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Hundreds Weigh in on FERC Grid Resiliency Pricing Proposal

By Blair Beasley

Monday, November 20, 2017

The Federal Energy Regulatory Commission (FERC) has been front and center in the energy policy world since the Department of Energy utilized its authority to directly propose its Grid Resiliency Pricing Rule to the independent commission. The notice of proposed rulemaking (NOPR) was placed on the fast track and sent to FERC in late September. Public comments were due October 23 and response to comments were due November 7. FERC will make a decision on the proposal before the end of the year.

If approved, the proposal would guarantee payments primarily to coal and nuclear units with 90 days of on-site fuel storage in certain competitive wholesale markets. The rulemaking says the payments would ensure proper compensation for the reliability and resiliency attributes that these generators provide.

The NOPR has garnered much attention for the substance of the proposal and the process by which it arrived on FERC’s docket. Hundreds of commenters – including power companies, elected officials, environmental groups, labor groups, market operators, and trade associations – have weighed in on the NOPR. Many of the comments fit into three main categories:

1. Opposition to the NOPR

2. Support of FERC acting quickly to value resiliency in the marketplace, but proposing a different remedy

3. Support of the NOPR

Opposition to the NOPR

A tranche of comments were firmly against the FERC NOPR. Opposition united some unlikely interests, with groups like the American Petroleum Institute and the Natural Resources Defense Council, all filing comments urging FERC to reject the proposal.

Common themes among this set of commenters includes:

1. The need for FERC to more clearly define resiliency and the problem that the NOPR seeks to address,

2. The concern that cost-of-service payments will cause serious harm to the wholesale markets,

3. The lack of opportunity for meaningful stakeholder involvement due to the expedited rulemaking process,

4. The concern that the Department of Energy’s proposal would raise costs for consumers and increase air pollution,

5. The question of whether supporting on-site fuel storage is the best way to improve reliability and resiliency on the grid, and

6. The argument that the NOPR does not meet the legal standard for action

Many commenters opposed to the proposal urged FERC to deny the NOPR, and instead, study and define resiliency on the grid.

We strongly encourage the Commission to use this opportunity created by the Secretary to identify attributes of the current competitive market system that need to be improved, to crisply define them and either modify the current published proposal or initiate regional proceedings to examine resilience issues and consider the need for market rule changes.

-Group of Eight Former FERC Chairs and Commissioners

This DOE NOPR would distort the markets and support power generators that cannot compete with the superior economics of natural gas generation, citing a reliability ‘emergency,’ even though one has not been shown to exist.

-American Petroleum Institute

…the proposed rule is misguided and fundamentally flawed and represents nothing more or less than corporate welfare that will result in massive harm to American consumers and the American economy.

-Electric Power Supply Association

Support the Problem Statement, Not the Proposed Remedy

Another group of commenters agreed that resiliency should be valued in the wholesale electricity marketplace, that the need for this market reform is urgent, and that FERC is the correct venue for action. However, these commenters did not give a blanket endorsement for the Department of Energy’s proposal to ensure cost-of-service payments to certain generators. Instead, many of these commenters offered up alternative solutions or substantive additions to the NOPR’s proposed remedy.

For example, ClearPath Foundation proposed two new market-based mechanisms to allow generators with certain resiliency attributes to receive compensation.

Another example is Exelon Corporation, which listed a series of actions that it called on FERC to undertake. This includes:

1. Correcting energy price formation in PJM;

2. Issuing a policy statement declaring that nuclear units that benefit from state programs designed to preserve their operation will not have their offers mitigated in FERC’s markets;

3. Directing organized markets to report on other market-based reforms that could help foster resiliency; and

4. Requiring the covered markets to submit detailed information that can be used to develop a richer understanding of where our grid’s vulnerabilities lie, how those vulnerabilities match up against the intelligence community’s threat assessments, and what steps must be taken to ensure a sufficient degree of resiliency to protect the nation.

(The Secretary of Energy) is asking whether wholesale markets in PJM, NYISO, and ISO-NE – which are designed to ensure we have enough megawatts to serve load- should also be designed to ensure we have the right megawatts to serve load. 

-Exelon

Allowing the current situation to continue risks a more vulnerable United States power grid.

-ClearPath Foundation

Support of the NOPR

Finally, a smaller group of commenters came out in support of the FERC NOPR. These commenters agreed that resiliency attributes need to be immediately valued in the wholesale marketplace and that ensuring cost-of-service payments to generators with on-site fuel storage would solve the problem.

Common themes among this set of commenters includes:

1. The argument that today’s markets are not pure and are constructed to achieve certain policy goals,

2. The assertion that current rates are not just and reasonable,

3. The finding that fuel-secure generators will continue to retire without urgent FERC action, and

4. The conclusion that the retirement of fuel-secure units will make the grid less resilient and reliable

For example, First Energy’s comments call for FERC to direct covered markets to adopt tariff changes that would ensure resilient generators receive a payment each month the covers the gap between what the unit earns in the capacity, energy, and ancillary markets and their full costs of operation and service. In exchange, the units must remain in operation and provide energy and ancillary services when called upon.

Several labor groups, including the Utility Workers Union of America, also came out in support of the NOPR. The Utility Workers Union of America said without FERC action the nation is at risk of losing coal and nuclear plants that provide critical reliability and resiliency attributes.

Getting these markets right is not simply a matter of sound policy, it impacts our members’ jobs and communities.

–Utility Workers Union of America

Simply put, the imminent closure of resilient generation presents a clear and present danger to the Nation.

–FirstEnergy

KEYWORDS: FEDERAL ENERGY REGULATORY COMMISSION, DEPARTMENT OF ENERGY, FERC