FERC approves one-year extension of Escanaba agreement

The Federal Energy Regulatory Commission on Aug. 13 conditionally accepted an amended System Support Resource (SSR) agreement designed to keep generating capacity of the city of Escanaba, Mich., in operation while grid upgrades are made to support a capacity shutdown.

On June 14, under section 205 of the Federal Power Act (FPA), the Midcontinent Independent System Operator (MISO) submitted an amended and restated SSR agreement between the city of Escanaba and MISO. Also on June 14, under section 205 of the FPA, MISO submitted revisions to a rate schedule under its tariff. In the Aug. 13 order, FERC conditionally accepted, effective June 15, as requested, subject to compliance filings, both requests.

The two SSR units, of 12.5 MW apiece, have been fired by coal while owned by Escanada, with plans to convert them to biomass under a new owner. In September 2012, FERC cleared Escanaba Green Energy LLC to buy these two small coal-fired units from the city of Escanaba.

In October 2012, MISO submitted the original Escanaba SSR agreement for the purpose of providing compensation for the continued availability of the SSR generating units until such time as the SSR units are no longer needed for reliability purposes.

On March 4, the commission conditionally accepted both the original Escanaba SSR agreement and the original rate schedule, allocating the costs to load serving entities (LSEs) within the ATC footprint effective June 15, 2012. On April 2, MISO filed a request for clarification or rehearing concerning the compliance directive in the Escanaba SSR order concerning section 9.G of the original Escanaba SSR agreement, and on May 3, MISO made the compliance filings directed by the commission in the Escanaba SSR order. MISO’s request for clarification or rehearing and its compliance filing are addressed in an order issued concurrently with the instant order.

Original SSR approval for Escanaba was a milestone

The original Escanaba SSR agreement was the first time MISO had used an SSR agreement in order to forestall the proposed retirement or mothballing of generating units in order to prevent a violation of reliability standards. However, under its own terms, the original Escanaba SSR agreement expired on June 14.

MISO states that it is required to annually review the SSR unit and grid characteristics to determine whether the SSR unit is qualified to remain as an SSR unit. MISO states that in accordance with a section of the original Escanaba SSR agreement, it provided Escanaba with notice on March 14 that MISO may need the SSR units for an extended period of time. MISO states that the term stated in the amended Escanaba SSR agreement reflects a one-year renewal period, beginning on June 15, 2013. MISO said the amended Escanaba SSR agreement is substantively the same as that previously conditionally approved by the commission in the original Escanaba SSR order.

Under the revised deal, MISO will continue to pay Escanaba an annual payment of $3,710,279 for fixed steam generation costs and $71.57 per MWh for each instance that MISO dispatches the SSR units for system reliability. MISO will also make applicable make-whole payments in the hours when the applicable market-clearing price is less than the dispatch price and will debit the settlement statements for each hour in which the applicable market-clearing price is above the dispatch rate.

MISO said that it evaluated options put forth by stakeholders, including the installation of capacitors as well as specific system reconfiguration recommendations, but found that none of these alternatives would resolve the reliability issues caused by the generator change of status.

MISO states that, as a result of discussions with various parties in recent months, it affirmed that due to environmental regulation issues, the Gladstone generation unit has limited availability to be utilized for reliability purposes, and remains only available for MISO to dispatch in a declared system emergency. Therefore, MISO states, consistent with its evaluation of the Gladstone generation unit in support of the original Escanaba SSR agreement, the Gladstone unit is still not a viable alternative to mitigate the reliability issues posed by the retirement of the SSR units. MISO contends that even if the restriction was released, the Gladstone generation unit has less generation capacity than the SSR units, and therefore, would still not suffice to meet the reliability need. MISO states that it also determined, consistent with its study in support of the original Escanaba SSR agreement, that there is no viable demand response alternative.

MISO added that it has determined that there are no new generation additions in the generation queue that would alleviate the need for the SSR unit and no transmission system reconfigurations, operating steps, or Remedial Action Plans available that would mitigate the subject reliability issues.

Various parties filed to intervene in these proceedings, including DTE Electric, Escanaba, ATC, Consumers Energy, Upper Peninsula Power, Wisconsin Electric Power, the Coalition of MISO Transmission Customers, Illinois Industrial Energy Consumers, the Minnesota Large Industrial Group and Wisconsin Power and Light. The industrial customers filed a protest in both dockets.

The commission said in the Aug. 13 order about its conditional approval: “[W]e find that MISO has adequately studied whether the SSR Units should continue to be designated as SSRs under its Tariff, and has reasonably determined that the SSR Units will continue to be needed to ensure system reliability for the term of the Amended Escanaba SSR Agreement. Thus, we conditionally accept the Amended Escanaba SSR Agreement, effective June 15, 2013, subject to MISO revising section 9.G of the Amended Escanaba SSR Agreement consistent with the compliance requirements set forth by the Commission in an order in Docket No. ER13-38-002 being issued concurrently with this order.”

FERC reiterated that if MISO requires further extension of the designation of the SSR units after the 12-month extension, it will once again be required to follow the SSR study and review process, including the requirement to include stakeholders in evaluating alternatives.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.