Dive Brief:
- State utility regulators are urging the Federal Energy Regulatory Commission to direct the Midcontinent Independent System Operator to hold a stakeholder process to determine how to allocate costs from power plants the U.S. Department of Energy orders to run past their planned retirements.
- At the same time, the Sierra Club and five other groups asked DOE to reconsider its “emergency” orders directing Northern Indiana Public Service Co., a division of NiSource, and CenterPoint Energy to continue running three coal-fired units in Indiana totaling more than 950 MW. In the rehearing request — a possible precursor to a lawsuit — the groups contend MISO doesn’t face a resource adequacy emergency as DOE claims.
- Operating NIPSCO’s Schahfer units 17 and 18 and CenterPoint’s Culley unit 2 for 90 days under the DOE orders will cost at least $20.6 million, according to a report Synapse Energy Economics prepared for the Sierra Club, the Environmental Law and Policy Center and Earthjustice. If DOE extends its 90-day orders, the units will require about $34 million in maintenance and environmental upgrade costs, the consulting firm said.
Dive Insight:
The filings at FERC from at least 10 states and at DOE are the latest steps related to the department’s efforts to use its emergency authority under the Federal Power Act’s section 202(c) to keep power plants from retiring.
DOE last year prevented six power plants totaling about 4,300 MW from retiring. Five of the power plants burn coal. They are in Colorado, Indiana, Michigan and Washington. DOE also ordered Constellation Energy to continue running two oil- and gas-fired units totaling 760 MW at its Eddystone plant in Pennsylvania. So far, DOE hasn’t let any of its 90-day orders for those power plants lapse.
The orders claim the regions where the plants are located face a severe power shortage that constitutes an emergency, necessitating the need to keep the plants online.
Lawsuits are pending in federal court to overturn some of those orders. In part, the suits say DOE failed to show there are emergencies affecting the power systems in the Upper Midwest or the Mid-Atlantic region.
Besides legal questions around DOE’s use of its emergency authority, one of the key questions is: who will pay to keep the power plants online?
Consumers Energy — the majority owner and operator of the 1,560-MW, coal-fired J.H. Campbell plant in West Olive, Michigan — spent $164 million running the plant through its first 90-day order and part of the second one while incurring an $80 million loss, Synapse said, citing U.S. Securities and Exchange Commission filings.
The Illinois Commerce Commission on Friday asked FERC to put a pause on CenterPoint’s request to recover its costs from ratepayers for keeping its Culley unit online to give MISO stakeholders time to vet a cost recovery mechanism.
FERC in mid-August rejected similar requests for a MISO stakeholder process to determine a cost allocation plan for the Campbell power plant. As a result, costs are set to be shared across MISO’s central and northern regions.
Since then, however, the circumstances have changed, according to the ICC.
“DOE’s emergency orders are becoming routine,” the utility regulators said. “It seems likely that current 202(c) orders will be extended and that more orders are likely to be issued, potentially for years. The likely frequency and length of these orders … is crucial in considering how to handle cost allocation for generating units that are unexpectedly and unnecessarily being retained on the system.”
The Organization of MISO States and the ICC made similar arguments at FERC in response to NIPSCO’s earlier request for cost recovery related to the DOE order on its Schahfer units.
“States must have a meaningful opportunity to evaluate impacts to their ratepayers and to represent those interests before the Commission reaches any final determination,” OMS said in a Jan. 20 filing at FERC.
If FERC routinely approves broad regional cost allocation for DOE’s emergency orders without showing the benefits from keeping the power plants online, utilities may be incentivized to speed up power plant retirements and “cash in” on shifting costs away from local customers and onto an 11-state region, OMS said.
“Under NIPSCO’s proposal, costs would be broadly allocated across MISO’s North and Central Subregions, including to customers and states for which no reliability benefit has been identified, including Indiana,” OMS said, noting that the PJM Interconnection had a stakeholder process to determine how to allocate costs from Constellation’s Eddystone units.
“That stakeholder-driven approach underscores a fundamental principle: meaningful engagement and transparent deliberation are essential before costs are imposed on customers, particularly where benefits are unclear or have not been demonstrated,” OMS said.
FERC should only approve a cost allocation plan that is based on “clear need and demonstrable benefits,” according to OMS. “Any such recovery must also include a detailed explanation of why existing MISO planning and cost allocation frameworks — designed precisely for evaluating regional needs and benefits — were inadequate or not followed.”
“OMS recognizes that the lack of a clear demonstration of need in DOE’s 202(c) orders has put the Commission in a position of having to approve cost allocation mechanisms where benefits may not exist or at best, are unclear,” the organization said.
The Arkansas Public Service Commission, the Indiana Utility Regulatory Commission, the Louisiana Public Service Commission, the Mississippi Public Service Commission, the New Orleans City Council and the Public Utility Commission of Texas abstained from the vote on the OMS filing.
