In a move opposed by generators, the Federal Energy Regulatory Commission on Thursday issued a rule that bars payments to power plant owners for reactive power within the standard power factor range.
“This reform will ensure that transmission providers do not pass on to transmission customers unjust and unreasonable charges that lack a sufficient economic basis or justification and yield no commensurate benefit for ratepayer,” FERC said.
As a result, interconnection customers will only be paid for reactive power when the transmission provider asks or directs the interconnection customer to operate its facility outside the “deadband” range set in its interconnection agreement, FERC said in the final rule.
Generating facilities must either produce or absorb reactive power for the transmission system to maintain required voltage levels, FERC said in its rule, which is set to take effect 60 days after it is published in the Federal Register. Reactive power provided outside of the deadband range — within 0.95 leading to 0.95 lagging — is considered an ancillary service, according to FERC.
“At the end of the day, this is about affordability and we're doing all that we can to address prices for consumers,” FERC Chairman Willie Phillips said during the commission’s monthly meeting Thursday.
“I'm proud to be able to vote on this order because of the particular step forward we're able to take when it comes to reducing rates that are not sufficiently justified for ratepayers,” FERC Commissioner Lindsay See said.
Only the PJM Interconnection, ISO New England and the New York Independent System Operator pay generators for reactive power within their deadband ranges, according to FERC.
PJM’s market monitor said the grid operator paid generators $388 million in 2023 for reactive capability and NYISO and ISO-NE paid $75 million and $18 million, respectively, according to FERC.
Opponents of FERC’s proposal to bar payments for reactive power within a generator’s deadband included the American Council on Renewable Energy, the Solar Energy Industries Association, the American Clean Power Association, the North American Generator Forum and Public Service Enterprise Group companies. NYISO and ISO-NE also opposed the proposal. In part, they said FERC was wrong to claim that there is minimal cost in providing reactive power.
Supporters of FERC’s rule included PJM, ratepayer advocates in New England and in PJM’s footprint, and American Electric Power.
In comments on the proposed rule, AEP, for example, said the rule could create cost savings for customers and reduce the burdens associated with “resource- and time-intensive cost-of-service reactive power rate proceedings for individual generating facilities.”
Here are four other takeaways from the meeting.
Phillips is ‘optimistic’ on nuclear power outlook. “I am very optimistic and quite excited to see the interest in nuclear generation around the country,” Phillips said during a media briefing in response to a question about Amazon and Google backing small modular reactors for their data centers. “I believe that there's great hope and optimism when it comes to small modular nuclear as well.”
Phillips said he supports an “all of the above” energy strategy. “I've always said that we have to have all the tools available to us on the table as we address the pressing needs of load and increasing demand. This is a good development.”
FERC dismisses challenges to its backstop siting rule. FERC upheld its May decision amending its regulations for applications for permits to build electric transmission facilities in national interest corridors in cases when states fail to make application decisions within a year. In its decision, the agency dismissed arguments made by Earthjustice and other environmental groups as well as by utility regulators from Louisiana, New York and Pennsylvania.
Among other things, FERC said permitting applicants must show they made good faith efforts to communicate with stakeholders. However, in its decision, FERC said permit applicants must engage with tribes and individual Indian landowners if their projects require rights-of-way on land owned in trust or restricted status.
FERC orders MISO return on equity refunds from 2013. On remand, the agency ordered Midcontinent Independent System Operator transmission owners — such as Ameren, Entergy and MidAmerican Energy — to adopt a 9.98% base ROE for their transmission assets, effective Sept. 28, 2016, down from a 10.02% ROE. The transmission owners must provide refunds based on the lower ROE, with interest, for the period from Nov. 12, 2013, to Feb. 11, 2015, and for the period from Sept. 28, 2016, to now.
In its decision, FERC decided to scrap its use of a risk premium model in its methodology for setting transmission ROEs.
FERC approves NERC budget. The agency approved the North American Electric Reliability Corp.’s proposal for a $123.1 million budget for 2025, up 8.2% from this year. The budget includes $79.2 million in costs related to the Electricity Information Sharing and Analysis Center, including the Cyber Risk Information Sharing Program, according to FERC. The budget includes $145.8 million in assessments to load-serving entities to fund NERC’s six regional entities, up 13.6% from this year.
