City Light Opposes Federal Rule Favoring Coal, Nuclear Power

Seattle City Light is opposing a proposed federal rule change that would provide higher prices for baseload electricity generated by coal and nuclear power plants for reliability and resiliency attributes the U.S. Department of Energy claims they provide.

Seattle City Light is opposing a proposed federal rule change that would provide higher prices for baseload electricity generated by coal and nuclear power plants for reliability and resiliency attributes the U.S. Department of Energy claims they provide.

While the proposed rule does not apply to City Light at this time, the utility filed comments to preserve our interest in regulatory proceedings that might affect how we do business.

City Light believes the process to develop this rule so far has been insufficient for thoughtful engagement by stakeholders. The utility also believes the rule sets narrow solutions that do not adequately address the country’s needs.

Here is the full text of the comments City Light submitted:

UNITED STATES OF AMERICA

BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION

Grid Reliability and  

Resilience Pricing

Docket No. RM18-1-000

 

COMMENTS OF THE CITY OF SEATTLE OPPOSING THE GRID RELIABILITY AND RESILIENCE PRICING RULE

Pursuant to the Notice Inviting Comments on Grid Reliability and Resilience Pricing in Docket No. RM18-1-000 of the Federal Energy Regulatory Commission (Commission) filed on October 2, 2017, The City of Seattle, by and through its City Light Department (Seattle), hereby respectfully submits these Comments of The City of Seattle Opposing the Grid Reliability and Resilience Pricing Rule in the above docket. Seattle appreciates the opportunity to offer comments on the proposed rule.

  1. BACKGROUND

The City of Seattle is a Washington municipal corporation that operates a municipal electric utility, through its City Light Department, which is governed by the Seattle City Council. Seattle’s principal place of business is located at the Seattle Municipal Tower, 700 Fifth Avenue, Seattle, WA 98124-4023. Seattle is not a public utility as defined by the Federal Power Act Section 201(f) (16 U.S.C. § 824(e)).

Seattle is dedicated to delivering its customers affordable, reliable and environmentally responsible electricity service. Seattle operates one of the largest publicly-owned utilities in the United States in terms of customers served, providing retail electric service to nearly 450,000 residential, commercial, and industrial customers in the Puget Sound area and thus serving nearly 1 million Seattle-area residents. Seattle’s customer rates are among the lowest of any urban electric utility.

Seattle owns and operates a transmission system consisting of more than 650 miles of transmission lines and towers connected to the utility’s five hydroelectric generation facilities. Reliable load service is at the core of Seattle’s mission, and a reliable transmission grid is essential to our ability to meet load service. Seattle’s power resources are 90 percent hydropower, much of which is owned and operated by Seattle. Additionally, Seattle operates its hydroelectric projects to support flood control, instream flows for fish, and reservoir recreation. Seattle’s total system generation capability was 2,014.1 MW in 2016. Notably, in 2005, Seattle became the first utility in the nation to achieve net-zero carbon dioxide emissions by fully offsetting emissions created by day-to-day operations and market power purchases to supplement its hydroelectric generation.

  1. COMMENTS

On September 28, 2017, the Secretary of the Department of Energy (DOE) submitted a proposed rule to the Commission addressing Grid Reliability and Resilience Pricing, and the formal proposal was published in the Federal Register on October 10, 2017 (proposed rule). The proposed rule published in the Federal Register limited the scope to independent system operators and regional transmission organizations (ISOs/RTOs) with energy and capacity markets, and Seattle has determined it is not subject to this narrowed rulemaking. However, Seattle has an interest in regulatory proceedings that may affect how it does its business, its wholesale electricity market transactions, and which might subsequently be imposed upon Seattle’s interests, as well as a greater interest in market, resource, reliability and resiliency issues throughout the nation. Additionally, decisions that apply to organized capacity markets may influence Commission approval of bilateral contracts that Seattle may seek in the future. Seattle is providing comments because it believes the proposed rule is problematic due to: (1) the inadequate process and insufficient time allowed for the development of a robust record with thoughtful engagement by stakeholders, and (2) the narrow solution this rulemaking sets forth that inadequately addresses regional and state market differences and needs.

Seattle supports the comments filed contemporaneously by the Large Public Power Council (LPPC), the American Public Power Association (APPA), the Clean Energy Group (CEG), and the National Hydropower Association (NHA) organizations to which Seattle belongs.

  1. The process to examine resiliency attributes of energy resources and infrastructure must be a deliberative one to develop a robust record with meaningful stakeholder participation.

DOE directed the Commission to act within 60 days of publication of the proposed rule in the Federal Register, or to issue an interim final rule immediately with modifications to the rule after receiving public and stakeholder comment. This short and aggressive period is insufficient to provide a reasonable opportunity for meaningful input from stakeholders and to examine the complex and important issues the proposed rule seeks to address, including pricing of generation and supporting grid reliability and resilience. Although Seattle agrees with the importance of addressing regulatory matters on a timely basis, the timeframe is unnecessarily hurried and the urgency with which DOE sets out to examine the proposed rule is not apparent and needs further scrutiny.

In August 2017, DOE released a Staff Report to the Secretary on Electricity Markets and Reliability (DOE Staff Report). The DOE Staff Report pointed out that there is a limited understanding of the best way to define and value grid resilience, noting that “[m]arkets recognize and compensate reliability, and must evolve to continue to compensate reliability, but more work is needed to understand what can be done to maintain resilience.”

1 By filing the proposed rule with the Commission, DOE ignores the recommendation of its own Staff to further research and review this subject.

The DOE Staff Report also finds that “[p]resently, BPS reliability is adequate despite the retirement of a portion of baseload capacity and unique regional hurdles posed by the changing resource mix.”2 Notably, the North American Electric Reliability Corporation (NERC) issued its 2017 State of Reliability Report in June 2017, which also found “the BPS provided an adequate level of reliability.”3 NERC President and Chief Executive Officer Gerry Cauley also testified at a FERC Reliability Technical Conference on June 22, 2017 that “the state of reliability in North America remains strong, and the trend line shows continuing improvement year over year.”4 The DOE proposed rule runs counter to the DOE Staff Report and NERC findings issued within the past few months.

Seattle urges the Commission to decline to adopt DOE’s proposed rule and close this docket, and initiate a new proceeding with a technical conference to allow stakeholders an opportunity to discuss a framework for ISO/RTO resiliency assessments to examine regional needs and basis for regional solutions. This will allow the Commission sufficient time to build a robust record for thoughtful and meaningful participation by interested parties.

 

1 Staff Report to the Secretary on Electricity Markets and Reliability, Department of Energy, August 2017, page 12 (DOE Staff Report, p. 12).

2 Id. at p. 11.

3 State of Reliability 2017 Report, North American Electric Reliability Corporation, June 2017, page vi (Executive Summary).

4 FERC Reliability Technical Conference/Panel I: Overview on the State of Reliability, Remarks of Gerry Cauley, President and CEO of the North American Electric Reliability Corporation, North American Electric Reliability Corporation, June 22, 2017, page 1.

  1. The subject of resiliency is better suited for regional consideration, with deference to State and local authorities to establish resource preferences and Integrated Resource Planning framework.

Resilience can be supported by a wide range of existing and emerging technologies; resilience services and products should be developed in a way that encourages participation by a broad range of resources, including generation, as well as other grid assets.

  1. Resources utilized for their resiliency attributes must be examined from a goals-desired basis and should not be resource-specific focused.

DOE clearly sets out to compensate what it pre-determines to be baseload resources, generally coal and nuclear generation, to support its position that reliability and resiliency of the grid is threatened due to lack of appropriate compensation for these resources. By narrowly defining which resources DOE believes impact the grid’s reliability and resilience, DOE fails to properly begin its analysis in examining generating resource attributes that actually support grid reliability and resilience. Seattle urges the Commission to focus on the attributes of resources and the goal of strengthening the grid’s reliability and resiliency, and to remain technology neutral rather than working to compensate specific resources. The proposed rule is incompatible with the foundational principle of organized electric market pricing whereby buyers and sellers bid at marginal cost and the market operator selects the least-cost stack of resources required to meet loads at the lowest-priced service. If the Commission approved the rule as proposed, it would be acting in an unduly preferential manner to the benefit of a very limited number of suppliers, and their fuel suppliers, when the industry has shown it is able to operate reliably with many and diverse fuel sources.

  1. State resource preferences and Integrated Resource Planning processes effectively establish and guide generating solutions for utilities.

Seattle uses its Integrated Resource Plan (IRP) process to ensure an adequate supply of resources to reliably meet the needs of our customers. The IRP looks out over a 20-year period, and evaluates risks associated with supply resources. Any single resource does not necessarily provide reliable service as that resource is subject to single point(s) of failure. A diversity of supply resources, including fuel type and location, increases the reliability of load service. The proposed rule would add costs for customers without any identified benefits to utilities’ resource mixes, and interferes with the right to identify and pursue a resource portfolio that meets customers’ needs at the lowest reasonable cost.

  1. Seattle is committed to meeting its customers and City Council expectations for carbon neutrality, while maintaining an affordable and reliable power system.

In April 2000, the City Council set a long-term goal for Seattle to achieve greenhouse gas neutrality while meeting all electricity needs of Seattle’s customers. In 2005, Seattle became the first utility in the nation to achieve net-zero carbon dioxide emissions by fully offsetting emissions created by day-to-day operations and market power purchases to supplement its hydroelectric generation. Seattle has maintained this carbon neutral status every year since, and intends to continue to pursue clean energy with renewable resources, energy efficiency and offsets.

Seattle uses hydroelectric resources for the majority of the power it provides, which is one reason its greenhouse gas emissions are so low. Seattle’s carbon emissions are further reduced by its aggressive energy efficiency and conservation programs, which help customers save energy and money. Renewable energy projects have been added to Seattle’s resource mix, including wind, landfill methane, and wood biomass energy. As discussed above, Seattle has adopted an IRP that relies on only new renewables and energy efficiency to meet future load growth. Our City Council approves of Seattle’s resource mix to assure reliable load service. The Commission should respect local and state resource planning requirements in its consideration of this issue, and reject the proposed rule as an undue restriction on utilities’ ability to pursue the resource path that best meets the needs of their customers.

  1. Proceedings that provide a direct incentive to coal resources without consideration of the detrimental impact on long-term grid resilience are ill-advised.

Seattle believes it is important to consider the reliability impacts of not taking significant steps to address climate change. Climate change poses risks to grid resiliency, with impacts that include greater severity of storms, sea level rise, extreme drought in some areas as well as increased heavy precipitation in other areas, and risks to infrastructure from wildfires due to hotter and more extreme temperatures. These impacts of climate change increase the stress on grid operations and infrastructure and require system adaptation to maintain reliability, resiliency and safety.

Specific impacts of climate change on mountain snowpack and glaciers that supply much of the water for Seattle’s hydroelectric projects pose a threat to Seattle and the region’s ability to continue to prosper in coming years. Since the middle of the 20th century, snowpack in the mountains of Washington alone has declined by approximately 25 percent. Further, snowmelt in our region is now occurring earlier than in past years, resulting in changes in the timing of hydropower generation throughout the year.

In response, Seattle created a Strategic Plan that established a Climate Initiative with two primary objectives: (1) research the impacts of climate change on the utility, and (2) develop an adaptation plan with strategic actions to mitigate such impacts. A changing climate is one major consideration in designing the utility of the future, and climate change adaptation is critical to electric utility preparedness, readiness and resilience. Seattle’s Climate Change Adaptation Plan

5 describes changes in the climate that could affect five aspects of its operations and infrastructure: shoreline properties, hydroelectric project operations, electricity demand, transmission and distribution, and fish habitat protection and restoration.

Seattle is one of 18 electric utilities in the nation that participated in DOE’s Partnership for Energy Sector Climate Resilience, where utilities expressed a commitment to increasing resilience to climate change. These utilities represented approximately 20 percent of the nation’s generating capacity and 25 percent of all customers within the United States. In its consideration of grid resiliency, the Commission should address threats to infrastructure that are associated with climate change, and Seattle urges the Commission to consider the reliability impacts of not taking significant steps to address climate change.

In sum, Seattle believes resilience planning, including modifications to markets that may be required to appropriately price resilience services, must occur through a more meaningful and thoughtful process that allows for full consideration of the relative issues and solutions.

5 Seattle City Light Climate Adaptation Plan Executive Summary is available at: http://www.seattle.gov/light/enviro/docs/Executive_Summary_Climate_Adaptation.pdf. Seattle City Light Climate Change Vulnerability Assessment and Adaptation Plan is available at: http://www.seattle.gov/light/enviro/docs/Seattle_City_Light_Climate_Change_Vulnerability_Assessment_and_Adaptation_Plan.pdf.

III. CORRESPONDENCE AND COMMUNICATIONS

All comments, materials, and other communications regarding the above-captioned proceedings in general should be served on the following individuals:

Catherine Leone-Woods

Director of Regulatory Compliance

Seattle City Light

700 Fifth Avenue

P.O. Box 34023

Seattle, Washington 98124-4023

 

Melissa Skelton

Regulatory Affairs Advisor

Seattle City Light

700 Fifth Avenue

P.O. Box 34023

Seattle, Washington 98124-4023

  1. CONCLUSION

For the reasons set forth above, Seattle respectfully requests the Commission decline to adopt the Grid Reliability and Resilience Pricing Rule, close this docket, and initiate a new proceeding with a technical conference to allow stakeholders an opportunity to discuss a framework for ISO/RTO resiliency assessments to examine regional needs and a basis for regional solutions. Seattle appreciates the opportunity to comment and respectfully requests that the Commission consider these comments.

Respectfully submitted this 23rd day of October, 2017.

/s/ Catherine Leone-Woods

Catherine Leone-Woods

Director of Regulatory Compliance

Seattle City Light

700 Fifth Avenue

P.O. Box 34023

Seattle, Washington 98124-4023