RM17-3-000 Federal Register 60 day

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Proposed Rules

Federal Register
Vol. 81, No. 251
Friday, December 30, 2016

This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.

DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
18 CFR Part 35
[Docket No. RM17–3–000]

Fast-Start Pricing in Markets Operated
by Regional Transmission
Organizations and Independent
System Operators
Federal Energy Regulatory
Commission, DOE.
ACTION: Notice of proposed rulemaking.
AGENCY:

The Federal Energy
Regulatory Commission is proposing to
revise its regulations to require that each
regional transmission organization and
independent system operator
incorporate market rules that meet
certain requirements when pricing faststart resources. These reforms should
lead to prices that more transparently
reflect the marginal cost of serving load,
which will reduce uplift costs and
thereby improve price signals to support
efficient investments.
DATES: Comments are due February 28,
2017.
ADDRESSES: Comments, identified by
docket number, may be filed in the
following ways:
• Electronic Filing through http://
www.ferc.gov. Documents created
electronically using word processing
software should be filed in native
applications or print-to-PDF format and
not in a scanned format.
• Mail/Hand Delivery: Those unable
to file electronically may mail or handdeliver comments to: Federal Energy
Regulatory Commission, Secretary of the
Commission, 888 First Street NE.,
Washington, DC 20426.
Instructions: For detailed instructions
on submitting comments and additional
information on the rulemaking process,
see the Comment Procedures Section of
this document.
FOR FURTHER INFORMATION CONTACT:

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SUMMARY:

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Daniel Kheloussi (Technical
Information), Office of Energy Policy
and Innovation, Federal Energy
Regulatory Commission, 888 First
Street NE., Washington, DC 20426,
(202) 502–6391, daniel.kheloussi@
ferc.gov.
Eric Vandenberg (Technical
Information), Office of Energy Market
Regulation, Federal Energy Regulatory
Commission, 888 First Street NE.,
Washington, DC 20426, (202) 502–
6283, [email protected].
Kaleb Lockwood (Legal Information),
Office of the General Counsel, Federal
Energy Regulatory Commission, 888
First Street NE., Washington, DC
20426, (202) 502–8255,
[email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
Paragraph Numbers
I. Background 5.
II. Discussion 8.
A. Current RTO/ISO Approaches to FastStart Pricing 11.
B. Comments on Fast-Start Pricing 18.
1. Fast-Start Resource Definitions and
Resource Eligibility 22.
2. Inclusion of Start-up and No-load Costs
in Prices 23.
3. Relaxation of Economic Minimum
Operating Limit 27.
4. Offline Fast-Start Resources 30.
5. Day-Ahead and Real-Time Market
Consistency 33.
C. Need for Reform of Fast-Start Pricing 34.
D. Commission Proposal 44.
1. Fast-Start Resource Definitions and
Resource Eligibility 46.
2. Inclusion of Start-up and No-load Costs
in Prices 49.
3. Relaxation of Economic Minimum
Operating Limit 54.
4. Offline Fast-Start Resources 56.
5. Day-Ahead and Real-Time Market
Consistency 60.
6. Additional Comments Sought on This
Proposal 64.
III. Compliance 66.
IV. Information Collection Statement 69.
V. Environmental Analysis 73.
VI. Regulatory Flexibility Act 74.
VII. Comment Procedures 77.
VIII. Document Availability 81.

1. In this Notice of Proposed
Rulemaking (NOPR), the Federal Energy
Regulatory Commission (Commission) is
proposing to address the pricing of
energy from resources that are able to
start quickly (i.e., any resource that is
able to start up within ten minutes or
less, that has a minimum run time of
one hour or less, and that submitted an
economic energy offer to the market)

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(fast-start resources). In this context,
fast-start pricing addresses the software
algorithms by which a regional
transmission organization (RTO) or
independent system operator (ISO)
incorporates the offers of fast-start
resources into the market prices for
energy and ancillary services.1
2. Varied approaches exist among
RTOs and ISOs to incorporate fast-start
resources into energy and ancillary
services prices (fast-start pricing). Faststart resources are unique because they
are often dispatched to their inflexible
minimum or maximum operating limits,
and are thus not eligible to set the
locational marginal price (LMP).2 In
addition, fast-start resources are
typically committed in real-time, very
close to the interval when they are
needed. As a result, the cost to commit
these resources is incurred at roughly
the same time the incremental energy
costs are incurred, which raises the
question of whether the commitment
costs should be included in the LMP.
Finally, fast-start resources can arguably
respond quickly enough to be
considered part of an RTO’s/ISO’s
operating reserves even when they have
1 In the November 20, 2015 Order Directing
Reports issued in Docket No. AD14–14–000, the
Commission noted that inflexible resources ‘‘are
generally referred to as block-loaded fast-start
resources.’’ Price Formation in Energy and
Ancillary Services Markets Operated by Regional
Transmission Organizations and Independent
System Operators, 153 FERC ¶ 61,221, at P 9 (2015)
(Order Directing Reports). The Commission also
stated that
[a]n inflexible resource generally refers to a
resource that may not be able to physically operate
much below its maximum output and therefore
cannot be dispatched up or down. For this reason,
the energy supply offer parameters for these
resources may stipulate that they be dispatched
either to zero or to a minimum level that is at (or
close to) their maximum output, but not in between.
Id. P 9 n.8. The Commission further noted that
‘‘[a] block-loaded resource is a resource whose
economic minimum operating limit is equal to its
economic maximum output.’’ Id. P 9 n.9. While this
NOPR seeks to address issues discussed in the
Order Directing Reports and the subsequent reports
and comments submitted in that docket, we do not
limit terms used in this NOPR to the definitions
provided in the Order Directing Reports.
2 At a high level, the LMP is set by the offer of
the resource that is dispatched up to serve the next
additional MW of demand or dispatched down to
accommodate the next MW of reduced demand.
Fast-start resources often have little or no dispatch
range (i.e., their economic minimum operating limit
equals their economic maximum operating limit). A
resource that is operating inflexibly at its economic
minimum operating limit or maximum operating
limit is not dispatchable to serve an additional
increment or decrement of load, and is thus not
eligible to set the LMP.

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not yet been committed. As a result of
these unique characteristics, RTOs/ISOs
have developed pricing specific to this
class of resources. This pricing is
designed generally to recognize that
fast-start resources are, for all intents
and purposes, the marginal resource
used to meet the next increment of
energy or operating reserves demand.
Based on experience with the different
fast-start pricing used by each RTO/ISO,
we believe some practices have emerged
over time that better represent the
marginal cost of serving load.
3. We preliminarily find that some of
these approaches may not result in rates
that are just and reasonable for several
reasons. We are concerned that some
existing practices may not ensure that
prices accurately reflect the marginal
cost of serving load, potentially
resulting in prices that do not reflect the
value of fast-start resources, potentially
creating unnecessary uplift payments,
and potentially failing to provide
incentives for market participants to
make efficient investments. As a result,
we propose to require that each RTO/
ISO incorporate the following five
requirements for its fast-start pricing.
First, an RTO/ISO must apply fast-start
pricing to any resource committed by
the RTO/ISO that is able to start up
within ten minutes or less, has a
minimum run time of one hour or less,
and that submits economic energy offers
to the market. Second, when an RTO/
ISO makes a decision to commit a faststart resource, it should incorporate
commitment costs, i.e., start-up and noload costs, of fast-start resources in
energy and operating reserve prices, but
must do so only during the fast-start
resource’s minimum run time. Third, an
RTO/ISO must modify its fast-start
pricing to relax the economic minimum
operating limit of fast-start resources
and treat them as dispatchable from zero
to the economic maximum operating
limit for the purpose of calculating
prices. Fourth, if an RTO/ISO allows
offline fast-start resources to set prices
for addressing certain system needs, the
resource must be feasible and economic.
Finally, an RTO/ISO must incorporate
fast-start pricing in both the day-ahead
and real-time markets.
4. We seek comment on these
proposed reforms 60 days after
publication of this NOPR in the Federal
Register.
I. Background
5. In June 2014, the Commission
initiated a proceeding, in Docket No.
AD14–14–000, Price Formation in
Energy and Ancillary Services Markets
Operated by Regional Transmission
Organizations and Independent System

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Operators, to evaluate issues regarding
price formation in the energy and
ancillary services markets operated by
RTOs/ISOs (Price Formation
Proceeding). The notice initiating that
proceeding stated that there may be
opportunities for the RTOs/ISOs to
improve the price formation process in
the energy and ancillary services
markets. As set forth in the notice,
prices used in energy and ancillary
services markets ideally ‘‘would reflect
the true marginal cost of production,
taking into account all physical system
constraints, and these prices would
fully compensate all resources for the
variable cost of providing service.’’ 3
Pursuant to the notice, staff conducted
outreach and convened technical
workshops on the following four general
issues: (1) use of uplift payments; (2)
offer price mitigation and offer price
caps; (3) scarcity and shortage pricing;
and (4) operator actions that affect
prices.4
6. In January 2015, the Commission
requested comments on questions that
arose from the price formation technical
workshops.5 As a result of these
comments, the Commission identified,
among other things, five technical topics
with potential for reform to improve
price formation, but for which further
information was needed. In November
2015, the Commission issued an order
that directed each RTO/ISO to report on
these five price formation topics: faststart pricing; managing multiple
contingencies; look-ahead modeling;
uplift allocation; and transparency.6 The
order directed each RTO/ISO to file a
report providing an update on its
current practices in the topic areas,
outlining the status of its efforts (if any)
to address issues in each of the five
topics, and responding to specific
questions contained in the order. This
NOPR addresses the pricing of fast-start
resources.
7. In the reports filed and the
subsequent comments, RTOs/ISOs and
other commenters addressed the issue of
fast-start pricing, as discussed below.7
II. Discussion
8. In RTOs/ISOs, LMPs reflect the
system marginal cost of serving the next
increment of load, taking into account
3 Price Formation in Energy and Ancillary
Services Markets Operated by Transmission
Organizations and Independent System Operators,
Notice, Docket No. AD14–14–000, at 2 (June 19,
2014).
4 Id. at 1, 3–4.
5 Notice Inviting Post-Technical Workshop
Comments, Docket No. AD14–14–000 (Jan. 16,
2015).
6 Order Directing Reports, 153 FERC ¶ 61,221).
7 A list of commenters and the abbreviated names
used in this NOPR appears in the Appendix.

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transmission constraints and line losses.
With certain exceptions, only resources
that are dispatchable, i.e., those that can
be dispatched up or down in response
to changes in system conditions, are
eligible to set prices.8 In many
situations, this eligibility requirement
ensures that LMPs reflect the marginal
cost of serving the next increment of
demand. However, this eligibility
requirement can distort LMPs when a
fast-start resource is committed and
dispatched to serve expected load
during a particular interval. This
restriction often prevents a fast-start
resource from setting prices when the
resource is dispatched at its economic
minimum operating limit. Fast-start
resources are often required to be
dispatched at their economic minimum
operating limit or are block-loaded.9
Because the system may need fewer
megawatts (MW) than the fast-start
resource’s economic minimum
operating limit to meet load, other
resources must be dispatched down.
The resources that were dispatched
down become the most economic option
to serve the next increment of load.
Therefore, despite the fact that a faststart resource is essentially marginal,
this restriction prevents a fast-start
resource dispatched at its economic
minimum operating limit from setting
the LMP. To allow fast-start resources to
set prices so that LMPs better reflect the
marginal cost of serving load, some
RTOs/ISOs modify the market rules and
software. Typically, they treat fast-start
resources as dispatchable in a pricing
algorithm (i.e., pricing run) separate
from the dispatch algorithm (i.e.,
dispatch run). While the dispatch run
meets all of the physical constraints of
the resources, the pricing run relaxes
the economic minimum operating limit
of a fast-start resource so that the
resource is treated as dispatchable by
the market-clearing software and
eligible to set prices.
9. Fast-start pricing can result in
improved price signals, especially
during tight or unexpected system
conditions when the need for fast-start
resources is the greatest. However, faststart pricing can create a disconnect
between prices and dispatch
instructions, which can lead to overgeneration. Specifically, fast-start
8 Order Directing Reports, 153 FERC ¶ 61,221 at
P 9.
9 Block-loaded means the resource’s economic
minimum operating limit equals its economic
maximum operating limit. The economic minimum
and maximum operating limits are the minimum
amount of electric power that a resource must be
allowed to produce, and the highest level a resource
can produce, while under economic dispatch,
respectively.

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pricing requires the pricing run to
assume that fast-start resources can
operate below the resources’ economic
minimum operating limit such that the
pricing run also dispatches other units
at levels greater than the level instructed
by the dispatch run. Many RTOs/ISOs
ensure that the disconnect in resource
output levels between the pricing and
dispatch runs are reconciled to avoid
over-generation; however, some RTOs/
ISOs do not reconcile the differences,
leading to dispatch targets that produce
energy in excess of what is needed to
serve load, i.e., over-generation. Further,
generation resources that are dispatched
downward to accommodate the
commitment of fast-start resources may
have incentives to produce energy above
their dispatch targets to capture the
higher prices set by fast-start resources,
leading to over-generation. Thus, faststart pricing rules are typically paired
with market rules to reduce the
incentives for producing energy above
dispatch targets.
10. Further, reflecting commitment
costs in LMPs requires some judgment
regarding how and when to include
those commitment costs. Similarly,
reflecting the costs of offline resources
in LMPs requires some judgment
regarding when these resources are
actually economically and technically
able to address a reserve shortage or
transmission constraint.

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A. Current RTO/ISO Approaches to
Fast-Start Pricing
11. Each RTO/ISO has developed its
own unique pricing to accommodate the
specific characteristics of fast-start
resources in its respective market.
12. CAISO defines fast-start resources
as those that can come online in under
two hours and can be committed in
CAISO’s fifteen-minute market or the
short-term unit commitment process.
CAISO states that there is no special
treatment for the commitment or pricing
of generating units related to whether
they are fast, medium, or long start.10
However, CAISO applies special
modeling logic to certain block-loaded
or nearly blockloaded resources known as
Constrained Output Generators.11
10 Report of CAISO, Docket No. AD14–14–000, at
4 (Mar. 4, 2016) (CAISO Report).
11 CAISO defines a Constrained Output Generator
as any generating unit with an operating range that
is no greater than the highest of three MW or five
percent of its maximum operating range. Id. at 1–
2. Block-loaded resources in CAISO are required to
register as Constrained Output Generators, while
certain nearly-block loaded resources are permitted
to register as Constrained Output Generators, if
desired. CAISO notes that there are currently no
resources registered as Constrained Output
Generators. Id. at 11.

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CAISO currently allows minimum load
costs to affect LMPs but does not
include start-up costs.12 In the dayahead market, Constrained Output
Generators are treated as dispatchable
resources in both the scheduling and
pricing run; thus, in the day-ahead
market, Constrained Output Generators
can set prices. In the real-time market,
the scheduling run does not allow
Constrained Output Generators to be
dispatched below their economic
minimum operating limit, but in the
pricing run the economic minimum
operating limit is relaxed to zero. CAISO
does not allow offline resources to set
LMP.13 CAISO states that because so
few resources have registered as
Constrained Output Generators, it has
no anecdotal data that its Constrained
Output Generator-related pricing logic
results in over-generation issues.
However, CAISO notes that overgeneration could be a concern if a large
number of resources were to register as
Constrained Output Generators.14
CAISO states that it is not currently
working on any stakeholder initiatives
to modify commitment or pricing logic
related to fast-start units, but notes that
some of its stakeholders have argued for
an extended pricing mechanism similar
to MISO’s Extended LMP mechanism.15
13. ISO–NE recently proposed
revisions to its process for dispatching
and pricing fast-start units, which will
become effective March 31, 2017.16
ISO–NE defines fast-start resources as
those with start-up times of thirty
minutes or less and which have a
minimum run time of one hour or less
and a minimum down time of one hour
or less.17 ISO–NE states that its pricing
mechanism will allow start-up and noload costs to be included in LMPs. ISO–
12 Id. at 2. In CAISO, a Constrained Output
Generator’s calculated energy bid (which is the
unit’s minimum load costs divided by the MW
quantity of the unit’s maximum output) can set the
LMP.
13 Id. at 10.
14 Id. at 8. Fast-start pricing could result in overgeneration (i.e., producing energy in excess of what
is needed to serve load) due to several factors. First,
price signals generated by fast-start pricing could
incent some resources to produce energy above
their dispatch targets. Specifically, if LMP is higher
than a resource’s incremental energy offer, that
resource would have an incentive to increase its
profits by generating above energy dispatch targets,
leading to over-generation. Second, an RTO/ISO
may use a scheduling run that incorporates relaxed
economic minimum operating limits and does not
require that generation be equal to load, resulting
in over-generation. See PJM Report on Price
Formation Issues, Docket No. AD14–14–000, at 12–
13 (Feb. 17, 2016) (PJM Report).
15 CAISO Report at 8–9.
16 ISO New England Inc. and New England Power
Pool Participants Committee, Docket No. ER15–
2716–000 (Oct. 19, 2015) (delegated letter order).
17 Report of ISO–NE., Docket No. AD14–14–000,
at 6 (Mar. 4, 2016) (ISO–NE Report).

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NE will have separate dispatch and
pricing runs, with the pricing run
following the dispatch run, where
economic minimum operating limits are
relaxed.18
However, ISO–NE does not allow
offline resources to set the LMP.19 ISO–
NE states that its revised fast-start
pricing is being implemented in the
real-time market only.20 ISO–NE argues
that its revised fast-start pricing logic
will eliminate over-generation issues
and states that it will compensate
certain re-dispatched resources for their
opportunity costs.21
14. MISO’s fast-start pricing logic,
referred to as Extended LMP (ELMP),
became effective in 2015.22 MISO
defines a fast-start generating resource
as a generating unit with a start-up time
of ten minutes or less and a minimum
run time of one hour or less.23 MISO
allows a fast-start resource’s start-up
and no-load costs to affect the LMP.
MISO also allows an offline fast-start
resource to set LMPs but only under
reserve or transmission scarcity
conditions.24 MISO’s ELMP is applied
to both day-ahead and real-time markets
in order to facilitate price convergence
between the two markets.25 MISO states
that, though it recognizes that fast-start
pricing can result in over-generation, it
has not observed any significant overgeneration issues. However, MISO
emphasizes that its settlement rules
incentivize following dispatch
instructions because it penalizes
resources that deviate.26 MISO states
that it is currently planning to
implement ELMP Phase II, which it
states will expand upon Phase I
principles by applying fast-start pricing
to more peaking resources.27
15. NYISO does not apply fast-start
pricing to all fast-start resources.
Instead, NYISO applies special pricing
logic, referred to as ‘‘hybrid gas turbine
pricing logic,’’ to all committed blockloaded resources qualified to provide
10-minute non-synchronous reserves.
This pricing logic allows block-loaded
gas turbines to set prices.28 Under this
logic, start-up and no-load costs are not
reflected in LMP. In the day-ahead
18 Id.

at 16.
at 10.
20 Id. at 3.
21 Id. at 14–15.
22 Midcontinent Indep. Sys. Operator, Inc., 150
FERC ¶ 61,143 (2015).
23 Report of MISO, Docket No. AD14–14–000, at
9 (Mar. 4, 2016) (MISO Report).
24 Id. at 11.
25 Id. at 8.
26 Id. at 15.
27 Id. at 7.
28 Corrected Report of NYISO, Docket No. AD14–
14–000, at 9 (Mar. 23, 2016) (NYISO Report).
19 Id.

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market, all resources are modeled as
dispatchable in the pricing pass of the
Security Constrained Unit Commitment
process, but NYISO states that this
process does not employ the same faststart pricing as is used in real-time.29
NYISO explains that, in the real-time
market, its hybrid gas turbine pricing
logic allows block-loaded resources to
be modeled as fully dispatchable to
determine prices.30 NYISO applies faststart pricing during a fast-start
resource’s minimum run time if it is
economic.31 NYISO also allows offline
fast-start resources to set prices and
allows start-up costs for those resources
to be reflected in the price.32 NYISO
states that it will be working with
stakeholders during 2016 to allow all
block-loaded units economically
committed by the real-time commitment
software to set prices.33
16. PJM’s tariff and other governing
documents do not include formal
definitions for fast-start or block-loaded
resources. For the purposes of its report,
PJM describes a fast-start resource as a
combustion turbine that can start within
two hours and a block-loaded resource
as one with an economic minimum
operating limit equal to its economic
maximum operating limit. In practice,
PJM allows block-loaded resources to
set prices.34 PJM’s pricing logic does not
allow block-loaded resources’ start-up
or no-load costs to be included in
prices. PJM states that in the day-ahead
market, the pricing and dispatch runs
are combined, while in the real-time
market, the pricing run executes first,
followed by the dispatch run.35 PJM
states that in both the day-ahead and
real-time markets, it relaxes the
economic minimum operating level of
block-loaded resources up to ten
percent.36 However, PJM does not allow
offline resources to set prices.37 PJM
explains that it allows resources with a
limited operating range, other than
block-loaded resources, to set prices
when operating to control a specific
transmission constraint.38 PJM states
that it is not currently working on any
stakeholder initiatives regarding faststart unit pricing.39
17. SPP has special pricing logic that
it applies to what it refers to as quickstart resources. SPP defines a quick-start
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29 Id.

at 15.
at 3.
31 Id. at 4.
32 Id. at 6, 10.
33 Id. at 3, 8.
34 PJM Report at 2.
35 Id. at 5.
36 Id. at 5.
37 Id. at 10–11.
38 Id. at 14–15.
39 Id. at 9.
30 Id.

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B. Comments on Fast-Start Pricing
18. Multiple commenters support the
use of fast-start pricing methods that
allow resources dispatched at their
operating limits to set LMP and allow
start-up and no-load costs to affect
prices.46 EPSA/WPTF 47 argues that
such fast-start pricing methods could
improve pricing signals and help correct
CAISO’s ‘‘duck curve problem’’ by
redistributing excess costs incurred
during the middle of the day to the
ramping periods.48 Similarly, Exelon

believes that RTOs/ISOs should ensure
that start-up and no-load costs of
resources dispatched at operational
limits can affect prices by using a
particular mathematical technique
called ‘‘convex hull pricing,’’ which
would better reflect the cost of
electricity, reduce uplift, and enhance
incentives for all resources to perform.49
19. Commenters identified a number
of best practices across the RTOs/ISOs.
Entergy, EPSA, and Westar generally
support certain aspects of MISO’s
ELMP. EPSA believes that MISO’s
ELMP approach yields favorable results
by ensuring that generators follow
dispatch signals and that generators’
minimum operating limits are satisfied
in dispatch.50 EPSA states that several
components of MISO’s ELMP can be
widely adopted across all RTO/ISO
pricing mechanisms.51 Further, EPSA
and PSEG Companies believe the
approaches used by MISO and ISO–NE
to relax the economic minimum limits
represent a best practice.52 Further,
PSEG Companies states that ISO–NE’s
revised fast-start pricing method
addresses over-generation concerns by
paying lost opportunity payments to
those resources that follow dispatch
instructions but are subsequently redispatched down to their economic set
point.53 In addition, EPSA and EPSA/
IPPNY are generally supportive of
NYISO’s fast-start pricing methods.54
20. On the other hand, EPSA and
Golden Spread express concern that the
fast-start pricing methods employed by
SPP are insufficient.55 Specifically,
Golden Spread states that certain
aspects of SPP’s market design features
and operator practices result in
inefficient market prices and fail to
reflect the costs to start and operate faststart resources or the value they provide
to the system.56
21. In contrast, the PJM Market
Monitor argues that relaxing economic
minimum limits for price setting
artificially overrides fundamental
pricing logic in order to reduce uplift.
The PJM Market Monitor argues that

40 Report of SPP on Price Formation Issues,
Docket No. AD14–14–000, at 1–2 (Mar. 7, 2016)
(SPP Report).
41 Id. at 5, 8, 10.
42 Id. at 2–3.
43 Id. at 2–3.
44 Id. at 8–9.
45 Id. at 4–5.
46 DC Energy, Inertia Power, and Vitol Comments
at 8; EPSA Comments at 11; EPSA/IPPNY
Comments at 6; EPSA/P3 Comments at 5; EPSA/
WPTF Comments at 4–5; Exelon Comments at
7–8; PSEG Companies Comments at 8.
47 EPSA filed multiple sets of comments paired
with different groups as well as its own stand-alone
comments.
48 EPSA/WPTF Comments at 4–5.

49 Exelon Comments at 6–7. Commenters
frequently refer to a certain pricing methodology
known as ‘‘convex hull pricing.’’ This methodology
allows the start-up and no-load costs of resources
to affect prices by using a particular mathematical
technique.
50 EPSA Comments (on MISO Report) at 12.
51 Id. at 6; EPSA Comments (on price formation)
at 12–13.
52 EPSA Comments (on MISO Report) at 6; PSEG
Companies Comments at 4.
53 PSEG Companies Comments at 7.
54 EPSA Comments (on SPP Report) at 7; EPSA/
IPPNY Comments at 5–6.
55 EPSA Comments (on SPP Report) at 5; Golden
Spread Comments at 1–2.
56 Golden Spread Comments at 1–2.

resource as a resource that (1) is
registered as a quick-start resource; (2)
has a cold start-up time of ten minutes
or less; (3) has a minimum run time of
one hour or less; and (4) has a total
minimum down time of one hour or
less.40 SPP does not allow start-up or
no-load costs to affect LMP directly, but
does allow quick-start resources to
include start-up and no-load costs in
their mitigated energy offer curves for
the purpose of unit commitment.41
SPP’s production run determines both
dispatch and pricing for all resources
but resources constrained by their
economic minimum or maximum
operating limits are not eligible to set
LMP.42 Specifically, SPP states that it
relaxes the economic minimum
operating limit of quick-start resources
to zero in a screening run that is
executed prior to the final production
run, which includes both dispatch and
pricing. SPP explains that if the quickstart resource is dispatched below its
economic minimum operating limit in
the screening run, it will be considered
offline in the final production run.
Conversely, SPP states that if the quickstart resource is committed at or above
its economic minimum operating limit,
it will be considered online in the final
production run.43 Additionally, SPP
does not allow offline quick-start
resources to set LMP.44 SPP reports that
it intends to implement new fast-start
pricing to commit quick-start resources
more efficiently in real-time in the
second quarter of 2017.45

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Federal Register / Vol. 81, No. 251 / Friday, December 30, 2016 / Proposed Rules
this can result in an increase in total
production costs.57 Specifically, the
PJM Market Monitor opposes PJM’s
practice of reducing the economic
minimum limit of certain resources to
change LMPs. The PJM Market Monitor
argues that this pricing logic is a form
of subjective pricing because it varies
from fundamental LMP logic based on
an administrative decision to reduce
uplift.58
1. Fast-Start Resource Definitions and
Resource Eligibility
22. Commenters generally support
applying enhanced technology-neutral
fast-start pricing logic to an expanded
set of resources. Exelon and IMG
Midstream/Tangibl recommend that the
definition of fast-start resources be
technology agnostic.59 EPSA and
Entergy support expanding MISO’s
ELMP pricing to include units that can
respond within thirty minutes and to
include more emergency demand
response resources.60 EPSA/NEPGA
also supports prioritizing fast-start
demand response resource pricing.61
IMG Midstream/Tangibl states that
PJM’s and CAISO’s definitions of faststart resources do not coincide with the
definition used by other RTOs/ISOs,
which define fast-start resources as
being able to start up within ten
minutes, rather than two hours as
defined by PJM and CAISO. Further,
IMG Midstream/Tangibl argues that
PJM’s definition inappropriately
rewards less flexible resources.62 IMG
Midstream/Tangibl recommends that
the Commission direct PJM and CAISO
to define stricter start-up time
requirements for fast-start resources, or
create two different classes for these
resources to better
differentiate those that are truly faststart from those that are not.63 With
respect to CAISO’s Constrained Output
Generator commitment process, EPSA/
WPTF points out that not all fast-start
resources are registered or would
qualify for this process.64
57 PJM

Market Monitor Comments at 2–3.
at 2.
59 Exelon Comments at 13; IMG Midstream/
Tangibl Comments 4–5.
60 EPSA Comments (on MISO Report) at 10; EPSA
Comments (on price formation) at 13; Entergy
Comments at 7.
61 EPSA/NEPGA Comments at 6–7.
62 IMG Midstream/Tangibl Comments at 2–4,
6–8.
63 Id. at 4–5. However, CAISO states that
regardless of whether a unit is classified as fast,
medium, or long start, there is no special treatment
for the commitment or pricing of that unit. CAISO
Report at 4.
64 EPSA/WPTF Comments at 5.

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2. Inclusion of Start-Up and No-Load
Costs in Prices
23. Multiple commenters believe that
the start-up and no-load costs of faststart resources should be allowed to
affect LMPs, particularly when a unit is
within its minimum run time.65
According to EEI, including start-up and
no-load costs in appropriate markets
could minimize uplift and result in
more complete and accurate price
signals for market participants.66 DC
Energy, Inertia Power, and Vitol note
that both ISO–NE and MISO use
reasonable methods of amortizing a faststart resource’s start-up costs over its
minimum run time, and that resource’s
no-load costs over its actual run time,
which appropriately includes these
costs in prices.67
24. EPSA/IPPNY urges the
Commission to direct NYISO to review
whether the start-up and no-load costs
of fast-start resources should be allowed
to affect LMPs and supports NYISO’s
current efforts in this regard.68
Similarly, Golden Spread, Westar, and
EPSA believe that SPP should
incorporate the start-up and no-load
costs of fast-start resources into the
LMP 69 in order to reduce uplift and
prevent price suppression.70
25. Conversely, the PJM Market
Monitor states that PJM appropriately
explains in its report the likely negative
impacts of including start-up and noload costs in PJM’s price-setting logic.71
PJM argues that to account for start-up
costs in LMP would involve
assumptions regarding the run time of a
fast-start resource in order to amortize
these costs over that period. PJM
contends that assumptions regarding
actual run time would introduce
uncertainty and error in LMP
calculations and cause potential
divergence between the dispatch
instructions given to a resource and the
65 DC Energy, Inertia Power, and Vitol Comments
at 8–9; EEI Comments at 3; EPSA/P3 Comments at
5–6; Exelon Comments at 9–10; IMG Midstream/
Tangibl Comments at 8–9; PSEG Companies
Comments at 9. Exelon also states that PJM’s
concern that resources will chase prices if start-up
and no-load costs are included in price should be
resolved by imposing a penalty to resources that
deviate from dispatch instructions. Exelon
Comments at 12.
66 EEI Comments at 3–4.
67 DC Energy, Inertia Power, and Vitol Comments
at 9.
68 EPSA/IPPNY Comments at 6.
69 As noted previously, SPP determines a unit’s
offer curve by combining start-up and no-load
adders with the unit’s energy offer curve. However,
only the energy component is used to set LMP. SPP
Report at 8.
70 EPSA Comments (on SPP Report) at 8; Golden
Spread Comments at 1–2; Westar Comments at
3–4.
71 PJM Market Monitor Comments at 1.

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LMP at the resource’s location.72 In
addition, PJM explains that
incorporating no-load costs into the
calculation of LMP would represent a
significant change to the status quo and
produce negligible benefits. PJM asserts
that such a change would introduce a
divergence between LMPs and dispatch
signals for all resources.73
26. CAISO asserts that LMPs are
intended to reflect the incremental cost
of serving load, which does not include
commitment costs, but states that the
logic by which the no-load costs of
block-loaded Constrained Output
Generators are included in LMPs could
be extended to other resources with a
limited operating range.74
3. Relaxation of Economic Minimum
Operating Limit
27. Several commenters argue that the
economic minimum operating limit of
block-loaded or fast-start resources
should be relaxed to zero when
determining prices. EPSA, EPSA/P3,
Exelon, and PSEG Companies argue that
PJM’s practice of relaxing the economic
minimum operating limit by at most ten
percent limits the ability for blockloaded resources to set LMPs whenever
they are required to meet load and
prevents a full consideration of a blockloaded resource’s costs.75 PSEG
Companies requests that the
Commission find that relaxing a blockloaded fast-start resource’s minimum
operating limit to zero (i.e., relaxing the
minimum operating limit by 100
percent) is the best practice because it
ensures that block-loaded resources can
set the price whenever they are
needed.76 PJM argues that because it
limits the relaxation of the economic
minimum operating limit by at most ten
percent, over-generation is kept to a
minimum and any imbalances are
managed by existing grid services.77
28. EPSA encourages the Commission
to direct all RTOs/ISOs to incorporate
the principles exemplified by MISO’s
ELMP pricing logic, which it believes
relaxes economic minimum operating
limits in a pricing run that occurs after
the dispatch run, and appears to have
resulted in robust dispatch operations
and not resulted in significant overgeneration. EPSA states that such logic
will help adequately compensate
resources for their distinct capabilities
72 PJM

Report at 10.
at 10.
74 CAISO Report at 12.
75 EPSA Comments (on MISO Report) at 6; EPSA/
P3 Comments at 6; Exelon Comments at 12; PSEG
Companies Comments at 4–5.
76 PSEG Companies Comments at 7.
77 PJM Report at 12.
73 Id.

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through LMPs and lead to efficient and
orderly dispatch.78
29. NYISO states that it allows blockloaded resources to be considered as
fully dispatchable from zero to their
upper limit when determining prices so
that these resources can set the price
whenever they are needed to meet
load.79 NYISO argues that not treating
such resources as fully dispatchable
could prevent these resources from
setting prices, especially in load pockets
within New York where only blockloaded resources are available to meet
reliability needs.80
4. Offline Fast-Start Resources
30. Several commenters express
concern that allowing offline resources
to set prices when they are not actually
capable of resolving a transmission or
reserve shortage could lead to
inaccurate price signals.81 Specifically,
Entergy, EPSA, and Westar express
concern that MISO is over-including
offline resources in price setting even
when they are not available to serve an
increase in demand.82 Westar further
states that the use of offline unit costs
can inappropriately prevent scarcity
price signals, prevent online resources
with higher costs from setting the price,
lead to increased uplift, and result in
prices that do not represent the true
marginal cost of production.83 To
remedy this issue, EPSA argues that
MISO must make significant
improvements to its dispatch modeling
and pricing processes in order to allow
offline resources to set prices only when
these resources are both economic and
available.84 MISO states that it allows
offline fast-start resources to set LMP,
but has, per guidance from its market
monitor, revised its commitment
methodology to better reflect unit
economics and availability.85
31. CAISO does not believe that
allowing offline resources to contribute
to LMP would lead to the most
economical market solution.86 CAISO
explains that it clears its markets using
classical unit commitment
methodologies where the objective is to
minimize the overall system costs,
including the commitment costs. Under
this approach, CAISO states that offline
78 EPSA

Comments (on MISO Report) at 12–13.
Report at 5.
80 Id. at 5.
81 Entergy Comments at 7; EPSA Comments (on
MISO Report) at 6–8; Exelon Comments at 13;
Westar Comments at 4–5.
82 Entergy Comments at 7; EPSA Comments (on
MISO Report) at 6–8; Westar Comments at 4–5.
83 Westar Comments at 4–5.
84 EPSA Comments (on MISO Report) at 6.
85 MISO Report at 11–14.
86 CAISO Report at 10.

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resources would not be committed in
CAISO markets because they are
considered to not lead to the most
economical solution. PJM and ISO–NE
argue that, since LMP is based on the
cost of the next incremental unit of
energy at that moment in time and an
offline resource cannot provide that
next incremental unit of energy, offline
resources should not be eligible to set
prices.87
32. With respect to NYISO’s treatment
of offline resources, LIPA states that
NYISO’s model reflects the availability
of offline units in LMPs while not
accurately representing the actual
flexibility of the system. LIPA explains
that this leads to inefficient pricing and
system dispatch, as well as excessive
start-ups of offline units.88
5. Day-Ahead and Real-Time Market
Consistency
33. Commenters also generally
support the use of fast-start pricing in
both the day-ahead and real-time
markets. Some commenters contend that
RTOs/ISOs should use consistent faststart pricing for both day-ahead and
real-time models to encourage price
convergence, regardless of how
infrequently fast-start units are
committed in the day-ahead market.89
Entergy supports MISO’s past efforts to
implement ELMP as a day-ahead and
real-time market platform such that
LMP reflects the true marginal cost of
production.90 PJM states that its faststart pricing logic is applied to both
markets in order to reflect the costs of
resources operated to address
transmission constraints in both dayahead and real-time LMPs.91 On the
other hand, ISO–NE states that its
revised fast-start pricing is being
implemented in the real-time market
only.92 ISO–NE explains that
implementation in the day-ahead
market would have a smaller beneficial
impact given that most fast-start
resources do not clear in the day-ahead
market. ISO–NE states that this is
especially true with respect to fossil fuel
fast-start resources, which have
inherently high operating costs and
primarily operate in response to
unanticipated real-time system
conditions.93
87 PJM

Report at 11; ISO–NE Report at 10.
Comments at 4.
89 DC Energy, Inertia Power, and Vitol Comments
at 9–10.
90 Entergy Comments at 7.
91 PJM Report at 13.
92 ISO–NE Report at 16–17.
93 ISO–NE Report at 16.
88 LIPA

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C. Need for Reform of Fast-Start Pricing
34. We preliminarily find that RTOs’/
ISOs’ existing practices regarding the
pricing of fast-start resources may result
in rates that are unjust and
unreasonable.
35. The Commission has stated that
the goals of price formation are to: (1)
Maximize market surplus for consumers
and suppliers; (2) provide correct
incentives for market participants to
follow commitment and dispatch
instructions, make efficient investments
in facilities and equipment, and
maintain reliability; (3) provide
transparency so that market participants
understand how prices reflect the actual
marginal cost of serving load and the
operational constraints of reliably
operating the system; and (4) ensure that
all suppliers have an opportunity to
recover their costs.94 The accurate
pricing of fast-start resources can
advance price formation goals by more
transparently reflecting the marginal
cost of serving load, which will reduce
uplift costs and thereby improve price
signals to support efficient investments
in facilities and equipment.
36. While most RTOs/ISOs have
incorporated some form of fast-start
pricing into their market-clearing
software, based on experience with the
different fast-start pricing used by each
RTO/ISO, we believe some practices
have emerged that better represent the
marginal cost of serving load.
Specifically, we believe that some
existing fast-start pricing practices, or a
lack of fast-start pricing practices, may
result in market prices that fail to
accurately reflect the marginal cost of
serving load. These prices may fail to
reflect the value of fast-start resources
and create unnecessary uplift payments.
37. For the reasons outlined below,
we preliminarily find that such market
outcomes may produce rates that are
unjust and unreasonable. First, we
preliminarily find that some current
RTO/ISO practices may fail to
accurately reflect the marginal cost of
serving load because fast-start resources
are inappropriately prevented from
setting prices.95 Fast-start resources are
often dispatched to meet real-time
system needs but are often ineligible to
94 See Notice Inviting Post-Technical Workshop
Comments, Docket No. AD14–14–000 at 2 Price
Formation in Energy and Ancillary Services Market
Operated by Transmission Organizations and
Independent System Operators, Notice, Docket No.
AD14–14–000.
95 See Midwest Indep. Transmission Sys.
Operator, Inc., 140 FERC ¶ 61,067, at P 38 (2012)
(finding that MISO’s LMP pricing algorithm, which
prohibited fast-start resources from setting the
market clearing price, ‘‘may produce an inaccurate
price signal’’).

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Federal Register / Vol. 81, No. 251 / Friday, December 30, 2016 / Proposed Rules
set the clearing price because these
resources are either dispatched at an
economic minimum operating limit or
are block-loaded. This is the case
because LMP is set by the offer of the
resource that is dispatched up to serve
the next additional MW of demand or
dispatched down to accommodate the
next MW of reduced demand. Fast-start
resources often have little or no
dispatch range (i.e., their economic
minimum operating limit equals their
economic maximum operating limit). A
resource that is operating inflexibly at
its economic minimum operating limit
or economic maximum operating limit
is not dispatchable to serve an
additional increment or decrement of
demand, so is not eligible to set prices.96
Rules or modeling practices that prevent
fast-start resources from setting prices
result in prices that fail to reflect the
cost of the marginal resource on the
system when that resource is needed to
serve load.
38. While PJM and NYISO allow
certain block-loaded resources to set
prices, they do not generally allow faststart resources that are not block-loaded
to set prices. CAISO allows only certain
block-loaded and nearly block-loaded
resources to set prices. In addition,
PJM’s practice of relaxing the economic
minimum operating limits of blockloaded resources by at most ten percent
could restrict the set of circumstances in
which such a resource could set prices.
39. Second, even if fast-start resources
were allowed to set prices, certain other
aspects of some current RTO/ISO faststart pricing practices, such as not
choosing to include commitment costs,
can prevent prices from accurately
reflecting the marginal cost of serving
load. Because of their operating
characteristics, fast-start resources are
uniquely situated to respond to
unforeseen real-time system needs.
When fast-start resources are committed
in real-time, it is often at short notice to
meet some system condition or market
need over a short time period, and, as
such, we preliminarily find that these
commitment costs should be considered
marginal costs. However, this is not the
current practice in all RTOs/ISOs, and
we preliminarily find that market rules
in some RTOs/ISOs that prevent prices
from reflecting commitment costs of
fast-start resources may contribute to
inaccurate price signals.
96 See Federal Energy Regulatory Commission,
Price Formation in Organized Wholesale Electricity
Markets: Staff Analysis of Operator-Initiated
Commitments in RTO and ISO Markets, Docket No.
AD14–14–000, at 26–27 (Dec. 2014), http://
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40. Third, some current practices
regarding the use of offline resources to
set prices in certain RTOs/ISOs may
distort price signals. For example, MISO
allows offline fast-start resources to set
prices under transmission constraint
violations or reserve shortage
conditions, although sometimes such
resources are not feasible (i.e., the
resources are not able to start up quickly
enough to address the shortage or
transmission constraint violation) or
economic for addressing the shortage or
transmission constraint violation.97 If an
offline fast-start resource is not actually
feasible or economic for addressing a
shortage or transmission constraint
violation, then the resulting prices
could be inefficiently low and mute the
price signals associated with shortages
or transmission constraint violations.98
41. Fourth, we are concerned that
implementation of fast-start pricing in
the real-time market only, or
implementation of fast-start pricing
practices in the day-ahead market that
are significantly different from the realtime market, can negatively impact dayahead and real-time price convergence
and may result in day-ahead market
prices that fail to reflect the marginal
cost of fast-start resources. Furthermore,
even though some RTOs/ISOs have
implemented some form of fast-start
pricing in the day-ahead market, current
rules limit which resources qualify as
fast-start resources in a manner that is
inconsistent with the requirements
herein.
42. Accordingly, we preliminarily
find that, based on experience with
existing RTO/ISO fast-start pricing
practices, some forms of fast-start
pricing may result in prices that fail to
reflect the marginal cost of production
in intervals when fast-start resources are
needed to serve load. As a result, prices
in RTO/ISO energy markets in some
periods may not reflect the value that
fast-start resources provide. As a result,
over the long run, prices in RTO/ISO
energy markets may fail to reflect the
need for fast-start resources and thus fail
to provide appropriate incentives for
investment.
43. We also preliminarily find that
existing RTO/ISO fast-start pricing
could create unnecessary uplift
payments. For example, when prices do
97 MISO, Informational Report on Extended
Locational Marginal Pricing, Docket No. ER12–668–
000, at 9 (Aug. 29, 2016). MISO states that for
reserve shortages, 53 percent of participating offline
fast-start units were feasible and economic. For
transmission violations, it states that 77 percent of
participating offline units were feasible and
economic.
98 See, e.g., Potomac Economics, 2015 State of the
Market Report for the MISO Electricity Markets at
33 (June 2016).

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not sufficiently reflect a marginal faststart resource’s commitment cost, the
resource must be compensated through
out-of-market uplift payments.
Compensating resources through uplift
payments is less transparent than
compensating resources through market
clearing prices that reflect the marginal
cost of production, which could be
based on the costs of a fast-start
resource. Additionally, uplift payments
are often allocated more broadly, which
can mute the investment signals
provided by prices over longer time
periods, therefore inhibiting efficient
market entry and exit. In addition,
resources with costs below the marketclearing price may also have a lower
financial incentive to perform at times
when fast-start resources typically
operate, such as during stressed system
conditions, when the performance of all
resources is particularly important.99
D. Commission Proposal
44. To remedy the potentially unjust
and unreasonable rates caused by
existing RTO/ISO fast-start pricing
practices, we propose, pursuant to
section 206 of the Federal Power Act,100
to establish a set of fast-start pricing
requirements in RTOs/ISOs. These
requirements would ensure RTO/ISO
day-ahead and real-time markets more
accurately reflect the marginal costs of
operating fast-start resources.
Specifically, we propose to require each
RTO/ISO to establish the following set
of requirements for its fast-start pricing:
(1) Apply fast-start pricing to any
resource committed by the RTO/ISO
that is able to start up within ten
minutes, has a minimum run time of
one hour or less, and that submits
economic energy offers to the market;
(2) incorporate commitment costs, i.e.,
start-up and no-load costs, of fast-start
resources in energy and operating
reserve prices; (3) modify fast-start
pricing to relax the economic minimum
operating limit of fast-start resources
and treat them as dispatchable from zero
to the economic maximum operating
limit for the purpose of calculating
prices; (4) if the RTO/ISO allows offline
fast-start resources to set prices for
addressing certain system needs, the
resource must be feasible and economic;
and (5) incorporate fast-start pricing in
both the day-ahead and real-time
markets. We seek comment on each of
these proposals.
99 Settlement Intervals and Shortage Pricing in
Markets Operated by Regional Transmission
Organizations and Independent System Operators,
Order No. 825, FERC Stats. & Regs. ¶ 31,384, at P
58 & n.99 (2016).
100 16 U.S.C. 824e (2012).

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45. We expect that the proposed
reforms will remedy current RTO/ISO
fast-start pricing practices that
potentially lead to unjust and
unreasonable rates and will provide
benefits that are consistent with the
goals of the Commission’s price
formation initiative. For instance, the
proposed reforms are intended to more
accurately reflect the marginal cost of
production in periods when a fast-start
resource is the marginal resource and
provide price signals that better inform
investment decisions, including where
and when fast-start resources should be
built or maintained. The proposed
reforms will also benefit markets by
providing more accurate and
transparent price signals that better
reflect the actual marginal cost of
serving load and reduce uplift.

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1. Fast-Start Resource Definitions and
Resource Eligibility
46. In order to establish consistent
treatment for fast-start resources across
RTOs/ISOs and ensure that prices
appropriately reflect the cost of serving
load, we propose to require that each
RTO/ISO must define fast-start
resources as resources that meet the
following performance requirements: 101
(1) Are able to start up within ten
minutes or less; (2) have a minimum run
time of one hour or less; and (3) submit
economic energy offers to the market,
i.e., not self-scheduling energy. We
preliminarily find that this definition of
fast-start resources will address the
deficiencies in current RTO/ISO faststart pricing practices that limit the
eligibility of certain fast-start resources
to set prices.102 In addition, any
resource, regardless of technology type,
that meets the above definition would
qualify as a fast-start resource and
would then be covered by the fast-start
pricing requirements, as defined further
herein.
47. We preliminarily find that it is
appropriate to include both
dispatchable fast-start resources and
block-loaded fast-start resources in the
definition of a fast-start resource, as is
done in ISO–NE and MISO. That is,
some fast-start resources are committed
and dispatched to an output level equal
to the resource’s economic minimum
operating limit that is lower than the
resource’s economic maximum
101 RTOs/ISOs would need to routinely assess a
resource’s currently effective parameters and status
prior to conferring fast-start pricing eligibility.
102 See supra section II.C. We understand that this
proposed definition of fast-start resource could
require changes to previously approved RTO/ISO
pricing practices. However, as discussed further
below, we seek comment on this proposed
definition, and will consider these comments in the
development of any Final Rule in this proceeding.

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operating limit. Such a resource would
not be eligible to set prices in all
circumstances and would therefore
create the same concerns we have
regarding block-loaded fast-start
resources. Further, if only block-loaded
fast-start resources are included in the
definition, as is done in CAISO and
NYISO, certain resources could have the
incentive to restrict the operating range
in their energy supply offers.103
Moreover, it appears that a variety of
technologies beyond conventional
generation can and should be eligible
for dispatch under fast-start pricing. For
example, both MISO and ISO–NE allow
certain demand response resources to
set prices under their fast-start
pricing.104 Given that a variety of
resources could be the last resource
dispatched to serve load (i.e., the
marginal resource), we propose to use
the performance requirements noted
earlier to define fast-start resources,
rather than specific technological
characteristics.
48. We seek comment on this
proposed definition of fast-start
resources. For example, we seek
comment on whether the definition of
fast-start resources should include
resources that have start-up times of
greater than ten minutes. Similarly, we
seek comment on whether the definition
of fast-start resources should include
resources with minimum run times of
longer than one hour. We also seek
comment on whether there are other
characteristics that should be included
in the definition of fast-start resources.
Additionally, we seek comment on any
additional tariff changes that may be
necessary to implement the reforms
proposed herein. Finally, we seek
comment on whether this proposed
definition should instead define
minimum standards for each operating
characteristic necessary to be
considered a fast-start resource, to,
among other things, allow regional
variation.
2. Inclusion of Start-Up and No-Load
Costs in Prices
49. We propose to require RTOs/ISOs
to allow fast-start resources’
commitment costs, i.e., start-up and noload costs,105 to be reflected in prices.
103 For example, if only block-loaded fast-start
resources are eligible for fast-start pricing, some
resources may have an incentive to reduce their
dispatchable range, which could lead to inefficient
results, such as a reduction in system flexibility.
104 MISO, FERC Electric Tariff, Schedule 29A,
ELMP for Energy and Operating Reserve Market: ExPost Pricing Formulations (40.0.0); ISO–NE,
Transmission, Markets and Services Tariff, Market
Rule 1, III.2.4 (19.0.0).
105 No-load costs are the theoretical costs in $/
hour for operating a resource at zero MW output.

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Specifically, we propose to require that,
in the pricing run, each RTO/ISO
determine prices by calculating an
enhanced energy offer for each fast-start
resource that includes not just the
incremental energy offer but also
incorporates start-up and no-load costs.
Specifically, the enhanced energy offer
should include the following
components: (1) The incremental energy
offer; (2) the amortized start-up cost;
and (3) an amortized portion of the noload cost, as described below. The
enhanced energy offer can only be used
to set prices during the resource’s
minimum run time, as discussed further
below.
50. To incorporate a fast-start
resource’s start-up and no-load costs
into prices, we propose to define
specific formulations. Recognizing that
commitment costs may be determined
in different ways in RTOs/ISOs, these
proposals are not intended to alter how
a resource’s start-up and no-load costs
are calculated. To incorporate a faststart resource’s start-up cost into prices,
we propose to define a resource’s
amortized start-up cost as equal to its
start-up cost divided by the product of
its economic maximum operating limit
and minimum run time. To determine
the portion of a fast-start resource’s noload costs that is reflected in prices, we
propose to define the amortized no-load
cost as the no-load cost divided by the
resource’s economic maximum
operating limit. For both amortized
start-up and no-load costs, we propose
to accept any mathematically equivalent
formula.106
51. We preliminarily find that given
the unique operating characteristics of
fast-start resources, their commitment
costs, i.e., start-up and no-load costs,
should be viewed as marginal costs and,
as such, should be included in prices.
The Commission previously accepted
MISO’s ELMP methodology, which
allows commitment costs to affect
prices. There, the Commission found
that incorporating the commitment costs
of fast-start resources in prices leads to
prices that better reflect the costs of
committing and dispatching
resources.107 Moreover, incorporating a
fast-start resource’s start-up and no-load
costs would ensure that prices reflect
106 For instance, the RTO/ISO could introduce a
fractional commitment variable for fast-start
resources within the market pricing algorithm.
Adding such a variable provides an additional
option of introducing a portion of the capability of
a resource in the solution while adding only an
equivalent fraction of the amortized commitment
cost.
107 Midwest Indep. Transmission Sys. Operator,
Inc., 140 FERC ¶ 61,067 at P 39.

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srobinson on DSK5SPTVN1PROD with PROPOSALS

the actual marginal cost of production
and will thus reduce uplift.
52. As noted above, we propose that
the enhanced energy offer can only be
used to set prices during the resource’s
minimum run time. While it could be
argued that commitment costs for faststart resources are still marginal costs of
operating the system even beyond a faststart resource’s minimum run time,
attempting to amortize start-up costs
beyond the minimum run time is
problematic from a practical standpoint,
specifically in the real-time market. This
is because, after the minimum run time
is completed, the unit commitment
algorithm may decommit the fast-start
resource if it is no longer economic,
making the total run time unknown.
When the actual run time of the faststart resource is unknown, it is difficult
to define an appropriate period over
which to amortize that resource’s startup cost. Given that the resource must
operate for no less than its minimum
run time, we believe that amortizing a
fast-start resource’s commitment costs
during this period represents a
reasonable approach.108
53. We seek comment on the proposal
to include a fast-start resource’s start-up
and no-load costs as marginal costs. We
also seek comment on whether to
amortize commitment costs for the
purpose of calculating prices, and the
proposed formulas to amortize these
costs. In particular, we understand that
the amortization period for commitment
costs acts as a proxy for the timeframe
over which the committed fast-start
resource is likely to be marginal.
Therefore, we seek comment on whether
there are better or alternative timeframes
over which commitment costs for faststart resources should be amortized. We
also specifically seek comment on
whether the economic maximum
operating limit is the appropriate value
to use when amortizing start-up and noload costs or whether another capacity
value may be more appropriate.
3. Relaxation of Economic Minimum
Operating Limit
54. We propose to require RTOs/ISOs,
in the pricing run, to relax to zero each
fast-start resource’s economic minimum
operating limit, thereby treating these
resources as fully dispatchable for the
purpose of calculating prices. Relaxing
the economic minimum operating limit
of a fast-start resource to zero will
permit an inflexible or mostly inflexible
fast-start resource to be treated as
dispatchable by the RTO/ISO market
108 This proposal does not address RTOs/ISOs
including no-load costs in prices beyond a fast-start
resource’s minimum run time.

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software during the pricing run. The
purpose of this proposal is to enable a
fast-start resource to set the market
clearing price if it is, indeed, the
marginal unit needed to serve load.
Additionally, RTOs/ISOs must ensure
that they sufficiently address overgeneration concerns. Specifically, each
RTO/ISO must ensure that physical
dispatch instructions to resources do
not result in over-generation and must
have market rules that address the
potential for over-generation due to
deviations from dispatch instructions.
As noted above, RTOs/ISOs with faststart pricing already use penalties and/
or opportunity cost payments to ensure
that resources adhere to scheduled
dispatch instructions.109 We propose
that, as part of its compliance filing to
any Final Rule, each RTO/ISO should
either demonstrate that its current
practices meet the requirements
established here to address overgeneration, or propose additional tariff
changes to do so.
55. We seek comment on whether
there are challenges associated with
relaxing the economic minimum
operating limit for the pricing run. We
also seek comment on any overgeneration concerns, such as whether
over-generation can be managed through
penalties for deviations, opportunity
cost payments, or other existing
mechanisms. Additionally, we seek
comment on alternative methods to treat
fast-start resources as fully dispatchable
for the purpose of calculating prices.
4. Offline Fast-Start Resources
56. Allowing offline fast-start
resources to set prices can better reflect
the cost of providing energy at a given
location or of meeting reserve
requirements. For instance, if the realtime dispatch algorithm optimizes
spinning reserve 110 supply among
online resources and these online
resources are not sufficient to meet the
RTO’s/ISO’s spinning reserve
requirements, the dispatch algorithm
will determine there is a shortage of
spinning reserve and implement the
appropriate shortage pricing. However,
in such circumstances, while online
resources may not be sufficient to meet
spinning reserve requirements, there
may be offline fast-start resources that
109 See supra section II.A; MISO, FERC Electric
Tariff, § 40.3.4 (33.0.0) (charges for excessive or
deficient energy deployment); ISO–NE.,
Transmission, Markets and Services Tariff, Market
Rule 1, III.F.2.3.10 (24.0.0) (lost opportunity cost
credit for resources displaced by fast-start
resources).
110 Spinning reserve refers to reserve capacity that
is online and synchronized to the system and is
ready to meet electric demand within ten minutes
of a dispatch instruction by an RTO/ISO.

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96399

can quickly provide energy in the same
time frame as spinning reserve. If RTOs/
ISOs do not adequately consider all
resources that are available to meet
system needs, including fast-start
resources that are offline, this may
result in the use of administrative
pricing or other measures (e.g.,
committing additional resources) that
are less economically efficient because
they do not reflect the availability of
less expensive fast-start resources that
could resolve the issue and thus result
in higher overall system costs. Allowing
RTOs/ISOs to include offline fast-start
resources may have benefits; however,
we do not propose to require that all
RTOs/ISOs allow offline resources to set
prices. Instead, we propose to establish
certain requirements for those RTOs/
ISOs that choose to allow offline faststart resources to set prices.
57. While allowing offline fast-start
resources to set prices can be beneficial,
it is imperative that the offline resources
actually be feasible (i.e., able to start
quickly) and economic for addressing
certain system needs.111 For example,
an offline fast-start resource that has not
reached its minimum down time would
not actually be able to start to remedy
a transmission constraint violation,
energy shortage, or reserve shortage.
Such an offline fast-start resource is not
a feasible option to resolve the system
issue and should not be allowed to set
prices. Further, if online resources were
not able to meet an RTO’s/ISO’s
spinning reserve requirement, the
dispatch algorithm would calculate the
price based on an applicable shortage
price. However, if offline fast-start
resources are considered, there may be
an offline fast-start resource that can be
used to meet the spinning reserve
requirement at a price lower than the
shortage price. If, for example, the
shortage price for spinning reserve was
$80/MWh, it would only be economic to
allow a fast-start resource to set prices
if the full cost to operate the resource
was less than $80/MWh. To accurately
reflect the full cost of operating the faststart resource, its offer would need to
include start-up costs and no-load costs
(amortized over a certain timeframe and
capacity value). If the offline fast-start
resource set prices at a level that did not
reflect its full cost of operation, the
resulting prices could be inefficiently
low. For instance, if the offline fast-start
resource set the spinning reserve price
111 See Order No. 825, FERC Stats. & Regs.
¶ 31,384 at P 168 (‘‘. . . we agree with Potomac
Economics that if an RTO’s/ISO’s pricing model
allows infeasible or uneconomic units to set prices,
the offline units represent an artificial increase in
real-time supply that will depress real-time
prices.’’).

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based on an offer that included only its
incremental energy cost of $75/MWh,
the resource would be setting the
spinning reserve price, even though, if
its full cost of operation was considered,
it may not be more economic than
establishing the shortage price of $80/
MWh.
58. We propose to allow offline faststart resources to be eligible to set prices
if the resource is feasible and economic.
As a threshold requirement, an offline
fast-start resource may only be used to
set prices (1) during a transmission
constraint violation; or (2) if energy or
ancillary service shortage conditions
exist. Transmission constraint violations
are defined as any instance where a
transmission constraint is exceeded
because the cost of redispatching
resources to resolve the constraint is
greater than the penalty factor
associated with that constraint.112
Energy or ancillary service shortage
conditions are defined as any instance
where prices for energy or ancillary
services are calculated using
administrative prices as defined in the
RTO’s/ISO’s tariff. To be considered
feasible, we propose that an offline faststart resource must meet the following
criteria: (1) Have a start-up time of ten
minutes or less; (2) have a generation
shift factor of no less than 5 percent on
the applicable transmission constraint
that is being exceeded; and (3) must not
have any operational constraints that
would prevent the resource from
starting and providing energy.113 We
preliminarily find that a start-up time of
ten minutes or less will ensure that
offline fast-start resources are feasible to
address transmission constraint
violations or reserve shortages in a
timeframe that is consistent with
applicable facility ratings and
contingency reserve deployment
periods. Similarly, we preliminarily
find that requiring a generation shift
factor of no less than 5 percent will
ensure that an offline fast-start resource
used to set price during a transmission
constraint violation can actually relieve
the constraint if started. This minimum
generation shift factor is similar to the
threshold used in MISO, which is 6
percent.114 To be considered economic,
the RTO/ISO’s fast-start pricing must
consider the full cost of an offline faststart resource, including its amortized
112 See Comments of Potomac Economics, Docket
No. AD14–14–000, at 20 (Feb. 24, 2015).
113 For example, the resource cannot be within its
minimum down time and must not be prevented
from starting due to environmental restrictions, fuel
use restrictions, or other operational restrictions.
114 MISO, FERC Electric Tariff, Schedule 29A,
ELMP for Energy and Operating Reserve Market: ExPost Pricing Formulations (40.0.0), II.B, III.B.

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start-up and no-load costs. The offline
fast-start resource’s full cost must be
less than the administrative shortage
price for the shortage or transmission
constraint violation the resource is
resolving.
59. We seek comment on the proposal
to reflect the costs of offline fast-start
resources in prices in certain
circumstances. Specifically, we seek
comment on whether we should
establish a standard amortization period
for the commitment costs of offline faststart resources for all RTOs/ISOs,
similar to online fast-start resources, or
whether RTOs/ISOs should be allowed
to propose an amortization period on
compliance. To determine a resource’s
full cost for the purpose of pricing,
RTOs/ISOs could amortize a resource’s
costs over a particular time period. We
also seek input on any additional rules
for offline fast-start resources to ensure
they will respond in time to meet the
system needs beyond requiring that they
be feasible and economic for addressing
system needs. We also seek comment on
the market conditions under which
offline fast-start resources should be
able to set prices (e.g., transmission
constraint violations, energy or
operating reserve shortages).
5. Day-Ahead and Real-Time Market
Consistency
60. We propose to require RTOs/ISOs
to incorporate fast-start pricing in both
the day-ahead and real-time markets.
We preliminarily find that doing so
provides a more accurate price signal in
the day-ahead market and supports
price convergence between the dayahead and real-time markets.
61. As discussed above, fast-start
resources are frequently used to quickly
respond to real-time system conditions.
However, under certain market
conditions, such as high day-ahead
demand or persistent congestion
patterns, fast-start resources may
economically clear the day-ahead
market. For reasons similar to the ones
discussed above, we believe that when
these resources economically clear the
market, market prices should reflect the
marginal cost of these resources. By
allowing fast-start resources to set
prices, RTO/ISO markets will send a
transparent price signal that more
accurately reflects marginal costs.
62. We further preliminarily find that
requiring consistent pricing practices in
both the day-ahead and real-time
markets will lead to better price
convergence, and therefore we believe
these benefits merit implementation of
fast-start pricing in both the day-ahead
and real-time markets. Absent
consistent pricing in both the day-ahead

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and real-time markets, day-ahead and
real-time market prices may be different
even under similar market conditions.
For example, the day-ahead and realtime markets in ISO–NE could produce
different energy prices even under
identical market conditions because the
day-ahead market does not incorporate
the commitment costs of fast-start
resources in energy prices.
63. We seek comment on the proposal
to incorporate consistent fast-start
pricing in both day-ahead and real-time
markets. Specifically, we acknowledge
that implementation in the day-ahead
market may have a smaller benefit given
that most fast-start resources clear in the
real-time market, and we thus seek
comment on the extent to which there
are benefits or drawbacks to applying
the proposed reforms to both the dayahead and real-time markets, as opposed
to only the real-time markets. Further,
we seek comment on whether there are
any reasons for establishing different
fast-start pricing practices in the dayahead and real-time markets. In
particular, we seek comment on
including commitment costs in the dayahead market given different forecast,
optimization, and commitment time
horizons than the real-time market,
where fast-start units can have brief
dispatch periods to meet system needs.
6. Additional Comments Sought on This
Proposal
64. We seek comment on the need for
reform and on the five proposals
outlined above.115 We also seek
comment on whether allowing fast-start
resources to set prices could result in
the exercise of market power. For
example, the concentrated ownership of
fast-start resources could raise market
power concerns that are not addressed
in existing RTO/ISO market power
mitigation procedures.116
115 These five proposals are: (1) An RTO/ISO
must apply fast-start pricing to any resource
committed by the RTO/ISO that is able to start up
within ten minutes, has a minimum run time of one
hour or less, and that submits economic energy
offers to the market; (2) an RTO/ISO should
incorporate commitment costs of fast-start resources
in energy and operating reserve prices; (3) an RTO/
ISO must modify its fast-start pricing to relax the
economic minimum operating limit of fast-start
resources and treat them as dispatchable from zero
to the economic maximum operating limit for the
purpose of calculating prices; (4) if an RTO/ISO
allows offline fast-start resources to set prices for
addressing certain system needs, the resource must
be feasible and economic; and (5) an RTO/ISO must
incorporate fast-start pricing in both the day-ahead
and real-time markets.
116 Such procedures could include any
procedures or conduct and impact tests that provide
offer and physical operating parameter mitigation
for economic withholding, physical withholding, or
out-of-market commitment.

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65. We recognize the potential that
the proposed reforms may require
significant changes to RTO/ISO software
systems, which can be a complex and
costly endeavor. We seek comment on
the required software changes, updates
to optimization modeling and parameter
inputs, estimated costs and time
necessary to implement aspects of the
reforms proposed in this NOPR, and any
additional considerations for
implementing the requirements
proposed herein.
III. Compliance
66. We propose to require that each
RTO/ISO submit a compliance filing
within 90 days of the effective date of
any eventual Final Rule in this
proceeding to demonstrate that it meets
the proposed requirements set forth in
any Final Rule. We note that this
compliance deadline is for RTOs/ISOs
to submit proposed tariff changes or
otherwise demonstrate compliance with
any Final Rule. We understand that
implementing the reforms required by
any Final Rule in this proceeding may
be a complex endeavor. However, we
preliminarily find that implementation
of these reforms is important to ensure
rates remain just and reasonable.
Therefore, we propose that tariff
changes filed in response to a Final Rule
in this proceeding must become
effective no more than six months after
compliance filings are due. We seek
comment on this proposed compliance
timeline.
67. We seek comment on the
proposed deadline for RTOs/ISOs to
submit the compliance filing 90 days
following the effective date of any Final
Rule in this proceeding. Specifically, we
seek comment on whether 90 days is
sufficient time for RTOs/ISOs to

srobinson on DSK5SPTVN1PROD with PROPOSALS

IV. Information Collection Statement
69. The Paperwork Reduction Act
(PRA) 118 requires each federal agency to
seek and obtain Office of Management
and Budget (OMB) approval before
undertaking a collection of information
directed to ten or more persons or
contained in a rule of general
applicability. OMB regulations 119
require approval of certain information
collection requirements imposed by
agency rules. Upon approval of a
collection of information, OMB will
assign an OMB control number and an
expiration date. Respondents subject to
the filing requirements of an agency rule
will not be penalized for failing to
respond to the collection of information
unless the collection of information
displays a valid OMB control number.
70. The reforms proposed in this
NOPR would amend the Commission’s
regulations to improve the operation of
organized wholesale electric power
markets operated by RTOs/ISOs. The
Commission proposes to require each
RTO and ISO implement market rules
that meet certain requirements when
pricing fast-start resources. The reforms
proposed in this NOPR would require
one-time filings of tariffs with the

Commission and potential software
upgrades to implement the reforms
proposed in this NOPR. The
Commission anticipates the reforms
proposed in this NOPR, once
implemented, would not significantly
change currently existing burdens on an
ongoing basis. With regard to those
RTOs/ISOs that believe that they
already comply with the reforms
proposed in this NOPR, they could
demonstrate their compliance in the
compliance filing required 90 days after
the effective date of any Final Rule in
this proceeding. The Commission will
submit the proposed reporting
requirements to OMB for its review and
approval under section 3507(d) of the
Paperwork Reduction Act.120
71. While the Commission expects the
adoption of the reforms proposed in this
NOPR to provide significant benefits,
the Commission understands
implementation can be a complex
endeavor. The Commission solicits
comments on the accuracy of provided
burden and cost estimates and any
suggested methods for minimizing the
respondents’ burdens, including the use
of automated information techniques.
Specifically, the Commission seeks
detailed comments on the potential cost
and time necessary to implement
aspects of the reforms proposed in this
NOPR, including (1) hardware, software,
and business processes changes; and (2)
processes for RTOs/ISOs to vet
proposed changes amongst their
stakeholders.
72. Burden Estimate: 121 The
Commission believes that the burden
estimates below are representative of the
average burden on respondents,
including necessary communications
with stakeholders. The estimated
burden and cost for the requirements
contained in this NOPR follow.122

Number of
respondents

Annual
number of
responses per
respondent

Total number
of responses

Average burden
hours and cost
per response 123

Total annual burden
hours and
total annual cost

Cost per
respondent
($)

(1)

(2)

(1) * (2) = (3)

(4)

(3) * (4) = (5)

(5) ÷ (1)

80 hours, $5,920 ........

480 hours, $35,520 ....

........................

Tariff filing costs ..........

6

1

117 See, e.g., Order No. 825, FERC Stats. & Regs.
¶ 31,384 at P 72; Demand Response Compensation
in Organized Wholesale Energy Markets, Order No.
745, FERC Stats. & Regs. ¶ 31,322, at P 4 & n.7,
order on reh’g and clarification, Order No. 745–A,
137 FERC ¶ 61,215 (2011), reh’g denied, Order No.
745–B, 138 FERC ¶ 61,148 (2012), vacated sub nom.
Elec. Power Supply Ass’n v. FERC, 753 F.3d 216
(D.C. Cir. 2014), rev’d & remanded sub nom. FERC
v. Elec. Power Supply Ass’n, 136 S. Ct. 760 (2016).
118 44 U.S.C. 3507(d).
119 5 CFR 1320.
120 44 U.S.C. 3507(d) (2012).

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develop new tariff language in response
to any Final Rule.
68. To the extent that any RTO/ISO
believes that it already complies with
the reforms proposed in this NOPR, the
RTO/ISO would be required to
demonstrate how it complies in the
compliance filing required 90 days after
the effective date of any Final Rule in
this proceeding. To the extent that any
RTO/ISO seeks to argue on compliance
that its existing market rules are
consistent with or superior to the
reforms adopted in any Final Rule, the
Commission will entertain those at that
time.117

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6

121 Burden means the total time, effort, or
financial resources expended by persons to
generate, maintain, retain, disclose, or provide
information to or for a federal agency, including:
‘‘. . . (ii) Developing, acquiring, installing, and
utilizing technology and systems for the purpose of
collecting, validating, and verifying information;
(iii) Developing, acquiring, installing, and utilizing
technology and systems for the purpose of
processing and maintaining information; (iv)
Developing, acquiring, installing, and utilizing
technology and systems for the purpose of
disclosing and providing information. . . .’’ 5 CFR
1320.3(b)(1) (2016). The time, effort, and financial

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resources necessary to comply with a collection of
information that would be incurred by persons in
the normal course of their activities (e.g., in
compiling and maintaining business records) will
be excluded from the ‘‘burden’’ if the agency
demonstrates that the reporting, recordkeeping, or
disclosure activities needed to comply are usual
and customary.
122 For this information collection, the
Commission staff estimates that industry is
similarly situated in terms of hourly cost (wages
plus benefits). Based on the Commission’s average
cost (wages plus benefits) for 2016, the Commission
is using $74.50/hour.

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Number of
respondents

Annual
number of
responses per
respondent

Total number
of responses

Average burden
hours and cost
per response 123

Total annual burden
hours and
total annual cost

Cost per
respondent
($)

(1)

(2)

(1) * (2) = (3)

(4)

(3) * (4) = (5)

(5) ÷ (1)

Implementation costs ..

6

1

6

srobinson on DSK5SPTVN1PROD with PROPOSALS

Total (one-time in
Year 1).

Cost to Comply: The Commission has
projected the total cost of compliance,
all within six months of a Final Rule
plus initial implementation, to be
$1,746,252. After Year 1, the reforms
proposed in this NOPR, once
implemented, would not significantly
change existing burdens on an ongoing
basis.
Title: FERC–516E, NOPR in RM17–3.
Action: Proposed revisions to an
information collection.
OMB Control No.: TBD.
Respondents for this Rulemaking:
RTOs and ISOs.
Frequency of Information: One-time
during year one.
Necessity of Information: The
Commission proposes this rule to
improve competitive wholesale electric
markets in the RTO and ISO regions.
Internal Review: The Commission has
reviewed the proposed changes and has
determined that the changes are
necessary. These requirements conform
to the Commission’s need for efficient
information collection, communication,
and management within the energy
industry. The Commission has assured
itself, by means of internal review, that
there is specific, objective support for
the burden estimates associated with the
information collection requirements.
65. Interested persons may obtain
information on the reporting
requirements by contacting the
following: Federal Energy Regulatory
Commission, 888 First Street NE.,
Washington, DC 20426 [Attention: Ellen
Brown, Office of the Executive Director],
email: [email protected], Phone:
(202) 502–8663, fax: (202) 273–0873.
Comments on the collection of
information and the associated burden
estimate in the proposed rule should be
sent to the Commission in this docket
and may also be sent to the Office of
Information and Regulatory Affairs,
Office of Management and Budget, 725
17th Street NW., Washington, DC 20503
123 The Commission staff anticipates that the
average respondent for this collection is similarly
situated to the Commission, in terms of salary plus
benefits. Based upon FERC’s 2016 annual average
of $154,647 (for salary plus benefits), the average
hourly cost is $74.50/hour.

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3,853 hours, $285,122

23,118 hours,
$1,710,732.

........................

3,933 hours, $291,042

23,598 hours,
$1,746,252.

$291,042

[Attention: Desk Officer for the Federal
Energy Regulatory Commission], at the
following email address:
[email protected]. Please
refer to Docket No.: RM17–3, FERC–
516E, OMB Control No. 1902–0286 in
your submission.
V. Environmental Analysis
73. The Commission is required to
prepare an Environmental Assessment
or an Environmental Impact Statement
for any action that may have a
significant adverse effect on the human
environment.124 We conclude that
neither an Environmental Assessment
nor an Environmental Impact Statement
is required for this NOPR under section
380.4(a)(15) of the Commission’s
regulations, which provides a
categorical exemption for approval of
actions under sections 205 and 206 of
the FPA relating to the filing of
schedules containing all rates and
charges for the transmission or sale of
electric energy subject to the
Commission’s jurisdiction, plus the
classification, practices, contracts and
regulations that affect rates, charges,
classifications, and services.125
VI. Regulatory Flexibility Act
74. The Regulatory Flexibility Act of
1980 (RFA) 126 generally requires a
description and analysis of proposed
rules that will have significant
economic impact on a substantial
number of small entities. The RFA
mandates consideration of regulatory
alternatives that accomplish the stated
objectives of a rule and that minimize
any significant economic impact on a
substantial number of small entities.
The Small Business Administration’s
(SBA) Office of Size Standards develops
the numerical definition of a small
business.127 These standards are
provided on the SBA Web site.128
124 Regulations Implementing the National
Environmental Policy Act of 1969, Order No. 486,
FERC Stats. & Regs. ¶ 30,783 (1987).
125 18 CFR 380.4(a)(15).
126 5 U.S.C. 601–12.
127 13 CFR 121.101.
128 U.S. Small Business Administration, Table of
Small Business Size Standards Matched to North

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75. The SBA classifies an entity as an
electric utility if it is primarily engaged
in the transmission, generation and/or
distribution of electric energy for sale.
Under this definition, the six RTOs/
ISOs are considered electric utilities,
specifically focused on electric bulk
power and control. The size criterion for
a small electric utility is 500 or fewer
employees.129 Since every RTO/ISO has
more than 500 employees, none are
considered small entities.
76. Furthermore, because of their
pivotal roles in wholesale electric power
markets in their regions, none of the
RTOs/ISOs meet the last criterion of the
two-part RFA definition of a small
entity: ‘‘not dominant in its field of
operation.’’ 130 As a result, we certify
that the reforms required by this NOPR
would not have a significant economic
impact on a substantial number of small
entities.
VII. Comment Procedures
77. The Commission invites interested
persons to submit comments on the
matters and issues proposed in this
notice to be adopted, including any
related matters or alternative proposals
that commenters may wish to discuss.
Comments are due February 28, 2017.
Comments must refer to Docket No.
RM17–3–000, and must include the
commenter’s name, the organization
they represent, if applicable, and their
address in their comments.
78. The Commission encourages
comments to be filed electronically via
the eFiling link on the Commission’s
Web site at http://www.ferc.gov. The
Commission accepts most standard
American Industry Classification System Codes
(effective Feb. 26, 2016), https://www.sba.gov/sites/
default/files/files/Size_Standards_Table.pdf.
129 13 CFR 121.201 (Sector 22, Utilities).
130 The RFA definition of ‘‘small entity’’ refers to
the definition provided in the Small Business Act,
which defines a ‘‘small business concern’’ as a
business that is independently owned and operated
and that is not dominant in its field of operation.
The Small Business Administration’s regulations at
13 CFR 121.201 define the threshold for a small
Electric Bulk Power Transmission and Control
entity (NAICS code 221121) to be 500 employees.
See 5 U.S.C. 601(3) (citing to section 3 of the Small
Business Act, 15 U.S.C. 632).

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Federal Register / Vol. 81, No. 251 / Friday, December 30, 2016 / Proposed Rules
word processing formats. Documents
created electronically using word
processing software should be filed in
native applications or print-to-PDF
format and not in a scanned format.
Commenters filing electronically do not
need to make a paper filing.
79. Commenters that are not able to
file comments electronically must send
an original of their comments to:
Federal Energy Regulatory Commission,
Secretary of the Commission, 888 First
Street NE., Washington, DC 20426.
80. All comments will be placed in
the Commission’s public files and may
be viewed, printed, or downloaded
remotely as described in the Document
Availability section below. Commenters
on this proposal are not required to
serve copies of their comments on other
commenters.

Dated: December 15, 2016.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

VIII. Document Availability

*

81. In addition to publishing the full
text of this document in the Federal
Register, the Commission provides all
interested persons an opportunity to
view and/or print the contents of this
document via the Internet through the
Commission’s Home Page (http://
www.ferc.gov) and in the Commission’s
Public Reference Room during normal
business hours (8:30 a.m. to 5:00 p.m.
Eastern time) at 888 First Street NE.,
Room 2A, Washington, DC 20426.
82. From the Commission’s Home
Page on the Internet, this information is
available on eLibrary. The full text of
this document is available on eLibrary
in PDF and Microsoft Word format for
viewing, printing, and/or downloading.
To access this document in eLibrary,
type the docket number excluding the
last three digits of this document in the
docket number field.
83. User assistance is available for
eLibrary and the Commission’s Web site
during normal business hours from the
Commission’s Online Support at (202)
502–6652 (toll free at 1–866–208–3676)
or email at [email protected],
or the Public Reference Room at (202)
502–8371, TTY (202) 502–8659. Email
the Public Reference Room at
[email protected].
List of Subjects in 18 CFR Part 35

srobinson on DSK5SPTVN1PROD with PROPOSALS

Electric power rates, Electric utilities.
By direction of the Commission.

Regulatory Text
In consideration of the foregoing, the
Commission proposes to amend Part 35,
Chapter I, Title 18, Code of Federal
Regulations, as follows:
PART 35—FILING OF RATE
SCHEDULES AND TARIFFS
1. The authority citation for part 35
continues to read as follows:

■

Authority: 16 U.S.C. 791a–825r, 2601–
2645; 31 U.S.C. 9701; 42 U.S.C. 7101–7352.

2. Amend § 35.28 by adding paragraph
(g)(10) to read as follows:

■

§ 35.28 Non-discriminatory open access
transmission tariff.

*
*
*
*
(g) * * *
(10) Pricing fast-start resources—(i)
Definition of fast-start resources. A faststart resource is any resource that is able
to start up within ten minutes or less,
that has a minimum run time of one
hour or less, and that submitted an
economic energy offer to the market.
(ii) Application to both day-ahead
and real-time markets. A Commissionapproved independent system operator
or regional transmission organization
with a tariff that contains a day-ahead
and a real-time market must implement
the following requirements in both the
day-ahead and real-time markets.
Implementation of the following
requirements must be consistent
between the day-ahead and real-time
markets.
(iii) Start-up and no-load costs. When
a Commission-approved independent
system operator or regional transmission
organization makes a decision to
commit a fast-start resource, it must
calculate prices by determining a faststart resource’s enhanced energy offer,
which includes the following
components: The resource’s incremental
energy offer, amortized start-up cost,
and amortized no-load cost. In using
that offer to calculate prices for the realtime and day-ahead markets, each
Commission-approved independent
system operator and regional
transmission organization must
amortize a fast-start resource’s start-up
cost over the resource’s minimum run

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time and its economic maximum
operating limit and must divide a faststart resource’s no-load cost by the
resource’s economic maximum
operating limit, but are only required to
do so during the resource’s minimum
run time.
(iv) Relaxation of economic minimum
operating limit. Each Commissionapproved independent system operator
and regional transmission organization
must relax to zero each fast-start
resource’s economic minimum
operating limit such that the resource is
able to be treated as fully dispatchable
for purposes of calculating prices. Each
Commission-approved independent
system operator and regional
transmission organization must ensure
that physical dispatch instructions to
resources do not result in overgeneration and must have market rules
that address the potential for overgeneration due to deviations from
dispatch instructions.
(v) Offline fast-start resources. If a
Commission-approved independent
system operator or regional transmission
organization uses offline fast-start
resources to calculate prices, the
resource must have a start-up time of
ten minutes or less, must not have any
operational constraints that would
prevent the resource from starting and
providing energy, and must set prices
based on the resource’s amortized full
cost, including start-up and no-load
costs, which must be less than the
administrative shortage price for the
shortage or transmission constraint
violation the resource is resolving. In
addition, an offline fast-start resource
used to resolve a transmission
constraint violation must have a
generation shift factor of no less than 5
percent on the applicable transmission
constraint that is being exceeded. Each
Commission-approved independent
system operator and regional
transmission organization may use an
offline fast-start resource to calculate
prices only during a transmission
constraint violation or during energy or
ancillary service shortage conditions.
The following appendix will not
appear in the Code of Federal
Regulations.
Appendix—List of Short Names/
Acronyms of Commenters

Commenter

CAISO ........................................................
DC Energy, Inertia Power, and Vitol .........
EEI .............................................................
EPSA .........................................................
EPSA/IPPNY ..............................................
EPSA/NEPGA ............................................

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California Independent System Operator Corporation.
DC Energy, LLC, Inertia Power, LP, and Vitol Inc.
Edison Electric Institute.
Electric Power Supply Association.
Electric Power Supply Association and Independent Power Producers of New York.
Electric Power Supply Association and New England Power Generators Association, Inc.

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96403

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Federal Register / Vol. 81, No. 251 / Friday, December 30, 2016 / Proposed Rules
Short name/acronym

Commenter

EPSA/P3 ....................................................
EPSA/WPTF ..............................................
Entergy .......................................................

Electric Power Supply Association and PJM Power Providers.
Electric Power Supply Association and Western Power Trading Forum.
Entergy Services, Inc. commented on behalf of the Entergy Operating Companies (Entergy Arkansas, Inc.; Entergy Louisiana, LLC; Entergy Mississippi, Inc.; Entergy New Orleans, Inc.; and
Entergy Texas, Inc.).
Exelon Corporation.
Golden Spread Electric Cooperative, Inc.
IMG Midstream LLC and Tangibl LLC.
ISO New England Inc.
Long Island Power Authority and Long Island Lighting Company d/b/a Power Supply Long Island.
Midcontinent Independent System Operator, Inc.
Monitoring Analytics, LLC.
New York Independent System Operator, Inc.
PJM Interconnection, L.L.C.
PSEG Companies (Public Service Electric and Gas Company; PSEG Power LLC; and PSEG Energy Resources & Trade LLC).
Southwest Power Pool, Inc.
Westar Energy, Inc.

Exelon ........................................................
Golden Spread Electric ..............................
IMG Midstream/Tangibl .............................
ISO–NE ......................................................
LIPA ...........................................................
MISO ..........................................................
PJM Market Monitor ..................................
NYISO ........................................................
PJM ............................................................
PSEG Companies ......................................
SPP ............................................................
Westar ........................................................

[FR Doc. 2016–30971 Filed 12–29–16; 8:45 am]

ADDRESSES:

BILLING CODE 6717–01–P

as follows:

You may submit comments

Electronic Submissions
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Food and Drug Administration
21 CFR Part 101
[Docket No. FDA–2016–D–2335]

Use of the Term ‘‘Healthy’’ in the
Labeling of Human Food Products;
Request for Information and
Comments; Extension of Comment
Period
AGENCY:

Food and Drug Administration,

HHS.
Notification; extension of
comment period.

ACTION:

The Food and Drug
Administration (FDA or we) is
extending the comment period for a
docket to receive information and
comments on the use of the term
‘‘healthy’’ in the labeling of human food
products. We established the docket
through a notice that appeared in the
Federal Register of September 28, 2016.
In the notice, we requested comments
on the term ‘‘healthy’’, generally, and as
a nutrient content claim in the context
of food labeling; we also requested
comments on specific questions
contained in the notice. We are taking
this action in response to requests for an
extension to allow interested persons
additional time to submit comments.
DATES: FDA is extending the comment
period on the notice that published in
the Federal Register of September 28,
2016 (81 FR 66562). Submit either
electronic or written comments by April
26, 2017.

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Submit electronic comments in the
following way:
• Federal eRulemaking Portal:
https://www.regulations.gov. Follow the
instructions for submitting comments.
Comments submitted electronically,
including attachments, to https://
www.regulations.gov will be posted to
the docket unchanged. Because your
comment will be made public, you are
solely responsible for ensuring that your
comment does not include any
confidential information that you or a
third party may not wish to be posted,
such as medical information, your or
anyone else’s Social Security number, or
confidential business information, such
as a manufacturing process. Please note
that if you include your name, contact
information, or other information that
identifies you in the body of your
comments, that information will be
posted on https://www.regulations.gov.
• If you want to submit a comment
with confidential information that you
do not wish to be made available to the
public, submit the comment as a
written/paper submission and in the
manner detailed (see ‘‘Written/Paper
Submissions’’ and ‘‘Instructions’’).
Written/Paper Submissions
Submit written/paper submissions as
follows:
• Mail/Hand delivery/Courier (for
written/paper submissions): Division of
Dockets Management (HFA–305), Food
and Drug Administration, 5630 Fishers
Lane, Rm. 1061, Rockville, MD 20852.
• For written/paper comments
submitted to the Division of Dockets
Management, FDA will post your
comment, as well as any attachments,
except for information submitted,

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marked and identified, as confidential,
if submitted as detailed in
‘‘Instructions.’’
Instructions: All submissions received
must include the Docket No. FDA–
2016–D–2335 for ‘‘Use of the Term
’Healthy’ in the Labeling of Human
Food Products; Request for Information
and Comments.’’ Received comments
will be placed in the docket and, except
for those submitted as ‘‘Confidential
Submissions,’’ publicly viewable at
https://www.regulations.gov or at the
Division of Dockets Management
between 9 a.m. and 4 p.m., Monday
through Friday.
• Confidential Submissions—To
submit a comment with confidential
information that you do not wish to be
made publicly available, submit your
comments only as a written/paper
submission. You should submit two
copies total. One copy will include the
information you claim to be confidential
with a heading or cover note that states
‘‘THIS DOCUMENT CONTAINS
CONFIDENTIAL INFORMATION.’’ We
will review this copy, including the
claimed confidential information, in our
consideration of comments. The second
copy, which will have the claimed
confidential information redacted/
blacked out, will be available for public
viewing and posted on https://
www.regulations.gov. Submit both
copies to the Division of Dockets
Management. If you do not wish your
name and contact information to be
made publicly available, you can
provide this information on the cover
sheet and not in the body of your
comments and you must identify this
information as ‘‘confidential.’’ Any
information marked as ‘‘confidential’’
will not be disclosed except in
accordance with 21 CFR 10.20 and other
applicable disclosure law. For more
information about FDA’s posting of

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