[Federal Register Volume 85, Number 204 (Wednesday, October 21, 2020)]
[Rules and Regulations]
[Pages 67094-67158]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20973]
[[Page 67093]]
Vol. 85
Wednesday,
No. 204
October 21, 2020
Part II
Department of Energy
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Federal Energy Regulatory Commission
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18 CFR Part 35
Participation of Distributed Energy Resource Aggregations in Markets
Operated by Regional Transmission Organizations and Independent System
Operator; Final Rule
Federal Register / Vol. 85 , No. 204 / Wednesday, October 21, 2020 /
Rules and Regulations
[[Page 67094]]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 35
[Docket No. RM18-9-000; Order No. 2222]
Participation of Distributed Energy Resource Aggregations in
Markets Operated by Regional Transmission Organizations and Independent
System Operators
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule.
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SUMMARY: The Federal Energy Regulatory Commission (Commission) is
amending its regulations to remove barriers to the participation of
distributed energy resource aggregations in the capacity, energy, and
ancillary service markets operated by Regional Transmission
Organizations and Independent System Operators (RTO/ISO).
DATES: This rule is effective December 21, 2020. Each RTO/ISO must file
the tariff changes needed to implement the requirements of this final
rule by September 17, 2021.
FOR FURTHER INFORMATION CONTACT:
David Kathan (Technical Information), Office of Energy Policy and
Innovation, Federal Energy Regulatory Commission, 888 First Street NE,
Washington, DC 20426, (202) 502-6404
Karin Herzfeld (Legal Information), Office of General Counsel--Energy
Markets, Federal Energy Regulatory Commission, 888 First Street NE,
Washington, DC 20426, (202) 502-8459
SUPPLEMENTARY INFORMATION:
Table of Contents
Paragraph Nos.
I. Introduction...................................... 1
II. Procedural History............................... 10
III. Need for Reform................................. 16
A. Comments...................................... 19
B. Commission Determination...................... 26
IV. Discussion....................................... 31
A. Commission Jurisdiction....................... 31
1. Scope of Final Rule....................... 31
a. Comments.............................. 32
b. Commission Determination.............. 38
2. Opt-Out................................... 45
a. Comments.............................. 47
b. Commission Determination.............. 56
3. Interconnection........................... 68
a. Comments and Data Request Responses... 70
b. Commission Determination.............. 90
B. Definitions of Distributed Energy Resource and 105
Distributed Energy Resource Aggregator..........
1. NOPR Proposal............................. 105
2. Comments.................................. 106
3. Commission Determination.................. 114
C. Eligibility To Participate in RTO/ISO Markets 119
Through a Distributed Energy Resource Aggregator
1. Participation Model....................... 119
a. NOPR Proposal......................... 119
b. Comments.............................. 120
c. Commission Determination.............. 129
2. Types of Technologies..................... 133
a. NOPR Proposal......................... 133
b. Comments.............................. 135
c. Commission Determination.............. 141
3. Double Counting of Services............... 147
a. NOPR Proposal......................... 147
b. Comments.............................. 148
c. Commission Determination.............. 159
4. Minimum and Maximum Size of Aggregation... 165
a. NOPR Proposal......................... 165
b. Comments.............................. 167
c. Commission Determination.............. 171
5. Minimum and Maximum Capacity Requirements 175
for Distributed Energy Resources
Participating in an Aggregation.............
a. NOPR Proposal......................... 175
b. Comments.............................. 176
c. Commission Determination.............. 179
6. Single Resource Aggregation............... 182
a. NOPR Proposal......................... 182
b. Comments.............................. 183
c. Commission Determination.............. 185
D. Locational Requirements....................... 187
a. NOPR Proposal......................... 187
b. Comments.............................. 191
c. Commission Determination.............. 204
E. Distribution Factors and Bidding Parameters... 208
a. NOPR Proposal......................... 208
b. Comments.............................. 210
c. Commission Determination.............. 225
F. Information and Data Requirements............. 230
[[Page 67095]]
a. NOPR Proposal......................... 230
b. Comments.............................. 231
c. Commission Determination.............. 236
G. Metering and Telemetry System Requirements.... 241
a. NOPR Proposal......................... 241
b. Comments.............................. 246
c. Commission Determination.............. 262
H. Coordination Between the RTO/ISO, Aggregator, 272
and Distribution Utility........................
1. Market Rules on Coordination.............. 272
a. NOPR Proposal......................... 272
b. Comments.............................. 274
c. Commission Determination.............. 278
2. Role of Distribution Utilities............ 281
a. NOPR Proposal......................... 281
b. Comments.............................. 282
c. Commission Determination.............. 292
3. Ongoing Operational Coordination.......... 300
a. NOPR Proposal......................... 300
b. Comments.............................. 302
c. Commission Determination.............. 310
4. Role of Relevant Electric Retail 314
Regulatory Authorities......................
a. NOPR Proposal......................... 314
b. Comments.............................. 315
c. Commission Determination.............. 322
5. Coordination Frameworks................... 325
a. NOPR Proposal......................... 325
b. Comments.............................. 326
c. Commission Determination.............. 330
I. Modifications to List of Resources in 332
Aggregation.....................................
a. NOPR Proposal......................... 332
b. Comments.............................. 333
c. Commission Determination.............. 335
J. Market Participation Agreements............... 339
1. NOPR Proposal............................. 339
2. Comments.................................. 342
3. Commission Determination.................. 352
K. Compliance.................................... 357
1. Comments.................................. 358
2. Commission Determination.................. 360
L. Issues Beyond the Scope of This Rulemaking.... 362
1. Comments.................................. 362
2. Commission Determination.................. 363
V. Information Collection Statement.................. 364
A. Summary of this IC............................
B. Discussion.................................... 366
VI. Environmental Analysis........................... 369
VII. Regulatory Flexibility Act Certification........ 370
VIII. Document Availability.......................... 375
IX. Effective Date and Congressional Notification.... 378
Appendix A: Abbreviated Names of Commenters..........
I. Introduction
1. In this final rule, the Federal Energy Regulatory Commission
(Commission) is adopting reforms to remove barriers to the
participation of distributed energy resource \1\ aggregations in the
Regional Transmission Organization (RTO) and Independent System
Operator (ISO) markets (RTO/ISO markets).\2\ For the reasons discussed
below, we find that existing RTO/ISO market rules are unjust and
unreasonable in light of barriers that they present to the
participation of distributed energy resource aggregations in the RTO/
ISO markets, which reduce competition and fail to ensure just and
reasonable rates. Therefore, pursuant to the Commission's authority
under Federal Power Act (FPA) section 206,\3\ the Commission modifies
Sec. 35.28 \4\ of its regulations to require each RTO/ISO to revise
its tariff to ensure that its market rules facilitate the participation
of distributed energy resource aggregations, as discussed further
below.
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\1\ We define a distributed energy resource as any resource
located on the distribution system, any subsystem thereof or behind
a customer meter. These resources may include, but are not limited
to, electric storage resources, distributed generation, demand
response, energy efficiency, thermal storage, and electric vehicles
and their supply equipment. See infra P 114.
\2\ For purposes of this final rule, we define RTO/ISO markets
as the capacity, energy, and ancillary services markets operated by
the RTOs and ISOs. We note that, in the Notice of Proposed
Rulemaking (NOPR) in this proceeding, the Commission used
``organized wholesale electric markets'' and included that term in
the proposed regulatory text. See Electric Storage Participation in
Markets Operated by Regional Transmission Organizations &
Independent System Operators, Notice of Proposed Rulemaking, 81 FR
86522, 157 FERC ] 61,121 (2016) (NOPR). We find that using ``RTO/ISO
markets'' is sufficient to describe the markets at issue in this
final rule and therefore will no longer use ``organized wholesale
electric markets'' here or include that term in the regulatory text.
\3\ 16 U.S.C. 824e.
\4\ 18 CFR 35.28 (2020).
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2. As the Commission explained in the NOPR, barriers to the
participation of new technologies, such as many types of distributed
energy resources, in the RTO/ISO markets can emerge when the rules
governing participation in those
[[Page 67096]]
markets are designed for traditional resources and in effect limit the
services that emerging technologies can provide.\5\ For example, the
Commission noted in the NOPR that, as a general matter, distributed
energy resources tend to be too small to meet the minimum size
requirements to participate in the RTO/ISO markets on a stand-alone
basis, and may be unable to meet certain qualification and performance
requirements because of the operational constraints they may have as
small resources.\6\ The Commission further stated that existing
participation models \7\ for aggregated resources, including
distributed energy resources, often require those resources to
participate in the RTO/ISO markets as demand response, which limits
their operations and the services that they are eligible to provide.\8\
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\5\ See NOPR, 157 FERC ] 61,121 at P 2.
\6\ See id. PP 13, 105.
\7\ In addition to tariff provisions that apply to all market
participants, the RTOs/ISOs create tariff provisions for specific
types of resources when those resources have unique physical and
operational characteristics or other attributes that warrant
distinctive treatment from other market participants. The tariff
provisions that are created for a particular type of resource are
what we refer to in this final rule as a participation model.
\8\ NOPR, 157 FERC ] 61,121 at P 106. Demand response means a
reduction in the consumption of electric energy by customers from
their expected consumption in response to an increase in the price
of electric energy or to incentive payments designed to induce lower
consumption of electric energy. 18 CFR 35.28(b)(4).
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3. Where such barriers exist, resources that are technically
capable of providing some services on their own or through aggregation
are precluded from competing with resources that are already
participating in the RTO/ISO markets.\9\ These restrictions on
competition can reduce the efficiency of the RTO/ISO markets,
potentially leading an RTO/ISO to dispatch more expensive resources to
meet its system needs. By removing barriers to the participation of
distributed energy resource aggregations in the RTO/ISO markets, this
final rule will enhance competition and, in turn, help to ensure that
the RTO/ISO markets produce just and reasonable rates.
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\9\ In Order No. 841, the Commission clarified that
``technically capable'' of providing a service means meeting all of
the technical, operational, and/or performance requirements that are
necessary to reliably provide that service. Electric Storage
Participation in Markets Operated by Regional Transmission
Organizations & Independent System Operators, Order No. 841, 83 FR
9580, 162 FERC ] 61,127, at P 78 (2018), order on reh'g, Order No.
841-A, 84 FR 23902, 167 FERC ] 61,154 (2019), aff'd sub nom. Nat'l
Ass'n of Regulatory Util. Comm'rs v. FERC, 964 F.3d 1177 (D.C. Cir.
2020).
.
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4. Facilitating distributed energy resource participation in RTO/
ISO markets will provide a variety of benefits to those markets.
Integrating these resources' capabilities into RTO/ISO planning and
operations will help the RTOs/ISOs account for the impacts of these
resources on installed capacity requirements and day-ahead energy
demand, thereby reducing uncertainty in load forecasts and reducing the
risk of over procurement of resources and the associated costs.\10\
These resources are able to locate where price signals indicate that
new capacity is most needed, potentially helping to alleviate
congestion and congestion costs during peak load conditions and to
reduce costs related to transmitting energy into persistently high-
priced load pockets.\11\ Indeed, in the NOPR, the Commission noted
certain valuable characteristics that distributed energy resources can
offer, including their ability to co-locate with load and provide
associated benefits. Additionally, their relatively short development
lead time allows distributed energy resources to respond rapidly to
near-term generation or transmission reliability-related requirements,
further improving their ability to enhance reliability and reduce
system costs.
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\10\ NOPR, 157 FERC ] 61,121 at P 129.
\11\ Id. P 130.
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5. The rules that we adopt in this final rule will help enable the
participation of distributed energy resources in the RTO/ISO markets by
providing a means for these resources to, in the aggregate, satisfy
minimum size and performance requirements that they may not meet on a
stand-alone basis.\12\ The Commission in the NOPR noted that
distributed energy resource aggregations can help to address the
commercial and transactional barriers to distributed energy resource
participation in the RTO/ISO markets, such as sharing the significant
costs of participating in those markets, including the costs of the
necessary metering, telemetry, and communication equipment.\13\
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\12\ See id. PP 105, 125.
\13\ Id. P 126.
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6. To address barriers to the participation of distributed energy
resource aggregations in the RTO/ISO markets, we require each RTO/ISO
to revise its tariff to establish distributed energy resource
aggregators as a type of market participant that can register
distributed energy resource aggregations under one or more
participation models in the RTO/ISO tariff that accommodate the
physical and operational characteristics of each distributed energy
resource aggregation.
7. Generally, we are adopting the specific reforms proposed in the
NOPR, but with certain revisions based on the record in this
proceeding, including input from the Commission technical conference
convened April 10-11, 2018, responses to a post-technical conference
notice, and responses to the Commission's September 5, 2019 Data
Requests to RTOs/ISOs on policies and procedures that affect the
interconnection of distributed energy resources. In particular, certain
proposals in the NOPR have been altered in this final rule to better
address the needs of different stakeholders, facilitate solutions to
potential technical challenges, and to reflect the substantial efforts
that have already been undertaken by some RTOs/ISOs to incorporate
distributed energy resources into their markets, by providing for
greater regional flexibility with respect to a number of proposed
requirements.
8. For each RTO/ISO, the tariff provisions addressing distributed
energy resource aggregations must (1) allow distributed energy resource
aggregations to participate directly in RTO/ISO markets and establish
distributed energy resource aggregators as a type of market
participant; (2) allow distributed energy resource aggregators to
register distributed energy resource aggregations under one or more
participation models that accommodate the physical and operational
characteristics of the distributed energy resource aggregations; (3)
establish a minimum size requirement for distributed energy resource
aggregations that does not exceed 100 kW; (4) address locational
requirements for distributed energy resource aggregations; (5) address
distribution factors and bidding parameters for distributed energy
resource aggregations; (6) address information and data requirements
for distributed energy resource aggregations; (7) address metering and
telemetry requirements for distributed energy resource aggregations;
(8) address coordination between the RTO/ISO, the distributed energy
resource aggregator, the distribution utility, and the relevant
electric retail regulatory authorities; (9) address modifications to
the list of resources in a distributed energy resource aggregation; and
(10) address market participation agreements for distributed energy
resource aggregators. Additionally, each RTO/ISO must accept bids from
a distributed energy resource aggregator if its aggregation includes
distributed energy resources that are customers of utilities that
distributed more than 4 million megawatt-hours in the previous fiscal
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year. An RTO/ISO must not accept bids from a distributed energy
resource aggregator if its aggregation includes distributed energy
resources that are customers of utilities that distributed 4 million
megawatt-hours or less in the previous fiscal year, unless the relevant
electric retail regulatory authority permits such customers to be bid
into RTO/ISO markets by a distributed energy resource aggregator.
9. As discussed further below in Section IV.K (Compliance), each
RTO/ISO must file the tariff changes needed to implement the
requirements of this final rule within 270 days of the publication date
of this final rule in the Federal Register.
II. Procedural History
10. This final rule arises out of the same Commission inquiry that
led to Order No. 841,\14\ in which the Commission amended its
regulations under the FPA to remove barriers to the participation of
electric storage resources in RTO/ISO markets. The Commission commenced
that inquiry by hosting a panel to discuss electric storage resources
at its November 19, 2015, open meeting. Subsequently, on April 11,
2016, Commission staff issued data requests to each of the six RTOs/
ISOs seeking information about the rules in the RTO/ISO markets that
affect the participation of electric storage resources. Concurrently,
Commission staff issued a request for comments, seeking information
from interested persons on whether barriers exist to the participation
of electric storage resources in the RTO/ISO markets that may
potentially lead to unjust and unreasonable wholesale rates. In
addition to the responses from the RTOs/ISOs, Commission staff received
44 comments. Many of the responses and comments discussed types of
distributed energy resources and general market participation issues
beyond concerns specific to electric storage resources.\15\
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\14\ Order No. 841, 162 FERC ] 61,127.
\15\ See, e.g., CAISO Response (AD16-20) at 2-3; ISO-NE Response
(AD16-20) at 6-7, 26-27; PJM Response (AD16-20) at 20-21; Advanced
Energy Economy Comments (AD16-20) on RTO/ISO Responses (AD16-20) at
16-18; RES Americas Comments (AD16-20) on RTO/ISO Responses (AD16-
20) at 4-5.
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11. On November 17, 2016, the Commission issued the NOPR in that
proceeding. In addition to its proposed reforms to facilitate the
participation of electric storage resources in RTO/ISO markets, the
Commission proposed to amend its regulations under the FPA to remove
barriers in current RTO/ISO market rules that may prevent new, smaller
distributed energy resources that are technically capable of
participating in the RTO/ISO markets from doing so.\16\
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\16\ NOPR, 157 FERC ] 61,121 at PP 103, 124.
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12. The Commission received 109 comments on the NOPR from a diverse
set of stakeholders.\17\ On February 15, 2018, the Commission issued
Order No. 841. In that final rule, the Commission noted that more
information was necessary to inform its consideration of its NOPR
proposals regarding facilitating the participation of distributed
energy resource aggregations in RTO/ISO markets and stated that it
would continue to explore the proposed distributed energy resource
aggregation reforms under Docket No. RM18-9-000.\18\
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\17\ See Appendix A for a list of entities that submitted
comments and the shortened names used throughout this final rule to
describe those entities.
\18\ Order No. 841, 162 FERC ] 61,127 at P 5. The Commission
incorporated by reference all comments filed in response to the NOPR
in Docket No. RM16-23-000 into Docket No. RM18-9-000 and directed
any further comments regarding the proposed distributed energy
resource aggregation reforms should be filed henceforth in Docket
No. RM18-9-000.
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13. The Commission also announced that it would hold a technical
conference to gather additional information regarding some distributed
energy resource aggregation issues. The technical conference, which was
held on April 10-11, 2018, addressed five issues related to this
proceeding: Locational requirements, state and local regulator
concerns, compensation for multiple services, coordination of
distributed energy resource aggregations, and ongoing operational
coordination.\19\ During the technical conference, more than 50
individuals and entities offered a broad range of perspectives. The
Commission issued a notice inviting post-technical conference comments
and requesting comments on a number of follow-up questions related to
each panel.\20\ The Commission received 52 post-technical conference
comments from a diverse set of stakeholders.
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\19\ See Supplemental Notice of Technical Conference, Docket
Nos. RM18-9-000 and AD18-10-000 (Mar. 29, 2018), https://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=14856384.
\20\ See Notice Inviting Post-Technical Conference Comments,
Docket No. RM18-9-000 (Apr. 27, 2018), https://elibrary.ferc.gov/idmws/common/OpenNat.asp?fileID=14 882250.
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14. On September 5, 2019, Commission staff issued data requests to
each of the six RTOs/ISOs seeking information regarding their policies
and procedures that affect the interconnection of distributed energy
resources. In addition to the responses from the RTOs/ISOs, Commission
staff received 11 reply comments.
15. Some RTOs/ISOs in recent years have taken steps to facilitate
the participation of distributed energy resource aggregations in their
markets, and the Commission has approved these proposals. In June 2016
and January 2020, the Commission accepted proposals to allow
distributed energy resource aggregations to participate in certain RTO/
ISO markets.\21\ In addition, RTOs/ISOs have implemented some
participation models for distributed energy resource aggregations to
participate in their markets, often as demand response resources, with
a few exceptions.\22\
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\21\ See Cal. Indep. Sys. Operator Corp., 155 FERC ] 61,229
(2016); N.Y. Indep. Sys. Operator, Inc., 170 FERC ] 61,033 (2020)
(NYISO Aggregation Order).
\22\ E.g., CAISO Data Request Response (2019 RM18-9) at 6
(citing CAISO Tariff, Section 4.17); ISO-NE Data Request Response
(2019 RM18-9) at 17-18 (stating that distributed energy resources
may participate in wholesale markets as demand resources or
Settlement Only Resources).
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III. Need for Reform
16. In the NOPR, the Commission stated that its proposal is a
continuation of efforts pursuant to its authority under the FPA to
ensure that the RTO/ISO tariffs and market rules produce just and
reasonable rates, terms, and conditions of service.\23\ Specifically,
the Commission noted that it had observed that market rules designed
for traditional resources can create barriers to entry for emerging
technologies. The Commission expressed its concern that existing RTO/
ISO tariffs impede the participation of distributed energy resources in
the RTO/ISO markets by providing limited opportunities for distributed
energy resource aggregations.\24\
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\23\ NOPR, 157 FERC ] 61,121 at P 9 (citing Integration of
Variable Energy Resources, Order No. 764, 139 FERC ] 61,246, order
on reh'g and clarification, Order No. 764-A, 141 FERC ] 61,232
(2012), order on clarification and reh'g, Order No. 764-B, 144 FERC
] 61,222 (2013); Wholesale Competition in Regions with Organized
Electric Markets, Order No. 719, 73 FR 64100 (Oct. 28, 2008), 125
FERC ] 61,071 (2008), order on reh'g, Order No. 719-A, 74 FR 37776
(Jul. 29, 2009), 128 FERC ] 61,059 (2009), order on reh'g, Order No.
719-B, 129 FERC ] 61,252 (2009)).
\24\ Id. P 13.
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17. The Commission acknowledged in the NOPR that distributed energy
resources can at times effectively provide the capacity, energy, and
ancillary services that are purchased and sold in the RTO/ISO
markets.\25\ However, the Commission explained that sometimes these
resources can be too small to participate in these markets
individually. The Commission also noted that current RTO/ISO market
[[Page 67098]]
rules often limit the services that distributed energy resources are
eligible to provide, in many cases only allowing these resources to be
used as demand response or load-side resources when they are located
behind a customer meter or by imposing prohibitively expensive or
otherwise burdensome requirements.
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\25\ See id.
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18. The Commission preliminarily found that the barriers to the
participation of distributed energy resources through distributed
energy resource aggregations in the RTO/ISO markets may, in some cases,
unnecessarily restrict competition, which could lead to unjust and
unreasonable rates.\26\ The Commission stated that effective wholesale
competition encourages entry and exit and promotes innovation, incents
the efficient operation of resources, and allocates risk appropriately
between consumers and producers. Thus, the Commission stated that
removing the barriers to participation by distributed energy resource
aggregations will enhance the competitiveness, and in turn the
efficiency, of RTO/ISO markets and thereby help to ensure just and
reasonable and not unduly discriminatory or preferential rates for
wholesale electric services.
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\26\ See id. P 14.
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A. Comments
19. Most commenters, including state entities and RTOs/ISOs,
support requiring RTOs/ISOs to remove barriers to the participation of
distributed energy resource aggregations in their markets, subject to
the Commission's adopting certain modifications to the NOPR proposals
and/or allowing for regional flexibility in implementing reforms in any
eventual final rule.\27\ Among other things, these commenters identify
improved competition and reliability as benefits of the proposed
reforms and note that they provide a better way to provide price
signals to distributed energy resources than current retail
programs,\28\ which may reduce the cost of meeting power system
needs.\29\ AWEA notes that participation in wholesale markets allows
distributed energy resources to receive real-time information about
system needs.\30\ Commenters also state that the removal of barriers
to, and integration of, distributed energy resource aggregations could
spur innovation, and allow these aggregations to serve important roles
on the grid.\31\ Several commenters emphasize that a distributed energy
resource aggregation framework must ensure that aggregated distributed
energy resources can provide all the services that they are capable of
providing,\32\ while competing on a level and technology-neutral
playing field with other resources.\33\ Some commenters note that
distributed energy resources do not currently fit within existing
paradigms, which were designed for, and favor, other resources.\34\
Others state that for distributed energy resources and distributed
energy resource aggregations to fairly participate, they must meet the
same technical and commercial requirements as other resources, and pay
equally for ancillary services and use of the transmission system.\35\
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\27\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
31-32; Connecticut Department of Energy Comments (RM16-23) at 4;
IPKeys/Motorola Comments (RM16-23) at 4; Leadership Group Comments
(RM16-23) at 2; MISO Comments (RM16-23) at 2; Ohio Commission
Comments (RM16-23) at 2-3.
\28\ AWEA Comments (RM16-23) at 1-2; City of New York Comments
(RM16-23) at 3, 5, 7; Maryland and New Jersey Commissions Comments
(RM16-23) at 2; Ohio Commission Comments (RM16-23) at 2; Public
Interest Organizations Comments (RM16-23) at 5-6.
\29\ AWEA Comments (RM16-23) at 2.
\30\ Id.
\31\ California Energy Storage Alliance Comments (RM16-23) at 4;
Microgrid Resources Coalition Comments (RM16-23) at 10; Union of
Concerned Scientists Comments (RM16-23) at 9, 15, 17 (noting the
lack of participation models for potential market service providers
like domestic electric water heaters and distributed solar
resources).
\32\ See, e.g., Advanced Energy Management Comments (2018 RM18-
9) at 3; Direct Energy Comments (2018 RM18-9) at 5, 11-13; Energy
Storage Association Comments (2018 RM18-9) at 2; Microsoft Comments
(2018 RM18-9) at 16-17; NRG Comments (2018 RM18-9) at 5-6.
\33\ Advanced Energy Economy Comments (2018 RM18-9) at 5;
Advanced Energy Management Comments (2018 RM18-9) at 3; Microsoft
Comments (2018 RM18-9) at 15-16; NRG Comments (2018 RM18-9) at 3.
\34\ Fresh Energy/Sierra Club/Union of Concerned Scientists
Comments (RM16-23) at 1; Public Interest Organizations Comments
(RM16-23) at 5-6.
\35\ PJM Market Monitor Comments (RM16-23) at 10-11; New York
Utility Intervention Unit Comments (RM16-23) at 3.
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20. Several commenters assert that existing participation models
discriminate against distributed energy resources. For instance, Public
Interest Organizations argue that distributed energy resources in PJM
are often forced into participating as demand response, or
interconnecting as generation, which are cost prohibitive.\36\ Stem
asserts that CAISO's Non-Generator Resource and Distributed Energy
Resource Provider models effectively prevent participation of behind-
the-meter resources in CAISO.\37\ Advanced Energy Economy contends
that, despite the benefits that aggregated distributed energy resources
provide,\38\ performance penalties for deviation from the
characteristics of traditional generation effectively preclude
participation in the capacity market.\39\
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\36\ Public Interest Organizations Comments (RM16-23) at 19.
\37\ Stem Comments (RM16-23) at 12, 16.
\38\ Advanced Energy Economy states that the benefits include
the ability to provide a quick response to system emergencies, which
gives other resources time to ramp up or procure fuel, the ability
of demand response to prevent blackouts during times of peak demand,
and the ability to be dispatched granularly to provide support to
specific parts of the grid. Advanced Energy Economy Comments (RM16-
23) at 42-43.
\39\ Id. (arguing that PJM's capacity performance construct and
ISO-NE's pay-for-performance construct both effectively require
indefinite run times to avoid performance penalties that can amount
to more than a year's worth of capacity revenue).
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21. Some commenters state that distributed energy resource
aggregation integration can be accomplished in a reliable and cost-
effective manner.\40\ Other commenters argue that allowing distributed
energy resource aggregations to participate in wholesale markets will
create new opportunities and enhance the reliability and resilience of
the grid, leading to benefits such as savings and efficiency.\41\
Advanced Energy Buyers suggest that allowing distributed energy
resources to participate in RTO/ISO markets will also provide such
resources with additional revenue streams, making them more economic
and candidates for greater investment, and provide additional benefit
to the grid as a result of increased market activity.\42\ Commenters
also note that the pairing of dispatchable resources with non-
dispatchable resources in an aggregation could create a portfolio that
overall could be dispatchable to the bulk power system.\43\ Other
commenters assert that, if distributed energy resources are not able to
participate in wholesale markets, it could result in system overbuild,
inaccurate wholesale price formation, and lack of visibility into
system conditions.\44\
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\40\ Advanced Energy Economy Comments (2018 RM18-9) at 5.
\41\ See, e.g., Advanced Energy Buyers Comments (2018 RM18-9) at
3; CAISO Comments (2018 RM18-9) at 1; Direct Energy Comments (2018
RM18-9) at 11-13; NRG Comments (2018 RM18-9) at 5-6; Tesla Comments
(2018 RM18-9) at 3.
\42\ Advanced Energy Buyers Comments (2018 RM18-9) at 5.
\43\ NYISO Indicated Transmission Owners Comments (2018 RM18-9)
at 4.
\44\ Id.; Microsoft Comments (2018 RM18-9) at 13.
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22. Certain United States senators express support for the proposed
rule which, they state, would help develop frameworks for how
renewables can aggregate together to more effectively participate in
energy markets, and provide useful guidance on how to better integrate
these resources with existing energy providers. In addition,
[[Page 67099]]
these United States senators maintain that the rulemaking comes at a
critical time for renewable energy because renewables led the way in
2016 for new additions onto the energy grid.\45\ These United States
senators, as well as members of the United States House of
Representatives, urge the Commission to adopt a final rule that
provides all distributed energy resources with the opportunity to
participate in RTO/ISO markets, noting that the changes proposed in the
NOPR will help improve the reliability and resilience of the bulk power
system by providing operators with new local tools to manage
unanticipated events and potentially lower costs for customers. They
state that renewable energy provided 10% of electricity generation in
2018 due to state and federal policies as well as consumer interest in
choosing cost-competitive technologies.\46\
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\45\ September 22, 2017 Letter to Chairman Neil Chatterjee from
United States Senators Sheldon Whitehouse, Cory A. Booker, Edward J.
Markey, Ron Wyden, Elizabeth Warren and Bernard Sanders (filed Sept.
25, 2017) (September 22 Letter); see also May 23, 2018 Letter to
Chairman Kevin McIntyre from United States Senators Sheldon
Whitehouse, Edward J. Markey, Martin Heinrich, Jeanne Shaheen,
Richard Blumenthal, Margaret Wood Hassan, Angus S. King, Jr., Dianne
Feinstein, Bernard Sanders, Catherine Cortez Masto, Jack Reed, Ron
Wyden, Jeff Merkley, Kamala D. Harris, Cory A. Booker, and Brian
Schatz (filed May 23, 2018) (discussing 2016 estimates from the
Energy Information Administration that distributed energy resources
accounted for about two percent of the installed generation capacity
in the United States). In response to the September 22 Letter,
Chairman Chatterjee stated that the Commission has a role in
fostering resource neutral, non-discriminatory policies with respect
to the wholesale markets, including removing barriers to the
participation of distributed energy resources in the wholesale
markets. Chairman's Response to September 22 Letter (filed Oct. 5,
2017).
\46\ February 11, 2019 Letter to Chairman Neil Chatterjee from
United States Congress members Peter Welch, Mike Levin, Mike
Quigley, Paul D. Tonko, Daniel W. Lipinski, Jerry McNerney, James R.
Langevin, Kathy Castor, Raul M. Grijalva, Mark Pocan, Donald S.
Beyer Jr., Matt Cartwright, Nanette Diaz Barrag[aacute]n, Sean
Casten, Jamie Raskin, James P. McGovern, and Mike Doyle (filed Feb.
11, 2019); February 11, 2019 Letter to Chairman Neil Chatterjee from
United States Senators Sheldon Whitehouse, Edward J. Markey, Cory A.
Booker, Catherine Cortez Masto, Martin Heinrich, Brian Schatz, Ron
Wyden, Jeffrey A. Merkley, Kamala D. Harris, Richard Blumenthal,
Jack Reed, Angus S. King, Jr., Tina Smith, Jacky Rosen, Margaret
Wood Hassan, Jeanne Shaheen, Dianne Feinstein, and Bernard Sanders
(filed Feb. 21, 2019).
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23. Mensah asserts that one of the biggest limitations that needs
to be addressed is the ability of behind-the-meter distributed energy
resources to inject onto the grid.\47\ Tesla requests the Commission
extend to distributed energy resource aggregations the finding in Order
No. 841 that existing tariffs do not recognize the operational
characteristics of electric storage resources and limit their
participation in the markets.\48\ Tesla urges the Commission to require
that RTO/ISO tariffs allow distributed energy resources, including
those resources physically located behind an end-use customer meter, to
employ their full operational range by injecting energy onto the grid
in order to provide any wholesale service through participation in
distributed energy resource aggregations.\49\
---------------------------------------------------------------------------
\47\ Mensah Comments (RM16-23) at 3.
\48\ Tesla Comments (2018 RM18-9) at 7.
\49\ Id. at 1, 7.
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24. Some commenters argue that the Commission needs to provide
general guidance on distributed energy resource aggregation, with
straightforward rules, clearly defined responsibilities, and data-
driven market signals.\50\ They explain that distributed energy
resource aggregations must have transparent and predictable parameters
for participation that are not overly restrictive and do not contain
undue administrative delay.\51\ Microsoft suggests that the Commission
provide ``directional guidance'' to RTOs/ISOs to remove barriers.\52\
---------------------------------------------------------------------------
\50\ Advanced Energy Buyers Comments (2018 RM18-9) at 2;
Advanced Energy Economy Comments (2018 RM18-9) at 5.
\51\ Advanced Energy Buyers Comments (2018 RM18-9) at 5.
\52\ Microsoft Comments (2018 RM18-9) at 13.
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25. In contrast, EEI states that the Commission should defer to
regional stakeholder processes and coordination with state-
jurisdictional entities to formulate the detailed provisions required
to implement distributed energy resource aggregation participation in
the wholesale market.\53\ APPA states that the evidence is thin to show
that there is a great demand for distributed energy resource
aggregation programs or that such programs will bring meaningful
benefits to consumers in the RTO/ISO regions.\54\
---------------------------------------------------------------------------
\53\ EEI Comments (2018 RM18-9) at 3.
\54\ APPA Comments (2018 RM18-9) at 10.
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B. Commission Determination
26. For the reasons discussed below, in this final rule, we affirm
the preliminary finding in the NOPR that existing RTO/ISO market rules
are unjust and unreasonable because they present barriers to the
participation of distributed energy resource aggregations in the RTO/
ISO markets, and such barriers reduce competition and fail to ensure
just and reasonable rates. Specifically, current RTO/ISO market rules
present barriers that prevent certain distributed energy resources that
are technically capable of participating in the RTO/ISO markets on
their own or through aggregation from doing so.\55\ Permitting
distributed energy resource aggregations to participate in the RTO/ISO
markets may allow these resources, in the aggregate, to meet certain
qualification and performance requirements, particularly if the
operational characteristics of different distributed energy resources
in a distributed energy resource aggregation complement each other.\56\
The reforms adopted in this final rule will remove the barriers that
qualification and performance requirements currently pose to the
participation of distributed energy resources in the RTO/ISO
markets.\57\
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\55\ See NOPR, 157 FERC ] 61,121 at P 124.
\56\ See id. P 125.
\57\ See infra section IV.C.4 (Minimum and Maximum Size of
Aggregation) (agreeing with commenters that a minimum size
requirement not to exceed 100 kW will help improve competition in
the RTO/ISO markets and avoid confusion about appropriate minimum
size requirements for distributed energy resource aggregations under
existing or new participation models); Section IV.C.6 (Single
Resource Aggregation) (explaining that a consistent minimum size
requirement will minimize barriers in the event that an individual
distributed energy resource ceases to participant in RTO/ISO markets
as a single qualifying distributed energy resource aggregation).
---------------------------------------------------------------------------
27. The reforms adopted in this final rule are timely, as there has
been significant development of distributed energy technologies and
deployment of distributed energy resources in recent years. Moreover,
this development has generated discussions on the potential for such
resources--including new distributed energy resources that are smaller,
interconnected at lower voltages, and geographically dispersed--to
provide grid services through participation in RTO/ISO markets. Wider
scale use of distributed energy resources is enabled by increased
deployment of, and improvements in, metering, telemetry, and
communication technologies. Aggregations of new and existing
distributed energy resources can provide new cost-effective sources of
energy and grid services and enhance competition in wholesale markets
as new market participants.
28. Individual distributed energy resources often do not meet the
minimum size requirements to participate in the RTO/ISO markets under
existing participation models and often cannot satisfy all the
performance requirements of the various participation models due to
their small size. In order to participate in RTO/ISO markets,
distributed energy resources tend to participate in RTO/ISO demand
response programs. While these demand response programs have helped
reduce barriers to load curtailment resources, they often limit the
operations of some
[[Page 67100]]
types of distributed energy resources, such as electric storage or
distributed generation, as well as the services that they are eligible
to provide.\58\
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\58\ For example, when participating through demand response
programs, distributed energy resources generally can only operate to
reduce customer demand at the meter, and any injection/generation
cannot exceed customer demand. Consequently, these resources are
prevented from injecting additional electricity into the grid to
make sales of electricity in RTO/ISO markets.
---------------------------------------------------------------------------
29. We find that adopting the reforms described below will enhance
the competitiveness, and in turn the efficiency, of RTO/ISO markets and
thereby help to ensure just and reasonable and not unduly
discriminatory or preferential rates for wholesale electric
services.\59\ Further, the reforms required by this final rule will
help the RTOs/ISOs account for the impacts of distributed energy
resources on installed capacity requirements and day-ahead energy
demand, thereby reducing uncertainty in load forecasts and the risk of
over procurement of resources and the associated costs, and provide
numerous other benefits.\60\ Accordingly, as discussed further below,
we adopt the NOPR proposal to add Sec. 35.28(g)(12)(i) to the
Commission's regulations and require each RTO/ISO to have tariff
provisions that allow distributed energy resource aggregations to
participate directly in RTO/ISO markets.\61\ While we agree with
commenters that there are operational, technological, and cost
implications that must be evaluated and addressed, as explained below,
we find that the record in this proceeding provides sufficient basis
for taking action to require the implementation of the generic
requirements discussed herein.
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\59\ See infra Section IV.C.1 (Participation Model); Section
IV.C.2 (Types of Technologies); Section IV.C.3 (Double Counting of
Services); Section IV.H.2 (Role of Distribution Utilities); Section
IV.J (Market Participation Agreements).
\60\ See infra Section IV.C.4 (Minimum and Maximum Size of
Aggregation); Section IV.D (Locational Requirements).
\61\ In addition, we adopt the proposal to add sections
35.28(b)(10) and (11) to the Commission's regulations incorporating
the definitions for distributed energy resource and distributed
energy resource aggregator.
---------------------------------------------------------------------------
30. To the extent that an RTO/ISO proposes to comply with any or
all of the requirements in this final rule using its currently
effective requirements for distributed energy resources, it must
demonstrate on compliance that its existing approach meets the
requirements in this final rule.
IV. Discussion
A. Commission Jurisdiction
1. Scope of Final Rule
31. In the NOPR, the Commission stated that it was proposing
reforms pursuant to its legal authority under section 206 of the FPA to
ensure that the RTO/ISO tariffs are just and reasonable and not unduly
discriminatory or preferential.\62\
---------------------------------------------------------------------------
\62\ NOPR, 157 FERC ] 61,121 at P 1.
---------------------------------------------------------------------------
a. Comments
32. Several commenters assert that the basis for the Commission's
jurisdiction is straightforward because sales from distributed energy
resource aggregators into wholesale markets are sales at wholesale in
interstate commerce.\63\ Other commenters question the Commission's
authority to implement the proposed reforms, seek clarification of the
NOPR's scope, or ask the Commission to respect existing federal, state,
and local jurisdictional boundaries.\64\
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\63\ See, e.g., Sunrun Comments (2018 RM18-9) at 3-4 (citing 16
U.S.C. 824(b)(1)); Connecticut State Entities Comments (RM16-23) at
7; Stem Comments (2018 RM18-9) at 3.
\64\ See, e.g., APPA/NRECA Comments (RM16-23) at 18-20; MISO
Transmission Owners Comments (RM16-23) at 17-18; NESCOE Comments
(RM16-23) at 16; TAPS Comments (RM16-23) at 4-5; Xcel Energy
Services Comments (RM16-23) at 6-9, 23-24.
---------------------------------------------------------------------------
33. Stem asserts that the Commission should clarify that it has
jurisdiction over participation in the wholesale markets and the
associated transactions, while relevant electric retail regulatory
authorities \65\ have jurisdiction over the physical dispatch and the
resulting electrical activity on the distribution system.\66\
Connecticut State Entities argue that, while the management of the
impacts of new generation on the distribution system remains with the
states, the comprehensive and effective integration of these emerging
technologies into the wholesale markets rests with the Commission.\67\
---------------------------------------------------------------------------
\65\ The term ``relevant electric retail regulatory authority''
means the entity that establishes the retail electric prices and any
retail competition policies for customers, such as the city council
for a municipal utility, the governing board of a cooperative
utility, or the state public utility commission. See Order No. 719,
125 FERC ] 61,071 at P 158.
\66\ Stem Comments (2018 RM18-9) at 3.
\67\ Connecticut State Entities Comments (RM16-23) at 7.
---------------------------------------------------------------------------
34. Harvard Environmental Policy Initiative argues that the
Commission's proposal to assert jurisdiction over a distributed energy
resource aggregator's sale of sink-related services to RTOs/ISOs would
fall under the Commission's jurisdiction under the test applied by the
U.S. Supreme Court in FERC v. Electric Power Supply Ass'n,\68\ and that
the Commission has authority under FPA section 206 to require RTOs/ISOs
to enable the participation of distributed energy resource
aggregators.\69\ Harvard Environmental Policy Initiative further
contends that a company's distribution system investments, even if
motivated by a Commission rule, are not evidence that the Commission
has overstepped its legal authority, and that, even if a change in
state law were necessary to allow consumers to participate, the NOPR
does not force states to do anything and does not require states to
facilitate the development of distributed energy resources.\70\
---------------------------------------------------------------------------
\68\ Harvard Environmental Policy Initiative Comments (RM16-23)
at 3 (citing FERC v. Electric Power Supply Ass'n, 136 S. Ct. 760,
776 (2016) (EPSA)).
\69\ Id. at 4-5.
\70\ Id. at 9, 12.
---------------------------------------------------------------------------
35. In contrast, some commenters question the Commission's
authority to impose the proposed reforms or seek clarification of
federal and state jurisdictional boundaries.\71\ APPA/NRECA interpret
the NOPR to be limited to reforms to the RTO/ISO tariff rules governing
RTO/ISO markets and they urge the Commission not to expand the scope of
the NOPR beyond RTO/ISO markets and to preserve state and local
authority over retail sales, generation facilities, and local
distribution facilities.\72\ TAPS similarly asserts that any final rule
should be limited to (1) the treatment by RTOs/ISOs of energy and
ancillary services from distributed energy resources after those
resources have already been delivered to the RTO's/ISO's markets; and
(2) assuring that any such participation of distributed energy resource
aggregations in RTO/ISO markets is compatible with the safe and
reliable operation of the distribution system, as well as relevant
electric retail regulatory authority and distribution utility tariffs,
rules, and requirements.\73\ FirstEnergy argues that any rules adopted
by the Commission must preserve state jurisdictional authority over
distribution-level resources.\74\ Similarly, the Maryland and New
Jersey Commissions ask the Commission to confirm that state decisions
on distribution system design, resource interconnection access,
operations, and costs will not be viewed
[[Page 67101]]
as a barrier to wholesale competition or subject to Commission
review.\75\ MISO Transmission Owners assert that any final rule must
not disturb a state's jurisdiction over retail electricity sales and
retail distribution service, including state regulation of retail
rates, net metering programs, and participation in wholesale markets by
resources located behind a retail distribution service meter.\76\
---------------------------------------------------------------------------
\71\ See EEI Comments (RM16-23) at 25; Icetec Comments (2018
RM18-9) at 1-2; Maryland and New Jersey Commissions Comments (RM16-
23) at 2-3; Massachusetts Commission Comments (RM16-23) at 10; Stem
Comments (2018 RM18-9) at 3.
\72\ APPA/NRECA Comments (RM16-23) at 18-20.
\73\ TAPS Comments (RM16-23) at 9.
\74\ FirstEnergy Comments (2019 RM18-9) at 5 n.13.
\75\ Maryland and New Jersey Commissions Comments (RM16-23) at
3.
\76\ MISO Transmission Owners Comments (RM16-23) at 5-6.
---------------------------------------------------------------------------
36. The Maryland and New Jersey Commissions ask the Commission to
enunciate clear federal and state jurisdictional lines pertaining to
both the distribution system and distributed energy resources, whether
in front of or behind the meter.\77\ The Massachusetts Commission and
EEI ask the Commission to clarify whether distribution system-connected
and behind-the-meter distributed energy resources that participate in
wholesale markets are Commission-jurisdictional facilities.\78\ EEI
notes that the Commission has exclusive jurisdiction over sales for
resale under the FPA.\79\ The Harvard Environmental Policy Initiative
states that EEI confuses Commission jurisdiction over energy sales with
state jurisdiction over generation facilities and argues that states
will retain authority over the resources themselves.\80\
---------------------------------------------------------------------------
\77\ Maryland and New Jersey Commissions Comments (RM16-23) at
2.
\78\ Massachusetts Commission Comments (RM16-23) at 11.
\79\ EEI Comments (RM16-23) at 23-24 (citing 16 U.S.C.
824o(a)(1)).
\80\ Harvard Environmental Policy Initiative Comments (RM16-23)
at 12.
---------------------------------------------------------------------------
37. Icetec asks the Commission either to (1) clarify that retail
customers transmitting power from distributed energy resources behind
their retail service point to their retail point of interconnection are
not considered public utilities subject to Open Access Transmission
Tariff (OATT) and Open Access Same-Time Information System (OASIS)
requirements, or (2) require RTOs/ISOs to include a pro forma request
for waiver of those requirements in distributed energy resource
participation agreements.\81\ The Harvard Environmental Policy
Initiative states that the Commission should establish a jurisdictional
line that distinguishes between sales by distributed energy resource
aggregators and sales by individual distributed energy resources by
determining that an energy sale from an individual distributed energy
resource is not a ``wholesale sale in interstate commerce'' but is
instead ``any other sale'' under FPA section 201 and therefore not
subject to Commission regulation.\82\
---------------------------------------------------------------------------
\81\ Icetec Comments (2018 RM18-9) at 9.
\82\ Harvard Environmental Policy Initiative Comments (RM16-23)
at 13 (quoting 16 U.S.C. 824(b)(1)).
---------------------------------------------------------------------------
b. Commission Determination
38. FPA section 201 authorizes the Commission to regulate the
transmission of electric energy in interstate commerce and the
wholesale sale of electric energy in interstate commerce, as well as
all facilities used for such transmission or sale of electric
energy.\83\ FPA section 201 also defines a public utility as a person
who owns or operates facilities subject to the jurisdiction of the
Commission.\84\ FPA sections 205 \85\ and 206 \86\ provide the
Commission with jurisdiction over all rates and charges made, demanded,
or received by any public utility for or in connection with the
transmission or sale of electric energy subject to the Commission's
jurisdiction. Those sections also provide the Commission with
jurisdiction over all rules, regulations, practices, or contracts
affecting jurisdictional rates, charges, or classifications.
---------------------------------------------------------------------------
\83\ 16 U.S.C. 824.
\84\ Id. 824(e).
\85\ Id. 824d.
\86\ Id. 824e.
---------------------------------------------------------------------------
39. The Commission's authority to issue regulations pertaining to
distributed energy resource aggregations stems from both the
Commission's jurisdiction over the wholesale sales by distributed
energy resource aggregators into RTO/ISO markets and from its
jurisdiction over practices affecting wholesale rates.\87\
---------------------------------------------------------------------------
\87\ See Nat'l Ass'n of Regulatory Util. Comm'rs v. FERC, 964
F.3d at 1186 (``FERC bears the responsibility of regulating the
wholesale market, which encompasses `both wholesale rates and the
panoply of rules and practices affecting them.' '') (quoting EPSA,
136 S. Ct. at 773).
---------------------------------------------------------------------------
40. First, we find that the sales of electric energy by distributed
energy resource aggregators for purposes of participating in an RTO/ISO
market are wholesale sales subject to the Commission's jurisdiction. In
Order No. 841, the Commission observed that an electric storage
resource that injects electric energy back to the grid for purposes of
participating in an RTO/ISO market engages in a sale of electric energy
at wholesale in interstate commerce.\88\ Similarly, to the extent that
a distributed energy resource aggregator's transaction in RTO/ISO
markets entails the injection of electric energy onto the grid and a
sale of that energy for resale in wholesale electric markets, we find
that the Commission has jurisdiction over such wholesale sales.\89\
---------------------------------------------------------------------------
\88\ Order No. 841, 162 FERC ] 61,127 at P 30.
\89\ See EnergyConnect, Inc., 130 FERC ] 61,031, at P 29 (2010).
We note that injections of electric energy to the grid do not
necessarily trigger the Commission's jurisdiction. See Sun Edison
LLC, 129 FERC ] 61,146 (2009), reh'g granted on other grounds, 131
FERC ] 61,213 (2010) (the Commission's jurisdiction would arise only
when a facility operating under a state net metering program
produces more power than it consumes over the relevant netting
period); MidAmerican Energy Co., 94 FERC ] 61,340 (2001).
---------------------------------------------------------------------------
41. Second, we find that RTO/ISO market rules governing sales in
RTO/ISO markets by distributed energy resource aggregators from demand
resources (e.g., demand response and energy efficiency) are practices
affecting wholesale rates. This finding aligns with the decision of the
U.S. Supreme Court in EPSA, which interpreted the FPA as providing the
Commission with jurisdiction over the participation in RTO/ISO markets
of demand response resources: A type of non-traditional resource that,
by definition, is located behind a customer meter and generally is
located on the distribution system.\90\ First, the Court found that the
Commission's regulation of demand response participation in wholesale
markets met the ``affecting'' standard in FPA sections 205 and 206
``with room to spare.'' \91\ Second, the Court found that the
Commission's regulation of demand response resources did not regulate
retail sales in violation of FPA section 201(b).\92\ These holdings
apply equally to RTO/ISO market rules governing sales in RTO/ISO
markets by distributed energy resource aggregators from demand
resources.
---------------------------------------------------------------------------
\90\ See Order No. 841-A, 167 FERC ] 61,154 at P 33 (citing
EPSA, 136 S. Ct. 760; 18 CFR 35.28(b)(4)).
\91\ EPSA, 136 S. Ct. at 774 (referring to the Commission's
jurisdiction under FPA sections 205 and 206 to regulate practices
affecting jurisdictional rates).
\92\ Id. at 784.
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42. We clarify that, to the extent a distributed energy resource
aggregator makes sales of electric energy into RTO/ISO markets, it will
be considered a public utility subject to the Commission's
jurisdiction.\93\ Such distributed energy resource aggregators must
fulfill certain responsibilities set forth in the FPA and the
Commission's rules and regulations.\94\ If a distributed
[[Page 67102]]
energy resource aggregator (1) aggregates only demand resources; or (2)
aggregates only customers in a net metering program that are not net
sellers, that distributed energy resource aggregator would not become a
public utility.\95\
---------------------------------------------------------------------------
\93\ See EnergyConnect, Inc., 130 FERC ] 61,031 at P 29 (finding
an aggregator of retail customers to be a public utility under FPA
section 201(e) because its agreements to make sales of balancing
energy for resale in RTO/ISO markets would constitute jurisdictional
facilities under FPA section 201(b)).
\94\ Examples of such responsibilities include filing rates
under FPA section 205 (potentially including obtaining market-based
rate authority); filing Electric Quarterly Reports; submitting FPA
sections 203 and 204 filings related to corporate mergers and other
activities; and fulfilling FPA section 301 accounting obligations
and FPA section 305(b) interlocking directorate obligations. See 16
U.S.C. 824b, 824c, 824d, 825, 825d(b).
\95\ See EnergyConnect, Inc., 130 FERC ] 61,031 at P 30 (finding
that ``where an entity is only engaged in the provision of demand
response services, and makes no sales of electric energy for resale,
that entity would not own or operate facilities that are subject to
the Commission's jurisdiction and would not be a public utility that
is required to have a rate on file with the Commission''); Sun
Edison LLC, 129 FERC ] 61,146 (the Commission's jurisdiction would
arise only when a facility operating under a state net metering
program produces more power than it consumes over the relevant
netting period); MidAmerican Energy Co., 94 FERC ] 61,340.
---------------------------------------------------------------------------
43. We further clarify that we are only exercising jurisdiction in
this final rule over the sales by distributed energy resource
aggregators into the RTO/ISO markets. Hence, an individual distributed
energy resource's participation in a distributed energy resource
aggregation would not cause that individual resource to become subject
to requirements applicable to Commission-jurisdictional public
utilities.
44. As the Commission stated in Order Nos. 841 and 841-A, the
Commission recognizes a vital role for state and local regulators with
respect to retail services and matters related to the distribution
system, including design, operations, power quality, reliability, and
system costs.\96\ As in Order No. 841, we reiterate that nothing in
this final rule preempts the right of states and local authorities to
regulate the safety and reliability of the distribution system and that
all distributed energy resources must comply with any applicable
interconnection and operating requirements.\97\
---------------------------------------------------------------------------
\96\ Order No. 841, 162 FERC ] 61,127 at P 36; Order No. 841-A,
167 FERC ] 61,154 at P 42.
\97\ See Order No. 841-A, 167 FERC ] 61,154 at P 46.
---------------------------------------------------------------------------
2. Opt-Out
45. In the NOPR, the Commission proposed to require each RTO/ISO to
revise its tariff as necessary to accommodate the participation of
distributed energy resource aggregations in RTO/ISO markets.\98\ In the
NOPR, the Commission stated that, to the extent existing rules or
regulations explicitly prohibit certain technologies from participating
in RTO/ISO markets, it did not intend to overturn those rules or
regulations.\99\ However, the Commission did not propose a mechanism by
which relevant electric retail regulatory authorities could authorize
or prohibit the participation of distributed energy resources or
distributed energy resource aggregators in RTO/ISO markets. The
Commission also explained that, because the individual resources in
distributed energy resource aggregations likely will fall under the
purview of multiple organizations (e.g., the RTO/ISO, state regulatory
commissions, relevant distribution utilities, and local regulatory
authorities), the proposed market participation agreements \100\ for
distributed energy resource aggregators must require that the
aggregator attest that its distributed energy resource aggregation is
compliant with the tariffs and operating procedures of the distribution
utilities and the rules and regulations of any other relevant
regulatory authority.\101\ The Commission stated that this may include
any laws or regulations of the relevant electric retail regulatory
authority that do not permit demand response resources to participate
in RTO/ISO markets as the Commission considered in Order No. 719.\102\
---------------------------------------------------------------------------
\98\ NOPR, 157 FERC ] 61,121 at P 124.
\99\ Id. P 133.
\100\ See Section IV.J (Market Participation Agreements) below
for more discussion of market participation agreements.
\101\ NOPR, 157 FERC ] 61,121 at P 157.
\102\ Id. P 157 n.238 (citing Order No. 719, 125 FERC ] 61,071
at P 154).
---------------------------------------------------------------------------
46. After the technical conference, the Commission sought comments
on whether states could require distributed energy resources to choose
to participate in either an RTO/ISO market or retail compensation
program, but not allow participation in both.\103\ The Commission also
sought comments on the benefits and drawbacks of such an approach.
---------------------------------------------------------------------------
\103\ Notice Inviting Post-Technical Conference Comments at 6.
---------------------------------------------------------------------------
a. Comments
47. As described above,\104\ numerous commenters question the
Commission's authority to require RTOs/ISOs to accommodate the
participation of distributed energy resource aggregations in RTO/ISO
markets. They believe that, to mitigate their jurisdictional concerns,
relevant electric retail regulatory authorities and/or distribution
utilities must be allowed to either authorize or prohibit the
participation of distributed energy resources and/or distributed energy
resource aggregators in the RTO/ISO markets (i.e., to opt in or opt
out, respectively).\105\ Thus, they specifically request that the
Commission adopt an opt-out/opt-in provision similar to that
established in Order No. 719 to allow relevant electric retail
regulatory authorities to decide whether distributed energy resources
may participate in aggregations in RTO/ISO markets.\106\
---------------------------------------------------------------------------
\104\ See supra Section IV.A.1 (Scope of Final Rule).
\105\ See, e.g., APPA/NRECA Comments (RM16-23) at 21-22; DTE
Electric/Consumers Energy Comments (RM16-23) at 7; MISO Transmission
Owners Comments (RM16-23) at 6; NARUC Comments (RM16-23) at 4-5;
TAPS Comments (RM16-23) at 10, 16-17.
\106\ See, e.g., AES Companies Comments (RM16-23) at 31; Kansas
Commission Comments (2018 RM18-9) at 4; NRECA Comments (2018 RM18-9)
at 6-7, 27-28; Organization of MISO States Comments (RM16-23) at 4-
5; Southern Companies Comments (2018 RM18-9) at 3-4 (citing Order
No. 719, 125 FERC ] 61,071; Order No. 719-A, 128 FERC ] 61,059); see
discussion of opt-out/opt-in infra PP 59, 64.
---------------------------------------------------------------------------
48. Some of these commenters contend that the Commission would be
exceeding its statutory authority if the final rule does not include an
opt-out.\107\ They argue that the Commission may determine how
distributed energy resources participate in RTO/ISO markets, but
whether they participate is the exclusive province of the states.\108\
APPA points to the existing opt-out for demand response resources
established in Order No. 719 to argue that the applicability of
relevant electric retail regulatory authority should not turn on the
wholesale participation model selected by the aggregator.\109\ APPA
asserts that the authority of relevant electric retail regulators over
the terms and conditions of interconnection to the distribution system
includes the authority to limit the manner in which a distributed
energy resource uses the distribution system.\110\ APPA argues that an
opt-out is consistent with the NOPR's proposal that market
participation agreements include an attestation that an aggregation is
compliant with distribution utility tariffs and the rules and
regulations of any other relevant regulatory authority. APPA further
argues that an opt-out conforms with the requirement in Order No. 841
that an electric storage resource must be ``contractually permitted''
to inject electric energy back onto the grid (e.g., per the
interconnection agreement between an electric storage resource that is
interconnected on a distribution system or behind the meter and the
distribution utility to which it is
[[Page 67103]]
interconnected).\111\ Xcel Energy Services argues that, to the extent
distributed energy resource participation in RTO/ISO markets does
occur, the applicable state has the authority to establish the
parameters of the participation model, not the RTO/ISO.\112\ Xcel
Energy Services asserts that the Commission should not usurp the
states' authority to address inappropriate arbitrage between retail and
wholesale consumption.\113\
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\107\ Kansas Commission Comments (2018 RM18-9) at 3; NARUC
Comments (2018 RM18-9) at 2-3; see APPA Comments (2018 RM18-9) at
15.
\108\ Kansas Commission Comments (2018 RM18-9) at 2-3; NARUC
Comments (2018 RM18-9) at 2-3.
\109\ APPA Comments (2018 RM18-9) at 17-18.
\110\ Id. at 15-16 (noting that CAISO's Distributed Energy
Resource Provider program requires compliance with applicable
distribution utility tariffs and operating procedures, as well as
applicable requirements of the relevant electric retail regulatory
authority).
\111\ Id. at 16 (citing NOPR, 157 FERC ] 61,121 at P 157; Order
No. 841, 162 FERC ] 61,127 at P 33).
\112\ Xcel Energy Services Comments (RM16-23) at 23-24.
\113\ Id. at 24.
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49. Multiple United States senators urge the Commission to preserve
the authority of state and local authorities over distribution
utilities with respect to distributed energy resource aggregators. They
express concern that the final rule could have a negative effect on
state and local authorities' ability to regulate retail and
distribution service. They argue that, if the Commission authorizes the
aggregation of distributed energy resources by entities other than the
local distribution utility without authorization by the appropriate
state or local regulator, the Commission would break precedent and
expand Commission regulation into areas that are jurisdictional to
state and localities under the FPA. They maintain that the relevant
electric retail regulatory authority is best positioned to decide
whether to authorize third-party distributed energy resource
aggregators to transact with retail customers.\114\
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\114\ May 7, 2019 Letter to Chairman Neil Chatterjee from United
States Senators John Hoeven, Kevin Cramer, John Barrasso, John
Boozman, Lisa Murkowski, Michael B. Enzi, Joni K. Ernst, Roger F.
Wicker, Shelley Moore Capito, Chuck Grassley, M. Michael Rounds,
Steve Daines, John Thune, Thom Tillis, Mike Crapo, Cindy Hyde-Smith,
Roy Blunt, James E. Risch, James Lankford, Deb Fischer, James M.
Inhofe, and Bill Cassidy. In response to this letter, the Chairman
noted that he asked state regulators participating at the April 2018
technical conference to discuss whether and why they view as
important in the context of this rulemaking the type of flexibility
that the Commission has provided to relevant electric retail
regulatory authorities with respect to participation of demand
response resources in wholesale electric markets. The Chairman also
stated that he recognizes the important role of state and local
regulators with respect to reliability and resilience, particularly
with respect to the distribution system. Chairman's Response to May
7, 2019 Letter (filed June 4, 2019).
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50. Those commenters advocating for an opt-out also generally
express concerns about the cost, and operational and reliability
impacts, of distributed energy resource aggregations on distribution
utilities and the distribution system.\115\ With regard to cost
impacts, some commenters suggest that costs borne by small utilities
and their customer bases may outweigh the benefits of distributed
energy resource aggregation participation in RTO/ISO markets, and that
small to medium-sized distribution utilities may not have the resources
needed to coordinate with distributed energy resource aggregators and
RTOs/ISOs.\116\ In addition, NRECA argues that opt-out/opt-in
provisions would lessen the compliance burden on smaller entities and
would be consistent with the deference to relevant electric retail
regulatory authorities included in IEEE 1547.\117\ NRECA also raises
concerns that distributed energy resource aggregators may ``cherry-
pick'' the more lucrative resources in a system, undermining
reliability and the ability of utilities to develop and invest in their
own integrated distributed energy resources portfolio.\118\
Organization of MISO States suggests that even a temporary opt-out
would allow for safe and reliable implementation with minimal
disruption to the distribution system.\119\
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\115\ See, e.g., Vice Chairman Place Comments (2018 RM18-9) at
2-3; EEI Comments (2018 RM18-9) at 19-20; Eversource Comments (2018
RM18-9) at 12-13; NRECA Comments (2018 RM18-9) at 7-10, 12; see also
AMP Comments (2019 RM18-9) at 1.
\116\ APPA Comments (2018 RM18-9) at 7 (asserting that rate
design challenges can be particularly acute for small to medium-
sized distribution utilities), 9-10 (asserting that monitoring and
responding to system impacts associated with distributed energy
resource aggregation activity could be particularly difficult for
small and medium-sized utilities); APPA/NRECA Comments (RM16-23) at
39 (asserting that the costs of installing new meters or new
communication technology to capture wholesale market transactions
would burden smaller distribution utilities in particular); NRECA
Comments (2018 RM18-9) at 14 (asserting that smaller distribution
cooperatives may not have staff or resources needed to conduct
ongoing operational coordination with RTOs/ISOs and distributed
energy resource aggregators), 26 (asserting that the considerable
amount of funding required to potentially benefit a small number of
customers imposes too large of a burden on small utilities); TAPS
Comments (RM16-23) at 15-16 (asserting that, particularly for a
small utility, the costs of ongoing coordination, metering,
settlements, and rate-unbundling needed to support sales to RTO/ISO
markets by distributed energy resources may far exceed the potential
efficiency benefits from their participation in RTO/ISO markets).
\117\ NRECA Comments (2018 RM18-9) at 27-28. IEEE-1547 is a
standard of the Institute of Electrical and Electronics Engineers
(IEEE) that provides a set of criteria and requirements for the
interconnection of distributed energy resources.
\118\ Id. at 22-23.
\119\ Organization of MISO States Comments (2018 RM18-9) at 5-6.
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51. Some commenters argue that, to relieve smaller entities of cost
and coordination burdens, the Commission should at a minimum establish
an express opt-in requirement for small distribution utilities similar
to the one the Commission adopted in Order No. 719.\120\ NRECA asserts
that the distributed energy resource aggregation proposals would be
costly for small cooperatives in rural, remote communities.\121\ NRECA
and TAPS recommend that the Commission require express permission from
the relevant electric retail regulatory authority before the RTO/ISO
may accept bids from distributed energy resource aggregations located
on the system of a utility that distributes 4 million MWh or less,
employing the same size threshold as the small utility opt-in allowed
in Order No. 719-A.\122\
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\120\ APPA Comments (2018 RM18-9) at 19-20; TAPS Comments (RM16-
23) at 16; TAPS Comments (2018 RM18-9) at 19-21.
\121\ NRECA Comments (2019 RM18-9) at 4-5.
\122\ Id.; TAPS Comments (RM16-23) at 16-17; TAPS Comments (2018
RM18-9) at 19 & n.27.
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52. In contrast, other commenters caution against adopting the
Order No. 719 construct.\123\ Many of those commenters argue that an
opt-out is not necessary because the Commission has exclusive
jurisdiction over sales from distributed energy resource aggregators
into RTO/ISO markets.\124\ Moreover, several commenters argue that the
responsibility for integrating emerging technologies into RTO/ISO
markets rests with the Commission (while the states are responsible for
managing the impacts on the distribution system) and that the Order No.
719 opt-out provision has effectively prevented the development of
demand response in the Midwest and led to higher wholesale rates.\125\
In addition, some commenters argue that providing states with an opt-
out would be inconsistent with the Commission's denial of such an opt-
out
[[Page 67104]]
from electric storage participation in Order No. 841.\126\
---------------------------------------------------------------------------
\123\ See, e.g., Advanced Energy Buyers Comments (2018 RM18-9)
at 6; Advanced Energy Management Comments (2018 RM18-9) at 7-8, 10-
11; Icetec Comments (2018 RM18-9) at 10-11; SEIA Comments (2018
RM18-9) at 8; Stem Comments (2018 RM18-9) at 4-6.
\124\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 18; Energy Storage Association Comments (2018 RM18-9) at 5;
Icetec Comments (2018 RM18-9) at 11; Stem Comments (2018 RM18-9) at
4-5 (arguing that the FPA does not permit a state to use its
jurisdiction over generation or local distribution facilities to
prevent distributed energy resources or distributed energy resource
aggregators from accessing Commission-jurisdictional markets);
Sunrun Comments (2018 RM18-9) at 3-4 (arguing that whether wholesale
sales originate from facilities on the transmission system, the
distribution system, or behind the meter is immaterial to the
Commission's jurisdiction and that FPA section 201(b) distinguishes
between authority to regulate transactions and authority to regulate
facilities).
\125\ Advanced Energy Economy Comments (RM16-23) at 44-45;
Connecticut State Entities Comments (RM16-23) at 7; Organization of
MISO States Comments (RM16-23) at 5 n.3 (noting concerns of Illinois
Commission).
\126\ E.g., Advanced Energy Management Comments (2018 RM18-9) at
7-8 (citing Order No. 841, 162 FERC ] 61,127 at P 35).
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53. With respect to the Commission's authority, some commenters
assert that only the Commission has jurisdiction to determine
eligibility for wholesale market participation \127\ and that limiting
or conditioning wholesale market participation through retail tariffs
\128\ or distribution interconnection agreements \129\ would interfere
with that jurisdiction. Advanced Energy Management asserts that because
selling injections of electric energy in wholesale markets is governed
under the FPA and distributed energy resources are not always behind
the meter, there should not be a blanket opt-out available to relevant
electric retail regulatory authorities.\130\
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\127\ Advanced Energy Economy Comments (2018 RM18-9) at 18
(citing Advanced Energy Econ., 161 FERC ] 61,245 (2017) (AEE
Declaratory Order), reh'g denied, 163 FERC ] 61,030 (2018) (AEE
Rehearing Order); Order No. 841, 162 FERC ] 61,127 at P 35);
Advanced Energy Management Comments (2018 RM18-9) at 18; Icetec
Comments (2018 RM18-9) at 11, 16.
\128\ Advanced Energy Economy Comments (2018 RM18-9) at 18.
\129\ Icetec Comments (2018 RM18-9) at 11; see Stem Comments
(2018 RM18-9) at 15.
\130\ Advanced Energy Management Comments (RM16-23) at 7.
Advanced Energy Management states that there should be no
restriction on where distributed energy resource aggregators can
recruit customers to participate in the wholesale market. Advanced
Energy Management Comments (2018 RM18-9) at 11.
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54. However, some commenters recognize that states do have the
right to implement retail tariffs that disqualify a resource from
participating in the state program if the resource elects to
participate in RTO/ISO markets.\131\ Several commenters caution that,
if the Commission does consider an opt-out, it must be narrowly
tailored.\132\ Harvard Environmental Policy Initiative points to the
Commission's proposed coordination provisions to demonstrate that the
Commission will not preempt state authority over distribution system
planning or create new authority for the Commission to allow
distributed energy resources to connect to a distribution system
without a utility's approval or knowledge.\133\
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\131\ See Advanced Energy Management Comments (2018 RM18-9) at
11; Stem Comments (2018 RM18-9) at 11; Sunrun Comments (2018 RM18-9)
at 8.
\132\ See Advanced Energy Economy Comments (2018 RM18-9) at 21;
Public Interest Organizations Comments (2018 RM18-9) at 8-10
(suggesting a Commission waiver process with a notice and comment
period); Stem Comments (2018 RM18-9) at 6 (suggesting, as one basis
to restrict distributed energy resource participation, the
demonstration of a reliability violation that cannot be resolved
through effective distribution system management).
\133\ Harvard Environmental Policy Initiative Comments (RM16-23)
at 12.
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55. In response to concerns about the impact of distributed energy
resource aggregations on the distribution system, several commenters
argue that distributed energy resource aggregation participation in
RTO/ISO markets does not introduce additional reliability or cost
concerns beyond those that are addressed through the interconnection
process.\134\ In contrast with commenters that suggest that distributed
energy resource aggregations introduce reliability or cost concerns,
Advanced Energy Economy argues that an opt-out would limit RTO/ISO
visibility into distributed energy resource operations, thereby
preventing RTO/ISO operators from using them to maintain reliability
and improve resilience, and would limit an RTO's/ISO's ability to
efficiently optimize all of the resources available in its region,
risking increased costs to consumers.\135\
---------------------------------------------------------------------------
\134\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 17-18; Advanced Energy Management Comments (2018 RM18-9) at 9-10;
Stem Comments (2018 RM18-9) at 9, 15; Sunrun Comments (2018 RM18-9)
at 6; see also New Jersey Board Comments (2018 RM18-9) at 4.
\135\ Advanced Energy Economy Comments (2018 RM18-9) at 15-16.
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b. Commission Determination
56. We decline to include a mechanism for all relevant electric
retail regulatory authorities to prohibit all distributed energy
resources from participating in the RTO/ISO markets through distributed
energy resource aggregations (i.e., to opt out). However, we modify the
NOPR proposal in recognition of the potential indirect costs borne by
smaller utilities due to this final rule. More specifically, and as
discussed further below, we add Sec. 35.28(g)(12)(iv) to the
Commission's regulations to provide that RTOs/ISOs may not accept bids
from distributed energy resource aggregators aggregating customers of
small utilities \136\ unless the relevant electric retail regulatory
authority allows such customers of small utilities to participate in
distributed energy resource aggregations (i.e., to opt in).
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\136\ As discussed below, we will consider small utilities to be
those with a total electric output for the preceding fiscal year not
exceeding 4 million MWh.
---------------------------------------------------------------------------
57. We disagree with the suggestion that the Commission is legally
required to grant an opt-out that enables all relevant electric retail
regulatory authorities to prohibit all distributed energy resources
from participating in the RTO/ISO markets through distributed energy
resource aggregations. The Commission has exclusive jurisdiction over
the wholesale markets and the criteria for participation in those
markets, including the wholesale market rules for participation of
resources connected at or below distribution-level voltages.\137\ As
the Commission previously has found, establishing the criteria for
participation in RTO/ISO markets, including with respect to resources
located on the distribution system or behind the meter, is essential to
the Commission's ability to fulfill its statutory responsibility to
ensure that wholesale rates are just and reasonable.\138\
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\137\ Order No. 841-A, 167 FERC ] 61,154 at P 38; Order No. 841,
162 FERC ] 61,127 at P 35 (citing EPSA, 136 S. Ct. 760; AEE
Declaratory Order, 161 FERC ] 61,245 at PP 59-60; see also Nat'l
Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1187 (``FERC has the
exclusive authority to determine who may participate in the
wholesale markets.''); Nat'l Ass'n of Regulatory Util. Comm'rs v.
FERC, 475 F.3d 1277, 1280-82 (D.C. Cir. 2007); Transmission Access
Policy Study Grp. v. FERC, 225 F.3d 667, 696 (D.C. Cir. 2000).
\138\ Order No. 841-A, 167 FERC ] 61,154 at P 31; see also id. P
38 (citing AEE Rehearing Order, 163 FERC ] 61,030 at P 36). The
Supreme Court also has recognized that the Commission extensively
regulates the structure and rules of wholesale auctions, in order to
ensure that they produce just and reasonable results. See Hughes v.
Talen Energy Mktg., LLC, 136 S. Ct. 1288, 1293-94 (2016) (Hughes);
EPSA, 136 S. Ct. at 769.
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58. This final rule addresses rules for participation in RTO/ISO
markets by distributed energy resource aggregators. Like the
Commission's rules governing demand response and electric storage
resource participation in RTO/ISO markets, this final rule
``addresses--and addresses only--transactions occurring on the
wholesale market.'' \139\ Thus, we continue to find that the FPA and
relevant precedent does not legally compel the Commission to adopt a
relevant electric retail regulatory authority opt-out with respect to
participation in RTO/ISO markets by all resources interconnected on a
distribution system or located behind a retail meter.\140\ As the
United States Court of Appeals for the District of Columbia Circuit
(D.C. Circuit) recently explained, the Commission has jurisdiction to
decide which entities may participate in wholesale markets, which means
that a relevant electric
[[Page 67105]]
retail regulatory authority cannot broadly prohibit the participation
in RTO/ISO markets of all distributed energy resources or of all
distributed energy resource aggregators as doing so would interfere
with the Commission's statutory obligation to ensure that wholesale
electricity markets produce just and reasonable rates.\141\
---------------------------------------------------------------------------
\139\ EPSA, 136 S. Ct. at 776; see also Nat'l Ass'n of
Regulatory Util. Comm'rs, 964 F.3d at 1186, 1189 (finding that
``Order No. 841 solely targets the manner in which an [electric
storage resource] may participate in wholesale markets'' and that
Order Nos. 841 and 841-A ``do nothing more than regulate matters
concerning federal transactions''); Order No. 841-A, 167 FERC ]
61,154 at P 44.
\140\ Order No. 841-A, 167 FERC ] 61,154 at P 32; see also AEE
Declaratory Order, 161 FERC ] 61,245 at P 62 (citing EPSA, 136 S.
Ct. at 776).
\141\ See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at
1187 (``[B]ecause FERC has the exclusive authority to determine who
may participate in the wholesale markets, the Supremacy Clause . . .
requires that [s]tates not interfere. . . . FERC's statement in
Order No. 841-A that [s]tates may not block RTO/ISO market
participation `through conditions on the receipt of retail service,'
or impose any `condition[ ] aimed directly at the RTO/ISO markets,
even if contained in the terms of retail service,' is simply a
restatement of the well-established principles of federal
preemption.'') (quoting Order No. 841-A, 167 FERC ] 61,154 at P 41)
(finding that states cannot intrude on the Commission's jurisdiction
by prohibiting all consumers from selling into the wholesale market)
(citing AEE Rehearing Order, 163 FERC ] 61,030 at P 37; AEE
Declaratory Order, 161 FERC ] 61,245 at P 61); see also Hughes, 136
S. Ct. at 1298 (``States may not seek to achieve ends, however
legitimate, through regulatory means that intrude on FERC's
authority over interstate wholesale rates . . . .''); Oneok, Inc. v.
Learjet, Inc., 575 U.S. 373, 386 (2015) (finding that the proper
test for determining whether a state action is preempted is
``whether the challenged measures are 'aimed directly at interstate
purchasers and wholesalers for resale' or not'') (quoting N. Natural
Gas Co. v. State Corp. Comm'n of Kan., 372 U.S. 84, 94 (1963));
Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1187 (similar).
---------------------------------------------------------------------------
59. As commenters point out, the Commission in Order No. 719
granted relevant electric retail regulatory authorities an opt-out from
allowing retail customers to participate directly in wholesale markets
through aggregations of demand response resources.\142\ As noted above,
the Commission was not obligated to provide such an opt-out, but rather
did so as an exercise of its discretion.\143\ Consistent with that
previous exercise of the Commission's discretion, we clarify that this
final rule does not affect the ability of relevant electric retail
regulatory authorities to prohibit retail customers' demand response
from being bid into RTO/ISO markets by aggregators.\144\
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\142\ Order No. 719, 125 FERC ] 61,071 at PP 154-55.
\143\ See EPSA, 136 S. Ct. at 779 (describing the opt-out as a
``notable solicitude toward the States,'' in recognition of ``the
linkage between wholesale and retail markets and the States' role in
overseeing retail sales''); Nat'l Ass'n of Regulatory Util. Comm'rs,
964 F.3d at 1190 (``Local Utility Petitioners correctly acknowledge
that EPSA did not condition its holdings on the existence of an opt-
out.'').
\144\ See 18 CFR 35.28(g)(1)(iii). Similarly, we recognize
Kentucky's existing right to exclude energy efficiency resources
from wholesale market participation. AEE Declaratory Order, 161 FERC
] 61,245 at P 66.
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60. However, unlike aggregators of demand response, distributed
energy resource aggregators are capable of engaging in sales for resale
of electricity and those distributed energy resource aggregators making
such sales in the RTO/ISO markets are public utilities subject to the
Commission's jurisdiction.\145\ We recognize that the participation of
distributed energy resource aggregators in RTO/ISO markets necessarily
has effects on the distribution system,\146\ and, as in Order No. 841,
we have considered those effects in evaluating whether to exercise our
discretion to grant an opt-out. Upon such consideration, we find that
the benefits of allowing distributed energy resource aggregators
broader access to the wholesale market outweigh the policy
considerations in favor of an opt-out. Specifically, we find that the
reliability, transparency, and market-related benefits of removing
barriers to the participation of distributed energy resource
aggregators in RTO/ISO markets are significant. Considering those
benefits,\147\ we are not persuaded that concerns about potential
effects on the distribution system justify adopting an opt-out that
could substantially limit that participation.\148\ As discussed below,
there are several ways that relevant electric retail regulatory
authorities may address any such concerns without broadly prohibiting
the participation of distributed energy resources or distributed energy
resource aggregators in RTO/ISO markets. Therefore, we do not find it
appropriate and thus decline to exercise discretion to adopt a broad
opt-out with respect to distributed energy resource aggregations in
this final rule.
---------------------------------------------------------------------------
\145\ See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at
1190 (citing Order No. 841-A, 167 FERC ] 61,154 at PP 51-52
(distinguishing [electric storage resource] participation in
wholesale sales from demand response resources participating in
wholesale bids)).
\146\ See Order No. 841-A, 167 FERC ] 61,154 at P 56 (citing
EPSA, 136 S. Ct. at 776).
\147\ See, e.g., supra PP 4 (explaining that integrating
distributed energy resources' capabilities into RTO/ISO planning and
operations will help the RTOs/ISOs account for the impacts of these
resources on installed capacity requirements and day-ahead energy
demand, thereby reducing uncertainty in load forecasts and reducing
the risk of over procurement of resources), 27 (stating that
distributed energy resource aggregations can provide new grid
services and enhance competition in wholesale markets as new market
participants), 29 (finding that the reforms in this final rule will
enhance the competitiveness, and in turn the efficiency, of RTO/ISO
markets); see, e.g., infra PP 114 (explaining that the revised
definition of distributed energy resource adopted in this final rule
is technology-neutral, thereby ensuring that any resource that is
technically capable of providing wholesale services through
aggregation is eligible to do so, which enhances competition in the
RTO/ISO markets), 142 (stating that requiring RTOs/ISOs to allow
heterogeneous aggregations will further enhance competition in RTO/
ISO markets by ensuring that complementary resources, including
those with different physical and operational characteristics, can
meet qualification and performance requirements), 160, 163
(discussing how the final rule enhances competition and improves
reliability by requiring RTOs/ISOs to allow participation of
distributed energy resources in both wholesale and retail or
multiple wholesale programs), 173 (finding that requiring RTOs/ISOs
to establish a minimum size requirement not to exceed 100 kW will
remove a barrier to distributed energy resource aggregations,
improve competition in RTO/ISO markets, avoid confusion about
appropriate requirements, and help ensure just and reasonable
rates), 205 (discussing the benefits of single-node and multi-node
aggregations).
\148\ The list of benefits catalogued in the preceding footnote
includes many of the same benefits that the D.C. Circuit pointed to
when explaining why the Commission's decision not to provide an opt-
out in Order No. 841 was not an unreasoned departure from Order No.
719. See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1190
(explaining that the Commission's decision to forgo an opt-out was
``neither unexplained nor unsupported'' and pointing to the
Commission's consideration of the benefits of enabling broad
participation of electric storage resources, including on
``competition,'' ``prices,'' and the ``diversity'' of resource types
that can participate in RTO/ISO markets).
---------------------------------------------------------------------------
61. We continue to recognize the important role that state and
local authorities play with respect to distributed energy resources and
their potential aggregation. This final rule does not curtail that
authority. As in Order No. 841, the reforms adopted in this final rule
do not preclude or limit state or local regulation of: Retail rates;
distribution system planning, distribution system operations, or
distribution system reliability; distributed energy resource facility
siting; and interconnection of resources to the distribution system
that are not subject to Commission jurisdiction, as discussed further
below.\149\ In addition, and again as recognized in Order No. 841,
under a relevant electric retail regulatory authority's jurisdiction
over its retail programs, such a regulatory authority is able to
condition a distributed energy resource's participation in a retail
distributed energy resource program on that resource not also
participating in the RTO/ISO markets.\150\ This should allow
[[Page 67106]]
a retail regulatory authority to address any specific concerns.
---------------------------------------------------------------------------
\149\ See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at
1188 (noting that the similar decision in ``Order No. 841 does not
`usurp[ ] state power' '' and pointing to the fact that ``States
retain their authority to impose safety and reliability requirements
without interference from FERC, and [electric storage resources]
must still obtain all requisite permits, agreements, and other
documentation necessary to participate in federal wholesale
markets'') (quoting EPSA, 136 S. Ct. at 777).
\150\ See Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at
1188 (``States retain their authority to prohibit local [electric
storage resources] from participating in the interstate and
intrastate markets simultaneously, meaning [s]tates can force local
[electric storage resources] to choose which market they wish to
participate in.''); Order No. 841-A, 167 FERC ] 61,154 at P 41
(acknowledging 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 RTO/ISO markets because, in that scenario,
the owner of a resource has a choice between participating in the
retail market or wholesale market); see also Arkansas Commission
Comments (2019 RM18-9) at 2-4.
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62. As to commenters' concerns regarding cost impacts on the
distribution system, we note that, in Order No. 841, with respect to
concerns about electric storage resources' use of the distribution
system, the Commission observed that, in PJM Interconnection L.L.C.,
the Commission permitted a distribution utility to assess a wholesale
distribution charge to an electric storage resource participating in
the PJM markets. Consistent with this precedent, the Commission found
that it may be appropriate, on a case-by-case basis, for distribution
utilities to assess a charge on electric storage resources similar to
those assessed to the market participant in that proceeding.\151\
Consistent with that conclusion, we find that it may also be
appropriate, on a case-by-case basis, for distribution utilities to
assess a wholesale distribution charge on distributed energy resource
aggregators participating in RTO/ISO markets.
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\151\ Order No. 841, 162 FERC ] 61,127 at P 296 (citing PJM
Interconnection L.L.C., 149 FERC ] 61,185, at P 12 (2014) (wholesale
distribution charge that ComEd will assess to Energy Vault is a
weighted average carrying charge that is applied on a case-by-case
basis, depending on the distribution facilities expected to be used
in providing wholesale distribution service), order on reh'g, 151
FERC ] 61,231, at PP 16-18 (2015)).
---------------------------------------------------------------------------
63. Moreover, we recognize that, where appropriate, the Commission
previously has taken steps to address a potential burden imposed by a
Commission final rule on smaller entities. For instance, the Commission
has distinguished small utilities whose total electric output for the
preceding fiscal year did not exceed 4 million MWh \152\ for purposes
of granting waivers from Order No. 889's \153\ standards of conduct for
transmission providers \154\ and determining whether a specific
cooperative should be considered a non-public utility outside the scope
of a refund obligation involving the California energy crisis.\155\ In
Order No. 719-A, the Commission provided an opt-in for small utilities,
which requires the relevant electric retail regulatory authority to
give affirmative permission for the demand response of customers of
utilities that distributed 4 million MWh or less in the previous fiscal
year to be bid into RTO/ISO markets by an aggregator of those retail
customers.\156\
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\152\ The 4 million MWh cutoff stems from the Small Business
Size Standards component of the North American Industry
Classification System, which previously defined a small utility as
one that, including its affiliates, is primarily engaged in the
generation, transmission, or distribution of electric energy for
sale, and whose total electric output for the preceding fiscal year
did not exceed 4 million MWh. 13 CFR 121.201 (2013) (Sector 22,
Utilities, North American Industry Classification System (NAICS)).
Currently, the number of employees is the basis used to measure
whether electric power generation, transmission, and distribution
industries are small businesses. 13 CFR 121.201 (2020) (Sector 22,
Utilities, NAICS).
\153\ Open Access Same-Time Information System & Standards of
Conduct, Order No. 889, FERC Stats. & Regs. ] 31,035 (1996) (cross-
referenced at 75 FERC ] 61,078), clarified, 76 FERC ] 61,009 (1996),
order on reh'g, Order No. 889-A, FERC Stats. & Regs. ] 31,049
(cross-referenced at 78 FERC ] 61,221), reh'g denied, Order No. 889-
B, 81 FERC ] 61,253 (1997), aff'd in relevant part sub nom.
Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667 (D.C.
Cir. 2000).
\154\ See Wolverine Power Supply Coop., 127 FERC ] 61,159, at P
15 (2009).
\155\ See San Diego Gas & Elec. Co. v. Sellers of Energy &
Ancillary Servs. in Mkts. Operated by the CAISO, 125 FERC ] 61,297,
at P 24 (2008).
\156\ Order No. 719-A, 128 FERC ] 61,059 at PP 51, 59-60.
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64. Notwithstanding our finding that the benefits of this final
rule outweigh the policy considerations in favor of a broad opt-out, we
acknowledge that this final rule may place a potentially greater burden
on smaller utility systems.\157\ Recognizing this potentially greater
burden on small utility systems, we will exercise our discretion to
include in this final rule an opt-in mechanism for small utilities
similar to that provided in Order No. 719-A. Specifically, we determine
that customers of utilities that distributed 4 million MWh or less in
the previous fiscal year may not participate in distributed energy
resource aggregations unless the relevant electric retail regulatory
authority affirmatively allows such customers to participate in
distributed energy resource aggregations.
---------------------------------------------------------------------------
\157\ See supra P 50 (citing APPA Comments (2018 RM18-9) at 7,
9-10; APPA/NRECA Comments (RM16-23) at 39; NRECA Comments (2018
RM18-9) at 14, 26-28; TAPS Comments (RM16-23) at 15-16).
---------------------------------------------------------------------------
65. We therefore direct each RTO/ISO to amend its market rules as
necessary to (1) accept bids from a distributed energy resource
aggregator if its aggregation includes distributed energy resources
that are customers of utilities that distributed more than 4 million
MWh in the previous fiscal year, and (2) not accept bids from
distributed energy resource aggregators if its aggregation includes
distributed energy resources that are customers of utilities that
distributed 4 million MWh or less in the previous fiscal year, unless
the relevant electric retail regulatory authority permits such
customers to be bid into RTO/ISO markets by a distributed energy
resource aggregator. We conclude that this opt-in mechanism
appropriately balances the benefits that distributed energy resource
aggregation can provide to RTO/ISO markets with a recognition of the
burdens that such aggregation may create for small utilities in
particular. Accordingly, we find that adopting this mechanism helps to
ensure that any ``negative effects'' of this final rule are
``outweighed by the benefits,'' \158\ listed above,\159\ that it
provides to RTO/ISO markets.
---------------------------------------------------------------------------
\158\ Nat'l Ass'n of Regulatory Util. Comm'rs, 964 F.3d at 1190.
\159\ See supra n.147.
---------------------------------------------------------------------------
66. On compliance, we require each RTO/ISO to explain how it will
implement this small utility opt-in. We note that an RTO/ISO may choose
to implement this requirement in a similar manner as it currently
implements the small utility opt-in provision under Order No. 719-A.
67. Although the Small Business Administration (SBA) no longer
defines small utilities based on total electric output for the
preceding fiscal year of 4 million MWh or less,\160\ we use this
standard for purposes of this final rule, as it is consistent with the
Commission's use of this standard for the opt-in adopted in Order No.
719-A,\161\ and is supported by commenters asking the Commission to
include an opt-in as part of this rule.\162\
---------------------------------------------------------------------------
\160\ The SBA now defines small utilities based on the number of
employees. 13 CFR 121.201 (establishing a threshold of 1,000
employees for electric power distribution utilities).
\161\ Order No. 719-A, 128 FERC ] 61,059 at PP 51, 59-60.
\162\ NRECA Comments (2019 RM18-9) at 4-5; TAPS Comments (RM16-
23) at 16-17; TAPS Comments (2018 RM18-9) at 19 & n.27.
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3. Interconnection
68. The NOPR did not propose any changes to RTO/ISO policies and
procedures for the interconnection of distributed energy resources.
However, the Commission stated that comments demonstrated that current
RTO/ISO market rules often limit the services that distributed energy
resources are eligible to provide, including by imposing prohibitively
expensive or otherwise burdensome interconnection requirements.\163\
The Commission also recognized that RTO/ISO demand response models
often prohibit distributed energy resources from injecting power back
onto the grid in
[[Page 67107]]
part because they are not studied in the interconnection process.\164\
---------------------------------------------------------------------------
\163\ See NOPR, 157 FERC ] 61,121 at P 13 & n.30 (citing Energy
Storage Association's comment that interconnection processes can
pose prohibitively high transaction costs for the small project
sizes that characterize behind-the-meter storage, which creates
undue burdens on behind-the-meter storage participation in most
RTOs/ISOs).
\164\ See id. P 15 & n.32 (citing PJM's response that demand-
side resources are not studied by PJM through the generation
interconnection process and are not allowed to inject energy beyond
the customer's meter and onto the distribution or transmission
system).
---------------------------------------------------------------------------
69. On September 5, 2019, Commission staff issued data requests to
each of the six RTOs/ISOs seeking information regarding their policies
and procedures that affect the interconnection of distributed energy
resources. The RTOs/ISOs filed their responses in October 2019, and
several commenters subsequently submitted reply comments.
a. Comments and Data Request Responses
70. Several commenters state that any final rule should make clear
that the interconnection of resources on a state-jurisdictional
distribution system remains the responsibility of the distribution
utilities and the states.\165\ The Maryland and New Jersey Commissions
seek confirmation that state jurisdiction would remain unchanged as to
the siting and costs associated with interconnecting resources to the
distribution system, and would apply to all resources, including
distributed energy resources, having or seeking interconnection or
access to the wholesale market.\166\ The Maryland and New Jersey
Commissions request that the Commission confirm that, in the context of
interconnection requests for wholesale market access, states will
continue to have discretion to review distribution utility company
tariffs to justify how costs are allocated or how the resources and
their proposed interconnection locations benefit ultimate
ratepayers.\167\ The Massachusetts Commission makes similar
arguments.\168\
---------------------------------------------------------------------------
\165\ See, e.g., IRC Comments (RM16-23) at 9-10; Massachusetts
Municipal Electric Comments (RM16-23) at 4; Massachusetts State
Entities Comments (2019 RM18-9) at 11; NESCOE Comments (RM16-23) at
16; TAPS Comments (RM16-23) at 15.
\166\ Maryland and New Jersey Commissions Comments (RM16-23) at
2-3.
\167\ Id. at 3.
\168\ Massachusetts Commission Comments (RM16-23) at 11.
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71. In order to avoid uncertainty and litigation, Duke Energy and
EEI ask for additional clarity with respect to state-versus-Commission
jurisdiction affecting interconnection, distribution planning, and
investments to enable distributed energy resource aggregation.\169\
TAPS asks that any final rule make clear that, absent proper
application of a Commission-jurisdictional Generator Interconnection
Agreement, the Commission does not seek to alter or preempt local and
state rules governing interconnection to the distribution system.\170\
Furthermore, TAPS asserts that, given the limited circumstances in
which the Commission has the authority to require interconnection to,
or deliveries over, distribution facilities, the NOPR appropriately
does not attempt to establish new rules or requirements governing the
details of interconnection of distributed energy resources.\171\
---------------------------------------------------------------------------
\169\ Duke Energy Comments (RM16-23) at 4; EEI Comments (RM16-
23) at 25.
\170\ TAPS Comments (RM16-23) at 15.
\171\ Id. at 5-9.
---------------------------------------------------------------------------
72. As to their own interconnection procedures and experience with
distributed energy resources, ISO-NE, NYISO, and PJM's data request
responses reference Order Nos. 2003 and 2006 and indicate that they
apply the jurisdictional test for dual-use facilities established in
those orders.\172\ As explained in more detail below, Order Nos. 2003
and 2006 established what some RTOs/ISOs have labeled the ``first use''
test, under which the first interconnection to a distribution facility
for the purpose of making wholesale sales is not subject to Commission
jurisdiction, but triggers jurisdiction for any subsequent wholesale
interconnection requests to the same distribution facility.\173\ MISO
explains that no distributed energy resources have requested to
interconnect to distribution facilities subject to the MISO tariff but
indicates that it would apply the jurisdictional test in Order Nos.
2003 and 2006 in processing subsequent interconnection requests to such
facilities.\174\ SPP states that it would consider an interconnection
to be Commission jurisdictional only if the relevant distribution
facilities were under SPP's functional control, and SPP's data request
response appears to indicate that, even after the first wholesale use,
such distribution facilities would not be subject to its tariff.\175\
CAISO states that, if a distributed energy resource plans to
participate in CAISO's markets, the interconnection is Commission
jurisdictional pursuant to the utility distribution company's Wholesale
Distribution Access Tariff.\176\
---------------------------------------------------------------------------
\172\ ISO-NE Data Request Response (2019 RM18-9) at 3-4, 9-10;
NYISO Data Request Response (2019 RM18-9) at 1-2; PJM Data Request
Response (2019 RM18-9) at 2, 5.
\173\ Standardization of Generator Interconnection Agreements &
Procedures, Order No. 2003, 104 FERC ] 61,103, at P 804 (2003),
order on reh'g, Order No. 2003-A, 106 FERC ] 61,220, order on reh'g,
Order No. 2003-B, 109 FERC ] 61,287 (2004), order on reh'g, Order
No. 2003-C, 111 FERC ] 61,401 (2005), aff'd sub nom. Nat'l Ass'n of
Regulatory Util. Comm'rs v. FERC, 475 F.3d 1277 (D.C. Cir. 2007),
cert. denied, 552 U.S. 1230 (2008); Standardization of Small
Generator Interconnection Agreements and Procedures, Order No. 2006,
111 FERC ] 61,220, order on reh'g, Order No. 2006-A, 113 FERC ]
61,195 (2005), order granting clarification, Order No. 2006-B, 116
FERC ] 61,046 (2006), corrected, 71 FR 53,965 (Sept. 13, 2006); see
also Reform of Generator Interconnection Procedures and Agreements,
Order No. 845, 163 FERC ] 61,043 (2018), errata notice, 167 FERC ]
61,123, order on reh'g, Order No. 845-A, 166 FERC ] 61,137 (2019),
errata notice, 167 FERC ] 61,124, order on reh'g, Order No. 845-B,
168 FERC ] 61,092 (2019). We note that Order No. 845 did not make
any changes to the ``first use'' test for distribution
interconnection at issue here.
\174\ See MISO Data Request Response (2019 RM18-9) at 6-7 (``If
the [distributed energy resource] interconnection customer intends
to connect the [distributed energy resource] unit to facilities
listed on [MISO's list of transmission facilities transferred to its
functional control] or a distribution facility that provides
Wholesale Distribution Service, then the Interconnection Customer is
required to follow the Generator Interconnection Procedures
(Attachment X) of MISO Tariff. If [the distributed energy resource]
is not interconnecting to such facilities, then the interconnection
customer is required to follow the interconnection rules of the Host
Distribution Provider.'').
\175\ See SPP Data Request Response (2019 RM18-9) at 2-3, 6
(``Such distribution facilities are not subject to the Tariff in
this situation. The Tariff would not apply to non-jurisdictional
facilities; however, there might be an obligation for the utility to
coordinate with SPP regarding potential impacts to the SPP
Transmission System.'').
\176\ CAISO Data Request Response (2019 RM18-9) at 2-4
(explaining that ``each CAISO transmission owner that is
[Commission] jurisdictional and operates distribution facilities has
a Wholesale Distribution Access Tariff with the express purpose of
enabling [distributed energy resources] to interconnect to the
distribution grid and still participate in the CAISO wholesale
markets'').
---------------------------------------------------------------------------
73. In response to CAISO's data request response, SoCal Edison
clarifies that every SoCal Edison distribution facility with which a
new resource seeks interconnection pursuant to the Wholesale
Distribution Access Tariff is already subject to an OATT for purposes
of making wholesale sales.\177\ Pacific Gas & Electric states that the
Commission-jurisdictional Wholesale Distribution Access Tariff is not
only the primary, but also should be the exclusive, means of
interconnecting certain distributed energy resources that wish to
export energy for purposes of participating in the wholesale
markets.\178\ It states that this is important because California's
Rule 21, a state-jurisdictional tariff, does not currently provide a
methodology to separate wholesale from retail use and
[[Page 67108]]
thus could allow bypass of retail rates for behind-the-meter
distributed energy resources that both consume and export electricity
for both retail and wholesale purposes.\179\
---------------------------------------------------------------------------
\177\ SoCal Edison Comments (2019 RM18-9) at 2.
\178\ Pacific Gas & Electric Comments (2019 RM18-9) at 4. It
states, however, that some wholesale market-participating
distributed energy resources interconnect today under California's
Rule 21, a state-jurisdictional tariff. For instance, it asserts
that Rule 21 applies to Qualifying Facilities (QF) that make net
surplus sales under California's net metering program, which are
considered qualifying sales under the Public Utilities Regulatory
Policy Act (PURPA).
\179\ Id. at 5.
---------------------------------------------------------------------------
74. Pacific Gas & Electric notes that CAISO's existing Demand
Response Provider participation model allows existing retail loads
interconnected under state-approved tariffs to participate in wholesale
markets as non-exporting Proxy Demand Response resources without the
risk of bypassing retail rates.\180\ Pacific Gas & Electric explains
that it and CAISO can avoid the risk of retail bypass by requiring any
individual distributed energy resources in a distributed energy
resource aggregation that had previously interconnected as non-
exporting resources under California's Rule 21 and that now wish to
export electricity to participate in wholesale markets to seek a new
interconnection pursuant to, or to convert their existing
interconnection to an agreement under, the Wholesale Distribution
Access Tariff. Pacific Gas & Electric states that this framework
complies with the Commission's implementation of the jurisdictional
boundaries set forth in federal law.\181\
---------------------------------------------------------------------------
\180\ Id. at 6.
\181\ Id. at app. A.
---------------------------------------------------------------------------
75. AMP asserts that some of the RTO/ISO responses erroneously
state that a distribution facility becomes Commission jurisdictional
when a wholesale sale occurs over that distribution facility. AMP
asserts that it is the wholesale transaction, not the distribution line
itself, that is subject to the Commission's jurisdiction.\182\ AMP also
notes that RTO/ISO processes should refer to local jurisdiction and
interconnection processes in addition to state processes because
decision making is often done at the local level pursuant to local
jurisdictional authority separate and distinct from state regulatory
authority.
---------------------------------------------------------------------------
\182\ AMP Comments (2019 RM18-9) at 2.
---------------------------------------------------------------------------
76. Several commenters request that the Commission revise its
interconnection policy as it applies to distributed energy
resources.\183\ Advanced Energy Economy states that the Commission
could work with relevant electric retail regulatory authorities and
distribution utilities to address interconnection requirements through
standard interconnection tariffs in those states where distributed
energy resources are not classified as QFs under PURPA \184\ and for
which no retail tariff exists.\185\
---------------------------------------------------------------------------
\183\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 19-21; Eversource Comments (2018 RM18-9) at 9-10; Icetec Comments
(2018 RM18-9) at 2-3, 11.
\184\ 16 U.S.C. 796(17)-(18), 824a-3.
\185\ Advanced Energy Economy Comments (2018 RM18-9) at 20-21
(asserting that resources in such states have no clear path to
interconnection to the distribution system and a limited ability to
participate in any wholesale distributed energy resource aggregation
program).
---------------------------------------------------------------------------
77. Eversource argues that, because the participation of
distributed energy resources in RTO/ISO markets could convert a
previously state-jurisdictional distribution facility into a
Commission-jurisdictional distribution facility and potentially
necessitate hundreds or thousands of interconnection agreement filings,
the Commission should revisit the interconnection agreement filing
criteria for distributed energy resources and develop a process that
fairly balances the administrative burden on parties with respect for
Commission and state jurisdictional lines.\186\ Icetec requests that
the Commission reinforce the traditional bright line between Commission
and state jurisdiction at the transmission-distribution boundary by
confirming that relevant electric retail regulatory authorities have
sole jurisdiction over the interconnection of resources to the
distribution system, while ensuring that that jurisdiction may not be
used to discriminatorily restrict or condition distributed energy
resource participation in RTO/ISO markets.\187\
---------------------------------------------------------------------------
\186\ Eversource Comments (2018 RM18-9) at 9-10.
\187\ Icetec Comments (2018 RM18-9) at 2-3, 11.
---------------------------------------------------------------------------
78. Advanced Energy Management requests that the Commission
recognize the clear distinction between the distribution
interconnection process and the wholesale market registration
process.\188\ Advanced Energy Management states that the Commission has
authority over the criteria for wholesale market registration and
participation, and that state and local regulators have authority over
the criteria for a non-discriminatory distribution interconnection
process that ensures that interconnecting distributed energy resources
that wish to participate in the wholesale market do not create
distribution reliability issues.\189\ According to Advanced Energy
Management, if a distributed energy resource imposes costs on the grid
when it interconnects, regardless of reason, those costs can be
recovered as interconnection costs under the authority of state
regulators.\190\
---------------------------------------------------------------------------
\188\ Advanced Energy Management Comments (2018 RM18-9) at 18;
Advanced Energy Management Comments (2019 RM18-9) at 3.
\189\ Advanced Energy Management Comments (2018 RM18-9) at 18-
19; Advanced Energy Management Comments (2019 RM18-9) at 3.
\190\ Advanced Energy Management Comments (2018 RM18-9) at 10.
---------------------------------------------------------------------------
79. Stem recommends that the Commission initiate a process to
revise distribution utilities' interconnection tariffs (e.g., the
Wholesale Distribution Access Tariffs in California) so that (1)
individual distributed energy resources, participating through an
aggregator, are not required to do more than satisfy the local
interconnection requirements in order to offer residual capability
through the RTO/ISO markets, and (2) the tariffs accommodate the
potential for coordinated dispatch of a distributed energy resource
aggregation such as including limitations on aggregated behavior due to
distribution system constraints, which would be communicated to the
RTO/ISO as a reduced size resource during registration as a market
participant.\191\ Microgrid Resource Coalition similarly asserts that a
responsive distributed energy resource needs to specify its expected
modes of operation during the interconnection process by establishing
its physical capabilities subject to any residual distribution system
constraints, which will establish the limits of its ability to provide
services to the grid.\192\
---------------------------------------------------------------------------
\191\ Stem Comments (2018 RM18-9) at 9-10, 15-16.
\192\ Microgrid Resources Coalition Comments (2018 RM18-9) at
12.
---------------------------------------------------------------------------
80. Public Interest Organizations argue that some RTO/ISO tariffs
present significant barriers to distributed energy resource
interconnection, particularly those that require individual distributed
energy resources to complete a wholesale interconnection process.\193\
Therefore, Public Interest Organizations propose that distributed
energy resource interconnection be solely under retail jurisdiction,
and that RTO/ISO purview over distributed energy resource aggregations
be limited to market rules, and where cause is shown, for transmission
system impacts.\194\
---------------------------------------------------------------------------
\193\ Public Interest Organizations Comments (2019 RM18-9) at 3.
\194\ Id. at 3-4.
---------------------------------------------------------------------------
81. Some commenters contend that PJM's interconnection processes
impose significant transaction costs on distributed energy
resources.\195\ Icetec asserts that every distributed energy resource
that wishes to participate in PJM markets, no matter how small, must go
through PJM's interconnection queue; that an individual residential
owner must file an OATT with the Commission registering the 120 volt
wiring in its house as a transmission
[[Page 67109]]
provider before a third party can apply to interconnect distributed
energy resources located behind a residential meter; and that PJM
refers most distribution-connected projects to distribution utilities
for further study, even if the resource is already interconnected and
injecting power under a distribution interconnection tariff.\196\
Icetec claims that, in contrast, distribution utilities may operate
distributed energy resources attached to their systems without going
through RTO/ISO interconnection, which creates partially discriminatory
market access by placing merchant distributed energy resource
developers at a significant disadvantage relative to incumbent
utilities.\197\ Icetec requests that the Commission require RTOs/ISOs
to accept a distributed energy resource as deliverable to the wholesale
transmission system, with further studies limited to the transmission
system, when it is properly connected to the distribution system under
an arrangement approved by the relevant electric retail regulatory
authority.\198\ Icetec also asks the Commission to both allow
distributed energy resources that deliver to the transmission system at
a bus that is primarily load-serving to participate in wholesale
markets without further transmission studies and to direct RTOs/ISOs to
file tariff revisions setting procedures and timelines for
interconnection studies carried out by distribution utilities for
interconnection of distributed energy resources intending to
participate in RTO/ISO markets.\199\
---------------------------------------------------------------------------
\195\ Icetec Comments (2018 RM18-9) at 7-9; UofD/Mensah Comments
(2019 RM18-9) at 2-5.
\196\ Icetec Comments (2018 RM18-9) at 7-8.
\197\ Id. at 8.
\198\ Id. at 8-9.
\199\ Id. at 9.
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82. UofD/Mensah similarly contend that PJM's existing processes are
unjust and unreasonable in light of barriers that they present to small
resources that interconnect under state or local jurisdiction.\200\
According to UofD/Mensah, PJM imposes a more burdensome market
participation process on resources that interconnect under state or
local jurisdiction than on resources that interconnect under Commission
jurisdiction.\201\ Specifically, they contend that PJM's Small
Generator Interconnection Procedures use screens based only on the
local distribution system rather than studies to assess safety and
reliability, require PJM to provide interconnection customers that pass
the screens an Interconnection Service Agreement within 15-20 days of
the request, and only cost $500--$5,000 depending on the circumstances.
They assert, however, that for non-jurisdictional interconnections,
each resource must wait up to six months for the queue study process to
begin and undergo a Feasibility Study and sometimes a System Impact
Study, expected to take three months each, before approval. They assert
that UofD was required to provide deposits totaling $27,000 for its 933
kW electric vehicle project, which is nine times the deposit that they
would have been charged if the interconnection was Commission
jurisdictional.
---------------------------------------------------------------------------
\200\ UofD/Mensah Comments (2019 RM18-9) at 2, 4.
\201\ Id. at 2.
---------------------------------------------------------------------------
83. UofD/Mensah therefore request that the Commission align the
RTO/ISO market participation process requirements for non-Commission-
jurisdictional interconnections with the Commission's Small Generator
Interconnection Procedures.\202\ UofD/Mensah also recommend that the
current distributed energy resource interconnection process be improved
by permitting a subset of small, behind-the-meter resources that
already have state or local interconnection approval to be
automatically approved to provide wholesale services.\203\ For those
resources not automatically approved, UofD/Mensah recommend that the
Commission limit the allowable cost and time of existing RTO/ISO
processes and allow aggregations to be studied as a group. Finally,
after correcting the non-Commission-jurisdictional interconnection
process, UofD/Mensah recommend that the Commission consider declining
to exercise its authority over the interconnection of distributed
energy resources that seek to provide wholesale services or at least
clarify the ``dual-use doctrine'' in specific cases so that developers
need not rely on RTOs/ISOs to interpret it.\204\ In response to UofD/
Mensah, PJM notes that its stakeholder process is currently considering
reforms designed to provide a ``fast-track'' avenue for processing
energy-only resources under 2 MW.\205\
---------------------------------------------------------------------------
\202\ Id. at 4-5.
\203\ Id. at 5.
\204\ Id. at 5-6.
\205\ PJM Reply Comments (2019 RM18-9) at 4.
---------------------------------------------------------------------------
84. Advanced Energy Economy asserts that the Commission does not
need to address interconnection practices in order to issue a final
rule, and suggests that, if the Commission is interested in exploring a
different approach for interconnection of distributed energy resources,
it should do so in a separate proceeding.\206\ Advanced Energy Economy
also asserts that each of the RTOs/ISOs described processes that are
generally consistent with the Commission's long-standing ``dual use''
policy.\207\
---------------------------------------------------------------------------
\206\ Advanced Energy Economy Comments (2019 RM18-9) at 1-2, 7-
8.
\207\ Id. at 2-3.
---------------------------------------------------------------------------
85. Several commenters argue that distribution interconnection
requirements should address distribution-level reliability concerns
that are raised by the interconnection of distributed energy resources
to distribution systems.\208\ Vice Chairman Place of the Pennsylvania
Public Utilities Commission argues for primacy of a distribution
utility's interconnection requirements in determining the eligibility
of distributed energy resources to participate in distributed energy
resource aggregations, and asserts that distributed energy resource
aggregations may necessitate new interconnection requirements or
study.\209\ Vice Chairman Place asserts that distribution utilities are
authorized by state regulators to protect distribution operations, and
that distributed energy resources participating in aggregations will
need to comply with state-level interconnection agreements.\210\
FirstEnergy argues that states must address the development of
distributed energy resource interconnection standards and technical
requirements, and that distribution utilities are best situated to
identify system issues that may affect ongoing reliable operations on
local systems.\211\
---------------------------------------------------------------------------
\208\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 17; PJM Comments (2018 RM18-9) at 18-19; Stem Comments (2018
RM18-9) at 15.
\209\ Vice Chairman Place Comments (2018 RM18-9) at 2.
\210\ Id. at 2-3.
\211\ FirstEnergy Comments (2019 RM18-9) at 4-5.
---------------------------------------------------------------------------
86. Several commenters argue that the RTOs/ISOs should perform some
sort of study of a distributed energy resource aggregation because
distribution-level interconnection reviews are only a reliability and
safety check for individual resources, and do not evaluate the combined
impact that an aggregation would have on the system or the impact that
the distributed energy resource will have on the system if it chooses
to participate in an aggregation.\212\ EEI, PJM Utilities Coalition,
and San Diego Gas & Electric recommend that an aggregation study be
done if a distributed energy resource joins an aggregation and if the
composition of an aggregation changes
[[Page 67110]]
after registration.\213\ TAPS agrees, and notes that, even for
distribution utilities with robust generation interconnection processes
that include rigorous modeling and studies, it may be impossible to
anticipate and fully evaluate every possible combination of loads,
resources, and distribution system configurations to determine in
advance whether potential RTO/ISO and distributed energy resource
aggregator dispatch decisions might have adverse impacts.\214\
Similarly, NRECA asserts that an interconnection agreement with the
distributed energy resource is necessary but not sufficient; NRECA
argues that distribution utilities need to be able to conduct an
integration study within a reasonable timeline that considers grid
topology, as well as to modify their interconnection procedures to
ensure third-party distributed energy resource participation in RTO/ISO
markets will not create any safety, reliability or power quality
concerns, and that implementation will conform with IEEE standards
(such as IEEE 1547).\215\ Pacific Gas & Electric concurs with the need
to modify existing processes and protocols for distribution review
requirements for assessing aggregation impacts and points to an ongoing
collaborative process underway in California that requires additional
time to complete.\216\
---------------------------------------------------------------------------
\212\ EEI Comments (2018 RM18-9) at 14-16; Organization of MISO
States Comments (2018 RM18-9) at 8-9; San Diego Gas & Electric
Comments (2018 RM18-9) at 5; SoCal Edison Comments (2018 RM18-9) at
11.
\213\ EEI Comments (2018 RM18-9) at 15-16; PJM Utilities
Coalition Comments (2018 RM18-9) at 14; San Diego Gas & Electric
Comments (2018 RM18-9) at 5.
\214\ TAPS Comments (2018 RM18-9) at 12.
\215\ NRECA Comments (2018 RM18-9) at 29, 30.
\216\ Pacific Gas & Electric Comments (2018 RM18-9) at 14-15,
18.
---------------------------------------------------------------------------
87. On the other hand, several commenters raise concerns about the
use of distribution interconnection processes to limit participation of
distributed energy resources in wholesale markets. Advanced Energy
Economy argues that the distribution interconnection process should not
be used as a lever to unduly limit participation in wholesale
markets.\217\ Similarly, Stem asserts that the Commission must prevent
a distribution utility from imposing discriminatory state-level
interconnection requirements that are intended to foreclose distributed
energy resources from participating in the RTO/ISO markets.\218\ Stem
asserts that, for instance, the Commission should not allow the
distribution utilities to effectively veto distributed energy resource
participation in wholesale markets by unreasonably delaying necessary
updates to interconnection tariffs.\219\ Advanced Energy Management and
Icetec agree that distributed energy resources should comply with
distribution interconnection requirements, but argue that the exercise
of state and local regulatory and distribution utility authority should
occur prior to a distributed energy resource's registration in an RTO/
ISO.\220\ Specifically, they argue that state and local regulatory
authorities and distribution utilities should define non-discriminatory
interconnection procedures that ensure the distribution grid can
accommodate distributed energy resources.\221\ NRG argues that
distributed energy resources should only be required to have one
interconnection study and should not be subject to additional review,
noting that collaboration on transmission and distribution impact
studies may be necessary, and that NYISO, PJM, and CAISO are already
engaged in some form of collaboration with distribution utilities on
these matters.\222\
---------------------------------------------------------------------------
\217\ Advanced Energy Economy Comments (2018 RM18-9) at 18.
\218\ Stem Comments (2018 RM18-9) at 15.
\219\ Id. at 16.
\220\ Advanced Energy Management Comments (2018 RM18-9) at 18;
Icetec Comments (2018 RM18-9) at 18.
\221\ Advanced Energy Management Comments (2018 RM18-9) at 18;
Icetec Comments (2018 RM18-9) at 18-19.
\222\ NRG Comments (2018 RM18-9) at 8-9.
---------------------------------------------------------------------------
88. Several commenters argue that the relevant electric retail
regulatory authorities must have discretion to allocate any
distribution system-related costs incurred by utilities as a result of
distributed energy resource participation in RTO/ISO markets.\223\ Some
commenters warn that, without proper cost allocation methods, retail
customers effectively would be subsidizing wholesale market
participation.\224\ EEI argues that distribution utilities should not
have to absorb any stranded costs if they invest in upgrades needed for
distributed energy resource aggregation that are ultimately not
utilized.\225\ APPA and EEI argue that there is little evidence of
significant demand for distributed energy resource aggregation
programs, and so distribution utilities may have to invest in upgrades
to the distribution system that are ultimately never needed.\226\ The
Indiana Commission asserts that distribution utilities may have to
procure additional capacity to account for uncertainty in their
forecasts regarding the amount of future distributed generation
available to them.\227\
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\223\ Vice Chairman Place Comments (2018 RM18-9) at 3; APPA
Comments (2018 RM18-9) at 21; EEI Comments (2018 RM18-9) at 20; New
Jersey Board Comments (2018 RM18-9) at 4.
\224\ APPA Comments (2018 RM18-9) at 10; Indiana Commission
Comments (2018 RM18-9) at 8; NRECA Comments (2018 RM18-9) at 12.
\225\ EEI Comments (2018 RM18-9) at 20.
\226\ APPA Comments (2018 RM18-9) at 10-12; EEI Comments (2018
RM18-9) at 21.
\227\ Indiana Commission Comments (2018 RM18-9) at 8.
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89. Other commenters argue that any cost allocation associated with
a distributed energy resource aggregator participating in RTO/ISO
markets would fall under the Commission's jurisdiction because the
aggregator would be acting as a wholesale entity engaged in a
Commission-jurisdictional transaction.\228\ Hence, a few commenters
suggest that, to the extent a distribution utility incurs additional
costs to provide service to distributed energy resource aggregations,
those costs should be recovered through a wholesale distribution tariff
filed with the Commission.\229\ NRECA asserts that the impact of a
distributed energy resource or distributed energy resource aggregation
interconnection on a host distribution utility must be considered in
the interconnection process, whether under RTO/ISO procedures or state-
jurisdictional procedures.\230\ NRECA notes that to do so will require
that cooperatives in RTO/ISO regions develop new distributed energy
resource interconnection agreements and procedures.\231\
---------------------------------------------------------------------------
\228\ Icetec Comments (2018 RM18-9) at 12 (citing PJM
Interconnection, LLC, 149 FERC ] 61,185, order on reh'g, 151 FERC ]
61,231); SoCal Edison Comments (2018 RM18-9) at 6 (citing Detroit
Edison Co., 334 F.3d 48 (D.C. Cir. 2003)).
\229\ Advanced Energy Economy Comments (2018 RM18-9) at 18
(citing Order No. 841, 162 FERC ] 61,127 at P 301); Icetec Comments
(2018 RM18-9) at 12; Stem Comments (2018 RM18-9) at 3.
\230\ NRECA Comments (2019 RM18-9) at 6-7.
\231\ Id. at 7.
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b. Commission Determination
90. For the reasons discussed below, we decline to exercise our
jurisdiction over the interconnections of distributed energy resources
to distribution facilities for the purpose of participating in RTO/ISO
markets exclusively as part of a distributed energy resource
aggregation. Thus, we will not require standard interconnection
procedures and agreements or wholesale distribution tariffs for such
interconnections.
91. In Order Nos. 2003 and 2006, the Commission first adopted
standard interconnection procedures and agreements that apply when an
interconnection customer ``that plans to engage in a sale for resale in
interstate commerce or to transmit electric energy
[[Page 67111]]
in interstate commerce'' \232\ requests interconnection to the
facilities of a public utility's Transmission System \233\ or
Distribution System \234\ that, at the time that the interconnection is
requested, are used either to transmit electric energy in interstate
commerce or to sell electric energy at wholesale in interstate commerce
pursuant to a Commission-filed OATT.\235\ The Commission recognized
that ``some [lower-voltage facilities] are used for jurisdictional
service such as carrying power to a wholesale power customer for resale
and are included in a public utility's OATT,'' and that ``in some
instances, there is a separate OATT rate for using them, sometimes
called a Wholesale Distribution Rate.'' \236\ The Commission also noted
that, with respect to a Commission-jurisdictional interconnection to a
distribution facility, the cost of upgrades needed on the Distribution
System to accommodate the interconnection must be directly assigned to
the interconnection customer because an upgrade to the Distribution
System generally does not benefit all transmission customers.\237\ In
Order No. 2003-C, the Commission concluded that, while it does not have
the authority to directly regulate a ``local distribution'' facility
that is used to transmit energy being sold at wholesale, ``the
Commission may regulate the entire transmission component (rates, terms
and conditions) of the wholesale transaction.'' \238\
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\232\ Order No. 2003, 104 FERC ] 61,103 at P 804; see also Order
No. 845, 163 FERC ] 61,043.
\233\ The Commission defined ``Transmission System'' as ``[t]he
facilities owned, controlled or operated by the Transmission
Provider or the Transmission Owner that are used to provide
transmission service under the Tariff.'' Order No. 2006, 111 FERC ]
61,220 at P 6.
\234\ The Commission defined ``Distribution System'' as ``[t]he
Transmission Provider's facilities and equipment used to transmit
electricity to ultimate usage points such as homes and industries
directly from nearby generators or from interchanges with higher
voltage transmission networks which transport bulk power over longer
distances. The voltage levels at which Distribution Systems operate
differ among areas.'' Id. P 7.
\235\ Order No. 2003, 104 FERC ] 61,103 at P 804; see Order No.
2006, 111 FERC ] 61,220 at P 5; see also Order No. 845, 163 FERC ]
61,043.
\236\ Order No. 2003, 104 FERC ] 61,103 at P 803; see also Order
No. 845, 163 FERC ] 61,043.
\237\ Order No. 2003, 104 FERC ] 61,103 at P 697; see also Order
No. 845, 163 FERC ] 61,043.
\238\ Order No. 2003-C, 111 FERC ] 61,401 at P 53; see also
Order No. 845, 163 FERC ] 61,043.
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92. In practice, Order Nos. 2003 and 2006 established what some
RTOs/ISOs have labeled the ``first use'' test, under which the first
interconnection to a distribution facility for the purpose of making
wholesale sales is not subject to Commission jurisdiction. This is
because, at the time of the request, the distribution facility is not
used to transmit electric energy in interstate commerce or subject to
wholesale open access under an OATT. Therefore, the first
interconnecting resource ``that plans to engage in a sale for resale in
interstate commerce or to transmit electric energy in interstate
commerce'' \239\ on a distribution facility is not required to use the
transmission provider's Commission-jurisdictional Generator
Interconnection Procedures or obtain a Commission-jurisdictional
Generator Interconnection Agreement.\240\ As a result, such
interconnections are governed by the applicable state or local law.
---------------------------------------------------------------------------
\239\ Order No. 2003, 104 FERC ] 61,103 at P 804; see also Order
No. 845, 163 FERC ] 61,043.
\240\ See Order No. 2003-C, 111 FERC ] 61,401 at P 53; Order No.
2006, 111 FERC ] 61,220 at P 7; Order No. 845, 163 FERC ] 61,043;
see also PJM Interconnection, L.L.C., 114 FERC ] 61,191, at P 14,
order on reh'g, 116 FERC ] 61,102 (2006).
---------------------------------------------------------------------------
93. However, under the ``first use'' test, subsequent
interconnections of resources to the same distribution facility for the
purpose of engaging in wholesale sales or transmission in interstate
commerce are subject to Commission jurisdiction because the
distribution facilities are already being used to facilitate wholesale
transactions and therefore are subject to an OATT. Thus, any subsequent
resources interconnecting to the same distribution facility for
Commission-jurisdictional purposes (e.g., to make wholesale sales in
interstate commerce) must use the Commission-jurisdictional Generator
Interconnection Procedures and Generator Interconnection Agreement
established in Order Nos. 2003 and 2006 and later amended in Order No.
845. The United States Court of Appeals for the District of Columbia
Circuit upheld this jurisdictional application as consistent with the
FPA.\241\
---------------------------------------------------------------------------
\241\ See Nat'l Ass'n of Regulatory Util. Comm'rs v. FERC, 475
F.3d at 1280-82 (``By establishing standard agreements FERC has
exercised its jurisdiction over the terms of those relationships.'')
(citing Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667,
696 (D.C. Cir. 2000) (``FPA [section] 201 makes clear that all
aspects of wholesale sales are subject to federal regulation,
regardless of the facilities used.'')).
---------------------------------------------------------------------------
94. The Commission adopted this limited jurisdictional approach to
avoid ``allow[ing] a potential wholesale seller to cause the
involuntary conversion of a facility previously used exclusively for
state jurisdictional interconnections and delivery, and subject to the
exclusive jurisdiction of the state, into a facility also subject to
the Commission's interconnection jurisdiction,'' believing that this
outcome would cross the jurisdictional line established by
Congress.\242\ Nevertheless, the Commission anticipated that its
standard interconnection procedures and agreement terms would rarely
apply to distributed generation: ``We recognize that Order No. 2003
does not apply to most distributed generation, since these facilities
almost always interconnect to facilities that are not subject to an
OATT.'' \243\
---------------------------------------------------------------------------
\242\ Order No. 2003-C, 111 FERC ] 61,401 at P 51; see also
Order No. 845, 163 FERC ] 61,043.
\243\ Order No. 2003-A, 106 FERC ] 61,220 at P 739; see also
Order No. 2006, 111 FERC ] 61,220 at P 8 (``Because of the limited
applicability of this Final Rule, and because the majority of small
generators interconnect with facilities that are not subject to an
OATT, this Final Rule will not apply to most small generator
interconnections.''); Order No. 845, 163 FERC ] 61,043.
---------------------------------------------------------------------------
95. We agree with commenters that the integration of distributed
energy resource aggregations into the RTO/ISO markets warrants our
addressing the application of the Commission's interconnection policy
to the distributed energy resource aggregations enabled by this final
rule. As the Commission recognized in Order No. 792, renewable
portfolio standards, state policies promoting distributed generation,
and decreases in capital costs have driven a substantial increase in
small generator interconnection requests.\244\ In the intervening
years, those trends have only intensified, further stimulating
distributed energy resource development.\245\ We anticipate that
increased participation of distributed energy resources in RTO/ISO
markets via distributed energy resource aggregations will substantially
increase the number of distributed energy resource interconnections to
distribution facilities for the purpose of engaging in wholesale
transactions and/or transmission in interstate commerce. Such growth
could increase the number of distribution-level interconnections
subject to the Commission's jurisdiction. As Public Interest
Organizations suggest, a large influx of distribution-level
interconnections could create uncertainty as to whether certain
interconnections are subject to Commission jurisdiction or state/local
jurisdiction, and whether they would require the use of the
Commission's
[[Page 67112]]
standard interconnection procedures and agreement.\246\ It could
additionally burden RTOs/ISOs with an overwhelming volume of
interconnection requests.\247\
---------------------------------------------------------------------------
\244\ Small Generator Interconnection Agreements & Procedures,
Order No. 792, 145 FERC ] 61,159, at P 23 (2013), as modified,
errata notice, 146 FERC ] 61,019, as modified, errata notice, 148
FERC ] 61,215, clarified, Order No. 792-A, 146 FERC ] 61,214 (2014).
\245\ See Public Interest Organizations Comments (2019 RM18-9)
at 6-7. See also EIA, August 2019 Monthly Energy Review at Figure
7.2a, https://www.eia.gov/totalenergy/data/monthly; Office of Energy
Projects, Energy Infrastructure Update For July2019 at 4 (July
2019), https://www.ferc.gov/legal/staff-reports/2019/july-energy-infrastructure.pdf).
\246\ Public Interest Organizations Comments (2019 RM18-9) at 9.
\247\ Id. at 5.
---------------------------------------------------------------------------
96. Given these concerns and the confluence of local, state, and
federal authority over distributed energy resource interconnections, in
this final rule, we decline to exercise jurisdiction over the
interconnections of distributed energy resources to distribution
facilities for those distributed energy resources that seek to
participate in RTO/ISO markets exclusively as part of a distributed
energy resource aggregation. We do not believe that requiring standard
interconnection procedures and agreement terms for these
interconnections is necessary to advance the objectives of Order Nos.
2003, 2006 and 845, which established standard interconnection
procedures and agreements in order to prevent undue discrimination,
preserve reliability, increase energy supply, lower wholesale prices
for customers by increasing the number and types of new generation that
would compete in the wholesale electricity market, reduce
interconnection time and costs, and facilitate development of non-
polluting alternative energy sources.\248\ Rather, we agree with
commenters that state and local authorities, which have traditionally
regulated distributed energy resource interconnections, have the
requisite experience, interest, and capacity to oversee these
distribution-level interconnections.
---------------------------------------------------------------------------
\248\ See Order No. 2003, 104 FERC ] 61,103 at P 1; Order No.
2006, 111 FERC ] 61,220 at P 1; Order No. 845, 163 FERC ] 61,043;
see also New York v. FERC, 535 U.S. 1, 26-27 (2002) (upholding the
Commission's discretion to issue a tailored remedy where ``the
remedy it ordered constituted a sufficient response to the problems
. . . identified in the wholesale market''). In issuing Order Nos.
2003 and 2006, the Commission acknowledged that their requirements
would rarely apply to the interconnections of distributed energy
resources. See Order No. 2003-A, 106 FERC ] 61,220 at P 739; Order
No. 2006, 111 FERC ] 61,220 at P 8; Order No. 845, 163 FERC ]
61,043.
---------------------------------------------------------------------------
97. Because we decline here to exercise our jurisdiction over the
interconnection of a distributed energy resource to a distribution
facility for the purpose of participating in RTO/ISO markets
exclusively through a distributed energy resource aggregation, the
interconnection of such a resource for the purpose of participating in
a distributed energy resource aggregation would not constitute a first
interconnection for the purpose of making wholesale sales under the
``first use'' test. As such, only a distributed energy resource
requesting interconnection to the distribution facility for the purpose
of directly engaging in wholesale transactions (i.e., not through a
distributed energy resource aggregation) would create a ``first use''
and any subsequent distributed energy resource interconnecting for the
purpose of directly engaging in wholesale transactions would be
considered a Commission-jurisdictional interconnection. We believe that
this approach will minimize any increase in the number of distribution-
level interconnections subject to the Commission's jurisdiction that
this final rule may cause.
98. This final rule does not require any changes to the pro forma
Generator Interconnection Procedures or Generator Interconnection
Agreements. To the extent that the jurisdictional conditions described
in Order Nos. 2003 and 2006 are met, those standard interconnection
procedures and agreement terms originally established in Order Nos.
2003 and 2006 and later amended by Order No. 845 will continue to apply
to the interconnections of distributed energy resources that
participate in RTO/ISO markets individually, independent of a
distributed energy resource aggregation. This final rule also does not
revise the Commission's jurisdictional approach to the interconnections
of QFs that participate in distributed energy resource
aggregations.\249\
---------------------------------------------------------------------------
\249\ See Order No. 2003, 104 FERC ] 61,103 at PP 813-815; Order
No. 2006, 111 FERC ] 61,220 at PP 516-518; Order No. 845, 163 FERC ]
61,043.
---------------------------------------------------------------------------
99. With respect to arguments that distributed energy resources
should only be required to have one interconnection study--at the
distribution interconnection stage--and should not be subject to
additional review in connection with the possibility of RTO/ISO market
participation, and competing arguments that both distribution
interconnection studies and separate distributed energy resource
aggregation studies are needed when distributed energy resources join
an aggregation, we believe that there could be different approaches to
this issue that would work in appropriate circumstances. We therefore
decline to create new universal requirements or initiate a process to
standardize tariffs with respect to these matters at this time. In
response to increased demand for distributed energy resource
aggregations for wholesale market participation, some state or local
authorities may choose to voluntarily update their distribution
interconnection processes to assess the impacts of distributed energy
resource aggregations on the distribution system at the initial
interconnection stage, while other state and local authorities may not.
In the latter scenario, it may be both necessary and appropriate for
the RTO/ISO, in coordination with affected distribution utilities, to
conduct separate studies of the impact on the distribution system after
a distributed energy resource joins a distributed energy resource
aggregation. Moreover, as the individual distributed energy resources
in an aggregation may change over time,\250\ we cannot discount the
possibility that the electrical characteristics of the aggregation will
change significantly enough to require restudy. In practice, we expect
that modifications to the list of resources in a distributed energy
resource aggregation could occasionally indicate changes to the
electrical characteristics of the distributed energy resource
aggregation that are significant enough to potentially adversely impact
the reliability of the distribution or transmission systems and justify
restudy of the full distributed energy resource aggregation; therefore,
RTOs/ISOs and distribution utilities may perform such aggregation
restudies if necessary. Similarly, while the interconnections of
distributed energy resources seeking to participate in RTO/ISO markets
as part of a distributed energy resource aggregation would be subject
to state or local interconnection procedures, we believe that
coordination between RTOs/ISOs and distribution utilities, as discussed
in Section IV.H below, should ensure that RTOs/ISOs have the
information that they need to study the impact of the aggregations on
the transmission system. In general, where needed, such studies of the
impact of an aggregation as a whole on the transmission system should
be the only aggregation-related studies that the RTO/ISO needs to
undertake.\251\
---------------------------------------------------------------------------
\250\ See infra Section IV.I (Modifications to List of Resources
in Aggregation).
\251\ However, as explained earlier, RTOs/ISOs may still need to
study individually those distributed energy resources intending to
individually participate in RTO/ISO markets rather than through
aggregations.
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100. In response to the comments of Advanced Energy Economy, we
decline to require standard interconnection tariffs in those states
where no retail tariff exists for distributed energy resources that are
not QFs under PURPA. We believe that such a situation should be
addressed at the state level, as discussed above.
101. While some commenters raise concerns that declining to create
new
[[Page 67113]]
universal distribution interconnection requirements or initiate a
process to standardize distribution interconnection tariffs could
result in uncertainty and delay, or could be used to unduly limit
participation of distributed energy resource aggregations in wholesale
markets, we believe that such concerns are speculative at this time. In
this regard, we note that, while we are herein declining to exercise
jurisdiction over the interconnections of distributed energy resources
to distribution facilities for the purpose of participating in
distributed energy resource aggregations, the Commission may revisit
this policy decision in the future, should we discover abuses of the
distribution interconnection process or the rise of unnecessary
barriers to the participation of distributed energy resource
aggregations in RTO/ISO markets.
102. With respect to the related arguments that the distribution
interconnection process and the distributed energy resource aggregation
registration process are separate but require coordination, we agree,
and believe that the coordination requirements discussed in Section
IV.H of this final rule appropriately address this need.
103. Although we find it appropriate to decline to exercise
jurisdiction over the interconnections of distributed energy resources
intending to participate in RTO/ISO markets exclusively through a
distributed energy resource aggregation, we recognize that such
distributed energy resources may already have interconnected pursuant
to procedures that were accepted by the Commission prior to the
effective date of this final rule. Therefore, to minimize disruption to
existing interconnection agreements for distributed energy resources,
we are not requiring distributed energy resources that already
interconnected under Commission-jurisdictional procedures to convert to
state or local interconnection agreements.
104. Accordingly, in its compliance filing, we require each RTO/ISO
to make any necessary tariff changes to reflect the guidance above.
B. Definitions of Distributed Energy Resource and Distributed Energy
Resource Aggregator
1. NOPR Proposal
105. In the NOPR, the Commission proposed to define a distributed
energy resource as ``a source or sink of power that is located on the
distribution system, any subsystem thereof, or behind a customer
meter.'' \252\ The Commission added that these resources may include,
but are not limited to, electric storage resources, distributed
generation, thermal storage, and electric vehicles and their supply
equipment. The Commission proposed to define a distributed energy
resource aggregator as ``an entity that aggregates one or more
distributed energy resources for purposes of participation in the
capacity, energy and ancillary service markets of the regional
transmission operators and independent system operators.'' \253\
---------------------------------------------------------------------------
\252\ NOPR, 157 FERC ] 61,121 at PP 1 n.2, 104.
\253\ Id. P 5 n.13.
---------------------------------------------------------------------------
2. Comments
106. Several commenters raise concerns with the proposed definition
of distributed energy resource. EEI suggests that the Commission use a
term besides ``source or sink of power'' to reflect the Commission's
desire to include all electric devices that can produce or consume
energy because a source or sink is a location and not a resource.\254\
AES Companies, MISO Transmission Owners, and NYISO Indicated
Transmission Owners seek clarification whether the definition of
distributed energy resources includes resources that are behind and in
front of the meter. AES Companies explain that it is not out of the
ordinary for resources such as solar or batteries to be interconnected
at the distribution system but not behind the meter, and NYISO
Indicated Transmission Owners state that aggregations of front-of-the-
meter distributed energy resources should be able to elect to
participate in wholesale markets as part of a distributed energy
resource aggregation.\255\
---------------------------------------------------------------------------
\254\ EEI Comments (RM16-23) at 16 n.23.
\255\ AES Companies Comments (RM16-23) at 40-41; NYISO Indicated
Transmission Owners Comments (RM16-23) at 13.
---------------------------------------------------------------------------
107. NYISO Indicated Transmission Owners caution that, while a
general definition of a distributed energy resource is appropriate,
rules for elective participation in RTO/ISO markets may still require
individual classifications for types of distributed energy resources
because differences in their capabilities may warrant specific
operational, reliability, and compensation considerations.\256\ NYISO
points out that it has a broader definition of distributed energy
resource than that proposed in the NOPR and therefore asks the
Commission to permit regional flexibility to allow NYISO to fashion
rules and market designs that meet its needs while still achieving the
Commission's goal of integrating distributed energy resources into the
wholesale markets.\257\ NYISO notes that it has also proposed to allow
small aggregations of community distributed generation to provide
wholesale market services as distributed energy resources.\258\ NRG
encourages the Commission to direct the RTOs/ISOs to use a definition
of distributed energy resources based on technology-neutral principles,
including the capability to provide load curtailment, load consumption
or charging, injection, and ancillary services (e.g., regulation,
reserves, and flexible ramping services).\259\ According to NRG,
regulatory authorities may differ in their definition of distributed
energy resources, but generally reference their ability to ``generate
and inject power into the distribution and/or transmission systems.''
Thus, NRG states, distributed energy resources should be defined as a
class of assets that can both inject and curtail electricity.\260\
---------------------------------------------------------------------------
\256\ NYISO Indicated Transmission Owner Comments (RM16-23) at
15.
\257\ NYISO Comments (RM16-23) at 11 (stating it defines
distributed energy resource as ``a resource, or a set of resources,
typically located on an end-use customer's premises that can provide
wholesale market services but are usually operated for the purpose
of supplying the customer's electric load''). We note that, on
January 23, 2020, the Commission accepted NYISO's proposed tariff
revisions related to aggregations, including its proposal to define
Distributed Energy Resource as: (i) A facility comprising two or
more Resource types behind a single point of interconnection with an
Injection Limit of 20 MW or less; or (ii) a Demand Side Resource; or
(iii) a Generator with an Injection Limit of 20 MW or less, that is
electrically located in the [New York Control Area]. NYISO
Aggregation Order, 170 FERC ] 61,033; see NYISO, NYISO Tariffs,
NYISO MST, Section 2.4 MST Definitions--D (15.0.0).
\258\ NYISO Comments (RM16-23) at 11.
\259\ NRG Comments (2018 RM18-9) at 3.
\260\ Id. at 5-6.
---------------------------------------------------------------------------
108. EEI asks the Commission to clarify the types of distributed
energy resources that qualify as ``thermal storage,'' noting that if
the thermal energy cannot be readily transformed into electric energy,
then the storage device cannot be used as an electric resource.\261\
Public Interest Organizations seek clarification that thermal storage
includes, but is not limited to, both grid-enabled water heaters and
grid-enabled thermostats, which can precool or preheat to avoid energy
usage during peak demand, make and store ice to use as air
conditioning, and direct control of smart-home energy management.\262\
---------------------------------------------------------------------------
\261\ EEI Comments (RM16-23) at 16 n.23.
\262\ Public Interest Organizations Comments (RM16-23) at 15-16
& nn.45-46.
---------------------------------------------------------------------------
109. Some commenters seek to capture a broad range of distributed
[[Page 67114]]
energy resources in the definition. Advanced Energy Economy asks the
Commission to revise the definition to explicitly include energy
efficiency and demand response resources of all types as well as
``customer site[s] capable of demand reduction.'' \263\ Other
commenters also request or support including energy efficiency
resources in the definition of distributed energy resource.\264\ NYISO
Indicated Transmission Owners request clarification that intermittent
generation may be considered a distributed energy resource, which can
be aggregated into dispatchable distributed energy resource
aggregations.\265\ They add that certain behind-the-meter intermittent
generation may not be a distributed energy resource if it participates
in a distribution utility's net metering or other program regarding
which the Commission has clarified that the resource is not engaging in
a wholesale sale for jurisdictional purposes.\266\
---------------------------------------------------------------------------
\263\ Advanced Energy Economy Comments (RM16-23) at 21.
\264\ E4TheFuture Comments (RM16-23) at 1; Efficient Holdings
Comments (RM16-23) at 6-7; Public Interest Organizations Comments
(RM16-23) at 15-16.
\265\ NYISO Indicated Transmission Owners Comments (RM16-23) at
15.
\266\ Id. at n.17.
---------------------------------------------------------------------------
110. Advanced Energy Management requests that the Commission
clarify that its definition of distributed energy resources includes
demand response resources, or that demand response resources can choose
to participate in distributed energy resource participation models
where they are a better fit.\267\
---------------------------------------------------------------------------
\267\ Advanced Energy Management Comments (RM16-23) at 8-10.
---------------------------------------------------------------------------
111. Commenters ask for assurance that the NOPR does not change
existing demand response rules, and that resources currently
participating as demand response could continue to do so, even if they
would fall under the definition of a distributed energy resource.\268\
They note that certain reforms may drive existing, low-cost commercial
and industrial demand response from the market.\269\ Advanced Energy
Management argues that the NOPR may be more applicable to newer forms
of distributed energy resources that currently are not accommodated by
a demand response model and that the demand response model should not
be changed.\270\
---------------------------------------------------------------------------
\268\ Advanced Energy Economy Comments (RM16-23) at 50-51
(noting that existing market rules recognize a distinction between
demand response and distributed energy resource aggregations, such
as in CAISO, where there are separate programs for exporting
distributed energy resources and non-exporting distributed energy
resources that operate as demand response); Advanced Energy
Management Comments (RM16-23) at 6 (noting specifically the reforms
in Section III.B.4 of the NOPR for distributed energy resource
aggregators as it applies to commercial and industrial demand
response); IRC Comments (RM16-23) at 7; PJM Comments (RM16-23) at 6.
\269\ Advanced Energy Management Comments (RM16-23) at 7.
\270\ Id. at 6-8.
---------------------------------------------------------------------------
112. PJM, however, states that it does not view energy efficiency
or load curtailment as distributed energy resources, based upon PJM's
distinction between its existing and robust participation models for
energy efficiency and demand response.\271\ To limit disruption to its
models, PJM distinguishes distributed energy resources by limiting them
to generation and electric storage resources capable of injecting
energy onto the distribution system.\272\
---------------------------------------------------------------------------
\271\ PJM Comments (2018 RM18-9) at 1.
\272\ Id. at 2.
---------------------------------------------------------------------------
113. A few commenters discuss the definition of a distributed
energy resource aggregator. E4TheFuture supports the Commission's
proposal to require each RTO/ISO to revise its tariff to define
distributed energy resource aggregators as a type of market
participant.\273\ Efficient Holdings asks the Commission to create a
universal and comprehensive market participant definition for
distributed energy resource aggregators that would be flexible enough
to incorporate emerging technologies and provide these resources the
same ability to offer multiple products afforded to large scale
generators.\274\ MISO Transmission Owners also assert that the term
``distributed energy resource aggregator'' should be formally defined;
in addition, they ask whether that term is inclusive of behind- and
front-of-the-meter products and whether a utility could bid its
existing demand response peak shaving assets into the market as a
distributed energy resource aggregator.\275\ Advanced Energy Management
requests clarification on the distinction between demand response and
distributed energy resource aggregators, arguing that the former should
consist of behind-the-meter resources that participate only in the
demand response framework, while the latter could be either behind- or
front-of-the-meter resources and participate in any model.\276\
---------------------------------------------------------------------------
\273\ E4TheFuture Comments (RM16-23) at 2.
\274\ Efficient Holdings Comments (RM16-23) at 7.
\275\ MISO Transmission Owners Comments (RM16-23) at 17-18.
\276\ Advanced Energy Management Comments (RM16-23) at 6.
---------------------------------------------------------------------------
3. Commission Determination
114. Upon consideration of the comments received, we modify the
definition of distributed energy resource proposed in the NOPR.
Specifically, we amend Sec. 35.28(b) of the Commission's regulations
to define a distributed energy resource as ``any resource located on
the distribution system, any subsystem thereof or behind a customer
meter.'' These resources may include, but are not limited to, resources
that are in front of and behind the customer meter, electric storage
resources, intermittent generation, distributed generation, demand
response, energy efficiency, thermal storage, and electric vehicles and
their supply equipment--as long as such a resource is ``located on the
distribution system, any subsystem thereof or behind a customer
meter.'' \277\ The revised definition of distributed energy resource
that we adopt in this final rule is technology-neutral, thereby
ensuring that any resource that is technically capable of providing
wholesale services through aggregation is eligible to do so, which
enhances competition in the RTO/ISO markets and, in turn, helps to
ensure that these markets produce just and reasonable rates.\278\
---------------------------------------------------------------------------
\277\ As discussed further in Section IV.C.2 below, we find that
RTOs/ISOs may not prohibit any particular type of distributed energy
resource technology from participating in distributed energy
resource aggregations. We note that the types of thermal storage
described by EEI and Public Interest Organizations may qualify as
demand response or energy efficiency resources under RTO/ISO market
rules.
\278\ See infra Section IV.C.2 (Types of Technologies).
---------------------------------------------------------------------------
115. In response to Advanced Energy Economy's request, we clarify
that energy efficiency and demand response resources are capable of
providing demand reductions at customer sites, and therefore ``customer
sites capable of demand reduction'' may meet the definition of a
distributed energy resource.\279\ In response to requests for regional
flexibility, we further note that RTOs/ISOs can propose their own
definitions for the Commission's evaluation as long as the scope and
applicability of the proposed definitions are consistent with the
Commission's definition of distributed energy resource and consistent
with all aspects of this final rule.
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\279\ See Advanced Energy Economy Comments (RM16-23) at 21.
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116. We find that the NOPR proposal to define a distributed energy
resource as a source or sink of power risked creating unnecessary
confusion because it was not clear as to which resources could qualify
and the definition inadvertently excluded some resources
[[Page 67115]]
that could be aggregated to sell energy, capacity, or ancillary
services. The revised definition of distributed energy resource is
intended to be broad enough to encompass current and future
technologies that qualify as distributed energy resources with no
further need to clarify or revise the definition as new technologies
are developed.
117. As discussed further below in Sections IV.C, IV.F, and IV.H,
we clarify that distributed energy resource aggregations must be able
to meet the qualification and performance requirements to provide the
service that they are offering into RTO/ISO markets. For example,
because a type of resource like energy efficiency cannot be dispatched,
metered, or telemetered, it would likely be impossible for distributed
energy resource aggregations comprised exclusively of energy efficiency
resources to be able to provide energy or ancillary services to the
RTOs/ISOs because the aggregation would not be technically capable of
providing those services.
118. We also adopt a modified definition of distributed energy
resource aggregator than was proposed in the NOPR, and therefore amend
Sec. 35.28(b) of the Commission's regulations to define a distributed
energy resource aggregator as ``the entity that aggregates one or more
distributed energy resources for purposes of participation in the
capacity, energy and/or ancillary service markets of the regional
transmission organizations and/or independent system operators.'' \280\
We clarify that, because demand response falls under the definition of
distributed energy resource, an aggregator of demand response could
participate as a distributed energy resource aggregator. However, this
final rule does not affect existing demand response rules.
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\280\ As discussed further in Section IV.C.6, consistent with
Order No. 719, we require each RTO/ISO to allow a single qualifying
distributed energy resource to serve as its own distributed energy
resource aggregator. See Order No. 719, 125 FERC ] 61,071 at P
158(d) (``An [aggregator of retail customers] can bid demand
response either on behalf of only one retail customer or multiple
retail customers.'').
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C. Eligibility To Participate in RTO/ISO Markets Through a Distributed
Energy Resource Aggregator
1. Participation Model
a. NOPR Proposal
119. In the NOPR, the Commission proposed to require each RTO/ISO
to revise its tariff as necessary to allow distributed energy resource
aggregators to offer to sell capacity, energy, and ancillary services
in RTO/ISO markets.\281\ Specifically, the Commission proposed to
require that each RTO/ISO revise its tariff to define distributed
energy resource aggregators as a type of market participant that can
participate in RTO/ISO markets under the participation model that best
accommodates the physical and operational characteristics of its
distributed energy resource aggregation. The Commission explained that
this means that the distributed energy resource aggregator would
register as, for example, a generation asset if that is the
participation model that best reflects its physical
characteristics.\282\ The Commission stated that, while it expects
efficiencies to be gained by allowing distributed energy resource
aggregations to participate under existing participation models, it
also acknowledges that the use of existing participation models may not
be possible in every RTO/ISO based on how market participation is
structured. However, the Commission emphasized that, where
participation under existing participation models is possible, the
distributed energy resource aggregation must still satisfy the
eligibility requirements of the applicable participation model before
it can participate in RTO/ISO markets under that participation model.
Therefore, to accommodate the participation of distributed energy
resource aggregations, the Commission proposed that each RTO/ISO modify
the eligibility requirements for existing participation models as
necessary to allow for such participation.
---------------------------------------------------------------------------
\281\ NOPR, 157 FERC ] 61,121 at P 124.
\282\ Id. P 128.
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b. Comments
120. Several commenters assert that a new participation model for
distributed energy resource aggregations is necessary.\283\ The Ohio
Commission, Tesla/SolarCity, and Public Interest Organizations support
the Commission's efforts to require each RTO/ISO to modify its tariff
to provide a participation model for distributed energy resource
aggregators.\284\ AES Companies explain that a new and separate
participation model is necessary to facilitate market participation of
distributed energy resource aggregations due to their unique impacts on
the bulk electric system and state-jurisdictional considerations.\285\
Stem also asserts that each RTO/ISO needs to implement a model that
accommodates behind-the-meter exporting resources or, if that is
impractical, to implement a model in which behind-the-meter non-
exporting resources can fully participate.\286\ Microgrid Resources
Coalition notes its support for allowing aggregations of behind-the-
meter distributed energy resources to participate fully and notes that
it is important to allow for the participation of distributed energy
resources that have flexible controllable output.\287\
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\283\ See, e.g., Microsoft Comments (2018 RM18-9) at 15; NRG
Comments (2018 RM18-9) at 4.
\284\ Ohio Commission Comments (RM16-23) at 4; Public Interest
Organizations Comments (RM16-23) at 21; Tesla/SolarCity Comments
(RM16-23) at 20.
\285\ AES Companies Comments (RM16-23) at 32 (noting that,
because the proposed definition of a distributed energy resource
aggregation includes resources that are both a source and a sink,
the aggregation can be a distributed generation entity or a micro
grid (includes generation, load, and distribution lines)).
\286\ Stem Comments (RM16-23) at 12-13.
\287\ Microgrid Resources Coalition Comments (2018 RM18-9) at 3,
4-5.
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121. Commenters offer a range of views regarding how distributed
energy resource aggregations should be treated under an RTO's/ISO's
participation model. Some commenters suggest that when acting as a
generator, distributed energy resource aggregations should be treated
like any generator.\288\ Other commenters focus on the need for clarity
around what services distributed energy resources will be allowed to
provide and how they can be aggregated.\289\ For example, Xcel Energy
Services contends that distributed energy resources will likely not
have firm transmission service and may not be able to deliver services
to the system that depend on firm transmission such as capacity or
black start capability.\290\ Some commenters argue that an aggregation
of distributed energy resources should be treated as a single resource
by the wholesale market operator, noting that this would reduce
barriers and may improve performance.\291\ Other commenters similarly
support the ability of an aggregator to transact directly in the
wholesale market without a load serving entity or electric distribution
company as agent.\292\
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\288\ NYISO Comments (RM16-23) at 13; PJM Comments (RM16-23) at
5-6.
\289\ AES Companies Comments (RM16-23) at 39; Avangrid Comments
(RM16-23) at 10; Tesla/SolarCity Comments (RM16-23) at 20; Xcel
Energy Services Comments (RM16-23) at 12-13.
\290\ Xcel Energy Services Comments (RM16-23) at 12-13.
\291\ Advanced Microgrid Solutions Comments (RM16-23) at 7; NRG
Comments (RM16-23) at 10; Stem Comments (RM16-23) at 5; Tesla/
SolarCity Comments (RM16-23) at 20-21.
\292\ Mosaic Power Comments (RM16-23) at 5.
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122. Some commenters posit that the Commission should allow the
[[Page 67116]]
distributed energy resource aggregator to determine the participation
model for distributed energy resource aggregations based on the
characteristics of the aggregation as a whole, even if it includes
diverse technologies,\293\ and that aggregators should be able to
define the capabilities of the resources in their aggregations.\294\
Some commenters stress the importance of allowing diverse technologies
(e.g., solar, storage, and demand response) \295\ to be in the same
aggregation, while others argue that entities that own multiple
distributed energy resources should be allowed to participate in more
than one aggregation.\296\ Stem asserts that, if behind-the-meter
resources are directed to an existing participation model, then the
Commission should require a detailed review to show that the existing
model does not discriminate against the capabilities of new
resources.\297\
---------------------------------------------------------------------------
\293\ Advanced Energy Economy Comments (RM16-23) at 21.
\294\ Microgrid Resources Coalition Comments (RM16-23) at 6.
\295\ Advanced Energy Economy Comments (RM16-23) at 21.
\296\ NextEra Comments (RM16-23) at 14; Public Interest
Organizations Comments (RM16-23) at 16.
\297\ Stem Comments (RM16-23) at 13.
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123. Advanced Energy Management states that, if an end-use customer
is capable of curtailing load and discharging a battery located behind
its meter, it is unclear whether the customer's distributed energy
resource aggregator could aggregate both the storage and load
curtailment into the same resource. Advanced Energy Management also
states that it would be inefficient to have the same customer
participate as part of two different resources or through two
unnecessarily separate participation models.\298\ MISO Transmission
Owners request clarity on the interplay between the rules that apply to
storage and the rules that apply to distributed energy resources,
noting that some resources may fall into both categories, and any
potential conflicts should be resolved. For example, MISO Transmission
Owners seek clarity on whether an aggregator of electric vehicles is
considered storage or a distributed energy resource aggregator, or
both.\299\
---------------------------------------------------------------------------
\298\ Advanced Energy Management Comments (RM16-23) at 9.
\299\ MISO Transmission Owners Comments (RM16-23) at 20.
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124. Microgrid Resources Coalition argues that RTOs/ISOs should
allow aggregators to bid their resources together or separately as
demand response and delivered power.\300\ Energy Storage Association
also argues that any final rule should account for distributed energy
resources' provision of bi-directional services,\301\ and Icetec
asserts that a participation model should allow sites that mix load
reductions and distributed energy resources to offer their combined
capacity as a single market resource.\302\ Microgrid Resources
Coalition also argues that distributed energy resource aggregations,
particularly microgrids, do not fit neatly into existing participation
models or the new participation model for electric storage resources
proposed in the NOPR.\303\
---------------------------------------------------------------------------
\300\ Microgrid Resources Coalition Comments (2018 RM18-9) at 8.
\301\ Energy Storage Association Comments (2018 RM18-9) at 2.
\302\ Icetec Energy Services Comments (2018 RM18-9) at 6.
\303\ Microgrid Resources Coalition Comments (RM16-23) at 5-6
(noting that demand response participation models that are based on
shutting down an industrial process or activating a seldom used
generator are not appropriate for resources like a microgrid that
uses multiple conventional and unconventional resources to manage
multiple loads of varying flexibility and is optimized by
sophisticated controls).
---------------------------------------------------------------------------
125. Other commenters recommend that the Commission require the
RTOs/ISOs to incorporate sufficient flexibility into their
participation models. Public Interest Organizations suggest that, in
order to take advantage of distributed energy resources' ability to
absorb excess electricity, shift load, and reinject electricity onto
the grid at peak times, participation models should be flexible and
enable resources to act as demand-side resources and/or as generation
and should not require resources to choose one participation model
exclusively.\304\ Efficient Holdings similarly contends that
participation models should not force distributed energy resources to
choose between individual categories of services to offer into the
market at any given time.\305\ NYISO Indicated Transmission Owners
request that energy-only distributed energy resource aggregations be
allowed in the distributed energy resource participation model, and
consistent with existing practice for other energy-only resources,
should not be required to offer in the day-ahead market and should be
permitted in both the day-ahead and real-time markets.\306\ NYISO also
asks the Commission to permit regional flexibility that would allow
NYISO to create rules and market designs that meet its needs while
meeting the Commission's desire to integrate distributed energy
resources into the wholesale energy, ancillary service, and capacity
markets.\307\
---------------------------------------------------------------------------
\304\ Public Interest Organizations Comments (RM16-23) at 19.
\305\ Efficient Holdings Comments (RM16-23) at 7-8.
\306\ NYISO Indicated Transmission Owners Comments (RM16-23) at
10-11 (citing Cal. Indep. Sys. Operator Corp., 155 FERC ] 61,229 at
P 11 (accepting CAISO model that allows intermittent resources to
participate in a dispatchable aggregation)).
\307\ NYISO Comments (RM16-23) at 11.
---------------------------------------------------------------------------
126. New York State Entities ask the Commission to grant RTOs/ISOs
the flexibility to devise participation models that reflect market
conditions and ongoing initiatives such as those described in NYISO's
Distributed Energy Resource Roadmap.\308\ New York State Entities
highlight that NYISO is attempting to harmonize the developing
wholesale market enhancements with the complementary retail programs
emerging from New York's Reforming the Energy Vision initiative.\309\
---------------------------------------------------------------------------
\308\ New York State Entities Comments (RM16-23) at 12, 13
(citing Distributed Energy Resources Roadmap for New York's
Wholesale Electricity Markets, (January 2017), New York Independent
System Operator, Inc.) (Distributed Energy Resource Roadmap); see
supra note 21.
\309\ New York State Entities Comments (RM16-23) at 13 (citing
Distributed Energy Resource Roadmap at 4-6).
---------------------------------------------------------------------------
127. Some commenters note that the RTOs/ISOs need new and revised
market rules to incorporate distributed energy resources, but not
necessarily a new participation model.\310\ ISO-NE argues that a new
participation model would be costly and disruptive and create no
additional value because distributed energy resources can monetize
their value to the grid through several existing avenues.\311\
---------------------------------------------------------------------------
\310\ Advanced Energy Economy Comments (2018 RM18-9) at 5-6;
Advanced Energy Management Comments (2018 RM18-9) at 3; Icetec
Energy Comments (2018 RM18-9) at 3-4, 6; NYISO Indicated
Transmission Owners Comments (2018 RM18-9) at 5.
\311\ ISO-NE Comments (2018 RM18-9) at 2-4.
---------------------------------------------------------------------------
128. Advanced Energy Management argues that a final rule should not
require RTOs/ISOs to replace their existing programs, such as demand
response programs.\312\ Icetec argues, however, that existing
``interconnected generation'' models and demand response models are not
sufficient for distributed energy resource participation, and states
that capacity market requirements for year-round performance in PJM
prevent distributed energy resources from offering their full capacity
value.\313\ Tesla argues that, regardless of model, distributed energy
resources should receive comparable compensation.\314\
---------------------------------------------------------------------------
\312\ Advanced Energy Management Comments (2018 RM18-9) at 3.
\313\ Icetec Comments (2018 RM18-9) at 5
\314\ Tesla Comments (2018 RM18-9) at 1, 9.
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c. Commission Determination
129. In this final rule, we adopt the NOPR proposal to require each
RTO/ISO to have tariff provisions that allow
[[Page 67117]]
distributed energy resource aggregations to participate directly in
RTO/ISO markets. We conclude that existing participation models may
create barriers to the participation of distributed energy resource
aggregators in RTO/ISO markets by limiting the operation of distributed
energy resource aggregations and the services that they may be eligible
to provide.
130. We therefore adopt the NOPR proposal to add Sec.
35.28(g)(12)(i) to the Commission's regulations and require each RTO/
ISO to establish distributed energy resource aggregators as a type of
market participant and to allow distributed energy resource aggregators
to register distributed energy resource aggregations under one or more
participation models in the RTO's/ISO's tariff that accommodate the
physical and operational characteristics of the distributed energy
resource aggregation. However, upon consideration of the comments, we
modify the NOPR proposal to provide each RTO/ISO with greater
flexibility to determine how best to revise the participation models
set forth in its market rules to facilitate the participation of
distributed energy resource aggregations. Specifically, to meet the
goals of the final rule, each RTO/ISO can comply with the requirement
to allow distributed energy resource aggregators to participate in its
markets by modifying its existing participation models to facilitate
the participation of distributed energy resource aggregations, by
establishing one or more new participation models for distributed
energy resource aggregations, or by adopting a combination of those two
approaches. The Commission will evaluate each proposal submitted on
compliance to determine whether it meets the goals of this final rule
to allow distributed energy resources to provide all services that they
are technically capable of providing through aggregation.
131. This approach will provide each RTO/ISO with the flexibility
to facilitate the participation of distributed energy resource
aggregations in its markets in a way that is efficient and cost-
effective as well as fits the market design of the RTO/ISO. Permitting
each RTO/ISO to create one or more new participation models for
distributed energy resources addresses commenter concerns about the
limitations of existing models. Likewise, permitting each RTO/ISO to
modify existing participation models, instead of requiring creation of
one or more new participation models, addresses commenter concerns that
creating a new participation model may be too costly or disruptive, or
that existing models do not need to be replaced.
132. Providing RTOs/ISOs with the flexibility to determine whether
to modify existing participation models, create one or more new
participation models, or use a combination of existing and new
participation models will allow each RTO/ISO to reflect varying
regional needs in its approach to allow distributed energy resource
aggregators to participate in its markets.
2. Types of Technologies
a. NOPR Proposal
133. In the NOPR, the Commission stated that distributed energy
resources may include, but are not limited to, electric storage
resources, distributed generation, thermal storage, and electric
vehicles and their supply equipment.\315\ The Commission also
preliminarily found that limiting the types of technologies that are
allowed to participate in the RTO/ISO markets through distributed
energy resource aggregators would create a barrier to entry for
emerging or future technologies, potentially precluding them from being
eligible to provide all of the capacity, energy and ancillary services
that they are technically capable of providing.\316\ The Commission
stated that, while some individual resources or certain technologies
may not be able to meet the qualification or performance requirements
to provide services to the RTO/ISO markets on their own, they may
satisfy such requirements as part of a distributed energy resource
aggregation where resources complement one another's capabilities. The
Commission further stated that combining electric storage resources
with distributed generation could allow the aggregate resource to
achieve performance requirements (such as minimum run times) that an
electric storage resource could not meet on its own and provide
services (such as regulation) that distributed generation may not be
able to provide on its own.\317\
---------------------------------------------------------------------------
\315\ NOPR, 157 FERC ] 61,121 at P 104; see supra Section IV.B.
(Definitions of Distributed Energy Resource and Distributed Energy
Resource Aggregation).
\316\ NOPR, 157 FERC ] 61,121 at P 133.
\317\ Id. P 133 n.231.
---------------------------------------------------------------------------
134. In the NOPR, the Commission proposed to require that each RTO/
ISO revise its tariff so that it does not prohibit the participation of
any particular type of technology in the RTO/ISO markets through a
distributed energy resource aggregator.\318\ This was to help ensure
that the market rules that RTOs/ISOs develop to comply with any final
rule issued in this proceeding were sufficiently flexible to
accommodate the participation of new distributed energy resources as
technology evolves, and to acknowledge the potential that a distributed
energy resource may meet qualification or performance requirements by
participating in a distributed energy resource aggregation that it
cannot on its own. The Commission stated, however, that, to the extent
that existing rules or regulations explicitly prohibit certain
technologies from participating in RTO/ISO markets, it did not intend
to overturn those rules or regulations.
---------------------------------------------------------------------------
\318\ Id. P 133.
---------------------------------------------------------------------------
b. Comments
135. Several commenters support the Commission's proposal not to
prohibit the participation of any particular type of technology in RTO/
ISO markets through a distributed energy resource aggregation.\319\
Generally, they state that it is important for the market rules to be
resource neutral, allowing other attributes such as cost, quality,
flexibility, and other attributes sought by market participants, to
dictate which resources can successfully participate in RTO/ISO
markets. They assert that resource neutrality reduces risk for
investment in new technologies and preserves flexibility for the
participation of future technologies and avoid unnecessary barriers to
entry.
---------------------------------------------------------------------------
\319\ See, e.g., AES Companies (RM16-23) at 32-33; CAISO
Comments (RM16-23) at 23; City of New York Comments (RM16-23) at 8;
Massachusetts Commission Comments (RM16-23) at 8-10; R Street
Institute Comments (RM16-23) at 8.
---------------------------------------------------------------------------
136. Several commenters argue that distributed energy resource
aggregation participation models must allow a variety of technology
configurations. Efficient Holdings argues that third party aggregators
of behind-the-meter resources must have better access to the markets,
which can be achieved through reforms including refined product
definitions, reduction of burdensome and expensive operational
requirements, and rules to address distribution utility non-compliance,
embracing the broadest array of technologies possible.\320\ Energy
Storage Association and Stem seek to ensure that front-of-the-meter
resources, behind-the-meter exporting and non-exporting resources, and
heterogeneous groups of resources are all able to participate in
distributed energy
[[Page 67118]]
resource aggregations.\321\ Stem states that it is reasonable to
restrict the mixing of front-of-the-meter, behind-the-meter exporting,
and behind-the-meter non-exporting resources within a single
aggregation.\322\
---------------------------------------------------------------------------
\320\ Efficient Holdings Comments (RM16-23) at 7-9.
\321\ Energy Storage Association (RM16-23) at 24-25; Stem
Comments (RM16-23) at 7, 12, 13.
\322\ Stem Comments (RM16-23) at 12, 13.
---------------------------------------------------------------------------
137. Commenters also note that allowing distributed energy resource
aggregations to include multiple types of distributed technologies
allows multi-technology aggregations such as microgrids and
complementary resources such as solar and storage to participate in
RTO/ISO markets, will provide RTOs/ISOs another source of flexible
controllable output. CAISO states that, consistent with the
Commission's proposal, its Commission-approved Distributed Energy
Resource Provider model allows aggregations to consist of different
distributed energy resource types.\323\ AES Companies encourage the
Commission to review the validity of any prohibitions on the
participation of existing technologies (i.e., rules currently exist
prohibiting certain types of resources in the tariffs for direct market
participation) in a separate docket rather than in this
proceeding.\324\
---------------------------------------------------------------------------
\323\ CAISO Comments (RM16-23) at 23.
\324\ AES Companies Comments (RM16-23) at 32-33.
---------------------------------------------------------------------------
138. In contrast, some commenters express general concerns about
aggregations that include different types of technologies.\325\
American Petroleum Institute contends that aggregating different types
of distributed energy resources will make market optimization more
difficult.\326\ TAPS urges the Commission to give RTOs/ISOs discretion,
claiming that combining multiple types of distributed energy resources
within a single aggregation may be beneficial but could pose issues
when determining locational and minimum size requirements for mixed
aggregations.\327\
---------------------------------------------------------------------------
\325\ American Petroleum Institute Comments (RM16-23) at 10;
ISO-NE Comments (RM16-23) at 31-35; TAPS Comments (RM16-23) at 27.
\326\ American Petroleum Institute Comments (RM16-23) at 10.
\327\ TAPS Comments (RM16-23) at 27.
---------------------------------------------------------------------------
139. Several commenters state that RTOs/ISOs will need flexibility
to avoid imposing additional costs or barriers to entry on different
types and configurations of prospective distributed energy resource
aggregations.\328\ SPP argues that managing an aggregation as a
discrete set of different assets may be infeasible in commitment and
dispatch and that sub-categorizing different types of distributed
energy resources within a single aggregation would be extremely
complex.\329\ PJM Market Monitor states that distributed generation and
distributed storage should not be mixed within aggregations and that
resources should be aggregated by type for each wholesale market node.
For example, according to PJM Market Monitor, distributed generation
should be aggregated, at the same node with other distributed
generation, while distributed storage should be aggregated at the same
node with other distributed storage.\330\
---------------------------------------------------------------------------
\328\ CAISO Comments (RM16-23) at 38; Fresh Energy/Sierra Club/
Union of Concerned Scientists Comments (RM16-23) at 3; New York
State Entities Comments (RM16-23) at 21.
\329\ SPP Comments (RM16-23) at 22.
\330\ PJM Market Monitor Comments (RM16-23) at 15-16.
---------------------------------------------------------------------------
140. ISO-NE also asks for flexibility and provides several
arguments as to why certain heterogeneous aggregations are not
desirable.\331\ More specifically, ISO-NE argues that (1) demand-side
load resources should only be allowed to participate in aggregations
with other load because of how certain charges and credits are
allocated to load; \332\ (2) electric storage resources would not
benefit from participating in aggregations with non-storage distributed
energy resources because of state-of-charge management issues; \333\
and (3) aggregations of non-intermittent resources with different
physical and economic characteristics would need to self-schedule,
potentially adding financial risk for the participant, reducing the
efficiency of the dispatch, and contributing to uplift or excess
generation conditions.\334\ In addition, ISO-NE states that demand
response resources should not be allowed to participate in distributed
energy resource aggregations because of their distinct settlement
rules.\335\ According to ISO-NE, in order to accommodate aggregations
that include both demand response and non-demand response resource
components, ISO-NE would need to establish rules to disaggregate these
components for purposes of settlement. ISO-NE requests that, if they
are not required to participate separately, the Commission clarify
which rules must apply to such resources.\336\ ISO-NE adds that its
region is steadily transitioning its energy market away from self-
scheduling and toward requiring all energy supply and demand to be
priced and that being required to implement rules that accommodate
aggregations composed of heterogenous resource types would be a
significant step backwards in that effort.\337\
---------------------------------------------------------------------------
\331\ ISO-NE Comments (RM16-23) at 31-36.
\332\ Id. at 33.
\333\ Id. at 33-34.
\334\ Id. at 34-35.
\335\ Id. at 32.
\336\ Id. at 32-33.
\337\ Id. at 34-35.
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c. Commission Determination
141. To implement Sec. 35.28(g)(12)(ii)(a) of the Commission's
regulations, we require that each RTO's/ISO's rules do not prohibit any
particular type of distributed energy resource technology from
participating in distributed energy resource aggregations. We find that
limiting the types of technologies that are allowed to participate in
RTO/ISO markets through a distributed energy resource aggregator would
create a barrier to entry for emerging or future technologies,
potentially precluding them from being eligible to provide all of the
capacity, energy, and ancillary services that they are technically
capable of providing. Requiring that each RTO's/ISO's rules do not
exclude any particular types of technology from participating in
distributed energy resource aggregations in RTO/ISO markets will ensure
a technology-neutral approach to distributed energy resource
aggregations, which will ensure that more resources are able to
participate in such aggregations, thereby helping to enhance
competition and ensure just and reasonable rates.
142. We agree with commenters that generally support requiring
RTOs/ISOs to allow groupings of different technology types in
distributed energy resource aggregations.\338\ Additionally, we agree
with NRG that, while some individual resources or certain technologies
may not be able to meet the qualification or performance requirements
to provide certain services to RTO/ISO markets on their own, they may
be able to satisfy such requirements as part of a distributed energy
resource aggregation where resources complement one another's
capabilities.\339\ For instance, in the NOPR, the Commission stated
that aggregating electric storage resources with distributed generation
could allow the aggregation to achieve performance requirements (such
as minimum run times) that an electric storage resource could not meet
on its own and provide services (such as regulation) that
[[Page 67119]]
distributed generation may not be able to provide on its own.\340\
Therefore, to implement Sec. 35.28(g)(12)(ii)(a) of the Commission's
regulations, we clarify the NOPR proposal and require each RTO/ISO to
revise its tariff to allow different types of distributed energy
resource technologies to participate in a single distributed energy
resource aggregation (i.e., allow heterogeneous distributed energy
resource aggregations).\341\ Requiring that RTOs/ISOs allow
heterogeneous aggregations will further enhance competition in RTO/ISO
markets by ensuring that complementary resources, including those with
different physical and operational characteristics, can meet
qualification and performance requirements such as minimum run times,
which will help ensure that these markets produce just and reasonable
rates.
---------------------------------------------------------------------------
\338\ See, e.g., AES Companies (RM16-23) at 32-33; CAISO
Comments (RM16-23) at 23; City of New York Comments (RM16-23) at 8;
Energy Storage Association (RM16-23) at 24-25; Fresh Energy/Sierra
Club/Union of Concerned Scientists Comments (RM16-23) at 3;
Massachusetts Commission Comments (RM16-23) at 8-10; New York State
Entities Comments (RM16-23) at 21; R Street Institute Comments
(RM16-23) at 8; Stem Comments (RM16-23) at 7, 12, 13.
\339\ NRG Comments (RM16-23) at 19.
\340\ NOPR, 157 FERC ] 61,121 at P 133 n.231.
\341\ ISO-NE defines a heterogeneous aggregation as consisting
of ``different resource types, such that, for example, a single
aggregation might consist of a battery, distributed generation
assets, and electric vehicles.'' ISO-NE Comments (RM16-23) at 31.
---------------------------------------------------------------------------
143. We are unconvinced by arguments in favor of homogeneous
aggregations. We find that the benefits of allowing heterogeneous
aggregations outweigh the concerns regarding complexity of
implementation. While SPP and ISO-NE indicate that market rules
allowing for heterogeneous aggregations would be challenging to develop
and implement,\342\ neither explains why their markets are unique such
that it would be necessary for the Commission to permit regional
flexibility. In addition, concerns about RTOs'/ISOs' ability to manage
a diverse set of distributed energy resources are misplaced because the
distributed energy resource aggregator, not an individual distributed
energy resource in the aggregation, is the market participant with whom
the RTO/ISO would be interacting. Moreover, the aggregator, not the
RTO/ISO, would be responsible for ensuring that the distributed energy
resource aggregation meets applicable RTO/ISO performance and
registration requirements.
---------------------------------------------------------------------------
\342\ ISO-NE Comments (RM16-23) at 32; SPP Comments (RM16-23) at
21-22.
---------------------------------------------------------------------------
144. We also are not persuaded by ISO-NE's reservations related to
state-of-charge management and self-scheduling. We find that market
participants are best positioned to make these participation decisions.
If ISO-NE is correct that self-scheduling adds financial risk for the
participant and that, because of state-of-charge management issues,
electric storage resources would not benefit from participating in
distributed energy resource aggregations, then we would expect market
participants to act in their economic interest.
145. As to ISO-NE's concerns about incorporating demand response
resources into distributed energy resource aggregations, we note that
demand response aggregations and the resources in them that effectuate
load reductions currently are not necessarily composed of the same
types of technologies and are already providing services in numerous
RTO/ISO markets. Therefore, similar to the Commission's finding in
Order No. 745-A, from the perspective of the RTO/ISO, the means by
which an aggregation is able to provide wholesale services does not
change the value of that service to the wholesale grid.\343\ In
response to ISO-NE's request for clarification about which settlement
rules apply to distributed energy resource aggregations composed of
both demand response and non-demand response resources, we clarify that
the requirements in Order No. 745 would apply to demand response
resources participating in heterogeneous aggregations. In addition,
while ISO-NE would prefer to exclude demand response resources from
distributed energy resource aggregations to simplify settlement and the
allocation of charges and credits to load, we reiterate that the
benefits of allowing heterogeneous aggregations outweigh ISO-NE's
preference to limit the types of resources that can participate in
aggregations. We clarify, however, that the participation of demand
response in distributed energy resource aggregations is subject to the
opt-out and opt-in requirements of Order Nos. 719 and 719-A. Therefore,
if the relevant electric retail regulatory authority where a demand
response resource is located has either chosen to opt out or has not
opted in, then the demand response resource may not participate in a
distributed energy resource aggregation.\344\
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\343\ As the Commission stated in Order No. 745-A, ``[f]rom the
perspective of the grid, the manner in which a customer is able to
produce such a load reduction from its validly established baseline
(whether by shifting production, using internal generation,
consuming less electricity, or other means) does not change the
effect or value of the reduction to the wholesale grid.'' Demand
Response Compensation in Organized Wholesale Energy Markets, Order
No. 745-A, 137 FERC ] 61,215, at P 66 (2011), reh'g denied, Order
No. 745-B, 138 FERC ] 61,148 (2012), vacated sub nom. Elec. Power
Supply Ass'n v. FERC, 753 F.3d 216 (D.C. Cir. 2014), rev'd &
remanded sub nom. EPSA, 136 S. Ct. 760.
\344\ See supra P 59.
---------------------------------------------------------------------------
146. As to ISO-NE's concern that self-scheduling will reduce the
efficiency of the dispatch and contribute to uplift or excess
generation conditions, we note that no other RTOs/ISOs raise this
concern. Market rules allowing for heterogeneous aggregations are
already in place in CAISO,\345\ and the Commission recently accepted
market rules allowing for heterogeneous aggregations in NYISO.\346\
Based on the record before us, ISO-NE has not sufficiently demonstrated
why it is uniquely unable to implement market rules that can overcome
these dispatch, uplift, and excess generation challenges.
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\345\ Cal. Indep. Sys. Operator Corp., 155 FERC ] 61,229 at P
11.
\346\ NYISO Aggregation Order, 170 FERC ] 61,033.
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3. Double Counting of Services
a. NOPR Proposal
147. In the NOPR, the Commission stated that it is appropriate for
each RTO/ISO to limit the participation of resources in RTO/ISO markets
through a distributed energy resource aggregator that are receiving
compensation for the same services as part of another program.\347\ The
Commission explained that, because resources able to register as part
of a distributed energy resource aggregation will be located on the
distribution system, they may also be eligible to participate in retail
compensation programs, such as net metering, or other wholesale
programs, such as demand response programs. Therefore, to ensure that
there is no duplication of compensation, the Commission proposed that
distributed energy resources that are participating in one or more
retail compensation programs such as net metering or another wholesale
market participation program will not be eligible to participate in
RTO/ISO markets as part of a distributed energy resource aggregation.
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\347\ NOPR, 157 FERC ] 61,121 at P 134.
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b. Comments
148. Most commenters that address the issue of double counting
agree that distributed energy resources should not be compensated twice
for providing the same service but disagree on what constitutes ``the
same service,'' how to implement such a requirement, or who should be
responsible.\348\ In this regard, Pacific Gas & Electric supports
prevention of double compensation and discusses the processes in
California that protects against the bypass of retail rates for behind-
the-meter distributed energy resources that both consume and
[[Page 67120]]
export electricity for both retail and wholesale purposes.\349\ Some
commenters also assert that the NOPR proposal provides a solution to
prevent double compensation,\350\ provides clear jurisdictional
lines,\351\ reduces confusion,\352\ and could ease coordination issues
for distributed energy resources and alleviate the limitations of
metering and accounting practices to distinguish between wholesale and
retail activities.\353\ In addition, some commenters posit that
allowing distributed energy resources that earn compensation in out-of-
market retail programs to participate in RTO/ISO markets may distort
price formation, skewing market results and clearing prices.\354\ Other
commenters express concern that dual wholesale and retail participation
could enable distributed energy resources to arbitrage between retail
and wholesale markets, creating opportunities for market
manipulation,\355\ or to cherry pick between retail and wholesale
constructs, preventing effective distribution system planning.\356\ To
address this concern, some commenters suggest that the Commission
should require RTOs/ISOs to restrict the ability of distributed energy
resources to switch between wholesale and retail participation by
imposing a waiting period of at least one year.\357\
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\348\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
33-34; Calpine Comments (2018 RM18-9) at 6-7; Dominion Comments
(RM16-23) at 9-10; Microsoft Corporation Comments (2018 RM18-9) at
17; New York State Entities Comments (RM16-23) at 13.
\349\ Pacific Gas & Electric Comments (2019 RM18-9) at 5.
\350\ Avangrid Comments (RM16-23) at 11; Pacific Gas & Electric
Comments (RM16-23) at 17.
\351\ Delaware Commission Comments (RM16-23) at 4.
\352\ See, e.g., Calpine Comments (2018 RM18-9) at 6;
Organization of MISO States Comments (2018 RM18-9) at 8; PJM
Utilities Coalition Comments (2018 RM18-9) at 13.
\353\ See, e.g., APPA/NRECA Comments (RM16-23) at 39-40; EEI
Comments (RM16-23) at 25-26; Massachusetts Municipal Electric
Comments (RM16-23) at 3; National Hydropower Association Comments
(RM16-23) at 11; Six Cities Comments (RM16-23) at 6.
\354\ Calpine Comments (2018 RM18-9) at 6; EPSA Comments (2018
RM18-9) at 15; TAPS Comments (2018 RM18-9) at 25.
\355\ TAPS Comments (2018 RM18-9) at 26.
\356\ PJM Utilities Coalition Comments (2018 RM18-9) at 13.
\357\ APPA Comments (2018 RM18-9) at 25 (suggesting a waiting
period of one year); Calpine Comments (2018 RM18-9) at 7 (suggesting
a waiting period of five years as in PJM's Fixed Resource
Requirement process).
---------------------------------------------------------------------------
149. CAISO comments that, consistent with the NOPR proposal, its
Distributed Energy Resource Provider model specifies that resources
participating in a wholesale market aggregation may not participate in
a retail net energy metering program if that program does not expressly
also permit wholesale market participation.\358\ CAISO states that this
rule extends to various aspects of retail net metering programs such as
net metering with storage or virtual net metering.\359\ CAISO explains
that the rationale for this rule is that CAISO's Distributed Energy
Resource Provider model requires continuous wholesale
participation.\360\ Additionally, CAISO states that under California's
current net energy metering program rules, a participating resource
already benefits from netting its excess energy against subsequent
electricity bills.\361\ Based on this netting approach, there is no
energy available to offer into the CAISO markets because the excess
energy is banked for later withdrawal. CAISO believes the Commission's
approach in the NOPR is consistent with Commission orders determining
that exports to the transmission grid under a net energy metering
program do not constitute a sale for resale of electricity under the
FPA because these customers are, on a net basis, consumers.
---------------------------------------------------------------------------
\358\ CAISO Comments (RM16-23) at 24 (citing Cal. Indep. Sys.
Operator Corp., 155 FERC ] 61,229 at P 6).
\359\ Id. at 24.
\360\ CAISO Comments (2018 RM18-9) at 15.
\361\ CAISO Comments (RM16-23) at 24.
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150. Some commenters ask the Commission to modify or clarify
certain issues related to the NOPR proposal to prevent double counting.
For instance, several commenters urge the Commission to give clear
guidance about the definition of a retail compensation program or to
clarify the scope of the retail prohibition.\362\ A number of
commenters argue that the RTOs/ISOs should be responsible for
demonstrating how they will prevent duplicate compensation for the same
service.\363\ To that end, some commenters urge the Commission to, at a
minimum, direct RTOs/ISOs to establish protocols that address duplicate
compensation,\364\ monitor distributed energy resource offers for true
cost, and hold distributed energy resources accountable for
performance, among other measures.\365\ ISO-NE notes that if
distributed energy resources have to choose between wholesale and
retail participation, retail programs and behind-the-meter demand
response may be more attractive in New England.\366\
---------------------------------------------------------------------------
\362\ ISO-NE Comments (RM16-23) at 54; SEIA Comments (RM16-23)
at 16-17; TAPS Comments (RM16-23) at 11.
\363\ See, e.g., Advanced Microgrid Solutions Comments (RM16-23)
at 6; Dominion Comments (RM16-23) at 9-10; EEI Comments (RM16-23) at
25-26; Gridwise Comments (RM16-23) at 2; Public Interest
Organizations Comments (RM16-23) at 23-24; Stem Comments (RM16-23)
at 4, 7-8.
\364\ EPSA Comments (2018 RM18-9) at 14; TAPS Comments (2018
RM18-9) at 26-27.
\365\ Calpine Comments (2018 RM18-9) at 7; EPSA Comments (2018
RM18-9) at 20.
\366\ ISO-NE Comments (2018 RM18-9) at 3.
---------------------------------------------------------------------------
151. Conversely, numerous commenters assert that the Commission
should permit distributed energy resource aggregations to participate
in both wholesale and retail markets,\367\ provided that the
distributed energy resources are technically capable of doing so and
there are not physical system limitations that would prevent such
participation.\368\ Some of these commenters argue that distributed
energy resources should not receive duplicate compensation for the same
service but should receive compensation for each distinct or
incremental value they provide at the retail or wholesale level, and
that being allowed to do so will improve efficiency and lower overall
costs.\369\ Some commenters that are in favor of RTOs/ISOs allowing
dual participation also note that relevant electric retail regulatory
authorities have the ability to prevent it.\370\ Several commenters
contend that there is precedent for dual participation \371\ and argue
that a blanket ban would create a barrier to distributed energy
resource participation, underestimating their capabilities, and inhibit
competition, undermining the NOPR.\372\ Icetec and Tesla point out that
capacity markets have long avoided duplicate compensation for demand
response and for generators providing multiple services at once (e.g.,
energy and reserves) and urge the Commission to apply the logic of
these constructs to
[[Page 67121]]
distributed energy resources.\373\ Advanced Energy Economy claims that
the NOPR proposal would prevent the RTOs/ISOs from accessing a growing
pool of resources located close to load that can be cost-effectively
dispatched to ensure reliability.\374\ Several commenters argue that
requiring resources to choose between markets would diminish the
incremental value of distributed energy resources, leading to less
efficient and flexible markets and reducing distributed energy
resources' commercial viability.\375\ Commenters contend that, even if
some services could qualify generally as the same service, it would be
possible to distinguish them.\376\ Some commenters identify a number of
scenarios in which providing distinct wholesale and retail services is
feasible and explain that dispatch triggers for these programs usually
do not overlap, which further indicates that they are not the same
services.\377\ Additional commenters note potential discrepancies
between the NOPR proposal and the Commission's recent policy statement
enabling multiple-use applications for electric storage resources,\378\
and contend that experience in CAISO has demonstrated that it is
possible to differentiate between services.\379\
---------------------------------------------------------------------------
\367\ See, e.g., Advanced Energy Buyers Comments (2018 RM18-9)
at 2; Genbright Comments (RM16-23) at 2-4; Global Cold Chain
Alliance Comments (2018 RM18-9) at 2; MISO Transmission Owners
Comments (RM16-23) at 6; New York Commission Comments (2018 RM18-9)
at 16.
\368\ Energy Storage Association (2018 RM18-9) at 2; Microsoft
Corporation Comments (2018 RM18-9) at 17; NRG Comments (2018 RM18-9)
at 6-8; SEIA Comments (RM16-23) at 16; Sunrun Comments (RM16-23) at
3.
\369\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 8, 12-13; American Petroleum Institute Comments (RM16-23) at 13;
Direct Energy Comments (2018 RM18-9) at 11-13; EPSA Comments (2018
RM18-9) at 15; NARUC Comments (RM16-23) at 5; Viking Cold Solutions
Comments (2018 RM18-9) at 2.
\370\ California Commission Comments (2018 RM18-9) at 10-11; New
York Commission Comments (2018 RM18-9) at 17-18.
\371\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
39; Advanced Energy Management Comments (RM16-23) at 11-14; City of
New York Comments (RM16-23) at 10-11; NRG Comments (2018 RM18-9) at
7-8; NYPA Comments (2018 RM18-9) at 2.
\372\ See, e.g., California Energy Storage Alliance Comments
(RM16-23) at 4-6; Genbright Comments (RM16-23) at 3-4; Microgrid
Resources Coalition Comments (RM16-23) at 12; SEIA Comments (RM16-
23) at 16; Stem Comments (RM16-23) at 4, 7.
\373\ Icetec Comments (2018 RM18-9) at 14; Tesla Comments (2018
RM18-9) at 4.
\374\ Advanced Energy Economy Comments (RM16-23) at 33-34.
\375\ See, e.g., Advanced Energy Management Comments (RM16-23)
at 10-11; Advanced Microgrid Solutions Comments (RM16-23) at 6;
Energy Storage Association Comments (RM16-23) at 22-23; Public
Interest Organizations Comments (RM16-23) at 22-24; Tesla/SolarCity
Comments (RM16-23) at 3.
\376\ Energy Storage Association Comments (2018 RM18-9) at 2;
New York Commission Comments (2018 RM18-9) at 15; NYISO Indicated
Transmission Owners Comments (2018 RM18-9) at 13. See also
California Commission Comments (2018 RM18-9) at 8 (noting that the
California Commission declined to categorize the 22 services defined
for the multiple use application framework adopted in D.18-01-003 by
their service elements, which are either energy or capacity).
\377\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
34-35; California Energy Storage Alliance Comments (RM16-23) at 5-6;
DER/Storage Developers Comments (RM16-23) at 2-3; Tesla/SolarCity
Comments (RM16-23) at 5-7. Advanced Energy Management notes that
dispatch for the Consolidated Edison programs only overlapped with
dispatch for the NYISO programs in six percent of hours from 2011 to
2015. Advanced Energy Management Comments (RM16-23) at 12-13.
\378\ Institute for Policy Integrity Comments (RM16-23) at 7;
Open Access Technology Comments (RM16-23) at 4-5; Stem Comments
(RM16-23) at 4 (citing Utilization of Elec. Storage Res. for
Multiple Servs. When Receiving Cost-Based Rate Recovery, 158 FERC ]
61,051 (2017)).
\379\ Leadership Group Comments (RM16-23) at 3 (citing Cal.
Indep. Sys. Operator Corp., 155 FERC ] 61,229 at P 11).
---------------------------------------------------------------------------
152. However, many commenters disagree over how the Commission
should assess what constitutes ``the same service.'' Some commenters
assert that ``same service'' should refer narrowly to retail and
wholesale programs that compensate a distributed energy resource for
the exact same kW or kWh for the same value, providing no incremental
value to the system.\380\ Other commenters argue that tools are
necessary to prevent double compensation for the same service and
suggest using performance requirements and dispatch triggers,
contracting, market/participation rules, registration,protections,
mathematical/accounting solutions, and/or a coordination framework,
among other measures, to prevent double counting.\381\ According to
some of these commenters, market rules could prevent double
compensation when a resource is dispatched simultaneously for multiple
programs or to prevent a resource from being permitted to sell the same
market product as both an individual resource and as part of an
aggregation in the same timeframe.\382\ Some commenters suggest using
certain criteria to determine when a service provides incremental value
to the retail or wholesale system or using metrics to enable
segmentation of time or service provided.\383\ PJM asks the Commission
not to prohibit PJM from using accounting rules to delineate between a
behind-the-meter distributed energy resource aggregation's wholesale
and retail transactions, as applicable.\384\
---------------------------------------------------------------------------
\380\ Advanced Energy Management Comments (2018 RM18-9) at 13;
New York Commission Comments (2018 RM18-9) at 15.
\381\ See, e.g., California Commission Comments (2018 RM18-9) at
9-10; Microgrid Resources Coalition Comments (2018 RM18-9) at 12-14;
New York Commission Comments (2018 RM18-9) at 16, 18-19; NYISO
Indicated Transmission Owners Comments (2018 RM18-9) at 13-14; Tesla
Comments (2018 RM18-9) at 3-7.
\382\ Advanced Energy Management Comments (RM16-23) at 13; AES
Companies Comments (RM16-23) at 39; New York State Entities Comments
(RM16-23) at 15-16.
\383\ Advanced Energy Buyers Comments (2018 RM18-9) at 6;
Advanced Energy Economy Comments (2018 RM18-9) at 13; Advanced
Energy Management Comments (2018 RM18-9) at 14-15.
\384\ PJM Comments (RM16-23) at 23.
---------------------------------------------------------------------------
153. IRC urges the Commission to work with states to set forth
clear processes for resolving jurisdictional and rate issues to prevent
double compensation based on the details of a particular retail
program.\385\ Some commenters suggest that the Commission collaborate
with local regulatory authorities because local conditions may warrant
special rules and restrictions for distributed energy resource
participation in multiple markets or defer to state jurisdictions.\386\
Some commenters request that the Commission clarify the right of state
regulators to monitor and regulate potential duplicate compensation
\387\ and request that the Commission provide guidance to distribution
utilities regarding the proposal.\388\
---------------------------------------------------------------------------
\385\ IRC Comments (RM16-23) at 3-5.
\386\ EEI Comments (RM16-23) at 26-27; Pacific Gas & Electric
Comments (2018 RM18-9) at 10.
\387\ Massachusetts Commission Comments (RM16-23) at 11.
\388\ ISO-NE Comments (RM16-23) at 54.
---------------------------------------------------------------------------
154. In addition, several commenters seek clarification that RTOs/
ISOs are not precluded from allowing distributed energy resources to
provide multiple non-overlapping wholesale services.\389\ NYISO
requests clarification on whether distributed energy resources are
permitted to offer the ``same service'' to the wholesale markets and
distribution system-level retail programs.\390\ Lastly, some commenters
state that the Commission should revisit and further examine the issue
of dual participation in the future.\391\
---------------------------------------------------------------------------
\389\ NextEra Comments (RM16-23) at 14; NYISO Comments (RM16-23)
at 14-15; Public Interest Organizations Comments (RM16-23) at 21-22.
\390\ NYISO Comments (RM16-23) at 14-15.
\391\ EEI Comments (RM16-23) at 25; New York Utility
Intervention Unit Comments (RM16-23) at 6; Pacific Gas & Electric
Comments (RM16-23) at 17-18; SoCal Edison Comments (RM16-23) at 10.
---------------------------------------------------------------------------
155. Other commenters argue that the NOPR proposal would undermine
state policy.\392\ Numerous commenters argue that the NOPR proposal
conflicts with the Commission's findings in New York State Public
Service Commission v. New York Independent System Operator, Inc., in
which the Commission stated that ``[w]hile the wholesale- and the
retail-level demand response programs may complement each other, they
serve different purposes, provide different benefits, and compensate
distinctly different services,'' \393\ and would interfere with New
York's existing programs and state objectives.\394\ The California
Commission maintains that dual participation of a distributed energy
resource in retail programs and RTO/ISO markets is a retail matter
under state jurisdiction.\395\ The
[[Page 67122]]
Arkansas Commission, with support from Advanced Energy Economy, states
that dual participation of distributed energy resource aggregations in
RTO/ISO and retail markets requires a cooperative federalism approach
in which the Commission has authority over RTO/ISO eligibility rules,
states have exclusive jurisdiction over retail customer programs and
may set terms and conditions so long as they do not conflict with
Commission orders, and state regulators play a complementary role.\396\
---------------------------------------------------------------------------
\392\ California Commission Comments (RM16-23) at 6-7; City of
New York Comments (RM16-23) at 13; New York State Entities Comments
(RM16-23) at 18.
\393\ N.Y. Pub. Serv. Comm'n v. N.Y. Indep. Sys. Operator, Inc.,
158 FERC ] 61,137, at P 33 (2017).
\394\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
35-36; Advanced Energy Management Comments (RM16-23) at 11-13;
Harvard Environmental Policy Initiative Comments (RM16-23) at 7; New
York State Entities Comments (RM16-23) at 14,16-18; Union of
Concerned Scientists Comments (RM16-23) at 19.
\395\ California Commission Comments (2018 RM18-9) at 10-11.
\396\ Supplemental Comments of Arkansas Commission (2018 RM18-9-
000) at 1-2; Answer of Advanced Energy Economy to Supplemental
Comments of Arkansas Commission (2018 RM18-9) at 2.
---------------------------------------------------------------------------
156. In addition, some commenters assert that the Commission does
not have authority to prevent distributed energy resources from selling
retail services.\397\ The Harvard Environmental Policy Initiative
argues that there is no legal barrier that prevents distributed energy
resources from participating in both state and Commission programs, and
that the Commission has the authority to allow each RTO/ISO to
determine how to allow distributed energy resources to participate in
both state-level and wholesale programs, though they note it may be
operationally complex.\398\ Tesla/SolarCity asserts that differences in
jurisdiction must not prevent distributed energy resources from
receiving compensation for distinct services \399\ and argues that
effects on retail rates should not be relevant.\400\ Several commenters
add that the Commission's decision in this final rule will not affect
the ability of relevant electric retail regulatory authorities to
restrict wholesale participation for distributed energy resources
wishing to participate in retail programs.\401\
---------------------------------------------------------------------------
\397\ California Commission Comments (RM16-23) at 6; DER/Storage
Developers Comments (RM16-23) at 2; SEIA Comments (RM16-23) at 16;
Stem Comments (RM16-23) at 7.
\398\ Harvard Environmental Policy Initiative Comments (RM16-23)
at 6-7 (citing NOPR, 157 FERC ] 61,121 at P 134).
\399\ Tesla/SolarCity Comments (RM16-23) at 2-3.
\400\ Id. at 3 (quoting EPSA, 136 S. Ct. 760 at 776 (``When FERC
regulates what takes place on the wholesale market, as a part of
carrying out its charge to improve how that market runs, then no
matter that effect on retail rates . . .'')).
\401\ APPA Comments (2018 RM18-9) at 25-26; PJM Utilities
Coalition Comments (2018 RM18-9) at 13; TAPS Comments (2018 RM18-9)
at 25.
---------------------------------------------------------------------------
157. However, some commenters disagree with other commenters'
proposed approaches to differentiate between wholesale and retail
services. APPA contends that the methods proposed by some commenters of
determining what constitutes the same service are flawed, an
incremental value approach is conceptually complicated, and using
dispatch triggers to distinguish services is problematic because a
resource could not respond to a reliability event in both the wholesale
and retail markets at once.\402\ Similarly, Sunrun argues that a
universal characterization of services would create litigation and
confusion.\403\ PJM asserts that the Commission should not ``over-
define'' the services that distributed energy resources provide but
instead should focus on the services traditionally addressed in the
wholesale market (e.g., capacity, energy and ancillary services), and
require that any unit of capacity/resource adequacy only be compensated
once across the wholesale and retail domains.\404\ NYISO Indicated
Transmission Owners point out that the ability to differentiate
services is dependent on particular programs and markets, and suggest
that the Commission consider programs as they are filed by the relevant
RTOs/ISOs.\405\ MISO states that it defers to relevant electric retail
regulatory authorities to address any double compensation matters.\406\
NYISO states that if competing dispatch obligations still arise, it
will be the aggregator's responsibility to resolve the conflict and
face penalties, as appropriate.\407\
---------------------------------------------------------------------------
\402\ APPA Comments (2018 RM18-9) at 24-25.
\403\ Sunrun Comments (2018 RM18-9) at 9-10.
\404\ PJM Comments (2018 RM18-9) at 14.
\405\ NYISO Indicated Transmission Owners Comments (2018 RM18-9)
at 7-8.
\406\ MISO Comments (2018 RM18-9) at 22.
\407\ NYISO Comments (2018 RM18-9) at 9-11.
---------------------------------------------------------------------------
158. NRG and Stem argue that the Commission should only be
concerned with double compensation if retail participation interferes
with the provision of wholesale services.\408\ Similarly, other
commenters argue that the Commission should focus on preventing
distributed energy resources from receiving double payment for the same
wholesale service and not whether those resources are also receiving
retail level compensation.\409\ NYISO Indicated Transmission Owners
note that many distribution utilities have established programs to
accommodate technology within retail service programs and argue that
any changes to market rules for participation of distributed energy
resource aggregations in wholesale markets should avoid encroaching
upon or abrogating the jurisdictional status of these distribution-
level programs, which, they state, do not involve wholesale sales.\410\
---------------------------------------------------------------------------
\408\ NRG Comments (RM16-23) at 8; Stem Comments (RM16-23) at 7.
\409\ Advanced Energy Economy Comments (2018 RM18-9) at 13;
Energy Storage Association Comments (2018 RM18-9) at 5; New York
Commission Comments (2018 RM18-9) at 18; Stem Comments (RM16-23) at
7.
\410\ NYISO Indicated Transmission Owners Comments (RM16-23) at
8.
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c. Commission Determination
159. To implement Sec. 35.28(g)(12)(ii)(a) of the Commission's
regulations and upon consideration of the comments received, we adopt
the NOPR proposal, as modified and clarified below, to allow RTOs/ISOs
to limit the participation of resources in RTO/ISO markets through a
distributed energy resource aggregator that are receiving compensation
for the same services as part of another program.
160. However, we agree with many commenters that the NOPR proposal
to prohibit distributed energy resources that are receiving
compensation in a retail program from being eligible to participate in
the RTO/ISO markets as part of a distributed energy resource
aggregation was overly broad. Commenters identify multiple examples
where participation in both wholesale and retail markets is feasible
\411\ and is already permitted and occurring,\412\ and they identify a
variety of existing and potential approaches to address reasonable
concerns about double counting and overcompensation.\413\ Therefore,
rather than barring participation in both wholesale and retail or
multiple wholesale programs, we modify the NOPR proposal to require
each RTO/ISO to revise its tariff to: (1) Allow distributed energy
resources that participate in one or more retail programs to
participate in its wholesale markets; (2) allow distributed energy
resources to provide multiple wholesale services; and (3) include any
appropriate restrictions on the distributed energy resources'
participation in RTO/ISO markets through distributed energy resource
aggregations, if narrowly designed to avoid counting more than once the
services provided by distributed energy resources in RTO/ISO markets.
In compliance with this final rule, we
[[Page 67123]]
require each RTO/ISO to describe how it will properly account for the
different services that distributed energy resources provide in the
RTO/ISO markets.
---------------------------------------------------------------------------
\411\ See, e.g., Advanced Microgrid Solutions Comments (RM16-23)
at 5-6; American Petroleum Institute Comments (RM16-23) at 13; NRG
Comments (RM16-23) at 8; Open Access Technology Comments (RM16-23)
at 5; Public Interest Organizations Comments (RM16-23) at 22.
\412\ Direct Energy Comments (2018 RM18-9) at 11-13; Energy
Storage Association Comments (2018 RM18-9) at 5; NRG Comments (2018
RM18-9) at 6-8.
\413\ NESCOE Comments (RM16-23) at 14-15 (citing Utilization of
Electric Storage Resources for Multiple Services When Receiving
Cost-Base Rate Recovery, 158 FERC ] 61,051 at P 2); SEIA Comments
(RM16-23) at 16 (citing Utilization of Electric Storage Resources
for Multiple Services When Receiving Cost-Based Rate Recovery, 158
FERC ] 61,051).
---------------------------------------------------------------------------
161. We find that it is appropriate for RTOs/ISOs to place narrowly
designed restrictions on the RTO/ISO market participation of
distributed energy resources through aggregations, if necessary to
prevent double counting of services. For instance, if a distributed
energy resource is offered into an RTO/ISO market and is not added back
to a utility's or other load serving entity's load profile, then that
resource will be double counted as both load reduction and a supply
resource. Also, if a distributed energy resource is registered to
provide the same service twice in an RTO/ISO market (e.g., as part of
multiple distributed energy resource aggregations, as part of a
distributed energy resource aggregation and a standalone demand
response resource, and/or a standalone distributed energy resource),
then that resource would also be double counted and double compensated
if it clears the market as part of both market participants. Thus, we
find that it is appropriate for RTOs/ISOs to place restrictions on the
RTO/ISO market participation of distributed energy resources through
aggregations after determining whether a distributed energy resource
that is proposing to participate in a distributed energy resource
aggregation is (1) registered to provide the same services either
individually or as part of another RTO/ISO market participant; \414\ or
(2) included in a retail program to reduce a utility's or other load
serving entity's obligations to purchase services from the RTO/ISO
market.
---------------------------------------------------------------------------
\414\ For example, as part of another distributed energy
resource aggregation, a demand response resource, and/or a
standalone distributed energy resource.
---------------------------------------------------------------------------
162. This restriction is similar to that adopted by the Commission
in Order No. 719 in the context of aggregations of demand response,
which states that ``[a]n RTO or ISO may place appropriate restrictions
on any customer's participation in an [aggregation of retail
customers]-aggregated demand response bid to avoid counting the same
demand response resource more than once.'' \415\ In addition, as
discussed in Section IV.A.2 above, relevant electric retail regulatory
authorities may decide whether to permit the customers of small
utilities to participate in the RTO/ISO markets through distributed
energy resource aggregations and relevant electric retail regulatory
authorities continue to have authority to condition participation in
their retail distributed energy resource programs on those resources
not also participating in RTO/ISO markets,\416\ which should allow them
to mitigate any double-compensation concerns.
---------------------------------------------------------------------------
\415\ Order No. 719, 125 FERC ] 61,071 at P 158.
\416\ Supplemental Comments of Arkansas Commission (RM16-23-000)
at 2.
---------------------------------------------------------------------------
163. We agree with many commenters that the NOPR proposal could
undermine the effectiveness of existing retail and wholesale programs,
render current RTO/ISO market participants ineligible to continue their
participation, and reduce competition in RTO/ISO markets, which could
lead to unjust and unreasonable rates. Further, there may be instances
in which an individual distributed energy resource could technically,
reliably, and economically provide multiple, distinct services at
wholesale and retail levels, and therefore preventing it from doing so
may undermine the final rule by creating a new barrier to participation
in RTO/ISO markets, thereby inhibiting competition and decreasing
reliability. We believe the modified rules that we adopt herein will
enable efficient outcomes in RTO/ISO markets by capturing the full
value of distributed energy resources and enabling efficient resource
allocation while also requiring RTOs/ISOs to address double-counting
concerns.
164. In addition to addressing the potential market and reliability
impacts of the NOPR proposal described above, we find that the reforms
we adopt here are consistent with the Commission's determination that a
single distributed energy resource can participate in both retail and
wholesale programs and be compensated in each for providing
``distinctly different services.'' \417\ While commenters suggest
several tests to identify duplicate services, the record does not
include a consistent or practical method for the Commission to
universally define ``same services'' across wholesale and retail
markets, and we therefore do not believe that it is appropriate to
prescribe an approach across all RTOs/ISOs. For this reason, we will
grant RTOs/ISOs regional flexibility with respect to the restrictions
they propose in their tariffs to minimize market impacts caused by the
double counting of services provided by distributed energy resources in
the RTO/ISO markets.
---------------------------------------------------------------------------
\417\ N.Y. Pub. Serv. Comm'n v. N.Y. Indep. Sys. Operator, Inc.,
158 FERC ] 61,137 at P 33.
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4. Minimum and Maximum Size of Aggregation
a. NOPR Proposal
165. In the NOPR, the Commission proposed that distributed energy
resource aggregations must meet any minimum size requirements of the
participation model under which they elect to participate in RTO/ISO
markets.\418\ The Commission stated that, for example, if a distributed
energy resource aggregator decides to register using the participation
model for electric storage resources given the cumulative physical and
operational characteristics of the distributed energy resources in its
aggregation, then its distributed energy resource aggregation would be
required to meet the 100 kW minimum size requirement that the
Commission required for that participation model. The Commission stated
that, alternatively, if the distributed energy resource aggregator
registered as a generator, then its aggregation would be required to
meet the minimum size requirement for the generator participation model
in the relevant RTO/ISO market.
---------------------------------------------------------------------------
\418\ NOPR, 157 FERC ] 61,121 at P 136.
---------------------------------------------------------------------------
166. After the April 2018 technical conference, the Commission
sought comments on whether reducing the minimum size of distributed
energy resource aggregations to participate in RTO/ISO markets would
help alleviate concerns about requiring distributed energy resource
aggregations to locate only at a single node.\419\
---------------------------------------------------------------------------
\419\ Notice Inviting Post-Technical Conference Comments at 3.
---------------------------------------------------------------------------
b. Comments
167. SPP agrees with the Commission's proposal for aggregations to
meet any minimum size requirements of the participation model under
which they elect to participate, noting that that is consistent with
SPP's registration requirements for any resource type.\420\
---------------------------------------------------------------------------
\420\ SPP Comments (RM16-23) at 16.
---------------------------------------------------------------------------
168. In contrast, several commenters argue that the Commission
should require RTOs/ISOs to adopt a minimum size requirement of 100 kW
for all distributed energy resource aggregations, regardless of the
participation model in which they elect to participate.\421\ NYISO
states that it is currently working with stakeholders on a distributed
energy resource market design proposal that would set a minimum
aggregation size of 100 kW
[[Page 67124]]
because this is the smallest increment that NYISO believes it can
accurately model, commit, and dispatch with its current grid operations
software.\422\ Some of those commenters contend that a minimum size
requirement above 100 kW runs counter to the NOPR's goal of improving
competition in the wholesale markets while avoiding excessive
registration of individual small resources and modeling
complexity.\423\ Tesla/SolarCity state that a minimum size requirement
of 100 kW across all markets would avoid any confusion caused by
artificial differences between the electric storage and distributed
energy resource aggregation participation models.\424\ Some commenters
argue that minimum size requirements greater than 100 kW pose a
significant barrier to entry.\425\ Direct Energy disagrees with ISO-
NE's assertion at the technical conference that there is no real need
for aggregation because there is no minimum size limitation for
participating in ISO-NE's markets, stating that while Direct Energy is
supportive of establishing a framework without minimum size limitations
for distributed energy resources, the lack of such limitations should
not serve as an alternative for aggregation.\426\ NRG states that 100
kW is an efficient minimum size requirement but that the participation
model for distributed energy resource aggregations should set minimum
resource participation thresholds only to the extent necessary to
accommodate existing metering and data management systems
infrastructure.\427\
---------------------------------------------------------------------------
\421\ See, e.g., Advanced Energy Management Comments (RM16-23)
at 16-17, 25-26; Mensah Comments (RM16-23) at 3; Efficient Holdings
Comments (RM16-23) at 8; NYISO Comments (RM16-23) at 15-16; Tesla/
SolarCity Comments (RM16-23) at 17, 26.
\422\ NYISO Comments (RM16-23) at 15-16; PJM Comments (RM16-23)
at 27. On January 23, 2020, the Commission accepted NYISO's tariff
revisions establishing a new participation model for aggregations of
resources, including distributed energy resources, which requires
that each energy, ancillary service, and capacity transaction on
behalf of an aggregation must have a minimum offer of 100 kW, and if
an aggregation offers a combination of withdrawals, injections, and/
or demand reductions, it must offer at least 100 kW of each. See
NYISO Aggregation Order, 170 FERC ] 61,033 at P 14.
\423\ Advanced Energy Management Comments (RM16-23) at 16-17;
Advanced Energy Economy Comments (RM16-23) at 51-52 (citing NOPR,
157 FERC ] 61,121 at P 94); California Energy Storage Alliance
Comments (RM16-23) at 7-8.
\424\ Tesla/SolarCity Comments (RM16-23) at 26.
\425\ Fresh Energy/Sierra Club/Union of Concerned Scientists
Comments (RM16-23) at 2 (citing MISO Market Subcommittee
Presentation, November 29th, 2016, https://www.misoenergy.org/Library/Repository/Meeting%20Material/Stakeholder/MSC/2016/20161129/20161) (stating that the integration of distributed energy resources
and smaller-scale resources is within the ``probable limit of
current systems''); Tesla/SolarCity Comments (RM16-23) at 27 (citing
N.Y. Indep. Sys. Operator, Inc., 155 FERC ] 61,166 (2016)).
\426\ Direct Energy Comments (2018 RM18-9) at 8-9 (citing
Technical Conference Transcript at 22).
\427\ NRG Comments (RM16-23) at 12; NRG Comments (2018 RM18-9)
at 4.
---------------------------------------------------------------------------
169. Several commenters argue that the Commission should provide
the RTOs/ISOs with flexibility to establish any minimum size
requirement for distributed energy resource aggregations based on their
ability to model and dispatch these resources.\428\ SoCal Edison states
that each RTO/ISO should be allowed to determine its own minimum size
requirements, providing the example of CAISO's requirement that
distributed energy resource aggregations be at least 500 kW to help
ensure that an aggregation is large enough to have a measurable impact
on the transmission system.\429\ EPRI and SoCal Edison both highlight
the software challenges and potential costs associated with
implementing a minimum size requirement at or below 100 kW.\430\
Pacific Gas & Electric asserts that RTOs/ISOs must be allowed to
account for the differences between interacting with aggregations and
stand-alone resources in their markets.\431\ MISO states that, to the
extent the Commission deems it necessary to set a volume threshold for
aggregated participation, the threshold should apply to registration
minimums and not be related to how RTOs/ISOs model or dispatch
resources.\432\ NYISO Indicated Transmission Owners assert that
aggregations should be subject to the same minimum size requirements as
traditional resources that are based on the services they are
providing.\433\
---------------------------------------------------------------------------
\428\ See, e.g., AES Companies Comments (RM16-23) at 34; IRC
Comments (RM16-23) at 7; ISO-NE Comments (RM16-23) at 36; MISO
Comments (RM16-23) at 20; Pacific Gas & Electric Comments (RM16-23)
at 17.
\429\ SoCal Edison Comments (RM16-23) at 11 (citing CAISO
Tariff, Section 4.17.5.1; CAISO, Transmittal Letter, Docket No.
ER16-1085, at 9 (filed March 4, 2016)).
\430\ EPRI Comments (2018 RM18-9) at 7-8; SoCal Edison Comments
(2018 RM18-9) at 5.
\431\ Pacific Gas & Electric Comments (RM16-23) at 17.
\432\ MISO Comments (2018 RM18-9) at 16-17.
\433\ NYISO Indicated Transmission Owners Comments (RM16-23) at
12.
---------------------------------------------------------------------------
170. Energy Storage Association agrees that a lower limit is
necessary but asserts that the Commission should not allow RTOs/ISOs to
place upper limits on the size of distributed energy resource
aggregations.\434\ In contrast, CAISO believes that the Commission
should adopt an upper limit on the size of these aggregations to ensure
reliable operation of the transmission system while obtaining more
experience with distributed energy resource aggregations. CAISO notes
that its Distributed Energy Resource Provider model imposes a maximum
capacity requirement of 20 MW on aggregations that span multiple
pricing nodes to limit the impact of these aggregations on congestion
on the CAISO grid without severely constraining the ability of
distributed energy resource providers to form viable aggregations.\435\
Similarly, SPP argues that the Commission should consider a maximum
size requirement for aggregations across multiple nodes but that no
maximum requirement is necessary for aggregations located at a single
node.\436\ University of Delaware's EV R&D Group argues that upper
power limits should allow for an aggregation of 100-200 kW resources as
this will better permit the participation of electric bus fleets.\437\
---------------------------------------------------------------------------
\434\ Energy Storage Association Comments (RM16-23) at 25-26.
\435\ CAISO Comments (RM16-23) at 25-26.
\436\ SPP Comments (RM16-23) at 16.
\437\ University of Delaware EV R&D Group Comments (2018 RM18-9)
at 1.
---------------------------------------------------------------------------
c. Commission Determination
171. We adopt the NOPR proposal, with modifications, and add Sec.
35.28(g)(12)(iii) to the Commission's regulations to require each RTO/
ISO to implement a minimum size requirement not to exceed 100 kW for
all distributed energy resource aggregations. We agree with commenters
that a minimum size requirement not to exceed 100 kW will help improve
competition in the RTO/ISO markets and avoid confusion about
appropriate minimum size requirements for distributed energy resource
aggregations under existing or new participation models. We do not
expect this requirement to overburden RTO/ISO modeling software with an
excessive number of small resources because 100 kW is currently a
commonly used resource size. In contrast, larger minimum size
requirements that may have been designed for different types of
resources could pose a significant barrier to entry for distributed
energy resource aggregations. In addition, this minimum size
requirement is consistent with the Commission's minimum size
requirement for electric storage resources in Order No. 841.\438\
---------------------------------------------------------------------------
\438\ Order No. 841, 162 FERC ] 61,127 at P 270.
---------------------------------------------------------------------------
172. Several RTOs/ISOs support a minimum size requirement not to
exceed 100 kW. PJM and SPP have a minimum size requirement of 100 kW
for all resources and support the same requirement for distributed
energy resource aggregations, and all of the RTOs/ISOs have at least
one participation model that allows resources as small as 100 kW to
[[Page 67125]]
participate in their markets.\439\ However, we recognize concerns about
the ability of modeling and dispatch software to handle a large number
of small distributed energy resource aggregations. Therefore, while we
require each RTO/ISO to implement on compliance a minimum size
requirement not to exceed 100 kW for all distributed energy resource
aggregations, we will consider any future post-implementation requests
to increase the minimum size requirement above 100 kW if the RTO/ISO
demonstrates that it is experiencing difficulty calculating efficient
market results and there is not a viable software solution for
improving such calculations.\440\
---------------------------------------------------------------------------
\439\ See, e.g., CAISO Data Request Response (AD16-20) at 10-11;
ISO-NE Data Request Response (AD16-20) at 13-14; MISO Data Request
Response (AD16-20) at 10; NYISO Data Request Response (AD16-20) at
9; PJM Data Request Response (AD16-20) at 10.
\440\ The Commission offered the RTOs/ISOs a similar
accommodation for the minimum size requirement for electric storage
resources. See Order No. 841, 162 FERC ] 61,127 at P 275.
---------------------------------------------------------------------------
173. We agree with the post-technical conference comments that a
minimum size requirement that is lower than some existing RTO/ISO
minimum size requirements will help alleviate concerns about the
ability of single node aggregations to achieve the necessary minimum
size, particularly given our findings on locational requirements for
distributed energy resource aggregations.\441\ NYISO recently adopted
this approach, stating that because it decided to limit distributed
energy resource aggregations to a single pricing node in its
distributed energy resources roadmap, NYISO thought it was appropriate
to lower the minimum size threshold for distributed energy resource
aggregations to 100 kW.\442\ Therefore, not only will a minimum size
requirement that does not exceed 100 kW remove a barrier to distributed
energy resource aggregations, improve competition in RTO/ISO markets,
avoid confusion about appropriate requirements, and help ensure just
and reasonable rates, but application of this requirement in
conjunction with our findings on locational requirements, discussed in
Section IV.D below, will help alleviate any adverse competitive impacts
that single node aggregations may have.\443\
---------------------------------------------------------------------------
\441\ See infra Section IV.D (Locational Requirements).
\442\ Technical Conference Transcript at 27; see NYISO
Aggregation Order, 170 FERC ] 61,033.
\443\ See infra Section IV.D (Locational Requirements).
---------------------------------------------------------------------------
174. We are not persuaded by commenters to adopt a maximum size
requirement for distributed energy resource aggregations that span
multiple pricing nodes. We do not see a need to adopt such a
requirement because, as explained in Section IV.E below, to the extent
that RTOs/ISOs allow for multi-node distributed energy resource
aggregations, distribution factors and bidding parameters should
provide the RTOs/ISOs with the information from geographically
dispersed resources in a distributed energy resource aggregation
necessary to reliably operate their systems regardless of the size of
the aggregation.\444\ We also note that, given our findings on
locational requirements, we are not requiring RTOs/ISOs to establish
multi-node distributed energy resource aggregations.\445\
---------------------------------------------------------------------------
\444\ See infra Section IV.E (Distribution Factors and Bidding
Parameters).
\445\ See infra Section IV.D (Locational Requirements).
---------------------------------------------------------------------------
5. Minimum and Maximum Capacity Requirements for Distributed Energy
Resources Participating in an Aggregation
a. NOPR Proposal
175. The Commission proposed not to establish a minimum or maximum
capacity requirement for an individual distributed energy resource to
be able to participate in RTO/ISO markets through a distributed energy
resource aggregator.\446\ The Commission stated that it believes
participation in RTO/ISO markets through a distributed energy resource
aggregator should not be conditioned on the size of the resource but
recognized that existing RTO/ISO market rules may require distributed
energy resources to meet certain minimum or maximum capacity
requirements under certain participation models. Therefore, the
Commission sought comment on whether to establish a minimum or maximum
capacity limit for individual distributed energy resources seeking to
participate in RTO/ISO markets through a distributed energy resource
aggregator, or whether to allow each RTO/ISO to propose such a minimum
or maximum capacity requirement on compliance with any final rule
issued in this rulemaking proceeding. To the extent that commenters
believe that the Commission should adopt a minimum or maximum capacity
requirement for individual distributed energy resources participating
in RTO/ISO markets through a distributed energy resource aggregator,
the Commission sought comment on what that requirement should be.
---------------------------------------------------------------------------
\446\ NOPR, 157 FERC ] 61,121 at P 135.
---------------------------------------------------------------------------
b. Comments
176. Several commenters support the Commission's proposal not to
establish a minimum capacity requirement for individual distributed
energy resources participating in RTO/ISO markets through distributed
energy resource aggregations.\447\ Some commenters state that minimum
or maximum capacity requirements are not necessary for individual
distributed energy resources because the aggregator will interact with
the wholesale market as a single resource and, as such, that
aggregation will be subject to eligibility rules.\448\ Fluidic, Fresh
Energy/Sierra Club/Union of Concerned Scientists, and Tesla/SolarCity
argue that aggregators should be allowed to optimize their portfolio
with any mix of resources to ensure the most cost-effective
aggregation.\449\ Energy Storage Association notes that, while many
behind-the-meter electric storage resources are relatively small (only
a few kW in some cases), in aggregate, they can operate nearly
identically to a single, much larger electric storage resource.\450\
---------------------------------------------------------------------------
\447\ See, e.g., APPA/NRECA Comments (16-23) at 43; Fluidic
Comments (RM16-23) at 5; Fresh Energy/Sierra Club/Union of Concerned
Scientists Comments (RM16-23) at 2; ISO-NE Comments (RM16-23) at 36;
NYISO Indicated Transmission Owners Comments (RM16-23) at 12.
\448\ See, e.g., NYISO Indicated Transmission Owners Comments
(RM16-23) at 12; R Street Institute Comments (RM16-23) at 8; SEIA
Comments (RM16-23) at 18; SPP Comments (RM16-23) at 16; Tesla/
SolarCity Comments (RM16-23) at 27.
\449\ Fluidic Comments (RM16-23) at 5, Fresh Energy/Sierra Club/
Union of Concerned Scientists Comments (RM16-23) at 2; Tesla/
SolarCity Comments (RM16-23) at 27.
\450\ Energy Storage Association Comments (RM16-23) at 25-26.
---------------------------------------------------------------------------
177. Several commenters ask the Commission to defer to the RTOs/
ISOs to propose and justify to the Commission any minimum and maximum
capacity requirements for individual distributed energy resources
participating in RTO/ISO markets through distributed energy resource
aggregations.\451\ EEI argues that the RTO/ISO-established requirements
should be based on their individual market rules and their ability to
verify the accuracy of the metering and the verification process for
the resource.\452\ NYISO notes that it is evaluating whether there
should be a maximum size for a distributed energy resource in an
aggregation in order to permit
[[Page 67126]]
independent modeling of relatively large distributed energy resources
and provide grid operators more operational awareness and control over
distributed energy resources that may be needed to address system
conditions.\453\
---------------------------------------------------------------------------
\451\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
51; Duke Energy Comments (RM16-23) at 5; ISO-NE Comments (RM16-23)
at 36; MISO Transmission Owners Comments (RM16-23) at 20; Pacific
Gas & Electric Comments (RM16-23) at 16.
\452\ EEI Comments (RM16-23) at 27.
\453\ NYISO Comments (RM16-23) at 15. The Commission accepted
NYISO's proposal to limit the size of resources in an aggregation to
20 MW or less. NYISO Aggregation Order, 170 FERC ] 61,033 at P 9.
---------------------------------------------------------------------------
178. MISO Transmission Owners argue that capacity limits should be
identified at the RTO/ISO level unless a distribution utility is
impacted, in which case the distribution utility should have discretion
to set its own requirements so that any minimum size requirement
respects capacity limitations on a distribution circuit, whether
individual or in the aggregate.\454\ Similarly, APPA/NRECA assert that
the Commission has no jurisdiction over facilities used for generation
or local distribution and that state and local regulators are likely
best equipped to address minimum or maximum capacity requirements.\455\
---------------------------------------------------------------------------
\454\ MISO Transmission Owners Comments (RM16-23) at 20.
\455\ APPA/NRECA Comments (RM16-23) at 43.
---------------------------------------------------------------------------
c. Commission Determination
179. To implement Sec. 35.28(g)(12)(ii)(a) of the Commission's
regulations, we adopt the NOPR proposal, as modified below, and will
not establish a minimum or maximum capacity requirement for individual
distributed energy resources to participate in RTO/ISO markets through
a distributed energy resource aggregation. Although we decline to
establish a specific maximum capacity requirement for individual
distributed energy resources in an aggregation, we direct each RTO/ISO
to propose a maximum capacity requirement for individual distributed
energy resources participating in its markets through a distributed
energy resource aggregation or, alternatively, to explain why such a
requirement is not necessary, as discussed further below.
180. We decline to require RTOs/ISOs to adopt minimum capacity
requirements for individual distributed energy resources to participate
in their markets through a distributed energy resource aggregation. We
agree with commenters that minimum capacity requirements for
distributed energy resources to participate in an aggregation are not
necessary because each individual resource will participate in the
market via an aggregation, which acts as a single resource. To this
end, we note that distributed energy resource aggregators, as market-
interfacing entities, are responsible for meeting applicable RTO/ISO
qualification and performance requirements, including minimum size
requirements, and for determining how any performance penalties or
deratings determined by the RTO/ISO would apply to the individual
resources in an aggregation.
181. While we find that minimum capacity requirements are
unnecessary, we recognize the concerns raised by EEI and NYISO with
respect to each RTO's/ISO's ability to accurately model and verify the
metering of larger distributed energy resources. We believe that
capping the maximum capacity size of an individual distributed energy
resource participating in a distributed energy resource aggregation
would ensure that larger resources are required to participate
individually, thereby allowing RTOs/ISOs to independently model and
verify the metering of these larger resources. Independent modeling and
verification may provide system operators with greater operational
awareness and control to address changing system conditions. Therefore,
to implement Sec. 35.28(g)(12)(ii)(a) of the Commission's regulations,
we require each RTO/ISO, in compliance with this final rule, to either
propose a maximum capacity requirement for individual distributed
energy resources participating in its markets through a distributed
energy resource aggregation or, alternatively, to explain why such a
requirement is not necessary.
6. Single Resource Aggregation
a. NOPR Proposal
182. The NOPR proposed, consistent with Order No. 719, that each
RTO/ISO revise its tariff to allow a single qualifying distributed
energy resource to avail itself of the proposed distributed energy
resource aggregation rules by serving as its own distributed energy
resource aggregator.\456\
---------------------------------------------------------------------------
\456\ NOPR, 157 FERC ] 61,121 at P 137 (citing Order No. 719,
125 FERC ] 61,071 at P 158(d)).
---------------------------------------------------------------------------
b. Comments
183. AES Companies, NextEra, and NYISO agree with the Commission's
proposal to require each RTO/ISO to revise its tariff to allow a single
qualifying distributed energy resource to avail itself of the proposed
distributed energy resource aggregation rules by serving as its own
distributed energy resource aggregator.\457\ CAISO states that,
consistent with the NOPR proposal, CAISO allows a distributed energy
resource provider to aggregate one or more distributed energy resources
for purposes of wholesale market participation.\458\
---------------------------------------------------------------------------
\457\ AES Companies Comments (RM16-23) at 39; NextEra Comments
(RM16-23) at 14; NYISO Comments (RM16-23) at 16.
\458\ CAISO Comments (RM16-23) at 26.
---------------------------------------------------------------------------
184. Xcel Energy Services suggests that a higher minimum threshold
size should be established for single distributed energy resource
aggregations because a proliferation of individual aggregators could
increase administrative costs.\459\
---------------------------------------------------------------------------
\459\ Xcel Energy Services Comments (RM16-23) at 24.
---------------------------------------------------------------------------
c. Commission Determination
185. To implement Sec. 35.28(g)(12)(ii)(a) of the Commission's
regulations, we adopt the NOPR proposal to require each RTO/ISO to
revise its tariff to allow a single qualifying distributed energy
resource to avail itself of the proposed distributed energy resource
aggregation rules by serving as its own distributed energy resource
aggregator.\460\
---------------------------------------------------------------------------
\460\ See supra P 118 n.280.
---------------------------------------------------------------------------
186. We decline to require a minimum size greater than 100 kW for a
single qualifying distributed energy resource that serves as its own
distributed energy resource aggregator, as requested by Xcel Energy
Services. We find that such a requirement is unnecessary at this time
as the 100 kW minimum size requirement is a commonly used resource size
that should not overburden RTO/ISO modeling software even if many
individual resources choose to participate as such single distributed
energy resource aggregations. In addition, a consistent minimum size
requirement for aggregations of both single and multiple distributed
energy resources will minimize barriers in the event that an individual
distributed energy resource ceases to participate in a multi-resource
aggregation and subsequently seeks to participate in RTO/ISO markets as
a single qualifying distributed energy resource aggregation. As
discussed above in Section IV.C.5, a single distributed energy resource
aggregation would need to comply with all of the applicable RTO's/ISO's
requirements, including any minimum or maximum capacity requirements
for individual distributed energy resources.\461\ We clarify that, like
other distributed energy resources seeking to participate in RTO/ISO
markets exclusively through a distributed energy resource aggregation,
we will not exercise jurisdiction over the interconnection to a
distribution facility of a distributed energy resource for the purpose
of participating in RTO/ISO markets exclusively through a single-
[[Page 67127]]
resource aggregation. We also clarify that a single qualifying
distributed energy resource that serves as its own aggregator would
also be subject to any requirements applicable to distributed energy
resource aggregators.
---------------------------------------------------------------------------
\461\ See supra Section IV.C.5 (Minimum and Maximum Capacity
Requirements).
---------------------------------------------------------------------------
D. Locational Requirements
a. NOPR Proposal
187. In the NOPR, the Commission stated that it was concerned that
some existing requirements for aggregations to be located behind a
single point of interconnection or pricing node may be overly stringent
and may unnecessarily restrict opportunities for distributed energy
resources to participate in the RTO/ISO markets through a distributed
energy resource aggregator.\462\ The Commission noted that recent
improvements in metering, telemetry, and communication technology
should facilitate better situational awareness and enable management of
geographically dispersed distributed energy resource aggregations,
potentially rendering such restrictive locational requirements
unnecessary.
---------------------------------------------------------------------------
\462\ NOPR, 157 FERC ] 61,121 at P 138.
---------------------------------------------------------------------------
188. Thus, the Commission proposed to require each RTO/ISO to
revise its tariff to establish locational requirements for distributed
energy resources to participate in a distributed energy resource
aggregation that are as geographically broad as technically
feasible.\463\ The Commission stated that this proposal would give each
RTO/ISO flexibility to adopt locational requirements that both allow
for the participation of geographically dispersed distributed energy
resources in the RTO/ISO markets through a distributed energy resource
aggregation, where technically feasible, and also account for the
modeling and dispatch of the RTO's/ISO's transmission system. The
Commission further acknowledged that the appropriate locational
requirements may differ based on the services that a distributed energy
resource aggregator seeks to provide (e.g., the locational requirements
for participation in the day-ahead energy market may differ from those
for participation in ancillary service markets).
---------------------------------------------------------------------------
\463\ Id. P 139.
---------------------------------------------------------------------------
189. To the extent that commenters would prefer that the Commission
require the RTOs/ISOs to adopt consistent locational requirements, the
Commission sought comment on what locational requirements it could
require each RTO/ISO to adopt that would allow distributed energy
resources to be aggregated as widely as possible without threatening
the reliability of the transmission grid or the efficiency of RTO/ISO
markets.\464\ The Commission noted that, in some RTOs/ISOs and for some
services, the only geographic limitations imposed on distributed energy
resource aggregations are by zone or due to modeled transmission
constraints.\465\ The Commission also sought comment on potential
concerns about dispatch, pricing, or settlement that the RTOs/ISOs must
address if the distributed energy resources in a particular distributed
energy resource aggregation are not limited to the same pricing node or
behind the same point of interconnection.\466\
---------------------------------------------------------------------------
\464\ Id. P 140.
\465\ Id. n.233 (citing CAISO and NYISO tariff provisions).
\466\ Id. P 141. The Commission noted that its proposal to allow
the relevant distribution utility or utilities to review the list of
distributed energy resources in a distributed energy resource
aggregation would help ensure that dispatch of the aggregated
distributed energy resources as a single resource will not cause any
reliability concerns.
---------------------------------------------------------------------------
190. At the April 2018 technical conference, the Commission sought
comment on how to establish locational requirements for distributed
energy resource aggregations that are as broad as technically
feasible.\467\ After the technical conference, the Commission sought
further comment on how RTOs/ISOs can accurately represent distributed
energy resources in each node within a multi-node aggregation.\468\
---------------------------------------------------------------------------
\467\ Supplemental Notice of Technical Conference at 2-3.
\468\ Notice Inviting Post-Technical Conference Comments at 2-3.
---------------------------------------------------------------------------
b. Comments
191. Several commenters support the Commission's proposal to
require distributed energy resource aggregations that are as
geographically broad as technically feasible and cite numerous benefits
of broad aggregation.\469\ IRC states that this proposal strikes the
appropriate balance between accommodating smaller distributed energy
resources and providing the necessary flexibility to RTOs/ISOs.\470\
Advanced Energy Economy contends that aggregation across a broad
geographic area is fundamental to the distributed energy resource
business model.\471\ Advanced Energy Management contends that the
larger the aggregation, the lower the chance of underperformance.\472\
Several commenters support multi-node aggregation, stating that it will
improve market entry and overall competitive benefits.\473\ Others
assert that multi-node aggregation will improve the services that
distributed energy resource aggregations can provide, enhancing grid
resilience and reliability.\474\
---------------------------------------------------------------------------
\469\ See, e.g., Advanced Energy Management Comments (RM16-23)
at 24; DER/Storage Developers Comments (RM16-23) at 4; Efficient
Holdings Comments (RM16-23) at 17-18; IRC Comments (RM16-23) at 8;
NRG Comments (RM16-23) at 10-11.
\470\ IRC Comments (RM16-23) at 8.
\471\ Advanced Energy Economy Comments (RM16-23) at 45.
\472\ Advanced Energy Management Comments (RM16-23) at 24.
\473\ See, e.g., Advanced Energy Buyers Comments (2018 RM18-9)
at 7; CAISO Comments (2018 RM18-9) at 10-11; EPRI Comments (2018
RM18-9) at 6; NRG Comments (2018 RM18-9) at 4-5; SEIA Comments (2018
RM18-9) at 14.
\474\ Advanced Energy Management Comments (2018 RM18-9) at 5;
Direct Energy Comments (2018 RM18-9) at 2-3; Lorenzo Kristov
Comments (2018 RM18-9) at 14; SEIA Comments (2018 RM18-9) at 14.
---------------------------------------------------------------------------
192. Several commenters highlight examples of current RTO/ISO
activities supporting broad geographic aggregation. Advanced Energy
Economy states that PJM and NYISO have allowed aggregation at a broad
level for behind-the-meter resources.\475\ Several commenters note that
CAISO allows aggregation across nodes by permitting an aggregator to
submit distribution factors.\476\ Advanced Energy Management highlights
that ISO-NE allows aggregation at the dispatch zone level, stating that
this suggests that it is technically feasible to aggregate behind-the-
meter resources to that level even for energy and ancillary services
participation.\477\
---------------------------------------------------------------------------
\475\ Advanced Energy Economy Comments (RM16-23) at 45.
\476\ Id.; DER/Storage Developers Comments (RM16-23) at 4;
Tesla/SolarCity Comments (RM16-23) at 28. CAISO uses load
distribution factors to reflect the relative amount of load at each
node. The sum of all load distribution factors for a single
aggregation is one. See CAISO Tariff, Appendix A.
\477\ Advanced Energy Management Comments (RM16-23) at 25.
---------------------------------------------------------------------------
193. Multiple commenters also articulate concerns regarding
limiting distributed energy resource aggregations to a single
node.\478\ Advanced Energy Economy and Advanced Energy Management
contend that aggregation limited to the nodal level will not meet the
``geographically broad as technically feasible'' standard, and Advanced
Energy Management asks the Commission to clarify that it does not.\479\
Advanced Energy Economy and CAISO further caution against the economic
effects of single-node aggregation, stating that it would erode
[[Page 67128]]
the economics of aggregating distributed energy resources and create a
barrier to their wholesale market participation.\480\
---------------------------------------------------------------------------
\478\ See, e.g., AES Companies Comments (RM16-23) at 36;
Efficient Holdings Comments (RM16-23) at 18; Public Interest
Organizations Comments (RM16-23) at 24; R Street Institute Comments
(RM16-23) at 9; Sunrun Comments (2018 RM18-9) at 14.
\479\ Advanced Energy Economy Comments (RM16-23) at 46-47;
Advanced Energy Management Comments (RM16-23) at 24.
\480\ Advanced Energy Economy Comments (2018 RM18-9) at 22;
CAISO Comments (2018 RM18-9) at 10-11.
---------------------------------------------------------------------------
194. Several commenters state that, at the technical conference,
CAISO and PJM described workable approaches to mitigate any reliability
concerns and to achieve proper price formation for multi-node
aggregations of distributed energy resources.\481\ Other commenters
point to approaches used elsewhere, such as multi-node aggregations of
demand response resources in other regions.\482\ Organization of MISO
States comments that, in MISO, multi-node aggregation is allowed for
purposes of capacity accreditation, but only for a limited set of
resource types.\483\
---------------------------------------------------------------------------
\481\ Advanced Energy Economy Comments (2018 RM18-9) at 22;
Advanced Energy Management Comments (2018 RM18-9) at 5-6; Direct
Energy Comments (2018 RM18-9) at 6 (citing Technical Conference
Transcript at 17, 18, 53); Sunrun Comments (2018 RM18-9) at 14.
\482\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 22; Advanced Energy Management Comments (2018 RM18-9) at 6
(citing ISO-NE Comments, Docket No. AD16-20-000 (filed Feb. 13,
2017) (``ISO-NE explains that, for the capacity market, demand
resources may consist of an aggregation of multiple end-use
customers, though they must be at least 100 kW and located within a
dispatch zone or load zone as required under the participation model
through which they are participating. ISO-NE further explains that
for the energy and reserve markets, demand response resources may
also be aggregated as long as they are individually at least 10 kW,
have an expected maximum interruptible capacity of 5 MW or less, and
are located within a dispatch zone and reserve zone.'')); CAISO
Comments (2018 RM18-9) at 10, 12-13; Lorenzo Kristov Comments (2018
RM18-9) at 14; PJM Market Monitor Comments (2018 RM18-9) at 7-8.
\483\ Organization of MISO States Comments (2018 RM18-9) at 2
(citing Midcontinent Independent System Operator, Open Access
Transmission, Energy, and Operating Reserve Markets Tariff, Module
E-1, Section 69A.3.5).
---------------------------------------------------------------------------
195. Other commenters further express support for the feasibility
of dispatching and settling distributed energy resource aggregations
across multiple nodes. For instance, PJM explains that it already
dispatches demand response resources across varying levels of
geographic areas, including across different pricing nodes, which could
be used as a foundation for developing similar rules to dispatch
distributed energy resources injecting past the applicable retail
meter.\484\ Xcel Energy Services states that it is not concerned with
aggregations across multiple nodes if the region has accurate topology
models, volumetric weightings, and billing/settlement metering at each
location (and penalties are assessed at the individual resource level
to disincentivize gaming, manipulation, and price formation
errors).\485\ Avangrid contends that provisions that would allow
``settlement-only'' generation treatment for aggregated distributed
energy resources would allow aggregation of these resources on a
broader load zone basis for energy market settlement.\486\
---------------------------------------------------------------------------
\484\ PJM Comments (RM16-23) at 28.
\485\ Xcel Energy Services Comments (RM16-23) at 25.
\486\ Avangrid Comments (RM16-23) at 12.
---------------------------------------------------------------------------
196. Some commenters address the relationship between the minimum
and maximum size requirement for distributed energy resource
aggregations and the locational requirements for them. Eversource and
other commenters state that limiting the maximum size of a distributed
energy resource aggregation can also mitigate any negative operational
impacts of geographically broad aggregations.\487\ Tesla/Solar City
state that a minimum size requirement of 100 kW would allow the
reasonable development of aggregations within any locational
requirement established for distributed energy resource
aggregations.\488\ In their comments in response to the Notice Inviting
Post-Technical Conference Comments, multiple commenters agree that
reducing the minimum size requirement for distributed energy resource
aggregations to 100 kW may alleviate concerns about requiring
aggregations to be located at a single node.\489\ Organization of MISO
States observes that lowering the minimum size requirement for
distributed energy resource aggregations would decrease the need for
broad aggregation across Local Balancing Authorities and that this
could also reduce the size of resources, which inherently lowers any
related reliability risk to the system.\490\ Lorenzo Kristov states
that single-node distributed energy resource aggregations that meet the
minimum size threshold would be useful resources for the wholesale
market, so the question is whether the additional complexity of multi-
node distributed energy resource aggregations has commensurate
benefits.\491\ SEIA states that it supports a 100 kW minimize size
limit, but does not support limiting aggregations to single pricing
nodes.\492\
---------------------------------------------------------------------------
\487\ Advanced Energy Economy Comments (2018 RM18-9) at 22
(citing Technical Conference Transcript, Comments of Andrew Levitt,
Senior Market Strategist, PJM Interconnection, L.L.C., at p. 20,
lines 2-8, and P 49, lines 21-24 (noting the ability of economic
dispatch engines to manage any constraints that may be caused by
dispatching individual resources within an aggregation)); CAISO
Comments (2018 RM18-9) at 5; Eversource Comments (2018 RM18-9) at
13; PJM Comments (2018 RM18-9) at 5, 11-12; SEIA Comments (2018
RM18-9) at 14.
\488\ Tesla/SolarCity Comments (RM16-23) at 26.
\489\ See, e.g., EPRI Comments (2018 RM18-9) at 7-8; Lorenzo
Kristov Comments (2018 RM18-9) at 14; Organization of MISO States
Comments (2018 RM18-9) at 2; PJM Comments (2018 RM18-9) at 12.
\490\ Organization of MISO States Comments (2018 RM18-9) at 2.
\491\ Lorenzo Kristov Comments (2018 RM18-9) at 14.
\492\ SEIA Comments (2018 RM18-9) at 14.
---------------------------------------------------------------------------
197. Other commenters, however, recommend that the Commission
restrict aggregation to one pricing node or interconnection point.\493\
Some commenters are concerned that a geographically broad locational
requirement could have potential reliability impacts on the
distribution system or the bulk electric system.\494\ For instance,
several RTOs/ISOs, including those that support multi-node
aggregations, express concerns related to managing the aggravation of
transmission constraints and resulting pricing and operational
implications in real time if aggregated resources were to span both
sides of a constraint.\495\ PJM Market Monitor states that the
potential addition of more distributed energy resources means they
should be aggregated at a single node to allow operators to have
visibility and control.\496\ PJM Market Monitor asserts that it is
impossible to ensure that dispatch of a multi-node aggregation of
distributed energy resources does not exacerbate a transmission
constraint in a nodal system.\497\
---------------------------------------------------------------------------
\493\ ISO-NE Comments (RM16-23) at 37-40; NYISO Comments (RM16-
23) at 17; NYISO Indicated Transmission Owners Comments (RM16-23) at
13-14; PJM Market Monitor Comments (RM16-23) at 13.
\494\ See, e.g., American Petroleum Institute Comments (RM16-23)
at 10-11; Duke Energy Comments (RM16-23) at 3, 5-6; EEI Comments
(RM16-23) at 28-29; Institute for Policy Integrity Comments (RM16-
23) at 9; Pacific Gas & Electric Comments (RM16-23) at 18-19.
\495\ See, e.g., CAISO Comments (RM16-23) at 27; ISO-NE Comments
(RM16-23) at 37; MISO Comments (RM16-23) at 21-22; NYISO Comments
(2018 RM18-9) at 6, 16; SPP Comments (RM16-23) at 17-19.
\496\ PJM Market Monitor Comments (2018 RM18-9) at 12.
\497\ Id. at 4.
---------------------------------------------------------------------------
198. NYISO Indicated Transmission Owners argue that aggregations
spanning more than one transmission zone could present both
administrative and operational difficulties for the RTO/ISO and the
distribution utility and that aggregations should be limited to a
single transmission node unless price separation does not exist.\498\
EPSA and the PJM Market Monitor argue that because all the RTOs/ISOs
rely on nodal security constrained economic dispatch, it is appropriate
for a generic rule to limit aggregations to a single node to ensure
that the markets continue to be
[[Page 67129]]
efficient and competitive.\499\ EPRI states that aggregations at single
nodes would generally be the most beneficial for the distributed energy
resources financially, for the RTOs/ISOs with respect to reliability,
and for consumers economically.\500\ NYISO states that single-node
aggregation allows NYISO to telemeter only the aggregation rather than
each individual resource within the aggregation, reducing the cost of
participation and better allowing smaller resources to participate in
the NYISO markets.\501\
---------------------------------------------------------------------------
\498\ NYISO Indicated Transmission Owners Comments (RM16-23) at
13-14.
\499\ EPSA Comments (2018 RM18-9) at 8-9; PJM Market Monitor
Comments (2018 RM18-9) at 2-3.
\500\ EPRI Comments (2018 RM18-9) at 6.
\501\ NYISO Comments (2018 RM18-9) at 6, 8.
---------------------------------------------------------------------------
199. Commenters also address the dynamic nature of managing multi-
node aggregations of distributed energy resources--such as the
challenges that come from frequent changes in congestion patterns and
system topology.\502\ Several commenters express concerns that a
geographically broad locational requirement for distributed energy
resource aggregations could disrupt nodal pricing methods and result in
different treatment of resources located at a single node (i.e., among
multi-node distributed energy resource aggregations and
generators).\503\ Calpine states that it may be possible to revisit
procedures for multi-node aggregation of distributed energy resources
as the system topology changes due to congestion, but that rules
associated with locational requirements may not provide the flexibility
necessary for the RTOs/ISOs to manage dynamic grid conditions in real
time.\504\
---------------------------------------------------------------------------
\502\ CAISO Comments (2018 RM18-9) at 5-6; EPRI Comments (2018
RM18-9) at 3-4; MISO Comments (2018 RM18-9) at 18; NYISO Comments
(2018 RM18-9) at 6; PJM Market Monitor Comments (2018 RM18-9) at 3.
\503\ See, e.g., American Petroleum Institute Comments (RM16-23)
at 10-11; EEI Comments (RM16-23) at 28-30; ISO-NE Comments (RM16-23)
at 37-40; NYISO Indicated Transmission Owners at 16-17; PJM Market
Monitor Comments (RM16-23) at 13.
\504\ Calpine Comments (2018 RM18-9) at 4-5 (citing comments of
Dr. Joseph Bowring, Technical Conference Transcript at 37; comments
of Jeff Bladen, Technical Conference Transcript at 36).
---------------------------------------------------------------------------
200. With respect to whether the Commission should require the
RTOs/ISOs to adopt consistent locational requirements for distributed
energy resource aggregations, commenters provide varied
recommendations. Tesla/SolarCity recommend that the Commission
establish consistent locational requirements across the RTOs/ISOs,
similar to CAISO's Distributed Energy Resource Provider framework.\505\
Mensah supports locational requirements by distribution utility zones
or defined sub-zones, while noting locational requirements may vary
across RTOs/ISOs.\506\ Mensah asserts that locational requirements
should be consistent for all wholesale market services within an
individual RTO/ISO in order to avoid unnecessary complications.
---------------------------------------------------------------------------
\505\ Tesla/SolarCity Comments (RM16-23) at 27.
\506\ Mensah Comments (RM16-23) at 3.
---------------------------------------------------------------------------
201. Other commenters suggest that the RTOs/ISOs should have
flexibility to determine the locational requirements appropriate for
their region. Noting CAISO's approach to distributed energy resource
aggregation within ``sub-zones,'' ISO-NE's approach to self-scheduling
distributed energy resources, and the PJM Market Monitor's desire for
nodal aggregations, MISO argues that the Commission should allow each
RTO/ISO to establish tailored approaches based on its regional
needs.\507\ Similarly, Calpine and SoCal Edison assert that the
Commission should allow regional variations.\508\ PJM asserts that the
Commission should require RTOs/ISOs to adopt measures necessary to
ensure control of congestion, but should allow flexibility to tailor
those measures for individual systems.\509\
---------------------------------------------------------------------------
\507\ MISO Comments (2018 RM18-9) at 20 (citing Technical
Conference Transcript at 9-11, 14-15, 20-23).
\508\ Calpine Comments (2018 RM18-9) at 5-6; SoCal Edison
Comments (2018 RM18-9) at 3.
\509\ PJM Comments (2018 RM18-9) at 6-7.
---------------------------------------------------------------------------
202. Other commenters, including AES Companies and MISO
Transmission Owners, argue for regional flexibility but recommend that
other entities besides the RTOs/ISOs, such as affected balancing
authorities, distribution utilities, states, and non-regulated
distribution cooperatives, determine the locational requirements.\510\
---------------------------------------------------------------------------
\510\ AES Companies Comments (RM16-23) at 10, 34; MISO
Transmission Owners Comments (RM16-23) at 21.
---------------------------------------------------------------------------
203. Several of the commenters that support the Commission adopting
rules for multi-node aggregations suggest that the RTOs/ISOs could be
permitted to present evidence in their compliance filings demonstrating
that limiting aggregations is necessary for reliability reasons.\511\
Direct Energy and NRG argue that any limits or boundaries on
aggregations of distributed energy resources must be supported by a
transparent, comprehensive, and data-driven regional analysis, and that
a distributed energy resource's participation should only be precluded
if its participation would undermine reliability.\512\
---------------------------------------------------------------------------
\511\ Advanced Energy Economy Comments (2018 RM18-9) at 22-23;
Advanced Energy Management Comments (2018 RM18-9) at 6; Direct
Energy Comments (2018 RM18-9) at 3-4 (describing examples of
distributed energy resource aggregations being operated in Belgium,
France and Australia); NRG Comments (2018 RM18-9) at 5.
\512\ Direct Energy Comments (2018 RM18-9) at 4-5, 6-7 (citing
Technical Conference Transcript at 9, 34).
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c. Commission Determination
204. We adopt the NOPR proposal and add Sec. 35.28(g)(12)(ii)(b)
to the Commission's regulations to require each RTO/ISO to revise its
tariff to establish locational requirements for distributed energy
resources to participate in a distributed energy resource aggregation
that are as geographically broad as technically feasible. However,
given the variety of approaches to locational requirements proposed by
commenters, we will provide each RTO/ISO with flexibility to determine
the locational requirements for its region, as long as it demonstrates
that those requirements are as geographically broad as technically
feasible. To the extent that an RTO/ISO seeks to continue its currently
effective locational requirements for distributed energy resources, it
must demonstrate on compliance that its approach meets this
requirement. To comply with this rule, each RTO/ISO must provide a
detailed, technical explanation for the geographical scope of its
proposed locational requirements. This explanation could include, for
example, a discussion of the RTO/ISO's system topology and regional
congestion patterns, or any other factors that necessitate its proposed
locational requirements.
205. We recognize the arguments for both multi-node and single-node
aggregations. There are several benefits of multi-node aggregations,
such as improved market entry and competition, lower chance of
underperformance, and improved services that aggregations can provide.
However, single-node aggregations may reduce the cost of participation
for smaller resources by telemetering the aggregation rather than each
individual resource and allows RTOs/ISOs to better manage intra-zonal
price congestion. Additionally, as discussed above, the reduction of
the minimum size requirement for distributed energy resource
aggregations will help alleviate commenters' concerns about requiring
aggregations to locate only at a single node.\513\
---------------------------------------------------------------------------
\513\ See supra Section IV.C.4 (Minimum and Maximum Size of
Aggregation).
---------------------------------------------------------------------------
206. We are persuaded by comments that identify the various
benefits of multi-node distributed energy resource
[[Page 67130]]
aggregations. In particular, we are persuaded by CAISO's arguments that
multi-node aggregations allow for greater market participation by
reducing transaction costs and assembling appropriately sized resources
optimized for the wholesale electricity markets, and by PJM's assertion
that it already dispatches demand response resources across different
pricing nodes.\514\ We believe that the challenges of managing a multi-
node aggregation--especially around a transmission constraint--can be
overcome through coordination between RTOs/ISOs, aggregators, and
distribution system operators. However, we also recognize that existing
differences--both operational and administrative--among RTOs/ISOs make
such a uniform requirement challenging. Those differences are relevant
here because some RTOs/ISOs already aggregate resources in a different
manner, dynamic changes in system topology and congestion patterns vary
across each RTO/ISO, and each RTO/ISO may have different solutions
addressing reliability impacts on their respective systems.
Accordingly, while each RTO/ISO must provide a detailed, technical
explanation for the geographical scope of its proposed locational
requirements, this final rule provides RTOs/ISOs with a certain degree
of flexibility as to the technical aspects of a locational requirement
that is as geographically broad as possible.
---------------------------------------------------------------------------
\514\ See CAISO Comments (2018 RM18-9) at 10; PJM Comments
(RM16-23) at 28.
---------------------------------------------------------------------------
207. As to arguments regarding the relative merits of single node
and multi-node aggregations, we find that providing RTOs/ISOs with the
flexibility to establish their own locational requirements on
compliance that are as geographically broad as technically feasible
will allow such arguments to be considered in the stakeholder process
and in each RTO/ISO-specific compliance proceeding. We also are not
persuaded by Mensah's and Tesla/SolarCity's arguments for consistent
locational requirements either across the RTOs/ISOs or for all
wholesale market services within an individual RTO/ISO. We find that
there is no need to standardize the locational requirements and
therefore instead provide the RTOs/ISOs the flexibility to develop more
tailored approaches based on their regional needs. In addition, we are
not persuaded by AES Companies' and MISO Transmission Owners' arguments
that entities other than the RTO/ISO should determine the locational
requirements of distributed energy resources. We find that RTOs/ISOs
have the primary responsibility of administering the regional markets
and reliably operating the system, and are therefore in the best
position to propose on compliance the appropriate locational
requirements, as long as they demonstrate that those requirements are
as geographically broad as technically feasible, to enable distributed
energy resources to participate in a distributed energy resource
aggregation for their regions.
E. Distribution Factors and Bidding Parameters
a. NOPR Proposal
208. In the NOPR, the Commission proposed to require each RTO/ISO
to revise its tariff to include the requirement that distributed energy
resource aggregators (1) provide default distribution factors \515\
when they register their distributed energy resource aggregation; and
(2) update those distribution factors if necessary when they submit
offers to sell or bids to buy into the RTO/ISO markets.\516\ The
Commission also proposed to require each RTO/ISO to revise the bidding
parameters for each participation model in its tariff to allow
distributed energy resource aggregators to update their distribution
factors when participating in RTO/ISO markets. The Commission sought
comment on this proposal as well as comment on alternative approaches
that may provide the RTOs/ISOs with the information from geographically
or electrically dispersed resources in a distributed energy resource
aggregation necessary to reliably operate their systems. The Commission
also sought comment on whether bidding parameters in addition to those
already incorporated into existing participation models may be
necessary to adequately characterize the physical or operational
characteristics of distributed energy resource aggregations.
---------------------------------------------------------------------------
\515\ Distribution factors indicate how much of the total
response from a distributed energy resource aggregation would be
coming from each node at which one or more resources participating
in the aggregation are located.
\516\ NOPR, 157 FERC ] 61,121 at P 143.
---------------------------------------------------------------------------
209. After the April 2018 technical conference, the Commission
sought additional information about bidding parameters or other
potential mechanisms needed to represent the physical and operational
characteristics of distributed energy resource aggregations in RTO/ISO
markets.\517\
---------------------------------------------------------------------------
\517\ Notice Inviting Post-Technical Conference Comments at 4-5.
---------------------------------------------------------------------------
b. Comments
210. A number of commenters support the Commission's proposed
requirement for distributed energy resource aggregators to provide
default distribution factors to the RTO/ISO when registering
distributed energy resource aggregations and to update those
distribution factors as necessary.\518\ Tesla/SolarCity states that
this method strikes the proper balance between providing flexibility
and market access to distributed energy resource aggregators while
providing sufficient information to RTOs/ISOs about the locations of
the individual distributed energy resources and how dispatching them
will affect the system.\519\ DER/Storage Developers assert that
distribution factors would provide the RTO/ISO with sufficient
information to maintain reliability without requiring unnecessary
information about individual distributed energy resources.\520\
---------------------------------------------------------------------------
\518\ See, e.g., CAISO Comments (RM16-23) at 30; DER/Storage
Developers Comments (RM16-23) at 4; NextEra Comments (RM16-23) at
15; SEIA Comments (RM16-23) at 19; Xcel Energy Services Comments
(RM16-23) at 25.
\519\ Tesla/SolarCity Comments (RM16-23) at 28.
\520\ DER/Storage Developers Comments (RM16-23) at 4.
---------------------------------------------------------------------------
211. CAISO generally supports the Commission's proposal and notes
that its Distributed Energy Resource Provider model rules require an
aggregator to submit generation distribution factors with its bid.\521\
CAISO states that multi-node aggregations require distribution factors
to model the impact of the resource on the transmission system and that
allowing resources to update distribution factors in the bid submission
process mitigates the potential for inaccuracies. If an aggregator does
not submit distribution factors with its bid, CAISO states that it uses
the aggregation's default generation distribution factors registered in
CAISO's Master File for a reasonable expectation of how the resource
will perform across applicable pricing nodes.\522\ CAISO notes that
using distribution factors to schedule load is an acceptable and
feasible practice despite inherent inaccuracies.\523\ Microgrid
Resources Coalition notes that CAISO's Distributed Energy Resource
Provider model permits participation in aggregations of separately
metered resources independent of the various attributes of the other
loads and resources behind the meter and that the critical feature of
this arrangement is the ability to define the limits of participation
so that the aggregator and the system operator can dispatch the
aggregation within those
[[Page 67131]]
limits.\524\ Lorenzo Kristov also notes that the CAISO Distributed
Energy Resource Provider structure enables multi-node aggregations
using both default and biddable distribution factors.\525\ Lorenzo
Kristov states, however, that these provisions have not yet been
practically tested by a non-demand-response resource. Conversely, NYISO
states that it does not need distribution factors to dispatch
distributed energy resource aggregations accurately because it intends
to limit distributed energy resource aggregations to resources at a
single transmission node.\526\
---------------------------------------------------------------------------
\521\ CAISO Comments (2018 RM18-9) at 11.
\522\ CAISO Comments (RM16-23) at 30-31.
\523\ CAISO Comments (2018 RM18-9) at 11.
\524\ Microgrid Resources Coalition (2018 RM18-9) at 9.
\525\ Lorenzo Kristov Comments (2018 RM18-9) at 14.
\526\ NYISO Comments (RM16-23) at 17. The Commission accepted
NYISO's tariff provisions related to aggregations, which require
that facilities within an aggregation are electrically connected to
the same transmission node. NYISO Aggregation Order, 170 FERC ]
61,033 at PP 6, 11.
---------------------------------------------------------------------------
212. Other RTOs/ISOs assert that implementing the Commission's
proposal may be technically difficult. SPP states that implementing
distribution factors in the software is not trivial.\527\ MISO states
that it currently updates the distribution factors daily and that
updating more frequently may result in a significantly large amount of
data exchange and processing in the market system.\528\
---------------------------------------------------------------------------
\527\ SPP Comments (RM16-23) at 19.
\528\ MISO Comments (RM16-23) at 23.
---------------------------------------------------------------------------
213. Several RTOs/ISOs also describe the limitations of
distribution factor requirements. SPP notes that distribution factors
provide the reliability coordinator with the distribution of the
resources in the aggregation, but those factors do not guarantee that
the resources in the aggregation will move pro-rata. SPP asserts that
the uncertainty in the aggregate response may cause a reliability issue
by introducing uncertainty in its effective dispatch to resolve
constraints. SPP adds that the economics and pricing of the aggregate
may not reflect the actual response on the sub-aggregate level.\529\
Similarly, ISO-NE also argues that distribution factors may vary based
on the actual level of dispatch of the aggregate, for example, there
could be a large difference between distribution factors based upon the
maximum MW output and the minimum MW output of an aggregation.\530\
Pacific Gas & Electric suggests that, because the distribution factors
will impact settlements and congestion, distributed energy resource
aggregations should use an outage management-like system to report if
real-time distribution factors differ from those that are used for the
market award.\531\
---------------------------------------------------------------------------
\529\ SPP Comments (RM16-23) at 19-20.
\530\ ISO-NE Comments (RM16-23) at 42-43.
\531\ Pacific Gas & Electric Comments (RM16-23) at 19.
---------------------------------------------------------------------------
214. Some commenters assert that the Commission should not impose
the distribution factor requirements in all regions. NYISO Indicated
Transmission Owners state that the application of distribution factors
may not be the optimal approach for dispatching resources within an
aggregation in all systems, especially if it leads to dispatching
resources on either side of a single constraint.\532\ NYISO Indicated
Transmission Owners argue that the Commission should require RTOs/ISOs
to develop solutions that are regionally appropriate and that promote
efficient dispatch of resources with effective resolution of
constraints on both the transmission and distribution systems.
---------------------------------------------------------------------------
\532\ NYISO Indicated Transmission Owners Comments (RM16-23) at
20.
---------------------------------------------------------------------------
215. Similarly, ISO-NE asks the Commission to allow each RTO/ISO to
develop an approach that works well in light of each region's
particular network configuration, infrastructure, and existing
operational processes.\533\ ISO-NE explains that, rather than providing
distribution factors, an aggregator could, for example, report the
expected MW capability at each node, or that size limits for being
dispatchable in the markets could be lowered, reducing the need to
aggregate across multiple nodes to participate.\534\ ISO-NE states
that, for a mesh network such as most of New England, using
distribution factors as the basis for dispatch is problematic.\535\
ISO-NE explains that a participant would be unable to predict the
changing power flows to multiple connected nodes without possessing the
same detailed knowledge of grid configuration used by ISO-NE and the
distribution utilities in real-time operations. As a result, ISO-NE
contends that any stated distribution factors could bear little
relation to real-time operations.
---------------------------------------------------------------------------
\533\ ISO-NE Comments (RM16-23) at 41.
\534\ Id. at 45.
\535\ Id. at 42.
---------------------------------------------------------------------------
216. ISO-NE contends that, in scenarios where the distribution
system is not radial to the transmission system, a single resource
located in the distribution network may have sensitivities to multiple
nodes in the transmission system.\536\ ISO-NE argues that it is not
reasonable for an aggregator to try to submit distribution factors for
each node as they would not have visibility to these sensitivities.
ISO-NE notes that it has addressed this problem with Asset-Related
Demand by only supporting aggregations of Asset-Related Demand that
have similar sensitivities to each node, so that an aggregated node can
be modeled to reflect the impacts to the system of the Asset-Related
Demand for which the Asset-Related Demand has a 100% distribution
factor. ISO-NE states that this approach may or may not be appropriate
for distributed energy resource aggregations and would require further
evaluation and coordination with the distribution utilities.\537\
---------------------------------------------------------------------------
\536\ Id. at 44.
\537\ Id. at 44-45.
---------------------------------------------------------------------------
217. In response to the Commission's request for comment on whether
bidding parameters in addition to those already incorporated into
existing participation models may be necessary to adequately
characterize the physical or operational characteristics of distributed
energy resource aggregations, some commenters argue that RTOs/ISOs
should be allowed to require additional bidding parameters for
distributed energy resource aggregations to reliably operate the bulk
power system and accurately reflect resources in the wholesale
markets.\538\ Stem suggests that bidding parameters in current RTO/ISO
rules assume that a resource's physical attributes, such as ramp rate
or maximum charge limit, are fixed values and that the resource is
dispatchable to those levels at all times, which will need to
change.\539\ Stem argues that behind-the-meter resources should be able
to elect to be out of the market at certain times, as long as their
existing service obligations are met.\540\ PJM Market Monitor asserts
that, as long as distributed energy resources are priced and dispatched
locationally, the existing offer parameters should address the
characteristics of the resources.\541\ Dominion argues that distributed
energy resource aggregators should be allowed to communicate
distributed energy resource aggregations' operating limitations to the
RTO/ISO and control their dispatch to the same extent as other
resources.\542\ Dominion adds that certain distributed energy
resources, such as solar generators, should also have the option to
only be curtailed for reliability concerns.
---------------------------------------------------------------------------
\538\ Dominion Comments (RM16-23) at 11; NYISO Comments (RM16-
23) at 17.
\539\ Stem Comments (RM16-23) at 15, 16.
\540\ Id. at 16.
\541\ PJM Market Monitor Comments (2018 RM18-9) at 5.
\542\ Dominion Comments (RM16-23) at 11.
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218. NYISO Indicated Transmission Owners assert that distributed
energy resource aggregations participating in capacity markets should
bid a capacity value that reflects the aggregation's
[[Page 67132]]
value in satisfying the peak period resource adequacy
requirements.\543\ NYISO Indicated Transmission Owners state that the
capacity value for distributed energy resource aggregations should take
into account various factors, such as variability of the aggregation,
extent to which the distributed energy resource aggregation is energy
limited, and composition of technologies that comprise the aggregation,
but underscores that solutions should be addressed during
implementation in each RTO's/ISO's stakeholder process to ensure
regional variations are accommodated.\544\
---------------------------------------------------------------------------
\543\ NYISO Indicated Transmission Owners Comments (RM16-23) at
11.
\544\ Id. at 11-12.
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219. MISO states that it needs more time to further investigate and
better understand the potential need for additional bidding parameters
for distributed energy resource aggregations.\545\ MISO asserts that
such parameters will likely be needed to the extent a distributed
energy resource may involve an aggregation of electric storage
resources and if the RTO/ISO is expected to manage their state of
charge. MISO explains that, as an example, distributed energy resource
aggregations might need to provide information describing sub-
aggregations for MISO to address security constraints associated with
separate distribution networks or separate nodes within a distribution
network.\546\
---------------------------------------------------------------------------
\545\ MISO Comments (RM16-23) at 23.
\546\ Id. at 23-24.
---------------------------------------------------------------------------
220. Advanced Microgrid Solutions asserts that RTOs/ISOs must have
separate rules regarding attributes, bidding parameters, and dispatch
in order to recognize the multiple uses for behind-the-meter electric
storage resources.\547\ Advanced Microgrid Solutions further explains
that some requirements relevant to a single-site resource are
irrelevant for an aggregation.\548\ For instance, Advanced Microgrid
Solutions states that an aggregation of behind-the-meter resources does
not have an equivalent to a state of charge for a single-site
distributed energy resource to be used as a bidding parameter for a
fleet of aggregated distributed energy resources and, instead, the
aggregator must bid based on calculated availability and should be
penalized if the fleet does not perform as bid. Furthermore, Microgrid
Resources Coalition asserts that microgrids can also provide wholesale
services with suitable metering and controls but that their
participation is frequently restricted.\549\ Microgrid Resources
Coalition argues that it is important that the resource be able to
define the limits of participation within the aggregation, so that it
can be dispatched within its own limits, noting that an aggregation
would be subject to penalties if it cannot comply.
---------------------------------------------------------------------------
\547\ Advanced Microgrid Solutions Comments (RM16-23) at 7.
\548\ Id. at 8.
\549\ Microgrid Resources Coalition Comments (RM16-23) at 6.
---------------------------------------------------------------------------
221. EPRI states that an injection of energy from a resource on the
distribution system usually results in reduced losses as compared to
the same injection on the transmission bus.\550\ EPRI argues that this
reduction of losses is one of the substantial values that distributed
energy resources can provide and that this value should be reflected in
marginal prices at distributed energy resource locations.\551\ EPRI
states that the RTO/ISO may not be able to calculate the value without
information on the distribution system, so this value may need to be
included as a bidding parameter, which may require verification by the
distribution utility.
---------------------------------------------------------------------------
\550\ EPRI Comments (RM16-23) at 28.
\551\ Id. at 29.
---------------------------------------------------------------------------
222. Several RTOs/ISOs do not believe that the Commission should
mandate additional universal bidding parameters. SPP believes that each
RTO/ISO should have the discretion to develop bidding parameters that
reflect their unique needs relative to their individual software and
applications.\552\ CAISO notes that its existing market participation
models available to distributed energy resource aggregations provide
the means to account for the physical and operational characteristics
of an aggregation and argues that no universal bidding parameters need
to be established.\553\
---------------------------------------------------------------------------
\552\ SPP Comments (RM16-23) at 20.
\553\ CAISO Comments (RM16-23) at 31.
---------------------------------------------------------------------------
223. Duke Energy argues that any RTO/ISO bidding parameters must
treat all resources comparably and not favor certain new technologies
or resources over others.\554\ NRG contends that, for aggregations,
bidding parameters should generally match the appropriate participation
model. For example, NRG states generation bidding parameters should
apply to aggregations composed strictly of distributed generators, and
demand response bidding parameters should apply to aggregations
containing only load resources with no ability to net inject into the
system.\555\ NRG notes that the bidding parameters for bi-directional
resources should be general enough to encompass requirements of
distributed energy resource aggregators as well as storage-only
resources.
---------------------------------------------------------------------------
\554\ Duke Energy Comments (RM16-23) at 6-7.
\555\ NRG Comments (RM16-23) at 14.
---------------------------------------------------------------------------
224. EPRI states that distribution factors are the primary unique
parameter, noting that they may need to be allowed to vary dynamically
in order for values to be as accurate as possible.\556\ EPRI also
suggests that the value of marginal distribution losses on the
distribution system is unique and may help the RTO/ISO determine
economically efficient resources.
---------------------------------------------------------------------------
\556\ EPRI Comments (2018 RM18-9) at 5.
---------------------------------------------------------------------------
c. Commission Determination
225. In this final rule, we adopt the NOPR proposal, as modified
below, and add Sec. 35.28(g)(12)(ii)(c) to the Commission's
regulations to require each RTO/ISO to establish market rules that
address distribution factors and bidding parameters for distributed
energy resource aggregations. Specifically, we require each RTO/ISO
that allows multi-node aggregations to revise its tariff to (1) require
that distributed energy resource aggregators give to the RTO/ISO the
total distributed energy resource aggregation response that would be
provided from each pricing node, where applicable, when they initially
register their aggregation and to update these distribution factors if
they change; \557\ and (2) incorporate appropriate bidding parameters
into its participation models as necessary to account for the physical
and operational characteristics of distributed energy resource
aggregations.\558\
---------------------------------------------------------------------------
\557\ We note that distribution factors are only necessary to
the extent that distributed energy resources participating in an
aggregation are located at different nodes. This methodology would
apply only when distributed energy resources located at different
nodes participate in the same aggregation to provide a particular
market service.
\558\ For example, such bidding parameters could include
response rates, ramp rates, and upper and lower operating limits.
See CAISO Tariff, Section 30.5.2.1; NYISO Tariffs, NYISO MST,
Section 4.2.1.3.3 (18.0.0).
---------------------------------------------------------------------------
226. As the Commission explained in the NOPR, RTOs/ISOs need to
know which resources in a distributed energy resource aggregation will
be responding to their dispatch signals and where those resources are
located.\559\ As the Commission also explained in the NOPR, this
information is particularly important if the resources in a distributed
energy resource aggregation are located across multiple points of
interconnection, multiple transmission or distribution lines, or
multiple nodes on the grid.
---------------------------------------------------------------------------
\559\ NOPR, 157 FERC ] 61,121 at P 142.
---------------------------------------------------------------------------
227. Additionally, we agree with commenters that some bidding
parameters for existing participation models may not accommodate the
[[Page 67133]]
unique features of certain distributed energy resource aggregations,
and that different bidding parameters may be needed to recognize
distributed energy resources' multiple uses. Therefore, we further
modify the NOPR proposal to require that each RTO/ISO incorporate
appropriate bidding parameters into its participation models as
necessary to account for the physical and operational characteristics
of distributed energy resource aggregations. In meeting this
requirement, each RTO/ISO must either (1) incorporate appropriate
bidding parameters that account for the physical and operational
characteristics of distributed energy resource aggregations into its
one or more new participation models for such aggregations; and/or (2)
adjust the bidding parameters of the existing participation models to
account for the physical and operational characteristics of distributed
energy resource aggregations.
228. We find that the revisions directed by this final rule will
provide distributed energy resource aggregators with the flexibility to
update their distribution factors and provide RTOs/ISOs with the
information needed to model aggregations accurately enough to issue
feasible dispatch instructions and maintain reliability.
229. However, several commenters contend that requiring the RTOs/
ISOs to account for distribution factors and other bidding parameters
as described in the NOPR may be technically difficult to implement, or
of little benefit considering the RTO's/ISO's network configuration. In
light of this concern, we find that, in meeting this requirement, each
RTO/ISO may revise its tariff to manage the locational attributes of
distributed energy resource aggregations in a manner that reflects the
RTO's/ISO's unique network configuration, infrastructure, and existing
operational processes. We will evaluate, upon compliance, the RTO's/
ISO's proposal to ensure that it will provide the RTO/ISO with
sufficient information from resources in a multi-node distributed
energy resource aggregation that is necessary to reliably operate its
systems without imposing undue burden on individual distributed energy
resources or utility distribution companies.\560\ RTOs/ISOs that allow
multi-node aggregations must, at a minimum, propose clear protocols
explaining how a distributed energy resource aggregation can provide
the required information and update that information when needed.
---------------------------------------------------------------------------
\560\ Id. P 143.
---------------------------------------------------------------------------
F. Information and Data Requirements
a. NOPR Proposal
230. In the NOPR, the Commission proposed that the distributed
energy resource aggregator must initially provide to the RTO/ISO a
description of the physical parameters of the distributed energy
resource aggregation, including (1) the total capacity; (2) the minimum
and maximum operating limits; (3) the ramp rate; (4) the minimum run
time; and (5) the default distribution factors, if applicable.\561\ The
Commission also proposed to require each RTO/ISO to revise its tariff
to require each distributed energy resource aggregator to provide the
RTO/ISO with a list of the distributed energy resources in the
distributed energy resource aggregation that includes information about
each of those distributed energy resources, including each resource's
capacity, location on the distribution system, and operating limits. In
addition, the Commission proposed to require each RTO/ISO to revise its
tariff to require distributed energy resource aggregators to maintain
aggregate settlement data for the distributed energy resource
aggregation so that the RTO/ISO can regularly settle with the
distributed energy resource aggregator for its market
participation.\562\ Lastly, the Commission proposed to require
distributed energy resource aggregators to maintain data, for a length
of time consistent with the RTO's/ISO's auditing requirements, for each
individual resource in its distributed energy resource aggregation so
that each resource can verify its performance if audited. The
Commission sought comment on these proposed data requirements and on
whether there are information and data requirements imposed by RTOs/
ISOs that apply to other market participants that should not apply to
individual distributed energy resources participating in RTO/ISO
markets through a distributed energy resource aggregation.\563\
---------------------------------------------------------------------------
\561\ Id. P 145.
\562\ Id. P 147.
\563\ Id. PP 146, 147.
---------------------------------------------------------------------------
b. Comments
231. Some commenters support the NOPR proposal to require
information and data requirements for individual distributed energy
resources. CAISO, EEI, and Organization of MISO States support
requiring distributed energy resource aggregators to provide a list of
individual resources and their location and technical
capabilities.\564\ The New York Commission asserts that local
distribution utilities must have information on the activities of
distributed energy resources, even when they are only providing
wholesale services.\565\ However, Mosaic Power requests that electric
distribution companies address their operational need for information
in the least restrictive manner possible, given that account owner
registration requirements would create prohibitive costs under its
business model.\566\ ISO-NE and NYISO request that the Commission give
them flexibility to develop their own information and data requirements
and urge the Commission to provide only high-level guidance.\567\
---------------------------------------------------------------------------
\564\ CAISO Comments (RM16-23) at 32; EEI Comments (RM16-23) at
31; Organization of MISO States Comments (RM16-23) at 8.
\565\ New York Commission Comments (RM16-23) at 14.
\566\ Mosaic Power Comments (RM16-23) at 6.
\567\ ISO-NE Comments (RM16-23) at 46-47; NYISO Comments (RM16-
23) at 17.
---------------------------------------------------------------------------
232. In contrast, many developers argue that information and data
requirements should only apply to the distributed energy resource
aggregation as a whole because (1) it is the single interface with the
RTO/ISO; and (2) it is not necessary for the RTO/ISO to model each and
every resource included in an aggregation to effectively model and
dispatch the aggregation.\568\ Efficient Holdings claims that failure
to account for the dynamic nature of a distributed energy resource
aggregation asset's performance capabilities and the likely turnover of
individual resources within a distributed energy resource aggregation
will place undue burden on these assets.\569\
---------------------------------------------------------------------------
\568\ See, e.g., Advanced Microgrid Solutions Comments (RM16-23)
at 8; AES Companies Comments (RM16-23) at 41, 45-46; DER/Storage
Developer Comments (RM16-23) at 3-4; MISO Transmission Owners
Comments (RM16-23) at 22; Stem Comments (RM16-23) at 13-14.
\569\ Efficient Holdings Comments (RM16-23) at 20.
---------------------------------------------------------------------------
233. Several commenters believe RTOs/ISOs currently have
information and data requirements for other market participants that
should not apply to individual distributed energy resources
participating in RTO/ISO markets through an aggregation.\570\ For
example, CAISO explains that it has certain requirements that do not
apply to distributed energy resources in an aggregation (e.g., its
meteorological data requirements that apply to eligible intermittent
resources do not extend to a distributed energy resource aggregation)
and urges the Commission to maintain a degree of flexibility on this
issue.\571\ R Street Institute similarly
[[Page 67134]]
argues that requiring the same meteorological data for distributed
energy resource aggregators as stand-alone variable energy resources
could impose undue burdens on individual distributed energy
resources.\572\ MISO argues that current data communication methods
between MISO, the local balancing authority, and the generation
operator may be cost prohibitive for distributed energy resource
aggregators.\573\ However, several distribution utilities argue that
information and data requirements should be comparable for all
wholesale market participants.\574\
---------------------------------------------------------------------------
\570\ CAISO Comments (RM16-23) at 33; Efficient Holdings
Comments (RM16-23) at 11, 19-20; R Street Institute Comments (RM16-
23) at 10.
\571\ CAISO Comments (RM16-23) at 32-34.
\572\ R Street Institute Comments (RM16-23) at 10.
\573\ MISO Comments (2018 RM18-9) at 19.
\574\ EEI Comments (RM16-23) at 31; Duke Energy Comments (RM16-
23) at 6; Xcel Energy Services Comments (RM16-23) at 26.
---------------------------------------------------------------------------
234. Some commenters generally support the requirements for
distributed energy resource aggregators to maintain aggregate
settlement data \575\ and maintain data for a defined length of time,
consistent with the RTO's/ISO's auditing requirements, for each
individual resource in the aggregation so that each resource can verify
its performance if audited.\576\ However, Sunrun requests that RTOs/
ISOs only apply these requirements to the aggregation and not to
individual resources within the aggregation.\577\
---------------------------------------------------------------------------
\575\ CAISO Comments (RM16-23) at 34; MISO Comments (RM16-23) at
25; Xcel Energy Services at 26.
\576\ CAISO Comments (RM16-23) at 34; IRC Comments (RM16-23) at
10; SoCal Edison Comments (RM16-23) at 12-13.
\577\ Sunrun Comments (RM16-23) at 5.
---------------------------------------------------------------------------
235. Advanced Energy Buyers state that RTOs/ISOs should facilitate
streamlined data collection and sharing, including from the RTO/ISO to
the distribution utility, to enable data-driven planning and operation
to maximize efficiency, as well as to send good investment signals to
enable customers to prioritize delivery of distributed energy resources
where they will add maximum value.\578\
---------------------------------------------------------------------------
\578\ Advanced Energy Buyers Comments (2018 RM18-9) at 7.
---------------------------------------------------------------------------
c. Commission Determination
236. Upon consideration of the comments, we adopt the NOPR
proposal, with modifications, and add Sec. 35.28(g)(12)(ii)(d) to the
Commission's regulations to require each RTO/ISO to establish market
rules that address information requirements and data requirements for
distributed energy resource aggregations. Specifically, we require each
RTO/ISO to revise its tariff to (1) include any requirements for
distributed energy resource aggregators that establish the information
and data that a distributed energy resource aggregator must provide
about the physical and operational characteristics of its aggregation;
(2) require distributed energy resource aggregators to provide a list
of the individual resources in its aggregation; and (3) establish any
necessary information that must be submitted for the individual
distributed energy resources. We also require each RTO/ISO to revise
its tariff to require distributed energy resource aggregators to
provide aggregate settlement data for the distributed energy resource
aggregation and to retain performance data for individual distributed
energy resources in a distributed energy resource aggregation for
auditing purposes.
237. With respect to the NOPR proposal that the distributed energy
resource aggregator initially provide to the RTO/ISO ``a description of
the physical parameters of the distributed energy resource
aggregation,'' \579\ we believe that the physical attributes of the
distributed energy resource aggregation as a whole may already be
captured by an RTO's/ISO's registration requirements for all market
participants or may otherwise be inapplicable to distributed energy
resource aggregations. Therefore, to avoid creating unnecessary or
redundant requirements for distributed energy resource aggregations and
to provide flexibility to the RTOs/ISOs, we do not adopt that proposal.
Rather, we require the RTOs/ISOs to revise their tariffs to establish
any necessary physical parameters that distributed energy resource
aggregators must submit as part of their registration process only to
the extent these parameters are not already represented in general
registration requirements or bidding parameters applicable to
distributed energy resource aggregations.
---------------------------------------------------------------------------
\579\ NOPR, 157 FERC ] 61,121 at P 145.
---------------------------------------------------------------------------
238. With respect to information requirements for individual
distributed energy resources, we do not adopt the NOPR proposal to
require each RTO/ISO to revise its tariff to require distributed energy
resource aggregators to provide the RTO/ISO with specific information
about each of the distributed energy resources in an aggregation,
including each resource's capacity, location on the distribution
system, and operating limits. Instead, we direct each RTO/ISO to revise
its tariff to require distributed energy resource aggregators to
provide a list of the individual distributed energy resources
participating in their aggregations to the RTO/ISO. If an RTO/ISO needs
additional information beyond this list, the RTO/ISO should identify
and explain in its compliance filing what additional specific
information about the individual distributed energy resources within an
aggregation that the RTO/ISO needs. The RTO/ISO should also propose how
the information requested must be shared with the RTO/ISO and affected
distribution utilities. As part of these tariff revisions, and as
further discussed in Section IV.I. below, each RTO/ISO must also
require that the distributed energy resource aggregator update that
list of individual resources and associated information as it changes.
We find that this approach provides greater flexibility to RTOs/ISOs
and imposes potentially less onerous requirements upon distributed
energy resource aggregators, while ensuring that necessary information
is conveyed to RTOs/ISOs.
239. We also clarify that the distributed energy resource
aggregator, not an individual distributed energy resource in the
aggregation, is the single point of contact with the RTO/ISO, and the
aggregator would be responsible for managing, dispatching, metering,
and settling the individual distributed energy resources in its
aggregation. As such, the RTO/ISO may only need the information
necessary to model and dispatch the distributed energy resource
aggregation as a whole, and thus we agree with commenters that sharing
detailed information about the individual distributed energy resources
may be an unnecessary and unduly burdensome requirement. We believe
that the modified approach described above strikes a reasonable balance
between the information needs of RTOs/ISOs and the burden that
providing such information can place on distributed energy resource
aggregators seeking to participate in RTO/ISO markets.
240. With respect to the aggregate settlement data for a
distributed energy resource aggregation, as well as performance data
for individual distributed energy resources in a distributed energy
resource aggregation, we find that these sets of information are
necessary for the participation of any type of resource in RTO/ISO
markets and to enable RTOs/ISOs to perform necessary audit functions.
Therefore, we adopt the NOPR proposal to require each RTO/ISO to revise
its tariff to require each distributed energy resource aggregator to
maintain and submit aggregate settlement data for the distributed
energy resource aggregation, so that the RTO/ISO can regularly settle
with the distributed energy resource aggregator for its market
participation,
[[Page 67135]]
and to provide, upon request from the RTO/ISO, performance data for
individual resources in a distributed energy resource aggregation for
auditing purposes.\580\ However, we clarify that the requirements for
settlement and performance data should be consistent with the
settlement and auditing data requirements for other market
participants. Additionally, while we believe that performance data for
individual distributed energy resources will be necessary for
distributed energy resource aggregations to comply with the data
retention and auditing procedures of the RTOs/ISOs, we are also
sympathetic to the concerns that data requirements for individual
distributed energy resources in a distributed energy resource
aggregation can be unduly burdensome. To reduce the burden on
distributed energy resource aggregators and the RTOs/ISOs, we find that
distributed energy resource aggregators should only be required to
retain that performance data for individual distributed energy
resources in an aggregation that the RTO/ISO deems necessary for
auditing purposes. Therefore, to the extent that an RTO/ISO does not
need certain performance data from individual distributed energy
resources in a distributed energy resource aggregation for auditing
purposes, it should not require a distributed energy resource
aggregator to retain that information for individual distributed energy
resources participating in a distributed energy resource aggregation.
With respect to Advanced Energy Buyers' assertion that RTOs/ISOs should
facilitate streamlined data collection and sharing, we decline to
prescribe the specific manner in which information and data should be
collected and shared with distribution utilities.
---------------------------------------------------------------------------
\580\ See id. P 147.
---------------------------------------------------------------------------
G. Metering and Telemetry System Requirements
a. NOPR Proposal
241. In the NOPR, the Commission stated that, while the distributed
energy resources in an aggregation will need to be directly metered,
the metering and telemetry system, i.e., hardware and software,
requirements RTOs/ISOs impose on distributed energy resource
aggregators and individual resources in distributed energy resource
aggregations can pose a barrier to the participation of these
aggregations in RTO/ISO markets.\581\ The Commission recognized that
RTOs/ISOs need metering data for settlement purposes and telemetry data
to determine a resource's real-time operational capabilities so that
they can efficiently dispatch resources. The Commission found, however,
that metering and telemetry systems are often expensive, potentially
creating a burden for small distributed energy resources. The
Commission stated that, while telemetry data about a distributed energy
resource aggregation is necessary for the RTO/ISO to efficiently
dispatch the aggregation, telemetry data for each individual resource
in the aggregation may not be.
---------------------------------------------------------------------------
\581\ NOPR, 157 FERC ] 61,121 at P 150.
---------------------------------------------------------------------------
242. The Commission stated that, while it did not propose to
require specific metering and telemetry systems for distributed energy
resource aggregators, it proposed to require each RTO/ISO to revise its
tariff to identify any necessary metering and telemetry hardware and
software requirements for distributed energy resource aggregators and
the individual resources in a distributed energy resource
aggregation.\582\ The Commission stated that these requirements must
ensure that the distributed energy resource aggregator can provide
necessary information and data to the RTO/ISO,\583\ but must not impose
unnecessarily burdensome costs on the distributed energy resource
aggregators or individual resources in a distributed energy resource
aggregation that may create a barrier to their participation in the
RTO/ISO markets.
---------------------------------------------------------------------------
\582\ Id. P 151.
\583\ Id. (citing the Commission's proposal pertaining to
information and data requirements).
---------------------------------------------------------------------------
243. The Commission noted that there may be different types of
resources in these aggregations, some in front of the meter, some
behind the meter with the ability to inject energy back to the grid,
and some behind the meter without the ability to inject energy to the
grid.\584\ The Commission therefore sought comment on whether the RTOs/
ISOs need to establish metering and telemetry hardware and software
requirements for each of the different types of distributed energy
resources that participate in the RTO/ISO markets through distributed
energy resource aggregations as well as whether the Commission should
establish specific metering and telemetry system requirements and, if
so, what requirements would be appropriate.
---------------------------------------------------------------------------
\584\ Id. P 151.
---------------------------------------------------------------------------
244. With respect to telemetry, the Commission stated that the
distributed energy resource aggregator should be able to provide to the
RTO/ISO the real-time capability of its aggregated resource in a manner
similar to the requirements for generators, including the operating
level of the resource and how much that resource can ramp up or ramp
down over its full range of capability, including its charging
capability for distributed energy resource aggregations that include
electric storage resources.\585\ The Commission further noted that
these telemetry system requirements may also need to be in place at
different locations for geographically dispersed distributed energy
resource aggregations that have to provide distribution factors or
other similar information.
---------------------------------------------------------------------------
\585\ Id. P 152.
---------------------------------------------------------------------------
245. With respect to metering, the Commission recognized that
distributed energy resources may be subject to metering system
requirements established by the distribution utility or local
regulatory authority.\586\ Therefore, the Commission proposed that each
RTO/ISO rely on meter data obtained through compliance with these
distribution utility or local regulatory authority metering system
requirements whenever possible for settlement and auditing purposes,
only applying additional metering requirements for distributed energy
resource aggregations when this data is insufficient.
---------------------------------------------------------------------------
\586\ Id.
---------------------------------------------------------------------------
b. Comments
246. In their comments, the various RTOs/ISOs describe slightly
different approaches to metering and telemetry requirements for
distributed energy resource aggregations. CAISO states that, under its
Distributed Energy Resource Provider model, the aggregator must follow
the same metering and telemetry standards as other resources.\587\
NYISO states that it will propose to require distributed energy
resource aggregators to have six-second real-time metering and
telemetry that will be sent either directly to NYISO or through the
utility and to provide after-the-fact meter data uploads for settlement
purposes.\588\ ISO-NE states that individual distributed energy
resources in an aggregation should meet
[[Page 67136]]
the same product-based metering and telemetry requirements as all other
resources, whether the distributed energy resource is behind the meter
or in front and whether or not it can inject power into the grid.\589\
PJM states that, generally, it is reasonable for behind-the-meter
distributed energy resources that seek to inject power onto the grid
(either individually or as part of a distributed energy resource
aggregation) to follow existing telemetry and metering rules from the
generation framework for similarly sized resources, noting that
metering and telemetry rules for generation may vary by resource
size.\590\
---------------------------------------------------------------------------
\587\ CAISO Comments (RM16-23) at 38.
\588\ NYISO Comments (RM16-23) at 18-19. NYISO's Aggregation
Participation Model, accepted by the Commission on January 23, 2020,
requires that (1) aggregations provide real-time telemetry every six
seconds; (2) NYISO send real-time base point signals to, receive
revenue-quality meter data for settlement purposes from, and receive
real-time telemetry from an aggregation, not the individual
facilities within an aggregation; (3) aggregations of like resource
types are subject to the existing metering and telemetry rules for
that resource type; and (4) metering and telemetry of the individual
facilities in an aggregation derive from either directly measured or
calculated values, or a combination thereof, in accordance with the
requirements set forth in NYISO's procedures. See NYISO Aggregation
Order, 170 FERC ] 61,033 at PP 57-74.
\589\ ISO-NE Comments (RM16-23) at 48-50.
\590\ PJM Comments (RM16-23) at 22 (citing PJM Manual 14D:
Generation Operational Requirements, rev. 40, section 4.2.2 (Jan. 1,
2017)).
---------------------------------------------------------------------------
247. A number of commenters support the Commission's proposal to
provide the RTOs/ISOs with flexibility to establish and implement
metering and telemetry rules to suit their individual needs.\591\ CAISO
states that local regulatory authorities already impose metering and
telemetry standards and that RTOs/ISOs need flexibility to incorporate
those local requirements without imposing additional costs or barriers
to entry on prospective distributed energy resource aggregations.\592\
A number of other commenters make similar points.\593\ ISO-NE
recommends that the Commission avoid being overly prescriptive so that
ISO-NE can apply existing metering and telemetry requirements to
distributed energy resources.\594\ SoCal Edison asks that the
Commission not issue a standard directive but rather encourage the
distribution utilities in an RTO/ISO to work together with the RTO/ISO
to continue the development of appropriate metering and telemetry
technologies.\595\ IRC asserts that RTOs/ISOs should be given the
flexibility to define metering and telemetry requirements outside of
their tariffs.\596\ Tesla argues that RTOs/ISOs should allow
alternatives to metering and telemetry requirements that could provide
the needed information, such as sampling, end-use metering devices, or
verifiable behavioral actions.\597\
---------------------------------------------------------------------------
\591\ See, e.g., CAISO Comments (RM16-23) at 38; IRC Comments
(RM16-23) at 10; ISO-NE Comments (RM16-23) at 48; New York State
Entities Comments (RM16-23) at 21; SoCal Edison Comments (RM16-23)
at 14-15.
\592\ CAISO Comments (RM16-23) at 38.
\593\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 9; Advanced Energy Management Comments (2018 RM18-9) at 22-23;
Microsoft Comments (2018 RM18-9) at 18 (citing Justin Gundlach &
Romany Webb, Distributed Energy Res. Participation in Wholesale
Markets: Lessons from the California ISO, 39 ENERGY L. REV. 47, 68-
69 (2018)); NRG Comments (2018 RM18-9) at 3; Tesla Comments (2018
RM18-9) at 10-11 (citing NOPR, 157 FERC ] 61,121 at P 150).
\594\ ISO-NE Comments (RM16-23) at 48.
\595\ SoCal Edison Comments (RM16-23) at 14-15.
\596\ IRC Comments (RM16-23) at 10.
\597\ Tesla Comments (2018 RM18-9) at 10-11.
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248. Other commenters contend that the Commission should take a
more active role in establishing specific metering and telemetry
requirements for distributed energy resource aggregations. MISO
believes that it is appropriate for the Commission to define the
telemetry and metering requirements,\598\ while others suggest that the
Commission establish a set of standards or generally applicable
criteria but allow RTOs/ISOs flexibility on how those standards are
implemented or to exceed the Commission's requirements.\599\
---------------------------------------------------------------------------
\598\ MISO Comments (RM16-23) at 25.
\599\ Fresh Energy/Sierra Club/Union of Concerned Scientists
Comments (RM16-23) at 3; Independent Energy Producers Association
Comments (RM16-23) at 5; PJM Comments (RM16-23) at 22.
---------------------------------------------------------------------------
249. Several commenters acknowledge that metering and telemetry
requirements for distributed energy resource aggregators and individual
resources participating in distributed energy resource aggregations can
pose a barrier to the participation of these resources in RTO/ISO
markets.\600\ Advanced Energy Management and R Street Institute note
that the costs of metering, telemetry, and communication equipment pose
a disproportionately high burden for small distributed energy resources
because they cannot spread the cost across as many MWs as large
generators.\601\ Advanced Energy Economy requests that the Commission
clarify that real-time and short interval telemetry is not required for
distributed energy resource aggregations and individual distributed
energy resources.\602\
---------------------------------------------------------------------------
\600\ See, e.g., Advanced Energy Management Comments (RM16-23)
at 17-18; New York State Entities Comments (RM16-23) at 21; NextEra
Comments (RM16-23) at 15-16; Public Interest Organizations Comments
(RM16-23) at 14; R Street Institute Comments (RM16-23) at 10.
\601\ Advanced Energy Management Comments (RM16-23) at 18; R
Street Institute Comments (RM16-23) at 10.
\602\ Advanced Energy Economy Comments (RM16-23) at 47.
---------------------------------------------------------------------------
250. Several commenters argue that telemetry requirements
comparable to those of traditional generators would be too burdensome,
even if imposed only at the aggregation level.\603\ Advanced Energy
Economy asserts that such requirements would be prohibitively expensive
and unnecessary to ensure reliability because equipment would need to
be installed at every distributed energy resource site to obtain
accurate readings.\604\ These commenters and others instead suggest
that telemetry requirements, particularly with respect to timing
granularity, should be commensurate to the need of the system and
service provided.\605\ Advanced Energy Management recommends that
virtual telemetry with after-the-fact meter data be allowed for
aggregators of small resources.\606\ Further, Advanced Energy
Management recommends that the Commission not require that distributed
energy resource aggregators that participate only in capacity markets
implement new telemetry requirements.\607\
---------------------------------------------------------------------------
\603\ Id. at 48; Advanced Energy Management Comments (RM16-23)
at 17; City of New York Comments (RM16-23) at 9.
\604\ Advanced Energy Economy Comments (RM16-23) at 48.
\605\ Id.; Advanced Energy Management Comments (RM16-23) at 18;
City of New York Comments (RM16-23) at 9; Energy Storage Association
Comments (RM16-23) at 25; Public Interest Organizations Comments
(RM16-23) at 24.
\606\ Advanced Energy Management Comments (RM16-23) at 18-19.
Advanced Energy Management describes virtual telemetry as
statistical forecasting of an aggregated resource's performance,
generally monitored by some form of communications to confirm
aggregated resource performance, which provides the aggregator or
scheduling coordinator a signal to send to the RTO/ISO.
\607\ Id.
---------------------------------------------------------------------------
251. Several commenters assert that metering and/or telemetry
requirements are necessary only at the aggregation level, and that
telemetry requirements on individual distributed energy resources would
be cost prohibitive and unnecessarily burdensome.\608\ Public Interest
Organizations, New York State Entities, and Advanced Energy Economy
state that grid operators do not need telemetry information about each
distributed energy resource in an aggregation because the loss of one
would not interfere with system reliability or with the operation of
the aggregation, and these parties request clarification that such
telemetry is not required.\609\ NRG and Advanced Energy Economy contend
that the aggregator should be responsible for providing metering and
telemetry that meets the RTO/ISO requirements to ensure that the
aggregated performance of the distributed energy resources meets the
[[Page 67137]]
claimed and offered performance.\610\ Stem asks that each RTO/ISO be
required to justify any metering and telemetry rules regarding
individual resources in an aggregation.\611\
---------------------------------------------------------------------------
\608\ See, e.g., AES Companies Comments (RM16-23) at 36; Energy
Storage Association Comments (RM16-23) at 25; New York State
Entities Comments (RM16-23) at 20; Public Interest Organizations
Comments (RM16-23) at 14-15; R Street Institute Comments (RM16-23)
at 10.
\609\ Advanced Energy Economy Comments (RM16-23) at 49; New York
State Entities Comments (RM16-23) at 20; Public Interest
Organizations Comments (RM16-23) at 14-15.
\610\ Advanced Energy Economy Comments (RM16-23) at 49-50; NRG
Comments (RM16-23) at 10.
\611\ Stem Comments (RM16-23) at 14.
---------------------------------------------------------------------------
252. Other commenters argue that metering and telemetry
requirements are important for reliability and should be the same for
distributed energy resource aggregations as for any other resource
type.\612\ EEI argues that this is important so the RTO/ISO knows the
operating level of the resource and how much that resource can ramp up
or ramp down over its full range of capability.\613\ Energy Storage
Association agrees, as long as the telemetry allows distributed energy
resource aggregations to provide the same products and services as
traditional generators.\614\ PJM also agrees, but notes that smaller
resources have lower-cost telemetry requirements in its market.\615\
EPSA asserts that estimation, sampling, and other inexact methods
provide insufficient precision and, therefore argues that distributed
energy resources should be subject to the same metering requirements as
traditional supply resources.\616\ NYISO Indicated Transmission Owners
contend that the cost of new or additional communications requirements
should be considered a prerequisite to maintain the reliability of the
system rather than a barrier to entry.\617\
---------------------------------------------------------------------------
\612\ See, e.g., EEI Comments (RM16-23) at 34; Energy Storage
Association Comments (RM16-23) at 25; ISO-NE Comments (RM16-23) at
48-50; New York Utility Intervention Unit Comments (RM16-23) at 3-5;
TAPS Comments (RM16-23) at 23.
\613\ EEI Comments (RM16-23) at 34.
\614\ Energy Storage Association Comments (RM16-23) at 25.
\615\ PJM Comments (RM16-23) at 22.
\616\ EPSA Comments (2018 RM18-9) at 10, 13.
\617\ NYISO Indicated Transmission Owners Comments (RM16-23) at
19.
---------------------------------------------------------------------------
253. Some commenters argue that metering and telemetry requirements
should be placed on individual distributed energy resources within an
aggregation.\618\ Multiple commenters argue that distributed energy
resources need to be directly metered to distinguish between wholesale
and retail actions.\619\ MISO believes that it is appropriate for the
Commission to identify the criteria and process for differentiating
retail versus wholesale transactions of distributed energy
resources.\620\ TAPS states that RTOs/ISOs should require telemetry on
individual distributed energy resources for situational awareness and
so that facilities are not inadvertently directed to operate beyond
physical capabilities.\621\ Moreover, ISO-NE argues that statistical
estimation of an aggregation's output rather than direct metering and
telemetry of individual distributed energy resources introduces error
and that the impact of using estimation to determine distribution
factors is not clear.\622\ PJM and the IRC request that the Commission
establish that RTOs/ISOs have the right to require metering and
telemetry for individual distributed energy resources comparable to
traditional resources in order to avoid seams issues and inconsistent
industry roll-out.\623\ Avangrid cautions that even with separate
metering, ownership and reconciliation of the data for retail billing
and wholesale settlement may be impractically complex.\624\ NYISO
Indicated Transmission Owners assert that resources above a certain
size and within an aggregation may require additional metering to
mitigate issues on a utility's distribution system.\625\
---------------------------------------------------------------------------
\618\ See, e.g., DER/Storage Developers Comments (RM16-23) at 4;
Independent Energy Producers Association Comments (RM16-23) at 8;
ISO-NE Comments (RM16-23) at 48-50; NYISO Indicated Transmission
Owners Comments (RM16-23) at 19; Organization of MISO States
Comments (RM16-23) at 9.
\619\ Avangrid Comments (RM16-23) at 15; Independent Energy
Producers Association Comments (RM16-23) at 8; ISO-NE Comments
(RM16-23) at 48-50; Organization of MISO States Comments (RM16-23)
at 9.
\620\ MISO Comments (RM16-23) at 25.
\621\ TAPS Comments (RM16-23) at 23.
\622\ ISO-NE Comments (RM16-23) at 51.
\623\ PJM Comments (RM16-23) at 22.
\624\ Avangrid Comments (RM16-23) at 15.
\625\ NYISO Indicated Transmission Owners Comments (RM16-23) at
7.
---------------------------------------------------------------------------
254. Several commenters agree with the Commission that telemetry
system requirements may need to be in place at different locations for
geographically dispersed distributed energy resource aggregations that
have to provide distribution factors.\626\ PJM Market Monitor argues
that meter and telemetry information should be disaggregated at each
node and that the RTO/ISO should provide nodal settlement.\627\ MISO
Transmission Owners argue that it is not clear how multi-node
aggregations would be settled.\628\ AES Companies contend that the
Commission should permit the aggregation to include more than one
metering point where the system characteristics indicate more are
needed.\629\ Duke Energy maintains that RTOs/ISOs should have access to
telemetry information at individual points of interconnection and that
the distribution utility may need to access similar data.\630\
---------------------------------------------------------------------------
\626\ AES Comments (RM16-23) at 36; Duke Energy Comments (RM16-
23) at 5; EEI Comments (RM16-23) at 34; MISO Transmission Owners
Comments (RM16-23) at 24.
\627\ PJM Market Monitor Comments (RM16-23) at 15.
\628\ MISO Transmission Owners Comments (RM16-23) at 24.
\629\ AES Companies Comments (RM16-23) at 37.
\630\ Duke Energy Comments (RM16-23) at 5.
---------------------------------------------------------------------------
255. Most commenters support the proposal in the NOPR that, when
existing distribution utility metering requirements for distributed
energy resources are sufficient, RTOs/ISOs should rely on that
technology rather than impose new requirements.\631\ Avangrid argues
that the distribution utility might be able to provide the necessary
data to the RTO/ISO on behalf of the distributed energy resource
aggregator via a third-party agreement.\632\
---------------------------------------------------------------------------
\631\ See, e.g., Advanced Energy Management Comments (RM16-23)
at 18-19; EEI Comments (RM16-23) at 33; Mosaic Power Comments (RM16-
23) at 5-6; SoCal Edison Comments (RM16-23) at 14-15; TAPS Comments
(RM16-23) at 24.
\632\ Avangrid Comments (RM16-23) at 15. Avangrid adds that the
electric distribution companies should be allowed to charge for this
service.
---------------------------------------------------------------------------
256. APPA/NRECA express concern that the proposal to rely on meter
data from the distribution utility would place significant burdens on
distribution utilities and introduce new cybersecurity and privacy
implications, issues which will require significant time and resources
for utilities to address.\633\ APPA asserts that such costs could
undermine the benefits of distribution utilities' existing retail
distributed energy resource programs, effectively imposing costs on
retail customers to subsidize wholesale market participation.\634\
Advanced Energy Management asserts that telemetry requirements to
participate in a wholesale program should be driven by the RTO/ISO
system needs, which are less granular than at the distribution
level.\635\ Advanced Energy Management adds that a distributed energy
resource that only seeks participation in the wholesale market should
only be required to fulfill the RTO's/ISO's metering requirements.
Advanced Energy Economy states that RTOs/ISOs should adopt procedures
that provide for regular information and communications flows to occur
from the aggregator, to the RTO/ISO, and then to distribution
utilities.\636\
---------------------------------------------------------------------------
\633\ APPA Comments (2018 RM18-9) at 9-10; NRECA Comments (2018
RM18-9) at 11-12, 30.
\634\ APPA Comments (2018 RM18-9) at 10.
\635\ Advanced Energy Management Comments (2018 RM18-9) at 22-
23.
\636\ Advanced Energy Economy Comments (2018 RM18-9) at 9 n.11.
---------------------------------------------------------------------------
257. Several commenters generally agree with the Commission that
individual distributed energy resources in an aggregation will need to
be
[[Page 67138]]
directly metered. These commenters argue that behind-the-meter
distributed energy resources should be metered separately from the host
site's load due to the need to distinguish between wholesale and retail
actions.\637\ DER/Storage Developers ask the Commission to direct all
RTOs/ISOs to allow direct metering of resources as an optional
alternative to traditional baselines to determine performance.\638\
Independent Energy Producers Association notes that dual-metering can
serve other Commission goals such as minimizing cost shifts, ensuring
reliability, and ensuring market integrity.\639\ MISO states that
visibility at the point of injection is needed to mitigate transmission
risks and ensure that a distributed energy resource is following
dispatch instructions, particularly as the volume of distributed energy
resources grows.\640\ EPSA argues that netting retail and wholesale
services reduces RTO/ISO visibility which makes it difficult for RTOs/
ISOs to efficiently dispatch resources, measure and verify resource
performance, calculate baseline load levels, and support the
reliability, planning, and modeling of system capabilities.\641\
Avangrid cautions that even with separate metering, ownership and
reconciliation of the data for retail billing and wholesale settlement
may be impractically complex.\642\
---------------------------------------------------------------------------
\637\ Avangrid Comments (RM16-23) at 15; Independent Energy
Producers Association Comments (RM16-23) at 8; Microsoft Comments
(2018 RM18-9) at 17; Organization of MISO States Comments (RM16-23)
at 9; Stem Comments (2018 RM18-9) at 3, 19.
\638\ DER/Storage Developers Comments (RM16-23) at 4.
\639\ Independent Energy Producers Association Comments (RM16-
23) at 8.
\640\ MISO Comments (2018 RM18-9) at 19.
\641\ EPSA Comments (2018 RM18-9) at 10-13 (citing Distributed
Energy Resources Roadmap at 29-30).
\642\ Avangrid Comments (RM16-23) at 15.
---------------------------------------------------------------------------
258. Some commenters question the authority of the Commission or
the RTOs/ISOs to impose specific metering and telemetry requirements on
distributed energy resources. AES Companies argue that the only
metering and telemetry requirements that the Commission or the RTOs/
ISOs can dictate are for the aggregator's node or point of
interconnection to the transmission system under RTO/ISO control.\643\
IRC asks the Commission to acknowledge in any final rule that the RTOs/
ISOs have no jurisdiction to require state-regulated utilities to
install specific retail metering technology, but that wholesale
metering rules for distributed energy resources must be met.\644\
California Energy Storage Alliance recommends that local regulatory
authorities develop and implement metering and telemetry requirements
to avoid the Commission imposing any requirements outside the
Commission's jurisdiction.\645\ The Delaware Commission recommends that
the Commission require distributed energy resources to employ separate
metering and telemetry capability if they are providing both wholesale
and retail services.\646\
---------------------------------------------------------------------------
\643\ AES Companies Comments (RM16-23) at 47.
\644\ IRC Comments (RM16-23) at 6.
\645\ California Energy Storage Alliance Comments (RM16-23) at
9.
\646\ Delaware Commission Comments (RM16-23) at 5-7 (citing FPC
v. Fla. Power & Light Co., 404 US 461, 463 (1972)), 8.
---------------------------------------------------------------------------
259. Some state regulators, distribution utilities, and their
representatives note that upgrades may be needed to current metering
technology and associated networking and cyber security in order to
support RTO/ISO needs \647\ and argue that associated costs must be
borne by the distributed energy resources or their aggregators or
through wholesale level cost allocation, and not by distribution
utilities.\648\
---------------------------------------------------------------------------
\647\ See, e.g., Avangrid Comments (RM16-23) at 15; Dominion
Comments (RM16-23) at 12; EEI Comments (RM16-23) at 13; NARUC
Comments (RM16-23) at 6; SoCal Edison Comments (RM16-23) at 14.
\648\ See, e.g., Delaware Commission Comments (RM16-23) at 7;
EEI Comments (RM16-23) at 33-34; IRC Comments (RM16-23) at 6;
Massachusetts Municipal Electric Comments (RM16-23) at 4; Six Cities
Comments (RM16-23) at 3; TAPS Comments (RM16-23) at 24.
---------------------------------------------------------------------------
260. Several commenters discuss the relationship between RTOs/ISOs
and distribution utilities and their respective metering and telemetry
requirements. Fresh Energy/Sierra Club/Union of Concerned Scientists
encourage the development of a framework to share metering data between
the RTO/ISO, distribution utility, and distributed energy resource
aggregator.\649\ Duke Energy recommends that the final rule not
preclude the transfer of telemetry data between the RTO/ISO and the
electric distribution utility.\650\ Similarly, EEI asserts that both
the RTO/ISO and the distribution utility should be provided telemetry
information,\651\ while IRC states that wholesale and retail metering
requirements need to be harmonized to prevent undue barriers to
participation.\652\ Xcel Energy Services recommends that the RTOs/ISOs
and distribution utilities should define the role of a meter data
management agent to provide needed meter data.\653\
---------------------------------------------------------------------------
\649\ Fresh Energy/Sierra Club/Union of Concerned Scientists
Comments (RM16-23) at 3.
\650\ Duke Energy Comments (RM16-23) at 5.
\651\ EEI Comments (RM16-23) at 34.
\652\ IRC Comments (RM16-23) at 6.
\653\ Xcel Energy Services Comments (RM16-23) at 27.
---------------------------------------------------------------------------
261. NARUC, EEI, and MISO argue that, before metering and telemetry
requirements can be established, additional information must be
gathered about the type and purpose of metering and telemetry data
needed, the access to and provision of this data, and the cost
allocation involved.\654\ On the other hand, Fresh Energy/Sierra Club/
Union of Concerned Scientists ask the Commission to not let this debate
hinder progress on establishing necessary distributed energy resource
requirements.\655\
---------------------------------------------------------------------------
\654\ EEI Comments (RM16-23) at 33; MISO Comments (RM16-23) at
25; NARUC Comments (RM16-23) at 7.
\655\ Fresh Energy/Sierra Club/Union of Concerned Scientists
Comments (RM16-23) at 3.
---------------------------------------------------------------------------
c. Commission Determination
262. We adopt the NOPR proposal and add Sec. 35.28(g)(12)(ii)(f)
to the Commission's regulations to require each RTO/ISO to revise its
tariff to establish market rules that address metering and telemetry
hardware and software requirements necessary for distributed energy
resource aggregations to participate in RTO/ISO markets.
263. We understand the need to balance, on one hand, the RTO's/
ISO's need for metering and telemetry data for settlement and
operational purposes, and, on the other hand, not imposing unnecessary
burdens on distributed energy resource aggregators. Therefore, we will
not prescribe the specific metering and telemetry requirements that
each RTO/ISO must adopt; rather, we provide the RTOs/ISOs with
flexibility to establish the necessary metering and telemetry
requirements for distributed energy resource aggregations, and require
that each RTO/ISO explain in its compliance filing why such
requirements are just and reasonable and do not pose an unnecessary and
undue barrier to individual distributed energy resources joining a
distributed energy resource aggregation.
264. To implement this requirement, we direct each RTO/ISO to
explain, in its compliance filing, why its proposed metering
requirements are necessary (e.g., for the distributed energy resource
aggregator to provide the settlement and performance data to the RTO/
ISO discussed in Section IV.F or to prevent double counting of services
as discussed in Section IV.C.3) and why its proposed telemetry
requirements are necessary (e.g., for the RTO/ISO to have sufficient
situational awareness to dispatch the
[[Page 67139]]
aggregation and the rest of the system efficiently). This explanation
should also include a discussion about whether, for example, the
proposed requirements are similar to requirements already in existence
for other resources and steps contemplated to avoid imposing
unnecessarily burdensome costs on the distributed energy resource
aggregators and individual resources in distributed energy resource
aggregations that may create an undue barrier to their participation in
RTO/ISO markets. We find that this approach will provide each RTO/ISO
with the flexibility to develop metering and telemetry requirements
appropriate for the needs of its systems.
265. Given the variety of potential aggregation business models, as
well as the variety of existing distribution utility requirements to
which the distributed energy resources participating in aggregations
will be subject, we find that imposing standard requirements is
unwarranted. Standard metering and telemetry requirements could run the
risk of imposing unnecessary costs on RTOs/ISOs, distributed energy
resource aggregators, and the individual distributed energy resources.
For example, imposing standard requirements could impede RTOs/ISOs from
adequately incorporating metering and telemetry requirements already
imposed on distributed energy resources by local regulatory authorities
and thereby create a barrier to the participation of distributed energy
resources in RTO/ISO markets. We find that adopting the NOPR proposal
minimizes these risks and the costs associated with implementing these
requirements because it allows RTOs/ISOs to propose metering and
telemetry requirements in addition to those already in place only when
they determine that such additional requirements are needed.
266. As clarified in Section IV.F, the distributed energy resource
aggregator, not the individual distributed energy resources in the
aggregation, is the single point of contact with the RTO/ISO,
responsible for managing, dispatching, metering, and settling the
individual distributed energy resources in its aggregation. We further
clarify here that the distributed energy resource aggregator is also
the entity responsible for providing any required metering and
telemetry information to the RTO/ISO.
267. We decline the requests of some commenters to explicitly limit
metering and/or telemetry requirements to the distributed energy
resource aggregation level, or to require telemetry of individual
distributed energy resources participating in an aggregation. Rather,
consistent with the flexibility provided in Section IV.F, we will not
require uniform metering requirements across all RTOs/ISOs, nor will we
require each RTO/ISO to impose uniform metering requirements on
individual distributed energy resources. Rather, we provide flexibility
to RTOs/ISOs to propose specific metering requirements, including any
that may apply to individual distributed energy resources that the RTO/
ISO demonstrates are needed to obtain any required performance data for
auditing purposes and to address double compensation concerns.
Similarly, we provide flexibility to the RTO/ISO as to whether to
propose specific telemetry requirements for individual distributed
energy resources in an aggregation. The need for such requirements may
depend, for example, on whether the RTO/ISO allows multi-node
aggregations or how multi-node aggregations are implemented. By
providing flexibility while also requiring that the RTO/ISO explain why
any proposed metering and telemetry requirements are necessary, we
allow the RTO/ISO to obtain the metering and telemetry information it
needs without burdening the distributed energy resource aggregator to
provide data that may not be necessary.
268. We also clarify that, consistent with this flexible approach,
we are not requiring RTOs/ISOs to establish metering and telemetry
hardware and software requirements for distributed energy resource
aggregations that are identical to those placed on existing resources,
or to establish different or additional metering and telemetry
requirements for distributed energy resource aggregations. Rather, we
expect that RTOs/ISOs will base any proposed metering and telemetry
hardware and software requirements for distributed energy resource
aggregations on the information needed by the RTO/ISO while avoiding
unnecessary requirements that may act as a barrier to individual
distributed energy resources joining distributed energy resource
aggregations or to distributed energy resource aggregations
participating in the wholesale markets. However, as explained in
Section IV.F, we require that metering data for settlement purposes at
the distributed energy resource aggregation level be consistent with
settlement data requirements for other resource types. We recognize
that metering and telemetry requirements may vary depending on the
types of distributed energy resources participating in an aggregation,
the size of the individual distributed energy resources or aggregated
resource, or the particular service provided. For example, more
granular or precise telemetry may be necessary for a distributed energy
resource aggregation that is participating in the frequency regulation
market than one that is exclusively providing energy or capacity. To
ensure that the flexible approach outlined here provides the RTO/ISO
with sufficient information to administer the wholesale markets and
ensure reliability of the transmission system while not unduly
burdening distributed energy resources and distributed energy resource
aggregations, we require that each RTO/ISO explain in its compliance
filing why its proposed metering and telemetry requirements for
distributed energy resource aggregations are just and reasonable and do
not pose an unnecessary and undue barrier to individual distributed
energy resources joining a distributed energy resource aggregation.
269. We also adopt the NOPR proposal that each RTO's/ISO's proposed
metering requirements should rely on meter data obtained through
compliance with distribution utility or local regulatory authority
metering system requirements whenever possible for settlement and
auditing purposes. We further clarify that this requirement also
applies to existing telemetry infrastructure. By using existing
infrastructure whenever possible, RTOs/ISOs should be able to obtain
the data they need and avoid proposing new metering and telemetry
requirements that would be duplicative and could erect unnecessary
barriers to entry for distributed energy resource aggregators and
individual distributed energy resources participating in an
aggregation. With respect to jurisdictional concerns raised by some
commenters, we note that any additional RTO/ISO metering and telemetry
requirements would not change those required by state or local
regulatory authorities and would be required solely to assist with
settlements and audits of activity in RTO/ISO markets, or to provide
RTOs/ISOs with the real-time information needed to reliably and
efficiently dispatch their systems.
270. In response to concerns about the potential costs and burdens
that could be imposed on distribution utilities as a result of the
requirement that RTOs/ISOs rely on metering and telemetry data obtained
through compliance with distribution utility or local regulatory
authority metering system requirements whenever possible, we expect
that in
[[Page 67140]]
general, this information will be provided by individual distributed
energy resources to distributed energy resource aggregators, and from
distributed energy resource aggregators to RTOs/ISOs. However, to the
extent that the RTO/ISO proposes that such information come from or
flow through distribution utilities, we require that RTOs/ISOs
coordinate with distribution utilities and relevant electric retail
regulatory authorities to establish protocols for sharing metering and
telemetry data, and that such protocols minimize costs and other
burdens and address concerns raised with respect to privacy and
cybersecurity.
271. In response to IRC's request for flexibility to define
metering and telemetry requirements outside the RTO/ISO tariffs, we
find that the RTO/ISO tariffs should include a basic description of the
metering and telemetry practices for distributed energy resource
aggregations as well as references to specific documents that will
contain further technical details. Decisions as to whether an item
should be placed in a tariff or in a business practice manual are
guided by the Commission's rule of reason policy,\656\ under which
provisions that ``significantly affect rates, terms, and conditions''
of service, are readily susceptible of specification, and are not
generally understood in a contractual agreement must be included in the
tariff, while items better classified as implementation details may be
included only in the business practice manual. We find that metering
and telemetry requirements significantly affect the terms and
conditions of the participation of distributed energy resource
aggregations in RTO/ISO markets and, therefore, must be included in the
RTO/ISO tariffs.
---------------------------------------------------------------------------
\656\ See, e.g., Energy Storage Ass'n v. PJM Interconnection,
L.L.C., 162 FERC ] 61,296, at P 103 (2018) (Energy Storage Ass'n v.
PJM) (citing Midcontinent Indep. Sys. Operator, Inc., 158 FERC ]
61,003, at P 69 (2017); PacifiCorp, 127 FERC ] 61,144, at P 11
(2009); City of Cleveland v. FERC, 773 F.2d 1368, 1376 (D.C. Cir.
1985) (finding that utilities must file ``only those practices that
affect rates and service significantly, that are reasonably
susceptible of specification, and that are not so generally
understood in any contractual arrangement as to render recitation
superfluous''); Pub. Serv. Comm'n of N.Y. v. FERC, 813 F.2d 448, 454
(D.C. Cir. 1987) (holding that the Commission properly excused
utilities from filing policies or practices that dealt with only
matters of ``practical insignificance'' to serving customers)).
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H. Coordination Between the RTO/ISO, Aggregator, and Distribution
Utility
1. Market Rules on Coordination
a. NOPR Proposal
272. In the NOPR, the Commission noted that the market rules that
each RTO/ISO adopts to facilitate the participation of distributed
energy resource aggregations must address coordination between the RTO/
ISO, the distributed energy resource aggregator, and the distribution
utility to ensure that the participation of these resources in RTO/ISO
markets does not present reliability or safety concerns for the
distribution or transmission system.\657\ Thus, the Commission proposed
to require each RTO/ISO to revise its tariff to provide for
coordination among the RTO/ISO, a distributed energy resource
aggregator, and the relevant distribution utilities with respect to (1)
the registration of new distributed energy resource aggregations; and
(2) ongoing coordination, including operational coordination, between
the RTO/ISO, a distributed energy resource aggregator, and the relevant
distribution utility or utilities.
---------------------------------------------------------------------------
\657\ NOPR, 157 FERC ] 61,121 at P 153.
---------------------------------------------------------------------------
273. After the April 2018 technical conference, the Commission
sought further information on certain proposals regarding detailed
aspects of the coordination requirements.\658\
---------------------------------------------------------------------------
\658\ Notice Inviting Post-Technical Conference Comments at 7-
11.
---------------------------------------------------------------------------
b. Comments
274. Many commenters support the coordination processes proposed in
the NOPR because it will ensure that participation of distributed
energy resource aggregations in RTO/ISO markets does not compromise
these markets or the reliability or safety of the transmission and
distribution systems.\659\ For example, based on its experience with
implementing CAISO's Distributed Energy Resource Provider framework,
Pacific Gas & Electric states that it is vitally important that RTOs/
ISOs coordinate with distribution utilities with respect to both
registration of distributed energy resource aggregations and their
ongoing operation.\660\
---------------------------------------------------------------------------
\659\ See, e.g., CAISO Comments (RM16-23) at 39; Connecticut
State Entities Comments (RM16-23) at 6; Dominion Comments (RM16-23)
at 13; Institute for Policy Integrity Comments (RM16-23) at 9; NYISO
Comments (RM16-23) at 19.
\660\ Pacific Gas & Electric Comments (RM16-23) at 21.
---------------------------------------------------------------------------
275. Advanced Energy Economy states that it recognizes that the
RTOs/ISOs need visibility into distributed energy resource operations
and that coordination among the RTO/ISO, the distribution utility, and
distributed energy resource aggregators is necessary to ensure reliable
operations.\661\ Advanced Energy Economy asserts that these visibility
and operational issues are surmountable and that certain RTOs/ISOs
(particularly CAISO and ISO-NE) have made great progress in developing
standards and rules to address these issues. Advanced Energy Economy
states that fully integrating advanced energy technologies that are
already available and growing rapidly will only enhance the ability to
quickly address visibility and operational issues.
---------------------------------------------------------------------------
\661\ Advanced Energy Economy Comments (RM16-23) at 13.
---------------------------------------------------------------------------
276. Commenters note that coordination would be further enhanced
with the development of distribution system operators.\662\ PJM
believes that value may be added if an RTO/ISO were to coordinate with
a distribution system operator, but states that without a true
distribution system operator operating in the PJM region (or anywhere
else in the country) it cannot opine on the specific benefits that such
coordination could achieve.\663\ SoCal Edison notes that, in
California, distribution utilities are already performing the initial
functions of a distribution system operator and that the utility is
uniquely situated to provide this role in the future.\664\
---------------------------------------------------------------------------
\662\ De Martini and Kristov define a distribution system
operator as ``the entity responsible for planning and operational
functions associated with a distribution system that is modernized
for high levels of [distributed energy resources].'' Paul De Martini
and Lorenzo Kristov, ``Distribution Systems in a High DER Future:
Planning, Market Design, Operation and Oversight,'' Future Electric
Utility Regulation Series, Lawrence Berkeley National Laboratory,
October 2015, p. vi.
\663\ PJM Comments (RM16-23) at 28.
\664\ SoCal Edison Comments (RM16-23) at 8.
---------------------------------------------------------------------------
277. While supportive of the coordination requirements in the NOPR,
Mensah argues that the cost of registering an aggregation as well as
ongoing operational coordination should not place any unnecessary
burden on distributed energy resource aggregations.\665\
---------------------------------------------------------------------------
\665\ Mensah Comments (RM16-23) at 4.
---------------------------------------------------------------------------
c. Commission Determination
278. We adopt the NOPR proposal, as modified and clarified below,
and add Sec. 35.28(g)(12)(ii)(g) to the Commission's regulations to
require each RTO/ISO to revise its tariff to establish market rules
that address coordination between the RTO/ISO, the distributed energy
resource aggregator, the distribution utility, and the relevant
electric retail regulatory authorities.
[[Page 67141]]
279. We agree with commenters that coordination requirements should
not create undue barriers to entry for distributed energy resource
aggregations. However, we must also consider the substantial role of
distribution utilities and state and local regulators in ensuring the
safety and reliability of the distribution system. We believe that the
reforms adopted herein appropriately balance those needs.
280. Further, as discussed in Section IV.H.4 below,\666\ although
the NOPR did not discuss the role of state and local regulatory
authorities in coordination efforts, we recognize that state and local
regulatory authorities have a key role to play in such coordination
efforts. Therefore, we have modified the NOPR proposal to ensure that
the RTO/ISOs also coordinate with these entities.
---------------------------------------------------------------------------
\666\ See infra Section IV.H.4 (Role of Relevant Electric Retail
Regulatory Authorities).
---------------------------------------------------------------------------
2. Role of Distribution Utilities
a. NOPR Proposal
281. In the NOPR, the Commission proposed that the market rules on
coordination provide the relevant distribution utility or utilities
with the opportunity to review the list of individual resources that
are located on their distribution systems and that enroll in a
distributed energy resource aggregation before those resources may
participate in RTO/ISO markets through the aggregation.\667\ The
Commission explained that the purpose of this coordination would be to
ensure that all of the individual resources in the distributed energy
resource aggregation are technically capable of providing services to
the RTO/ISO through the aggregator and are eligible to be part of the
aggregation.\668\ The Commission further explained that the opportunity
for the relevant distribution utility to review the list of these
resources would allow them to assess whether the resources would be
able to respond to RTO/ISO dispatch instructions without posing any
significant risk to the distribution system and to ensure these
resources are not participating in any other retail compensation
programs. The Commission proposed to give the relevant distribution
utility or utilities the opportunity to report such concerns or issues
to the RTO/ISO for its consideration prior to the RTO/ISO allowing the
new or modified distributed energy resource aggregation to participate
in the organized wholesale electric market.
---------------------------------------------------------------------------
\667\ NOPR, 157 FERC ] 61,121 at PP 149, 154.
\668\ Id. P 154.
---------------------------------------------------------------------------
b. Comments
282. Numerous commenters generally support the NOPR proposal for
distribution utility review,\669\ but differ about the scope and the
timing of this review.
---------------------------------------------------------------------------
\669\ See, e.g., Avangrid Comments (RM16-23) at 16; Pacific Gas
& Electric Comments (RM16-23) at 21; PJM Comments (2018 RM18-9) at
19; Robert Borlick Comments (RM16-23) at 5-7; SoCal Edison Comments
(RM16-23) at 6; TAPS Comments (2018 RM18-9) at 27.
---------------------------------------------------------------------------
283. While generally supportive of the NOPR proposal, several
distribution utilities voice a broad range of concerns about their role
in coordination and the impact of distributed energy resource
aggregations on their distribution systems. In particular, distribution
utilities generally argue for an even greater and decision-making role
in reviewing distributed energy resource registrations.\670\ NRECA
argues for distribution utility review of individual distributed energy
resource participation in distributed energy resource aggregations
before the resources participate in RTO/ISO markets.\671\ Additional
commenters argue that distribution utilities and RTOs/ISOs must be
afforded enough time to perform impact studies, preferably using study
parameters adopted and implemented by state and local regulators, for
each distributed energy resource and for the aggregation to ensure safe
and reliable grid operation,\672\ and other commenters specifically
request that the Commission address the timing of the distribution
utility review in the final rule.\673\ MISO Transmission Owners request
that any final rule require distribution utility approval of any
aggregation arrangement to ensure that all of the appropriate
distribution utility requirements for interconnection and other
relevant regulations and processes have been met.\674\ NRECA asserts
that distribution utilities need detailed information in order to
assess whether distributed energy resource participation is
beneficial.\675\
---------------------------------------------------------------------------
\670\ See, e.g., Dominion Comments (RM16-23) at 10; EEI Comments
(RM16-23) at 35-36; MISO Transmission Owners Comments (RM16-23) at
19; SoCal Edison Comments (RM16-23) at 11-12; Xcel Energy Services
Comments (RM16-23) at 28.
\671\ NRECA Comments (2018 RM18-9) at 29.
\672\ See, e.g., Dominion Comments (RM16-23) at 10; EEI Comments
(RM16-23) at 35-36; PJM Utilities Coalition Comments (2018 RM18-9)
at 14-15.
\673\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
40; Advanced Energy Management Comments (RM16-23) at 21; NextEra
Comments (RM16-23) at 17.
\674\ MISO Transmission Owners Comments (RM16-23) at 19.
\675\ NRECA Comments (2018 RM18-9) at 29.
---------------------------------------------------------------------------
284. Moreover, several distribution utilities seek more than review
capability and assert that the distribution utility's consent to the
participation of a distributed energy resource in an aggregation is a
necessary prerequisite before the aggregation may operate.\676\
According to these commenters, distribution utilities, who have the
knowledge and understanding of distribution system challenges, should
have the authority to make decisions regarding the participation of a
distributed energy resource aggregation.\677\ EEI further argues that
distribution utilities must be able to restrict participation until the
reliability and/or safety issue is addressed, and must be notified in
real-time if a resource that is connected to its distribution system
joins a distributed energy resource aggregation.\678\
---------------------------------------------------------------------------
\676\ See, e.g., EEI Comments (2018 RM18-9) at 10, 13; NRECA
Comments (2018 RM18-9) at 29; PJM Utilities Coalition Comments (2018
RM18-9) at 14; TAPS Comments (RM16-23) at 25; TAPS Comments (2018
RM18-9) at 28.
\677\ See, e.g., EEI Comments (2018 RM18-9) at 13; TAPS Comments
(2018 RM18-9) at 28.
\678\ EEI Comments (2018 RM18-9) at 13.
---------------------------------------------------------------------------
285. Electric storage resource developers and advocates support the
NOPR proposal, but raise concerns about the proposed distribution
utility review process.\679\ They are concerned that distribution
utility review will act as a barrier by providing the distribution
utility a ``gatekeeper'' role.\680\ Furthermore, some commenters argue
that distribution utilities do not have the right or the jurisdiction
to veto what distributed energy resources may join aggregations or what
aggregations may participate in organized wholesale electric
markets.\681\ Advanced Energy Management states that giving
distribution utilities discretionary authority to approve distributed
energy resources ``could usurp FERC's clear jurisdiction over the
conditions for wholesale market eligibility.'' \682\ Similarly, SEIA
suggests that the discretion of distribution utilities should be
limited to violations of interconnection agreements and that it
[[Page 67142]]
would be inappropriate for distribution utilities to have veto rights
over distributed energy resource participation.\683\ SEIA further draws
a distinction between existing and new distributed energy resources.
For existing distributed energy resources that are already operating on
the grid, so long as the distributed energy resource does not modify
the generation system outside of what has already been approved, SEIA
recommends that the Commission ensure that there is a streamlined
process to ensure that the existing distributed energy resources can
participate through a distributed energy resource aggregator
participation model.
---------------------------------------------------------------------------
\679\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
39, 40; Advanced Energy Management Comments (RM16-23) at 21, 22;
Center for Biological Diversity Comments (RM16-23) at 3; Stem
Comments (RM16-23) at 15.
\680\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
39, 40; Advanced Energy Management Comments (RM16-23) at 21, 22;
Stem Comments (RM16-23) at 14-15.
\681\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 11; Advanced Energy Management Comments (2018 RM18-9) at 18; SEIA
Comments (2018 RM18-9) at 16; Stem Comments (2018 RM18-9) at 15;
Sunrun Comments (2018 RM18-9) at 6.
\682\ Advanced Energy Management Comments (2018 RM18-9) at 18.
\683\ SEIA Comments (2018 RM18-9) at 16.
---------------------------------------------------------------------------
286. Commenters in support of the NOPR proposal urge the Commission
to include limits on the scope of this review or adopt specific
parameters for this review. Global Cold Chain Alliance and Viking Cold
Solutions raise concerns about distribution review processes that
prevent development and adoption of new technologies.\684\ Advanced
Energy Management and Advanced Energy Economy further argue that
distribution utilities should (1) be required to identify to RTOs/ISOs
specific areas of their network where they have limited ability to
accommodate additional distributed energy resource registrations, with
a notification requirement only when the local ability has been
exceeded; (2) allow customers and their distributed energy resource
aggregators to see information provided by the utility if the RTO/ISO
uses that information in a decision to prohibit a distributed energy
resource registration, and provide the ability to appeal such a
rejection; and (3) be prohibited from registering customers in their
own distributed energy resource aggregations that they had previously
disqualified for reliability reasons.\685\ Advanced Energy Management
also recommends that there should be no requirement for distribution
utilities to review distributed energy resource registrations unless
the customers are exporting to the grid.\686\ After a specific timeline
of review, Advanced Energy Management and Tesla recommend that the
distribution utility still be given the opportunity to notify the RTO/
ISO if the distributed energy resource does not have the necessary
interconnection agreements or is participating in a retail tariff that
did not allow wholesale participation.\687\ In these limited
``exception only'' models, distribution utilities are not provided the
ability to approve distributed energy resource participation in
Commission-jurisdictional markets, but may review and raise
objections.\688\ Advanced Energy Management and Stem state that
distribution utilities should exercise their authority prior to a
distributed energy resource's registration in a RTO/ISO by defining
non-discriminatory interconnection procedures that ensure the
distribution grid can accommodate distributed energy resources, whether
or not a distributed energy resource aggregation participated in a
wholesale transaction.\689\
---------------------------------------------------------------------------
\684\ Global Cold Chain Alliance Comments (2018 RM18-9) at 2-3;
Viking Cold Solutions Comments (2018 RM18-9) at 3.
\685\ Advanced Energy Economy Comments (RM16-23) at 39, 40;
Advanced Energy Management Comments (RM16-23) at 21, 22.
\686\ Advanced Energy Management Comments (RM16-23) at 21.
\687\ Advanced Energy Management Comments (2018 RM18-9) at 19;
Tesla Comments (2018 RM18-9) at 10.
\688\ See, e.g., Advanced Energy Management Comments (2018 RM18-
9) at 17; Icetec Comments (2018 RM18-9) at 17-18; Sunrun Comments
(2018 RM18-9) at 7; Tesla Comments (2018 RM18-9) at 9-10.
\689\ Advanced Energy Management Comments (2018 RM18-9) at 18;
Stem Comments (2018 RM18-9) at 15.
---------------------------------------------------------------------------
287. Multiple commenters suggest specific review criteria that the
distribution utilities should adhere to. Several commenters assert that
any denial of participation in distributed energy resource aggregation
should only be based on specified operational coordination and
reliability concerns, such as violation of state-regulated
interconnection protocols and agreements that address binding
distribution system constraints and reflect non-discriminatory
agreements on exporting energy to the grid, or reflect customers who
already participate in tariffs or other agreements that disallow
wholesale participation.\690\ NRECA offers the following criteria: That
the participation of a distributed energy resource in an aggregation
will not create any safety, reliability or power quality concerns on
their systems, and that implementation of distributed energy resource
aggregation will conform to the requirements of the IEEE
standards.\691\ NYISO Indicated Transmission Owners suggest that any
interconnection agreement for a distributed energy resource
participating in an aggregation must demonstrate the ability of an
individual distributed energy resource to (1) participate in an
aggregation; (2) communicate essential information to the distribution
system operator and RTO/ISO using RTO/ISO communication and operating
protocols, as appropriate; and (3) meet RTO/ISO performance
standards.\692\ Pacific Gas & Electric recommends that an individual
distributed energy resource wishing to participate in an aggregation
(1) will not cause voltage problems or overload existing equipment; (2)
is able to comply with requirements in its individual interconnection
agreement when operated in the aggregate; and (3) is not already
participating in another distributed energy resource aggregation.\693\
EEI argues that the criteria to determine distributed energy resource
participation should be ``good utility practice.'' \694\ In a similar
vein, several commenters request clear standards or guidelines for
distribution utility review, while APPA conversely urges the Commission
to allow for flexibility in the criteria adopted by distribution
utilities.\695\
---------------------------------------------------------------------------
\690\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 11; Icetec Comments (2018 RM18-9) at 16; SEIA Comments (2018
RM18-9) at 16; Stem Comments (2018 RM18-9) at 14-15; Tesla Comments
(2018 RM18-9) at 9.
\691\ NRECA Comments (2018 RM18-9) at 30.
\692\ NYISO Indicated Transmission Owners Comments (2018 RM18-9)
at 15, 17.
\693\ Pacific Gas & Electric Comments (2018 RM18-9) at 17-18.
\694\ EEI Comments (2018 RM18-9) at 14.
\695\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
39; APPA Comments (2018 RM18-9) at 27; Center for Biological
Diversity Comments (RM16-23) at 3.
---------------------------------------------------------------------------
288. Stem and Tesla/SolarCity do not support the NOPR proposal on
distribution utility review and recommend that limits be placed on this
review if the Commission chooses to include the requirement in a final
rule. Stem argues that the Commission should not give local
distribution utilities carte blanche to deny a distributed energy
resource eligibility to participate in a distributed energy resource
aggregation, RTO/ISO markets, or other participation model.\696\ Stem
recommends an alternative default approach that allows participation
unless the local utility provides a specific, credible safety or
reliability risk.\697\ Tesla/SolarCity argue that having an appropriate
level of communication between the RTO/ISO and distribution utility
eliminates the need for distribution utility review.\698\
---------------------------------------------------------------------------
\696\ Stem Comments (RM16-23) at 4, 15.
\697\ Id. at 4.
\698\ Tesla/SolarCity Comments (RM16-23) at 30.
---------------------------------------------------------------------------
289. Commenters also express differing opinions on the length of
time required to conduct the review of distributed energy resource
participation. Several distribution utilities recommend that a
reasonable timetable or no time limits be established for review, and
argue that sufficient time is needed for review and/
[[Page 67143]]
or consultation between the distributed energy resource aggregator and
distribution utility to ensure the distribution grid can be operated in
a safe and reliable manner during the aggregated distributed energy
resource operating conditions.\699\ Distributed energy resource
providers, such as Stem, take the opposite view and assert that RTOs
and ISOs are not obligated to wait for the distribution utility to
review the registration of a distributed energy resource if the
distributed energy resource can prove it has completed an applicable
state-level interconnection process.\700\ Nevertheless, several
commenters agree that it would be reasonable for an RTO/ISO to pause
registration of a distributed energy resource to provide time (e.g., 10
days or CAISO's 30-day timeline) for the distribution utility to ensure
that sufficient interconnection procedures have been followed and
approved interconnection agreements are in place, but they do not
recommend the Commission require a specific timeline.\701\ Icetec
specifically requests that RTO/ISO rules be developed on the procedures
and timelines for distribution-level studies if there is no state and
local regulatory tariff governing these studies.\702\
---------------------------------------------------------------------------
\699\ See, e.g., NRECA Comments (2018 RM18-9) at 29; Pacific Gas
& Electric Comments (2018 RM18-9) at 13.
\700\ Stem Comments (2018 RM18-9) at 15.
\701\ See, e.g., Icetec Comments (2018 RM18-9) at 17-18; Stem
Comments (2018 RM18-9) at 15; Sunrun Comments (2018 RM18-9) at 7.
\702\ Icetec Comments (2018 RM18-9) at 9.
---------------------------------------------------------------------------
290. RTOs/ISOs support the NOPR proposal but raise questions about
their role in aggregation approvals and dispute resolution,
communication system requirements, and the extent of the coordination
proposed by the Commission.\703\ PJM argues that the registration
process and timing needed to participate in an RTO/ISO market should be
straight forward, predictable, and transparent, and that any basis for
the RTO/ISO to prohibit wholesale market participation should be set
forth in its tariff.\704\ CAISO, IRC, and PJM would also like the
Commission to provide guidance on how and where disputes between the
RTO/ISO and distribution utilities regarding coordination of
distributed energy resources are to be resolved.\705\ CAISO requests
additional processes beyond sharing information, arguing that processes
are needed to resolve or mitigate any problems the distribution utility
may find during its review, including developing a solution with the
distributed energy resource provider.\706\
---------------------------------------------------------------------------
\703\ CAISO Comments (RM16-23) at 39, 41-43, 46; IRC Comments
(RM16-23) at 9; ISO-NE Comments (RM16-23) at 54-55; PJM Comments
(RM16-23) at 8, 26; SPP Comments (RM16-23) at 24.
\704\ PJM Comments (2018 RM18-9) at 19.
\705\ CAISO Comments (RM16-23) at 41; IRC Comments (RM16-23) at
9; PJM Comments (RM16-23) at 8.
\706\ CAISO Comments (RM16-23) at 41.
---------------------------------------------------------------------------
291. Finally, while most comments focus on initial registration,
TAPS states that a distribution utility should also be able to reopen
the approval of an individual distributed energy resource's enrollment
in a distributed energy resource aggregation if the distribution system
is reconfigured.\707\
---------------------------------------------------------------------------
\707\ TAPS Comments (2018 RM18-9) at 28.
---------------------------------------------------------------------------
c. Commission Determination
292. To implement Sec. 35.28(g)(12)(ii)(g) of the Commission's
regulations, we adopt the NOPR proposal to require each RTO/ISO to
modify its tariff to incorporate a comprehensive and non-discriminatory
process for timely review by a distribution utility of the individual
distributed energy resources that comprise a distributed energy
resource aggregation, which is triggered by initial registration of the
distributed energy resource aggregation or incremental changes to a
distributed energy resource aggregation already participating in the
markets. As described below, each RTO/ISO must coordinate with
distribution utilities to develop a distribution utility review process
that includes criteria by which the distribution utilities would
determine whether (1) each proposed distributed energy resource is
capable of participation in a distributed energy resource aggregation;
and (2) the participation of each proposed distributed energy resource
in a distributed energy resource aggregation will not pose significant
risks to the reliable and safe operation of the distribution system. To
support this review process, RTOs/ISOs must share with distribution
utilities any necessary information and data collected under Section
IV.F of this final rule about the individual distributed energy
resources participating in a distributed energy resource aggregation.
In addition, the results of a distribution utility's review must be
incorporated into the distributed energy resource aggregation
registration process.
293. To balance the need for distribution utility review with the
need to avoid creating potential barriers to distributed energy
resource aggregation, as noted by commenters, we require each RTO/ISO
to demonstrate on compliance with this final rule, as discussed further
below,\708\ that its proposed distribution utility review process is
transparent, provides specific review criteria that the distribution
utilities should use, and provides adequate and reasonable time for
distribution utility review.\709\ A transparent review process with
specific review criteria will allow distribution utilities to review
and identify concerns regarding the ability of distributed energy
resources to participate in a distributed energy resource aggregation
without posing significant reliability risk to the distribution system.
We also find that allowing an RTO/ISO to design this new process allows
regional flexibility in developing review procedures appropriate for
each particular RTO/ISO.
---------------------------------------------------------------------------
\708\ See infra PP 295-297.
\709\ For example, the approach used in the CAISO Distributed
Energy Resource Provider program.
---------------------------------------------------------------------------
294. As explained above,\710\ we decline to exercise jurisdiction
over the interconnection of an individual distributed energy resource
seeking to participate in RTO/ISO markets exclusively as part of an
aggregation. We expect that the state and local interconnection
processes for distributed energy resources will provide the appropriate
platform to address and study potential distribution system impacts and
provide the necessary information to inform distribution utility review
during distributed energy resource aggregation registration. However,
to the extent that some existing state and local interconnection
processes do not already capture such information, this final rule in
no way prevents state and local regulators from amending their
interconnection processes to address potential distribution system
impacts that the participation of distributed energy resources through
distributed energy resource aggregations may cause. In addition,
coordination between RTOs/ISOs, distributed energy resource
aggregators, relevant electric retail regulatory authorities, and
distribution utilities during the registration and distribution utility
review processes should provide RTOs/ISOs with the information they
need to study the impact of distributed energy resource aggregations on
the transmission system.
---------------------------------------------------------------------------
\710\ See supra Section IV.A.3 (Interconnection).
---------------------------------------------------------------------------
295. We agree with commenters \711\ that a lengthy review time or
the lack of a deadline could erect a barrier to distributed energy
resource
[[Page 67144]]
participation in the RTO/ISO markets and may unduly delay
participation. In response to these concerns, we clarify that any
distribution utility review must be completed within a limited, but
reasonable amount of time.\712\ We expect a reasonable amount of time
may vary among RTOs/ISOs but should not exceed 60 days. An RTO/ISO, on
compliance, should propose a timeline that reflects its regional needs.
In compliance with this final rule, we require each RTO/ISO to revise
its tariff to specify, as part of its proposed distribution utility
review process, the time that a distribution utility has to identify
any concerns regarding a distributed energy resource seeking to
participate in the RTO/ISO markets through an aggregation.
---------------------------------------------------------------------------
\711\ See, e.g., Advanced Energy Management Comments (2018 RM18-
9) at 19; Stem Comments (2018 RM18-9) at 15; Tesla Comments (2018
RM18-9) at 9.
\712\ For instance, CAISO utilizes a 30-day review period in its
Distributed Energy Resource Provider program.
---------------------------------------------------------------------------
296. In addition, we agree with commenters that argue for specific
standards and criteria to guide and govern the distribution utility
review process. However, we are not standardizing the criteria that the
RTOs/ISOs must adopt. We believe there are sufficient differences among
the regions, such as their rules limiting participation in different
programs, to warrant flexibility in determining specific standardized
criteria. On compliance with this final rule, we require that each RTO/
ISO revise its tariff to include, as part of its proposed distribution
utility review processes, the distribution utility review criteria by
which distribution utilities can determine that a distributed energy
resource (1) is capable of participating in an aggregation, e.g., the
distributed energy resource is not already participating in a retail
distributed energy resource program in which the relevant electric
retail regulatory authority conditioned the resource's participation on
not participating in RTO/ISO markets; and (2) does not pose significant
risks to the reliable and safe operation of the distribution system.
297. We agree with multiple commenters, such as EEI and Advanced
Energy Economy, that the RTOs/ISOs must include potential impacts on
distribution system reliability as a criterion in the distribution
utility review process. For example, if a distribution utility
determines during the distribution utility review process that a
distributed energy resource operated as part of an aggregation may
increase voltage above acceptable limits or create potential equipment
overloads, the distribution utility should have the opportunity to
alert the RTO/ISO and recommend removal of that distributed energy
resource from the distributed energy resource aggregation. In addition,
the distribution utility should have the opportunity to request that
the RTO/ISO place operational limitations on an aggregation or removal
of a distributed energy resource from an aggregation based on specific
significant reliability or safety concerns that it clearly demonstrates
to the RTO/ISO and distributed energy resource aggregator on a case-by-
case basis. For example, the RTOs/ISOs may consider requiring a signed
affidavit or other evidence from the distribution utility that a
distributed energy resource's participation in RTO/ISO markets would
pose a significant risk to the safe and reliable operation of the
distribution system, and processes to contest the distribution
utility's recommendation for removal or for operational limitations to
be placed on the aggregation.
298. In response to comments from EEI, TAPS, and multiple
distribution utilities that argue for a larger and decision-making role
for the distribution utilities during the review of distributed energy
resource registrations, we decline to provide such a role. We find that
requiring or permitting distribution utilities to authorize the
participation of distributed energy resources in RTO/ISO markets
directly or as part of an aggregation could create a barrier to
distributed energy resource aggregation.\713\ The distribution utility
review processes and interconnection protocols discussed above should
address and resolve the key distribution reliability concerns raised by
these commenters. We find that the ability of distribution utilities to
review and comment on distributed energy resource participation in
aggregations, as well as the Commission's finding that individual
distributed energy resources that will participate in aggregations will
interconnect under state and local interconnection protocols,
represents a balanced approach to removing barriers to the
participation of distributed energy resource aggregations in RTO/ISO
markets, while protecting reliability and the fundamental role of
distribution utilities in operating their distribution systems.
---------------------------------------------------------------------------
\713\ See supra Section IV.A.2 (Opt-Out) for further discussion.
---------------------------------------------------------------------------
299. In response to concerns raised by IRC and PJM regarding
disputes about distribution utility review,\714\ we find that any
disputes over the application of coordination and distribution utility
review processes between the RTO/ISO, the distribution utilities, and
the distributed energy resource aggregators must be subject to a
process for resolving disputes in the RTO/ISO tariff. Therefore, we
require each RTO/ISO to revise its tariff to incorporate dispute
resolution provisions as part of its proposed distribution utility
review process. In its compliance filing, each RTO/ISO should describe
how existing dispute resolution procedures are sufficient or,
alternatively, propose amendments to its procedures or new dispute
resolution procedures specific to this subject. Ensuring that disputes
regarding the distribution utility review process are subject to
dispute resolution provisions in RTO/ISO tariffs provides a formal
mechanism for the interested party to attempt to resolve the issue with
the RTO/ISO. Any parties in conflict over the distribution utility
review processes may also bring such disputes to the Commission's
Dispute Resolution Service, or file complaints pursuant to FPA section
206 at any time.\715\
---------------------------------------------------------------------------
\714\ See, e.g., IRC Comments (RM16-23) at 9; PJM Comments (2018
RM18-9) at 8.
\715\ For example, a dispute over how the RTO/ISO managed and
implemented the distribution review process during a distributed
energy resource aggregation registration could be brought to the
Commission.
---------------------------------------------------------------------------
3. Ongoing Operational Coordination
a. NOPR Proposal
300. In the NOPR, the Commission proposed to require that each RTO/
ISO revise its tariff to establish a process for ongoing coordination,
including operational coordination, among itself, the distributed
energy resource aggregator, and the distribution utility to maximize
the availability of the distributed energy resource aggregation
consistent with the safe and reliable operation of the distribution
system.\716\ The Commission explained that the purpose of this ongoing
coordination would be to ensure that the distributed energy resource
aggregator disaggregates dispatch signals from the RTO/ISO and
dispatches individual resources in a distributed energy resource
aggregation consistent with the limitations of the distribution system.
To account for the possibility that distribution facilities may be out
of service and impair the operation of certain individual resources in
a distributed energy resource aggregation, the Commission also proposed
to require each RTO/ISO to revise its tariff to require the distributed
energy resource aggregator to report to the RTO/ISO any changes to its
offered quantity and related distribution
[[Page 67145]]
factors that result from distribution line faults or outages.
---------------------------------------------------------------------------
\716\ NOPR, 157 FERC ] 61,121 at P 155.
---------------------------------------------------------------------------
301. In addition, the Commission sought comment on any related
reliability, safety, and operational concerns and how they may be
effectively addressed.
b. Comments
302. Several commenters express their support for ongoing
coordination and emphasize the importance of real-time coordination to
ensure safe and reliable operation of the transmission and distribution
systems.\717\ Many distribution utilities in support of the NOPR
proposal suggest specific roles or priorities for distribution
utilities as part of ongoing coordination. Pacific Gas & Electric
states that services in support of distribution system safety and
reliability must be prioritized, as determined by the distribution
company, over wholesale market participation when distributed energy
resources are providing multiple services.\718\ NYISO Indicated
Transmission Owners and Xcel Energy Services request that the
Commission permit distribution utilities to limit the energy injections
and ancillary services from specific distributed energy resources with
advanced notice.\719\ Other commenters argue that distribution
utilities must have the ability to limit distributed energy resource
generation in order to ensure safety and reliability because RTOs/ISOs
do not have sufficient information to maintain the safety and
reliability of the distribution grid.\720\
---------------------------------------------------------------------------
\717\ See, e.g., APPA/NRECA Comments (RM16-23) at 45; Duke
Energy Comments (RM16-23) at 7; EEI Comments (RM16-23) at 37; Exelon
Comments (RM16-23) at 2, 11; Guannan He Comments (RM16-23) at 2;
NYISO Comments (RM16-23) at 19.
\718\ Pacific Gas & Electric Comments (RM16-23) at 21.
\719\ NYISO Indicated Transmission Owners Comments (RM16-23) at
15-16; Xcel Energy Services Comments (RM16-23) at 28.
\720\ Organization of MISO States Comments (2018 RM18-9) at 5;
SoCal Edison Comments (RM16-23) at 7-8.
---------------------------------------------------------------------------
303. Several commenters provide input on the processes needed to
alert distributed energy resource aggregators about problems on
distribution systems. Dominion agrees with the NOPR requirement that a
distributed energy resource aggregator should be responsible for
reporting to the RTO/ISO when its offered quantity changes due to
distribution facilities being out of service.\721\ SPP notes it will
require significant effort to coordinate with entities with which the
RTO/ISO has not previously had two-way communications.\722\ CAISO
recommends that the approach being developed for its Distributed Energy
Resource Provider program be used as a means to allow distribution
utilities to identify problems on their distribution systems.\723\
CAISO believes that a process is needed for distribution utilities to
notify a distributed energy resource aggregator of changes to
distribution system conditions that will affect the aggregated
resource's ability to perform to its maximum capability, such as a red/
green traffic signal.\724\ The Organization of MISO States argues that
distribution system operators must have the ability to communicate
information on topology changes in real-time which may impact the
ability of aggregations to participate in the wholesale market.\725\
Several commenters indicate that the current data acquisition
technologies are largely manual, but will be adequate initially for
ongoing coordination.\726\
---------------------------------------------------------------------------
\721\ Dominion Comments (RM16-23) at 13-14.
\722\ SPP Comments (RM16-23) at 24.
\723\ CAISO Comments (RM16-23) at 42-43.
\724\ Id. at 42-44.
\725\ Organization of MISO States Comments (2018 RM18-9) at 5.
\726\ See, e.g., NYISO Indicated Transmission Owners Comments
(2018 RM18-9) at 22; PJM Comments (2018 RM18-9) at 27.
---------------------------------------------------------------------------
304. Multiple commenters state that, at higher distributed energy
resource penetrations, enhanced equipment and information to increase
coordination and communication between the distribution utility,
distributed energy resource aggregator, and the RTO/ISO will be
necessary and are still in the process of being developed.\727\ TAPS
and EEI argue that distribution utilities will need timely information
on planned dispatch, and that there must be a realistic timeline for
preventing a dispatch and notifying the distributed energy resource
aggregator or the RTO/ISO if a dispatch would adversely affect retail
service.\728\
---------------------------------------------------------------------------
\727\ See, e.g., Advanced Energy Management Comments (2018 RM18-
9) at 21-22; NYISO Indicated Transmission Owners Comments (2018
RM18-9) at 23; Pacific Gas & Electric Comments (2018 RM18-9) at 22-
23; PJM Comments (2018 RM18-9) at 27; TAPS Comments (2018 RM18-9) at
14.
\728\ EEI Comments (2018 RM18-9) at 12; TAPS Comments (2018
RM18-9) at 14.
---------------------------------------------------------------------------
305. Some commenters address the role of the distribution utility
in ongoing operational coordination. Advanced Energy Economy and EEI
state that the distribution utility should be made aware of all
information collected by the aggregator.\729\ More fundamentally, EEI
comments that the distribution utility is in the best position to serve
as the coordinator of distribution operations to ensure the complete
provision of information is being provided to all parties.\730\
---------------------------------------------------------------------------
\729\ Advanced Energy Economy Comments (2018 RM18-9) at 11; EEI
Comments (2018 RM18-9) at 17.
\730\ EEI Comments (2018 RM18-9) at 17.
---------------------------------------------------------------------------
306. Several commenters offer suggestions or request guidance on
aspects of ongoing coordination. Avangrid advocates that all
communication during ongoing coordination be channeled through
distributed energy resource aggregators.\731\ Furthermore, Avangrid
states that distributed energy resource aggregators should assume the
responsibility for the performance of their aggregated resource and be
responsible for any costs incurred by distribution utilities to
mitigate and resolve power quality issues caused by distributed energy
resources. TeMix states that dispatch of end customer load, distributed
generation, and storage must be coordinated with the operators of the
distribution grid circuits, which can be complex.\732\
---------------------------------------------------------------------------
\731\ Avangrid Comments (RM16-23) at 17.
\732\ TeMix Comments (RM16-23) at 4.
---------------------------------------------------------------------------
307. Several commenters claim that the RTO/ISO tariffs should be
less specific about what is required for ongoing coordination processes
and rules. ISO-NE states that the Commission should not be overly
prescriptive regarding the level of detail required in each RTO/ISO
tariff regarding coordination among these entities on operational
coordination, and requests that the Commission allow each RTO/ISO to
develop these requirements in conjunction with stakeholders.\733\
Pacific Gas & Electric states that it may be appropriate to include
high-level requirements for information sharing and operational
coordination, but more technical issues associated with distributed
energy resource aggregation implementation are fluid and evolving, and
thus tariff language may not be flexible or adaptable enough to account
for needed useful, timely changes.\734\ Advanced Energy Economy and
Union of Concerned Scientists emphasize that ongoing coordination
already occurs with other resources, such as remote and dispersed
hydroelectric generation, and argue that existing protocols are
sufficient.\735\
---------------------------------------------------------------------------
\733\ ISO-NE Comments (RM16-23) at 55.
\734\ Pacific Gas & Electric Comments (RM16-23) at 22.
\735\ Advanced Energy Economy Comments (RM16-23) at 38; Union of
Concerned Scientists Comments (RM16-23) at 9.
---------------------------------------------------------------------------
308. Most commenters agree that distribution utilities should have
the right to override RTO/ISO dispatch instructions for distributed
energy resources located on their distribution systems to resolve or
avoid distribution
[[Page 67146]]
reliability issues.\736\ Lorenzo Kristov indicates that the manner in
which a distribution utility can override a dispatch instruction should
be clarified so that distributed energy resource providers will be
better able to estimate their risk of being curtailed due to
distribution system conditions.\737\ NYISO Indicated Transmission
Owners state that the distribution utility should communicate potential
issues with dispatch schedules to the distributed energy resource
aggregators to provide them with an opportunity to re-adjust the
distributed energy resource aggregation dispatch schedule.\738\
Conversely, Stem argues that, because a distribution utility does not
have visibility into the exact distribution level impacts of a
wholesale market dispatch, the distribution utility should not be able
to override a dispatch.\739\
---------------------------------------------------------------------------
\736\ See, e.g., California Commission Comments (2018 RM18-9) at
18; Duquesne Comments (2018 RM18-9) at 7; NYISO Indicated
Transmission Owners Comments (2018 RM18-9) at 23; Pacific Gas &
Electric Comments (2018 RM18-9) at 24; SunRun Comments (2018 RM18-9)
at 5-6; TAPS Comments (2018 RM18-9) at 29.
\737\ Lorenzo Kristov Comments (2018 RM18-9) at 17.
\738\ NYISO Indicated Transmission Owners Comments (2018 RM18-9)
at 23.
\739\ Stem Comments (2018 RM18-9) at 17.
---------------------------------------------------------------------------
309. Commenters disagree about how performance penalties should be
applied in the event that a distribution utility overrides an RTO/ISO
dispatch. Several commenters generally argue that distributed energy
resource aggregators should be subject to performance penalties, like
all other resources.\740\ PG&E and PJM assert that non-deliverability
penalties are subject to bilateral and contractual agreement between
the distributed energy resource aggregator and the RTO/ISO.\741\
Developers argue that the aggregator should not be assessed penalties
due to an outage caused by the distribution system operator's
controls.\742\ Distribution utilities argue that, in the event of a
curtailment, they must have protection from liability.\743\
---------------------------------------------------------------------------
\740\ Monitoring Analytics Comments (2018 RM18-9) at 13; NYISO
Indicated Transmission Owners Comments (2018 RM18-9) at 23; PJM
Comments (2018 RM18-9) at 27-28.
\741\ Pacific Gas & Electric Comments (2018 RM18-9) at 24; PJM
Comments (2018 RM18-9) at 27-28.
\742\ Microgrid Resources Coalition Comments (2018 RM18-9) at
15; Stem Comments (2018 RM18-9) at 17; SunRun Comments (2018 RM18-9)
at 6.
\743\ Eversource Comments (2018 RM18-9) at 11; SoCal Edison
Comments (2018 RM18-9) at 10; TAPS Comments (2018 RM18-9) at 29.
---------------------------------------------------------------------------
c. Commission Determination
310. We agree with commenters that emphasize the importance of
real-time coordination to ensure safe and reliable operation of the
transmission and distribution systems. Consequently, to implement Sec.
35.28(g)(12)(ii)(g) of the Commission's regulations, we adopt the NOPR
proposal to require each RTO/ISO to revise its tariff to (1) establish
a process for ongoing coordination, including operational coordination,
that addresses data flows and communication among itself, the
distributed energy resource aggregator, and the distribution utility;
and (2) require the distributed energy resource aggregator to report to
the RTO/ISO any changes to its offered quantity and related
distribution factors that result from distribution line faults or
outages. Further, we require each RTO/ISO to revise its tariff to
include coordination protocols and processes for the operating day that
allow distribution utilities to override RTO/ISO dispatch of a
distributed energy resource aggregation in circumstances where such
override is needed to maintain the reliable and safe operation of the
distribution system. These processes that allow distribution utilities
to override RTO/ISO dispatch must be contained in the tariff and must
be non-discriminatory and transparent but still address distribution
utility reliability and safety concerns. We find these operational
coordination requirements will maximize the availability of the
distributed energy resource aggregation consistent with the reliable
and safe operation of the distribution system.
311. Commenters disagree over the level of specificity needed in
RTO/ISO tariffs and describe different approaches to ongoing
coordination. To account for different regional approaches and to
provide flexibility, we are not prescribing specific protocols or
processes for the RTOs/ISOs to adopt as part of the operational
coordination requirements, but rather we will allow each RTO/ISO to
develop an approach to ongoing operational coordination in compliance
with this final rule.
312. We also require each RTO/ISO to revise its tariff to apply any
existing resource non-performance penalties to a distributed energy
resource aggregation when the aggregation does not perform because a
distribution utility overrides the RTO's/ISO's dispatch. We find that
this requirement will ensure that distributed energy resource
aggregations are subject to non-performance penalties similarly to
other resources participating in RTO/ISO markets. We note that this
requirement will incent distributed energy resource aggregators to
register individual distributed energy resources on less-constrained
portions of distribution networks in order to minimize the likelihood
of incurring non-performance penalties from the RTO/ISO.
313. We acknowledge that the timing and location of distribution
utility overrides of dispatch instructions are outside of the control
of distributed energy resource aggregators, and that aggregators may
not have advance notice of overrides during an operating day. In
response to commenters who state that distribution utilities must have
protection from liability in the event of a curtailment or an outage
caused by the distribution system operator's actions to preserve the
safety and reliability of the distribution system,\744\ we decline to
impose any specific liability provisions. Given the arguments advanced
by commenters, we are not persuaded that all distribution providers
face similar liability concerns and that these concerns should be
addressed through standardized liability provisions in RTO/ISO tariffs.
Accordingly, we decline to establish a generic requirement for RTOs/
ISOs with respect to liability provisions.
---------------------------------------------------------------------------
\744\ See, e.g., Eversource Comments (2018 RM18-9) at 11; SoCal
Edison Comments (2018 RM18-9) at 10; TAPS Comments (2018 RM18-9) at
29.
---------------------------------------------------------------------------
4. Role of Relevant Electric Retail Regulatory Authorities
a. NOPR Proposal
314. The NOPR did not directly address the role of relevant
electric retail regulatory authorities in coordination with the RTO/
ISO, the distributed energy resource aggregator, and the distribution
utility when a distributed energy resource aggregation seeks to
participate in an RTO/ISO market. However, after the April 2018
technical conference, the Commission sought comment on the role of
relevant electric retail regulatory authorities in coordination.
b. Comments
315. Most commenters assert that relevant electric retail
regulatory authorities have a central and key role in coordination and
that the responsibilities of such authorities should be focused on
setting rules and supervising distribution utility review of
distributed energy resource participation in aggregations.
316. Some relevant electric retail regulatory authorities argue
that they must have a central role in coordination to ensure that their
jurisdiction is preserved as it relates to market activities on the
distribution system by distributed energy resources participating in
RTO/ISO markets.\745\
[[Page 67147]]
Vice Chairman Place requests that the Commission require the role of
relevant electric retail regulatory authorities be reflected in RTO/ISO
rules, and that, if the Commission sets roles and responsibilities in
RTO/ISO rules, relevant electric retail regulatory authorities should
participate in setting these rules.\746\ In addition, the Organization
of MISO States contends that relevant electric retail regulatory
authorities will need to be aware of coordination efforts and be able
to participate in, and in some cases lead, these efforts based on
jurisdictional scope, prevalence of distributed energy resource
penetration, and state and local policy.\747\ Vice Chairman Place
requests that the relevant electric regulatory authority's ability to
restrict distributed energy resource participation in the wholesale
market be maintained.\748\
---------------------------------------------------------------------------
\745\ See, e.g., Vice Chairman Place Comments (2018 RM18-9) at
8; Organization of MISO States Comments (2018 RM18-9) at 9-10.
\746\ Vice Chairman Place Comments (2018 RM18-9) at 8.
\747\ Organization of MISO States Comments (2018 RM18-9) at 9.
\748\ Vice Chairman Place Comments (2018 RM18-9) at 5.
---------------------------------------------------------------------------
317. Distribution utilities generally agree with the comments from
relevant electric retail regulatory authorities and support a central
and key role for relevant electric retail regulatory authorities in
coordinating the participation of aggregated distributed energy
resource in RTO/ISO markets.\749\ Specific roles and responsibilities
for relevant electric retail regulatory authorities identified by
distribution utility commenters include: Supervision of distribution
utility review of distributed energy resource participation in
aggregations; evaluation of distributed energy resources
interconnection to distribution facilities; overseeing issues regarding
distribution system operation and reliability; data sharing; and
setting of metering requirements and related mechanisms to distinguish
wholesale and retail transactions.\750\ Moreover, APPA requests that
the Commission be explicit that nothing in the final rule preempts or
otherwise limits the ability of relevant electric retail regulatory
authorities to adopt rules or tariffs, and to set rates to recover and
allocate the costs associated with facilitating wholesale market
participation by aggregated distributed energy resources.\751\
---------------------------------------------------------------------------
\749\ See, e.g., APPA Comments (2018 RM18-9) at 2; New York
Indicated Transmission Owners Comments (2018 RM18-9) at 17; Pacific
Gas & Electric Comments (2018 RM18-9) at 16.
\750\ See, e.g., APPA Comments (2018 RM18-9) at 6; California
Commission Comments (2018 RM18-9) at 1-3, 12; Organization of MISO
States Comments (2018 RM18-9) at 9; Pacific Gas & Electric Comments
(2018 RM18-9) at 16.
\751\ APPA Comments (2018 RM18-9) at 4.
---------------------------------------------------------------------------
318. CAISO also comments in support of the role of relevant
electric retail regulatory authorities in facilitating coordination.
Based on its experience in California, CAISO identifies several
possible coordination roles and responsibilities for relevant electric
retail regulatory authorities, including: Establishing metering
requirements for distributed energy resources; establishing rules for
multi-use applications; providing oversight of distribution utility
review of distributed energy resource participation in an aggregation;
and resolving distributed energy resource aggregation
controversies.\752\ As an example of the importance of relevant
electric retail regulatory authorities in distributed energy resource
coordination, CAISO references its Commission-approved distributed
energy resource process that requires that distributed energy resource
providers comply with applicable utility distribution company tariffs,
and operating procedures incorporated into those tariffs, as well as
applicable requirements of the local regulatory authority.\753\
---------------------------------------------------------------------------
\752\ CAISO Comments (2018 RM18-9) at 13-14.
\753\ Id. at 14.
---------------------------------------------------------------------------
319. Conversely, other commenters argue for a somewhat more limited
role for relevant electric retail regulatory authorities. Advanced
Energy Management argues that the role of relevant electric retail
regulatory authorities should be limited to defining non-discriminatory
interconnection procedures that ensure the distribution grid can
accommodate distributed energy resources, and ensuring that the
distributed energy resource can safely deliver energy to the grid.\754\
Icetec asserts that the coordination of distributed energy resource
registrations should not become a vehicle for distribution utilities or
relevant electric retail regulatory authorities to exercise improper
authority over eligibility to participate in wholesale markets.\755\ In
order to forestall this possible intervention, Icetec recommends making
distribution interconnection and registration for wholesale markets
entirely separate processes.\756\
---------------------------------------------------------------------------
\754\ Advanced Energy Management Comments (2018 RM18-9) at 18.
\755\ Icetec Comments (2018 RM18-9) at 16.
\756\ Id. at 18-19.
---------------------------------------------------------------------------
320. Some commenters urge the Commission to respect state and local
concerns regarding distributed energy resource aggregations. APPA
states that the Commission should afford distribution utilities and
their relevant electric retail regulatory authorities a key role in
coordinating the participation of aggregated distributed energy
resources in RTO/ISO markets.\757\ The Indiana Commission states that
distributed energy resource wholesale participation must work in tandem
with, and not in contravention of, Indiana's utility regulatory
framework.\758\ PJM Utilities Coalition urges the Commission to defer
to relevant electric retail regulatory authorities in fashioning
programs that integrate distributed energy resources into the
distribution system, asserting that states are uniquely positioned to
balance the benefits of distributed energy resource participation in
wholesale markets with costs and other adverse impacts on distribution
systems and retail load.\759\
---------------------------------------------------------------------------
\757\ APPA Comments (2018 RM18-9) at 2.
\758\ Indiana Commission Comments (2018 RM18-9) at 2.
\759\ PJM Utilities Coalition Comments (2018 RM18-9) at 10.
---------------------------------------------------------------------------
321. The California Commission recommends that, given the
complexity of ensuring just compensation for resources, it is most
appropriate for local regulatory authorities to establish distinctly
defined services and rules to govern coordination across wholesale and
retail markets.\760\
---------------------------------------------------------------------------
\760\ California Commission Comments (2018 RM18-9) at 10-11.
---------------------------------------------------------------------------
c. Commission Determination
322. In consideration of the comments and to implement Sec.
35.28(g)(12)(ii)(g) of the Commission's regulations, we require each
RTO/ISO to specify in its tariff, as part of the market rules on
coordination between the RTO/ISO, the distributed energy resource
aggregator, and the distribution utility, how each RTO/ISO will
accommodate and incorporate voluntary relevant electric retail
regulatory authority involvement in coordinating the participation of
aggregated distributed energy resources in RTO/ISO markets. We agree
with commenters that relevant electric retail regulatory authorities
have a role in coordination, i.e., in setting rules at the distribution
level and in RTO/ISO stakeholder discussions. Many relevant electric
retail regulatory authorities indicate strong interest in participating
in such coordination.
323. We note that the roles delineated in CAISO's Distributed
Energy Resource Provider tariff provisions may provide an example of
how relevant electric retail regulatory authorities could be involved
in coordinating the participation of distributed energy resource
aggregations in RTO/ISO
[[Page 67148]]
markets. CAISO's Distributed Energy Resource Provider model requires
that distributed energy resource providers comply with applicable
utility distribution company tariffs and operating procedures
incorporated into those tariffs, as well as applicable requirements of
the local regulatory authority.\761\
---------------------------------------------------------------------------
\761\ CAISO Comments (2018 RM18-9) at 14.
---------------------------------------------------------------------------
324. We further note that possible roles and responsibilities of
relevant electric retail regulatory authorities in coordinating the
participation of distributed energy resource aggregations in RTO/ISO
markets may include, but are not limited to: Developing interconnection
agreements and rules; developing local rules to ensure distribution
system safety and reliability, data sharing, and/or metering and
telemetry requirements; overseeing distribution utility review of
distributed energy resource participation in aggregations; establishing
rules for multi-use applications; and resolving disputes between
distributed energy resource aggregators and distribution utilities over
issues such as access to individual distributed energy resource data.
We require that any such role for relevant electric retail regulatory
authorities in coordinating the participation of distributed energy
resource aggregations in RTO/ISO markets be included in the RTO/ISO
tariffs and developed in consultation with the relevant electric retail
regulatory authorities. Further, as noted in Section IV.G, to the
extent that metering and telemetry data comes from or flows through
distribution utilities, we require that RTOs/ISOs coordinate with
distribution utilities and the relevant electric retail regulatory
authorities to establish protocols for sharing metering and telemetry
data that minimize costs and other burdens and address concerns raised
with respect to customer privacy and cybersecurity.
5. Coordination Frameworks
a. NOPR Proposal
325. As part of its proposal to require coordination in the NOPR,
the Commission sought comment on the level of detail necessary in the
RTO/ISO tariffs to establish a framework for ongoing coordination
between the RTO/ISO, a distributed energy resource aggregator, and the
relevant distribution utility or utilities.\762\
---------------------------------------------------------------------------
\762\ NOPR, 157 FERC ] 61,121 at P 155.
---------------------------------------------------------------------------
b. Comments
326. Several commenters propose that the Commission take a more
proactive step and require RTOs/ISOs to establish a broader
coordination structure, or ``coordination framework'' that addresses
all aspects of coordination (planning, distributed energy resource
registration, and operational coordination) between distributed energy
resources, distributed energy resource aggregators, RTOs/ISOs, and
distribution utilities. At the technical conference, panelist Jeffery
Taft, Chief Architect at Pacific Northwest National Laboratory,
described a coordination framework as a way to exchange information and
control signals between the three levels of the U.S. electric system,
namely the bulk power level, the distribution level, and the
distributed energy resource/customer level.\763\ R Street proposes two
purposes for coordination frameworks, namely, to encourage
technological innovation, and to coordinate policies between retail and
wholesale markets.\764\ Stem proposes three coordination frameworks (1)
an operational framework; (2) a planning framework; and (3) a markets
framework.\765\ PJM suggests a framework that focuses on two components
(1) reliability-related items; and (2) administrative items.\766\ CAISO
proposes an all-encompassing process that addresses each element of
distributed energy resource aggregation.\767\
---------------------------------------------------------------------------
\763\ Technical Conference Transcript at 388.
\764\ R Street Comments (RM16-23) at 10-11.
\765\ Stem Comments (2018 RM18-9) at 7-8.
\766\ PJM Comments (2018 RM18-9) at 19-21, 24.
\767\ CAISO Comments (RM16-23) at 39-51.
---------------------------------------------------------------------------
327. Several commenters express the belief that the development of
a coordination framework will ensure that participation of distributed
energy resource aggregations in RTO/ISO markets does not compromise the
reliability or safety of the transmission and distribution
systems.\768\ For example, based on its experience with implementing
CAISO's Distributed Energy Resource Provider framework, Pacific Gas &
Electric states that it is important that RTOs/ISOs coordinate with
distribution utilities.\769\
---------------------------------------------------------------------------
\768\ See, e.g., id. at 39; Institute for Policy Integrity
Comments (RM16-23) at 9; NYISO Comments (RM16-23) at 19.
\769\ Pacific Gas & Electric Comments (RM16-23) at 21.
---------------------------------------------------------------------------
328. R Street Institute argues for a coordination framework that
creates incentives for innovation and deployment of advanced active
network management practices (e.g., real-time operating procedures) and
technologies (e.g., software-enabled communications among control
centers).\770\ E4TheFuture notes that data creation, communications,
and analytics are fundamental to successfully including distributed
energy resources in the organized wholesale electric markets, and that
the technologies and services surrounding these fundamentals and the
standards that will support valuation and aggregation are evolving
rapidly.\771\ E4TheFuture asks the Commission to support the RTOs/ISOs
in creating solutions to nimbly address the rapid development of these
technologies over time.
---------------------------------------------------------------------------
\770\ R Street Institute Comments (RM16-23) at 10.
\771\ E4TheFuture Comments (RM16-23) at 2.
---------------------------------------------------------------------------
329. Several commenters recommend that the Commission not require a
specific coordination framework at this time. Public Interest Groups
argue that the Commission should not specify a particular structure for
coordination frameworks but instead allow the ``laboratories of
innovation'' of state and distribution utilities to develop new
practices and procedures.\772\ Lorenzo Kristov emphasizes that these
coordination efforts are at an early stage, noting that there are no
best practices and no best coordination framework to adopt.\773\ The
California Commission asks that the Commission not establish specific
requirements at this time, but instead to track the development of
frameworks and architectures around the country and document best
practices.\774\
---------------------------------------------------------------------------
\772\ Public Interest Organizations Comments (2018 RM18-9) at
11-12.
\773\ Lorenzo Kristov Comments (2018 RM18-9) at 16-17.
\774\ California Commission Comments (2018 RM18-9) at 12.
---------------------------------------------------------------------------
c. Commission Determination
330. We believe that, among other benefits, a broader, holistic
approach to coordination--referred to herein as a coordination
framework--could help ensure that different elements of distributed
energy resource aggregations do not work at cross-purposes. Because the
topic of coordination frameworks is still developing and was not fully
considered in this record, we encourage, but do not require, each RTO/
ISO to develop a coordination framework that addresses the needs of its
region.
331. We note that it may be beneficial for the RTOs/ISOs and their
stakeholders to take into consideration in developing coordination
frameworks the interoperability of new information technology and
communications systems. Such systems will likely need to exchange
mutually recognizable data, and will become more important as
distributed energy resource penetration reaches higher levels. Early
consideration of these issues could help prevent redundancy and
unnecessary costs later.
[[Page 67149]]
I. Modifications to List of Resources in Aggregation
a. NOPR Proposal
332. In the NOPR, the Commission proposed that each RTO/ISO revise
its tariff to allow a distributed energy resource aggregator to modify
the list of resources in its distributed energy resource aggregation
without re-registering all of the resources if the modification will
not result in any safety or reliability concerns.\775\ The Commission
emphasized, however, that, pursuant to other proposed
requirements,\776\ the relevant distribution utility or utilities must
have the opportunity to review the list of individual resources that
are located on their distribution system in a distributed energy
resource aggregation before those resources may participate in RTO/ISO
markets through the aggregation, so that they can assess whether the
resources would be able to respond to RTO/ISO dispatch instructions
without posing any significant risk to the distribution system.\777\
---------------------------------------------------------------------------
\775\ Id. P 149.
\776\ See supra Section IV.H.2 (Role of Distribution Utilities).
\777\ NOPR, 157 FERC ] 61,121 at P 154.
---------------------------------------------------------------------------
b. Comments
333. Many commenters support the Commission's proposal to allow a
distributed energy resource aggregator to modify its list of resources
without re-registering all of the resources in the distributed energy
resource aggregation.\778\ In support, University of Delaware's EV R&D
Group states that within a substantial aggregation, small residential
electric vehicle interconnection sites might enter and exit the
aggregation even on a daily basis, as new participants and existing
participants change vehicles, homes, or preferences.\779\ However,
NYISO asks the Commission to require the distributed energy resource
aggregator to advise the RTOs/ISOs of any changes to the list of
resources and changes in the aggregation's performance output or
operating characteristics.\780\
---------------------------------------------------------------------------
\778\ See, e.g., Advanced Microgrid Solutions Comments (RM16-23)
at 8; Avangrid Comments (RM16-23) at 13; CAISO Comments (RM16-23) at
35-37; City of New York Comments (RM16-23) at 9-10; EEI Comments
(RM16-23) at 32-33.
\779\ University of Delaware's EV R&D Group Comments (2018 RM18-
9) at 2.
\780\ NYISO Comments (RM16-23) at 18.
---------------------------------------------------------------------------
334. Many commenters also generally support the proposal to allow
distribution utilities to review the list of resources when it is
revised.\781\ Mensah states that any review should be streamlined as
much as possible.\782\ Stem stresses the importance of transparent
standards of review and argues that opaque review methodologies create
an unreasonable barrier to participation of distributed energy
resources.\783\ Additionally, many commenters emphasize the need to
determine whether any changes in the list of resources affect safety
and reliability at both the transmission and distribution levels.\784\
Dominion adds that the review process to determine the impacts of a
change in the list of resources on safety and reliability must be
established in a final rule.\785\
---------------------------------------------------------------------------
\781\ See, e.g., APPA/NRECA Comments (RM16-23) at 45; EEI
Comments (RM16-23) at 32-33; Mensah Comments (RM16-23) at 4; MISO
Transmission Owners Comments (RM16-23) at 23; NYISO Comments (RM16-
23) at 18.
\782\ Mensah Comments (RM16-23) at 4.
\783\ Stem Comments (RM16-23) at 15.
\784\ Avangrid Comments (RM16-23) at 12-13; CAISO Comments
(RM16-23) at 34-35; Dominion Comments (RM16-23) at 11; Mensah
Comments (RM16-23) at 4; Pacific Gas & Electric Comments (RM16-23)
at 20.
\785\ Dominion Comments (RM16-23) at 11.
---------------------------------------------------------------------------
c. Commission Determination
335. We adopt the NOPR proposal, as modified below, and add Sec.
35.28(g)(12)(ii)(e) to the Commission's regulations to require each
RTO/ISO to establish market rules that address modification to the list
of resources in a distributed energy resource aggregation.
336. We require each RTO/ISO to revise its tariff to specify that
distributed energy resource aggregators must update their lists of
distributed energy resources in each aggregation (i.e., reflect
additions and subtractions from the list) and any associated
information and data,\786\ but that, when doing so, distributed energy
resource aggregators will not be required to re-register or re-qualify
the entire distributed energy resource aggregation. We note that any
modification triggers the distribution utility review process
(discussed in Section IV.H.2 above). This requirement is necessary to
ensure that the RTOs/ISOs have accurate and current information about
the individual distributed energy resources that make up a distributed
energy resource aggregation and to allow distribution utilities the
opportunity to review those modifications.\787\ We find that this
requirement will ensure minimal administrative burden, while protecting
safety and reliability at both the transmission and distribution
levels.
---------------------------------------------------------------------------
\786\ See supra Section IV.F (Information and Data
Requirements).
\787\ See supra Section IV.H.2 (Role of Distribution Utilities).
---------------------------------------------------------------------------
337. While any modification of a distributed energy resource
aggregation will trigger distribution utility review, we clarify that
it may be appropriate for each RTO/ISO to abbreviate the distribution
utility's review of modifications to the distributed energy resource
aggregations. As the Commission explained in the NOPR, the requirements
for modifying the list of resources in a distributed energy resource
aggregation can present a barrier to the participation of distributed
energy resource aggregations in RTO/ISO markets.\788\ We find that the
incremental impacts on RTO/ISO markets and operations that would result
from the addition or removal of individual distributed energy resources
from a distributed energy resource aggregation, after the initial
registration, are likely to be minimal and thus individual distributed
energy resources should generally be able to enter and exit distributed
energy resource aggregations participating in RTO/ISO markets without
impairing safety and reliability. Because the impacts of modifications
may often be minimal, an abbreviated review process should be
sufficient for the distribution utility to identify the cases where an
addition to the list of resources might pose a safety or reliability
concern. As stated in Section IV.A.3, modifications to the list of
resources in a distributed energy resource aggregation, and the
resulting distribution utility and RTO/ISO review of those changes,
could occasionally indicate changes to the electrical characteristics
of the distributed energy resource aggregation that are significant
enough to potentially adversely impact the reliability of the
distribution or transmission systems and justify restudy of the full
distributed energy resource aggregation.\789\ However, even in such
circumstances, we do not believe that participation of the distributed
energy resource aggregation will need to be paused during the review of
modifications or restudy. Aggregators should be able to continue to bid
the unmodified portion of their aggregation into RTO/ISO markets. For
example, in the event that a resource withdraws from an aggregation,
the aggregator could continue to participate in the market by modifying
its bidding parameters to reflect the aggregation's changed capability
to perform.
---------------------------------------------------------------------------
\788\ NOPR, 157 FERC ] 61,121 at P 148.
\789\ See supra P 99.
---------------------------------------------------------------------------
338. Finally, to the extent that an RTO/ISO requires distributed
energy resource aggregators to provide information on the physical or
operational characteristics of its distributed energy resource
aggregation (pursuant to Section IV.F), we require
[[Page 67150]]
each RTO/ISO to revise its tariff to ensure that distributed energy
resource aggregators must update such information if any modification
to the list of resources participating in the aggregation results in a
change to the aggregation's performance. We find that this requirement
will ensure that the RTOs/ISOs have accurate and current information
about the physical and operational characteristics of the distributed
energy resource aggregations that are participating in their markets,
with minimal administrative burden.
J. Market Participation Agreements
1. NOPR Proposal
339. In the NOPR, the Commission stated that, in order to ensure
that a distributed energy resource aggregator complies with all
relevant provisions of the RTO/ISO tariffs, it must execute an
agreement with the RTO/ISO that defines its roles and responsibilities
and its relationship with the RTO/ISO before it can participate in RTO/
ISO markets.\790\ The Commission explained that, because the individual
resources in these distributed energy resource aggregations will likely
fall under the purview of multiple organizations (e.g., the RTO/ISO,
state regulatory commissions, relevant distribution utilities, and
local regulatory authorities), these agreements must also require that
the distributed energy resource aggregator attest that its distributed
energy resource aggregation is compliant with the tariffs and operating
procedures of the distribution utilities and the rules and regulations
of any other relevant regulatory authority.\791\ The Commission
therefore proposed that each RTO/ISO revise its tariff to include a
market participation agreement for distributed energy resource
aggregators. The Commission did not propose specific requirements for
such agreements in the NOPR; instead, the Commission sought comment on
the information these agreements should contain.
---------------------------------------------------------------------------
\790\ NOPR, 157 FERC ] 61,121 at P 157.
\791\ The Commission explained that this may include any laws or
regulations of the relevant retail regulatory authority that do not
permit demand response resources to participate in RTO/ISO markets
as the Commission considered in Order No. 719. Id. n.238 (citing
Order No. 719, 125 FERC ] 61,071 at P 154).
---------------------------------------------------------------------------
340. The Commission also explained that, while these agreements
will define the roles and responsibilities of the distributed energy
resource aggregator, they should not limit the business models under
which distributed energy resource aggregators can operate.\792\
Therefore, the Commission proposed that the market participation
agreement for distributed energy resource aggregators that each RTO/ISO
must include in its tariff may not restrict the business models that
distributed energy resource aggregators may adopt. The Commission
stated that market participation agreements for distributed energy
resource aggregators should not preclude distribution utilities,
cooperatives, or municipalities from aggregating distributed energy
resources on their systems or even microgrids from participating in the
RTO/ISO markets as a distributed energy resource aggregation.
---------------------------------------------------------------------------
\792\ Id. P 158.
---------------------------------------------------------------------------
341. After the April 2018 technical conference, the Commission
sought comment on whether the proposed use of market participation
agreements addresses state and local regulator concerns about the role
of distribution utilities in the coordination and registration of
distributed energy resources in aggregations. The Commission further
asked whether the proposed provisions in the market participation
agreements that require that distributed energy resource aggregators
attest that they are compliant with the tariffs and operation
procedures of distribution utilities and state and local regulators are
sufficient to address such concerns.\793\
---------------------------------------------------------------------------
\793\ See Notice Inviting Post-Technical Conference Comments at
6.
---------------------------------------------------------------------------
2. Comments
342. All commenters that address this topic agree that market
participation agreements between RTOs/ISOs and distributed energy
resource aggregators are necessary. However, commenters disagree on the
structure of these agreements.
343. Many commenters support the NOPR proposal to require a market
participation agreement for distributed energy resource
aggregators.\794\ ISO-NE, however, urges the Commission to exclude from
a final rule any specific directives regarding market participation
agreements for aggregations of distributed energy resources, including
requiring attestation from the aggregator.\795\ ISO-NE states that such
directives are not needed because its current generic market
participant agreement is sufficient as a ``simple and proven'' approach
to accommodate distributed energy resource aggregations and because
other coordination processes, including the asset registration process,
may be preferable mechanisms for gathering and verifying information
related to a participant's assets.
---------------------------------------------------------------------------
\794\ See, e.g., APPA/NRECA Comments (RM16-23) at 46; California
Commission Comments (2018 RM18-9) at 7; Mensah Comments (RM16-23) at
4; NYISO Comments (RM16-23) at 20; PJM Comments (RM16-23) at 28-29;
SoCal Edison Comments (2018 RM18-9) at 2, 10-11.
\795\ ISO-NE Comments (RM16-23) at 56-57.
---------------------------------------------------------------------------
344. Some commenters express concerns about the sufficiency of
market participation agreements to address state and local regulatory
concerns. The New York Commission, for example, cautions that a rule
addressing the nature and use of market participation agreements should
not create barriers that hinder a state regulator's ability to guide
the ways that distributed energy resource aggregations can be formed,
registered, managed, and operated, including the role of a distribution
utility in the coordination and registration of distributed energy
resource aggregations.\796\ Organization of MISO States asserts that
concerns remain about the ability to effectively police compliance with
participation agreements, and that in order to comply, new lines of
communication between distribution utilities, distributed energy
resource aggregators, and the RTO/ISO will need to be developed.\797\
---------------------------------------------------------------------------
\796\ New York Commission Comments (2018 RM18-9) at 13.
\797\ Organization of MISO States Comments (2018 RM18-9) at 4.
---------------------------------------------------------------------------
345. Organization of MISO States asserts that further participation
agreements will need to be crafted to accommodate ever-evolving
technology changes and to avoid such initial agreements becoming
barriers to innovation. It asserts that the RTO/ISO stakeholder process
is the appropriate place for these modifications to participation
agreements to occur.\798\
---------------------------------------------------------------------------
\798\ Id. at 4-5.
---------------------------------------------------------------------------
346. Commenters express varying recommendations for the structure
of an agreement or agreements and the parties required to enter them.
AES Companies suggest a three-party agreement between the aggregator,
distribution utility, and RTO/ISO is appropriate,\799\ while Pacific
Gas & Electric suggests two two-party agreements (one agreement between
aggregator and RTO/ISO, and another between aggregator and distribution
utility).\800\ APPA/NRECA and MISO Transmission Owners favor the
utilities being party to the agreements and argue that the agreement
should demonstrate that the aggregation has been authorized by the
utility or its relevant regulatory authority.\801\ CAISO also suggests
that
[[Page 67151]]
the Commission consider whether a separate Commission-jurisdictional
agreement should apply between a distribution utility and a distributed
energy resource aggregator.\802\
---------------------------------------------------------------------------
\799\ AES Companies Comments (RM16-23) at 12-13, 49.
\800\ Pacific Gas & Electric Comments (RM16-23) at 24-26.
\801\ APPA/NRECA Comments (RM16-23) at 46-47; MISO Transmission
Owner Comments (RM16-23) at 26-27.
\802\ CAISO Comments (RM16-23) at 51-52.
---------------------------------------------------------------------------
347. Some commenters request flexibility, further guidance from the
Commission, and/or the participation of other parties in crafting
market participation agreements. Most RTOs/ISOs suggest that some of
their existing agreements may be applicable but argue for flexibility
in establishing appropriate agreements.\803\ Pacific Gas & Electric
also argues that each RTO/ISO should be allowed to craft agreements
appropriate for its markets.\804\ NARUC requests that, for states that
do allow third party aggregations, the Commission only provide broad
policy direction in a final rule and allow the RTOs/ISOs to develop
with state input the necessary details for implementation.\805\ EEI
similarly argues that RTOs/ISOs and distribution utilities should
develop market participation agreements in conjunction with their
stakeholders.\806\ Xcel Energy Services goes further, stating that the
details of market participation agreements will need to be addressed by
states.\807\ PJM asserts that further clarification as to the role of
electric distribution companies and other relevant regulatory
authorities is needed for PJM to finalize the appropriate market
participant agreement design.\808\ Massachusetts Municipal Electric
requests sufficient flexibility for the agreement to accommodate
different conditions at different distribution utilities.\809\ Mensah,
however, states that the participation agreement, and any necessary
amendments, should be standardized, streamlined, and automated as much
as possible to avoid unnecessary costs.\810\
---------------------------------------------------------------------------
\803\ Id.; ISO-NE Comments (RM16-23) at 56-57; MISO Comments
(RM16-23) at 26-27; NYISO Comments (RM16-23) at 20; PJM Comments
(RM16-23) at 28-29.
\804\ See Pacific Gas & Electric Comments (RM16-23) at 24.
\805\ NARUC Comments (RM16-23) at 5.
\806\ EEI Comments (RM16-23) at 39.
\807\ Xcel Energy Services Comments (RM16-23) at 29.
\808\ PJM Comments (RM16-23) at 29.
\809\ Massachusetts Municipal Electric Comments (RM16-23) at 5.
\810\ Mensah Comments (RM16-23) at 4.
---------------------------------------------------------------------------
348. Some commenters advocate for specific requirements in market
participation agreements. EEI argues that the agreements should ensure
that distributed energy resource aggregators are subject to comparable
requirements as other resources.\811\ AES Companies assert that an
agreement should only obligate the aggregator to conform to the
appropriate tariff rules and a proportionate share of essential
reliability services as determined by each RTO/ISO and its
stakeholders.\812\ Pacific Gas & Electric states that an agreement
between the aggregator and the distribution utility should include
detailed requirements regarding operational coordination, mitigation of
system impacts, cost allocation, and notification of changes to the
aggregation.\813\
---------------------------------------------------------------------------
\811\ EEI Comments (RM16-23) at 39.
\812\ AES Companies Comments (RM16-23) at 12-13.
\813\ Pacific Gas & Electric Comments (RM16-23) at 24-25.
---------------------------------------------------------------------------
349. Avangrid emphasizes that the market participation agreement
should be explicit that the aggregator is a wholesale market
participant required to comply with the provisions in the tariff,
including operational requirements.\814\ MISO Transmission Owners and
TAPS support requiring the distributed energy resource aggregator to
attest to compliance with distribution utility tariffs and operating
procedures and with the rules and regulations of any other relevant
regulatory authority.\815\ APPA/NRECA support requiring aggregators to
demonstrate, rather than simply attest, that the relevant electric
retail regulatory authority has authorized wholesale market
participation by the resources in the aggregation, and to include in
the market participation agreement requirements for notice to
distribution utilities of any changes in resources and for compliance
by the aggregator and its resources with the tariffs and operating
procedures of the relevant distribution utilities.\816\ MISO
Transmission Owners make similar arguments in their comments.\817\
---------------------------------------------------------------------------
\814\ Avangrid Comments (RM16-23) at 18.
\815\ MISO Transmission Owners Comments (RM16-23) at 19 (citing
NOPR, 157 FERC ] 61,121 at P 157); TAPS Comments (RM16-23) at 13-14.
\816\ APPA/NRECA Comments (RM16-23) at 47.
\817\ MISO Transmission Owners Comments (RM16-23) at 19, 26-27.
---------------------------------------------------------------------------
350. On the other hand, Tesla/SolarCity contend that, because many
individual distributed energy resources may not be new nor installed by
the aggregator, any attestation requirement should only require
aggregators to state that, ``to the best of their knowledge,'' the
distributed energy resources in the aggregation are compliant with
distribution company tariffs and operating procedures and relevant
regulatory authority rules and regulations.\818\
---------------------------------------------------------------------------
\818\ Tesla/SolarCity Comments (RM16-23) at 31.
---------------------------------------------------------------------------
351. APPA/NRECA, Open Access Technology, MISO Transmission Owners,
and NARUC support the NOPR proposal that market participation
agreements should not restrict the business models for distributed
energy resource aggregators, though the latter two commenters condition
their support on the distributed energy resource aggregation having
been permitted by the state regulatory body and, if applicable, the
distribution utility.\819\ NARUC supports the NOPR language that allows
a scenario in which distribution utilities can act as aggregators so
that the states can provide oversight of the terms and conditions of
their relationship with distributed energy resources and customers,
while allowing participation of the aggregator in RTO/ISO markets.\820\
On the other hand, Xcel Energy Services asserts that the NOPR language
may be too vague to protect yet-to-be-designed aggregator business
models and also could inappropriately limit the ability of RTOs/ISOs to
prevent business models that could threaten grid reliability.\821\
---------------------------------------------------------------------------
\819\ APPA/NRECA Comments (RM16-23) at 47-48; MISO Transmission
Owners Comments (RM16-23) at 26 (citing NOPR, 157 FERC ] 61,121 at P
158); NARUC Comments (RM16-23) at 5 (citing NOPR, 157 FERC ] 61,121
at P 158); Open Access Technology Comments (RM16-23) at 4.
\820\ NARUC Comments (RM16-23) at 5 (citing NOPR at P158).
\821\ Xcel Energy Services Comments (RM16-23) at 29.
---------------------------------------------------------------------------
3. Commission Determination
352. We add Sec. 35.28(g)(12)(ii)(h) to the Commission's
regulations and adopt the NOPR proposal to require each RTO/ISO to
establish market rules that address market participation agreements for
distributed energy resource aggregators. Specifically, we require each
RTO/ISO to revise its tariff to include a standard market participation
agreement that defines the distributed energy resource aggregator's
role and responsibilities and its relationship with the RTO/ISO and
that an aggregator is required to execute before it can participate in
the RTO/ISO markets. We also adopt the NOPR proposal that this market
participation agreement must include an attestation that the
distributed energy resource aggregator's aggregation is compliant with
the tariffs and operating procedures of the distribution utilities and
the rules and regulations of any relevant electric retail regulatory
authority. As the Commission explained in the NOPR, these requirements
are necessary to ensure that a distributed energy resource aggregator
complies with all relevant
[[Page 67152]]
provisions of the RTO/ISO tariffs, the tariffs and operating procedures
of the distribution utilities, and the rules and regulations of any
other relevant electric retail regulatory authority.\822\ These
requirements are also supported by a general consensus among commenters
that market participation agreements are necessary and, as expressed by
some commenters, that the use of market participation agreements could
help address state and local regulatory concerns.
---------------------------------------------------------------------------
\822\ See NOPR, 157 FERC ] 61,121 at P 157.
---------------------------------------------------------------------------
353. Also, as proposed in the NOPR, we require that the market
participation agreements that the RTOs/ISOs include in their tariffs
not limit the business models under which distributed energy resource
aggregators can operate. Allowing distributed energy resource
aggregators with varying business models to be included in such
agreements should increase the ability of the distributed energy
resource aggregators, and resources within such aggregations, to
participate in the RTO/ISO markets.
354. With the exception of the attestation requirement and
prohibition of business model limitations described above, we will not
specify the exact terms and conditions of the market participation
agreements. This approach will give the RTOs/ISOs and stakeholders
flexibility to develop appropriate agreements, and increase the ability
of the distributed energy resource aggregators, and resources within
such aggregations, to participate in RTO/ISO markets by better
tailoring agreements to the operating conditions and needs of those
markets, and thereby help to enhance competition in the markets.
Commenters, including the RTOs/ISOs, express a variety of views about
the specific requirements that should be included in such agreements
and the potential need for additional agreements, and most commenters
request flexibility in ability to design these agreements. We believe
that this flexibility will provide RTOs/ISOs working with their
stakeholders the ability to design the appropriate agreements for their
regions and the reasonableness of such proposals will be evaluated in
each RTO/ISO-specific compliance proceeding.
355. We also are not persuaded by the suggestion of some commenters
that we require additional agreements to help facilitate participation
by distributed energy resource aggregations in RTO/ISO markets, or that
we require additional entities, such as distribution utilities,
distribution system operators, or relevant regulatory authorities, to
be parties to the market participation agreements that we are
requiring. We believe that the attestation requirement that we adopt in
this final rule will help ensure distributed energy resource aggregator
compliance with the tariffs and operating procedures of distribution
utilities and the rules and regulations of other relevant regulatory
authorities. RTOs/ISOs and their stakeholders are best equipped to
determine the nature and composition of, and counterparties to,
additional agreements. We note that RTOs/ISOs and stakeholders may
choose to include additional parties or incorporate related agreements
in the proposed market participation agreements. Moreover, as discussed
above in Sections IV.H.2 and IV.I, our directive to RTOs/ISOs to
establish market rules on coordination will address coordination among
any parties not included as parties to the market participation
agreements (i.e., the distribution utility and the relevant state and
local regulators), including the ability of distribution utilities to
review modifications.\823\
---------------------------------------------------------------------------
\823\ See supra Section IV.H.1 (Market Rules on Coordination).
---------------------------------------------------------------------------
356. In response to Xcel Energy Services' assertion that the NOPR
proposal to prohibit RTOs/ISOs from limiting the business models under
which distributed energy resource aggregators can operate does not
protect future business models and may allow other business models that
threaten grid reliability, we disagree. Instead, it is responsive to
many commenters' requests to avoid undue Commission specificity with
respect to the required contents of market participation agreements to
allow RTOs/ISOs sufficient regional flexibility in developing these
agreements, including to address any business model challenges and any
implications for grid reliability. Further, we note that Xcel Energy
Services does not provide examples or support for its concerns that
certain business models could threaten grid reliability or future
business models. We think permitting RTO/ISO prohibitions against
certain business models in their market participation agreements is not
necessary given a distributed energy resource aggregator's duty to
adhere to RTO/ISO market rules, the attestation requirement that we
require to be included in the market participation agreements, as well
as the ability of RTOs/ISO to craft any necessary safeguards short of
business model prohibitions within these agreements. In response to
PJM's assertion that further clarification about the role of
distribution utilities and other relevant regulatory authorities is
needed for PJM to finalize the appropriate market participant agreement
design, we believe that we have provided such clarification to the
extent possible, elsewhere within this final rule.\824\
---------------------------------------------------------------------------
\824\ See supra Section IV.C.3 (Double Counting of Services).
---------------------------------------------------------------------------
K. Compliance
357. In the NOPR, the Commission proposed to require each RTO/ISO
to submit a compliance filing within six months of the date the final
rule in this proceeding is published in the Federal Register. The
Commission stated that it believed that six months is sufficient for
each RTO/ISO to develop and submit its compliance filing, but
recognized that implementation of the reforms proposed in the NOPR
could take more time due to the changes that may be necessary to each
RTO's/ISO's modeling and dispatch software. Therefore, the Commission
proposed to allow 12 months from the date of the compliance filing for
implementation of the proposed reforms to become effective.
1. Comments
358. Most RTO/ISO commenters, with the exception of PJM, indicate
that they would need to modify their existing rules to appropriately
integrate distributed energy resource aggregations.\825\ PJM states
that it does not require significant modifications to dispatch
software, communication platforms, or automation tools, as PJM already
has developed many tools that can be adapted for distributed energy
resource aggregations, but that improved coordination with electric
distribution providers may be a challenge.\826\
---------------------------------------------------------------------------
\825\ See CAISO Comments (2018 RM18-9) at 4; PJM Comments (2018
RM18-9) at 8-9.
\826\ PJM Comments (2018 RM18-9) at 8-9.
---------------------------------------------------------------------------
359. Eversource recommends that the Commission provide sufficient
time for proposals to be developed through the stakeholder process on
this complex issue.\827\ Dominion suggests a pilot project should be
undertaken first.\828\ Duquesne Light notes that distributed energy
resource integration should proceed in a ``measured'' way to assess
operational, reliability, safety and cost implications, noting that
some new technologies may require observation and testing before being
deemed capable of providing expanded services such as being deemed a
capacity resource.\829\ Distributed energy resource developers and
their advocates, as well as some
[[Page 67153]]
state commissions, believe that the proposal is timely and should not
be delayed, especially given the rapid pace of technological
advancement.\830\
---------------------------------------------------------------------------
\827\ Eversource Comments (2018 RM18-9) at 11.
\828\ Dominion Comments (RM16-23) at 9.
\829\ Duquesne Light Company Comments (2018 RM18-9) at 3-4.
\830\ See, e.g., AWEA Comments (RM16-23) at 4; Delaware
Commission Comments (RM16-23) at 4; Fresh Energy/Sierra Club/Union
of Concerned Scientists Comments (RM16-23) at 1.
---------------------------------------------------------------------------
2. Commission Determination
360. After consideration of the comments submitted, we find that it
is reasonable to provide RTOs/ISOs with additional time to submit their
proposed tariff revisions in response to the final rule, given that the
changes could require significant work on the part of RTOs/ISOs.
Consequently, after consideration of the comments submitted, we will
require each RTO/ISO to file the tariff changes needed to implement the
requirements of this final rule within 270 days of the publication date
of this final rule in the Federal Register. To the extent that an RTO/
ISO proposes to comply with any or all of the requirements in this
final rule using its currently effective requirements for distributed
energy resources, it must demonstrate on compliance that its existing
approach meets the requirements in this final rule.
361. Based on comments submitted about the complexity of changes to
RTO/ISO market rules and systems, we will not require the
implementation of the tariff provisions within 12 months from the date
of the compliance filing, as proposed in the NOPR. Instead, we will
require each RTO/ISO to propose a reasonable implementation date,
together with adequate support explaining how the proposal is
appropriately tailored for its region and implements this final rule in
a timely manner. The Commission will establish on compliance the
effective date for each RTO's/ISO's compliance filing.
L. Issues Beyond the Scope of This Rulemaking
1. Comments
362. Some commenters raise issues that were not addressed in the
NOPR. For instance, commenters raise issues regarding how the deduction
of behind-the-meter resources from reserve margin requirements affects
price formation; \831\ impacts of subsidizing resources on functioning
of RTO/ISO markets; \832\ capacity market mitigation policies for
distributed energy resources; \833\ impacts on system variability and
unpredictable operation due to RTO/ISO market participation of
distributed energy resources; \834\ impacts of distributed energy
resource aggregations on distribution system operations and
reliability, and necessary distribution system adjustments; \835\
reflecting distribution system benefits associated with distributed
energy resource aggregations into RTO/ISO market operation; \836\
distribution system configuration issues; \837\ need for modernizing
distribution system equipment, such as the deployment of distributed
energy resource management systems (DERMS); \838\ privacy and
cybersecurity concerns; \839\ data collection practices during
distributed energy resource registration focused on attributes
available for essential grid services, but not necessarily in support
of a market product; \840\ differing compensation for short-duration
resources to account for reduced run times in the capacity market;
\841\ and clarification that the term electric storage resource as
defined in Order No. 841 may include an aggregation of distributed
electric storage resources.\842\
---------------------------------------------------------------------------
\831\ See, e.g., NRG Comments (RM16-23) at 6.
\832\ See, e.g., PJM Market Monitor Comments (RM16-23) at 10.
\833\ See, e.g., NRG Comments (RM16-23) at 6.
\834\ See, e.g., Advanced Energy Economy Comments (2018 RM18-9)
at 24; NYISO Indicated Transmission Owners Comments (2018 RM18-9) at
20; Organization of MISO States Comments (2018 RM18-9) at 10.
\835\ See, e.g., Advanced Energy Management Comments (2018 RM18-
9) at 24; Vice Chairman Place Comments (2018 RM18-9) at 2-3; EEI
Comments (2018 RM18-9) at 8-9, 19-21; Pacific Gas & Electric
Comments (2018 RM18-9) at 20-21, 24-25; PJM Comments (2018 RM18-9)
at 28; TAPS Comments (2018 RM18-9) at 7-11.
\836\ See, e.g., Stem Comments (2018 RM18-9) at 11.
\837\ See, e.g., NRECA Comments (2018 RM18-9) at 8.
\838\ See, e.g., CAISO Comments (2018 RM18-9) at 7; EPSA
Comments (2018 RM18-9) at 9-13; Eversource Comments (2018 RM18-9) at
10-11.
\839\ See, e.g., California Commission Comments (2018 RM18-9) at
18; NRECA Comments (2018 RM18-9) at 11.
\840\ See, e.g., Union of Concerned Scientists Comments (RM16-
23) at 10-11 (citing J. Nelson, Ph.D. and L.M. Wisland, Achieving 50
Percent Renewable Electricity in California--The Role of Non-Fossil
Flexibility in a Cleaner Electricity Grid (2015), http://www.ucsusa.org/sites/default/files/attach/2015/08/Achieving-50-Percent-Renewable-Electricity-In-California.pdf).
\841\ See, e.g., Advanced Energy Economy Comments (RM16-23) at
42-43.
\842\ See, e.g., University of Delaware's EV R&D Group Comments
(2018 RM18-9) at 1.
---------------------------------------------------------------------------
2. Commission Determination
363. The NOPR did not propose reforms related to these issues
raised by commenters. Therefore, these issues are outside the scope of
this proceeding and will not be addressed here.
V. Information Collection Statement
364. The information collection (IC) contained in this final rule
is being submitted to the Office of Management and Budget (OMB) for
review under section 3507(d) of the Paperwork Reduction Act of
1995.\843\ OMB's regulations,\844\ in turn, require approval of certain
information collection requirements imposed by agency rules.
Respondents subject to the filing requirements of a rule will not be
penalized for failing to respond to the collection of information
unless the collection of information displays a valid OMB control
number.
---------------------------------------------------------------------------
\843\ See 44 U.S.C. 3507(d).
\844\ 5 CFR pt. 1320 (2020).
---------------------------------------------------------------------------
365. The Commission has submitted this IC to OMB as a revision of
FERC-516H. OMB has assigned control number 1902-0303 to FERC-516H. The
Commission is not asking OMB to change the expiration date of control
number 1902-0303 (May 31, 2021).
A. Summary of This IC
Title: FERC-516H (Electric Rate Schedules and Tariff Filings, in
Docket No. RM18-9-000).
OMB Control No. 1902-0303.
Type of Request: Revision of FERC-516H.
Abstract: This final rule, at 18 CFR 35.28(g)(12), includes two IC
activities. Each RTO and ISO must have tariff provisions that allow DER
aggregations to participate directly in the organized wholesale
electric markets. In addition, each RTO and ISO must update the
economic dispatch software accordingly.
Types of Respondent: RTOs and ISOs.
Frequency of Collection: One time.
Estimate of Annual Burden \845\: The Commission estimates the total
annual burden and cost \846\ for this IC in the following table:
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\845\ ``Burden'' is the total time, effort, or financial
resources expended by persons to generate, maintain, retain, or
disclose or provide information to or for a Federal agency. For
further explanation of what is included in the information
collection burden, refer to Title 5 Code of Federal Regulations
1320.3.
\846\ Commission staff believes that industry is similarly
situated in terms of cost for wages and benefits. Therefore, we are
using the FERC 2020 average cost (for wages plus benefits) for one
FERC full-time equivalent (FTE) of $172,329 ($83.00 per hour).
---------------------------------------------------------------------------
In response to comments on the NOPR, we have increased the
estimated burden and cost for the requirements of the final rule from
those originally proposed in the NOPR. The estimated burden and cost
for the requirements contained in this final rule follow.
[[Page 67154]]
Additions to FERC-516H, as Implemented in the Final Rule in Docket No. RM18-9-000
--------------------------------------------------------------------------------------------------------------------------------------------------------
A B C D E F G
--------------------------------------------------------------------------------------------------------------------------------------------------------
Avg. number
of Total
Types of response Number of responses number of Average burden (hours) and Total annual burden hours Cost per
respondents per responses cost per response and total annual cost respondent
respondent
(col. B x (col. D x.................. (col. F /
col. C) col. E).................... col. B)
--------------------------------------------------------------------------------------------------------------------------------------------------------
One-Time Tariff Filing Due to RM18-9 6 1 6 1,529 hrs; $126,907......... 9,174 hrs; $761,442........ $126,907
Final Rule.
Software Update.......................... 6 1 6 1,500 hrs; $124,500......... 9,000 hrs; $747,000........ 124,500
--------------------------------------------------------------------------------------------------------------
Total Burden......................... ........... ........... ........... 3029 hrs; $251,407.......... 18,174 hrs; $1,508,442..... 251,407
--------------------------------------------------------------------------------------------------------------------------------------------------------
B. Discussion
366. The Commission implements this final rule and FERC-516H to
remove barriers to the participation of distributed energy resource
aggregations in the capacity, energy, and ancillary service markets
operated by RTOs and ISOs. This IC in this final rule conforms to the
Commission's need for efficient information collection, communication,
and management within the energy industry.
367. In this final rule, we are requiring each RTO/ISO to propose
revisions to its tariff that (1) allow distributed energy resource
aggregations to participate directly in RTO/ISO markets and establish
distributed energy resource aggregators as a type of market
participant; (2) allow distributed energy resource aggregators to
register distributed energy resource aggregations under one or more
participation models that accommodate the physical and operational
characteristics of the distributed energy resource aggregations; (3)
establish a minimum size requirement for distributed energy resource
aggregations that does not exceed 100 kW; (4) address locational
requirements for distributed energy resource aggregations; (5) address
distribution factors and bidding parameters for distributed energy
resource aggregations; (6) address information and data requirements
for distributed energy resource aggregations; (7) address metering and
telemetry requirements for distributed energy resource aggregations;
(8) address coordination between the RTO/ISO, the distributed energy
resource aggregator, the distribution utility, and the relevant
electric retail regulatory authorities; (9) address modification to the
list of resources in a distributed energy resource aggregation; and
(10) address market participation agreements for distributed energy
resource aggregators.
368. Interested persons may obtain information on the reporting
requirements by contacting Ellen Brown, Office of the Executive
Director, Email: DataClearance@ferc.gov; Phone: (202) 502-8663.
VI. Environmental Analysis
369. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\847\ We
conclude that neither an Environmental Assessment nor an Environmental
Impact Statement is required for this final rule under Sec.
380.4(a)(15) of the Commission's regulations, which provides a
categorical exemption for approval of actions under sections 205 and
206 of the FPA relating to the filing of schedules containing all rates
and charges for the transmission or sale of electric energy subject to
the Commission's jurisdiction, plus the classification, practices,
contracts, and regulations that affect rates, charges, classifications,
and services.\848\
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\847\ Regulations Implementing the Nat'l Envt'l Policy Act of
1969, Order No. 486, 52 FR 47,897 (Dec. 17, 1987), FERC Stats. &
Regs., ] 30,783 (1987) (cross-referenced at 41 FERC ] 61,284).
\848\ 18 CFR 380.4(a)(15) (2020).
---------------------------------------------------------------------------
VII. Regulatory Flexibility Act Certification
370. The Regulatory Flexibility Act of 1980 (RFA) \849\ generally
requires a description and analysis of rules that will have a
significant economic impact on a substantial number of small entities.
The RFA mandates consideration of regulatory alternatives that
accomplish the stated objectives of a rule and that minimize any
significant economic impact on a substantial number of small entities.
The SBA Office of Size Standards develops the numerical definition of a
small business.\850\ The small business size standards are provided in
13 CFR 121.201.
---------------------------------------------------------------------------
\849\ 5 U.S.C. 601-12.
\850\ 13 CFR 121.101 (2020).
---------------------------------------------------------------------------
371. Under the SBA classification, the six RTOs/ISOs would be
considered electric bulk power transmission and control, for which the
small business size threshold is 500 or fewer employees.\851\ Because
each RTO/ISO has more than 500 employees, none are considered small
entities.
---------------------------------------------------------------------------
\851\ 13 CFR 121.201 (Sector 22, Utilities).
---------------------------------------------------------------------------
372. Furthermore, because of their pivotal roles in wholesale
electric power markets in their regions, none of the RTOs/ISOs meet the
last criterion of the two-part RFA definition of a small entity: ``not
dominant in its field of operation.'' \852\
---------------------------------------------------------------------------
\852\ The RFA definition of ``small entity'' refers to the
definition provided in the Small Business Act, which defines a
``small business concern'' as a business that is independently owned
and operated and that is not dominant in its field of operation. The
SBA's regulations at 13 CFR 121.201 define the threshold for a small
Electric Bulk Power Transmission and Control entity (NAICS code
221121) to be 500 employees. See 5 U.S.C. 601(3) (citing to section
3 of the Small Business Act, 15 U.S.C. 632).
---------------------------------------------------------------------------
373. The estimated cost related to this final rule includes: (a)
Preparing and making a one-time tariff filing ($126,907 per entity, as
detailed in the Information Collection section above), and (b) updating
the economic dispatch software. We estimate the one-time software work
will take 1,500 hours with an approximate cost of $124,500 per entity.
Therefore, the total estimated one-time cost for the tariff filing and
software work is $251,407 per entity (or $126,907 + $124,500); the
total estimated one-time industry cost is $1,508,442.
374. As a result, we certify that the reforms required by this
final rule would not have a significant economic impact on a
substantial number of small entities, and therefore no regulatory
flexibility analysis is required.
VIII. Document Availability
375. In addition to publishing the full text of this document in
the Federal
[[Page 67155]]
Register, the Commission provides all interested persons an opportunity
to view and/or print the contents of this document via the internet
through the Commission's Home Page (http://www.ferc.gov). At this time,
the Commission has suspended access to the Commission's Public
Reference Room due to the President's March 13, 2020 proclamation
declaring a National Emergency concerning the Novel Coronavirus Disease
(COVID-19).
376. From FERC's Home Page on the internet, this information is
available on eLibrary. The full text of this document is available on
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or
downloading. To access this document in eLibrary, type the docket
number excluding the last three digits of this document in the docket
number field.
377. User assistance is available for eLibrary and the FERC's
website during normal business hours from FERC Online Support at (202)
502-6652 (toll free at 1-866-208-3676) or email at
ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at
public.referenceroom@ferc.gov.
IX. Effective Date and Congressional Notification
378. These regulations are effective December 21, 2020. The
Commission has determined, with the concurrence of the Administrator of
the Office of Information and Regulatory Affairs of OMB, that this rule
is not a ``major rule'' as defined in section 351 of the Small Business
Regulatory Enforcement Fairness Act of 1996.
List of Subjects in 18 CFR Part 35
Electric power rates, Electric utilities.
By the Commission. Commissioner Danly is dissenting with a
separate statement attached.
Issued: September 17, 2020.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
In consideration of the foregoing, the Commission amends part 35,
chapter I, title 18, Code of Federal Regulations, as follows:
PART 35--FILING OF RATE SCHEDULES AND TARIFFS
0
1. The authority citation for part 35 continues to read as follows:
Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42
U.S.C. 7101-7352.
0
2. Amend Sec. 35.28 by adding paragraphs (b)(10) and (11) and (g)(12)
as follows.
Sec. 35.28 Non-discriminatory open access transmission tariff.
* * * * *
(b) * * *
(10) Distributed energy resource as used in this section means any
resource located on the distribution system, any subsystem thereof or
behind a customer meter.
(11) Distributed energy resource aggregator as used in this section
means the entity that aggregates one or more distributed energy
resources for purposes of participation in the capacity, energy and/or
ancillary service markets of the regional transmission organizations
and/or independent system operators.
* * * * *
(g) * * *
(12) Distributed energy resource aggregators. (i) Each independent
system operator and regional transmission organization must have tariff
provisions that allow distributed energy resource aggregations to
participate directly in the organized wholesale electric markets. Each
regional transmission organization and independent system operator must
establish distributed energy resource aggregators as a type of market
participant. Additionally, each regional transmission organization and
independent system operator must allow distributed energy resource
aggregators to register distributed energy resource aggregations under
one or more participation models in the regional transmission
operator's or the independent system operator's tariff that accommodate
the physical and operational characteristics of the distributed energy
resource aggregation.
(ii) Each regional transmission organization and independent system
operator, to accommodate the participation of distributed energy
resource aggregations, must establish market rules that address:
(A) Eligibility to participate in the independent system operator
or regional transmission organization markets through a distributed
energy resource aggregation;
(B) Locational requirements for distributed energy resource
aggregations;
(C) Distribution factors and bidding parameters for distributed
energy resource aggregations;
(D) Information and data requirements for distributed energy
resource aggregations;
(E) Modification to the list of resources in a distributed energy
resource aggregation;
(F) Metering and telemetry system requirements for distributed
energy resource aggregations;
(G) Coordination between the regional transmission organization or
independent system operator, the distributed energy resource
aggregator, the distribution utility, and the relevant electric retail
regulatory authorities; and
(H) Market participation agreements for distributed energy resource
aggregators.
(iii) Each regional transmission organization and independent
system operator must establish a minimum size requirement for
distributed energy resource aggregations that does not exceed 100 kW.
(iv) Each regional transmission organization and independent system
operator must accept bids from a distributed energy resource aggregator
if its aggregation includes distributed energy resources that are
customers of utilities that distributed more than 4 million megawatt-
hours in the previous fiscal year. An independent system operator or
regional transmission organization must not accept bids from a
distributed energy resource aggregator if its aggregation includes
distributed energy resources that are customers of utilities that
distributed 4 million megawatt-hours or less in the previous fiscal
year, unless the relevant electric retail regulatory authority permits
such customers to be bid into RTO/ISO markets by a distributed energy
resource aggregator.
Note: The following appendix will not appear in the Code of
Federal Regulations.
Appendix A: Abbreviated Names of Commenters
The following table contains the abbreviated names of all
commenters in this docket.
------------------------------------------------------------------------
Abbreviation Commenter (full name)
------------------------------------------------------------------------
Advanced Energy Buyers....... Advanced Energy Buyers.
Advanced Energy Economy...... Advanced Energy Economy.
[[Page 67156]]
Advanced Energy Management... Advanced Energy Management Alliance.
Advanced Microgrid Solutions. Advanced Microgrid Solutions, Inc.
Advanced Rail Energy Storage. Advanced Rail Energy Storage, LLC.
AES Companies................ AES Companies.
Alevo........................ Alevo USA Inc.
Altametric................... Altametric LLC.
Amanda Drabek................ Amanda Drabek, Pantsuit Nation of East
Texas.
American Petroleum Institute. American Petroleum Institute.
Vice Chairman Place.......... Vice Chairman Andrew Place of the
Pennsylvania Public Utilities
Commission.
APPA......................... American Public Power Association.
APPA/NRECA................... American Public Power Association and
National Rural Electric Cooperative
Association.
Arkansas Commission.......... Arkansas Public Service Commission.
Avangrid..................... AVANGRID, Inc.
AWEA......................... American Wind Energy Association.
Beacon Power................. Beacon Power, LLC.
Benjamin Kingston............ Benjamin D. Kingston.
Bonneville................... Bonneville Power Administration.
Brookfield Renewable......... Brookfield Renewable.
CAISO........................ California Independent System Operator
Corporation.
California Commission........ Public Utilities Commission of the State
of California.
California Energy Storage California Energy Storage Alliance.
Alliance.
California Municipals........ California Municipal Utilities
Association.
Calpine...................... Calpine.
Center for Biological Center for Biological Diversity.
Diversity.
City of New York............. City of New York.
Connecticut Department of Connecticut Department of Energy and
Energy. Environmental Protection.
Connecticut State Entities... Bureau of Energy and Technology Policy of
the Connecticut Department of Energy and
Environmental Protection and the
Connecticut Public Utilities Regulatory
Authority.
Delaware Commission.......... Delaware Public Service Commission.
DER/Storage Developers....... DER and Storage Developers.
Direct Energy................ Direct Energy.
Dominion..................... Dominion Resources Services, Inc.
DTE Electric/Consumers Energy DTE Electric Company and Consumers Energy
Company.
Duke Energy.................. Duke Energy Corporation.
E4TheFuture.................. E4TheFuture.
Eagle Crest.................. Eagle Crest Energy Company.
EEI.......................... Edison Electric Institute.
Efficient Holdings........... Efficient Holdings, LLC.
ELCON........................ Electricity Consumers Resource Council.
Energy Storage Association... Energy Storage Association.
EPRI......................... Electric Power Research Institute.
EPSA......................... Electric Power Supply Association.
EPSA/PJM Power Providers..... Electric Power Supply Association and PJM
Power Providers Group.
Eversource................... Eversource Energy Service Company.
Exelon....................... Exelon Corporation.
FirstEnergy.................. FirstEnergy.
FirstLight................... FirstLight Power Resources, Inc.
Fluidic...................... Fluidic Energy.
Fresh Energy/Sierra Club/ Fresh Energy, the Sierra Club, and the
Union of Concerned Union of Concerned Scientists.
Scientists.
Genbright.................... Genbright LLC.
Global Cold Chain Alliance... Global Cold Chain Alliance.
GridWise..................... GridWise Alliance.
Guannan He................... Guannan He.
Harvard Environmental Policy Harvard Environmental Policy Initiative.
Initiative.
Icetec....................... Icetec.
Imperial Irrigation District. Imperial Irrigation District.
Independent Energy Producers Independent Energy Producers Association.
Association.
Indiana Commission........... Indiana Utility Regulatory Commission.
Institute for Policy Institute for Policy Integrity.
Integrity.
IPKeys/Motorola.............. IPKeys Technologies and Motorola
Solutions.
IRC.......................... ISO-RTO Council.
ISO-NE....................... ISO New England Inc.
Kansas Commission............ Kansas Corporation Commission.
Kathy Seal................... Kathy Seal.
Leadership Group............. Leadership Group.
Liza White................... Liza C. White.
Lorenzo Kristov.............. Lorenzo Kristov.
Lyla Fadali.................. Lyla Fadali.
Magnum....................... Magnum CAES, LLC.
Maryland and New Jersey Maryland Public Service Commission and
Commissions. New Jersey Board of Public Utilities.
Massachusetts Commission..... Massachusetts Department of Public
Utilities.
Massachusetts State Entities. Massachusetts Department of Public
Utilities and Massachusetts Department
of Energy Resources.
[[Page 67157]]
Massachusetts Municipal Massachusetts Municipal Wholesale
Electric. Electric Company.
Matthew d'Alessio............ Matthew d'Alessio.
Mensah....................... AF Mensah Inc.
Microgrid Resources Coalition Microgrid Resources Coalition.
Microsoft.................... Microsoft Corporation.
Minnesota Energy Storage Minnesota Energy Storage Alliance.
Alliance.
MISO......................... Midcontinent Independent System Operator,
Inc.
MISO Transmission Owners..... MISO Transmission Owners.
Mosaic Power................. Mosaic Power, LLC.
NARUC........................ National Association of Regulatory
Utility Commissioners.
National Hydropower National Hydropower Association.
Association.
NEPOOL....................... New England Power Pool.
NERC......................... North American Electric Reliability
Corporation.
NESCOE....................... New England States Committee on
Electricity.
New Jersey Board............. New Jersey Board of Public Utilities.
New York Commission.......... New York Public Service Commission.
New York State Entities...... New York Public Service Commission and
New York State Energy Research and
Development Authority.
New York Utility Intervention Utility Intervention Unit of the New York
Unit. State Department of State.
NextEra...................... NextEra Energy Resources, LLC.
NRECA........................ National Rural Electric Cooperative
Association.
NRG.......................... NRG Energy, Inc.
NYISO........................ New York Independent System Operator,
Inc.
NYISO Indicated Transmission Central Hudson Gas & Electric
Owners. Corporation, Consolidated Edison Company
of New York, Inc., National Grid, New
York Power Authority, Orange and
Rockland Utilities, Inc., and Power.
NYPA......................... New York Power Authority.
Ohio Commission.............. Public Utilities Commission of Ohio.
Open Access Technology....... Open Access Technology International,
Inc.
OpenADR...................... OpenADR Alliance.
Organization of MISO States.. Organization of MISO States.
Pacific Gas & Electric....... Pacific Gas and Electric Company.
PJM.......................... PJM Interconnection, L.L.C.
PJM Market Monitor........... Monitoring Analytics, LLC.
PJM Utilities Coalition...... American Electric Power Service
Corporation, East Kentucky Power
Cooperative, Inc., and FirstEnergy
Service Company, on behalf of its
affiliates.
Power Applications........... Power Applications and Research Systems,
Inc.
Protect Sudbury.............. Protect Sudbury.
Public Interest Organizations Clean Wisconsin, Environmental Defense
Fund, Environmental Law & Policy Center,
Fresh Energy, GridLab, Natural Resources
Defense Council, Northwest Energy
Coalition, Sierra Club, Southern
Environmental Law Center, Union of
Concerned Scientists, Vote Solar,
Western Grid Group.
R Street Institute........... R Street Institute.
RES Americas................. Renewable Energy Systems Americas Inc.
Research Scientists.......... Drs. Audun Botterud, Apurba Sakti, and
Francis O'Sullivan.
Robert Borlick............... Robert L. Borlick.
San Diego Gas & Electric..... San Diego Gas & Electric.
San Diego Water.............. San Diego County Water Authority.
Schulte Associates........... Schulte Associates LLC.
SEIA......................... Solar Energy Industries Association.
Silicon Valley Leadership Silicon Valley Leadership Group.
Group.
Six Cities................... Cities of Anaheim, Azusa, Banning,
Colton, Pasadena, and Riverside,
California.
SoCal Edison................. Southern California Edison Company.
Southern Companies........... Southern Company Services, Inc.
SPP.......................... Southwest Power Pool, Inc.
Starwood Energy.............. Starwood Energy Group Global, L.L.C.
Stem......................... Stem, Inc.
Sunrun....................... Sunrun Inc.
TAPS......................... Transmission Access Policy Study Group.
TechNet...................... TechNet.
TeMix........................ TeMix Inc.
Tesla........................ Tesla, Inc.
Tesla/SolarCity.............. Tesla, Inc. and SolarCity Corporation.
Trans Bay.................... Trans Bay Cable LLC.
Union of Concerned Scientists Union of Concerned Scientists.
University of Delaware's EV EV R&D Group, University of Delaware.
R&D Group.
UofD/Mensah.................. EV R&D Group, University of Delaware and
AF Mensah Inc.
Viking Cold Solutions........ Viking Cold Solutions.
Xcel Energy Services......... Xcel Energy Services Inc.
------------------------------------------------------------------------
[[Page 67158]]
United States of America--Federal Energy Regulatory Commission
------------------------------------------------------------------------
Docket No.
------------------------------------------------------------------------
Participation of Distributed Energy Resource RM18-9-000.
Aggregations in Markets Operated by Regional
Transmission Organizations and Independent
System Operators.
------------------------------------------------------------------------
(Issued September 17, 2020)
DANLY, Commissioner, dissenting:
1. The Commission today approves a rule requiring Regional
Transmission Organizations (RTO) and Independent System Operators (ISO)
to revise their tariffs to accommodate distributed energy resource
(DER) aggregators. I dissent because, regardless of the benefits
promised by DERs, the Commission goes too far in declaring the extent
of its own jurisdiction and because the Commission should not encourage
resource development by fiat.
2. The Federal Power Act (FPA) delineates the respective roles of
the Commission and the States, assigning powers in accordance with each
sovereigns' core interests.\853\ The federal government is tasked with
ensuring just and reasonable wholesale rates, prohibiting state action
that would either encumber interstate commerce or harm other states.
The States retain authority over the most local of concerns: Choice of
generation, siting of transmission lines, and the entirety of retail
sales and distribution. Each sovereign has a sphere of authority, and
in each sphere, the relevant sovereign's powers are supreme.
---------------------------------------------------------------------------
\853\ See 16 U.S.C. 824 (2018).
---------------------------------------------------------------------------
3. Respect for the States' role in our federal system and under the
FPA would counsel against even modest, non-essential declarations of
our authority, if done at the States' expense. Why, when issuing a
directive to the RTOs and ISOs (undoubtedly Commission-jurisdictional
entities), must we also declare that ``retail regulatory authorit[ies]
cannot broadly prohibit the participation in RTO/ISO markets of all
distributed energy resources or of all distributed energy resource
aggregators''? \854\ Perhaps the States should not or cannot prohibit
such participation.\855\ But it is not for us to make sweeping
declarations regarding the States' jurisdiction over distributed
generation. Rather, the Commission's jurisdiction over wholesale rates
would ideally be vindicated, were it to collide with a state
prohibition, through a challenge to a specific enactment or regulation
by making arguments ``armed with principles of federal preemption and
the Supremacy Clause.'' \856\
---------------------------------------------------------------------------
\854\ Final Rule, Order No. 2222, 172 FERC ] 61,247, at P 58
(2020).
\855\ I acknowledge the legal authority upon which the majority
bases its exercise of jurisdiction. Compare FERC v. Elec. Power
Supply Ass'n, 136 S. Ct. 760 (2016), with Nat'l Ass'n of Regulatory
Util. Comm'rs v. FERC, 964 F.3d 1177 (D.C. Cir. 2020). The concern I
express is prudential, not legal.
\856\ Midwest ISO Transmission Owners v. FERC, 373 F.3d 1361,
1372 (D.C. Cir. 2004).
---------------------------------------------------------------------------
4. Apart from the Commission's injudicious jurisdictional
declarations, today's order stands as an imprudent exercise of the
Commission's power. Why promulgate a rule at all? Reluctance to govern
by fiat is counseled particularly in a case like this in which the
generation resources the majority seeks to promote, by their very
nature, inevitably will affect the distribution system, responsibility
for which is assigned, with no ambiguity, to the States. We should
allow the RTOs and ISOs (or the States or the utilities) to develop
their own DER programs in the first instance. If the promises of DERs
are what they purport to be, the markets will encourage their
development. And if those programs result in wholesale sales in
interstate commerce, then the question of the Commission's jurisdiction
will be ripe. Commission directives are unnecessary to encourage the
development of economically-viable resources. I have greater faith in
the power of market forces and in the discernment of the utilities and
the States.
For these reasons, I respectfully dissent.
James P. Danly,
Commissioner.
[FR Doc. 2020-20973 Filed 10-20-20; 8:45 am]
BILLING CODE 6717-01-P