FERC Filings
Comments of EPSA on FERC's Staff Report and Technical Conference Regarding Reactive Power and Voltage Control
Compensation
As explained above, the central issues relating to compensation are the concerns about discrimination and the lack of comparability, especially outside of RTO areas. Failure to compensate all generators on the same terms and conditions is fundamentally inconsistent with established FERC policy, as well as the Commission’s effort to eliminate discriminatory behavior. EPSA agrees with the FERC staff’s conclusion that “[i]n some control areas generators owned by the transmission provider are paid for reactive power while other generators are not. Such discrimination is poor public policy and could be considered undue discrimination under the Federal Power Act. Comparability has been a bedrock principle of open access and competitive market development. The Commission’s general policy favoring comparability should apply in the reactive power context.”
Beyond these overarching policy concerns that we urge the Commission to address, EPSA believes that compensation should be provided to all generators as a cost-based capacity payment based upon the design and capability of the generation unit. Further, compensation should include fixed and variable costs, regardless of whether the generator is operating within its capability curve. Such compensation should include capacity payments and account for heat loss. In addition, when an IPP is directed to reduce its real power output in response to a transmission provider’s request for additional reactive power, the IPP’s compensation should include its opportunity cost.
EPSA favors the continued use of the AEP methodology, and cautions against shifting to any alternative mechanism that would further limit or encumber IPPs’ efforts to obtain full and fair compensation for the reactive and voltage support services they provide. An alternative to the AEP methodology, if any, must ensure adequate and comparable cost recovery for IPPs providing these services. EPSA urges the Commission to develop a template to clarify and make transparent recognized categories of fixed and variable costs associated with reactive power and voltage support services, and direct transmission providers to include it in LGIAs. Any such template should account for the fact that payment streams should recognize the value of reserves and send signals for the type of equipment in which generators should invest.