The PFR Final Rule: The Way Things Should Work (but often don’t)

In an era marked by polarized politics and over-the-top political policy making, the final rule on primary frequency response issued last week by the Federal Energy Regulatory Commission gave us all hope that the Federal government – or at least one small agency in a huge bureaucracy – could actually do the right thing.

In a unanimous decision, the FERC issued a final rule on primary frequency response that adopted the positions ELCON urged in our comments. ELCON General Counsel Rick Bidstrup called it a “big win” and said it was “very unusual and special to get such an unambiguous result solely attributable to a single entity.”

Unusual, yes, but it was the result of the hard and diligent work of ELCON members, counsel, staff and FERC.  Here’s how it came down.

In late 2016 ELCON staff circulated a memo to the membership on a proposed FERC rule amending the Large Generator (LGIA) and Small Generator Interconnection Agreements (SGIA) to require that all new generating facilities install, maintain, and operate a functioning governor or equivalent controls as a precondition of interconnection and specified certain operating requirements. One member responded that a certain class of combine heat and power (CHP) facilities would not be able to fully comply with the new mandate.

With the technical advice of members, ELCON counsel drafted and filed comments in early 2017 generally supporting the intent of the proposed rule but pointed out the currently proposed wording could imply that industrials’ behind-the-meter generation, including but not limited to CHP units, would be required to provide primary frequency response in the event of frequency deviations.  ELCON said such a requirement is not compatible with the integration of industrial CHP units and the manufacturing processes that they support.

Specifically, ELCON said the proposed LGIA and SGIA language should be revised to explicitly exclude imposition of mandatory primary frequency response obligations on industrial CHP units and other similarly-situated forms of industrial behind-the-meter generation that are “sized to the load.” Also, ELCON suggested that language in the LGIA and SGIA exempting nuclear plants could simply be amended to include industrials’ behind-the-meter generation.

In addition to filing comments, early in 2017 ELCON staff, counsel and members met with commissioners and staff from the Office of General Counsel and Office of Electric Reliability to discuss our concerns with the proposed rule. Commissioner Cheryl LaFleur and former Commissioner Collette Honorable, the only two commissioners at that time still working at FERC, seemed particularly supportive of ELCON’s argument as did staff in the Office of General Counsel and Office of Electric Reliability.

Those meetings were followed by a number of phone calls between John Hughes and FERC staff. With better understanding of each perspective, ELCON filed supplemental comments with specific proposed exemption language in March. As a result of the hard work by ELCON members, counsel and staff and an admirable effort by FERC staff to reach out and understand our perspective, the final rule issued last week not only quoted our comments extensively and closely tracked our proposal, it actually expanded the rule so it isn’t limited only to industrial CHP.  Perhaps, more significantly, as John pointed out, this is the first time FERC treated CHP not just like any utility generator and recognized the importance of its integration with a steam/thermal host.

It wasn’t easy but in the end the ELCON full court regulatory press paid off. Well-deserved kudos to everyone involved.