NRU Timeline for Returning to Regular Meetings
Local and national news outlets are constantly discussing the status of vaccine distribution, timetables for inoculation and the reopening of the economy, so I thought it would be timely to give an update on the status of NRU. Acting with an abundance of caution in terms of safety, to ensure consistency and allow for members to plan their summers well in advance, we will be conducting all NRU group meetings virtually until at least August 2021. This includes NIU, NRU, NRU-Power Services and Post-2028 Working Group meetings. We have heard feedback from many of you regarding the desire to return to in-person meetings as soon as possible and while we agree with the urgency and very much look forward to getting together with our members, we are putting everyone’s safety at the forefront of the discussion.
We don’t want restrictions on large group gatherings to hinder the availability of NRU resources to our members. I encourage you to contact me directly to discuss opportunities for smaller group presentations or one on one engagement. I can be reached at firstname.lastname@example.org or (509) 993-4088.
Congressman Simpson Concept Update
Chatter around the Simpson concept has died down considerably over the last couple weeks. It’s reasonable to interpret the relative quiet as the concept losing momentum due to a lack of vocal support aside from a few environmental advocates, and those voices are countered by others in the environmental community speaking out against the litigation moratorium included in the concept. As in all things political, a lack of momentum does not preclude the concept from being included in the Biden administration’s planned multitrillion dollar infrastructure bill or some other vehicle and getting pushed forward by dam breaching proponents.
With that in mind, a group of public power leaders, myself included, continue meeting to dissect and discuss the Simpson concept. It bears repeating that no one meeting to discuss the concept supports breaching of the four lower Snake River dams. This small group has also unanimously agreed that identifying a solution to end the unsustainable repetitive pattern of litigation and the resulting losses in generation due to court ordered river operations, is crucial to stabilizing both the amount of our future power supply from the federal system and the cost of that supply. As I have written previously, this is a problem that needs resolution.
Release of the Simpson concept and the attention garnered by it has created an opportunity for public power to do what we do best and that is to solve a problem. While we haven’t yet identified a specific solution to the problem of salmon versus the lower Snake River dams, we do know that we will need the engagement and help of the Northwest delegation. To that end, the aforementioned group is working on drafting a letter to the Northwest delegation engaging them in the conversation and asking for their help in solving this long running problem. This small group wants to be as inclusive as possible from both an effectiveness perspective (strength in numbers) and from ensuring that all in public power are included in this important conversation and NRU members will have the opportunity to sign the letter when it is ready. I anticipate drafting of the letter will be completed in the next couple of weeks.
BPA and the Energy Imbalance Market (EIM)
During the EIM Implementation workshop this week, BPA shared a number of updates, two of which are particularly relevant to NRU members and are summarized below. Comments on these issues are due March 30th. Initial thoughts from staff are noted below. Given the short turnaround, please send any reaction to staff’s initial thoughts to Megan (email@example.com). We will share the draft comments via the Portland Update next week, but that will only give a few days for revisions and we want to ensure we capture your feedback.
Greenhouse Gas (GHG) Accounting in the EIM
Given the current accounting procedures in the EIM, there is no explicit link between individual resources and loads. As a result, any EIM purchase imported into a Balancing Authority Area (BAA) is considered an unspecified market purchase. Depending on a utility’s regulatory requirements, unspecified market purchases are often assigned an assumed GHG emissions factor. Generally, the emissions factor is about 0.428 MT CO2e/MWh.
In order to capture value from its clean resource mix, BPA has the designation of an “Asset Controlling Supplier” (ACS), meaning it calculates its carbon emissions on an annual basis. BPA’s ACS rate varies based on the amount of unspecified market purchases it has to make due to the water year conditions but is still extremely low compared to other systems.
When California Air and Resources Board (CARB) calculates BPA’s ACS rate, it will count BPA’s purchases from the EIM as unspecified market purchases. All else equal, that will increase the carbon emissions in BPA’s ACS rate. BPA does not know the amount of EIM purchases it may make but notes that most hydro utilities have captured value by purchasing from the EIM and holding water for higher value periods.
BPA shared projections that its emissions factor might double due to a high level of assumed EIM purchases. To be clear, BPA’s ACS rate doubling would still yield a very low rate, but this is something we need to be aware of due to utilities’ different regulatory environments.
Any EIM Entity has the option to “turn on the flag” to sell into California, which then requires carbon compliance payment for that sale. BPA’s analysis shows a net financial benefit from selling into California, even after paying the carbon compliance cost. Again, depending on a utilities’ regulatory environment, the increased ACS carbon emissions rate may or may not be something that can be “financially bought down.” This is something we need to consider carefully.
Given the importance of maintaining a clean BPA system, NRU staff believes BPA needs to consider customer impacts both now and into the future as carbon regulations evolve.
Proposed NRU comments:
Maintaining the “cleanliness” of BPA’s system is important for customers, particularly those subject to regulation like Washington with the Clean Energy Transformation Act. This must be considered now and in the future.
It is unclear what the net effect to BPA’s carbon emissions will be if BPA participates in the EIM. For example, will EIM purchases offset bilateral purchases? Or will EIM purchases be incremental, thus increasing the amount of unspecified purchases in BPA’s system mix?
Likewise, it is unclear whether the assumed financial offset will work for customers and is dependent on their regulatory requirements.
Given these uncertainties, we recommend that this question be addressed in the Phase V Close-Out Letter. This will allow a more thorough discussion of the costs, benefits and risks, and provide documentation of the discussion. We also ask that BPA keep customers regularly apprised of how its (assumed) participation in the EIM is impacting its carbon emissions; the Quarterly Business Review could be a viable forum.
EIM Phase V Close-Out Letter
Several years ago, NRU, along with others in public power, worked hard to get BPA to agree to have a “final decision” to join the EIM after the BP-22 rate case ended so we could consider all relevant information together. BPA eventually agreed and proposed a “Phase V Close-Out Letter” to be released October – December 2021. BPA then changed this timeline to allow the CAISO to file the EIM Entity agreement with FERC by October 1, 2021. BPA’s revised timeline is to post its Draft Phase V Close-Out Letter on August 2nd, with a three-week public comment period, closing on August 20th. Bear in mind, the Final Records of Decision in the BP-22 and TC-22 proceedings will be published just five days earlier, on July 28th.
NRU staff is extremely concerned that BPA is not providing a legitimate “Phase V Close-Out Letter” process to truly consider all information holistically before making the decision to join the EIM. This compressed timeline also seems to close the door on whether BPA should update its cost/benefit analysis, received from E3 consulting in June 2019. BPA staff said they would evaluate in July whether to update the business case. If you find yourself scratching your head with how that timing fits in with the publication of the draft Phase V Close-Out Letter on August 2nd, rest assured, you are following along just fine.
When asked, BPA staff said they would not be considering the recent SPP announcement of a proposal for a competitive market to CAISO as part of their decision-making process on whether to join the EIM.
Proposed NRU Comments:
Express concern over the lack of holistic consideration of all information gathered in the last year and a half to inform the Phase V decision to join the EIM or not.
Express the need to discuss, outside of the constraints of ex parte, the rate case decisions regarding forecasted EIM dispatch benefits and the applicability of the E3 cost/benefit analysis.
Post-2028 Kick-Off Meeting with BPA and Public Power
Yesterday, the PPC Rates and Contracts forum held its first meeting focused on post-2028 BPA power contracts. For the first two hours, BPA staff shared their initial thinking regarding process during 2021 and proposed high-level leanings (which are attached). The last hour was a public power only strategizing session. BPA staff is looking for feedback by April 8th on the following post-2028 “interests” and “foundational tenets.”
Lowest Tier 1 Costs and Tier 1 Rates
Customer/Regional Support and Equity
Certainty of Obligations for All Parties
Promote Infrastructure Development Consistent with the Northwest Power Act
Consistency with BPA Stewardship Obligations
Advancement of National and Regional Objectives
1. Standardized contracts offered over a consistent term length.
2. A long-term contract term and rate structure.
3. Provider of Choice product offerings of Load Following, Block, and Slice/Block.
4. Continue to utilize a tiered rate structure and a TRM.
NRU’s Post-2028 Working Group will discuss the BPA proposal during our March 30th meeting and we will share its recommendation(s) on how to proceed with the broader membership via the Portland Update.
There seems to be interest within public power to work together to draft a “public power post-2028 proposal” to advance to BPA. It is unclear the scope of such work product, but PPC staff took on the task of developing a workplan and timeline. The idea is for public power to bring our thoughts to BPA instead of waiting for them to issue a concept paper at the end of the calendar year. This idea should sound familiar as it has been the plan of NRU since November 2019 when we announced formation of the NRU Post-2028 Working Group and intentions for utilization of that group.
NRU staff continue to use the NRU principles and policy positions in our conversations within public power and with BPA. NRU staff have already had one-on-one conversations with a number of public power entities, including EWEB, PNGC, PPC, Snohomish PUD, Tacoma and WPAG, and have more scheduled. We will continue to work with the Post-28 Working Group to analyze issues and develop strategies and bring recommendations to the NRU Board for direction. Entities engaged by NRU have been appreciative of our collaborative efforts and receptive to our principles and positions.
Parties File Rebuttal Testimony in Bonneville’s Rate Proceedings
On Tuesday, parties to Bonneville’s BP-22 rate case filed testimony rebutting other parties’ earlier-filed direct testimony. Per direction from the Board of Directors, NRU sponsored rebuttal testimony urging Bonneville to eliminate the Utility Delivery segment for transmission rates, include associated costs in the Network rate, and therefore avoid the proposed 29% increase to the Utility Delivery Charge in the BP-22 rate period. NRU’s testimony is attached to this update.
Other parties to the BP-22 case filed testimony on revenue financing, EIM costs and benefits, transmission losses, fish and wildlife costs, and other issues.
In the TC-22 case, Bonneville and other parties have also filed rebuttal testimony. Among the filings is a detailed response to NRU from Bonneville on Seller’s Choice. In summary, BPA rejected NRU’s arguments that we put forward in our direct testimony that challenged the transmission planning and capacity usage arguments that BPA has made over the last year. To be blunt, we found BPA’s rebuttal testimony to lack any real substance.
NRU staff is reviewing rebuttal testimony from all parties and developing strategy for the briefing stage of the rate cases. Briefs are due in TC-22 on April 16 and in BP-22 on April 27. We will schedule a webinar with NRU Members in the coming weeks for input and direction on drafting NRU’s briefs in the rate cases.
Public Power Comments on the California ISO Governance Review Committee’s (GRC’s) Proposal to Bifurcate and Delay Changes to EIM Governance
This week, NRU and the Public Power Council (PPC) joined forces to draft and deliver verbal comments to the GRC in response to the GRC’s proposal to bifurcate the process and schedule for making changes to the California EIM governance structure. Under the proposal, the GRC would advance on schedule, less controversial changes to the governance structure but would delay and create further process for consideration of the creation of a joint authority governance between the CAISO Board of Governors and the EIM Governing Body.
NRU and PPC comments noted that, together, we represent nearly all of Bonneville’s preference customers, expressed understanding for the interest in more stakeholder engagement, and stated that:
Agreed-upon portions of the proposed changes to EIM governance should be advanced and implemented as soon as possible;
We cannot assess the whole of the governance changes until the joint authority issue is resolved;
Delays will impact our assessment of Bonneville’s decision to join the EIM;
We will assess governance issues in light of the recent proposal from the Southwest Power Pool to create an alternative organized market in the Northwest; and
We support action on the delegation of authority issue as soon as possible.
A written version of our verbal comments is attached to this update. As a follow up, next week we will be meeting with John Prescott, the current Chair of the EIM Governing Body.