REPORT OF THE ELECTRICITY COMMITTEE

• Published in: Energy law journal Vol. 43; no. 1; pp. 1 - 18
• Format: Journal Article
• Language: English
• Published: Washington Foundation of the Energy Law Journal 01.01.2022
• Subjects: Ambient temperature; Cold; Cold weather; Component reliability; Contracts; Coordination; Costs; Critical components; Electrical loads; Electricity distribution; Extreme weather; Fuels; Gas pipelines; Heating load; Jurisdiction; Load shedding; Natural gas; Peak load; Planning; Retrofitting; Revisions; Severe weather; State legislatures; Subsidiaries; Supply chains; Weather forecasting; Winter; Winter storms; United States > US; Texas
• ISSN: 0270-9163

II.FERC Severe Cold Weather Event Preparation In November 2021, the FERC, the North American Electric Reliability Corporation (NERC), and Regional Entities (RE) issued a report on the severe cold weather event that occurred between February 8 and 20, 2021 that affected Texas and the South-Central region of the United States (hereinafter referred to as "Event").20 The report highlighted the need for stronger mandatory electric reliability standards, particularly with respect to generator cold weather-critical components and systems.21 The report recommended revisions to the NERC Reliability Standards surrounding generator winterization and gas-electric coordination.22 The Event had a significant impact on the reliability of the bulk electric system (BES).23 "The Electric Reliability Council of Texas (ERCOT) averaged 34,000 MW of generation unavailable (based on expected capacity) for over two consecutive days, equivalent to nearly half of its all-time winter peak electric load of 69,871 MW. "32 First, generating units unprepared for cold weather failed in large numbers.33 Second, the natural gas fuel supply struggled to meet both residential heating load and generating unit demand for natural gas.34 FERC noted that many natural gas-fired generating units rely on non-firm commodity and/or pipeline transportation contracts.35 Analysts with the Federal Reserve Bank of Dallas estimated that the outages caused direct and indirect losses to the Texas economy of between $80 to $130 billion.36 It also predicted continuing effects on the supply chain through the end of 2021.37 "On February 16, 2021, while the Event was still occurring, the Commission and NERC jointly announced a FERC-NERC-Regional Entity staff inquiry into the operations of the BES during the extreme winter weather conditions currently being experienced by the Midwest and South Central states in February 2021. "38 Staff from FERC, NERC and all six RE quickly formed a team (the Team) of over 50 subject matter experts and identified the scope of the inquiry to include: assessing what occurred during the Event, identifying commonalities with previous cold weather events and any lessons that should be incorporated in the development by NERC of cold weather Reliability Standards, and making recommendations to avoid similar events in the future.3 The purpose of the team formation was not to determine whether there may have been violations of applicable regulations, requirements, or standards subject to the Commission's jurisdiction, but to make findings and recommendations with the aim of preventing future events.40 As a result of the study, FERC suggested 28 recommendations and areas for additional study, including (a) changes to reliability standards to address winterization of generating plants, (b) providing generation owners an opportunity to be compensated for the costs of retrofitting their generating units to perform at specified ambient temperatures, and (c) that generation owners identify the reliability risks related to their natural gas fuel contracts so that they can provide the BAs with the percentage of total generating unit capacity that the BA can rely upon during the local forecasted cold weather. 41 In August of 2021, the Commission approved revisions to the NERC Reliability Standards to address cold weather, including a new requirement for generating units to have a cold weather preparedness plan.42 However, the effective date for these revisions is April 1, 2023.43 FERC also suggested that Generation Owners (GO) have the opportunity to be compensated for (a) the costs of retrofitting their generating units to perform at specified ambient temperatures or (ii) the costs of designing any new units to do so.44 FERC, NERC and the REs will host a joint technical conference to discuss how to improve the winter readiness of generating units before the recently approved Reliability Standards revisions become effective.45 In addition to revising the Reliability Standards, other recommendations include seasonal reserve margin calculations, effects of cold weather on mechanical fatigue, increasing the flexibility of manual load shedding, use of weather forecasts, and coordination of protective relay settings.46 The FERC recommendations are assigned to one of four timeframes: (1) before Winter 2021-2022; (2) before Winter 2022-2023; (3) before Winter 20232024; and (4) beyond Winter 2023-2024. Most recommendations fall within timeframes of Winter 2022-2024.47 Also, because of the interdependencies between the gas and electric sectors that came to light during the winter storm, as well as the vulnerabilities of natural gas infrastructure that were exposed, the FERC urged Congress, state legislatures, and regulatory agencies to require natural gas facilities to implement and maintain cold weather preparedness plans.48 III.International transmission Company v. FERC Three electric transmission company subsidiaries of International Transmission Company (ITC) petitioned for review in the United States Court of Appeals for the District of Columbia Circuit (DC Circuit) of a FERC order that reduced the companies' Transco return on equity incentive adder to 25 basis points.49 ITC argued that FERC (1) "arbitrarily and capriciously departed from precedent establishing a particular methodology to assess Transco independence"; and (2) "exceeded its statutory