FERC Filings
Request of EPSA for Clarification and Rehearing of Order No. 2003-A re: Standardization of Generator Interconnection Agreements and Procedures
Reactive Power
EPSA is also troubled by the changes made to Article 9.6.3 addressing "Payment for Reactive Power." There, in response to the concerns raised by Calpine, the Commission said that if the Transmission Provider pays its own or its affiliated generators for reactive power within the established power range, it must also pay the Interconnection Customer. EPSA supports that ruling since the concept of comparability clearly requires that if a Transmission Provider pays its own or affiliated generation for reactive power services provided within the established range, then it must pay independent generators providing the same service.
At the same time, the Commission said that its ruling on Calpine’s concerns “also addresses Duke Energy’s and Reliant’s concerns.” Duke Energy and Reliant were raising a much broader principle, i.e. that generators should be compensated for reactive power whether it is provided within or outside of the generator's capability curve, and that this compensation should be determined in the rate schedule filed by the Generator. Thus the Commission erred to the extent that it limited compensation to only those circumstances when the Transmission Provider pays its own affiliated generation for reactive services provided within the established range.
It is critical in this proceeding that the Commission clearly establish and enforce the right of Interconnection Customers to be compensated for reactive power, whether it is provided within or outside of the generator's capability curve and regardless of what sort of compensation arrangements exist between the Transmission Provider and its own or its affiliate’s generation. Clearly, generators are providing a service. In Detroit Edison, the Commission found that the provision of reactive power is an essential service absolutely necessary for the safe and reliable operation of the grid:
A generator is required to supply reactive power in order to operate the facility in a safe and reliable manner and in accordance with good utility practice. If, however, a transmission provider requests a generator to increase or decrease reactive power output, the generator must be compensated by the transmission provider. [The generator] is free to file ancillary service schedules to provide for compensation where such service is sought by the [transmission provider].
Indeed, the service provided by Generation Facilities is essentially the same that Transmission Providers provide and receive compensation as an ancillary service. If a generator delivers reactive power beyond the point of interconnection (or absorbs it at the point of interconnection), it is providing the very product that the Commission has defined as an ancillary service, Reactive Supply and Voltage Control from Generation Sources Service. Certainly there are costs involved in providing this service. At a minimum, Generation Facilities incur the capital cost of equipment necessary to provide reactive service, and also incur incremental variable costs and increased generation losses in the provision of reactive service. Additionally, the Generation Facility may occasionally be requested to provide reactive power outside its capability curve, as may be necessary during an emergency. In order to comply with such a request the Generation Facility must by necessity reduce its production and sale of active power, thereby incurring an opportunity cost for which it must also be compensated.
Thus, like the Transmission Provider, the Generation Facility should be compensated. Such compensation can be in the form of a market-based payment for each unit of reactive power supplied or absorbed at the request or direction of the control area, or in the form of a cost-based payment related to the capital cost of the equipment needed to provide reactive service, as is the current practice in the PJM ISO, the New York ISO and ISO New England. Such matters should be decided as part of an appropriate rate filing under Section 205 of the Federal Power Act. On rehearing, the Commission should so rule.