Eliminating compensation for generators providing reactive power could threaten electric reliability and undermine investment .
Date filed: June 26, 2024
Venue: Federal Energy Regulatory Commission
Docket No.: RM22-2-000
On June 26, 2024, the Electric Power Supply Association (EPSA), joined by the PJM Power Providers Group (P3), New England Power Generators Association, Inc. (NEPGA), Independent Power Producers of New York, Inc. (IPPNY), and the Coalition of Midwest Power Producers (COMPP) (collectively, the Indicated Trade Associations), filed reply comments at the Federal Energy Regulatory Commission (Commission) regarding the notice of proposed rulemaking (NOPR) proposing to eliminate reactive power compensation for generation facilities providing reactive power within the standard power factor range.
The Indicated Trade Associations’ reply comments highlight that initial comments in the proceeding reflect strong opposition to the Commission’s proposal and demonstrate that the provision of reactive power imposes significant costs on generators, and that wholesale elimination of separate compensation for such costs would upset the expectations of investors and jeopardize reliability by eliminating a stable revenue stream that was relied on to make projects financeable and by eliminating incentives for generators to do anything beyond the bare minimum requirements imposed under their interconnection agreements.
In contrast, the relatively few commenters supporting the NOPR simply repeated unsupported assertions and arguments made in the NOPR itself, without providing additional evidence that would bolster these positions.
Further, none of these supporters put forward a valid rationale for denying generators compensation for a service that is necessary for reliability, especially when transmission owners will continue to receive compensation for providing the very same service, likely at higher costs to consumers.
As a result, we reiterate that, as a matter of law and policy, the Commission should withdraw its NOPR proposal and instead focus its efforts on improving and streamlining the methodologies used to determine reactive service compensation for generators, consistent with the earlier notice of inquiry (NOI) in this proceeding.
