Exelon’s warning reignites great American fuel fight

Source: Peter Behr, E&E News reporter • Posted: Monday, May 14, 2018

U.S. utility industry leaders have split sharply over whether threats to the nation’s electric grid demand new and more urgent federal action.

On one side are PJM Interconnection, the nation’s largest wholesale power grid operator, and Exelon Corp., the Chicago-based energy company with 10 million customers and one of the nation’s largest generating fleets.

In comments made in response to a Federal Energy Regulatory Commission inquiry into electric grid resilience, Exelon and PJM said the risks of extreme natural disasters and cyberattacks need closer attention from U.S. officials.

“The attacks observed so far do not represent the full scope of the threat,” said written comments from Exelon Executive Vice President Kathleen Barrón and Exelon attorneys. “Adversaries likely have more effective and destructive tools that they have not yet implemented, instead waiting for a time when they will be most devastating.”

Regional transmission organizations (RTOs), including PJM, don’t have the information they need to assess those threats, Exelon said. “They are largely on their own in attempting to identify resilience threats,” Exelon officials said. “This information gap makes it nearly impossible for RTOs to effectively plan for resilience in the face of man-made threats.”

FERC’s request for comments (in docket AD18-7), which closed Wednesday, was the commission’s response to Energy Secretary Rick Perry’s April 2017 directive to his staff for a report analyzing whether electricity markets adequately compensate large nuclear and coal plants that stockpile fuel. Perry’s order, widely considered a response to President Trump’s desire to aid his strong political allies in the coal industry, led to a proposed rulemaking Perry sent to FERC.

FERC Chairman Kevin McIntyre, speaking yesterday at a Washington Post Live forum, said Perry’s question wasn’t off-base, but under its policies, FERC couldn’t accept his proposal that coal and nuclear plants get an income boost as a resilience credit for on-site fuel supplies.

“We did acknowledge and in fact embraced the concept of resilience as something that really does cry out for attention,” McIntyre said.

The question is how much on-site fuel bolsters generators’ ability to withstand attacks or natural disasters, he noted, and if so, what consumers should be charged for the benefit.

“We’re trying to figure that out now,” McIntyre said. “It wouldn’t be beyond the pale to think if we could identify with sufficient specificity what are the resilience attributes that merit compensation, then we can move to that compensation calculation stage.”

The FERC inquiry was an opportunity for another round of the great American fuel fight between fossil fuel, nuclear and renewable power interests. This time, the battle is couched in fresh arguments about how well one energy source or another is equipped to recover from a winter freeze, massive hurricane, cyberattack or solar storm.

Exelon went further that PJM in its comments to FERC. The utility giant urged the commission to access classified government intelligence to define confidential “design basis threats” that grid companies must plan for, rebuff and recover from.

The company’s statement quoted Paul Stockton, former assistant Defense secretary for homeland defense: “The gap is widening between what [grid operators] know about the threat and the knowledge they need to assess and ensure resilience.

“The Commission has an absolutely vital role to play in developing a design basis threat for fuel resilience,” said Stockton, managing director of the Sonecon LLC consulting firm.

Code words

On the other side of the arguments being made to FERC are energy companies urging FERC not to act on suggestions that the grid faces imminent threats.

“NERC activities already address several aspects of resilience,” the North American Electric Reliability Corp., the FERC-appointed grid security overseer, wrote in its comments. NERC writes detailed cybersecurity regulations, generation adequacy assessments and recovery procedures. It will “continue to assess whether further activities are appropriate,” NERC said.

Entergy Corp., the New Orleans-based utility, said its regional organization, the Midcontinent Independent System Operator, Inc. (MISO), concludes that “it has no immediate resilience deficiencies, that it already has stakeholder proceedings in place for improvements in certain areas such as stronger communications, and that it is aware of potential threats to resilient and reliable operations including the significant shift in the resource mix on the near horizon.”

“MISO has said nothing to justify FERC orders for additional resilience requirements,” Entergy noted.

MISO officials and counterparts at the California Independent System Operator Corp., ISO New England Inc., New York Independent System Operator Inc. and Southwest Power Pool Inc. said the comment record to FERC “does not support any universal resilience standard. To the contrary, the record demonstrates that RTOs/ISOs have different resilience issues and priorities.”

Exelon, the largest U.S. nuclear power operator, cited statistics on how well reactors stayed online during last winter’s blizzard, compared with both natural gas and coal-fired generation.

Rob Gramlich, president of Grid Strategies LLC, testifying to the House Energy and Commerce Subcommittee on Energy, said, “There is no infrastructure more important than transmission, which is essential to the reliable and affordable electricity service we depend on for almost every modern commercial and individual activity.”

“If resilience is a code word for propping up uneconomic plants, that effort needs to ‘sink on its own poor merits,'” he said, quoting former FERC Chairman Pat Wood III. “We need to update transmission policy to create the grid we know we’ll need in the future.”

The crucial, still-unanswered question is what kinds of future threats grid operators and FERC should plan for and how those expectations affect resilience investments and consumers’ utility bills.

Along the Gulf Coast, Entergy backed its opposition to any new FERC initiatives on resilience by noting the defenses it put in place in the aftermath of huge hurricanes. In 2016 and 2017, Entergy built and opened up to two new transmission control centers in Mississippi and Arkansas, equipping one to take over if the other were damaged. They were deliberately moved farther away from the Gulf Coast because of storm threats.

It has gone beyond existing engineering standards to harden transmission lines and poles to withstand 140-mph winds in the counties south of Interstate 10, a vital transportation corridor.

‘Design basis threat’

Exelon countered that such conventional resilience planning doesn’t consider man-made threats — even if unlikely — or the possibility of once-in-a-century earthquakes that would break gas pipelines or power lines, severing very large U.S. regions.

For example, a “design basis threat” should include the number of gas transmission pipelines that adversaries could interrupt, it said. Gas pipeline cyber readiness is overseen by the Transportation Security Administration, not NERC and FERC.

“In fact, a PJM study found that a single gas pipeline in the PJM region serves more than 11,000 [megawatts] of generation,” Exelon noted. “The loss of that pipeline alone — whether from an earthquake, a cyberattack, a physical attack, or some other event — could wreak havoc in the region and nationally.”

Another study, by the ICF consulting firm, centered on PJM and New York found that more than 18,000 MW of generation would be at risk from an extended pipeline outage, it added.

Relying on dual-fuel generators that can burn oil as well as natural gas — the backup that helped New England through the severe winter weather in January — could fail if a storm shut down roads for most of a week, Exelon said, citing Stockton.

“Most oil capacity in PJM relies on trucks to deliver oil,” Exelon said. “That delivery often takes five to 10 days under normal conditions. In times of extreme weather, delivery is often delayed up to three additional days. In an extreme weather or man-made event that lasts more than four days, oil-burning units run the very real risk of running out of oil that they cannot replenish.”

Exelon reiterated that the most concerning threats are man-made, not weather-related, and traditional reliability analyses aren’t well-suited to deal with an attack designed to cause maximum damage.

Although the likelihood of such an attack that’s tantamount to a declaration of war may be considered low, building potent defenses is a strong deterrent from ever facing that threat, Stockton has said, a point emphasized in the December 2017 White House National Security Strategy.

“Put simply, unless PJM is modeling the right scenarios, its analysis of fuel security vulnerabilities, and the solutions it will propose based on that analysis, will not necessarily ensure resilience,” Exelon’s Barrón and company attorneys said in their filing to FERC.