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On September 29, 2017, Department of Energy (“DOE”) Secretary Rick Perry submitted a Notice of Proposed Rulemaking (“NOPR”) to the Federal Energy Regulatory Commission (“Commission”) that, if adopted, would require Commission-approved regional transmission organizations (“RTOs”) and independent system operators (“ISOs”) to implement “reliability and resiliency pricing” to fully compensate the attributes that “baseload” generating units provide to the grid.

The NOPR proposes two principal revisions to the Commission’s regulations. First, the NOPR would require RTOs/ISOs to revise their tariffs to establish a just and reasonable “reliability and resiliency rate” that would: (1) apply to the purchase of electric energy from an eligible resource, discussed below,; and (2) facilitate recovery of the fully allocated costs and a return on equity for such resources. DOE explains that the rate shall ensure that eligible resources are fully compensated for the benefits they provide to grid operations, including reliability, resiliency, and on-site fuel assurance. Compensable costs would include, but would not be limited to, “operating and fuel expenses, costs of capital and debt, and a fair return on equity and investment.”

Second, DOE identifies the eligibility criteria that resources must meet to receive the reliability and resiliency rate. To be eligible, resources must: (1) be physically located within a Commission-approved RTO/ISO; (2) be able to provide essential energy and ancillary services; (3) have a 90-day supply of on-site fuel; (4) be compliant with all applicable federal, state, and local environmental laws, rules, and regulations; and (5) not be subject to cost-of-service regulation by any state or local regulatory authority.

The proposal directs the Commission either to consider and take final action on the NOPR by December 11, 2017, or to issue the proposed rule as an interim final rule. In addition, the proposal requires public comments by November 24, 2017, or by the deadline established by the Commission. The Commission issued a Notice Inviting Comments, establishing October 23, 2017 as the due date for initial public comments and November 7, 2017 as the due date for reply comments.

The NOPR can be found here.

For more information, please contact Thomas Rudebusch, Michael Postar, Sean Neal or Jason Gray.