By Rich Heidorn Jr.

FERC on Thursday rejected multiple requests to reconsider its landmark electric storage order, prompting a partial dissent from Commissioner Bernard McNamee over requests to allow states to opt out (RM16-23-001, AD16-20-001, Order No. 841-A).

The majority rejected requests that it allow relevant electric retail regulatory authorities (RERRAs) the ability to opt out of its storage provisions, as the commission did for demand response under Order 719. The commissioners also rebuffed questions about their authority to require that power sold by RTO markets to an electric storage resource (ESR) for resale be at the wholesale LMP.

Dissent

McNamee’s 13-page dissent said the majority “fails to recognize the states’ interests in ESRs located behind a retail meter (behind-the-meter) or connected to distribution facilities.”

“I believe Order Nos. 841 and 841-A are on solid footing when they deal with ESRs connected to the transmission system and how ESRs may participate in the wholesale market, and I concur in those aspects of today’s order. I am troubled, however, that the storage orders do not fully respect or consider the impact they may have on local distribution systems, the states that regulate those local distributions systems and local retail customers,” McNamee wrote.

McNamee said he would have reconsidered the commission’s finding that it has jurisdiction over whether ESRs located behind the meter or on a local distribution system are permitted to participate in the RTO/ISO markets through the ESR participation model, and its refusal to provide states the opportunity to opt out of the participation model.

But the majority said the Federal Power Act gives FERC clear jurisdiction over storage.

It cited the Supreme Court’s 2016 EPSA ruling, which upheld FERC’s jurisdiction over the participation in RTO markets of DR resources, which are generally located on the distribution system. “The court did not find the commission’s authority to be lessened by the location of demand response resources behind the retail customer meter,” the commission said.

“We disagree with assertions by petitioners and the dissent that, unless the commission adopts an opt-out, the commission’s regulation of the RTO/ISO market participation of distribution-connected and behind-the-meter electric storage resources violates FPA Section 201. We find that the Supreme Court’s jurisdictional findings in EPSA regarding wholesale demand response apply with at least as much force to participation in RTO/ISO markets by electric storage resources engaged in wholesale sales in interstate commerce, even where those resources are interconnected on a distribution system or located behind a retail meter.”

The majority also rejected assertions that states can dictate whether resources can participate in the RTO markets through conditions on the receipt of retail service. “We acknowledge that states have the authority to include conditions in their own retail distributed energy resource or retail electric storage resource programs that prohibit any participating resources from also selling into the RTO/ISO markets. In that scenario, the owner of a resource has a choice between participating in the retail market or wholesale market. However, states may not take away that choice by broadly prohibiting all retail customers from participating in RTO/ISO markets.”

The commissioners said McNamee incorrectly suggested that the commission had required that storage “be permitted to use distribution facilities so that they may access the wholesale market.”

“Although Order No. 841 provides that states may not prohibit electric storage resources from participating in wholesale markets, that requirement does not amount to an effective right of access to the distribution system itself. As noted, Order No. 841 does not modify states’ authority to regulate the distribution system, including the terms of access, provided that they do not ‘aim directly at the RTO/ISO markets.’”

Participation Model

FERC also rejected AES’ request for rehearing over the use of a single participation model for storage.

“While we agree … that the various technologies that qualify as an electric storage resource under the definition that the commission adopted in the final rule may have different operating characteristics and that new electric storage technologies will likely emerge, we continue to find that a single participation model can be designed to be flexible enough to accommodate any type of electric storage resource,” it said.

FERC said AES had mischaracterized Order 841 as requiring that storage resources seeking to participate in RTO markets be available to RTOs as dispatchable resources. But the commission said it would change its regulations to clarify that dispatchable storage must be permitted by RTOs to participate in that manner and be eligible to set clearing prices.

RTO Requests

The commission granted SPP’s request for clarification, saying RTOs without capacity markets do not have to create such a product to comply with Order 841. “However, to the extent that an RTO/ISO has a resource adequacy construct, the RTO/ISO must demonstrate on compliance that the existing market rules governing its resource adequacy construct provide a means for electric storage resources to participate in that construct if electric storage resources are technically capable of doing so,” it said.

It rejected a clarification request by MISO, reiterating that RTOs must allow storage resources the same ability to self-schedule as other market participants.

In response to another MISO request, FERC clarified that the RTO may propose in its compliance filing a requirement that a storage resource submit its forecasted state of charge at the beginning of any market interval in which it intends to participate. “With that said, we make no findings on the proposal that MISO outlines in its request for clarification,” it added.

Minimum Size Requirement

FERC rejected the Edison Electric Institute’s request for rehearing on Order 841’s directive that RTOs establish a minimum size requirement not to exceed 100 kW, saying the threshold “balances the benefits of increased competition with the potential need to update RTO/ISO market clearing software to effectively model and dispatch smaller resources.”

It also rejected MISO’s request to phase in the minimum size requirement. “We continue to believe that, given the record showing that all RTOs/ISOs are already accommodating the participation of smaller resources in their markets and the commission’s willingness to consider requests to increase the minimum size requirement in the future, we are providing the RTOs/ISOs with adequate time to develop the requisite tariff language and update their modeling and dispatch software to comply with Order No. 841,” it said.

Charging Energy

Pacific Gas and Electric asked the commission to acknowledge that states have jurisdiction to determine how power flowing from distribution lines into the storage located behind the customer meter is split between retail consumption and wholesale charging for later discharge into the wholesale markets.

“The sale of energy from the grid that is used to charge electric storage resources for later resale into the energy or ancillary service markets constitutes a sale for resale in interstate commerce,” the commission said. “As such, the just and reasonable rate for that wholesale sale of energy used to charge that electric storage resource is the RTO/ISO market’s wholesale LMP.”

It said CAISO’s request for clarification that storage resources participating as transmission resources should not incur transmission charges for charging demand is premature, noting the ISO “has not yet filed a proposal to allow electric storage resources to provide transmission or reliability services.”

In response to another issue raised by CAISO, the commission clarified that “the RTO/ISO itself does not need to be the entity that directly meters electric storage resources.”

“We also … clarify that an RTO/ISO could require verification from the host distribution utility that it is unable or unwilling to net wholesale demand from retail settlement before the RTO/ISO ceases to settle an electric storage resource’s wholesale demand at the wholesale LMP. While Order No. 841 stated that each RTO/ISO must prevent electric storage resources from paying twice for the same charging energy, it did not specify how each RTO/ISO must implement this requirement.”

FERC rejected requests to change the compliance deadlines it set in Order 841, insisting “the timeline for compliance and implementation is reasonable.” In April, FERC issued deficiency letters to all six jurisdictional RTOs and ISOs over their compliance filings, pressing for definitions, tariff citations and other details. (See FERC Asks RTOs for more Details on Storage Rules.)

Reaction

The National Rural Electric Cooperative Association said FERC “side-stepped” the FPA in its jurisdictional ruling.

“The commission has dealt a blow to consumers and dramatically expanded its authority by giving itself the discretion to decide which distributed and behind-the-meter energy storage resources can participate in wholesale electricity markets,” NRECA CEO Jim Matheson said in a statement. “In doing so, FERC has undermined the ability of local utilities and regulatory authorities to manage these resources for the benefit of consumers.”

Jeff Dennis, general counsel for Advanced Energy Economy, praised the ruling. “We applaud FERC for upholding Order No. 841, recognizing the benefits to consumers and the grid of giving all energy storage resources, including those located on the distribution grid or behind the meter, an opportunity to participate in wholesale markets,” he said.

“We also appreciate Chairman [Neil] Chatterjee’s focus on FERC’s continued efforts to remove the barriers that keep advanced energy technologies from participating in wholesale markets. Energy storage is just one of the technologies that face barriers to entry. We urge FERC to finalize a similar rule to permit aggregations of distributed energy resources to participate in wholesale markets, utilizing the same legally sound approach taken in today’s order.”