Reliability

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On January 8, 2018, FERC terminated the Department of Energy’s (“DOE”) Proposed Rule on Grid Reliability and Resilience Pricing (“Proposed Rule”) proceeding, and, instead, initiated a new proceeding whereby FERC plans to collect information on resilience from regional transmission organizations (“RTO”) and independent system operators (“ISO”).  Once that information is collected, FERC will determine whether further action is necessary to address grid resilience.  While FERC’s decision was unanimous, three of FERC’s Commissioners issued separate concurring opinions.  Of note, Commissioner Neil Chatterjee stated that while he would have preferred an order that took an interim step to address the issues raised in the Proposed Rule, he looked forward to addressing those critical issues in the new proceeding established by FERC.

On December 21, 2017, FERC issued a Notice of Proposed Rulemaking (“NOPR”) proposing to direct the North American Electric Reliability Corporation (“NERC”) to modify the cybersecurity incident reporting requirements under the Critical Infrastructure Protection (“CIP”) Reliability Standards.  According to FERC, the proposal is intended to “improve awareness of existing and future cyber security threats and potential vulnerabilities.”

On January 2, 2018, the California Independent System Operator Corp. (“CAISO”) announced plans to become its own reliability coordinator by spring 2019.  The plan will require CAISO to withdraw from Peak Reliability, the current reliability coordinator for the Western Interconnection. Although the full suite of reliability services to be offered remains unclear, CAISO stated that it will offer outage coordination, day-ahead planning, and real-time monitoring reliability services.

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.

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.  

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 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.

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.

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”). 

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.