New York Seeks to Create a Modern Regulatory Model

Posted on May 26, 2016 by Jeff Bayne

Last week, the New York Public Service Commission (NY PSC), part of the New York Department of Public Service, issued an Order Adopting a Ratemaking and Utility Revenue Model Policy Framework (Framework Order) in Case No. 14-M-0101, Proceeding on Motion of the Commission in Regard to Reforming the Energy Vision (NY-REV).  In this Framework Order, the NY PSC aims to establish a “modern regulatory model,” after concluding that it is no longer able to meet its core duties under the cost-of-service ratemaking model of the previous century.

The NY PSC focuses on three concerns with traditional, cost-of-service ratemaking: (1) the lack of incentives to innovate; (2) the biases toward capital expenditures and against third-party investment; and (3) the asymmetry of information between regulators and the regulated. While last week’s Framework Order does not eliminate cost-of-service earnings, it adds additional market-based and outcome-based earnings opportunities for utilities.  The goal is to expand utilities’ revenue opportunities in order to better align utilities’ financial interests with grid modernization policies.

For example, the order establishes “Platform Service Revenues” (PSRs), which constitute a new form of utility revenues associated with the operation or facilitation of distribution-level markets. As an analogy, think of your smartphone and its operating system as a platform.  Third-party developers can create apps for this platform, and the platform allows consumers and developers to reach each other.  In terms of energy and grid modernization, Distributed Energy Resources (DERs) are the third-party app developers, and the NY PSC wants to use PSRs to encourage utilities to facilitate a distribution-level market, or platform, in which DERs can better interact with consumers.  PSRs could be earned by providing services such as data analysis, optimization or scheduling services, energy services financing, engineering services for microgrids, and enhanced power quality services.

The Framework Order also provides utilities with an opportunity to receive “Earning Adjustment Mechanisms” (EAMs). EAMs offer outcome-based incentives for specific policy goals such as peak reduction, consumer engagement, affordability, and energy efficiency.

Several other state utility commissions are also exploring grid modernization through formal proceedings and/or investigations.

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Petitioners in North Dakota v. EPA Seek Suspension of Briefing Schedule

Posted on May 25, 2016 by Anjali Patel

Yesterday, May 24, 2016, petitioners and petitioner-intervenors in State of North Dakota v. EPA, the consolidated cases seeking D.C. Circuit review of EPA’s CO2 emission standards for new, modified, and reconstructed power plants (NSPS), filed a motion requesting that the court suspend its briefing schedule.  Under the schedule issued by the court in March 2016, the deadline for opening briefs is currently set for July 15, 2016.

The suspension request relates to EPA’s recent denial of five petitions for reconsideration of the NSPS.  In the motion, the petitioners state that three of the denied reconsideration petitions were filed by parties in North Dakota.  The petitioners seek a suspension of the court’s briefing schedule in order to allow parties to file petitions for review of EPA’s recent denial and to allow consolidation of those new petitions with the existing North Dakota petitions.  The motion notes that EPA and the respondent-intervenors oppose the motion.

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NERC Issues Phase II Reliability Assessment

Posted on May 24, 2016 by Anjali Patel

Last week, the North American Electric Reliability Corporation (NERC) issued its Phase II assessment of potential reliability impacts of EPA’s final Clean Power Plan (CPP).  While the report acknowledges that there is on-going CPP-related litigation, it assumes, for purposes of the analysis, that that the CPP is implemented as outlined in the final rule.  NERC’s Phase II report follows on its April 2015 Phase I report, which assessed potential reliability impacts of the proposed CPP, and its January 2016 guidance on reliability considerations for state regulators to consider when formulating state implementation plans.

In the analysis, NERC examines potential resource adequacy and reliability risks that result from the following five scenarios (a reference cases and four sensitivity cases) over the 2016-2030 time period:

  • Reference Case, which assumes no CPP and represents the business-as-usual approach;
  • Base Case, which identifies the direct impacts to the resources mix as a result of CPP implementation and assumes that, with the exception of the Regional Greenhouse Gas Initiative (RGGI) states, allowance trading will only occur intra-state;
  • National Trading Case, which includes the assumption that states will fully optimize allowance trading and trade on a national scale;
  • High Renewable Penetration Case, which models the development of an additional 26-28 GW of renewable energy capacity (mostly in MISO) as compared to the Base Case; and
  • Accelerated Nuclear Retirements Case, which includes the assumption that existing nuclear units may retire at a rate earlier than predicted by the U.S. Energy Information Administration.

On the basis of its modeling, NERC concludes that “the CPP is expected to accelerate a fundamental change in the electricity generation mix in the United States and transform grid-level reliability services, diversity, and flexibility,” but that there will be a large integration of renewables regardless of the CPP.  NERC also finds that trading of allowances under a national trading program could result in greater coal and less natural gas use, but it is likely that the actual trading program will fall somewhere between the base case (limited to intra-state trading) and the national trading program case.  NERC further finds that the expected resource mix changes under all of the scenarios will require additional pipeline and transmission infrastructure development.

NERC’s recommendations include the following:

  • Planning for new transmission and natural gas pipeline infrastructure should already be underway because such infrastructure will be needed regardless of whether the CPP is implemented;
  • Regional planning coordinators and transmission planners should conduct more granular and localized system reliability assessments to provide greater guidance to states and stakeholders as to what will be required to ensure reliability;
  • States should plan for and include a sufficient level of frequency support, ramping capability, and voltage control in order to maintain reliability in light of the large amounts of renewable generation that are expected to come on-line;
  • State implementation plans should retain adequate reserve margins; and
  • EPA, DOE and FERC should continue to work together with transmission planners, planning coordinators, state environmental offices, and state utility commissions (among other stakeholders) to ensure that state plan submittals address and resolve any reliability issues that may result from CPP compliance.
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EPA Fires Back on MATS, Joined by Generators

Posted on May 19, 2016 by Jessica Bell

Last week, EPA filed its brief in opposition to the petition of twenty states for a writ of certiorari, arguing against Supreme Court review of the D.C. Circuit’s decision not to vacate the Mercury and Air Toxics Standards (MATS) while EPA considered costs of the rule.  EPA makes four main arguments:

  1. The state petitioners lack standing to bring this challenge.  EPA argues that because MATS establishes substantive standards, rather than directly regulate the petitioners (unlike the CPP, which does impose obligations on states), the states are not able to show harm to any of their legally protected interests, a necessary showing for standing to obtain judicial review.
  2. EPA’s issuance of a supplemental finding makes this case moot.  The D.C. Circuit decided not to vacate MATS pending EPA’s consideration of costs.  EPA has since finalized this analysis, so EPA argues any decision on whether or not the D.C. Circuit’s decision not to vacate was appropriate would have no effect on the ongoing validity of MATS.
  3. The D.C. Circuit’s decision was a valid exercise of discretion under the Clean Air Act judicial review provision.
  4. The D.C. Circuit’s decision is consistent with other circuit court decisions concerning when remand to an agency without vacatur is appropriate.

A group of states, local governments, and public health and environmental organizations filed a brief* in support of EPA.  They make similar arguments to EPA’s—that EPA’s supplemental finding renders the interim remedy question moot, that the Clean Air Act gives the court discretion, that there is no circuit split among courts of appeal, and that remanding to EPA without vacatur did not repudiate the Supreme Court’s Michigan v. EPA ruling.

An industry group also filed a brief* in support of EPA.  This group of generators argues that the industry has come into compliance with MATS over the past four years, and that any interruption would “jeopardize the investment-backed expectations of the industry.”  They argue that the states petitioning for certiorari have not invested in complying with MATS—unlike industry—and “have nothing at stake.”  In earlier challenges to MATS, other industry players sided with the states, which made the states’ injury (or lack thereof) less of an issue.

*Copies of these briefs were obtained from S&P Global.

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Lawrence Berkeley National Laboratory to Host an EM&V Webinar Series

Posted on May 18, 2016 by Anjali Patel

The Lawrence Berkeley National Laboratory (LBNL) announced that it will be holding a webinar series to support states considering implementing new or expanding existing evaluation, measurement, and verification (EM&V) methods for energy efficiency programs. EM&V documents energy and demand savings and can be used to evaluate processes to improve implementation of efficiency programs.  Under the Clean Power Plan, if a state seeks to utilize zero- or low-carbon emitting resources to meet its emission goals, then its state implementation plan must include requirements for EM&V procedures.

LBNL’s webinar series is targeted towards staff from public utility commissions, state energy offices, state environment departments, and non-profit organizations and will “provide an overview of the who, what, when, where, why and how of EM&V.”  The first program in the series, Planning and Budgeting for the Evaluation (EM&V) of Energy Efficiency Programs, will be held on Monday, May 23, 2016, from 2:00-3:15 PM EST.

The webinar programs will be recorded and posted along with the presentations on LBNL’s EM&V Webinar Series website.

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