FERC Issues Final Rule Concerning Integration of Variable Energy Resources

By Debra Roby, Alan Robbins and Alan Rukin

On June 22, 2012, the Federal Energy Regulatory Commission (“Commission”) issued Order No. 764, a final rule (“Final Rule”) approving changes to the pro forma Open Access Transmission Tariff (“OATT”) and Large Generator Interconnection Agreement (“LGIA”) concerning integration of Variable Energy Resources, or VERs. The Final Rule defines “Variable Energy Resource” as a generation facility using an energy source that is renewable, cannot be stored by the owner or operator, and has variability beyond the control of the owner or operator. While various types of resources can be classified as VERs, including solar and geothermal, wind turbine generators currently comprise the majority of VERs. With VERs making up an increasing percentage of new generating capacity being brought on-line, the Commission determined that it was time to re-evaluate practices that were developed at a time when virtually all generation on the system could be scheduled with relative precision and when only load exhibited significant degrees of within-hour variation. The Commission began soliciting public input on this topic in January of 2011.

The Final Rule adopts two specific reforms to ease integration of VERs. The first is a modification to the Commission’s pro forma OATT to allow all transmission customers the option of scheduling transmission at 15-minute intervals, rather than on an hourly basis. The Commission found this modification necessary because the existing pro forma OATT has no provision allowing customers to mitigate generator imbalance charges even when the customer knows or believes that generation output will change within the hour. The Commission believes that moving from hourly to 15-minute scheduling intervals will reduce the amount of imbalance energy that the affected Balancing Authority will need to produce, leading to a corresponding reduction in the amount of capacity held to provide that energy. This, in turn, can lower reserve-related costs for the source balancing authority and, ultimately, consumers.

The second change amends the Commission’s pro forma LGIA such that new interconnection customers whose generating facilities are VERs must provide meteorological and forced outage data to the transmission provider, when requested, to provide a basis for the transmission provider’s use in forecasting the VER’s electrical power production. The Commission noted that power production forecasts can provide public utility transmission providers with advanced knowledge of system conditions needed to manage the variability of VER generation through the unit commitment and dispatch process, rather than through the deployment of reserve service, such as regulation reserves which can be more costly.

FERC considered, but rejected, a third reform that would have created a new rate schedule under the pro forma OATT for generator regulation and frequency response service. The Commission declined to adopt this provision after receiving comments urging the Commission to recognize that a uniform provision may not be suitable for all regions.

In her partial dissent, Commissioner LaFleur noted her support for intra-hour scheduling and power production forecasting, as well as the guidance provided on generator reserve charges, but disagreed with the majority on the narrow point of demonstrating compliance. As issued, the Rule requires parties to make revisions to the Tariffs in order to demonstrate compliance with the new intra-hour scheduling and power production forecasting rules. LaFleur would have allowed parties the option of demonstrating that existing reforms already underway meet the new requirements.

Order No. 764 becomes effective 60 days following publication in the Federal Register. Transmission providers must file complying OATTs with FERC within 12 months of the effective date.

(FERC Docket No. RM10-11-000)


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