DOE NOPR Faces Criticism But Remains on Fast-Track, with Initial Comments Due October 23

On September 28, 2017, Secretary of Energy Rick Perry sent a letter to FERC enclosing a Notice of Proposed Rulemaking(NOPR), which Secretary Perry asserts “requires the Commission-approved organized markets to develop and implement market rules that accurately price generation resources necessary to maintain the reliability and resiliency of our Nation’s electric grid.” Both the timing and substance of the proposal have been criticized by energy industry representatives, lawmakers, and current and former FERC commissioners, but the Commission has denied requests to extend the comment period on the proposal (see the notice here and analysis here), and acting Chairman Neil Chatterjee has recently confirmed that it will take some action within the 60-day timeline set by the NOPR.

Here’s a recap of some of the key developments to date:

  • August 23: DOE released the Staff Report to the Secretary on Electricity Markets and Reliability. Secretary Perry cites the report in arguing that there is an urgent need for FERC to take action to address reliability and resiliency, but critics of the NOPR have argued that the proposal is inconsistent (see examples here and here) with the report’s conclusions.
  • September 28: Secretary Perry submitted the NOPR, which would require Commission-approved ISO or RTOs to “establish a tariff that provides a just and reasonable rate [including pricing to ensure full compensation for “reliability, resiliency, and on-site fuel-assurance”] 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.” A “grid reliability and resiliency resource” is an electric generation resource that, among other things, is able to provide essential energy and ancillary reliability services and has a 90-day fuel supply on site.
  • October 2: Eleven trade organizations filed a Joint Motion requesting that FERC allow for at least a 90-day period for initial comments and convene a technical conference prior to the comment deadline. On the same day, FERC issued a Notice Inviting Comments on the NOPR, and set an October 23 deadline for initial comments and a November 7 deadline for reply comments.  Critics also argued that the rule fails to demonstrate how it would improve resilience, and that it “would blow the market up.”
  • October 3: In response to the Notice, the energy trade organizations moved for an extension that would provide a 90-day initial and 45-day reply comment period. Representatives from some of those organizations, along with others from the energy sector, also testified at a House Committee on Energy and Commerce, Subcommittee on Energy, hearing on “Defining Reliability.” Views at the hearing were predictably split between natural gas, solar, and wind industry representatives, who opposed the NOPR, and coal, nuclear, and hydropower representatives, who expressed at least qualified support for the substance of the rule.
  • October 4: FERC issued a Request for Information, which poses 30 questions concerning, among other things, the need for reform, “grid reliability and resiliency resource” eligibility, the 90-day fuel supply requirement, rule implementation, and rate calculation.
  • October 5: Witnesses, including Dr. Joseph Bowring, PJM Independent Market Monitor, and Rebecca Tepper, Chair of the Consumer Liaison Group for ISO-NE and Chief of the Energy and Telecommunications Division in the Massachusetts Attorney General’s Office, testified at a House Subcommittee on Energy, hearing on consumer perspectives on improving the nation’s electricity markets. All six witnesses stated that they took issue with both the process and substance of the NOPR.
  • October 10: The Grid Resiliency Pricing Rule was published in the Federal Register. The published version of the rule adds language that limits its application to regions “with energy and capacity markets.”
  • October 11: FERC denied requests for extension of the NOPR comment period.
  • October 12: Secretary Perry testified at a hearing on the DOE’s “Missions and Management Priorities,” before the House Subcommittee on Energy.  He called the idea of a free market in electrical generation a “fallacy” where every state regulates the energy industry and stated that the proposal was a way to “kick-start” a conversation about grid resiliency and reliability.
  • October 13: Chairman Chatterjee explained that his goal is to “correct market deficiencies . . . in a legally defensible manner that doesn’t blow up the markets.” He also stated that FERC has “numerous tools at its disposal,” including issuing an advanced or superseding NOPR, extending the comment period, convening a technical conference, or issuing a final rule, to respond to the NOPR within 60 days.
  • October 16: Eleven Democratic Senators sent a letter to FERC “remind[ing] the Commission of its procedural and substantive obligations under the Administrative Procedure Act and Executive Order 12866,” noting several “inaccuracies and mischaracterizations” in Secretary Perry’s letter and the NOPR, and urging FERC to reject the rule.
  • October 19: Eight former FERC Commissioners filed comments arguing that the proposal would be a “significant step backward from the Commission’s long and bipartisan evolution to transparent, open, competitive wholesale markets,” and encouraging the Commission to modify the proposal or “initiate regional proceedings to examine resilience issues and consider the need for market rule changes.”
  • October 23: Initial comment deadline.

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