MISO exec discusses transmission projects, concerns about coal retirements, natural gas supply

Representatives of the Midwest ISO (MISO) are confident about the future of the majority of the transmission projects planned within its region, saying they are based on a solid value proposition rather than speculation.

“Business cases for the [transmission] investments in the MISO footprint seem to still be sound,” Clair Moeller, MISO’s executive vice president of transmission and technology, told reporters at the NARUC Winter Committee Meetings in Washington, D.C., Feb. 4. “A lot of business cases that we’ve seen come and go have a transmission developer and a generation developer and they forgot to line up the load. If you start with the load then go to the generation developer and connect the two, things go pretty well and they stay on track.”

One project within MISO that recently derailed is the Midwest Power Transmission project (MPT). The sponsor of that project, MidAmerican Energy Holdings, announced in late January that it would no longer pursue the project but would provide no additional details about the reasons behind its decision. The MPT had been identified in the MISO’s regional generation outlet study (RGOS) planning effort.

MISO officials say the RTO’s multi-value projects (MVP) are moving forward.

“The multi-value projects are all proceeding [and were] premised on meeting some legislative requirements, so those businesses cases weren’t about developers,” Moeller said.

MISO is also grappling with other transmission as well as non-transmission issues, including seams coordination. In addition to ongoing seams issues with PJM Interconnection, they are more pressing now, with Entergy (NYSE:ETR) poised to join the organization, and with the Southwest Power Pool’s (SPP) pending market launch, Moeller said.

“It’s clear to us that seams are always going to be with us,” Moeller said. “We need to keep working the PJM seam, and it’s our hope that we can help make the seam transition easy for SPP as well. As they try to stand their market up, it’s important that we do that right so we keep things efficient.”

EPA regulations and generation challenges

The Environmental Protection Agency’s (EPA) mercury and air toxics standard (MATS) rule is causing some economic turbulence among the RTO’s generation members, Moeller said, calling it “one of the bigger issues we’re working our way through.”

According to its figures, MISO has a total 66,000 MW of coal generation in its fleet. At present, 18,000 MW are MATS-compliant, leaving 48,000 MW that still need to comply with the rules. Of those, 100 units representing a total of 36,000 MW have a plan to come into compliance, according to Moeller, and a total of 12,000 MW have announced their intention to retire by the compliance deadline of 2016.

Nearly 6,000 MW can be replaced by other generation, demand-side resources, or other qualifying resources, Moeller said. About 3,000 MW of new gas-fired generation is in its generation interconnection queue, leaving a shortfall of about 3,500 MW for the pool.

“Our job is to point out that gap; it’s up to the utilities and load-serving entities to fill that gap,” Moeller noted.

Reliability of gas supply a potential issue

With coal retirements, the demand on natural gas for electricity generation within MISO is causing concerns about demand for the commodity during the winter months; specifically, whether there will be sufficient gas available for the RTO’s 18,000 MW of gas-fired generation.

“The problem is on our winter peak; it’s going to be a coincident peak,” Moeller said. “Heat load and electric [generation] load have the same peak in the wintertime, so the question of, ‘How reliable is the gas supply?’ is a new question for the wintertime for the Midwest.”

If absolutely no gas were available for its generators, the RTO would face a supply shortfall of more than 11,000 MW over the winter of 2016.

“It’s probably not all unavailable, but it’s also probably not all available, either, so how do you pick between ‘It’s all right,’ and panic?” he asked.

While Moeller said gas suppliers have been very helpful in addressing the new challenges brought by the increasing reliance on gas brought about by lower gas prices and EPA regulations, he noted that coordination is complicated by the fact that there is no single clearinghouse for gas information.

“There are 21 different [interstate] gas pipes in the Midwest ISO’s footprint, and you have to talk to them one at a time,” he said.

The issue of adequate supply availability is further complicated by the timing around generation retirements.

The FERC tariff requires that a company give MISO a six-month notice of intent to retire; however, it typically takes between 18 and 24 months to actually make the appropriate adjustments to the grid to make it safe to retire the unit. “So the worry we have here is that people wait until the last minute, six months before the compliance deadline, to tell us they need to retire,” Moeller said.

EPA’s “fifth year” provision isn’t expected to help availability much, he added, noting that while EPA may not take action against generators that are non-compliant in the fifth year, such a generator could still be subject to third-party lawsuits. “Our asset owners aren’t very interested in getting there,” Moeller said.

The upcoming Entergy integration is expected to provide some additional generation at pivotal times, he added, noting that the Entergy footprint doesn’t get as cold as northern portions of the region in the wintertime. The lower demand, coupled with Entergy’s portfolio, which includes significant gas and nuclear generation, should provide a source of additional generation to meet winter demand.