In what may prove to be a major policy decision, FERC has announced that all entities providing reactive power service must have a rate schedule on file with the Commission. Even reactive power service provided free of charge under an interconnection agreement will be required to have a rate schedule on file at FERC. Recognizing the significance of this decision, FERC also announced that it will be holding a workshop to discuss the specifics of this policy change and how parties will be expected to implement the new requirements.
What began as a dispute between Chehalis Power Generating, L.P. and FERC over whether the rate for reactive power service was subject to the refund requirements of the FERC regulations, has now evolved into something that will affect a significant number of generating facilities across the U.S. Chehalis had been providing reactive power service to Bonneville Power Administration at no charge. It then filed a rate schedule for the service and told FERC that since it was an initial rate (there not having previously been a rate schedule on file from Chehalis), and because it had been providing reactive service to BPA at no charge, the rate could not be subject to refund. FERC found that because Chehalis had been providing the service to BPA for a period of time before filing the rate schedule, it was in fact a change in rate and subject to refund regardless of whether it had previously charged or been paid for the service.
FERC’s new policy is based on its view that because reactive power is a FERC jurisdictional service, any service provided, whether free of charge or even within-the-deadband reactive power service, must be provided pursuant to a rate schedule on file. The new policy applies to existing generators providing reactive power service pursuant to existing interconnection agreements as well as new generators pursuant to a new interconnection agreement. FERC directed that its staff hold a workshop to explore the mechanics of generators filing reactive power rate schedules for which there is no compensation. After the new rules are established, FERC has said that the failure to timely file a rate schedule could result in possible sanctions.
Source: Leonard, Street and Dienard