ISO-NE winter electricity supply 2016-2017

Thursday, December 8, 2016

New England should have sufficient electricity supplies to meet consumer demand this winter, according to regional power grid operator ISO New England, Inc.  But because natural gas pipeline constraints could limit electricity production, the grid operator has implemented a Winter Reliability Program to help ensure supply meets demand.

ISO-NE is the regional transmission organization responsible for most of New England's electric grid.  In that role, it forecasts electricity demand, and operates markets to match up generation with demand.

On December 5, 2016, ISO-NE released a statement addressing winter 2016-2017 with respect to electricity reliability.  The grid operator projects that at normal winter temperatures of about 7 degrees Fahrenheit, peak demand will reach 21,340 MW, or 22,028 MW if extreme winter weather of 2 degrees F occurs.  This would be above the 2015-2016 winter peak demand of 19,545 MW (February 14, 2016, from the hour from 6 to 7 p.m.), and below the all-time regional winter peak of 22,818 MW (a cold snap on January 15, 2004).

According to the grid operator, electricity supplies should be sufficient to meet consumer demand this winter -- but natural gas pipeline constraints and other factors create risks that could affect reliability.  Natural gas generated 49% of the region's electricity in 2015, and natural gas-fired power plants represent about 44% (or 14,850 megawatts) of the region's total generating capacity. But ISO-NE views about 3,450 MW of natural gas-fired generating capacity as "at risk" this winter due to the insufficiency of the region's natural gas infrastructure.  Despite some new pipeline projects and the present availability of liquified natural gas (LNG), the region faces the loss of 1,500 MW of coal- and oil-fired generation this spring with the closure of the Brayton Point Power Station in Massachusetts.

ISO-NE touts its 2016-2017 Winter Reliability Program as designed to address these "multiple risks" of pipeline constraints and non-gas unit retirement. As previously approved by the Federal Energy Regulatory Commission, the program will run from December 1, 2016 to February 28, 2017, and includes an oil inventory component, an LNG component, and a demand response component.

In light of this planning, and barring "unexpected resource outages or fuel delivery constraints," ISO-NE projects New England's electricity supplies should be sufficient this winter to meet consumer demand.

NY considers ESCO reforms

Wednesday, December 7, 2016

New York utility regulators have launched consideration of reforms to how retail electricity suppliers called energy service companies or ESCOs operate in that state.  A December 2, 2016 notice issued by the New York Department of Public Service describes a history of "substantial overcharges and deceptive practices by the ESCO industry harming New York consumers," and establishes a process to "push ahead with reforms to ensure that ESCOs provide useful, value-added, economical services to New York consumers."  New York's ESCO reform process will play out in conjunction with other state initiatives, such as the Reforming the Energy Vision program.

As described in the Notice of Evidentiary and Collaborative Tracks and Deadline for Initial Testimony and Exhibits, the New York Public Service Commission initially opened up the energy services market to retail competition "to spur innovation in the creation of value-added products, particularly energy efficiency services that regulated rates may not provide, and to create commodity price competition that would result in efficiencies."  The notice summarizes the regulatory philosophies driving the historic decision to separate monopoly services (transmission and distribution) from competitive services (energy commodity), and the expectation that robust competitive markets would yield societal benefits.

But based on its "considerable experience with the offering of retail service to mass market customers by ESCOs," in 2014 the Commission determined "that the retail markets serving mass-market customers are not providing sufficient competition or innovation to properly serve consumers."  In the Commission's view, its subsequent efforts to realign the retail market have not succeeded: "customer abuses and overcharging persist, and there has been little innovation, particularly in the provision of energy efficiency and energy management services.  Commodity price differentiation has not worked, and the market for differentiated services is immature or non-existent."

For these reasons, on December 2, 2016, the Commission gave public notice that it "continues to examine measures that must be taken to ensure that these customers receive valuable services and pay just and reasonable rates for commodity and other services."  Among the measures identified for consideration by the Commission are:
  • whether ESCOs should be completely prohibited from serving their current products to mass-market customers;
  • whether the regulatory regime, rules and Uniform  Business Practices (UBP) applicable to ESCOs need to be modified to implement such a prohibition, to provide sufficient additional guidance as to acceptable rates and practices of ESCOs, or to create enforcement mechanisms to deter customer abuses and overcharging, including whether the Commission decision not to subject ESCOs to Article 4 of the Public Service Law should be revisited; and
  • whether new ESCO rules and products can be developed that would provide sufficient real value to mass-market customers such that new products could be provided to them by ESCOs in the future in a manner that would ensure just and reasonable rates.
To pursue these efforts, the Commission established two procedural tracks.  An evidentiary track will consider the first two bullets listed above, while a "collaborative" track will focus on the third bullet. 

The Commission has previously described ESCO reforms as supportive of New York's Reforming the Energy Vision initiative, a comprehensive revisioning of the state's electricity sector.  In a February 2016 order, the Commission noted, "Development of markets in which vendors offer innovative services of value to consumers, and in which consumers can participate with confidence, is critically important to the success of the Reforming the Energy Vision (REV) initiative. Retail energy markets focused on commodity-only products, and in which ESCOs do not meet expectations of many customers, will thwart these objectives."

Initial pre-filed testimony and exhibits for the Track I evidentiary case on ESCO reforms are due on or before April 7, 2017.

Maryland considers offshore wind applications

Tuesday, December 6, 2016

Maryland moves closer to offshore wind development, as the state Public Service Commission reviews two applications for offshore wind projects.

The Maryland Offshore Energy Act of 2013 contains a number of provisions that would benefit a “qualified offshore wind project” that
  1. is located on the outer continental shelf, between 10 and 30 miles off the Maryland coast, in an area that is designated for leasing by the Bureau of Ocean Energy Management within the U.S. Department of the Interior,
  2. interconnects to the PJM Interconnection grid at a point located on the Delmarva peninsula, and
  3. is approved by the Public Service Commission.
On February 25, 2016, the Maryland Public Service Commission opened an application period for Offshore Wind Projects.  While the original deadline was August 23, it was ultimately extended three times, until November 18, 2016.

On November 22, the Commission's consultant announced that two offshore wind project applications were submitted, found to be administratively complete, and found to have met the minimum threshold criteria. The applicants are (i) US Wind, Inc., a subsidiary of Toto Holding SpA, and (ii) Skipjack Offshore Wind, LLC, a subsidiary of Deepwater Wind Holdings, LLC.

The Commission then opened a docketed proceeding (Case Number 9431) to conduct a multi-part review to evaluate and compare the proposed offshore wind project applications submitted by US Wind and Skipjack.  Petitions to intervene in that proceeding are due by Monday, December 12, 2016.

FERC energy trading compliance white paper

Monday, December 5, 2016

Enforcement staff at the Federal Energy Regulatory Commission have released a white paper presenting their view of effective practices to ensure energy trading complies with prohibitions against market manipulation. The November 2016 document, “Staff White Paper On Effective Energy Trading Compliance Practices,” provides examples of compliance practices that Office of Enforcement staff have found effective in detecting and deterring market manipulation – as well as examples of ineffective compliance practices. Staff’s identification of these best practices and pitfalls can inform electric energy and natural gas market participants as they design, implement, and maintain strong compliance programs.

The Commission is charged with prohibiting market manipulation in jurisdictional electricity and gas markets. It has enunciated penalty guidelines, policy statements and regulations relating to preventing and penalizing market manipulation. These statements emphasize the importance of having an effective compliance program. As the Commission has described it, “For an organization’s compliance program to be deemed effective under the Penalty Guidelines, an organization must: (1) exercise due diligence to prevent and detect violations; and (2) otherwise promote an organizational culture that encourages a commitment to compliance with the law.”

The white paper provides additional insight into how the Office of Enforcement views compliance issues. It highlights the need for a “culture of compliance”:
For any compliance program to be effective, the organization must have a culture of compliance. Promoting a culture of compliance starts at the top, with a Chief Executive Officer and other executive officers who are committed to compliance and who demonstrate that commitment through action. The organization and the executive officers must be committed to promoting compliance at all levels by devoting the necessary resources to the organization’s compliance activities, implementing and enforcing rules and restrictions that are appropriate for the organization’s activities, ensuring that employees understand their compliance obligations, and continually assessing the effectiveness of the compliance practices.
The white paper then provides examples of effective compliance practices, organized into three categories. The first category focuses on designing an effective trading compliance program with a “strong foundation.” According to staff, this involves making “the appropriate decisions relating to: (1) the organizational structure and composition of the compliance function; (2) human resources issues, such as hiring standards, compensation, and discipline; (3) the types of training used to disseminate compliance information; and (4) the technological resources dedicated to the compliance function.”

The second category of practices identified by enforcement staff focuses on establishing, implementing, and enforcing effective practices to deter and detect market manipulation and other misconduct. In addition to implementing some or all of the practices described above in designing the organization’s compliance program, the white paper says organizations should also “(1) establish appropriate rules and restrictions for its traders that will further reduce the risk of misconduct; (2) consistently monitor trading activities for violations of those rules and for any other suspicious activity; and (3) strictly enforce all compliance rules and follow up on all potential issues.”

The third category focuses on assessing the performance of the compliance program on a regular basis. The Penalty Guidelines call for periodic evaluation of the effectiveness of the organization’s compliance program. The white paper provides additional color on staff’s views about assessment, calling for performance audits and taking action on all items identified in an audit.

The white paper finally identifies “ineffective trading compliance practices,” which staff said “generally reflect an organization’s failure to: (1) tailor its compliance program to the specific needs of its trading operation; (2) keep the compliance program up-to-date; (3) make compliance policies accessible to its employees both literally and from the prospective of employee comprehension; (4) place the appropriate emphasis on ensuring compliance; and (5) follow through on monitoring for violations and enforcing compliance-related rules.”

The white paper is designed to supplement the Commission’s Policy Statements, but it explicitly does not require organizations to establish or follow any specific practices to receive compliance credit under the Penalty Guidelines if a violation occurs. Instead, according to the white paper, the existence of these practices in an organization’s compliance program may factor positively into the Commission’s consideration of whether the organization’s compliance program was effective. At the same time, the white paper notes that “adopting the effective practices described herein will not shield an organization from, or provide a defense to, an enforcement action if the Commission concludes, after an evaluation of the facts and circumstances involved, that it committed a violation,” although having an effective compliance program in place at the time of a violation could lead to a reduced penalty.

NPS updates oil and gas rights rules

Friday, December 2, 2016

The U.S. National Park Service has adopted a final rule updating its regulations governing the exercise of non-federal oil and gas rights. The NPS states that the rule improves its ability to protect park resources, values, and visitors from potential impacts associated with nonfederal oil and gas operations located within National Park Service units outside Alaska.

At issue are non-federal oil and gas rights within national park system units.  According to the NPS, these arise where the United States does not own the oil and gas interest, either because:
  • The United States acquired the property from a grantor that did not own the oil and gas interest; or
  • The United States acquired the property from a grantor that reserved the oil and gas interest from the conveyance.
Currently, 12 park system units are home to 534 non-federal oil and gas operations:
  • Alibates Flint Quarries National Monument, Texas (5 operations)
  • Aztec Ruins National Monument, New Mexico (4 operations)
  • Big Cypress National Preserve, Florida (20 operations)
  • Big Thicket National Preserve, Texas (39 operations)
  • Big South Fork National River and Recreation Area, Tennessee/Kentucky (152 operations)
  • Cumberland Gap National Historical Park, Tennessee (2 operations)
  • Cuyahoga Valley National Park, Ohio (90 operations)
  • Gauley River National Recreation Area, West Virginia (28 operations)
  • Lake Meredith National Recreation Area, Texas (174 operations)
  • New River Gorge National River, West Virginia (1 operation)
  • Obed Wild and Scenic River, Tennessee (5 operations)
  • Padre Island National Seashore, Texas (14 operations)
NPS has stated an expectation that future non-federal oil and gas operations within park boundaries could occur in up to 30 additional System units, based on "the presence of split estates, exploration and production occurring on adjacent or nearby lands, and likely increases in energy prices."

While the NPS promulgated regulations in 1978 governing the exercise of non-federal oil and gas rights, it had not updated these rules since then.  The final rule issued in November 2016 thus represents the first change in over 37 years.  Its changes include a broadening of scope, to cover all non-federal oil and gas operations within the boundary of a system unit outside of Alaska.
 This rule is effective December 5, 2016.

Maine considers community solar rules

Thursday, December 1, 2016

As Maine utility regulators consider changes to the state’s net metering rule for solar panels and other customer-owned generation, revisions proposed by the Public Utilities Commission could change how consumers can participate in community and shared ownership solar projects.

For years, the Maine Public Utilities Commission’s rules have allowed “net energy billing,” a metering and billing mechanism that promotes the development and operation of smaller renewable generation facilities. Net metering is responsible for nearly all customer-owned solar power projects developed in Maine to date, including a handful of shared ownership or community solar farms. But as utility Central Maine Power Company reported that its customers' net metering reached 1% of peak load last year, the Commission launched a process to consider revisions to its net energy billing rules.

On September 14, 2016, the Commission released a Notice of Rulemaking along with proposed amendments to its rule. As proposed by the Commission, the amended rule would expand net energy billing in Maine in several ways. It would increases the size cap for an eligible facility by 50%, from 660 kilowatts to one megawatt. It would also recognize four different types of net energy billing arrangements that would be allowed: individual customer; customer leases; shared ownership; and community NEB.

Under the shared ownership model, each participating customer must have a shared ownership interest in the eligible facility under which the customers have joint responsibility for the costs of the shared ownership facility and have rights to the output of the shared ownership facility in proportion to their cost responsibilities. Under shared ownership net energy billing, the transmission and distribution utility would allocate the nettable energy of the shared ownership facility to customers in proportion to each customer’s ownership interest in the eligible facility.

The proposed rule would also explicitly allow for “community” net energy billing, a model that the Commission recognized as “increasing as a means to promote smaller solar installations.” The proposal suggests that community projects would have similarities to shared ownership projects, with additional registration and consumer protection provisions, but potentially with different ownership requirements.

The case over the rule change’s adoption remains pending for now. While some elements of the proposal would expand net metering opportunities, the proposal would also ratchet down the amount of energy that new projects could net against their T&D bill, from 100% in 2016 to 0% for new NEB customers after 2025. Elements of the Commission’s proposal remain controversial. Nevertheless the Commission’s proposal suggests a potential direction for future community solar projects in Maine.

FERC 2016 Report on Enforcement

The Federal Energy Regulatory Commission's enforcement program has shown consistency in recent years, according to a presentation by Office of Enforcement staff to the Commissioners.  On November 17, 2016, the Commission's Office of Enforcement released its 2016 Report on Enforcement.  This report, along with a presentation and two related white papers, provides insight into Commission staff’s views as well as emerging trends related to manipulation of FERC-jurisdictional markets.

Federal law charges the Commission with enforcing a variety of laws and regulations pertaining to utilities and energy matters.  These and related Commission policies include prohibitions on market manipulation.  Within the Commission, its Office of Enforcement houses various functions related to enforcing anti-market manipulation.

In its tenth annual Report on Enforcement, the Office of Enforcement provides information on the activities of all four OE Divisions: Analytics and Surveillance, Audits and Accounting, Energy Market Oversight, and Investigations.

As described in a related presentation by staff to the Commission:
A major theme reflected in this year’s Annual Report is the consistency in the Commission’s enforcement program. OE’s priorities have not changed over the past few years. We have focused, and will continue to focus, on four distinct areas: (1) fraud and market manipulation; (2) serious violations of the Reliability Standards; (3) anticompetitive conduct; and (4) conduct that threatens transparency in regulated markets.
Staff also published two white papers covering compliance practices and enforcement efforts: