The Federal Energy Regulatory Commission on Feb. 16 unanimously approved new grid reliability standards developed in response to a February 2021 severe cold weather event that knocked out power for millions of customers in Texas.

Acting FERC Chairman Willie Phillips called the new standards "an important step" in addressing more than two dozen recommendations outlined in a staff report on the root causes of the outages.

But FERC also directed the North American Electric Reliability Corp. to revise the standards to address concerns about implementation timelines and ensure the measures apply to all power generators needed to keep the lights on in sub-freezing temperatures.

New standards apply to transmission operators, generation owners

A November 2021 report produced by FERC and NERC staff in the wake of the February 2021 weather event, dubbed Winter Storm Uri, outlined 28 different recommendations for avoiding a repeat disaster.

Among those, the report recommended modifying load-shedding procedures to ensure natural gas supply facilities do not automatically lose power when generation shortfalls occur. The report also called for a range of freeze protection measures at existing power plants that would be expected to perform in peak winter conditions.

In October 2022, NERC submitted two separate standards (RD23-1) for FERC's approval.

The first standard, EOP-011-3, requires transmission operators to minimize any overlap between circuits that serve critical loads such as gas supply facilities and other circuits used to conduct rotating customer blackouts. One of the primary drivers of the multiday grid outages that occurred in the Electric Reliability Council of Texas Inc. region was a sudden loss of available natural gas supplies.

In approving the standard, FERC noted that it did not receive any substantive opposition from industry participants.

NERC's second standard, EOP-012-1, requires generators needed for winter reliability to undertake freeze protection measures based on specific extreme cold weather temperatures. FERC approved the standard, but the agency directed NERC to submit revisions within 12 months that respond to several key concerns.

As an initial matter, the commission ordered NERC to require generators without sufficient freeze protection measures to submit corrective action plans by specific deadlines. In addition, FERC directed NERC to develop auditable criteria for generators to meet when declaring implementation constraints.

FERC also told NERC to shorten the effective date for EOP-012-1 and stagger its implementation timeline. As proposed, the standard would become effective 60 months after regulatory approval.

"The proposal before us requires existing generators to weatherize so they would be capable of operating for one hour at extreme cold temperatures beginning in April 2027," Commissioner Allison Clements said during FERC's Feb. 16 monthly open meeting. "Needless to say, that doesn't bring total comfort that we will ensure we get through the next multiday event like Winter Storm Uri."

FERC also directed NERC to submit revised language that clarifies how the standard will apply to intermittent resources that do not always run continuously.

"Ensuring clear applicability to intermittent generators is critical to ensuring that enough generating units are available during cold temperatures," FERC said.

Commission addresses concerns about methodology, cost recovery

FERC dismissed concerns raised by regional grid operators about the way in which generators must plan for extreme low temperatures. A coalition of grid operators worried that NERC's proposed methodology fails to account for the extreme temperatures actually experienced over the last few decades.

FERC acknowledged that NERC "could have adopted other, potentially more robust approaches." But the commission concluded that the combination of measures in the standard — which include inspection and maintenance, regular training and periodic reviews — is sufficient for now.

FERC was also unpersuaded by arguments that the standard should be clarified to reflect that a lack of cost recovery can be considered a commercial constraint. Competitive power producer groups had called for the change.

"We believe it would be inappropriate to allow entities participating in competitive wholesale electric markets to simply opt-out of reliability improvements offered by NERC's proposal because they lack a dedicated cost recovery mechanism," FERC said.

NERC plans to submit additional standards for approval toward the end of 2023 to address the remaining recommendations in the joint FERC-NERC report on the February 2021 winter storm.

Market design considerations

During the Feb. 16 meeting, Commissioner Mark Christie said regional grid operators may also need to revisit their market designs to guard against increasingly frequent extreme weather.

"I've always said from the beginning, one of the problems that prompted Uri was market design," Christie said.

ERCOT has traditionally relied on scarcity pricing alone to send market signals that guide decisions to invest in new generation capacity. In January, Texas utility regulators recommended creating a credit mechanism that would retroactively reward power plants that perform during times of scarcity.

In other market-related developments, Phillips announced a June 20 forum in Portland, Maine, to address persistent concerns about grid reliability in the fuel-constrained ISO New England region.

"These issues aren't just electric, but also gas," Phillips said. "Both market design and infrastructure play a role."

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.