U.S. Secretary of Energy Rick Perry last year petitioned the Federal Energy Regulatory Commission (FERC) to craft policies to provide for “resilience” in the nation’s generation resource mix. He wrote that ensuring a reliable and resilient electric supply and corresponding supply chain are vital to national security.
Framing the issue as “national security” is what’s happening now, with the White House National Security Council arguing for the administration to use the Defense Production Act and authority under Federal Power Act section 202(c) to “temporarily delay retirements of fuel-secure electric generation resources.” FERC has rejected arguments that government intervention into wholesale energy markets is needed. It also has asked the question: What exactly is resilience, and do we need it?
FERC has said it places a priority on resilience, and recently issued an order initiating a new proceeding (Docket No. AD18-7-000) to holistically examine the resilience of the bulk power system. FERC’s action directed the regional transmission organizations (RTOs) and independent system operators (ISOs) to provide information as to whether FERC and the markets need to take additional steps to affirm the resilience of the bulk power system. FERC said its goals are to “develop a common understanding among the Commission, industry and others of what resilience of the bulk power system means and requires; to understand how each regional transmission organization and independent system operator assesses resilience in its geographic footprint; and to use this information to evaluate whether additional Commission action regarding resilience is appropriate.”
Yet resilience remains an elusive concept. The comments from the RTOs and ISOs explain resilience as another, perhaps expanded, value of reliability. Their comments in response to FERC indicate all is well with each of their respective systems. But at the same time, market events show that we do not have a clear view of what resilience is, how to measure it, or how to ensure it.
Responding to FERC’s directive, PJM Interconnection took a bold approach, seeking to establish a set of principles that would (intentionally) act as a lightning rod or spark action. PJM, for example, asked FERC to adopt a slightly different core definition of resilience and apply it (essentially) nationwide. FERC’s order in January came with this definition: “The ability to withstand and reduce the magnitude and/or duration of disruptive events, which includes the capability to anticipate, absorb, adapt to, and/or rapidly recover from such an event.”
PJM recommended an alternative formulation: “The ability to withstand or reduce the magnitude and/or duration of disruptive events, which includes the capability to identify and mitigate vulnerabilities and threats, and plan for, prepare for, absorb, adapt to, and/or recover from such an event.” Note the omission of the word “rapidly,” and the addition of the phrase “identify and mitigate vulnerabilities and threats.”
Additionally, PJM’s description of resilience—a term still in flux—as an extension of reliability is notable. Reliability is a well-defined set of ISO/RTO functions overseen by FERC, from capacity markets to secure resources years in advance, to split-second frequency regulation and black-start capacity to respond to emergencies.
Ensuring Grid Resilience
Where we go from here is not clear, but it’s clear action is needed. The Commission must act quickly and substantively, because the underlying concerns around resilience have surfaced in a multitude of proceedings. For example, the Electric Power Supply Association (EPSA) says resilience “must be a priority in all regions of the country, not only those served by independent system operators or regional transmission organizations.” According to the EPSA: “It is important for [FERC] to extend its inquiry on the holistic examination of resilience to all jurisdictional entities, particularly transmission owners and systems outside of ISOs/RTOs.”
Broad concerns about the loss of baseload generation persist. Cynics will see a political, not a practical, motivation at play, but leaked memos and reports tell us that the National Security Council is studying the security risk from coal and nuclear power plant shutdowns.
In the recent docket, FERC has amassed a robust record that should lead to action. What type of action is not clear. FERC’s options include using this record to justify that everything is fine. That choice seems unlikely given Chairman McIntyre’s seriousness of purpose and the record developed in the docket. It seems more probable that FERC will affirm the various individual RTO/ISO plans to advance resilience in their respective regions. If FERC sets forth a universal definition of resilience, the RTOs/ISOs can pursue meaningful steps to achieving said resilience in their markets.
Between the bookends lies an array of choices for FERC. What FERC will choose to do is hard to discern, but the general sentiment of commenters is that FERC must act—and soon—to ensure the resilience of the bulk power system. ■
—Kenneth W. Irvin is a partner in Sidley Austin LLP’s Washington, D.C., office. Christopher Polito is an associate with Sidley Austin LLP in Washington, D.C. This article has been prepared for informational purposes only and does not constitute legal advice. This information is not intended to create, and the receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this without seeking advice from professional advisers. The content therein does not reflect the views of the firm.