On November 15, 2017, PJM Interconnection LLC (“PJM”) released two proposals to modify how Locational Marginal Prices (“LMPs”) are formed in its wholesale energy market and to enhance compensation for resources providing essential grid services during “shortage” periods.  The LMP proposal seeks to enhance system reliability by expanding the eligibility criteria for setting wholesale energy market prices in the PJM footprint.  Practically speaking, this proposal will allow a wider variety of energy resources, notably less economically flexible generating units such as coal and nuclear generators, to set LMPs and increase their revenue recovery prospects.  Along with the U.S. Department of Energy’s Notice of Proposed Rulemaking currently before FERC (see October 2, 2017 edition of the WER), PJM’s dual proposals represent the latest developments in an ongoing national discussion about whether, and how, organized electricity markets can play a role in ensuring fuel diversity and system reliability through pricing mechanisms. Continue Reading PJM Proposes Price Formation and Shortage Pricing Reforms to Increase Compensation to Generators Providing Reliability Services

The California Independent System Operator Corp. (“CAISO”) is moving forward on a slate of proposals which are intended to enhance grid reliability.  These proposals include addressing issues related to generation retirement, entering into a specific reliability must-run contract, modifications to incentives related to the resource adequacy program, as well as adjusting the compensation given to its Board of Governors (the “Board”).  On November 2, 2017, the Board approved the four proposals, and CAISO will file any resulting tariff related changes with FERC at a later date.   Continue Reading CAISO Board Approves Proposals to Enhance Grid Reliability

On October 20, 2017, FERC approved the California Independent System Operator Corporation’s (“CAISO”) proposal to revise tariff language as it relates to the procurement and cost allocation of black start capability.  Under the proposed changes, black start capability will be redefined as a reliability service instead of an ancillary service, with costs for black start services to be allocated to the participating transmission owner in the service area the resource is located.  The revisions will go into effect on November 1, 2017. Continue Reading FERC Approves CAISO Proposal on Generating Unit Black Start Capabilities

On October 19, 2017, FERC issued a Notice of Proposed Rulemaking (“NOPR”) proposing to direct the North American Electric Reliability Corporation (“NERC”) to modify the Critical Infrastructure Protection (“CIP”) Reliability Standard, CIP-003-7 (Cyber Security – Security Management Controls), which is intended to mitigate cyber security risks posed by malware from ‘transient electronic devices’ (such as laptops and thumb drives) used at low-impact cyber systems.  FERC stated in the NOPR that, once those modifications have been made, it plans to make the new reliability standard effective approximately 18 months after FERC approval. Continue Reading FERC Proposes to Direct NERC to Revise Cyber Proposal on Malware Risks

On October 2, 2017, FERC issued notice of the September 29, 2017 Notice of Proposed Rulemaking (“NOPR”) from the United States Department of Energy (“DOE”) under section 403 of the Department of Energy Organization Act.  In the NOPR, DOE urges FERC to act quickly to enact rules requiring regional transmission organizations and independent system operators (“RTOs/ISOs”) to provide just and reasonable rates for “fuel-secure” generation units (see October 2, 2017 edition of the WER).  Shortly thereafter, on October 4, FERC staff issued a Request for Information, listing various questions for commenters to address in aiding the Commission to better understand the NOPR’s implications.  Commenting parties have until October 23, 2017 to file initial comments and until November 7, 2017 to file reply comments.  In recent testimony before the Senate’s Committee on Energy and Natural Resources, FERC General Counsel, James Danly, confirmed that FERC intends to review the comments and take final action within 60 days of the NOPR’s publication, as requested by the DOE. Continue Reading FERC Sets Comment Deadline and Poses Questions for Commenters on DOE Proposed Rule

On September 29, 2017, United States Department of Energy (“DOE”) Secretary Rick Perry took the unusual step of proposing a rule for final action by the Federal Energy Regulatory Commission (“FERC”).  Secretary Perry’s initiative, a DOE-issued Notice of Proposed Rulemaking (“NOPR”) under section 403 of the Department of Energy Organization Act (“DOE Act”) (42 U.S.C. § 7173), urges FERC to act extremely quickly to enact rules requiring regional transmission organizations and independent system operators (“RTOs/ISOs”) to provide just and reasonable rates for “fuel-secure” generation units (e.g., coal and nuclear units).  See Grid Resiliency Pricing Rule, Docket No. RM17-3-000, at 4–5 (Sept. 29, 2017) (“DOE NOPR”).  Continue Reading Department of Energy Proposes FERC-Authorized Full Cost Recovery for Certain Nuclear and Coal Power Generation

On September 20, 2017, FERC issued two final rules and a notice of proposed rulemaking (“NOPR”) on reliability standards for the bulk power system. The final rules—Order Nos. 836 and 837—will become effective sixty days after their publication in the Federal Register.  Parties interested in filing comments on matters discussed in the NOPR must do so within sixty days of when that notice is published in the Federal Register. Continue Reading FERC Issues Final Rules and NOPR to Enhance Bulk Electric System Resilience, Reliability

On September 14, 2017, the Subcommittee on Energy of the United States House of Representatives Committee on Energy and Commerce held a hearing on defining reliability in a transforming electricity industry.  During the hearing, committee members raised concerns about reliability and grid transformation in the face of cybersecurity threats and extreme weather.  FERC Chairman Neil Chatterjee testified at the hearing that FERC would continue its role in ensuring “world-class reliability” during this grid transformation.  Continue Reading FERC Chairman Addresses Reliability in House Testimony

On July 23, 2017, the Southwest Power Pool, Inc. (“SPP”) Board of Directors and Members Committee voted to authorize SPP President and Chief Executive Officer Nick Brown to terminate the Regional Delegation Agreement (“RDA”) between SPP and the North American Electric Reliability Corporation (“NERC”), which would effectively dissolve the SPP Regional Entity (“SPP RE”)—an independent and functionally separate division of SPP.  The SPP RE Trustees approved a resolution on July 24, 2017, endorsing the decision.

Continue Reading SPP to Dissolve its Regional Entity Function by December 31, 2018

On June 20, 2017, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit” or “the court”) rejected petitions for review challenging FERC’s approval of capacity market rules set by the PJM Interconnection, LLC (“PJM”) in 2014.  The D.C. Circuit held that FERC’s approval of the rules was adequately explained and within its statutory authority under the Federal Power Act.  In particular, the D.C. Circuit rejected assertions from various environmental, clean energy, and public utility petitioners that the new capacity market rules unduly discriminated against variable energy resources. Continue Reading D.C. Circuit Rejects Challenges to PJM’s Capacity Market Rules, Including Year-Round Requirement Impacting Renewable Energy Generators