As Part of a Greater Emphasis on Provision of Ancillary Services, FERC Found Exemption No Longer Just and Reasonable

On June 16, 2016, FERC issued Order No. 827, which requires transmission-owning public utilities to revise their open access transmission tariffs to establish reactive power requirements for new interconnecting non-synchronous (i.e., wind) generators. New non-synchronous generators will be required to provide dynamic reactive power within a range of 0.95 leading to 0.95 lagging (unless the interconnecting utility has established a different power factor for non-synchronous generators) at the high side of the generation substation. The requirements will be applicable to facilities that have not executed a Facilities Study Agreement as of the effective date of Order No. 827, which will be 90 days after its publication in the Federal Register.

FERC initially exempted wind generators from the reactive power requirement when it established its procedures for interconnecting generation facilities to the transmission grid (FERC Order No. 2003). At that time, FERC deemed the exemption necessary because the cost to design and build a wind generator that could provide reactive power was expensive, so imposing a reactive power requirement on such generators would create an obstacle to their development. As a result of technological advances, the cost of designing and building a wind generator that can provide reactive power is now comparable to that for synchronous generators. Additionally, FERC explained, because of the increased number of wind generators on certain systems, the potential for either a deficiency in reactive power or the imposition of an undue burden (without a technological or cost basis) on synchronous generators to provide reactive power, has also increased.

In light of these changes, FERC found that it is no longer just and reasonable that wind generators should have an exemption that is not available to other generators, and that requiring non-synchronous generators to provide reactive power was necessary to protect reliability. FERC does, however, recognize that some distinctions between synchronous and non-synchronous generators still exist. In recognition of these distinctions, the order requires that non-synchronous generators provide reactive power at the high side of the generation substation; whereas synchronous generators will continue to provide reactive power at the point of interconnection.

FERC considered, but decided not to apply the requirement to existing non-synchronous generators requesting new interconnection for facility upgrades unless the interconnecting utility determines that the reactive power is needed to ensure safety or reliability. Non-synchronous generators seeking compensation for the provision of reactive power will need to propose a mechanism for calculating the requested payments. Transmission-owning public utilities and those non-jurisdictional utilities seeking to maintain reciprocity status are required to revise their tariffs to adopt the new requirements within 90 days after publication of Order No. 827 in the Federal Register.

FERC's determination with respect to reactive power arises just before its June 30, 2016 workshop (Docket No. AD16-17-000) to discuss compensation for Reactive Supply and Voltage Control within the Independent System Operators and Regional Transmission Organizations. And separately, FERC is considering in another Notice of Inquiry (Docket No. RM16-6-000), whether additional requirements should apply with respect to provision and compensation of primary frequency response service from existing and new synchronous and non-synchronous generators.

Finally, in another order affecting reactive power supply, FERC issued a show cause order contemporaneous with Order No. 827 to the Midcontinent Independent System Operator (MISO) to direct it to (a) revise its tariff to ensure that a reactive power resource owner will no longer receive compensation after it has deactivated or transferred a unit providing such power (or show why revision is not necessary), and (b) maintain and post on its website a chart listing all resource owners receiving compensation for reactive power and their current reactive power revenue requirements. FERC's order was precipitated by filings by certain generators that suggested that MISO might be continuing to pay resources for reactive power from units that are no longer capable of providing the service.