On December 21, 2017, FERC opened investigations into the pricing of fast-start resources in three regional power markets: the New York Independent System Operator, Inc. (“NYISO”), PJM Interconnection, L.L.C. (“PJM”), and Southwest Power Pool, Inc. (“SPP”).
Fast-start resources are often committed in real-time, very close to when needed because they are, by definition, able to start quickly. However, without a fast-start pricing methodology, some fast-start resources are ineligible to set prices, often due to inflexible operating limits. In order to address this policy concern, FERC issued a Notice of Proposed Rulemaking (“NOPR”) in December 2016 (see December 19, 2016 edition of the WER). In the NOPR, FERC preliminarily found that the fast-start pricing practices, or lack thereof, of some existing Regional Transmission Organizations (“RTOs”) and Independent System Operators (“ISOs”) were potentially yielding unjust and unreasonable rates. As a result, FERC proposed to establish certain requirements for pricing fast-start resources and the subsequent adoption of these requirements by each RTO/ISO. Nevertheless, based on the more than thirty comments received by the Commission, FERC proposed on December 21, 2017 during the Commission’s open meeting to withdraw the NOPR and terminate the rulemaking proceeding. Upon receiving affirmative votes from all five Commissioners, the NOPR was withdrawn.
FERC instead, however, issued three separate orders, pursuant to section 206 of the Federal Power Act, which initiated investigations into the fast-start pricing practices of three specific RTOs/ISOs–NYISO, PJM, and SPP. In particular, the investigations will examine whether:
- NYISO should revise its tariff to: (1) modify its pricing logic to allow the start-up costs of fast-start resources to be reflected in its pricing logic; and (2) allow the relaxation of all dispatchable fast-start resources’ economic operating limits by up to 100 percent for the purpose of setting price;
- PJM should revise its tariff to, among other things: (1) allow relaxation of fast-start resources economic minimum operating limits by up to 100 percent; (2) consider fast-start resources within dispatch in a way that is consistent with minimizing production costs, subject to appropriate operational and reliability constraints; and (3) modify its pricing logic to allow the commitment costs of fast-start resources to be reflected in prices; and
- SPP should revise its tariff to, among other things: (1) modify its dispatch process to respect physical parameters of resources while minimizing production costs; (2) modify its pricing logic to allow the commitment costs of fast-start resources to be reflected in prices; and (3) allow all quick-start resources, including block-loaded quick-start resources, to set price.
In the Commission open meeting, Commissioner Cheryl LaFleur remarked that the remaining RTOs/ISOs were left “off the hook” for specific reasons. Commissioner LaFleur noted that ISO New England Inc. and the Midcontinent Independent System Operator, Inc. had both largely already implemented the “best practices” for fast-start pricing in the eyes of the Commission. Additionally, Commissioner LaFleur stated that she was persuaded by what the California Independent System Operator Corporation (“CAISO”) had filed in the docket relative to fast-start pricing practices and that a reform in CAISO would provide “limited benefit for them relative to their other priorities that are going on right now.” Thus, the focus remains on NYISO, PJM, and SPP for the time being.
Interventions are due within 21 days of the December 21, 2017 order. Interested parties may file initial briefs no later than 45 days after publication in the Federal Register, with reply briefs due 30 days thereafter.
For a copy of the FERC press release regarding these investigations, and the investigation orders themselves, see here.