response is an Interconnection-wide phenomenon. Accordingly, we find
that minimum, uniform primary frequency response requirements,
including timely and sustained response, are just and reasonable.
    96. EEI comments that without a provision to ``fairly ensure
adequate compensation,'' and a mandate that each new generating
facility operate with headroom at all times, the proposed requirements
for timely and sustained primary frequency response ``cannot be
implemented in a manner that is fair and non-discriminatory.'' \207\
EEI asserts that ``requiring all resources to have a timely operating
response, but

failing to require necessary headroom, unfairly discriminates between
those resources that are capable of providing a timely response due to
their design or current operation status over resources that are not
capable of providing a timely response.'' \208\ We disagree. We are
imposing operating requirements on all newly interconnecting generating
facilities (with limited exemptions) but not mandating headroom or
compensation for any generating facilities. Any headroom maintained by
these facilities is not required by this final action, and does not
render our operating requirements unduly discriminatory. If future
conditions necessitate a headroom requirement, we will then consider
any appropriate compensation.
---------------------------------------------------------------------------

    \207\ EEI Comments at 11.
    \208\ Id.
---------------------------------------------------------------------------

    97. As noted in Section II above, one of the Commission's concerns
with the current lack of clear, uniform primary frequency response
requirements is NERC's finding indicating that a number of generator
owners/operators have implemented operating settings that have
effectively removed the availability of their generating facilities
from providing timely and sustained primary frequency response (e.g.,
wide deadband settings, uncoordinated plant-level controls).\209\ The
reforms adopted in this final action, to be applied uniformly to new
generating facilities, are intended to eliminate these practices.
Accordingly, the Commission determines that the requirements are just,
reasonable and not unduly discriminatory or preferential.
---------------------------------------------------------------------------

    \209\ Id. PP 8-9, 39.
---------------------------------------------------------------------------

    98. Further, while it is true that generating facilities that are
operated with no headroom at the time of an under-frequency deviation
will provide little or no response in the upward direction, they will
still be available to support the reliability of the power system by
responding in the downward direction during abnormal over-frequency
system conditions. Since the timing of an abnormal frequency deviation
outside of the deadband parameter--and when a generating facility will
thus be required to respond--is unpredictable, it is possible that
these generating facilities will have operating capability in the
upward direction to respond to some abnormal under-frequency
deviations.
    99. We agree with the suggestions of EEI and WIRAB to explicitly
prohibit interconnection customers from blocking or otherwise
inhibiting the governor's or equivalent controls' ability to
respond.\210\ Accordingly, as discussed below in Section II.K.3, the
Commission will modify in this final action the NOPR proposal to
require interconnection customers to not block or otherwise inhibit the
governor or equivalent controls' ability to respond.
---------------------------------------------------------------------------

    \210\ EEI Comments at 16, 18-19; WIRAB Comments at 5-6.
---------------------------------------------------------------------------

    100. AWEA, ESA, and WIRAB ask the Commission to clarify the
proposed timely and sustained response provisions, and their comments
raise the following questions: (1) How soon should a generating
facility begin to provide primary frequency response following a
disturbance; and (2) how long, at a minimum, should the response be
sustained?
    101. Regarding how soon a generating facility should begin to
provide primary frequency response following a disturbance, the
Commission agrees with WIRAB that the definition of ``without undue
delay'' should be clarified.\211\ Accordingly, we clarify that the NOPR
proposal for generating facilities to respond ``without undue delay''
is intended to address the concern that an interconnection customer
could program an intentional delay of several seconds or minutes to
effectively avoid contributing to the support of power system
reliability following a disturbance. Following the sudden loss of
generation or load, primary frequency response must be delivered as
promptly as possible, within the physical characteristics of the
generating facility, in order to avoid, for example, Interconnection
frequency declining to a level where UFLS relays are activated or to a
lower level where generation under-speed protection relays activate,
resulting in additional generation trips or cascading outages.
Accordingly, in response to WIRAB's request to clarify when a
generating facility should respond to a frequency deviation, we will
modify the NOPR proposal and adopt in this final action the requirement
that generating facilities respond immediately after system frequency
deviates outside of the deadband parameter, to the extent that they
have available operating capability in the direction needed to correct
frequency deviation at the time of the disturbance.\212\
---------------------------------------------------------------------------

    \211\ See WIRAB Comments at 5.
    \212\ The Commission accepted similar tariff language proposed
by CAISO. See Cal. Indep. Sys. Operator Corp., 156 FERC ] 61,182, at
P 17 (2016) (accepting, among other things, CAISO's proposed changes
to s Section <IP_ADDRESS> of its tariff, which provides in pertinent part
that ``Participating Generators with governor controls that are
synchronized to the CAISO Controlled Grid must respond immediately
and automatically.'').
---------------------------------------------------------------------------

    102. We agree with WIRAB that no grace period should be allowed
that can postpone the response. Accordingly, we deny AWEA's request to
coordinate response times between interconnection customers and system
operators.\213\ Instead, we require generating facilities to respond
immediately, consistent with the technical capabilities of the
generating facility and its control equipment.
---------------------------------------------------------------------------

    \213\ See AWEA Comments at 8-9 (describing efforts to coordinate
the fast response times of wind facilities with system operators).
---------------------------------------------------------------------------

    103. Regarding the minimum period of time that a response should be
sustained, we will not establish in this final action a minimum
timeframe in minutes that the response to frequency deviations should
be sustained since the amount of time that Interconnection frequency
remains outside of the deadband varies by event.
    104. We determine that rather than using the term ``stable'' used
in the NOPR concerning the sustained response requirement, it is
preferable to require primary frequency response to be sustained until
such time that system frequency returns to a value within the deadband.
Therefore, we find that WIRAB's recommendation to adopt its definition
of ``stable value'' is moot. Accordingly, we clarify that with the
exception of certain operational constraints described in Section
<IP_ADDRESS> of the pro forma LGIA and Section <IP_ADDRESS> of the pro forma
SGIA, generating facilities that respond to abnormal and sustained
frequency deviations outside of the deadband parameter are required to
provide and sustain primary frequency response until system frequency
has returned to a value within the deadband parameter. If frequency
recovers to within the deadband but suddenly deviates outside of the
deadband parameter again, the interconnection customer will be required
to provide and sustain its response until such time that frequency
returns to a value within the deadband.
    105. Comments related to electric storage resources pertaining to
the timely and sustained response provisions are addressed below in
Section II.H.2.

D. Proposal Not To Mandate Headroom

1. NOPR Proposal
    106. In the NOPR, the Commission clarified that the proposed
requirements did not impose a generic headroom requirement, but sought
comment on such a requirement.\214\ The Commission stated its belief
that the reliability benefits from the proposed

modifications to the pro forma LGIA and pro forma SGIA do not require
imposing additional costs that would result from a generic headroom
requirement.\215\
---------------------------------------------------------------------------

    \214\ NOPR, 157 FERC ] 61,122 at P 51.
    \215\ Id.
---------------------------------------------------------------------------

2. Comments
    107. Several commenters state that the Commission should not create
a mandatory headroom requirement.\216\ Idaho Power asserts that a
generic headroom requirement is not necessary at this time.\217\ AWEA,
Public Interest Organizations, and SDG&E state that there are
significant opportunity costs involved in maintaining headroom.\218\
WIRAB adds that not every generating facility needs to provide primary
frequency response all the time; instead the decision of whether a
generating facility provides primary frequency response and the
necessary amount of headroom should be determined by economic
considerations rather than by generic requirements.\219\ EEI supports
the NOPR proposal not to include a generic headroom requirement in the
pro forma LGIA and pro forma SGIA ``since these requirements go beyond
capability (i.e., equipment specifications.)'' \220\ However, EEI also
asserts that not requiring headroom while requiring all primary
frequency responses to be timely and sustained would be discriminatory,
because all generating facilities are not capable of timely
responses.\221\ We address this assertion above in Section II.C.3.
---------------------------------------------------------------------------

    \216\ EEI, Public Interest Organizations, AWEA, ESA, ISO-RTO
Council, Xcel, Idaho Power, WIRAB, NERC, First Solar.
    \217\ Idaho Power Comments at 2.
    \218\ AWEA Comments at 2; Public Interest Organizations Comments
at 4; SDG&E Comments at 2.
    \219\ WIRAB Comments at 9.
    \220\ EEI Comments at 13.
    \221\ Id. at 11.
---------------------------------------------------------------------------

    108. AWEA requests that the Commission consider expanding on the
NOPR proposal by finding that it would be unjust and unreasonable for a
transmission provider to impose a requirement for all generating
facilities to reserve headroom to provide primary frequency response
due to the large inefficiency and cost of such a requirement.\222\ ESA
asserts that it interprets the Commission's proposal as an explicit
prohibition against requiring interconnection customers to reserve
headroom as a condition of interconnection.\223\
---------------------------------------------------------------------------

    \222\ AWEA Comments at 3.
    \223\ ESA Comments at 2.
---------------------------------------------------------------------------

3. Commission Determination
    109. We will not mandate a headroom requirement at this time. We
continue to believe that the reliability benefits from the proposed
modifications to the pro forma LGIA and pro forma SGIA do not require
imposing additional costs that would result from a generic headroom
requirement.\224\
---------------------------------------------------------------------------

    \224\ NOPR, 157 FERC ] 61,122 at P 44.
---------------------------------------------------------------------------

    110. We decline to address AWEA's request to find it unjust and
unreasonable for a transmission provider to impose a requirement for
all generating facilities to reserve headroom to provide primary
frequency response. Instead, in response to AWEA and ESA, we clarify
that this final action does not prohibit a transmission provider from
arguing to the Commission that headroom should be required as a
condition of interconnection in a particular factual circumstance and
proposing an associated compensation mechanism. We will evaluate any
such filings on a case-by-case basis. Finally, we revise proposed
Article 9.6.4 of the pro forma LGIA and Article 1.8.4 of the pro forma
SGIA to delete the following reference: ``Nothing shall require the
generating facility to operate above its minimum operating limit, below
its maximum operating limit, or otherwise alter its dispatch to have
headroom to provide primary frequency response.'' We believe that this
phrase is unnecessary and that it is clear without it that we are not
requiring headroom as a condition of interconnection.

E. Proposal Not To Mandate Compensation

1. NOPR Proposal
    111. The Commission did not propose to mandate compensation related
to the new primary frequency response requirements, stating ``the
Commission has previously accepted changes to transmission provider
tariffs that similarly required interconnection customers to install
primary frequency response capability or that established specific
governor settings, without requiring any accompanying compensation.''
\225\ Further, the Commission clarified that the absence of a
compensation mandate is not intended to prohibit a public utility from
filing a proposal for primary frequency response compensation under
section 205 of the FPA.\226\
---------------------------------------------------------------------------

    \225\ Id. P 55 (citing PJM Interconnection, L.L.C., 151 FERC ]
61,097 at n.58; Cal. Indep. Sys. Operator Corp., 156 FERC ] 61,182,
at PP 10-12 and 17 (2016); New England Power Pool, 109 FERC ] 61,155
(2004), order on reh'g, 110 FERC ] 61,335 (2005)).
    \226\ Id.
---------------------------------------------------------------------------

2. Comments
    112. Many commenters support not mandating compensation.\227\ On
the other hand, a few commenters reject the NOPR's overarching
approach, asserting instead that a market-based approach or a
centralized forward procurement process is needed.\228\ Other
commenters qualify their support of the NOPR's approach to compensation
on future efforts to establish forward procurement or market
mechanisms.\229\
---------------------------------------------------------------------------

    \227\ ISO-RTO Council; WIRAB; Xcel; PG&E APPA et al.; EEI; MISO
TOs; NRECA; California Cities; and SoCal Edison.
    \228\ AES; SDG&E API; Chelan County; R St. Institute; and CESA.
    \229\ AWEA; ELCON; Public Interest Organizations; and First
Solar.
---------------------------------------------------------------------------

    113. Some commenters believe that compensation issues are best
decided at the regional level.\230\ ISO-RTO Council asserts that not
mandating compensation is reasonable because ``[f]undamentally, the
costs of providing primary frequency response by all registered
generators should be viewed simply as a cost of reliable generator
operation (similar to, for example, maintenance, staffing, metering,
software, and communications).\231\ APPA et al. agrees, stating that
primary frequency response capability should be a standard feature of
new generating facilities.\232\ APPA et al. also notes that the
Commission recently recognized imposing requirements for generating
facilities with governor controls without additional compensation is a
just and reasonable condition of participation in wholesale
markets.\233\ In addition, SoCal Edison believes that the costs of
primary frequency response capability are already adequately recovered
through existing bilateral or market-based capacity contracts.\234\
---------------------------------------------------------------------------

    \230\ Xcel Comments at 7; PG&E Comments at 2; EEI Comments at
11; MISO TOs Comments at 14.
    \231\ ISO-RTO Council Comments at 10.
    \232\ APPA et al. Comments at 6.
    \233\ Id. (citing Cal. Indep. Sys. Operator Corp., 156 FERC ]
61,182 at P 17 (2016)).
    \234\ SoCal Edison Comments at 4.
---------------------------------------------------------------------------

    114. AWEA states that the cost of attaining primary frequency
response capability for new generators is low \235\ but asserts that
the Commission's decision not to address compensation for primary
frequency response capability in the proposed rulemaking is not a major
concern, so long as there is no headroom requirement.\236\ California
Cities compares primary frequency response with a number of
interconnection requirements for generating facilities in which the
recovery of capital costs and operating

expenses are not necessarily ensured.\237\ California Cities states
that developers of new generating facilities have the opportunity to
recover capital costs for primary frequency response capability in the
same ways they recover other capital costs associated with generation
resources and can factor the costs of primary frequency response into
their economic assessment of project viability under anticipated market
conditions and into their negotiations for capacity sales.\238\
---------------------------------------------------------------------------

    \235\ AWEA Comments at 1.
    \236\ Id. at 9.
    \237\ California Cities Comments at 4.
    \238\ Id.
---------------------------------------------------------------------------

    115. ELCON supports not mandating compensation, expressing its
expectation that such costs should be low, observing that the
administrative costs of a compensation scheme may outweigh the costs of
providing mandated service.\239\ Further, ELCON joins APPA et al. in
noting that this is consistent with prior Commission decisions
requiring the installation of primary frequency response capability or
specifying governor settings, without mandating compensation.\240\
ELCON emphasizes that its comments regarding compensation are limited
to the currently proposed limited applicability of new requirements to
new generation facilities because a broader approach would trigger more
significant costs and should focus on market-based solutions such as
that under Order No. 819.\241\
---------------------------------------------------------------------------

    \239\ ELCON Comments at 6.
    \240\ Id. n.4 (citing PJM Interconnection, L.L.C., 151 FERC ]
61,097 at n.58; Cal. Indep. Sys. Operator Corp., 156 FERC ] 61,182,
at PP 10-12 and 17 (2016); New England Power Pool, 109 FERC ] 61,155
(2004), order on reh'g, 110 FERC ] 61,335 (2005)).
    \241\ Id. at 7.
---------------------------------------------------------------------------

    116. In support of compensation, several commenters state that the
proposed requirements are inefficient or uneconomic because, among
other points, they require new generating facilities to install and
operate a governor or equivalent controls when the necessary primary
frequency response could be provided at lower cost by another
generating facility (e.g., battery storage or existing generating
facility).\242\ These commenters believe that market-based procurement
will create opportunities for transmission providers to obtain higher-
quality frequency response at a lower cost compared to a mandatory
primary frequency response requirement for all newly interconnecting
generating facilities. Rather than the mandatory requirements proposed
in the NOPR, some commenters prefer market-based compensation to incent
the ``right'' level of primary frequency response.\243\
---------------------------------------------------------------------------

    \242\ AES Companies Comments at 9; API Comments at 4; AWEA
Comments at 11; ELCON Supplemental Comments at 12, in support of R
St Institute's Comments; Competitive Suppliers Comments at 4; ESA
Comments at 6; Public Interest Organizations Comments at 2; R St
Institute Comments at 4; SDG&E Comments at 5-6 and SDG&E
Supplemental Comments at 2-3. Public Interest Organizations, in
their Comments at 5-6, refer to the need to remove settlement system
``disincentives'' to the provision of primary frequency response by
existing generators, which the Commission interprets as a request
for compensation for providing this service.
    \243\ API Comments at 3-4; Chelan County Comments at 1-2; Public
Interest Organizations Comments at 6-7; R St Institute's Comments at
2-3; and SDG&E Comments at 3.
---------------------------------------------------------------------------

    117. Other commenters believe that generating facilities should not
be required to provide primary frequency response without compensation
for their costs of providing the service.\244\ SDG&E asserts that the
NOPR proposals will not address the Commission's concerns regarding the
decline in primary frequency response because ``uncompensated costs are
at the root of poor historical performance.'' \245\ Further, AWEA
raises concerns that it is unjust and unreasonable to mandate that new
generation incur investment and maintenance costs to be primary
frequency response capable without being provided a real opportunity to
recover such costs.\246\ Competitive Suppliers assert that ``[a]ll
resources that provide essential reliability services such as primary
frequency response and inertia should be explicitly compensated rather
than mandating generators provide them without distinct and additional
compensation.'' \247\ Competitive Suppliers urge the Commission to
address compensation in a final rule or additional NOPR.\248\ First
Solar encourages the Commission to require compensation for the
configuration and additional communication, software and control
technologies required to operate the equipment at a solar PV generation
facility to provide essential reliability services.\249\ First Solar
believes that the Commission should also require ISOs and RTOs develop
a funding mechanism and operational and market rules to accommodate the
headroom requirements for these facilities to provide frequency
response.\250\
---------------------------------------------------------------------------

    \244\ AWEA Comments at 10; ELCON Supplemental Comments at 12-13
(over longer term); Competitive Suppliers Comments at 3, 5; ESA
Comments at 6-7; First Solar Comments at 4; MISO TOs Comments at 5
(compensation should be determined regionally); and SDG&E Comments
at 3.
    \245\ SDG&E Comments at 3.
    \246\ AWEA Comments at 10.
    \247\ Competitive Suppliers Comments at 5.
    \248\ Id.
    \249\ First Solar Comments at 4.
    \250\ Id.
---------------------------------------------------------------------------

    118. ESA raises concerns that, without compensation, the primary
frequency response requirement for electric storage ``may produce
disproportionate adverse economic impacts.'' \251\ Therefore, ESA
recommends that the Commission ``direct RTOs/ISOs to use pay-for-
performance principles to price primary frequency response provision.''
\252\ ESA relies on Order No. 755, where the Commission found that
frequency regulation compensation practices that do not compensate
performance result in rates that are unjust, unreasonable, and unduly
discriminatory or preferential. ESA contends that the same argument
applies to frequency response compensation.\253\
---------------------------------------------------------------------------

    \251\ ESA Comments at 4.
    \252\ Id. at 6.
    \253\ ESA Comments at 6-7 (citing Frequency Regulation
Compensation in Organized Wholesale Power Markets, Order No. 755,
FERC Stats. & Regs. ] 31,324, at P 2 (2011) (crossed referenced at
137 FERC ] 61,064).
---------------------------------------------------------------------------

3. Commission Determination
    119. We will not mandate compensation for primary frequency
response service in this final action. We are not persuaded by comments
that assert: (1) Generating facilities should not be required to
provide a service if there is not explicit compensation; (2) market-
based compensation would be more efficient than the NOPR proposal; (3)
inertia should be compensated in this final action; and (4) that
frequency regulation compensation under Order No. 755 requires that
primary frequency response be compensated. We address each of these
points below.
    120. Commenter assertions that the Commission is improperly
requiring the provision of a service without compensation are
misplaced. While we are requiring newly interconnecting generating
facilities to install equipment capable of providing frequency response
and adhere to specified operating requirements, we are not mandating
headroom, which is a necessary component for the provision of primary
frequency response service. In addition, as stated in the NOPR, ``[t]he
Commission has previously accepted changes to transmission provider
tariffs that similarly required interconnection customers to install
primary frequency response capability or that established specified
governor settings, without requiring any accompanying compensation.''
\254\ Further, we agree

with California Cities that there are interconnection requirements for
generating facilities in which the recovery of capital costs and
operating expenses are not necessarily ensured.
---------------------------------------------------------------------------

    \254\ NOPR, 157 FERC ] 61,122 at P 55 (citing PJM
Interconnection, L.L.C., 151 FERC ] 61,097 at n.58; Cal. Indep. Sys.
Operator Corp., 156 FERC ] 61,182 at PP 10-12 and 17; New England
Power Pool, 109 FERC ] 61,155, order on reh'g, 110 FERC ] 61,335).
The Commission reiterated this approach in Indianapolis Power &
Light Company v. Midcontinent Indep. Sys. Operator, Inc., 158 FERC ]
61,107, at PP 36-37 (2017) (Indianapolis Power) (denying
Indianapolis Power's request that the Commission find MISO's Tariff
to be unjust, unreasonable, and unduly discriminatory or
preferential because it does not compensate suppliers of primary
frequency response).
---------------------------------------------------------------------------

    121. On balance, we find that the record indicates that the cost of
installing, maintaining, and operating a governor or equivalent
controls is minimal.\255\ Also, the greatest cost associated with
providing primary frequency response results from maintaining headroom,
as noted by several commenters.\256\ No commenter provided any evidence
suggesting that the costs of providing primary frequency response are
greater than those indicated in the NOPR.\257\ While the Commission has
approved specific compensation for discrete services that require
substantial identifiable costs, such as for frequency regulation and
operating reserves, the Commission has not required specific
compensation for all reliability-related costs. We agree with those
commenters who observe that minimal reliability-related costs such as
those incurred to provide primary frequency response, are reasonably
considered to be part of the general cost of doing business, and are
not specifically compensated.
---------------------------------------------------------------------------

    \255\ See NOPR, 157 FERC ] 61,122 at PP 62-71; see also ISO-RTO
Council Comments at 9 (stating ``the incremental cost to provide
frequency response is minimal''); ELCON Comments at 6 (citing ``the
low costs triggered by the NOPR's limited applicability to only new
generating facilities''); AWEA Comments at 1 (stating ``the cost of
attaining [primary frequency response] capability for new generators
is low.'').
    \256\ See AWEA Comments at 9; Public Interest Organizations
Comments at 4.
    \257\ See NOPR, 157 FERC ] 61,122 at P 41 (stating that ``small
generating facilities are capable of installing and enabling
governors at low cost in in a manner comparable to large generating
facilities.'').
---------------------------------------------------------------------------

    122. With regard to requests for the Commission to mandate market-
based compensation, we are not persuaded by assertions that mandatory
market-based mechanisms for the procurement of primary frequency
response capability are just and reasonable at this time given the
record before us. While some economic efficiency may be gained from
acquiring primary frequency response from the subset of generation that
is most economically efficient at providing this service, we believe
that the time and costs of developing a market in RTO/ISO regions or
bilaterally purchasing the service in non-RTO/ISO regions should be
carefully considered. ISO-RTO Council asserts, for example, that the
administrative costs of developing and implementing market-based
compensation of primary frequency response are likely to outweigh the
incremental efficiency benefits.\258\ Similarly, SDG&E states that, to
develop a market, each RTO/ISO will have to address issues such as
developing complex software to operate the market and verifying
generator performance in sub-minute intervals, which may require the
installation of high-quality metering equipment such as phasor
measurement units.\259\ Nonetheless, an RTO/ISO may propose such an
approach upon an adequate showing under section 205, if it so chooses.
---------------------------------------------------------------------------

    \258\ See ISO-RTO Council Comments at 9-10. See also ELCON
Comments at 6.
    \259\ See SDG&E Comments at n.6.
---------------------------------------------------------------------------

    123. With regard to Competitive Suppliers' view that the Commission
should mandate explicit compensation for inertial response, we decline
to adopt such a requirement.\260\ We recognize the reliability value of
inertial response, as it helps to slow the rate of change of frequency
during frequency deviations. In addition, very low levels of inertial
response within an Interconnection increase the risk that the speed of
primary frequency response delivery will be too slow to prevent large
frequency deviations from exceeding pre-determined thresholds for load
shedding or automatic generator trip protection. However, no commenter
asserts that inertial response trends on the Eastern and Western
Interconnections are approaching levels that could threaten
reliability. In addition, because inertial response is provided
automatically by the rotating mass of synchronous machines as system
frequency deviates and is not controllable, synchronous generating
facilities do not incur additional incremental costs to provide
inertial response. Indeed, neither Competitive Suppliers nor any other
commenter has indicated what, if any, incremental costs must be
incurred to provide inertial response. Accordingly, we conclude that
compensation for inertial response compensation is not warranted at
this time.
---------------------------------------------------------------------------

    \260\ See Competitive Suppliers Comments at 5.
---------------------------------------------------------------------------

    124. We disagree with ESA's contention that the treatment of
frequency regulation under Order No. 755 requires compensation of
primary frequency response in this final action. In Indianapolis Power,
the Commission rejected a similar request for primary frequency
response compensation based on Order No. 755, finding that ``Order No.
755 is inapposite, as that order involved an existing market, where the
Commission found that the frequency regulation compensation practices
of RTOs and ISOs resulted in rates that are unjust, unreasonable, and
unduly discriminatory or preferential.'' \261\ For similar reasons,
Order No. 755 is inapposite here.
---------------------------------------------------------------------------

    \261\ Indianapolis Power, 158 FERC ] 61,107 at P 37.
---------------------------------------------------------------------------

    125. AES and MISO TOs request that the Commission allow for the
development of primary frequency response pools, self-supply of primary
frequency response, and transferred primary frequency response
markets.\262\ We conclude that existing requirements (e.g., contracts
for frequency response service under Order No. 819,\263\ and recent
Commission action regarding transferred frequency response \264\)
already address two of these options. Also, a Frequency Response
Sharing Group under Reliability Standard BAL-003-1.1, is an option
currently available to balancing authorities.
---------------------------------------------------------------------------

    \262\ AES Comments at 5; MISO TOs Comments at 11.
    \263\ Third-Party Provision of Primary Frequency Response
Service, Order No. 819, FERC Stats. & Regs. ] 31,375 (2015) (cross-
referenced at 153 FERC ] 61,220).
    \264\ Cal. Indep. Sys. Operator Corp., 156 FERC ] 61,182, order
on clarification, compliance, and rehearing, 158 FERC ] 61,129
(2017).
---------------------------------------------------------------------------

    126. Finally, nothing in this final action is meant to prohibit a
public utility from filing a proposal for primary frequency response
compensation under section 205 of the FPA.\265\
---------------------------------------------------------------------------

    \265\ See NOPR, 157 FERC ] 61,122 at P 55.
---------------------------------------------------------------------------

F. Application to Existing Generating Facilities That Submit New
Interconnection Requests That Result in an Executed or Unexecuted
Interconnection Agreement

1. NOPR Proposal
    127. In the NOPR, the Commission proposed to apply the revisions to
the pro forma LGIA and pro forma SGIA to new generating facilities that
execute or request the unexecuted filing of interconnection agreements
on or after the effective date of any final action issued.\266\ The
Commission also proposed to apply the requirements to any large or
small generating facility that has an executed or has requested the
filing of an unexecuted LGIA or SGIA as of the effective date of any
final action, but that takes any action that requires the submission of
a new interconnection request on or after the effective date of any
final action.\267\ The Commission sought comment on the

proposed effective date, including whether the proposed application of
the requirements would be unduly burdensome.\268\
---------------------------------------------------------------------------

    \266\ Id. P 54.
    \267\ Id.
    \268\ Id.
---------------------------------------------------------------------------

2. Comments
    128. Most commenters addressing this issue agree with the proposed
effective date and applicability, with some suggesting additional
action would be helpful.\269\ While Bonneville supports the
Commission's proposed effective dates, it observes that ``if
significant modifications are made to the generating facility, the cost
of including primary frequency response capability may not add much to
the cost of the modifications themselves.'' \270\ Therefore, Bonneville
believes that the Commission should ``explore defining what constitutes
a `significant modification''' and require existing generating
facilities to include primary frequency response capability when making
one.\271\ California Cities support the Commission's proposal because
the proposal is sufficiently narrow as to only include those generating
facilities that make a substantial change.\272\
---------------------------------------------------------------------------

    \269\ Idaho Power Comments at 2; WIRAB Comments at 8-9; First
Solar Comments at 4; Bonneville Comments at 3; California Cities
Comments at 3-4; ISO-RTO Council Comments at 8.
    \270\ Bonneville Comments at 3.
    \271\ Id.
    \272\ California Cities Comments at 3-4.
---------------------------------------------------------------------------

    129. Other commenters, however, believe that the NOPR proposal
should go further. ISO-RTO Council states that it ``is unaware of any
limitations that would render the Commission's proposed effective date
infeasible or unduly burdensome'' and therefore it supports the
proposed effective date.\273\ However, ISO-RTO Council suggests that
the Commission expand the application of the primary frequency response
capability and operating requirements to both conforming and non-
conforming interconnection agreements resulting from new
interconnection requests by existing generating facilities.\274\ ISO-
RTO Council explains that under the NOPR proposal, an existing
interconnection customer that ``takes an action that requires the
submission of a new interconnection request resulting in the execution
of a conforming interconnection agreement would not be obligated under
the Commission's proposed requirements because the interconnection
agreement would not be filed.'' \275\ Therefore, ISO-RTO Council
recommends that the proposed requirements apply to any existing
interconnection customer that takes any action that requires the
submission of a new interconnection request that results in the
execution of an interconnection agreement, regardless of whether the
agreement is filed, or the filing of an unexecuted interconnection
agreement after the effective date of any final action.\276\
---------------------------------------------------------------------------

    \273\ ISO-RTO Council Comments at 8.
    \274\ Id.
    \275\ Id.
    \276\ Id.
---------------------------------------------------------------------------

    130. Xcel contends that the Commission's proposal does not go far
enough to ensure future generating facilities are capable of providing
primary frequency response.\277\ Xcel's concern pertains to the
possibility of a generating facility obtaining an interconnection
agreement for more generation than is initially installed. In this
situation, new generating facilities installed years after the
effective date of the final action would not be required to install
primary frequency response capability because a new interconnection
agreement for subsequent phases is not required.\278\ Therefore, Xcel
asks the Commission to consider requiring that any new generating
facility added to expand an existing large or small generating facility
more than two years after the effective date of the final action be
required to provide primary frequency response, even if no new
interconnection agreement is required.\279\
---------------------------------------------------------------------------

    \277\ Xcel Comments at 6.
    \278\ Id.
    \279\ Id. Xcel states that this approach should not apply to an
uprate of an existing facility.
---------------------------------------------------------------------------

    131. SVP raises concerns that the proposed reforms could apply to
existing generating facilities if interconnection customers amend their
interconnection agreements for minor updates involving no material
substantive changes to the interconnected facilities or to the
interconnection itself.\280\ SVP explains that as a licensee of three
hydropower projects, each with a generating capacity of less than 20
MW, SVP has for over 30 years continually procured interconnection
service for these facilities through an interconnection agreement with
PG&E.\281\ SVP states that it is coordinating with PG&E and CAISO to
reformat the existing agreements and that it may execute and file an
amended agreement after the effective date of the final action with no
material changes to the facilities or to the interconnection.\282\ SVP
seeks clarification that the proposed reforms will not apply to
existing facilities with existing interconnection agreements that
execute new form agreements if there are no material substantive
changes to the interconnected facilities or to the interconnection
itself.\283\
---------------------------------------------------------------------------

    \280\ SVP Comments at 5-6.
    \281\ Id. at 4-5.
    \282\ Id. at 5.
    \283\ Id.
---------------------------------------------------------------------------

3. Commission Determination
    132. With the clarifications noted below, we adopt the NOPR
proposal to apply the primary frequency response requirements adopted
herein to all newly interconnecting generating facilities as well as to
all existing large and small generating facilities that take any action
that requires the submission of a new interconnection request that
results in the filing of an executed or unexecuted interconnection
agreement on or after the effective date of this final action.\284\ In
response to SVP's request, we clarify that where the submission of a
new interconnection request by an existing generating facility results
in an executed or unexecuted interconnection agreement by that existing
generating facility, such event would be considered the triggering
event that would impose the requirements of this final action.
Accordingly, should an existing interconnection customer sign a new or
amended interconnection agreement for reformatting purposes only those
existing generating facilities would not be subject to the requirements
of this final action.\285\
---------------------------------------------------------------------------

    \284\ NOPR, 157 FERC ] 61,122 at P 63.
    \285\ Article 1 of the pro forma LGIA defines an interconnection
request as: ``an interconnection customer request, in the form of
Appendix 1 to the Standard Large Generator Interconnection
Procedures, in accordance with the Tariff, to interconnect a new
Generating Facility, or to increase the capacity of, or make a
Material Modification to the operating characteristics of, an
existing Generating Facility that is interconnected with the
Transmission Provider's Transmission System.'' Sections 30.9 and
30.10 of the pro forma LGIA provide that the LGIA and its appendices
may be amended by mutual agreement of the parties and do not state
that a new interconnection request must be submitted in order to do
so.
---------------------------------------------------------------------------

    133. Bonneville suggests that the Commission should ``explore
defining what constitutes a `significant modification' '' to existing
generating facilities that would subject them to the primary frequency
response requirements adopted in this final action. It is unclear what
Bonneville means by ``significant modification.'' However, we note that
under the pro forma LGIP, a ``material modification'' \286\ to an
existing generating facility would result in an interconnection request
requiring a new interconnection agreement, thereby

subjecting the existing generating facility to the requirements adopted
in this final action.\287\ The Commission has not adopted a bright-line
definition of what constitutes a material modification; rather, that is
a fact-specific inquiry.\288\ Bonneville has not persuaded us that we
should adopt such a bright line now. Bonneville provides no information
regarding how many, if any, modification requests by existing
generating facilities would not be deemed material, and would therefore
not trigger the requirements of this final action, since the
interconnection customer would not be required to submit a new
interconnection request or execute a new interconnection agreement.
Accordingly, we are not persuaded by Bonneville of the need to include
a definition for the new term ``significant modification'' at this
time.
---------------------------------------------------------------------------

    \286\ The pro forma LGIA defines a Material Modification as:
``those modifications that have a material impact on the cost or
timing of any Interconnection Request with a later queue priority
date.''
    \287\ See pro forma LGIP Sec. 4.4.3.
    \288\ See Order No. 2003, FERC Stats. & Regs. ] 31,146 at P 168.
---------------------------------------------------------------------------

    134. Similarly, Xcel provides no support for its suggestion that a
significant number of new generating facilities, covered by a prior
interconnection agreement, may be built two or more years following the
effective date of this final action and therefore should be subject to
the primary frequency response requirements.\289\ Accordingly, we
decline to adopt Xcel's suggestion to require ``new generating
facilities that are interconnected two years or more after the
effective date of the Final Rule [to] also meet these requirements,
even if a new interconnection agreement is not required.'' \290\
---------------------------------------------------------------------------

    \289\ Xcel Comments at 6.
    \290\ Id. at 4.
---------------------------------------------------------------------------

    135. Further, the Commission believes that ISO-RTO Council's
request that ``the Commission expand the application of the primary
frequency response requirements to both conforming and non-conforming
interconnection agreements resulting from new interconnection requests
by existing generators'' is unnecessary.\291\ ISO-RTO Council's concern
relates to the NOPR's use of the phrase ``filing of an executed or
unexecuted interconnection agreement.'' \292\ We note that if an
interconnection customer executes a new conforming interconnection
agreement for an existing generating facility as a result of a new
interconnection request, the agreement would not be filed at the
Commission but instead reported in Electric Quarterly Reports (EQRs).
However, a conforming new or amended LGIA or SGIA would need to conform
to the specific transmission provider's most recently revised pro forma
LGIA and pro forma SGIA, which would include the requirements of this
final action. The Commission clarifies that the final action is
intended to apply to all existing generating facilities that submit a
new interconnection request that results in an executed or unexecuted
interconnection agreement, regardless of whether that agreement is
filed at the Commission or merely reported in EQRs.
---------------------------------------------------------------------------

    \291\ ISO-RTO Council Comments at 8.
    \292\ See NOPR, 157 FERC ] 61,122 at PP 46, 54, 63.
---------------------------------------------------------------------------

G. Application to Existing Generating Facilities That Do Not Submit New
Interconnection Requests That Result in an Executed or Unexecuted
Interconnection Agreement

1. NOPR Proposal
    136. In the NOPR, the Commission sought comment on the proposal to
apply the proposed reforms only to newly interconnecting generating
facilities. In particular, the Commission sought comment on whether
additional primary frequency response performance or capability
requirements for existing facilities are needed, and if so, whether the
Commission should impose those requirements by: (1) Directing the
development or modification of a reliability standard pursuant to
section 215(d)(5) of the FPA; or (2) acting pursuant to section 206 of
the FPA to require changes to the pro forma OATT.\293\
---------------------------------------------------------------------------

    \293\ NOPR, 157 FERC ] 61,122 at PP 3, 57.
---------------------------------------------------------------------------

2. Comments
    137. Most commenters oppose applying the proposed primary frequency
response requirements to existing generating facilities.\294\ Several
commenters argue that requiring existing generating facilities to
install and operate governors or equivalent controls would be overly
expensive and unnecessarily burdensome.\295\ Specifically, AWEA
contends that a retroactive primary frequency response requirement
would be particularly costly for older wind turbines with fixed blades
that cannot physically provide primary frequency response, newer wind
turbines that would still require substantial hardware and software
changes, and turbines from vendors that are out of business.\296\
Moreover, some commenters argue that a blanket requirement is
unnecessary given generally adequate levels of frequency response at
this time.\297\
---------------------------------------------------------------------------

    \294\ PG&E, APPA et al., AWEA, NRECA, WIRAB, ELCON, Competitive
Suppliers, TVA, Public Interest Organizations, and Sunflower and
Mid-Kansas oppose expanding the applicability of the reforms to
existing generating facilities.
    \295\ APPA et al. Comments at 7-8; NRECA Comments at 10; Public
Interest Organization Comments at 4; ELCON Comments at 5-6.
    \296\ AWEA Comments at 4.
    \297\ NRECA Comments at 10; WIRAB Comments at 10-12; Competitive
Suppliers Comments at 6.
---------------------------------------------------------------------------

    138. NERC and the NYTOs contend that it is too soon after the
implementation of Reliability Standard BAL-003-1.1 to determine whether
it is necessary or appropriate to impose requirements for primary
frequency response on existing generating facilities.\298\
---------------------------------------------------------------------------

    \298\ NERC Comments at 8; NYTOs Supplemental Comments at 3-4.
---------------------------------------------------------------------------

    139. On the other hand, Bonneville and ISO-RTO Council support
reforms that would apply to existing generating facilities, suggesting
that the Commission direct NERC to develop a Reliability Standard for
frequency response. While Bonneville states that the cost to retrofit
existing generators may be prohibitive, it contends that a standard
similar to TRE's regional Reliability Standard BAL-001-TRE-01, which
requires generator owners/operators in the Texas region to set their
governors to meet performance requirements, would ensure both
capability and performance.\299\ ISO-RTO Council argues that the
development of a Reliability Standard will spread frequency response
requirements over many generating facilities in a non-discriminatory
manner and help facilitate compliance with Reliability Standard BAL-
003-1.1.\300\
---------------------------------------------------------------------------

    \299\ Bonneville Comments at 3-4.
    \300\ ISO-RTO Council Comments at 13.
---------------------------------------------------------------------------

    140. Other commenters suggest that the Commission should wait to
apply the proposed reforms to existing generation facilities until
further research is completed. APPA et al. state that NERC's required
report on the availability of generating facilities to provide
frequency response,\301\ due in July 2018, will better inform the
Commission whether further action is needed on existing generating
facilities.\302\ WIRAB states that while it does not believe new or
modified Reliability Standards are currently needed, it recommends that
the Commission ``direct NERC and the Regional Entities to measure and
monitor frequency response, particularly governor response and
withdrawal, in Event Analysis and track resulting trends,'' \303\ and
develop guidelines and best practices that reflect regional
differences.\304\ WIRAB states

that NERC's Frequency Response Annual Analysis Report ``can easily be
expanded to track trends, model and analyze frequency response in each
of the interconnections over a 10-year time horizon, and to make
recommendations regarding current and future frequency response
needs.'' \305\ WIRAB states that if significant declines in frequency
response occur, such as decreasing frequency nadirs or continued
evidence of governor withdrawal, the Commission could then direct NERC
and the Regional Entities to develop or modify their mandatory
reliability standards and/or update NERC's Primary Frequency Control
Guideline to ensure frequency response is preserved.\306\
---------------------------------------------------------------------------

    \301\ Order No. 794, 146 FERC ] 61,024 at P 3.
    \302\ APPA et al. Comments at 3-4.
    \303\ WIRAB Comments at 10.
    \304\ Id. at 4.
    \305\ Id. at 10.
    \306\ Id. at 11.
---------------------------------------------------------------------------

    141. In order to encourage regional flexibility and periodic
updating of the proposed maximum droop and deadband settings, WIRAB
recommends that the Commission direct NERC and the Regional Entities
``to monitor frequency response capability in each region, revisit and
revise NERC's droop and deadband setting guidelines as needed, and
generated best practices'' to encourage generating facilities to
``appropriately tighten regional droop and deadband settings as needed
to maintain system reliability.'' \307\ Further, WIRAB recommends that
the Commission periodically reexamine the specific droop and deadband
settings, which should not be viewed as a ``once-and-for-all
decision.'' \308\ In support of its position, WIRAB reminds the
Commission that NERC's Primary Frequency Control Guideline states that
tighter deadband settings of approximately 0.017 Hz can be
successfully implemented and encouraged efforts to lower deadband
settings to that level.\309\
---------------------------------------------------------------------------

    \307\ Id. at 4.
    \308\ Id.
    \309\ Id. at 4-5.
---------------------------------------------------------------------------

    142. Similarly, ISO-RTO Council requests the monitoring of the need
for existing generators to provide primary frequency response. ISO-RTO
Council acknowledges that NERC and the industry have already taken
steps to ensure sufficient primary frequency response, including the
development of Reliability Standard BAL-003-1.1, publishing an
operating guide for generating facilities, outreach to governor and
controls manufacturers, conducting webinars, as well as outreach to the
North American Generator Forum.\310\ ISO-RTO Council asserts that the
Commission should not delay the issuance of the final action by
requiring the development of a Reliability Standard for existing
generating facilities.\311\ Instead, it maintains such requirements
should be evaluated and, if necessary, proposed in a future
proceeding.\312\
---------------------------------------------------------------------------

    \310\ ISO-RTO Council Comments at 11, n.23.
    \311\ Id.
    \312\ Id.
---------------------------------------------------------------------------

3. Commission Determination
    143. We will not impose primary frequency response requirements on
existing generating facilities that do not submit new interconnection
requests that result in an executed or unexecuted interconnection
agreement. We conclude that applying the proposed requirements only to
newly interconnecting generating facilities will adequately address the
Commission's concerns regarding primary frequency response. We are
persuaded by commenters that requiring existing generating facilities
that have not submitted a new interconnection request to install and
operate governors or equivalent controls would be overly expensive and
unnecessarily burdensome.\313\ The record indicates that costs of
installing primary frequency response capability is minimal for newly
interconnecting generating facilities, and as such, we do not believe
that a mandate for compensation is needed at this time. However, the
record also indicates that the expense to some existing facilities may
be cost prohibitive,\314\ for example if retrofits are needed, and
accordingly we believe that applying the requirements to existing
generating facilities may be unduly burdensome.
---------------------------------------------------------------------------

    \313\ APPA et al. Comments at 7-8; NRECA Comments at 10; Public
Interest Organization Comments at 4; ELCON Comments at 5-6.
    \314\ See, e.g., Bonneville Comments at 3.
---------------------------------------------------------------------------

    144. We agree that NERC, the Regional Entities, and other affected
industry stakeholders should continue to measure and monitor the impact
of Reliability Standard BAL-003-1.1 on generating facility frequency
response performance, and the amount and adequacy of primary frequency
response generally. We note that Order No. 794 required NERC to file in
July 2018 the results of a study on the availability of existing
generating facilities to provide primary frequency response.\315\ We
expect that NERC's July 2018 report will inform the Commission if
additional action is warranted regarding the need to impose additional
requirements on existing generating facilities.
---------------------------------------------------------------------------

    \315\ Order No. 794, 146 FERC ] 61,024 at P 3.
---------------------------------------------------------------------------

    145. NERC's July 2018 report will afford an opportunity for all
interested parties to consider WIRAB's recommendation to expand the
scope of NERC's Frequency Response Annual Analysis Report and/or State
of Reliability Report to ``track trends, model and analyze frequency
response in each of the [I]nterconnections over a 10-year time horizon,
and to make recommendations regarding current and future frequency
response needs.'' \316\ The July 2018 report may also provide insight
into whether NERC should consider tracking and reporting the resulting
trends of frequency response performance at the regional level (e.g.,
at the regional entity or balancing authority level), and if necessary,
develop guidelines and/or best practices that reflect regional
differences.\317\ This will allow the Commission to access future
standards directives, as necessary.
---------------------------------------------------------------------------

    \316\ See WIRAB Comments at 10.
    \317\ NERC already tracks frequency response performance at the
Interconnection-wide level in its annual State of Reliability
Report.
---------------------------------------------------------------------------

    146. We also encourage NERC to review, and if necessary, update its
Primary Frequency Control Guideline as appropriate to reflect changes
in the generation resource mix, particularly as it pertains to the
technical attributes of non-synchronous generating facilities.
    147. In addition, NERC and the Regional Entities should also
continue to monitor the operation and impact of the operating
requirements for droop, deadband, and sustained response adopted in
this final action, and recommend to the Commission any changes to those
settings (e.g., lower droop values or tighter deadband settings) in the
future that may become appropriate in light of changed circumstances.

H. Requests for Exemption or Special Accommodation

1. Combined Heat and Power Facilities
a. NOPR Proposal
    148. In the NOPR, the Commission proposed to apply the primary
frequency response capability and operating requirements to all newly
interconnecting generating facilities, including CHP facilities.
b. Comments
    149. ELCON and API contend that the special characteristics of
industrial CHP generating facilities warrant an exemption or special
accommodation from the proposed revisions to the pro forma LGIA and pro
forma SGIA.\318\

ELCON is concerned that, because of the unique connection between their
generation and industrial equipment, the mandatory nature of the new
primary frequency response requirements could adversely impact the
manufacturing processes of its member companies. ELCON asserts that the
generation equipment in CHP facilities ``which are part and parcel of
the load itself, cannot be treated as if they were conventional, stand-
alone generators, and forcing them to act as stand-alone generation
will compromise and potentially harm the manufacturing process by
interfering with the steam balance.'' \319\
---------------------------------------------------------------------------

    \318\ ELCON Comments at 8-9; API Comments at 4-5. The Commission
notes that API states that CHP and cogeneration facilities are
interchangeable. See API Comments at 2. However, this final action
uses only the term ``CHP'' to avoid confusion with ``cogeneration
facility,'' which is a defined term under the Public Utility
Regulatory Policies Act of 1978. See 18 CFR 292.203(b) and 292.205
(2017).
    \319\ ELCON Comments at 9.
---------------------------------------------------------------------------

    150. In particular, ELCON explains that ``[g]eneration equipment
that is integrated with industrial process equipment is operated to
optimize the overall manufacturing process including the safe operation
of critical infrastructure'' and that ``[r]equiring all industrial
generation to provide primary frequency response without respect to the
operational needs of the manufacturing process may jeopardize the
reliability and safe operation of both.'' \320\
---------------------------------------------------------------------------

    \320\ Id. at 8.
---------------------------------------------------------------------------

    151. ELCON explains that there are a ``wide variety of
configurations and capacities in the universe of CHP generators that
are dedicated to an industrial process,'' with some CHP industrial
facilities designed to generate in excess of their load having ``the
flexibility to provide [primary frequency response] to the extent their
industrial process would not be impacted.'' \321\ ELCON also notes that
other CHP facilities are sized to match their industrial load, ``which
in reality means sized to the steam or thermal requirement of the host
manufacturing process.'' \322\ ELCON asserts that ``[s]uch facilities
cannot reasonably provide [primary frequency response] service without
compromising the efficiency, reliability and safe operation of the
manufacturing process.'' \323\
---------------------------------------------------------------------------

    \321\ ELCON Supplemental Comments at 2-3.
    \322\ Id.
    \323\ Id.
---------------------------------------------------------------------------

    152. For example, ELCON states that an increasing number of
manufacturers are installing turbines at their industrial facilities to
obtain lower emissions and other benefits \324\ that are susceptible to
a loss of combustion during certain types of frequency excursions.
ELCON explains that such events could have severe consequences,
including load curtailment and suspension, a manufacturing shutdown,
and execution of emergency procedures to de-pressure and stabilize
equipment.\325\ ELCON states that additional implications of such
events include ``the loss of production, possibly for an extended
period, additional maintenance and repair costs for equipment,
additional personnel costs, excess emissions during shutdown and
startup procedures, and although the shutdown process is designed to be
executed safely and effectively, some increased potential for safety,
health, and environmental consequences.'' \326\ During under-frequency
conditions, the provision of primary frequency response results in
increased MW output, which ELCON explains may result in a level of
steam production that exceeds the operating requirements of the
manufacturing process.\327\
---------------------------------------------------------------------------

    \324\ Combustion turbines operating in ``lean-burn'' mode use a
higher air to fuel ratio (i.e., excess air is allowed into the
process) to reduce NOx emissions.
    \325\ ELCON Supplemental Comments at 4.
    \326\ Id. at 4-5.
    \327\ Id. at 6. ELCON raises an additional concern that
mandating primary frequency response could discourage the
development of CHP facilities ``because of the added investment
cost, operational risk, efficiency loss and regulatory burden.'' Id.
at 9.
---------------------------------------------------------------------------

    153. To address these concerns, ELCON states that ``the proposed
LGIA and SGIA language should be revised to explicitly exclude
imposition of mandatory primary frequency response obligations on
industrial CHP units and other similarly-situated forms of industrial
behind-the-meter generation.'' \328\ ELCON proposes the following new
language for the pro forma LGIA, Section <IP_ADDRESS> and pro forma SGIA,
Section <IP_ADDRESS> to specifically exempt ``industrial behind-the-meter
generation that is sized-to-load (i.e., the industrial load and the
generation are near-balanced in real-time operation and the generation
is controlled to maintain the unique thermal, chemical, or mechanical
output necessary for the operating requirement of its host industrial
facility).'' \329\ ELCON asserts, however, that an exemption from the
mandatory primary frequency response obligation still could allow
certain industrial processes that are capable of providing primary
frequency response to opt-in to such arrangements.\330\
---------------------------------------------------------------------------

    \328\ Id. at 9.
    \329\ Id. at 11.
    \330\ Id.
---------------------------------------------------------------------------

    154. API supports ELCON's exemption request, adding that CHP
facilities bring certain benefits such as high efficiency and lowered
emissions and that the proposal may present a barrier to entry for such
generating facilities.\331\ API contends that adjusting operating
levels for reasons outside of the manufacturing process, such as in
response to instructions of the balancing authority, ``risks a decline
in CHP efficiency and may introduce substantial risks to the
manufacturing process.'' \332\ Accordingly, API requests that the final
action exempt all CHP technologies from maintaining and operating
automatic turbine-generator governors as a condition of
interconnection, regardless of whether they are sized for load or
not.\333\
---------------------------------------------------------------------------

    \331\ API Comments at 5.
    \332\ Id.
    \333\ Id. at 4.
---------------------------------------------------------------------------

c. Commission Determination
    155. The Commission exempts newly interconnecting CHP facilities
that are sized to serve on-site load and have no material export
capability from the operating requirements of this final action.
However, considering the low costs associated with governor
installation, we will require all newly interconnecting CHP facilities,
including those sized-to-load, to install a governor or equivalent
control equipment capable of providing primary frequency response as a
condition of interconnection as proposed in the NOPR.\334\ We believe
that it is prudent to require newly interconnecting CHP facilities to
install primary frequency response capability now in the event that
there is an increased need in the future for primary frequency response
capability. Further, we adopt, with certain modifications, the
definition of ``sized-to-load'' contained in ELCON's proposed new
language for the pro forma LGIA and pro forma SGIA.\335\ In particular,
we define CHP facilities that are ``sized-to-load'' as those generating
facilities that are behind-the-meter generation that are sized-to-load
(i.e., the thermal load and the generation are near-balanced in real-
time operation and the generation is primarily controlled to maintain
the unique thermal, chemical, or mechanical output necessary for the
operating requirement of its host facility).\336\ We believe that
ELCON's request to limit the definition of ``sized-to-load'' only to
industrial CHP facilities is too narrow.
---------------------------------------------------------------------------

    \334\ ELCON noted ``the low costs triggered by the NOPR's
limited applicability to only new generation facilities'' when
agreeing with the Commission's proposal not to mandate compensation.
ELCON Comments at 6.
    \335\ See ELCON Supplemental Comments at 11.
    \336\ Id.
---------------------------------------------------------------------------

    156. We agree with ELCON and API that CHP facilities sized-to-load
present

unique concerns regarding the efficiency, reliability, and safe
operation of their industrial processes that warrant this exemption.
For example, ELCON notes that an increasing number of interconnection
customers with CHP facilities are using turbines susceptible to a loss
of combustion during certain types of frequency excursions, and that
such events could have severe consequences, including load curtailment
and suspension, a manufacturing shutdown, and execution of emergency
procedures to de-pressure and stabilize equipment.\337\ Additionally,
during under-frequency conditions, the provision of primary frequency
response results in increased MW output, which ELCON explains may
result in a level of steam production that exceeds the operating
requirements of the manufacturing process.\338\
---------------------------------------------------------------------------

    \337\ ELCON Supplemental Comments at 4.
    \338\ Id. at 6. ELCON raises an additional concern that
mandating primary frequency response could discourage the
development of CHP facilities ``because of the added investment
cost, operational risk, efficiency loss and regulatory burden.'' Id.
at 9.
---------------------------------------------------------------------------

2. Electric Storage Resources
a. NOPR Proposal
    157. The NOPR proposed to apply the primary frequency response
capability and operating requirements to all new generating facilities,
including electric storage resources, without exception.
b. Comments
i. NOPR Comments
    158. While most comments on the NOPR did not specifically request
an exemption for electric storage resources, some commenters suggest
changes to the proposed pro forma LGIA and pro forma SGIA provisions to
accommodate electric storage resources. In particular, ESA argues that
the proposed requirements disproportionately affect electric storage
resources in four ways.\339\ First, ESA states that the use of a
nameplate capacity basis for primary frequency response will require
storage to provide more frequent and greater magnitude of primary
frequency response service than traditional generating facilities.\340\
For example, ESA argues if a traditional generating facility with a
nameplate capacity of 100 MW has a minimum set point of 40 MW, the
primary frequency response service will be based on the 60 MW of
capacity above that minimum set point. However, ESA states that
electric storage has no minimum set point and is capable of operating
at the full range of its capacity for withdrawals and injections.\341\
---------------------------------------------------------------------------

    \339\ ESA Comments at 3.
    \340\ Id. at 3-4.
    \341\ Id.
---------------------------------------------------------------------------

    159. Second, ESA claims that whereas traditional generating
facilities start-up and shut-down as a part of normal operations and
are not required to provide primary frequency response while offline,
electric storage resources are, by contrast, ``always online'' even
when not charging or discharging.\342\ Therefore, ESA suggests that
electric storage resources will be available, on a more frequent basis,
to provide primary frequency response than other generating facilities
that go offline.\343\ Third, ESA states that different electric storage
technologies have different optimal depths of discharge, and exceeding
the optimal depth of discharge accelerates the degradation of the
facility and increases operations and maintenance costs. ESA asserts
that this scenario indicates the potential of the use of nameplate
capacity as the basis for primary frequency response to result in a
disproportionate impact on electric storage resources.\344\
---------------------------------------------------------------------------

    \342\ Id. at 4.
    \343\ Id.
    \344\ Id. at 3-4.
---------------------------------------------------------------------------

    160. Fourth, ESA notes that unlike traditional generating
facilities, electric storage is energy limited. Thus, ESA argues that
the requirement to sustain output in proposed section <IP_ADDRESS> of the
pro forma LGIA poses unique regulatory and financial exposure, such as
NERC violations and lost revenues in future intervals, especially when
a storage resource is at a low state of charge subsequent to the
provision of energy or ancillary services.\345\
---------------------------------------------------------------------------

    \345\ Id. at 4.
---------------------------------------------------------------------------

    161. ESA claims that, for these reasons, the proposal is unduly
discriminatory by potentially burdening storage, and recommends that
the NOPR proposal be modified to: (1) Establish a minimum set point for
primary frequency response service; and (2) include inadequate state of
charge as an explicit operational constraint exempting storage from
maintaining sustained output.\346\ Absent these requested changes, ESA
requests a complete exemption for electric storage resources.\347\
---------------------------------------------------------------------------

    \346\ Id. at 4-5.
    \347\ Id. at 5.
---------------------------------------------------------------------------

    162. AES Companies request a complete exemption from the proposed
NOPR requirements for electric storage resources including but not
limited to battery storage devices providing one or more ancillary
services.\348\ AES Companies assert that the proposed requirement of a
maximum five percent droop setting, if imposed, would unnecessarily
limit the benefits that electric storage resources specifically
designed for primary frequency response can contribute to grid
stability.\349\ AES Companies also state that a five percent droop
setting ignores the majority of the primary frequency response capacity
that an electric storage resource was designed to deliver by directing
the resource to deliver only a fraction of its benefits.\350\ AES
Companies further argue for an exemption from the requirement to
dedicate a portion of the capacity of an electric storage resource for
the provision of primary frequency response.\351\ AES Companies state
that droop parameters should be specific to the technology, and that
requiring, for instance, a lithium ion battery to provide primary
frequency response at its full capacity would require a droop
approaching 0 percent.\352\
---------------------------------------------------------------------------

    \348\ See AES Companies Comments at 17, 19 (i.e., specified
changes to the pro forma language).
    \349\ Id. at 6. AES Companies contend that a five percent droop
will limit the amount of capacity that an electric storage resource
can dedicate to primary frequency response service.
    \350\ Id.
    \351\ Id. at 6. The Commission notes that in the NOPR, it did
not propose any mandatory headroom requirements.
    \352\ AES Companies Comments at 7.
---------------------------------------------------------------------------

ii. Supplemental Comments
    163. Supplemental commenters are split on whether electric storage
resources should be subject to the operating requirements proposed in
the NOPR. Tri-State, ISO-RTO Council, Berkshire, NERC, and WIRAB
support applying the proposed requirements to electric storage
resources. SoCal Edison opposes the proposed operating requirements,
but explains that if the Commission adopts the proposal, it should be
applicable to all newly interconnecting generating facilities on a
technology neutral basis so that such requirements will be implemented
in a non-discriminatory fashion.\353\
---------------------------------------------------------------------------

    \353\ SoCal Edison Supplemental Comments at 2.
---------------------------------------------------------------------------

    164. However, Sunrun, AES Companies, and CESA comment that electric
storage resources would bear a disproportionate impact compared to
other resources due to the proposed droop and sustained response
requirements, and therefore request an exemption or an accommodation
from the proposed requirements. Several other commenters reiterate
their initial NOPR comments that operating requirements for primary
frequency response should not be included in the pro forma LGIA and pro
forma SGIA, stating that a market-based approach to

primary frequency response, or regional flexibility in facilitating the
provision of primary frequency response (e.g., allowing balancing
authorities to determine which generating facilities should supply
primary frequency response) would lead to more efficient and cost
effective outcomes.\354\
---------------------------------------------------------------------------

    \354\ See, e.g., EEI Comments at 4-5.
---------------------------------------------------------------------------

    165. A number of commenters reference either technical or economic
challenges that would be unique to electric storage resources under the
proposed requirements. Sunrun, ESA, and CESA state that electric
storage resources have a finite lifecycle, and that compliance with the
proposed operating requirements for timely and sustained response may
limit the lifetime of an electric storage resource.\355\ These
commenters also assert that different electric storage technologies
will have different depths of discharge and may face different
challenges under the proposed operating requirements.
---------------------------------------------------------------------------

    \355\ Sunrun Supplemental Comments at 2; ESA Supplemental
Comments at 4; CESA Supplemental Comments at 11.
---------------------------------------------------------------------------

    166. ESA argues that the proposed droop and sustained response
requirements would impose adverse conditions on electric storage
resources because they would bear a disproportionate impact on the
provision of primary frequency response capability compared to other
generating facilities. In particular, ESA asserts that because electric
storage resources are energy-limited, it is inappropriate to require
electric storage resources to provide sustained response because doing
so would constrain electric storage resources from effectively managing
their fuel supply (i.e., state of charge), potentially reducing their
ability to fulfill service obligations and creating an effective
headroom requirement.\356\
---------------------------------------------------------------------------

    \356\ ESA Supplemental Comments at 3.
---------------------------------------------------------------------------

    167. ESA restates its NOPR comment that droop is calculated as a
percent of nameplate capacity above a minimum set point, and because
electric storage resources lack such a set point, storage resources
will be required to provide proportionally greater primary frequency
response service.\357\ In addition, ESA states that if an electric
storage resource is charging when called upon to provide primary
frequency response, the switch to discharging means that the electric
storage resource will provide both the injected energy and the removal
of an effective ``load,'' creating a response significantly greater
than contemplated in the proposed droop settings.\358\ However, EPRI
states that this concern can be mitigated if the Commission makes
certain clarifications in the final action. In particular, EPRI states
that the NOPR requirement setting the droop curve at no more than five
percent, based on nameplate capacity, can be assumed to refer to a
slope equating to a five percent change in frequency causing a change
in the full discharge capacity (not discharge capacity plus charge
capacity) of the electric storage resource.\359\ Both AES Companies and
ESA comment that the proposed deadband and timely response requirements
do not pose challenges or adverse operational impacts for most electric
storage resources.\360\
---------------------------------------------------------------------------

    \357\ Id. at 4.
    \358\ Id.
    \359\ EPRI Supplemental Comments at 6.
    \360\ AES Companies Supplemental Comments at 23; ESA
Supplemental Comments at 6.
---------------------------------------------------------------------------

    168. Additionally, ESA claims that since electric storage resources
are always ``online,'' as opposed to generating facilities that start-
up and shut-down (i.e., go offline), electric storage resources would
be available to provide primary frequency response on a more frequent
basis, and would therefore be expected to provide more primary
frequency response service than generating facilities that go
offline.\361\ On the other hand, APS states that while it acknowledges
that electric storage resources could provide more primary frequency
response than other resources, such provision will be limited by the
obligations and operational characteristics and design of such
resources, similar to all other resource types. In particular, if there
is to be a minimum state of charge below which electric storage
resources would not have to provide primary frequency response, these
resources may not be providing primary frequency response of greater
magnitude than other resources.\362\
---------------------------------------------------------------------------

    \361\ ESA Supplemental Comments at 7.
    \362\ APS Supplemental Comments at 6.
---------------------------------------------------------------------------

    169. Several commenters assert that there is little substantive
difference between the operating constraints faced by electric storage
resources and the operational characteristics that limit the capacity
of other types of generating facilities to provide primary frequency
response.\363\ For example, NERC asserts that ``run-of-river hydro
units may have insufficient river flow, thermal units may have
discharge temperature limitations on cooling water, gas turbines may
need to be derated during the summer, pumped storage may not have yet
refilled storage reservoirs, and units may be in the middle of coming
on or going off-line.'' \364\ NERC states that while several types of
generating facilities have technical limitations that may inhibit their
ability to provide primary frequency response under certain
circumstances, these operating constraints should not preclude any
generating facility from maintaining primary frequency response
capability.\365\ A number of supplemental commenters state that any
determination regarding accommodations to mitigate such operational
constraints, including, for example, the threshold limit below which an
electric storage resource should be required to provide primary
frequency response or allowed to disconnect from the grid during low
frequency events, must be made on a case-by-case basis and can be done
during the interconnection process.\366\ Further, APS comments that the
operational wear and tear on electric storage resources and its impact
on the overall life expectancy of an electric resource is not
significantly different than the potential impact of wear and tear on
other generating facilities.\367\
---------------------------------------------------------------------------

    \363\ See, e.g., APS Supplemental Comments at 4; NERC
Supplemental Comments at 5, stating that operating constraints
should not preclude any new generating facility from maintaining
primary frequency response capability.
    \364\ NERC Supplemental Comments at 5.
    \365\ Id.
    \366\ See, e.g., APS Supplemental Comments at 5, 7; EPRI
Supplemental Comments at 12-13; NRECA Supplemental Comments at 3;
NERC Supplemental Comments at 5, stating that interconnection
customers should evaluate any ``technical limitations on a unit-by-
unit basis and coordinate with their NERC Balancing Authority and
Interconnection Agreement Transmission Provider/Transmission Owner,
as appropriate.''
    \367\ APS Supplemental Comments at 7.
---------------------------------------------------------------------------

    170. ISO-RTO Council also believes that possible accommodations or
exemptions for electric storage resources and small generators are
unwarranted, stating that such measures could allow such resources to
avoid solving the very problem to which such resources contribute and
the NOPR rules were intended to address.\368\ ISO-RTO Council asserts
that the proposed requirements are consistent with the recommendations
and guidelines contained in NERC's Primary Frequency Control Guideline,
and are similar to the current requirements of PJM, ISO-NE, and CAISO
for electric storage resources and/or small generators to install,
maintain and operate primary frequency response related equipment as a
condition of interconnection ``that have not required exemptions for
either electric storage resources or small generators.'' \369\ ISO-RTO
Council

further notes that primary frequency response capability requirements
that already exist in ``areas with substantial penetration of renewable
resources'' in the European Union have not had ``negative impacts.''
\370\
---------------------------------------------------------------------------

    \368\ ISO-RTO Council Supplemental Comments at 2.
    \369\ Id. at 3.
    \370\ Id. at 4 (citing ENTSO-E requirements for Generators,
Chapter 1, Article 13).
---------------------------------------------------------------------------

    171. EPRI states that the unique characteristics of electric
storage resources should not directly affect the current requirements
for droop settings.\371\ Specifically, EPRI comments that there is a
limited amount of additional power required (2 percent of nameplate or
less for a 0.1 Hz frequency deviation) and a limited amount of time it
must be sustained (generally five minutes or less, maximum about seven
minutes).\372\ EPRI concludes that the energy required to provide
sustained frequency response is very small in relation to the energy
that the electric storage resource would be providing otherwise.\373\
---------------------------------------------------------------------------

    \371\ EPRI Supplemental Comments at 4.
    \372\ Id.
    \373\ Id.
---------------------------------------------------------------------------

    172. While ESA supports an exemption for electric storage
resources, it suggests several accommodations to the proposed
requirements to mitigate the potentially adverse impact of the proposed
requirements on electric storage resources. ESA asserts that electric
storage resources should have a means to effectively ``go offline,''
similar to generating facilities on shut down, and that the language
``whenever the Large Generating Facility is operated in parallel with
the Transmission System'' in Section <IP_ADDRESS> should be interpreted to
mean providing services to the grid and should exclude simply being
idle.\374\ WIRAB adds that it would not be just and reasonable to
require an electric storage resource to enable primary frequency
response while in standby mode when other generating facilities are not
subject to a similar requirement.\375\
---------------------------------------------------------------------------

    \374\ ESA Supplemental Comments at 8.
    \375\ WIRAB Supplemental Comments at 6.
---------------------------------------------------------------------------

    173. ESA also suggests that electric storage resources should be
exempt from requirements for providing sustained primary frequency
response when such a resource does not have enough energy stored to
provide sustained frequency response at required capacity when a
frequency deviation occurs (i.e., inadequate state of charge).\376\ ESA
states that this exemption for ``inadequate state of charge'' should be
included along with the allowances for ambient temperature limitations,
outages of mechanical equipment, and regulatory requirements in the
proposed tariff language of Section <IP_ADDRESS>. WIRAB agrees that the
concept of energy limitation should be included as an exemption to
sustained response in proposed Section <IP_ADDRESS> of the pro forma LGIA
and <IP_ADDRESS> of the pro forma SGIA, but clarifies that this exemption
should not apply only to electric storage resources because other
generating facilities also face energy limitations.\377\
---------------------------------------------------------------------------

    \376\ ESA Supplemental Comments at 10.
    \377\ WIRAB Supplemental Comments at 5.
---------------------------------------------------------------------------

    174. ESA states that, in lieu of other mechanisms to accommodate
electric storage resources, operators of electric storage resources
could specify an operating range outside of which electric storage
resources would not be required to provide and/or sustain primary
frequency response.\378\ Doing so, according to ESA, would prevent the
excessive wear and tear impacts on electric storage resources, as well
as potentially mitigate inadequate state of charge for sustained
response.\379\ However, ESA states that even with this approach to
mitigate adverse impacts of primary frequency response requirements,
electric storage resources would continue to face constraints on state
of charge management and a reduction in capability to provide other
energy and ancillary services, primarily as a result of the
unpredictable nature of abnormal frequency deviations.\380\ APS
comments that establishing a minimum set point or an operating range
are both workable solutions, and argues that the Commission should
allow flexibility in determining the approach on a case-by-case
basis.\381\ APS states that an operating range could be established
through collaboration and evaluation during the interconnection process
and included in the interconnection agreement.\382\ EPRI comments that
a static operating range could lead to inefficiencies.\383\ AES
Companies does not support the use of an operating range.\384\
---------------------------------------------------------------------------

    \378\ ESA Supplemental Comments at 12-13.
    \379\ Id. at 13.
    \380\ Id.
    \381\ APS Supplemental Comments at 9.
    \382\ Id. at 8-9.
    \383\ EPRI Supplemental Comments at 15.
    \384\ AES Companies Supplemental Comments at 38.
---------------------------------------------------------------------------

    175. SDG&E believes that markets for primary frequency response
have the potential to eliminate nearly all the issues addressed by the
questions in the Commission's Request for Supplemental Comments.\385\
Berkshire recommends that the Commission acknowledge in the final
action that electric storage resources are not always utilized as
generation or accounted for as generation assets, and that the
Commission consider holding a technical conference to discuss
alternative applications for electric storage resources apart from
providing primary frequency response within a prescribed
bandwidth.\386\
---------------------------------------------------------------------------

    \385\ SDG&E Supplemental Comments at 3-4
    \386\ Berkshire Supplemental Comments at 2-3.
---------------------------------------------------------------------------

c. Commission Determination
    176. In consideration of the unique physical and operational
characteristics of electric storage resources, we will require
transmission providers to include in their pro forma LGIA and pro forma
SGIA specific accommodations for electric storage resources and place
limitations on when electric storage resources will be required to
provide primary frequency response consistent with the conditions set
forth in Sections 9.6.4, <IP_ADDRESS>, <IP_ADDRESS>, <IP_ADDRESS>, and <IP_ADDRESS> of the
pro forma LGIA and Sections 1.8.4, <IP_ADDRESS>, <IP_ADDRESS>, <IP_ADDRESS>, and
<IP_ADDRESS> of the pro forma SGIA, as applicable.
    177. Specifically, as discussed in further detail below, this
includes the identification of an operating range within which electric
storage resources will be required to provide primary frequency
response, the identification of particular operating circumstances when
electric storage resources will not be required to provide primary
frequency response, and the inclusion of energy limitations in the list
of exemptions from the requirement to provide primary frequency
response.
    178. We disagree with SoCal Edison, ISO-RTO Council, and WIRAB that
suggest electric storage resources should be subject to the same
requirements for primary frequency response as all other
resources.\387\ We find that the provision of primary frequency
response in accordance with the requirements of this final action may
present challenges for some electric storage resources. Specifically,
we are persuaded by ESA's comments that requiring an electric storage
resource to sustain its output without any consideration for whether
the electric storage resource has sufficient state of charge could
result in depths of discharge that could accelerate the degradation of
an electric storage resource. However, while we agree that electric
storage resources could experience disproportionate harm from the
proposed requirements under some circumstances, we are also persuaded
by EPRI's suggestion that those harms would be modest and can be
mitigated with certain

accommodations.\388\ In particular, EPRI notes that ``the energy
required to provide sustained primary frequency response is very small
in relation to the energy that the electric storage resource would be
providing otherwise due to provision of energy or other ancillary
services such that the risk of running into state of charge limits
would already be known and not likely impacted by provision of primary
frequency response by itself.'' \389\
---------------------------------------------------------------------------

    \387\ ISO-RTO Supplemental Comments at 4-5; SoCal Edison
Supplemental Comments at 2; WIRAB Supplemental Comments at 3.
    \388\ ``If an electric storage resource is not providing any
online service, it should not be required to provide primary
frequency response to align with the rules designated in the NOPR.''
EPRI Supplemental Comments at 8; ``Resources claiming artificial
minimum set points during operational time frames that they would
not provide primary frequency response during over-frequency events
can be managed on a case-by-case basis, if sufficient primary
frequency response capability is otherwise available.'' EPRI
Supplemental Comments at 10; ``The [operating] range should be
provided if there are any ``rough zones'' for any technologies where
primary frequency response is not controllable, not possible, or
would lead to extraordinary damage or wear-and-tear costs.'' EPRI
Supplemental Comments at 15.
    \389\ EPRI Supplemental Comments at 4.
---------------------------------------------------------------------------

    179. We are persuaded by ESA's comment that allowing operators of
electric storage resources to specify an operating range ``would
prevent the excessive wear and tear impacts on electric storage as well
as potentially mitigate inadequate state of charge for sustained
response.'' \390\ Therefore, while acknowledging the limited degree of
the amount of energy that will be required to provide sustained
response,\391\ we find that, on balance, limiting the circumstances
under which electric storage resources are required to provide primary
frequency response will adequately alleviate the potential for
excessive wear and tear that may have otherwise been experienced by
electric storage resources.
---------------------------------------------------------------------------

    \390\ See ESA Supplemental Comments at 12-13.
    \391\ See EPRI Supplemental Comments at 4, stating that ``the
energy required to provide sustained primary frequency response is
very small in relation to the energy that the electric storage
resource would be providing otherwise due to provision of energy or
other ancillary services.''
---------------------------------------------------------------------------

    180. Specifically, we will require electric storage resources to
identify in their interconnection request an operating range for the
basis of the provision of primary frequency response. This operating
range will represent the minimum and maximum states of charge between
which an electric storage resource will be required to provide primary
frequency response. The operating range for each electric storage
resource will need to be agreed to by the interconnection customer and
transmission provider, in consultation with the applicable balancing
authority or any other relevant parties as appropriate, consider the
system needs for primary frequency response, and the physical
limitations of the electric storage resource as identified by the
developer and any relevant manufacturer specifications, and be
established in Appendix C of the pro forma LGIA (``Interconnection
Details'') or Attachment 5 of the pro forma SGIA (``Additional
Operating Requirements for the Transmission Provider's Transmission
System and Affected Systems Needed to Support the Interconnection
Customer's Needs''). We find that this operating range addresses
concerns regarding excessive wear and tear on electric storage
resources, mitigates the concerns about inadequate state of charge, and
effectively allows electric storage resources to identify a minimum and
maximum set point below and above which they will not be obligated to
provide primary frequency response comparable to synchronous generation
as suggested by ESA.\392\
---------------------------------------------------------------------------

    \392\ See ESA Supplemental Comments at 12-13.
---------------------------------------------------------------------------

    181. However, we do not agree with ESA that electric storage
resources should not be required to specify the details of an
inadequate state of charge parameter in their interconnection
agreements.\393\ We find that requiring an electric storage resource to
identify the states of charge at which it is unable to inject or
receive additional energy to provide primary frequency response is
necessary to mitigate the adverse impacts on electric storage resources
while still requiring them to provide this essential reliability
service when they are technically capable to do so. While we believe
that the interconnection customer will have the best information
regarding the physical capabilities of the electric storage resource
and any limitations that should be placed on its operations due to
manufacturer specifications, we also believe that the transmission
provider will have the best information with respect to: (1) The
expected magnitude of frequency deviations; (2) the expected duration
that system frequency will remain outside of the deadband parameter;
and (3) the expected incidence of frequency deviations outside of the
deadband parameter. This information from the transmission provider is
necessary for the interconnection customer to calculate the anticipated
obligations to provide primary frequency response for an electric
storage resource in terms of the energy requirements for individual
incidents, as well as increased electricity throughput (i.e., cycling)
over the life of the electric storage resource. We note that both the
physical limitations of the electric storage resource, as identified by
the interconnection customer, and the expected primary frequency
response system requirements, as identified by the transmission
provider, may be necessary to determine the appropriate operating range
for an electric storage resource. Therefore, we find that it is
necessary to provide the interconnection customer with the ability to
propose an operating range with its initial interconnection request,
but also allow the transmission provider and/or balancing authority to
consider the system needs for primary frequency response prior to
reaching an agreement on the final operating range among the parties in
a LGIA or SGIA. We also find that the transmission providers must treat
electric storage resources in a not unduly discriminatory or
preferential manner when determining the appropriate operating range.
---------------------------------------------------------------------------

    \393\ See ESA Supplemental Comments at 11.
---------------------------------------------------------------------------

    182. Because the requirements for primary frequency response may
change over time, the Commission is persuaded by commenters that it is
appropriate to provide transmission providers with flexibility to
determine whether the operating ranges established in the
interconnection agreements for electric storage resources are static or
dynamic values.\394\ We understand that system conditions and
contingency planning can change, which may alter the anticipated
incidence, magnitude, and duration of frequency deviations.
Additionally, the capabilities of electric storage resources to provide
primary frequency response may change due to degradation, repowering,
or changes in service obligations, and these may also need to be
considered when revisiting a dynamic operating range.\395\ If a
transmission provider decides to implement a dynamic operating range
for an electric storage resource to provide primary frequency response,
it must also determine how frequently the operating range will be
reevaluated and the factors that may be considered when reevaluating it
either on a case-by-case basis in Appendix C of the pro forma LGIA and
Attachment 5 of the pro forma SGIA, or as a standard approach filed in
compliance with this final action. To the extent that the
interconnection customer and the transmission provider

cannot agree on these issues, the interconnection customer has the
right to request the filing of an unexecuted interconnection agreement
to seek Commission resolution.
---------------------------------------------------------------------------

    \394\ See, e.g., APS Supplemental Comments at 8; EPRI
Supplemental Comments at 15; ESA Supplemental Comments at 13.
    \395\ A dynamic operating range will allow the minimum and
maximum state of charge values that define the operating range to
change over time based on changing system needs and/or electric
storage resource capabilities.
---------------------------------------------------------------------------

    183. Additionally, we agree with comments that suggest certain
electric storage technologies are always online and capable of
providing primary frequency response, and that without any
accommodation, those resources could be required to provide sustained
primary frequency response more frequently than other generating
facilities that start up and shut down (i.e., go offline).\396\
Therefore, we find that it is appropriate to place limitations on when
electric storage resources are required to provide primary frequency
response. In particular, we agree with EPRI that ``[if] an electric
storage resource is not providing any online service, it should not be
required to provide primary frequency response.'' \397\ To require an
electric storage resource to provide a service under conditions that
other generating facilities are not required to provide it would raise
discrimination concerns. Therefore, we revise the pro forma LGIA and
pro forma SGIA to make clear that electric storage resources will only
be required to provide primary frequency response when they are online
and are dispatched to inject electricity to the grid and/or dispatched
to receive electricity from the grid. We clarify that the requirement
to provide primary frequency response will exclude situations when an
electric storage resource is not dispatched to inject electricity to
the grid and/or dispatched to receive electricity from the grid.
---------------------------------------------------------------------------

    \396\ See ESA Supplemental Comments at 7.
    \397\ See EPRI Supplemental Comments at 8. EPRI states that the
determination of a generating facility being online is ``it being
connected to the grid and providing online services (energy or
online ancillary services).''
---------------------------------------------------------------------------

    184. We also agree with WIRAB that electric storage resources and
some other resources could face physical limitations that would make
them unable to provide primary frequency response, and believe that
accommodations for such limitations are appropriate.\398\ While the
previously discussed accommodations for electric storage resources are
intended to limit adverse impacts of the primary frequency response
requirements on them, we find that providing a specific exemption for
physical energy limitations will not only further ensure that electric
storage resources are not required to provide primary frequency
response when they are physically unable to do so, but it will also
prevent other resources that experience similar physical limitations
from being required to provide the service when they are not able to.
Conditions under which a resource is physically unable to provide
primary frequency response could, for example, include an inability for
an electric storage resource to increase its output because it does not
have any stored energy (i.e., its state of charge is equal to zero), or
an inability for a wind or solar generating facility to increase output
because there is not sufficient wind or solar energy to allow an
increase in MW output.
---------------------------------------------------------------------------

    \398\ See WIRAB Supplemental Comments at 4.
---------------------------------------------------------------------------

    185. Moreover, we find that including this exemption in the pro
forma LGIA and pro forma SGIA is consistent with our finding that it is
not necessary to establish a headroom requirement for primary frequency
response. Because we are not requiring newly interconnecting generating
facilities to maintain headroom to provide primary frequency response,
we find that it is unjust and unreasonable to require the provision of
primary frequency response from generating facilities that are
physically unable to provide the service. Accordingly, we clarify that
all generating facilities subject to this final action will be exempt
from the timely and sustained frequency response requirements if they
experience a physical energy limitation that would prevent them from
fulfilling their obligations that would have otherwise been required
under the parameters set forth in this final action. To implement this
requirement, we modify the list of exemptions in Section <IP_ADDRESS>
(Timely and Sustained Response) of the pro forma LGIA and Section
<IP_ADDRESS> (Timely and Sustained Response) of the pro forma SGIA to
include the term ``physical energy limitation.'' We define ``physical
energy limitation'' to mean the circumstance when a resource would not
have the physical ability, due to insufficient remaining charge for an
electric storage resource or insufficient remaining fuel for a
generating facility to satisfy its timely and sustained primary
frequency response service obligation, as dictated by the magnitude of
the frequency deviation and the droop parameter of the governor or
equivalent controls. However, we also find that when a generating
facility experiences a physical energy limitation, then the
interconnection customer must be able to demonstrate to the
transmission provider, and to the extent applicable, the relevant
balancing authority, that such a physical energy limitation existed
before or during an abnormal frequency deviation outside of the
deadband parameter.
    186. We find that ESA's comments that suggest a minimum set point
should be used in the determination of the droop response are
misplaced. A generating facility's minimum set point is not used in the
calculation of the MW droop response. We clarify that for all
generating facilities, the calculation of the MW droop response is
based on a generating facility's nameplate capacity (i.e., for a five
percent droop curve, a generating facility would be expected to
increase its output by 100 percent of its nameplate capacity for a five
percent change in frequency). While it is true in theory that an
electric storage resource may have a greater operating range over which
to provide primary frequency response, from a practical standpoint the
droop parameter limits the percentage of nameplate capacity that a
generating facility will provide in response to abnormal frequency
deviations.\399\
---------------------------------------------------------------------------

    \399\ For example, as pointed out by EPRI, ``[a] [five percent]
droop setting and 36mHz deadband equates to an individual resource
having a frequency response of about [two percent of] nameplate
capacity per tenth of a Hz at a tenth of a Hz frequency deviation.''
EPRI Supplemental Comments at 7.
---------------------------------------------------------------------------

    187. ESA contends that ``[i]f a storage resource is charging when
called to provide [primary frequency response], the switch to
discharging means that the storage [resource] will provide both the
injected energy and the removal of an effective `load,' creating a
response significantly greater than contemplated in the proposed droop
settings.'' \400\ To address ESA's concern, we will require electric
storage resources that are being dispatched to charge at the time of an
abnormal frequency deviation to increase (for over-frequency
deviations) or decrease (for under-frequency deviations) the rate at
which they are charging according to the droop parameter to satisfy the
timely and sustained primary frequency response requirement. For
example, if an electric storage resource is charging at two MW prior to
an abnormal under-frequency deviation, and the calculated response per
the droop parameter is to increase real-power output by one MW, the
electric storage resource could satisfy its obligation by reducing its
consumption by one MW (instead of completely reducing its consumption
by the full two MW and then discharging at one MW, which would result
in a net of three MW provided as primary frequency response). Further,
if an electric storage resource is capable of switching from charging
to discharging, or vice versa, within the time period that the primary
frequency response is

needed the resource should do so if necessary to meet its calculated
response. For example, if an electric storage resource is charging at
one MW prior to an abnormal under-frequency deviation, and the
calculated response per the droop parameter is to increase real-power
output by three MW, the electric storage resource could satisfy its
obligation by switching from charging at one MW to discharging at two
MW. We clarify that electric storage resources would not be required to
change from charging to discharging, or vice versa, if they are not
technically capable of making the transition during the period in which
the primary frequency response is needed.
---------------------------------------------------------------------------

    \400\ ESA Supplemental Comments at 3-4.
---------------------------------------------------------------------------

    188. Regarding AES Companies' contention that a five percent droop
setting ignores the majority of the primary frequency response capacity
that an electric storage resource was designed to deliver,\401\ we note
that, as stated in the NOPR, the requirements adopted in this final
action are minimum requirements; therefore, if a new generating or
electric storage facility elects, in coordination with its transmission
provider and/or balancing authority, to operate in a more responsive
mode by using lower droop or tighter deadband settings, nothing in
these requirements would prohibit it from doing so.\402\
---------------------------------------------------------------------------

    \401\ AES Companies Comments at 6.
    \402\ NOPR, 157 FERC ] 61,122 at P 48.
---------------------------------------------------------------------------

    189. Finally, we are not persuaded by Berkshire that a technical
conference is needed at this time because there is sufficient evidence
in the record to make a finding on this issue, as discussed in this
final action.
3. Distributed Energy Resources
a. NOPR Proposal
    190. In the NOPR, the Commission proposed to apply the primary
frequency response capability and operating requirements to all newly
interconnecting generating facilities interconnecting through an LGIA
or SGIA.\403\
---------------------------------------------------------------------------

    \403\ Order No. 2006, FERC Stats. & Regs. ] 31,180 at P 7, order
on reh 'g, Order No. 2006-A, FERC Stats. & Regs. ] 31,196, order on
clarification, Order No. 2006-B, FERC Stats. & Regs. ] 31,221.
---------------------------------------------------------------------------

b. Comments
    191. Several commenters assert that the final action should include
special considerations for generating facilities connecting at the
distribution level. Public Interest Organizations state that, in the
NOI, SolarCity Corporation raised concerns that already-installed
behind-the-meter generation and DERs could become subject to the pro
forma SGIA should those DERs opt to participate in wholesale energy
markets.\404\ Public Interest Organizations request that the Commission
clarify the circumstances in which DER participation in wholesale
energy markets would trigger requirements in the SGIA because
``[u]nless warranted by a significant shortfall of primary frequency
response service, requiring the retrofit of existing generators for
primary frequency response capability under such circumstances would
not be cost-effective.'' \405\ TVA states that exceptions to the
primary frequency response requirements could reasonably be justified
for generating facilities interconnected only through lower voltage
distribution systems.\406\
---------------------------------------------------------------------------

    \404\ Public Interest Organizations Comments at 3.
    \405\ Id. at 3-4.
    \406\ TVA Comments at 4.
---------------------------------------------------------------------------

    192. Xcel argues that dynamic frequency response at the
distribution level can interfere with anti-islanding \407\ protection
methods, and that, unlike transmission-connected generation, generating
facilities connected to the distribution system must meet the anti-
islanding requirements of the Institute of Electrical and Electronics
Engineers (IEEE) Standards to protect the distribution system.\408\
Xcel explains that the IEEE anti-islanding standards may require that
the primary frequency response of the facility be restricted or that
suitable mitigation measures be installed.\409\ Accordingly, Xcel
asserts that the pro forma SGIA should require that the distribution
system operator be notified of the primary frequency response
capabilities of a generating facility to be connected to the
distribution system, and that the distribution system operator must
have the ability to place limitations on the primary frequency response
of the generating facility if such limitations are required to ensure
system reliability and power quality.\410\
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    \407\ Islanding refers to the condition in which a DER continues
to power a location even though electrical grid power from the
electric utility is no longer present. Unintentional islanding can
pose a hazard to utility personnel and customer equipment, and it
may prevent automatic re-connection of devices. The currently
effective version of IEEE-1547 standard requires that for an
unintentional island in which the DER energizes a portion of the
distribution system, the DER shall detect the island and cease to
energize the system within two seconds of the formation of an
island.
    \408\ Xcel Comments at 9; IEEE Standard 1547-2003,
Interconnecting Distributed Resources with Electric Power Systems
and IEEE Standard 1547a-2014, Interconnecting Distributed Resources
with Electric Power Systems Amendment 1.
    \409\ Xcel Comments at 9.
    \410\ Id.
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c. Commission Determination
    193. The requirements of this final action will apply to newly
interconnecting DERs that execute, or request the unexecuted filing of,
an LGIA or SGIA on or after the effective date of this final action. We
find Public Interest Organizations' request that the Commission clarify
the circumstances in which DER participation in wholesale energy
markets would trigger requirements in the pro forma SGIA to be outside
the scope of this proceeding.\411\
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    \411\ CAISO, ISO-NE, MISO, NYISO, PJM, and SPP all have programs
that allow demand response and/or certain demand-side resources to
aggregate and participate in wholesale markets. The CAISO model
requires a prospective DER aggregator to execute a Distributed
Energy Resource Provider Agreement to accept and abide by the terms
of the CAISO Tariff, but does not require the DER aggregator nor the
aggregated DERs to execute an SGIA. See Cal. Indep. Sys. Operator
Corp., 155 FERC ] 61,229, at P 1 (2016) (conditionally accepting
tariff provisions to facilitate participation of aggregations of
distribution-connected or distributed energy resources in CAISO's
energy and ancillary service markets).
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    194. Xcel is concerned that dynamic frequency response at the
distribution level can interfere with anti-islanding protection
methods. The sustained response provisions adopted herein would require
a generating facility, only to the extent that it is allowed to remain
online and ride through a disturbance and has operating capability in
the direction needed to counteract the frequency deviation, to provide
and sustain its response.
    195. The Commission in Order No. 828 provided flexibility to
address anti-islanding concerns by finding that, if a transmission
provider believes a particular facility has a higher risk of
unintentional islanding due to specific conditions at that facility,
the transmission provider may coordinate with the small generating
facility to set ride through settings appropriate for those conditions,
in accordance with Good Utility Practice and the appropriate technical
standards.\412\ For those facilities with a lower risk of forming an
unintentional island, the Commission found that they can be held to a
longer ride through requirement.\413\
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    \412\ See Order No. 828, 156 FERC ] 61,062 at P 28.
    \413\ Id.
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    196. We clarify that the sustained response provisions in the
revisions to the pro forma LGIA and pro forma SGIA apply only when a
generating facility is allowed to ride through, and do not supersede a
generating facility's ride through settings, or require an
interconnection customer to override anti-islanding protection or any
protective relaying that has been set to

disconnect the generating facility during certain abnormal system
conditions. Further, we clarify that for those abnormal system
conditions in which a generating facility is not tripped offline by
anti-islanding or protective relays and remains connected, to the
extent it has the necessary MW operating capability in the appropriate
direction to correct the frequency deviation, it would be expected to
provide and sustain primary frequency response.
    197. Accordingly, the obligations imposed for primary frequency
response apply only to generating facilities allowed to ride through
and, because the ride through settings will be coordinated between the
interconnection customer and the transmission provider, we believe this
should adequately address Xcel's anti-islanding concerns.
4. Nuclear Generating Facilities
a. NOPR Proposal
    198. In the NOPR, the Commission proposed to exempt generating
facilities regulated by the NRC due to their unique operating
characteristics and regulatory requirements.
b. Comments
    199. Several commenters support the exemption for nuclear
generating facilities.\414\ EEI and the MISO TOs agree with the
proposed exemption, explaining that nuclear units are restricted by
their NRC operating licenses on the amount of primary frequency
response, if any, they can provide for safety reasons.\415\ EEI also
noted that in comments filed in response to the NOI, the Nuclear Energy
Institute pointed out that nuclear plants are not well-suited to
provide primary frequency response, and emphasized the role of the NRC
as the safety regulator for commercial nuclear operations and its
regulatory restrictions on NRC licenses.\416\ MISO TOs assert that
nuclear generating facilities generally have turbine controls, which
are designed to maintain steam pressure and do not respond to grid
frequency deviations, and that because primary frequency response is
automatic, unsupervised and unplanned maneuvering of a nuclear reactor
can lead to safety issues.\417\
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    \414\ See, e.g., AES Companies Comments at 7; MISO TOs Comments
at 8, 13-14; EEI Comments at 14; NRECA Comments at 3; PG&E Comments
at 2; SoCal Edison Comments at 4; TVA Comments at 3; Xcel Comments
at 8.
    \415\ EEI Comments at 14; MISO TOs Comments at 13.
    \416\ EEI Comments at 14.
    \417\ MISO TOs Comments at 13-14.
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    200. On the other hand, other commenters believe that the
Commission should not automatically exempt new nuclear generating
facilities. WIRAB asserts that the Commission should require new
nuclear generating facilities to seek individual exemptions, as needed,
based on legitimate safety requirements in their NRC operating
license.\418\ WIRAB contends that in the future, new nuclear generating
facilities in the U.S. may have the capability to safely and reliably
respond to frequency deviations, and therefore the Commission should
not provide an automatic exemption.\419\
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    \418\ WIRAB Comments at 7-8.
    \419\ Id.
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    201. Similarly, ISO-RTO Council believes that the Commission should
not ``anticipate'' exemption requirements. Instead, ``any pro forma
exemptions to the requirement to provide frequency response, including
exemptions for new nuclear units, should be supported by applicable
regulatory requirements, such as NRC rules and any regional
requirements demonstrated by the nuclear owner to be applicable to the
particular unit or type of unit.'' \420\
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    \420\ ISO-RTO Council Comments at 7.
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c. Commission Determination
    202. We adopt the NOPR proposal to exempt nuclear generating
facilities from the final action requirements, due to the unique
regulatory and technical requirements of nuclear generating facilities.
As explained in the NOPR, nuclear generating facilities have separate
licensing requirements under the NRC, which often restrict or severely
limit nuclear generating facilities from providing primary frequency
response.\421\ Further, nuclear generating facilities are designed to
maintain internal steam pressure and are not intended to react to
changes in the grid.\422\
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    \421\ NOPR, 157 FERC ] 61,122 at P 31.
    \422\ Id.
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    203. We disagree with WIRAB's and ISO-RTO Council's view that an
entire class of generating facilities should not be exempted from the
pro forma requirements. We find that the unique regulatory and
technical requirements of nuclear facilities justify an exemption.
Requiring nuclear generating facilities to request unit-specific
exemptions from providing a service that their licensing requirements
already limit or restrict could result in an unreasonable
administrative burden that can be avoided by allowing a general
exemption in the pro forma LGIA and pro forma SGIA, and we do so here.
5. Wind Generating Facilities
a. NOPR Proposal
    204. In the NOPR, the Commission did not propose to exempt new wind
generating facilities from the new primary frequency response
requirements. The Commission observed that while primary frequency
response functionality has not been a standard feature on non-
synchronous generating facilities, recent technological advancements
have equipped wind generating facilities with this capability. The
Commission further noted that wind generating facilities typically
operate at their maximum operating output, and generally lack excess
capacity (or headroom) to provide primary frequency response during
under-frequency conditions.\423\
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    \423\ NOPR, 157 FERC ] 61,122 at P 13.
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b. Comments
    205. AWEA states that the Commission's proposed addition of a
primary frequency response requirement to the pro forma LGIA and pro
forma SGIA can be met at low cost for new wind projects, and therefore
new wind turbines should not have difficulty complying with the