FERC Seeks to Rectify Imbalance in OATT with New Rule Giving Lift to Wind

To integrate wind and other intermittent resources energy more completely into wholesale power markets, FERC has proposed a new rule that would relax the imbalance penalties that generators pay under the pro forma open-access transmission tariff ("OATT").  The proposed new generator imbalance service schedule is intended to address the unique characteristics and constraints of intermittent resources such as wind, solar and run-of-river hydro facilities that rely on the weather, and therefore have a limited ability to predict or control their output.  Comments on the proposed imbalance rule are due to FERC by May 26, 2005.

When FERC first adopted the OATT, wind energy played a smaller role in power generation, and was not forecast to grow as it is today.  Instead, the OATT was designed around the characteristics of generators with controlled fuel input and more precise scheduling ability, and, among other objectives, was intended to help promote predictable scheduling by generators.  At present, most intermittent resources are held to the same exacting scheduling requirements as dispatchable generators, but the inability of intermittent resources to correlate their scheduled and actual output can cause them to pay high penalties, compromising their economics. 

FERC's proposal would establish for intermittent resources a safe-harbor bandwidth of plus or minus 10 percent.  Deviations within the bandwidth would be priced at the transmission provider's incremental/decremental cost at the time of the deviation.  Deviations outside the bandwidth would be priced at the transmission provider's system incremental/decremental cost plus or minus 10 percent.  The proposed rule would apply even more relaxed standards to intermittent generators of less than 20 MW in size.

For those transmission provider tariffs that already contain more lenient imbalance charge provisions, FERC proposes that the lesser charge continue to apply to intermittent resources.  The proposal adheres to the existing tariff standard of allowing modification of generation schedules up to 20 minutes before the hour to minimize exposure to the costs associated with imbalances. 

FERC is seeking comments on a wide range of issues related to the proposed rule and generator imbalances generally, including whether generator imbalance provisions in future interconnection agreements should conform to what is proposed in the rulemaking, and what effect the proposed rule would have on transmission system operations and reliability.  FERC also noted that system reliability should not be compromised by the proposal since the impact of the intermittent resources for most transmission systems will be relatively small in comparison to total generation and transmission on any system. 

The proposed rulemaking stems from the increased attention FERC has given to wind energy issues in the past year.  In December, the agency's technical staff issued a white paper on the status of wind energy in wholesale markets, followed by a technical conference and public comments in January.  FERC also proposed in January regulations addressing the interconnection of wind energy plants to the grid.  See UPDATE (1/31/05).  [Imbalance Provisions for Intermittent Resources Accessing the State of Wind Energy in Wholesale Electricity Markets, 111 FERC ¶ 61,026 (2005)] [UPDATE]