[Federal Register Volume 81, Number 36 (Wednesday, February 24, 2016)]
[Notices]
[Pages 9182-9192]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-03837]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. RM16-6-000]


Essential Reliability Services and the Evolving Bulk-Power 
System--Primary Frequency Response

AGENCY:  Federal Energy Regulatory Commission, Energy.

ACTION:  Notice of Inquiry.

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SUMMARY:  In this Notice of Inquiry, the Federal Energy Regulatory 
Commission (Commission) seeks comment on the need for reforms to its 
rules and regulations regarding the provision and compensation of 
primary frequency response.

DATES:  Comments are due April 25, 2016.

ADDRESSES:  You may submit comments, identified by docket number and in 
accordance with the requirements posted on the Commission's Web site, 
http://www.ferc.gov. Comments may be submitted by any of the following 
methods:
     Agency Web site: Documents created electronically using 
word processing software should be filed in native applications or 
print-to-PDF format and not in a scanned format, at http://www.ferc.gov/docs-filing/efiling.asp.
     Mail/Hand Delivery: Those unable to file electronically 
must mail or hand deliver comments to: Federal Energy Regulatory 
Commission, Secretary of the Commission, 888 First Street NE., 
Washington, DC 20426.
    Instructions: For detailed instructions on submitting comments and 
additional information on the rulemaking process, see the Comment 
Procedures Section of this document.

FOR FURTHER INFORMATION CONTACT:
Jomo Richardson (Technical Information), Office of Electric 
Reliability, Federal Energy Regulatory Commission, 888 First Street 
NE., Washington, DC 20426, (202) 502-6281, [email protected].
Mark Bennett (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street NE., Washington, 
DC 20426, (202) 502-8524, [email protected].

SUPPLEMENTARY INFORMATION: 
    1. In this Notice of Inquiry (NOI), the Commission seeks comment on 
the need for reforms to its rules and regulations regarding the 
provision and compensation of primary frequency response. In recent 
years, the nation's electric supply portfolio has transformed to a 
point where fewer resources may now be providing primary frequency 
response than when the Commission considered this issue in other 
relevant proceedings. As discussed below, in light of the changing 
resource mix and other factors, it is reasonable to expect this trend 
to continue. Considering the significance of primary frequency response 
to the reliable operation of the Bulk-Power System,\1\ the Commission 
seeks input on whether and what action is needed to address the 
provision and compensation of primary frequency response.
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    \1\ Section 215(a)(1) of the Federal Power Act (FPA), 16 U.S.C. 
824o(a)(1) (2012) defines ``Bulk-Power System'' as those 
``facilities and control systems necessary for operating an 
interconnected electric energy transmission network (or any portion 
thereof) [and] electric energy from generating facilities needed to 
maintain transmission system reliability.'' The term does not 
include facilities used in the local distribution of electric 
energy. See also Mandatory Reliability Standards for the Bulk-Power 
System, Order No. 693, FERC Stats. & Regs. ] 31,242, at P 76, order 
on reh'g, Order No. 693-A, 120 FERC ] 61,053 (2007).
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    2. Specifically, the Commission seeks comment on whether amendments 
to the pro forma Large Generator Interconnection Agreement (LGIA) and 
Small Generator Interconnection Agreement (SGIA) are warranted to 
require all new generation resources to have frequency response 
capabilities as a precondition of interconnection. The Commission also 
seeks comment on the performance of existing resources and whether 
primary frequency response requirements for these resources are 
warranted. Further, the Commission seeks comment on the requirement to 
provide and compensate for primary frequency response.

[[Page 9183]]

I. Background

A. Technical Overview: The Nature and Operation of Frequency Response

    3. Reliably operating an Interconnection \2\ requires maintaining 
balance between generation and load so that frequency remains within 
predetermined boundaries around a scheduled value (60 Hz in the United 
States). Interconnections occasionally experience system contingencies 
(e.g., the loss of a large generator) that disrupt the balance between 
generation and load. These contingencies result in frequency deviations 
that can potentially cause under frequency load shedding (UFLS), 
additional generation tripping, or cascading outages.\3\ Consequently, 
some generators within an Interconnection automatically deploy 
frequency control actions, including inertial response and primary 
frequency response, during disturbances to arrest and stabilize 
frequency deviations. The reliability of the Bulk-Power System depends 
in part on the operating characteristics of generating resources that 
balancing authorities \4\ commit to serve load. However, not all 
generating resources provide frequency support services, which are 
essential to maintaining the reliability and stability of the Bulk-
Power System.\5\
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    \2\ An Interconnection is a geographic area in which the 
operation of Bulk-Power System components is synchronized. In the 
continental United States, there are three Interconnections, namely 
the Eastern, Electric Reliability Council of Texas (ERCOT), and 
Western Interconnections.
    \3\ UFLS is designed for use in extreme conditions to stabilize 
the balance between generation and load. Under frequency protection 
schemes are drastic measures employed if system frequency falls 
below a specified value. Automatic Underfrequency Load Shedding and 
Load Shedding Plans Reliability Standards, Notice of Proposed 
Rulemaking, 137 FERC ] 61,067 (2011).
    \4\ The North American Electric Reliability Corporation's (NERC) 
Glossary of Terms defines a balancing authority as ``(t)he 
responsible entity that integrates resource plans ahead of time, 
maintains load-interchange-generation balance within a balancing 
authority area, and supports Interconnection frequency in real 
time.''
    \5\ As discussed below, NERC Reliability Standard BAL-003-1 has 
requirements related to frequency response, but it is applicable to 
balancing authorities and not individual generating resources.
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    4. Frequency response is a measure of an Interconnection's ability 
to arrest and stabilize frequency deviations within pre-determined 
limits following the sudden loss of generation or load. Frequency 
response is affected by the collective responses of generation and load 
resources throughout the entire Interconnection. Inertial response, 
primary frequency response, and secondary frequency response all 
contribute to stabilizing the Bulk-Power System by correcting frequency 
deviations.
    5. Inertial response, or system inertia, involves the release or 
absorption of kinetic energy by the rotating masses of online 
generation and load within an Interconnection, and is the result of the 
coupling between the rotating masses of synchronous generation and load 
and the electric system.\6\ An Interconnection's inertial response 
influences how fast frequency drops after the loss of generation and 
how fast it rises after a reduction of load. The less system inertia 
there is, the faster the rate of change of frequency \7\ during 
disturbances. An adequate amount of system inertia is important since 
following the sudden loss of generation, inertia serves to reduce the 
rate of change of frequency, allowing time for primary frequency 
response actions to arrest the frequency deviation and stabilize the 
power system.
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    \6\ See, e.g., Use of Frequency Response Metrics to Assess the 
Planning and Operating Requirements for Reliable Integration of 
Variable Renewable Generation, Ernest Orlando Lawrence Berkeley 
National Laboratory, at 13-14 (December 2010), available at: http://energy.lbl.gov/ea/certs/pdf/lbnl-4142e.pdf (LBNL Frequency Response 
Metrics Report).
    \7\ Rate of change of frequency is mainly a function of the 
magnitude of the loss of generation (or load) and system inertia and 
is measured in Hz/second.
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    6. Primary frequency response, net of changes in generation real 
power (MW) output and power consumed by load in response to a frequency 
deviation, is the first stage of overall frequency control, begins 
within seconds after the frequency changes, and is critical to the 
reliable operation of the Bulk-Power System.\8\ Primary frequency 
response is mostly provided by the automatic and autonomous actions 
(i.e., outside of system operator control) of turbine-governors, while 
some response is provided by frequency responsive loads due to changes 
in system frequency. Primary frequency response actions are intended to 
arrest the frequency deviation until it reaches the minimum frequency, 
or nadir.\9\ An important goal for system planners and operators is for 
the frequency nadir, during large disturbances, to remain above the 
first stage of firm UFLS set points within an Interconnection. The 
time-frame to arrest frequency deviations typically ranges from five to 
15 seconds, depending on the Interconnection.
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    \8\ See, e.g., LBNL Frequency Response Metrics Report at 15-16.
    \9\ The point at which the frequency decline is arrested 
(following the sudden loss of generation) is called the frequency 
nadir, and represents the point in which the net primary frequency 
response (MW) output from all generating units and the decrease in 
power consumed by the load within an Interconnection matches the net 
initial MW loss of generation.
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    7. Secondary frequency response involves changes to the MW output 
of resources on automatic generation control (e.g., regulation 
resources) that respond to dispatch instructions.\10\ Secondary 
frequency response actions usually begin after 30 seconds or more 
following a contingency, and can take 5 minutes or more to restore 
system frequency to its scheduled value.
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    \10\ See e.g., LBNL Frequency Response Metrics Report at 9-11.
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B. Evolving Generation Resource Mix

    8. The nation's generation resource mix is undergoing a 
transformation that includes the retirement of baseload, synchronous 
units, with large rotational inertia. The changing resource mix also 
includes the integration of more distributed generation, demand 
response, and natural gas resources, and the rapid expansion of 
variable energy resources (VERs) \11\ such as wind and solar.\12\ 
Several factors, such as existing and proposed federal and state 
environmental regulations, renewable portfolio standards, tax 
incentives, and low natural gas prices, have driven these developments.
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    \11\ For the purposes of this proceeding, the term Variable 
Energy Resource refers to a device for the production of electricity 
that is characterized by an energy source that: (1) Is renewable; 
(2) cannot be stored by the facility owner or operator; and (3) has 
variability that is beyond the control of the facility owner or 
operator. This includes, for example, wind, solar thermal and 
photovoltaic, and hydrokinetic generating facilities. See 
Integration of Variable Energy Resources, Order No. 764, FERC Stats. 
& Regs. ] 31,331 at n. 1 (2012), order on reh'g and clarification, 
Order No. 764-A, 141 FERC ] 61,232 (2012), order on clarification 
and reh'g, Order No. 764-B, 144 FERC ] 61,222 (2013).
    \12\ The Solar Energy Industries Association (SEIA) recently 
reported that more than 50 percent of newly installed electric 
generating capacity in the U.S. came from solar generation in the 
first quarter of 2015. See SEIA Solar Market Insight Report 2015 Q1 
(2015), http://www.seia.org/research-resources/solar-market-insight-report-2015-q1.
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    9. During 2015, natural gas-fired generation surpassed coal as the 
predominant fuel source for electric generation, and is now the leading 
fuel type for capacity additions.\13\ In addition, NERC recently 
determined that there has been almost 50 GW of baseload (e.g., coal, 
nuclear, petroleum, and natural gas) retirements since 2011.\14\
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    \13\ See NERC 2015 Long Term Reliability Assessment at 1 
(December 2015), http://www.nerc.com/pa/RAPA/ra/Reliability%20Assessments%20DL/2015LTRA%20-%20Final%20Report.pdf.
    \14\ See NERC 2015 Summer Reliability Assessment at 5 (May 
2015), http://www.nerc.com/pa/RAPA/ra/Reliability%20Assessments%20DL/2015_Summer_Reliability_Assessment.pdf
.
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    10. In addition, between 2014 and 2015, all three U.S. 
Interconnections have experienced growth in the installed nameplate 
capacity of wind and solar generation. For example, as illustrated by 
the figure below, NERC

[[Page 9184]]

has observed that the three Interconnections collectively added 
approximately 11.1 GW of wind and 1.73 GW of solar generation between 
2014 and 2015.\15\ More specifically, in 2015: (1) The Eastern 
Interconnection had 37.6 GW of wind and 1.6 GW of solar capacity, 
representing a growth rate of 12 percent and 116 percent over the 
respective 2014 levels of 33.5 GW and 0.73 GW;\16\ (2) ERCOT had 14.7 
GW of wind and 0.18 GW of solar, representing a growth rate of 29 
percent and 50 percent over the respective 2014 levels of 11.4 GW and 
0.12 GW;\17\ and (3) Western Interconnection had 24.8 GW of wind and 
8.4 GW of solar, representing a growth rate of 17 percent and 11 
percent over the respective 2014 levels of 21.1 GW and 7.6 GW.\18\
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    \15\ NERC 2015 Summer Reliability Assessment, Table 3 at page 7.
    \16\ Id.
    \17\ Id.
    \18\ Id.
    [GRAPHIC] [TIFF OMITTED] TN24FE16.030
    
    11. The changing generation resource mix has the potential to 
reduce the inertial response within some Interconnections, as VERs do 
not contribute to inertia unless they are specifically designed to do 
so. For example, solar photovoltaic resources have no rotating mass and 
thus no rotational inertia. Similarly, while wind turbines have a 
rotating mass, power converters that interconnect modern wind turbines 
decouple the rotation of their turbines from the grid. As such, modern 
wind turbines do not contribute to the system's inertia unless 
specifically configured to do so.\19\ Therefore, increased numbers of 
VERs, in conjunction with significant retirements of large conventional 
resources with large rotational inertia, have the potential to reduce 
system inertia.
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    \19\ See, e.g., General Electric WindINERTIA Control Fact Sheet 
(2009), http://site.ge-energy.com/prod_serv/products/renewable_energy/en/downloads/GEA17210.pdf.
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    12. In addition, VERs do not provide primary frequency response 
unless specifically configured to do so. Furthermore, since VERs 
typically have low marginal costs of production, they would likely not 
be dispatched in a manner necessary to provide primary frequency 
response, since the provision of primary frequency response involves 
the reservation of capacity (or ``headroom'') in order for a resource 
to automatically increase its MW output in response to drops in system 
frequency. Therefore, there is a significant risk that, as conventional 
synchronous resources retire or are displaced by increased numbers of 
VERs that do not typically have primary frequency response 
capabilities, the net amount of frequency responsive generation online 
will be reduced.\20\
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    \20\ Non-synchronous generators such as VERs (e.g., wind and 
solar resources) produce electricity that is not synchronized to the 
electric grid (i.e., direct current (DC) power or alternating 
current (AC) power at a frequency other than 60 hertz). Inverters 
convert non-synchronized AC or DC power into synchronized AC power 
that can be transmitted on the transmission system. These resources 
do not operate in the same way as conventional generators and 
respond differently to network disturbances.
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    13. The combined impacts of lower system inertia and lower 
frequency responsive capability online may adversely affect reliability 
during disturbances because lower system inertia results in more rapid 
frequency deviations during disturbances. This, in turn, may result in 
lower frequency nadirs, particularly if the primary frequency 
capability online is not sufficiently fast. This is a potential 
reliability concern because, as the frequency nadir lowers, it 
approaches the Interconnection's UFLS trip setting, which could result 
in the loss of load and additional generation across the 
Interconnection.
    14. These developments and their potential impacts could challenge 
system operators in maintaining reliability. The Commission believes 
that a substantial body of evidence has emerged warranting 
consideration of possible actions to ensure that resources capable of 
providing primary frequency

[[Page 9185]]

response are adequately maintained as the nation's resource mix 
continues to evolve.
    15. In 2014, NERC initiated the Essential Reliability Services Task 
Force (Task Force) to analyze and better understand the impacts of the 
changing resource mix and develop technical assessments of essential 
reliability services.\21\ The Task Force focused on three essential 
reliability services: frequency support, ramping capability, and 
voltage support.\22\
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    \21\ Essential reliability services are referred to as elemental 
reliability building blocks from resources (generation and load) 
that are necessary to maintain the reliability of the Bulk-Power 
System. See Essential Reliability Services Task Force Scope Document 
at 1 (April 2014), http://www.nerc.com/comm/Other/essntlrlbltysrvcstskfrcDL/Scope_ERSTF_Final.pdf.
    \22\ Essential Reliability Services Task Force Measures Report 
at 22 (December 2015), http://www.nerc.com/comm/Other/essntlrlbltysrvcstskfrcDL/ERSTF%20Framework%20Report%20-%20Final.pdf.
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    16. The Task Force considered the seven ancillary services \23\ 
adopted by the Commission in Order Nos. 888 \24\ and 890 \25\ as a 
subset of the essential reliability services that may need to be 
augmented by additional services as the Bulk-Power System 
characteristics change. However, the Task Force did not intend to 
recommend new reliability standards or propose actions to alter the 
existing suite of ancillary services.\26\ Instead, its focus was on 
educating and informing industry and other stakeholders about essential 
reliability services, developing measures and industry best practices 
for tracking essential reliability services, and developing 
recommendations to ensure that essential reliability services continue 
to be provided as the nation's generation resource mix evolves.\27\
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    \23\ The seven ancillary services are: (1) Scheduling, System 
Control and Dispatch Service; (2) Reactive Supply and Voltage 
Control from Generation Sources Service; (3) Regulation and 
Frequency Response Service; (4) Energy Imbalance Service; (5) 
Operating Reserve--Spinning Reserve Service; (6) Operating Reserve--
Supplemental Reserve Service; and (7) Generator Imbalance Service.
    \24\ Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities; Recovery 
of Stranded Costs by Public Utilities and Transmitting Utilities, 
Order No. 888, FERC Stats. & Regs. ] 31,036 (1996), order on reh'g, 
Order No. 888-A, FERC Stats. & Regs. ] 31,048, order on reh'g, Order 
No. 888-B, 81 FERC ] 61,248 (1997), order on reh'g, Order No. 888-C, 
82 FERC ] 61,046 (1998), aff'd in relevant part sub nom. 
Transmission Access Policy Study Group v. FERC, 225 F.3d 667 (D.C. 
Cir. 2000), aff'd sub nom. New York v. FERC, 535 U.S. 1 (2002).
    \25\ Preventing Undue Discrimination and Preference in 
Transmission Service, Order No. 890, FERC Stats. & Regs. ] 31,241, 
order on reh'g, Order No. 890-A, FERC Stats. & Regs. ] 31,261 
(2007), order on reh'g, Order No. 890-B, 123 FERC ] 61,299 (2008), 
order on reh'g, Order No. 890-C, 126 FERC ] 61,228, order on 
clarification, Order No. 890-D, 129 FERC ] 61,126 (2009).
    \26\ NERC Essential Reliability Services Task Force Scope 
Document at 2.
    \27\ Id.
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    17. The reliability of the Bulk-Power System will be increasingly 
dependent upon the operational characteristics of natural gas and 
renewable generating units, as these types of resources are expected to 
comprise an increasing percentage of the future generation resource 
mix. The Task Force stated that ``the reliability of the electric grid 
depends on the operating characteristics of the replacement 
resources.'' \28\ NERC observed that ``wind, solar, and other variable 
energy resources that are an increasingly greater share of the Bulk-
Power System provide a significantly lower level of essential 
reliability services than conventional generation.'' \29\ The Task 
Force concluded that it is prudent and necessary to ensure that primary 
frequency capabilities are present in the future generation resource 
mix, and recommends that all new generators support the capability to 
manage frequency.\30\
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    \28\ Essential Reliability Services Task Force Measures Report 
at iv.
    \29\ See NERC State of Reliability 2015 Report at 16 (May 2015), 
http://www.nerc.com/pa/RAPA/PA/Performance%20Analysis%20DL/2015%20State%20of%20Reliability.pdf.
    \30\ Essential Reliability Services Task Force Measures Report 
at vi.
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    18. Contributing to the concerns associated with the nature and 
operational characteristics of the evolving resource mix is the 
uncertainty whether a resource configured to provide primary frequency 
response is willing and able to offer such a service when called upon 
to do so. While almost all existing synchronous resources and some non-
synchronous resources have governors or equivalent control equipment 
capable of providing primary frequency response, generator owners and 
operators can independently decide whether units provide primary 
frequency response.\31\
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    \31\ A governor is an electronic or mechanical device that 
implements primary frequency response on a generator via a droop 
parameter. Droop refers to the variation in MW output due to 
variations in system frequency. A governor also has a dead band 
which establishes a minimum frequency deviation (from nominal) that 
must be exceeded in order for the governor to act. Example droop and 
dead band settings are 5 percent and 0.036 Hz, 
respectively.
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    19. For example, at present, it is possible for a generator owner/
operator to block or disable the governor or to set a wide dead band 
setting. A wide dead band setting can result in a unit not providing 
primary frequency response for most frequency deviations. As discussed 
more fully below, in February 2015, NERC issued an Industry Advisory 
which determined that a significant portion of generators within the 
Eastern Interconnection utilize dead bands or governor control settings 
that either inhibit or prevent the provision of primary frequency 
response.\32\ In response to this issue and other concerns, NERC's 
Operating Committee recently approved a Primary Frequency Control 
Guideline that contains recommended settings for generator governors 
and other plant control systems, and encourages generators within the 
three U.S. Interconnections to provide sustained and effective primary 
frequency response.\33\
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    \32\ NERC Generator Governor Frequency Response Industry 
Advisory (February 2015), http://www.nerc.com/pa/rrm/bpsa/Alerts%20DL/2015%20Alerts/NERC%20Alert%20A-2015-02-05-01%20Generator%20Governor%20Frequency%20Response.pdf.
    \33\ See NERC Primary Frequency Control Guideline Final Draft 
(December 2015), http://www.nerc.com/comm/OC/Reliability%20Guideline%20DL/Primary_Frequency_Control_final.pdf. 
See also NERC Operating Committee Meeting Minutes (January 2016), 
http://www.nerc.com/comm/OC/AgendasHighlightsMinutes/Operating%20Committee%20Minutes%20-%20Dec%2015-16%202015-Final.pdf.
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    20. NERC's State of Reliability Report for 2015 explained that the 
three U.S. Interconnections currently exhibit stable frequency response 
performance above their Interconnection Frequency Response 
Obligations.\34\ However, NERC has pointed out a historic decline in 
frequency response performance in both the Western and Eastern 
Interconnections.\35\ NERC identified several key reasons for the 
decline, mainly tied to the primary frequency response performance of 
generators.\36\
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    \34\ NERC State of Reliability Report 2015 at 9 (May 2015). See 
http://www.nerc.com/pa/RAPA/PA/Performance%20Analysis%20DL/2015%20State%20of%20Reliability.pdf. Reliability Standard BAL-003-1 
establishes Interconnection Frequency Response Obligations that are 
designed to require sufficient frequency response for each 
Interconnection to arrest frequency declines even for severe, but 
possible, contingencies.
    \35\ See NERC Frequency Response Initiative Industry Advisory--
Generator Governor Frequency Response at slide 10 (April 2015), 
http://www.nerc.com/pa/rrm/Webinars%20DL/Generator_Governor_Frequency_Response_Webinar_April_2015.pdf. See 
also Review of the Recent Frequency Performance of the Eastern, 
Western and ERCOT Interconnections, Ernest Orlando Lawrence Berkeley 
National Laboratory, at pp xiv-xv (December 2010), http://energy.lbl.gov/ea/certs/pdf/lbnl-4144e.pdf.
    \36\ See NERC Frequency Response Initiative Report: The 
Reliability Role of Frequency Response (October 2012), http://www.nerc.com/docs/pc/FRI_Report_10-30-12_Master_w-appendices.pdf 
(Frequency Response Initiative Report).
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C. Prior Commission and Industry Actions

    21. In this proceeding, the Commission seeks comment on the need

[[Page 9186]]

for reforms to its rules and regulations regarding the provision of 
primary frequency response. This section offers an overview of 
Commission and industry action to date related to frequency response to 
provide the context for the consideration of what, if any, actions the 
Commission should take to ensure that adequate frequency response is 
available to maintain grid reliability.
    22. In April 1996, the Commission issued Order No. 888, to address 
undue discrimination in transmission service by requiring all public 
utilities to provide open access transmission service consistent with 
the terms of a pro forma Open Access Transmission Tariff (OATT).\37\ 
The pro forma OATT sets forth the terms of transmission service 
including, among other things, the provision of ancillary services. 
Additionally, the Commission adopted six ancillary services stating 
they are ``needed to accomplish transmission service while maintaining 
reliability within and among control areas affected by the transmission 
service.'' \38\ The ancillary service involved in this proceeding is 
Regulation and Frequency Response Service, found in Schedule 3 of the 
pro forma OATT.
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    \37\ Order No. 888, FERC Stats. & Regs. ] 31,036.
    \38\ Id. at 31,705.
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    23. In July 2003, the Commission issued Order No. 2003, which 
revised the pro forma OATT to include a pro forma LGIA, which applies 
to interconnection requests of large generators (i.e., generators 
larger than 20 MW).\39\ While the pro forma LGIA adopted standard 
procedures and a standard agreement for the interconnection of large 
generating facilities, it was ``designed around the needs of large 
synchronous generators.'' \40\ The Commission also added a blank 
Appendix G (Requirements of Generators Relying on Newer Technologies) 
to the LGIA to serve as a means by which to apply interconnection 
requirements specific for generators relying on newer technologies, 
such as wind generators.\41\
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    \39\ Standardization of Generator Interconnection Agreements and 
Procedures, Order No. 2003, FERC Stats. & Regs. ] 31,146, app. 6 
(LGIP), app. C (LGIA) (2003), order on reh'g, Order No. 2003-A, FERC 
Stats. & Regs. ] 31,160, order on reh'g, Order No. 2003-B, FERC 
Stats. & Regs. ] 31,171 (2004), order on reh'g, Order No. 2003-C, 
FERC Stats. & Regs. ] 31,190 (2005), aff'd sub nom. Nat'l Ass'n of 
Regulatory Util. Comm'rs v. FERC, 475 F.3d 1277 (D.C. Cir. 2007), 
cert. denied, 552 U.S. 1230 (2008).
    \40\ Order No. 2003-A, FERC Stats. & Regs. ] 31,160 at P 407 & 
n.85.
    \41\ Id.
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    24. In May 2005, the Commission issued Order No. 2006, which 
required all public utilities to adopt standard terms and conditions 
for new interconnecting small generators (i.e., those no larger than 20 
MW) under a pro forma SGIA.\42\
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    \42\ Standardization of Small Generator Interconnection 
Agreements and Procedures, Order No. 2006, FERC Stats. & Regs. ] 
31,180, order on reh'g, Order No. 2006-A, FERC Stats. & Regs. ] 
31,196 (2005), order granting clarification, Order No. 2006-B, FERC 
Stats. & Regs. ] 31,221 (2006).
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    25. The Commission recently issued a notice of proposed rulemaking 
to revise the pro forma LGIA and SGIA to eliminate the exemption for 
wind generators and other non-synchronous generators regarding reactive 
power requirements.\43\ The proposed rule proposes to require all newly 
interconnecting generators, both synchronous and non-synchronous, to 
provide reactive power.
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    \43\ Reactive Power Requirements for Non-Synchronous Generation, 
153 FERC ] 61,175 (2015).
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    26. Although the Commission has previously included technical 
requirements for generators in the LGIA and Large Generator 
Interconnection Procedures (LGIP),\44\ both the pro forma LGIA and SGIA 
are silent with respect to primary frequency response requirements.
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    \44\ For example, in Order Nos. 661 and 661-A, the Commission 
adopted standard procedures and technical requirements related to 
low voltage ride thru and power factor design criteria for the 
interconnection of large wind plants, and required all public 
utilities that own, control, or operate facilities for transmitting 
electric energy in interstate commerce to append Appendix G to their 
LGIPs and LGIAs in their OATTs to include these requirements. 
Interconnection for Wind Energy, Order No. 661, FERC Stats. & Regs. 
] 31,186, order on reh'g, Order No. 661-A, FERC Stats. & Regs. ] 
31,198 (2005).
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    27. In a final rule issued on January 16, 2014, the Commission 
approved Reliability Standard BAL-003-1, which establishes frequency 
response requirements for balancing authorities.\45\ Reliability 
Standard BAL-003-1 established Interconnection Frequency Response 
Obligations that prescribe the minimum frequency response that must be 
maintained by an Interconnection. The purpose of the Interconnection 
Frequency Response Obligation is to maintain the minimum frequency 
(nadir) above UFLS set points following the largest contingency of the 
Interconnection as defined by the resource contingency criteria in BAL-
003-1. Each balancing authority is assigned a Frequency Response 
Obligation \46\ that is a proportionate share of the Interconnection 
Frequency Response Obligation, and is based on its annual generation 
and load.\47\ Requirement R1 of BAL-003-1 requires each balancing 
authority to achieve an annual Frequency Response Measure that equals 
or exceeds its Frequency Response Obligation. The Frequency Response 
Measure is the median value of a balancing authority's frequency 
response performance during selected events over the course of a 
year.\48\ Requirement R1 of BAL-003-1 becomes effective on April 1, 
2016, and compliance begins on December 1, 2016.
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    \45\ Frequency Response and Frequency Bias Setting Reliability 
Standard, Order No. 794, 146 FERC ] 61,024 (2014). Reliability 
Standards proposed by NERC are submitted to the Commission for 
approval pursuant to section 215(d) of the FPA; 16 U.S.C. 824o(d).
    \46\ NERC's Glossary of Terms defines Frequency Response 
Obligation as ``[t]he balancing authority's share of the required 
Frequency Response needed for the reliable operation of an 
Interconnection.''
    \47\ The Interconnection Frequency Response Obligation and 
Frequency Response Obligation are expressed in MW per 0.1 Hertz (MW/
0.1 Hz).
    \48\ Attachment A of BAL-003-1. NERC will identify between 20 to 
35 events annually in each Interconnection for calculating the 
Frequency Response Measure. See also Procedure for ERO Support of 
Frequency Response and Frequency Bias Setting Standard, (November 
30, 2012), http://www.nerc.com/pa/Stand/Project%20200712%20Frequency%20Response%20DL/Procedure_Clean_20121130.pdf.
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    28. Although Reliability Standard BAL-003-1 requires sufficient 
frequency response from balancing authorities, on average, to maintain 
Interconnection frequency, it does not require generators to provide 
primary frequency response. In the rulemaking in which the Commission 
approved Reliability Standard BAL-003-1, some commenters expressed 
concern that the standard does not address the availability of 
generator resources to provide primary frequency response or the 
premature withdrawal \49\ of primary frequency response. In Order No. 
794, the Commission directed NERC to submit a report by July 2018 
analyzing the availability of resources for each balancing authority 
and Frequency Response Sharing Group \50\ to meet their Frequency 
Response Obligation.\51\ Furthermore, the Commission stated that, if 
NERC learns that balancing authorities are experiencing difficulty in 
procuring sufficient resources to satisfy their Frequency Response 
Obligations,

[[Page 9187]]

NERC should immediately report it to the Commission with appropriate 
recommendations for mitigation.\52\
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    \49\ NERC has stated that ``[w]ithdrawal of primary frequency 
response is an undesirable characteristic associated most often with 
digital turbine-generator control systems using setpoint output 
targets for generator output. These are typically outer-loop control 
systems that defeat the primary frequency response of the governors 
after a short time to return the unit to operating at a requested MW 
output.'' See Order No. 794, 146 FERC ] 61,024 at P 65 (citing 
NERC's Frequency Response Initiative Report).
    \50\ NERC's Glossary of Terms defines a Frequency Response 
Sharing Group as a ``group whose members consist of two or more 
Balancing Authorities that collectively maintain, allocate, and 
supply operating resources required to jointly meet the sum of the 
Frequency Response Obligations of its members.''
    \51\ Order No. 794, 146 FERC ] 61,024 at P 60.
    \52\ Id. P 63.
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    29. Additionally, in Order No. 794, the Commission stated that the 
nature and extent of the problems that could result from the premature 
withdrawal of primary frequency response, and how best to address them, 
will be better understood after NERC and balancing authorities have 
more experience with Reliability Standard BAL-003-1.\53\ The Commission 
also stated that the need to take action regarding the premature 
withdrawal of primary frequency response, including requiring load 
controllers to include a frequency bias term to sustain frequency 
response or otherwise modifying Reliability Standard BAL-003-1, should 
be decided after we have actual experience with the Reliability 
Standard.\54\
---------------------------------------------------------------------------

    \53\ Id. P 75.
    \54\ Id. P 76.
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    30. In light of the ongoing evolution of the nation's generation 
resource mix, and other factors, such as NERC's Generator Governor 
Industry Advisory released in February 2015, the Commission believes 
that it is prudent to take a proactive approach to better understand 
the issues related to primary frequency response performance and 
determine what additional actions beyond Reliability Standard BAL-003-1 
may be appropriate. Thus, the Commission is proceeding with a Notice of 
Inquiry at this time rather than waiting until NERC submits a report in 
2018.
    31. In the absence of national primary frequency response 
requirements applicable to individual generating resources, some areas, 
including ERCOT, ISO New England Inc. (ISO-NE), and PJM 
Interconnection, L.L.C. (PJM), have implemented regional requirements 
for individual generating resources within their regions in order to 
maintain reliability.
    32. For example, the Commission accepted Texas Reliability Entity 
Inc.'s Regional Reliability Standard BAL-001-TRE-01 (Primary Frequency 
Response in the ERCOT Region) as mandatory and enforceable, which 
places requirements on generator owners and operators with respect to 
the provision of primary frequency response within the ERCOT 
region.\55\ In particular, BAL-001-TRE-01 requires generator owners to 
operate each generating unit/generating facility that is connected to 
the interconnected transmission system with the governor in service and 
responsive to frequency when the generating unit/generating facility is 
online and released for dispatch, and to promptly notify the balancing 
authority of any change in governor status.\56\ Additionally, BAL-001-
TRE-01 requires generator owners to set specified governor dead band 
and droop parameters.\57\ Moreover, BAL-001-TRE-01 requires generator 
owners to provide minimum initial and sustained primary frequency 
response performance.\58\ NERC recently noted that ERCOT experienced a 
significant improvement in its frequency response performance as 
generators within its region adjusted their governor settings for 
compliance with BAL-001-TRE-01.\59\
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    \55\ North American Electric Reliability Corporation, 146 FERC ] 
61,025 (2014). The requirements of BAL-001-TRE-01 help to ensure 
that generation and load remain balanced--or are quickly restored to 
balance--in the ERCOT Interconnection so that system frequency is 
restored to stability and near normal frequency even after a 
significant event occurs on the system. In Order No. 693, the 
Commission approved a regional difference for the ERCOT 
Interconnection from Reliability Standard BAL-001-0, allowing ERCOT 
to be exempt from Requirement R2, and found that ERCOT's approach to 
frequency response under its own market protocols appeared to be 
more stringent than Requirement R2. Order No. 693, FERC Stats. & 
Regs. ] 31,242 at PP 313-315.
    \56\ Reliability Standard BAL-001-TRE-01, at Requirements R7 and 
R8.
    \57\ Reliability Standard BAL-001-TRE-01, at Requirement R6.
    \58\ Reliability Standard BAL-001-TRE-01, at Requirements R9 and 
R10.
    \59\ NERC 2014 Frequency Response Annual Analysis Report at 6 
(February 2015), http://www.nerc.com/FilingsOrders/us/NERC%20Filings%20to%20FERC%20DL/Final_Info_Filing_Freq_Resp_Annual_Report_03202015.pdf. See also 
Table 3 at 6.
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    33. ISO-NE requires each generator within its region with a 
capability of ten MW or more, including renewable resources, to operate 
with a functioning governor with specified dead band and droop 
settings, and to also ensure that the provision of primary frequency 
response is not inhibited by the effects of outer-loop controls.\60\
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    \60\ Section I of ISO-NE's Operating Procedure No. 14--Technical 
Requirements for Generators, Demand Resources, Asset Related Demands 
and Alternative Technology Regulation Resources, http://www.iso-ne.com/rules_proceds/operating/isone/op14/op14_rto_final.pdf.
---------------------------------------------------------------------------

    34. PJM has pro forma interconnection agreements that obligate 
interconnection customers within its region to abide by all PJM rules 
and procedures pertaining to generation and transmission, including 
rules and procedures set forth in the PJM Manuals.\61\ PJM requires 
large, conventional generators to operate on unrestricted governor 
control to assist in maintaining Interconnection frequency, and 
recently established specified governor dead band and droop 
requirements for all generating resources (excluding nuclear units) 
with a gross plant/facility aggregate nameplate rating greater than 75 
MVA.\62\ In addition, PJM recently added new interconnection 
requirements for interconnection customers entering its queue after May 
2015 and seeking to interconnect non-synchronous generators, including 
wind generators, to use ``enhanced inverters'' with the capability to, 
among other things, provide primary frequency response.\63\ PJM stated 
that the installed capacity of VERs in its region is expected to 
increase to approximately 15 GW by the 2016-17 delivery year, and that 
it has an additional 25 GW of VERs in its interconnection queue.\64\ 
PJM expressed a need for VERs to install the capability to 
automatically reduce or increase their real power output in order to 
respond to a variety of system conditions, including high or low 
frequencies. PJM also stated that this capability will provide 
flexibility in responding to transmission system events using all 
available resources which, according to PJM, will be increasingly 
important as VERs displace synchronous generators that have these 
capabilities.\65\
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    \61\ PJM Tariff, Attachment O Sec.  8.0.
    \62\ PJM Manual 14D.
    \63\ PJM Interconnection, L.L.C., 151 FERC ] 61,097, at n.58 
(2015).
    \64\ PJM Interconnection, L.L.C., Transmittal Letter, Docket No. 
ER15-1193-000, at 2 (filed Mar. 6, 2015).
    \65\ Id. at 11.
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D. Compensation for Primary Frequency Response Service

    35. This section offers an overview of Commission and industry 
action to date related to compensation for primary frequency response. 
At present, there are few, if any, entities receiving compensation for 
selling primary frequency response as a stand-alone product, and there 
are no current rates applicable to sales of primary frequency response 
alone. However, several options for transactions involving primary 
frequency response have been developed. Transmission providers may sell 
primary frequency response service in combination with regulation 
service under the bundled pro forma OATT Schedule 3 product, Regulation 
and Frequency Response Service.\66\

[[Page 9188]]

Schedule 3 in the pro forma OATT in Order Nos. 888 \67\ and 890 \68\ 
permits jurisdictional transmission providers to outline their rates 
for this regulation and frequency response service through a filing 
under FPA section 205. Schedule 3 charges are cost-based rates paid by 
transmission customers to the transmission provider. Additionally, 
Order No. 784 made it possible for third-party sellers to offer 
Schedule 3 service to the transmission provider at a rate up to the 
published Schedule 3 rate, or at rates that result from an appropriate 
competitive solicitation.\69\ Such third-party sales could involve any 
combination of regulation and primary frequency response services, 
including unbundled primary frequency response service by itself.
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    \66\ Regulation service is different than primary frequency 
response because regulation resources respond to automatic 
generation control signals, which responds to Area Control Error. 
Regulation is centrally coordinated by the balancing authority. 
Primary frequency response, in contrast, is autonomous and is not 
centrally coordinated. Schedule 3 lumps these different services 
together, despite their differences. The Commission in Order No. 888 
found that ``while the services provided by Regulation Service and 
Frequency Response Service are different, they are complementary 
services that are made available using the same equipment. For this 
reason, we believe that Frequency Response Service and Regulation 
Service should not be offered separately, but should be offered as 
part of one service.'' Order No. 888, FERC Stats. & Regs. ] 31,036, 
at PP 212-213 (1996).
    \67\ Order No. 888, FERC Stats. & Regs. ] 31,036.
    \68\ Order No. 890, FERC Stats. & Regs. ] 31,241.
    \69\ Third-Party Provision of Ancillary Services; Accounting and 
Financial Reporting for New Electric Storage Technologies, Order No. 
784, FERC Stats. & Regs. ] 31,349, at PP 6-7 (2013), order on 
clarification, Order No. 784-A, 146 FERC ] 61,114 (2014).
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    36. Finally, in Order No. 819, the Commission revised its 
regulations to foster competition in the sale of primary frequency 
response service.\70\ In the final rule, the Commission approved the 
sale of primary frequency response service at market-based rates by 
entities that qualify for market-based rate authority for sales of 
energy and capacity to any willing buyer. Order No. 819 focused on how 
jurisdictional entities can qualify for market-based rates for primary 
frequency response service in the context of voluntary bilateral sales, 
and did not place any limits on the types of transactions available to 
procure primary frequency response service; they may be cost-based or 
market-based, bundled with other services or unbundled, and inside or 
outside of organized markets.\71\ Order No. 819 did not require any 
entity to purchase primary frequency response from third parties or 
develop an organized market for primary frequency response.\72\
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    \70\ Third-Party Provision of Primary Frequency Response 
Service, Order No. 819, 153 FERC ] 61,220 (2015).
    \71\ Id. P 13.
    \72\ Id. P 37. The Commission denied Calpine Corporation's 
request for Regional Transmission Organizations (RTOs) and 
Independent System Operators (ISOs) to be given a deadline to 
develop tariff changes that would enable them to implement primary 
frequency response compensation mechanisms.
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II. Request for Comments

    37. The Commission seeks comment on the need for reforms to its 
rules and regulations regarding the provision and compensation of 
primary frequency response. Specifically, the Commission seeks comment 
on possible actions to ensure that the provision of primary frequency 
response continues to remain at levels adequate to maintain the 
reliability of the Bulk-Power System in light of the ongoing 
transformation of the nation's generation resource mix. The Commission 
understands that this transformation in the nation's generation 
portfolio could eventually result in a reduction of system inertia and 
fewer generation resources with primary frequency response 
capabilities. In addition, as discussed above, NERC has indicated that 
a significant number of generators within the Eastern Interconnection 
utilize dead bands or governor control settings that either inhibit or 
prevent the provision of primary frequency response. Together, these 
factors could result in potential downward shifts of the frequency 
nadir during disturbances, closer to UFLS set points that would trigger 
significant widespread outages.
    38. Presently, there are no pro forma agreements for primary 
frequency response transactions. Voluntary sales of primary frequency 
response, would most likely involve negotiated, bilateral contracts 
between buyers and sellers. In this regard, considering their 
compliance obligations under Reliability Standard BAL-003-1, balancing 
authorities will be the most likely source of demand for voluntary 
purchases of primary frequency response service from third-party 
sellers, including those who have not provided the service in the past. 
Accordingly, as discussed further below, the Commission seeks comment 
on whether and to what extent balancing authority demand for voluntary 
purchases of frequency response would be reduced if all or all newly 
interconnecting resources were required to provide frequency response 
service. Further, we also seek comment on the impact this would have on 
the Commission's efforts under Order No. 819 to foster the development 
of a bilateral market for market-based rate sales of primary frequency 
response service as a means of cost-effectively meeting such demand.
    39. Within RTO/ISO markets, no current stand-alone primary 
frequency response product exists. Any RTO/ISO that desires to 
explicitly procure and compensate primary frequency response would need 
new tariff provisions because no RTO/ISO currently defines or procures 
such a product. As discussed below, the Commission seeks comment on the 
need for and the nature of frequency response compensation within the 
context of current RTO/ISO market optimization processes.
    40. Accordingly, the Commission seeks comment on the following 
possible actions, discussed in more detail below: (1) Modifications to 
the pro forma LGIA and SGIA mandating primary frequency response 
requirements for new resources, among other changes; (2) new primary 
frequency response requirements for existing resources; and (3) the 
requirement to provide and compensate for primary frequency response.

A. Modifications to the pro forma LGIA and SGIA

    41. Reliability Standard BAL-003-1 and the pro forma LGIA and SGIA 
do not specifically address generators' provision of primary frequency 
response. Article 9.6.2.1 of the pro forma LGIA (Governors and 
Regulators) requires that if speed governors are installed, they should 
be operated in automatic mode.\73\ Reliability Standard BAL-003-1 and 
the pro forma LGIA and SGIA do not explicitly: (1) Require generators 
to install the necessary capability to provide primary frequency 
response; (2) prescribe specific governor settings that would support 
the provision of primary frequency response; \74\ or (3) establish 
generator primary frequency response performance requirements during 
disturbances (e.g., require the response to be sustained, and not 
prematurely withdrawn prior to the initiation of secondary frequency 
response actions to return system frequency back to its nominal value 
and back within a generator's dead band setting).\75\
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    \73\ Order No. 2003, FERC Stats. & Regs. ] 31,146, app. C 
(LGIA).
    \74\ Generator governors can be enabled or disabled which 
determines whether or not primary frequency response is provided at 
all by the generator. In addition, even if a governor is enabled, 
its control settings can limit the conditions under which the 
generator provides primary frequency response.
    \75\ Primary frequency response would not be expected to be 
provided if no capacity (or ``headroom'') is reserved on a unit.
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    42. The Commission's pro forma generator interconnection agreements 
and procedures were developed at a time when traditional generating 
resources with standard governor controls and large rotational inertia 
were the predominant sources of electricity generation. However, 
circumstances are evolving, with NERC and others predicting significant

[[Page 9189]]

retirements of conventional synchronous resources, all of which 
contribute to system inertia, and some of which provide primary 
frequency response. In addition, VERs are projected to comprise an 
increasing portion of the installed capacity in many regions of the 
country, but they do not typically provide inertial response or primary 
frequency response unless specifically configured to do so.
    43. Regarding VERs, the Commission understands that in previous 
years, many non-synchronous resources were not consistently designed 
with primary frequency response capabilities. However, NERC and others 
have stated that VER manufacturers have made significant advancements 
in recent years to develop the necessary controls that would enable 
VERs to provide frequency response.\76\ NERC recommends that the 
industry analyze how wind and solar photovoltaic resources can 
contribute to frequency response and to work toward interconnection 
requirements that ensure system operators will continue to maintain 
essential reliability services.\77\ Also relevant are PJM's recent 
additions of new interconnection requirements for VERs entering its 
queue after May 2015.\78\ PJM has stated that the necessary 
capabilities for non-synchronous resources to provide primary frequency 
response, among other services, are now ``baked in'' as enhancements to 
inverter capabilities.\79\
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    \76\ NERC Long Term Reliability Assessment at 27 (November 
2014), http://www.nerc.com/pa/RAPA/ra/Reliability%20Assessments%20DL/2014LTRA_ERATTA.pdf.
    \77\ Id.
    \78\ PJM Interconnection, L.L.C., 151 FERC ] 61,097, at n.58 
(2015).
    \79\ PJM Interconnection, L.L.C., Docket No. ER15-1193-000 
(March 6, 2015) Transmittal Letter at 11.
---------------------------------------------------------------------------

    44. In light of the ongoing changes in the nation's resource mix as 
well as NERC's concerns regarding the primary frequency response 
performance of existing resources, the Commission seeks comment on 
whether and how to modify the pro forma LGIA and SGIA to require 
primary frequency response capability and performance of new generating 
resources.
    45. To that end, the Commission seeks comment on the following 
questions:
    1. Should the pro forma LGIA and SGIA be revised to include 
requirements for all newly interconnecting generating resources, 
including non-synchronous resources, to:
    1.1. Install the capability necessary to provide primary frequency 
response?
    1.2. Ensure that prime mover governors (or equivalent frequency 
control devices) are enabled and set pursuant to NERC's Primary 
Frequency Control Guideline (i.e., droop characteristics not to exceed 
5 percent, and dead band settings not to exceed 0.036 Hz)?
    1.3. Ensure that the MW response provided (when there is available 
headroom) in response to frequency deviations above or below the 
governor's dead band from 60 Hz is:
    1.3.1. Sustained until system frequency returns to within the 
governor's dead band setting?
    1.3.2. Provided without undue delay and responds in accordance with 
a specified droop parameter?
    2. What are the costs associated with making a newly 
interconnecting generation resource capable of providing primary 
frequency response? Specifically, what are the pieces of equipment or 
software needed to provide primary frequency response, and what are the 
costs associated with those pieces of equipment or software? Are there 
significant differences between synchronous and non-synchronous 
resources in providing primary frequency response, (e.g., the type of 
equipment necessary)?
    3. Regarding question (1) above, are the governor control settings 
recommended by NERC's Primary Frequency Control Guideline the 
appropriate settings to include in the pro forma LGIA and SGIA? Why or 
why not?
    4. Regarding new resources, including non-synchronous resources, 
are there physical, technical, or operational limitations/concerns to 
promptly providing sustained primary frequency response in the 
direction necessary to counteract under-frequency and over-frequency 
deviations? How should new requirements account for such limitations?
    5. Are metrics or monitoring useful to evaluate whether new 
resources:
    5.1. Operate with governors (or equivalent frequency control 
devices) enabled?
    5.2. Set governor control settings as described in question (1) 
above?
    5.3. Provide sustained MW response (when the unit has available 
headroom and system frequency deviates outside of the dead band) that 
is in the direction necessary to correct the frequency deviation and 
responsive in accordance with a specified droop parameter?
    6. How would transmission providers verify that new resources 
provide adequate primary frequency response performance?
    6.1. What information is necessary in order to facilitate 
performance verification?
    6.2. What changes, if any, to existing infrastructure (including, 
but not limited to telemetry and software tools) would be required in 
order to verify primary frequency response performance?
    6.3. What limitations based on resource type, if any, should be 
considered when evaluating primary frequency response performance?
    7. How would transmission providers ensure compliance with the new 
rules?
    7.1. Are penalties appropriate to ensure that new generating 
resources adhere to the new requirements described in question (1) 
above, and if so, how should such penalties be structured and 
implemented?
    7.2. Are penalties appropriate only if a resource receives 
compensation for adhering to the new requirements described in question 
(1) above?

B. New Primary Frequency Response Requirements for Existing Resources

    46. The Commission seeks comment on how it might address the issue 
of primary frequency response performance in existing generators. As 
discussed above, the Commission is considering amendments to the pro 
forma LGIA and SGIA that would apply prospectively and only to new 
generating resources and not the existing generating fleet. However, 
the Commission notes that NERC has also expressed concerns related to 
the primary frequency response performance of the existing generating 
fleet.
    47. For example, in 2010, NERC conducted a governor response survey 
to gain insight into governor settings from several turbine governors 
across the three U.S. Interconnections.\80\ Analysis revealed a wide 
disparity in the reported governor control settings. For example, NERC 
found that several generator owners or operators reported dead bands 
between 0.05 Hz and 0.3 Hz, which are wider than those prescribed by 
ERCOT'S BAL-001-TRE-01 Regional Standard or recommended by NERC's 2015 
Generator Governor Frequency Response Industry Advisory \81\ and 
Primary Frequency Control Guideline.\82\
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    \80\ Frequency Response Initiative Report at 87.
    \81\ NERC Generator Governor Frequency Response Industry 
Advisory.
    \82\ NERC Primary Frequency Control Guideline Final Draft.
---------------------------------------------------------------------------

    48. In February 2015, NERC issued an Industry Advisory, which 
expressed its determination that a significant portion of generators 
within the Eastern Interconnection utilize governor dead bands or other 
control settings that

[[Page 9190]]

either inhibit or prevent the provision of primary frequency 
response.\83\
---------------------------------------------------------------------------

    \83\ NERC Generator Governor Frequency Response Industry 
Advisory.
---------------------------------------------------------------------------

    49. Furthermore, some generating units have controls that withdraw 
primary frequency response prior to the initiation of secondary 
frequency controls, which is a significant concern in the Eastern 
Interconnection and a somewhat smaller issue in the Western 
Interconnection. These controls are known as outer-loop controls to 
distinguish them from more direct, lower-level control of the generator 
operations. Primary frequency response withdrawal occurs when outer-
loop controls deliberately act to nullify a generator's governor 
response and return the unit to operate at a pre-disturbance scheduled 
MW output. This is especially problematic when it occurs prior to the 
activation of secondary response, and has the potential to degrade the 
overall response of the Interconnection and result in a frequency that 
declines below the original nadir. NERC has observed that early 
withdrawal of primary frequency response continues to occur within the 
Eastern Interconnection.\84\
---------------------------------------------------------------------------

    \84\ NERC 2015 Frequency Response Annual Analysis Report at vi 
(September 2015), http://www.nerc.com/comm/OC/RS%20Landing%20Page%20DL/Related%20Files/2015_FRAA_Report_Final.pdf.
---------------------------------------------------------------------------

    50. Furthermore, NERC's Resources Subcommittee has determined that 
the majority of gas turbines operate in some type of MW Set Point 
control mode.\85\ According to the NERC Resources Subcommittee, the 
Eastern Interconnection Initiative has uncovered that in order for gas 
turbines to respond in MW Set Point control mode, an additional 
frequency algorithm has to be installed.\86\ Moreover, NERC's Resources 
Subcommittee stated that ``the net result is that the gas turbine fleet 
that has been installed in the past 20+ years is not frequency 
responsive, [which] has to be corrected.'' \87\ NERC has also observed 
that in many conventional steam plants, dead band settings exceed the 
maximum 0.036 Hz dead band, and the resulting response is 
squelched and not sustained.\88\
---------------------------------------------------------------------------

    \85\ See News from SERC's NERC Resources Subcommittee Rep--
Primary Frequency Response at 1 (May 2015), https://www.serc1.org/
docs/default-source/outreach/communications/resource-documents/serc-
transmission-reference/201505_-st/primary-frequency-
response.pdf?sfvrsn=2. MW set-point control mode automatically 
interrupts governor response in order for a generating unit to 
maintain a pre-disturbance dispatch.
    \86\ Id.
    \87\ Id.
    \88\ See NERC Generator Governor Frequency Response Advisory--
Webinar Questions and Answers at 1 (April 2015), http://www.nerc.com/pa/rrm/Webinars%20DL/Generator_Governor_Frequency_Response_Webinar_QandA_April_2015.pdf.
---------------------------------------------------------------------------

    51. As noted above, in December 2015, NERC's Operating Committee 
approved a Primary Frequency Control Guideline that contains 
recommended settings for generator governors and other plant control 
systems, and encourages generators within the three U.S. 
Interconnections to provide sustained and effective primary frequency 
response during major grid events in order to stabilize and maintain 
system frequency within allowable limits.\89\ However, the Commission 
notes that NERC's Primary Frequency Control Guideline is not mandatory 
and enforceable and does not alter any approved Reliability Standards.
---------------------------------------------------------------------------

    \89\ NERC Primary Frequency Control Guideline Final Draft.
---------------------------------------------------------------------------

    52. In light of the above discussion, the Commission seeks to 
further explore issues regarding the provision of primary frequency 
response by the existing generation fleet and seeks comment on the 
following questions:
    1. Should the Commission implement primary frequency response 
requirements for existing resources, as discussed above for new 
generators? If so, what is an appropriate means of doing so (e.g., 
changes to transmission provider tariffs or improvements to existing 
reliability standards)? How would transmission providers ensure that 
existing resources adhere to new primary frequency response 
requirements?
    2. As noted above, some existing generating units set dead bands 
wider than those recommended by NERC's Primary Frequency Control 
Guideline, and some units have control settings set in a manner that 
results in the premature withdrawal of primary frequency response. 
Should the Commission prohibit these practices? If so, by what means?
    3. What are the costs of retrofitting existing units, including 
non-synchronous resources, and with specific reference to such factors 
as equipment types and MW capacity, to be capable of providing 
sustained primary frequency response?
    4. Regarding existing units, are there physical, technical, or 
operational limitations or concerns to promptly providing sustained 
primary frequency response in the direction necessary to counteract 
under-frequency and over-frequency deviations?

C. Requirement to Provide and Compensate for Primary Frequency Response 
Service

    53. Without the explicit requirement to provide primary frequency 
response or appropriate compensation for the provision of such service, 
resource owners may choose to disable or otherwise reduce the provision 
of primary frequency response from their existing resources or not 
install the equipment on their new resources.\90\
---------------------------------------------------------------------------

    \90\ IEEE, Interconnected Power System Response to Generation 
Governing: Present Practice and Outstanding Concerns (May 2007) 
(citing Cost of Providing Ancillary Services from Power Plants--
Volume 1: A Primer, EPRI TR-1 07270-V1, 4161, Final Report, March 
1997), http://resourcecenter.ieee-pes.org/pes/product/technical-reports/PESTR13.
---------------------------------------------------------------------------

    54. The Commission seeks information on whether there is a need to 
establish or modify procurement and compensation mechanisms for primary 
frequency response, and whether these mechanisms will ensure that the 
resulting rates are just and reasonable. The Commission invites 
commenters to share their overall views, including the operational, 
technical and commercial impacts that may result from mandates to 
provide primary frequency response. To that end, the Commission seeks 
comment on the following questions:
    1. Should all resources be required to provide minimum levels of: 
(1) Primary frequency response capability; and (2) primary frequency 
response performance in real-time?
    1.1. ``Capability'' involves having a turbine governor or 
equivalent equipment that has the ability to sense changes in system 
frequency, and is enabled and set with appropriate governor settings 
(e.g., droop and dead band), and assuming capacity (or ``headroom'') 
has been set aside, the physical ability to ramp the resource quickly 
enough in order to provide useful levels of primary frequency response 
to help arrest the frequency deviation.
    1.2. ``Performance'' would involve putting the ``capability'' into 
actual service: i.e., actually operating the resource with governors or 
equivalent equipment enabled, ensuring that governor controls (e.g., 
droop and dead band) and other settings are properly set and 
coordinated, such that when capacity (or ``headroom'') has been set 
aside, the unit promptly provides sustained primary frequency response 
during frequency excursions, until system frequency returns to within 
the governor's dead band setting.
    2. Is it necessary for every generating resource to install the 
capability necessary to provide primary frequency

[[Page 9191]]

response? Or is it more appropriate for balancing authorities to 
identify and procure the amount of primary frequency response service 
that they need to meet their obligations under Reliability Standard 
BAL-003-1 and the optimum mix of resources to meet that need?
    2.1. To the extent that balancing authorities are responsible for 
procuring adequate primary frequency response service, does the current 
framework for blackstart provide a useful guide for how primary 
frequency response service could be procured?
    2.2. Does the Commission's recent rulemaking allowing third-party 
sales of frequency response services at market based rates allow 
balancing authorities to procure sufficient amounts of primary 
frequency response as required by BAL-003-1?
    2.3. To the extent that balancing authorities centrally optimize 
primary frequency response, wherein an algorithm optimizes in the 
operating horizon the set of resources in which to allocate primary 
frequency response headroom: Should all newly interconnecting resources 
be required to install the necessary capability in these areas? Can 
balancing authorities predict far ahead of the operating horizon the 
least-cost set of resources from which it will optimize the provision 
of primary frequency response?
    2.4. Would the costs of requiring all resources to have the 
capability to provide primary frequency response be significantly 
greater than the costs that would result from an Interconnection-wide 
or balancing authority-wide optimization of which generators should be 
capable of providing primary frequency response?
    2.5. Would the costs of requiring all new resources to enable and 
set their governors, or equivalent equipment, to be able to provide 
primary frequency response in real-time be significantly greater than 
the costs that would result from an Interconnection-wide or balancing 
authority-wide optimization of which generators should provide primary 
frequency response in real-time?
    2.6. Please discuss the viability of implementing an 
Interconnection-wide optimization mechanism.
    2.7. Would requiring every resource to be capable of providing 
primary frequency response result in over-procurement or inefficient 
investment in primary frequency response capability to the detriment of 
customers?
    2.8. Without rules to compel performance, how would balancing 
authorities ensure that the optimal set of resources chosen by an 
optimization algorithm actually enable governor controls with 
appropriate governor settings so that they provide sustained primary 
frequency response when capacity (or ``headroom'') has been reserved 
and frequency deviates outside of their dead band settings?
    3. If generation resources were required to have minimum levels of 
primary frequency response capability or performance, should such 
resources be compensated for providing primary frequency response 
capability, performance, or both? If so, why? If not, why?
    3.1. If payment is based on capacity (or ``headroom'') that is set 
aside for primary frequency response, how should such a capacity 
payment be structured and determined?
    3.2. If payment is based on actual performance, either alone or in 
combination with a capacity-based payment, please discuss possible rate 
structures applicable to primary frequency response performance.
    3.3. Will a market price provide resources with sufficient 
incentive to invest in primary frequency response capability and make 
the service available to the balancing authority in real-time, absent a 
requirement that resources maintain the capability to provide primary 
frequency response and perform as required?
    4. Currently, how do RTOs/ISOs ensure that they have the 
appropriate amount of primary frequency response capability during 
operations?
    4.1. Are resources contracted for primary frequency response 
outside of the market optimization and dispatch?
    4.2. Alternatively, does the market optimization and dispatch 
incorporate primary frequency response in its optimization?
    5. Would it be appropriate for RTOs/ISOs to create a product for 
primary frequency response service?
    5.1. Should this product be similar to a capacity product for the 
procurement of primary frequency response capability from resources?
    5.2. Should this product be similar to other ancillary service 
products in which certain resources would be selected in the day-ahead 
or real-time markets to provide primary frequency response?
    5.3. Are there benefits to co-optimizing the capacity (or 
``headroom'') allocated on generating units for primary frequency 
response with the market optimization and dispatch of RTOs/ISOs? If so, 
what are the challenges associated with doing so?
    6. Are there benefits to separating Frequency Response Service 
under Schedule 3 and creating a separate ancillary service covering 
each individually? If so, how should a new pro forma Primary Frequency 
Response Ancillary Service be structured?
    7. When compensating for primary frequency response, should 
compensation be different inside and outside of RTOs/ISOs?
    8. What procurement requirements or compensation mechanisms could 
be used for primary frequency response from stored energy resources? 
When considering requirements or compensation for stored energy 
resources, how should possible additional costs or other concerns be 
addressed?

III. Comment Procedures

    55. The Commission invites interested persons to submit comments, 
and other information on the matters, issues and specific questions 
identified in this notice. Comments are due April 25, 2016. Comments 
must refer to Docket No. RM16-6-000, and must include the commenter's 
name, the organization they represent, if applicable, and their address 
in their comments.
    56. The Commission encourages comments to be filed electronically 
via the eFiling link on the Commission's Web site at http://www.ferc.gov. The Commission accepts most standard word processing 
formats. Documents created electronically using word processing 
software should be filed in native applications or print-to-PDF format 
and not in a scanned format. Commenters filing electronically do not 
need to make a paper filing.
    57. Commenters that are not able to file comments electronically 
must send an original of their comments to: Federal Energy Regulatory 
Commission, Secretary of the Commission, 888 First Street NE., 
Washington, DC 20426.
    58. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commenters on this proposal are 
not required to serve copies of their comments on other commenters.

IV. Document Availability

    59. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
Internet through FERC's Home Page (http://www.ferc.gov) and in FERC's 
Public Reference Room during normal business hours (8:30 a.m. to 5:00 
p.m. Eastern

[[Page 9192]]

time) at 888 First Street NE., Room 2A, Washington, DC 20426.
    60. From FERC's Home Page on the Internet, this information is 
available on eLibrary. The full text of this document is available on 
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or 
downloading. To access this document in eLibrary, type the docket 
number excluding the last three digits of this document in the docket 
number field.
    61. User assistance is available for eLibrary and the FERC's Web 
site during normal business hours from FERC Online Support at 202-502-
6652 (toll free at 1-866-208-3676) or email at 
[email protected], or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at 
[email protected].

    By direction of the Commission.

    Issued: February 18, 2016.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2016-03837 Filed 2-23-16; 8:45 am]
BILLING CODE 6717-01-P