FERC Notice of Inquiry on Reactive Power Capability Compensation Opens Door to Certainty for Reactive Rate Filers

On November 18, 2021, the Federal Vitality Regulatory Fee (FERC or Fee) issued a Notice of Inquiry (NOI), in search of remark on points associated to reactive energy functionality compensation. 

Particularly, the Fee is in search of feedback on:

  1. numerous features of the AEP Methodology-based compensation;

  2. potential various methodologies for calculating reactive energy compensation; and

  3. reactive energy functionality compensation via transmission charges for sources that interconnect on the distribution stage. 

Preliminary feedback are due 60 days after the NOI has been revealed within the Federal Register and reply feedback are due 90 days after the preliminary remark deadline.

The NOI represents a step in direction of the potential of larger certainty relating to reactive energy compensation.


Reactive energy is a crucial ancillary service offered by era and non-generation sources on a transmission system to facilitate the long-distance transmission of actual energy, and to assist system voltages and assist guarantee reliability of the transmission grid.  Prices for reactive energy provided utilizing era sources are recovered individually from the price of fundamental transmission service.

In 1999, the Fee authorized a technique, now referred to because the AEP Methodology, for American Electrical Power Service Corp., a public utility that abided by the Fee’s Uniform System of Accounts and yearly submitted a FERC Type No. 1, in search of to get better prices for the reactive energy its synchronous turbines offered. (See Opinion No. 440, 88 FERC ¶ 61,141.)  Subsequently, the Fee has really helpful, although by no means required, use of the AEP Methodology, nor required some other uniform method for reactive energy functionality compensation.  Since 1999, the electrical business has undergone important adjustments—at present, the bulk of the reactive energy filings submitted to the Fee are made by homeowners of non-synchronous sources and lots of submitting entities have acquired waivers of the requirement to preserve their accounts underneath the Uniform System of Accounts guidelines and to file FERC Type No. 1.

FERC Seeks Remark on Reactive Power Capability Compensation and Market Design Matters

The NOI seeks remark on three overarching classes of points and poses particular questions inside every class. Beneath are the three classes, together with a abstract of some of the extra important questions requested in every class.

1. Is the AEP Methodology a simply and cheap method in all circumstances? 

The Fee requested commenters to deal with whether or not numerous features of the AEP methodology are nonetheless applicable; to take into account sources whose reactive energy necessities aren’t addressed within the useful resource’s interconnection settlement; and to clarify why events apart from the market monitor and RTO/ISO typically don’t take part in reactive energy filings set for listening to and settlement choose procedures.  The Fee additionally requested for feedback on the next matters:

a) Degradation: FERC requested about how a useful resource’s reactive energy functionality degrades over time, whether or not periodic reactive energy functionality testing needs to be required and whether or not the AEP methodology needs to be modified to account for reactive energy functionality degradation over the lifetime of the useful resource.

b) Non-synchronous Assets: FERC requested whether or not the present AEP Methodology could be appropriately utilized to reactive energy functionality compensation for non-synchronous sources, together with what non-synchronous useful resource gear corresponds to the synchronous useful resource gear used within the AEP Methodology and the way the prices related to the gathering system of non-synchronous sources correspond with how prices are assigned underneath the AEP Methodology. The Fee additionally requested how the intermittent availability of such non-synchronous sources needs to be accounted for.

c) Evidentiary Help at FERC: Acknowledging that many submitting entities have acquired waivers of the requirement to preserve their accounts underneath the Uniform System of Accounts guidelines and to file FERC Type No. 1, the Fee requested how to accumulate independently verifiable price data from such submitting entities.  Particular to PJM, MISO, and non-RTO/ISOs that compensate for reactive energy functionality based mostly on the prices of particular person sources or on a fleet-wide foundation, the Fee asks if filers in such areas needs to be required to submit with their compensation submitting, a standardized kind with acknowledged schedules and officer and unbiased accountant certification necessities.

d) Potential Overcompensation in PJM: FERC seeks remark on the PJM Market Displays considerations concerning the potential in PJM for double restoration or overpayment for reactive energy functionality.

2. Potential Options to the AEP Methodology

FERC sought remark on options to the AEP Methodology, considering completely different useful resource sorts.  FERC requested about present compensation approaches together with flat fee and substitute price approaches.  Noting that in CAISO and SPP, sources aren’t immediately compensated for reactive energy functionality, FERC requested how these sources get better their prices. FERC additionally requested if it will be preferable in areas with a centrally-cleared capability market for reactive energy functionality compensation to be recovered by embedding prices within the sources capability market gives, quite than to use a separate cost-based fee.

3. Ought to sources which might be interconnected to a distribution system and take part in wholesale markets be eligible for reactive energy functionality compensation?

FERC asks about distribution-connected sources: whether or not they’re dispatchable by route of the transmission supplier to present voltage assist and whether or not they need to be compensated for reactive energy functionality.  FERC additionally requested if such sources are topic to reactive energy functionality testing necessities.


Within the final six years FERC has set almost all reactive fee filings for listening to and settlement procedures with little steering or directive for the individuals on the problems for decision. With no certainty in how to adapt a technique meant for synchronous turbines who abide by the FERC System of Accounts and file FERC Type No. 1’s, reactive fee filers are compelled to both settle at drastically lowered charges or submit to doubtlessly protracted litigation. Understandably, the overwhelming majority of filers have opted to resolve their instances with non-precedential black field settlements. The inconsistent leads to these instances have left the business with uncertainty relating to fee restoration for reactive service functionality.

FERC’s NOI gives a step in direction of the potential of larger certainty relating to reactive energy. The Fee’s obvious openness to reevaluating its present inconsistent and sub-optimal method is a constructive improvement for homeowners of era with reactive energy functionality.  A rulemaking that establishes certainty may significantly cut back the quantity of proposed reactive energy fee schedules set for listening to procedures, deliver an finish to what is commonly pricey and protracted settlement negotiations, and will enable for reactive fee filers to earn extra consultant charges.

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