The Federal Energy Regulatory Commission (FERC) recently issued a Notice of Proposed Rulemaking proposing to revise its regulations to foster competition in the sale of primary frequency response service.  FERC seeks comments by April 27, 2015 on this initiative, including the sale of primary frequency response service at market-based rates.  This is the most tangible step in FERC’s ongoing efforts to ensure the adequate supply of this essential reliability resource.

In particular, FERC seeks to:

• Establish a clear difference between frequency regulation and frequency response. In FERC Order 888, “Regulation and Frequency Response” was defined as one of six ancillary services. FERC now wants to establish these as separate and distinct services.
• Facilitate the sale of third-party frequency response services to the Balancing Authorities newly responsible for demonstrating minimum frequency response performance.
• Open the door to market-based sales by reducing barriers. In order to sell services at market prices instead of cost-based prices, the supplier had to demonstrate that it did not have the ability to control prices (market power).  FERC 784 lowered the requirements to demonstrate a lack of market power, facilitating market-based sales. The same rate screens would be used to qualify for the sale of market-based frequency response services.
• Indicate that frequency response services can be provided anywhere in the interconnection where the responsible balancing authority (the buyer of the services) is located, and without any transmission scheduling or reservation requirements imposed on the seller.

Pierce Atwood and Grid Storage Consulting have been advocating on behalf of commencing frequency response at market-based rates.