U.S. DOE Orders FERC To Consider Adopting Rule To Provide Non-Market Compensation To Coal, Nuclear Units in RTOs

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.

Under federal statute, DOE can direct FERC to consider a rule proposal from DOE expeditiously. FERC is obligated to consider the proposal in the time directed by DOE, but FERC is not required to adopt any proposal.

The rule would create a class of generating assets known as, "grid reliability and resiliency resources."

Among other things, such a resource would be 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

The rule would establish a, "reliability and resiliency rate."

Specifically, each FERC-approved RTO would be ordered to, "establish a tariff that provides a just and reasonable rate for the (A) purchase of electric energy from an eligible reliability and resiliency resource and (B) recovery of costs and a return on equity for such resource dispatched during grid operations."

"The just and reasonable rate shall include pricing to ensure that each eligible resource is fully compensated for the benefits and services it provides to grid operations, including reliability, resiliency, and on-site fuel assurance, and that each eligible resource recovers its fully allocated costs and a fair return on equity," DOE's proposal states

Compensable costs shall include, but not be limited to, operating and fuel expenses, costs of capital and debt, and a fair return on equity and investment.

DOE's proposal does not address cost recovery or cost allocation for the reliability and resiliency rate.