FERC Approves New Cold Weather Reliability Standards

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FERC approves new NERC Cold Weather Reliability Standards that seek to enhance the reliability of the grid in preparation for extreme winter weather events.

On August 24, 2021, the Federal Energy Regulatory Commission ("FERC") approved new cold weather electric reliability standards proposed by the North American Electric Reliability Corporation ("NERC"). The standards will apply to a wide range of industry participants including power generators (traditional and renewable), transmission operators, and other entities responsible for ensuring the overall reliability of the electric grid (balancing authorities and reliability coordinators). Unlike previously existing guidelines or recommendations, FERC and NERC can enforce these new standards through significant civil penalties authorized under the Federal Power Act.

The new standards will come into effect on April 1, 2023, but FERC strongly encouraged entities capable of complying to do so as soon as possible. The standards cover the entirety of the bulk power system throughout the continental United States, Canada, and the northern portion of Baja California, Mexico. This includes the Electric Reliability Council of Texas ("ERCOT") and all of Texas—because while the Public Utility Commission of Texas (not FERC) regulates ERCOT market transactions, FERC and NERC regulate the reliability of the bulk power system.

Multiple events over the last ten years have revealed how extreme cold weather impacts the reliability of the bulk power system. With these weather events, and the increasing regulatory focus on climate change and preparedness for future weather events, the new standards seek to address what FERC/NERC have determined are shortcomings in "winterization" measures implemented by generators and the availability of sufficiently accurate, detailed operational data.

Under the new standards, generators will be required to implement cold weather preparedness plans subject to annual inspections by reliability coordinators and balancing authorities. These include freeze protection methods, fuel considerations and operating temperatures. Grid authorities will be required to establish new databases that reflect generating units' operational limitations during forecasted cold weather conditions.

The new standards did not face significant industry pushback. For example, the Electric Power Supply Association, a leading trade association representing the generation sector, expressed its support for the new standards, stating that they strike an appropriate balance between requiring mandates while also allowing generators flexibility in preparing for weather events.

Because NERC's regulatory and enforcement authority focuses exclusively on the electric industry, these new enforceable reliability standards necessarily address only the bulk power system rather than natural gas production and supply issues. However, natural gas delivery reliability has also been impacted by extreme winter weather events, and FERC and NERC are expected to address their non-binding views on both electric and natural gas market vulnerabilities in their upcoming joint inquiry report on the power outages that occurred in Texas and surrounding states earlier this year.

Finally, these new reliability standards may not be the only changes flowing from cold weather events that affect grid performance, as FERC's order recounts NERC's statement that if the joint inquiry recommends even further modifications, NERC is "prepared to address those recommendations promptly through its standard development process."

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.

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