FERC Filings
Comments of EPSA on FERC's Staff Report and Technical Conference Regarding Reactive Power and Voltage Control
Deficiencies Of The Existing Paradigm
The existing rules governing compensation for reactive power and voltage support services lead to outcomes that are fundamentally incompatible with FERC’s effort to promote comparable, nondiscriminatory treatment of all market participants. That the services involved are essential to system reliability further amplify the need for corrective action. EPSA applauds the Commission’s effort to engage all stakeholders in a comprehensive discussion about the regulatory policies pertaining to reactive power. An overview of the present circumstances reveals a patchwork of rules and requirements resulting in dissimilar, incomparable treatment of generators for providing essentially the same service.
Particularly, the major “divide” is between RTO/ISO footprints and non-RTO/ISO areas. FERC-approved tariff provisions in RTO/ISO areas, while themselves non-uniform, at least recognize the right of all generators to be compensated for reactive power and voltage support services. In non-RTO areas, however, IPPs are left to rely on the applicable provisions contained in Order No. 2003-B pertaining to Large Generator Interconnection Agreements (LGIA) . More problematic is the burden and uncertainty this approach imposes on IPPs, whose reactive compensation depends upon negotiating individual interconnection agreements with transmission providers who often occupy a superior bargaining position.
In this regard, the relevant provisions of Order No. 2003-B have unfortunately proven to be an unworkable and ineffective means of ensuring that IPPs are adequately compensated on a comparable basis with utility affiliate generators. As Kris Zadlow of Calpine, an IPP with extensive experience constructing and operating generation plants in numerous non-RTO states, explained during his panel presentation:
“the current compensation scheme does not pay IPPs for reactive supply and voltage control services…the current approach takes a long and drawn out process. Today, IPPs must file separate tariffs supporting testimony and rate support and work papers separately for each generator to get compensated…In practice what happens is the utility protests every single aspect of our tariffs, including whether or not we should get compensated at all. FERC should consider streamlining the process by clearly articulating a policy that non-affiliated generators should be compensated for reactive power in a manner that is comparable with their own utility affiliated generation.”
Moreover, Order No. 2003-B lacks sufficient criteria for determining if a transmission provider’s affiliate is being compensated within the prescribed 0.95 lagging to 0.95 leading power factor range which triggers compensation for all generators connected to that transmission provider. This lack of transparency makes it difficult to determine which units a system operator is relying on for reactive support. Beyond this, the limited focus on actual reactive power/MVAR production/absorption highlights a more fundamental flaw in that approach. The approach to compensation embodied in Order No. 2003-B ignores the fact that reactive power/voltage support involves the provision of a broader service. Recognizing this premise is essential to establishing a fair, adequate compensation scheme.
As Anjan Bose, the Dean of Engineering at Washington State University stated during his panel presentation, “if you are going to provide a service for which you need compensation, I think it is easier to look at voltage control as the service, rather than VARs, which is one step removed in a proximate way to the voltages.” Robert O’Connell of Williams Power Company, Inc., agreed, stating that “what we’re talking about is a service. And that service is to control voltage. And by issuing a voltage schedule, which is something that the transmission owners do for every connected generator, what they are sending to the merchant is an order for a variable amount of reactive power, depending on the voltage that is being controlled.”
The obligation IPPs assume pursuant to interconnection agreements, as well as the reliability standards of the North American Electric Reliability Council (NERC) and regional reliability councils, requires IPPs to maintain the supply capability necessary to provide voltage support and stability enhancement. It follows that this capability, and the related financial burden, exist regardless of whether the actual reactive power output at any given moment is inside or outside the capability curve. Harry Terhune of ATC addressed this fact, stating that “generators should be eligible for compensation for the reactive support required to maintain system voltages under a range of system conditions, both inside and outside the power factor range required in their interconnection agreements.”