As FERC mulls whether to require generators to certify that outages at their facilities are due to a valid, technical reason, a leading academic at the Massachusetts Institute of Technology (MIT) last Wednesday suggested that operators of power plants adopt a protocol for how they “call” outages, which in turn would be audited internally and ultimately signed off on by top corporate executives with power suppliers.

William Hederman, the head of FERC’s Office of Market Oversight and Investigations, last week disclosed that the agency is mulling whether or not to require power plant operators to certify that outages at their facilities are due to an uncontrollable mechanical failure or other problem.

“I think the plants ought to have a protocol for how they call outages, what kinds of considerations go into that,” MIT Professor Paul Joskow said at a FERC staff conference looking at market monitoring issues and the Commission’s recently proposed standard market design (SMD) for U.S. wholesale electricity markets. A notice of proposed rulemaking (NOPR) related to the SMD was issued this summer.

He pointed out that there’s more than one type of outage that can hit a plant. “There are mandatory outages, you’ve got to shut the plant down…there are some discretionary outages, just like with your car — you’ve got an oil leak but you don’t really have to take it in immediately,” the MIT professor said.

“I think there should be a requirement that the internal auditor for the company audit the implementation of that protocol and then a responsible corporate official should sign off on it — that the protocol’s in place, that it’s been audited and that it’s being adhered to,” Joskow went on to say. “I don’t think that’s a big deal. I don’t think the CEO has to sign it, but I think a responsible corporate official can verify that the protocol’s in place.”

FERC and regional market monitors would then have an opportunity to see whether the protocols are appropriate “and, especially under emergency conditions, have the capability to tell suppliers if they have discretionary outages they should take them at some other time.”

Jade Eaton, a U.S. Department of Justice (DOJ) attorney, said that before such an audit procedure is imposed “you should look at how much time and money it’s going to take for every plant in the country to comply.” At the same time, Eaton said that “it does seem that it may be a one-time thing if there is a protocol that’s viewed as a kind of best practices protocol along the lines of what Paul was talking about that everyone does,” the DOJ attorney said.

As things currently stand, plant operators use disparate decisionmaking processes in determining whether to take a unit offline, Eaton went on to note. “If there was a standardized protocol, then people would document that and if they varied from it, they would contemporaneously document why they were making a change,” Eaton told the conference.

More broadly, Eaton said that SMD will make it much easier to monitor markets for any untoward behavior. “As an enforcement person who has had to look at data to determine whether a transaction is going to change the ability of people to manipulate price, a standard market design lets me get there so much faster,” Eaton said.

For her part, Energy Security Analysis Inc.’s Kristin Domanski said that FERC having “more of a dialogue” with power buyers and sellers in the market “is absolutely essential to understand where they’re coming from.” She underscored the point that when a market monitor looks at bid data and assesses an individual unit’s bid, “the monitor needs to understand where that bid comes from and surely there are times where, perhaps, there’s market manipulation at play or market power.”

But, at other times, “it’s a function of individual capital costs, which are not the same for every plant,” Domanski said. “So when you’re looking at a data point like a bid, you need to understand where that’s coming from by understanding the operator’s point of view and with that knowledge be able to assess when someone is trying to do something wrong.”

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