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Calling Grid Resilience "An Important Issue," And Directing RTOs To Be "Proactive", FERC Opens New Proceeding On Grid Resiliency While Rejecting DOE's Sought Cost-Of-Service Payments

January 9, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

FERC rejected a request from the U.S. Department of Energy to adopt a cost-of-service rate to provide non-market compensation to resources in RTOs for the, "reliability, resiliency, and on-site fuel assurance," provided by such resources, but FERC ordered further investigation of grid resiliency, calling the issue, "important."

As previously reported (see story here), U.S. Energy Secretary Rick Perry on September 28 submitted a directive to FERC to consider adopting rules which would provide non-market compensation to certain generating units, such as coal and nuclear plants.

DOE's proposed rule (FERC Docket RM18-1) would have created a class of generating assets known as, "grid reliability and resiliency resources," and would have provided non-market compensation to such resources

Among other things, such a resource would have been defined as meeting the following conditions:

• is able to provide, "essential energy and ancillary reliability services, including but not limited to voltage support, frequency services, operating reserves, and reactive power."

• has a 90-day fuel supply on site enabling it to operate during an emergency, extreme weather conditions, or a natural or man-made disaster

FERC rejected DOE's sought remedy to address grid resilience, finding that DOE's proposal had not been shown to be consistent with FERC's various statutory obligations, including FERC's charge to ensure just and reasonable rates.

"Neither the Proposed Rule nor the record in this proceeding has satisfied the threshold statutory requirement of demonstrating that the RTO/ISO tariffs are unjust and unreasonable. While some commenters allege grid resilience or reliability issues due to potential retirements of particular resources, we find that these assertions do not demonstrate the unjustness or unreasonableness of the existing RTO/ISO tariffs. In addition, the extensive comments submitted by the RTOs/ISOs do not point to any past or planned generator retirements that may be a threat to grid resilience. We also disagree with assertions that an adequate record exists through the Commission’s price formation efforts to support the Proposed Rule’s action regarding bulk power system resilience," FERC said

"[W]e note that the Proposed Rule would allow all eligible resources to receive a cost-of-service rate regardless of need or cost to the system. The record, however, does not demonstrate that such an outcome would be just and reasonable. It also has not been shown that the remedy in the Proposed Rule would not be unduly discriminatory or preferential. For example, the Proposed Rule’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

However, while denying DOE's sought remedy, FERC said in its order that, "Promoting the resilience of the bulk power system is an important issue for the Commission. Each RTO/ISO should take a proactive stance on addressing and ensuring resilience."

"Therefore, we are initiating a new proceeding, Docket No. AD18-7-000, to take additional steps to explore resilience issues in the RTOs/ISOs. The goal of this proceeding is: (1) to develop a common understanding among the Commission, industry, and others of what resilience of the bulk power system means and requires; (2) to understand how each RTO and ISO assesses resilience in its geographic footprint; and (3) to use this information to evaluate whether additional Commission action regarding resilience is appropriate at this time. This examination of the resilience of the bulk power system will be a priority of the Commission," FERC said

"We recognize that the RTOs/ISOs are well-suited to understand the needs of their respective regions and initially assess how to address resilience given their individual geographic needs. 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. Indeed, the efforts of RTOs and ISOs on grid resilience encompass a range of activities, including wholesale electric market design, transmission planning, mandatory reliability standards, emergency action plan development, inventory management, and routine system maintenance. However, many of these activities are not unique to RTOs/ISOs and are performed by transmission providers in areas that do not have centralized wholesale electricity markets," FERC said

"As noted above, the topic of the new proceeding -- resilience of the bulk power system -- will remain a priority of the Commission and we expect to review the additional material and promptly decide whether additional Commission action on this issue is warranted," FERC said

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