Consumers Energy AUG 7 2014 Waiver App.Pdf
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20140807-5167 FERC PDF (Unofficial) 8/7/2014 4:47:30 PM UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION ) Consumers Energy Company, ) Docket No. EL14-____-000 ) CONSUMERS ENERGY COMPANY’S REQUEST FOR WAIVER 20140807-5167 FERC PDF (Unofficial) 8/7/2014 4:47:30 PM TABLE OF CONTENTS Page I. EXECUTIVE SUMMARY .................................................................................................2 II. DESCRIPTION AND BENEFITS OF ALTERNATIVE PROPOSALS ............................3 1. Planned Outage ........................................................................................................3 2. Waiver of Must-Offer and Requirements to Purchase Replacement ZRCs ..................................................................................................3 3. Replacement ZRCs for Period in Question Only .....................................................4 4. Financial Payment ....................................................................................................4 III. ISSUE AND PROPOSED SOLUTIONS ...........................................................................4 A. The Classic Seven ...................................................................................................4 B. The 6.5 Week Disconnect .......................................................................................5 C. Consumers Energy Cannot Continue to Operate the Classic Seven on Coal Beyond April 16, 2016 ...............................................................................6 D. The MISO Resource Adequacy Tariff Requirements Are Unjust and Unreasonable in Relation to the 6.5 Week MATS Issue .................................9 E. Consumers Energy’s Proposed Options to Remedy the 6.5 Week Disconnect ..................................................................................................14 1. The Classic Seven Participate in 2015-2016 Planning Reserve Auction and MISO Considers the 6.5 Weeks Difference as a Scheduled Outage ......................................................................................15 2. The Classic Seven Participate in 2015-2016 Auction and the Commission Grants Waivers to the Must-Offer Requirements for the 6.5 Week Gap and for the Requirement to the Purchase Replacement ZRCs ...................................................................................16 3. The Classic Seven Participate in 2015-2016 Auction and the Commission Requires Consumers Energy to Purchase ZRCs: (1) Only for the 6.5 Week Period and (2) Only if They Are Available ...................................................................................................17 i 20140807-5167 FERC PDF (Unofficial) 8/7/2014 4:47:30 PM TABLE OF CONTENTS (continued) Page 4. The Classic Seven Participate in 2015-2016 Auction and the Commission Requires Consumers Energy to Pay a 6.5 Week Deficiency Charge if ZRCs are Not Available .........................................18 IV. THE PROPOSED REMEDIES MEET THE COMMISSION’S STANDARD FOR GRANTING WAIVER .....................................................................19 A. Good Faith ............................................................................................................20 B. Limited Scope .......................................................................................................21 C. Concrete Problem ..................................................................................................21 D. Undesirable Consequences ...................................................................................22 V. REQUESTED DATE ........................................................................................................23 VI. COMMUNICATIONS .....................................................................................................23 VII. CONCLUSION .................................................................................................................24 Attachment A Testimony of David F. Ronk, Jr. ii 20140807-5167 FERC PDF (Unofficial) 8/7/2014 4:47:30 PM UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION ) Consumers Energy Company, ) Docket No. EL14-____-000 ) CONSUMERS ENERGY COMPANY’S REQUEST FOR WAIVER Pursuant to Rule 207(a)(5) of the Rules of Practice and Procedure of the Federal Energy Regulatory Commission (“FERC” or the “Commission”),1 Consumers Energy Company (“Consumers Energy”) respectfully requests a limited, one-time waiver of certain provisions of the Open Access Transmission, Energy and Operating Reserve Markets Tariff (“Tariff”) of the Midcontinent Independent System Operator, Inc. (“MISO”). Consumers Energy specifically requests a waiver to promote reliability and prevent unjust and unreasonable costs to customers that, absent relief, will occur due to the interplay of the United States Environmental Agency (“EPA”) Mercury and Air Toxics Standards (“MATS”)2 and the MISO Tariff Resource Adequacy Requirements as they pertain to seven of Consumers Energy’s coal fuel units with a combined name plate capacity of 940.7 MW, collectively known as the “Classic Seven,”3 during the 2015-2016 Planning Year.4 1 18 C.F.R. § 385.207(a)(5) (2013). 2 National Emission Standards for Hazardous Air Pollutants from Coal-and Oil-fired Electric Utility Steam Generating Units and Standards of Performance for Fossil-Fuel-Fired Electric Utility, Industrial-Commercial Institutional, and Small Industrial-Commercial-Institutional Steam Generating Units, available at http://www.gpo.gov/fdsys/pkg/FR-2012-02-16/pdf/2012-806.pdf (last visited Jun. 20, 2014). 3 The Classic Seven consist of: J.C. Weadock Unit 7 – Nameplate Capacity 151 MW; J.C. Weadock Unit 8 – Nameplate capacity 151 MW; B.C. Cobb Unit 4 – Nameplate Capacity 156 MW; B.C. Cobb Unit 5 – Nameplate Capacity 156 MW; J.R. Whiting Unit 1 – Nameplate Capacity 101.2 MW; J.R. Whiting Unit 2 – Nameplate Capacity 101.5 MW; and J.R. Whiting Unit 3 – Nameplate Capacity 124 MW. 4 Capitalized terms not otherwise defined herein have the meanings ascribed thereto in section 1 of the MISO Tariff. “Planning Year” is defined as “[t]he period of time from June 1st of one year to May 31st of the following year that is used for developing Resource Plans.” 1 20140807-5167 FERC PDF (Unofficial) 8/7/2014 4:47:30 PM I. EXECUTIVE SUMMARY The EPA’s MATS rule imposes emissions limitations that the Classic Seven would be required to meet as of April 16, 2016. The cost of bringing the Classic Seven into compliance with MATS cannot be justified and, as a result, Consumers Energy will be suspending the operations of the Classic Seven no later than that date. The MISO Tariff, on the other hand, has requirements that run over a Planning Year from June 1 through May 31 of the subsequent year. If the Classic Seven are to be considered Capacity Resources by MISO during the 2015-2016 Planning Year, the current MISO rules would require the Classic Seven to be available for service for the entire Planning Year through Mary 31, 2016, even while the EPA MATS compliance is the inventive for suspending operations 6.5 weeks earlier. Absent a waiver of certain MISO rules as they apply to the Classic Seven or modification to those rules pursuant to a complaint, there are no economically reasonable alternatives for Consumers Energy to pursue. Consumers Energy may not withhold the Classic Seven from offering into the MISO Planning Reserve Auction for the 2015-2016 Planning Year. According to MISO’s interpretation of its Tariff, Consumers Energy is not permitted to declare a forced or scheduled outage for the 6.5 week period even though it is obvious that the EPA MATS rule is the cause of the suspension of operations. There is no mechanism within the MISO Tariff that ensures that Consumers Energy will be able to buy replacement capacity through the auction to cover the 6.5 week period. Instead, Consumers Energy could have to purchase replacement capacity for the Planning Year at a cost of between $5.8 million to $84.8 million. As a result, Consumers Energy would have far more capacity in its own generation fleet and under contract than it needs for 45.5 weeks of the Planning Year prior to the date operation of the Classic Seven is suspended including both summer and winter peak periods, just so that it can 2 20140807-5167 FERC PDF (Unofficial) 8/7/2014 4:47:30 PM cover the fixed capacity obligation during the 6.5 weeks of spring when the need for capacity is far lower. In this Request for Waiver, Consumer Energy proposes four alternative approaches to address this 6.5 week gap caused by the disconnect between EPA’s compliance deadline and MISO’s Tariff requirements. Each of those is discussed in greater detail below.5 II. DESCRIPTION AND BENEFITS OF ALTERNATIVE PROPOSALS To address the problem created by the 6.5 week gap between the MATS retirement deadline and the end of the 2015-2016 Planning Year, Consumers Energy proposes that the Commission implement one of the following four options: 1. Planned Outage: The Commission should waive the portion of the MISO Tariff that would bar Consumers Energy from declaring the Classic Seven to be on an outage for the 6.5 week period at the end of the 2015-2016 Planning Year. Consumers Energy respectfully suggests that this is the best option available to obtain the benefits of the Classic Seven’s continued operations until forced to suspend operations by the EPA MATS rule. Under Section 69.A.5 of the MISO Tariff, the “must offer obligation does not apply to the extent that the Capacity Resource