DOE Requests FERC Fast-Track A Rule That Will Benefit Coal And Nuclear Plants

by McCarter & English, LLP

McCarter & English, LLP

On September 28, 2017, the U.S. Department of Energy (“DOE”) took the unusual step of submitting a Notice of Proposed Rulemaking (“NOPR”) for consideration by the Federal Energy Regulatory Commission (“FERC”), now docketed by FERC as RM18-1-000. The NOPR proposes to compensate certain generating resources in organized wholesale markets through out-of-market revenues for reliability, resiliency and fuel-assurance attributes. The proposed criteria for these subsidies would result in certain coal and nuclear resources being the beneficiaries. Depending on how the Regional Transmission Organizations (“RTOs”) and Independent System Operators (“ISOs”) that manage the organized wholesale markets would implement any directives stemming from a final rule, the NOPR could have a significant effect on how power is priced in those markets and could potentially drive up clearing prices and, in turn, consumer electricity bills.

DOE’s intent appears to be to provide nuclear and coal resources—in organized wholesale markets—with financial support over and above current market clearing prices. The NOPR proposes that each RTO/ISO would be required to propose market rules that provide eligible coal and nuclear plants physically located in RTO/ISO regions that are not subject to cost-of-service rate regulation by a state or local authority with full recovery of the costs associated with reliability, resiliency and on-site fuel assurance. The types of costs proposed for recovery include, but are not limited to, “operating and fuel expenses, costs of capital and debt, and a fair return on equity and investment.” The NOPR is short on details, proposing to leave the details of implementation to the RTOs/ISOs. Any estimate of the effect on consumers would depend on the approach taken by the RTOs/ISOs in implementing the directives. For example, if an RTO/ISO determined that its current capacity market design rules already comply with the NOPR proposal, the proposed rule could have little impact on consumers in that region. However, if the RTO/ISO developed a method for providing additional out-of-market compensation for such resources akin to a Reliability Must Run (“RMR”) contract, consumers could face significant increases in electricity prices. 

This NOPR raises numerous fundamental questions that will have to be addressed by FERC and the industry:

  • Would the proposed rule establish guaranteed price floors, and thus subsidies, for eligible coal and nuclear resources, while also allowing them to retain all the upsides of market prices when those prices exceed costs, leading to a “higher of market-based rates or cost” pricing regimen?
  • What effect would these out-of-market revenues have on the incentives for new market entry built into current market design?
  • How would the proposed rule be reconciled with FERC’s long-professed objective of facilitating competitive wholesale markets? 
  • How would attributes of reliability and resiliency to be rewarded by the NOPR be measured and valued? 
  • What would be a reasonable compensation level, if any, for the attributes to be compensated?

FERC Staff issued a set of queries to try to obtain answers to these and other questions.

FERC established an unusually short comment period, with an initial comment deadline of October 23, 2017, and reply comments due November 7, 2017. A number of entities requested an extension of time to 90 days for comments as well as an extension of time for FERC to consider comments. As of the issuance of this Alert, FERC had not ruled on these motions.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© McCarter & English, LLP | Attorney Advertising

Written by:

McCarter & English, LLP

McCarter & English, LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.