Southwest Power Pool to expand

The Federal Energy Regulatory Commission has largely accepted a proposal to expand the geographic footprint of the Southwest Power Pool, a regional power market that will soon include a significant portion of the Upper Great Plains.

Southwest Power Pool, Inc. (SPP) was founded in 1941 by a coalition of regional power companies interested in keeping an Arkansas aluminum factory supplied with power to meet critical defense needs.  Since 2004, SPP has been recognized by the FERC as a Regional Transmission Organization or RTO.  Today, SPP organizes and operates parts of the electric power grid in nine states: Arkansas, Kansas, Louisiana, Mississippi, Missouri, Nebraska, New Mexico, Oklahoma, and Texas. 

On September 11, 2014, pursuant to section 205 of the Federal Power Act (FPA), SPP submitted to the FERC proposed revisions to its governing documents to facilitate the decision of three major transmission owners of the so-called Integrated System in the Upper Great Plains to join SPP.  The three proposed member-owners are:

• Western Area Power Administration – Upper Great Plains Region: one of four regions of the United States Department of Energy's Western Area Power Administration. Western is a federal power marketing agency that markets federal power and owns and operates transmission facilities through 15 western and central states, encompassing a geographic area of 1.3 million square miles. Western ’s primary mission is to market federal power and transmission resources constructed with Congressional authorization. The federal generation marketed by Western is generated by power plants that were constructed by federal generating agencies, principally the Department of the Interior’s Bureau of Reclamation and the U.S. Army Corps of Engineers. In the Upper Great Plains Region , or Western - UGP, Western owns an extensive system of high - voltage transmission facilities and markets federally generated hydroelectric power in the Pick - Sloan Missouri - Basin Program - Eastern Division of Western.
• Basin Electric Power Cooperative: serves 2.8 million customers in territories covering approximately 540,000 square miles using nearly 2,100 miles of transmission lines and 70 switch yards
• Heartland Consumers Power District: a public corporation and political subdivision of the State of South Dakota. It provides wholesale power to 28 municipalities in eastern South Dakota, southwest Minnesota, and northwest Iowa, to six South Dakota state agencies, and to one electric cooperative in South Dakota.

These entities proposed to join SPP as transmission owning members, to place their respective transmission facilities under the functional control of SPP, and to begin taking transmission service under the SPP Tariff.  Their stated motivation was increasing market size and thus opportunities for both consumers and producers of energy.

By order dated November 10, 2014, the FERC accepted SPP's proposal.  Together, these new SPP members provide the backbone of the bulk electric transmission system across seven states in the Upper Great Plains region consisting of approximately 9,500 miles of transmission lines rated 115 kV through 345 kV.  The FERC order directed SPP to take certain interim steps, and SPP has announced plans to integrate the three new utilities by October 2015.

TVA to lose largest industrial customer

The Tennessee Valley Authority is losing its largest industrial customer, a government-owned uranium enrichment plant.  When the plant near Paducah, Kentucky closes next year, TVA will lose about 5 percent of its electricity sales, resulting in a loss of about $600 million in annual revenue. What does this mean for TVA and for its fleet of coal-fired electric generating facilities?

The Tennessee Valley Authority is the nation's largest public power provider and a corporation of the U.S. government.  TVA provides electricity for about 9 million people in seven southeastern states: Alabama, Georgia, Kentucky, Mississippi, North Carolina, Tennessee, and Virginia.  TVA is independently financed, meaning it neither receives no taxpayer money nor retains any earnings as profits.  It owns the most operating electric capacity of any utility in the U.S. (33,804 MW as of 2011), and leads the nation in both volume of annual energy sales (167,730 million kilowatt-hours) and annual revenue ($11.841 billion).

TVA's largest customer has been the Paducah Gaseous Diffusion Plant.  Originally built by the U.S. Department of Energy to enrich uranium into fuel for U.S. nuclear power plants, the plant has been leased to and managed by USEC, Inc. since 1993.  Paducah has been the nation's only facility for processing low-enriched uranium since 2001.

Last month, USEC announced that it plans to close the Paducah plant in 2014.  When that happens, TVA will face a new, smaller landscape of demand for its power.  As a result, some observers expect TVA to close the nearby Shawnee Fossil Plant.  The Shawnee facility is a 1,200-megawatt coal-fired power plant built at the same time as the Paducah enrichment plant at a site about 2 miles away.

TVA has not yet indicated whether it will close Shawnee, but in recent months it has announced plans to close 3 other older coal-fired power plants: the Widows Creek Fossil Plant in northeast Alabama, and the John Sevier and Johnsonville fossil plants in Tennessee.  On the other hand, TVA continues to modernize and invest in refurbishing other older coal-fired plants, including the Gallatin Fossil Plant near Nashville, Tennessee.  TVA is investing about $1.1 billion in Gallatin to install pollution controls including sulfur dioxide capture technology.

How TVA responds to the loss of the Paducah uranium plant remains to be seen.  TVA's relatively low rates for power may attract another large industrial customer to the region.  If that happens, it may continue to operate the Shawnee facility and other plants that can be made economical.  Otherwise, TVA may find itself faced with choices to mothball Shawnee or to do something else with its newfound surplus power.

Tropical Storm Isaac threatens energy production in Gulf

Tropical Storm Isaac is bearing down on the U.S. Gulf Coast -- and whether or not it becomes Hurricane Isaac, the storm is already impacting energy production across the Gulf of Mexico.

Satellite image of Tropical Storm Isaac, courtesy of the U.S. National Oceanic and Atmospheric Administration (NOAA).

Isaac is currently about 300 miles south of the mouth of the Mississippi River and is expected to become a hurricane before reaching the northern Gulf Coast late Tuesday.  Concern over human and environmental safety has led oil and gas production and drilling companies to pull their personnel off remote structures in the Gulf.  According to the federal Bureau of Safety and Environmental Enforcement or BSEE, personnel have been evacuated from 346 production platforms across the Gulf of Mexico -- more than half of the 596 manned platforms in the Gulf.  Personnel have also been evacuated from 41 out of the 76 exploration and drilling rigs currently operating in the Gulf.

When production platforms and drilling rigs are evacuated, companies are required to close safety valves located below the surface of the ocean floor to prevent the release of oil or gas. This "shut-in" process is designed to protect the environment, but it has obvious consequences for the production of energy resources like oil and gas.  The BSEE estimates that 1,076,642 barrels of oil production per day has been shut-in as a result of Isaac (about 78.02 percent of the current daily oil production in the Gulf of Mexico), as has 2,165.94 million cubic feet per day of natural gas production (about 48.13 percent of the current daily natural gas production in the Gulf).

Provided the storm leaves Gulf production and drilling assets unharmed, these platforms and rigs may resume operations after the storm has passed (and after they have passed inspection).  But the disruption to offshore petroleum and natural gas production will already have affected the markets, driving short-term prices upward.

Particularly if it intensifies into Hurricane Isaac, Tropical Storm Isaac may also damage onshore energy assets, ranging from local electric distribution lines to major transmission lines, and from distributed generation projects like rooftop solar panels to utility-scale nuclear or other power plants.  Wind, rain, flooding, and a significant storm surge of 6 to 12 feet are all expected for southeast Louisiana, Mississippi, and Alabama.

NOAA forecasts call for the storm to have passed New Orleans by Thursday, by which time the extent of any damage may begin to be apparent -- and the process of restoration and recovery will begin.

Quick draw for hydrokinetic priority

Last year, I noted the "gold rush" aspect of hydrokinetic energy development in the US, as developers raced to the Federal Energy Regulatory Commission to file claims on promising sites.  Some of the most obvious areas for hydrokinetic development, such as the Mississippi River system, generated hundreds of applications for preliminary permits which would grant exclusive rights to study the site and prepare a first-priority license application within three years.

In some cases, multiple developers applied for a preliminary permit for the same site.  Whoever files a valid application first is given first priority; developers filing an application for the same site later face an uphill battle as competing applicants.

In the heat of the gold rush, sometimes multiple applications come in with identical filing times.  How does FERC resolve these disputes?  A quick draw?

A random drawing, as it turns out.  As long as the Commission believes that none of the applicants’ plans is better adapted than the others to develop, conserve, and utilize in the public interest the water resources of the region at issue, FERC uses a random drawing to resolve disputes over who gets to count as having been there first.

The Commission has used random drawings to assign priority to competing applications with identical filing times since at least 2009, when it granted first priority for a site to the city of Angoon, Alaska, defeating the cities of Petersburg and Wrangell.  Since then, it has issued notices announcing filing priority for preliminary permit application at least 33 more times, most recently resolving ten disputes by random drawing this past Wednesday.

The need for such a mechanism highlights the booming interest in many high-value sites for generating innovative hydroelectricity without building new dams.  The hydrokinetic quick draw may be a sign that the most promising sites have attracted competitive interest, even if the means of picking a temporary winner (typically a term of three years) is ultimately random.

July 5, 2011 - ambitious Mississippi River hydrokinetic projects up close

Staking a claim to a site for a hydrokinetic energy project can feel a bit like the wild West.  A recent flap over rights to study and seek licenses for hydrokinetic projects in the lower Mississippi River illustrates the challenges of the race to get a permit, and the changing ways in which regulators evaluate permit applications.

A weathered boathouse on the rocky shore of Islesford, Maine.

I've already noted the significant interest in developing the hydrokinetic resources of the lower Mississippi River.  Developers have filed about 300 preliminary permit applications for Mississippi River hydrokinetic projects, with two developers -- Free Flow Power Corporation and Northland Power -- applying for the vast bulk of the sites.  As of April 2011, Free Flow Power had 24 active permits for the Mississippi River, with applications filed for another 105 river sites.  Northland has applied to the Federal Energy Regulatory Commission for preliminary permits at 40 sites along the same reach, 28 of which Free Flow Power is also pursuing.

This flood of interest in preliminary permits for hydrokinetic projects in the Mississippi River appears to have taken federal regulators by surprise.  Between the applications filed by these two developers, preliminary permits have been sought or awarded for 141 sites covering nearly all of this 850-mile reach of the Mississippi River.  On April 1, 2011, the director of FERC's Office of Energy Projects sent a letter to these two developers, expressing skepticism that two companies could actually develop and file license applications for more than a small fraction of the sites during the short term of the preliminary permit.  (Recall that a preliminary permit just stakes a temporary claim to a site; to build and operate a project, a full project license is generally required.)  The director's letter also expressed concern over letting two applicants tie up so much of the river.  Based on these concerns, the letter noted that Commission staff intended "to decline to issue additional permits on this stretch of the river, and instead allow potential developers to advance their projects through the Commission’s licensing process."

In response, Northland Power pointed out that a Commission policy to deny permits would prevent Northland from studying the sites enough to know if it wanted to file a license application, let alone from promoting competition and developers' reasonable rights to reserve sites.  Free Flow Power noted that the timing and standards of the Commission's Integrated Licensing Process make it "impossible" to file a complete license application within the 3-year term of a preliminary permit.  As a concession to FERC's interest in competition, Free Flow Power also trimmed back its request for permits, withdrawing 58 of the 60 new preliminary permit applications for the Mississippi (representing 419 river miles) and choosing not to seek successive permits for a handful of sites whose preliminary permits had expired. 

This twin-pronged message  -- supporting competition and offering compromise  -- apparently worked.  In letters to the developers dated June 9, 2011, FERC staff noted, "After reviewing all of the resulting filings, staff has determined that it is appropriate to continue processing permit applications on the lower Mississippi River at this time."  

(FERC accepted for processing 43 of Free Flow Power's applications for permits, and incidentally told Northland Power that 40 of its permit applications were deficient for failing to include geographic information about the project and adjacent communities, requesting additional information within 30 days.  As of July 4, 2011, FERC's eLibrary system did not yet show any follow-up from the developer.)