Archive for the ‘Reliability Standards’ Category

Private Financing for Energy-Saving Retrofits on the Horizon

Photo by aylamillerntor. Some rights reserved.

As we posted in June, President Obama’s Better Buildings Initiative updated tax incentives aimed to encourage retrofitting buildings to reduce energy bills. Although considered the “low-hanging fruit” of carbon reduction, financing of commercial building retrofits for energy efficiency has largely remained in the realm of public subsidies. Opening the floodgates of private financing could expand the scale and reach of such projects, and a study released Tuesday by the Deutsche Bank Americas Foundation aims to nudge lenders to do just that.

Energy savings projections have accompanied building and financing proposals for some time, but loan underwriters have long looked at these projections with a skeptical eye, rarely incorporating them into underwriting models. There are no consolidated results showing energy savings from subsidized retrofitting projects – around since the Carter administration – nor from the Energy Star programs run by utilities across the country, leaving little data for the underwriting models of financial institutions. Similarly, energy audits are not usually subject to follow-ups and are subject to little accountability. Which is where the Deutsche Bank study comes in.

Analyzing the accuracy and reliability of energy audits associated with more than 230 apartment building retrofitting projects in New York City, the study offers data to instill a measure of confidence in lenders who have generally been reluctant to underwrite energy savings. The Foundation touts that their data-driven findings lay the foundation for lenders and builders to collaborate to develop standards for reporting, best practices, and energy monitoring. The New York City Energy Efficiency Corporation will take this next step, using the data to pilot underwriting guidelines as a starting point for the first transactions that underwrite energy-saving projects.

Accompanying the study is a companion document summarizing the wide ranging benefits of energy efficiency retrofits for building owners and tenants. A New York Times article from June describes the demand for the Deutsche Bank study, and a November article covers some of its early findings.

Western Electricity Coordinating Council Slapped with (only?) $350,000 Civil Penalty for Alleged Violations of Reliability Standards

Photo by JustoRuiz. Some rights reserved.

As reported, summarized, and analyzed by law firm Hogan Lovells in a recent Alert, FERC earlier this month issued an Order that concluded an investigation of Pacific Northwest Security Coordinator (PNSC), the predecessor  of Western Electricity Coordinating Council (WECC).

The investigation was launched after a “disturbance” that occurred in 2008 (a short circuit on a transformer in Utah), and, together, FERC and NERC found that PNSC’s “inadequate response” to the event, combined with a failure to have certain proper procedures in place, violated nine requirements of five Reliability Standards. As a result, WECC was ordered to pay a civil penalty in the amount of $350,000.

Considering that WECC –  one of nine regional electric reliability councils under NERC authority – describes itself as “responsible for coordinating and promoting bulk electric system reliability,” you’d hope they’d have their reliability down pat.

And therefore it makes sense that Hogan Lovells is left wondering why the penalty was so low, given that Florida Power and Light Company “paid a US$25 million fine in connection with the Flagami incident.” (The Flagami incident represented the first time that a regional reliability entity was fined for violating a mandatory reliability standard.) However, the law firm also notes that the Florida Reliability Coordinating Council, in its role as Reliability Coordinator, paid only a $350,000 fine for the incident.

Power Outage at FERC Headquarters

Photo by access.denied. Some rights reserved.

The headline says it all, really, and to try and make a clever joke out of it would be perhaps cruel, but more importantly, beyond my comedic capacity.

Starting Tuesday, May 31st, FERC and several other buildings in DC found themselves without power. FERC, who alerted visitors to their website of the outage with a small message in red text on their homepage, has been effectively closed since the failure of a series of underground cables that provide power to the area.

Potomac Electric Power Company (Pepco), the public utility servicing DC, is no stranger to power outages. In 2006, FERC – finding that “reliability standards are not being met” in the DC area – directed Pepco (and PJM Interconnection, a regional transmission organization that coordinates wholesale electricity in DC) to develop and implement a comprehensive plan to provide adequate reliability in the region. Just four years later, however, the Washington Post wrote a scathing analysis of Pepco’s reliability problems – it was called “Why Pepco can’t keep the lights on” – which detailed continued outages in the region.

Of course, FERC isn’t the only organization whose operations are susceptible to power outages in various ways. A text search for “power outage” on knowledgemosaic’s Risk Factors page (limiting search to Summary Only), reveals risk factor language from about thirty EDGAR filers disclosing risk related to power outages.

For instance, electric utility Arizona Public Service Co points out that “the operation of power generation facilities involves risks that could result in unscheduled power outages or reduced output, which could materially affect APS’s results of operations,” whereas colocation data center InterXion Holding N.V. admits that their business “is dependent on the adequate supply of electrical power and could be harmed by prolonged electrical power outages or increases in the cost of power.”

Given Pepco’s past performance, one wonders whether “lives in a district served by Pepco” should be its own risk factor.

At the time of writing, Pepco expected power to be restored by midnight Wednesday. Until then, FERC’s eFiling service remains unavailable.

UPDATE: According to the FERC website, power was temporarily restored last night at 9pm at FERC Headquarters, but was lost again shortly after 11pm. Pepco now expects to restore power this afternoon.

FERC Issues Study of Frequency Response Metrics and Variable Renewable Generation

Late last week FERC announced the release of a FERC-initiated, FERC-funded, and Lawrence Berkeley National Laboratory-conducted study that develops “an objective methodology to evaluate the reliability impacts of varying resource mixes including increased amounts of renewable resources.”

Photo by Zuzu. Some rights reserved.

The study, “Use of Frequency Response Metrics to Assess the Planning and Operating Requirements for Reliable Integration of Variable Renewable Generation” (supporting documents for which can be found here) examines the potential impact on frequency response of adding variable resources like wind power to the grid. “Frequency response” measures the ability of a bulk power system to respond to a change in system frequency, such as a sudden loss of generation that could cause blackouts.

However, the purpose of the study was less to specifically determine the impact, and rather, as a part of its analysis, identify and test metrics for measuring the adequacy of frequency response, which will be useful for “operating and planning a reliable system with increased amounts of variable renewable generation.”

A Van Ness Feldman Alert on the topic posits that FERC will use the study, and subsequent comments from stakeholders, to “refine its policies governing reliability and the integration of variable generation resources.” The Alert also suggests that stakeholders may use the study “to support positions filed in response to the Commission’s Notice of Proposed Rulemaking addressing the Integration of Variable Energy Resources.”

Comments on the study may be submitted here under Docket AD11-08-000 by March 7, 2011.

Reliability Standards: Are FERC and NERC Cracking the Enforcement Whip?

Last month’s Briefing from Winston & Strawn suggests that NERC and FERC are casting an ever-widening net of enforcement over renewable energy developers and other generators subject to reliability standards.

"Young Boy with Whip" (and the next head of FERC Enforcement?)

In addition to expanding the scope of transmission-related reliability standards to cover renewable energy sources, FERC has also “confirmed that it is devoting more resources to investigating alleged violations of the reliability standards,” according to Winston & Strawn.

And how exactly does investigation and enforcement of reliability standards work? Often FERC’s enforcement team will work together with the North American Electric Reliability Corporation (NERC) – an electric reliability organization certified by FERC to develop and enforce the reliability standards – to both investigate alleged violations and conduct proactive audits relating to compliance with these standards. (The federal rules relating to investigations can be found under 18 CFR 1B.)

Under “commission approved procedures,” NERC prepares and files Notices of Penalty (NOP), which detail violations and may include settlement agreements or other resolutions and remedies. The NOPs are then filed publicly (view NERC’s database here) with FERC, who can take further action (for instance, by initiating proceedings), or decline further review (rendering any enforcement actions or penalties within the NOP effective).

Sometimes these audits or investigations (or even self-reports of violations!) are disclosed in SEC filings. You can see some choice disclosures from 2010 below. Will the number of investigations explode in 2011? Stay tuned to knowledgemosaic and The Green Mien to find out.


Duke Energy Ohio, Inc. | Form 10-Q | 11/5/2010

In September 2008 the FERC initiated a preliminary, non-public investigation to determine if there were any potential violations by Duke Energy Carolinas of the North American Electric Reliability Council Reliability Standards. This investigation was coordinated with an ongoing Compliance Violation Investigation conducted by SERC Reliability Corporation. On March 5, 2009, FERC presented its preliminary findings about the event to Duke Energy Carolinas and solicited Duke Energy Carolinas’ responsive views about the event and the findings. On March 27, 2009, Duke Energy Carolinas conveyed its responsive views to FERC Staff. This investigation could result in penalties being assessed.


PACIFICORP /OR/ | Form 10-Q | 11/5/2010

In April 2008, PacifiCorp received notice of a preliminary non-public investigation from the FERC and the NERC to determine whether an outage that occurred in PacifiCorp’s transmission system in February 2008 involved any violations of reliability standards. In November 2008, PacifiCorp received preliminary findings from the FERC staff regarding its non-public investigation into the February 2008 outage. Also in November 2008, in conjunction with the reliability standards review, the FERC assumed control of certain aspects of the WECC’s 2007 audit. PacifiCorp has engaged in discussions with FERC staff regarding findings related to the WECC audit and the non-public investigation. However, PacifiCorp cannot predict the impact of the audit or the non-public investigation on its consolidated financial results at this time.

PPL ELECTRIC UTILITIES CORP | Form 10-Q | 10/29/2010

Since 2007, PPL Electric and certain subsidiaries of PPL Energy Supply have self-reported potential violations of certain applicable reliability requirements and submitted accompanying mitigation plans. The resolution of certain of these potential violation reports is pending. In April 2010, a PPL Electric settlement with RFC resolving four self-reported potential violations became final. PPL Electric agreed to pay a settlement amount of $290,000 and, among other things, to engage in additional vegetation clearing at a cost of approximately $7 million over the next three years. The settlement amount was paid in May 2010. The resolution of certain other self-reported matters is pending. Any regional reliability entity determination concerning the resolution of violations of the Reliability Standards remains subject to the approval of the NERC and the FERC. PPL Electric and PPL Energy Supply cannot predict the outcome of these matters.

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