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FERC Approves Change In Allocation Of Network Service Peak Load Opposed By Retail Suppliers

Retail Supplier Had Said Change Would Disrupt Long-Term Retail Contracts

October 16, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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FERC has approved a filing by Virginia Electric and Power Co., d/b/a Dominion Energy Virginia (Dominion) to change the calculation of Network Service Peak Load (NSPL) for transmission customers within the Dominion Zone in PJM, with FERC approving Dominion's new twelve month coincident peak (12-CP) allocation feature.

Currently, the charge for Network Integration Transmission Service (Transmission Service) in the Dominion Zone is calculated by dividing Dominion’s annual transmission revenue requirement by the load in the Dominion Zone at that zone’s annual coincident peak (1-CP) demand. PJM assigns Monthly Demand Charges to each zone according to each, "Network Customer’s individual wholesale and retail customer Zone Network Loads (including losses) at the time of the annual peak of the Zone in which the load is located."

As summarized by FERC, "Dominion states that, because billing is calculated using a single-hour snapshot of customer demand, it can result in large changes in cost responsibility from year to year depending on when the annual system peak occurs, and it incentivizes load serving entities to forecast the annual peak and intentionally reduce their load in that hour to avoid charges. Dominion argues that reducing load in this manner can significantly reduce or even eliminate a customer’s responsibility for Transmission Service charges for an entire year."

Under the revisions approved by FERC, Dominion will collect hourly load data for all Network Customers in the Dominion Zone (including applicable losses) coincident with each of the Dominion Zone’s twelve monthly transmission peaks during the twelve-month period ending September 30, and then calculate a Network Customer’s average 12-CP value by dividing the sum of the twelve coincident peak load values for that customer by twelve. The 12-CP allocation factor for a Network Customer is calculated by dividing the Network Customer’s average 12-CP demand by the sum of all the average 12-CP demands for all Network Customers. Then, each Network Customer’s NSPL is calculated by multiplying its 12-CP allocation factor by the Dominion Zone’s NSPL

Dominion's tariff will also include a process to adjust a Network Customer’s NSPL contributions daily, in the event that eligible retail customers in jurisdictions that provide retail choice change Network Customers.

FERC previously rejected the changes, without prejudice, stating that, at such time, Dominion had relied on a hypothetical situation and did not provide evidence that such cost shifts actually occurred, or were likely to occur.

Dominion re-filed the changes with additional data that Dominion said provided evidence of cost shifting and intentional reduction in demand at the 1-CP

Calpine argued that Dominion has no empirical evidence to back up its claims that the 12-CP methodology is needed to avoid improper cost shifting. Microsoft, in a protest, stated that the data Dominion provided in response to the Commission’s question does not demonstrate that customers are consistently reducing demand at the 1-CP, but shows increases and decreases in demand across days. Joint Protestors, which included industrial customers and the Virginia Committee for Fair Utility Rates, argued that the data Dominion presents merely shows that four customers had success in predicting Dominion’s 1-CP event and, therefore, curtailed, but did not unnecessarily curtail during other hours when they did not have incentive to do so.

Various protestors argued that because annual peak loads are one of the main determinants of the investment in transmission capacity in PJM, the current 1-CP approach allows customers to pay for transmission based on their contribution to the annual system peak, on which transmission system planning is based. By contrast, protestors argued that Dominion’s proposal would not link customers’ charges for transmission with their contribution to system peak load and the transmission investment needed to accommodate that peak load.

Calpine argued that Dominion’s proposal will stifle attempts by other load-serving entities to promote efficiency and cost-saving by managing their customers’ demand

Protestors argued that Dominion’s proposed methodology should be rejected because it would discourage retail competition for energy supply in Virginia. The PJM Industrial Customer Coalition stated that retail customers can currently reduce their costs by moving from Dominion’s rate structure, where peak-shaving signals are muted by Dominion’s retail tariff rate design, to a rate structure where they can realize savings by reducing demand during the annual zonal peak hour. The PJM Industrial Customer Coalition and Calpine argued that this incentive is removed by Dominion’s proposal because customers reducing their load during the annual system peak would receive approximately 1/12th the savings in NITS and other charges that they would have received under the current 1-CP methodology, thereby also reducing the incentives for retail customers to switch providers. Calpine also stated that Dominion’s proposal will disrupt long-term contracts it has entered into, as a Competitive Service Provider in Virginia, which were priced based on the assumption that Calpine would be able to manage its customers’ respective loads to help control NITS and other costs

FERC, however, approved Dominion's filing and 12-CP proposal, effective January 1, 2020, as requested.

FERC said, "[W]e find that Dominion’s proposed 12-CP methodology aligns with how Dominion conducts transmission system planning. Dominion has shown that, in the past five years, its transmission planning has changed to factor-in additional load periods because it is experiencing both winter and summer peaks, a changing capacity mix, growth of distributed energy resources, growth in renewables, and replacement of aging transmission infrastructure. Dominion explains that it has traditionally performed transmission planning to ensure reliability for all load levels that would occur during the year, but with an emphasis on summer and/or winter peak loading periods. Dominion notes that up until the last five years, the actual annual peaks were typically summer peaks, but in the last four out of five years, the actual annual peaks have been winter peaks. Dominion explains that this has resulted in a forecast of summer annual peaks for the next ten years and also consideration of the winter peaks in transmission planning."

FERC said, "Further, Dominion states that the changing capacity mix, due to significant growth in renewable resources and the retirement of fossil fuel generators, has required the need to fully assess other load periods beyond the summer and winter peaks. Dominion points to the growth of distributed generation in creating operational challenges, such as backflow occurring onto the transmission system during light load periods, which requires transmission upgrades. Additionally, Dominion notes that data center growth has a high load factor, which influences year-round monthly peaks, and that renewable generation resources are being sited in areas further away from heavy load centers, covering a broader geographic area with multiple points of interconnection. As a result, Dominion is planning more transmission level projects to address aging infrastructure and light load issues than transmission projects necessary to address the annual system peak. Dominion notes that PJM has recognized the reliability challenges associated with light load periods and has modified PJM’s RTEP process to incorporate light load methodology in power flow cases and potential new project drivers. For these reasons, we find that Dominion has demonstrated that the transmission planning process has changed from planning for an annual peak to considering the reliability needs necessary to meet changing system conditions for other periods of the year and that Dominion’s proposed 12-CP methodology, which considers monthly peak usage in all seasons, reflects the way Dominion plans its transmission system. Additionally, we are persuaded by Dominion’s arguments and data that a 12-CP methodology reduces yearly volatility in transmission charges due to seasonal peak shifts."

FERC said, "We disagree with protestors who assert that Dominion has failed to satisfy its FPA section 205 burden based on the examples of the data of the customers that are able to curtail their load during the 1-CP that Dominion provides in this filing. Protestors assert that because Dominion does not specifically identify which customers are the subjects of those examples, the Commission should, therefore, reject Dominion’s proposal ... Order No. 888 allows public utility transmission providers to adopt a different allocation provided the utility is able to reasonably demonstrate the allocation reflects its transmission system planning, which Dominion has done. For the same reason we reject VMEA’s argument that Dominion’s circumstances do not merit a different allocator than the rest of PJM because no other utility in PJM uses a 12-CP methodology. It is irrelevant for purposes of our determination here what allocation methodology other utilities in PJM are using.

"We reject arguments that Dominion’s proposal is inconsistent with the principles of cost causation. As we have found above, Dominion has demonstrated that, in the past five years, it has changed how it plans its transmission system and that its proposal is consistent with such planning. Thus, we disagree with NOVEC that there is no link between a Network Customer’s charges for transmission service, its contribution to system peak load, and the resulting investment needed to accommodate that contribution," FERC said

"While we recognize system benefits may result from voluntary load reductions, the record in this proceeding demonstrates that voluntary load reductions during the 1-CP events are obscuring the level of transmission system usage by Dominion’s customers. As detailed in the examples offered by Dominion, certain wholesale customers are voluntarily reducing demand during the 1-CP events and returning to normal levels of demand during off-peak times. This can result in Dominion not having an accurate depiction of transmission usage with which to plan the transmission system in a manner that ensures all demand can be reliably served," FERC said

"We disagree with ICC’s [PJM Industrial Customer Coalition] contention that the 12-CP method would not allocate costs based on actual use of the system during the periods most relevant for planning purposes, consistent with Commission precedent (i.e., Occidental v. PJM). In Occidental v. PJM, the Commission found PJM’s inclusion of customers’ interruptible, non-firm load for allocating transmission costs was unjust and unreasonable since access charges for use of PJM’s transmission system should be allocated to network customers based on a network customer’s actual use of PJM’s transmission system, consistent with the principle of cost causation. In the instant proceeding, Dominion is not seeking to include its customers’ quantity of interruptible, non-firm load. Rather, Dominion is modifying the frequency at which it measures system peaks, which will yield more accurate depictions of customers’ demands," FERC said

"We reject Calpine’s argument that Dominion did not demonstrate that it plans its transmission system based on the assumption that curtailed load will 'reappear' at system peak. Calpine’s argument is misplaced because it assumes Dominion still conducts transmission planning based on annual peak. As we explain above, the 12-CP method reflects Dominion’s current transmission planning, which considers system conditions for other periods of the year. Thus, we need not address Dominion’s support for this 'reappearance' issue," FERC said

"We also find ICC’s [PJM Industrial Customer Coalition] and Calpine’s concerns regarding retail choice in Virginia to be beyond the scope of this proceeding. The FPA reserves the responsibilities of retail-related matters exclusively to the states, not the Commission and therefore, we will not address these concerns here," FERC said

Docket ER19-1661

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