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CRS INSIGHT
DOE's Grid Resiliency Pricing Rule
October 13, 2017 (IN10806)
Related Author
Richard J. Campbell, Specialist in Energy Policy (rcampbelU~c r bc gov, 7-7905)
In U.S. regions with mpetii ecrici marketthe market price of wh esal lec ri i has fallen in recent years
due to decreased demand, and the increased availability of relatively loW-priced natural g as a fuel. The relatively
higher cost of operating and maintaining older, less efficient coal and nuclear plants in particular make it difficult for
them to compete with lower cost, more efficient natural gas-fired power plants, or with renewable electricity generation
with lower operating costs (and in some cases, tax credits and state mandates). These mi and nuclearpower plants may
be increasingly faced with closure and eventual retirement if they cannot offer their generation at prices that allow them
to s e c into the competitive markets. Competitive electriit markets are administered by independent
system operators (ISOs) and regional transmission organizations (RTOs), and account for 600 f h ecrici supl
in the United States. These entities are under the regulatory authority of the Federal Energy Regulatory Commission
(FERC).
The Secretary of Energy's Proposed Rule
Some observers have expressed concerns that the trend of closures of coal and nuclear power plants will impact the f I
diversity and rliability of the electric power industry, while Qjh i diSpnie that there is a need for concern. The U.S.
Department of Energy (DOE) undertook an analy3ia examining electricity markets and reliability, finding that while
[m]arkets recognize and compensate reliability, and must evolve to continue to compensate reliability.., more work is
needed to address resilience. In this report, DOE describes a resilient system as one able to anicie br
to and/or rapidly reco rm ni dipi n Because of the fuel storage requirements of coal plants
and the length of the fuel cycle of nuclear power plants they were termed fuel-secure generation, which potentially
increase the resiliency of the grid. The Secretary of Energy appears to have concluded from the report that certain
reliability and resiliency attributes of fuel-secure generation were not being appropriately valued in competitive
electricity markets. The Secretary appears to see a trend of premature retirements of fuel-secure coal and nuclear power
plants as a situation which may impair the resiliency of the grid, a trend that could be reduced by rates which
compensate such fuel-secure generation for its resiliency attributes.
On October 10, 2017, the Energy Secretary proposed the Grid Resiliency Pricing Rule (82 Federal Register 46940),
based on DOE's authority under Section 403 of the Department of Energy Organization Act (P L 95-91; DOE Act). In
the Notice of Proposed Rulemaking (NOPR), the Energy Secretary directed FERC to use its authority under the L~ial
Power Act to establish just and reasonable rates for wholesale electricity sales. The DOE Secretary directed FERC to](ViewImageLocal?handle=hein.crs/crsmthmbcsm0001&div=1&collection=&method=preview&ext=.png&size=3)