FERC Proposes Rule Changes on Interconnect, Fast Start

The Federal Energy Regulatory Commission (FERC) on December 15 proposed reforms to its large generator (20 MW or more) interconnection processes.

The notice of proposed rulemaking (or NOPR in FERC-speak) would revise FERC's 2003 pro-forma large generator interconnection procedures and agreement.

At the FERC meeting approving the proposed rule, FERC Chairman Norman Bay said, "Much has changed since 2003," including the advent of copious amounts of new natural gas capacity, the rise in renewable generation, and growing use of electric storage. All pose new problems to interconnecting to the grid.

In a news release, FERC said, "A lengthy interconnection process can be a challenge to generation technologies that are evolving rapidly. The commission believes that interconnection processes should be capable of incorporating rapidly evolving generation technologies into an interconnection request while maintaining system reliability."

The commission added, "Currently, many interconnection customers experience delays, and some interconnection queues have significant backlogs and long timelines. A recurring issue is that withdrawals of interconnection requests late in the process lead to re-studies and subsequent delays for customers lower in the interconnection queue. Furthermore, cost and timing uncertainty presents a significant obstacle, as some interconnection customers are less able to absorb unexpected and potentially higher costs or extended timelines resulting from the withdrawal of requests higher in the queue."

While the proposed rule applies to FERC's definition of large generators, the commission is also seeking comment on whether any of the proposed reforms should apply to generation under 20 MW.

In other action, the commission proposed a rule to codify and change how regional transmission organizations and independent system operators pay for fast-start generation, including a standard definition. Fast-start would mean a resource that can put electricity into the grid within 10 minutes or less and run for an hour. At the meeting, the FERC staff noted: "Without some form of fast-start pricing, fast-start resources are often not eligible" for the same type of prices in the conventional auctions, which are based on "locational marginal pricing," or LMP.

The intent of the proposal is to move away from the practice of "uplift" pricing that has evolved to overcome shortcomings in LMP pricing. In a 2014 staff analysis of uplift pricing, FERC said, "RTOs and ISOs provide make-whole payments, or uplift payments, to resources whose commitment and dispatch resulted in a shortfall between the resource's offer and the revenue earned through market clearing prices." The study said, "Uplift payments and the reasons they are incurred lack transparency."

At Thursday's meeting, Bay said the fast-start proposal "will result in more accurate pricing about the cost of serving loads and prices that better reflect the value of fast-start resources." He said it would give "market participants incentive" to invest in fast-start generation.

Commissioner Cheryl LaFleur said the proposal will make prices "better reflect marginal costs" and "better inform forward investment decisions."

Comments of both notices are due 60 days after they are published in the Federal Register.

-Kennedy Maize is a long-time energy journalist and frequent contributor to POWER

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