FERC Sustains Prior Termination of Grid Reliability and Resilience Rulemaking Proceeding; Terminates Grid Resilience Inquiry Proceeding

Troutman Pepper

Troutman Pepper

[co-author: Alex Taylor]

On February 18, 2021, FERC issued two orders terminating the proceedings stemming from the Department of Energy’s (“DOE”) Proposed Rule on Grid Reliability and Resilience (“Proposed Rule”). FERC previously established rulemaking proceedings in Docket No. RM18-1-000 to consider the proposed rule, which was submitted to FERC by the DOE in September 2017 pursuant to the Department of Energy Organization Act section 403 (“DOE Proposed Rulemaking Proceeding”). FERC terminated the DOE Proposed Rulemaking Proceeding on January 8, 2018 (see January 17, 2018 issue of the WER), instead opening an inquiry proceeding in Docket No. AD18-7-000 (“Inquiry Proceeding”) to evaluate the resilience of the bulk power system in the regions operated by regional transmission organizations (“RTOs”) and independent system operators (“ISOs”). On February 18, 2021, FERC: 1) issued an order on rehearing that sustained its decision to terminate the DOE Proposed Rulemaking Proceeding in Docket No. RM18-1-000; and 2) terminated the Inquiry Proceeding in Docket No. AD18-7-000.  Commissioner Neil Chatterjee issued a dissenting opinion in the order terminating the Inquiry Proceeding.

FERC’s February 18, 2021 order sustaining its previous decision to terminate the DOE Proposed Rulemaking Proceeding addressed arguments raised on rehearing by the Foundation for Resilient Societies (“Resilient Societies”) and modified the discussion of the January 8, 2018 order. The Proposed Rule asked FERC to consider ordering RTOs/ISOs to establish provisions in their Tariffs that would adequately compensate the energy sold by an eligible “reliability and resilience resource” using a cost-of-service rate mechanism. Resilient Societies argued that FERC’s termination of the DOE Proposed Rulemaking Proceeding was “arbitrary and capricious and thus violated the Administrative Procedure Act, because the Commission failed to respond meaningfully to the arguments raised before it.” FERC maintained that it had explained its reasoning adequately for terminating the proceeding, because it had made “a very specific finding” in the January 8, 2018 order that the Proposed Rule failed to demonstrate that the existing RTO/ISO Tariffs were unjust and unreasonable, as required by the Federal Power Act section 206. Thus, FERC concluded that “it was not an abuse of discretion for the Commission to terminate that proceeding” and sustained the result of the January 8, 2018 order.

In the January 8, 2018 order, FERC also initiated the Inquiry Proceeding to develop a common understanding of what resilience of the bulk power system means and requires, how each RTO/ISO assesses resilience in its geographic footprint, and whether additional action was appropriate after terminating the DOE Proposed Rulemaking Proceeding. RTOs/ISOs had 60 days to submit information to FERC regarding FERC’s current understanding of the term resilience, how RTOs/ISOs assess threats to resilience, and how RTOS/ISOs mitigate threats to resilience.

FERC’s February 18, 2021 order terminating the Inquiry Proceeding concluded that, based on its review of the record compiled over the last three years, the resilience of the bulk power system would be best addressed “on a case-by-case and region-by-region basis.” Although FERC terminated the Inquiry Proceeding, FERC assured that “it is not the end of the Commission’s ongoing efforts to ensure the resilience and reliability of the bulk power system.”

In a separate dissenting opinion, Commissioner Chatterjee stated that he opposed the order terminating the Inquiry Proceeding. Commissioner Chatterjee pointed out that the severity of recent extreme cold weather events suggests that, “despite the lessons learned and actions taken in the past to improve winterization and gas-electric coordination, the bulk power system may not be able to withstand extreme cold weather events.” Commissioner Chatterjee reasoned that “terminating this resilience proceeding in the face of clear and continuing weather-related resilience concerns that affect multiple regions, is ill advised.” As a result, Commissioner Chatterjee suggested taking a “more comprehensive” and “holistic” approach—as opposed to the majority’s “piecemeal” and “region-by-region” approach—by adopting a definition of resilience and taking steps to understand how RTOs/ISOs assess the resilience of their regions.

FERC’s decision to sustain its prior termination of the DOE Proposed Rulemaking Proceeding in Docket No. RM18-1-000 can be found here.  FERC’s decision to terminate the Inquiry Proceeding in Docket No. AD18-7-000 can be found here.

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