FERC Holds its First Meeting in Nearly Two Years with a Full Slate of Commissioners.

At the December 21, 2017 FERC open meeting, the first with the agency’s new Chairman, Kevin McIntyre and a full slate of Commissioners, several major new orders and policy initiatives were announced that are important to the energy industry, including initiating a more RTO-specific approach to fast-start resource pricing policies, new reporting requirements for cyber security incidents and a preliminary announcement of FERC’s intent to review the current pipeline certificate procedures.

  1. Fast-Start Pricing in RTO Markets. FERC withdraws 2016 rulemaking. In late 2016, FERC initially set out to develop a uniform set of fast-start pricing practices in all RTO/ISO markets. Fast-start resources are committed in real-time, very close to the interval when needed, and can respond quickly to unforeseen system needs. According to FERC, without fast-start pricing, some fast-start resources are not eligible to set prices due to inflexible operating limits. With the 2016 Notice of Proposed Rulemaking (NOPR), FERC hoped to improve price formation practices to reflect the value of fast-start resources and thereby support efficient investment in fast-start resources. The 2016 NOPR proposed to require each RTO/ISO to establish a set of requirements for fast-start pricing applicable to resources that are able to start up within ten minutes, have a minimum run time of one hour or less and that submit economic energy offers to the market. FERC proposed that the requirements applicable to fast-start resources should, among other things, (1) incorporate commitment costs (start up and no-load costs) in the energy and operating reserve prices; (2) relax the economic minimum operating limit and treat them as dispatchable from zero to the economic maximum operating limit for pricing purposes; (3) be applicable in day-ahead and real time markets. After receiving extensive comments in response to the NOPR, FERC decided that a uniform set of fast-start pricing requirements is not the best way to pursue the NOPR’s goals. Instead, FERC determined that it was more appropriate to pursue the fast-start pricing goals through the initiation of Section 206 proceedings in NYISO, PJM and SPP. Fast Start Pricing in Markets Operated by RTOs and ISOs, 161 FERC ¶ 61,293 (2017).Issuance of Section 206 proceedings in NYISO, PJM and SPP to modify Fast-Start Pricing Tariff provisions. – FERC opened investigations into the pricing of fast-start resources in the three RTO regions to ensure that their pricing policies allow prices to accurately reflect the marginal cost of serving load. Specifically, the investigations will determine whether:
  • NYISO should (1) modify its pricing logic to reflect the start-up costs of fast-start resources in its pricing logic; and (2) relax all dispatchable fast-start resources’ economic operating limits by up to 100 percent for price setting purposes. New York ISO, 161 FERC ¶ 61,294 (2017);
  • PJM should, among other things: (1) relax fast-start resources economic minimum operating limits by up to 100 percent; (2) consider fast-start resources within dispatch in a way that minimizes production costs, subject to appropriate operational and reliability constraints; and (3) modify its pricing logic to allow fast-start resource commitment costs to be reflected in prices (PJM Interconnection L.L.C., 161 FERC ¶ 61,295 (2017)); and
  • SPP should, among other things: (1) modify its dispatch process to respect physical parameters of resources while minimizing production costs; (2) modify its pricing logic to reflect commitment costs of fast-start resources in prices; and (3) allow all quick-start resources, including block-loaded quick-start resources, to set price. Southwest Power Pool, Inc., 161 FERC ¶ 61,296 (2017).

Initial Briefs by the RTOs and interested parties are due to FERC in 45 days from the date the notices of the investigations are published in the Federal Register.

  1. Cyber Security Incident Reporting NOPR

FERC issued a notice of proposed rulemaking (NOPR) proposing to expand mandatory reporting of cyber security incidents. Under the current CIP Reliability Standard CIP-008-5 (Cyber Security – Incident Reporting and Response Planning), cyber security incidents must be reported only if they have compromised or disrupted one or more reliability tasks. Cyber Security Incident Reporting Reliability Standards, 161 FERC ¶61,291 (2017). According to FERC, the current reporting threshold does not include unsuccessful attempts to compromise or disrupt and may therefore understate the true scope of cyber-related threats facing the grid. FERC noted that in 2015 and 2016, there were no reported events under the current reporting threshold. However, FERC and NERC both expressed concerns that this does not necessarily suggest that the risk of a cyber attack is low. Rather, this may suggest a gap in the current mandatory reporting requirement.

FERC’s NOPR would direct NERC to submit modifications to the current Reliability Standard to broaden the requirement by requiring mandatory reporting of cyber security incidents that compromise, or attempt to compromise, a responsible entity’s Electronic Security Perimeter or associated Electronic Access Control or Monitoring Systems (EACMS). FERC’s NOPR would also require NERC to modify the CIP Reliability Standards to (1) specify the required information in cyber security incident reports to improve the quality of reporting and allow for ease of comparison by ensuring that each report includes specified fields of information; and (2) establish a deadline for filing a report once a compromise or disruption, or an attempted compromise or disruption, is identified by a responsible entity.

The effect of this new requirement on responsible entities should not be burdensome given that Reliability Standard CIP-007-6, R4.1, already requires responsible entities to log detected successful login attempts, detected failed access attempts and failed login attempts. The proposed new standard would apply to cyber security incidents that compromise or attempts to compromise a responsible entity’s Electronic Security Perimeter (ESP) or associated Electronic Access Control or Monitoring Systems (EACMS). It would not apply to non-operating systems such as email systems or other business/enterprise functions.

FERC proposed that the incident reports continue to go to the Electricity Information Sharing and Analysis Center (E-ISAC), but also would require that the reports be sent to the Industrial Control Systems Cyber Emergency Response Team (ICS-CERT) and that NERC file an annual, public and anonymized summary of the reports with FERC. Comments on the NOPR are due 60 days after publication in the Federal Register.

  1. Proposed Review of Natural Gas Pipeline Certificate Policies.

One of Chairman McIntyre’s first new policy initiatives will be to review FERC’s policies on certification of natural gas pipelines, Specifically, FERC will review its Policy Statement on Certification of New Interstate Natural Gas Pipeline Facilities, issued in 1999. According to McIntyre “[m]uch has changed in the energy world since 1999, and it is incumbent upon us to take another look at the way in which we assess the value and the viability of our pipeline applications.” The next steps in terms of specific format and scope of the review will be announced in the near future.