This month, FERC rejected a proposal by Puget Sound Energy, Inc. requiring all wind generation resources within Puget's balancing area to purchase Wind Following Service from Puget or otherwise procure such service. According to Puget, this service was designed to allow Puget to recover capacity costs associated with following and balancing intra-hour variations in output from wind generation. Puget argued that the service was necessary to meet reliability standards that require continuously balancing generation and load and maintaining sufficient reserves to keep the Puget system balanced. Puget stated that it currently has sufficient stored hydroelectric capacity to balance the variability of wind generation, but that it expects a capacity shortfall in the future.
The rate for the Wind Following Service would be calculated by multiplying the percentage of wind generator's installed capacity that must be backed up by the incremental monthly cost of reserving one kilowatt of quick-responding natural gas generation. Puget's proposed initial rate was $2.70 per kilowatt-month and would be recalculated annually.
FERC rejected Puget's proposal stating that Puget failed to show that its rate calculation would not result in an over-recovery of its costs. Puget also had not adequately demonstrated that its rate calculation was a reasonably accurate representation of the opportunity costs Puget incurs to provide a following service for wind generators. Finally, Puget also had not explained how self-scheduling for the service would work, such as the types and locations of resources that may be used.
FERC's rejection was without prejudice to Puget filing a revised proposal that addresses FERC's concerns. While it is unclear whether Puget will file a revised proposal, it is likely that many utilities are considering similar proposals in an attempt to allocate costs associated with the integration of renewable energy resources.