First Look: DOE's NOPR to FERC on Grid Resiliency Pricing

The Policy

What it does

Proposes that certain power plants be offered new pricing dependent on their "resiliency" — defined by having a 90 day supply of fuel on-site —  which FERC later rejects.

Synopsis

On September 28, 2017, Secretary of Energy Rick Perry submitted a Notice of Proposed Rulemaking (NOPR) to the Federal Energy Regulatory Commission (FERC) calling for certain power plants to be offered new pricing that rewards them for their “resiliency.”

Resiliency in this case was defined as the ability to continue normal operation in the event of fuel supply disruptions due to emergency or disaster. For power plants to be eligible for the new pricing, they would have been required to have on-site a 90-day supply of fuel and meet several other regulatory conditions. The NOPR argued that decreasing resiliency is leading to more power disruptions; however, this conclusion contradicts findings in other recent Department of Energy and National Electricity Reliability Corporation (NERC) studies on U.S. power system reliability. The proposed rule applied only to plants located in specific electricity markets, called RTOs and ISOs, and would have significantly altered pricing dynamics in those markets by providing additional revenue to coal and nuclear plants, which have otherwise been out-bid by lower-cost natural gas and renewable plants.

Update: On January 8th, 2018, FERC unanimously declined to continue the Rulemaking Process initiated by Secretary Perry on the basis that the Proposed Rule did not meet the legal standards required for FERC action. Instead, FERC initiated a new proceeding to look at grid reliability more holistically, with regional grid operators directed to submit initial comments within 60 days.

Context

The Science

Relevant Experts

The Nicholas Institute for Environmental Policy Solutions at Duke University held a webinar entitled "DOE's Directive to FERC on Baseload Resources: Understanding the Legal and Market Implications" on October 19, 2017. The full video of the webinar, as well as the associated resources, can be found here.