Market Policy

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On December 1, 2017, FERC concluded that it has exclusive jurisdiction over the participation of energy efficiency resources (“EERs”) in wholesale electricity markets.  FERC also found that: (1) state or local regulators may not bar or restrict EER participation in wholesale electricity markets, unless given express authority to do so by FERC; and (2) FERC’s previous Order No. 719 on demand response may not be interpreted to permit a state or local regulator to exercise an opt-out and bar or restrict the participation of EERs.

On November 28, 2017, FERC accepted in part and rejected in part the California Independent System Operator Corporation’s (“CAISO”) two sets of tariff revisions concerning natural gas system limitations on CAISO’s system and market operations.  Specifically, FERC accepted CAISO’s proposed extension, for one additional year, of temporary Aliso Canyon tariff revisions that FERC previously accepted on an interim basis.  However, FERC rejected CAISO’s proposal to make other interim measures permanent and to extend their application to the entire CAISO-operated western grid, including the CAISO-operated Western Energy Imbalance Market (“EIM”).

On November 16, 2017, FERC issued a Notice of Proposed Rulemaking (“NOPR”) in which it proposed to approve two Reliability Standards—PRC-027-1 (Coordination of Protection Systems for Performance During Faults) and PER-006-1 (Specific Training for Personnel)—that the North American Electric Reliability Corporation (“NERC”) submitted in a petition on September 2, 2016, and which are intended to replace currently-effective Reliability Standard PRC-001-1.1(ii) (System Protection Coordination).  FERC also proposed to direct NERC to modify PRC-027-1 to require an initial protection system coordination study to ensure that applicable entities will perform (or have performed), as a baseline, a study demonstrating proper coordination of their protection systems.  Lastly, FERC proposed in the NOPR to approve new and revised definitions to the NERC Glossary of Terms, the associated violation risk factors, violation severity levels, implementation plans, and effective dates for PRC-027-1 and PER-006-1, and the retirement of currently-effective PRC-001-1.1(ii).

On November 3, 2017, FERC largely denied rehearing requests from a group of generation developers (“Generation Developers”) regarding the Midcontinent Independent System Operator, Inc.’s (“MISO”) revisions to its Generator Interconnection Procedures (“GIP”) and its pro forma Generator Interconnection Agreement (“GIA”).  With the exception of one issue, FERC otherwise rejected the Generation Developers requests that FERC reconsider prior MISO revisions regarding the efficiency and timeliness of MISO’s generator interconnection queue process contained in Attachment X of its Open Access Transmission, Energy and Operating Reserve Markets Tariff (“Tariff”).

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.

On November 9, 2017, FERC issued an order conditionally accepting proposed revisions to Attachment AE of the Southwest Power Pool, Inc. (“SPP”) Open Access Transmission Tariff (“Tariff”).  SPP’s proposed Tariff revisions modify SPP’s so-called “scarcity pricing” methodology in response to FERC Order No. 825.  Under this newly-approved methodology, SPP will institute variable demand curves that will more accurately reflect the value of resources during times of shortages, thereby reducing price signal distortions that can reduce incentives for resources to respond to dispatch signals.  In its order conditionally accepting the Tariff revisions, FERC directed SPP to make a compliance filing to show that certain provisions be placed in SPP’s Tariff as opposed to its Marketplace Protocols.

On November 3, 2017, FERC largely denied rehearing requests from a group of generation developers (“Generation Developers”) regarding the Midcontinent Independent System Operator, Inc.’s (“MISO”) revisions to its Generator Interconnection Procedures (“GIP”) and its pro forma Generator Interconnection Agreement (“GIA”).  With the exception of one issue, FERC otherwise rejected the Generation Developers requests that FERC reconsider prior MISO revisions regarding the efficiency and timeliness of MISO’s generator interconnection queue process contained in Attachment X of its Open Access Transmission, Energy and Operating Reserve Markets Tariff (“Tariff”).

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.

On October 25, 2017, FERC issued an order explaining the market consequences when a resource loses certain participation rights in the New York Independent System Operator, Inc. (“NYISO”) Installed Capacity (“ICAP”) market.  The order on clarification, which was requested by NRG Power Marketing LLC and GenON Energy Management, LLC (collectively, “NRG”), followed a January 27, 2017 decision in which FERC largely accepted NYISO’s proposed revisions to its Market Administration and Control Area Services Tariff (“Tariff”) to correct a pricing inefficiency in its ICAP market design.  As FERC clarified in this most recent order, when a capacity resource loses its ability to participate in NYISO’s ICAP market, certain benefits or discounts tied to that participation ability—here, a so-called “Locality Exchange Factor”—fall away.

On October 19, 2017, FERC ordered Southwest Power Pool, Inc. (“SPP”) to revise its Open Access Transmission Tariff (“OATT”) to provide that network customers with service subject to redispatch can only obtain Auction Revenue Rights (“ARRs”) and Long-Term Congestion Rights (“LTCRs”) for those times and in the amounts that service can be provided without redispatch.