Virtual Power Plants to Provide Power to Texas Grid for the First Time
August 23, 2023
by Paul Ciampoli
APPA News Director
August 23, 2023
Two virtual power plants are now qualified and able to provide dispatchable power to the Texas electric grid, which is operated by the Electric Reliability Council of Texas, the Texas Public Utility Commission said on Aug. 23.
This marks a first for the state’s electricity market and is part of the Aggregate Distributed Energy Resource (ADER) pilot project the Public Utility Commission of Texas directed ERCOT to begin developing in June 2022.
The pilot project tests how consumer-owned, small energy devices, such as battery energy storage systems, backup generators, and controllable electric vehicle chargers, can be virtually aggregated and participate as a resource in the wholesale electricity market, strengthening grid reliability.
There are currently eight ADERs totaling 7.2 MW in the pilot project. Six have completed the initial registration steps and are in the commissioning process.
Two of the eight (both represented by Tesla Electric) have completed required testing and are qualified to participate.
Texans are increasingly investing in small energy resources, such as backup generators or solar panels connected to battery energy storage systems, for their homes and businesses, the PUCT said.
There are currently 2.3 GW of these small (less than 1 MW each) resources across the state, with 300 MW added so far in 2023 alone.
An ADER represents the aggregation of devices that are located at multiple sites as a single resource.
The ADER coordinates the operation of individual devices to collectively reduce demand or feed power to the grid. Through an automated process, the ADER responds to specific ERCOT instructions, allowing participating customers to sell their surplus power to the grid when called upon or reduce use. This is an additional source of dispatchable power for the ERCOT grid.
ADERs are formed and operated by retail electric providers or utilities that sell electricity to homes and businesses.
In the pilot project, compensation terms and participation requirements will vary depending on the provider operating the ADER. To qualify for the pilot project, an ADER must be able to produce at least 100 kW, and each individual device in the ADER must be less than 1 MW. The average residential battery is about 5 kW.
The pilot project is currently capped at 80 MW of total participation to ensure a safe and controlled rollout.
“As generation and distribution technology continues to improve, we expect to see more Texans taking advantage of these small energy resources in the future,” said ERCOT President and CEO Pablo Vegas. “This pilot project is an opportunity for us, the electric industry, and participants to learn how to harness these resources to support reliability in the ERCOT market.”
The two ADERs announced on Aug. 23 involve Tesla Electric customers who have Powerwall storage systems in their homes and have agreed to sell their surplus power in the ERCOT market.
One ADER aggregates Houston-area CenterPoint Energy customers and the other ADER aggregates Dallas-area customers served by Oncor Electric Delivery Company.
These two VPPs are the first to participate in the ERCOT wholesale market as ADERs.
Participating in the PUCT’s pilot project is voluntary, and any entity that serves electric customers in ERCOT is encouraged to learn about the project and plan for future participation.
ADERs participating in the pilot project must include power generation devices, such as battery energy storage systems or generators, and may also include demand response devices like smart thermostats, controllable EV chargers and smart water heaters that can be controlled to reduce electricity use.
The ADER Pilot Project and a 20-member task force were established by two PUCT Commissioners.
The task force assists the PUCT and ERCOT by ensuring public transparency, providing subject matter expertise and facilitating stakeholder collaboration with ERCOT.
The pilot project “will continue to collaboratively develop solutions until permanent rules are developed for ADER participation in the market or until the PUCT and ERCOT deem the lessons-learned from the pilot project are complete,” the PUCT said.
APPA Weighs in on Proposed and Temporary Rules for Elective Payment of Energy Tax Credits
August 22, 2023
by Paul Ciampoli
APPA News Director
August 22, 2023
The American Public Power Association recently submitted comments to the Internal Revenue Service in response to the federal agency’s issuance of temporary and proposed regulations for the implementation of elective payment of energy tax credits.
APPA, which submitted the comments on Aug. 14, noted that the Proposed Rule provides the mechanism by which an applicable entity may make an election for elective payment.
“However, there is no indication in the Proposed Rule or other public comments about how and when the Service will act on such an election,” APPA noted.
As an example, it noted that a June 2023 Treasury presentation slide deck provides a hypothetical timetable for an applicable entity to make an elective payment election including when the facility is placed in service, when the entity would complete pre-filing registration with the Service, and the deadline for filing a return to make an elective payment election.
That slide deck, however, only states that payment will be received “after (the) return is processed” with no indication as to when that might occur.
APPA notes that public power utilities typically finance large capital investments with an up-front bond issuance that plays the dual role of covering up-front project costs, but also allowing for the repayment of those costs over time. Tax credit payments that are not received until after project completion will likely require bridge financing before longer-term financing is secured, it said.
“Uncertainty as to the timeframe in which the payments will be made will hinder the assembly of the financial package because it will create uncertainty in the assurances to financiers that the entity can meet financing, funding, and repayment project requirements. This will drive up project costs, perhaps blocking financing entirely, and will reduce the willingness of some to take advantage of elective payment,” APPA said.
For the elective-payment mechanism to be effective, final regulations should provide a timeline by which Treasury and the IRS intend to make elective payments, APPA said.
For example, this could include providing that elective payment will be made no later than 30 to 60 days after the later of (1) the date the applicable entity timely files its tax return electing to receive the applicable credit payment or (2) the due date (without extensions) for filing the return.
Additionally, under the Internal Revenue Code of 1986 and the Proposed Rule, an applicable entity may make an elective payment election with respect to any applicable credit.
Where elective payment was made available to certain existing credits (i.e., Code sections 45 and 45Q), elective payment is effective for facilities “placed in service after December 31, 2022.”
However, in an uncodified provision, the IRA provides that the elective payment provisions are effective “for taxable years beginning after Dec. 31, 2022.”
The Code provides latitude to taxpayers in determining their applicable taxable year, including calendar year, taxable year, and part year taxable years where needed.
Neither the IRA, nor the Code as modified by the IRA, specifically defines “taxable year” for a governmental entity that is not otherwise required to file a return. The Code as amended by the IRA does provide that the due date for an elective payment election is generally the due date for the tax return the applicable entity would otherwise file.
However, section 6417 does provide that for a governmental entity for which no return is otherwise required the due date will be “such date as is determined appropriate by the Secretary.”
In response to Treasury’s request for comments, APPA on November 4, 2022, requested that governmental entities not otherwise required to file a return be allowed to seek elective payment on a rolling basis, akin to the process by which a governmental entity seeks reimbursement of federal excise taxes on a Form 8849, Claim for Refund of Excise Taxes.
The Proposed Rule would require governmental entities not otherwise required to file a return to make an elective payment election by filing a Form 990-T.
Service instructions for Form 990-T establish a deadline for filing the return14 and also establish a taxable year for those filing the return by requiring entities to adopt their accounting year as their taxable year.
“In effect, by adopting the Form 990-T as the mechanism by which a governmental entity not otherwise required to pay taxes may make an elective payment election, the Proposed Rule is also imposing a requirement that a governmental entity that is not otherwise required to file a return must adopt its accounting year as its taxable year for purposes of an elective payment election,” APPA said.
This decision creates a transitional issue where an entity (a) placed a credit property into service after December 31, 2022, but before June 14, 2023, when the Proposed Rule was published, and (b) operates on a fiscal year rather than a calendar year, it said.
Specifically, the problem occurs where the credit property was placed in service after December 31, 2022, but before the entity’s accounting year begins in 2023. As a result, while the credit property was placed in service after December 31, 2022, the Proposed Rule would have the effect of treating the credit property as having been placed in service in a tax year beginning before January 1, 2023.
“Had notice of such a decision been provided prior to January 1, 2023, this could arguably be a justified outcome.”
The IRS has an interest in administrability, including not having to change forms after the fact or to process high volumes of amended returns due to a change in law.
Likewise, with prior notice, an applicable entity would have had known to avoid placing a unit into service prior to the beginning of its newly mandated taxable year. However, this requirement was imposed after the fact and without notice, creating an unjust and unintended outcome.
APPA urged Treasury and the IRS to amend the Proposed Rule to provide transition relief to projects falling into the window of time described above for affected public power entities.
“Specifically, we would encourage Treasury to allow on a transitional basis, a part-year taxable year beginning on January 1, 2023, and ending at the usual end of an entity’s usual accounting year. The Code already accommodates such an approach.”
While it would create some additional administrative burden, this would apply only to governmental entities that are not otherwise required to file a return and so would not require consideration of any amended returns, APPA said.
“More importantly, though, this would provide horizontal equity to all governmental entities. The converse – punishing those that rushed to place energy property in service as intended by this historic policy change – would be unfair and contrary to congressional intent of encouraging rapid and robust use of elective payment.”
Alternatively, such an entity could be allowed to adopt a calendar year taxable year. “The usual concerns with such an approach causing conflict between an entity’s accounting books and tax books simply do not apply where the entity would not otherwise be required to file a return. And again, the Code is expansive, not restrictive, in its flexibility in adoption of taxable years, including a calendar year.”
Along with these topics, APPA also weighed in on a number of other elements of the proposed rule.
In related news, APPA Senior Government Relations Director John Godfrey testified on Aug. 21 at the U.S. Department of Treasury and Internal Revenue Service’s “Public Hearing on Proposed Regulations: Section 6417 Elective Payment of Applicable Credits.”
Among other things, he thanked the Treasury and the IRS for making clear that public power entities, including utility districts, joint action agencies and joint powers agencies, qualify for elective payment and that public power utilities in a co-ownership arrangement with other entities (cooperatives and for-profits) can still claim elective payment for their share of the project.
Godfrey also emphasized the need for certainty and streamlining of the elective payment process, including pre-filing registration of tax credit properties.
New LADWP Policy Calls for Spreading Out Infrastructure Upgrade Costs to All Benefitting Customers
August 22, 2023
by Paul Ciampoli
APPA News Director
August 22, 2023
The Board of Water and Power Commissioners for the Los Angeles Department of Water and Power recently approved a policy under which LADWP’s present and future customers will fairly share in the cost of new power infrastructure upgrades located in the public right-of-way for construction projects, commonly known as underground line extensions.
Under the previous LADWP policy, the cost of electrical infrastructure upgrades to support the electric service needs for new customers, and customers needing upgrades, was assessed to the first customer, typically a developer, rather than apportioning the upgrade costs to all expected power users that will derive a benefit from the upgraded power infrastructure.
Charging the full infrastructure upgrade cost to the first customer requiring the upgrades has been a significant financial burden for many development projects in the city, LADWP noted.
“By apportioning this cost burden and implementing a system to spread out the upgrade cost to all benefitting customers, LADWP will encourage and support the development of new housing and electrification infrastructure, including additional solar and EV chargers,” it said.
Under the newly-adopted policy, LADWP as well as other adjacent customers, would share in the cost of the additional power conduit and structural system upgrades, if they also benefit from the upgrades.
“The change to the policy brings LADWP in step with other electric utilities throughout California and is frankly, a win-win for customers and for LADWP,” said Aram Benyamin, LADWP Chief Operating Officer, in a statement. “We expect to see an uptick of customer-initiated power infrastructure projects throughout the city with the approval of this new approach which will in turn, help us shore up our own electric grid to be more resilient to the modern demands on our power system.”
Separately, the Board also voted to make permanent the practice of LADWP covering the substantial cost of underground line extensions for 100% affordable and permanent supportive housing developments in Los Angeles. The practice has been a key part of LADWP’s successful “Project PowerHouse” Initiative launched in March 2023.
Since its launch, LADWP has received more than two-hundred 100% affordable housing projects with 52 currently in active construction.
“Project PowerHouse has demonstrated that, by working very closely with affordable housing developers on tight timelines, the preliminary, design, and construction phases of affordable housing project development can be dramatically reduced. In total, LADWP has cut the development review, engineering, and construction timeline by 86%,” the public power utility said.
Twenty-nine projects since the launch of the Mayor’s Executive Directive 1 have already been placed into service and benefited from the expedited approval timeline of Project PowerHouse. These projects have already provided 1,849 new 100% Affordable or Permanent Supportive Housing units in Los Angeles.
New Braunfels Utilities Launches Effort to Collaboratively Manage Water Resources
August 22, 2023
by Paul Ciampoli
APPA News Director
August 22, 2023
Texas public power utility New Braunfels Utilities, the City of New Braunfels, Texas, and the Guadalupe-Blanco River Authority on Aug. 15 launched an interagency program to collaboratively manage water resources.
The program’s launch “comes after several years of planning by the three agencies and additional partners who identified the primary challenges facing New Braunfels’ water resources and the strategic and actionable ways the agencies could work together, and with the community, to address these challenges,” said a news release related to the unveiling of One Water New Braunfels.
This work is captured in the One Water New Braunfels Roadmap and additional details are provided in the One Water New Braunfels Roadmap Report.
One Water is a globally recognized integrated approach to water planning that is being adopted by communities across the country, the news release said.
The Water Research Foundation defines One Water as an integrated planning and implementation approach to managing finite water resources for long-term resilience and reliability, meeting not only the economic needs but also community and ecosystem needs. The One Water methodology requires thinking of water as a single system and recognizes that all water flows — including stormwater, rainwaters, and wastewater — are viable water resources.
One Water New Braunfels was made official through action by NBU Board of Trustees and GBRA Board of Directors earlier this summer and a recent vote by the New Braunfels City Council to approve an interagency agreement.
The agreement outlines the governance and management of the One Water New Braunfels program and establishes an advisory council and a working group responsible for continued development and implementation of the New Braunfels One Water Roadmap.
A Program Coordinator will manage day to day operations of the program, support the efforts of the advisory council and working group, and serve as primary liaison with the community at large.
Crews from Colorado Springs Utilities Participate in Electric Trauma Training Program
August 22, 2023
by Paul Ciampoli
APPA News Director
August 22, 2023
In early August, electric line crews from Colorado Springs Utilities continued a long-standing partnership with the Colorado Springs Fire Department to complete the fifth annual, two-day Electric Trauma Training program.
For the first time in the program’s existence, a Flight for Life team also participated in the training and a mock rescue exercise, Colorado Springs Utilities noted in a blog post.
More than 100 electric line employees attended this year’s event, along with four CSFD firefighters and three members from Flight for Life, the blog post said.
Colorado Springs Utilities said that the two-day training included smaller groups of employees rotating through seven stations — each one reflecting a different trauma scenario.
This rotation included a “hurt man rescue” exercise where a lineworker must quickly assess an injured colleague while high on a power pole and then bring that colleague safely to the ground.
Beyond the hurt man rescue, the stations provided employees an opportunity to practice emergency medical service notifications, conduct initial injury assessments, perform CPR, apply a tourniquet and pack a wound.
“Due to the nature of line work, our crews can encounter a lot of different trauma cases and rescue situations,” said John Rombeck, Electric Training and Safety Specialist for the public power utility, in the blog post. “It’s important that our training programs provide hands-on experiences that create mental and muscle memory because time is of the essence in a real-life trauma event.”
Rombeck said with each year that passes, the training program continues to improve and evolve, thanks to feedback from both employees and first responders.
Department of the Interior Offers $72.5 Million Under New Tribal Electrification Program
August 22, 2023
by Paul Ciampoli
APPA News Director
August 22, 2023
The Department of the Interior on Aug. 15 announced the launch of a new program and availability of $72.5 million in initial funding to help Tribal communities electrify homes.
Tribal Nations across the country have their own unique energy and electrification-related needs and implementation capacity, Interior said.
The Tribal Electrification Program “will meet the unique needs of individual Tribal communities by supporting collaborative and community-led planning and implementation.”
The program will provide financial and technical assistance to Tribes to connect homes to transmission and distribution that is powered by renewable energy; provide electricity to unelectrified Tribal homes through zero-emissions energy systems; transition electrified Tribal homes to zero-emissions energy systems; and support associated home repairs and retrofitting necessary to install the zero-emissions energy systems.
For more information on this program, visit the Bureau of Indian Affairs website.
OUC, Kissimmee Utility Authority Hit New Power Demand Records
August 13, 2023
by Paul Ciampoli
APPA News Director
August 13, 2023
Florida public power utilities OUC and Kissimmee Utility Authority recently hit new power demand records with soaring temperatures hitting the state last week.
In Florida, Orlando-based OUC on Aug. 10 said that with record heat and heat indexes impacting Central Florida, OUC experienced new peak electric demand for its Orlando and St. Cloud service territories.
On Wednesday, Aug. 9, demand by OUC’s Orlando electric customers reached 1,349 megawatts, breaking records set on Monday and Tuesday. St. Cloud customers also set a record for electric demand on Wednesday, reaching 271 MW, eclipsing records set on Monday and Tuesday.
Previously, Orlando recorded a peak demand of 1,285 MW on June 25, 2019, while St. Cloud recorded a peak demand of 250 MW on July 3, 2023.
Meanwhile, as the heat index in the Kissimmee, Fla., region topped 110 degrees on Tuesday, Aug. 8, residents set a new all-time record for electricity use.
Kissimmee Utility Authority recorded an instantaneous system peak of 439.2 MW at 5:12 p.m. on Tuesday. On Monday, the utility recorded a system peak load of 435.7 megawatts, shattering the previous record of 416.2 set on July 13, 2022.
Blue Ridge Power Agency RFP Seeks Wind, Solar PPA Proposals
August 12, 2023
by Paul Ciampoli
APPA News Director
August 12, 2023
Blue Ridge Power Agency has issued a request for proposals that seeks competitive power purchase agreement proposals for utility-scale solar and wind assets with a commercial operation date in 2028 or 2029.
BRPA is a Virginia-based joint action agency.
Specifically, the RFP seeks a solar system of PPA at least 50 MW in aggregate for all BRPA members to participate in and a 40 MW slice of wind energy for a single BRPA member to purchase within PJM, with preference for projects already in the interconnection queue and sited in the American Electric Power and Dominion transmission zones.
Proposals are due on September 12, 2023 by 5:00 PM (EST).
NPPD’s Wholesale Electric Rates Remain Among Lowest in Nation
August 12, 2023
by Paul Ciampoli
APPA News Director
August 12, 2023
Nebraska Public Power District’s wholesale electric rates have once again ranked amongst the lowest in the country compared to roughly 800 wholesale electric providers, the public power utility reported on Aug. 11.
Several years ago, NPPD wanted to benchmark its wholesale rate against others in the nation as well as show how NPPD’s rates compares to its peers.
To do this, NPPD established a goal of being in the National Rural Utilities Cooperative Finance Corporation’s first quartile — below the 25-percentile mark, which would indicate NPPD’s wholesale rate is among the lowest of peer wholesale utility rates.
In 2020 NPPD met the goal by finishing at the 23.2 percentile, then in 2021 improved to the 12.4 percentile, and now that the data for 2022 has been finalized NPPD’s rank improved further, finishing at the 11.7 percentile.
“Achieving and improving on this goal for three straight years is thanks to our staff’s commitment to put customers first,” said NPPD President and CEO Tom Kent. “Our team has done a great job at focusing on cost control and outstanding operational performance within our plants and throughout our transmission and distribution system. All essential in our goal to continue providing affordable, reliable, resilient, and sustainable power to our customers.”
NPPD’s wholesale rates have remained steady for six straight years, and as a not-for-profit public corporation, NPPD is able to share surpluses with customers in the form of production credit adjustments, it noted.
NPPD has wholesale contracts with 37 municipalities and 23 rural public power districts and rural cooperatives across the state.
Company Kicks Off Biomass to Hydrogen Project in Partnership with SMUD
August 12, 2023
by Paul Ciampoli
APPA News Director
August 12, 2023
Mote Inc. on Aug. 10 said it has received $1.2 million in grant funding to establish its second biomass to hydrogen and carbon sequestration plant in partnership with the Sacramento Municipal Utility District, a California public power utility.
As Mote’s hydrogen offtake partner for the second facility in Sacramento, SMUD and Mote have been collaborating on the project development.
The grant funding is from the U.S. Forest Service, the California Department of Conservation and the California Department of Forestry.
Upon completion, the facility would produce approximately 21,000 metric tons per year of carbon-negative hydrogen for use in thermal power generation and transportation.
The plant would also sequester over 450,000 metric tons of carbon dioxide annually. The project is supported by forestry stakeholders due to Mote’s capacity to create value from large amounts of wood waste, Mote said.
The project can utilize up to 300,000 metric tons per year of forest residues and wood waste from regional forest management programs. This waste would otherwise be open-air burned, left to decompose, or sent to a landfill.
Similar to its first project near Bakersfield, Calif., this second plant will integrate with carbon capture and geological sequestration methods to produce carbon-negative hydrogen.
Using gasification and a proprietary integration of proven technology, Mote can process woody waste from farms, forestry, and urban sources. The remaining carbon dioxide from the process is captured and permanently placed underground in saline aquifers for ecologically safe storage.
Mote said it has received a formal invitation to submit a Part II application to the Department of Energy Loan Programs Office Title 17 Clean Energy Financing program, which can offer loan guarantees up to 80 percent of eligible project costs for innovative energy projects like Mote’s facilities.
Bakersfield construction is expected to begin in 2025 and target full operational capacity by 2027.
Additionally, Mote is a member of the ARCHES community and their application for the DOE’s Regional Clean Hydrogen Hub grant.
DOE’s invitation to submit a Part II application is not an assurance that DOE will invite the applicant into the due diligence and term sheet negotiation process, that DOE will offer a term sheet to the applicant, or that the terms and conditions of a term sheet will be consistent with the terms proposed by the applicant, Mote said.
“The foregoing matters are wholly dependent on the results of the DOE review and evaluation of a Part II Application and DOE’s determination of whether to proceed,” Mote said.
The American Public Power Association has issued a report that is available for free to members that provides a perspective on where the emerging hydrogen market is in the U.S. and globally, what is driving the growing interest in hydrogen and what obstacles are preventing hydrogen technology from being able to scale-up.