FERC Chairman Kevin McIntyre provided some insight Thursday into the Commission's approach to an ongoing examination of the resilience and reliability of the nation's power grid.
When the Federal Energy Regulatory Commission unanimously rejected Department of Energy (DOE) Secretary Rick Perry's controversial notice of proposed rulemaking (NOPR) in January and instead issued a separate order "to holistically examine the resilience of the bulk power system," it also "embraced the concept of resilience as something that really does cry out for attention," McIntyre said at a forum hosted by the Washington Post.
"In my view, as a conceptual matter, we're not doing it right if we don't recognize what the [resilience] attributes are, define them sufficiently to justify action upon them and ensure that we get the compensational aspect of it right," McIntyre said of FERC's process.
"And this is not unique to resilience attributes. We already have certain types of functions that are performed by different types of electric generating resources in different ways -- for example, providing voltage support to our transmission grid, or providing frequency response,” he added.
“These are highly technical concepts, but certain types of electric generating facilities are recognized as being able to provide these types of supportive measures...those attributes are recognized in official FERC policy and are compensated accordingly. So it wouldn't be beyond the pale to think that if we could identify with sufficient specificity the resilience attributes that merit compensation, then we can look at that compensation calculation stage."
Those attributes wouldn't necessarily include 90 days of on site fuel supply, as has been suggested by Perry, McIntyre said.
DOE submitted the NOPR to FERC last September. While coal and some electricity organizations showed support for the NOPR, natural gas industry groups were vehemently opposed, calling it a bailout for coal and nuclear power generators.
One analysis concluded that subsidies included in the NOPR would have cost as much as $10.6 billion a year, with the vast majority of the money going to a handful of coal and nuclear companies.
"The spate of extreme weather events we've had over the past several years have given us a lot of data and ability to study exactly how our grid performed, with a particular eye toward seeing whether there are certain types of generating resources that did better than others, that were more reliable than others during those very challenging operational circumstances."
In March, FirstEnergy Solutions Corp., which recently filed for Chapter 11 bankruptcy protection, sought an emergency order from DOE to direct PJM Interconnection to secure long-term capacity for nuclear and coal-fired plants that would compensate owners for the baseload power they provide. The relief was sought under Section 202(c) of the Federal Power Act, which gives the DOE secretary the ability to address power emergencies.
"I don't think we have an emergency on our hands right now in the sense of the ability of our grid to perform today and in coming weeks and months. I don't think we have that sort of situation. However, that's not my call. Section 202(c) of the Federal Power Act, which was the basis on which First Energy has made its submittal to the Department of Energy, has its own standards spelled out there, and I trust the Secretary of Energy and his team at DOE to kind of perform their own valid analysis of that and to determine whether or not any further action is necessary."
At a hearing before the Science, Space and Technology Committee Wednesday, Perry suggested that the use of a Truman-era law, rather than Section 202(c), could be a way to address the issues he brought up in last year's DOE NOPR and protect the nation's coal and nuclear generating facilities.
"Section 202(c) is an economic issue. That's approaching this from an economic standpoint, and I think it's really important for us as a country to look at this for what...it's really about,” Perry said. “It's about the national security of our country, of keeping our plants -- all of them -- online, being able to deliver energy no matter whether it's a natural disaster that we might see from a polar vortex, or if something more nefarious as a cyber attack from a terrorist state or some entity with bad intent for the United States.
"We are looking at a number of ways to approach this. I know the Defense Production Act [of 1950] is one of those ways to address that; we're looking at that very closely as well. Having resilience and reliability to our grid is as important to our national security as anything I can think of."
Enacted within weeks of the United States entering the Korean War, the Defense Production Act of 1950 authorizes the president to effectively nationalize industries deemed necessary to national defense.
"It's perhaps not the most obvious fit," McIntyre said of Perry's suggestion to implement the Act.
"Even Section 202(c) of the Federal Power Act tees off of the concept of continuance of a war in which the United States is involved as being kind of the baseline circumstance that would justify a DOE order to certain types of facilities to either begin operating or continue operations,” he added. “The statute does go on to encompass in a more generic fashion some sort of ongoing emergency of ongoing import...the fit is perhaps not the most obvious one, but I'm certain that DOE has a handle on that issue and will analyze that in making its decision."