If you are new to the industry or simply want to brush up on the basics, the Federal Energy Regulatory Commission’s (FERC) consider the recently released Reliability Primer a gift. The comprehensive manual not only provides an overview of the FERC’s role in overseeing the reliable operation of the power grid, it provides a great overview of the electric power system. It should be required reading for electric utility employees, especially new hires and those with legal or regulatory responsibilities. This manual helps newcomers develop foundational knowledge in an industry riddled with acronyms and jargon. Its title, Reliability Primer, could very well have been Electricity 101 and 102.

Starting on page 10, the Primer begins with the basics, providing a detailed discussion about the three main functions of the electric system; generation, transmission and distribution. In the discussion regarding generation, the Primer explains the various types of power plants, ranging from thermal to renewables such as wind and solar. Data on energy sources is also provided. With the fracking boom, it is not surprising that natural gas is the leader with coal and nuclear rounding out the top three fuel sources.

If you want to understand the FERC’s authority under the Federal Power Act (FPA), section III of the Primer provides a detailed discussion. It explains the Energy Policy Act of 2005 and the FERC’s implementation of Section 215 of the FPA. The reader will gain an understanding of the FERC’s authority and oversight in the development and enforcement of mandatory reliability standards for the nation’s bulk power grid. The FERC states the Primer is written to be used as a traditional text or reference manual and I agree. 

Recently, the staff of the New York State Department of Public Service issued its recommendations in the Value of Distributed Energy Resources Proceeding. The 68-page report provides a comprehensive discussion regarding the compensation and valuation of distributed energy resources (DER). Among its many recommendations, the report provides that existing rooftop solar systems should continue to receive compensation under their current net energy metering (NEM) contracts for a period of 20 years from the date of initial operation. However, customers can also leave NEM and adopt the new proposed compensation method. Other recommendations include:

  • Utilities would develop fee-based, “Virtual Generation Portfolios” – a pool of new DER projects that will be developed in conjunction with private energy companies.
  • Interim measures for Community Distributed Generation (CDG) projects that are in the advanced stage of development. For a limited 90-day period, a specific amount of CDG projects can qualify for compensation under the current NEM framework in order to aid the transition to the new methodology and ensure that early CDG development can deliver on increasing DER access to all New Yorkers.
  • Distributed Generation projects, such as solar for large commercial customers, fuel cells, farm waste generators and micro combined heat-and-power would also transition to the new methodology following action by the New York Public Service Commission.
  • Behind-the-meter generation should be recognized for its environmental value and for contributing to the state’s overall Clean Energy Standard (CES) goal. 

Initial comments on the report are due December 5, 2016, with reply comments due December 19, 2016. Action by the New York Public Service Commission on these recommendations is expected in January 2017. 

The utility industry has a reputation for being stodgy and slow to innovate and change. Yet one of its main regulators is quite different. The Federal Energy Regulatory Commission (FERC) has often taken the lead when it comes to embracing technology and adopting new ways of connecting with the public. From electronic filing to webcasts of public meetings, the FERC seemed to be an early adopter. Last month, FERC did it again with the launch of “Open Access,” the podcast series. According to host Craig Cano, the goal is

“to have a conversation about FERC, what it does and how that can affect you. FERC can get very legal and very technical, so we will strive to keep it simple.”

The podcast begins by explaining what FERC does:

“… oversees the interstate transmission of electricity, natural gas and oil. FERC’s authority also includes review of proposals to build interstate natural gas pipelines and liquefied natural gas terminals, and licensing of nonfederal hydropower projects. FERC protects the reliability of the high-voltage interstate transmission system through mandatory reliability standards and it monitors interstate energy markets to ensure that everyone in those markets is playing by the rules.”

In the first episode, Mary O’Driscoll of FERC talks with Charles Curtis, the first chairman of the FERC. They take a walk down memory lane where I learned the good ole days were not always so good. The former commissioner states,

“The Federal Power Commission, before it, was a commission in significant disarray. It had a decisional process that assigned the Commission about 22,000 decisions per year, and it had a backlog of some 20 to 25 years of matters awaiting decision of the Commission.”

Ouch, I can’t imagine any business waiting that long for adjudication.

In the second episode, Ms. O’Driscoll connects us with then-commissioner Tony Clark, who reflects on his time at the Commission as he prepared to leave at the end of September 2016. Former commissioner Clark served one term at FERC, having been nominated by President Obama and sworn in on June 15, 2012. Prior to that, he served 12 years as a member of the North Dakota Public Service Commission, including a term as its president. With this being one of the most lethal presidential elections since I have been voting, it is refreshing to hear former commissioner Clark discuss FERC’s nonpartisan approach:

“When you’re talking about something as important as energy, which is critical to the safety and well-being of the nation’s economy and our people, you want to have decisions that are made in a nonpartisan, nonpolitical way. … You may disagree from time to time with commissioners on a certain issue, but it tends to not be political. It is often said around here there’s not a Republican way or a Democrat way to keep the lights on. So I think that nonpartisan nature of it makes it easy to work with people in good faith. Over the four-plus years that I’ve been here it would be difficult to find any particular pattern in terms of vote. Here was a coalition of commissioners that always voted together and here is the other side that voted together in a bloc on certain things. It never worked that way. And I think the key is you have to maintain a degree of collegiality and respect.”

Wow! The house, the senate and candidates should take note! You can listen to both episodes here.

By: Gatsheena Beauplan

What is the Quadrennial Energy Review? The QER enables the federal government to translate policy goals into a set of analytically based, integrated actions for over a four-year time period. As directed by the President, the QER is envisioned as a focused, actionable document designed to provide policymakers, industry, investors and other stakeholders with unbiased data and analysis on energy challenges, needs, requirements and barriers that will inform a range of policy options. 

The deadline for submitting comments to the Quadrennial Energy Review is July 1, 2016 – less than one week away.

The first installment of the QER examined the Nation’s infrastructure for transmission, storage and distribution, including liquid and natural gas pipelines, the grid and shared transport such as rail, waterways,and ports. It was released in April 2015. Given the critical enabling role of electricity articulated in the first installment, the Administration has determined that the second installment of the QER will develop a set of findings and policy recommendations to help guide the modernization of the nation’s electric grid and ensure its continued reliability, safety, affordability and environmental performance through 2040.

If you haven’t submitted comments yet to the second installment of the QER, you only have a few days left to make your thoughts heard.

Submit your comments today.

More information about the QER is available HERE.

Industry Wide Collaboration to Drive Solar Costs Down Through Efficient Data Exchange

By: Gatsheena Beauplan 

The Orange ButtonSM initiative has launched! As part of the U.S. Department of Energy SunShot initiative, the Orange Button initiative is designed to standardize data across the solar project lifecycle, enhance data quality, and make solar transactions more efficient.  By creating solar data standards, open marketplaces, and tools for accessing data by the private sector, Orange Button aims to improve market transparency in a self-sustaining manner.

The SGIP (Smart Grid Interoperability Panel) and partner SEIA (Solar Energy Industries Association) are tasked with organizing a wide array of market participants to drive strategy and to collect business requirements from a variety of perspectives.  Through this collaboration, collective output will be incorporated into the design and implementation of specific data tools aimed to facilitate the Orange Button objectives. To accomplish its goals, SGIP and SEIA are forming five Strategy and Business Requirements Working Groups. 

The groups include:

  • Deployment – Focused on the data needs associated with structural and electrical safety and other permitting concerns. This working group will include building code and safety standards experts, project developers, and other relevant stakeholders.
  • Financial Engaged in supporting efficient finance for projects, as well as efficient financial reporting practices during project operation. This working group will examine data practices for tax and accounting systems, streamlining information exchange between banks and developers to assess development risk, and the data exchange environment necessary to conduct effective financial asset management activities.
  • Grid Integration – Focused on the data needs for utilities, ISOs, and solar developers with regard to new utility-scale and behind-the-meter connections.
  • Real Estate – Focused on data requirements of the real estate industry (as they are relevant to solar projects) to deploy projects at various types of commercial real estate (e.g., owner-occupation of buildings, types of lease structures held by tenants).
  • Solar O&M – Focused on all data requirements behind project operations and maintenance practices and cost models.

Interested in joining one of the Orange Button Strategy and Business Requirements working groups listed above? Click the register button below:


For more information on the Orange Button initiative, click here to view the Orange Button Overview webinar that was hosted by SGIP on May 26th, 2016.

Orange Button Initiative.jpg

The Public Utilities Commission of California (CPUC) recently introduced a draft regulatory incentive proposal addressing issues regarding the utilities’ business models, financial interests and role with respect to distributed energy resources (DER) deployment. Given the potential magnitude of this rulemaking to the utilities’ business models, I suggest that utilities and other stakeholders nationwide follow this docket closely.

The pilot program is offering regulatory incentives to the state’s three large investor owned utilities (IOUs) for the deployment of cost-effective DERs. The current proposal offers a shareholder incentive for the deployment of cost-effective DERs that displace or defer a utility expenditure, based on a fixed percentage of the payment made to the DER provider (customer or vendor). Below is a quote from the order that explains the concept:

“There are two roadblocks . . . to understanding financial value. Many in the regulatory community believe that:  (1) the utility’s return on equity is the sole value driver; and (2) regulators set returns on equity at a rate equal to the cost of equity. Neither of these perceptions is correct, and understanding why is key to developing effective utility incentive mechanisms. 


Many regulatory reform discussions focus on the utility’s return on equity as the sole driver of financial value, but that does not align with the concept of investor value creation. It is not the absolute level of a company’s return on equity (r), but rather the difference between r and its cost of equity (k), that creates the value opportunity that drives the stock price. (Appendix B, p. 6)

This discussion leads to the following correction to the investment incentive proposition espoused by many:

INCORRECT:  r > 0 utilities have an incentive to expand 

CORRECT:  r > k   utilities have an incentive to expand 

  r = k   utilities are indifferent as to whether they expand

  r < k   utilities have a disincentive to expand Capital, like any other input to a production process, is not free.

This should have intuitive appeal. Does it seem likely that utilities would rush to expand their facilities if regulators allow them to earn, for example, a 2 percent return on such investment? Clearly there is some minimum acceptable level of return. The cost of capital, by definition, is that minimum return hurdle.

This corrected incentive structure should give some readers pause. Many, if not most, regulators say that they set utility rates of return equal to the cost of capital. If that condition held, utility management focused on creating value should not care whether it ever makes any plant investment. Just as buying apples for 50 cents and selling them for 50 cents creates no value for the grocery store owner, raising capital at a cost of 10 percent to invest in assets that earn 10 percent is similarly a financial wash—no matter how large the investment, it creates no investor value. (Appendix A, p. 3)” 

Comments and responses to the questions are to be filed no later than May 2, 2016. Reply comments may be filed not later than May 16, 2016. Some of the questions to be addressed are:

  • Is the proposed incentive, in the range of 3.5% grossed up for taxes, approximately correct?
  • Are there other disincentives to the deployment of DERs that this proposal does not address that should be considered at the same time? If so, please explain.  
  • Is the suggested process for identifying and approving DER projects that would generate an incentive reasonable and appropriate? How could the process be improved? 

In accordance with President Obama’s 2014 Memorandum establishing the Quadrennial Energy Review (QER), the Department of Energy (DOE) recently announced it will begin the second installment of the Quadrennial Energy Review (QER 1.2) aimed at developing findings and policy recommendations to help guide the modernization of the nation’s electric grid. According to DOE’s briefing memorandum, QER 1.2 will focus on ensuring the electric grid’s continued reliability, safety, security, affordability and environmental performance through 2040. It will include an analysis of the fundamental elements that comprise the electricity system, including end use, distribution, transmission, grid operations and planning, generation, markets, finance and security.

Stakeholders are invited to both provide their own views on key issues to be addressed, as well as to respond to any or all of the framing questions in their comments. Additional insights and recommendations for Federal action to address challenges and opportunities associated with modernizing the Nation’s electricity system are welcomed. Here is a snapshot of the Framing Questions for QER 1.2:

Distributed Energy Resources (DER): Demand Response, Distributed Generation and Distributed Energy Storage 

  • How should DER value streams be assessed from different perspectives—customer, utility and society? 
  • What are the major barriers to distributed generation deployment, including financial, technical, transactional and distribution system limitations? 
  • What policies and regulations enable demand response to support variable energy resources at utility scale?

Electricity Consumption and Energy Efficiency by Sector (residential, commercial, industrial, transportation) Status, Trends and Barriers

  • What levels and patterns of electricity consumption exist today and are forecasted for 2040 in the industrial, commercial, residential and transportation sectors?
  • What business models and methods of customer engagement have been most successful, or show he most promise, for deploying residential efficiency measures? What is the role of policy in facilitating these models and methods?  

Electricity Markets

  • What frameworks and metrics can characterize regional markets and degree of market regulation?
  • How have markets performed across different criteria since restructuring?
  • How can policy levers be employed to remove barriers in each type of market to facilitate policy goals? 
  • Are there barriers to cleaner and more efficient generation given cost of capital differences?  

Electricity Finance 

  • How sensitive are costs to inputs (commodity prices, construction costs, technology costs)?
  • How do costs change under alternate financial scenarios (interest/debt/capital)?
  • What are the end user cost distributions under alternate DG/centralized scenarios?

Electricity Valuation 

  • How are uncertainty and risk taken into account under electricity valuation practices?
  • What value streams do electricity technologies provide to the system that are or are not monetized (and to which stakeholders do they accrue)? 
  • Do grid operators and policymakers manage tradeoffs among value streams?

Jurisdiction and Regulations

  • How did existing jurisdictional boundaries and policies evolve? What are the authorities for oversight of the electricity system? What are the responsibilities vested at each level?
  • What policy levers that exist at each level that may be challenged by the growing blurring of jurisdictional lines?
  • Distribution-level planning is becoming increasingly important: DER requires utility planners to achieve better integration of transmission planning and distribution planning and coordination between the Feds and the states.  How do wholesale and retail markets complement each other (from a jurisdictional perspective)? 

Here is the schedule for public input meetings. You can visit the QER website for additional details.

Boston, Massachusetts–April 15, 2016

Salt Lake City, Utah–April 25, 2016

Des Moines, Iowa–May 6, 2016

Los Angeles, California–May 10, 2016

Austin, Texas (Date TBD)

Atlanta, Georgia (Date TBD)

All comments can be submitted here up to July 1, 2016. 

It’s a great day for the Federal Energy Regulatory Commission (FERC) and supporters of demand response. Today, the United States Supreme Court issued its decision in FEDERAL ENERGY REGULATORY COMMISSION v. ELECTRIC POWER SUPPLY ASSOCIATION ET AL., upholding the FERC’s authority to regulate wholesale demand response as well as FERCs method of compensating demand response participants. In the 6-2 decision, the Supreme Court ruled:

  • The practices at issue directly affect wholesale rates.
  • The Federal Power Act (FPA) provides FERC with the authority to regulate the wholesale electric market.
  • FERC has not regulated retail sales.
  • FERC’s method of compensating demand response participants at locational marginal pricing (LMP) is not arbitrary and capricious.
  • A contrary view would conflict with the FPA’s core purposes by preventing the use of a tool (demand response) that will curb prices and enhance reliability in the wholesale electricity market.

Today, the Federal Energy Regulatory Commission (FERC) will hold a Technical Conference to discuss policy issues related to the reliability of the Bulk-Power System from 10 a.m. –  4 p.m. The Commission will also accept written comments regarding the matters discussed at the technical conference. The Commission states that written comments regarding the matters discussed at the conference should be submitted in Docket No. AD15-7-000 on or before July 9, 2015. There will be three informative panels:

Panel I:  2015 State of Reliability Report

This panel will address the North American Electric Reliability Corporation’s (NERC) recently released 2015 State of Reliability report. Here are a few of the questions panelists will address:

  • What does the 2015 report show about the effectiveness of NERC’s reliability activities and related industry efforts? 
  • What progress has been made with respect to the recommendations in the 2014 report and what are the obstacles to continued progress? 
  • What priorities have been identified in the 2015 State of Reliability report and how are these different from the 2014 report? 
  • Does the 2015 report indicate that more resources should be directed to particular reliability risks or areas?  
  • Are there other significant issues that require analysis or changes in the planning and operation of the bulk power system during the next 1-5 years?

Panel II: Emerging Issues

This panel will tackle emerging issues such as changes to our nation’s fuel sources and power supply portfolio, federal and state policies on renewable and other resources, and new environmental regulations. Here is a sampling of the questions panel II will address:

  • What emerging issues are going to challenge NERC and industry? How are these issues being considered in long-term, seasonal and operational planning studies?  
  • What progress has been made by NERC’s Essential Reliability Services Task Force in developing new approaches to the “reliability building blocks” (voltage support, ramping capability, and frequency support) needed for reliability and for ensuring their provision as the resource mix changes? 
  • Are any changes in reliability standards or other regulatory requirements needed or appropriate?  
  • Are additional efforts needed to maintain reliability as the growth of natural gas-fired generation continues? What specific additional improvements still need to be made? 

Panel III: ERO Performance and Initiatives 

NERC identifies various evolving issues that face the bulk power system and develops initiatives to address those issues. Some of the issues Panel III will address include: 

  • Explain the feedback loop from event analysis and compliance monitoring and enforcement to standards development. 
  • What are some examples of how Standards were modified or developed as a result of bulk-power system events?
  • What are the initial results of the risk-based Compliance Monitoring and Enforcement Program? 
  • What specific improvements to reliability performance, reduction to reliability risks, and increased compliance efficiencies are NERC and the industry experiencing as a result of this initiative?

The conference will be held at:

Federal Energy Regulatory Commission
Commission Meeting Room
888 First Street, NE
Washington, DC 20426 

If you can’t get to D.C. today, a free webcast of this event is also available through www.ferc.gov.  A link is posted on the Technical Conference Event page. There you can also find panelists statements and the full agenda.   

Vice President Joe Biden recently spoke in Philadelphia to announce the release of the Quadrennial Energy Review (QER). According to a White House fact sheet, “the QER is envisioned as a focused, actionable document designed  to  provide  policymakers, industry, investors, and other stakeholders with unbiased data and analysis on energy challenges, needs, requirements, and barriers that will inform a range of policy options, including legislation.” The first installment of the QER examines how to modernize our nation’s energy infrastructure and is primarily focused on energy transmission, storage, and distribution (TS&D), the networks of pipelines, wires, storage, waterways and railroads. Each chapter provides recommendations to improve or remedy the issues discussed. At 347 pages, the QER provides an in-depth overview of the energy issues impacting our nation. If you are not interested in all of the topics or simply want to save some memory space, the Review’s homepage provides an individual PDF of each chapter. Here is a listing of the chapters:

Ensuring the Resilience, Reliability, Safety, and Security of TS&D Infrastructure

Modernizing the Electric Grid

Modernizing U.S. Energy Security Infrastructures in a Changing Global Marketplace

Improving Shared Transport Infrastructures

Integrating North American Energy Markets

Addressing Environmental Aspects of TS&D Infrastructure

Enhancing Employment and Workforce Training

Siting and Permitting of TS&D Infrastructure