[Federal Register Volume 79, Number 39 (Thursday, February 27, 2014)]
[Notices]
[Pages 11097-11100]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-04278]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
[Docket No. AD14-7-000]
Third-Party Provision of Reactive Supply and Voltage Control and
Regulation and Frequency Response Services; Notice of Workshop
Take notice that Federal Energy Regulatory Commission (Commission)
staff will convene a workshop to obtain input on third-party provision
of reactive supply and voltage control and regulation and frequency
response services. The workshop will be held on April 22, 2014 in the
Commission Meeting Room at the offices of the Federal Energy Regulatory
Commission, 888 First Street NE., Washington, DC 20426. Members of the
Commission may attend.
Advance registration is not required, but is encouraged. You may
register at the following Web page: https://www.ferc.gov/whats-new/registration/04-22-14-form.asp.
Those wishing to participate in the program for this event should
nominate themselves through the on-line registration form no later than
March 14, 2014 at the following Web page: https://www.ferc.gov/whats-new/registration/04-22-14-speaker-form.asp.
The Commission will issue a subsequent notice providing the
detailed agenda for the workshop.
In Order No. 784, the Commission revised its regulations to foster
competition and transparency in ancillary services markets.\1\ Among
other things, the Commission revised Part 35 of its regulations to
reflect reforms to its Avista \2\ policy governing the sale of
ancillary services at market-based rates to public utility transmission
providers. The Commission implemented these reforms out of a concern
that the Avista restriction limiting the sale of ancillary services at
market-based rates absent a showing of lack of market power to a public
utility transmission provider for purposes of satisfying its open
access transmission (OATT) requirements was proving to be an
unreasonable barrier to entry, unnecessarily restricting access to
potential suppliers.\3\ Based on the record developed in that
proceeding, the Commission relaxed the Avista restrictions with respect
to the sale of Energy Imbalance, Generator Imbalance, Operating
Reserve-Spinning and Operating Reserve-Supplemental services.
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\1\ Third-Party Provision of Ancillary Services; Accounting and
Financial Reporting for New Electric Storage Technologies, Order No.
784, 78 FR 46,178 (July 30, 2013), FERC Stats. & Regs. ] 31,349, at
PP 2-3 (2013).
\2\ Avista Corp., 87 FERC ] 61,223, order on reh'g, 89 FERC ]
61,136 (1999) (Avista).
\3\ See Order No. 784, FERC Stats. & Regs. ] 31,349 at P 9.
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However, the Commission found that the technical and geographic
requirements associated with Reactive Supply and Voltage Control
(Schedule 2) and Regulation and Frequency Response (Schedule 3)
services precluded application of the existing market power screens to
the sale of those services. Instead, the Commission provided other
options for such sales (price cap and competitive solicitation,
described further below) and stated its intention to gather more
information regarding the technical, economic and market issues
concerning the provision of these services in a new, separate
proceeding. The Commission stated that such proceeding will consider,
among other things, the ease and cost-effectiveness of relevant
equipment upgrades, the need for and availability of appropriate
special arrangements such as dynamic scheduling or pseudo-tie
arrangements, and other technical requirements related to the provision
of Schedule 2 and Schedule 3 services.
Consistent with the Commission's stated intent in Order No. 784,
staff would like to receive input from interested persons regarding the
technical, economic and market issues concerning the provision of
Schedule 2
[[Page 11098]]
and Schedule 3 services. To facilitate this discussion, staff provides
additional background regarding Commission policies and recent actions
with respect to reactive power, frequency response, and frequency
regulation.
Reactive Power
Reactive power is a critical component of operating an alternating
current (AC) electricity system, and is required to control system
voltage within appropriate ranges for efficient and reliable operation
of the transmission system. At times generators or other resources must
either supply or consume reactive power for the transmission system to
maintain voltage levels required to reliably supply electricity from
generation to load.
Payments for reactive power capability vary by region. Some regions
do not pay for reactive power capability within the required power
factor range, finding that it is a requirement of generator operation
under good utility practice. Other regions pay generators a cost-based
rate for reactive power capability, since generators incur costs to
provide that capability and paying generators aligns incentives with
desired behavior for system flexibility. Where such cost-based rates
are paid, providers of reactive power generally are authorized to
receive payment pursuant to tariffs on file with the Commission. The
Avista policy permitting some ancillary service sales without a showing
of lack of market power, did not apply to Schedule 2 service.\4\
Accordingly, suppliers wishing to sell Schedule 2 service at market-
based rates have always needed to demonstrate a lack of market power
with respect to the reactive power product before such sales would be
authorized.
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\4\ See id. n.17.
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In Order No. 784, the Commission nevertheless evaluated whether the
existing market power screens could be applied to the sale of Schedule
2 service without significant modification.\5\ The Commission found
that the more stringent technical and geographic considerations
associated with Schedule 2 service suggest that it is not the simple
combination of basic energy and capacity products. The Commission noted
that most comments addressing the sale of Schedule 2 service agree that
the set of resources considered by the existing market power screens
for energy and capacity would differ too significantly from the set of
resources that would be considered by market power analyses designed
specifically for Schedule 2 service. The Commission therefore concluded
that the record before it did not support application of the existing
market power screens without significant modification to Schedule 2
service. Instead, the Commission allowed market-based sales of Schedule
2 service to a public utility that is purchasing ancillary services to
satisfy its OATT requirements if the sale is made pursuant to a
competitive solicitation that meets certain specified requirements,\6\
or when such sale is made at or below the buying public utility
transmission provider's own Schedule 2 rate.\7\
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\5\ Id. PP 59-61.
\6\ Id. P 99.
\7\ Id. PP 82-85.
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At the workshop, staff would like to discuss the following:
The extent to which reactive power can be traded across
balancing areas in a manner consistent with existing market power
screens for energy and capacity;
Whether there should be payment for reactive power
capability within the required power factor range;
How cost-based payments for reactive power capability
should be structured; and
What are the obligations of generators receiving payment
for reactive power capability?
Frequency Response and Frequency Regulation
In Order No. 784, the Commission also evaluated whether the
existing market power screens for sales of energy and capacity could be
applied to the sale of Schedule 3 service without significant
modification.\8\ The Commission discussed Schedule 3 as a single
service in Order No. 784, focusing primarily on AGC-based frequency
regulation. However, frequency response is distinct from frequency
regulation.\9\ Frequency response involves the autonomous, automatic,
and rapid reaction of an individual turbine-generator or other resource
to change its output to rapidly dampen large changes in frequency,
generally through appropriate governor settings. Frequency regulation
is produced from either manual or automated dispatch (through Automatic
Generation Control (AGC)) from a centralized system.\10\ In Order No.
888, the Commission found that governor-based autonomous frequency
response did not merit a separate ancillary service because at the time
the same resources that respond to regulation signals also provided
governor response under then-standard industry practices.\11\ As a
result, the language of Order No. 888 discussing Schedule 3 was focused
primarily on AGC-based central dispatch.\12\
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\8\ Id. PP 59-61.
\9\ As used herein, frequency response refers to primary
frequency response and frequency regulation refers to secondary
frequency response.
\10\ See Frequency Response and Frequency Bias Setting
Reliability Standard, Order No. 794, 146 FERC ] 61,024 at PP 8-9
(2014).
\11\ ``While the services provided by Regulation Service and
Frequency Response Service are different, they are complimentary
services that are made available using the same equipment.''
Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities; Recovery
of Stranded Costs by Public Utilities and Transmitting Utilities,
Order No. 888, FERC Stats. & Regs. ] 31,036, slip at 212 (1996),
order on reh'g, Order No. 888-A, FERC Stats. & Regs. ] 31,048, order
on reh'g, Order No. 888-B, 81 FERC ] 61,248 (1997), order on reh'g,
Order No. 888-C, 82 FERC ] 61,046 (1998), aff'd in relevant part sub
nom. Transmission Access Policy Study Group v. FERC, 225 F.3d 667
(D.C. Cir. 2000), aff'd sub nom. New York v. FERC, 535 U.S. 1
(2002).
\12\ ``Regulation and Frequency Response Service is accomplished
by committing on-line generation whose output is raised or lowered
(predominantly through the use of automatic generation control
equipment). . .'' See OATT Schedule 3.
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While it remains true that most generating units capable of
providing frequency regulation are also capable of providing frequency
response, standard industry practices have changed and it is no longer
clear that most resources providing frequency regulation are also
providing frequency response. Accordingly, staff is evaluating whether
additional market mechanisms are needed to facilitate the provision of
either frequency response or frequency regulation in the organized or
bilateral markets. For purposes of considering the technical, economic
and market issues concerning the provision of Schedule 3 service, staff
believes it would be productive to focus on frequency response and
frequency regulation separately.
Frequency Regulation
Frequency regulation is used to balance generation, interchange and
demand by managing the response of available resources within
minutes.\13\ Frequency regulation is provided under different market
mechanisms in the organized and bilateral markets. Regional
transmission operators (RTOs) and independent system operators (ISOs)
generally procure frequency regulation through auction-based market
mechanisms in which payments are intended to cover the range of costs
[[Page 11099]]
incurred to provide service.\14\ Resources wishing to sell frequency
regulation in RTO/ISO markets are authorized to do so pursuant to their
MBR tariffs.
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\13\ Order No. 794, 146 FERC ] 61,024 at P 9. The level of
frequency regulation required for each balancing authority area is
not fixed, but is set by each balancing authority area to meet the
requirements of NERC Reliability Standards.
\14\ Frequency Regulation Compensation in the Organized
Wholesale Power Markets, Order No. 755, FERC Stats. & Regs. ]
32,324, at PP 6-11 (2011), reh'g denied, Order No. 755-A, 138 FERC ]
61,123 (2012).
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Outside the RTO/ISO markets, Avista authorizes suppliers who cannot
show a lack of market power with respect to Schedule 3 service to
nevertheless sell that service with certain restrictions.\15\ One such
restriction is that the authorization provided by Avista does not apply
to sales to a public utility that is purchasing ancillary services to
satisfy its own OATT requirements to offer ancillary services to its
own customers.\16\ In Order No. 784, the Commission evaluated whether
the existing market power screens could be applied with respect to the
sale of Schedule 3 service without significant modification, as a way
to permit such sellers to avoid the otherwise applicable Avista
restriction.
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\15\ Additionally, any seller who can successfully demonstrate a
lack of market power with respect to Schedule 3 service would
receive authorization from the Commission to sell to any entity
without restrictions, including public utility transmission
providers.
\16\ See Avista, 87 FERC ] 61,223 at n.12.
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As in Order No. 888, the Commission's evaluation of this issue in
Order No. 784 focused primarily on frequency regulation, not frequency
response.\17\ The Commission concluded that the existing market power
screens for energy and capacity were inadequate for analyzing Schedule
3 service because there are significant technical requirements, such as
the need for AGC equipment, that limit the set of resources capable of
supplying Schedule 3 service. The Commission agreed in principle with
commenters that potential competitors could be viewed as existing
competitors for purposes of market power analysis if it is known that
they can install needed equipment rapidly and profitably in response to
appropriate price signals, but found that the record does not
conclusively support the notion that such equipment upgrades (e.g., to
install AGC equipment in an existing generator) can be accomplished in
such a manner. The Commission also noted that the record indicates that
third-party sellers of Schedule 3 service might need to enter into or
facilitate special transmission service arrangements between
neighboring balancing authorities, such as dynamic scheduling or
pseudo-tie arrangements, in order to make sales outside of their home
balancing authority area. Because this fact could impact the
appropriateness of using the default geographic market reflected in the
existing market power screens for sales of energy and capacity, and
thus the ability to apply those screens to sales of Schedule 3 service
without significant modification, the Commission concluded that the
record before it did not support application of the existing market
power screens for sales of energy and capacity to sales of Schedule 3
service. Instead, the Commission allowed market-based sales of Schedule
3 service to a public utility that is purchasing ancillary services to
satisfy its OATT requirements if the sale is made pursuant to a
competitive solicitation that meets certain specified requirements,\18\
or when such sale is made at or below the buying public utility
transmission provider's own Schedule 3 rate.\19\
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\17\ Order No. 784, FERC Stats. & Regs. ] 31,349 at PP 59-61.
\18\ Id. P 99.
\19\ Id. PP 82-85.
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At the workshop, staff would like to discuss the technical,
economic and market issues concerning the provision of Schedule 3
service as it relates to frequency regulation outside of the RTO
regions, including:
To what extent do existing resources lack the necessary
AGC equipment to provide frequency regulation?
Why do existing resources that have AGC equipment choose
not to use it?
What is the ease and expense of adding AGC equipment to an
existing resource?
Are any special transmission scheduling provisions needed
to enable the provision of frequency regulation from one balancing
authority area to another? If so, what is the ease and expense of
implementing them?
Are there efforts underway to make the provision of
frequency regulation easier?
Frequency Response
Sufficient frequency response is necessary to stabilize frequency
within an interconnection immediately following the sudden loss of
generation or load. The ability of a power system to withstand a sudden
loss of generation or load depends on the presence and adequacy of
resources capable of providing rapid incremental power changes to
counterbalance the disturbance and arrest a frequency deviation. Most
frequency response is provided by the automatic and autonomous actions
of turbine-generators that have appropriate governor settings, with
some response being provided by load resources that have capabilities
similar to autonomous governor response.\20\
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\20\ Order No. 794, 146 FERC ] 61,024 at P 6. Once it becomes
effective, NERC Reliability Standard BAL-003-1 will establish a
minimum frequency response obligation for each balancing authority
area.
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On January 16, 2014 the Commission issued Order No. 794, Frequency
Response and Frequency Bias Setting Reliability Standard. The now-
approved NERC Reliability Standard BAL-003-1 establishes a minimum
Frequency Response Obligation for each balancing authority areas or
frequency response sharing group; provides a uniform calculation of
frequency response measure; establishes Frequency Bias Settings that
set values closer to actual balancing authority frequency response; and
encourages coordinated AGC operation.\21\ By imposing a requirement on
balancing authority areas and frequency response sharing groups to
provide frequency response, Order No. 794 will have the effect of
transitioning frequency response from what was historically considered
an interconnection-wide system characteristic to a distinct balancing
service that specific entities must deliver. Recognizing this, the
Commission issued a separate docket in July 2013 to explore the market
implications of the new frequency response and frequency bias setting
requirements, including potential impacts of the frequency bias setting
being different from actual frequency response; potential market and
commercial impacts of not accounting for transmission limitations and
historical flows when calculating frequency response obligations;
crediting load resources as part of the frequency response obligation;
the potential need for compensating frequency response resources; and
any other potential impacts on transmission capacity or ancillary
services.\22\
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\21\ Id. P 1.
\22\ Market Implications of Frequency, Response and Frequency
Bias Setting Requirements, Notice of Request for Comments, 144 FERC
] 61,058 (2013).
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Although a public utility transmission provider using its own
resources to provide Schedule 3 service would likely recover most of
its costs of providing governor-based frequency response along with its
costs for AGC-based frequency regulation under OATT Schedule 3, to the
extent the same units are providing both services, there are few market
mechanisms in place regarding compensation for frequency response as a
stand-alone service. Unlike frequency regulation, frequency response
has not been defined as a
[[Page 11100]]
product in the RTO/ISO markets. And while the authorization provided in
Avista would apply to frequency response, the restriction on sales to a
public utility that is purchasing ancillary services to satisfy its own
OATT requirements to offer ancillary services to its own customers
effectively precludes development of a market for frequency response.
These concerns along with the recently authorized reliability standard
have created the need for Commission Staff to request input regarding
existing regulatory and tariff provisions as well as potential market
implications for frequency response service.
At the workshop, staff would like to discuss the technical,
economic and market issues concerning the provision of Schedule 3
service as it relates to frequency response, including:
To what extent should existing resources be required to
provide their inherent quantity of frequency response as part of their
existing obligations, with any shortfall in achieving the balancing
authority area's frequency response obligation being procured through
tariff or market mechanisms such as in ERCOT;
Could competitive, market-based procurement of primary
frequency response performance be structured to address potential
market power concerns;
Whether provision of autonomous governor response could be
traded in a manner that is consistent with the existing market power
screens for sales of energy and capacity;
To what extent can existing resources be equipped with
governors, or other control equipment that can serve the same function,
and how expensive or time consuming would such a retrofit be;
Since governor-based autonomous frequency response would
not require any dispatch signal from a balancing area operator, would
any special dispatch or transmission scheduling provisions be needed to
provide the service from resources in a neighboring balancing authority
area;
Could competitive procurement of primary frequency
response be structured to avoid increases in Transmission Reliability
Margin, avoid barriers to non-conventional resources, and assure the
performance will be consistent with the Commission-approved balancing
authority area obligation, assure the generators providing primary
frequency response achieve appropriate speed and magnitude of power
output;
How could cost-based payments for primary frequency
response performance be structured;
To what extent do existing resources lack the necessary
equipment or fail to utilize the appropriate settings on that equipment
to provide primary frequency response;
Why do existing resources that have the necessary
equipment to provide primary frequency response choose not to use it or
to absorb response; and,
Are penalties for deviating from generation schedules
viewed as a serious impediment to the provision of frequency response?
The workshop will not be transcribed. However, there will be a free
webcast of the workshop. Anyone with Internet access interested in
viewing this workshop can do so by navigating to the FERC Calendar of
Events at www.ferc.gov and locating this event in the Calendar. The
event will contain a link to its webcast. The Capitol Connection
provides technical support for the webcasts and offers the option of
listening to the workshop via phone-bridge for a fee. If you have any
questions, visit www.CapitolConnection.org or call (703) 996-3100.
FERC workshops are accessible under section 508 of the
Rehabilitation Act of 1973. For accessibility accommodations please
send an email to [email protected] or call toll free (866) 208-
3372 (voice) or (202) 502-8659 (TTY), or send a fax to (202) 208-2106
with the requested accommodations.
FOR FURTHER INFORMATION CONTACT:
Sarah McKinley (Logistical Information), Federal Energy Regulatory
Commission, Office of External Affairs, (202) 502-8368,
[email protected]
Rahim Amerkhail (Technical Information), Federal Energy Regulatory
Commission, Office of Energy Policy and Innovation, 888 First Street
NE., Washington, DC 20426, (202) 502-8266, [email protected].
Dated: February 20, 2014.
Kimberly D. Bose,
Secretary.
[FR Doc. 2014-04278 Filed 2-26-14; 8:45 am]
BILLING CODE 6717-01-P