By Margaret Claybour, Jim Mitchell, and Glenn Benson

FERC, on October 17, 2013, adopted a new generic policy requiring all generators that provide jurisdictional reactive power service to have a rate schedule on file with FERC setting forth the rates, terms, and conditions under which reactive power is provided, regardless of whether the generator is compensated for the reactive power service

FERC announced the policy in an order on voluntary remand from the United States Court of Appeals for the District of Columbia Circuit regarding whether a generator’s proposed filing to supply reactive power services was an initial rate filing (which is not subject to its suspension and refund authority under Section 205(e) of the Federal Power Act) or a changed rate.  Chehalis Power Generating, L.P., 145 FERC ¶ 61,052 (2013).  Of note, FERC found in the proceeding below that Chehalis, the generator, had been providing reactive power service pursuant to an interconnection agreement, “ableit without a charge,” before it submitted its proposed reactive power rate schedule to be compensated for that service.  Therefore, Chehalis’ new rate filing was deemed to be a changed rate subject to the suspension and refund provisions of section 205(e) of the Federal Power Act rather than an initial rate schedule.  Although FERC styles its announcement as a clarification of its policy, it may take some generators by surprise that they must have on file at FERC a reactive power rate schedule for any jurisdictional reactive power service, including reactive power provided within the leading and lagging power factor design criteria required under an interconnection agreement, i.e., “within-the-deadband reactive power service,” even if the generator receives no compensation for provision of the service.

Importantly, the order at footnote 35, “clarifies that [FERC] does not intend to exercise its authority to impose enforcement sanctions for a jurisdictional entity’s failure, prior to this order, to have a rate schedule on file for the provision of reactive power service without compensation.”  FERC, however, goes on to remind jurisdictional entities “that they must submit filings on a timely basis in the future or face possible sanctions by the Commission.” 

The order also directs FERC staff to “conduct a workshop, in a generic proceeding, to explore the mechanics of public utilities filing reactive power rate schedules for which there is no compensation.”  Concurrent with the issuance of the order, FERC issued in Docket No. AD14-1 a notice announcing the intent to hold a workshop on Zero Rate Reactive Power Rate Schedules.  As of the posting of this blog entry, no date has been set for the workshop.