By L&W energy attorneys

The Federal Energy Regulatory Commission (FERC) recently released a notice of proposed rulemaking (NOPR) in Docket No. RM11-7-000 revising the compensation paid for frequency regulation service in organized wholesale power markets administered by Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs).     

Frequency regulation service is the injection or withdrawal of real power by facilities capable of responding appropriately to deviations or imbalances on a transmission system.  Minor frequency deviations can adversely affect energy consuming devices, while major deviations cause generation and transmission equipment to separate from the grid, possibly resulting in cascading blackout. Frequency regulation is largely provided by generators (e.g., water, steam and combustion turbines) specially equipped to respond to dispatch signals sent by a transmission system operator.  However, non-generator resources, such as controllable demand response and storage devices, are increasingly providing this service in some of the organized wholesale power markets. 

In the NOPR FERC makes a preliminary finding that the emergence of technologies capable of responding more quickly than generators to dispatch signals has prompted evaluation of market rules regarding frequency regulation service.  If FERC ultimately finds that these market rules fail to provide just and reasonable compensation it proposes to remedy this situation by requiring a two-part payment comprised of a uniform price for regulation capacity and a performance accuracy payment reflecting a resource’s ability to respond quickly to dispatch instructions to increase or decrease their provision of energy (or discharge or charge in the case of a storage device, or consume more or less energy in the case of a demand response resource).  While the capacity payment proposed in the NOPR is fairly straightforward, the NOPR does not specify how the performance accuracy payment will be determined in the market.  FERC seeks comment on both the appropriate measurement for accuracy and pricing structure within 60 days after the NOPR is published in the Federal Register. 

The following FERC-jurisdictional RTOs and ISOs have organized wholesale power markets for energy, capacity and ancillary services (such as frequency regulation): PJM Interconnection, LLC (PJM); New York Independent System Operator (NYISO); Midwest Independent System Operator, Inc. (Midwest ISO); ISO New England Inc. (ISO-NE); California Independent System Operator Corp. (CAISO); and the Southwest Power Pool, Inc. (SPP).  SPP does not currently have a market for frequency regulation service.  Outside of the RTO/ISO markets, frequency regulation service is provided by the transmission provider on a cost-of-service basis pursuant to its Open Access Transmission Tariff (OATT).