FERC Filings
Motion of EPSA for Leave to Intervene and Protest on Entergy's Generator Imbalance Agreement
Comments
As noted above, Entergy’s GIA proposal is extensive and the filing voluminous. Nonetheless, even a preliminary review reveals significant changes that are clearly not equal or superior to the Commission’s required OATT provisions. The area of most concern is Entergy’s GRS charge. The charge will provide Entergy with duplicative compensation and lacks parameters that generators can meet. The inflexible parameters and excessive GRS charges discriminate against competitive generators and will prevent them from effectively competing in the wholesale market.
Entergy submits that increasingly unaffiliated generators have created “an additional burden…to supply energy and capacity for others’ schedules,” and that Entergy deserves to be compensated for this service. Typically competitive generators in other regions of the country play a part in providing ancillary services that bolster reliability. Ironically, in Entergy’s GRS proposal, competitive generators are characterized as undermining system operation and reliability.
Entergy correctly asserts that its generation must respond to moment-to-moment imbalances; however, it is not true that Entergy’s generation is uncompensated. This generating capacity is already being compensated as part of Entergy’s rate-base. Any compensation received as part of the GRS would be additional compensation beyond the return Entergy has been receiving from these assets. This compensation for both the rate-based piece and the proposed levelized GRS rate include a rate of return that represents unprecedented compensation for regulation service.
On a practical basis one competitive generator can have a negative imbalance while another can have a corresponding positive imbalance, which cancels the imbalances out, thus not requiring Entergy to provide any regulation service. However, under the GRS proposal each generator’s imbalances would be tracked separately, purporting to increase the amount of regulation service that Entergy provides, but not actually requiring Entergy to do anything. Generators may end up paying a GRS charge for imbalances that Entergy doesn’t actually resolve. This makes no sense.
Competitive generators are already penalized under the GIA for imbalances, where excess energy is purchased for only a small portion of its value and deficient energy is sold to competitive generators significantly above the market price. In addition, it is likely that a generator will incur a GRS charge in the same hour it incurs GIA charge. Because of the interplay between the two charges, Entergy’s proposal creates conflicting incentives for competitive generators and could result in their being unable to avoid both GRS and GIA charges and still meet their schedules.
Every time a competitive generator attempts to run under this proposal, it faces the likelihood of a GRS charge and/or a GIA charge, while Entergy’s generation will not face similar penalties. Since many competitive generators in Entergy run to meet peaking needs and have short-run times, the excessive additional regulation and imbalance costs will discourage generators from running, since the costs will often outweigh the potential revenues. Since the GRS will cause competitive generators to sit idle more hours, Entergy’s older and less efficient generation will run more. The net effect will be less competition and higher prices for consumers.
While these fundamental concerns should be enough to convince the Commission not to approve Entergy’s request, it is also clear that Entergy’s proposed methodology for the GRS charge is not well supported and will undermine the development of a competitive market in the Southeast. There are several aspects of the GRS calculation that concern generators, including:
• Entergy proposes a levelized rate for the GRS charge, asserting that such a rate is appropriate because it has not been collecting any GRS charge in the past and thus using a levelized rate does not shift any costs. While it is true that the proposed GRS charge is new, the facilities used by Entergy have been in its rate base for decades and Entergy has been collecting rates for such facilities on a straight-line depreciation method. Thus, using a levelized rate, as opposed to a straight-line depreciation method that properly reflects prior depreciation on the units, is improper.
• The proposal would include Entergy’s coal units in its calculation of the rates. The coal units are base load units that would not provide significant amounts of regulation service. Therefore, they should not be included in any GRS calculation.
• Entergy’s proposed GRS charge measures regulation at five minute intervals, whereas NERC’s CPS2 looks at ten minute intervals. Using smaller intervals increases the chances of generators being exposed to a regulation charge and does not match the CPS2 standard.
• Measuring the greatest and smallest imbalance over the course of an hour does not accurately capture the amount of regulation service provided on a moment-to-moment basis because the imbalances may have occurred very far apart and thus Entergy ultimately may never need to move its units in any manner in order to cover both imbalances.
• Entergy’s proposed charge would use the hour with the greatest amount of “regulation service” to set the GRS charge for an entire day, even though Entergy is not providing that amount of regulation service each and every hour of the day. Thus, Entergy’s proposed charge results in an unjustified windfall for Entergy.