On November 20, 2015, the Commission amended its regulations to permit the sale of primary frequency response service at market-based rates by sellers with market-based rate authority for sales of energy and capacity. As defined by the Commission, “primary frequency response service” is “a resource standing by to provide autonomous, pre-programmed changes in output to rapidly arrest large changes in frequency until dispatched resources can take over.” The Commission clarified that sellers can provide primary frequency response service “irrespective of what specific equipment they may choose to use to make such sales.”
In determining whether or not a public utility should be granted authority to make sales of energy and capacity at market-based rates, the Commission uses two indicative screens in its analysis: (i) the wholesale market share screen; and (ii) the pivotal supplier screen. In its November 20, 2015 order, the Commission adopted these existing market power screens used for energy and capacity sales for primary frequency response service. The Commission also found that market-based rate authority for sales of primary frequency response should be granted on the same basis as sales of energy and capacity, meaning that while market power is tested at the resource’s location, authority is granted for sales anywhere that the seller is capable of transacting. Additionally, while the Commission noted that a transmission reservation may sometimes be needed to support a sale of primary frequency response, it stated its belief that there should never be a need to actually schedule transmission or change a transmission schedule in connection with primary frequency response service because, by definition, individual frequency responses would not be sustained for long enough periods to trigger a need for transmission service or schedule changes.
In addition to these determinations, the Commission clarified that: (i) its November 20, 2015 order did not require any entity to purchase primary frequency response from third parties or to develop an organized market for primary frequency response; and (ii) potential voluntary buyers and sellers of primary frequency response service are free to negotiate any refinements to the basic product definition established by the Commission, so long as such refinements “remain consistent with the basic definition.”
With respect to implementation, the Commission found that a seller that already has market-based rate authority as of the effective date of the November 20, 2015 order is authorized as of that date to make sales of primary frequency response service at market-based rates. The Commission further found that such a seller will be required to revise the third-party provider ancillary services provision of its market-based rate tariff to reflect that it wishes to make sales of primary frequency response service at market-based rates, but stated that, in order to reduce the administrative burden, such sellers may wait to file such a tariff revision until the next time they make a market-based rate filing with the Commission, such as a notice of change in status filing or a triennial update. Lastly, the Commission noted that any entity selling primary frequency response service will need to report such sales in its Electric Quarterly Report.
The Commission’s November 20, 2015 order, Order No. 819, is effective 90 days after publication in the federal register, and may be found here.