Energy Legal Blog

Already one set of utilities has withdrawn from the from the Midwest Independent System Operator (MISO) after concluding membership in the regional transmission organization was providing inadequate benefits.  Now another utility has threatened to do the same.  In a recent filing at the Wisconsin Public Service Commission (PSC), Wisconsin Public Service (WPS) suggested that if new interstate power lines are not constructed to relieve grid constraints, it may withdraw from MISO, as did LG&E Energy and Kentucky Utilities [see Kentucky PSC Allows Utilities to Leave Midwest ISO].  

Wisconsin joined MISO based on the existence of temporary congestion cost protections.  As these protections are set to end in 2010, further congestion cost increases now loom for the Wisconsin-Upper Michigan System (WUMS), the most constrained region in MISO.  Due to an inability to import more power from outside of the state, WPS is forced to maintain a reserve margin of 18 percent, in contrast to the reserve margins of 12 to 14 percent maintained by other MISO-area utilities.  In addition, the WUMS experienced 94 hours with prices above $200/MWh in 2005, compared to 83 hours at that level for the rest of the market.  WUMS averages day-ahead and real-time clearing prices 33 percent higher than Minnesota and Chicago and 15 percent higher than Michigan.   

To combat these congestion costs, WPS suggested the PSC should require American Transmission Co. (ATC) to construct at least three of the interstate transmission lines that ATC proposed in an August 2005 study identifying several power line construction options from Wisconsin to Iowa, Illinois and Minnesota.  The PSC has yet to approve any of the options.  WPS argues that eliminating transmission constraints in the WUMS could permit it to reduce its reserve margin, saving ratepayers $20 million a year.  Should the PSC continue to delay in approving any new projects, WPS suggested it might withdraw from MISO.

Project developers throughout the U.S. frequently must manage resistance to new energy infrastructure from local communities.  In an unusual twist, a state regulator that foresees potential energy shortages, the Vermont Department of Public Service (DPS), is seeking to hire consultants to help manage the ever-present “not-in-my-backyard” sentiment that continues to thwart energy planning in many parts of New England.

Two-thirds of Vermont’s power contracts expire between 2012 and 2017.  These include long-term deals with Hydro-Quebec and the Vermont Yankee nuclear plant.  While Vermont’s utilities are responsible for replacing these resources, the DPS wishes to engage with the public to help prepare a pathway for the eventual energy supply choices for 2012 and beyond.  The DPS’ solicitation is seeking consultants to assist with educating the public about the realities of power supply through measures such as polling, public meetings, web-based communications, and direct information sharing with citizen groups in an effort to discover areas of consensus before advancing an energy supply plan. 

What role the market monitors of RTOs and ISOs should play in investigations and enforcement of market rules continues to be in dispute.  At issue is the perceived lack of accountability of RTOs/ISOs, together with mounting confusion over how much FERC has relied on and wishes to rely on market monitors to police markets.  PJM’s recent modification of its market monitoring plan has brought to the fore numerous concerns about the authority and independence of market monitors.

In May 2005, FERC issued a Policy Statement on Market Monitoring in which it attempted to better define the scope of a market monitors’ authority, and laid out those types of issues the market monitor had to refer to FERC rather than address itself.  Last month, the agency largely approved a PJM proposed tariff amendment that was intended to comply with the Policy Statement.  In the amendment PJM relinquished in favor of FERC any claim to authority to issue demand letters or request that market participants discontinue certain actions. 

However, separate requests for rehearing of FERC’s order were filed by the Pennsylvania Public Utility Commission, the Organization of PJM States, a coalition of state regulatory commissions of most of the states in which PJM operates, and the Indicated Parties — a hodgepodge of various consumer, industrial and municipal interests in the PJM region.  They complained that PJM’s plan (as approved by FERC) fails to grant the market monitors sufficient independence from PJM and market participants and denies them sufficient authority to communicate independently with FERC, state commissions, and  market participants or to fulfill its other responsibilities.  The petitioners echoed the dissenting statement of Commissioner Suedeen Kelly who had called for an investigation into whether certain aspects of PJM’s market monitoring plan were just and reasonable, and argued for greater specificity in the PJM tariff regarding the market monitor’s independence and authority.

In order to encourage the development of new generating capacity and to make the Electric Reliability Council of Texas's (ERCOT) operations more transparent, on August 10 the Public Utility Commission of Texas (PUCT) unanimously approved a wide-ranging PUCT staff proposal to address the projected decline of generation reserve margins in ERCOT.  To encourage investment in new generating facilities, the PUCT plan proposes to gradually increase ERCOT's energy bid cap to $3000/MWh (up from $1000/MWh) by 2009, after ERCOT implements a nodal pricing market.  In addition, during the development of the proposal, PUCT staff considered establishing formal capacity markets, but rejected that approach in favor of an energy-only market, after determining that installed capacity markets do not offer market-based incentives for investment and would impose an unwanted layer of regulation.  The PUCT also cited the high costs of capacity markets to consumers, a fight that is currently being played out in other regions of the country [See, e.g., Capacity Market Redesign: New England Settlement Approved, PJM Proceeding Continues].

Related to the increased bid cap, the PUCT plan also increases and expedites the amount of market information that is publicly disclosed.  In approving the plan, the PUCT expressly linked increasing publicly available information with the increase in the bid cap.  The PUCT expects greater transparency in information flows will help police market power abuses that may accompany the increased bid cap.

The PUCT plan also adds several other features to the ERCOT market, including a definition of the term “market power” consistent with the definition commonly used by courts, and a requirement for more frequent reports from ERCOT on supply and demand issues.

Massachusetts Governor Mitt Romney has issued a “Next-Gen” long-term energy plan that calls for a “negawatts” market in which utilities would pay customers for increased efficiency and reduced energy use when those payments are cheaper than constructing new power generation facilities.  In addition, the plan advocates market-based retail prices ― consumers would pay more for running appliances and other electrical devices at peak periods, while paying less at off-peak times.  Real-time pricing would apply to industrial consumers, while small business and residents would pay time-of-day rates.  The plan would also create a conservation lottery that would award prizes to customers who purchase energy-efficient equipment.   In addition, public buildings will become subject to new heightened efficiency standards, and tax incentives will be offered to encourage purchases of fuel-efficient vehicles. 

To promote renewable energy, the plan focuses on biomass energy, clarifying biomass's qualification under Massachusetts' Renewable Portfolio Standard, and expediting select wind project permitting (the plan supports several specific wind projects, but does not include the controversial Cape Wind project).   

To address lack of infrastructure, the plan seeks to encourage on-site generation by reducing the “standby” rates charged by utilities for backup service for companies that install their own on-site generation facilities, with a goal of 250 MW of new peak demand supplied by on-site generation by 2010 and 500 MW by 2014.   

Massachusetts' energy demands are projected to exceed supply by 2013, and the state faces the prospect of paying federally mandated subsidies to encourage power plant construction.  The Next-Gen plan now goes to the state agencies charged with its implementation: the Department of Telecommunications and Energy, the Office of Environmental Affairs, and the Office of Economic Development.

The California Energy Commission (CEC) has taken another step toward meeting the California Legislature's mandate to create a tracking system to monitor compliance with the state's renewable portfolio standard (RPS).  Last week, CEC approved a contract with the Western Electricity Coordinating Council (WECC) that supports the Western Renewable Energy Generation Information System (WREGIS).  WREGIS is a voluntary, independent renewable energy registry and tracking system for the Western Interconnect that will be used to verify retail sellers' compliance with the California RPS.  WREGIS should ensure that renewable generation will be counted once only for purposes of meeting the RPS and will verify retail product claims in California and other states.  WECC will serve as the institutional home for WREGIS. 

WECC and the CEC expect WREGIS to be up and running by mid-2007.  While initially funded by California ratepayers, once WREGIS is operational it will charge user fees to recover its operating costs. 

Colorado, Oregon, Nevada, New Mexico, and Arizona are also considering requiring the use of WREGIS to ensure compliance with each of their renewable energy policies.  While the contract supporting WREGIS acknowledges that the tracking system could be used in other states, California is focusing on meeting its own accelerated RPS goal of 20% renewable energy by 2010; other states may need to work with WECC individually to tailor the product to their own needs.