The USA Federal Energy Regulatory Commission has issued a Notice of Inquiry, dated 18 November, seeking comments on issues related to reactive power capability compensation. The NOI issue of represents a step towards the potential for creating greater certainty regarding reactive power compensation.

Specifically, the Commission is seeking comments on:

  • various aspects of the AEP Methodology-based compensation;
  • potential alternative methodologies for calculating reactive power compensation; and
  • reactive power capability compensation through transmission rates for resources that interconnect at the distribution level. 

Initial comments are due 60 days after the NOI has been published in the Federal Register and reply comments are due 90 days after the initial comment deadline.

Reactive power is a critical ancillary service provided by generation and non-generation resources on a transmission system to facilitate the long-distance transmission of real power, and to support system voltages and help ensure reliability of the transmission grid.  Costs for reactive power supplied using generation resources are recovered separately from the cost of basic transmission service.

In 1999, the Commission approved a method, now referred to as the AEP Methodology, for American Electric Power Service Corp, a public utility that employed the Commission’s Uniform System of Accounts and annually submitted a FERC Form No. 1, seeking to recover costs for the reactive power its synchronous generators provided. Subsequently, the Commission has recommended, though never required, use of the AEP Methodology: nor has it required any other uniform approach for reactive power capability compensation.  But since 1999 the electricity industry has undergone significant changes – today, the majority of the reactive power filings submitted to the Commission are made by owners of non-synchronous resources and many filing entities have received waivers of the requirement to maintain their accounts under the Uniform System of Accounts rules and to file FERC Form No. 1.