AUSenergy News Update 07/17/2014
Jul 17, 2014

In today’s AUSenergy News Update: Iowa Supreme Court rules solar energy company did not act as a public utility, FERC order 745 rehearing, and harsh winter leaves natural gas inventories low.

Iowa Supreme Court rules solar energy company did not act as a public utility

Summary: The Iowa Supreme Court ruled that Eagle Point Solar did not act as a public utility when it attempted to enter a third-party power purchase agreement (PPA) with the city of Dubuque. Alliant spokesperson, Justin Foss, stated, “If PPAs become prevalent, it could create a financial strain that might have to be passed on to the customer…The financing model, and the rate model, that Iowa utilities use is that the costs for the entire system are divided out among all the kilowatt hours that the customers use…When people use less of those energy units, you have a smaller pool by which to divide all of those costs for the power pole, for the power line, for the power plant, for the employee.”
AUS Comment: Alliant spokesperson, Justin Foss’s comments regarding the possibility of passing costs onto customers if PPAs become too prevalent, point to the fact that utilities, such as Alliant Energy, perceives PPAs as a threat to their monopoly utility business model. As other disruptive forces such as distributed electric generation and energy efficiency continues to grow, it’s becoming increasingly apparent that the old monopoly utility business model will not work in the future.

FERC order 745 rehearing

Summary: FERC and PJM are seeking a rehearing of a US Court of Appeals decision which effectively invalidated FERC Order 745. The Order mandated that demand response be fairly valued in the wholesale energy market. The 2017/2018 RPM Base Residual Auction: Sensitivity Analysis revealed that if demand response were eliminated from wholesale markets, PJM capacity prices would increase, but reliability would not be threatened. However, PJM stated, “PJM does not have good options for replacing demand response capacity commitments on very short notice for the current summer, and replacing demand response capacity commitments for the next three summers (to the extent they even can be fully replaced) would likely be very costly…In January, PJM received more megawatts as load reductions than it could obtain as generation from all but the very largest generating stations.”
AUS Comment: It is well known that demand response is a method of ensuring the grid’s ability to meet electricity needs during peak demand times, and that it is far more environmentally benign than utilizing peaker power plants to do so. Order 745 provided an opportunity to deploy and motivate DR without encroaching on state rights. AUS hopes the US Court of Appeal’s decision will be reversed.

Harsh winter leaves natural gas inventories low

Summary: The persistent cold winter temperatures resulting from this previous winter’s polar vortex have depleted natural gas storage supplies. Although natural gas storage injections are the highest they’ve been in over a decade, inventories are still 27% below the five-year average. The American Gas Association and other analysts believe that gas is unlikely to rebound fully before winter. As a result, there is an increased risk of a recurrence of last winter’s pricing.
AUS Comment: With exceedingly high volumes of natural gas being injected into storage along with milder summer weather, AUS recommends locking into a fixed rate before injections stop in October.

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