Canada's largest wind farm built in Quebec

Thursday, November 29, 2012

A newly expanded wind farm on Quebec’s Gaspé Peninsula became Canada’s largest. commissioned wind project. The second phase of the Gros-Morne project came online, bringing the project’s total operating nameplate capacity to 211 megawatts.

Cartier Wind Energy Inc. developed and operates the Gros-Morne project. The company, known as Cartier Énergie Éolienne in French, was founded in 2004 as a partnership of TransCanada Corporation (62% owner) and Innergex Renewable Energy or its associated Innergex Power Income Fund (38).

Cartier submitted winning bids to provincial electric utility Hydro-Québec Distribution in response to its request for proposals seeking to buy 1000 megawatts of wind power from merchant projects on the Gaspé Peninsula. As a result, the company was selected to construct and operate six wind farms spread around the administrative region of Gaspesie, Iles-de-la-Madeleine and the Regional County Municipality of Matane.

Collectively, the Cartier projects’ total nameplate capacity will be 740 megawatts. Over 600 megawatts have now been commissioned, including the Baie-des-Sables, Carleton, L'Anse-à-Valleau, and Montagne Sèche projects in addition to Gros-Morne.

Cartier now ranks among Canada’s largest owners of wind generation capacity. Wind is a growing sector in Canada, with the Canadian Wind Energy Association projecting that the country will host 6,400 megawatts of wind capacity by the end of 2012, with Quebec alone accounting for over 1,247 megawatts.

FERC enforcement of energy laws

Wednesday, November 28, 2012

The Federal Energy Regulatory Commission is charged with enforcing statutes and rules covering much of the U.S. energy industry.  Its jurisdiction includes wholesale electricity market activity, electric and natural gas transmission and storage, and hydropower.  A report recently issued by the FERC's Office of Enforcement documents its enforcement activities in fiscal year 2012 (ending September 30, 2012).  The report illustrates the role of the Office of Enforcement and the importance of compliance by regulated entities.

According to the report, in FY2012, Enforcement focused on matters involving four kinds of conduct:
  • Fraud and market manipulation;
  • Serious violations of the Reliability Standards; 
  • Anticompetitive conduct; and
  • Conduct that threatens the transparency of regulated markets.
The report states that Enforcement does not intend to change its priorities in FY2013.

Organizationally, Enforcement currently houses four divisions: the Division of Investigations, the Division of Audits, the Division of Energy Market Oversight, and the Division of Analytics and Surveillance.  While these divisions are designed to coordinate on some enforcement operations, each has a specific mandate.

The Division of Investigations conducts public and non-public investigations of possible violations of the statutes, regulations, rules, orders, and tariffs administered by the Commission.  These investigations typically arise from self-reports, tips, calls to the Enforcement Hotline, referrals from organized markets or their monitoring units, other agencies, other offices within the Commission, or as a result of other investigations.  Where FERC Enforcement staff finds violations of sufficient seriousness, staff reports its findings to the Commission and attempts to settle the investigation for appropriate sanctions and future compliance before recommending that the Commission initiate a public show cause proceeding.

The Division of Audits administers the Commission’s audit and accounting programs. These programs help the Commission achieve effective and appropriate oversight of jurisdictional entities while maintaining accountability and transparency. To accomplish its mission, Audits conducts operational and financial performance and compliance audits of jurisdictional entities, and conducts other activities that aid the Commission. These audits and other activities assess how jurisdictional entities implement statutes, orders, rules, tariffs, and regulations the Commission administers.

The Division of Energy Market Oversight is responsible for monitoring and overseeing the nation’s wholesale natural gas and electric power markets. On a daily basis, Market Oversight examines and monitors the structure and operation of these markets to identify market anomalies, flawed or inadequate market rules, tariff and rule violations, and other unlawful behavior. Market Oversight administers, analyzes, and ensures compliance with the filing requirements for Electronic Quarterly Reports (EQRs) and various Commission financial forms.

The newest branch of FERC's Enforcement office is its Division of Analytics and Surveillance, created in February 2012 to develop surveillance tools, conduct surveillance, and analyze transactional and market data to detect potential manipulation, anticompetitive behavior, and other anomalous activities in the energy markets.  Analytics and Surveillance focuses on three areas: (1) natural gas surveillance; (2) electric surveillance; and (3) transactional analysis.  Within these areas, the Division of Analytics and Surveillance develops and refines surveillance tools to perform continuous surveillance and analysis of market participant behavior, economic incentives, operations, and price formation on both the natural gas and electric markets, to detect anomalous activities in the markets and identify potential investigative subjects.

Together, these divisions' FY2012 activities led to almost four hundred recommendations for corrective action and over $5.8 million in refunds, over $148 million in civil penalties and disgorgement of over $119 million in unjust profits in FY2012, and penalties for over 904 possible or confirmed violations.  In a future post, I will look at some of these specific enforcement cases in more detail.  It is clear that the FERC Office of Enforcement wields considerable power and is increasingly active.

Gila River Power, FERC enforcement settle for $3.4 million in market manipulation case

Wednesday, November 21, 2012

Federal regulators have amped up their investigations of businesses involved in U.S. energy markets in recent years.  This week the Federal Energy Regulatory Commission (FERC) approved a settlement between its Office of Enforcement and Gila River Power LLC over market manipulation claims, requiring Gila River to pay a punitive fine of $2.5 million, and disgorge unjust profits of $911,553 plus interest.  Notably, this settlement represents the first time that a market participant accused of manipulating power markets has admitted to unlawful energy trades.

Gila River is a subsidiary of Entegra Power Group LLC.  Entegra owns and operates four combined cycle power plants capable of producing about 3,300 MW of power.  Two of these plants are located at the 2,200 MW Gila River Power Station in Arizona, while the other four are located at the Union Power Station in Arkansas.  Entegra markets energy from these facilities to customers in the southeastern and southwestern U.S.

In the settlement agreement, Gila River admitted to using energy transactions known as "wheeling-through transactions" between July 2009 and October 2010 to manipulate prices in markets operated by the California Independent System Operator.  Because congestion on the transmission grid limited both the amount of power Gila River could import into California as well as the price it could get for that power, the company designed its transactions to avoid creating congestion so that it would receive a higher price on a higher quantity of energy imports.  This strategy involved claiming that it was simply passing power between two points outside California over transmission facilities located inside California, even though its transactions lacked a resource and a load outside the California markets as required by the CAISO tariff.

Under the FERC's enforcement procedures and penalty guidelines, the FERC assessed a base penalty amount based on its powers under the Federal Power Act, which allows it to levy fines of $1,000,000 per day for each violation.  The FERC then considered mitigating factors, including Gila River's cooperation in the enforcement investigation and its acceptance of responsibility for its violations.  Based on these factors, and negotiations between Gila River's legal counsel and the FERC's Office of Enforcement, the parties settled on a fine of $2.5 million, and disgorge unjust profits of $911,553 plus interest. 

While the Gila River settlement represents the first time an accused company has admitted market manipulation, FERC has used its enforcement powers more extensively in recent years.  In fiscal 2012, FERC approved nine settlement agreements entered into by Enforcement for total civil penalty payments of more than $148 million and disgorgement of more than $119 million plus interest.

Long Island utility exec resigns, hurricane response blamed

Thursday, November 15, 2012

The Long Island Power Authority announced this week that its Chief Operating Officer, Mike Hervey, has resigned from LIPA effective at the end of 2012.

LIPA is a political subdivision of the State of New York.  LIPA was formed in 1985 as a non-profit municipal electric utility to take over the assets of former investor-owned utility Long Island Lighting Company.  Today, LIPA owns the electric grid in most of Long Island.  LIPA does not own electric generation assets on the island but serves 1.1 million customers with electricity generated off-island.  Its electric distribution network was hard hit by Hurricane Sandy, with over 1.1 million customers losing power.  As of earlier this week, 10,000 customers just east of New York City were still without power, while 35,000 more farther onto Long Island suffered significant flood damage and will need repairs before electric service can be restored.  County executives and other leaders are calling for federal involvement, and have criticized LIPA for its management of the restoration process.

In a statement released November 13, LIPA Chairman Howard E. Steinberg stated that he had accepted Hervey's resignation, with regret, on behalf of the Board of Trustees.  The announcement noted that Hervey had worked for LIPA for 12 years, including serving as CEP for two years.

Also on Tuesday, New York Governor Andrew Cuomo formed a commission to investigate utility companies' storm preparedness and management.  Governor Cuomo used his powers under the Moreland Act to form the commission, whose mandate also includes an examination of the regulatory and legal structures for oversight of utility operations.  Citing storms including Hurricane Irene, Tropical Storm Lee, and Hurricane Sandy in the past two years, Governor Cuomo also addressed the adaptation process of adjusting "to the reality of more frequent major weather incidents".

One utility executive has already resigned, and the commission's investigation will soon be under way.  What other changes lie ahead for utility companies in New York and elsewhere as a result of utility responses to hostile weather?

From brownfields to renewable energy sites

Wednesday, November 14, 2012

Contaminated lands, landfills, and mine sites are increasingly being used as sites for renewable energy projects.  For example, many landfills may be suitable for siting solar photovoltaic panels.  Former industrial sites with subsoil contamination may not be suitable for redevelopment with buildings, but may be able to host solar or wind-based electric generation.  According to the U.S. Environmental Protection Agency, renewable energy systems have been installed at 60 such sites in 25 states.  What is the future of this trend?
EPA policy encourages renewable energy development on current and formerly contaminated land and mine sites when it is aligned with the community’s vision for the site.  Under EPA's RE-Powering America's Land initiative, EPA identifies the renewable energy potential of these sites and provides resources for communities, developers, industry, state and local governments.

An EPA report released earlier this month describes 60 renewable systems installed on potentially contaminated lands, landfills, and mine sites.  Of these, the majority (49) generate electricity through solar photovoltaic technology.  Seven generate electricity from the wind; biomass, geothermal, hydropower, and combined solar/wind round out the count.  Together, these resources provide 184.7 MW of electric generation capacity.  Most sell their power into the wholesale market, while some use the power on-site.

Host sites are split among private, federal, municipal, and state ownership.  Sites include those regulated under EPA's Comprehensive Environmental Response, Compensation, and Liability Act program (CERCLA, or Superfund), EPA's Resource Conservation and Recovery Act program (RCRA), brownfields, and landfills.

Many more potential sites exist.  Thousands of properties across the country face redevelopment challenges from contamination.  The country is home to over 3,000 active commercial landfills and 10,000 municipal landfills.  While not all may be suitable for renewable energy development, the concept offers the opportunity to create a revenue stream from property otherwise limited in use and saddled with environmental liabilities.  This revenue could be used for remediation of the sites' contamination, as well as for other purposes.  The trend of developing renewable energy facilities on contaminated lands, landfills, and mine sites is likely to continue for the foreseeable future.

Flow chart of 2011 US energy use

Tuesday, November 13, 2012

A flow chart released by the Lawrence Livermore National Laboratory illustrates the sources and uses of energy in the United States.  It depicts information about all the energy sources used to power society, as well as the breakdown of how that energy is used - or wasted - in electricity generation, transportation, residential, commercial, and industrial contexts.

On the energy source side, petroleum - oil, gasoline, and similar products - provides the largest share of the energy we consume, slightly more than a third of total energy.  Natural gas comes in second, providing about a quarter of total energy, with coal coming in at another 20%.  Altogether, these fossil fuels provided about 82% of the energy consumed in the U.S. in 2011.  Nuclear power provided about 8% of the energy used.  The remainder came from renewable resources including biomass, hydropower, wind, geothermal, and solar.

About 40% of the energy from these sources was used to generate electricity.  The remainder was used directly for other purposes such as transportation, heating, and industrial processes.

On the use side, transportation consumed the largest share of energy, about 28%.  The industrial sector consumed another 24% of the energy.  Households consumed about 11%, and commercial businesses consumed about 9%.

This analysis of energy use leaves about 27% of the energy unaccounted for.  This energy was consumed in the generation of electricity, but was "rejected", meaning that it could not be captured for a useful purpose.  Waste heat being emitted from a generator is a classic example of this rejected energy.  End users from industry to residences also waste or reject energy; in fact, according to the chart, 57% of the total energy consumed in the U.S. in 2011 was rejected, while only 43% was put to a useful purpose.

Vermont transmission line vandalism

Friday, November 9, 2012

Vermont's electric transmission authority has reported vandalism to a section of high-voltage line connecting Hydro-Quebec's grid to southern New England markets.  According to the Caledonian Record, 167 insulating discs were shot out from a transmission line in the town of Concord, Vermont.

Vermont Electric Power Company (VELCO) manages Vermont's electric transmission system, which includes, 738 miles of transmission lines, 13,000 acres of rights-of-way, 55 substations, switching stations and terminal facilities, interconnection facilities with Hydro-Quebec, as well as fiber optic communication networks that both control the electric system and provide the backbone for high-speed data internet access. VELCO was formed by the state's utilities in 1956 as the nation's first statewide, "transmission only" public utility.

Vandals reportedly used a shotgun to shoot the glass insulating discs which are spaced along the transmission lines and are designed to keep the lines safe from shorting out.  In all, 167 out of over 400 insulating discs were destroyed.  As a result, VELCO depowered the line until the discs could be replaced, which took from last Friday until last Sunday.  The repair itself cost about $250,000, but the biggest cost arose when regional grid operator ISO New England was forced to turn to the spot market to replace the electricity normally imported over the line from Quebec while the line was down.  The cost of that replacement power was reportedly over $1 million per day.

The incident is now the subject of a federal investigation.  Laws enacted after the widespread eastern blackout in 2003 and the September 11 terrorist attacks have increased the penalties for disrupting electric transmission and other infrastructure.  The insulating disc shooting may be treated as a "terrorist act" under federal law.

Transmission lines provide value to society, but are typically expensive and are often located in remote areas.  Hunting often occurs along or near transmission lines; just this year, VELCO won the National Wild Turkey Federation's Energy for Wildlife award for the company’s ongoing commitment to develop and improve wildlife habitat along its rights-of-way.  The extent of the damage to the insulating discs makes the shooting appear to be intentional, and thus more than a "hunting accident".  How will the incident affect transmission line owners' policies about public access to areas near lines?  How can transmission lines be better protected against vandalism?

Connecticut coal-fired power plant air permit issued

Thursday, November 8, 2012

The U.S. Environmental Protection Agency has approved a five-year permit for the last coal-fired power plant operating in Connecticut.  The plant, PSEG Power LLC's Bridgeport Harbor Generating Station, can generate 529 megawatts of energy by combusting coal and oil.

While the plant has operated since 1961, its permit renewal was questioned for economic and environmental reasons.  Across the nation, operators of coal plants have announced plans to close or convert plants to other fuels such as natural gas and biomass.  Between the low cost of natural gas - projected to stay low for the foreseeable future - and tighter environmental regulations affecting the electric utility sector, many older and smaller coal-fired power plants are no longer economic to operate.  Additionally, environmental activists have targeted coal-burning plants as polluters, and had argued against the Bridgeport Harbor plant's new permit.

Under the federal Clean Air Act, existing major stationary sources (i.e. those capable of emitting 100 tons per year or more of any criteria air pollutant) must obtain a so-called Title V permit every five years.  Generally, Title V permits are issued by the state or local air pollution control agency, but EPA has 45 days to review any proposed permit and request changes.  In September, Connecticut recommended that EPA renew Bridgeport Harbor's permit.  After the 45-day review process, EPA approved the permit's issuance.

What does the Bridgeport Harbor air permit mean?  Most directly, it means PSEG may continue to operate its plant for another five years -- if it wants to. According to the Connecticut Post, by mid-summer the plant had only operated 24 days this year.  The Bridgeport Harbor plant can provide both baseload power and peaking power needed to satisfy peak consumer demand, but generally the fewer days an asset operates, the harder it is to recover the cost of ownership and operations.

Moreover, coal-fired power plants are declining in the U.S.  This is particularly true in New England, a region far from coal mining.  Will PSEG hold onto the Bridgeport Harbor station and seek another Title V permit in 2017?  For how long will the plant continue to burn coal?  Will PSEG or another owner seek to repurpose the plant to burn other fuels?

Election 2012 and energy recap

Wednesday, November 7, 2012

With yesterday's general election behind us, people across the United States are considering its impact on energy policy.  From President Obama's retention of the White House to state elections and ballot measures, voters have reshaped the energy landscape.  Here are some highlights:

  • Congress remains divided.  At the federal level, Democrats held onto control of the Senate, while Republicans retained control in the House.  The chambers' partisan nature may lead to gridlock, or at least to consensus-based, relatively moderate measures as the only kind of legislation likely to meet the approval of both chambers of Congress.

  • Michigan rejects constitutional amendment on renewable energy.  Michigan voters rejected a proposed amendment to the state constitution that would have increased the amount of renewable energy that utilities must buy to serve their customers.  Proposition 3 would have required electric utilities to generate at least 25 percent of their annual retail sales of electricity from renewable energy sources by 2025.  Only 36% voted in favor of the measure to increase the renewable portfolio standard, meaning the RPS initiative failed.
Other election results, ranging from congressional races to state governor contests, will also shape energy policy in 2013 and beyond.  People and businesses that can react quickly will be in a better position to capitalize on the election results.

How Election 2012 affects energy policy

Tuesday, November 6, 2012

Today voters across the United States cast ballots in the 2012 general election. At stake are a broad range of political offices, ranging from the presidency to local municipal roles. How will the election's outcomes affect energy policy, energy-related businesses, and consumers?

The presidential contest has drawn the greatest attention over the past year. Whether President Obama will retain his office or Governor Romney will take the White House is the largest question. Based on the candidates' past actions and current campaign platforms, voters have some sense of how each would exercise his presidential powers. On energy issues, both candidates appear to favor increased domestic production of natural gas and oil. The candidates differ in their philosophies on the role of governmental incentives and subsidies -- whether for fossil fuel production or for renewable electricity generation -- and on emissions regulations for coal-fired and other power plants. The candidates also disagree on specific energy projects and programs ranging from the Keystone XL pipeline to the Navy's Great Green Fleet biofuels initiative.

Beyond the presidency, federal elections will determine the composition of Congress. While energy policy is more sensitive to presidential changes than to individual congressional elections, the makeup of Congress drives federal energy policy in the aggregate. All seats in the House of Representatives are up for grabs, as are a third of Senate seats. Of the 33 Senate seats, Democrats need to win 21 seats to retain their majority while Republicans need to win 14 seats to take control. The senators elected in 2012 will participate in setting any national energy policy.

State elections will also shape energy policy for the coming years. Voters will select governors in 11 states, and state legislative offices are widely contested. While federal energy policy draws the most attention, the U.S. federalist system leaves significant authority to individual states to set their own policies on energy issues. For example, states may establish electric renewable portfolio standards or otherwise regulate the resource mix used to produce usable energy. The outcomes of state elections will also affect policies on energy efficiency, smart meters and smart grid infrastructure.

Voters in some states will also cast ballots on measures directly affecting energy policy, such as the Michigan citizens' initiative seeking to increase utilities' use of electricity produced by renewable resources.

It may be some time until all the ballots are finally counted, but by tomorrow night we will have a better understanding of the results for most of the races and ballot questions. Those who can translate the election results into an understanding of future policies - and business opportunities - will have a leg up on the competition.

Hurricane Sandy prompts Jones Act waiver

Friday, November 2, 2012

Hurricane Sandy's disruption of petroleum shipments and refining has led Secretary of Homeland Security Janet Napolitano to issue a temporary waiver allowing foreign oil tankers to enter ports in the northeastern United States.

The Jones Act, a federal law enacted as part of the Merchant Marine Act of 1920, limits who may carry on coastal shipping between domestic ports.  This so-called cabotage law generally requires that all goods transported by water between U.S. ports be carried in U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents.

Hurricane Sandy's impacts to northeastern energy infrastructure included disruption of oil and gasoline supplies in the area near New York City and New Jersey.  Between reduced supply and concentrated demand, gasoline is reported to be in shortage conditions.  Long lines are reported at gas stations, and demand at some stations has led them to run out of gasoline. 

In an attempt to alleviate the shortage, today Secretary of Homeland Security Janet Napolitano issued a temporary, blanket waiver of the Jones Act.  The waiver is designed to allow foreign-flagged oil tankers, that would otherwise be barred from the U.S. coastwise trade, to ship petroleum products from the Gulf of Mexico to Northeastern ports.  The waiver will remain operative through November 13th.

Will Michigan vote for renewable energy as a constitutional amendment?

Thursday, November 1, 2012

Voters will decide a broad slate of issues in the upcoming U.S. elections on November 6, including many that address energy policy.  Questions range from who will serve as president to the role of government in managing the mix of energy resources used to power society.  In several states, voters will decide whether to increase renewable energy mandates.  One example of such a question is Michigan Proposal 3, a citizen-initiated ballot measure that would mandate that 25% of the state's electricity must come from renewable resources by 2025.
Under current law, Michigan's renewable portfolio standard requires electric suppliers to procure at least 10 percent of electricity from renewable sources such as wind, solar, hydro and biomass by 2015.  If enacted, Proposal 3 would increase this RPS requirement to 25% by 2025, and limit the impact of the requirement on electric rates to no more than a 1% annual increase.

The official text of Proposal 3 reads:

This proposal would:
  • Require electric utilities to provide at least 25% of their annual retail sales of electricity from renewable energy sources, which are wind, solar, biomass, and hydropower, by 2025.
  • Limit to not more than 1% per year electric utility rate increases charged to consumers only to achieve compliance with the renewable energy standard.
  • Allow annual extensions of the deadline to meet the 25% standard in order to prevent rate increases over the 1% limit.
  • Require the legislature to enact additional laws to encourage the use of Michigan made equipment and employment of Michigan residents.
Should this proposal be approved?
YES __
NO ____

The effort to place this question on the ballot has been led by a group called Michigan Energy, Michigan Jobs.  Supporters project that the amendment would help the local economy by creating over 40,000 jobs and attract $10 billion in new investments, as well as promoting public and environmental health.  Opponents, including a group called the Clean Affordable Renewable Energy for Michigan Coalition or (CARE) argue both that the increased renewable mandate would cost too much and that such a measure does not belong in the state constitution.

How will Michigan voters respond to this issue?  We will find out within the next week.