By Rich Heidorn Jr.
Nuclear and coal generators made their closing argument for price supports Tuesday, as opponents urged FERC to reject the proposal or let RTO stakeholders take up the resilience debate.
Tuesday was the deadline for reply comments in response to the Department of Energy’s Notice of Proposed Rulemaking, which called for cost-of-service pricing for coal and nuclear generators in competitive markets (RM18-1). The deadline for initial comments was Oct. 23. (See FERC Flooded with Comments on DOE NOPR.)
The Rule of Three
Three-step proposals were all the rage in the latest filings, with the Nuclear Energy Institute calling for a cost-of-service mechanism to prevent “premature” retirements, an order requiring RTOs to promptly improve their price formation rules, and a long-term program for ensuring that organized markets value resilience.
Exelon, which is the beneficiary of nuclear subsidies in Illinois and New York, had its own three-step proposal, starting with “immediate action” to correct “inaccurate price signals [for] fuel-secure resources,” including ordering PJM to make energy market reforms within 90 days. RTOs and ISOs also would be prevented from mitigating the capacity market bids of plants receiving zero-emission credits “or other support payments.”
FERC should follow those actions, the company argued, with an order requiring RTOs to report on their systems’ vulnerabilities to high-impact, low-frequency events. Lastly, it said the commission should use that data, “together with threat analysis from the national security and intelligence communities, to establish a design basis threat (DBT) that can inform cost-effective market reforms.” The DBT would provide a resilience benchmark and a basis for developing solutions, the company said.
The last two steps of Advanced Energy Management Alliance’s proposal were like those of Exelon’s, with the opening of a resilience proceeding and reporting by RTOs.
But the group, which represents distributed energy resource companies and storage providers, had its own idea for step one: “Eliminate barriers to storage and distributed energy resource participation” by finalizing FERC’s November 2016 NOPR (RM16-23). (See FERC Rule Would Boost Energy Storage, DER.)
The commission received hundreds of responses to the DOE NOPR. FERC staffer Patrick Clarey told the SPP Board of Directors meeting Oct. 24 that the commission had received more than 700 comments; AEMA said it had counted “roughly 750 sets of comments.”
Congress Weighs in
Among the most recent responses were dueling submissions from members of Congress, with Republicans generally supporting the proposal and Democrats mostly in opposition.
Illinois Republican Reps. Mike Bost, Rodney Davis and Darin LaHood said “the proposed DOE rule makes critical strides toward correcting faulty market designs and valuing the role of baseload generation.”
Rep. Joyce Beatty (D-Ohio) joined with David Joyce and 10 other Ohio Republicans to warn that premature plant closings “have resulted in an electrical grid with weakened resiliency and a diminished ability to respond to crisis.”
New Jersey Republican Reps. Frank LoBiondo and Leonard Lance expressed fear that the state could lose its nuclear generation — the source of almost half of its electricity.
Rep. Jerry McNerney (D-Calif.) and 13 other Democrats from his state, Pennsylvania, Hawaii, New York, Massachusetts, North Carolina, Virginia and Vermont expressed “serious concerns with the proposal and its timeline.”
They cited DOE data showing outages resulting from extreme weather increased 10-fold from 1984 to 2012 and doubled between 2003 and 2014. “Given these facts and the compounding, regional and varied effects of climate change on extreme weather, a one-size-fits-all approach to resiliency, as outlined in the NOPR, is inappropriate and not adequate to the challenge,” they said.
House Energy Subcommittee Vice Chair Pete Olson (R-Texas) joined with ranking member Bobby Rush (D-Ill.) to say more time is needed to study the “remarkably complex issue.” They said it should be addressed “through existing proceedings at the federal and regional level rather than quickly moving to make a sweeping, top-down decision in the near term.”
“FERC — with bipartisan support from members of Congress and presidents — have worked for decades to improve these markets. Ultimately, this has given us markets that provide a reliable and resilient power system through open competition. This has also meant that risks are borne by investors in generating assets, not consumers or taxpayers. We continue to believe this is critically important,” they said.
Among those also registering support for the NOPR were the Interior Department, Southern Co. and AES (parent of Indianapolis Power & Light, Dayton Power and Light and AES Energy Storage).
Opponents Urge Time for Study
In contrast, the Electricity Consumers Resource Council and other industrial energy users said the NOPR would “overturn decades of precedent and suddenly determine the existing RTO/ISO tariffs are unjust and unreasonable.”
A broad coalition including the American Petroleum Institute, American Wind Energy Association, Conservation Law Foundation and Electric Power Supply Association reiterated its earlier comments, urging FERC to reject what they called an “abrupt and unjustified cost-based compensation mechanism.”
The National Association of State Utility Consumer Advocates, which had not filed initial comments, said acting on DOE’s demand for a final rule within 60 days would violate the Administrative Procedure Act by failing to provide the public with adequate notice or reasonable time to have meaningful input.
ISO-NE said the “very limited time” FERC allowed for reply comments did “not permit a comprehensive rebuttal to the efforts of the NOPR’s supporters to overcome the proposal’s unsound foundation.”
“However, in-depth analysis is not needed to understand why the proposal is both legally untenable and an unviable policy option,” the RTO said. “The breadth and depth of opposition to the NOPR among industry stakeholders and electricity consumers is striking in its own right.”
American Municipal Power also cited procedural concerns. “Several other commenters suggested that the commission adopt alternative proposals to modify the RTO energy market rules or take other actions that are beyond what was contemplated by the DOE proposal. The commission cannot lawfully accept such proposals as part of this rulemaking process.”
Former FERC Chairman Norman Bay made a similar point at the GTM U.S. Power and Renewables Summit in Austin, Texas, Tuesday.
“The timeline really amounts to a rocket docket. There’s no other way to describe it,” Bay said. “When you look at FERC Order 888, FERC spent a year on that particular order. In the normal course of events, it’s not uncommon to see a rulemaking take 12-15 months, or even longer than that,” Bay said.
AMP also agreed with many critics that the DOE proposal failed to prove existing RTO market rules are unjust and unreasonable. “The legal deficiencies coupled with the practical reality that the DOE proposal would not resolve the reliability concerns raised by the secretary but would impose significant new costs on customers should make this an easy call for the commission,” AMP said.
The Environmental Defense Fund urged FERC to “further enhance gas-electric coordination in a focused and targeted manner.”
“Electric generators were the smallest sector for natural gas demand in 1988, and they now are the largest,” EDF said. “But the natural gas regulatory framework has not kept pace with this new development.”
Next Steps
The commission has said it expects to take some action on the proposal within 60 days after its Oct. 10 publication in the Federal Register.
FERC will address the NOPR with a full complement of commissioners, thanks to the Senate’s Nov. 2 confirmation of Republican Kevin McIntyre and Democrat Richard Glick.
Tom Kleckner and Michael Kuser contributed to this article.
