DOE Proposes Grid Resiliency Pricing Rule

Last week, DOE proposed that FERC enact rules for FERC-approved Independent System Operators (ISOs) and Regional Transmission Operators (RTOs) to “ensure that certain reliability and resilience attributes of electric generation resources are fully valued.”  The DOE Notice of Proposed Rulemaking (NOPR) focuses on power plants that can withstand major fuel supply disruptions, which it defines as resources “able to provide essential energy and ancillary reliability services and have a 90-day fuel supply on site in the event of supply disruptions caused by emergencies, extreme weather, or natural or man-made disasters.”

The NOPR cites to the recently issued DOE Staff Report on electric markets and reliability, noting that “the DOE Staff Report warns that premature retirement of fuel-secure resources imposes serious risks.”  According to the NOPR, wholesale pricing in RTOs and ISOs “does not adequately consider or accurately value” the resiliency benefits that these fuel-secure generation resources provide.  To address this issue, Secretary Perry directed FERC to issue a rule requiring its organized markets to develop and implement market rules that “accurately price” these resources.

This action was taken pursuant to section 403 of the Department of Energy Organization Act (42 U.S.C. § 7173), which states that FERC “shall consider and take final action on any proposal made by the Secretary [of Energy] . . . in an expeditious manner in accordance with such reasonable time limits as may be set by the Secretary for the completion of action by the Commission on any such proposal.”  Here, Secretary Perry has instructed FERC to take final action within 60 days after the notice is published in the Federal Register.  Any final rule, according to DOE’s proposal, will take affect within 30 days of its publication in the Federal Register, and each ISO and RTO subject to the rule will have to submit a compliance filing within 15 days of the effective date of such a rule.

On October 2, 2017, FERC solicited comments on the proposed rule.  Comments are due by October 23, 2017, and reply comments are due by November 7, 2017.