FERC

(July 2012) Thanks for your enlightening editorial about the problems of feed-in tariffs for photovoltaic installations and the distortions they are causing in cost responsibilities among electric utility customers. While these issues are an immediate and growing concern, an entirely different set of problems will emerge over the next decade as the share of renewables in total generation approaches the high levels being dictated by most regulatory authorities.

In competitive power markets based on locational marginal pricing (LMP), the facts sometimes conflict with popular belief. Most notably: 1. When there’s congestion, the books don’t balance, and ratepayers always pay more than the generators receive. The difference is sometimes called “congestion cost.” 2. Congestion in a competitive market doesn’t necessarily increase ratepayers’ costs; and 3. Reductions in LMP are incomplete and sometimes misleading measures of economic benefits of transmission upgrades. These three facts and their implications should be considered in transmission planning, market design, tariffs, and system operations.

State commissions can select from a toolkit of regulatory approaches to promote desired utility cybersecurity behavior. One approach is to allow the industry to selfregulate, and another approach is to leave the job to the federal government. But sofar, neither the industry nor the federal government have developed and implemented adequate standards for securing the smart grid. States can play a constructive role—albeit perhaps not in the form of traditional regulation.

On April 30, FERC held a technical conference to review scientific claims and policy arguments about geomagnetic disturbances, known as GMD—how some say that a once-in-a-century solar storm could induce a power surge on the interstate grid so destructive as to cook and fry as many 300 extra-high-voltage transformers, plunging much of the nation into a blackout lasting months or even years. Some researchers even harbor fears that GMDs could end life as we know it.

Technology is quickly making energy storage more economical and effective than ever before. But companies that wish to invest in storage capacity face a journey through a frustrating regulatory no-man’s land. Opening the gateway for storage to deliver smart grid benefits will require a more streamlined and coherent approach to regulating storage as utility infrastructure.

For the first time, perhaps, the electric utility industry may need to keep track not only of peak load, but also of minimum load, as the Federal Energy Regulatory Commission reviews a proposal by the Solar Energy Industries Association to employ a new definition of minimum load under a new, relaxed threshold test that would govern eligibility for fast-tracking of applications by generation developers to interconnect new, small-scale solar energy projects to the local utility distribution grid.

Beacon Power filed bankruptcy last fall, amid a political firestorm sparked by Solyndra’s demise. But should the company have received a bailout, so it could continue operating until FERC’s new pay-for-performance rules take effect?

The electric utility industry offers up a wealth of ideas on how the Federal Energy Regulatory Commission might reform its policy, adopted under FERC Order 679 in 2006, of granting financial incentives for investments in transmission line projects that ensure reliability or mitigate line congestion so as to reduce the cost of delivered power. Fortnightly’s Bruce W. Radford reports.

The governors of New Jersey and Maryland have embarked on a crusade that could topple competitive energy markets in their states—and perhaps beyond. Glen R. Thomas, former chairman of the Pennsylvania PUC, challenges policy makers in the two states to stand up for free markets and stop a destructive race to the bottom.