January 15, 2018

Federal Regulators Shut Down Perry’s Proposed Rule for Grid Resilience

In an order issued January 8, the Federal Energy Regulatory Commission (FERC) determined that Secretary Rick Perry’s Sep. 29 notice of proposed rulemaking (NOPR) on grid resilience does not meet the statutory requirements of the Federal Power Act (FPA).

FERC said that it has closed the docket it opened to consider the NOPR and take comments from stakeholders. As an alternative, however, FERC in its order initiated a new proceeding to explore resilience issues within the operations of U.S. regional transmission operators and independent system operators (RTO/ISO).

The NOPR asked FERC to consider directing U.S. organized markets to create rules that price generation resources necessary to maintain the reliability and resiliency of the U.S. bulk power system. Perry sought rules that allowed for the recovery of costs for “fuel-secure” resources that could provide “reliable capacity, resilient generation, frequency and voltage support and on-site fuel inventory.” Eligible units would have been required to have a 90-day fuel supply on site in the event of supply disruption.

In comments to FERC, a large group of clean energy industry representatives urged FERC not to adopt the NOPR, claiming that special payments to so-called resilient generation, such as coal and nuclear, would be discriminatory. They noted that Perry’s claim that the U.S. power grid faces imminent reliability and resilience problems has not been demonstrated and specialized payments are unjustified.

The Advanced Energy Economy, one of the commenters in that group, in a statement yesterday supported FERC’s order. Malcolm Woolf, AEE senior vice president for policy, said:

“We commend the FERC commissioners for rejecting an unwarranted bailout of uneconomic power plants in order to solve a problem that doesn’t exist. We look forward to engaging in a holistic look at what it takes to keep the lights on, and to demonstrating the contribution of advanced energy technologies to an affordable, reliable, resilient grid.” 

The American Council on Renewable Energy, also a commenter in that group, said in a statement yesterday that it was “pleased” with FERC’s final action. Gregory Wetstone, ACORE’s president and CEO, said:

“We believe FERC has laid out a sensible approach to gathering the vital information needed to support any changes to electricity markets, and we are confident that, in the end, the record still will not support market intervention.

One thing we do know for sure: whenever America’s power grid has come across real world resilience issues, renewable energy played an essential role in supporting grid reliability, ramping up, for example, to provide more power in the 2014 Polar Vortex event when coal piles froze. At ACORE, we will continue our work to ensure that the reality of renewable resilience is considered in any future FERC rulemaking discussions.”

In a statement yesterday, Environment America’s Energy Program Director, Rob Sargent, added:

“Secretary Perry’s proposed rule was but another in a long list of actions by the Trump Administration that defy the facts to appease the polluter lobby. We should not tolerate actions like this that are designed to extend the life of the polluting and risky power plants.”

Just and Reasonable

FERC said in its order yesterday, that, “although the [NOPR] failed to satisfy the fundamental legal requirements of section 206 of the FPA, the [NOPR] and the record developed to date have shed additional light on resilience more generally and on the need for further examination by the Commission and market participants of the risks that the bulk power system faces and possible ways to address those risks in the changing electric markets.”

In order to meet the statutory standards of FPA, the NOPR needed to show that existing RTO/ISO tariffs are “unjust, unreasonable, unduly discriminatory or preferential.” And any proposed remedy also must be shown to be “just, reasonable, and not unduly discriminatory or preferential.”

FERC noted that, although some commenters alleged there will be resilience or reliability issues as the result of the retirements of certain generation resources, those claims do not demonstrate that RTO/ISO tariffs are unjust or unreasonable. In addition, FERC said that the records of the proceeding did not demonstrate that allowing eligible resources to receive a “cost-of-service rate regardless of need or cost to the system,” was just and reasonable.

The NOPR’s “on-site 90-day fuel supply requirement would appear to permit only certain resources to be eligible for the rate, thereby excluding other resources that may have resilience attributes,” FERC said.

New Proceedings

Under its new docket (AD18-7), FERC said it will work to develop a “common understanding among the Commission, industry, and others of what resilience of the bulk power system means and requires.”

In addition, FERC will try to understand how each RTO/ISO assesses resilience in its geographic footprint and use that information to evaluate whether additional action by FERC will be appropriate.
FERC directed U.S. RTOs/ISOs to submit information regarding resilience in their regions within 60 days of the order.

“Although the Proposed Rule focuses on one possible aspect of grid resilience — secure onsite fuel — we conclude that a proper evaluation of grid resilience should not be limited to that single issue, and should instead encompass a broader consideration of resilience issues, including wholesale electric market rules, planning and coordination, and NERC standards,” FERC said.

FERC provided, as a guideline, a definition of resilience as:

The ability to withstand and reduce the magnitude and/or duration of disruptive events, which includes the capability to anticipate, absorb, adapt to, and/or rapidly recover from such an event.

FERC also will take comments on the RTO/ISO submissions from other industry members.

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