Midwest utilities grapple with reliability heading into FERC carbon forum 

Source: Rod Kuckro and Emily Holden, E&E reporters • Posted: Wednesday, April 1, 2015

Giving states more time to integrate regional plans to cut carbon emissions could be as vital to keeping the lights on as any electric reliability mechanism, energy regulators will be told at a hearing in St. Louis today.

The Federal Energy Regulatory Commission is rounding out its regional tour exploring how U.S. EPA’s Clean Power Plan might affect electric reliability. Experts in the central region of the United States, from the Canadian border to the Gulf Coast, plan to tell the commission that states need more time to devise plans so they can collaborate with one another. That way, they can review how their proposals mesh and what infrastructure needs to be built.

WPPI Energy, an electric utility that operates in Wisconsin, Michigan, Minnesota, Iowa and Illinois, worries that its five states could choose different kinds of plans that won’t necessarily interact well together. WPPI thinks FERC should review all state plans at once to examine reliability concerns before proposals are submitted to EPA. But that would mean pushing back deadlines.

“We think that it would make sense to build enough time into the schedule for a reasonable review of potential reliability problems,” said Andy Kellen, a vice president at WPPI.

Critics say the draft rule’s interim goals, which require progress between 2020 and 2029, wouldn’t allow enough time for states to collaborate or build pipelines and power lines. EPA has hinted that the timeline for interim requirements could change in the final rule slated to be issued this summer, but won’t divulge exactly how.

Multiple utilities will tell FERC that EPA should also revise the rule to make it easier for states to trade carbon allowances without submitting compliance proposals as a group. That concept of informal collaboration has been gaining momentum in discussions around the country.

EPA has said states can use mass-based standards and cap their annual emissions or use rate-based standards and lower the pounds of carbon that come from producing a megawatt-hour of power.

Carbon trading would be simpler if states adopted “mass-based” standards, but the rule might not be incentivizing that approach, Entergy Corp. will testify.

“Establishing clear rules that allow states to elect mass-based compliance, combined with the opportunity for bilateral trading of CO2 emission … would facilitate multi-state compliance without the complexities of developing multi-state compacts and/or joint compliance plans,” said Michael Schnitzer, a consultant speaking for Entergy, a large utility in the Deep South, in a statement to FERC.

Ameren to press for ‘safety valve’

Under the proposed rule, states that work with others to submit multi-state proposals have until 2018 to file a plan with EPA, two extra years. Entergy says states establishing trading opportunities should also get that extra time.

Even with more time and collaboration, there might still be a need for a reliability backstop, panelists will testify.

But Ameren reiterates, “these mechanism are not a substitute for first addressing the most significant reliability problem with the CPP — the interim targets.”

Jeffrey Gust, vice president of compliance and standards for MidAmerican Energy Co., plans to ask FERC to encourage participation in large regional transmission organizations, which “typically allow for more economic provision of operating reserves than would be possible in smaller, balkanized markets.”

Gust suggested that FERC provide a “strong signal for entities to form and/or join organized markets including incentives on return on equity.”

Minnesota Power is offering comments that aim “to make implementation of the Clean Power Plan workable in Minnesota and prospectively all states.”

At the top of the list of fixes to the proposed rule sought by the utility is a sweeping system reliability “safety valve” that would address the loss of coal-fired generation to the greater use of natural gas for electricity, according to Michael Cashin, environmental policy adviser for Minnesota Power’s parent, Allete Inc. That reliability mechanism should also apply to the possible effects of state compliance efforts that would rely on more renewable power and increased energy efficiency, he says in his comments.

“There is going to be a need for a safety valve to prevent unusual hardships,” but “that in itself is not going to solve the issues for reliability,” Cashin said in an interview yesterday.

“When it comes to a safety valve, if it’s getting exercised a lot, it would be an indication that the program itself is encountering problems,” Cashin said.

But suggesting how a safety valve would be triggered and what the result should be is difficult without knowing what EPA does to respond to concerns in its final version of the rule, he said.

Then, it would “give people another round of input, and at that time, we could probably put some substance on what a safety valve would look like,” Cashin said.