A busy week in the Invenergy case
By Steve Ahlquist in UpriseRI
Last week was a busy week in the Invenergy case, culminating in a Federal Energy regulatory Commission (FERC) ruling on Friday late afternoon in the second of the two pending lawsuits pertaining to Invenergy. This e-mail reviews the events of the past week, suggests what those events mean for opponents of Invenergy, and looks ahead to next steps.
On Monday, January 22,
Invenergy informed the Energy
Facilities Siting Board (EFSB)
that it (Invenergy) had cancelled its
water contract with the Narragansett
Indian Tribe.
On Wednesday, Jan. 24,
Invenergy informed the EFSB that it (Invenergy) had withdrawn its lawsuit at
FERC seeking to shift hundreds of millions of dollars in interconnection costs
to ratepayers.
Also on Wednesday, Conservation Law Foundation (CLF) asked the EFSB not to cancel the Show Cause Hearing schedule for next Tuesday, January 30, because there was still a very important second lawsuit pending at FERC that could affect the outcome of the EFSB Docket. We were unsuccessful; the EFSB cancelled the January 30 Show cause Hearing, saying that the hearing was moot due to the cancellation of the water contract with the Narragansett Indian Tribe and the withdrawal of one of the FERC cases.
Litigation always has
its ups and downs, and the foregoing events were not helpful for the
anti-Invenergy side. Invenergy’s filing its lawsuit at FERC, seeking to shift
hundreds of millions of dollars in interconnection costs to ratepayers, was a
very stupid move on Invenergy’s part for several reasons.
It allowed CLF to hammer Invenergy mercilessly in the press, and it looked like the EFSB was going to stay the entire case until Invenergy’s lawsuit was resolved, which would have taken over a year.
That delay would probably have killed Invenergy. Unfortunately, Invenergy recognized this fact as well as we did, which led Invenergy to withdraw its lawsuit. While this made Invenergy look “not yet ready for prime time,” it also makes a further stay unlikely.
It allowed CLF to hammer Invenergy mercilessly in the press, and it looked like the EFSB was going to stay the entire case until Invenergy’s lawsuit was resolved, which would have taken over a year.
That delay would probably have killed Invenergy. Unfortunately, Invenergy recognized this fact as well as we did, which led Invenergy to withdraw its lawsuit. While this made Invenergy look “not yet ready for prime time,” it also makes a further stay unlikely.
Nevertheless, on Friday morning, CLF and Burrillville filed a motion
for new stay (after a Show Cause Hearing) based on the
continued pendency of the second lawsuit at FERC. In that Motion, we were
pretty bold in asserting the likely outcome of the still-pending FERC case: ISO
would win; Invenergy would lose. (Our prediction did not take much legal
acumen. The standard of the Federal
Power Act(Section 205) that the ISO had filed the case under is very,
very, very deferential to the ISO.)
Also on Friday, the EFSB issued a schedule for the Final Hearing for dates
running from April through August.
And, on Friday evening, FERC issued its ruling in the second case (and,
yes, the ISO won, just as we said it would). (This is the technical, legal
citation for FERC’s ruling: ISO
New England, Inc. 162 FERC ¶ 61,058, Jan. 26,
2018.) Specifically, here is what FERC ruled:
Invenergy lost its
request to self-build the interconnection. [FERC Order, p. 16, ¶ 38.] Remember
that Invenergy had said it could build the interconnection faster than National Grid could. But
FERC ruled that Grid would build the interconnection. This means that it is now
impossible for Invenergy to be operational on June 1, 2021, as it
promised the EFSB. (This will hurt Invenergy if the case goes to a Final
Hearing.)
Invenergy also said it
could build the interconnection less expensively than Grid could do, so there
is now added expense for Invenergy. (Remember, these are the expenses that
Invenergy had tried, but failed, to shift to ratepayers.)
Invenergy lost its
argument that it did not want to post the bond at the same time that it issues
the Notice To Proceed (NTP) to National Grid (that is,
proceed with designing and building the interconnection). [FERC Order, p. 10, ¶
24.] Invenergy will have to post the bond when it issues the NTP, just as the
ISO Tariff requires, just like every other generator in New England.
FERC reminded everyone
that Invenergy and National Grid are free to renegotiate the timing for signing the Large Generator Interconnection
Agreement (LGIA) and
posting the bond. [FERC Order, p. 10, ¶ 25.] (Invenergy and National Grid
have already done this, because, under the original
schedule, Invenergy should have signed the LGIA (and posted the bond) long ago.
So what will happen
next?
In light of FERC’s
ruling late on Friday, Invenergy is now at a crossroads. Specifically,
Invenergy has to decide between four options going forward:
Option
One: Invenergy could choose
to appeal the FERC decision to the Circuit
Court of Appeals for the District of Columbia. This is probably the
least likely option of all, for several reasons. First, Invenergy’s chance of
prevailing in the Circuit Court would be approximately zero.
Second, the fact that FERC has now ruled in the case effectively moots CLF’s newly filed Motion for a Stay (filed just this past Friday). We asked the EFSB for a stay pending the outcome of this FERC case.
Now we have the outcome. Right now, time is of the essence to Invenergy; the worst thing that could happen to Invenergy now is that the EFSB issues a stay. FERC’s ruling took away CLF’s argument in favor of a stay, but Invenergy appealing to the D.C. Circuit would give CLF that argument back. Invenergy is unlikely to do that.
Second, the fact that FERC has now ruled in the case effectively moots CLF’s newly filed Motion for a Stay (filed just this past Friday). We asked the EFSB for a stay pending the outcome of this FERC case.
Now we have the outcome. Right now, time is of the essence to Invenergy; the worst thing that could happen to Invenergy now is that the EFSB issues a stay. FERC’s ruling took away CLF’s argument in favor of a stay, but Invenergy appealing to the D.C. Circuit would give CLF that argument back. Invenergy is unlikely to do that.
Option
Two: Invenergy could
immediately issue the NTP and post the required bond of tens of millions of
dollars. This is highly unlikely. Invenergy has
said that no reasonable developer would post such a huge bond in advance of
securing all major permits. Because I do not trust what Invenergy says, I have
verified independently the fact that this is true. If Invenergy took this
course, it would certainly strengthen Invenergy’s case at the upcoming Final
Hearing, but this is highly improbable.
Option
Three: Invenergy could
walk away from the project. When Invenergy filed its permit application at the
EFSB on October 29, 2015, Invenergy fully expected to have its permit by March
2016 – with little or no opposition from Burrillville or the public. Things
have not exactly worked out that way for Invenergy. If Invenergy does, at some
point, decide to abandon its proposal, that decision will be driven by
financial concerns. There are now several reasons why the finances for the
project are less attractive for Invenergy than it had planned.
Invenergy conceived this
project when Forward Capacity
Auction (FCA) clearing
prices (in FCA-8) were over $17/kW-month in
this zone, and Invenergy hoped and planned to clear both of its turbines at
that very high price. But by the time Invenergy participated in FCA-10, Invenergy was only able
to clear one turbine and the auction clearing price had crashed to
$7.03/kW-month (with no zonal price separation).
Invenergy’s second
turbine failed to clear again in FCA-11, and then was disqualified
from even participating in FCA-12 (to
be held on February 5, 2018). It is possible that the factors that led
the ISO to disqualify Invenergy’s
Turbine Two from FC-12 will also get the turbine disqualified
for FC-13.
There is little profit
margin on the energy side of the market, and
power plant developers rely heavily on capacity payments
to turn a profit. The ISO provides a seven-year price lock for developers that
clear in an FCA – but Invenergy has already lost three of those seven years.
By withdrawing one of
the two lawsuits at FERC last week, Invenergy is going to have to pay hundreds
of millions of dollars in interconnection costs that it was not counting on
paying.
And with the FERC
ruling on Friday, Invenergy lost its option to self-build the
interconnection. Invenergy said that it
could build the interconnection much faster and much less expensively than
National Grid could. But now Invenergy is forced to pay the much higher costs
of having Grid build the interconnection (and take longer into the bargain).
Invenergy won’t be up and running in 2021, and it will lose a fourth year of the seven-year FCA price lock-in.
The combination of the
foregoing suggests that Invenergy was probably reconsidering its commitment to
this power plant over the last few days and weeks. Nevertheless, Invenergy
probably is not yet ready to pull the plug and walk away. Invenergy is probably
closer to walking away than it was a year (or even six months) ago; but
Invenergy is probably not quite there yet.
That leaves one more
possible route forward for Invenergy, and it is this route that is the most
likely.
Option
Four: As noted above,
FERC invited the parties (mainly Invenergy and National Grid, but also the ISO)
to negotiate a new schedule for when Invenergy issues the NTP and posts its
bond.
If Invenergy wants to go ahead with the Burrillville power plant, but does not want to issue the NTP and post the bond immediately, it can work out an entirely new schedule for doing so – a schedule that pushes the time table for the plant even further into the future.
If Invenergy wants to go ahead with the Burrillville power plant, but does not want to issue the NTP and post the bond immediately, it can work out an entirely new schedule for doing so – a schedule that pushes the time table for the plant even further into the future.
Such a course would be
good for Invenergy because it would provide a clear path forward for Invenergy
to go to a Final Hearing, get an EFSB permit, and maybe even eventually build
the plant. However, time is not on Invenergy’s side; and in the eight months or
so between now and the end of a Final Hearing, most of what is likely to happen
is likely to hurt Invenergy:
If Invenergy doesn’t issue
the NTP for eight to ten months, it won’t be on line until 2022 at the
earliest. Invenergy will lose another year of its seven-year FCA price lock-in.
If Invenergy isn’t up
and running until 2022, it strengthens CLF’s argument that Invenergy wasn’t
needed all along. Invenergy insisted that its electricity was urgently needed
by the grid in 2019, but it is now obvious to everyone that Invenergy is not
needed at all. This will hurt Invenergy at a Final Hearing.
Moreover, lots more
renewable energy is coming into the system every year, thereby lessening even
further the need for Invenergy.
In fact, it is entirely
conceivable that the ISO will involuntarily terminate the Capacity Supply Obligation (CSO) that Invenergy acquired in
FCA-10 as soon as it (the ISO) is able to do so under the Tariff, this summer
(which would be before the end of the Final Hearing).
This fourth option —
Invenergy negotiating a new schedule for building out the interconnection – is
the most likely course of events in the wake of Friday’s FERC
ruling.
This route is also Invenergy’s best way forward, because it keeps the project alive for another year. (And, of course, it forces Burrillville and CLF to continue to litigate against Invenergy.)
But the passage of time also hurts Invenergy. If the ISO does involuntarily terminate Invenergy’s CSO, that single action would almost certainly be the end of Invenergy.
It would be the end of Invenergy politically, because Invenergy’s only argument (flawed argument, but still an argument) in favor of the plant would be gone. It would also be the end of Invenergy economically, because that price lock-in from the auction is crucial to any developer turning a profit.
This route is also Invenergy’s best way forward, because it keeps the project alive for another year. (And, of course, it forces Burrillville and CLF to continue to litigate against Invenergy.)
But the passage of time also hurts Invenergy. If the ISO does involuntarily terminate Invenergy’s CSO, that single action would almost certainly be the end of Invenergy.
It would be the end of Invenergy politically, because Invenergy’s only argument (flawed argument, but still an argument) in favor of the plant would be gone. It would also be the end of Invenergy economically, because that price lock-in from the auction is crucial to any developer turning a profit.
Nevertheless, for now,
the bottom line is that opponents of Invenergy still have a fight ahead.