Office of Energy Policy and Innovation; Request for Comments Regarding Rates, Accounting and Financial Reporting for New Electric Storage Technologies, 36381-36384 [2010-15450]
Download as PDF
<![CDATA[
Federal Register / Vol. 75, No. 122 / Friday, June 25, 2010 / Notices
docket(s). For assistance with any FERC
Online service, please e-mail
FERCOnlineSupport@ferc.gov. or call
(866) 208–3676 (toll free). For TTY, call
(202) 502–8659.
Kimberly D. Bose,
Secretary.
[FR Doc. 2010–15386 Filed 6–24–10; 8:45 am]
BILLING CODE 6717–01–P
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
The filings in the above-referenced
proceeding are accessible in the
Commission’s eLibrary system by
clicking on the appropriate link in the
above list. They are also available for
review in the Commission’s Public
Reference Room in Washington, DC.
There is an eSubscription link on the
Web site that enables subscribers to
receive e-mail notification when a
document is added to a subscribed
docket(s). For assistance with any FERC
Online service, please e-mail
FERCOnlineSupport@ferc.gov. or call
(866) 208–3676 (toll free). For TTY, call
(202) 502–8659.
[Docket No. ER10–1452–000]
Kimberly D. Bose,
Secretary.
Vitol Inc.; Supplemental Notice That
Initial Market-Based Rate Filing
Includes Request for Blanket Section
204 Authorization
[FR Doc. 2010–15391 Filed 6–24–10; 8:45 am]
BILLING CODE 6717–01–P
mstockstill on DSKH9S0YB1PROD with NOTICES
June 18, 2010.
DEPARTMENT OF ENERGY
This is a supplemental notice in the
above-referenced proceeding of Vitol
Inc.’s application for market-based rate
authority, with an accompanying rate
tariff, noting that such application
includes a request for blanket
authorization, under 18 CFR part 34, of
future issuances of securities and
assumptions of liability.
Any person desiring to intervene or to
protest should file with the Federal
Energy Regulatory Commission, 888
First Street, NE., Washington, DC 20426,
in accordance with Rules 211 and 214
of the Commission’s Rules of Practice
and Procedure (18 CFR 385.211 and
385.214). Anyone filing a motion to
intervene or protest must serve a copy
of that document on the Applicant.
Notice is hereby given that the
deadline for filing protests with regard
to the applicant’s request for blanket
authorization, under 18 CFR part 34, of
future issuances of securities and
assumptions of liability, is July 7, 2010.
The Commission encourages
electronic submission of protests and
interventions in lieu of paper, using the
FERC Online links at https://
www.ferc.gov. To facilitate electronic
service, persons with Internet access
who will eFile a document and/or be
listed as a contact for an intervenor
must create and validate an
eRegistration account using the
eRegistration link. Select the eFiling
link to log on and submit the
intervention or protests.
Persons unable to file electronically
should submit an original and 14 copies
of the intervention or protest to the
Federal Energy Regulatory Commission,
888 First St., NE., Washington, DC
20426.
Federal Energy Regulatory
Commission
VerDate Mar<15>2010
16:23 Jun 24, 2010
Jkt 220001
[Docket No. AD10–13–000]
Office of Energy Policy and Innovation;
Request for Comments Regarding
Rates, Accounting and Financial
Reporting for New Electric Storage
Technologies
June 11, 2010.
Dear Reader:
Pursuant to authority delegated to the
Director, Office of Energy Policy and
Innovation, under 18 CFR 375.315,
comments are requested in the abovereferenced docket regarding rates,
accounting and financial reporting
associated with services provided by
electric storage technologies.1
Commission staff has been
considering the growing interest in the
use of non-traditional technologies to
help meet the Nation’s electricity needs.
In particular, newer storage technologies
like flywheels and chemical batteries
have recently achieved technological
maturity and are well into successful
pilot stages and, in some cases,
commercial operation. The roles of
traditional generation, transmission, and
distribution assets within the electric
system are well understood and each
has set method(s) of rate recovery,
accounting and financial reporting.
However, the same is not necessarily
true of electric storage.
Under appropriate circumstances,
storage can act like any of the traditional
asset categories, and also like load. The
only electricity storage technology that
has been widely adopted to date,
pumped storage hydropower, was
generally built at a time when the
majority of utility assets were
constructed by vertically integrated
load-serving utilities at retail ratepayer
expense. In many parts of the country
today, entities other than vertically
integrated load-serving utilities have
expressed interest in building and
owning electric storage assets of varying
sizes. Suggested business models range
from traditional cost-of-service rates to
competing in wholesale commodity
trading; some are considering the
possibility of multiple revenue streams
which may blend both cost-of-service
recovery for some costs with other costs
being at risk in competitive wholesale
market transactions. For all of these
reasons, there is little case precedent to
guide industry and a divergence in
practice concerning how to develop
rates and categorize electric storage
costs for rate purposes.
Further, the Commission’s
accounting 2 and financial reporting
requirements 3 currently do not contain
specific accounting, functional
classification, and related FERC Form
No. 1 reporting requirements for new
storage technologies. Under a cost-ofservice ratemaking methodology, it is
critical for companies to accurately and
uniformly account and report financial
information and data to facilitate the
development and monitoring of rates.
Without this information, it would be
difficult for the Commission and others
to determine the costs related to new
storage technologies for cost-of-service
rate purposes.
In order to better understand the
various ways electric storage can be
used, where each of those uses would
fall within established jurisdictional
boundaries, and the appropriate rate
treatment, accounting classification, and
reporting requirements for those uses,
Commission staff seeks comment on the
attached document regarding
alternatives for categorizing and
compensating storage services, and in
particular ideas on how best to develop
rate policies that accommodate the
flexibility of storage, consistent with the
Federal Power Act.4 In addition, staff
welcomes comments about any other
aspects of these storage issues not
specifically raised in the attachment.
Persons wishing to comment on the
matters discussed herein should submit
comments to the Commission no later
than 45 days after the publication of this
notice in the Federal Register.
2 18
1 The
statements herein do not necessarily reflect
the views of the Commission.
PO 00000
Frm 00036
Fmt 4703
Sfmt 4703
36381
CFR Part 101 (2009).
CFR Part 141 (2009).
4 16 U.S.C. 791a–825r (2006).
3 18
E:\FR\FM\25JNN1.SGM
25JNN1
36382
Federal Register / Vol. 75, No. 122 / Friday, June 25, 2010 / Notices
Comments should reference Docket No.
AD10–13–000. For further information,
please contact:
Rahim Amerkhail (Technical
Information), Office of Energy Policy
and Innovation, Federal Energy
Regulatory Commission, 888 First
Street, NE., Washington, DC 20426,
(202) 502–8266,
Rahim.Amerkhail@ferc.gov.
Christopher Handy (Accounting
Information), Office of Enforcement,
Federal Energy Regulatory Commission,
888 First Street, NE., Washington, DC
20426, (202) 502–6496,
Christopher.Handy@ferc.gov.
Thank you.
Jamie Simler,
Director, Office of Energy Policy & Innovation.
mstockstill on DSKH9S0YB1PROD with NOTICES
Attachment—Potential Approaches to
Categorizing Storage Service for
Compensation Purposes 5
To determine what, if any,
Commission-jurisdictional rate structure
is appropriate for a given electric storage
asset, staff has attempted to identify the
chief electric system uses of storage.
Staff believes that the chief electric
storage uses implicating Commission
jurisdiction are: (1) Maintaining service
to unbundled transmission customers;
(2) enhancing the value of generation;
and (3) providing ancillary services.6
Below staff reviews compensation
structures available for these uses of
storage, as well as the possibility of
creating a stand-alone contract storage
service. Staff seeks comment on the
ideas contained throughout and in
particular on the following issues:
• The circumstances in which a
storage provider can be classified and
receive compensation as a transmission
asset.
• The circumstances, if any, under
which a storage project should be
permitted to receive compensation as
transmission and also receive
compensation for enhancing the value
of merchant generation or providing
ancillary services.7
• Whether creation of a stand-alone
contract storage service should be
considered and in particular, the
possibility that a storage provider would
5 The statements herein do not necessarily reflect
the views of the Commission.
6 These uses are exclusive of the service storage
may provide to retail load.
7 Some new technologies have the potential to
respond to frequency deviations in the transmission
system faster than other (traditional generation)
resources. At the May 26, 2010 technical conference
in Docket No. AD10–11–000, the Commission staff
explored issues relating to frequency compensation
in the organized wholesale power markets,
including whether there are benefits to be gained
from linking compensation for frequency regulation
service to the quality of the service provided.
VerDate Mar<15>2010
16:23 Jun 24, 2010
Jkt 220001
provide only the service of electricity
storage and leave it to its customers to
determine how to use their contracted
share of the storage device.
• Whether new accounting and
reporting requirements need to be
created in order to facilitate cost of
service ratemaking for these new storage
technologies.
I. The Uses of and Rate Treatment for
Storage Facilities
1. Maintaining Service to Unbundled
Transmission Customers
Some storage technologies can be
used to support unbundled transmission
service by supplying reactive power or
possibly by acting as a virtual
replacement transmission circuit in the
event of a transmission line trip (by
releasing energy to replace the
transmitted energy that was cut-off by
the line trip). The Commission recently
clarified in response to a request by
Western Grid that batteries used in this
fashion are eligible for potential cost
recovery through the California ISO
transmission access charge, provided
certain additional protections were in
place as described in that order.8
Accordingly, cost recovery through a
jurisdictional transmission rate would
be permissible under certain
circumstances.
However, an identical storage facility
could be installed on the distribution
grid to similarly provide voltage support
or serve as a virtual replacement
distribution circuit. In that case, the
storage asset could be considered to
provide non-jurisdictional distribution
service, leading to cost recovery through
retail rates.
2. Enhancing the Value of Generation
Another possible use of a storage
facility is to shift generation output from
one period to another. Again, the
appropriate rate treatment for a given
storage facility will vary with its use. On
the one hand, a generation owner could
build a storage facility to enhance the
market value of its generation by
shifting off-peak generation to more
lucrative peak periods. If the purpose is
to enhance the market value of
generation in this way, staff believes
that storage facility costs should be
recovered through the generator’s
wholesale energy charges alone (i.e., no
separate storage charge).
On the other hand, a load-serving
entity could install the same type of
storage facility to shift generation output
used to serve retail customers; for
example to store excess off-peak wind
8 Western Grid Development, LLC, 130 FERC
¶ 61,056, at P 43 (2010) (Western Grid).
PO 00000
Frm 00037
Fmt 4703
Sfmt 4703
generation for use in serving retail load
later in the day. In that case, staff would
view this as using storage to serve a
non-jurisdictional retail purpose so that
no Commission-jurisdictional cost
recovery would be permissible. Instead,
the load-serving entity would likely
seek to include the cost of this storage
facility in its bundled retail rates.
However, a load-serving entity may
also use such storage facility to reduce
demand as part of a wholesale market
demand response program. In that case,
the storage resource could seek to be
compensated as a demand response
resource.
3. Provision of Ancillary Services
Storage facilities also can be used to
provide ancillary services, priced at cost
or market consistent with the
Commission’s current rules and
regulations. A storage provider wishing
to provide these services would appear
to enjoy all of the same options for
doing so as are currently available to
any other independent power marketer.
II. Using Storage Facilities for Multiple
Purposes
Distinguishing between the potential
uses of electric storage facilities is
helpful to identify the potential
ratemaking treatment that could apply
in varying circumstances. In reality,
however, a single storage facility can
often be used for multiple purposes,
which complicates cost recovery issues.
For example, a transmission provider
might be interested in building pumped
storage to address issues related to
variable energy resource integration.
Being a transmission provider, it could
use the storage facility as a transmission
asset to provide voltage support or as a
virtual replacement transmission
circuit. On that basis, the transmission
provider may seek to recover the asset’s
costs through Commission-jurisdictional
transmission rates. The transmission
provider also may be able to use the
storage facility to firm up output from
variable energy resources used to serve
retail load. This latter function would be
equivalent to shifting variable
generation from one period to another in
order to maintain deliverability to retail
customers, implicating cost recovery
under retail rates. Moreover, the same
storage facility could be used to provide
ancillary services, the costs of which
would be recovered through the
transmission provider’s Commissionapproved rates.
Given that storage facilities can be
physically capable of providing
multiple services, it may be reasonable
to contemplate some appropriate
sharing of the total cost of the facilities
E:\FR\FM\25JNN1.SGM
25JNN1
mstockstill on DSKH9S0YB1PROD with NOTICES
Federal Register / Vol. 75, No. 122 / Friday, June 25, 2010 / Notices
between Commission-jurisdictional
and/or retail rates. It should be noted
that permitting storage performing
transmission functions to recover costs
through transmission rates raises certain
additional issues in the Commission
context. Some of these issues have been
discussed in prior Commission orders.9
Staff seeks comment on the following
criteria that could be used to determine
the mechanisms by which a storage
facility can recover its costs, including
when the facility is being used for
multiple purposes:
(1) Intended use and capability of the
facility.
Recovery in transmission rates could
be conditioned on a demonstration that
the intended use of the storage asset is
for transmission purposes, such as to
support the transmission system
through either voltage support or
providing energy to address
transmission line instability or trips,
and that the asset is capable of
performing the specified function.
Commission staff seeks comment on an
‘‘intended use and capabilities’’
standard, and whether it creates
uncertainty. Would a good option be to
rely on transmission planning processes
to make such a determination? Also, the
concept of a storage asset supporting
service to transmission customers by
providing energy to address
transmission line instability or trips
seems to rely on the idea that
maintaining service to transmission
customer ‘‘load’’ is different from
maintaining service to nonjurisdictional retail load. Is there
enough difference between un-bundled
transmission ‘‘load’’ and retail load to
justify identifying this as a separate,
jurisdictional use of storage rather than
a non-jurisdictional retail use?
(2) Commitment to address crosssubsidization and competitive concerns.
Unlike traditional transmission assets,
electric storage serving a transmission
function and receiving cost-based
transmission rates would also be
physically capable of providing
ancillary services or otherwise
enhancing the value of generation in
wholesale energy markets. Accordingly,
potential cross-subsidization,
competition, and discrimination issues
could arise if the storage participated in
those markets at the same time it is
receiving full cost-recovery through
transmission rates. Although a
commitment not to participate in
wholesale energy markets would
address these concerns, staff seeks
comment on whether there are other
9 See Western Grid; Nevada Hydro Co., 122 FERC
¶ 61,272 (2008) (Nevada Hydro).
VerDate Mar<15>2010
16:23 Jun 24, 2010
Jkt 220001
ways to address these concerns such
that the storage provider can fully
utilize the capabilities of its storage
device?
There is some precedent in retail
ratemaking for permitting guaranteed
cost recovery (in bundled retail rates)
while also permitting profit-seeking offsystem sales in a competitive
environment. Retail regulators at times
have addressed this issue by requiring a
utility making off-system sales from
generation built at retail ratepayer
expense to credit to retail rates at least
the cost of such off-system sales, and
possibly some share of the profit as
well. The Commission imposed a
similar requirement in Pacific Gas &
Electric Co., where it approved a
revenue sharing ratemaking treatment
for secondary uses of jurisdictional
assets, such as leases for space on
transmission facilities for
telecommunications and the use of
transmission tower licenses for wireless
antennas.10 While those measures could
address cross-subsidization issues, staff
seeks comment on whether this type of
structure would fully address wholesale
discrimination and competitive
concerns in the electric storage context.
(3) Maintaining the independence of
market operators.
The Commission has long held that a
Regional Transmission Organization
(RTO) or Independent System Operator
(ISO) must be independent of its market
participants. ISO/RTO operation of
traditional transmission assets does not
jeopardize the ISO/RTO’s independence
from energy market participants because
such assets generally cannot participate
in the energy market. As noted above
however, a storage asset would remain
physically capable of participating in
the energy market. Moreover, it might
need to transact in the energy market in
order to charge and discharge for
purposes of serving its transmission
function. Can an ISO/RTO’s ‘‘operation’’
of a storage facility be deemed to
include responsibility for charging and
discharging the storage facility through
energy market transactions without
jeopardizing its independence, or is this
only a concern if the ISO/RTO is
essentially left taking title to the
resulting stored power, which was one
of the main concerns with the proposal
in Nevada Hydro? 11 Do any existing
ISO/RTO practices for implementing
special dispatch procedures for certain
resources (e.g., PJM Interconnection’s
pool-scheduling procedures for hydro
10 See Pacific Gas & Electric Co., 106 FERC
¶ 61,058 (2004); Pacific Gas & Electric Co., 90 FERC
¶ 61,314 (2000).
11 Nevada Hydro, 122 FERC ¶ 61,272 at P 82.
PO 00000
Frm 00038
Fmt 4703
Sfmt 4703
36383
units) convey some level of control or
do they simply implement the resource
owner’s instructions for dispatch in a
manner that, while more detailed, is
essentially similar to how traditional
generators are dispatched based on bid
and operating parameters? Could similar
special procedures be developed for
storage technologies more generally?
(4) Application of the Avista Policy.
The Commission has adopted a policy
permitting third-party provision of
ancillary services at market-based rates
with one key exception, described in the
Avista orders.12 Specifically, third-party
provision of ancillary services at
market-based rates is prohibited to a
transmission provider seeking to meet
its own ancillary service requirements.
This exception was meant to ensure a
competitive market for such ancillary
services by maintaining the existence of
a cost-based utility back-stop for such
services. Subsequently, however, utility
industry restructuring sometimes led to
situations where the incumbent utility
divested its generation assets and thus
needed to purchase ancillary services
from third-parties. As a result, the
Commission began authorizing case-bycase waivers of this prohibition, but
otherwise left it in place.
This prohibition on third-party
provision of ancillary services at
market-based rates to transmission
providers seeking to meet their own
ancillary services requirements may
pose an undue barrier to the
development of storage facilities and
other resources capable of providing
ancillary services. Staff seeks comment
on whether this prohibition with caseby-case waiver remains appropriate and,
if not, ideas for revising the policy.
III. New Contract Storage Service
Most interstate natural gas storage
facilities are operated as transmission
facilities and offer open access storage
services to customers who contract for
that service; the storage facility operator
may not buy and sell the gas commodity
at that location. Contract storage service
is offered at either cost-based or
negotiated rates for the service of storing
customers’ gas and only those storage
customers buy and sell the gas
commodity itself (storage customers
hold ‘‘title’’ to the gas held in storage).
Generally, the customer pays a
reservation fee and a storage fee based
on usage with penalties for over and
under scheduling, though this may not
always be the case with negotiated rates.
Either way, the time arbitrage gains on
the stored gas are the profit or loss for
12 Avista Corporation, 87 FERC ¶ 61,223, order on
reh’g, 89 FERC ¶ 61,136 (1999).
E:\FR\FM\25JNN1.SGM
25JNN1
mstockstill on DSKH9S0YB1PROD with NOTICES
36384
Federal Register / Vol. 75, No. 122 / Friday, June 25, 2010 / Notices
the customer, not the gas storage
operator.
This model has not yet been adopted
for electric storage facilities but may
provide an attractive alternative
business model for some storage
operators. In this model, the storage
operator would operate and maintain
the electricity storage facility at its
customers’ direction and never take title
to the energy stored at the facility. Thus,
each storage customer would decide
how to use its purchased storage
capacity. If, for example, a given storage
customer has market-based rate
authority, then it could use its
contracted-for storage capacity to
arbitrage differences in peak and offpeak energy prices. The Commission
would review the storage provider’s
cost-based rates for the stand-alone
service of storage, or its authority to
negotiate market-based rates for that
service, separately from the review of
the storage customer’s independent
authority to make power sales using the
stored energy (or any other kind of
energy).
Alternatively, if the storage facility
happens to be favorably located to
address a transmission reliability issue,
by providing voltage support or serving
as a virtual replacement transmission
circuit, then to address the issue the
local transmission owner could contract
with the storage facility to provide this
function with all or part of its storage
capacity. Again, since the storage
provider would provide storage service
only at the customer’s direction and
under a dedicated storage rate, the
particular use to which each customer
puts its contracted-for storage capacity
should not play a role in the
Commission’s review of the stand-alone
storage rate. However the storage
customer, in this example a
transmission owner, would still need to
make its own separate filing to justify
transmission rate recovery for the cost of
its storage contract.
The primary potential barrier to this
type of business model appears to be
financial. An independent contract
storage provider might need to sign up
long-term customers in advance under
bilateral contracts, perhaps following an
open season, in order to secure
financing for construction of the facility.
Storage facilities with large up-front
capital costs, like pumped storage, may
have difficulty attracting sufficient
customer interest during the crucial preconstruction financing phase. However,
storage service from newer storage
technologies with lower up-front capital
costs may be easier to finance and
market in this way.
VerDate Mar<15>2010
16:23 Jun 24, 2010
Jkt 220001
We seek comment on the practicality
and usefulness of this type of standalone contract storage service.
IV. Accounting and Financial Reporting
for New Storage Technologies
The Commission’s existing
accounting and reporting requirements
classify utility plant costs under the
following accounts: (1) Intangible, (2)
steam, (3) nuclear, (4) hydraulic, (5)
other production, (6) transmission, (7)
distribution, (8) regional transmission
and market operation, and (9) general
plant. These functional classifications
have associated operation and
maintenance expense accounts to record
expenses associated with the plant
assets. However, there are no specific
plant asset accounts or related operation
and maintenance expense accounts to
record costs associated with new storage
technologies such as flywheels and
chemical batteries. Consequently, Staff
seeks comments on the following
matters:
1. What new plant functions, if any,
should be created to accommodate the
above-mentioned technologies?
2. What new plant or new equipment
accounts and related reporting
requirements, if any, need to be created
to facilitate cost of service or other rate
policies for the above-mentioned
technologies?
3. What new operations and
maintenance expense accounts and
related reporting requirements, if any,
need to be created to facilitate cost of
service or other rate policies for the
above-mentioned technologies?
4. What new revenue accounts and
related reporting requirements, if any,
need to be created to facilitate cost of
service or other rate policies for the
above-mentioned technologies?
5. What type of financial and nonfinancial data, if any, and what level of
detail need to be reported in the FERC
Form No. 1 for the above-mentioned
technologies and how would the
Commission and others use this
information for developing and
monitoring cost-based rates?
[FR Doc. 2010–15450 Filed 6–24–10; 8:45 am]
BILLING CODE 6717–01–P
PO 00000
Frm 00039
Fmt 4703
Sfmt 4703
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
[Project No. 13234–001]
City and Borough of Sitka; Notice
Soliciting Scoping Comments for an
Applicant Prepared Environmental
Assessment Using the Alternative
Licensing Process
June 17, 2010.
a. Type of Application: Alternative
Licensing Process
b. Project No.: 13234–001
c. Applicant: City and Borough of
Sitka
d. Name of Project: Takatz Lake
Hydroelectric Project
e. Location: On the Takatz Lake and
Takatz Creek, approximately 20 miles
east of the City of Sitka, Alaska, on the
east side of Baranof Island. The project
would occupy lands of the Tongass
National Forest, administered by the
U.S. Forest Service.
f. Filed Pursuant to: Federal Power
Act, 16 U.S.C. 791(a)–825(r).
g. Applicant Contact: Christopher
Brewton, Utility Manager, City and
Borough of Sitka, Electric Department,
105 Jarvis Street, Sitka, Alaska 99835;
(907) 747–1870, e-mail:
chrisb@cityofsitka.com.
h. FERC Contact: Joseph Adamson, at
(202) 502–2085; or e-mail
joseph.adamson@ferc.gov.
i. Deadline for filing scoping
comments: July 19, 2010
All documents (original and eight
copies) should be filed with: Kimberly
D. Bose, Secretary, Federal Energy
Regulatory Commission, 888 First
Street, NE., Washington, DC 20426.
The Commission’s Rules of Practice
and Procedure require all interveners
filing documents with the Commission
to serve a copy of that document on
each person on the official service list
for the project. Further, if an intervener
files comments or documents with the
Commission relating to the merits of an
issue that may affect the responsibilities
of a particular resource agency, they
must also serve a copy of the document
on that resource agency.
Scoping comments may be filed
electronically via the Internet in lieu of
paper. The Commission strongly
encourages electronic filings. See 18
CFR 385.2001(a)(1)(iii) and the
instructions on the Commission’s Web
site (https://www.ferc.gov/docs-filing/
ferconline.asp) under the ‘‘e-filing’’ link.
For a simpler method of submitting text
only comments, click on ‘‘Quick
Comment.’’
E:\FR\FM\25JNN1.SGM
25JNN1
]]>Agencies
[Federal Register Volume 75, Number 122 (Friday, June 25, 2010)]
[Notices]
[Pages 36381-36384]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-15450]
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
[Docket No. AD10-13-000]
Office of Energy Policy and Innovation; Request for Comments
Regarding Rates, Accounting and Financial Reporting for New Electric
Storage Technologies
June 11, 2010.
Dear Reader:
Pursuant to authority delegated to the Director, Office of Energy
Policy and Innovation, under 18 CFR 375.315, comments are requested in
the above-referenced docket regarding rates, accounting and financial
reporting associated with services provided by electric storage
technologies.\1\
---------------------------------------------------------------------------
\1\ The statements herein do not necessarily reflect the views
of the Commission.
---------------------------------------------------------------------------
Commission staff has been considering the growing interest in the
use of non-traditional technologies to help meet the Nation's
electricity needs. In particular, newer storage technologies like
flywheels and chemical batteries have recently achieved technological
maturity and are well into successful pilot stages and, in some cases,
commercial operation. The roles of traditional generation,
transmission, and distribution assets within the electric system are
well understood and each has set method(s) of rate recovery, accounting
and financial reporting. However, the same is not necessarily true of
electric storage.
Under appropriate circumstances, storage can act like any of the
traditional asset categories, and also like load. The only electricity
storage technology that has been widely adopted to date, pumped storage
hydropower, was generally built at a time when the majority of utility
assets were constructed by vertically integrated load-serving utilities
at retail ratepayer expense. In many parts of the country today,
entities other than vertically integrated load-serving utilities have
expressed interest in building and owning electric storage assets of
varying sizes. Suggested business models range from traditional cost-
of-service rates to competing in wholesale commodity trading; some are
considering the possibility of multiple revenue streams which may blend
both cost-of-service recovery for some costs with other costs being at
risk in competitive wholesale market transactions. For all of these
reasons, there is little case precedent to guide industry and a
divergence in practice concerning how to develop rates and categorize
electric storage costs for rate purposes.
Further, the Commission's accounting \2\ and financial reporting
requirements \3\ currently do not contain specific accounting,
functional classification, and related FERC Form No. 1 reporting
requirements for new storage technologies. Under a cost-of-service
ratemaking methodology, it is critical for companies to accurately and
uniformly account and report financial information and data to
facilitate the development and monitoring of rates. Without this
information, it would be difficult for the Commission and others to
determine the costs related to new storage technologies for cost-of-
service rate purposes.
---------------------------------------------------------------------------
\2\ 18 CFR Part 101 (2009).
\3\ 18 CFR Part 141 (2009).
---------------------------------------------------------------------------
In order to better understand the various ways electric storage can
be used, where each of those uses would fall within established
jurisdictional boundaries, and the appropriate rate treatment,
accounting classification, and reporting requirements for those uses,
Commission staff seeks comment on the attached document regarding
alternatives for categorizing and compensating storage services, and in
particular ideas on how best to develop rate policies that accommodate
the flexibility of storage, consistent with the Federal Power Act.\4\
In addition, staff welcomes comments about any other aspects of these
storage issues not specifically raised in the attachment.
---------------------------------------------------------------------------
\4\ 16 U.S.C. 791a-825r (2006).
---------------------------------------------------------------------------
Persons wishing to comment on the matters discussed herein should
submit comments to the Commission no later than 45 days after the
publication of this notice in the Federal Register.
[[Page 36382]]
Comments should reference Docket No. AD10-13-000. For further
information, please contact:
Rahim Amerkhail (Technical Information), Office of Energy Policy
and Innovation, Federal Energy Regulatory Commission, 888 First Street,
NE., Washington, DC 20426, (202) 502-8266, Rahim.Amerkhail@ferc.gov.
Christopher Handy (Accounting Information), Office of Enforcement,
Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426, (202) 502-6496, Christopher.Handy@ferc.gov.
Thank you.
Jamie Simler,
Director, Office of Energy Policy & Innovation.
Attachment--Potential Approaches to Categorizing Storage Service for
Compensation Purposes \5\
---------------------------------------------------------------------------
\5\ The statements herein do not necessarily reflect the views
of the Commission.
---------------------------------------------------------------------------
To determine what, if any, Commission-jurisdictional rate structure
is appropriate for a given electric storage asset, staff has attempted
to identify the chief electric system uses of storage. Staff believes
that the chief electric storage uses implicating Commission
jurisdiction are: (1) Maintaining service to unbundled transmission
customers; (2) enhancing the value of generation; and (3) providing
ancillary services.\6\ Below staff reviews compensation structures
available for these uses of storage, as well as the possibility of
creating a stand-alone contract storage service. Staff seeks comment on
the ideas contained throughout and in particular on the following
issues:
---------------------------------------------------------------------------
\6\ These uses are exclusive of the service storage may provide
to retail load.
---------------------------------------------------------------------------
The circumstances in which a storage provider can be
classified and receive compensation as a transmission asset.
The circumstances, if any, under which a storage project
should be permitted to receive compensation as transmission and also
receive compensation for enhancing the value of merchant generation or
providing ancillary services.\7\
---------------------------------------------------------------------------
\7\ Some new technologies have the potential to respond to
frequency deviations in the transmission system faster than other
(traditional generation) resources. At the May 26, 2010 technical
conference in Docket No. AD10-11-000, the Commission staff explored
issues relating to frequency compensation in the organized wholesale
power markets, including whether there are benefits to be gained
from linking compensation for frequency regulation service to the
quality of the service provided.
---------------------------------------------------------------------------
Whether creation of a stand-alone contract storage service
should be considered and in particular, the possibility that a storage
provider would provide only the service of electricity storage and
leave it to its customers to determine how to use their contracted
share of the storage device.
Whether new accounting and reporting requirements need to
be created in order to facilitate cost of service ratemaking for these
new storage technologies.
I. The Uses of and Rate Treatment for Storage Facilities
1. Maintaining Service to Unbundled Transmission Customers
Some storage technologies can be used to support unbundled
transmission service by supplying reactive power or possibly by acting
as a virtual replacement transmission circuit in the event of a
transmission line trip (by releasing energy to replace the transmitted
energy that was cut-off by the line trip). The Commission recently
clarified in response to a request by Western Grid that batteries used
in this fashion are eligible for potential cost recovery through the
California ISO transmission access charge, provided certain additional
protections were in place as described in that order.\8\ Accordingly,
cost recovery through a jurisdictional transmission rate would be
permissible under certain circumstances.
---------------------------------------------------------------------------
\8\ Western Grid Development, LLC, 130 FERC ] 61,056, at P 43
(2010) (Western Grid).
---------------------------------------------------------------------------
However, an identical storage facility could be installed on the
distribution grid to similarly provide voltage support or serve as a
virtual replacement distribution circuit. In that case, the storage
asset could be considered to provide non-jurisdictional distribution
service, leading to cost recovery through retail rates.
2. Enhancing the Value of Generation
Another possible use of a storage facility is to shift generation
output from one period to another. Again, the appropriate rate
treatment for a given storage facility will vary with its use. On the
one hand, a generation owner could build a storage facility to enhance
the market value of its generation by shifting off-peak generation to
more lucrative peak periods. If the purpose is to enhance the market
value of generation in this way, staff believes that storage facility
costs should be recovered through the generator's wholesale energy
charges alone (i.e., no separate storage charge).
On the other hand, a load-serving entity could install the same
type of storage facility to shift generation output used to serve
retail customers; for example to store excess off-peak wind generation
for use in serving retail load later in the day. In that case, staff
would view this as using storage to serve a non-jurisdictional retail
purpose so that no Commission-jurisdictional cost recovery would be
permissible. Instead, the load-serving entity would likely seek to
include the cost of this storage facility in its bundled retail rates.
However, a load-serving entity may also use such storage facility
to reduce demand as part of a wholesale market demand response program.
In that case, the storage resource could seek to be compensated as a
demand response resource.
3. Provision of Ancillary Services
Storage facilities also can be used to provide ancillary services,
priced at cost or market consistent with the Commission's current rules
and regulations. A storage provider wishing to provide these services
would appear to enjoy all of the same options for doing so as are
currently available to any other independent power marketer.
II. Using Storage Facilities for Multiple Purposes
Distinguishing between the potential uses of electric storage
facilities is helpful to identify the potential ratemaking treatment
that could apply in varying circumstances. In reality, however, a
single storage facility can often be used for multiple purposes, which
complicates cost recovery issues.
For example, a transmission provider might be interested in
building pumped storage to address issues related to variable energy
resource integration. Being a transmission provider, it could use the
storage facility as a transmission asset to provide voltage support or
as a virtual replacement transmission circuit. On that basis, the
transmission provider may seek to recover the asset's costs through
Commission-jurisdictional transmission rates. The transmission provider
also may be able to use the storage facility to firm up output from
variable energy resources used to serve retail load. This latter
function would be equivalent to shifting variable generation from one
period to another in order to maintain deliverability to retail
customers, implicating cost recovery under retail rates. Moreover, the
same storage facility could be used to provide ancillary services, the
costs of which would be recovered through the transmission provider's
Commission-approved rates.
Given that storage facilities can be physically capable of
providing multiple services, it may be reasonable to contemplate some
appropriate sharing of the total cost of the facilities
[[Page 36383]]
between Commission-jurisdictional and/or retail rates. It should be
noted that permitting storage performing transmission functions to
recover costs through transmission rates raises certain additional
issues in the Commission context. Some of these issues have been
discussed in prior Commission orders.\9\ Staff seeks comment on the
following criteria that could be used to determine the mechanisms by
which a storage facility can recover its costs, including when the
facility is being used for multiple purposes:
---------------------------------------------------------------------------
\9\ See Western Grid; Nevada Hydro Co., 122 FERC ] 61,272 (2008)
(Nevada Hydro).
---------------------------------------------------------------------------
(1) Intended use and capability of the facility.
Recovery in transmission rates could be conditioned on a
demonstration that the intended use of the storage asset is for
transmission purposes, such as to support the transmission system
through either voltage support or providing energy to address
transmission line instability or trips, and that the asset is capable
of performing the specified function. Commission staff seeks comment on
an ``intended use and capabilities'' standard, and whether it creates
uncertainty. Would a good option be to rely on transmission planning
processes to make such a determination? Also, the concept of a storage
asset supporting service to transmission customers by providing energy
to address transmission line instability or trips seems to rely on the
idea that maintaining service to transmission customer ``load'' is
different from maintaining service to non-jurisdictional retail load.
Is there enough difference between un-bundled transmission ``load'' and
retail load to justify identifying this as a separate, jurisdictional
use of storage rather than a non-jurisdictional retail use?
(2) Commitment to address cross-subsidization and competitive
concerns.
Unlike traditional transmission assets, electric storage serving a
transmission function and receiving cost-based transmission rates would
also be physically capable of providing ancillary services or otherwise
enhancing the value of generation in wholesale energy markets.
Accordingly, potential cross-subsidization, competition, and
discrimination issues could arise if the storage participated in those
markets at the same time it is receiving full cost-recovery through
transmission rates. Although a commitment not to participate in
wholesale energy markets would address these concerns, staff seeks
comment on whether there are other ways to address these concerns such
that the storage provider can fully utilize the capabilities of its
storage device?
There is some precedent in retail ratemaking for permitting
guaranteed cost recovery (in bundled retail rates) while also
permitting profit-seeking off-system sales in a competitive
environment. Retail regulators at times have addressed this issue by
requiring a utility making off-system sales from generation built at
retail ratepayer expense to credit to retail rates at least the cost of
such off-system sales, and possibly some share of the profit as well.
The Commission imposed a similar requirement in Pacific Gas & Electric
Co., where it approved a revenue sharing ratemaking treatment for
secondary uses of jurisdictional assets, such as leases for space on
transmission facilities for telecommunications and the use of
transmission tower licenses for wireless antennas.\10\ While those
measures could address cross-subsidization issues, staff seeks comment
on whether this type of structure would fully address wholesale
discrimination and competitive concerns in the electric storage
context.
---------------------------------------------------------------------------
\10\ See Pacific Gas & Electric Co., 106 FERC ] 61,058 (2004);
Pacific Gas & Electric Co., 90 FERC ] 61,314 (2000).
---------------------------------------------------------------------------
(3) Maintaining the independence of market operators.
The Commission has long held that a Regional Transmission
Organization (RTO) or Independent System Operator (ISO) must be
independent of its market participants. ISO/RTO operation of
traditional transmission assets does not jeopardize the ISO/RTO's
independence from energy market participants because such assets
generally cannot participate in the energy market. As noted above
however, a storage asset would remain physically capable of
participating in the energy market. Moreover, it might need to transact
in the energy market in order to charge and discharge for purposes of
serving its transmission function. Can an ISO/RTO's ``operation'' of a
storage facility be deemed to include responsibility for charging and
discharging the storage facility through energy market transactions
without jeopardizing its independence, or is this only a concern if the
ISO/RTO is essentially left taking title to the resulting stored power,
which was one of the main concerns with the proposal in Nevada Hydro?
\11\ Do any existing ISO/RTO practices for implementing special
dispatch procedures for certain resources (e.g., PJM Interconnection's
pool-scheduling procedures for hydro units) convey some level of
control or do they simply implement the resource owner's instructions
for dispatch in a manner that, while more detailed, is essentially
similar to how traditional generators are dispatched based on bid and
operating parameters? Could similar special procedures be developed for
storage technologies more generally?
---------------------------------------------------------------------------
\11\ Nevada Hydro, 122 FERC ] 61,272 at P 82.
---------------------------------------------------------------------------
(4) Application of the Avista Policy.
The Commission has adopted a policy permitting third-party
provision of ancillary services at market-based rates with one key
exception, described in the Avista orders.\12\ Specifically, third-
party provision of ancillary services at market-based rates is
prohibited to a transmission provider seeking to meet its own ancillary
service requirements. This exception was meant to ensure a competitive
market for such ancillary services by maintaining the existence of a
cost-based utility back-stop for such services. Subsequently, however,
utility industry restructuring sometimes led to situations where the
incumbent utility divested its generation assets and thus needed to
purchase ancillary services from third-parties. As a result, the
Commission began authorizing case-by-case waivers of this prohibition,
but otherwise left it in place.
---------------------------------------------------------------------------
\12\ Avista Corporation, 87 FERC ] 61,223, order on reh'g, 89
FERC ] 61,136 (1999).
---------------------------------------------------------------------------
This prohibition on third-party provision of ancillary services at
market-based rates to transmission providers seeking to meet their own
ancillary services requirements may pose an undue barrier to the
development of storage facilities and other resources capable of
providing ancillary services. Staff seeks comment on whether this
prohibition with case-by-case waiver remains appropriate and, if not,
ideas for revising the policy.
III. New Contract Storage Service
Most interstate natural gas storage facilities are operated as
transmission facilities and offer open access storage services to
customers who contract for that service; the storage facility operator
may not buy and sell the gas commodity at that location. Contract
storage service is offered at either cost-based or negotiated rates for
the service of storing customers' gas and only those storage customers
buy and sell the gas commodity itself (storage customers hold ``title''
to the gas held in storage). Generally, the customer pays a reservation
fee and a storage fee based on usage with penalties for over and under
scheduling, though this may not always be the case with negotiated
rates. Either way, the time arbitrage gains on the stored gas are the
profit or loss for
[[Page 36384]]
the customer, not the gas storage operator.
This model has not yet been adopted for electric storage facilities
but may provide an attractive alternative business model for some
storage operators. In this model, the storage operator would operate
and maintain the electricity storage facility at its customers'
direction and never take title to the energy stored at the facility.
Thus, each storage customer would decide how to use its purchased
storage capacity. If, for example, a given storage customer has market-
based rate authority, then it could use its contracted-for storage
capacity to arbitrage differences in peak and off-peak energy prices.
The Commission would review the storage provider's cost-based rates for
the stand-alone service of storage, or its authority to negotiate
market-based rates for that service, separately from the review of the
storage customer's independent authority to make power sales using the
stored energy (or any other kind of energy).
Alternatively, if the storage facility happens to be favorably
located to address a transmission reliability issue, by providing
voltage support or serving as a virtual replacement transmission
circuit, then to address the issue the local transmission owner could
contract with the storage facility to provide this function with all or
part of its storage capacity. Again, since the storage provider would
provide storage service only at the customer's direction and under a
dedicated storage rate, the particular use to which each customer puts
its contracted-for storage capacity should not play a role in the
Commission's review of the stand-alone storage rate. However the
storage customer, in this example a transmission owner, would still
need to make its own separate filing to justify transmission rate
recovery for the cost of its storage contract.
The primary potential barrier to this type of business model
appears to be financial. An independent contract storage provider might
need to sign up long-term customers in advance under bilateral
contracts, perhaps following an open season, in order to secure
financing for construction of the facility. Storage facilities with
large up-front capital costs, like pumped storage, may have difficulty
attracting sufficient customer interest during the crucial pre-
construction financing phase. However, storage service from newer
storage technologies with lower up-front capital costs may be easier to
finance and market in this way.
We seek comment on the practicality and usefulness of this type of
stand-alone contract storage service.
IV. Accounting and Financial Reporting for New Storage Technologies
The Commission's existing accounting and reporting requirements
classify utility plant costs under the following accounts: (1)
Intangible, (2) steam, (3) nuclear, (4) hydraulic, (5) other
production, (6) transmission, (7) distribution, (8) regional
transmission and market operation, and (9) general plant. These
functional classifications have associated operation and maintenance
expense accounts to record expenses associated with the plant assets.
However, there are no specific plant asset accounts or related
operation and maintenance expense accounts to record costs associated
with new storage technologies such as flywheels and chemical batteries.
Consequently, Staff seeks comments on the following matters:
1. What new plant functions, if any, should be created to
accommodate the above-mentioned technologies?
2. What new plant or new equipment accounts and related reporting
requirements, if any, need to be created to facilitate cost of service
or other rate policies for the above-mentioned technologies?
3. What new operations and maintenance expense accounts and related
reporting requirements, if any, need to be created to facilitate cost
of service or other rate policies for the above-mentioned technologies?
4. What new revenue accounts and related reporting requirements, if
any, need to be created to facilitate cost of service or other rate
policies for the above-mentioned technologies?
5. What type of financial and non-financial data, if any, and what
level of detail need to be reported in the FERC Form No. 1 for the
above-mentioned technologies and how would the Commission and others
use this information for developing and monitoring cost-based rates?
[FR Doc. 2010-15450 Filed 6-24-10; 8:45 am]
BILLING CODE 6717-01-P
