FERC’s Response to DOE’s Proposed Grid Resiliency Pricing Rule: Will the Process Continue Moving So Rapidly?

October 30, 2017

September 28th, the Department of Energy (DOE) issued a Notice of Proposed Rulemaking (NOPR) for a “Grid Resiliency Pricing Rule.” This rule directs the Federal Energy Regulatory Commission (FERC) to attribute greater value to “baseload” resources like coal and nuclear by allowing them to recover full cost of plant service. These resources are touted to be more reliable and resilient than intermittent renewables, like wind and solar, or natural gas facilities, which cannot easily store fuel on site. Aside from the controversy surrounding what generation sources are truly “reliable” or “resilient”, whether the conversation around grid reliability is even properly focused, or the potential effects on competitive electricity markets, DOE’s vague demand for prompt FERC action and FERC’s developing response gives cause for interest.
DOE demanded that FERC respond and take action within 60 days and to act “expeditiously.” FERC has since expedited the process—initial comments are due today, October 23rd. Intervening parties will be responding to a series of impressively broad questions from FERC, ranging from “What is resilience?” to “How should [organized markets] allocate the cost of the proposed rule to market participants?”

Chairman Neil Chatterjee has publicly announced that the proposed Grid Resiliency Pricing Rule will be a top priority for FERC this upcoming year, but Commissioners Robert Powelson and Cheryl LaFleur have expressed doubt.

Among the biggest reasons for doubt include not only DOE’s rushed timeline but also the degree of vagueness in DOE’s NOPR. This is evidenced by FERC’s overbroad questions for commenters, and Commissioner LaFleur recently shared that FERC is “getting ahead of [itself]” because “[i]f you were to try to put that [NOPR] into law . . . it would [need to] be considerably more detailed.” The DOE timeline is as follows: a 45-day notice and comment period, followed by a 15-day period by which FERC must “complete final action on the rule,” and finally a 15-day period by which organized markets must submit compliance filings. This turnaround is absolutely untenable, and FERC denied industry associations’ (ranging from American Wind Energy Association to the American Petroleum Institute) request for an extension on the notice and comment period. This indicates that, for now at least, FERC intends to follow DOE’s tight timeline and move forward with the proposed Grid Resiliency Pricing Rule.
With over 200 received comments and the NOPR’s initial vagueness, broad criticism of the NOPR, a new FERC Chairman undergoing the nomination process, and even Chairman Chatterjee’s tempered approach in highlighting FERC’s independence and reassurance that FERC has many tools at its disposal to “act”, FERC is likely to move forward thoughtfully and with great care. As Chairman Chatterjee recently stated, “We’ve invested nearly two decades and billions upon billions of dollars in our existing market structure, and I don’t want to do anything to disrupt that market structure.”
It is important that FERC keeps this sentiment in the front of its mind as it moves forward. Benefits to the grid like reliability, resilience, and flexibility should all be properly valued within FERC-jurisdictional markets. However, FERC must engage in a deliberate, honest, and detailed inquiry into these issues if it wants to ensure rates are truly just and reasonable and price signals maintain competitive markets. With so many unanswered questions and an uncertain process ahead, it behooves FERC to remain moderate and independent in a rulemaking process that could rewrite tariffs for half the nation’s electricity generation sector.