On March 21, 2024, the Federal Energy Regulatory Commission (“FERC”) issued a Notice of Proposed Rulemaking (“NOPR”) regarding reactive power compensation. Currently, three of the six Regional Transmission Organizations / Independent System Operators (“RTOs/ISOs”) in the nation compensate generating facilities for reactive power provided within the standard power factor range. Outside of RTOs/ISOs, Transmission Providers may pay for the capability to provide reactive power within the standard power factor range.
The NOPR proposes that Transmission Providers (including RTOs/ISOs) will no longer separately compensate generators operating within the standard power factor range for reactive power. FERC reasons that providing reactive power within the standard power factor range is simply meeting the generator’s obligations as an interconnection customer, is in accordance with good utility practice, and that providing reactive power within the standard power range imposes no or little cost to producers. Instead, FERC states that provision of reactive power within the standard power factor range can be reflected in energy and capacity offers made in organized and bilateral markets. FERC proposes that Transmission Providers would be required to pay an interconnection customer for reactive power only when the Transmission Provider requests that the interconnection customer operate its facility outside of the standard power factor range.
FERC seeks comments on the transition period once a final rule is adopted (i.e., how long after adopting a final rule should FERC allow entities currently receiving a reactive power revenue requirement to continue to receive such payments before they are terminated). FERC also seeks comment on potential reliability impacts, effect on the ability of generating facilities to recover their costs in the market, and impact on investment decisions.
Comments and reply comments on the NOPR will be due 60 days and 90 days, respectively, after the NOPR is published in the Federal Register.
FERC’s Reactive Power NOPR is available here.
If you have any questions regarding FERC’s Reactive Power NOPR, please do not hesitate to reach out to Sean M. Neal, Andrea Sarmentero, or Sylwia Dakowicz.
