On June 16, 2016, the Federal Energy Regulatory Commission (the “Commission”) issued Order No. 827, which establishes reactive power requirements for all new non-synchronous generation (the “Rule”). Specifically, the Rule revises the Commission’s pro forma Large Generator Interconnection Agreement (“LGIA”) and pro forma Small Generator Interconnection Agreement (“SGIA”) to require that newly interconnecting non-synchronous generators, including wind generators, provide dynamic reactive power pursuant to the terms of their interconnection agreements. The Rule is the result of a Notice of Proposed Rulemaking addressing reactive power requirements that was issued by the Commission last November.
I. Reactive Power Requirement
The Rule requires that all non-synchronous generators under development that have not yet executed a Facilities Study Agreement design their generating facilities to provide dynamic reactive power within the power factor range of .95 leading to .95 lagging at the high-side of the generator substation. Recognizing that some differences remain between synchronous and non-synchronous generators, the requirement to provide reactive power at the generator substation differs from the requirements imposed on synchronous generators, which are required to provide reactive power at the point of interconnection. This is a departure from the initial proposal outlined in the NOPR, which would have required non-synchronous generators to provide reactive power at the point of interconnection. However, the Commission explains in the Rule that non-synchronous generation will be able to provide dynamic reactive power at the high-side of the generator substation at lower cost compared to dynamic reactive power at the point of interconnection.
All non-synchronous generators that provide reactive power in accordance with the Rule will be eligible for compensation for reactive power consistent with the existing compensation provisions of the LGIA/SGIA.
As noted above, the Rule applies to all non-synchronous generators under development that have not yet executed a Facilities Study Agreement. Existing non-synchronous generators and non-synchronous generators currently under development that have already executed a Facilities Study Agreement are not required to comply with the requirements of the Rule. This exemption is a further departure from the NOPR, which would have imposed the reactive power requirements of the Rule on all non-synchronous generators under development that had not yet executed an LGIA or SGIA. However, the Commission reasoned that execution of the Facilities Study Agreement is a more appropriate trigger for the Rule, as generators that have progressed beyond that point in the interconnection queue process may have already purchased the equipment necessary to interconnect, and could therefore be subject to additional financial burdens if required to comply with the Rule.
III. Other Departures from the NOPR
The Rule departs from the NOPR in several other respects as well. Of note, the Commission did not adopt an exemption that would have limited the requirement to maintain reactive power to those generators whose real power output exceeded 10% of their nameplate capacity. Instead, all non-synchronous generators are required to maintain reactive power, regardless of their real power output level. Additionally, existing non-synchronous generators making facility upgrades that require new interconnection requests will not be required to comply with the Rule. Instead, such generators will continue to be bound by the existing LGIA/SGIA provisions, which exempt such generators from the requirement to provide reactive power unless the transmission provider’s System Impact Study shows that the provision of reactive power by that generator is necessary to ensure safety or reliability.
IV. Effective Date
The Rule becomes effective on September 21, 2016. Within 90 days after the effective date of the Rule, each public utility transmission provider is required to submit a compliance filing to revise its pro forma SGIA and LGIA to comply with the requirements of the Rule.
 The Commission notes in the Rule that Commission staff is convening a workshop to explore reactive power compensation issues in RTO/ISO markets on June 30, 2016.