Who is Max Gen & why does he matter?

​In January of 2018, we reported on the energy impact of the historic cold weather event from January 16-18th that drove temperatures in Louisiana into the ‘teens and drove state-wide energy demand to historic highs. As a result of the persisting lack of energy efficient housing stock, Louisiana residents cranked their heaters to stay warm. As demand rose, MISO, the independent grid operator, called a “MaxGen” (Maximum Generation) event, asking all generation in the MISO south region including, Louisiana, Mississippi, Arkansas, and a slice of Texas, to be available at their maximum capacity. In addition, a few “load modifying” industrial resources were called upon to reduce their usage during the peak event. In the final day of the cold snap an appeal went out to the public to conserve energy in order to protect the grid and ensure the capacity available would meet the state’s needs without blackouts. Fortunately, there were no blackouts related to lack of capacity, and the system worked as expected.

 However, the fact that utilities publicly requested consumer conservation concerned the Louisiana Public Service Commission, who opened an investigation into the reasons for the public appeal. The Commission reasoned that the utilities who had reported having adequate resources to meet peak loads, plus a safety net of a +12% reserve margin should not have to make such requests during extreme weather.

We now know what happened. A significant portion of power plants throughout the MISO south region were unavailable due to forced outages, planned outages, and de-ratings as a result of the gas, nuclear, and coal plants being unable to provide the capacity expected. In fact, only 65% of Entergy’s operating company’s generation was available to serve load during the severe cold weather event. 

This event has continued to impact energy costs four months later, through the Fuel Adjustment Clause (FAC), especially in New Orleans. On February 20, Entergy filed a letter to the City Council alerting them to the impact to the FAC in March as a result of various January issues.

FACs are representative of both fuel and purchased power, minus the energy sold into the market, from two months prior. Entergy’s letter stated that the preliminary calculation of the FAC would have taken that per/kwh line item on your bill from $0.035323 in February to $0.06561/kwh in March, or a ~90% increase.The letter went on to say that the increase was driven by 1)total fuel purchased (gas), 2)a gas cost increase of 35%, and 3) that owned generation (native generation and PPAs) decreased significantly, due in part to “certain plant outages.” Entergy’s letter asked the Council for the go-ahead to freeze the FAC for the month of March at the same level as February in order to protect customers from bill spikes. The bill impact from January would then be spread out over a number of months. The request was apparently granted, since March’s FAC was the same as February, but you may have noticed an uptick in the cost of your FAC this month. 

New Orleans City Council should take a hard look at the causes and impacts of plant outages. Where any owned generation was unavailable, the Council and the Commission should verify that the outages which drove market prices up were appropriate.

As we said back in January, one of the greatest lessons from the cold snap is the very real need for investments in energy efficiency and other demand-side management programs. Greater efficiency in our homes and businesses would have improved comfort and health across the state during that extreme weather event and would continue to provide benefits for years. In addition, some of the lingering cost impacts would have been mitigated. Would you rather be warm because you turned up the heat? Or would you rather be warm because your home puts every kWh to use? Additionally, weatherization in homes can protect other systems including plumbing, which was severely impacted by the cold snap around the region.  The good news is that New Orleans' Energy Smart program is on a roll, growing significantly each year for at least the next two years, including demand response programs that can help manage peak capacity needs.

At the LPSC however, efficiency programming has ground to a halt at all of the major utilities, and rulemaking has been stymied for months. We sincerely hope commissioners see the need for mature efficiency programs and will make sure the rulemaking for EE at the state moves forward.
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Finally, the spike in gas costs should illustrate the danger of focusing solely on natural gas in Louisiana for new electricity generation The fracking boom in the US has kept average gas prices fairly low but not diversifying our power mix with fuel-free power will always put customers at risk for volatility in the market, especially when we collectively need power the most.as often happens in cold weather, the wide demand for natural gas in January drove the Henry Hub cost of the country’s “cheapest fuel” way up for the month. This is all not to mention the wide-ranging climate and environmental impacts of natural gas fracking.The Alliance is currently working through Integrated Resource Planning with every major utility in the state, and will continue to find ways to support energy resources that can 1) reduce our need for energy, 2) clean up the generation we require, and 3) reduce energy burdens throughout the year.
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Since hot summer months are just around the corner, we recommend you take advantage of any efficiency programs available in your area. Anything you do to improve how well your home uses energy will save you money and make you more comfortable! Now is the time to reach out to your utility and ask what programs they have available to help reduce your energy waste.