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FERC's Glick argues reserve margins may be wrong metric for winter reliability

Federal Energy Regulatory Commission member Richard Glick said Oct. 17 the agency should consider using a different metric than reserve margins when assessing wintertime reliability in the fuel-constrained Northeastern U.S.

The suggestion was delivered after FERC staff presented the commission's 2019-2020 Winter Energy Market Assessment during a monthly open meeting that projected a more than 70% reserve capacity margin within the six-state ISO New England footprint.

Despite having the second-widest projected winter reserve margin among the nation's grid operators, the ISO-NE has been warning about the reliability threats posed by New England's continuing shift away from "fuel-secured" nuclear, coal- and oil-fired power plants and toward a generation mix of interruptible natural gas-fired plants and intermittent renewables. The fuel constraint problem is most pronounced in the winter, when natural gas pipelines become constrained by demand during stretches of extreme cold weather and deliveries of liquefied natural gas or oil as backup fuel become difficult.

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"When you see 70%, you say, 'Hey, that's pretty good, what do we need to worry about?' and clearly there are concerns, especially in New England," Glick said following the presentation. "So are there other metrics we should be thinking about?"

A FERC staff member responded by noting that while reserve margins are useful metrics, they are also based on forecasts. Actual demand and generation figures can vary because they are subject to operational considerations, the staff member said.

Glick continued by arguing the commission and the North American Electric Reliability Corp., which helps FERC set reliability standards, as well as other stakeholders, should start exploring different metrics with regard to winter reliability in the Northeast.

"This is an important issue that I think we should start considering, because the way we structure market rules, the way markets operate, the way decisions are made here but elsewhere, as well, are in large part based on trying to meet reliability, which is obviously what we're required to do," Glick said. "Using the reserve margin, sometimes it causes us to over-procure capacity or make decisions that might be good for one part of the year and might not actually be good for another part of the year, and I think [it] adds a lot of costs onto consumers."

Meanwhile, in April, the ISO-NE released a white paper describing the region's energy security conundrum as an economic Catch-22 for generators. If a generator does not make a costly supplemental fuel supply arrangement when the region's gas pipelines are tightly constrained and renewables' output is low high real-time wholesale energy market prices will prevail that severely cost consumers but do not immediately benefit generators if they lack the fuel to operate, the paper explained.

In August, an "inventoried energy program" proposed by the ISO-NE as a short-term winter fuel security fix went into effect by operation of law after FERC was unable to reach a voting quorum on the proposal due to recusals. Glick called that program, which pays resources for keeping fuel or another form of potential energy on hand during the winter, "an utter waste of ratepayers' money."

"Based on the record here, one cannot help but wonder whether burning that money might contribute as much to fuel security as wasting it on entities that we know will not do anything differently," he said in an accompanying statement.