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FERC Seeks Comments on Market Design Issues Affecting Nuclear Power Plants

The agency requests comments on policies regarding state support for zero-carbon-emitting power plants.

On May 23, the Federal Energy Regulatory Commission (FERC) issued a notice inviting comments on the interplay between state policy goals and organized wholesale electricity markets. The referenced state policy goals involve state support for zero-carbon-emitting power plants, including nuclear power plants, generally in the form of tax credits.

FERC is asking for comments to further explore information presented on this topic at a technical conference convened by FERC commissioners and staff on May 1 and 2, 2017. FERC seeks comments on the five potential paths for reconciling the two policies already identified by the FERC staff. It also seeks broader comments on any “conceptual level” changes that would need to be implemented, and whether the necessary changes could be implemented and in what time frame. Finally, the notice seeks input on the larger principles that should drive reconciliation of the two separate policy goals, including any necessary procedural requirements.

FERC’s recent actions are part of a larger policy discussion in which electricity market design issues remain controversial, a discussion that has been driven in part by increased state support for maintaining baseload generation, including nuclear, as the integration of renewables and other technologies continues. New York and Illinois, for example, have created tax incentives to support nuclear reactors in their states, but both programs are being challenged in court by other generators. Other states, including Connecticut, New Jersey, Pennsylvania, and Ohio, are reportedly considering similar support.

In addition, US Secretary of Energy Rick Perry in April ordered a study of the reliability of the electrical grid and wholesale electrical market designs’ impact on grid resilience and baseload power resources. Secretary Perry’s order asked the Department of Energy (DOE) to review “market-distorting effects of federal subsidies that boost one form of electricity at the expense of another,” and requested “concrete policy recommendations and solutions.” The results of this study are due by mid-June.

Finally, two Regional Transmission Organizations (RTOs)—ISO New England Inc. (ISO-NE) and PJM Interconnection L.L.C. (PJM)—are considering changes to their respective wholesale market designs to reconcile the same competing policies that FERC’s technical conference and notice are exploring. ISO-NE is considering a change to its capacity market rules that would allow state-subsidized generation to be directly substituted in the capacity auction to “buy out” retiring generators. PJM is considering capacity market rule changes that would allow state-subsidized generation to clear in its auctions while avoiding broader suppression of clearing prices generally. PJM is also considering changes to its energy markets to establish a carbon pricing framework that would permit states to advance carbon policy objectives without impacting other states.

Comments on FERC’s technical conference are due within 30 days, i.e., by June 22, 2017, with reply comments due within 45 days, i.e., by July 7, 2017. The FERC Docket No. is AD17-11.

Copyright © 2018 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

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Timothy P. Matthews, Morgan Lewis, energy and litigation attorney
Partner

With a background in the nuclear power industry, Timothy P. Matthews represents and counsels electric utilities, nuclear industry suppliers, and other licensees before the Nuclear Regulatory Commission (NRC), the Department of Labor (DOL), and other regulatory agencies, and in US federal courts. He counsels clients in investigations, discrimination allegations, and regulatory compliance matters. He also advises on matters related to new nuclear plant development, electric utility industry restructuring, and complex disputes including mediation, arbitration, and...

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Stephen Spina, Morgan Lewis, Energy attorney
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Stephen M. Spina represents electric utilities and other electric industry participants before the Federal Energy Regulatory Commission (FERC) in restructuring, market investigations, and Federal Power Act regulatory matters. He advises electric utilities on issues relating to market pricing, transmission, reliability standards compliance, rate matters, and participation in regional transmission organizations, including capacity and energy market issues. His representation also extends to audits and investigations before FERC’s Office of Enforcement, as well as enforcement and audit proceedings involving the North American Electric Reliability Corporation.

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Joseph Lowell, Energy and environmental attorney, Morgan Lewis
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Joseph W. Lowell counsels electric utility and natural gas clients on all areas of Federal Energy Regulatory Commission (FERC) regulation. Joseph’s practice focuses on FERC jurisdictional rates, Independent System Operator (ISO) and Regional Transmission Organization (RTO) rules and markets, transmission and interconnection services, investigations and audits, regulatory compliance and training, litigation and appeals, demand response, and acquisitions. While working as a junior economist for FERC’s Office of Energy Market Regulation, Joseph advised the FERC on electric...

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Grant Eskelsen, Morgan Lewis, Litigation lawyer
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Grant W. Eskelsen handles a broad range of matters for the nuclear industry. He routinely counsels clients on compliance with nuclear-export related matters, including 10 CFR Part 810 and 10 CFR Part 110. Grant holds a top-secret security clearance and supports investigations and litigation involving classified information. He also provides due diligence support for energy transactions and supports clients in claims against the government for its ongoing failure to accept spent fuel from utilities. Grant also assists clients in internal investigations and litigation...

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