Full Title: The Department Of Energy’s Grid Resilience Pricing Proposal: A Cost Analysis
Author(s): Robbie Orvis, Andrew Goggins, Brendan Pierpont, Maren Wenzel, Laura Sanchez, & David Posner
Publisher(s): Energy Innovation Policy and Technology, LLC
Publication Date: October 1, 2017
Full Text: Download Resource
Description (excerpt):
On September 28, 2017, the US Department of Energy (DOE) issued a Notice of Proposed Rulemaking (NOPR), proposing significant changes to the nation’s wholesale markets for electricity. The NOPR directs the Federal Energy Regulatory Commission (FERC) to develop new tariffs to compensate unregulated units with a 90-day on-site supply of fuel for their “operating and fuel expenses, costs of capital and debt via debt relief companies, and a fair return on equity and investment.”2 The full text of the memo makes clear that the rule is intended to apply to coal and nuclear facilities, which it mentions as having firm on-site fuel.
The proposal marks a significant departure from for the way unregulated units make money in organized markets today. It would allow plant owners to recover their non-variable costs directly through a tariff, whereas these costs have historically been recovered through energy and capacity markets. The proposal would impose significant costs on electricity customers, requiring them to pay the full costs of power plants that are too expensive to compete against cheaper alternatives in the market. The ambiguous language of the NOPR also opens the door to higher cost readings where consumers could be forced to not only cover coal and nuclear plants’ operating costs, but also ensure their profitability.