FERC Dismisses Cherokee energy center's request for reactive power compensation

​In Docket No. ER21-304, in its orders issued in April 2021 and reaffirmed on August 3, 2021, FERC dismissed Cherokee’s submission of a request for reactive power compensation under Schedule 2 of the PJM OATT. FERC found that the Large Generator Interconnection Agreement (LGIA), through which Cherokee claimed entitlement to reactive power compensation, was not in FERC’s authority, since, where a utility is obligated to purchase the total output of a qualifying facility (QF), as in this case, the relevant state exercises authority over the interconnection and the allocation of interconnection costs.
Cherokee owns and operates the Cherokee Energy Center (Facility), which is a (QF) under the Public Utility Regulatory Policies Act of 1978 (PURPA). Cherokee sells capacity and energy from the Facility to Duke Energy Carolinas, LLC (DEC) under a Power Purchase Agreement (PPA), which initially was scheduled to expire on December 31, 2020, but has since been extended until the earlier of an ongoing state proceeding concerning the PPA, or August 29, 2021. Cherokee and DEC are parties to a LGIA providing for the interconnection of the Facility to DEC’s system. Cherokee states that the LGIA requires Cherokee to provide reactive service to DEC with compensation to be set forth in the reactive rate at issue in this proceeding. On November 2, 2020, Cherokee filed the proposed reactive rate schedule with FERC. In that filing, Cherokee also invoked the Commission’s reactive service comparability standard, which requires that a transmission provider pay for reactive services within the established power factor range to the extent the transmission provider pays it own or affiliated generators for that service.
FERC found that Cherokee was not selling the real or reactive output from the Facility to a third party nor did Cherokee state its intention to do so, even after the expiration of the PPA. FERC also found that sales of energy and capacity that made pursuant to a state’s regulatory authority under PURPA includes reactive power. It therefore concluded that it did not have regulatory authority of the LGIA.