FERC rejects DOE NOPR, cites it does not provide enough evidence

Written By: Katherine DeMetre
January 10, 2018

FERC Order 841

The Federal Energy Regulatory Commission (FERC) has rejected the Notice of Proposed Rulemaking (NOPR) from the Department of Energy (DOE). FERC, which is comprised of five commissioners, voted unanimously to reject the proposed rule from Secretary of Energy Rick Perry. The commission filed an order terminating Docket No. RM18-1-000, which the commission set up to review the NOPR.

The proposed rule, filed in late September of last year, was created in hopes of enhancing the United States' grid resiliency with a 90-day fuel supply requirement. According to the DOE, it would have allowed for "the recovery of costs of fuel-secure generation units." However, the proposed rule favored coal and nuclear plants, which caused much controversy. On Jan. 8, FERC's order commented that the DOE did not provide enough evidence that the existing market rules were unacceptable. In the order, FERC wrote:

While some commenters allege grid resilience or reliability issues due to potential retirements of particular resources, we find that these assertions do not demonstrate the unjustness or unreasonableness of the existing RTO/ISO tariffs. In addition, the extensive comments submitted by the RTOs/ISOs do not point to any past or planned generator retirements that may be a threat to grid resilience.

FERC also noted that the DOE failed to provide evidence that the retirement of coal and nuclear plants would put the U.S. power supply at risk. "[FERC] concluded that changes in the generation mix, including the retirement of coal and nuclear generators, have not diminished the grid’s reliability or otherwise posed a significant and immediate threat to the resilience of the electric grid," wrote the commission.

Additionally, FERC concluded that the NOPR's cost recovery proposal would not be an improvement to the current market structures. "[T]he Proposed Rule would allow all eligible resources to receive a cost-of-service rate regardless of need or cost to the system. The record, however, does not demonstrate that such an outcome would be just and reasonable. It also has not been shown that the remedy in the Proposed Rule would not be unduly discriminatory or preferential," wrote the commission.

FERC also noted that the 90-day fuel supply requirement would "appear to permit only certain resources to be eligible for the rate, thereby excluding other resources that may have resilience attributes." Robbie Orvis, policy design project manager at Energy Innovation, agreed that the proposal was unreasonable. “FERC also stated the cost recovery aspect of DOE’s proposal paying generators for 90 days of fuel on site would be unjust and unreasonable — our research showed up to $10.8 billion in new consumer costs from this subsidy,” Orvis told GTM via email. 

The NOPR did manage to gain support from utilities, as well as organizations linked to the coal industry. But the proposed rule mainly received backlash from renewable groups, market analysts and former FERC commissioners all worried that the rule would hurt the energy sector. Although the NOPR was dismissed, the commission expressed that it is still their priority to increase grid resiliency in U.S. FERC created a new docket, Docket No. AD18-7-000, to "specifically evaluate the resilience of the bulk power system in the regions operated by regional transmission organizations and independent system operators." The new docket has already gained favorable approval by many environmentalists and renewable advocates. Michael Panfil, director of federal energy policy for the Environmental Defense Fund, said in a statement:

FERC was right to reject the DOE’s costly and ill-considered proposal that would have undermined markets and an increasingly competitive, clean, and affordable electricity sector. FERC’s decision prioritizes deliberate, careful study over-politicization.

In addition, Gregory Wetstone, president and CEO of the American Council on Renewable Energy, told the press, "FERC has laid out a sensible approach to gathering the vital information needed to support any changes to electricity markets. We are confident that, in the end, the record still will not support market intervention."

FERC commissioner Neil Chatterjee also agreed with the final decision. Although he would have preferred short-term subsidies, he stated that the order was a "positive step forward in addressing these critical issues." He also stated his “concerns regarding bulk power system resilience in the interim period prior to the conclusion of the proceeding” could take several years to complete, and requested for a process in order to find out if “interim measures may be needed.”

With news of the NOPR rejected, Perry told the press that he appreciated FERC's efforts to address the market distortions that put the power grid at risk. "As intended, my proposal initiated a national debate on the resiliency of our electric system," he said via email. "What is not debatable is that a diverse fuel supply, especially with onsite 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."

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