The electric transmission year in review by TransmissionHub

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From the California ISO board clarifying the rules for the governance body to oversee the Western energy imbalance market (EIM), to court proceedings involving demand response and the U.S. Environmental Protection Agency’s Clean Power Plan, the following are some examples of the transmission industry news covered this year.

TransmissionHub forecasting $29.7 billion in transmission investment in 2016-2017

TransmissionHub continued to update the industry over the year, with Kent Knutson, director of Hub Services for PennWell, most recently saying on Dec. 16 that transmission projects valued at $13.7 billion came online in 2015 in the United States and Canada, down considerably from the $22.3 billion forecast earlier in the year.

Driven by stagnant load growth and regulatory uncertainty, the market for new larger long-haul projects has slowed, he said. Meanwhile there is a continued influx of reliability driven projects by regulated sponsored utilities, Knutson said.

Of 135 projects slated for completion in 2016, 25 cost more than $100 million each; of 117 projects in 2017, 36 cost more than $100 million; and of 138 projects in 2018, 60 cost more than $100 million.

“[E]ach quarter we seem to find more and more projects that are suspended or pushed out to a later period, and therefore the number is a little bit less,” he said.

Knutson also said that $23.5 billion of transmission investment is under construction in the United States and Canada, noting that the next two years are being seen “as pretty big spend years” given the ongoing construction, but after that, things will taper off.

As noted in his presentation, investment of planned and under construction transmission projects is forecast at $141.4 billion, representing 41,260 miles, which is up slightly from TransmissionHub’s 3Q15 outlook of $140.9 billion, but down significantly from the 1Q15 outlook of $160.1 billion.

TransmissionHub forecasts an average investment of $20.5 billion per year from 2016 to 2020.

TransmissionHub kept its regional forums going in 2015, with TransForum West held in May in Denver, and TransForum East held in early December in Washington, D.C.

At TransForum West, one speaker, Ken Collison, vice president – Energy Advisory Solutions with ICF International, discussed FERC Order 1000 and lessons learned from previous closed-end solicitations, noting on May 5 that it is “very difficult to beat an incumbent, but it’s not impossible.”

As noted in his presentation during a panel on Order 1000, other lessons learned from previous solicitations include:

·      The team needs to be highly qualified in terms of rights of way (ROWs), engineering, construction and O&M, for instance

·      Domestic and state experience may count more than overseas work

·      Bidders should detail risks to costs/schedule, with mitigation plans

·      Very early completion commitments may not count for much

Another speaker, Roxane Perruso, vice president and general counsel, with TransWest Express, said on May 6 at TransForum West that developing transmission is like trying to finish an "Ironman transmission triathlon."

During a panel on large transmission projects in the West, she said, “[T]here are basically three different things that you’re trying to do and the twist is you’re trying to do them all at once.”

Those things, she said, involve right of way acquisition and permitting, regulatory processes, as well as marketing and commercial matters.

Speaking on the Dec. 1 panel on rate recovery at TransForum East, David DesLauriers, director – Management Consulting Division, with Black & Veatch Corp., said that 2015 was a remarkable year “in the sense that we saw, really, a confluence of the emerging pressures emerging for transmission developers. Those pressures were arising from challenges to base returns on equity, evolving incentive policy … as well as new rate certainty questions that are arising out of [FERC] Order 1000.”

He also noted that all projections of transmission investment going forward from 2015 and beyond indicate that there is a leveling out of transmission build. He said that the drivers for transmission investment are still present, such as congestion matters, renewable integration, the changing grid, the need to improve reliability, aging infrastructure issues, and the need to introduce new technologies into the grid.

Another speaker, Brian Thumm, director, Regional Planning, with ITC Holdings, said transmission is needed to support the Clean Power Plan.

Speaking on the Dec. 1 panel on the Clean Power Plan and its effect on transmission, Thumm noted that the plan is purported to be a game-changer for the industry, with large changes in generation portfolios, resource fuel mixes and an aggressive compliance timeline.

RTO/ISO matters

Among matters covered this year involving RTOs and ISOs, the Midcontinent ISO, for instance, said on Dec. 10 that its board of directors has approved the MISO Transmission Expansion Plan 2015 (MTEP15), which marked the first such plan to include a competitively bid project – the $67 million Duff–Coleman 345-kV line in southern Indiana.

The MTEP 15 consists of 345 projects to ensure reliability and position the MISO power grid for future growth, with the projects representing $2.75 billion in new transmission investment, MISO said.

Also, the California ISO board has approved rules to increase the participation of distributed energy resources, such as rooftop solar facilities, in the California ISO market, adopted a budget for 2016, and clarified the rules for the governance body to oversee the Western EIM.

The meeting took place over Dec. 17 and Dec. 18, when the California ISO board adopted a 2016 budget of $195.3 million, which is a reduction of more than $3 million from the current budget. The 2016 budget is also $7 million below the $202 million cap set by federal regulators, the California ISO said in a Dec. 18 statement.

The board also approved two recommendations from the EIM Transitional Committee to establish a charter and create a selection process – through a nominating committee – for the planned EIM governing body. The board in September approved the new governance structure for the EIM, widening the market oversight to allow regional stakeholders to have input on market rules since entities outside of California were joining the EIM.

The board approved amendments to the California ISO corporate bylaws establishing the authority of the EIM governing body. The EIM governing body will oversee and approve market rules in EIM-related matters before submitting them to the California ISO board, and the California ISO board will not approve tariff amendments within the primary authority of the EIM governing body without its prior approval, according to the amendments.

The EIM balances supply and demand in several states and enhances efficiency in the dispatch of generation resources to meet demand, including improved access to renewable resources in multiple states over the territories of the California ISO and PacifiCorp, the California ISO has said. NV Energy became a participating member on Dec. 1, while Puget Sound Energy and Arizona Public Service have signed agreements with the California ISO to participate starting in October 2016. Portland General Electric intends to join the EIM in October 2017, and Idaho Power is considering joining the market.

In October, PJM Interconnection said it filed its answer with FERC in response to a complaint from Delaware and Maryland state regulators regarding the cost allocation for the Artificial Island transmission project (Docket No. EL15-95).

PJM said that in its filing, it does not take a position on the propriety of the cost allocation methodology, which PJM said is part of the transmission rates and rate design that are the sole province of the PJM transmission owners.

PJM also said that its filing addresses the engineering judgment and process for the final solution, which PJM asserted is consistent with FERC Order 1000 and offers the most efficient and cost-effective solution to address the system needs.

According to PJM’s answer, the Delaware Public Service Commission and the Maryland PSC on Aug. 28 filed the complaint, asking FERC to find that PJM’s use of its solution-based distribution factor (solution-based DFAX) to allocate costs of the Artificial Island project included in PJM’s Regional Transmission Expansion Plan is unjust, unreasonable and unduly discriminatory and preferential because “… it results in grossly disproportionate financial impact to customers within the Delmarva transmission zone when compared with the limited benefits to consumers in that zone.”

PJM said that as the PSCs acknowledge, under the PJM tariff, transmission rates and rate design are within the sole province of the transmission owners, and they have exclusive, unilateral rights to make filings relating to the establishment and recovery of those revenue requirements and rate design. In that regard, PJM said it understands that the transmission owners will file a response to the complaint, which, presumably, will address the propriety of using the solution-based DFAX methodology as applied to the facts in the proceeding.

PJM on July 29 said that its Board of Managers approved the PJM staff recommendation to accept LS Power's proposal to build a 230-kV line under the Delaware River in order to resolve operational performance issues around the Artificial Island area in southern New Jersey.

Also this year, PJM saw the retirement of its president and CEO, Terry Boston, whose successor to that position is Andy Ott.

In addition, in its 2015 Regional System Plan, ISO New England said in November that with the New England power system undergoing a transformation through generation retirements and an increasing reliance on renewable resources and natural gas-fired generation facilities, the addition of transmission in the coming years will help the region maintain reliability and meet public policy goals.

The plan includes the addition of 210 transmission projects over the next 10 years at a cost of $4.8 billion. From 2002 to June 2015, 634 transmission projects were placed in service at a cost of $7.2 billion, with the investments improving reliability and dramatically reducing congestion, ISO-NE said.

Also, earlier this month, ISO-NE and the New York ISO said that they have implemented a new interregional market system that will streamline electric energy transactions and improve power flow between the two markets.

Coordinated transaction scheduling, which was introduced on Dec. 15, makes more efficient use of the transmission lines by enabling market participants to access the lowest-cost power source between the two regions, the ISOs said in their statement.

Enhancements include increasing the frequency of scheduling energy transactions over the transmission network between regions, software changes so that the two ISOs can better coordinate selection of the most economic transactions, and the elimination of several fees that impede efficient trade between New York and New England, the ISOs said.

In New York, another matter that made news this year is the Reforming the Energy Vision initiative, which, according to “The Energy Industry Update” released on Sept. 15 by ScottMadden, is setting the stage for increased promotion of distributed energy resources and energy efficiency.

Also in New York, state regulators determined in a Dec. 17 order that there is a transmission need driven by public policy requirements for new 345-kV major electric transmission facilities to cross the Central East and Upstate New York/Southeast New York interfaces to provide additional transmission capacity to move power from upstate to downstate New York.

Keeping up with FERC, NERC, DOE

Among the coverage on such entities as NERC, TransmissionHub reported in November that the NERC board of trustees approved a strategic plan for the organization for 2016-2019, adopted four reliability standards revisions along with a new standard and called for enhanced data collection from large wind power plants, NERC said in a recent statement.

On the latter element, NERC said the additional data collection from wind power projects of 75 MW or larger will be added to its existing Generator Availability Data System data request. The added information will help define the performance of wind generation and aid the analysis and mitigation of reliability risks.

It will also help in the monitoring of any effect transmission outages have on wind generators as well as any effect wind generator outages have on transmission, NERC said.

The NERC board also approved the removal of a requirement for the collection of planned transmission outages as part of NERC’s Transmission Availability Data System, after an assessment concluded that the requirement did not provide significant insight into understanding reliability, NERC said in a Nov. 5 statement.

This year, FERC heard about such matters as ITC Grid Development’s request that the commission provide the guidance that the company requested as to how winning bids will be treated for ratemaking purposes in time to facilitate the company’s participation in the Southwest Power Pool competitive solicitation process.

As TransmissionHub reported, various entities across the United States have filed comments with FERC on ITC Grid Development’s petition involving FERC Order 1000, in which the company sought guidance. ITC Holdings said in July that its petition comes at a time when RTOs are initiating their recently approved competitive solicitation processes.

In the fall, FERC saw now-former Commissioner Philip Moeller leave the agency. Moeller had been at FERC since July 2006 after being nominated by President George W. Bush and confirmed by the Senate. President Barack Obama nominated Moeller for his second term in 2010.

Moeller’s term expired in June, and in May he said he would stay on until a successor was named, but that has not happened yet. In his Oct. 6 statement, Moeller thanked both presidents who nominated him, Senate members for his confirmation, staff at FERC and members of the public for their input on FERC decisions.

“After leaving the commission I plan to pursue other opportunities in the energy field,” Moeller said in the statement.

Delivering the keynote address earlier this month at TransForum East, Moeller touched on various aspects concerning the U.S. electric power industry, from return on equity matters to siting challenges.

In other agency news, TransmissionHub reported in October that transmission congestion in the Midwest results from high and growing levels of wind generation that cannot be delivered from the western side to more distant, eastern loads, and the lack of additional transmission to enable further development in renewable-rich areas, according to a study recently released by the U.S. Department of Energy Office of Electricity Delivery and Energy Reliability.

Those factors resulted in higher real-time congestion costs in the central MISO, the study said.

As noted in the “2015 National Electric Transmission Congestion Study,” the Energy Policy Act of 2005 amended the Federal Power Act to require DOE to conduct a transmission congestion study every three years, in consultation with the states and appropriate regional reliability entities. DOE said this is its third congestion study, which is based on publicly available data through 2012, with limited updates in December 2013.

Court happenings

Demand response continued to make news in 2015 as, for instance, at least a couple of conservative justices on the U.S. Supreme Court in October appeared skeptical of the FERC demand response rule, suggesting that it encroaches on state jurisdiction.

“That's what it goes to in my mind,” Justice Antonin Scalia said of the FERC policy during a hearing before the high court on Oct. 14. Scalia also said that he was not swayed by an “opt-out” provision that FERC offered the states.

“I think it's an acknowledgment by FERC that, in fact, you know, we are mucking around in an area that's the state's area,” Scalia said. “And if the states don't want us to do it, we won't do that.”

A 71-page transcript of the proceeding is now available on the Supreme Court website.

The Electric Power Supply Association and certain other industry groups are trying to preserve the legal victory they gained in May 2014. That’s when the U.S. Court of Appeals for the District of Columbia Circuit overturned the FERC rule (Order No. 745) on demand response in its entirety.

The rule allows companies to pay consumers to use less electricity during peak periods, with an eye toward reducing the chance of blackouts or brownouts.

Another matter before court is the Clean Power Plan, which calls for 32 percent greenhouse gas reductions from existing power plants by 2030, with an interim compliance deadline in 2022.

EPA said that under the Clean Power Plan it is establishing final emission guidelines for states to follow in developing plans to reduce greenhouse gas emissions from existing fossil fuel-fired electric generating units. Specifically, the EPA is establishing: carbon dioxide emission performance rates representing the best system of emission reduction for two subcategories of existing fossil fuel-fired EGUs – fossil fuel-fired electric utility steam generating units and stationary combustion turbines; state-specific CO2 goals reflecting the CO2 emission performance rates; and guidelines for the development, submittal and implementation of state plans that establish emission standards or other measures to implement the CO2 emission performance rates, which may be accomplished by meeting the state goals. This final rule will continue progress already underway in the U.S. to reduce CO2 emissions from the utility power sector.

On Dec. 23, a nationwide coalition of utilities, coal producers, labor, and business organizations filed a brief at the U.S. Court for Appeals for the D.C. Circuit arguing for a stay of the Clean Power Plan, saying the plan will cause irreparable harm to the U.S. economy.

A separate brief was filed on Dec. 23 with the court from a coalition of 27 states, including lead plaintiff West Virginia, also arguing for a stay of the Clean Power Plan, which was published on Oct. 23 and appealed in court that same day.

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