Demand Response FERC ISO-NE MISO PJM Transmission

Highlights from the June FERC Open Meeting

June 24, 2016

By John Bullock, NRDC Summer Intern

FERC finalizes updates to price formation, removing barriers for flexible energy resources. (Docket No. RM15-24-000 FERC Order No. 825)

FERC directed ISOs and RTOs to take steps to align system dispatch and settlement intervals, which will help to ensure that resources are compensated at prices that reflect the value of the services they provide. Currently, market settlement intervals in three of the six FERC-regulated energy markets (ISO-NE, MISO, and PJM) are an hourly average of prices, even though the real-time dispatch interval in all six markets is 5 minutes. This distorts market price signals for all resources, including flexible and fast-responding resources such as demand response and storage. Misalignment of settlement and dispatch intervals causes flexible resources to earn less revenue, discouraging them from responding to dispatch signals. As we noted in our comments to the proposed rule, because demand response and storage resources have fast ramping rates, they can respond quickly to dispatch requests, but may be disincentivized from doing so because of distorted pricing signals in the current market. This rule will help ensure these resources are adequately compensated, and represents a step towards a more modernized grid.

FERC puts nail in coffin of demand response opposition, denies request for rehearing; accepts PJM’s compliance filings (Docket No. RM15-24-000, FERC Order on Rehearing and Compliance)

In a move that will help integrate demand response resources into PJM, FERC denied Talen Energy’s request for rehearing, and accepted tariff changes proposed by PJM in order to facilitate the participation of demand response resources in its organized capacity markets. In the wake of the D.C. Circuit’s decision in EPSA v. FERC in 2014, Talen filed a request for rehearing arguing that FERC incorrectly allowed demand response participation in the PJM markets because it lacked jurisdiction to set compensation for these resources. However, in January 2016 the Supreme Court reversed the D.C. Circuit decision, and FERC correctly denied Talen’s request as moot. In accordance with the July 22 Order, PJM removed language from its tariff to allow for participation of demand response providers in the transition auctions, and FERC subsequently approved these filings.

FERC removes exemption for wind and solar generators from providing reactive service (Docket No. RM16-1-000, FERC Order No. 827)

In a decision that reflects the rapid development of wind generation technology, FERC eliminated the current exemption for non-synchronous (wind and solar) generators from providing reactive power to the system. FERC found that modern wind turbine designs are inherently capable of providing reactive power voltage support services even though the turbines do not synchronize automatically to the grid’s frequency like steam turbine generators at coal, gas and nuclear plants. Following the proposed rule (discussed here), wind resources will now have to provide reactive power as a condition of interconnection. As we suggested in our comments, the Commission correctly recognized that because reactive power cannot readily be transmitted across long distances and because generators are often a long distance from the point of interconnection, reactive power provided by these resources should be measured at the generator terminals instead of the point of interconnection. Other groups (American Wind Energy Association and the Large-Scale Solar Association) also requested that FERC measure reactive power at generator terminals in their comments. While FERC changed who is required to provide reactive power, it did not update the compensation system for providing this service. FERC’s decision to measure the amount of reactive power at the generator terminal prevents what could have otherwise been an unduly discriminatory policy against wind and solar generators.

Implementing FAST Act provisions, FERC proposes new protections for infrastructure information (Docket No. RM16-15-000, FERC NOPR)

FERC issued a proposed notice of rulemaking to amend its regulations regarding the disclosure of Critical Electric Infrastructure Information (“CEII”). Congress recently amended the Federal Power Act as a part of the Fixing America’s Surface Transportation Act (FAST Act), and directed the Commission to amend its regulations on the storage and transfer of CEII to improve the security and disclosure mechanisms of the information. The Congressional amendment expands FERC’s definition of CEII (information about the bulk power system) as to include information about gas pipelines, oil and hydrological infrastructure. FERC is proposing sanctions for employees that disclose CEII, including suspension, termination, and possible jail time. Under the proposed rule, parties that are outlined in the statute (federal agencies, state agencies, intervenors, and public interest groups) will make a direct request for any CEII from FERC. The Commission is seeking comments from interested parties on the proposed rulemaking. Comments are due 45 days after the rule is published in the Federal Register.

FERC directs MISO to revise tariff, closing potential loophole (Docket No. EL16-61-000, FERC Order to Show Cause)

FERC directed MISO to revise its tariff to ensure that resource owners do not receive compensation for reactive service after the owner has deactivated or transferred ownership of its units, or show cause as to why a revision is unnecessary. Reactive service is an important tool for maintaining transmission reliability, whereby facilities are enlisted to absorb or produce reactive power, which is needed to maintain transmission line voltage within acceptable limits. A recent report suggested that MISO may be continuing to compensate these owners for Reactive Service after their resources are no longer able to provide those services. If MISO were providing compensation without the owners providing the corresponding service, it would be “unjust and unreasonable.” The order also directs MISO to publish a list of all the resource owners who receive compensation for their Reactive Service. FERC’s inquiry should help ensure that resources are not being compensated for services they are not actually providing.

FERC accepts ISO-NE’s Forward Capacity Market, rejecting claims of market manipulation (Docket No. ER16-1041-000, FERC Order Accepting Filing)

FERC approved ISO-New England’s 10th Forward Capacity Market auction results, without change. The FCM sets the prices at which resource owners are paid to be available to meet peak demand for a one year period three years in the future. Prices across the system in this year’s auction for the 2019-2020 planning year fell to $7.03/kW-month compared with $9.55/kW-month in most of the systems in last year’s auction for 2018-2019. FERC determined that this year’s price was “just and reasonable,” rejecting claims that prices were too high because ISO NE disallowed the participation of certain generators, and that they were the result of market manipulation. Two power generators, Dominion and Northeast Energy, argued that ISO-NE improperly prevented new incremental capacity from their respective units from participating in the bidding, but FERC rejected their arguments. Additionally, United Workers Union of America asserted that the results of the auction were the product of illegal market manipulation caused by the looming retirement of the Brayton Point coal plant. The Commission rejected this claim, noting that it previously investigated these allegations regarding the retirement of Brayton Point and found no evidence of market manipulation.

FERC denies Tri-State’s petition to recover PURPA-related costs in a victory for clean energy (Docket No. EL16-39-000, FERC Order on Petition for Declaratory Order)

We summarize this Order here.