On September 28, the Department of Energy (DOE) issued a Notice of Proposed Rulemaking (NOPR) proposing the Federal Energy Regulatory Commission (FERC) direct competitive power markets (RTOs and ISOs) to update their rules to “accurately price” what the proposal describes as “fuel-secure” generation.

Key Details

• “Fuel-secure” generation is defined by the DOE as resources that provide reliable capacity, resilient generation, frequency, and voltage support with on-site fuel inventory. These assets provide power for our basic needs, quality of life, and robust economy which are vital to the economic and national security of the United States.
• The notice from the DOE comes approximately one month after the agency released its Staff Report on Electricity Markets and Reliability which identified potential reliability issues driven by mass baseload retirements and the evolving generation mix.
• The notice highlights reports from industry analysts which find that regulated wholesale power markets are not adequately pricing resiliency attributes of fuel-secure electricity.
• The rule would allow for the full recovery of costs of certain eligible units physically located within the Commission-approved organized markets. The units must also be able to provide essential energy and ancillary reliability services and have a 90-day fuel supply on site in the event of supply disruptions caused by emergencies, extreme weather, or natural or man-made disasters. These criteria align particularly well with nuclear generating stations which again demonstrated their resilience during this year’s hurricane season.
• FERC received more than 1,300 submissions during the 60-day comment period from a wide range of stakeholders. One submission, from the Nuclear Energy Institute (NEI), a nuclear policy and advocacy group, described the NOPR as a necessary interim step but added that the Commission should “seek broader solutions to maintain the resilience and diversity of the electric grid.” An opposing view by the Rocky Mountain Institute stated the proposal is “urgent without evidence, alarmist without cause, and preemptory without authority.”

Implications

If approved, this proposal would mark the biggest change to regulated energy markets in years, offering a lifeline to the nuclear industry whose plants provide baseload generation but are increasingly squeezed by subsidized alternatives and the high cost of regulatory compliance. The effort by the DOE to correct market distortions has received both support and objections from across the energy industry and given the large number of submissions received during the comment period, this issue is likely to remain in the spotlight in the months ahead.

Additional Resources

Department of Energy: Grid Resiliency Pricing Rule

Department of Energy: Staff Report to the Secretary on Electric Markets and Reliability

North American Reliability Corporation: Long-Term Reliability Assessment (2016)

This report is part of ScottMadden’s Nuclear Minute series. To view all featured Nuclear Minutes, please click here.

Additional Contributing Author: Hank Bowden