The Federal Energy Regulatory Commission (FERC) set aside a proposal by Energy Secretary Rick Perry that would have provided billions of dollars in subsidies for coal and nuclear power plants under the guise of grid resiliency. Instead, the January 8 decision says the commission will open a new docket to consider broad policy issues related to resiliency.

(Read the FERC decision.)

"The Commission places a priority on resilience, and today issued an order initiating a new proceeding to holistically examine the resilience of the bulk power system," according to a press release. "The Commission recognizes that it must remain vigilant with respect to resilience challenges, because affordable and reliable electricity is vital to the country’s economic and national security."

In closing the docket, FERC found that neither the proposed rule nor evidence in the proceeding satisfied statutory requirements under the Federal Power Act of demonstrating that RTO/ISO tariffs are unjust and unreasonable.

"While some commenters allege grid resilience or reliability issues due to potential retirements of particular resources, we find that these assertions do not demonstrate the unjustness or unreasonableness of the existing RTO/ISO tariffs," FERC said. "In addition, the extensive comments submitted by the RTOs/ISOs do not point to any past or planned generator retirements that may be a threat to grid resilience."

Addressing the proposed subsidies for coal and nuclear plants to maintain grid resiliency, FERC says that the record "does not demonstrate that such an outcome would be just and reasonable. It also has not been shown that the remedy in the Proposed Rule would not be unduly discriminatory or preferential."

In concurring with the decision, FERC Commissioner Richard Glick wrote, "The Proposed Rule had little, if anything, to do with resilience, and was instead aimed at subsidizing certain uncompetitive electric generation technologies."

Perry NOPR

In late September Perry proposed that the FERC issue a final rule requiring organized electric markets to develop and implement reforms to "fully price" generation resources necessary to maintain grid reliability and resiliency.

A statement issued September 29 says that while a recent staff report to the Secretary on Electricity Markets and Reliability showed that the grid is generally reliable, "market distortions" could threaten its resilience. Perry said that FERC needs to "act swiftly" to ensure that the resiliency attributes of electrical generation from facilities with on-site fuel supplies are fully valued.

(Read "Cheap Natural Gas Hurts Coal and Nukes: DOE Report.")

The proposed rule would have allowed for the recovery of costs of "fuel-secure generation units frequently relied upon to make our grid reliable and resilient."

Eligible units must be able to have a 90-day fuel supply on site. The provision was seen as benefiting coal and nuclear generating stations, in particular.

Under the proposed rule, each FERC-approved independent system organization or regional transmission authority would be directed to authorize a tariff to buy electricity from an eligible "reliability and resiliency resource" and recover the costs and a return on equity. The rate would include pricing to ensure that each eligible resource is "fully compensated for the benefits and services" that it provides to grid operations, including reliability, resilience, and on-site fuel assurance, and that each eligible resource "recovers its fully allocated costs and a fair return on equity."

In a separate letter, Perry directed FERC to consider and complete final action on the proposal within 60 days of publication of the notification of proposed rulemaking (NOPR) in the Federal Register.