Dive Brief:
- Federal regulators have rejected Southwest Power Pool's plan to institute a resource adequacy requirement, finding several issues that will first need to be addressed.
- As part of SPP’s transition to the Integrated Marketplace in 2014, the operator became the balancing authority for the entire SPP region. Ultimately, SPP says the goal is greater market functionality that will coordinate next-day generation across the region.
- According to the RTO, the proposed resource adequacy requirement would require a "load responsible entity" (LRE) to have sufficient firm capacity to both serve its peak load and maintain a predetermined planning reserve margin.
Dive Insight:
FERC regulators point out that SPP’s market for bilateral capacity is relatively net-long compared to its proposed 12% planning reserve margin — so at least in the near term, there should be plenty of sellers to meet demand and the planning margin.
But the commission expressed concern over some of SPP's proposal, including a proposal to post publicly which LREs have not met their resource adequacy requirement. That idea, the commission concluded, would be unreasonable and unduly discriminatory.
"SPP failed to provide justification for creating a new information asymmetry between deficient LREs and potential sellers of capacity," the commission wrote. "As proposed, we are concerned that such information asymmetry may disadvantage LREs that are deficient, particularly if there is a limited quantity of available capacity."
SPP has the results of a deliverability study, and some commenters on SPP's proposed plan had requested the operator be required to release them as a means of resolving the issue. But FERC rejected that idea, noting that "those results contain proprietary information of the generator owners and should remain confidential."
SPP says it wants to ensure that two different LREs cannot rely on the same unit of firm capacity to satisfy their respective resource adequacy requirements. Additionally, an LRE that contracts to deliver firm capacity to another entity may not use that firm capacity to satisfy its own resource adequacy requirement.
Under SPP's proposal, each LRE’s resource adequacy requirement is equal to its net peak demand plus the SPP planning reserve margin multiplied by the net peak demand. That equation will result in the total megawatt firm capacity that each LRE must hold.
FERC also said the proposal "lacks a requirement that power purchase agreements be backed by verifiable capacity in order to serve as capacity resources." And, the commission said SPP’s proposal also lacks a process that would allow SPP to verify whether the contracts would meet the resource adequacy requirement.
"As such, SPP’s proposal fails to ensure that LREs that rely on power purchase agreements are providing sufficient capacity to meet their net peak demand plus planning reserve margin on the same basis as LREs that self-supply their own capacity, and therefore could result in unjust, unreasonable and unduly discriminatory
determinations of deficiencies and assessments of deficiency payments," the commission concluded.
