Monthly Retail Choice Regulatory Bulletin
June 2017
Executive Summary & Introduction
In past Regulatory Bulletins we’ve pointed out the ZEC subsidies in New York and Illinois for Exelon’s nuclear plants. Recently,
Dominion also made strong attempts to secure a subsidy for its Millstone nuclear plant in Connecticut, but failed at the state
legislature in a rare win for competitive power markets.
The infamous California “duck curve” has suddenly come to roost, with negative pricing during the peak and the steep (and
steepening) ramp in the transition to off peak which have real-life, reliability implications. The massive power outage in the
Bay Area in April—albeit blamed on equipment failure—is perhaps a portend of things to come. And now New York state wants
to be the next California of energy—and even surpass it. With such trends in mind, PJM is undertaking a study of its system
“Resilience” and reviewing “fuel diversity” and “fuel security”.
In the meantime, the California PUC and CEC have held an “En Banc” in which the policy makers were focused on increasing
regulation for retail choice, while the IOUs complained about new stranded costs.
There’s an interesting story about how transmission project costs are allocated to zones in PJM. Depending on the subscribed
methodology, hundreds of millions of dollars in cost allocation can shift from one zone to another—with clear winners and
losers.
Finally, New England faces a capacity deficit this summer, creating ripe conditions for price and uplift volatility if weather
becomes severe.
1.1 Assessment Approach
Our analysis of the Regulatory risk(s) to our customers is summarized in the rating(s) categories defined below:
Potential Financial Impact to Customer(s):
Symbol
$+
$-
Description
Signifies potential increase in costs
Signifies potential decrease in costs
Monthly Retail Choice Regulatory Bulletin
June 2017
Magnitude of Risk to Customer(s):
Symbol
Description
Major Impact
Description
Represents a regulatory or policy change that is in the process of being enacted by Regulators (i.e., PUC, ISO, FERC,
EDC) and is expected to result in a meaningful increase in
cost(s) to load; likely require immediate action.
Medium Impact
Represents a regulatory or policy change that is in the proposal process and being sponsored by one or more ISO stakeholders. Most of these Risk’s will likely be elevated to RED.
Medium Impact issues will require involvement but we expect
to have time to coordinate load on these type(s) of issues.
Actively Monitor
Represents a regulatory or policy discussions or trends that
may evolve to either RED or ORANGE categories. No immediate action item for load.
For Your Information
Industry developments or information, while not directly
impacting the customer, may be of interest or import to the
customer.
2.0 Overall Assessment
We have identified various issues that coalesce with the ratings categories described above. Notwithstanding, these are the Regulatory or
Policy issues we consider extremely relevant to our retail customers*. With respect to this Bulletin, the six categories which appear to represent the most significant impacts to retail customers are identified below and categorized according to ISO:
Section 2.1 –
Section 2.2 –
Section 2.3 –
Section 2.4 –
Section 2.5 –
Section 2.6 –
Policy
Capacity / System Reliability
Transmission
Ancillary Services
Energy No June 2017 update
Industry Development June 2017 update
*
Where appropriate, we have provided links to articles and other relevant information for reference purposes.
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Monthly Retail Choice Regulatory Bulletin
June 2017
2.1 Policy
Issue#
Rating
Issue
Millstone nuke loses subsidy fight in
Connecticut—In a significant victory for
competitive power markets, the CT
Legislature adjourned on June 7th,
rejecting hard-fought lobbying efforts
by Dominion to secure out-of-market
subsidies for its 2,110 MW Millstone
nuclear plant.
2.1a
ISO-NE
$-
A broad-based coalition of opponents,
including AARP, environmental and
renewable advocates, and competitive
energy producers, ran a successful
campaign during the 2017 session,
questioning Millstone’s need for a subsidy
and pointing out that the plant remains
committed to the ISO-NE market with a
Capacity Supply Obligation through at
least 2022.
Impact
Action/Result
Dominion sought a legislative
procurement mandate for
approximately half of the nuclear
plant’s output under long-term
contracts with state utilities.
While this is a win for competition in CT,
similar legislation is being shopped in
Pennsylvania and New Jersey, so we must
keep vigilant in our fight for competitive
markets.
Allowing major power generating units to
carve out politically-motivated subsidies
erodes the value that competitive
markets provide consumers. Gordon van
Wellie, CEO of ISO-NE, said that
providing out-of-market financial
support for certain resources would
“undermine the benefits of competition
and deter the investments needed to
maintain resource adequacy.”
Please contact your Calpine Solutions’ sales
representative with any questions about
legislative activities that may impact you in
your state.
See our June 9th Special Report,
“Millstone nuke loses subsidy fight in
Connecticut”
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Monthly Retail Choice Regulatory Bulletin
June 2017
2.1 Policy
Issue#
Rating
Issue
On May 19th, the CPUC and the CEC
conducted an En Banc to discuss retail
choice.
2.1b
CA
Unfortunately, direct access was not a
major discussion point of the En Banc. As
a matter of fact, there were no
commercial or industrial customers invited
on any of the panels to advocate for
increases in direct access participation or
to explain the benefits of direct access.
The policy makers were focused on what
additional regulation is needed in order
to ensure that retail choice—which
includes community choice aggregation
programs, roof-top solar, and demand
response programs—is regulated in a
manner that addresses California’s
energy policy goals.
The Oregon PUC has opened a new
proceeding, UM 1897, that proposes to
address the many policy implications of
providing “new” customers an
exemption from the current 5-year exit
fees.
2.1c
OR
Impact
The PUC appears to be playing policy
“catch-up” in the face of explosive
growth of community choice aggregation
and continued growth in roof-top solar.
Action/Result
Please contact your sales representative to
obtain additional information.
The take-away from the En Banc is that
the many forms of retail choice are
creating new stranded costs for the
IOUs, something the IOU panel repeated
over-and-over.
The proponents of retail choice advocated
for a more holistic look at the current
regulatory set-up to determine the future
role of the IOU as most customers move
away from traditional utility service.
Customers brought this issue to the
Oregon legislature in the form of SB 979.
While SB 979 died in committee, the
committee chair admonished the PUC to
address this “fairness” issue. UM 1897 is
the result of that effort.
Currently, whether you have been a
customer of PGE or PacifiCorp for years,
or just built a new facility, in order to
participate in the direct access program
one was required to pay 5-years of exit
fees for the so-called stranded costs.
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Please contact your sales representative to
obtain additional information.
Monthly Retail Choice Regulatory Bulletin
June 2017
2.2 Capacity / System Reliability
Issue#
Rating
Issue
RESILIENCE, the new buzzword at PJM—
The ISO has initiated a broad review of its
overall system reliability and has
published a white paper titled PJM’s
Evolving Resource Mix and System
Reliability. During the recent Grid 20/20
conference, PJM couched this issue around
fuel diversity in the context of system
reliability and has dubbed it “Resilience.”
2.2a
PJM
Over the last several years in PJM, we
have witnessed the decline of coal-fired
generation, increase in gas-fired
generation and continued penetration of
renewable resources. However, these
trends are expected to significantly
accelerate over the next few years,
during which we will also see the
retirement of some nuclear generation.
(Please see the graph on the next page
showing the installed capacity broken out
by fuel type.)
PJM white paper
Impact
Action/Result
To enhance the resilience of the PJM
PJM’s study of resilience, encompassing fuel
system, the ISO has outlined four areas of diversity and fuel security, will answer (or at
focus:
least make an attempt at) the questions like:

Define fuel diversity and fuel security 
with a primary focus on reliability

Reflect on current makeup of PJM/
U.S. fuel diversity

Analyze fuel diversity trajectory and
identify areas which will negatively
impact reliability

Explore fuel security and impact on
reliability and fuel diversity

Do we need to keep the nukes to
maintain system reliability?
How much renewables penetration can
the system absorb while still maintaining
reliability?
And, better define the requirements needed
to enhance resilience, to “keep the lights on,”
as they say in the industry.
Calpine Solutions will keep you apprised of
PJM will be discussing their findings and this effort.
recommendations with stakeholders at
various committees over the next
couple of years. This review and
discussion of resilience will provide the
foundation for the larger discussion
around the capacity construct, zero
emission objectives (i.e. carbon
pricing), and state subsidies.
Grid 20/20 presentation
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Monthly Retail Choice Regulatory Bulletin
June 2017
2.2 Capacity / System Reliability
Please refer to the previous page of this report for information regarding this graph.
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Source: PJM
Monthly Retail Choice Regulatory Bulletin
June 2017
2.2 Capacity / System Reliability
Issue#
2.2b
PJM
Rating
$-
Issue
Impact
PJM posts results of the capacity auction
for DY 2020/21—Prices for the 2020/21
capacity auction cleared at $76.53/MWday for the RTO, about 24% lower than the
$100/MW-day for the prior Delivery Year.
Lower capacity auction prices for DY
2020/21 will translate to a lower bill.
But the extended low capacity pricing is
troubling for generators, particularly
since this was the first DY with 100%
Capacity Performance requirements
with stiff penalties for nonperformance.
Notable exceptions were EMAAC, PS, PS
North, and DPL South which cleared at
$187.87/MW-day, 57% higher than the
$119.77/MW-day in the prior DY.
ComEd also broke out at $188.12/MWday but dropped 7% from $202.77 in the
prior DY.
The MISO capacity levels continue to
exceed the forecasted 2017 summer
peak demand and reserve margin
requirement.
2.2c
MISO
$-
Action/Result
Please see Calpine Solutions’ Special Report
dated 5/24/17 for more information.
Contact [email protected], if you
are interested in Calpine Solutions’ Capacity
Obligation Reduction Effort program.
The demand in the MISO region is
There is sufficient capacity forecasted to
expected to peak at 125 GW with 148.5
meet demand for the MISO region this
GW of available capacity, giving it an 18.8 summer.
percent reserve margin.
MISO projects demand to peak at 125 GW The 18.8 percent reserve margin for
with 148.5 GW of available capacity during this summer exceeds the planning
the 2017 summer season.
reserve margin requirement of 15.8
percent for 2017.
Press Release
2017 Summer Readiness Workshop
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Monthly Retail Choice Regulatory Bulletin
June 2017
2.2 Capacity / System Reliability
Issue#
Rating
Issue
PJM and NYISO held joint stakeholder
discussions to modify the NYISO/PJM
Joint Operating Agreement to develop
appropriate cost recovery mechanisms
to replace the damaged Ramapo Phase
Angle Regulator (PAR).
The first joint meeting took place at PJM
on March 1. PARs are used to change the
direction of electricity flow across
transmission lines.
2.2d
NYISO
$+
On May 31, 2017, the Management
Committee approved revisions to the
NYISO’s Open Access Transmission Tariff
(OATT) to allocate both the cost of
replacing the PAR, as well as ongoing
operating and maintenance costs, to
LSEs in the NYISO.
Ramapo Phase Angle Regulator Cost
Recovery
2.2e
NYISO
$-
Impact
Action/Result
The revisions to NYISO’s OATT will assure
Con Edison cost recovery and prevent
further delay in replacing the damaged
PAR. Con Edison will begin work on
replacing the PAR and anticipates the new
PAR will be in operation by early Fall
2017.
NYISO is targeting a July 2017 FERC filing.
Cost allocation and recovery would likely be
effective on the day the filing is submitted.
Calpine Solutions will continue to monitor this
issue.
With both PARs in operation the total
energy import capability from PJM into
NYISO will increase by 1,750 MW. It will
also increase real-time Market-to Market
capability and reduce NYISO’s minimum
Installed Reserve Margin (IRM) and
Locational Capacity Requirement (LCR).
The total anticipated annual cost to
repair, operate and maintain the PARs is
$5.5 million. The NYISO will allocate
that cost to LSEs statewide on a straight
load ratio share basis, under Rate
Schedule 1.
The NYISO expects sufficient resources
The total capacity resource of 41,013
There is sufficient capacity forecasted to
to meet this summer’s highest electricity MW to serve load during this summer
meet demand for the NYISO region this
usage in New York.
season surpasses the 2017 total capacity summer.
requirement of 35,798 MW for
NYISO anticipates having 41,013 MW of
reliability standards.
capacity available to meet forecasted
peak demand of 33,178 MW.
Press Release
2017 Summer Capacity Assessment
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Monthly Retail Choice Regulatory Bulletin
June 2017
2.3 Transmission
Issue#
2.3a
PJM
Rating
$+
Issue
Impact
Action/Result
In April 2017 the PJM Board approved
lifting the suspension of the $280 million
Artificial Island 230 kV transmission
project located in PSEG Zone in southern
New Jersey.
PJM has stated that while the standard
Solution-Based DFAX methodology is
appropriate for the cost allocation of
thermal upgrades, it does not work well
for voltage projects.
PJM makes an argument that the alternative
methodologies provide a more accurate
assessment of the beneficiaries of the project,
because of the stability nature of the project.
This transmission project is significant in a
couple of ways. It was one of the first
large competitively bid projects that was
ultimately awarded to LS Power, an
independent developer.
Therefore, PJM has proposed two
alternative methodologies to allocate the
project’s costs.
1. Stability Interface DFAX method
2. Stability Deviation Method
It is also one of the largest projects to
address the “stability” (or voltage) issues,
as compared to “thermal” (or congestion)
problems, which are more prevalent. As
such, PJM has provided alternative cost
allocation methods other than their
standard “Solution-Based DFAX”
methodology.
Under the Stability Interface DFAX and
Stability Deviation methods, Delmarva
Power is allocated 7% and 10% of the
project cost, respectively. Both
represent a significant reduction in
allocation of cost to Delmarva under the
standard Solution-Based DFAX method.
(An explanation of each method is
The project arguably benefits PSEG
provided in this white paper.)
territory the most but PJM’s SolutionBased DFAX method allocated 93% of the
cost to Delmarva Zone, much to the
consternation of Delmarva Power, its
customers, and consumer advocates of
Delaware.
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However, the ultimate decision as to which
methodology will prevail will likely be made
by the FERC.
The outcome of that decision is important to
the customer because it will determine the
share of the $280 million project cost that
will be allocated to various zones.
Calpine Solutions will keep you informed of
the outcome of this cost allocation issue.
Monthly Retail Choice Regulatory Bulletin
June 2017
2.4 Ancillary Services
Issue#
Rating
Issue
Tight operating capacity conditions and
recent declining trends in physical
energy cleared day-ahead suggest an
increased risk of uplift and reserve
shortages in New England this summer.
Impact
With the capacity shortfall and more
Please contact your Calpine Solutions sales
load relying on the real-time market,
representatives to discuss your hedging
conditions are set for reserve shortages, strategies for the summer.
volatility in the energy market and
potentially high uplift charges.
The delay of the 670 MW Footprint
Power natural gas combined-cycle plant,
originally scheduled online by 6/1/17,
and the retirement of coal-powered
Brayton Point result in a 400-500 MW
capacity deficit for the ISO this summer.
2.4a
ISO-NE
$+
Action/Result
Secondly, there has been a trend of
decreasing amounts of physical energy
clearing in the day-ahead market, which
currently stands at around 97%, low by
historical standards. This may be a result
of expectations of lower prices in the realtime. The 3% shortfall of physical energy
in the day-ahead isn’t a problem under
normal conditions, but it could cause
problems during peak loads in the
summer.
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Monthly Retail Choice Regulatory Bulletin
June 2017
3.0 Contact Information
Calpine Energy Solutions Regulatory Contacts:
 Becky Merola, Regulatory Policy, East, 614-558-2581 (mobile)
 Clint Sandidge, Regulatory Policy, ERCOT, Midwest, 713-361-7717 (office)
 Greg Bass, Regulatory Policy, West, 619-684-8199 (office)
 Jung Suh, ISO Analytics, 610-717-6472 (mobile)
 Leonard Sunga, ISO Analytics, 619-684-8187 (office)
Public/ISO Regulatory Contacts:
 PJM - http://pjm.com/about-pjm/who-we-are/contact-us.aspx
 MISO - https://www.misoenergy.org/AboutUs/ContactUs/Pages/ContactUs.aspx
 NEISO - http://iso-ne.com/contact/contact_us.jsp
 NYISO - http://www.nyiso.com/public/markets_operations/services/customer_support/index.jsp
 ERCOT - http://ercot.com/about/contact/
 CAISO - http://www.caiso.com/Pages/ContactUs.aspx
 Public Utilities Commission - http://www.naruc.org/commissions/
Disclaimer: The information, opinions, estimates, projections, and other materials contained herein are provided to intended recipients for their personal or internal company use as of the date hereof and are subject to change without notice. Some of the information, opinions, estimates, projections,
and other materials contained herein have been obtained from numerous sources (e.g., publicly available information, internally developed data, and
other third-party sources, including, without limitation, exchanges, news providers, and market data providers), and Calpine Energy Solutions, LLC. has
made reasonable efforts to ensure that the contents hereof have been compiled or derived from sources believed to be reliable and to contain information and opinions believed to be accurate and complete. However, Calpine Energy Solutions, LLC. has not independently verified such information
and opinions; makes no representation or warranty, express or implied, in respect thereof; takes no responsibility for any errors and omissions that may
be contained herein; and accepts no liability whatsoever for any loss arising from any use of or reliance on the information, opinions, estimates, projections, and other materials contained herein, whether relied upon by the intended recipient or any other third party. Information not reflected herein
may be available to Calpine Energy Solutions, LLC. .
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