Impact of FERC Rule #755

Abstract

Secondary frequency regulation service, also known as Automatic Generation Control (AGC), is one of the tools regional transmission organizations (RTOs) and independent system operators (ISOs) use to balance supply and demand to maintain reliable grid operations. On October 20, 2011, the Federal Energy Regulatory Commission (FERC) issued Final Rule #755 regarding frequency regulation compensation in the organized wholesale markets. This final rule affects the compensation that energy providers receive for their services. In addition to the market for net energy consumption, there will be a market for secondary frequency regulation services. The
final rule provides financial incentive for secondary frequency regulation performance and accuracy. The performance component rewards actual secondary frequency control contribution or "MW mileage." The accuracy component proposed by FERC is dependent upon how closely an energy provider follows the AGC signal.

This paper will analyze and summarize the impact of this FERC ruling on the hydro industry. Specifically, the hydro industry could realize new revenue streams by modifying the methods they use to control in hydro plants, some of which may actually be degrading grid stability and reliability, and the ruling may stimulate a discussion of how SCADA is used to control their powerplants. If the unintended consequence of this ruling is to minimize or negate the current contribution of hydroelectric plants to primary frequency control (governing with droop), recommendations to FERC may be suggested to avoid further degradation of the grid reliability due to reduced primary frequency control capability. Additionally, control system configurations that maximize revenues based on the new ruling along with their associated tradeoffs will be examined.