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Exelon, NRG executives voice faith in FERC on proposed price formation rule

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Exelon, NRG executives voice faith in FERC on proposed price formation rule

The Federal Energy Regulatory Commission will find a good solution to the Trump administration's push to ensure generators in wholesale energy and capacity markets get a reasonable return, executives with two large power companies said.

The U.S. Department of Energy recently asked FERC to craft a rule directing grid operators in regions with wholesale energy and capacity markets to allow plants with at least 90 days of onsite fuel inventory to fully recover their costs. The DOE's proposal, which is geared toward helping financially struggling coal and nuclear plants, stoked worries that FERC could upend competitive power markets that many utilities feel have served them and consumers well in the roughly 20 years since their inception.

But representatives of two large power companies, both of whom worked at FERC in the past, said the agency will figure out a reasonable solution.

"I don't think we should have any doubt that the staff of FERC will be able to figure out something that is adequate both to assess the problem… and develop a solution," Kathleen Barron, senior vice president of competitive market policy for Exelon Corp., said Oct. 16 at the Energy Bar Association's midyear forum in Washington, D.C.

Barron noted that FERC has already taken a "number of steps" to address the operational or economic limitations of different energy assets, including the commission's landmark Order 1000 transmission planning and cost allocation rule and Order 745 demand response rule.

"The smartest people in the industry work [at FERC]," Barron said. "They've asked all the right questions in the document that was released [by the DOE]. We owe them as an industry... our best ideas for how they should answer those questions, and I think we also owe them our trust that they will do what's in the best interest of customers."

About 62% of Exelon's energy mix is nuclear power, meaning the company could benefit from the DOE's proposal. But a substantial portion of its fleet - 20% - is natural gas-fired, exposing them to some downside if FERC tips the scale more in coal and nuclear plants' favor.

An official with NRG Energy Inc. also voiced confidence in FERC. "We think it is an extremely important conversation and really helps to highlight some of the issues," said NRG's vice president of market and regulatory affairs, Peter Fuller. "The solution set, I think, is much broader than what was in the original notice from DOE but again I have faith in our... colleagues [at the agency] to figure that out."

Barron and Fuller spoke on a panel about the legal intersection of state policy and energy markets. Both agreed that competitive markets should not only accommodate state policies, such as clean energy targets and incentives for nuclear power plants, but potentially incorporate some of those concepts more broadly.

While states can subsidize nuclear generation or set renewable procurement mandates, Barron said such a program is "a bridge" and "ideally we would use market-based structures to try to achieve the clean energy goals that we have for our customers, and we would like to see markets evolve."

Those issues were front and center at a technical conference FERC hosted in May. Fuller repeated some of NRG's suggestions from the technical conference, emphasizing that wholesale markets should accommodate state actions and evaluate what they can take from states and "build into the market." He also said regional transmission organizations and independent system operators should look at how to sustain investment and operations in a lower-carbon future.

Among other options, participants in the FERC technical conference suggested the creation of a carbon tax or pricing or the formation of clean energy markets to drive down emissions while supporting competition.