Feds settle on final 2011 Southwest blackout penalty

Over four years after a major 2011 power outage in Southern California and parts of the Southwest, federal energy regulators have approved the sixth and final settlement of penalties for violations of law and reliability standards. 

After the September 8, 2011 blackout left more than 5 million people in Southern California, Arizona and Baja California, Mexico, without power for up to 12 hours, the Federal Energy Regulatory Commission began investigating what had happened.  After conducting that investigation jointly with electric reliability organization North American Electric Reliability Corporation (NERC), in an April 2012 report FERC found that the outage started when a 500-kilovolt transmission line owned by utility Arizona Public Service Company tripped.

The FERC continued its investigation into the 2011 Southwest blackout after its staff report was made public.  It identified six entities believed to have been involved: Arizona Public Service Company, the California Independent System Operator, the Imperial Irrigation District, Southern California Edison, the Western Area Power Administration, and the Western Electricity Coordinating Council Reliability Coordinator.

FERC's enforcement process typically offers the accused an opportunity to agree to a stipulation of facts (for example, that the utility violated a particular reliability standard) and to pay a civil penalty and perform mitigation measures.  In its enforcement actions related to the 2011 Southwest blackout case, all six entities ultimately agreed to stipulations and penalties that were accepted by the Commission.

In July 2014, the FERC accepted Arizona Public Service's stipulation with NERC and FERC's Office of Enforcement, under which APS agreed to pay $3.25 million and improve its system reliability.  In August 2014, California's Imperial Irrigation District agreed to a $12 million fine.  Utility Southern California Edison agreed to a $650,000 fine in October.  In December, FERC settled with federal power marketing agency Western Area Power Administration with no penalty.  Grid operator California ISO agreed to pay $6 million.

This week the FERC announced a settlement with Western Electricity Coordinating Council.  WECC promotes grid reliability in the Western Interconnection, a broad area of the western United States.  According to the FERC order, FERC enforcement staff and NERC determined that WECC as the Reliability Coordinator violated nine requirements of the Interconnection Reliability Operations and Coordination (IRO) and the Facilities Design, Connection and Maintenance (FAC) groups of Reliability Standards.  Enforcement staff and NERC concluded that WECC failed to identify and prevent violations of system operating limits and Interconnection Reliability Operating Limits and was unaware of the impact of protection systems, and used an inadequate system operating limit methodology that exposed its area to cascading outages.

As a result, the settlement calls for WECC to pay a $16 million civil penalty.  $3 million of this will be split evenly between the U.S. Treasury and NERC, and $13 million will be invested in reliability enhancement measures that go above and beyond mitigation of the violations and the requirements of the Reliability Standards.  WECC and its successor as Reliability Coordinator, Peak Reliability, also agreed to mitigation and reliability activities and to submit to compliance monitoring.

FERC has described the WECC settlement as marking "final resolution" of the investigation by FERC Enforcement staff and NERC into the 2011 Southwest blackout.

4th California blackout FERC enforcement case settles

Federal regulators have approved a settlement with another federal agency over its role in a 2011 blackout in California, Arizona, and Mexico.

On September 8, 2011, the Southwest's electric grid was hit with a widespread power outage that left over 5 million people in California, Arizona and Baja California, Mexico, without power for up to 12 hours.  Previous investigations by the Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corporation (NERC) found that the blackout occurred when Arizona Public Service Company's 500-kilovolt Hassayampa-N.Gila transmission line tripped out of service, overloading the remaining elements of the regional grid. 

Earlier this year, FERC approved stipulations and consent agreements among its Office of Enforcement, NERC, and three public utilities.  Arizona Public Service agreed to pay $3.25 million in civil penalties, California's Imperial Irrigation District agreed to a $12 million settlement, and  Southern California Edison Company agreed to pay a $650,000 civil penalty and undertake additional compliance actions.

FERC approved a fourth settlement on November 24, 2014, with the Western Area Power Administration – Desert Southwest Region (Western-DSW).  One of four power marketing administrations within the United States Department of Energy, the Western Area Power Administration (WAPA) markets and transmits electricity to a fifteen-state region from hydroelectric power facilities at the Hoover, Parker, and Davis dams. Western-DSW is one of four regions carrying out this mission for WAPA, serving customers in Arizona, Southern California, and Southern Nevada. It sells more than ten billion kilowatt hours of hydroelectric power to approximately seventy municipalities, cooperatives, federal and state agencies, and irrigation districts. Western-DSW also operates and maintains more than forty substations and 3,100 miles of transmission lines.

In the FERC Order Approving Stipulation and Consent Agreement, the Commission notes that Western-DSW violated four Requirements of three Reliability Standards in the Transmission Operations (TOP) and Voltage and Reactive Control (VAR) categories. These groups of standards cover the responsibilities and decision making authority for reliable operations and maintenance of Bulk Power system facilities within voltage and reactive power limits to protect equipment and ensure reliable operation of the interconnection.  In particular, FERC Enforcement staff and NERC found that Western-DSW failed to operate its portion of the transmission system within voltage system operating limits and to maintain sufficient situational awareness prior to and during the event, undermining reliable operation of the Bulk Power System.

Western-DSW stipulated to the facts in the agreement and agreed to implement compliance measures necessary to mitigate the violations and improve overall reliability, including improving its models, better coordination with neighboring entities, and improving its situational awareness by adding a real-time monitoring tool that analyzes and alerts operators to potential contingencies. Western-DSW also agreed to make semi-annual compliance reports to Enforcement staff and NERC for at least one year.  Notably, the stipulation does not require Western-DSW to pay a civil penalty.

FERC's general investigative report on the incident identified six potential targets for enforcement action.  With cases settled against Western-DSW, SoCal Edison, the Imperial Irrigation District, and Arizona Public Service, only the California Independent System Operator and the Western Electricity Coordinating Council Reliability Coordinator have not yet been parties to a stipulation and consent agreement.

Chicago-area battery storage projects announced

Energy developer Renewable Energy Systems Americas Inc. has announced two grid-scale energy storage projects near Chicago.

Battery-based energy storage projects can offer benefits to the electricity grid by keeping the alternating current's frequency steady, and can do so at a lower cost than alternatives like ramping generators up and down.  Thanks in part to new federal policies, battery projects capable of providing frequency regulation can now earn increased revenue for their owners. 

This week RES Americas announced plans to pursue two energy storage projects in Illinois.  The company describes itself as a specialist in third-party development and construction services for the renewable energy, transmission, and energy storage industries.  It also builds renewable energy and storage projects that it owns itself.

In an apparent tribute to the Blues Brothers, its two newly announced projects will be named Jake and Elwood.   The Elwood Energy Storage Center will be sited in West Chicago, while the Jake Energy Storage Center will be in Joliet.  Beyond names and locations, the projects bear greater resemblance to each other than to the Blues Brothers.  Both projects were acquired from Glidepath Power in September.  Each will be interconnected to the Commonwealth Edison Co. electric grid, and will have an operational life expectancy of at least ten years.  Each will use lithium iron phosphate batteries with a 19.8 megawatt capacity, capable of storing 7.8 megawatt-hours of energy.

RES Americas expects to begin construction on both projects this winter, and to complete them by August 2015.  When complete, the battery projects will be able to provide real-time frequency regulation service to the PJM Interconnection LLC ancillary services market.  Thanks to recent federal orders including FERC Order No. 784, faster and more accurate regulation resources -- like battery storage arrays -- should be compensated more highly.  These policies both increase consumer demand and reduce developers' barriers to entry into battery-based energy storage projects.

Other battery projects are moving forward, based on values other than frequency regulation.  Last month, Southern California Edison Company brought its Tehachapi Wind Energy Storage Project online.  That $50 million project, the largest currently operating in North America, is capable of storing 32 megawatt-hours, deliverable as an 8 megawatt stream of energy for 4 hours.  The Tehachapi system is designed to help even out the flow of power produced by wind farms, which is naturally variable and intermittent.  Battery systems can also be designed to improve local reliability, support microgrids, or serve as non-transmission alternatives to building more utility wires.

For more information about battery energy storage projects, recent policies favoring energy storage and the opportunities they create, contact Todd Griset at Preti Flaherty at 207-791-3000.

North America's largest battery energy storage online

A California public utility has brought the largest battery energy storage in North America online.  Funded partially by federal stimulus funds, Southern California Edison's Tehachapi Wind Energy Storage Project is designed to demonstrate the effectiveness of large-scale battery storage systems.

Southern California Edison Company is the largest electricity supply company in Southern California.  As part of the U.S. Department of Energy's implementation of the American Recovery and Reinvestment Act of 2009, the utility won funding to develop a major battery energy storage system (or BESS).  The Tehachapi Wind Energy Storage project consists of an array of lithium-ion batteries capable of storing 32 megawatt-hours, deliverable as an 8 megawatt stream of energy for 4 hours.  The LG Chem batteries rely on the same lithium-ion cells installed in battery packs for General Motors’ Chevrolet Volt electric vehicle, and feature 608,832 individual battery cells arrayed in 10,872 battery modules and 604 battery racks.  Along with two 4MW/4.5MVA smart inverters, the project will be housed in a 6,300 square foot facility sited at SCE's existing Monolith substation.

Of the project's $49,956,528 total budget, half will be paid for by SCE, while federal funds will cover $24,978,264.  In return, the project will examine whether and how the battery energy storage system improves grid performance and helps integrate wind and other large-scale variable energy resourced generation.  Project performance will be measured by 13 specific operational uses, most of which either shift other generation resources to meet peak load and other electricity system needs with stored electricity, or resolve grid stability and capacity concerns that result from the interconnection of variable energy resources.  These uses include: providing voltage support and grid stabilization; decreasing transmission losses; diminishing congestion; increasing system reliability; deferring transmission investment; optimizing renewable-related transmission; providing system capacity and resources adequacy; integrating renewable energy (smoothing); shifting wind generation output; frequency regulation; spin/non-spin replacement reserves; ramp management; and energy price arbitrage.  In addition, the project will demonstrate how lithium-ion battery storage can provide nearly instantaneous back-up capacity, minimizing the need for fossil fuel-powered back-up generation.

Between technological advances and a series of recent policy decisions, battery energy storage could be poised for rapid growth.  For example, in 2011 the Federal Energy Regulatory Commission issued Order No. 755, requiring the grid operators in organized markets to compensate battery energy storage systems and other fast-ramping frequency regulation resources based on the actual service they provide.  Last year's Order No. 784 required public utilities to take into account the speed and accuracy of regulation resources such as batteries.  Meanwhile, batteries are hoped to help balance into the grid large amounts of energy from intermittent renewable resources such as solar and wind projects.

After two years, the Tehachapi Wind Energy Storage Project will have completed its initial demonstration run.  Will the project lead to greater deployment of battery energy storage systems in the U.S.?

FERC settles 3rd Southwest blackout case

A California public utility has settled claims by federal electricity regulators related to the September 8, 2011, blackout in the southwestern United States.  Following an investigation by the Federal Energy Regulatory Commission (FERC) and electric reliability organization North American Electric Reliability Corporation (NERC), Southern California Edison Company has agreed to pay a $650,000 civil penalty and undertake additional compliance actions.

According to previous investigative reports, the 2011 blackout started when a 500-kilovolt transmission line owned by Arizona Public Service Company tripped out of service, causing cascading power outages through automatic load shedding as other equipment quickly overloaded.  In the end, the outage affected over 5 million customers, shedding 7,835 megawatts of peak demand and over 30,000 megawatt-hours of energy.

Following the blackouts, both FERC and NERC launched investigations into what had happened.  As a federal agency, FERC has regulatory authority over the reliability of the electric bulk power system.  NERC is a not-for-profit international regulatory authority whose mission is to ensure the reliability of the bulk power system in North America, and has been designated by FERC as the nation's electric reliability organization.

In July, FERC announced a $3.25 million settlement with Arizona Public Service.  In August, FERC announced a $12 million settlement with California's Imperial Irrigation District.

Today, FERC announced that it has approved a stipulation and consent agreement between FERC’s Office of Enforcement, NERC, and Southern California Edison Company.  Through a joint investigation, FERC Office of Enforcement staff and NERC determined that the utility violated the Protection and Control group of NERC's Reliability Standards.  In particular, the investigation found that Southern California Edison failed to adequately coordinate its intertie separation scheme at the San Onofre nuclear generating station switchyard with certain other protection systems.  Enforcement staff and NERC found this violation to be a serious deficiency that undermined reliable operation of the Bulk Power System.

Through the settlement, Southern California Edison will pay a civil penalty of $650,000.  Of this penalty, $125,000 will be paid to the U.S. Treasury, $125,000 will be paid to NERC, and $400,000 will be invested in additional reliability enhancement measures.

With Southern California Edison's case resolved, all three of the vertically integrated utilities known to be implicated by FERC's investigation have now settled their alleged violations by agreeing to pay penalties.  Will further penalties be forthcoming?  Will the penalties and ordered reliability measures keep the lights on the next time the grid is stressed?

Google invests in solar energy projects

Google has announced an investment in six solar photovoltaic projects to its portfolio.  The projects, located in California and Arizona, have a combined electric generating capacity of 106 megawatts.  This deal illustrates the trend of renewable energy investments by data centers and other tech companies.

The projects are under development by Recurrent Energy.  Five are located in Southern California, while the sixth is in Arizona.  Google and investment firm KKR invested $400 million in the projects; Google's share is reportedly $80 million.  The partners will sell the power produced by the facilities to local utilities including Southern California Edison.

Google announced that this represents its fourteenth investment in renewable energy since 2011.  In 2010, the Federal Energy Regulatory Commission granted market-based rate authority to Google subsidiary Google Energy LLC, enabling it to sell power at wholesale.  Google has since entered into long-term agreements to purchase power from wind farms and other renewable generators.

Other tech companies are pursuing similar strategies.  Earlier this month Microsoft announced a deal to purchase energy produced by a Texas wind farm for its data center in San Antonio.  In September, eBay received market-based rate authorization from the Federal Energy Regulatory Commission, allowing it to sell surplus power from its generators to the grid.

For consumers like Google with significant demand for power, developing on-site electric generation or entering into a long-term power purchase agreement can be cost-effective, either by reducing the cost of energy or by reducing its exposure to price volatility.  Investments in renewable energy can also position companies for improved sustainability and "green" their public images.  For these reasons, the trend of tech company investment in renewable energy infrastructure will likely continue for the foreseeable future.

Park and forest service renewable energy

Managers of national and state parks and forests are considering whether they can cut their energy bill by developing distributed generation projects.  In many cases, distributed generation such as solar photovoltaic systems can be a good match for powering facilities like park headquarters, campgrounds, and maintenance buildings.  This can be especially true for places that are off the main electric grid, such as pockets of development within preserved lands.  It can also be true for grid-tied facilities, as incentives like net metering can make rooftop solar or other projects cost-effective for the end user.

Solar photovoltaic panels power the campground at Goblin Valley State Park, Utah.

Whether developed by a national park or state forest, connecting renewable generation to the grid involves working with the local electric utility.  In many parts of the country, interconnecting with the utility can be a challenging process.  Utilities typically must study whether the proposed generation can work with the existing set of transmission and distribution wires, and may get into disputes with customers over whether and how much upgrading is needed.  Some utilities claim to be swamped with interconnection requests, and are missing deadlines for studying system impacts and cooperating with customers.

In California, a different set of difficulties is preventing millions of dollars of renewable energy projects on federal land from connecting to the grid.  In response to economic incentives favoring distributed generation, the National Park Service and U.S. Forest Service have developed major new renewable projects at a variety of sites in California.  For example, the Park Service developed an $800,000 solar project at Death Valley National Park, anticipated to cut 70% off the visitor center's annual electric bill of about $45,724.  The Forest Service developed a large solar project at its Mono Lake facilities, along with other projects at existing sites.  However, the federal agencies have been unable to sign interconnection agreements with utility Southern California Edison, meaning the parks' renewable projects remain idle despite federal policy supporting sustainable operations.

At issue is a provision of federal law that prevents agencies from signing contracts exposing them to the risk of unknown future damages because such contracts would commit money outside the congressional budgeting process.  Federal agencies have been able to work around this restriction with other utilities, as evidenced by Yosemite National Park's successful interconnection of its $5.8 million solar photovoltaic project with the Pacific Gas & Electric grid.  Southern California Edison appears to be a holdout.

Will 2012 see a continuation of the trend toward replacing diesel electric generation in parks and national forests with alternative resources?