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FERC Approves MISO Transmission Owners' Proposal to Eliminate Reactive Power Compensation for All Generators

On January 27, 2023, the Federal Energy Regulatory Commission (FERC) issued an order accepting the MISO Transmission Owners’ filing to eliminate reactive power capability compensation under Schedule 2, Reactive Supply and Voltage Control from Generation or Other Sources Service of the Midcontinent Independent System Operator, Inc. (MISO) Open Access Transmission, Energy and Operating Reserve Markets Tariff (Tariff).

The Tariff revisions are effective as of December 1, 2022. Commissioner Clements issued a concurring opinion and Commissioner Danly issued a dissent.  

In accepting the MISO Transmission Owners’ filing, FERC found that the proposed Schedule 2 revisions are just and reasonable and not unduly discriminatory or preferential.  FERC highlighted that, under Order Nos. 2003 and 2003-A, if a transmission provider does not separately compensate its own or affiliated generators for reactive power service within the required standard power factor range (i.e., the power factor range for interconnection as detailed in the generator’s interconnection agreement), it is not obligated to compensate non-affiliated generators for reactive power service within that same range.  Based on that standard, FERC found that the MISO Transmission Owners’ proposal is permitted and is just and reasonable. 

Order Nos. 2003 and 2003-A, FERC stated, do not mandate that once a transmission provider compensates its own or affiliated generators it may never discontinue such compensation, and must always compensate unaffiliated generators.  Rather, FERC found that precedent allows for such elimination and protests challenging such an action are collateral attacks on this precedent. FERC also reiterated that little or no incremental investment is necessary for generators to provide reactive power within the required standard power factor range.

FERC explicitly disagreed with protesters’ arguments that the proposed elimination of reactive power compensation would impact system reliability, highlighting that new and existing generators will still be required to provide reactive power in the standard power factor range.  FERC also noted the MISO Transmission Owners did not propose to change MISO’s ability to redispatch individual generators manually for voltage control and that generators will be compensated under separate Tariff mechanisms if MISO directs generators to provide support outside of the standard range.

In a concurrence, Commissioner Clements highlighted the policy reasons that she joined in approving the proposal, including that case-by-case hearing and settlement procedures previously required for reactive power compensation were “administratively burdensome” and lacked transparency. 

Wright & Talisman, P.C. represents the MISO Transmission Owners in this proceeding.