FERC Finds that Generators Providing Reactive Power without Compensation Must Have Rate Schedule on File; Will not Exercise Enforcement Authority for Past Transgressions in Light of Current Policy Clarification

On October 17, 2013, the Federal Energy Regulatory Commission ("Commission") issued an order finding that all generators providing Reactive Supply and Voltage Control Service ("reactive power") must have a rate schedule on file with the Commission governing that service, even when the generator does not receive compensation for the service.  Traditionally, the Commission only has required generators to file a rate schedule addressing its provision of reactive power if it received compensation for providing the service.  Going forward, however, all generators providing reactive power will be required to have a rate schedule on file with the Commission governing the provision of reactive power, even if they provide this service at no charge. 

Noting that the provision of reactive power is a Commission-jurisdictional service, the Commission found that Section 205 of the Federal Power Act imposes an obligation on any public utility providing this service to have a rate schedule on file with the Commission, regardless of whether or not the utility receives compensation.  The Commission found that the generator at issue in the case, which had been providing reactive power to Bonneville Power Administration at no charge in accordance with its interconnection agreement, should have filed a rate schedule governing its provision of reactive power at the time that it first began providing this service.  Importantly, in recognition of the Commission's change in policy, the Commission stated that it does not intend to exercise its enforcement authority against any utilities that have been providing reactive power at no charge without a rate schedule on file with the Commission.  The Commission emphasized, however, that public utilities that provide this service going forward must have a rate schedule on file or face possible sanctions.  This issue may affect generators participating in bilateral markets to a greater degree than those in organized markets given that many organized markets have mechanisms for providing compensation for reactive power whereas whether compensation is provided varies from transmission owner to transmission owner in bilateral markets.

The Commission directed its staff to conduct a workshop to explore the mechanics of public utilities filing reactive power rate schedules for which there is no compensation and concurrently issued a notice establishing a proceeding to address these issues in Docket No. AD14-1-000, with the time and date of the workshop to be released at a later date.