Today the Federal Energy Regulatory Commission announced that it will investigate prices charged by two natural gas pipeline companies. The probe will determine whether both companies overcharged customers. The targets are Wyoming Interstate Company and Viking Gas Transmission Company. Viking connects Canadian natural gas to major pipelines in Wisconsin, North Dakota, and Minnesota; WIC transports through Colorado, Wyoming, and Utah. Both companies have 75 days to submit full cost of service and revenue information to FERC for analysis.
Meanwhile, on the other side of the market, FERC has sidelined JP Morgan Ventures Energy Corp. and laid down a six-month suspension of the company’s electric market-based sales rate authority beginning April 1, 2013. JP Morgan Ventures made factual misrepresentations and omitted information from filings to FERC and in communications with the California Independent System Operator, according to FERC. JP Morgan Ventures will still participate somewhat in wholesale energy markets during the suspension, but its rate will be capped at the higher of the applicable locational marginal price or its default energy bid.
Photo by Peter Craine. Some rights reserved.
Back in May, we posted about an external threat to the electric grid – solar storms. That possibility seemed pretty exciting, and warranted a really cool picture; check out our post here. Today, we cover another threat, more quantifiable but maybe less exciting – the inability to respond to deliberate cyber attacks on the electric grid.
Federal Energy Regulatory Commission Chairman Jon Wellinghoff has been pushing for cybersecurity reforms at the federal level for years. Currently, regulators have limited ability to respond to most threats to the electric grid: FERC’s jurisdiction does not reach the distribution-level utilities that run 97% of the nation’s power lines. No federal agency has the power to direct such a broad swath of energy infrastructure, but Wellinghoff suggested a starting place. First, FERC needs to be able to confidentially communicate threats to utilities, and second, needs some sort of enforcement authority.
On Thursday, FERC acted on its own to establish a division dedicated to mitigating cyber threats on the electric grid, despite lacking any additional enforcement authority from Congress. The new office’s initial focus will be on communicating with private-sector firms about cyber vulnerabilities – the current limit to federal authority.
Though Wellinghoff has been lobbying for increased cybersecurity enforcement authority for six years, legislation on the issue is stalled in Congress now. The White House is circulating a draft executive order on cybersecurity that would set standards to which infrastructure networks like the electric grid would adhere on a voluntary basis, so even if Congress is unable to address the issue this session, it will certainly remain on the table in the future. Some Congressmen, like Rep. Edward Markey of Massachusetts, describe the electric grid’s vulnerability to attack as “one of the single greatest threats to our national security.”
Photo by Peter Craine. Some rights reserved.
The Federal Energy Regulatory Commission (FERC) recently finalized a rule helping integrate Variable Energy Resources (VERs) into the US electric system. VERs are electricity generators that produce output that is not constant and controllable over time, sources like wind and solar. The existing electrical grid was designed with steady electricity generation sources in mind, and FERC’s Order No. 764 is an attempt to efficiently incorporate renewable resources into grid operations in the US by making power transmission from generator to grid more flexible.
Though renewables with variable generation are claiming a greater portion of electricity generation, the new rules could improve transmission scheduling flexibility for both VERs and traditional sources. The grid’s current setup challenges both renewable generators who struggle to work within grid rules designed for constant sources and for grid operators trying to incorporate hard-to-predict electricity sources.
The problems for VERs in the electrical grid are many. We have written about the Bonneville Power Administration struggling to cope with simultaneous surges in wind and hydroelectric power during storms, forcing it to give away or dump excess electricity. FERC’s new rule aims to help transmission from renewables to the grid in recognition of one of these problems. Under current rules, VERs incur high charges for supplying electricity in an amount above or below that committed to for each hour-long interval. With FERC’s change to scheduling transmissions in 15-minute intervals, VERs will be better able to match their committed transmission to actual output and avoid the imbalance penalties.
You can read Davis Wright Tremaine’s full advisory to learn about FERC’s Meteorological and Outage data changes, and a post of ours with background information about the new rules from November.
Photo by Iwan Gabovitch. Some rights reserved.
Davis Wright Tremaine, in their “Northwest Energy & Environmental Law Blog,” posted earlier this week about a recent FERC Order that denied Rock Island Clean Line LLC’s “request to apply a preference for energy from renewable resources in its open season.”
Rock Island Clean Line LLC (or “Rock Island”) submitted an application to FERC back in November 2011 requesting the authority for the Rock Island Clean Line transmission project, a 500-mile transmission line capable of delivering of up to 3,500 MW from renewable energy projects in Iowa, Nebraska South Dakota, and Minnesota to customers in Illinois and other states.
In order to establish a “preference for renewable energy” and thereby secure the support of stakeholders and potential customers, part of the application included a proposal to give preference to renewable energy resources in its open season. This part of the application was rejected:
We find that Rock Island’s general arguments do not sufficiently explain how distinctions between renewable energy resources and other types of generators justify its requested preferential treatment in an open season for initial transmission capacity.
Overall, however, the Order represented a win for Rock Island, who stated in a press release that they now have the “regulatory approval” they need from FERC to “begin negotiating transmission service agreements with potential customers of the Rock Island Clean Line transmission project, likely load serving entities or wind developers.”
Photo by Titus Tscharntke. Some rights reserved.
This guidance used to be just a glimmer in the commission’s eye. But as of May 17th, it’s official. That’s when FERC released its Policy Statement on the Commission’s Role Regarding the Environmental Protection Agency’s Mercury and Air Toxics Standards.
The Policy Statement specifically explains how FERC will provide advice to the EPA for it to rule on requests for Administrative Orders (AO) to operate in noncompliance with EPA’s Mercury and Air Toxics Standards. Last week’s Policy Statement was drawn up with consideration of all comments FERC received on a January 2012 white paper soliciting input on the staff’s position on the topic. (Our original post on the topic describes the standards and the EPA/FERC relationship in a bit more detail.)
Van Ness Feldman’s recent Alert on the topic sums up nicely both the Policy Statement and its implications:
FERC’s new Policy Statement provides that for each such extension request, it will advise EPA whether failure to grant such an extension might lead to a violation of a FERC-approved Reliability Standard. It will not, however, recommend to EPA that the Agency grant or deny such extension requests, and will not advise EPA on potential impacts that are not within FERC’s jurisdiction over reliability standards.
The Policy Statement has a narrow scope limited to case-by-case input to EPA on the potential reliability issues raised by individual generators retrofit or deactivation timelines that fall within FERC’s reliability jurisdiction. FERC’s input is not binding guidance to EPA. Moreover, the Policy Statement does not address the broad scope of reliability concerns that industry and policymakers have raised in connection with the Utility MATS rule. Concerns such as system resource adequacy and safety, coordination to schedule outages among generators within a region, and the potential regional reliability impact of multiple base load generators that choose to deactivate rather than comply with the Utility MATS rule are not addressed in FERC’s Policy Statement. The limited scope of the Policy Statement may prompt renewed calls by policymakers as well as industry for a more comprehensive, coordinated regional process to address the broader reliability concerns with the Utility MATS rule.
Geomagnetic storm in Alaska. Photo by NASA Goddard Photo and Video. Some rights reserved.
The most pressing natural disaster concern for 2013? We have all read about the risks of climate change, of earthquakes and tornadoes, of nuclear fallout, of the December 2012 apocalypse. But the sun has not managed to top the list. Next year, the sun is expected to reach a peak eruption period, which is associated with powerful sun storms that shoot charged particles into space. When those particles hit the earth and its magnetic field, they create currents that the electrical grid picks up. That can cause voltage fluctuations, overheating, and permanent damage to transformers, which could mean widespread blackouts. (The Wall Street Journal has an article on the topic here).
Regulators are now grappling with what action to take. The Federal Energy Regulatory Commission (FERC) is coordinating efforts to research the impacts of solar storms to develop a response (you can read FERC Commissioner Philip Moeller’s comments on the matter to the Bulk Power System Conference here). Among the possibilities being considered, regulators could require the industry to install blocking devices on transformers, for example, or just to add monitoring devices. Some scientists caution, though, that too little is known about the threat to warrant spending hundreds of millions of dollars on blocking devices. Meanwhile, the nation’s biggest grid operators and power generators are collecting data proactively on their systems’ vulnerabilities and abilities to respond to potential damage.
In testimony to the Committee on Energy and Natural Resources, Joseph McClelland, Director of FERC’s Office of Electric Reliability, emphasized the impact of major solar storms historically. In 1859, a solar storm left the telegraph system useless and burned multiple telegraph stations to the ground. The northern lights could be seen as far south as Panama. A 1921 storm had similar effects, but still the electrical grid was in its infancy.
Only in 1989 did particles from a solar storm of any scale hit modern electricity-transmission lines. A barrage of particles hit electrical systems from New Jersey through the province of Quebec, and within minutes most of the province was dark. The 1989 storm, though, is estimated to be only one tenth the size of the 1921 storm. Stay tuned for regulatory proposals and updates.
Late last week, FERC put out a call for comments via an April 19th Notice of Inquiry relating to open access and priority rights on interconnection facilities. Just a few days later law firms Van Ness Feldman and Alston + Bird stepped up to the plate with their analysis (here and here, respectively) on FERC’s proposed changes.
Specifically, FERC asks “whether, and, if so, how the Commission should revise its current policy concerning priority rights and open access with regard to certain interconnection facilities.” According to their news release, at a 2011 FERC technical conference, commenters asserted “asserted that open-access policies may be ill-suited for generator lead lines, which the NOI refers to as interconnection facilities,” and that “the policies may have detrimental impacts on the development and financing of such lines.”
Therefore FERC asks:
- Has industry largely adapted to current policy in the time since the technical conference?
- Must interconnection facilities provide third-party access under an open-access transmission tariff (OATT) to ensure non-discriminatory access and just and reasonable rates?
- Does current policy blur the line between interconnection and transmission service with respect to third-party access, creating unintended consequences?
So, what does it all mean?
Alston + Bird concludes that “the NOI could mark an early step in a major shift in the Commission’s policy towards generator interconnection,” and that “[t]he impact could be particularly pronounced in the renewable power industry, where generators are often located in remote locations at long distances from transmission systems, and are increasingly being planned and constructed on a modular, phased basis.” VNF, in turn, wraps it up like so:
“FERC will need to consider how best to balance the need to promote generation development from areas remote from the transmission grid, how to allocate costs in a way that does not promote free rider interconnections to generator lead lines, and how to reduce the regulatory burden on generation developers, among other issues.”
Comments are due June 11, 2012. View the Federal Register notice here.
Photo by Bindalfrodo. Some rights reserved.
On March 9th, FERC issued an Order approving the Stipulation and Consent Agreement that resolved an investigation into Constellation Energy Commodities Group’s (CCG) physical and financial electric energy trading activities in and around the New York Independent System Operator’s (NYISO) Control Area and in other RTOs.
Back in January 2008, FERC’s Office of Enforcement received anonymous tips suggesting that CCG “may have manipulated the prices of electric energy,” and later observed through its own surveillance activities that CCG was engaging in virtual trading in the NYISO that was unprofitable. An ensuing investigation found that CCG had violated both the Anti-Manipulation Rule (18 CFR § 1c.2) and the accuracy requirements of FERC regulations (18 CFR § 35.41(b)).
CCG has agreed to pay a civil penalty of $135,000,000 and to disgorge unjust profits of $110,000,000, including interest.
Interestingly enough, according to Van Ness Feldman, on the same afternoon that FERC issued the above order penalizing CCG, the agency also approved a proposed merger between CCG and Exelon Corporation.
Almost one year ago, FERC solicited the public: Should FERC revise its approach to examining horizontal market power concerns?
Well, should they? I’m not sure. Will they? No.
“[A]fter reviewing the comments received, the Commission has decided to retain its existing policies regarding the analysis of horizontal market power when reviewing transactions under section 203 of the FPA and in its electric market-based rate program. Accordingly, we will terminate the proceeding in Docket No. RM11-14-000.”
Thus read the February 16 Order terminating the rulemaking that might have implemented such changes.
The decision means that FERC’s approach will remain somewhat “stringent,” as some of the proposed changes to FERC’s horizontal merger policies involved adopting the more “flexible” Horizontal Merger Guidelines that were issued by the DOJ and FTC in 2010.
Morgan Lewis has more details here.
Photo by Pull Strings, Push Shapes. Some rights reserved.
The same day that the EPA released the final rule on Mercury and Air Toxics Standards (MATS) for power plants, it also published a Policy Memorandum outlining how it intended to handle requests for extensions in complying with the new rule. Yesterday, FERC announced how they intended to give the EPA a hand.
Section 112(i)(3) of the Clean Air Act establishes that affected sources must be compliant with MATS within three years, with an extension of up to one year available in certain cases. In addition, under Section 113(a) of the CAA – 42 USC 7413(a) – certain affected sources can obtain another one-year extension through an administrative order (AO).
The EPA’s Policy Memorandum addresses AOs issued for sources that “must operate in noncompliance with the MATS for up to a year to address a specific and documented reliability concern.” This extension would help bridge the gap when electric generating units may be needed to operate “to maintain the reliability of the electric grid when they would prefer, or could be required, to halt operations temporarily (until controls [needed to bring the unit into compliance with the new rules] can be installed).”
And this is where FERC steps in.
Because under the Federal Power Act, FERC is the regulatory agency charged with overseeing the reliability of the bulk power system, EPA plans to take advantage of FERC’s prowess. Although “the EPA’s issuance of an AO is not conditioned upon the approval or concurrence of any entity,” states the Policy Memorandum, “the EPA intends to consult, as necessary or appropriate on a case-by-case basis, with FERC and/or other entities with relevant reliability expertise.”
On January 30th, 2012, FERC released a white paper outlining the staff’s position on how FERC should advise the EPA on the requests for extensions. For instance, “Staff believes that the Commission should not permit entities to intervene in the preparation of the Commission comments to the EPA.”
One would hope not.
FERC is currently soliciting comments on the white paper under Docket No. AD12-1-000.