The Nickel Report

On September 6, Assistant Secretary of Energy for Electricity Bruce Walker issued an order under Section 202(c) of the Federal Power Act declaring an emergency shortage of electric generation and directing the California Independent System Operator (CAISO) to require the dispatch of electrical output from specified electric generating units, if the CAISO determines the generation is necessary to meet demand.  The order applies during afternoon and evening hours from September 6 through September 13, 2020.

The order is in response to a request from the CAISO, also issued on September 6, that the Department of Energy (DOE) find that an electric reliability emergency exists within California, and that the department order that electric generating units identified by the CAISO be ordered to operate “at their maximum generation output levels when directed to do so by the CAISO, notwithstanding air quality or other permit violations.” [1]  It follows a State declaration of emergency by Governor Gavin Newsom on September 2, suspending air quality permitting requirements and conditions “that prevent [a] facility from generating additional power during peak demand hours, from 3:00 p.m. to 10:00 p.m., or as otherwise needed to respond to the Extreme Heat Event.” [2]  As the CAISO request noted, “this proclamation does not suspend permitting requirements that arise from federal law.” [3]

During August and early September, California has experienced an unprecedented heat wave.  Los Angeles County recorded its highest temperature ever on September 6, reaching 121°F at Woodland Hills. [4]  Extreme heat was widespread throughout the West, reducing the ability of other States to export power to California.  Wildfires forced transmission lines out of service on September 5, causing the unavailability of 1,600 MW of generation. [5]

Moreover, the extreme heat continued into the evenings, creating an additional challenge for the State.  Solar energy supplies more than 20 percent of California’s electricity, [6] but solar output drops in the evening, requiring replacement generation.

The CAISO has called the timing difference between demand and supply from renewables a “duck curve,” where the daily graph plotting the electricity supply that must come from non-renewable sources shows a marked curve between morning and evening when solar output is available.  As solar generation has increased in the State, the duck curve has steepened, meaning an increasing volume of dispatchable resources must be available to ramp up to meet evening demand.

DOE’s order directs the CAISO to order the dispatch of power from the generation units specified in the order if the CAISO “determines that generation from the Specified Resources is necessary to meet the exceptional levels of electricity demand that the CAISO anticipates in California.” [7]  The order is limited to operation “only as needed to maintain the reliability of the power grid in California” between 2:00 p.m. and 10:00 p.m., “on days when the demand on the CAISO system exceeds expected energy and reserve requirements.”  It directs the CAISO to “exhaust all reasonably and practically available resources, including demand response and identified behind-the-meter generation resources to the extent that such resources provide support to maintain grid reliability, prior to dispatching the Specified Resources.” [8]

DOE made the limitations of the order so explicit because of language Congress added to Section 202(c) of the Federal Power Act in 2015.  This language, known as the “Olson language” (after the legislation’s sponsor, Congressman Pete Olson (R-TX)), requires DOE to limit emergency orders to the “hours necessary to meet the emergency and serve the public interest” where the order “may result in a conflict with a requirement of any Federal, State, or local environmental law or regulation.” [9]  The order must “to the maximum extent practicable, [be] consistent with any applicable Federal, State, or local environmental law or regulation and minimize[] any adverse environmental impacts.”  The Olson language provides liability protection to companies that exceed environmental requirements while operating under a 202(c) emergency order.  The effort to provide liability protection in such circumstances was prompted by penalties levied against the owner of the Potomac River Generating Station in 2006 for environmental exceedances while operating under a 202(c) emergency order. [10]

The generation units specified in the September 6 DOE order are natural gas-fired generating units, and include the following:

• Units 1-5 of the Walnut Creek Energy Park, El Segundo, California
• Units 5/6 and 7/8 of the El Segundo Energy Center, El Segundo, California
• Units 1-4 of the Long Beach Generating Station, Long Beach, California

[1] CAISO letter to Secretary of Energy Dan Brouillette, September 6, 2020.

[2] Proclamation of a State of Emergency

[3] CAISO letter.

[4] https://earthobservatory.nasa.gov/images/147256/california-heatwave-fits-a-trend

[5] CAISO letter.

[6] https://www.seia.org/state-solar-policy/california-solar

[7] DOE order, p. 3.

[8] Id.

[9] 16 U.S.C. 824a.

[10] This law firm represented the owner of that facility with respect to the 202(c) order.