March 2, 2016
Notice of Inquiry on Primary Frequency Response. In Docket No. RM16-6, FERC issued a Notice of Inquiry seeking comment on the need to reform its rules for primary frequency response provision and compensation. Frequency response is a grid reliability service that serves to maintain the rate at which the electric current reverses direction on the transmission system – 60 times per second (Hertz). Resources providing primary frequency response automatically change their output within 5 to 15 seconds when the grid’s frequency strays from 60 Hertz. (Other forms of frequency response service are either more quickly or slowly responding.)
Last November, FERC finalized a rule (Order No. 819) intended to foster competition in voluntary bilateral sales of primary frequency response service. (We submitted comments supporting this rule.) The rule focused on the authority to make these sales and did not impose requirements on transmission owners to procure primary frequency response from third parties or develop an organized market for primary frequency response.
FERC acknowledged that there is presently no deficit in frequency response service on the transmission system, but expressed concern that, absent intervention, this service would diminish as the nation retires large fossil-fuel power plants (some of which provide primary frequency response) and ramp up wind and solar generators that would require special equipment or modifications to provide primary frequency response.
FERC is therefore seeking input on potential actions it could take to help maintain primary frequency response service as the nation’s resource mix continues to evolve, including whether to:
- Amend the pro forma Large Generator and Small Generator interconnection agreements to require that all new generation resources have frequency response capabilities as a precondition of interconnection;
- Implement primary frequency response requirements for existing generation resources; and
- Establish procurement and compensation mechanisms for primary frequency response.
We support FERC’s efforts in proactively investigating the primary frequency response issue as the resource mix evolves and would most support a flexible framework approach for properly valuing and compensating frequency response.
Comments are due 60 days after publication in the Federal Register, which should take place in the next one to two weeks.
A new, speedier rehearing process. At its February meeting, FERC presented its new process for resolving rehearing requests (which are internal appeals of Commission orders). The new process will focus on issues raised at the rehearing stage that point out why the Commission erred in coming to a certain conclusion based on the arguments and evidence before it. This more targeted approach will dismiss arguments that were already raised and addressed in the original filings and order and will thus result in a speedier turn-around time for decisions on the rehearing requests. Because parties must exhaust the administrative process and obtain a final agency decision to qualify for a potential appeal in federal court, the new process enables challenging parties to bring their case to federal court on a timelier basis. This is good news for those seeking to challenge FERC’s decision before it’s too late (for example, if the parties are challenging a pipeline proposal approved by FERC and did not obtain a stay, a timely decision on rehearing would either reverse the approval or allow the parties to seek relief in court before the pipeline construction significantly progresses).
FERC approves joint dispatch for Colorado utilities. In Docket No. ER16-178, et al., FERC approved tariff revisions for three Colorado transmission-owning utilities (Black Hills Colorado, Platte River Power Authority and Public Service Co. of Colorado) to jointly dispatch their power plants. The joint dispatch will help integrate renewable generation onto the grid and ensure that the most efficient, cheapest generation provides power to the system. This is anticipated to help the utilities save about $4.5 million in the first year. The new system will also continuously match supply and demand on the grid, improving on the current process, which occurs in 15 minute increments.
Further, the Public Service Co. of Colorado is discussing with the Western Area Power Administration and several utilities about the potential to agree on a regional transmission cost approach covering parts of Arizona, Colorado, Nebraska, South Dakota, and Utah. The regional approach could help keep costs on trading in check by eliminating the accumulation of fees when electricity moves across multiple transmission systems.
FERC to investigate whether WECC must-offer obligation should be terminated. In Docket No. EL16-27, FERC initiated a Section 206 investigation under the Federal Power Act to consider terminating the must-offer requirement imposed on the Western Electricity Coordinating Council (WECC) following the California energy crisis of 2000-01. Utilities in WECC must offer all of their available capacity in real-time that has not already been scheduled through bilateral agreements and must post on the web the amount of capacity they have for sale. FERC’s investigation will assess whether the must-offer obligation has become unjust and unreasonable due to changes in circumstances, or in other words, whether the obligation has outlived its usefulness and continued compliance with the requirement has become burdensome.
In initiating the investigation, FERC pointed to several improvements in WECC addressing problems contributing to the energy crisis. Significantly, California has eliminated excessive reliance on spot markets to meet its load through an aggressive renewable portfolio standard and resource adequacy program. FERC noted that these improvements have contributed to a well-functioning market which has produced overall competitive prices. Further, changes to CAISO’s generation interconnection process and state policies promoting renewable energy development have brought online ample resources to meet WECC’s generation reserve margin targets through 2024.
Comments on whether or not this must-offer requirement should be eliminated are due to FERC by March 21.