BY CONTINUING TO USE THIS SITE, YOU ARE AGREEING TO OUR USE OF COOKIES. REVIEW OUR PRIVACY & COOKIE NOTICE
X


First wave of comments on US DOE's power market rule roll in

Washington (Platts)--24 Oct 2017 557 am EDT/957 GMT


A tsunami of comments covering the ideological waterfront of the US Department of Energy's contentious power market proposal flooded into the Federal Energy Regulatory Commission on Monday, a deadline set as part of the department's aggressive 60-day timeline for final action by the commission.

Ahead of filing official comments, the power industry was quick to take sides, drawing a clear line in the sand between the positions of the coal and nuclear sectors and practically everyone else, creating strange bedfellows among lobbying groups for competing fuels.

The notice of proposed rulemaking (RM18-1) sent to FERC last month seeks immediate commission "action to ensure that the reliability and resiliency attributes of generation with on-site fuel supplies are fully valued," and calls upon FERC to "exercise its authority to develop new market rules that will achieve this urgent objective."

The proposed rule would require independent system operators and regional transmission organizations to guarantee full cost recovery and a return on investment for generators that maintain 90-day on-site fuel supplies.

Article continues below...


Request a free trial of: Inside FERCInside FERC
Inside FERC

Published every Monday, Inside FERC is the authoritative guide to gas pipeline regulation and the agency's role in reshaping the electric utility industry. Inside FERC has covered the Federal Energy Regulatory Commission for more than 25 years, and our veteran editors and reporters offer a depth of experience and perspective unmatched in the industry.

Request a free trialRequest More Information


FIRSTENERGY PITCHES IMPLEMENTATION PLAN


FirstEnergy, whose eight-year power purchase agreements to provide income guarantees for more than 3,000 MW of its coal and nuclear generation were scuttled by FERC last year, in filed comments threw its support behind the grid reliability and resilience pricing rule, suggesting limited modifications and a plan for implementation.

The company disagreed with an array of other comments from the natural gas, renewables, public power and other industries arguing that the rule was unnecessary and that FERC's ongoing price formation initiatives would resolve the wholesale markets' problems.

"Fuel-secure, resilient generators are retiring at an unprecedented pace as a direct result of the RTO/ISO markets failing to compensate them for their resiliency contributions," FirstEnergy said. It crafted tariff revisions and a resiliency support resource agreement that the ISOs/RTOs could adopt, similar to reliability-must-run and system support resource agreements currently in use.

"The proposed compliance tariff provisions and RSR agreement provide that, in exchange for a resiliency support resource unit remaining in operation and providing energy and ancillary services in times of need by the RTO/ISO, the RTO/ISO will ensure that the RSR unit receives a payment each month equal to its full costs of operation and service less market revenues for capacity, energy and ancillary services," FirstEnergy said.


NEI VIEWS PROPOSAL AS 'INTERIM BACKSTOP'


The Nuclear Energy Institute contended that "while the commission considers how to achieve the [energy] secretary's goal for the long term, a full cost of service recovery mechanism as an interim backstop is necessary to ensure that nuclear generation units are not prematurely retired, and their resilience benefits lost forever."

NEI recommended that FERC "determine what system risks are not being addressed by current market designs and ... require RTOs to move expeditiously to propose pricing mechanisms that ensure markets will ensure system resilience, and open new proceedings as necessary."

On the other hand, 20 trade groups and other stakeholders representing the natural gas, wind, solar, electric storage, independent power producers and other energy technologies came together to jointly file comments opposing the NOPR.


OPPOSITION SAYS NOPR DISCRIMINATORY


They called the proposed compensation to coal and nuclear generators discriminatory and argued that "the justification for the proposed payments -- resiliency -- is not well-defined, nor does the DOE NOPR demonstrate that resiliency is lacking in the" regions impacted by the proposed rule.

The trade groups asserted "there is no evidence demonstrating that RTOs/ISOs need to subsidize resources with 90 days of on-site fuel in order to maintain reliable service during severe weather events or otherwise, and indeed there is substantial evidence showing that electric systems that lack, or are transitioning to lesser reliance on, coal and nuclear resources are nonetheless operated in a manner that is both reliable and resilient."

They pointed to an analysis by the Rhodium Group consultancy that found that "a mere 0.00007% of customer-hours lost to outage were caused by fuel supply emergencies between 2012-16."

That and other statistics "suggest that the DOE NOPR is a transparent attempt to prop up uneconomic generation that is unable to compete due largely to sustained low prices for natural gas and that is not otherwise needed for reliability," the trade groups said, urging FERC not to adopt the proposal.

--Jasmin Melvin, jasmin.melvin@spglobal.com
--Edited by Jason Lindquist, jason.lindquist@spglobal.com




Copyright © 2018 S&P Global Platts, a division of S&P Global. All rights reserved.