CEO’s Report: Cold weather creates energy emergency

Customers asked to conserve energy to protect electric grid

Subzero temperatures may not seem that unusual in the Midwest. But, the electric grid was hit with unprecedented demand the week of February 14 as record low temperatures extended up and down the central portion of the United States.

Utilities across the region were thrust into new territory as calls came for consumers to conserve energy. Rolling blackouts were carried out in some areas to prevent damage to the electric grid.

Heartland customers stepped up to help their fellow utilities by echoing requests for residents and businesses to conserve electricity. Public power ideals shone through.

While the state of Texas made headlines during the extreme weather event, limited interruptions of service in Heartland’s service territory were seen. While Heartland customers are situated in two different regional transmission organizations (RTOs), Southwest Power Pool experienced conditions unlike ever before.

Understanding how SPP works

Southwest Power Pool (SPP) operates the electric power grid in a 14-state region on behalf of member utilities. Their service area stretches from North Dakota down into parts of Texas.

SPP does not own electric generation resources or transmission lines, but rather balances the supply and demand of electricity minute-by-minute to ensure power gets to customers.

When electricity is generated, it goes into a “pool,” and from that “pool,” SPP manages the energy market throughout the central portion of the U.S. They ensure the amount of power sent is coordinated and matched with power received.

They are like the “air-traffic controllers” of the electric grid.

When one area is affected by extreme weather or another event, power generated in other areas can be dispatched to meet demand.

However, this event created record cold temperatures throughout SPP’s service territory. Areas with typically mild weather were below freezing and northern states stayed below zero for several days. This created an unprecedented demand on the electric grid.

It also put a strain on the available resource pool. Demand for natural gas, both as a heating source and for electrical generation, increased substantially. This caused supply shortages, exacerbated by the impacts of unusually cold temperatures on generation facilities in southern SPP.

During this period, SPP also experienced unusually low wind levels, significantly impacting available wind generation. A combination of seasonally unprecedented demand with these supply constraints created a “perfect storm.”

Energy Emergency Alerts declared

SPP declared the first Energy Emergency Alert (EEA) early on the morning of February 15 as the electric grid throughout SPP’s operating area saw increased strain.

SPP fluctuated between three different levels of emergency status through February 19. At level 1, enough generation is available to meet demand, but backup resources are below necessary levels. This could be considered the warning stage.

At level 2, all generation requirements can no longer be met and outside assistance is requested to meet demand. Consumers are asked to conserve energy to prevent power shutoffs.

SPP entered a level 3 EEA twice, once on February 15 and once on February 16. At this level, there is not enough electricity being generated to meet demand and power outages may be utilized to reduce demand and protect the system.

Two Heartland customers were affected by the controlled outages included Tyler, MN and Valentine, NE.

This marked the first time in SPP’s 80-year history it declared Energy Emergency Alert Levels 2 or 3 for its entire region. It is also the first time the grid operator has had to direct member utilities to implement controlled, temporary service interruptions to prevent widespread blackouts.

When the demand on the system outweighs the amount of electricity available, potential for catastrophic damage exists; damage that would result in much longer outages.

Market benefits

Heartland joined SPP in 2015. The integration provided greater flexibility and increased options for buying and selling power. While this particular weather event did create some inconveniences, market participation still comes with many benefits.

The goal of an RTO like SPP is to provide the lowest cost wholesale energy possible through the least cost generation dispatch.

With a vertically integrated utility, where the utility owns generation, pays for transmission and sells power directly to the consumer, there is more risk. During an event like we saw in mid-February, if our generation source was unable to perform, all customers would have been affected.

Participating in a market reduces that risk by having access to the entire pool of generation resources. The same is true any time of year. If for any reason, our generation is limited, we draw from the pool to serve customers.

Owning generation in the market also comes with benefits. Market prices fluctuate and during the February polar vortex, prices escalated as demand surged. Utilities that depend largely on the market for power were subject to those increased prices, such as we heard about in Texas.

Heartland, on the other hand, also sells generation into the market, which helps balance out our position. Our diverse resource mix helps protect customers against market swings.

Public appeals

Heartland issued public appeals to consumers to conserve energy throughout the energy emergency.

We continually communicated with customers, keeping them informed of which level SPP was operating at and measures they could take to control demand. We also blasted social media with energy conservation tips, and did our best to keep everyone apprised of the situation.

Utilities served by Heartland orchestrated their own appeals to consumers and took available measures to conserve electricity in their communities.

Every simple action taken helped protect the entire system. As public power communities, our customers gave new meaning to the term “community powered.”

Barbara Sugg, SPP president and chief executive officer, thanked SPP members, neighboring systems and the millions of people in the region for their response to the historic event.

“This has been a case study in everyone doing their part on behalf of the greater good. We take our responsibility to keep the lights on very seriously and appreciate the trust placed in us to do so. Thanks to voluntary conservation by people across our 14-state region, the quick actions taken by local utilities, and the dedication and expertise of our operators, we’re thankful we could keep the region-wide impact of this storm to a minimum.”

Fortunately, the energy emergency ended by February 19  and SPP returned to normal operations as warmer weather moved across the region.

What is SPP and how do their actions affect you?

A message from Heartland CEO Russell Olson

Over the last few days, we’ve experienced an unprecedented bout of cold weather. Record low temperatures were recorded across the 14-state region covered by the Southwest Power Pool (SPP), which stretches from North Dakota down into parts of Texas.

As a result, you were asked to conserve energy and, in some cases, controlled power outages were implemented to prevent longer, sustained outages.

You may be wondering what was so unusual about this cold snap. Why did we have to curb usage during what many of us consider a normal weather event?

First, you have to understand how SPP works.

Chances are you never heard of SPP before now. SPP is a regional transmission organization that operates the electric power grid on behalf of member utilities.

Essentially, the power grid is shared across the 14 states SPP serves. SPP does not own generation (electricity production) or the transmission lines (movement of electricity).

Rather, it balances the supply and demand of electricity minute-by-minute to ensure power gets to customers. Think of SPP as the grid’s “air traffic controller.”

When electricity is generated, it goes into a “pool,” and from that “pool,” SPP manages the energy market throughout the central portion of the U.S.

SPP ensures that the amount of power sent is coordinated and matched with power received. This allows the grid to be operated more efficiently and reduces costs.

So why does cold weather in Oklahoma affect how you use electricity?

Typically, extreme weather is limited to a smaller portion of the region. Power generated in one area can be dispatched to another area that needs it. It’s akin to neighbors helping neighbors.

However, the extreme cold of the last few days stretched across the region. Areas with typically mild weather saw unusual negative temperatures. This created an unprecedented demand on the electric grid.

It also put a strain on the available resource pool. Demand for natural gas, both as a heating source and for electrical generation, increased substantially because of the extreme cold. This caused supply shortages, exacerbated by the impacts of unusually cold temperatures on generation facilities in southern SPP.

During this period, SPP also experienced unusually low wind levels, significantly impacting available wind generation. A combination of seasonally unprecedented demand with these supply constraints created a “perfect storm.”

To protect the system, SPP has had to implement controlled outages throughout the region. This is a first in the company’s 80-year history. These decisions are not made lightly and are done as an absolute last resort. Though inconvenient at best, the shutoffs prevent damage to the transmission system, which would result in much longer outages.

Fortunately, warmer weather is on the way, easing system strain. SPP ended the energy emergency alert the morning of February 18. At this time, we don’t expect to see further scheduled outages.

We appreciate your cooperation in helping conserve and limit energy during this historic, trying time. Your small efforts helped create a greater impact that protects all electric customers.

Your efforts are what living in public power communities are all about. The last few days have given new meaning to term “community powered,” and we are grateful for your actions.

CEO’s Report: Reenergizing PURPA review efforts

The PURPA discussion at our recently held Annual Meeting was especially timely as on May 17, Federal Energy Regulatory Commission Chairman Kevin McIntyre said he has directed staff to “reenergize” FERC’s Public Utility Regulatory Policies Act of 1978 review initiative.

PURPA was enacted following the energy crisis of the 1970s. It was designed to encourage energy conservation and promote greater use of domestic, renewable energy and cogeneration.

The Act requires utilities to purchase electric energy from qualifying facilities (QF): cogeneration facilities and small power production facilities of 80 MW or less. FERC and the states were directed to implement PURPA, with FERC determining what constitutes a QF.

PURPA provides that all small power production facilities located at the same site count toward the 80 MW size limit.

Under FERC’s one-mile rule, the agency deems small power production facilities located more than one mile apart to be located at different sites. Some renewable developers have spread power production facilities that are more than 80 MW over a larger area, to divide the overall project into smaller ones that meet PURPA’s QF requirements.

Much has changed in the 40 years since PURPA was enacted including development of organized wholesale electricity markets and adoption of state and federal incentives to promote generation from wind and solar resources. Today, 15 percent of electric generation is from wind and solar versus virtually none in 1978.

McIntyre pointed out that much has changed even since 2015 and 2016 when PURPA reviews were first initiated and a technical conference was held. For one thing, the makeup of FERC is significantly different than at that time. Chairman McIntyre and Commissioner Glick were confirmed in November 2017, Commissioners Chatterjee and Powelson in August 2017. Only Commissioner LaFleur was a member of FERC during the initial review.

This latest review will look at issues involved with PURPA so the commission can determine if improvements and updates need to be made to the PURPA policies.

He also promised that the process would allow for stakeholder input, something I know we at Heartland will be eager to provide.

Commissioner Neil Chatterjee expressed his interest in the topic, stating that the current energy landscape “is profoundly different than that of the late ‘70s when PURPA was enacted and because of this many have rightly voiced their desire for a fresh look at existing policy to better align PURPA with the realities we face today.”

Any changes to the fundamental features of PURPA require congressional action. However, the FERC commissioners seem to agree they can play a role by examining existing regulations. A number of concerns were raised during the 2016 technical conference by both the industry and qualifying facility developers.

U.S. Representative Tim Walberg, R-Mich., introduced H.R. 4476, the PUPA Modernization Act of 2017, late last year.

The legislation would amend PURPA section 210(m) so that small power production facilities of 2.5 MW or greater would be presumed to have non-discriminatory access to wholesale markets for purposes of allowing electric utilities to terminate the mandatory QF purchase obligation.

The bill would also empower state PUCs and non-jurisdictional entities (such as public power utilities) to waive the mandatory purchase obligation on a case-by-case basis for small power production facility QFs if additional power is not needed to meet consumers’ electricity needs. It would also direct FERC to relax its strict one-mile rule to prevent abuse of the rule.

PURPA’s mandatory purchase obligation has forced many public power utilities, including Heartland customers, to buy QF power they don’t need, often at rates that are higher than what can be obtained from the market. Further, for Heartland customers, this obligation interferes with their power supply contract. It can also impact Heartland’s long-term generation capacity planning when we are unexpectedly required to purchase power not accounted for in our integrated resource plan.

We look forward to the review process and to providing input as it takes place. We do not believe Congress ever intended for utilities to have to buy power they don’t need, at rates higher than market. The cost of this excess power must be spread across a utility’s entire customer base, unfairly charging higher rates to customers who are not benefitting from the QFs. It is past time this outdated legislation be reviewed.