Friday, 10 March 2017
ED Vol 45 • No 47
IHS The Energy Daily
Business and Policy Coverage of the Power, Natural Gas, Oil, Nuclear and Renewable Industries
theenergydaily.com
EPA chief:
NERC stakeholders reject
CO2 not a
proposed supply chain
main cause of
cyber protection rules
climate change
BY JEFF BEATTIE
BY CHRIS HOLLY
Diverging sharply from the broad scientific consensus on the subject, EPA Administrator Scott Pruitt said Thursday
that man-made carbon dioxide is not “a
primary contributor” to global warming,
asserting more study is needed to fully
understand the greenhouse gas’s role in
climate change.
Speaking on the CNBC program “Squawk
Box,” Pruitt said “we don’t know” whether
emissions of carbon dioxide (CO2) from human activities—primarily the combustion
of fossil fuels—are the main driver of the
increase in global average temperature seen
over the last 150 years.
The North American Electric Reliability
Corp. appears to face a steep climb to win
approval for new cybersecurity protection requirements it has been directed by
FERC to impose on the supply chain supporting the nation’s bulk electric system,
as a first draft was sent down in flames
Monday with only 10 percent approval
from NERC’s voting stakeholders.
In a notice distributed Wednesday and obtained by IHS The Energy Daily, NERC said the
first draft of the supply chain cybersecurity
standards received only 10.36 percent support
of those stakeholders voting on the standard,
whereas to advance it will eventually needs
two-thirds support.
(Continued on p. 4, click here)
(Continued on p. 3, click here)
NRC, federal prosecutors probing
gun incident at TVA nuke plant
BY GEORGE LOBSENZ
The Nuclear Regulatory Commission
and federal prosecutors are probing a
March 2 incident at the Tennessee Valley Authority’s Browns Ferry nuclear
plant in Alabama in which a contractor
employee brought a small handgun into
a protected area of the plant without being detected by security screening procedures.
The incident appears to be one of the
more significant security lapses at a U.S.
nuclear plant in recent years, especially
since NRC clamped stronger site protection
requirements on nuclear plant operators in
NERC serves as the nation’s grid reliability watchdog, enforcing mandatory reliability
rules that it develops under oversight of the
Federal Energy Regulatory Commission.
It is not uncommon for the first draft of
NERC’s proposed reliability standards to fail
votes, according to people who have been involved with the process. Nevertheless, the
thin level of support for the first draft indicates that NERC has its work cut out for it on
one of the more expansive reliability rules it
has been tasked with developing.
Last July, FERC directed NERC to develop
new cybersecurity standards to address “supply chain risk management for industrial control system hardware, software, and computing and networking services associated with
bulk electric system operations.”
response to rising concerns about terrorists
targeting those facilities.
TVA officials said Thursday the unidentified contractor employee involved in the
incident was at the nuclear plant to work
on the Browns Ferry Unit 2 reactor, which
was out of service for refueling. However,
Browns Ferry’s two other reactors were in
operation at the time of the incident.
The officials said the motives of the person
involved remained unclear, and that compensatory security measures were immediately put in place at Browns Ferry and the
federal power authority’s two other nuclear
plants—Sequoyah and Watts Bar in Tennessee—immediately after it was learned the
individual’s smaller derringer revolver had
not been detected by security screening at
Browns Ferry.
Jim Hopson, a spokesman for TVA, told
IHS The Energy Daily that the compensatory
security measures would remain in place
at all of TVA’s nuclear plants until the utility determined how its security procedures
failed to detect the gun.
“We don’t have any indication that this
is a systematic problem, but until you know
that, you want to maintain the compensatory measures,” he said.
“Obviously, this is a serious and significant issue,” he added.
Hopson said it was not clear
whether the individual brought
the gun through a metal detector
or had it in personal effects that
went through an x-ray machine
(Continued on p. 2, click here)
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2 • Friday, 10 March 2017
IHS THE ENERGY DAILY
PSEG exiting controversial
PennEast gas pipe project
BY JIM DAY
To the delight of opponents of the project, New Jersey-based Public Service
Enterprise Group announced Thursday
it plans to sell its minority stake in the
PennEast pipeline project, which has
hit heavy resistance from greens and local governments in New Jersey.
The announcement bucks the trend of
investor-owned utilities plowing into the
booming natural gas pipeline business, although the PennEast project was Public
Service Enterprise Group (PSEG)’s only foray into the interstate gas transmission sector. The utility owns a 10 percent stake in
the $1.6 billion project, which is designed to
deliver low-cost Marcellus shale gas to New
Jersey.
PSEG officials said the decision to sell
that stake was made so it could focus on its
core business of running power plants and
providing electric and gas service to customers in New Jersey and on Long Island.
However, opponents of PennEast said
the withdrawal of the largest utility in New
Jersey is an indication that the controversial pipeline is “in trouble.”
The Federal Energy Regulatory Commission has delayed its review of the pipeline
several times, most recently in January following statements by New Jersey environmental regulators that they expect difficulties in issuing required permits because the
PennEast developers had not gained access
to land along the pipeline route to conduct
surveys.
FERC now plans to complete its environmental review of PennEast in April, and the
developers hope to bring the pipeline into
service in late 2018.
The state’s ratepayer advocate also has
joined opponents in questioning whether
a market need for the project exists. They
have urged FERC to conduct a detailed market analysis, rather than basing a determination of public need on precedent agreements signed mostly by companies affiliated with the pipeline developers.
“PSEG’s withdrawal is welcomed by
thousands of citizens who oppose PennEast,” said Tom Gilbert, the campaign director for the NJ Conservation Foundation,
which has been leading opposition to the
pipeline. “The fact that New Jersey’s largest utility is seeking to sell their share in
PennEast is further evidence that this unneeded, damaging project should not go
forward.”
On Thursday, PSEG officials disputed
the notion that the company plans to sell
its stake because of challenges the pipeline
faces, instead pointing to its intention of
remaining a key customer of the pipeline
once it gets built.
“This project will provide PSE&G customers with greater and more reliable access
to affordable natural gas. We look forward
to being a PennEast customer,” said Bill Levis, the president of PSEG Power. He added
that the company has “decided to put our
focus on our core business,” which includes
construction of three new combined-cycle
gas-fired power plants and running its exist-
theenergydaily.com
ing fleet of plants.
PennEast would deliver about 1.1 billion
cubic feet per day (cfd) of Marcellus shale
gas from northeastern Pennsylvania to interconnections with several other major
pipelines, including a connection in New
Jersey with Williams’ Transco system that
delivers gas throughout the Southeast and
along the East Coast.
The project is being developed by Spectra
Energy and subsidiaries of UGI Energy Services, Southern Co., New Jersey Resources,
South Jersey Industries and, until it sells its
stake, PSEG. The developers say increased
access to abundant supplies of inexpensive
gas provided by the pipeline would have
saved affected consumers nearly $900 million when gas and electricity prices shot up
during the “polar vortex” winter of 2013-14
and that savings would continue into the
future.
PSEG’s decision to pull out of PennEast
is unusual in that most of the nation’s largest investor-owned utilities have been rushing into gas pipelines as a means of driving
growth while also supplying fuel to new
gas-fired power plants. Southern Co., Dominion, Duke Energy, NextEra Energy and
DTE all have taken stakes in major greenfield pipeline projects as the industry builds
out infrastructure to serve the Marcellus
and Utica shale formations.
Like PennEast, many of the pipeline
projects have met fierce resistance from
green groups and some local governments,
but all of them appear to be advancing toward completion. FERC has certificated
more than 20 billion cfd of new pipeline
capacity since the beginning of 2016, with
several billion more cubic feet of capacity
currently under review.
NRC, federal prosecutors probing gun incident at nuke plant...(Cont’d from p. 1)
similar to those used in airport security.
He said it was some time after the individual went through security screening that TVA security officials learned that
the individual had a gun on the plant site
and went to find him. Hopson said the individual did not have the gun when he was
found, and that it was found in a different
location.
“Once [the security lapse] was discovered,
we tracked down the individual responsible
and their nuclear clearance was revoked on
the spot,” he said.
Hopson also said information about the
incident had been turned over to the local
U.S. attorney’s office for a review of any possible charges stemming from violation of
federal laws that bar possession of guns on
nuclear sites and other federal facilities.
NRC officials confirmed Thursday that the
agency had launched an inspection at Browns
Ferry to “look into the circumstances” surrounding the incident.
“Because of the security aspects of the
event, we are unable to provide specific
details of the inspection other than to say
that the NRC inspection will look at how
the event happened, whether there were
violations of NRC requirements and what
steps TVA has taken or is taking to minimize
the likelihood of such an event happening
again,” the agency said in a statement.
“Several weeks after the completion
of the inspection, the NRC will discuss its
findings with TVA, but the inspection report will not be publicly available. However, we will provide a brief summary at that
time excluding specific security-related
details.”
© 2017 IHS • Federal copyright law prohibits unauthorized reproduction by any means and imposes fines of up to $150,000 for violations.
theenergydaily.com
IHS THE ENERGY DAILY
Friday, 10 March 2017 • 3
Ontario pension fund backing Anbaric grid projects
Anbaric announced plans Thursday to
team with the Ontario Teachers’ Pension Plan to create a new company that
the Massachusetts-based grid project
developer said would pursue up to $2
billion in new transmission initiatives.
Anbaric said the partnership with the
pension fund represented the largest financial commitment by an investor in the
company’s 15-year history, which includes
several big projects.
The company developed the Neptune
Regional Transmission System, a subsea
power line completed in 2007 that delivers 660 megawatts to Long Island from
New Jersey. It also launched the Vermont
Green Line, a wind-plus-hydro project now
being completed by National Grid
Anbaric’s existing management team
will lead the new company.
NERC stakeholders reject proposed cyber protection rules...(Cont’d from p. 1)
The FERC order comes at a time of heightened concern across the industry and affected
agencies about the possibility of a computerbased attack sinking large parts of the U.S. infrastructure, particularly following a December 2015 cyber-attack that cut off service to
up to 225,000 customers of three Ukrainian
electric utilities. Cybersecurity also has become an increasing focus of attention because
utilities are installing smart grid infrastructure and other digital devices throughout the
grid that are linked to the Internet and managed through wireless networks.
However, NERC failed to win substantial
support for the first draft of the supply chain
standards because large numbers of the companies subject to NERC oversight feel strongly that those standards are not needed.
In comments sent to FERC after the commission first proposed in 2015 to require the
new standards, a giant swath of industry trade
groups opposed the idea, saying their supply
chains are already protected through existing NERC standards and protective steps the
companies themselves have otherwise taken.
“The trade associations do not support the
commission’s proposed directive for mandatory supply chain requirements because
the trade associations do not share the commission’s view of the reliability gap as described…,” said groups representing public
power utilities; the Edison Electric Institute;
which represents investor-owned electric
utilities; Electric Power Supply Association,
which represents merchant generators; Electricity Consumers Resource Council, which
represents industrial energy consumers; and
Transmission Access Policy Study Group,
whose members are transmission-dependent
utilities in 35 states.
“In addition, the trade associations disagree
with [FERC’s] contention that a gap exists in
the commission-approved NERC standards,”
they said in a September 21, 2015, filing.
“While [existing] NERC standards do not
contain explicit provisions for supply chain
management, transmission owners and operators already have significant responsibilities to perform under various commissionapproved [reliability] standards that already
address supply chain issues,” the groups said.
But FERC’s majority was unmoved, and directed NERC last July to develop a standard to
“address software integrity and authenticity;
vendor remote access; information system
planning; and vendor risk management and
procurement controls.”
Interestingly, the current problems facing
the supply chain reliability standard were predicted at the time FERC approved the initiative
by Commissioner Cheryl LaFleur, who is now
FERC’s acting chairman. In a six-page dissent
to the decision to require those standards, LaFleur said the commission’s majority was unwise
to proceed to a final rule without first issuing
a supplemental notice and seeking more comment, because the issue was complex and industry stakeholders had strong feelings about it.
“By failing to engage in adequate stakeholder outreach before directing development of a standard, the commission increases
the likelihood that implementation of a standard will be delayed,” she wrote.
LaFleur also suggested FERC had not
fleshed out its goals for the supply chain reliability standard sufficiently to give NERC the
direction it needed.
Citing “the inadequate process to date,”
LaFleur said the commission was issuing “a
general directive in the final rule, in the hope
that the [NERC] standards team will do what
the commission clearly could not do: translate
general supply chain concerns into a clear, auditable and enforceable standard within the
framework…of the Federal Power Act.”
NERC is supposed to submit the supply
chain standards to FERC by September 27, at
which time the commission will have a far different membership than it did when it required
the standards. The five-member commission
has three vacancies, all of which are expected
to be filled by Republicans to be nominated by
President Trump; LaFleur is expected to be replaced as FERC chairman by a Republican.
Two commissioners who supported the
supply chain standards—former Chairman
Norman Bay, a Democrat, and Tony Clark, a
Republican—have left FERC.
Generally speaking, the draft supply chain
standard rejected Monday is not particularly
prescriptive and instead directs the entities
NERC oversees to develop procedures for
meeting certain basic cybersecurity requirements. For instance, the standard would have
required those parties to develop “software integrity and authenticity controls that address
risks from compromised software and firmware.” The controls would have to verify, before installation, the identity of the publisher
for software, firmware, upgrades and patches,
and validate the “integrity” of the products.
NERC votes are initially open to all entities “materially affected by” the NERC standards, although the group establishes “ballot
bodies” to vote on each proposed standard,
with entities placed into weighted segments
to ensure all industry sectors are represented
in a balanced way.
In a daunting sign for NERC, seven of the
eight segments showed a heavy tilt towards
negative votes, while three “small electricity
users” voted 2-1 against approval.
A NERC spokeswoman cautioned against
reading too much into Monday’s vote, saying
“there are always at least two voting periods”
in the approval of reliability standards. “The
initial ballot period allows the standard drafting team to receive comments to consider, revise or respond to prior to entering additional
ballot phases, if necessary, followed by the
final ballot voting phase.”
NERC’s Wednesday notice said the drafting
team working on the standard will “review all
responses received during the comment period
and determine the next steps of the project.”
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4 • Friday, 10 March 2017
IHS THE ENERGY DAILY
theenergydaily.com
PJM prices hit record low in 2016—monitor
In a stark illustration of the impact of
low natural gas prices on U.S. electricity
markets, the market monitor for PJM Interconnection LLC said average real-time
prices in the grid operator’s Mid-Atlantic
and Midwest service territory in 2016
fell 19 percent from 2015 to $29.23 per
megawatt-hour—the lowest since PJM
launched its competitive wholesale power market in April 1999.
The independent market monitor, Joseph
Bowring, attributed the price drop to low
natural gas prices, which affect power prices
because gas-fired generation plays the key
role in setting market prices.
Bowring also said gas-fired plants were
the only kind of generation in PJM to benefit
from lower gas prices because their fuel costs
declined and they were dispatched more because of their cost advantage over competing
coal, nuclear and renewable energy plants.
“For gas-fired units, the decrease in [power] prices was more than offset by the decrease
in gas prices and increased operating hours,
resulting in higher energy net revenues for a
new combustion turbine (CT) and a new combined cycle (CC)…,” said a press release issued
by the market monitor on his annual review
of PJM’s market. “In 2016, average energy
market net revenues increased by 21 percent
for a new CT and 14 percent for a new CC.”
Average energy market net revenues de-
creased
54
percent for a
new coal plant, 86 percent for a new diesel
plant, 26 percent for a new nuclear plant, 19
percent for a new wind installation and 28
percent for a new solar installation.
Bowring said the drop in net energy revenues also was due to a decline in capacity
market prices, which he said fell in all parts
of PJM’s service territory except for areas of
the grid controlled by Public Service Electric
& Gas in New Jersey.
Bowring also revealed that total payments
for demand response programs decreased by
$163.2 million or 20.1 percent, from $812.2
million in 2015 to $649 million in 2016, primarily due to reduced revenues from the capacity market.
EPA chief: CO2 not a main cause of climate change...(Continued from p. 1)
“I think that measuring with precision human activity on the climate is something very
challenging to do and there’s tremendous disagreement about the degree of impact, so no,
I would not agree that it’s a primary contributor to the global warming that we see,” he
said. “But we don’t know that yet. We need to
continue the debate and continue the review
and the analysis.”
Pruitt’s statements clash with the conclusions of multiple periodic assessments of
climate science published by the Intergovernmental Panel on Climate Change (IPCC) and
multiple other premier research groups, all
of which agree that CO2 emissions and other
greenhouse gases from human activities are
the main drivers of global warming.
Kevin Trenberth, senior scientist at the
National Center for Atmospheric Research
and a frequent contributor to IPCC assessments, said Thursday that contrary to Pruitt’s
statements, “there is no doubt whatsoever
that the planet is warming and it is primarily
due to increased carbon dioxide in the atmosphere from burning of fossil fuels.”
President Trump’s nomination of Pruitt
to lead EPA was highly controversial in large
part because he spent much of his tenure as
Oklahoma’s attorney general challenging a
wide variety of EPA regulations in court, including the agency’s Clean Power Plan (CPP),
which would regulate power plant CO2 emissions. Pruitt also was seen by critics as being
too cozy with the oil and gas industry as Oklahoma’s top law enforcement officer. Pruitt
closely collaborated with industry officials
in challenging EPA rules, according to emails
from Pruitt’s office recently made public under a state court order.
Environmental groups charged Pruitt’s
statement Thursday contradicts his written
answers to questions from members of the
Senate Environment and Public Works Committee during confirmation proceedings on
his nomination to lead EPA.
Among other statements, Pruitt said he
agreed that EPA “has an important role when
it comes to the regulation of [CO2],” and that
he would fulfill that role as directed by the U.S.
Supreme Court in Massachusetts v. EPA, a case
that affirmed EPA’s responsibility to address
any harmful impacts from rising CO2 levels.
Pruitt also wrote that if confirmed he would
“work to ensure that any regulatory actions
are based on the most up-to-date and objective scientific data, including the ever-evolving
understanding of the impact increasing greenhouse gases have on our changing climate.”
During his Squawk Box interview, Pruitt
also suggested that Congress needs to clarify
EPA’s statutory authority to regulate greenhouse gases.
“The legislative branch has not addressed
this issue at all,” he said. “It’s a very fundamental question to say are the tools in the toolbox
available for EPA to address this issue of CO2….”
However, a veteran Clean Air Act attorney told IHS The Energy Daily that while legislation to strip EPA of authority to regulate
greenhouse gases would clear the Republicancontrolled House, it would die in the Senate,
where majority Republicans lack the votes
to overcome a certain Democratic filibuster.
“I can’t imagine anything that can clear both
chambers, honestly, and I’m not aware that
anyone is seriously talking about that,” the
attorney said Thursday.
Pruitt suggested Congress should respond
to the 2007 Massachusetts v. EPA decision, in
which the high court ruled that if EPA determined that emissions of greenhouse gases
posed a danger to public health and welfare,
the agency had to regulate those emissions.
EPA made that “endangerment” finding in
2009, triggering the CPP and other climate
initiatives by President Obama.
“The decision in 2007 was not that EPA
had to regulate,” Pruitt said. “The decision
in 2007 was they needed to make a decision.
And so I think all of those things have to be
addressed going forward, not least of which
is the response of the legislative branch with
respect to this issue.”
Executive Editor: George Lobsenz, (202) 481-3748; Contributing Editor: Eric Lindeman, (202) 572-1493; Reporters:
Chris Holly, (202) 481-7983; Jeff Beattie, (202) 481-9659; Jim Day, (202) 572-0516; Publisher: John Howland. To subscribe to IHS The Energy
Daily contact Client Services at (855) 417-4155 or [email protected]. For group discounts and site license information contact Head of Group
and Site License Sales: Sabrina Ousmaal at (202) 481-9272; [email protected]; IHS The Energy Daily is published electronically each
business day by IHS Global Inc.
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