FERC starts new grid resilience proceeding

09 January 2018

The US Federal Energy Regulatory Commission (FERC) yesterday terminated proceedings on Energy Secretary Rick Perry's proposed rulemaking on grid resilience and reliability, which would have recognised the attributes of generation sources able to store fuel on site. FERC has instead launched a new proceeding to "holistically" examine the resilience of the system.

Exelon's RE Ginna plant operating through extreme weather conditions in New York State during the first week of January (Image: Exelon Generation)

The Department of Energy's Notice of Proposed Rulemaking called for market reforms to recognise the ability of traditional baseload generation with on-site fuel supplies – including nuclear power plants - to provide grid resiliency during extreme events like hurricanes or extreme winter weather conditions.

The proposed rule was submitted to FERC on 29 September, when Perry instructed the regulator to "consider and complete final action" on the proposed rule within 60 days. Perry in December agreed to extend the deadline for FERC action on the proposed rule to 10 January, at the request of newly sworn-in FERC chairman Kevin McIntyre. McIntyre's request was prompted by FERC's receipt of over 1500 submissions on the proposed rule.

In a 31-page order issued yesterday, FERC announced that it had now decided to terminate the proceeding on the DOE proposal. The proposed rule, it said, had failed to satisfy "clear and fundamental" legal requirements under the US Federal Power Act (FPA) to show that existing tariffs set by ISOs (independent systems operators) and RTOs (regional transmission organisations) - the bodies that operate the USA's power grid - are unjust, unreasonable, unduly discriminatory or preferential.

"Given those legal requirements, we have no choice but to terminate [the docket]", it said.

Resilience remained an "important issue" warranting the commission's continued attention, FERC said. "Accordingly, although we terminate the Proposed Rule proceeding … we are not ending our work on the issue," it said.

"To the contrary, we are initiating a new proceeding to address resilience in a broader context and are directing the RTOs/ISOs to provide information - followed by an opportunity for comment by any other interested entity - that will inform us as to whether additional actions by the Commission and the ISOs/RTOs are warranted with regard to resilience issues."

FERC said the rule proposed by the DOE focused on one aspect of grid resilience - secure onsite fuel - but a "proper evaluation" should encompass a wider range of issues.

The goals of the new proceeding are: to develop a common understanding of what "resilience" is; to understand how each RTO/ISO assesses resilience within its geographic area; and to evaluate whether additional FERC action on resilience is needed.

The regional market operators have been given 60 days to submit the required information. Other interested parties will then have a further 30 days to submit comments.

The order was signed by FERC secretary Kimberley Bose and supplemented by concurring testimony from Commissioners Cheryl LaFleur, Neil Chatterjee and Richard Glick. LaFleur said she had "serious concerns" over "out-of-market payments to certain designated resources" as proposed by the DOE, and said the commission should focus its efforts "not on slowing the transition from the past but on easing the transition to the future".

Chatterjee said that while regulatory reforms can take years to complete, FERC's consideration of the DOE proposal "speaks to the prudence of considering, as soon as practicable, whether interim measures may be needed to avoid near-term bulk power system resilience challenges" that could result from "rapid, unprecedented changes" in the generation resource mix. The scale and pace of such changes were "staggering", he said.

"Commentators express an expectation that those trends will continue in the years ahead, with many nuclear and coal units particularly at risk of economic retirement despite their significant contribution to bulk power system resilience," he said.

Chatterjee said it would have been "prudent" in addition to initiating the new proceeding for FERC to issue an order requiring the RTOs/ISOs to protect generation resources that may be important for resilience, but that would be at risk of retirement in before the proceeding is concluded. But out-of-market mechanisms should only be a last resort, he said.

Commissioner Glick, in his concurring testimony, said the DOE's proposed rule had "little, if anything, to do with resilience, and was instead aimed at subsidising certain uncompetitive electric generation technologies". He said that studies had shown retirements of coal and nuclear had not diminished grid reliability or posed "significant and immediate threat" to resilience. He described the DOE's proposed remedy as a "multi-billion dollar bailout targeted at coal and nuclear generating facilities".

Perry said he appreciated FERC's "consideration and effort" to assess the "marketplace distortions" that were putting long-term grid resiliency at risk. "As intended, my proposal initiated a national debate on the resiliency of our electricity system," he said yesterday. "What is not debatable is that a diverse fuel supply, especially with on-site fuel capability, plays an essential role in providing Americans with reliable, resilient and affordable electricity, particularly in times of weather-related stress like we are seeing now," he said.

US Nuclear Energy Institute President and CEO Maria Korsnick said the organisation was disappointed that FERC had not taken affirmative action that would preserve the nation's nuclear power plants, but applauded Perry's efforts to place the issue on the national agenda.

"America's nuclear fleet must remain a strategic asset contributing to energy security, resilience, reliability, economic growth and environmental protection. The status quo, in which markets recognise only short-term price signals and ignore the essential role of nuclear generation, will lead to more premature shutdowns of well-run nuclear facilities. Once closed, these facilities are shuttered forever," she said.

"We are committed to working with FERC, the Department of Energy and other federal and state policymakers to ensure that America's nuclear fleet continues to deliver electricity reliably and affordably. We believe the direction to the RTOs/ISOs to 'take a proactive stance on addressing and ensuring resilience' must lead to prompt and meaningful action, including on issues such as price formation," she said.

Researched and written
by World Nuclear News