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August 25, 2017
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 | NEM Western Energy Policy Summit | |
| Please mark your calendars and plan to join us for NEM's Western Energy Policy Summit on October 23-25, 2017. The Summit will take place at Caesars Palace in Las Vegas, Nevada. An agenda is forthcoming. You may register at this hotlink. | |
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| DOE Staff Report on Electricity Markets and Reliability | |
| In response to the direction of Energy Secretary Perry, DOE Staff has issued a report on Electricity Markets and Reliability. Staff was asked to examine and assess the reliability and resilience of the electric grid as well as the evolution of electricity markets. Staff's Report includes findings and recommendations for future study.
Among the primary findings of the Staff Report with respect to wholesale electricity markets is that, "[w]hile centrally-organized markets have achieved reliable wholesale electricity delivery with economic efficiencies in their short-term operations, changing circumstances have challenged both centrally-organized and, to a lesser extent, vertically-integrated markets." Specifically, the Report finds:
"*To date, wholesale markets have withstood a number of stresses. While markets have evolved since their introduction, they are currently functioning as designed—to ensure reliability and minimize the short-term costs of wholesale electricity—despite pressures from flat demand growth, Federal and state policy interventions, and the massive economic shift in the relative economics of natural gas compared to other fuels. The resulting low average wholesale energy prices, while beneficial for buyers of wholesale electricity, represent a critical juncture for many existing baseload generation resources and their role in preserving reliability and resilience.
*Market designs may be inadequate given potential future challenges. VRE—with near-zero marginal costs and if at high penetrations—will lower wholesale energy prices independent of effects of the current low natural gas prices. This would put additional economic pressure on revenues for traditional baseload (as well as non-baseload) resources, requiring careful consideration of continued market evolutions.
*Markets need further study and reform to address future services essential to grid reliability and resilience. System operators are working toward recognizing, defining, and compensating for resource attributes that enhance reliability and resilience (on both the supply and demand side). However, further efforts should reflect the urgent need for clear definitions of reliability- and resilience-enhancing attributes and should quickly establish the market means to value or the regulatory means to provide them."
The Report attributed baseload power plant retirements to the "advantaged economics of natural gas-fired generators," low growth in electricity demand, dispatch of variable renewable energy resources, and regulatory compliance requirements with environmental regulations. As a result, "the continued closure of traditional baseload power plants calls for a comprehensive strategy for long-term reliability and resilience. States and regions are accepting increased risks that could affect the future reliability and resilience of electricity delivery for consumers in their regions. Hydropower, nuclear, coal, and natural gas power plants provide ERS and fuel assurance critical to system resilience. A continual comprehensive regional and national review is needed to determine how a portfolio of domestic energy resources can be developed to ensure grid reliability and resilience."
Staff's policy recommendations include the following:
1) With respect to wholesale markets, FERC should expedite efforts to improve energy price formation in centrally-organized wholesale electricity markets;
2) FERC should examine the valuation of new and existing Essential Reliability Services through the creation of fuel-neutral markets and/or regulatory mechanisms that compensate for services that support reliable grid operations;
3) DOE should support system resilience efforts of utilities, grid operators and consumers; and
4) Stakeholders should support increased electric and natural gas industry coordination to enhance system reliability and resilience.
The full text of the DOE Staff Report on Electricity Markets and Reliability is available on the NEM Website. | |
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 New York
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| Report and Conference on Carbon Pricing in the Wholesale Energy Market | |
| NYISO and DPS have initiated a process to examine the potential for carbon pricing in the wholesale energy market consistent with New York State energy policy goals. Toward that end, NYISO engaged the Brattle Group to review market design options for integrating the social cost of carbon into NYISO's competitive wholesale energy market. In response, the Brattle Group prepared a report entitled, "Pricing Carbon into NYIOS's Wholesale Energy Market to Support New York's Decarbonization Goals." The report concludes that,
"An obvious way to harmonize wholesale electricity markets with decarbonization goals is through carbon pricing. This is already done through the existing RGGI program, but at carbon price levels that are too low to support New York’s objectives. NYISO could incorporate a higher carbon price into its energy market by adding a charge to resources’ costs based on their emissions rate and a price-per-ton established by the NYPSC. These charges would affect unit commitment, dispatch, and settlement. Locational Based Marginal Prices (LBMPs) would increase according to the emissions rate of the marginal, price-setting resources (the “marginal emissions rate” or “MER”). NYISO would pay each generator the LBMP minus its individual carbon charge and then distribute carbon revenues to load-serving entities (LSEs), which our analysis assumes would be returned to customers. In addition, NYISO would assess emissions-based charges on electric energy imported into the state."
DPS Staff and NYISO will hold a conference on September 6, 2017, at Empire State Plaza in Albany to present the report and respond to questions. The full texts of the Carbon Pricing Report and Notice of Conference are available on the NEM Website.
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 Virginia
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| Testimony Filed on Dominion Proposed Renewable Energy Tariff | |
| A number of parties, including competitive supplier and customer interests, filed testimony on Dominion's proposed CRG Rate Schedules for 100% renewable energy energy for commercial and industrial customers with demand of 1,000 kW or more. The testimony raised a number of concerns with the proposal.
Direct Energy testimony explained that the Dominion proposal "lack[s] any provisions which establish price or by which price may be derived," and, "are not tariffs at all." Direct's witness also argued that Dominion's proposal is "lacking in substantive evidence that the terms under which it will sell renewable energy will be just and reasonable." The witness notes that Dominion's proposal would prohibit net metering customers from taking service under the renewable energy tariffs. Direct's witness concludes that, "In the final analysis, not only are the terms proposed by Dominion unfair and unreasonable, but approval of those terms as a 100% renewable energy tariff would cut off customers from access to competitive service providers. CSPs are better suited to meeting the renewable energy needs of those customers. The approval of Dominion's proposed CRG Rate Schedules would therefore amount to a double whammy. It would simultaneously impose a utility tariff loaded with disincentives to the purchase of renewable energy, and prohibit customers from purchasing renewable energy from any other provider."
Walmart filed testimony urging the Commission's careful scrutiny of the Dominion proposal since its approval would result in customers being denied access to alternative renewable energy options from competitive suppliers. Walmart's witness explained, "Walmart seeks to procure renewable energy in order to meet our corporate sustainability goals. Additionally, we strive to procure renewable energy, in addition to all of our energy and capacity requirements, at the lowest possible cost to our stores. Limiting the options available to customers, which approval of a utility 100 percent renewable energy offering would accomplish is not the optimal path forward for customers to be able to realize their renewable energy procurement goals."
The full text of the Filed Testimony is available on the NEM Website. | |
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