News & Insights

Energy Law Exchange

November 6, 2017

Hundreds of Parties Submit Comment in Response to Notice of Proposed Rulemaking on Grid Reliability and Resiliency Pricing

On September 28, 2017, Secretary of Energy Rick Perry issued a Notice of Proposed Rulemaking (the “NOPR”) directing the Federal Energy Regulatory Commission (“FERC”) “to take action to ensure that the reliability and resiliency attributes of generation with on-site fuel supplies are fully valued and in particular to exercise its authority to develop new market rules that will achieve this urgent objective.”  The NOPR proposed to require regional transmission organizations (“RTOs”) and independent system operators (“ISOs”) to provide for the recovery of fully allocated costs and a fair return on equity for “eligible grid reliability and resiliency resources,” which are defined, in part, as electric generation resources that have a 90-day fuel supply on site.  Only ISOs and RTOs with energy and capacity markets, and that have day-ahead and real-time markets, would be subject to the proposed rule.  On October 4, FERC’s Director of the Office of Energy Policy and Innovation also issued a Request for Information that listed thirty questions for commenters to address, including questions regarding the need for the proposed rule, how resilience should be defined and measured, what resources would be eligible for compensation, and what costs would be recoverable.

Initial comments on the NOPR were due on October 23, 2017.  Over 575 initial comments totaling more than 21,000 pages were filed. 

A wide variety of parties submitted comments opposing the NOPR, including state representatives, RTOs and ISOs, environmental groups, consumers, manufacturers, energy industry associations, and generators, including generators with coal-fueled plants that might benefit from the NOPR.  Most comments raised concerns with the proposal and highlighted the potential harmful outcomes of the NOPR on generators, consumers, markets, and the environment as well as the NOPR’s perceived procedural deficiencies.  Parties also raised concerns regarding the impact of the proposed rule on competitive markets, with a bipartisan group of former FERC Commissioners stating that adoption of the proposed rule would “disrupt decades of substantial investment made in the modern electric power system, raise costs for customers, and do so in a manner directly counter to the Commission’s long experience.”

Supporters of the NOPR included parties with connections to the coal and nuclear industries, such as labor unions, coal producers and transporters, and generators with coal-fueled or nuclear-powered plants.  These commenters largely argued that the retirement of coal-fired electric generation facilities and nuclear plants would result in the loss of jobs and tax revenues, causing a detrimental ripple effect in the local economies.  Affiliates of FirstEnergy Corporation (“FirstEnergy”), which owns a number of coal-fired and nuclear plants, strongly supported the NOPR, stating that “fuel-secure, resilient generators are retiring at an unprecedented pace as a direct result of the RTO/ISO markets failing to compensate them for their resiliency contributions.”

Reply comments are due on November 7, 2017.  In the NOPR, Secretary Perry directed FERC to take final action on the proposal within 60 days – i.e., by December 11, 2017.