is the other side that voted together in a bloc on certain things. It never worked that way. And I think the key is you have to maintain a degree of collegiality and respect.”

Wow! The house, the senate and candidates should take note! You can listen to both episodes here.

It’s a great day for the Federal Energy Regulatory Commission (FERC) and supporters of demand response. Today, the United States Supreme Court issued its decision in FEDERAL ENERGY REGULATORY COMMISSION v. ELECTRIC POWER SUPPLY ASSOCIATION ET AL., upholding the FERC’s authority to regulate wholesale demand response as well as FERCs method of compensating demand response participants. In the 6-2 decision, the Supreme Court ruled:

  • The practices at issue directly affect wholesale rates.
  • The Federal Power Act (FPA) provides FERC with the authority to regulate the wholesale electric market.
  • FERC has not regulated retail sales.
  • FERC’s method of compensating demand response participants at locational marginal pricing (LMP) is not arbitrary and capricious.
  • A contrary view would conflict with the FPA’s core purposes by preventing the use of a tool (demand response) that will curb prices and enhance reliability in the wholesale electricity market.

After a brief hiatus, Smart Grid Legal News is back! So many issues and not enough time or space so I thought I would start with the basics. I recently had the pleasure of meeting Christine Hertzog, managing director of Smart Grid Library, to discuss Smart Grid Dictionary, now it its sixth edition. At 466 pages, Smart Grid Dictionary covers acronyms and terms that are not just smart grid related but industry related. If you are new to the industry, the book will quickly become a well-worn staple. Veterans might find it useful to zero in on terms you might gloss over. Like most good ideas, Smart Grid Dictionary was created out of necessity. Trying to navigate an industry riddled with acronyms can be challenging. So for her own use, Christine began keeping a list of terms she hears often and soon Smart Grid Dictionary was born. Perusing through the dictionary, some of the terms that I take for granted, like classes of service or rate case, made me smile as I thought about how they could be confusing to those not enmeshed in this regulatory world. Below is a random sample of terms found in the Smart Grid Dictionary:

ADA (Advanced Distribution Automation)
A collection of intelligent sensors, remote controllers and bi-directional communications to manage distribution grids – covering substations to AMI assets.

Classes of service
A class or group of customers with similar characteristics that have a common rate for electric service. Some common classifications are residential, commercial, industrial and transportation.

Electric industry restructuring
The reconfiguration of vertically integrated electric utilities into markets with competing sellers, allowing customers to choose their suppliers but still receive delivery over the power lines of the local utility. Generation is now generally competitive, transmission is regulated by FERC (Federal Energy Regulatory Commission) and distribution falls under state jurisdictions.

ICAP (Installed Capacity)
A monthly market run by an ISO (Independent System Operator) that provides generators compensation for locating units in specific regions based on the net capacity the unit provides to the market after accounting for forced outages at the unit.

IEEE 2030.5
This standard incorporates Smart Energy Profile (SEP) 2.0. It defines application message exchange mechanisms, the exact messages exchanged and the security features used to protect the application messages. This enables utility management of the end user energy environment, including demand response, load control, and time of day pricing among other functions.

Before the chill of last winter’s polar vortex, many in the industry may not have even heard the term uplift payments. If you are still wondering exactly how it works, the Federal Energy Regulatory Commission (“FERC”) has a docket and workshop for you (Docket No. AD14-14-000). At this docket you will find an educational staff report on uplift payments in RTOs/ISOs. On Monday, September 8, 2014, FERC will hold a workshop to explore the technical, operational and market issues that give rise to uplift payments and the levels of transparency associated with uplift payments. The daylong informative workshop will begin at 8:45 a.m. and conclude at 5:15 p.m.

Panel 1 will address the basic issue of “What is uplift?” and explore issues that give rise to uplift payments as well as:

  • Drivers of uplift payments in RTOs/ISOs
  • Uplift payments that have been highly concentrated and persistent on a geographic or resource basis
  • Technical, operational and market issues driving uplift payments
  • The relationship between uplift payments and unit flexibility

Panel 2 will explore the impact of uplift on market participants.

Panel 3 will explore the adequacy of and the potential to enhance uplift transparency and recent market design changes that may address some of the causes of uplift.

Panel 4 will explore broader price formation issues and discuss next steps.

This agenda provides further details. As expected, the event will be held at the Federal Energy Regulatory Commission, 888 First Street, NE, Washington, DC 20426. This workshop is free of charge and open to the public.

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.

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.

As previously reported, the Federal Energy Regulatory Commission (“FERC” or “Commission”) will hold a Commissioner-led technical conference on Tuesday, April 1, 2014. A full day is planned to discuss the impacts of recent cold weather events on the Regional Transmission Organizations/Independent System Operators (“RTOs/ISOs”) and actions taken to respond. After opening remarks, there will be a presentation from the Commission’s Office of Enforcement. The first panel will take up the remainder of the morning and will include informative presentations by RTOs/ISOs representatives:

  • Brad Bouillon, California Independent System Operator
  • Peter Brandien, ISO-New England
  • Richard Doying, Midcontinent Independent System Operator
  • Wes Yeomans, New York Independent System Operator
  • Michael Kormos, PJM Interconnection
  • Bruce Rew, Southwest Power Pool

These industry leaders will address several concerns including: (1) the steps it took to prepare for the cold weather events; (2) the operational conditions leading into the day-ahead; and (3) the operator actions taken to address events prior to day-ahead, day-ahead, and in real-time.

In the afternoon, a broad spectrum of stakeholders will discuss:  

  1. Experiences during the cold weather events: Describe experience and observations during the cold weather events, the information that was available to assist in preparation, and the actions taken in real-time to respond.
  2. Lessons learned: Explain the most important lesson(s) learned, particularly as relevant to regional electric market prices and performance, adequacy of infrastructure, fuel procurement and fuel diversity.  
  3. Policy implications: Share observations about changes that could be made to improve the performance of Commission-regulated markets during future extreme weather events.  

In addition to the above, Commissioner Philip Moeller would like the following question answered. Details regarding his expectations can be found here

For each power plant that ran this winter and that is expected to retire due to EPA regulations, what resources will replace it?

Following the conference, the Commission will take written public comments until May 15, 2014. The Supplemental Notice provides more details. The conference will run from 9:00 am – 5:15 pm and will be held at the Federal Energy Regulatory Commission, 888 First Street, NE, Washington, DC 20426. Attendance is free open to the public. If attending, registration is requested.

Because the grid is so critical to all aspects of our society and economy, protecting its reliability and resilience is a core responsibility of everyone who works in the electric industry.

– Federal Energy Regulatory Commission (“FERC”) Acting Chairman Cheryl LaFleur

This month, FERC directed the North American Electric Reliability Corporation (“NERC”) to develop Reliability Standards requiring owners and operators of the Bulk-Power System to address risks due to physical security threats and vulnerabilities within 90 days. The Reliability Standards will require owners and operators of the Bulk-Power System to take at least three steps to protect physical security:

  1. Owners and operators must perform a risk assessment of their system to identify facilities that, if rendered inoperable or damaged, could have a critical impact on the operation of the interconnection through instability, uncontrolled separation, or cascading failures of the Bulk-Power System.
  2. Owners and operators of critical facilities must evaluate potential threats and vulnerabilities to those facilities.
  3. Owners and operators must develop and implement a security plan to address potential threats and vulnerabilities.

FERC recognizes that compliance with the Reliability Standards described above could contain sensitive or confidential information that, if released to the public, could jeopardize the reliable operation of the Bulk-Power System. As a result, NERC is also directed to include in the Reliability Standards a procedure that will ensure confidential treatment of sensitive or confidential information but still allow for the Commission, NERC and the Regional Entities to review and inspect any information that is needed to ensure compliance with the Reliability Standards.   

The industry understands the continuing need to address physical security and resilience. This latter point is critical because absolute protection from attack, physical or cyber, can never be promised. It is a risk embedded in our freedom. So a healthy ongoing focus on resilience is critical and grid owners and operators address these issues frequently if not daily. So I can’t help but wonder whether the recent media frenzy about Metcalf and a looming national blackout has FERC fighting back, not just with statements but this order.

The polar vortex made its presence known this winter and its impact on the electric and gas industry will be felt beyond the first day of spring. Bitter cold temperatures caused record-breaking demand for gas and electric, sending prices for these commodities to unprecedented peaks. It was brief but the wholesale price spikes in January affected everyone: utilities, suppliers, businesses and residential customers. As the bills rolled in, many were in shock wondering, “What just happened?” as they checked their invoices and contract provisions over and over and over again. To dig deeper into the answers, the Federal Energy Regulatory Commission (“Commission”) is establishing a technical conference to explore the impacts of the recent cold weather events on the Regional Transmission Organizations/Independent System Operators (RTO/ISO) and discuss actions taken to respond to those impacts. The discussion will focus on the impact of cold weather events on operational planning and real-time operations, market prices and performance; regional infrastructure; the actions taken in response to those impacts; gas procurement; and lessons learned that can be shared between regions and applied in future events.

This Commission-led technical conference regarding the 2013-2014 Winter Operations and Market Performance in Regional Transmission Organizations and Independent System Operators will take place on April 1, 2014 beginning at 9:00 am and ending at approximately 5:00 pm.  The conference will be held at the Federal Energy Regulatory Commission, 888 First Street, NE, Washington, DC 20426. Those interested in attending the technical conference are encouraged to register.