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FERC Rejects DOE’s Proposal on Grid Reliability


On January 8, the Federal Energy Regulatory Commission (FERC) rejected a rule proposed by the Department of Energy (DOE) on grid reliability and resilience pricing. The rule would have ensured that each eligible reliability and resiliency resource could recover its fully allocated costs.

According to DOE Secretary Rick Perry, FERC-approved wholesale markets are not necessarily pricing resiliency attributes of traditional baseload generation adequately. The rule would have paid for baseload generators to maintain a 90-day stockpile of fuel. 

Back in September, Perry proposed the rule to the FERC as a way to address what he called threats to U.S. electrical grid resiliency, citing the 2014 Polar Vortex as one example. Perry described it as a warning that the current and scheduled retirements of fuel-source units could affect the reliability and resiliency of the power grid.  

After rejecting the proposal, FERC initiated a new proceeding that will examine the resilience of the bulk power system by directing operators of the regional wholesale power markets to provide information as to whether FERC and the markets need to take additional action on resilience of the bulk power system.

“The goals of this proceeding are to develop a common understanding among the commission, industry and others of what resilience of the bulk power system means and requires; to understand how each regional transmission organization and independent system operator assesses resilience in its geographic footprint; and to use this information to evaluate whether additional commission action regarding resilience is appropriate,” the statement by FERC said.

Each regional market operator must submit the required information within 60 days of issuance of the order.

“I appreciate the commission’s consideration and effort to further assess the marketplace distortions that are putting the long-term resiliency of our electric grid at risk,” Perry said. “As intended, my proposal initiated a national debate on the resiliency of our electric system. What is not debatable is that a diverse fuel supply, especially with on-site fuel capability, plays an essential role in providing Americans with reliable, resilient and affordable electricity, particularly in times of weather-related stress like we are seeing now.”

Those in the coal industry were not nearly as positive as Perry following the announcement.

National Mining Association President Hal Quinn called the lack of action by the FERC “disappointing” especially following a week where there was a surge in demand for coal because of the severe weather.

“That coal-powered electricity came from many plants that will no longer be available if retirements continue at the pace expected,” Quinn said.

He added that while FERC agreed to continue to examine the grid vulnerability to events such as severe weather, retirements of vital coal and nuclear power plants continue. “It is now incumbent upon grid overseers to adopt significant measures to safeguard the American people and economy from serious disruptions in future power supply,” he said.

Robert E. Murray, chairman, president and CEO of Murray Energy echoed those sentiments, fearing that more decommissioning of plants will only add to the “critical situation.”

“If it were not for the electricity generated by our nation’s coal-fired and nuclear power plants, we would be experiencing massive brownouts and blackouts in this country,” he said. “During these critical times, coal has far outperformed all other fuel sources, including natural gas, dispatching at over twice the level of gas plants and over 15 times the output from windmills and solar panels.”