FERC Rejects Grid Reliability and Resilience Pricing — For Now!

Yesterday, FERC terminated the docket it opened in response to DOE Secretary Perry’s September proposal to compensate generators who maintain a 90-day fuel supply on-site.  The intent of the proposal was to compensate generators who provide reliability and resilience attributes to the grid.

The decision was unanimous, though there were several concurrences.  The commissioners were not persuaded that there is a reliability problem that requires immediate, out-of-market relief to coal and nuclear generators.

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.

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 did open a new docket, in which it will explore whether there is a reliability or resilience problem.  It asked RTOs and ISOs to provide answers within 60 days to questions it posed in the Order.

As a result, I don’t think we’ve heard the last of this issue.  Indeed, three of the commissioners wrote concurrences, laying down markers regarding what they see as potentially acceptable – or unacceptable – outcomes.  Commissioners LaFleur and Glick both made clear that they would not support any kind of payments to generators for providing “reliability,” though they both agreed that the discussions with the RTOs and the ISOs make sense.  Here’s LaFleur’s conclusion:

This proposed remedy, which simply designated resources for support rather than determining what services needed to be provided, would be highly damaging to the ability of the market to meet customer needs—including any demonstrated resilience needs—fairly, efficiently, and transparently. In effect, it sought to freeze yesterday’s resources in place indefinitely, rather than adapting resilience to the resources that the market is selecting today or toward which it is trending in the future.

Commissioner Glick was on the same page:

The Proposed Rule had little, if anything, to do with resilience, and was instead aimed at subsidizing certain uncompetitive electric generation technologies.

He also noted that it is transmission and distribution that raise the biggest resilience issues, not generation.

Finally, Commissioner Chatterjee weighed in as well.  As he has throughout the process, Commissioner Chatterjee has stated that he supports the intent of the NOPR, so long as protection for coal and nuclear generators would be “legally defensible” and “would not distort markets.”

I continue to think that that is a null set.

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