There are two, newly filed cases pertaining to Invenergy now pending at the Federal Energy Regulatory Commission (FERC) in Washington, DC: ER18-349 and EL 18-31. The central issue in both cases relates to who will pay several hundred million dollars to build and maintain the interconnection lines between Invenergy’s proposed power plant and the broader electricity grid run by ISO-New England. Under the ISO Tariff, Invenergy is responsible for these expenses; but in the FERC lawsuits, Invenergy is trying to get these costs shifted to New England ratepayers.
The Energy Facility Siting Board (EFSB) has scheduled a so-called “Show-Cause Hearing” for Tuesday, January 30, 2018, at which time Invenergy will be required to give any reasonable reason why the EFSB docket should not be suspended until those FERC lawsuits have been decided.
What is really going on with these two lawsuits that Invenergy is involved with at FERC?
Invenergy is genuinely, honestly committed to pursuing these lawsuits at FERC. Invenergy has hired a sophisticated international law firm to represent it. Crowell & Moring LLP has over 500 lawyers, offices in Washington, Los Angeles, and London, and represents multinational corporations like DuPont, Honeywell, and United Technologies. The legal papers that Invenergy has filed in the two FERC lawsuits are excellent, superb pieces of legal work. Hiring a big law firm to produce hundreds of pages of highly sophisticated legal pleadings is really expensive. One thing we can be sure of is that Invenergy genuinely, honestly means to pursue these cases at FERC, and is willing to spend big bucks to do so.
What is Invenergy arguing at FERC?
Invenergy is making two main arguments at FERC. First, Invenergy argues that long-standing FERC policy is for ratepayers, not power plant owners, to have to pay these interconnection costs.
The second argument pertains to how other grid operators in other parts of the country (where Invenergy has power plants) allocate these same interconnection costs. Our grid operator here in New England is ISO-New England. Invenergy has power plants regulated by the Midcontinent ISO (MISO) and the PJM Interconnection LLC (PJM). Both MISO and PJM spread those interconnection costs that Invenergy is litigating about to ratepayers.
Both of Invenergy’s legal arguments are correct as far as they go: The way ISO-NE allocates these interconnection costs to developers (not ratepayers) is against FERC policy. And if Invenergy’s proposed Burrillville power plant were regulated by the MISO or PJM tariff, Invenergy would not have to pay the disputed costs.
So are you saying that Invenergy is likely to win at FERC?
No, Invenergy is very likely to lose at FERC. Although both of Invenergy’s arguments are correct as far as they go, Invenergy arguments are still likely to fail at FERC. First of all, tariffs between different ISO/RTOs differ in many respects; FERC allows that. Second, every other generator in New England has had to pay these costs (according to the provisions of the ISO-NE tariff), and it would create a deeply uneven playing field if Invenergy got away with not paying them. Moreover, the New England states and public officials from all over New England have intervened in the FERC lawsuits to oppose Invenergy – because they do not want their ratepayers to have to pay these costs.
In short, while Invenergy’s legal arguments are correct that the MISO and PJM tariffs are different than the ISO-NE tariff, FERC allows different tariffs in different regions. Over the years, I have seen the argument “It’s done differently at PJM” used often at ISO-NE; I have never seen it work.
So what will the EFSB do at the show-cause hearing on January 30?
The EFSB will probably stay the EFSB Final Hearing, pending the outcome of the two cases at FERC. There is a really simple reason for this: the members of the EFSB honestly, genuinely want to know the results of the two FERC cases before proceeding with the Invenergy case. The EFSB’s view on this is sensible. One of Invenergy’s main arguments since the beginning of the case has been that building the Invenergy plant will have zero cost for ratepayers. If this changes, and there are, in fact, hundreds of millions of dollars of expenses for ratepayers, then:
(a) that fact would change the fundamental basis of the entire case; and
(b) the EFSB would like to know that fact before it conducts the Final Hearing and issues a decision.
As I said, the EFSB’s view on this is very sensible. And I cannot think of anything that Invenergy might say on January 30 that could change that outcome.
How long will it take for FERC to make its ruling?
In his December 1 letter to the EFSB, John Niland said that Invenergy hopes to have an answer from FERC in 60 days. However, there are two cases pending at FERC and they were filed under two different provisions of the Federal Power Act (FPA). One case was filed by ISO under Section 205 of the FPA; ordinarily such Section 205 cases can be dealt with in 60 days. (On this, Niland was right.) However, the second case, filed by Invenergy, was brought under Section 206 of the FPA. These cases routinely take a year or more. And since the underlying issue in both cases are the same, the ISO may consolidate the cases using the longer time frame.
You have said that if Invenergy were to win at FERC, that outcome would be good for opponents of Invenergy, because the EFSB would never approve a permit for the plant if Invenergy were allowed to shift hundreds of millions of dollars to ratepayers. But now you are saying that Invenergy is likely to lose its cases at FERC. Won’t that increase the likelihood of Invenergy getting its EFSB permit?
No. It is certainly true that if Invenergy wins its lawsuits at FERC, Invenergy will fail to get its EFSB permit because the EFSB will not permit a plant that shifts hundreds of millions of dollars to ratepayers.
But let’s take a look at what happens if Invenergy loses at FERC, which is highly probable.
First and foremost, Invenergy has said multiple times that it cannot and will not put up the required bond of tens of millions of dollars before it obtains an EFSB permit. Invenergy said this most recently in its December 20, 2017 FERC filing in case ER 18-349: “Clear River – as would be true of any other reasonable developer – is unwilling to commit to spending up to $88 million in advance of securing the permits required to construct the Project.” (Page 6.)
Moreover, Invenergy’s statements on this matter are completely accurate. Neither Invenergy nor any other developer would spend $88 million on a construction bond before getting permits. Invenergy has told the ISO and FERC on multiple occasions that it cannot and will not spend this money itself before the EFSB has granted Invenergy a permit – and Invenergy has been telling the truth on this point.
Now let’s consider the situation Invenergy will face after FERC issues its decisions. Let’s say that this occurs in the second half of 2018.
- Invenergy has told the EFSB that it will definitely be up and running by June 1, 2021, but in order for this to be possible under the ISO Tariff, Invenergy would have had to have signed its Large Generator Interconnection Agreement (LGIA) pursuant to Schedule 22 of the ISO Tariff no later than December 1, 2017. Instead of signing the required LGIA, Invenergy now has two lawsuits pending at FERC about the LGIA. Invenergy’s bold statements that it would be up and running in June 2021 are false.
- As of June 2018, Invenergy will have been a Non-Commercial Resource for two consecutive years. Under Section III.18.104.22.168.2.2 of the ISO Tariff, the ISO will then be able to involuntarily terminate the 485 MW Capacity Supply Obligation (CSO) that Invenergy acquired on Turbine One in Forward Capacity Auction-10 (FCA-10) in February 2016. The ISO will have an interest in terminating Invenergy because the ISO is responsible for system reliability and does not want 485 MW of phantom capacity in the system. Other generators will push the ISO to involuntarily terminate Invenergy because those 485 MW of phantom capacity will have the effect of driving down the clearing price for other generators in future FCAs.
- In September 2018, the ISO will send Invenergy its Qualification Determination Notice (QDN) for Invenergy’s Turbine Two for FCA-13 (to be held in February 2019). Based on the last QDN that Invenergy received for Turbine Two (in September 2017, for FCA-12, to be held in February 2018), Invenergy’s Turbine Two is very likely to be disqualified again – for the very same reason: failure to meet the required Critical Path Scheduling milestones.
- Every passing month and year makes it clearer that the electricity that Invenergy would produce is not needed by the ISO. Let’s take a look at the most recent evidence of this fact. On December 1, 2017, the ISO made its FERC filing reflecting the new Net Installed Capacity Requirement (Net-ICR) figures for the three separate Annual Reconfiguration Auctions (ARAs) in 2018 (one ARA for each of three separate Capacity Commitment Periods, or CCPs). In February 2016, when Invenergy’s Turbine One cleared FCA-10, the ISO’s Net-ICR for New England for the period 2019 to 2020 was 34,151 MW. In the most recent ISO filing with FERC, the Net-ICR for the same 2019-2020 time period, for the same geographic region of New England, was only 33,407 MW. The decrease of 744 MW is more than half again as much as all of Invenergy’s CSO of 485 MW. The expert testimony of Burrillville’s expert witness Glenn Walker and CLF’s expert witness Bob Fagan is that, with each passing month and year, figures from the ISO make clearer and clearer that Invenergy is just not needed.
Invenergy is likely to lose its lawsuits at FERC. When that happens, Invenergy will be required to post huge amounts of money, something which Invenergy has said over and over again it will not do before getting permits. But even if Invenergy did post those bonds, and the EFSB case did start up again, the new situation facing Invenergy would be very, very adverse. It would be clearer than ever that Invenergy is not needed. Invenergy may have lost its CSO on Turbine One and again had Turbine Two disqualified from even participating in the FCM. Turbine One, even if not completely terminated, will have failed to make its Commercial Operation Date of 2019 and 2020 and 2021. And much of the sworn testimony that Invenergy will have submitted to the EFSB will have been shown to be false.
So what is the short-term prognosis for Invenergy?
In the short term, the next big event is the Show-Cause Hearing on January 30. It is likely that the EFSB will suspend the Invenergy docket until the FERC lawsuits are fully resolved. This is a sensible thing to do, because the outcome of those lawsuits will provide information that the EFSB wants and needs to know before it grants or denies a permit to Invenergy.
And what is the longer-term prognosis?
Much will turn on how those FERC lawsuits turn out, but as I have said before, it is difficult to see how any result at FERC will not be devastating or fatal to Invenergy:
- If Invenergy wins, hundreds of millions of dollars of interconnection costs would be shifted to ratepayers. The EFSB would never allow that.
- If Invenergy loses, Invenergy will be forced to pay for things it has sworn it will not pay for; and the delay will put Invenergy into a very, very bad position.